Mr. Money Talk

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Episode Transcript

(00:09):
Good afternoon. This is Josh ArnoldFist or Money Talk with Judd Arnold here
to answer your questions on stocks,bonds, mutual funds. You should position
your investment dollars including your IRA infour oh one K. Don't hesitate to
give us a call nine five twonine two five five six eight. That's

(00:31):
nine five two nine two five fivesix eight. You always get straight talk,
not sugar coded advice. Before wehop in, we have to give
the usual disclaimer. Nothing on theshow should be construed as investment advice.
Everything is for discussion purposes. Onlythe views expressed on the show are ours
and ours alone. Investing in thestock market contains risk, including risk of

(00:52):
loss somewhere. All of the securitieswe discussed in this show may or may
not be suitable. Do not makeany investment decision without consulting a financial advice.
I love the way you do thatdisclaimer. You should bottle that,
judge, just bottle that up.Well, you work at a bunch of
big firms. You got a bunchof you got you a bunch of big

(01:14):
meetings with a bunch of overpaid lawyers. Let's jump right in. It is
a Friday afternoon for us as werecord this for the weekend, we've got
I don't know if this is theofficial invasion of Gaza, but that began
as the market closed and really sentyet again. The pattern of sell risk
on Friday continued in the market thatthat it does. I mean, we

(01:40):
o' say even from the from theopen today, the Dow was, Dow
was down, s and p waskind of mixed. Nasdaq was up on
the backs of a better than expectedreport from Amazon and even some better better
guidance, which definitely helped will saythe Magnificent seven overall, but the Magnificent

(02:04):
seven definitely had a overall had afuryed difficult week. Add to that,
Exxon and Chevron reported this this morningon this being Friday morning, and Chevron
missed top line, bottom line,and that's even with some positive news coming

(02:29):
from a merger with Hess and Chevronbeing a Dow component, just really took
the wind out of You can't downsales. You cannot buy the largest capitalization
stock in irrelevant sector. And whatI mean is, hey, you can

(02:52):
look at utilities and pull up achart of Ane, which is next Era
Energy, which is the old FloridaPower and Light when portfolio managers that track
the S and P five hundred havea sector that they don't know well,
or don't care about, or it'ssmall, So utilities are one percent of
the S and P five hundred Energyseven and I'm about to get to energy,
they crowd into the biggest most liquidname, next Era, which is

(03:15):
traded at anywhere between a three andfive term premium to every other utility for
going on ten years now, hasfinally crumbled this year to just catastrophic losses,
while the rest of the utility sector, while down twenty percent, is
most of it is outperforming massively.The big one go to Exxon and Chevron,

(03:37):
which combine for roughly half of theenergy exposure in the S and P
five hundred. That would be theXLETF. It's about seven percent of the
S and P five hundred, Sothose two stocks are about three and a
half percent, And what a lotof portfolio managers have done is they've just
bought those two and moved on,And so those two stocks trade at a

(03:58):
two to three term premium to everyother energy stock, which is why they
are using their overpriced currency to buy. In the case of Chevron, hess
in the case of Aixon Pioneer.And so when you take a massive acquisition
in the case of Chevron, whichis all stocked plus i'll say mixed to
negative earnings, you get a prettycatastrophic downward pressure like we saw Friday as

(04:26):
long only investors who suddenly have tocare say why do I own this thing
at this valuation? So it's oneof the many risks of passive investing.
Well, I'll throw another another riskout of passive investing. I get a
call this morning from a client,what do I make of j of Jamie

(04:47):
Diamond selling or announcing to sell amillion shares of JP Morgan's stock next year.
And I think that that announcement tooknot only JP Morgan down, but
the banking sector as well. Notto you know, not to belittle the

(05:08):
fact that the banking sector has gotsome serious, serious problems. I'll tell
you what. The banking look thebanking ECFKRI We have been all over this.
Banks are in deep, deep trouble. They're shedding assets, they're taking
losses. Nobody's going to be ableto grow book value. And I think
Jamie, who has never sold stockin JP morgan and most of his Networth

(05:29):
is JP Morgan. He's selling twentypercent of his holdings over the next year.
He's not selling it today. Ithink he's looking at it and he's
saying, well, I traded apremium to everybody. Sector is not going
to do great for a couple ofyears. Maybe I want to redeploy some
capital, which isn't a bad,bad idea. I'll tell you if you
want to talk about how bad banksare. The lending Club, which is
a little bit misleading of a companyname. It's not a club. So

(05:55):
they are an originator of consumer loansthat they resell down to. So it
is we'll call it an originator.A bank product. CEO hopped on the
conference call today and that stock hasgone from a COVID high I believe about
forty five down to five and itis a chartered bank, which will just
that is a huge decline. Butthey hopped on the earnings call and they

(06:20):
pulled absolutely no punches saying that thereis no demand from bank buyers for new
loans. You have to be kiddingthat that makes almost no sense. It
makes suns of sense because they're they'reshedding assets as deposits of the book equity

(06:43):
of the So the banking sector hastwenty three billion dollar twenty three trillion I
should say, sorry of assets roughly, and it's got about two and a
quarter trillion of book equity. Well, the deposit base is overstated because of
the search of deposits during COVID,still by one point five trillion, So
you're gonna take out somewhere between one. You know, maybe let's just be

(07:03):
considered. Let's say another trillion ofdeposits comes out. Is those normalized,
that's fifty percent of the book equityof banks who now are in this awful
position of having to sell assets tofund those deposits. Well, they can't
sell treasuries, which is where theydumped all the money, because they'll have
to take losses. So what doesthat Well, they got to take serious,

(07:25):
serious losses. Well, it meansthat as loans come due, right,
they don't roll them. That's whythey have no demand for new loans.
They're shrinking balance sheet. It's goingto be you know, the banking
et f THEKRI still trades a pointa times book value. I mean,
I don't understand why you shouldn't BEEOpoint four and the math behind that is

(07:46):
just well, if you have noearnings reels for the next five years and
you're gonna under earn your roe,you're only going to earn about a sixty
seven percent return, and you're aten times levered institution. People need to
earn that that the investment hurdle isprobably a double digit return low teams and
banks because you get to factor inthe risk that you could, you know,
lose all your money because it's abank. So no Bank of America.

(08:09):
When Buffett invested in twenty eleven,mind you, so two and a
half years after the bottom of thefinancial crisis, he bought it for point
four times book and that's when bookvalue is a real number. Today we're
pointing any times book and nobody's takinglosses yet. So what's going to happen?
Judge, Judge If if you're sayingloan demand from the bat loan no,

(08:30):
no lot loan okay, you're sayingfrom the bank perspective, it's asset
growth demand from banks in the formof okay. So I'm just trying to
think if I'm a small business,No, it's brutal. The credit gets
no credit, there's no credit,okay, which is this is the impact
of this is huge, and thisis one of the many things the FED
isn't looking at, or they justlook at interest rates. There's no credit

(08:54):
creation. The banking sector is notgoing to grow assets, which is a
huge you know nomics one on one, it's a huge impact on the velocity
of money. Well you know myyou know my feeling on the yeah,
which is which is not not realgood. You've got five hundred uh pH

(09:16):
PhDs And they must know nothing aboutthe real economy. And of course they
can't constantly say they're data data datadependent, but I don't know what data
they're using and other than data thatmight be several several months old. And
then on top of that, themarket is definitely going to be concerned next

(09:37):
week about what the FED is goingto do with short term interest rates when
they meet Tuesday and Wednesday. Well, no, we had a hot inflation
print Friday. But there's a lotof uncertainty and you're starting to see real
cracks. So we'll see. Imean, we're going to have to cover

(09:58):
this in the next few segments.But big tech reported this week, and
while Amazon did okay, most ofbeen tech did not do great. This
week, so you know a lotmore to discuss when we come back.
This is Josh Arnold, mister moneytalk with Jut Arnold. We're here to
help you. Call us nine fivetwo nine two five five six oh eight.

(10:24):
This is Josh Arnold, mister moneytalk with Jut Arnold, here to
answer your questions on stocks, bonds, mutual funds, how you should position
your investment dollars including your IRA andfour one K. Give us a call
nine five two nine two five fivesix oh eight. That's nine five two
nine two five five six oh eight. You always get straight talk. Not

(10:48):
sure your code of device. Thisthis past week, a lot of earnings
coming coming in. I paid moreattention to a large as A has given
one of my and our large positions. Amazon reported their numbers on Thursday,

(11:11):
and I thought Amazon numbers were we'llsay, close to out outstanding. And
their conference call, which a lotof questions centered on one segment of their
business, uh that being Amazon webServices, proved to be very helpful in

(11:35):
getting analysts understand that Amazon Web Servicesis continuing its growth trajectory or is going
to return to a fairly strong growthtrajectory as it adds a new a lot
new a lot of new business,and they also talked about generative a high

(12:00):
being included in that. One bigplus also for Amazon was the increase,
significant increase in their advertising revenues,and I think that'll be another business line
which will show continued growth. Littlewas mentioned of Amazon's logistics business, which

(12:26):
I think is another potential moneymaker andparticularly if that eventually gets separated out.
And probably the slow or softness oftheir guidance came from caution over the holiday

(12:48):
spending quarter, and that caution overholiday spending I have seen already mentioned in
a lot of retail retailers who havereported or are planning on reporting over the
next the next several weeks. Microsoftwas probably the or could be considered the

(13:13):
strongest report reporter of the four largetechnology companies that came out this week,
and Microsoft spent a lot of timetalking about A I and the increase in
their cloud business and in particular theirA zor business, which gave the impression

(13:37):
that Amazon was taking share from bothexcuse me, what Microsoft's Azora was taking
share from Amazon and Google. Amazonis still the largest public cloud out there

(13:58):
and generates more than twice what Azorgenerates and more than three times what Google
currently generates in terms of revenue forthe cloud. Google's numbers, well,
Google disappointed a lot of analysts anda lot of shareholders, as Google's stock

(14:24):
was down about twelve percent for theweek, taking a nice chunk out of
Google's year to date return. Googledid beat on the top and bottom,
but the focus was not on Google'ssearch business or advertising business, which is

(14:46):
strong, nor was it on theirYouTube business. It was on Google Cloud,
which showed a smaller increase than hadbeen anticipated. Not to mention,
of course, Google's other businesses.I shouldn't say Google, I should say

(15:09):
Alphabet. Alphabet's other businesses, uhdid not show any any potential whatsoever.
And Google's conference call was kind ofwandering and kind of meek. But then

(15:33):
there were some other other calls,you know, away from that, which
you know looked, you know,kind of kind of interesting. You had
Intel beating on you know, bothboth lines, primarily on cost cutting.

(15:56):
Uh. Their their stock moved up, and that helped the semiconductor space primarily.
On on Friday, you had CHIPOLTIand everybody loves well, I love
CHIPOLTI. We just got talking aboutI hear you. We got a level

(16:18):
said this, Okay, the marketis a massive sell off. Everything is
over sold, the S and Pfive so coming into this week, the
midcaps and the small caps are clearlyoversold. And you can look at RSI,
which is called relative strength index,you can look at price relative to
two hundred day moving average fifty.All of these things are massively oversold.
What changed this week was the onlything that was holding up was big cap

(16:41):
tech, and now that is rolledover to So the S and P five
hundred is now at the lower edgeof over sold. With an RSI below
thirty, fifty is normal, seventyis overbought. It's at thirty. It
has not been this low since youhave to go back to October twenty twenty
two, which was the market lows. And if you look at the IE

(17:02):
of the Russell two thousand index,which is mind cast, it is scraping
the bottom. And even the Nasdaq, which has been obviously the relative out
performer, is completely overseled and it'sat three forty closed the three forty five
with a two hundred day moving averageat three thirty nine. And my guess
is that we are going to breakthe two hundred day moving average for the

(17:22):
NAS deck most likely as my guess. So we got more earnings coming the
big ones. I mean we stillhave Apple, that is that is next
Thursday. I'm expecting a surprise,but analysts have already taken Apple's numbers down.
I know that there's a major concernabout China sales, in particular China

(17:45):
phone sales. Add to that,China is going after Fox con well,
Apple works Apple as already. Look, let's just give the cliff notes here,
which is Apple peak out at aboutone ninety six. We are now
at one sixty eight. We arecompletely over sold. We broke the two
hundred day moving average. We're atone seventy right now versus close of one

(18:08):
sixty eight. We broke down.Yet we broke through the two hundred day
on Thursday. So the question isgoing to be, what you really want
to see for the end of aselloff is when stocks stopped responding to bad
news, which is effectively the inverseof what you want to see don't want
to see at the end of apoll market, which is stocks stop responding
to good news. So I thinkthat's what we're looking for ultimately. Now,

(18:32):
just as a reminder, we bringthis up occasionally. While we talk
about all these short term things,we are actually quite long term. Our
portfolio turnovers quite well. We arepatient. We do have a training with
portfolio. We do, though,have a pretty big cash allocation. So
we watch all these things and weare waiting. If we can make two
to three good decisions a year,that should be enough. But make no

(18:57):
mistake, like things are are highlyuncertain right now. Now. One thing,
one piece of uncertainty we did remove. We've got the Republicans got a
Speaker of the House that was Thatwas that I thought was a big,
big deal. The question sid inthe Republican Party seems to have ended.
The question is going to the questionis going to be who or what is

(19:19):
the if you can get through theContinuing Resolution which comes up next month and
we avoid a government shutdown. SoI don't know. We all the political
world, I will just say beforewe go to break, not just in
the US, but across the worldis becoming incredibly murky. In the US,
we had local Dean Phillips, congressmanout of a you know, southwest

(19:42):
suburbs of Minneapolis and parts of Minneapolis, announced the candidacy challenge Joe Biden for
the Democratic nomination. That's actually amoderately credible challenge and Canada Trudeau is likely
to lose. Europe, most ofthe politicians are deeply un popular. Shina,

(20:02):
you have Zijingping is seventy one yearsold and the former premiere uh Lead
kept Kai passed away on Thursday.You have an incredibly uncertainable out there,
so the market is partially responding tothat as well. So a lot of
uncertainty, which uncertainty when oversold conditionsare typically pretty good long term bias.
It doesn't mean you're not going totake more pain prospectively, but the market's

(20:27):
pricing and a lot of bad stuff. But we're gonna have some good stuff
when we come back. But wegot to take a break, Yes we
do. This is Josh Arnold,mister money Talk with Judd Arnold. We're
always here to help you with yourinvestment decisions. Give us a call N
two nine five six eight. Youalways get straight talk. Not sure your

(20:51):
coded advice. This is Josh Arnold, mister money talk with jud here to
answer your question about stocks, bonds, mutual funds, how you should position
your investment dollars, including your IRAand four one K don't hesitate to give
us a call. Two nine fivefive six oh eight. That's two nine

(21:15):
five five six eight for those thatmissed being great talk not sugarcoated advice.
For those that missed the beginning ofthe show. Once again, our disclaimer,
which is everything we discuss on theshow is should not be considered investment
bites. Everything is for discussion purposesonly. Some are All of the securities
we discuss on the show may ormay not be suitable for you to not
make an investment decision with that,consulting an investment advisor. Investing in the

(21:38):
stockburn contains risk, including the riskof loss. With that, let's jump
right back in. We left onthe last segment on a dour note.
The market is over sold. Theworld is in chaos, which we don't
mean to minimize. I wouldn't saythe world is totally in chaos. There
are. There are significant problems aroundthe world, multiple wars going on,

(22:00):
including as always a Middle Eastern conflictwhich has the potential to drastically impact the
world's supply of oil. Just asa reminder, roughly half of the seaborn
crude in the world that's water thattravel that's oil that travels on the water,
which that's the price. About halfthe oil in the world moves by
water, so a quarter of allthe oil in the world goes through the

(22:22):
Straits of Hormouse, which is outof the Persian Gulf. And if oil
is ever disrupted out of that area, oh boy, do you have real
economic consequences. Of course, thatis on the other side of the Middle
East from where the conflict is,but it could very well spread. We
record this on Friday afternoon as Israelhas begun a not sure it's a limited

(22:42):
or full scale invasion of the Goadzastrip which could spread. Always always very
dangerous. If I look at it, if I look at what happened on
a political basis three weeks ago,it looked like the intent was not only

(23:03):
to harm Israel, but also harmrelate i'll say, Arab relations with Israel
and the upset we'll say, thecontinuation and expansion of the Abraham Accords,
in particular with normalization with the Saudi'sand Israel. And this seems to have

(23:26):
been, in my estimation, instigatedby the mulahs in Iran because they could
have been losing their their position orand or relevant. But that's just an
opinion from the from the chief seats. Well, I think one of one

(23:48):
of the things that I've talked withclients about is perhaps one of the scary
things is that is most clear isthat Hamas Aaron and that orbit of people
completely misjudged the both Israeli and Westernresponse. Certainly, never and never is
a long time, but I cannotremember a time going back in history or

(24:11):
Israel has had effectively the unconditional militarysupport of the US, the United Kingdom,
France and Germany at the same time, which I would tell you from
covering the region for a long time, can only occur if behind the scenes
they are getting the green light fromthe Saudis and the Amidis as well.
But well, what I what Ifound just just as an aside from this

(24:34):
this this came on Friday, Isaw a headline that the nine Arab Arab
States condemned Israel for what they werecondemned Israel. Yeah, but that's why
the goaza. But here's the interestingthing. I have never seen any seen

(24:57):
a statement coming out from these Arabstates also saying that Israel did have the
right essentially to defend itself for whathad happened to the log I think that
the Middle East is one of thoseplaces where you have to from a you

(25:18):
know, from a market standpoint,certainly we'll try to avoid the politics of
it. Do as I do,not as I say, is the important
thing. And I think the politicalanalysis is simply with the four major Western
powers firmly behind Israel, there issimply no way that is that is happening
unless the Saudis and the Amarandis areacquiescing to that. So the fear from

(25:41):
a market perspective is simply with thatlevel of unification. Do you get to
a point where the Saudis and theAmarandis wake up one day and say,
you know, we've got all themilitary assets here, why don't we just
go after the problem. So itis unclear whether this spreads a lot of

(26:02):
people unfortunately are going to lose theirlife, which is always horrific. War
is utterly horrific, and we hopeeverybody stays safe. From a market perspective,
the fear is simply this. Anyexpansion of this war will be a
complete headwind to the market and likelyleads to higher roil prices and just general
uncertainty, which obviously goes without sayingso. Tough times, but as always,

(26:29):
if you take a long enough yew, we always get through it because
we always have little positive statement comingfrom you. I've got to I've got
to follow up, follow up withsome other other positive news from you.
I know, one of one ofthe companies that you like, Pegaya,

(26:51):
which is the stock price has beenall over the over the place, had
some very good news earlier earlier thisweek, Paguya being a very you know,
a small cap stock. Well,Pagaya, look the stock price.
It had unbelievable news on Tuesday morning, which is they signed a top five

(27:11):
bank partner and a top four OEMcaptive and people were not expecting this anytime
soon. They already have twenty sixdifferent lending partners including Ally Financial and Sofi,
and these partnerships were certainly not expectedto come during in Israeli war,
with most of the management of thecompany in Israel, with stock traded as

(27:32):
high as one thirty eight, cameback, was trading fine Friday until the
ground invasion and then sold off fromone twenty five to one to twelve.
Earnings are next Friday and it's onethat we're very as excited as you can
be. I would say it's ifyou heard the earlier part of the show
where we talked about the negatives withbanks. Pagaya is a play on the
stress of banks. They partner withlending institutions, but they offload the risk

(27:57):
into the asset backed securities market andthey make a fee for doing that and
for banking and lending partners. It'sincredibly attractive because Pagaya takes loans that they
aren't going to make, gives thelending partner a majority of the fee without
taking any balance sheet risk, andPeguy doesn't take balance sheet risk either,
So I am it is still whatwhat they call an unseasoned equity, meaning

(28:21):
it is new to the public marketsas about a year and a half ago.
The stock is incredibly vulnerable. Ifyou go on Twitter, you can
find my very copious seventy five pagereport on it where I walk through the
cases of why this can be.This is currently dollar twelve stock, which
is about a one point one billiondollar valuation, could easily be worth three,
four, five and even ten dollarsa share if they hit their numbers,

(28:41):
and certainly the rubicon being crossed gettingsuch a great bank partner, and
we expect more partners to come.So always a way to make money.
Unclear whether we're going to make money, but I will point out we're seeing
both one main financial which is abig ABS user of a lender. And
this is a big theme which WIis the guys who use ABS instead of

(29:02):
deposit funded are growing. ABS isasset backed. Security is security. They
are bonds backed by bundles of loans. Okay, so you've got to make
sure everybody understands the term instead ofjust the initials. There there you go.
So it's certainly that this is amarket that is very well leveled.

(29:26):
I don't know where the overall market'sgoing to go. I do know that
one of the more attractive pieces ofthe market right now are these mad cap
and small caps, particularly the stocksthat have gone public over the last three
to four years that have largely beenorphaned because those have already they have trained.
There's a lot of There are alot of companies. But I will

(29:47):
point out before we go on,it is you have to look at the
menu. You cannot buy the storewith small caps. Small caps go on
small caps as a collective asset classis usually underperformance large caps, which is
a big counterintuitive because the failure rateis so high. So of the ones

(30:11):
that don't fail, those do actuallypretty darn well. But it is a
I mean, I'm looking at onein particular, small small caps that announced
that they were looking at strategic alternativesthis week, and they are major stockholder
or stockholder of this bank of thiscompany. Endeavor said, you know,

(30:34):
there's no reason not to take thiscompany back privately. We are seeing increased
activism and a lot of take privatesgiven where valuations are. But we'll talk
about that a little bit more whenwe come back. This is Josh Arnold,
mister money talk with Judd Arnold hereto answer your questions on stocks,

(30:56):
bonds, mutual funds. You shouldposition your investment dollars including your IRA and
four one K. Don't hesitate togive us a call nine five two nine
two five five six oh eight.This is Josh Arnold, mister money talk
with Judd Arnold here you answer yourquestions on stocks, bonds, mutual funds.

(31:21):
How you should position your investment dollarsincluding your IRA and four O one
K. Don't hesitate to give usa call nine five two nine two five
five six oh eight. That's ninefive two nine two five five six oh
eight. You always get straight talk, not surer code of advice. We're
talking about some of the small caps, mid caps, some companies that recently

(31:44):
have come public in the last severalyears, some coming public through special purpose
acquisition companies, and many of thesestocks either seem overlooked or have sold off.

(32:05):
Some of them are making some decent, decent money and maybe a number
of these companies should not have gonepublic. And now you have companies,
as we talked at the end ofthe last segment, such as Endeavor looking
at strategic alternatives and their majority shareholdersSilver Lake Partners is looking and saying,

(32:32):
well, maybe we should take thiscompany back private where it probably belonged in
the first place. So there's goingto be a lot, it's going to
be a lot lot of that.We are in the depths of a pretty
big sell off, the biggest selloff in more than a year, and

(32:55):
you are seeing at the exact sametime to this campaigns being launched with the
goal of taking companies private. Becausethis market has firmly bifurcated, meaning the
magnificent seven stocks have outperformed all yearand are still lot. The average stock
is down markedly this year, andit is flat from the lows. I

(33:19):
mean you are well, I say, it's at the lows of the last
couple of years. I mean youhad talked Chahda, I was going to
bring up. The equal weighted Sand P is in negative territory. It's
down five and a half percent forthe year, down almost six percent for
the quarter. We bottomed last Octoberat just under one thirty and we're at

(33:43):
one thirty three on a three yearbasis, we are down now a little
bit, and it's you know,it's just it's pretty darn scary. Think
about this. The pre COVID levelfor the equal weight S and P five
hundred was one twenty. We're atone thirty right now. We're barely up

(34:07):
first COVID. Well, the thethe market weight S and P is up
significantly over that massively, and it'sall as is the QQQ, which is
that's that's the driver of it.So for the S and P five hundred,
we pre COVID, our pre COVIDlevel was three thirty and we sit

(34:30):
here today at four to ten.So a decent you know a decent role
return. Albeit we we peaked outat forty eight hundred, so it's this
has been a story of big tech. But if you look at an even
scarier status the Russell two thousand,which is the bottom two thousand of the
top five stocks. Okay, ifyou want to attract that, that's iw

(34:53):
am iwe it's the bottom two thousandand the top three thousand stocks, so
take out the one thousand biggest.It's the bottom that has no return on
a five year basis nothing. Soit is just been very, very difficult,

(35:17):
and we're in the midst of it. So I hear people getting more
and more excited about twenty twenty four. We are waiting for the Santa Claus
rally, which I don't know ifit comes, you never do. Know.
It's a seasonal thing that November andDecember is usually pretty strong. But
I will say this earning season hasstarted off pretty difficultly. So you said

(35:38):
difficultly or typically difficultly, difficult,hard, not good, bad, Okay,
I would say hard is okay.I think that I think I think

(35:59):
that they're there's enough companies that havebeen beating numbers but have been issuing very
cautious guides the world. Look,I keep waiting for a big release day,
given how technically oversold we are,and for those people who don't under
don't follow the stockware. When youget over sold levels, which there's a
lot of ways to gauge them.I look at relative strength index, which

(36:22):
is just effectively how many updates vercent, how many down days in the short
period of time, And you canlook at two hundred day, fifty day,
one hundred day moving averages. Buteventually the machines turn on and because
positioning that is just exhaust itself betweenpeople selling and people's shorting, and there's
no one left to sell, andyou can get wild updates. I've been
waiting for you know what I liketo call a release valve day where we're

(36:45):
up one hundred and fifty two hundredbasis points. We had one half hearted
one earlier this week, but wereally haven't had the big one. And
based on where we are, whichisn't to say that we're not going to
keep going lower, by the way, we should have some type of a
big release date where you can figureout where everybody is. So I don't

(37:06):
know, it's not like I doanything right now, we're just sitting here
waiting and watching. We like whatwe own. Market goes up, market
goes down over the long period oftime. If you stick with it,
you got good companies, You're goingto do pretty darn well. But it's
incredibly we get how frustrating it isfor people. I said, last week,
you gave me. You gave mea little grief when I said I
expect to lose money every day forthe rest of the year. I like

(37:28):
to, yeah, I did giveyou grief on that. Well, I
was proving so far, I've beenproven correct. We're not that expectations or
we think we own good stuff andit'll play out, so we'll see,
we'll see a lot. That's oneof the reasons we do keep a big
cash position, and we have emphasizedthat for a very long, long period

(37:52):
of time. Typically we keep upto and I say up to thirty cash
and the balance is invested, inmy case, high quality growth growth companies
that are focused in on the Internet, leisure related businesses, China related businesses,

(38:16):
and real assets, along with doinga teeny bit of short term trading
on what to me are interesting shortterm opportunities and I'll say, my largest
holdings have so far proven proven stellar. Yes they are down from their highs,

(38:40):
but they continue to generate money andgenerate a lot of cash flow,
and that cash flow can be putto work any number of ways. I
know that jud just switching switching alittle bit to bonds, which is something

(39:06):
I am not an investor in.You're not an investor in. But with
all the talk about higher yields rightnow, those yields on keep getting higher,
which means bond prices keep getting lower, and anybody holding bonds has really

(39:31):
gotten hurt on particular bond funds,in particularly on a mark to market basis.
I look at I think if you'regoing to take any type of duration
risk on bonds, I think you'rereally being you're not appreciating the risk duration
risk, meaning if you go outmore than two years. So if you

(39:51):
want short term, if you wantthe yield it feels comfortable for you,
you can go on treasure IRAQ.You can buy one year, you can
buy six month, three months,six months, twelve months, two year
paper. But I will just say, while we are in a bond bear
market right now, the penalty forbeing wrong in bonds buying the ten year
or the thirty year on the tenure. Every percentage point on the yield moves

(40:15):
the bond price about eight points.So if you buy a five percent yield
and the yields go to six,you now go to ninety two. You're
down. And then the problem becomes. Once you're down on a bond portfolio,
your advisor whoever tells you, well, you can hold it to maturity.
You can get your money back,but the cost to you is the

(40:35):
fact that your capital is now trapped. You have an awful choice of accepting
a short term loss and reinvesting themoney somewhere else, or freezing that capital
in a terrible asset that you're justwaiting for appreciation. So short term fine,
but I just don't think anybody cancall where interest rates are going in

(40:59):
the near term. You can getto six, you can get to seven.
We had a huge GDP number thisweek, a lot of risks there,
and that's not if I'm taking riskslike that, I want. I
want to get an equity return,which is not getting But so that's that's
why I want to be in equities, which is our preference. And if
you're not in equities, keep themoney in cash both for safety and right

(41:22):
now you can get some reasonable yieldin in cash just for waiting. We
do like our companies on a longterm basis and we'll stick with them and
unless there's a change that warrants movingaway. Say this is Josh Arnold,

(41:42):
Miss the Money. Talk with JuddArnold, always here to help you with
your investing, both inside and outsideof retirement account. Do give us a
call nine five two nine two fivefive six oh eight. We're happy to
meet with you. Josh Arnold InvestmentConsultant is a registered investment advisor located in
the state of Minnesota. All securitiesdiscussed are for informational purposes only. Investment

(42:06):
contains risk, including risk of loss. Consult your investment professional before making any
decisions about your investment portfolio.