Mr. Money Talk

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Episode Transcript

(00:10):
This is Josh Arnold missed or MoneyTalk with jud Arnold here to answer your
questions on stocks, bonds, mutualfunds. Now you should position your investment
dollars including your IRA in four ohone K. Don't hesitate to give us
a call at nine five two ninetwo five five six oh eight. That's
nine five two nine two five fivesix eight. You always get straight talk,

(00:35):
not sugarcoated advice. Say if you'rejust tuning in for the first or
second or fourth time. Friendly reminderthat everything we talk about on the show
is for discussion purpose is for discussionpurposes only. Nothing should be considered as
investment advice. Some are all ofthe securities we discuss in the show may
or may not be suitable for you. Please consult a financial advisor before making

(00:56):
any any decisions about stocks, bonds, mutual funds to invest in. Investing
in the stock market contains a varietyof risk, including the risk of loss.
Big week this week, the bigweek is correct? What do you
think about the FID What do youthink you think the pin is done?

(01:17):
Well? The bond market says they'redone. I thought that the bond markets
was really responding to today's comments bysaid Governor Williams that no rate cuts are
going to happen next year, andyet on Wednesday it seems that Chairman Powell

(01:37):
indicated that there are three rate cutsfor next year. You know, I
don't think there's going to be maybeone cut next year, and I think
the Fed remains on higher for longerbut is still on pause for a long
time. The market is not agreeingwith the Williams comment. Today. The

(02:05):
one year rate is down a ton. It's down from five point five percent
in the from mid October to fourpoint nine eight percent, giving back fifty
BIPs. So it's pricing in twocuts in the next six months. And
the two year versus one year rateis you know, four nine seven verse

(02:29):
four point four four. The tenyear continues to fall in a three nine
to one percent versus high of fivepercent at the start of October. So
the markets rallied. Stock market,I should say, bond markets and stock
markets rally dramatically this week on theback of the FED press conference, and

(02:52):
they continue to do so. So. I the Russell two thousand index,
which is the index of small andMidCap stocks. It's the mall's two thousand
of the top three thousand stocks hadthe biggest peak to trough move since at
least nineteen seventy. That's how rapidthe rally has been. I mean,
I just look at it. Themonth of November, you know, and

(03:15):
we'll just say, bonds represented bythe TLT was trading at eighty five dollars
to share. Today the long bondrepresented by TLT is trading at ninety nine.
That's a that's a huge move.Part of it, I'm guessing due
to short covering more than anything else, and maybe part due to the realization

(03:40):
that the Fed, the FED couldbe done. John Well, no,
no, no, no, no, this is not about the Fed being
done. The Fed is not raisinginterest rates any this is it. The
question is how much do they cut? That's what the market is debating.

(04:00):
But from an equity standpoint, thecliff risk of the FED hiking into infinity's
gone markets are up dramatically, particularlythe most interest rates sectors. The bond
market has moved dramatically. So herewe are, and it's been a huge
week for small and MidCap stocks.Just a huge week, so been a

(04:23):
huge month. Just to give youan idea small MidCap stocks bottom the IWM,
which is the Russell two thousand bottomedat about one sixty at the end
of October and we sit at oneninety seven today. So about a twenty
five percent move in small cap andMidCap stocks in a month and a half.

(04:43):
That's how big. I mean,it's just huge epic moves. Well,
I mean, I'm not sure surehow many people had money ian invested
in small to mid mid caps otherthan you. Well, I see B
five hundred is having a great year. Beg goes into the background. Inflation

(05:04):
numbers have been very conducive to inflationbeing beat. So again, now we're
not macro. We always have toget this caveat we buy stocks, we
talk about macro. Macro is alwaysinteresting, Macro just being the direction of
the overall stock market, overall bondmarket. But this is you know that,
it's not a huge driver of ourinvestment philosophy. We buy cheap stocks

(05:26):
with growth. We're big believers ingrowth winning. In the end, you
got to pay the right price forit. But we're big believers in growth
winning. And I would just sayone of the biggest drivers of stock valuations
is the yield on the ten yearbond it's used to discount future cash flows
that coming in all all SEQL fromfive percent to three point nine percent in
about less than two months is goingto be a big tail, when for

(05:48):
stocks it already has been. We'reseeing seeing smaans MidCap stocks catch up a
little bit to their big cap cousins, is very supportive. It's likely this
This move in all markets, bondmarkets and stock markets would usually imply a
pickup in mergers and acquisition activity andIPO activity, which typically is supportive of
a continued equity market. And againthe last piece, we are in a

(06:13):
presidential election year coming up, usuallya good year for stocks because the politicians
get out and lie about all themoney they're going to give you for voting
for them, So usually a goodyear. So a lot of things are
setting up. Certainly a quest wellif if an election year JUDT is such
a good year, how come?And I would just say, the majority

(06:34):
of market strategists that I have seeninterviewed on Financial TV or have read in
other publications majority seem to be negativeand are even even cautioning that the stock

(06:54):
market represented by the S and Pfive hundred is going to correct next year.
Some where between eight and twenty percent. What kind of a call it?
Sorry about it that the only placethat you should be investing is is
bond first, though I continue tobe the big winner next year. Well,

(07:15):
you know, they can say allthey want. Saying that the market
next year, at one point intime is going to correct eight to twenty
percent is a call that you canmake in any year. Strategists are rarely
good stock pickers. In any givenyear. We like to remind people there's
three to four sell us of atleast five percent in a year, and
every year I will We would alwaystell an investor you better be prepared to
lose thirty percent in any year becauseyou can't predict any of these things in

(07:39):
the short run. The Fed quoteunquote pivot occurred. This has been a
question for two years. The bondmarket rallying that, especially long end rates
is incredibly supportive. Inflation looks containednow for new money investors, I would
agree. If that's your subtle point, that the market has already run and

(08:01):
is largely reflective of that. You'vegot Apple at you know, forty times
earnings right now or something crazy.No, Apple's not, it's only at
twenty nine times earnings. But Appleis is up. It's Apple was just
shy of two hundred dollars a share. On Friday, Bloomberg came out with

(08:22):
another report bad in China government.The government is banning iPhones. Get well,
really, that's we have some proofof this, because you've done this
before, Bloomberg News. You've madethis report before, it proved to be

(08:43):
wrong within just a few days,and you didn't provide any apology and or
correction. And now Apple's at awe'll say, an all time high.
It's approaching two hundred dollars a share, and on the friday of an expiration

(09:07):
date, right before Christmas, youcome out with this this particular news.
Well, I hope you have toback up for that. It's all part
of the game. It doesn't matterwhatever we take the long road. I
know it's frustrating, although it's hardto be frustrated when you're sitting at almost
two hundred a year on Apple.So well, part we're sitting we're only

(09:31):
fifty dollars shy shy of my pricetarget. And I do have some clients
that have said, well, whathappens when we hit the price target?
I said, well, as weapproach it, We're going to have to
continue to reevaluate where Apple's business isgoing. And part of my calculation does
not include any new products that arecoming out with Apple, does not include

(09:56):
any of their moves towards generative artificialintelligence, which could be big. So
that's just based on Apple's current youknow, current business. Well, we're
hoping for thirty times seven plus thecash on the balance sheet. That's how

(10:16):
you get to two fifty. Butwe're gonna have to come back after the
break with more money talk. Thisis Josh Arnold, mister money Talk with
jud Arnold here to answer your questionson stocks, bonds, mutual funds,
How you should position your investment dollarsincluding your IRA and four to one k.
Don't hesitate to give us a callnine five two nine two five five

(10:39):
six oh eight. We can helpyou. Nine five two nine two five
five six oh eight. This isJosh Arnold, mister money Talk with jud
Arnold here to answer your questions onstocks, bonds, mutual funds. How
you should position your investment dollars includingyour IRA and four oh one K.

(11:05):
Don't hesitate to give us a callat any time. Nine five two nine
two five five six eight nine fivetwo nine two five five six eight.
We're happy to meet with you andprovide you some direction into the coming years.
As we started Big Week, theFed um pausing again on on interest

(11:31):
rates, helping boost the bond market. Janet Yellen, in a interview,
said that she sees a soft landinginflation coming down to two percent by the
end of twenty twenty four and noget that, no recession risk into next

(11:52):
next year. Big news. Youhad Jeffrey Gunlock, the bond king it
saying buy bonds now. The Fedis on pause and is likely to stay
on pause, and the next movewith interest rates is is down. Bonds

(12:18):
will do very well next year.Then you have a big contract that was
signed in Major League Baseball with theDodgers. Oatani gets a seven hundred million
dollars deal and says he wants todefer six hundred and eighty million dollars of

(12:45):
that. Boy, the Dodgers aregoing to make out like bandits with with
that. Then the TV talking headsay buy the equal weight S and p
abandon the market weight S and T. We have real estate investment trusts are

(13:11):
up, probably on the back ofbond yields coming down, and we have
Intel coming out with a new chipto compete with AMD and Navidia. Not
to mention, of course, Costcoreports better than expected earnings and it's huge.

(13:37):
Oh, I forgot jud when youtalked about mergers and acquisitions. You've
got a I'll say, a cagematch wrestling cage match at Walt Disney between
Bob Iger and several activists. Veryvery interesting week going into the end of

(13:58):
the year and the and the Christmasholiday. I continue, I'll go on
my usual weekly rant about how terriblea business media is to say that there's
nothing interesting about the cage matchic,isn't he? And you should not touch
the stock. Well, I thinkthat would probably apply to paramounts as well,
because Sherry Redstone all of a suddenseems to be willing to part with

(14:26):
one of the family jewels or thefamily jewel. Well, they should have
sold a long time ago, andthe amount of money that was destroyed by
those egos is truly unbelievable. Thatfamily has written it from seventy bucks down
to sixteen. So so be it. Because legacy media is a terrible business.
As it transitions to the direct toconsumer. They can't figure out how

(14:46):
to get paid, and I thinkthe best days for that business model are
long behind it. Do not touchany of that stuff. Isn't to say
that it might not rally at certainpoints. I just think they need to
figure it out. And other thingsare a heck of a lot easier to
touch. Oh, there are plentyof things to me that that are easier.

(15:07):
The interesting thing about M and Ais and the IPO market is it
is both markets have been largely dormantfor the last two and a half years,
and I expect a pretty big catchup in M and A and eventually,
you know, some version of anew bull cycle in economically sensitive stocks

(15:28):
that can include oil and gas.Energy has been had a tough year this
year after two really big years.I think that's going to resume as we
go into next year. And Ithink general industrials are going to do really
well. Not the g's and industrial, but one of the best years ever
for that stock up about I thinkalmost eighty percent year to date. There's
a lot of stuff outside of tech. Now that being said, since two

(15:52):
thousand, oh god, I wantto say since about late two thousand and
two, tech has if all youbought was tech, that's all you needed.
Well, two thousand and two,when everything had been destroyed in technology
and a lot of Internet related tocompanies were destroyed in Lake two, you

(16:15):
know, from the middle of Yeah, after the tech bubble, we bought
Themed in October of twenty twenty two. So everything left has been a buy.
It's been a you know, growthusually wins, and that's sort of
our focus. So but but thereare a lot of companies that you know

(16:36):
still from that time, have notcome back to where they were. No,
they haven't, And I mean,why don't you work on that?
Cough, take a little drink ofwater right there, but I already did.
You can see the big diversions betweenwhat was the four horsemen, which
is which was Microsoft, Intel,Oracle and Cisco Systems and Crisco system still

(17:00):
has not come back to it's it'shigh, or at that time, Intel
has not come back to it's it'shigh. Intel was trading at sixty six
dollars to share in two thousand andMarch of two thousand, currently trading at
forty six. There will have beenno splits and up until Intel started talking

(17:26):
about artificial intelligence, chips. Thestock was trading it less than its two
thousand high. Yes, it didpay a dividend over that time, but
hardware hardware software a much easier business. But yeah, all this macro stuff.
Look, we're going to keep findingstocks to do. It's been a

(17:48):
great year for you and your clientportfolios. Amazon, you know, a
real phenomenal year. Apple continues tobe the stall wart as well. We've
talked in with a few other interestingtrade and yeah, more to do.
The year's not over yet, butmore to do. I'd say our big
call that the world isn't ending paidoff this year, Well, yeah I

(18:11):
didn't. I guess I'm more ofan optimist than the most than most people
that are in I'll say that arein the business, but I could quite
ask. Yeah, we're going tohave some bearish bearish points in time,
as we've we've stated before. Youknow, in any given year, the

(18:33):
stock market is going to pull backfive to ten percent at least three or
four times for any number of reasons. And as long as companies, as
we have stated, are able toincrease sales over a period of time keep
keep expenses low, you know you'regoing to the stock price will eventually follow.

(19:00):
Oh yeah, oh yeah, thatis that has been the case.
You did mention the you know howdifficult a year it was for we'll say
for all commodity stocks, but inparticular oil and gas stocks, which had
a huge run for we'll say foryears, work for two years, and

(19:23):
this past year have pulled back withand I'd have to say, with the
exception of some of the oil servicecompanies which did did stay up, although
they were down from their highs,but hard to work and energy when the
commodity is down. I think thecommodity is down this year twenty so.

(19:45):
But I did have I did havea question that was, what was put
to me, what do I,you know, what do I think about
Berkshire Hathaway selling a lot of Ithink the question was what did I think
of Berkshire Hathaway selling thirty billion dollarsworth of stock? And I was kind
of asked the question. I said, what do you mean Berkshire Hathaway selling

(20:08):
stock or do you mean more inbuffet selling stock? No, Berkshire Hathaway
selling stock. And I said,well, Berkshire Hathway is always selling,
selling shares of one kind. Theysold out of bank a lot of their
bank holdings, and they bought othercompanies instead. And this past week they

(20:29):
made another big buy in an energystock, that being adding to their position
in Occidental. But I don't knowwhat he's doing in Occidental anymore. He's
taking all this liquidity risk. Idon't think Oxy's any better than any other
energy stock. And now he's massivelya liquid he owns twenty seven or twenty
eight percent of it. Maybe hetakes a private I don't know. I
think it's kind of boring. Idon't love ean P Stock's exploration and production

(20:56):
stocks. It's a very hard businessto make outside returns. Typically do the
bat when you buy them when nobodywants them. The oil price is in
the gutter or the garbage bin,and you can make money on a very
easy commodity bet as well as areturn to more normal times. But well,
speaking of normal times, we're gonnatake a break and we will come

(21:18):
right back, Yes we will.This is Josh Arnold, mister money Talk
with Jut Arnold, always here tohelp you with your investments, whether inside
or outside your retirement account. Dogive us a call nine five two nine
two five five six oh eight.We're happy to help you, meet with

(21:38):
you in person and provide you somedirection into twenty twenty four. This is
Josh Arnold, mister Money Talk withJut Arnold here to answer your questions on
stocks, bonds, mutual funds.You should position your investment dollars, including

(21:59):
your in four to one k.Don't hesitate to give us a call nine
five two nine five five six oheight. That's nine to five to two
nine five five six oh eight.You always get straight talk, not sugarcoated
advice. Say if you missed thestart of the show or you haven't listened
to us before, Please keep inmind that everything we discussed in the show

(22:22):
is for discussion purposes only. Nothingshould be considered investment advice. Some are
all of the seheries we discussed onthe show may or may not be suitable
for you. Please consult a financialadvisor before making any investment decision. Investing
in the stock market contains a seriesof risks, including the risk of loss.
All right, that makes the lawyershappy, So let's get back to
the real thing. The Fed isdone. They're probably gonna cut the bond

(22:45):
markets pricing in a series of cuts. Equities rallied huge, especially small caps
rallied just epically. Small caps fromthe early October lows are up over twenty
five percent, including I think eightpercent this week. Unbelievable. The IWM
has had a huge move. Andthen bank banks being the other one,

(23:06):
which we're in the gutter for,you know, since Silicon Valley Bank.
What a move since they're a groupof stocks that I want to avoid.
Yeah, that one's up twenty fivepercent also from the lows, and in
the last five days up about justunder ten percent. And that's another thing
where you take what's called left tailrisks or downside risks to the market are

(23:33):
being not gonna say removed, becausethey're always there, but the pricing on
those risks, the probability of thethe bad outcomes is going lower and lower,
which is generally supportive. Now wesay all of this in the context
of what is now. People aregoing to look at the year end,
you know, five years from now, people look at the year end stock
returns for twenty twenty three and they'llsay, wow, SMP five hundred up

(23:55):
mid twenties percent, small MidCap stocksup fifteen to twenty what a great easy
year, And what is that untrue? Easy? My gosh, it's far
far from easy. This was aanother very difficult, difficult year. So
and this is a big tenant ofhow how we do things, which is

(24:15):
you it is too hard to callwhen you get in, when you get
out. We don't we talk alot, We talk a big game.
We talk about macro all the time. We really are pretty quiet when it
comes to trading, as you needto be. Because if you weren't invested
this week, you got you youmissed the move we had. Well,

(24:36):
there are awful lot of people whoweren't invested. Bear in mind, I
saw one statistic that there's over sixtrillion dollars just sitting in money market accounts
on the sidelines. I mean,that's that's a lot of dollars. Uh.
And if I were even to goback to the beginning of this this
year, with the number of strategistsand of who said don't invest in stocks

(25:02):
this year, recession is coming.The only place you need to be are
in bonds. And okay, thelong bond index right now is only down
one percent for the year. TheS and P five hundred. If you
had just invested in stocks through allthe ups and downs this year, and
there were some difficult times, particularlyover the course of the summer. I'll

(25:26):
say July, August, September,and part of October. The S and
P for the year is up whattwo percent? I think another another stat
will get people. The S andP five hundred. At the worst point,
you know, midway through the year, I think, was up nine
percent. Bonds at their worst pointin a year that everyone on TV was

(25:48):
screaming at you to buy bonds.Long treasury is TLT at its worst was
down twenty two percent for the yearat its worst moment. Now it's back
to flat for the year year.But this is our our big point on
bonds since two thousand. Now,you've been anti bonds your whole life.
You did it. You would acknowledgein you know, the mid nineties getting

(26:11):
an eight percent return in long bondsis it's not bad. It's not great,
but it's not horrific. What we'vebeen saying since the global financial work
crisis when bond returns went to zero, said what are you doing? And
during this recent bond volatility of thelast three years, when we played around
with interest rates, you've lost manythree years in a row being a long

(26:32):
treasury bond investor as interest rates wentup, and you've missed a monster return
in the US stock market. Andif you go back people people would point
out and say, well, yeah, I might have missed that big return
in the stock market over the lastthree years, but look at what I
missed in twenty twenty two when theDow was down twenty percent and NASDIK was

(26:56):
down a third. By being inbonds, at least I collected some interest
and still lost money. You stilllost mid teens and bonds, but I
but I got my interest. Judthat's not the point. And then and
and my bonds and bond funds arequote unquote safe. Being very facetious here,
I hear since since two thousand andnine, you made almost nothing in

(27:18):
bonds, and you made five xyour money in the S and P five
hundred. And that's the problem.That bonds always win, if you have
any sorry, stocks always win.If you have any type of time horizon,
you should be in stocks. Wehave to say that for some people,
potentially maybe bonds might be an alternative. We have to be fair and
balanced. Although when I asked thesepeople to be fair and balanced, how

(27:41):
they can empirically justify that. Theyasked me the key question, what do
you mean empirically, Well, I'mgonna just switch something in terms of,
you know, stocks versus bonds,because the I'll say the mantra is,
keep sixty percent of your money instocks, forty percent of your money in

(28:04):
bonds, or some slight variation onthat, and that will provide you some
safety and some growth because usually thebonds do not move in sync with stocks.
Although I would I would say,you know what, not true.

(28:26):
It's the stock market's going down,the bond market is probably also going down.
Yields are going up, so you'relosing money on both stocks and bonds.
I'd also point something out, andthis is from a very long time
ago, an interview that I sawon an old program called Wall Street Week
with Lewis Rukeiser, which was tome one of the more fabulous interview shows

(28:52):
and probably during that time period wasthe only financial show on television. One
of the I'll say once a year, Lewis Rukeiser would interview his father,
and one of the last interviews hedid of his father, who at that
time was celebrating his ninetieth birthday andLewis Rukeiser asked his father about investing in

(29:18):
stocks and why he was still investingnot only in stocks, but leaning to
gross stocks at his age at ninetybecause if the things went down, he
did not have enough time to recoverand his father his father's answer was,
you know, were it not foryou and your siblings who forced me to

(29:45):
get or put some of my moneyinto an annuity, I would never have
done that. Stocks are the onlyway to go. I've got from some
stocks dividends and those dividends grow everyyear, and other stocks I've got growth,
and that is the only way togo. I said. Okay,

(30:11):
here's a guy at ninety years old. And this interview took place I believe
in the in the late eighties earlynineties. So obviously Lewis Rukeiser's father had
been through a lot of different marketsand not only one thing that bonds are

(30:32):
good for enemies. I'll tell youone thing bonds are great for. They're
good for paying high fees and employingWall Street. Okay, that's that's it.
They're a high fee. It's reallyunbelievable. They're a high fee product.
Worst return on a five ten twentyI mean, it is just unbelievable.
The one year they work, you'remiserable anyway, and you should sell
them to buy stocks. So that'swhat I will say. When you talk

(30:56):
about a high feed product. Iyou know a number a lot of years
ago I did check out because youknow the different prices on bonds because bonds,
unlike stocks, there is no transparencyin terms of pricing none. You're

(31:17):
gonna get run over as an individualinvestor. You get run over as an
institutional investor too. I worked attwo of the biggest credit funds on Wall
Street. You get run over.That's what That's what the answer is.
You get run over in credit.But so be it. But what we're
gonna have to wrap this up afterthen after the break. This is Josh
Arnold, mister money talk with JuddArnold, always here to help you with

(31:41):
your investments. Don't hesitate to giveus a call. Nine five two nine
two five five six oh eight.That's nine five two nine two five five
six oh eight. You always getstraight talk. Not sure your coded advice.

(32:05):
This is Josh Arnold, mister moneytalk with Judd Arnold, here to
help you with your investments, whetherinside or outside of retirement account. Whether
you're investing in stocks, bonds,or mutual funds, don't hesitate to give
us a call. Nine five twonine two five five six oh eight.
That's nine five two nine two fivefive six oh eight. Well you had

(32:31):
a big, big week, Judd, you will say as an activist investor,
Uh, two of your holdings seemedto do well. One came back
a bunch, So congratulations to you. Wow. Then Tidewater needs to rally
a little bit more. That's ourenergy services stock, Pagaya. We went

(32:53):
activists on over the last weekend.We wrote a say a less than friendly
memo to the boarder, directors andthe CEO of the company. It did
get a nice upgrade or i sayinitiation this week from Jefferies midweek. Jeffery's
putting a two dollars and fifty centtarget on what was a one thirty stock.

(33:15):
Now you say, wow, you'redealing in penny stocks touching these things.
Keep in mind, Pagaya, thestock we're talking about, ticker PGY,
does have a little about a billionshares outstanding. So this is not
a well it's a small company,it's not Apple, but it's a billion
dollar money or I say, it'sabout a billion five market caps, so
not terribly small. And you know, we're we're hoping we get some positive

(33:39):
response. We've gotten some from otherinvestors, and I'll say we'll see on
that one. And as we talkedabout at the start of the show,
I deal a lot in small andMidCap stocks and those have been under severe
pressure. And it was real interestingthis week. I'm in the gym,
I'm going for my swim, theFED talks. I get out of the

(34:00):
pool and I see every stock Iown up fifteen percent. That continued through
and I felt like the weight thatI had been carrying had been lifted.
It wasn't that I was doing themath wrong. I just needed the macro
to adjust. Always a tough thing, but we'll see plenty of time left.
Small caps and bigcap stocks that Imostly deal with are not for everybody.

(34:22):
They're not for most people. Heck, they might not even be for
me. They got a lot morevolatility, and they will test you.
Oh boy, will they test youso well. You could see, Steven,
somebody in the IWM has definitely beentested. For a long, long
period of time. It used tobe that small caps outperformed big caps.

(34:46):
That has changed over the last twentyyears as the big caps have transitioned from
banks and insurance companies. You goback to nineteen eighty about the year I
was born. I was born innineteen eighty one, the top ten companies
in the S and P five hundredwere all bank and oil companies. And
that is what you see if youare an international investor in most countries that

(35:06):
you invest in, you know frontiercountries that all the big companies are banks
and oil companies. In America they'retech companies. There is not a single
trillion dollar company I believe outside Theremay be one in Europe, but that
that's a non bank. Outside theUnited States, we are truly the global

(35:27):
unicorn and the leader in the world. We've got tons of trillion dollar companies,
and our big tech companies are amongthe best businesses of all time.
And as long as that is trueand the valuations remain compelling and they grow
earnings the way they do, mostof the big cap you know, the
so called Magnificent seven, generally speaking, traded about I'm going to say twenty
one to twenty two times earnings andare growing earnings at about fifteen to twenty

(35:51):
percent. They are not bad valueseven here. So we'll see small caps.
You can't buy the menu like youcan in big caps big camps.
You buy the whole menu, buythe S and P five hundred or the
QQQ index. You can do whatwe do buy individual stocks. But it
is hard for us to say toan investor that you're doing the wrong thing

(36:12):
when you buy the quote unquote fullmenu and buy the index. With small
cap stocks, we can definitively sayyou should not buy the menu. You
need to pick and choose. Becausethe dispersion among returns of small cap stocks
is huge. These are less goodbusinesses. Less mature typically have more leverage,
more economically sensitive, which is whymoves and interest rates are pretty big

(36:34):
deal for them, because it meansthey have to pay less on their debt
or more of rates are going up. They can't fund future expansion the business
has improved down. I believe abouttwenty to twenty five percent of the RUSTLE
two thousand indexes comprised of companies thatdon't make money. They're attempting to make
money, they're trying real hard,but they do not make money. You
cannot get in the S and p. Five hundred unless you are profitable on

(36:58):
a gap generally accepted accounting for basisfour quarters in a row. So a
little different, a little different,but I do see, I do remember
a time when small companies did providea strong measure of safety against investing in

(37:19):
small against investing in large companies,primarily because they were overlooked and a lot
of and they were making a significantamount of money. And if you brought
bought a large number of them,some some could grow into larger businesses.
And when I started in business,i'll say before before you were born,

(37:47):
one of the top performing mutual fundswas just called the OTC Fund, which
had been absorbed probably several times gamesor might still exist in some measure with
tro price. But that fund didextremely well when the market sold off in

(38:09):
nineteen seventy three and seventy four,and then continued to do well for a
large number of years after the dirtyDirty portfolio. They had over three hundred
names. Well, most of thecompanies you wouldn't even know. Well,
I'll give you the dirty dirty secretover what happened when I was born in

(38:31):
nineteen eighty one, there were Ibelieve twelve thousand roughly public companies in the
United States. Private equity woke upand said, this is a huge arbitrage
and we're going to take all theseoverlooked public companies. Keep in mind twelve
thousand public companies in a world withno Internet, far slower dissemination of information.

(38:55):
I mean, you couldn't get youhad to read the value line manual.
It would come to you, youknow, type time. Well,
the value a line manual came everyweek, you got you know, different
different section and it was huge,huge, And today there's I think forty
five hundred public companies in the UnitedStates, so we've almost were down by

(39:16):
almost two thirds. Information is goesaround at lightning speed. The speed of
light. The ability to sort,sift through, get information on everything is
so different, and that is whythe small another I shouldn't say that's the
why, but that is a bigreason behind the ability. Berkshire Hathway was

(39:36):
largely built on the back of overlooksmall captain OTC stocks. It just simply
does not exist, which is afactor of investing in business as well as
understanding civilizations in life, which isthe world evolves and moves away from you.
But a different story for a differentday. The long winded answer that

(39:57):
we have is, you know,with your clients, you're incredibly folks on
big cat stocks and that has servedyou incredibly well, yes it has.
We've had a very very good goodyear this year. Thank you Apple,
thank you Amazon, even thank youto some of the casino names and other

(40:22):
we'll say travel related companies that we'veowned. But it has been a lot
of up and down, and nowwe have a period of up. I
do believe that after the start ofthe new year we might see a little

(40:43):
bit of tax selling as people taketake some of the gains they made this
year and pocket them, knowing thatthey don't have to pay capital gains taxes
on those for we'll say fifteen intotwenty twenty five, and then we have

(41:04):
the final quarters of earning starting inthe second week in January, and we'll
start start all over with next year. So going to be as they say,
wait, well wait, we gotwe got one more week to wrap
up, well two more weeks.It's really one's wrap up markets this year,

(41:28):
so plenty to com We remain excited, lots to do. Have a
great week, have a have agreat, great week, and we will
look forward to talking to you again. This is Josh Arnold, Mister Money
Talk with Judd Arnold, always hereto help you nine five two nine two
five five six eight. Josh ArnoldInvestment Consultant is a registered investment advisor located

(41:52):
in the state of Minnesota. Allsecurities discussed are for informational purposes only.
Investing contains risk, including risk ofloss. Consult you're investment professional before making
any decisions about your investment portfolio.