Mr. Money Talk

The afternoon. This is Josh Barnel, mister Money Talk with Judd Barnel here to answer your questions. One 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 five two nine two five five six o eight. That's nine five two nine two five five six o eight. You always get straight talk, not sure coded advice. What a week? What

a six months? Plenty of worry? And the S and P five hundred NAS deck and the dal Jones indices to continues to climb a wall of worry and continues to show positive numbers overall, this despite concerns about the Federal Reserve, and they will continue into next week as the FED has their June meeting, and there could be next week a sixty forty split whether the Fed is going to pause on raising interest rates for June and wait for more data,

or continue to raise rates another twenty five basis points because inflation and particularly wage inflation is still too sticky, or is the Fed going to wait to get more economic data including the CPI and GDP numbers for the next next month and

wait for their July meeting to raise rates twenty five basis points. Then, So in any event, whether the FED raises or pauses, I do believe the FED will continue to talk tough and the mantra could continue to be higher for longer, and the likelihood of the FED easing is not going to be until twenty twenty four at the earliest. That has been an overriding at least

in my estimation, worry about the market overall. Add in the concern about the debt ceiling, which was shorter term, concern still about government spending causing more inflation, concern about Russia and the Ukraine, worries about China, although economic worries about China could be camped down as China's GDP number came in at a negative that's right, a negative four point nine percent, which kind of

kind of hurts hurts them. Export growth in China is way way down, and the China reopening trade maybe put that could be put on pause as well. And then of course we have concerns about banks and banks tightening on credit, so a lot to worry about. Meantime, numerous strategists you know, have not really up their earnings estimates for the S and P for the year, and some leading strategists have actually cut their earnings estimates and also cut their

views for where the S and P will end the year. Now, compare that with the S and P touching forty three hundred, which I'd say would be a high for the last fifty two weeks, and touching a forty three hundred of the market technically could be considered into a new bowl market that being

up twenty percent off the October October low. But that SNP move still is overweighted by the moves primarily on will say seven, seven or eight stocks, including a favorite Apple, Amazon, Navidia, Tesla, Netflix, Google,

and Microsoft. And these stocks are also not only the leaders in the SNP, but also the leaders in in nasdec That said, you could say, if these stocks are in a strong up move, then I could look at the bank stocks and energy stocks being in bear market territory, and then I could look at some of the major retailers also being in a in a bear market territory. So plenty of will say, mixed singles in terms of the market. And then of course there's the bond market which is still we'll say

down for the year. As yields are well not at not at the high point. Um. You know, the bond indices are are still not making up any ground. So going to be, we'll say, or continue to be very very interesting. And before we touch on any individual stocks, jud what what do you think? It seems the stocks are going to keep working. That's what we said last week the week before that. I was quite

parished for a while, and it all played out for now. I don't think the Fed's gonna raise it. Well, they might, I don't think it matters all right if the Fed raises or not twenty five basis points next

week. The bond market is now positively sloped, meaning that the six year yield, six month yield is higher than the one month, the two months higher than the one month of three month, about the three months and the two months are about the same, and then the six month is the is the peak of the yield curves, So there's some positive carry there for bond guys. We're in the summer. Objects in motion tend to stay in motion. We're not going to have a big earnings wave until late July, so

we could kind of just sit here. I don't credit feels okay. People are complaining the credit spreads are too tight, not pricing in a recession, which is also code for credit spreads are prety tights. Yes, a lot of the bad stuff is known, and I think that's that's sort of the big thing. It was two three weeks ago when we had that negative data point on a Tuesday and oils sold out four percent, and I was throwing stuff on my screen because I just said, this is now cotton ridiculous.

For eighteen months now, good economic data equals rates up. Rates up equals oil down. At some point that relationship is gonna change and people are gonna say, maybe the economy is not as bad as we thought. Now. All of this is to say, nobody really knows what happens economically, you know, the predictions, whatever. I just think it's it's an okay environment for stocks, and I think our biggest call this year has been it's not

so bad. Individual stocks that are working can't work, And that was something that wasn't true in twenty twenty two, where it doesn't matter what you owned. Everything was going down and the market is certainly rewarding good stories. Marginal stories may not be getting rewarded, but good stories are getting rewarded and people feel better. SMP five hundred twelve point seven or eight percent year to date, the equal weights only up about twelve point or two point seven, so

still a ten point spread. We're waiting to see that spread compress. And people were fearful that the spread was gonna compress. In a parish way meeting, the SMP five hundred was going to trade off substantially and the equal way SMP five hundred was going to go down, but not go down as much. Now people are calling for the equal weight to sort of catch up a little bit. So the pressure also for active managers who are lagging the index

is pretty high. There's a really big lag because only a few stocks are driving most of the return, and those are stocks that active managers tend to not own, are aren't allowed to own in size equal to the index. So here we are. I don't know, we're running out a new bad stuff. They just indicted a president federally, but market doesn't care, and the election betting odds actually kind of stay constant. I don't know that would

be that would be interesting as well. Yeah, you know, I'm not taking of you although I will say, unfortunately it's really hard to beat the federal government in federal court. They have about a ninety nine point nine percent conviction rate. But anyway, that's that's something for a different show for us. That's more just like there's another exegets, an event that the markets shrugging offer, doesn't really worry about. But we've got a lot to worry about,

a lot to be excited about, and we'll have to chain. We should talk about some of the things we're excited about when we come back. This is Josh Arnold, mister money Talk with Judd Arnold here to answer your questions on stocks, bonds, mutual funds, how you should position your investment dollars. Do give us a call nine five two nine two five five to six h eight. That's nine five two nine two five six eight, says Josh Arnold missed her Money Talk with Judd arnopp here to answer your questions on

stocks, bonds, mutual funds. I you should position your investment dollars, including your IRA in four to one k. Don't hesitate to give us a call nine to five two nine two five five six o eight. It's ninety five two nine two five, five, six oh eight. You'll always get straight talk, not sugarcoated advice. I'm not going to ask ask you Judd where the bears bears have gone, but the bears running out of stuff that I had to have gone and gone into a little bit hybrid of hibernation.

Other than Mike Wilson of Morgan Stanley, who you know, has come out, we'll say, almost pounding the table, cutting his estimate for the s and P five hundred for the year as well as his UH, but kept his price target the SMP finishing the year and thirty one hundred. Yeah, the average price started for the SMP five hundreds. Now I think it's under two hundred dollars a share, and that would have us be kind of expensive

with the market I think at forty two hundred. But the problem is the bear, all these bare narratives, the events have come true and the stocks have not responded. And given how long we've been in this bear mode, almost eighteen months of bad, bad, bad, it's just kind of exhausting itself and people are shrugging and you have to ask if it's priced in, So what do I mean by that? Okay, let's start with what I just said on the SMP five hundred estimates. They were in two forty a

share for a while. Okay, they're too high. They're gonna go under two hundred. They're going to go under two hundred. Well, now we're

there, and stocks move with estimates. Once the estimates have moved and they've sat there, there isn't The way the stock market works is not Oh the analysts say the EPs estimate is X, and it's cheap to X. Well, No, what's really going on is people have a view about X, and X may be different the extent X moves, okay, but you don't just get to buy stuff optically, you know, the estimates have to move

it. And so I think people are a little exhausted on the earnings runt, which is okay, it's going to be a down year, and twenty four is going to be okay. So I mean we're three months away, quite frankly from the street disregarding twenty three numbers entirely because most stocks trade on one year forward earnings, so that's a negative. The banks, which I think are still a disaster that's gone on long enough where Okay, now they've

rallied back a little bit because we don't have a bank run. We may have a bank walk, as they say, but deposits for now have stabilized, which gives the banks time to offload bad assets. And I think bank stocks are really a struggle for a while, but we have recovered, and the acute pain is it is sort of not there. Oil prices have remained low, which is great for the market, bad for oil stocks, and

that's put a lid on inflation. Inflation has come down. There was a nice analyst report later in the week of a sharp analyst that we like was in the UK talking to asset managers and their takeaway was the Europeans are more bullish on US tech, less fearful of US inflation, and relatively speaking, prefer the US market to Europe. Well, I could, I could see

that. Yeah, it's it's not a hard call obviously, but um, the Europeans are not only in a recession, but they're definitely in a bear market and I would not be running out to invest in European stocks, right. So I think that that's another dynamic and all their negatives we in point two simply have either come true or haven't. But I think what the market is kind of saying where we are in this debate of hard landing, soft

landing. The not landing right now seems to be the thing, and it's it's a little bit the boy who cut Quiet Wolf, and now we have performance chasing. So I think for now all the negatives are still there. We ruin our conservative in our in our allocation. We're still twenty thirty percent cash, as we typically are. We like high return on investment with our capital, and cash is our heade. But it just doesn't seem that we're I don't know what the catalyst is going to be. We have wildfires in

Canada, wreaking havoc in New York. That doesn't matter. Okay, maybe we're just range bound. But it doesn't feel that we're going to fall apart and people are underinvested still, So there you go. That's my mushy mushy expert analysis. I really don't have a strong view. We look at our

portfolios. What are you what are you up here to date in the average client portfolio, the average client portfolio, or i'll say the PCP, which tracks one of our our model portfolio, an actual real life port portfolio to which all of my active active clients go off of is up thirty two point eight percent and it after fees, right versus SMP five hundred up twelve and change on a two three year basis, the outperformance is pretty big too.

So well, you know what the you know, we do take a concentrated, focused approach to you know, to our portfolios, so are not broadly diversified, so or a lot different than most uh We'll say most money managers are advisors. Uh So that can be a plus or minus. And of course past performance is no guarantee of future results. The world is constantly changing. But you know, the big positions that we've had for a long time

in both Apple and Amazon have rewarded investors. And then the focus that we have have had or I've had in terms of Internet related companies, leisure related companies, China related businesses, and real assets and doing some short term trading, keeping up to thirty percent in cash has continue to pay pay off very, very, very nicely. And that's one of the things that I have found from well, I mean very concentrated through a lot of kid of writers,

concentrated in good big cap stock Apple and Amazon. Two our Vegas horses by far nicest. See Amazon continue to wake up from his two year slumper. Yeah, because it was very as we've we shared with you, because we wear everything on our sleeve. Uh. Last year was very we'll say difficult, um and frustrating and definitely disappointing when it came to the Amazon. This year, this year, this year the opposite, uh an Amazon.

You know, Amazon's gotten a nice, nice little boost recently as more we'll say more cell side analysts of cold you know, have put Amazon as a top pick for for this year and probably at the next year. Amazon came out and offer is offering an AD tier or an AD based tier for prime um for prime customers, and they bet and they boost from some analysts based on generative artificial intelligence as part of Amazon Web Services, and that could kill

boost UM. Boost continues to lead AWS, which is Amazon server business just continues to lead that that thing, and it all roads tend to lead to AI. AI has been the big theme this year. Apple's benefited a little bit from into Apple seems to benefit from everything. So it's in terms of narrative, we'll just keep going back. If you're a bear at this point, I guess you're saying, I'm right in the end, and yeah, we're still twenty twenty thirty percent cash, But we just have to acknowledge there.

There hasn't been a new bear narrative for a while to it's the same thing. And you keep period on financial TV and it does not matter whether it's coming from strategists or or some of the other money managers that no, this things are too good. There are too many negatives out there be a seller. Look, I was admittedly terrified at the bank thing when we were very far in front of that, and I just last few weeks it's just

the bank indecks is recovering. At worst, it's going to be a bank walk, not a bank Run's not going to be a fire sale of assets. And time is the friend of every credit investor. I'm still not a bank investor, haven't been saying. I'm not saying you are, but the pipes of credit. If you're looking for things that can actually wreck the market, a series of bank runs and a forced sale of you know, hundreds of billions of dollars of securities is one thing. And what I'm saying is

we've gotten through that. That's just one more thing we've watched at this market that it seems to have shrugged off and it continues to look like the liquidation in last October was a near term one. So well, I want to touch base based when we talk about credit. A worry about the market is the Federal Reserve is going to be issuing over a trillion dollars worth of bonds. Yeah, yeah, yeah, yeah. We'll talk about touch that when

we come back. This is Josh Arnold, mister money talk with Judd Arnold. We're here to help you. Nine five two nine two five five six eight, he says, Josh Arnold, mister money talk with Judd Arnold, here to answer your questions on stocks, bonds, mutual funds, that you should position your investment dollars including your IRA at four oh one K. Don't hesitate to give us a call nine five two nine two five five six or eight. That's nine five two nine two five five to six h eight to

always get straight talk, sugar coded advice. We mentioned that a worry just as we concluded that could produce a negative for the market, and that being the Federal Reserve issuing over a trillion dollars of bonds. To help fund the debt the federal government. It's the cash balance of the federal government got down, I think under fifty billion. They need to constantly issue T bills, that's short term treasuries for liquidity purposes, because shockingly, revenues are not evenly

distributed throughout the year, but spending is typically evenly distributed. Like most large enterprises, they have short term funding needs. And with the government shutdown, potentially they've been hoarding or they had. We ran into a debt saying thing so they couldn't issue treasuries and so we've a drade in cash. And now the new bear fear is, well, they got to issue a trillion dollars of treasuries and that's going to soak up liquidity. Never in my life,

I'll just say this, has this been a cause of anything? Okay, I didn't think. So we've got massive balances in the reverse repo facility. Maybe the federal government has to pay a little before at the front end of the treasury current. This is not that these numbers sound big, but don't don't forget the money market, which is short term treasury bonds and commercial paper, is massive and sees this a mile away so I think this is what they call bear porn. You know, Oh I like that bear porn.

Yeah, so you know, negative stuff for people who are negative. And look, you have to be as an investor. You have to have strong opinions held loosely okay, which means you have to be arrogant to believe that you know more than the other person, but humble enough to know that you probably don't. So when it goes against you, you need to surrender quickly. Right. Secondarily, just remember the bears always sound smarter. The bulls make more money. That's why you know, the market over time tends to

go up. And so let's just be leary and we sort of balance these risks by having a cash balance, trimming positions when they get wrong, having a trading trading book that we have tight stops with. But I just I hate to be like I am, and I'd like to sound like a reluctant bull. You know, we are largely invested, we acknowledge all the negatives. I just we can take these things down every week and it's exhausting. And I think the market's kind of saying you've got to show me more.

And I think more acutely. You know, we've had an ESTMP five hundred earning estimates, they're not under two hundred. We've come down from two forty. It all comes down to earnings. At the end of the day, all of these negatives that people talk about the price of stocks is ultimately what's the earnings and what's the multiple I'm going to pay for those earnings. And stocks tend to move as estimates change, And once you get towards the end

of the year, people don't look at the year's earnings. They look at next year's earnings, and so the bears are right, then earnings we're going to come down, and that may have already been priced in last October. Well, I think companies would have had already been cutting their their views earlier. You know, I'll say not only earlier this year, but also late

last year. Companies were cutting cutting their views. And now some of the you know, some of these companies have been beating estimates when they've when when the earnings have come out, and that has been been a positive. And then you've had certain sectors of the market, particularly some of the large capitalism Asian companies, have just continued the producing results and then add in, add in all of a sudden the need for semiconductors in uh, in the technology

sphere and elsewhere, and a huge demand for those those semiconductors. UH. I think that's that's going to continue to you know, drive not only technology or technology related companies, but it could be a driver for for the market

going forward. And speaking of you know, technology, then we come back to what has been hot recently is artificial intelligence, which seemed to have started with Microsoft's Developers conference where they started promoting their use of artificial intelligence to give their search engine being a big push push up, and that kind of woke people up again to the uses of artificial intelligence, which has been around for

a long time, but in particular this regenerative artificial intelligence has gotten a nice, nice boost which has helped companies like the Vidia, which is seen as a big, big leader, and that stock not only started moving up with that, but when they announced their earnings, they surprised everybody with a huge revenue increase and at least going into a quarter and maybe beyond that. The AI thing has certainly been the theme for the year and it's really lifted all

of tech. I think it's just that simple, and it's incredibly fascinating. We'll see how this plays out. Keep in mind, the biggest companies in tech always win, and there's a big argument that you just play it that way with the biggest you're you're gonna get exposure. So AI very hard to predict. Well, it's it's been around for a long time. If there's nothing, it's nothing really new under the sun with it. I would just

say as an aside, Google certainly seems very vulnerable to AI. Yes, that would make most things typically our replacement for Google Search and the most basic level, and that is one of the reasons we haven't don Google when people ask us, because we're really overweight Apple and Amazon. Microsoft is really the one that we always debate because that's a pure monopoly too. But Meta and

Google, Meta being Facebook are ad based models that aren't true monopolies. Oh there's a There are a lot of ad based models, and some are, but they're not they're not monopolies, and I think to pay the prices if you own a monopoly and not get a monopoly is tough. Now, these stocks have done phenomenally well over ten years. People ask us why we don't own them when we own Apple and Amazon. And again, well we'll have

the debate on Microsoft. It doesn't really matter that much because Amazon and Apple about performing it. But it's it's certainly a fair point. Well, when you talk about monopolies, Adobe announced, you know, they're foray or additional foray into a regenerative artificial intelligence. Their stock got a big boost plush this past weeks plus they're gonna be coming out with their earnings next week. And Adobe, I mean you've said this, it's got a huge monopoly, huge

menopoly. That stock bottom did about two seventy five. It's now back to four or fifty the pandemic high, I think it was about seven I want to say six or seven hundred, but it looked like it was under siege for a while. That's another one. And I think the answer is at some point somebody's gonna be to Adobe. I mean there's just I mean I pay for Adobe Acrobat. They raised the price on me every ten now ten

percent, every quarterer. I just think it. You get a lot from the other ones, and at some point somebody's going to solve a PDF feword that we don't have to pay fifty five hundred bucks a year or four. But you don't have to play every game. You just have to play the games that you feel good about. So anyway, it's hard. You know, it's more interesting when we're negative and we say things are going to happen.

And I guess that is the meta points and met are not the stock but the you know, the euphemism if you will, that in the summer it's slow. It doesn't mean that things aren't going under the service, but we monitor them, but we are. This is a bear market in search of a new narrative. Okay, and until we get credit cracking, you know, because we really have the opposite. We have credit at the tights, the expressive, compressed. The bank run thing isn't nearly as bad.

Commercial real estate is horrific, but the prices of the securities and the buildings largely reflect that already. You need a new stimulus to move a market. You need to change in expectations or change in reality versus what is priced in. And for the short run, we're not sure while we're gonna stay twenty percent cash, so well, we'll come back with our last last little bit

after the break. Say this is Josh Arnold mister 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 to five two nine two five five six

oh eight. This is Josh Arnold. Mister 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 at nine two five five six oh eight. You always get straight talk, not sugar coaded advice. Well favorite Apple had had

a big worldwide developers conference this week. The stock prior to the meeting hit a new all time high at one hundred and eighty five dollars. A share closed a week at one hundred and eighty one dollars after the meeting, or while the meeting was going on. On the first day, that being Monday, Apple stock sold down to one hundred and seventy seven. Recovered a little

bit during the course of the week. A lot of a lot of analysts were somewhat down on Appole's introduction of their new virtual pro their virtual reality headset, or maybe I should say it got mixed reviews more on the cost, the cost of it being about thirty five hundred dollars and who would who would buy it and how many units? Apple would actually say, but they're not

going to be selling this until two twenty four. Meantime, the introduction during the Worldwide Developers Conference is giving developers time to develop applications for this particular unit that again is going to have i'll say limited sales, but it'll be another

item to lock people into Apple's ecosystem. Now. One analyst that who had been bullish on Apple Tom Ford, had cut his rating after seeing this virtual prow and said, now everything on Apple is pretty much priced in, and he lowered his price target on Apple from one ninety five to one eighty five.

On the flip side, one of the bigger bulls on Apple, Dan Ives of web Bush, raised his price target on Apple to two hundred and twenty dollars a share, which is thirty dollars a share below my price target on Apple, saying some of the parts for Apple make it worth that and

maybe even a little bit more. Apple, in my estimation is under owned, as most most large investors I think do not own the a full waiting of Apples, as given the Apples about seventh as a seven percent waiting in the S and P five hundred, and Microsoft is pretty close to that. So those two stocks are probably under owned by most large large investors. But Apples, But if I look at Apple not only as a company but where they are going, would kind of move into where some of the big opportunities

lie. I bring this up only because I saw an interview with one of the better emerging market investors, Mark Mobius, on Friday. He had been with the Templeton Funds for i'll say forever. Now he has his own firm, very very sharp, sharp guy. But he was asked about China, and particularly given the China's GDP number, as we had talked earlier in the program, was negative this year, what he saw in China and whether that

presented an opportunity for investment or some additional risks. He said, well, Chinese population is aging, but where he saw big opportunities was in South Korea, Taiwan and India. Our favorite Apple is big in all those places, and Apple is actually expanding in India. I think China is really going to be end up being It certainly may end up being Japan two point out,

and Japan two point out. It just means Japan is economically stagnated since nineteen ninety give a declining population, fully industrialized, and it's just it literally can't grow. China is self induced on the population control front with the right and

then economically, I would say also the one child policy. It has been a disappointment certainly for commodity and energy investors that Chinese reopening post COVID and they were locked down longer than anybody has been more tepid than you would expect. Now the rest of Asia, and that's really you know economically, that's Korea and Southeast Asia as well as the Taiwan too. He's grown has been growing faster than China for several years, so that's a big deal. China or

India is certainly ascendance as well. India is a lot poorer than China. Port and China. Part of the China stagnation Japan two point oh pisis is it's really unfair to look at China on any metric of per capita, which is just you know, GDP per capita for example, is just your GDP divided by your number of people. Because China, while it has one point five billion people, in the US populations about three hundred and thirty million.

And I don't mean this in a non humanistic way, and I will cavey at it like that, but realistically, there's about three hundred to five hundred million people in China that are going to be a grarian a thousand years from now, and so not that we completely exclude them from statistics, but the idea that you don't adjust the statistics to reflect that they're living at grarian lives in western China, I think is a mistake and it would be in misread

of the data. So the GDP per capita, oil, US per cappit, all this other stuff, they don't have as much upside as a pure look at the numbers would imply that's what I mean. Okay. India also one point five billion people outside of the major cities. Oh boy, it is well anyway, India has been a growth story for a long time. We'll see, we'll see what happens the rest Pakistan's been a center for a while, Sri Lanka, Vietnam, all these places. Growth is going to

really continue, and I think that's the bottom line. There's just far more people in the Asian orbit getting a piece of that. And that's certainly been Apple's big tailing, as it's been Nikes and certainly every commodity investors. So anyway, we shall we shall see. But for those those just joining, the meta points are the following. We don't have a new bear thesis.

The market has rallied four weeks in a row. We're not up twelve and change, almost thirteen percent for the year now, the equal weighted SMP that's on the index that we personally, yeah at our client portfolios are up north you know, thirty low thirty percents and change. So and we've outperformed on it on a two year, three or five year Well, I can say every year, but you can go back a lot, you can go back decades, and we've we've done very well, um and happy to show people

those numbers. So we do run more concentrate. But while we've been certainly acknowledging and fearful all year of the negatives, we just continue the last couple of weeks, there just isn't a new negative. And until there's a new negative, it's going to be hard for this market to sell off because a lot of the negatives are priced in SMP five hundred arans, estamates have already come down. We're now looking to twenty twenty four and not twenty twenty three.

We're just waiting for something, something new. So the next real time, well, the FED I don't think is going to matter next week whether it's zero or twenty five percent, and now it's going to be q Q three or Q two. Earnings is late July early August for most companies. That will be the next really big data point, and we don't expect much because that typically is a slow part of the part of the year, and then you'd start start focusing in on what's going to happen into the Christmas Christmas

quarter going forward. Meantime, coming up next week earnings from Oracle Adobe, we have the FED FED meeting, then both the CPI and PPI numbers and a weight and see we say we'll keep steady as we go, keeping up to thirty percent in cash, both for safety and to take advantage of any market pullbacks. There could well be a pullback coming in the summer, so just be prepared for that. And that's why we have the cash and we

continue to be focused on companies with growing sales and growing earnings. We're here to help you. Give us a call nine five two nine two five five six zero eight. I am Josh Arnold. Missed Money Talk with Judd Arnold. Josh Arnold Investment Consultant is a registered investment advisor located in a 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.