Mr. Money Talk

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Episode Transcript

(00:09):
In the afternoon. This is JoshArnold or Money Talk. Jett to Arnam
here to answer your question on stocks, bonds, mutual funds. Now,
you should position your investment dollars includingyour IRA in four o one k.
But you do have to give usa call two nine five five six oh

(00:29):
eight. That's nine five two ninetwo five five six oh eight. You
always get straight talk, not yourcoded advice. Say. Before we jump
in, we have to give theusual disclaimer. Everything we talk about in
the show is for discussion purposes only. Nothing should be considered actual investment advice.
Some are all of the securities wediscussed in the show may or may

(00:50):
not be suitable for you. Pleaseconsult investment advisor before making any investment decision.
Investing in the stock market contains numerousrisks, including especially the risk of
loss. Jud who would have thoughtthat over the course of the last six
weeks that the price of oil,instead of being close to one hundred and

(01:12):
fifty dollars a barrel, would betrading at seventy five dollars a barrel.
Who would have thought that interest ratesover that same period of time would have
dropped from you know, five percentdown to four point four percent on the

(01:37):
ten year treasury and who would havethought that earnings would have come in better
than expected for many many sectors thathave have have reported, well, it
looks like Pol's. It looks likePoul's going to land the plane. I

(01:59):
mean, I don't know if it'sPow was going to get more or less
credit than he should. This isgoing to be the first time in modern
history that inflation was defeated without arecession, which suddenly makes the transient crowd
right in the end, although Iwould caution they were not right in the
beginning. Well, I would putmyself in the transient crowd. Correct.

(02:24):
Now we should point out a fewthings. The only thing of that laundry
list of data points that you justgave that I think is surprising to people
is really the price of oil.Two major wars one in Ukraine Russia Russia
of course control. I don't knowif it's of course to me. I'm
not sure it's of course to everybody. Is ten percent of global production of

(02:46):
oil, so it's actually quite material. And you have a Middle East conflict
with Israel, Hamas and Iran proxiesgoing on, and you have the economy
threat the needle not going into recession. Most people would say, all all
sql, they would expect oil tobe higher in that regard, and it's

(03:07):
actually lower. And I think thesurprise has been extra supply growth from a
few places and demand that has notcorrelated with economic strength, oddly, but
so be it. It's oil.Nobody actually knows anything. And I say
that as somebody who's covered oil fora very very very long time. Well,

(03:30):
and you you are probably as closeto an expert as Daniel Jurgen is.
Well, you never try to predictthe price of oil. You try
to find stocks with a good exposureprofile to the price. Golden sacks out
this week with a call on twentytwenty four oil saying oil will be range
bound between eighty and one hundred dollarsa barrel. Not really a novel thought.

(03:53):
I'd say that's pretty consensus right now, but it's is a conundrum.
I continue to think that oil isin a much better place than it's been
for the last oh since twenty fourteen, but it will remain incredibly volatile,
volatile. So but let's talk aboutthe other more important stuff. We can

(04:14):
talk about the recent lows of themarket where the S and P five hundred,
which was up as much as nineteenpercent year to date at one point
this year only was up ten asof a month ago, and now we're
back to up almost just shy ofeighteen percent year to date. Now the
equal weight index is only up three, which just continues the story of the
year that the magnificent seven stocks arethe place. I really think, you

(04:39):
know, as they say, theother four hundred and ninety three S and
P stocks, I keep hearing,Well, it can't be just the magnificent
seven. What about the other stocks? And they should be catching up,
And the talking heads on TV,a lot of the prognosticators say, man,

(05:00):
you you should underweight the seven stocksthat have been leaders and overweight everything
else because they have to catch up. And they actually are doing quite well.
And I kind of look at someof the other stocks, the other

(05:21):
four hundred and ninety three stocks thatare in there, and there aren't a
lot of companies that I want toinvest in. Well, I think one
of the anecdotes that I shared onTwitter, which is a conversation you and
I had earlier this week, isthe four horsemen of the Internet Apocalypse from

(05:45):
the late nineties. That was themarket. People say, oh, that's
true. Thing, Microsoft, Intel, Oracle, and Cisco Systems system And
of those companies since they hit,they're they're nator in two thousand and then
fell. Cisco Systems is still trading, and Ciscoing Intell both below. They're

(06:12):
both below where they were. It'sOracle, A long time to catch you
up. But I the point wasless about where they're trading today. It's
more that in multiple regimes, ifyou will, and that's the fancy word
for moments in time, there area handful of stocks that tend to lead
the way, and that's kind ofthat's it. This isn't it's de ja

(06:36):
vu all over again. This isn'tthat unique. You're not that you know.
It's the it's the words the genz doesn't want to hear. You're
not that special. Oh my goodness, you're not. Or they're not You're
not that special, not that special, Oh my goodness, here it was.

(06:57):
I thought I was very special.No, So I think from that
regard, the Magnificent seven are upbecause they're the best stocks out there,
and they they're gonna keep doing ituntil they don't, which you know,
seems like a non prediction and acop out if you will. But I

(07:18):
guess our point is we see nothingthat changes that leadership other than we'll say,
others call it government interference. Andeven with you know, a little
government right now, these companies arestill continuing to lead. Yeah, I

(07:44):
think you're you're towards the tail endnow of quote unquote government interference. I
mean, Amazon's been sued with aridiculous lawsuit. Google's been sued. They've
all been sued. They're all terriblepeople according to the government because the government
has to pick on winners. MI'm terrible. I know, I shouldn't.
I should You're not terrible. I'veheard. I've heard that from a

(08:07):
few people. You know that success, if you're successful, people want to
tear you down. If you're acorporation and you're successful, the government wants
to tear you down. It iswhat it is. I think that we
have the rule of law and Ithink that's going to carry the day.
And I would point out, asyou would too, that Lena Khan,

(08:28):
the head of the FTC, theformer Darling of Yale, and it is
interesting that the Ivy League has losta little bit of luster over the last
month, and that's not necessarily abad thing. And when when good idea
is one of my favorite quotes is, and I say this as a state
school kid, my favorite quotes iswhen bad ideas have nowhere to go but

(08:50):
die, they go to they goto the Ivy League and become courses.
Well, I'll laugh a little biton that. Ill, I will laugh
a little bit on that. Peoplein my experience, people will tell you
where they're degree who lead conversations withI have a degree from, you know,
this esteemed institution typically have far lessto say than you would imagine.

(09:16):
So so there take it, thereyou go, take it, take it,
take it or leave it. Ithink looping back though to look,
this was kind of a crazy market. We are just seeing wild gesticulations below
the surface. The S and Pfive hundred led by the MAG seven very

(09:37):
very quiet, the IWM, whichis the bottom two thousand stocks of the
top three thousand in the market.So MidCap small caps seems to be up
or down over a percent and ahalf every day lately. On fed on
fed thoughts with the economic data pointsthis week on inflation retail set, I
for you know what, I actuallyforget what all the the data, No,
no, no CPI and people wehad CPI and P right. All

(10:01):
I know is right now the FEDFuture's curve, which predicts future interest rates,
is took out all the increases thisweek and is now pricing in a
cut as early as April. Wellshould we have a cut as early as
April in interest rates? And Ido not believe that that's going to happen,

(10:22):
So somebody's going to have to replaythis tape at that point in time.
I think the market could head downon that news because of the inference
that if the Fed is now cuttingrates, something's got to be wrong with
the economy. Well, there's alot right with the economy. But we're

(10:45):
gonna have to come back and takea break, so we'll talk about all
that's right when we come back.This is Josh Arnold, mister money Talk
with jud Arnold here to answer yourquestions on stocks, bonds, mutual funds.
You should position your investment dollars includingyour eye and four O one K
call us nine five two nine twofive five six oh eight. You always
get straight talk, not your advice. This is Josh Arnold Sister money Talk

(11:16):
with jud Arnold here to answer yourquestions on stocks, bonds, mutual funds.
Now you should position your investment dollarsincluding your IRA and four oh one
K. Don't hesitate to give usa call nine five two nine two five
five six oh eight. You'll alwaysget straight talk, not your coded advice.
Well, with a lot of alot going on below the surface of

(11:41):
the stock market and below what's beenhappening with the Magnificent seven, that being
Apple, Amazon, Fate, Meta, Microsoft, Alphabet or Goo Goo,

(12:05):
Tesla, and Navidia, there isor has been a lot of a lot
of movement, uh, some movementin what I call the travel space,
led by Bookings dot Com and Expedia. Expedia hitting a new high this week,

(12:28):
and that's still considered a cheap stockat least on a price to earnings
basis. We've had numerous other semiconductornames have been doing quite quite well recently,

(12:48):
and even some of the it lookslike even some of the transports at
least have not fallen out of bed. And then jud you brought up the
Russell two thousand, the IWM,which is a broad index of companies they

(13:13):
have been or that had That indexhas been perking up a little bit,
and I know you liked the deal. In some of the in the small
cap arena, well caps in midcastwe had a we had a good week
this week. Well, I'm goingto take it the Oncology Institute tick Er
TOI, which I have written aletter to. I offered to buy the
company at a dollar twenty a sharewhen the stock was trading in about sixty

(13:37):
five cents. My offer was rejected, not least of which because I don't
have one hundred million dollars to buyit at a dollar twenty a share.
But I thought that was a detailthat the CEO could overlook. And if
you think I'm kidding, I actuallydid write the letter. I felt confident
that I could raise the money atthat price and lo and behold the stocks
now to two dollars and thirty centsafter earnings. It's now where there's about
a hundred million shares. That's beeninteresting. So I think this continues to

(14:03):
be a very fascinating time for smalland MidCap stocks that are displaced now with
small MidCap. The difference between themand large cap isn't isn't just the size.
The range of outcomes is far moredispersed. Where large cap stocks tend
to be more correlated because they arebig and more reflect the economy, the
dispersion of small and MidCap stocks isdispersed and varied. And what we often

(14:26):
say is you can buy the menufor big cap stocks. You can do
it. The empirical evidence says,if you buy the fifty largest cap index,
you're typically going to make about eightpercent with a lot of volatility,
but you're gonna make about eight percentover time with small caps. You want
to buy items on the menu,but if you buy the whole menu,
you're probably gonna lose money. Well, I just remember a long time ago,

(14:54):
in a far away place when Iwas first starting out and I was
working as a broker with a smallbrokerage firm that was big on bond oriented
mutual funds, and I found,after moving my money from my stock related

(15:18):
funds at that point in time tothe bond related funds, that that was
not a wise choice. But atthe time I felt often want to recommend
these things too potential clients, thatI ought to be an owner of what
I'm recommending. So even back then, I ate my own cooking, and

(15:45):
I found as interest rates went up, bond values went down, and bond
funds got hurt even more than individualbonds. And I was searching around for
alternatives, and I came upon twodifferent mutual funds at the time that did
well in that period of time.One was the Templeton Growth Fund and the

(16:11):
other was a little fund out ofPhiladelphia at the time called the OTC Fund.
The OTC Fund no longer exists.It was absorbed by t row Price
and probably somebody else. But oneof the things I found from that OTC
fund, which concentrated on a lotof small to medium sized companies, is

(16:32):
during the worst economic period or periodor the worst market period nineteen seventy three
and seventy four at that time,these guys outperformed, as did the Templeton
Growth Fund, because they were investingin the parts of the market that operated

(16:52):
in and of themselves. So theywere, you know, their businesses operated
as they did and regardless of howthe economy was doing. So that was
pretty a broad swash of can Ican I summarize all of that stuff,
because it is a long winded wayof saying very simply one of the tenets

(17:15):
of our of our view growth wins. That's it. Growth wins. Okay,
I'll start with stress, a stressed, distressed debt guy. And even
though I traffic in different stocks thatyou do, at the end of the
day, we are trying to findstocks that grow earnings. That's it.

(17:37):
And we think value quote unquote.We would argue that we are value investors
that you know, traditional value investorswho you know the most pure form of
people who look for net nets,which is the market capital stock is less
than networking capital. That doesn't reallyexist anymore because people get smart to buying
a company for less than liquidation value. But people often obsess over being a

(18:03):
value investor in buying the cheapest,lowest pe multiple things, and we have
found that is not necessarily a pathto making money. That investors tend to
gravitate on things that can compound capitaland grow over time. And that intellectual
pivot that you made about twenty yearsago has Stinney jud we're talking a lot

(18:23):
longer than that. You're making meyounger, which was okay, but fair
enough, fair enough, this wasbefore you were born, so to speak.
Yes it was before you were born, but yes, that's when we
made that judgment. It's it's heldtrue ever since I got you, So

(18:48):
that that's it. I think froma macro perspective. You can hear the
tone of my voice. Last week, we were frustrated and I was befuddled.
This week, Oh yeah, youwere. It's a frustrating now.
The difference is you take out youranger through your voice. You don't do
it through trading. Don't really domuch on the tree, you know.
I think less is more. That'ssomething that you have embraced a lot longer

(19:11):
than I have. And you don'tneed to be a hero. We talk
a bigger game, so to speak, than we trade. Find things we
like and we're macro aware. Sothat's it. But we've got a quiet
week next week, we think,well, I say we have. I
actually want to say it's a quietweek because every week we got two wars

(19:33):
going on, and nothing's been aquiet week. We have a short week.
It's a very very short week.Technically, you've got even though Monday,
Tuesday, Wednesday or full market daysFriday, the half day, I
would say, it's really two anda half days of active activity and the
rest of the week is going tobe very muted and anytime there's muted trading

(19:56):
that can result in a lot ofvolatility. Plus, he'd say, it's
a very long weekend with thanks Thanksgivingand you have a big shopping day.
Next next Friday is big is BlackBlack Friday? Next Tuesday. A lot
of technology investors are going to befocusing in on the earnings from Navidia.

(20:19):
Uh. And I'll be looking atnot so much the earnings of Navidia,
which will be interesting in of themselves, just to see how chip sales are
going in in particular chips related toartificial intelligence. But I want to do
a recap of what's happening in LasVegas over this past or this coming weekend,

(20:45):
that being the Formula one race,and see the after effects. I
am a Formula one. I thinkit's a terrible idea. I think it
didn't need to be on the strip. I think it's disruptive, and I
think this is the only time it'sgoing to happen. Now that said,
I think Vegas is going to besuccessful despite this silliness. Well I don't.

(21:08):
It's I think it's just another anotherwe'll say, shout of an entertainment
on what is normally a very weeka week weekend for for Vegas. I
understand there's no week we can't well, we can agree to disagree on this
one. I think it's anyway.We have strong opinions of loosely okay,

(21:33):
on that note that we wish everybodya good Thanksgiving and a profitable market week.
Yes we do. This is JoshArnold, Mister Money Talk with Judd
Arnold, always here to help you. Give us a call nine five two
nine two five five six oh eight. As you can tell, we do
have opinions and we're happy to sharethem with you. Josh Arnold Investment Consultant

(21:57):
is a registered investment an advisor locatedin the state of Minnesota. All securities
discussed are for informational purposes only.Investing contains risk, including risk of loss.
Consult your investment professional before making anydecisions about your investment portfolio.