Mr. Money Talk

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Episode Transcript

(00:10):
After this is Josh Arnold, mistermoney Talk here to answer your questions on
stocks, bonds, mutual funds,how you should position your investment dollars including
your IRA and four oh one K. But you do have to give us
a call at nine five two ninetwo five five six oh eight. That's

(00:30):
nine five two nine two five fivesix eight. You always get straight talk,
not sure re coded advice. Beforewe begin, do have to remind
you that this program is for informationalpurposes only. Past performance is no guarantee

(00:54):
of future results. Markets are alwayschanging and can be volatile. Stocks and
bonds can can have losses as wellas gains. All companies mentioned can also

(01:22):
see their share prices move up ordown, both on good and good news
and or bad news, and canbe affected by both macro events and enter
company events. Before you take actionon any company, please consult your investment

(01:53):
professional and do bear in mind thator all of the companies mentioned may or
may not be suitable for you.Here we go as we're getting close to

(02:15):
the end of the year, andI cannot believe how quickly this this year
twenty twenty three has passed by.That might be a function of age more
than anything else. As you doget older, time seems to pass a
lot more quickly than when it waswhen I definitely was younger. That said,

(02:44):
as we get close to the endof the year, there are a
few things to remember or at leastwrite down before before the year ends.
First, if you have not fullyfunded your four four one k I RA
or SEP, now would be agood time to do that, particularly for

(03:07):
the four to one k. Withthe SEP and IRA, you do have
until you file your taxes to makeyour contribution for the previous year, but
the sooner you put make that investmentinto your four one k or ira or

(03:31):
SEP, and I recommend that youfully fund those fund those to the max
and not in the case of afour to one K only put in up
to what is matched put in upto the amounts that you can legally put

(03:53):
in. It is to your benefitas you do get a tax deduction.
The money that is in the fourto one k ira SEP is tax deductible
going in accumulates with no tax,but is taxable on upon withdrawal. With

(04:21):
a four to one K depending onthe company you work for, there could
be the additional benefit of a matchup to a certain percent. This is
all in your or for your benefit. In terms of investment choices, typically

(04:46):
with a four to one K,you might be offered a target fund,
a guaranteed fund or funds, severaldifferent bond funds, and several different stock
funds. My choice if I wereusing a four to one K, I

(05:08):
happened to use an s S eP within Josh Arnold Investment Consultant. And
with the SEP they have it's selfdirected, so we have many different choices.
My choices happen to be stocks andput put money into the same investments

(05:33):
that I recommend for my clients,going in at the same time and coming
out at the same time. Butin a four to one K and in
some iras you might be limited interms of your choices. But in a
four to one K, I doknow that there are several different mutual fund

(05:54):
fund choices. As I mentioned,a target date fund, a bond fund,
or a series of stock funds.The target date funds typically are fund
of funds that have a mixture ofbond funds and stock funds. And as

(06:15):
you go further out on the scale, the more years that you have towards
retirement, those target date funds aremore weighted towards stock funds. The closer
you are to retirement, the waitingmoves more to bond funds. I am

(06:41):
not a bond or bond fund investor, and I'm not going to recommend somebody
putting money into bonds. Bonds giveor where you're lending money, either to
federal government or a corporation, orin the case of tax free bonds,

(07:03):
which you're not going to put ina retirement account. There are bonds issued
by the state or municipality. Bondsdo, as we have talked on this
program for a very long period oftime, fluctuate based on changes in interest

(07:25):
rates. Interest rates go up,bond values go down. Bond funds are
buying a mixture of bonds that comedo at different different points in time.
But I have found that is interestrates move up, bond funds move down
in value, and it takes alot longer when interest rates reverse going down

(07:50):
for those bond funds to recover.So I've recommended not using bond funds,
and I'd even recommend not using atarget date fund. I think you'd be
better served by putting money into oneof the stock oriented funds, or just

(08:11):
to make it easy, if youhave a choice of a in stock funds
your only choices, and S andD index fund, that would be the
choice that I would recommend. Yes, stocks do go up and down in
value. Yes, if the marketgoes down, that index is going to

(08:33):
go down. And yes, ifthe index goes down a lot, you're
going to want to say, oh, get me out of all my stock
funds and just put it into amoney market fund because it's safe. Well,
I will tell you that over anyperiod of time, long period of

(08:54):
time, not short periods of time, the stock fund is going to out
for form the bond fund or outperformcash on a long term basis. But
you do taking some risk for that. So my recommendation in the four one
K is put money into this theS and P index fund, you know,

(09:20):
as a to the max that youyou can. Enough said with with
that. Now, when it comesto the market this week or even this
year, Wow, stocks far surpassedbonds. At the beginning of this year.

(09:41):
Most strategists, talking heads we're saying, avoid stocks, put your money
in bonds, lock in that fourpercent yield, and you're not going to
have to worry about anything this year. They these strategists seemed to give a

(10:03):
guarantee that putting money in bonds atthe four percent was the only way that
you were going to make money andmake money without without any any risk.
So they recommended no stocks, moneyonly in bonds or the money market instruments,

(10:28):
and that was the way to wealthin twenty twenty three. Unfortunately,
that is not how things worked out. But we're going to talk about that
and more when we come back withmore money Talk. I am Josh Arnold,
mister money Talk, here to helpyou n five two nine two five

(10:50):
five six eight. This is JoshArnold, mister money Talk. Actually up
with Judd Arnold, Sun number two. But Judd is in New York on
some business talking to several of thesmall and mid sized companies that he likes

(11:16):
to invest in, So he willbe back next week. But I mister
money Talk, Josh Arnold, Iam here to answer your questions on stocks,
bonds, mutual funds. Now youshould position your investment dollars. Give
us a call nine five two ninetwo five five six oh eight. That's
nine five two nine five five sixeight. You always get straight talk,

(11:41):
not sure code of advice. Aswe said at the conclusion of the last
segment the beginning of twenty twenty three, investment strategists talking heads both in the
news on TV, we're saying thatonly place to be, only place to

(12:05):
be. In twenty twenty three,bonds had to put your money in bonds
because of their belief that interest rateswould top out and then start then start
retreating as the Fed's fight against inflationwith higher interest rates in twenty twenty one

(12:31):
would put the economy in recession mode. And once the economy was in recession,
the FED would be forced to cutinterest rates. And as the FED
started cutting interest rates, bond priceswould go back up. And do remember

(12:54):
that bond prices is represent by anyof the index. Index funds were down
significantly in twenty twenty two as measuredby TLT the long long bond index that

(13:18):
was down a third in twenty twentytwo. It was down as much as
the Nasdaq in index q q Q. And it would take a significant drop

(13:39):
in interest rates for any investor tomake to make up that that loss in
the in the long long term bond. But in any case, strategists for
recommending bonds over overstocked US, andwe're of the belief that we'd be heading

(14:03):
into a recession, whether it beshallow or deep, so soft landing versus
hard landing. Well, looking backeleven months, bond prices are well up

(14:26):
from the bottom, are still downfor the year. So if you were
to invest in the long bond TLTat the beginning of the year, yes,
you did get some nice interest aboutfour or four percent, but the

(14:46):
value of your holdings is still downeight percent. That's that's not so good
for when you're investing in bonds.Yes, if you're going to hold those

(15:07):
bonds or that fund over a longerperiod of time, and you know,
should interest rates continue to fall,and long term interest rates have come down
in the month of November and comedown hard, and that has pushed up

(15:28):
the value of TLT. You know, from a low of eighty five dollars
a share to Friday's Clothes at ninetythree dollars a year. That's a pretty
good good gain, but still downsignificantly year to date. And that's particularly

(15:52):
against the S and P index,which at the beginning of the year strategist
said of void avoid Avoid, andthat index is up year today about sixteen
percent. Yes, it's been arocky ride putting money in the S and

(16:18):
P Index or in stocks this year, because we have had several five to
ten pull backs over the course courseof the time in terms of the index,
and we even came close to goinginto bear market territory for a brief

(16:42):
period of time this past summer asinterest rates moved up. And there are
still a lot of strategists that didn'tchange their tune in terms of investing invest

(17:03):
in bonds, go light on stocks, and you definitely do not want to
be in the Magnificent seven because thoseare priced too high. Those being Apple,
Amazon, Alphabet or Google, Microsoft, Meta, Navidia, and Tesla.

(17:29):
Those stocks which make up a largechunk of the S and P Index
because of their market weight, havecontinued to outperform. And I would say
Meta also known as Facebook and ownsreels and Instagram probably been the I'm not

(17:56):
going to say the best performer becausethat'd be was Na Video, but that
has done exceedingly well. Microsoft thisyear hit a hit a new high.
Apple rebounded from from a bottom andthat's up a bunch, and even Amazon

(18:19):
has done done very very well,the laggard of the Magnificent seven, that
would be uh, Tesla. Butthat's that to me is another story altogether.
Tesla's a company. I look atit as a car company. Other

(18:41):
people look at as a straight uptechnology company or a battery company. To
me, they sell cars, andnow they're going to be selling trucks.
And yes they are the leader inelectric vehicles, but electric vehicle sales are

(19:06):
flagging. General Motors and Ford arenot going to be as aggressive in selling
electric vehicles. To me, thereare plenty of issues related related to them,

(19:26):
which I'm not going to go intoit this at this point in time.
But to me, testsstilly a carcompany, and if I look at
it as a car company, it'sa very expensive car company. If I
were to look at it just asa straight up technology company, well maybe
maybe not so much. But they'reselling cars. They've got to, as

(19:52):
they say, they've got to movethat, move that metal to generate the
revenue will support the support to technology. So that to me would be one
stock that I'm not looking looking tobuy at this at this point in time.

(20:17):
Others, you know, see seeTesla differently. To me, it
is a car company and an expensivecar company at that. If I want
technology, man, there's a wholehost of technology companies out there that to

(20:37):
me offer some better growth opportunities,you know then than Tesla. So yes,
it has been underperforming. If Ihad had to choose, I'll say
amongst any of the companies in theMagnificent seven. And I'm still still heavy

(21:04):
in Apple and Amazon, but I'vegone over both of those on a very
frequent, very frequent basis. Appleby the way, did get some or
had some interesting news on Friday,and that and that relates, and that

(21:32):
relates to a potential deal with Paramountto bundle streaming on on Apple on Apple
Plus. That could be very interesting. Indeed, gives giving Apple some more
content that they can they can distribute. And the market seemed to like the

(21:55):
potential of the deal as it bidup it bien up the media company Paramount
today. But we're going to comeback and talk a little bit more about
some media companies as well as someissues that one of my clients brought up
to me. When we come backwith more money talk. I am Josh

(22:18):
Arnold, always here to help you. Nine five two nine two five five
six oh eight. This is JoshArnold Mister Money Talk with Judd Arnold.
Now not this this week, judis in New York visiting several several companies.

(22:41):
But I am here to answer yourquestions on stocks, bonds, mutual
funds, how you should position yourinvestment dollars, including your IRA and four
oh one K. Don't hesitate togive us a call at nine five two
nine two five five six oh eight. That's nine five two nine two five
five six oh eight always gets streighttalk. Not sure code of advice,

(23:03):
just a reminder this show is forinformational purposes only. Past performance is no
guarantee of future results. Any ofthe companies that we talk about on this
program are may or may not besuitable for you. All investments include risk,

(23:27):
and any discussion that is offered comesfrom our opinion and our research only.
Please consult your advisor before you makeany investment decision. This is Josh

(23:51):
Arnold Mister Money Talk. Call ninefive two nine two five five six eight.
Well, this past week I hada very interesting conversation with one of
my clients. He was concerned thatthe market was not only a little bit
too high, but he was concernedthat the market this being the stock market,

(24:14):
not the bond market, is readyfor a repeat or a replay of
what happened in two thousand and eighttwo thousand and nine when the mortgage bond
market and or mortgage backed securities thatwere invested in with tremendous leverage caused and

(24:45):
when the mortgage market fell apart,those mortgage backed securities dropped significant in value,
and banks that held those mortgage backedsecurities or individuals that held those mortgage
backed secure and particularly held those withlarge amounts of leverage UH suffered significant losses.

(25:08):
And the way that those losses orthe margin margin was met was by
selling selling stops. So during thatperiod of time, as the saying goes,
the baby got thrown out with thebath water, and numerous companies that

(25:33):
had significant assets, had very strongbusinesses, saw their stocks get crushed.
So this particular client is concerned abouta credit crunch affecting affecting the market.
Additionally, well, we had didnot have a recession this year, a

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recession defined as two straight quarters ofnegative GDP growth. He was concerned that
with a credit crunch, with thepotential of business slowing down, the potential
of consumers being up to their eyeballsin debt, that a recession would be

(26:29):
imminent and it would be a goodidea to reduce his stock position and increase
his cash position with the intent ofcoming back in after this event occurs.

(26:51):
So my response is, of course, yes, some of these things could
happen. Yes, at some pointwe could have a recession. However,
most strategists have been predicting a recessionfor the last year and a half,

(27:18):
and they have predicted that we'd bein a fairly steep recession right now,
given where what the FED was doingwith their quantitative tightening and raising interest rates.
My response was, in terms ofrecession, we did have a recession

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in the first half of twenty twentytwo, when GDP growth was negative for
two quarters in a row. Additionally, we were coming out of a government
mandated shutdown slash recession from that startedin early twenty twenty. So as the

(28:08):
economy started coming back to life,GDP grows even with the FED raising interest
rates, even with the price ofoil moving up, and the price of
oil actually peaked in June of twentytwenty two. But even with that,

(28:36):
the economy started to expand, andyes, the government with their spending large
es, which has increased the nationalguart that's another issue. Altogether has created
a situation where the gross domestic producthas actually been accelerating and not slowing down.

(29:03):
Indeed, this past week, theGDP growth was announced at five point
two percent, which is definitely unsustainable, but is a pretty significant, very
significant number. And that that thatgrowth was coming a lot from government spending

(29:33):
and also from private industry spending andtrying to expand, expand their their business.
As it comes to a credit crunchor bank issues, well, I
think that that has been priced into at least to some extent, and

(29:55):
I think that has been priced inmany months ago. And all you have
to do is look at bank stocks. Bank stocks are still not back to
where they were at the beginning ofthis year. Bank stocks stocks took a
significant hit and actually hurt the marketin April when three major banks were forced

(30:19):
to close down and government regulations orregulators came in and really came down hard
on many banks and asked them toincrease their capital capital reserves. Many banks
also cut back on their lending,so the lending market tightened tightened up,

(30:45):
and you could see see how thathas rippled through the economy and many different
many different segments, including or especiallyin housing. Now housing demand is is
up significantly. H home sales haveactually slowed slowed down, and prices have

(31:14):
started to come down, and nowmortgage rates have also come down. I
am not a bank investor, norwould I recommend investing in banks. I'll
leave that to you know, toother other people. Has met, So
that's that's still there. Now sellingyou know, our stocks, which leads

(31:44):
to the next question, our stockstoo high or certain stocks uh too expensive?
Here I could I could say guessstocks and even particular members of the
Magnificent Seven are trading at higher priceto earnings multiples than they would during a

(32:07):
market sell off. But part ofpart of that is the amount of money
that's come into this year, hascome into all the indices from index investors,
and part has been these companies actuallydoing better with their earnings reports and

(32:30):
even guiding i'll say less conservatively thanthey've had in the in the in the
past. Plus, there is thisbig push towards artificial intelligence and generative artificial
intelligence started with Microsoft's announcement of dealingwith Chat GPT back in May, and

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that announcement really gave we'll say theMagnificent seven and technology companies in general,
a big, a big, bigboost. Could these companies be right for
a pullback? Sure it was thepullback going to happen now, don't know,

(33:17):
But I could look at the volatilityindex the VIX and say, well,
it's down significantly from where it wasthis summer and at the place it
is, that could be indicative ofa little bit of caution. So if

(33:42):
you wanted to raise a little cashright now, you know, for safety's
sake as you come into the endof the year, that could make some
sense. You might also see inthe next several weeks a lot of individual
investors and maybe some institutional investors startbalancing their portfolios, selling some of their

(34:08):
winners to use up some of thelosses that they took in twenty twenty two
or even early in twenty twenty three. So there might be some either tax
we'll call it tax laws selling ortax gain selling, trying to balance off

(34:30):
off the two before the year yearends. So that could indicate a little
bit more volatility. Pay attention.This is Josh Arnold miss or Money Talk
here to help you have a questionwould like to sit down for a personal,
no cost, no obligation consultation callnine five two nine two five five

(34:55):
six oh eight. This is JoshArnold, mister money. Talk with Judd
Arnold. I'm here to answer yourquestions on stocks, bonds, mutual funds.
You should position your investment dollars.Don't hesitate to giving me a call

(35:15):
at nine five two nine two fivefive six oh eight. You always get
straight talk, not your code ofadvice. Nine five to two nine two
five five six oh eight. We'rehere to help you now. Another big
week of earnings concluded, and someother interesting events took took place this this

(35:43):
past week. Two heavyweights, inmy opinion this week passed passed away.
Henry the Kay Henry Kissinger died midweekat age one hun hundred. A phenomenal,

(36:05):
phenomenal presence, we'll say, inpolitics and in international affairs. Tremendous
thinker and definitely somebody that you wantto have on your side in any foreign

(36:30):
policy matter. Very great, greatman. And second, Charlie Munger,
probably one of the more brilliant investmentminds and investors on a very long term

(36:51):
basis, passed away at ninety ninejust shy of his one hundredth birthday.
Charlie Munger ran his own company,Daily Journal, and I was also vice
chairman and partner to Warren Buffett atBerkshire Hathaway. Charlie Munger was known,

(37:20):
we'll say, for his wit andwisdom. An interesting book about him called
Poor Charlie's Almac, kind of atake on Ben Franklin's book Poor Richard's Almanac.
Both men, in my estimation,will be missed for a very long

(37:46):
period of time. Well switching gearsfrom these two giants, we'll say the
market. The market this week wasstill in the thralls and probably will continue

(38:07):
to be in the thralls for quitesome time. Of the Federal Reserve either
you had Fed FED speakers this weekand with a FED meeting coming up in
a couple of weeks talking about inflationand their views of interest rates, and
it's still for the most part higherfor longer. But the market has tended

(38:30):
to move now on any bit ofnews or any indication that the Fed is
going to be on pause and mayin fact, at some point in twenty
twenty four start to cut interest rates. And of course all of this is

(38:52):
data dependent there is still the beliefthat inflation is still quite sticky and sticky
on the high end. Yes,you've got a few things that keep inflation
sticky. One is going to bethe price of energy or price of oil.

(39:14):
Although the price of oil has beencoming down and has not been moving
up. The price of oil isdown at seventy five dollars a barrel.
And as the price of oil falls, price of energy stocks have also been
coming down. Another area that I'mnot running running out to invest invest in.

(39:40):
The other area that provides sticky inflation, of course, is the price
of housing or mortgage adjusted rents.With mortgage rates starting to come down a
little bit, that should bring thatprice down, but that's still up significantly

(40:00):
from the beginning of the year.So those are two primary causes, will
say, of stickiness and inflation.And the third cause, of course is
wages, and wages have been creepingup a little bit. All you have
to do to look at where wagegrowth is going is looking look at some

(40:22):
of the recent union contracts, whichhave of course been up. But should
the Fed at least go on pauseor not talk as hawkish. That is
going to provide fuel to keep thestock market up. But again remember my

(40:46):
caution from the previous segment in thatthe market has moved up, the leading
leading stocks are now trading at higherprice to earnings multiple, the volatility index
has come down at a low.We're coming into a period of time where

(41:07):
there's going to be some what'll callit tax related selling by individuals, and
that could create as the month ofDecember evolves, at least either prior to
or after the FEDS meeting in afew weeks, that couldn't involve a little

(41:28):
bit more volatility before we go intothe new year. Without making too many
predictions, I will say there area lot of strategists that are continuing to
recommend that next year will be theyear of to be in bonds, and

(41:54):
maybe maybe next year will be areturn to the importance of a balance portfolio
of sixty percent in stocks forty percentin bonds. Our view is, if
you want safety, put your moneyin cash with not a lot of risk

(42:19):
and interest rates and a money marketis still good. We like to use
an asset allocation model of keeping upto thirty percent in cash because we know
that during the course of any yearthere are going to be several five to
ten percent pullbacks. Want to havecash available to invest during those pullbacks,
and the balance investing in companies thatoffer a product or service that we feel

(42:46):
will lead to continued growth of revenueand then earnings, with a focus on
companies involved in the Internet, leisure, China related businesses, and real assets.
This is Josh Arnold, mister moneyTalk, Always here to help you.

(43:09):
Give me a call. Nine fivetwo nine two five five six oh
eight. Been here through boo marketsand bear markets, Always here to help
you. Josh Arnold Investment Consultant isa registered investment advisor located in the state
of Minnesota. All securities discussed arefor informational purposes only. Investment contains risk,

(43:30):
including risk of loss. Consult yourinvestment professional before making any decisions about
your investment portfolio.