This is Josh Arnold, mister 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 your coded advice. Before we begin, do recognize that all the opinions that are shared on this program our hours and hours alone. Past performance is no guarantee of future results. Any stocks or bonds or mutual funds that we mention on this program may or may not be suitable for your situation. Please contact your financial advisor before you go go ahead with any
any investment decision. And now we begin. It has been a very very interesting twenty twenty three, and I do believe that twenty twenty four will be just as interesting, and maybe even a little bit more so given an upcoming
presidential election cycle. So not only do we have the election coming up, not only are there hostilities taking place in different corners of the world, and we also have to be present about the Federal Reserve and questioning whether or not they are going to be cutting rates in twenty twenty four, as many strategists, as many analysts are predicting that the FED could cut cut rates six times or nine times or more than that, and that has I'll say that belief
he has filtered true not only to the bond market as bond prices have gone up and yields have come down, but also has filtered into the stock market as interest rates have come down. Is given a boost to the overall stock market. So you still have that macro you know, some macro events that will color what happens to individual stocks and bonds and the market overall in twenty
twenty four, just as it has in twenty twenty three. Then there's going to be the focus on corporate earnings, that being the micro that we tend to look at as we look for company with both growing sales and then growing earnings over a period of time, and particular in industries or we'll say, sectors of the market that we feel that we can understand and also provide some
value to. Now, going going forward, I have focused primarily on investments in the internet, leisure related businesses, China related businesses without necessarily having to invest in China real assets such as real estate, And we do a bit of short term trading, trying to take advantage of some we'll say situations that I and we feel could merit a small investment for a short term trade. Some of these trades work, some do not, and sometimes some of the
trades eventually will lead to longer term investments. But I do believe that twenty twenty four will be as interesting and in some ways as volatile as twenty twenty three was. I do caution that in any given year, the market will have three to four, five to ten percent pullbacks. Not suggesting that you do any timing this as a strategy, but know that this is this has happened in the in the past and could probably well happen again in twenty twenty
four. Typically some of these pullbacks take place in February, in early March, again in April prior to tax tax selling, then a little bit in May, and then in late summer, and this summer could could be a
little bit more volatile just ahead of the election in early November. Then after the election, well it will be we'll say this, We'll say decisions will be made in terms of who the next president is going to be, and then with that certainty, typically the market will finish strong in November and into December. So just be aware of some of the ups and downs that are
typically going to be happening next year. That said, I am of the belief that unlike many I'll say many strategists, many analysts who are looking overall for the Fed to cut interest rates and be aggressive in their cuts, I do not believe that the Fed is going to cut at least before the election. They'll probably cut once, maybe twice, and that will be because they're noticing the trend or the inflation trend moving closer to their target of two percent.
I am I do not believe the economy is going to necessarily go into a recession. Though we could have a slowing of certain sectors in the economy, and that could cause many strategists analysts to start pushing the Fed to cut rates, or maybe even that becomes an impetus for the Fed to initiate their
first cut. Well, typically, if the Fed is going to be cutting or cuts aggressively, that to me would indicate that the economy is slowing a lot faster than the had FED had anticipated, and they want to keep some measure of we'll say equilibrium in the economy. So I think the FED will continue to talk tough with higher for longer mantra continuing, but they probably will not be aggressive in any rate cutting unless that inflation target ticks down closer to
two percent. Bonds, well, I've not been a bond investor, other than maybe for a short term trade. I don't see that changing. If interest rates remain static, bond bond prices should also remain static, or if yields, particular in the long end start falling more on a market basis, and yields did fall a bunch over the last few months, where the ten year Treasury went from five percent to down to three point eighty six percent,
and bond prices correspondingly moved moved up. That's a very significant drop and yield and boosting price. I don't see that happening again unless the economy slows precipitously, and again, I don't see that happening. When we come back, talk a little bit more about the direction of the bond market and my views of the stock market and some individual stocks. As we continue this is Josh Arnold, mister money talk with jut Arnold always here to help you. Give
us a call. Nine five two nine two five five six oh eight. 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 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. When we begin two
thousand and twenty three. Uh, the view, I'll say, the view from the Pew, but not our Pew, the view from the Pew's most market strategists, many animals us, were of the opinion that the place to be was bonds, as the FED would finish with their rate heights in twenty twenty three, and that would institute a recession. Once the recession hit, the FED would start cutting aggressively and that would boost bond prices. Well, the Fed did not cut interest rates. We did not have a recession in
twenty twenty three. Indeed, the GDP numbers were pretty pretty strong. Inflation and many sectors came down, came down pretty pretty well. The price of energy continued to fall, both at the gas pump, though the price at the pump is still higher than it was in two thousand and nineteen. Natural gas prices fell, so that's good for heating and cooling. Energy fell,
so that's kind of reduces a lot of inflationary expectations. Home prices and mortgage equivalent rents seemed to flatten out, and wages did go up, and I do believe there's still going to be some wage growth continuing to happen, just in terms of demand for labor and union wages are have also gone up. But overall, I think the inflation could get closer to the FEDS two percent target, maybe by the end of twenty twenty four than it was at the
beginning of twenty twenty twenty three. But bonds. Bonds, in my view, were not the place to be in twenty twenty three, though that's where most strategists had suggested you put your money, and they also said sell stocks, and stocks at the beginning of twenty twenty three were just off their low point, and I know a year ago at this time I was probably crying my beer, particularly over the performance of my two favorite stocks, Apple and
Amazon, which had Amazon in particular had dropped in twenty twenty two, you know, about fifty percent, and I thought that was excessive given what their business was and the business prospects. The same would be said of Apple, but Apple was only down a little bit more than the S and P was down in twenty twenty two, which was nineteen nineteen and a half percent.
But twenty twenty three proved proved a big, big change. As large capitalization stocks, and in particular in the tech sector, these companies became known as the Magnificent seven. Apple, Amazon, Microsoft, Alphabet also known as Google Meta or Facebook, Navidia, and Tesla moved up and definitely powered the S and P up to finishing twenty twenty three up twenty four point three percent.
That's very significant. The Dow was up thirteen point seven percent, and small companies represented by the IWN the Russell Russell two thousand, that was up fifteen percent. So overall, say that was a tricky good year. Bonds chick me, the long long bond represented by TLT was down for the year about one and a half percent, which is a lot better than being down fifteen
percent where it was in October. So that's a big change. The proprietary client portfolio, which is a real money portfolio that I run, focusing in on some longer term holes which includes Apple and Amazon, and then smaller positions in leisure stocks, China related companies, some real assets, and then also keeping some cash. That portfolio net after fees was up forty two point two five percent, So that was a very very nice comeback from twenty twenty twenty
two. So we could say we had a very good year and I was happy, definitely happy with that. But going back to the S and P, the focus on these large capitalization companies, the Magnificent seven really powered the S and P, which is a market market cap weighted fund, the equal weighted S and P fund, I think jud judge, yep, yep, Okay, the equal weighted S and P was up what about ten and a
half eleven percent? Yeah, so there were It's a year for big caps as it's been since since the level financial crisis, and they're in the we'll say the laggards of that four hundred and ninety three stocks and even the smaller companies you know, are starting to perform a lot better than the larger companies, and that might continue as going into twenty twenty four, as strength in
the overall market continues. Now, I am of the opinion that after a very strong run in the overall market, in the S and P index, particularly in the last two months of the year, you could see some early selling. And I do emphasize could see some selling. This isself just say the standard thing. Every year, what do we tell you meet with us, every client, every meeting. Here's the stats. Every year the market goes down at least five percent on average three to four times and at least
once goes down ten every year. Is that's that is true? I'm just saying after we have all and I would use some of that selling, Judd to be a buyer next sure, next week. Sure, we've had a big run. Typically the January effect plays out until the second or third week in January. We have had an extraordinary run in risky assets. Just to put it in context, the ARC Fund, probably one of the highest risk assets in the market, was up fifteen percent year to date mid mid October,
ends the year essentially up seventy percent seven zero. You put up fifty five points of performance in two months unbelievable. Yeah, there's a there's a lot of a lot of volatility there there no but like the S and P five hundred finishes the year up twenty four percent, it was only up nine in the middle of October. These were huge. We've had a huge run. The market needs to probably consolidate a little bit. I really loved talking
about macro because we don't make our decisions based on macro. We take what we're doing. Now. When we come back, Jud, we'll talk. We'll talk some micro and some individual names or individuals or sectors that could be good in twenty twenty four. This is Josh Arnold, mister money talk with jud Arnold. We are always here to help you with your investing, whether inside or outside your retirement account. Don't hesitate to give us a call.
Nine 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. You should position your investment dollars, including your IRA in four O one k. Don't hesitate to give us a call two nine five six oh eight. You always get straight talk, not your Code of Advice jud disclaimer. Some are all of the securities we discussed in the
show may or may not be suitable for individual investors. Everything we discussed on the show is for our discussion purposes only. Nothing should be considered an investment advice. Please consult investment advisor before making any investment decision. Investing in the
stock market contains a series of risk, including the risk of loss. Good Now, there did not seem to be a lot of risk of loss this year in the Magnificent seven, at least as the as the year progressed, And definitely one of the themes that really pushed up the Magnificent seven was generative artificial intelligence, and that could be a theme into twenty twenty four. Oh yeah, I mean, I don't know if it's a theme as much.
It's just a continuation as tech continues to involve. It needs more and more stuff, stuff being chips, software, all sorts of fun stuff like that. The need for tech. It's we have had market leadership from you know, some version of the Magnificent seven. That's Apple, Google, Amazon, Meta, which used to be Facebook, Tesla in video, I'm forgetting one Microsoft, Microsoft essentially since the global really since twenty eleven, and that's going
to continue for a while. These remained the best business out there. There's a few other businesses on par with them that should frankly be considered part of the magnificent seven United Healthcare, JP, Morgan Blackstone, and there's a few others that fit that bucket of things that have gone up essentially twenty times your money since the global financial crisis. But you know, the best businesses continue
to be the best businesses. Okay, until that changes, we're gonna have a big gap between the S and P five hundred market cap weight and equal weight, and away we go. But that's going to continue to be a theme. Energy is a big question. It had a tough year this year. On a three year basis, it's out performing absolutely everything. Healthcare had
a flat year. That's going to be an open question. Well, but healthcare, we're always going to be an open question, particularly with anything related to the pharmaceutic given you have the upcoming election, and that is a question. Jeez, you know, what can we do to limit uh price increases in pharmaceuticals? You know whatever? Like, look, we don't do a
lot in healthcare, and it's a hard sector. You know, most people like as I mentioned, would be fine just buying United Healthcare and closing their eyes. Drug companies are typically pretty bad businesses for everyone that you get right, you get a few wrong. You can look at the chart of Pfizer, which has done absolutely nothing for twenty five years and really scratch your head. So we like growth. That's the biggest thing. We like growth.
Growth, Growth pays, it's the best it's it's the best thing. Down. If your stuff keeps growing, it's typically going to be undervalued. If not this year's going to be undervalued next year of the year after. So growth is good. Well, we've seen also that this year, particularly at the end of the year, some of the small small caps you know, really accelerating in their in their movement. Well, small caps have chronically underperformed
for a couple of years. Now, Yes, you're one hundred percent domestically focused. The negatives is the negatives are number one. About twenty percent of
the small cap indices are banks. Banks have had a dreadful year. They finished on a good note, but a pretty dreadful year and that should continue for some time because of the issues around Silicon Valley Bank and interest rates, and they are what I would call asset log Now, we could do an entire show about white banks are in deep trouble and they're tough investments, but we don't need to. We'll just say avoid banks. But that's a big
piece. About fifteen to twenty percent of the MidCap small cap indicies are also unprofitable companies, and they're a different kind of unprofitable than tech unprofitable. So people are okay with a cloud company being unprofitable. With an industrial company, you're a little bit less willing to drink the kool aid, so to speak, if it can't make money when you're making widgets. And then lastly, small cap companies tend to have more debt. It tends to be floating rate.
As interest rates rise. That has put a huge pressure on companies that finance VI a debt, and too many companies finance be a debt because of historically low interest rates for thirteen years now post the FED pivot official pivot, we're going to say in mid December, a couple of weeks ago, small caps have gone on about a thirty five percent run in a month. It has been a historic move. Or I stay two months historic move, there's still on a five year basis not doing much. And with small caps,
we really, you know, we're not big ETF people. We buy around cooking and we buy individual stocks. If we worry TF people, we would say you can buy an ETF with big caps. With small caps, you really can't do it because you you don't want to own the men. You need to find individual stocks. I focus more on the small and MidCap stocks. I will tell you you have tremendous success in some and you have tremendous failures and other ones. I've had enough of them go to zero that you
know you just have to raise your discount rate a lot. Now. The ones that work end up paying extraordinarily well. Our biggest winner this year in my small cap investments has been the Oncology Institute, which was a former SPAC. It bottomed this year at wait for it, thirty five cents a share and went public at ten bottom to thirty five cents to share Midsummer, and we end the year at two dollars and five cents. If you do that math on thirty five cents, that's a huge, huge return. But there's
tremendous amount of risk as you said, in a huge company. Now this is this is what we look for, a very dislocated stock day on seventy five cancer treatment centers where you get your contruder and your other cancer therapy drugs. And it was a what I would consider to be a baby out with the bathwater from the spac boom. A little bit of complexity, but oh boy, until you know that stock had mightily struggled. So other ones have
done less well. You know a few of our legacy investments we had to take the l on and that was tough Care Max probably being the biggest one, which after doing quite well initially, you know one to two years ago, that stock is looking like it may go out of business next year. Flip side of that, you know, we'll give you another winner, which was zimb which is another big winner of ours. This was a spin spin up from zimmer Biomet. Stock came out at twenty five a share about four
years ago. In the spinoff, it bottomed all the way down at five dollars a share. This in March, I think it was March this year we got involved. Stock Ramms twelve came back to seven and finishes the year at seventeen fifty as they sell off their twenty percent of the business was a spine business. Now they're going to be a pure played dental business. We have high hopes for that. Once seventeen bucks, if it trades it ten times cash flow, it's worth about thirty two thirty three bucks, and that's
where it should trade. Great management team. So that's been a pleasant surprise. But it's a while here. We're gonna people people call, they asked, what are you thinking for twenty twenty four, and I'll just sound like a broken record, as will you, which is Marcut's going to go up, er down, or it's going to go down five percent at least three to four times during the year. Expect volatility. We don't know when it's gonna come. Like what you own, have a big cash balance and be
ready to deploy that cash balance into stuff and play offense. Politicians are going to do yep, politicians are going to do silly stuff. It's an election year. They do silly stuff. Every year. They talk about silly stuff. Companies are going to spin off, go public, go bankrupt, merge with each other. All sorts of things are going to happen, and ultimately what we're looking to do is get into stuff at what I would call a value price, and as time and complexity decrease, to sell at a speculative
or growth price to somebody else. All you can do in this business when it works well and when it doesn't sell quick sell often. That's pretty good. That's pretty good, and I think that's that's one of the reasons that we keep a pretty good cash cash balance. Typically in our asset allocation model we keep up to thirty percent in cash, both for safety and for opportunity. The balance is invested primarily in growth companies and we go go from there.
And as I said earlier, the proprietary client portfolio did very well this year, up forty two point two five percent after then after fees, and that's a real money portfolio. And and just on that we would point out the outperformance on a five year basis versus literally every benchmark is extraordinary. You can comment to the S and three five hundred or the nas SEQ one hundred, but come talk to us. We'll give you all the disclaimers and we can show it. You can have, you can hold it and look at
it. You can look at what we've done. We are the biggest investors in what we do. We are a family business. So but what that will be right back? This is Josh Arnold, Mister money Talk with Jutt Arnold here to answer your questions on stocks, bonds, mutual funds, how you should position your investment dollars. Give us a call two nine two five five six oh eight. This is Josh Arnold Minster Money Talk with Jut Arnold
sper answer your question on stocks, bonds, mutuol funds. Have you should position your investment dollars including your IRA four oh one k do give us a call nine five two nine 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. When you're looking at the at the market, jud right now? Uh, are there any sectors that that stand out to you that you really want to go go look at? Ah now, I I think we're
just waiting for things to fall out of bed. We like what we own a lot. Markets are on a lot. It's usually a bad idea to get to overly trade on the way up when the way up, and I think we're still on the way up. Yeon what you own? We look to do a few small trades, but generally speaking, on what you own, I'm going to make a decision to rotate or not rotate later in the
later in the year, or sorry, later in January. But I think one thing that I do feel strongly about we avoided energy for about ten years. Everybody's shooting down about five percent energy because it is showing to be inversely correlated to everything else, and it is a nice edge. Beyond that, I don't feel super strong. Five businesses that can pound I think the lesson in my investing life is certainly and one that you gravitated to as well,
which is growth wins and you just time in again. I look at what worked from the global financial crisis, and I was in a really great seat. I was at a stressed debt fund. We made money in O eight. I had a pile of money in nine and I started deploying it. And I think about how easy it would have been just to buy the obvious, really you know, premium businesses and where they turned out. So good stuff is probably going to keep working if you can get it at a reasonable
price and the to hold it for a long long period. One of my better friends was a banker at JP Morgan Chase for years, and I'll tell you what. You look at that stock from the global financial crisis, you may never need to sell it. Three percent of in a yield. Still to this day stocks at an all time high. Every sale since Jamie Diamond came in, I want to say six has been a bad sale of that
stock. And when the London whale thing happened where they had a rogue trader, and I think that was twenty eleven or twenty twelve, the stock went down to thirty bucks. Buffett said he owned one or two million shares in his personal account. You sit here today, you think of all the stuff that's gone bad in banking and where we are stocks one hundred and seventy bucks and still cheap. That's what you want to find a franchise. Things.
You got involved with clients in Apple in after the iPod wasn't in four h five. Oh yeah, after the iPod was two thousand and four. It's when your sister graduated from high school and you and your brother got her an iPod as a graduation gift. And I looked at that and said, this thing is a razor. And they sell razor blades, and kids like music. People like music, and they're going to keep buying it. And Apple
gets thirty cents a song. We're thirty cents out of each download. And I said, they also sell computers, and they're gonna have they're gonna sell games, they're gonna have other things. Them happened, and initially we made some Well, I'll just as you could have bought this thing at nine for
about six bucks this year. It's unbelievable. So compounders keep working. I read a pitch on in Video from twenty from two thousand and two recently, so he sent it to me when in Video is a two billion dollar company, it's over at trillion a day, talking about Jensen Wong and how great everything is. And you find growth early, and that's that's what I try to do, find growth early and then ride it. And as Charlie Munger used to say, the value is in the holding, so well he did
very well. It's in the holding. And if you've got if you have growth, and you have some time, and I definitely have, you have to have patience to deal with all the ups and downs. Because the times that I've owned Apple and Amazon as well, they have dropped numerous times fifty
percent in value, only to come back and come back stronger. And when they sell off, as long as that business is still still good and you can still see some growth, that's the time to buy some more shares, not the time to sell and then ride that ride that back up correct. Well, Look, it's not a controversy. It's not a controversial call. I think the market's going to do just fine next year. I think we transition to a new market phase with the FED pivot, and I think EMINE
is going to accelerate. I think i pos are going to accelerate, and I think that's going to be a nice little boost boost for the market. I unclear what happens in the world, as it always is hard to figure out these things, but I think the best business has remained very well positioned, and you've got a lot of up and comers as well, so well.
I think just focusing in on some of those businesses he has like to, you know, talk about and look at, you know, the broad picture some of the macro macro events, because that does have an impact, at least very short term with what goes on in the market and our individual
companies. But looking at you know, the individual companies and some of the areas of growth have brought up artificial intelligence, which really boosted i'll say the Magnificent seven starting last last May and focus I mean that's focus in on artificial intelligence. Now. To make this stuff work, you definitely need good information
and not not anything else. But not only do you need the good information, you need good software, you need good data data storage, and additionally you'll probably need some cyber security to keep keep away some of the bad actors as this is this is UH going on. So those types of companies that that fit in those segments, UH, you know, could do well to
talk about you need data, data storage and fast fast chips. Well, that's going to continue benefiting companies like Navidia A m D to some extent, Micron the people who make make the chips, Taiwan Semiconductor, or arm Arm
Holdings, just a few there. Uh. The UH cyber security names UH companies like UH crowd Strike, UH cyber cyber arc, UH pala Alto networks you know, fit fit in into that than the companies that are actually doing some of the artificial intelligence or or leading the charge there, whether it's a Microsoft, Google, Amazon, Apple. I think those are those names you
know, could could do do very well. You have some other you know, competitors, and we'll say in China that you know have that are going to compete, but I don't know whether they're going to compete on a worldwide basis, but definitely compete in in China and there's a big population there. But do be cautious with investments in China because of you know, more of the government issues which can throw a real wrench into any any stock just with
a quick change in regulation. Uh. That said, it is twenty twenty four is going to be interesting. Make sure you have some cash available to take advantage of any of the pullbacks that take place. Any questions at any time, don't hesitate to give us a call. Nine five two nine two five five six eight. We wish you a very happy, healthy, and prosperous twenty twenty four and we're always here to help you. Nine five two nine two five five six oh eight. I am Josh Arnold, mister Money
Talk with Judd Arnold. 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.