Mr. Money Talk

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Episode Transcript

(00:10):
Good afternoon. 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 IRAin four one k. But you do
have to give us a call atnine five two nine two five five six

(00:31):
oho eight. That's nine five twonine two five five six oh eight.
You always get straight talk, notsugarcoaded advice. Before we begin, we
have to before we begin, wehave to say everything on the show is
for discussion purposes only. Nothing onthe show can be should be considered investment
advice. Some are All the securitieswe discussed in the show may or may

(00:53):
not be suitable for every investor.Do not make any investment decision without consulting
an investment advice. All investing containsrisk, including risk of loss. All
right, let's get into the show. Wow, Joe, that's I just
love love how you do this.The disclaimer it is it is great stop.

(01:15):
I should have been a lawyer oror or now you're you're perfect with
what you do. You don't needto be be a lawyer. You would
not have have the ability as alawyer to do all of the of faith,
thinking and acting did you current currentlydo as an advisor or even before

(01:41):
that, as a portfolio manager fora for a hedge fund, or when
you worked for four different All right, an, let's get into the let
let's get into the into the involved, because it has been a bloodied month.
September historically the worst month for theSMP five hundred. On average,

(02:06):
the market loses one point one percentin September. We lost just under five
percent this month. Well, aswe have always said, Judd, during
the course of any year, you'retypically going to have three to four five
to ten percent pullbacks, and thisyear, I think the pullback that we've

(02:27):
had in September was the fourth fourthsuch five to ten percent pullback. And
we're not talking and we're just talkingabout the broad market, not any individual
stock, because they are an awfullot of stocks that are down more than
that, not only in the monthof September, but if we go back

(02:49):
to the July highs, we havenumerous stocks that are in what i'll call
correction territory or even bear market territory. Well, the s five hundred is
up low teens for the year.Now that's a market cap weighted index,
the equal weighted index, so allfive hundred components wait the same, is
only up about one percent for theyear. It has been a nothing of

(03:13):
a year, so tough year.As always, we'll see what happens in
September. I think the big newsas we record this show, as we
usually do on Friday, big news. The greatest hedge fund manager, certainly
of his generation, maybe ever,Dave Tepper out with comments Friday saying we
are in a new paradigm, nomore quantitative easing, which is a news,

(03:38):
and making the point that stocks arekind of fairly valued at if you
look at the S and P fivehundred, which again is market cap waited
about eighteen nineteen times earnings, orthe equal cap weighted index is treating about
fourteen fifteen times, so generally inlinewith historical numbers, we've got high interest
rates. Basically making the point thisis where stocks are the market should kind

(04:00):
of be here in aggregate, yesthere's room for individual stock style performer on
your perform, but if you're justbuying the index, not a lot of
people think it's going to really domuch and certain what it just till the
end of the year or going forward. Well, I guess he's saying going

(04:20):
forward or at least in the intermediateterm. Okay, we're fifteen times earnings,
he's said. If he's quoting anearnings multiple in anybody quoting an earning
is multiple at any point in timeand saying, well, the p's fair.
What they're kind of saying is you'regoing to get the earnings growth rate
you're not going to There's two waysto make money or lose money in a
stock, right, There's the rateof change of earnings or the multiple at

(04:44):
which you pay for them. Sowhen you do really well, the earnings
go up and the multiple people payfor it goes up. That's what happened
with Apple multiple times, but specificallyfrom the time that Buffets started purchasing in
twenty seventeen twenty eighteen, it's aboutten times earnings. Now we sit here
today, it's twenty seven times earnings, and those earnings are a lot higher,
and that has led to what athree increase in Apple over the last

(05:05):
I don't know if five six years. Conversely, what he is saying is
all right, the multiple that you'regoing to get for earnings inaggregate for the
market isn't likely to go up.And I think that's been kind of a
fair statement. I don't think it'sa unique call. But anytime Temper says
anything, people people like to seeshadows because he's such a brilliant guy.

(05:28):
Keep in mind, individual market callsare really really hard, and who the
heck knows, and he's gonna he'sgonna express his best through individual stocks,
bonds, he might buy commodities onright. I mean, Tempers an animal.
He can do anything. Well,I will. I will tell you
that there have been an awful lotof very smart people from the beginning of

(05:48):
the year and even till till nowthat have said the the market measured by
the S ANDP index would be downand down significantly this year, and not
only that, that we'd be inthe in the throes of a fairly deep
recession. Well, I said,that's proven to be the case. But

(06:12):
I've seen these people, with allearnestness, you know, say that's that's
our conviction, that's where things shouldbe. But they're not. First of
all, nobody can predic macro,and macro is just a big picture where
the SMP five hundred goes. Nobodycan do it. So when you hear
people, including us, saying,we think the market is gonna do this,
we think it's gonna do that,nobody is a clue. All you
can do is by individual stocks andlong term, the number one driver stock

(06:36):
performance over a ten year basis isrevenue growth. Now that's a little bit
misleading because if you're growing revenues overten years, that means you have to
have earnings because you got to fundthat growth. But this goes to one
of our core tenants, which isgrowth. Growth wins. You don't know
when you're gonna get paid for it, but eventually growth wins. You've got

(06:58):
to find stuff that grows faster thanthe market, or you buy it at
a multiple discount to the market,and the market starts giving it at a
higher multiple. But look, Ithink to add on to your comment that
you just made, I think youcan go a little bit deeper, which
is, at the start of theyear, people said, well, bond
yields have to rise, the Fed'stightening and whatnot. And I think if

(07:23):
you told all those same people specificallythat as we sit here at the end
of the third quarter and the sixmonth treasury is going to be at five
point five five percent, and importantly, the ten year treasury is going to
be at four point six percent.And let's just talk about the ten year
treasury for a second. It is, as they say, on a stick,

(07:48):
treasury since the Fed meeting is goingup one hundred basis points. Yeah,
we are at period of fifteen yearhigh on ten year interest rates might
be a sixteen year high now,and ten year interest rates have a huge

(08:09):
impact on stock valuation. So ifyou told those same people that they would
be incrementally more bearish now, I'dsay to counteract that, I will just
caution back to our whole thing thatnobody can call the market. A person
wiser than me, who I like, who's sort of an obscure oscure fella
said, Look, every year I'vebeen in this business, the market has

(08:31):
done quote unquote weird things. It'snever done what you thought you was going
to do. So a lot ofthis is positioning and whatnot. People are
generally bearish, And I'd say that'sthat's a pretty big indicator, which is
when everyone's barished, it's really hardto have a correction. Stocks tend to
do what's called the pain trade,which is the exact opposite of what everybody

(08:52):
believes they're going to do because they'rethey're embedded expectations. So long winded way
of saying, just to recap,it's been a horrible September. The market
on an equal weight basis barely upfor the year Q four seasonally strong,
but interest rates are a huge riskto this market, as is the price
of oil going up. We've gotwe're staring at a government shutdown, which

(09:16):
always gets resolved, but you know, it looks like we're gonna have one,
and the US don't know how howlong this particular shutdown is gonna gonna
go. The Republicans, to me, have shot themselves in the foot.
And even though the Democrats keep talking, oh, you know, the government
can't shut down, they're the peoplethat have also voted against any continuing spending

(09:39):
bills. So you have the Democratsvoting against that, you have a number
of Republicans voting against any continuing spendingspending bills. The Republicans are going to
get blamed, and the Democrats aregoing to say, well, you know,
all right, all right, wereto vote. But I don't want
to get get political here. I'mjust stating what there's going to be a
shut the shutdown, they're going toresolved it. I see. The bigger

(10:01):
fiscal thing is you have divided governmentnumber one where the Republicans called called the
House number two. They all spendlike drunken sailors. We're spending. Part
of the reason the bond market isout of control, and that's back end
rates are going up so much iswe're running deficits with three and a half
percent unemployment of five to six percentof GDP, and we got to refinance
a lot of government that I thinkabout half government, half the government debt

(10:22):
outstanding has to be refinanced the nextcouple of years. And so the bond
is well, we got it.Before you respond when yields are going we
got to come back. Before wecome back when yields are going up,
bond prices are going down, andvery few people talk about where bond prices

(10:43):
are going and they're going going downand on that. We'll come back with
more money talk after these important messages. I am Josh Arnold. Missed or
money talk with Judd Arnold. Youhave a question, you need some help,
give us a call nine five twonine two five five six O eight.

(11:05):
You'll always get straight talk, notsugr coded advice. This is Josh
Arnold, mister money talk with JuddArnold here to answer your questions on stocks,
bonds, mutual funds, how youshould 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 fivesix o eight. That's nine five two

(11:31):
nine two five five six o eight. You'll always get straight talk, not
sugar coded advice. Yes, veryfew people Judd talk about bond prices,
and the direction of bond prices isin verse two yields three years in a
row. If you've been an investorin long term treasuries, you've lost money.

(11:54):
I can't remember the last time that'shappened. I've looked back. It
has been a long time. Ifyou own bonds, you've been obliterated.
Now you hear people say, well, you gotta buy bonds now, you
gotta buy bonds now. When youlose ten percent in bonds, let me
tell you it is hard to getyour money back. We are not bond
people. Some people are. Somepeople argue these so called sixty forty this
is a superior way to invest atsixty percent equities forty percent bonds. We

(12:16):
would just humbily say that doesn't alwayswork, and it certainly doesn't work in
a rising interest rate environment, andthe ex think that you do make money
on bonds as interest rate interest ratesfall. I would point out that the
correlation between bonds and stocks has notheld up. Typically they're inversely correlated,
and we have seen in this environment, specifically, when the market is really

(12:37):
sold off, it is sold offpartially with bonds as well. As rates
have gone up. And when you'rein this environment where people are really concerned
about physical deficits by to six percentof GDP as far as the eye can
see, with only three percent unemploymentand tons of treasury debt to refinance,
it doesn't look like a great timeto be a bond holder. So I'll

(13:01):
give it care judging in the effortof being fair and balanced. Since we've
said don't own bonds, I sawan article about if you were going to
own bonds, take a look atbuying bonds that are deeply, deeply discounted,
and particularly bonds that were issued duringthe pandemic. The bond in particular

(13:26):
that I saw talked about was buyinga US Treasury that that was issued during
the pandemic that comes due in twentyfifty. So it was a thirty year
bonds two bond at the time ofone point seven five percent, and that

(13:52):
bond is currently trading about forty sevenforty eight cents on the dollar. So
interest rates are going to put down, the bond will go up in value.
Yeah, I'm going to go outand buy the bond. All right,
let's just unpack this for a second. All right, if you buy

(14:13):
any bond with duration that's more thana couple of years, you're taking massive
interest rate risk. And whether youbuy previously issued bonds that are called off
the run that were issuing, ora lower interest rates so the price goes
down so that the all in yield, which is the combination of coupon press
price appreciation that you get equals ayield that is attractive to you. Or

(14:37):
whether you get a new issue bondthat has a higher coupon and you're presumably
paying a hundred and sells the dollar, you are still making a massive interest
rate bet and a massively on certainworld. If you want to buy bonds,
I would humbly say by the sixmonths, by the three month,
you can even go out to oneyear, you're getting five point five percent.
And if you're wrong on interest rates, you're not to lose anything and

(15:00):
then you can reinvest. Now,the negative with buying shorter term bonds is
if interest rates move in your favor, meaning they go lower, you're not
You're gonna have reinvestment risk. Butwhat we would say is great, if
interest rates go down, stocks aregoing to go down, and then you
can buy stocks and you're better offthat way. A lot of different ways
to skin the cat, but noneof that is getting around the fact that

(15:22):
if you are buying you know,two, three, four or five out
to thirty year bonds right now,don't don't kid yourself. You're making a
massive interest rate bet that nobody cancall and you can. I'm not again,
I'm not, I'm not. I'mnot disagreeing. I hear you,
I hear you. I'm not abond person. I've avoid go back to

(15:43):
let's go back, let's go Ihappened like like stocks, and there are
plenty of stocks that to me lookattractive. Let's set the macro table because
the things way on stocks and againthe SMP five hundred, down four point
nine percent for the month of September, one of the worst months. It

(16:06):
was the worst month of the year. I think over the last couple years
it's been one of the worst monthsas well. Historically it's terrible. I
mean, five percent loss for themarketing and aggregate is just a brutal month.
The equal weight SMP five hundred,that's all those stocks weighed equally is
barely up for the year. Ithink it's up one percent. So what's
weighing on stocks? Oil prices aregoing up. Bond yields long term,
which we've been talking about at greatlength, are going up. Higher yields

(16:30):
are bad for bond prices. Broadyields up, bonds down. They're also
bad for stock valuations because stocks aremerely the present value of future cash flows,
and if you have a higher interestrate, you are discounting the future
at a higher rate, leading toa lower stock price. All that being
said, and then, and letme not forget the government shut down,
the u W strike. There's morebad stuff than I'm forgetting. China is

(16:55):
a bad asket case. There couldbe war in Taiwan, Ukraine. There's
a lot of there's a wall ofworry up there. At some point it
just doesn't matter. And you didsee the market try to rally this week
at rally Thursday, try to rallyFriday came back on comments from David Tepper,
the noted hedge fund manager, saying, you know, we're kind of
fairly valued, but stocks generally overthe long term go up seven hunt of

(17:18):
ten years, they go up.Our nice to go up. Find good
companies and buy them. That's that'sreally it. And a lot of things
have come back a lot more thanthe five percent pulled back. See,
it's not that complicated. Oh okay. I also think there's a there's a
huge point as well, people thedoomsayers, and there's a lot of doomsayers
out there. It's really doomsayers,as you've said, always sound a lot

(17:41):
smarter than we sound. Look,I think the biggest thing for the doomsayers
is that I would push back on, is the probability of us having a
credit event. A credit event beingLehman Brothers goes under lunch from Capital Management
in which we had I think thattwenty year anniverse, thirty year anniversary of
l twenty five year anniversary of thatit's really hard to have a credit event

(18:04):
right now. You look at it, the federers or has all these emergency
facilities, and you know banks arehitting those to finance sort of their bond
issues. So it's unlikely you canhave another Silicon Valley bank corps. And
it just it just doesn't you don'tsee it. Credit spreads, which is
the incremental interest that corporate tech topay over treasuries or over their sovereign rate,

(18:26):
are really not blowing out at all. So I don't know, I
just I don't see some larger events. So as we as we have said
three to five, three to four, five, five to ten percent pullbacks
a year on average in the marketor in the middle of one, these
things happen, okay, onward andupward, onward and upward. It is

(18:52):
well, it's it's it's very interestingbecause you've brought brought us up. The
price of oil continuing to move highyear algo. On Friday it did pull
back from ninety two dollars a barreldown to ninety dollars a barrel. We've
seen Exxon hit a I'm guessing itwas an all time high. But most

(19:18):
most oil stocks, particularly the Eand P companies are still significantly below their
hides from last year. On theflip side, the service companies have been
moving up and are if not athighs, close to close to highs.

(19:42):
But I did see something at aheadline today in the Wall Street Journals today
being Friday when we record the show, that the number of drilling rigs,
particularly in the Permian basin and maybeelsewhere in this country are down. While

(20:02):
you said it all, and I'vesaid this all year and most of last
year, which is E and P, which is the guy exploration and production
companies, those are the guys whoget shale, getting shale oil whatnot.
It's a terrible business. Shale oilis peaking. It's you got to recycle
your capital every two or three months. It's terrible. De stuctuated five times
earnings. They all have questions onreserve life, which is why their multiples

(20:23):
are so low. People don't seemore than ten eleven years of reserve life.
Conversely, the international guys like Exxonand the services companies that are exposed
to offshore oil, which is whereI've been concentrated. The offshore services companies,
the trailing rigs in the boats thatgo to it. We're talking about
tidewater rig Alaria's Noble seed drill.That's a growth area and it's a long

(20:45):
duration asset, and that's where thequote unquote action is going to be.
I'd say, more broadly, postUkraine, the administration, the US government
administration really you know, emptied abouthalf the strategic Trollium reserve, got oil
down to seventy bucks. They saidthey weren't going to cover, They didn't
cover, and now oils back toninety five. They're on the moves and

(21:07):
they misplayed it. MB asked Muhammadabout Ben Salmon and Opack. They completely
outplayed the US and rightly. Sothey play an infinite game. We play
a finite game, and I thinkoil is I mean, look, you
can go up or down. Ithink eighty is a pretty good floor,
which means these energy companies are goingto do pretty well if you're in the
right ones. Though you got toavoid the shale guys. It's just not
a growth industry. But we'll talkmore about this when we come back.

(21:32):
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 in four ohone K, don't hesitate to give us
a call nine five two nine twofive five six oh eight. You have
a question, We have an opinion. Nine five two nine two five five

(21:59):
six o eight. Josh Arnold meantfor 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 infour o one K, don't hesitate to
give us a call nine five twoand nine two five five six o eight.

(22:21):
That's ninety five two nine two fivefive six o eight. You always
get for those who invite, forthose who missed the beginning of the show.
Everything we discuss on the show isfor discussion purposes only. Nothing should
be considered investment advice. Some areall the securities we discussed on the show
may not be suitable for some areall. Investors do not make any investment
decision without consulting an investment advisor.Investing contains risk, including risk of loss.

(22:48):
All right, let's get back toit. We're talking energy. It's
unhinged. It's look. I thinkeverybody has to want a little bit of
energy because oils in a new pair. In many ways, it's sort of
the offset to you know, thetwenty ten to twenty twenty period where I
think we're gonna mean the ascended bullmarket. I think we're structurally short oil.

(23:10):
And when we've seen that those periodsof time in my career and before
my career, it takes a recessionslash, you know, big depression to
really get the capex cycle on theright side and get to a place of
excess first or I should say surplusfirst deficits. So you know, the
US we emptied half the Strategic PetroleumReserve and it hasn't done anything. I've

(23:33):
never understood that other than as again, we don't want to be too political
here because as you said, welike to be Switzerland when it comes to
politics. But the only reason thatthis administration depleted the Strategic Energy Reserve was

(23:53):
for votes. Got to bring downthe price of gasoline at the pump.
I think you need to segment thatinto two places. You were rational to
start using the Strategic Petroleum Reserve atthe start of the Ukraine invasion because keeping
mind, Russia is twelve percent ofglobal supply, and when when oil jumps
up from you know, I thinkit was sixty seventy bucks before the invasion

(24:14):
to one thirty that's when you're supposedto use it. I think where I
have a lot of heartburn, anda lot of people do, is three
months after when the world normalized,and they said, we're going to keep
liquidating it for another six months todrive the price down past you know,
from one thirty first to one hundred. Then we're gonna drive it down under
seventy. And we have this quoteunquote master plan. And I say that,
you know, moving my fingers androlling my eyes, that they said,

(24:38):
well, we have to create timefor the US producers to come back
online and respond. And I'm tosay to myself, but what on earth
are you talking about. This administrationdoesn't want more US production Number one.
Number two, None of the USguys are going to produce into this while
you're dropping the price and hosing them. And even if they wanted to,
they can't drill that much. Andyou see the administration out on today Friday,

(25:03):
we record this on Friday announcing overthe next five years they're only selling
leases for three blocks of offshore inthe Gulf of Mexico as opposed to demand
for twenty five and you're taking avictory lap with environmentalists in the same time
that they're complaining to OPEC about restrictingsupply. You can't talk out of both
sides of your mouth. I mean, I guess you can't, But you

(25:25):
know OPEC and OPEC plus which wouldbe you know, effectively the Saudis,
the Emiratis and the Russians as well. They've played this one beautifully, and
they didn't have to play at thatbeautiful given where we are with the supply
situation, and global demand has beenincredibly resilient. So I think we're just
in a world where oil is justgoing to be more expensive, and we
have expressed that beat through the offshoredrillers. I don't think the US on

(25:48):
shore producers that's like your Devin serogies, are a great investment. I think
shale is a terrible investment. Quitefrankly. It's just a hard thing to
get. You're recycling your capital everytwo three months, and that's just a
hard business. It's short duration andwhatnot. So we've seen the off show
joilers work really well. I thinkthat keeps playing out. We're entering a
winter, So I think llen Gis going to keep playing a big role

(26:11):
as well. That's ticker NFE orticker LLENG. But I think this is
just the world we're living in rightnow. And for equities that aren't energy,
that's higher inflation, lower consumer spending. It's something to adjust to.
Now, let me just step backand say something before we go off the

(26:32):
deep end here, which is fromtwenty ten to twenty fourteen, oil averaged
one hundred dollars a barrel, andthat's when one hundred dollars used to be
worthsome you know, you're one hundreddollars from twenty fourteen is probably you know,
one hundred and fifty bucks today withinflation. So it's not like the
world in the US can't operate withone hundred dollars oil, and it certainly

(26:53):
can't. But from a portfolio standpoint, it makes sense for people even if
you don't like energy. We arein it what's called the commodity cycle,
and so we're not and these thingscan go on for seven, eight,
nine, ten years, where thesecommodity companies just earned twenty thirty percent.
It turns on capital for a longperiod of time, so what would be

(27:18):
say, jed what would be wrong? Then instead of investing in we'll say
a tide water or trans ocean,or we'll say a Valero or a Noble
or an l n G or anNFE. If you just went out and
bought the commodity commodity itself or oneof the exchange traded funds that tracks energy,

(27:51):
well never yeah XL X P OI H. Well you've got that.
Then you have a d a dogboy Edward and Uncle Nancy George.
All right, let's talk about thecommodity first and then well we'll get to

(28:15):
you know, a broad commodity index. Okay, the commodity, the commodity
itself. I don't like those thingsbecause let's just take oil oils, what's
called the static variable, and soit goes up and you're gonna make money
in a linear fashion and you're gonnalose money in a linear fashion. The
beauty of stocks, when you dodo them well, is because of their

(28:37):
duration is so so infinite. Aslong as you get something with duration,
you want something that works if theprice of oil stays where it is or
it goes even if it goes down, you want something that can work,
and that's really what offshore is.So you think about the range of outcomes.
You buy oil today and I don'tknow, ninety two dollars a barrel,
I don't know where it goes.You can go up ten, down

(28:59):
ten, and you're gonna make alittle money. Maybe you want I think
that's a really hard thing to call. The guy's exposed to offshore cap bacs
at sixty dollars oil are going tomake a ton of money, and the
stocks are pricing in what I wouldconsider to be thirty dollar oil. So
I think you're going to make moneyon more earnings and on the multiple that
you're paying for those earnings, andyou're going to have an asymmetric or in

(29:22):
other words, that convects that meaningyou have less downside than you have outside.
And that's what you can create withstocks. Now, in terms of
some of the things you've you've mentionedright there, let's take un ung is
the Natural Gas Fund. It's aterrible investment. It's buying futures. Well
it's not. It's not just thatit's been slaughtered. It's a structurally disgusting,

(29:45):
awful, terrible fund, and itshould be illegal because it's rolling call
options and put options. So everymonth you pay the premium, you can't
know you it is mathematically impossible tomake money on that thing, even if
you're right on your commodity of view, if you hold it more than a
week because the big as they say, the cost to own because of the
option premiums is massive. Can't ownit? That would be That would probably

(30:10):
the same for oh as well.Well. Oi H is the Offshore Services
Index, which is a mixture ofoil. Yes, you don't want to
buy any etf of the commodity.Now you're talking about the ets. The
stocks you can do that. Youknow. You can buy xl E,
which is the big caps, it'smostly Xon and Chevrons. You can buy

(30:33):
oi H, which is the servicesindex, and that's mostly Slumberge, Haliburton,
Baker, Hughes. These are allfine investments. We go further,
we buy individual stocks. So Ithink the off shore ones are gonna be
the best, and they happen thebest, So I'll take that victory.
Lax there, Okay, that soundsthat sounds good. I like I like

(30:55):
that. I like that real quick. What about real estate? And it's
really hard to make money? Yeah, it's really hard to make real estate
make money in real estate investing throughthe public markets. Most of the returns
belonging in the private market, andso most I can't think of a reat

(31:15):
that's ever done really well, andthey got a lot of restructuring. So
I think that's a tough one.Do you want to buy real estate,
go do it in a private way. Doing it in public ways it has
a lot of costs. And likeI said, I've just never seen anything
work really well in real estate inthe public market. It was interesting though.

(31:40):
We saw Barry Sternlick today, ashe's done for the last year,
complaining about the Fed, the Fed, the Fed, the Fed. He's
killing the real estate market. Interestrates or rob cap rates are up.
Everybody bought a four cap He's gettingslaughtered. All commercial office buildings are going
to go to zero. A lotto do include I think, I mean

(32:02):
he he operates, uh, heoperates a a fun a lot of capital
uh and Starwood Capitals. You know, stock price has not has not gotten
slaughtered. Now, he's got avery nice dividend on on that. It's

(32:23):
too high for me to be excitedabout, but I his his thing is
a rate as a mortgage finance rate. I know he's talked before the he's
sitting on all this cash to buythings. When the world blows up.
Well, well we'll see what thathappen. We'll see if that happens,

(32:43):
what we got to come back,though, we we do come back.
When we come back. I dowant to talk about some large capitalization tech
companies that are under fire by thegovernment. This is Josh Arnold, miss
your money. Talk with Judd Arnoldhere to answer your questions on stocks,
bonds, mutual funds, how youshould position your investment dollars. Call us

(33:07):
nine five two nine two five fivesix oh eight. You have a question,
we have an opinion. This isJosh Arnold, mister money. Talk
with Judd Arnold here to answer yourquestions on stocks, bonds, mutual funds,

(33:27):
how you should position your investment dollars, including your IRA in four oh
one. Tight, don't hesitate togive us a call. Nine five two
nine two five five six oh eight. That's nine five two nine two five
five six o eight. Well.For the last three weeks, the Department
of Justice has been or has putGoogle or Alphabet on trial for being a

(33:52):
monopolist in the area of search,and this past week, the Federal Trade
Commission under Lina Khan Is filed suitagainst a favorite, Amazon for being a
monopolist in online retail, for operatinga super store online. I think both

(34:21):
of these suits are i'll say suspectto say, to say the least.
But in the case of Amazon,you know, the FTC has said that
Amazon has seized control of much ofthe online retail economy and what they don't

(34:45):
they don't offer any solution, butthey are five filing suit saying it is
a monopoly, and they don't don'ttreat their Amazon's competitors fairly, and all
this could lead to higher prices eventhough consumers have experienced lower prices on Amazon.

(35:14):
I'll just say this, there's awhole difference between theory and practice.
And you see the the FTC's chairman, Lena Kahn, I'll say this FTC
suit seems to follow I'm not gonnasay verbatim, but pretty close it does.

(35:37):
She wrote that when she at Yaleloss in the Yale Law Journal back
in twenty seventeen, called the articlescalled the Amazon antitrust paradox. Look,
she's gotten absolutely obliterated in every litigationthat she's pursued since she's taken over,

(35:58):
Chairman, I mean, absolutely obliteratedthought of the room. Why let's talk
about why for a second. Allright, American law is based on precedent
starry diseases. The thing, thearea of law that may have the most
precedent of any area of law isantitrust law. Every year, there's hundreds
of mergers that are litigated. You'vegot all this regulation from that has been

(36:21):
enacted by Congress. And what isanti trust? What is not her core
losses? This one included deviate fromthat precedent and established law. They invent
new theories. So let's just startat the very beginning, which is,
if you believe all this stuff,the avenue to do that is through the
legislative branch, not through the administrativeacting in the judicial, but in court.

(36:45):
The idea that you're going to getthese judges, specifically anti trust judges,
to side with you when they haveto overrule VOLUMEUS precedent. It's not
just oh, we have let's takethe abortion case. Oh, in nineteen
seventy two Roe v. Way,there's a precedent, bl blah blah blah.
And then right, after that,you know, in nineteen ninety one

(37:06):
or nineteen ninety two, I forgetwhat was the follow on abortion ruling,
not Roe v. Way, theoperative casey, thank you, So it's
really abortion. We've had all thisback and forth literally over two cases.
Okay, one from in a rowin seventy two casey, I think it
was ninety two or ninety three.Okay, with anti trust, you have

(37:28):
six precedents a year on most arguments. You just like these judges, and
they haven't everything that she's brought,and that the fundamental argument that she's making
is so ridiculous. Let's just breakthis down. Okay. Amazon has forty
five percent market sharing online advertising.The FDEC is arguing, wait for it,
that they have a dominant, exclusive, exclusionary market position. So they

(37:52):
have to go in in court andthey have to say, look, it's
forty five percent, and Walmart's aweek competitor, targets a week competitor.
I can go down the list.I mean Amazon share of total retail.
That's the other thing. They needto establish that online is a distinct and
separate segments. That that is thatis part of part of her case because
I've I've heard her interview. That'sjust her case that online retail is separate

(38:15):
from all retail. Amazon has maybesix percent of total total retail. The
biggest retamper in the country is isstill Walmart, uh, followed by you
know, any any number of numberof companies. And if I talk about

(38:37):
Amazon share of online retail, itis it's actually below below forty percent of
online retail. And the growth ofalternatives to Amazon in terms of online are
many, starting with Walmart's growth andon line. I think their growth in

(39:02):
the last year is in the midthirties for their online business. You have
shot the pent. But hold on, hold on, it's not about the
percentages. That's the thing she's goingin and arguing, well, here's the
percent here's the percent, all right. Microsoft, which had an actual monopoly

(39:22):
in office, the most landmark Rantatrust case probably the last twenty years,
which the government ended up losing inthe end, by the way, and
this was the Netscape case, whichis they bundled with Windows. They bundled
off Microsoft Browser for free, andthat killed Netscape. Okay, there was
no alternative to Windows. You don'thave a choice. The idea that they're

(39:45):
going to march into court, andthey're going to convince the judge that consumers
can only online shot from Amazon andno one else. When you whip out
your phone, plug in anything,people, Amazon's market shares reflective of a
better at a lower price. It'snot a monopoly if they raise prices ten
percent, does Amazon a pricing power? No, that's what a monopoly is.

(40:08):
A monopoly is you can raise pricesand your market shays stays the same.
Amazon's entire market share is predicated ongetting the stuff to you quicker,
i e. A better customer experienceand better price. If you take any
one of those two things away,it's not a monopoly in any classical or

(40:30):
modern sense of the word. It'sa ridiculously stupid case. It's unbelievable.
It's a total waste of government resources. They are going to lose, and
they are going to lose badly.It's well, well, yeah. One
of the things that I had tolaugh about was there was a section in
the complaint just so people realize howridiculous this is, a saying that Prime,

(40:53):
the subscription based Prime service, wasmonopolistic, and because they quoted some
Amazon people in positions who said yes, the goal of you know Prime,
it's not so much what you pay, it's once you pay eighty bucks for
Prime, you mentally want to shotmore on Amazon. And the FTC case
makes it this is some sort ofnefarious one off thing. You read this

(41:13):
and you say, okay, sowhat do you say, Sam's clubs to
illegal cost coz illegal? What like? Really really their monopoly? They have
a monopoly and exist because you optto pay eighty dollars for Prime. Oh
well, if I take that atthe step further, my running store u

(41:36):
t tcuh TC running offers a discountby joining the TC run Club. So
I've joined the PC run Club.I get better, better pricing because I'm
at the TC run Club. Doyou think I'm gonna go to another running
store? When I guess you wouldif you would keep it right now,

(42:01):
here's the last thing. If it'sa monopoly where the monopoly profits, there
aren't any. Amazon's lost money inretail up until six months ago, two
years of losses, there's no andit's never really made money. You look
at the segment, it's it's veryvery slim at Amazon retail. It's what

(42:22):
a waste, you know what thisis what this case is gonna do.
It's gonna do two things. It'sgonna be the downfall of her political career
and it's gonna be the start ofher academic career because she's gonna be hailed.
She didn't get toasted in the Harvardand Neo faculty lounges for the rest
of her life. It's just atotal choke. Anyway, it's been We
got a lot coming up at theend of the year, last quarter to

(42:42):
go. We're fired up. Wethink the market's awesome. Well, I
wouldn't say awesome. We think there'sa lot of opportunities give us. There
are plenty of opportunities out there.Let's just have to pick and choose.
Say this is Josh Arnold, misterMoney. Talked with Judd Arnold. Always
here for you. You have aquestion, We have an opinion. Call
us nine five two nine two fivefive six oh eight. Josh Arnold Investment

(43:07):
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Consult your investment professional before making anydecisions about your investment portfolio.