Mr. Money Talk

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Episode Transcript

(00:09):
This is Josh Arnold, mister moneyTalk with Judd Arnold here to answer your
questions on stocks, bonds, mutualfunds, how you should position your investment
dollars including your IRA and four ohone K. Don't hesitate to give us
a call at nine five two ninetwo five five six oh eight. That's

(00:31):
nine five two nine two five fivesix oh eight. You always get straight
talk, not sugarcoaded advice. Asalways, before we begin, do remember
that this this show is presents ouropinions of stocks, bonds, mutual funds,

(00:54):
and how we view the marketplace.All investments opinions our RS and rs
alone, or opinions that we sharewith our clients, none of this constitute's
investment advice. All investments have riskassociated with it, including the risk of

(01:21):
loss. Before you take action onany of our any of anything that we
discuss, please consult your financial advisor. Many of these investments may or may
not be suitable for your situation.Caveat empoor. This is Josh Arnold,

(01:53):
Mister money Talk. Judd is inNew York this week to cover the Barkleys
Energy Conference, but much has transpiredthis this week. It was not only
back to school for many coming backfrom labor Labor Day holiday, but also

(02:19):
the return of the varsity or asI've said to the varsity traders to the
market place. Volatility did increase alittle bit, as measured by the volatility
index. Option activity also increased.And all you have to do is look
at the stock chart of CBOE,the Chicago Board of Options Exchange. Much

(02:50):
of the volatility or to meet thevolatility index may he have dissipated this year
due to the advent of zero datedoptions. These these options track the daily

(03:13):
and I do say daily movements ofindividual stocks and or indices, and in
any option transactions, at least twoof three of the parties are going to
make make money. You're always goingto have the exchange making money on making

(03:38):
the trade, the broker who executesthe trade is going to make make money
on the trade, and you mayor may not make money. And as
the saying goes, two out ofthree ain't bad. But in light of

(04:00):
options activity increasing at least based onzero data options, that may have an
effect on the volatility index being aslow as it has has been, and
of course that is my estimation.We have seen a continued uptick in certain

(04:27):
commodity prices and in particular energy prices, primarily oil has been ticking ticking up,
and Judd's assessment from participating in theEmbarkment's Energy conference and speaking speaking with

(04:50):
many energy executives and attending different companiespresentations was that energy and exploration companies may
not be the place to invest,but the place to invest in Judge Judge

(05:14):
view is to stick with the infrastructurecompanies primarily rather than the will say,
rather than the drillers. The infrastructurecompanies or companies like tide Water which provides
will say services Hall in Britain,Schlumberge trans Ocean, which provides ocean going

(05:41):
rigs, and it is believed thatthe cost of those of operating those rigs,
or the rents to operate those rigsthat are will go to the companies
like a trans Ocean or a Tidewaterwill start going up. Judd is also
partial to New Fortress Energy, whichis involved in development and transhipment of liquid

(06:09):
and natural gas, and that wouldalso extend to Shanneer Energy market symbol is
l lnng uh. These companies,jud Fields offers offer some pretty good upside

(06:29):
with some some down downside protection.Maybe I've been I've been very hesitant in
dealing with energy companies other than afew that I'm very uh familiar with.
But my view is more on thewe'll say development side, looking at companies

(06:55):
like local Northern Oil and Gas,which is a company that I have followed
for twenty twenty plus years, andthey're more involved in we'll say the real
estate around oil, and Northern Oiland Gas has slowly but steadily been moving

(07:16):
up. Plus it pays a verynice dividend, and it's on the cheap
side on a price to earnings basis. I have also liked a small producer
that focuses more on natural gas drillingin the Permian basin and elsewhere, Comstock

(07:40):
Resources. But that's that's a muchmore speculative energy play, but could be
very very interesting. And there aresome people that look for yield in the
energy field and they concentrate on companieslike Energy Transfer Partners or Kinder Morgan,

(08:09):
which are more pipeline operators and they'llgenerate much higher, higher yields and still
give you some energy exposure. EnergyTransfer has been buying by shares on a
regular basis, so management obviously believesthat their shares are quite quite inexpensive.

(08:33):
I've been hesitant, i'll say,to look at some of the pipeline companies
because of an extremely bad experience thatI had many years ago with Kinder Morgan,

(08:54):
and they're cutting their distribution in half, which cut the stock price also
in half. Since that time,Kinder Morgan's stocks, i'll say, has
traded pretty close to where that prettyclose to where it was when the dividend

(09:20):
cut occurred. And right now,numerous i'll say big money is starting to
shift into energy energy stocks as theysee the price of oil moving up and
moving up significantly in the in thelast several weeks, particularly after both Russia

(09:46):
and the Saudis and OPEC proposed avoluntary ha ha, a voluntary million barrel
a day cut in production. I'mguessing that part of that cut in production,
they need the money and to todrive out some of the short sellers

(10:11):
that have been in the energy space. Meanwhile, the response that we've gotten
here in the United States, whichhappened happened this week, was not an
increase in oil and gas production,although that might happen with individual companies,

(10:35):
but the administration's viewpoint was not toencourage more energy production, to encourage more
energy independence. It was instead,we're going to cut leases in the anwar.

(10:56):
And I say, why kind ofnonsense is that? What kind of
nonsense? If you want to beenergy independent, you don't just need solar
and wind And the amount of moneythat's going into solar and wind wind projects

(11:18):
is astronomical. And the last timethe government pushed that kind of money into
will say solar projects especially, thatdid not end well for government investment.
All you have to do is lookup what happened with a company called Celindra.

(11:43):
But more on that as we proceed. You've got plenty to cover,
so stay tuned. This is JoshArnold, mister money talk that Judd Arnold
do give us a call nine fivetwo nine two five five six or eight.

(12:05):
It says Josh Arnold, mister moneytalk with Judd Arnold here to answer
your questions on stocks, bonds,mutual fonte. You should position your investment
dollars including your IRA in four ohone K. Don't hesitate to give us
a call at nine to five twonine two five five six o eight.
That's nine five two nine two fivefive six oh eight. You always get
straight talk not sure coded advice.Judd, as we said it during the

(12:28):
first segment, is been participating inthe Barkley's Energy Conference, and energy or
energy stocks have been been on themove, particularly recently since OPEC and the
Russians have decreased the amount of oilthat they're going to produce by one million

(12:54):
barrels a day. Don't know howlong this is going to continue, but
definitely they need they need the money. The response from the current administration here
in the United States, well,let's cut cut production and let's cut leasing

(13:18):
any of the energy reserves in asmall portion of the Alaska National Wildlife Reserve.
This wildlife preserve was specifically set upfor for energy development, among other

(13:39):
other things, and drilling or leasesin that preserve are a cheeny fraction of
the entire preserve. I once dida study, now this is many years
ago, of where the drilling takeplace. And if we were to take

(14:03):
a map, and we'll even say, take a map of Minnesota and say
that's the Anwar and then put adot maybe over Southdale in a dina,
that's where the drilling would take place. So a very teeny area in Anmar.

(14:26):
But if that were to be developed, or more oil or natural gas
could be developed here in the UnitedStates, we again could return to energy
independence. I do know that witha push towards wind and solar, you

(14:48):
start becoming dependent on I'll say,countries that are not necessarily friends of a
of a America given some of theminerals that are needed for that development.
But that becomes another story. Andnot that I'm against using wind or solar

(15:16):
for energy development. I just thinkthe costs associated with that and the net
energy result are minimal, particularly givenother sources of energy right now that are

(15:37):
far less expensive, including the developmentof natural gas. That said, energy
stocks have been moving up quote unquote, smart money has been shifting assets to
that for the time time being asthey see the price of crude oil march

(16:03):
in the last month from seventy dollarsa barrel to eighty four dollars a barrel,
and people have seen the price ofgasoline at the pump jumping up sixty
sets. Now when it comes toprice of that the pump moving up.

(16:25):
We do have the Federal reserve meetingcome in in two weeks, and the
Federal reserves potential move or non movinginterest rates currently is on the minds of

(16:45):
many market market participants, particularly giventhat earnings from companies are now going to
be few and far between until wehit it, we'll say the second week
of October. So macro issues willtend to overshadow micro issues. So what's

(17:10):
going on with the FED, what'sgoing on with world economies is going to
overshadow what's going on with individual companiesin terms of how people look at the
market that has that, and theend of a fiscal year will say for

(17:30):
numerous mutual funds where they're going tobalance out their gains versus losses, which
could could mean a lot of sellingtakes place in the market before that money
gets reinvested come October. Is somethingto to pay attention to. But when

(18:00):
we talk about the price of agasoline at the pump moving up next week,
we have a producer price index numbercoming out and a consumer price index
number coming out. Both of thosenumbers could be up. I'm not going
to say higher than expected, butthe likelihood of them being much lower than

(18:26):
expected, I think is on thelow side. The CPI be bear in
mind, is one or one thirdof that is the cost of housing,
or we'll say equivalent rents, andgiven that mortgage rates are higher and the

(18:52):
price of houses still has not comedown, and given that rents currently i'll
say across the United States, notin all sectors, because I have seen
some reports where certain cities in thecountry rents are starting to come down because

(19:14):
of a glut of apartment building.But we'll say equivalent rent is still going
to be high. Energy costs,particularly with the price of gasoline moving up,
are going to be high, andthe price of energy flows through to
a lot of other products, sowe might see a tip up, tip

(19:37):
up there. And then you canadd in wage costs, which are still
on the high side. Add inthat you've had a number of union contracts
either coming do or will come do, and those union contracts are also going
to be up. The only placewhere I have scene or heard of wages

(20:02):
coming down is from Walmart this week, which said that new hires in certain
certain areas the company will see adecrease in an hourly wage, and Walmart
saying they're doing that to provide amore balanced view for all new hires getting

(20:26):
the same same wage. Walmart's minimumhourly wage is lower than Targets or Macy's
cost goes or favorite Amazon. ButWalmart's stock has done very well recently and

(20:48):
has hit at a fifty two weekhigh. But concerns are going to be
this week, what is the producerprice index going to be and consumer price
index and how that could affect theFEDS thinking into the next meeting. And
whilst numerous FED governors have been speakingyes, they have continued to say rates

(21:15):
are going to stay higher for longer, Yes, we're going to be more
data dependent, and yes right now, right now, as in September,
it might be time to take apause to see the effect of what they're
they're doing. The market could geta little concerned if the CPI and PPI

(21:41):
numbers are a little high. Payattention, and one of the things that
we have suggested is in more VOTOmonths, you do have an opportunity to
buy shares of favorite companies that havebeen discounted, and that is why we've

(22:03):
recommended it keeping up to thirty percentin cash just to take advantage of any
of the pullbacks that occur during thecourse of any year. Typically we see
three to four, five to tenpercent pullbacks cause for any number of reasons.

(22:29):
So again with September being a moreor i'll say normally being a down
month in the markets and being alittle bit more volatile and more macro concerns
overtaking micro concerns. It may bewise to have this cash and then again

(22:52):
take advantage of some of these pullbacks. This is Josh Arnold, mister
money talk with Judd Arnold here toanswer your question on stocks, bonds,
mutual funds, how you should participatein your investment account. Don't hesitate to
give us a call at nine fivetwo nine two five five six oh eight.

(23:19):
This is Josh Arnold. Missed yourmoney Talk with Judd Arnold here to
answer your questions on stocks, bonds, mutual funds, how you should position
your investment dollars including your IRA infour oh one k. Don't hesitate to
give give us a call at ninefive two nine two five five six oh
eight. You always get straight talk, not sugar coaded advice. So we've

(23:44):
got energy prices on the on theupside do primarily to the price of oil
rising. Part part of that hasto do with the FED or to be
part of that has to do withthe Saudias and the Russians cutting production A

(24:10):
million barrels of oil a day.Part of that has to do, in
my estimation, with the administration's policyof cutting leases for drilling here here in
the United States. And of courseyou do have with we'll say, more

(24:34):
demand for energy and lower availability pushingup prices. I have seen a number
of strategists now calling for oil toreach or trade between eighty dollars and ninety
dollars and possibly going up to onehundred dollars a barrel with some of this,

(25:00):
with the shortages, and you knowthat could be a positive for energy
companies. Me, I'll say,unlike jud I am a little more cautious
on that particular sector. Judd likesthe infrastructure companies involved in energy, including

(25:22):
Tidewater, trans Ocean and New FortressEnergy. If I was forced into that
area, like some smaller producers includingNorthern Oil and Gas and cost stock Resources.
But more to the point, I'dprefer investing in companies involved in the

(25:47):
Internet, leisure businesses, other realassets such as real estate, and China
related companies. And boy, I'lltell you when it comes to China.
This week, news from China definitelyhad an adverse effect on my largest holding,

(26:12):
my client's largest holding, probably myfavorite long long term holding, Apple.
Apple stock was down a little overfour percent this week as concerns came,

(26:34):
and concerns came big on reports firstpublished in the Wall Street Journal and
then published again in by Bloomberg Newsthat China was going to be banning the
use of iPhones by government workers andworkers at state owned enterprises. This caused

(27:04):
a huge sell off early I'll say, in the middle of the middle of
this week, I'll say on Wednesdayand Thursday in Apple stock, sending it
back down from what my market technicianChris said the work said was the initial

(27:25):
breakout level at one hundred and seventydollars a share, not that many many
weeks ago. Now, a fewthings with that part, and I say
part could be associated with news ofChina banning the use of iPhones by government

(27:52):
officials and government workers and maybe andalso in state owned enter prizes. They're
also could be fear that China wouldban and or could ban sales of iPhones
within in the country as a meansof retaliation against American companies and particularly against

(28:23):
a big American company, and theretaliation of it is against or thrown at
Apple, you know, could begiven to the US's banning of Chinese company
or phone company Waowei several several yearsago that I don't know, but it

(28:48):
seems as if this reported ban andI say it's a reported ban, but
it could be a little bit morethan that. It could be an extension
of a band that already had beenin existence in China, at least as
applied to government officials not using aniPhone, but using a Chinese, Chinese

(29:14):
manufactured phone. But this reported bandcame came out simo almost simultaneous with the
release of Huawei's new upscale phone calledthe Made sixty and Made sixty Pro,

(29:37):
and came during Secretary of Commerces Ramundo'svisit to China. And I think the
Chinese wanted a little more leeway inopening up markets than the Secretary of Commerce

(30:00):
I was willing willing to give.But it just seemed a little bit too
coincidental. Now, Whawe's new phone, and I'm not sure the cost or
the specs specs on this is supposedto I'll say, according to reports,

(30:22):
it is supposed to be not completelycompetitive with the iPhone, but we'll say
good good enough for many people.Well, I don't know whether good enough
was going to cut it. Butall of this came out within a week

(30:47):
of Apple having their big event,which is next Tuesday, to introduce the
iPhone fifteen and some other other products. Now, typically Apple's stock price tends
to move up into this event andsells off after the event happens. Now

(31:15):
now the stock is sold off andsold off significantly prior to the event,
and I'm I'm not sure whether theevent is going to boost the stock price
significantly, at least until Apple's earningsreport comes out in October. In October,

(31:42):
but it would seem to me thatwhile not much has been leaked about
the iPhone fifteen, it may notbe a big leap from the iPhone fourteen,
other than the price might might increasea little bit. My guess also

(32:02):
is the new iPhone fifteen will probablyhave some improvements in their camera, will
have improvements in the speed, andfor phones that are sold into Europe,
instead of having their lightning port,it's going to have a USB C port.

(32:23):
But I, unlike some analysts,think that Apple is still going to
be selling a significant number of phonesduring the course of the year. Do
bear in mind, they're about oneand a half billion people that own iPhones

(32:43):
around the world, and they're overtwo billion active users of Apple products around
the world. It is believed thatsomewhere between two hundred and fifty million to
three hundred million iPhone users have notupgraded a phone in the last four years,

(33:10):
so they might still have a fairlysignificant upgrade cycle. I would also
point outfit if there was a banin of in China of selling iPhones,
still a lot of people that owniPhones and like the iPhones and will continue

(33:36):
to utilize and or buy products orservices through those through those iPhones. And
policies of course, could could change, and maybe that ban is more informal
than than formal that we do notdo not know. But if in fact

(34:04):
Apple does lose some potential buyers tothe Huawei phone based on price or nationalist
instincts, I'm not of the beliefthat the loss is going to be significant.
On top of that, I amof the belief that Apple's expansion into

(34:29):
other markets, notably India, wherethey have I do believe a six and
a half percent share of the phonemarket, and they are now manufacturing phones
in India for India as well asfor export elsewhere. I think Apple could

(34:50):
make up more phone sales there thanthey lose in China. So I'm still
very bullish on Apple on a longerterm basis. I do have a two
hundred and fifty dollars price target onthat based of course, on the earnings
multiplied by a pe right around thirtythirty and I still come up with two

(35:19):
hundred and fifty dollars a share,and unless things significantly change, I'm sticking
with that. Say, this isJosh Arnold, mister money Talk here to
answer your questions. Do give acall nine to five two nine two five
five six zero eight. This isJosh Arnold, mister money Talk with Judd

(35:45):
Arnold here to answer your questions onstocks, bonds, mutual funds. I
used them to how you should positionyour investment dollars, including your IRA and
four oh K. Don't hesitate togive us a call at nine five two
five five six o eight. It'snine five two nine two five five six
o eight. Just in terms ofpositioning. Typically, our asset allocation model

(36:10):
U does not focus on investing inbonds. Other people might might like bonds.
They might might say that the sixtypercent stock forty percent bond portfolio will
provide a lot of safety and stillgive you a good return. May be

(36:35):
true, But as interest rates havebeen moving up, bond prices have been
coming down, yields up, pricesdown and it and unless the economy slows
significantly, I don't see bond pricesfalling much. Yes, you can get

(36:57):
a very nice yield at shorter termbonds, that being you know, close
to five percent, But I canlook at a good number of stocks and
get yields that might be a littlebit below that, but still get a
significant return over a long period oftime. So I've been I'll say I

(37:22):
n we jud and I have beenmore stock oriented investors rather than bond oriented
investors, and for safety rather thaninvest in bonds which will fluctuate in value.
We happen to like playing old cashor money market investment where you can

(37:43):
earn you know, at least somedaily daily interest. So that's the positioning.
We'll say, up to thirty percentin cash balance invested in stocks with
an aim towards grow. My focushas been in companies involved in the Internet,

(38:05):
leisure related businesses, China related businesseswithout necessarily being in China and real
assets such as real estate, andthen taking a small portion and use that
for very short term trading. Hey, we've got big event, as we've

(38:29):
said with Apple coming up this week. Do have some earnings coming from Oracle,
which might give a little more flavorto what's going on with artificial intelligence.
Salesforce has their dream Force conference,and again that's going to talk a
little bit about artificial intelligence. Googlehas an anti trust trial on their search

(38:58):
quote unquote search monopoly. Yeah,and you could see the start of a
strike depending on the outcome of theUnited Auto Workers talks with Stillana's Ford in
general general motors. There's another areathat I avoid, that being investing in

(39:21):
car companies. I do like cars, I avoid investing in car companies.
Probably the closest I've come to thatis investing in uber or in a little
company called co part, But Ihave shied away from the other other manufacturers

(39:46):
of that Google anti trust trial,now, yeah, they have a commanding
lead in search. Is it amonopoly, I don't know. I'm not
I'm not so sure how it's amonopoly. But more people have been using

(40:07):
Google's search business, which has Ithink in almost an eighty five percent market
share of search or even paid paidsearch. I guess that's because they've got
a better mousetrap than Microsoft's bing orYahoo or AOL or or other search services.

(40:34):
To me, that's the We'll say. The consumers have spoken, and
speaking of a suit, our favoriteAmazon could also be facing a suit coming
up either later this month or nextfrom the Federal Trade Commission, going after

(40:57):
Amazon for their domination in online retailsales and possibly how they deal with third
party sellers and their their prime business. Again, I don't think this holds

(41:22):
a lot of water, But Ido know that the FTC chairman has wrote
a paper when she was in lawschool seven or eight years ago talking about
Amazon's monopoly and how Jeff Bezos hadutilized anti trust laws to build his business.

(41:52):
Well, I'm not so sure thather arguments have had a lot of
rigor, or I'm not going tosay hold a lot of water. I
do know that Amazon's Yes, Amazondoes have a good share of the online
retail space terms of total retail Amazonis a smaller player compared to Walmart,

(42:23):
Target, Costco and others, andall of those other companies also now are
involved in online businesses Amazon's third partysellers. Well, yes, Amazon charges
for that service. If I'm athird party seller, I want to make

(42:46):
things as easy as possible for peoplewho buy from me using Amazon, which
would include using Amazon to warehouse myproduct, ship my product, and then
pay pay me to me. Thatmakes it ease of use, more than

(43:09):
more than anything else. As toPrime, hey, I am a Prime
member. I think it provides alot of benefit, and I think I'm
going to you know, I've alwayssaid the cost of Prime is I'll say

(43:32):
the cost of Prime right now onone hundred and thirty nine dollars a year
could be double and it's still bebeneficial to me. So and lastly,
should the FTC prevail, and oneof the things they're looking for is for
Amazon to be broken up. Andif Amazon were to be broken up in

(43:54):
three parts, their current retail business, their third party business, and their
Amazon Web services. Now that someof the parts is worth an excess of
two hundred dollars a share, butvolatility will continue. One last thing.

(44:15):
It is very interesting though that Appleis down this week, but one of
the larger holders of Apple, thatbeing Virtshire Hathaway finished on the upside very
interesting. Indeed, say this isJosh Arnold reminding you that anything that we

(44:37):
have sold and set on this programis our opinions. Our opinions alone.
Investments do pose risk. Any Anyof the companies that we have talked about
may or may not be suitable foryou, and please consult before you act.

(45:00):
Please consult your financial advisor for moreinformation about how we can help you.
Give us a call nine to fivetwo nine two five five six oh
eight. You always get straight talk, not sugar coding device. Josh Arnold
Investment Consultant is a registered investment advisorlocated in a state of Minnesota. All

(45:20):
securities discussed are for informational purposes only. Investing contains risks, including risk of
loss. Consult your investment professional beforemaking any decisions about your investment portfolio.