Mr. Money Talk

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Episode Transcript

(00:10):
Good afternoon. This is johnsh Arnold, mister Money Talk with Judd Arnold here
to answer your questions on stocks,bonds, mutual funds, how you should
position your investment dollars including your IRAand four oh one K. But you
do, yes, you do haveto give us a call nine five two

(00:30):
nine two five five six oh eight. That's nine five two nine two five
five six oh eight. You alwaysget straight talk, not sugar coated advice.
Your turn jud with a disclaimer sayif this is your first time listening,

(00:50):
and or you have listened, wehave to say it anyway, which
is everything we discussed in the showis for discussion purposes only. Nothing should
be considered investment advice Summer. Allthe securities we discussed in the show may
or may not be suitable for youand your portfolio. Please consult an investment
advisor before making any investment decision.Consulting investing in the stock markettains a series

(01:11):
of risk, including the risk ofloss. Big week market still actually we've
had had a big month ever sincethe Fed said they're on pause and there's
the likelihood that they're going to well, they're not. They're done. They're

(01:33):
not raising rates we had two inflationprints come in this week that solidified the
fence position. Bonds have rallied alot, meaning interest rates have fallen a
lot, and the market got thecertainty that I would say it needed.
And let's just play back the tapea little bit. We will go back
near the recent lows. In midOctober October twentieth S and P five hundred

(01:55):
up ten point one percent for theyear. The RSP, which is the
equal weighted S and P five hundredwas down three percent for the year.
Fast forward, that is through October. That was through October, through the
market low in October. On tentwenty, we were at the s m
P SMP equal wait were up tenpoint one and down three Those same numbers

(02:16):
as we sit here today are plustwenty four percent and plus eleven percent.
Huge move. Oh, I'll say, well, it's a it's a good
thing that the the the PCP ourclient portfolio, which is which is real

(02:38):
money, so real money portfolio netafter fees is up forty five and a
half percent for the year. Wow, just building on building on gains.
That's out. That's I believe that'sabout three hundred percent in five years.
It is it is huge gain.But now keep in mind, really do

(03:00):
it makes up you know for thevery poor showing last year when we were
down thirty percent in twenty twenty two, well keep in mind the Nasdaq was
down thirty two percent in twenty twentytwo. And that's effectively our pitch,
which is our downside, the downsidewe have exhibited, and past performance is

(03:23):
not equal future success. The downsideis roughly in line with market indicies,
and the upside it has been althoughagain past performance doesn't equal future results,
and the composition of our portfolio isactually different than the indexes and all the
other usual disclaimers. But what wehave been able to do our say you
should been able, that you've beenable to do is quite extraordinary. And

(03:44):
happy to talk through how we aredifferent than other people because we are we
are stock pickers. It's a rarewe are. We are stops pickers,
and we get we do well mosttimes and not so well other times,
as is true of most stock pickers. Oh yes, oh yes, and
we eat our own cooking too.So speaking of cooking, though, it

(04:09):
has been a great year to finishand I mean the flur it has just
been so fast and furious, andlet me give you another fast and furious
rally. Stat the fund, whichis i'll say, a poster child for
speculative gross stocks and the end ofOctober October twentieth was up fifteen percent for

(04:29):
the year. Two months later,it's up seventy percent seven zero. Well,
I did hear Kathy Wood who runsthe portfolio, and she does run
a fairly concentrated portfolio, loading upon which she considers her best best ideas,

(04:55):
and she was very very adamant poundingthe table that the impact of artificial
intelligence and generative artificial intelligence has reallyhelped her portfolio out a lot, and

(05:18):
in particular, as the FEDS orbelief in the FED pausing went into to
effect, her money came back intoher companies. Now she makes a big
point that none of her companies arereally part of or a large part of

(05:45):
any index, with the exception ofher large holding that she still has in
Tesla, the others are really notpart of the S and P or are
very small part of the the Nasdaqindex. Certainly differentiative performance. I would
point out her co inverse correlation interestrates has been almost one to one,

(06:12):
and you know, we'll see howshe does this cycle. On a three
year basis, she's still down fiftyseven percent versus the Nasdaq on a three
year basis, up thirty two percenton a three year basis. She suffered
greatly in twenty twenty two well andtwenty twenty one. She was down twenty
three and a half percent in twentytwenty one and sixty seven percent in twenty

(06:36):
twenty two. So minus twenty threeminus sixty seven plus seventy equals minus fifty
seven. So long way back.But it does seem like we've transitioned into
a new market paradigm. I hatesaying that because it makes it it sounds
more fancy. Nobody actually knows macro, and I'll do the standard reminder that

(06:57):
we talk a lot of macro,but we actually don't trade that much.
We find stocks you really like andjust sort of go with that. But
it does seem like we're in alittle bit of a new paradigm. We
saw a lot of M and Apick up last week, and I would
expect the M and A theme toreally continue over the next three months.
We've had almost no M and aregoing well. I think should with interest

(07:21):
rates coming down or and the FEDfed on pause. With the amount of
money that is available and the needreally to consolidate in a lot of industries,
I think that that is going tobe And I'd actually add in the
number of companies that went public thespecial purpose acquisition companies, and many of

(07:47):
them are still way under their tendollars limit, and in large part a
lot of those companies should not havegone public. I think the mergers and
acquisition people are going to have asuperior time or next year in putting together

(08:11):
companies and or taking companies private.Definitely, definitely. I am involved a
lot more in the smaller ones,and I will say private takeout is a
bull thesis. Course. I'm enteringthese things that vastly different prices than than
ten dollars, So I think mycost basis and a few of them is

(08:33):
a lot lot lower. Well yeah, yeah, a lot lowers a buck,
you know, So there's should anythingpositive happen, the buck can turn
out pretty good, but you've gotto be very very selective and very very
careful because the buck might turn outto be a lot, or it could

(08:56):
turn out to be zero. Notfor everybody, we don't recommend it so
so. But that's uh, youare very specialized in that in that area.
But you talk about mergers and acquisitionsthat you know this. I think
a week ago there was talk ofParamount and Warner Brothers Discovery getting together.

(09:24):
Now we've talked before about these mediacompanies. That's not a place you'd want
to want to invest. But there'sa lot of we'll say ink and words
spilled on this, this potential merger. And then of course you've got Disney
where activists are getting on the boardand could force Disney to start moving some

(09:50):
of their assets. There's a wayto stay away from media, is all
I know. The fact that aretalking about a merger time Warner just just
was the merger of Scripts and andWarner Broadcasting a year and a half ago,
a disastrous merger, although they probablywould have both gone down a lot

(10:13):
on their own. Paramount is themerger of CBS and Viacoment has gone straight
down. This is an industry andtransition. We are in deep trouble.
Disney I don't find intractive at all. A lot to talk about, but
I'll come back with that and more. This is Josh Arnold, mister money

(10:33):
talk with jut Arnold always here tohelp you with your investments, whether inside
or outside your retirement account. Don'thesitate to give us a call. N
two nine five five six oh eight. This is Josh Arnold, mister money

(10:56):
talk with jut Arnold here to answeryour questions on stocks, bonds, mutual
funds, how you should position yourinvestment dollars including your IRA in four oh
one K. Don't hesitate to giveus a call. Two nine two five
five six eight. Wow. That'sall I can say, jud is wow.

(11:22):
And looking over over the landscape thisthis past year and even over the
last last month with the Fed onpause right now, I mean the ten
year bond yield has gone from fivepercent to three point nine percent in a
couple you know, about a month. We've had equities just dramatically rally.

(11:46):
I think the S and P fiveor the Dow Johns is up. I
hate the doubt, but I thinkthe Dow's been up eight weeks in a
row. The S and P hasjust been on a rocket ship. The
IWM, even which is the Russelltwo thousand, is on more than a
twenty percent up move in two months, which is a bull market. I
mean every index is in a bullmarket. Even banks, which even banks

(12:11):
the place that I don't want toinvest in, banks have moved up with
interest rates moving down. It's andit's funny funny you bring up banks.
You know, when interest rates weremoving up, strategist said, you've got
you know, we're pounding the table. You got to buy banks because as
interest rates move up, they're goingto be making a lot of money.
And I always thought, well,wait a minute. They had a tough

(12:33):
time making money when interest rates weredown and coming down. Now you're saying
they're going to make money with interestrates going up, and all these banks
are still sitting on a lot ofpaper bonds in particular where they're losing principle
on a market to market basis,How is that a profitable business? Well,

(12:54):
I think there's a larger point withbanks, which is the skew of
outcomes with banks. We're down.In mid October, they were down thirty
three percent for the year, andnow they're down ten point eight percent,
So you're still down. You capturedthe same twenty percent rally that you could
have captured in other industries, andyou did it with a lot more risk
because all the banks can go toI mean every individual bank could have go

(13:18):
theoretically can go to zero. Nowthe big ones aren't, but had interest
rates stay elevated for a long time. That's not a great return. And
I would say you under returned versusthe risk that you took in banks.
And I think banks were not bankinvestors, as you said, but certainly
for the next few years. Andstill these banks right size the assets and
liability side of their of their balancesheets. This is gonna just gonna be

(13:41):
a real trouble because the seeds thatblew up Silicon Valley Bank and Signature Bank
are still there across the banking industry. It doesn't mean they're all going to
blow up, but the banking industrytook in a historic wave of deposits during
COVID. They deployed most of thatmoney into treasuries at very low rates and

(14:03):
lost a ton of money. Andnow they're stuck. So most of these
guys are going to hold their treasuriesand their mortgage backed securities for the next
ten years, meaning the pace ofnew loans is a lot lower. They're
probably going to keep sheddings and deposits. It's not a great story in terms
of book big book value value,which is what they trade on. So

(14:24):
I don't love banks at all.We never really love banks, and I
think this rally has yet again shownwhat has been the trend for the last
twenty five years, which is techand growth lead off the bottom. And
trying to let me ask you,since we're talking about you know, tech
and growth and the banking industry,what about some of what we'll call it

(14:48):
the financial tech, like a Squareor a PayPal or a no I'll throw
Sofi in there as well. I'mwaffling because the economic drivers of a bunch
of those are a little bit differently. Okay, so is Square and Square

(15:09):
there's a real question on payments,and payments has just been under massive pressure.
Those things end up in the bestof times, all of those stocks
end up, will say, inthe growth bucket, so you do participate
often in bad times, they participatein the it's going out of business bucket.
So it's just harder, i'd say, with financial technology. And I

(15:30):
say this is with one of mybiggest investments, Pagaia Technologies, which is
ticker's pg Y. Being a financialtechnology company, you really have to be
careful about picking winners because most financialtechnology companies have gone completely obsolete or been
disintermediated by newer ones. It's afast evolving field and that's that's kind of

(15:50):
difficult. I'll just say it's difficult. But they have, you know,
they've rallied with tech companies. Whetherit plays out the right way, I
don't know. Hard for me tojust hard for me to judge. Okay,
well, I've I know that inthe past. Uh, you know,
I've traded and I and I dohave to emphasize I've traded both PayPal

(16:12):
and Square. I'm not so suretoday that I would I would want to
trade either one. I just don'tthere's so many hard questions on both of
those. Like with PayPal, VSand MasterCard have actually, for all the
advances and financial technology, Vson MasterCardcontinue to dominate payments. And I think

(16:37):
it's as simple as that, whichis PayPal and Square have really struggled to
break out of their payment their paymentroots. It's just harder to beat VS
MasterCard in the legacy banking system.So ones that have worked out, like
we'll see, I'll say so faris in a different bucket in that is
what i'd call an abs as setbacked security enabled lender. There there is

(17:03):
an interesting trade that I've highlighted.It's kind of why I'm in Pagaya,
which is for the first time,certainly in my lifetime, the A B
S market is offering cheaper funding andfinancing than the bank market. And this
is partially because of the stress inthe banking system and what I just talked
about with the post Silicon Valley stuff. So the A B S guys,
and it's really SOFI Pagaya. Youcan add an ally, which is an

(17:27):
auto loan business, and there's afew other ones that are really showing growth
when nobody else is showing growth now, so FI would call would caution there's
an actual short pisis on the stockthere. I'm not gonna say miss marketing
loans in a fraudulent way, butthey're certainly misrepresenting, you know, some

(17:48):
of they They have all these studentloans outstanding. That's a very small The
student loans is a very small partof the business. They have a bunch
of them, it's a very smallpart. So I would just be concerned
concerned with the you know, thenon payment of the student student loans.
Would you consider then, what isthis Upstart and Affirm in the in the

(18:15):
same category. Well, Upstarts abank channel guy, and that it's a
direct competitor to Pagaya. But it'sa bank channel guy. They originate loans
and sell them to banks and theyare facing a world of hurt because banks
don't want to buy. And soUpstart is in the same category as Lending
Club ticker LC, in the samecategory as Open Lending ticker lp RO,
which are all these FinTechs that grewup to create paper for commercial banks.

(18:40):
And as commercial banks say I don'tneed more paper because I'm shedding assets,
it's putting a lot of pressure onthose things. Now, Affirm and you
can add in SESEL ticker s ez L is part of the buy now,
pay later ecosystem, and that isalso taking a ton of share from
legacy banks. And that's why thosethings. Now, both of those are

(19:00):
very speculative stocks. I struggled withevaluation that, you know, fifty to
seventy five percent lower on both ofthem. And here we are, so
with all of these, you know, if you invest size appropriately and be
careful. Well, yeah, becauseI'd bring up a firm because I see

(19:21):
some of the deals that they've beenmaking with you know, companies like a
Walmart, and there seem to bemore of people that are utilizing Yeah,
but I would very much caution thatsay of investing. And again, the
stocks have gone up on the newsflow. The valuation of a firm I
think is one hundred and fifty timesearnings. It's not a cheap stock.

(19:45):
Correct, Well, It's never beena stock that I've wanted to own,
so because why do I you know, in terms of buy now, pay
later, I could take out myvisa or a master card or even today
my American Express card and I canbuy now. I think a lot of
the millennials, a lot of themillennials prefer the BNPL. Whether it's actually

(20:06):
cheaper than credit cards is an opendiscussion. They certainly do have some business
momentum, and the stocks have reallybeen performing quite well. Well. Not
that's an area I'll stay away from. I'll stick with my Internet related companies,
my leisure related related businesses, someof my China related businesses, and

(20:29):
some real assets, and I thinkI'll do I'll do fine with it.
Fine with that. Speaking of which, you know, we only have a
few few more shopping days till tillChristmas, and when we come back,
we'll talk about some of those placesto shop. This is Josh Arnold,

(20:51):
Mister Money Talk with Judd Arnold,always here to help you with your investing,
whether inside or outside your retirement account. Don't hesitate to give us a
call. Nine five two nine twofive five six oh eight. We have
an opinion. Is Josh Arnold mistermoney Talk with Jut Arnot here to answer

(21:15):
your questions. Let's talk sponds,mutual funds, how you should position your
investment dollars including your IRA and fouroh one K. 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. Only a few
shopping days left until Christmas, whichmeans if you need something now, well

(21:42):
it's gonna be very difficult to getit delivered to your door. But you
could go out and get a giftcard from we'll say my one of my
favorite running running stores, TC Running, you could get and if you go

(22:03):
to TC Running always asked for theJosh Arnold mister Money Talk discount, you
could get a gift card from oneof my favorite restaurants, whether it be
Cove or Jimmy's, or you canalways give a share of stock, and
giving a share of stock in manycases would be a gift that keeps on

(22:29):
giving. And there are many typesof gifts in the market that seem to
always keep on giving. In termsof both, we'll say some dividends and
even the potential and I do haveto talk about potential for capital appreciation.

(22:52):
So we can take some old dividendpayers that have a history of raising dividends.
Companies like Coca Cola or Pepsicola havehad a history of growing dividends and
people are always using their product.The Oracle of Omaha, Warren Buffett,

(23:17):
has a big holding in Coca Cola, and the dividend that he has gotten
from that, I think is probablyequal to the over the annualized appreciation.
I mean, his annual dividends areseventy I think he's up to seventy or
seventy five percent of his cost basison an annual basis he gets back in

(23:40):
dividends. The other dividend hero wehave to point out in the new icon
for Buy and Hold, Steve Baumer, not the founder of Microsoft, Bill
Gates in one of the most disastrousfriendship gaffes of all time. Bill Gates
let Warren Buffett convince him to diversify, advice that Steve Bohmer did not take.

(24:00):
And Steve Balmer is now because henever sold his Microsoft is now richer
than Gates. That is amazing.Plus, I'll say, plus Steve Bomber
owns a basketball team, yes,but more importantly, Steve Baumer getting a

(24:21):
billion a year in dividends from Microsoft, where Bill Gates he has to make
filings for his charitable funds and youcan kind of see it only gets about
four hundred and fifty million a yearonly indefinite distributions. That speaks to a
couple of things. And you know, it's been one of, I'll say,
one of the reasons I know formy success. But somebody could also

(24:44):
come back and say, well thatyou could have a lot of failure as
well because of the concentrated nature ofthe portfolio that we run. You know,
we've got some big long term holdingsin both Apple and Amazon and have
held them through a lot of upups and downs. I mean last year,
I was extremely frustrated at this timewith the performance of both both companies

(25:07):
this year very much elated, andI still think there's more to come,
but definitely it's not going to beon a straight line. If I look
at Warren Buffett, very concentrated portportfolio done very well despite you know,
somebody said, well he's of coursehe's diversified. Yep, he's diversified in

(25:32):
that he's got four different or whathe calls four different investment categories, but
still very large holdings. And ifI look just at his equity portfolio,
that's that's about fifty percent in onecompany now, which is my favorite Apple.
You know, I'm going to pointout something that I think it's underreported

(25:55):
about Berkshire. Not that not thatthere's that much that's underreported. American Express.
Buffett is held for I want tosay thirty years. He's up about
thirty times his money a one annually. You know, well, that's it's
doesn't work out that way. Butin terms of Keegers, if you understand
Matt, but he's made thirty timeshis money, not too shabby in a

(26:22):
relatively boring, pseudo monopoly type business. That's just quietly he bought ten percent
of it on a pullback and herewe go. You just prints there.
You know, it is that simplewith good ones, and it's just a
matter of matter of hold, holdingon correct and waiting for something to happen.

(26:45):
Microsoft took a very long time torecover from its fall after the government.
He always had to throw an asteriskto people who bring up Microsoft stock
charts. I believe there was abouta thirty dollars special dividend in five six
or oh seven, so you dohave to keep that in mind. But

(27:07):
yes, it took a long timefor Microsoft to recover and retake and then
blow pass It's dot com, bubblehigh and Sacha. But I mean,
I'm just going to even point outthis year Microsoft has had to add and
or change some of their their businessand they I'll say this year, I

(27:34):
mean they took off in May withtheir announcement of dealing with artificial intelligence or
generative artificial intelligence, and that isdefinitely going to be a theme going into
twenty twenty. Have one of thegreatest monopolies of all time, which is
Microsoft Office, and then certainly withthe desktop with Microsoft Windows, but Office,

(27:57):
especially Office and Wind it's just unbelievable. They've added a Zure and some
other stuff. Lincoln's worth a ton, very very good business. And I'd
say with long term holds, wehave to give both sides of the coin.
It is important to have businesses thatquote unquote compound value and are not
commodity sensitive. If you're going tohold for a while, If you hold

(28:18):
any commodity stock for any length oftime, eventually you're going to run out
of it. You're gonna get you'regonna get beaten. It's really hard to
compound a mine stock. But atypical business, what we like to call
a GDP plus or minus business,a business that tends to grow. We
grow domestic product, gross products shouldgrow every year on average. If you're
part of a growing society, andwe are part of the greatest economic society

(28:41):
certainly of all time. And I'dargue society on almost every metric. But
be that as it may, aslong as you're growing with GDP or have
some correlation, don't have a commodityand don't use so much leverage stocks your
compound. And I'll just point outbecause it came up, it's always a
favorite US steal. Bought out bya Japanese firm this week. We don't
know whether that's going to transpire.Well, certainly it's trading fair enough.

(29:04):
But the stock is at forty eightdollars a year, and I would just
point out that if you held thisstock, and I can go back to
nineteen ninety three and it was atthe same price level, well that's a
commodity stock. There you go,there you go, that is a commodity

(29:26):
stock. So much rather I haveanother type of business. Yeah, and
then we have to make on thecommodity side. We do have to point
out Warren Buffett seemingly every day addsmore occidental ticker ox y. He now
owns I think about thirty percent ofthat oil company. I have no clue
what the heck he's doing. Idon't understand why oxy is better than other

(29:48):
ones. I am an energy guy. We are somewhat bullish. I don't
know. Actually, I don't wantto speak for you. Energy has had
a tough year this year after twohuge years and on a three year trailing
basis. It is the XL,which is the S and P five hundred
energy sector is crushing every other sectorby a country mile, up about one

(30:10):
hundred and forty six percent cumulative overthe last three years with the next best
sector I believe is Semiconductors of sixtytwo percent on a three year basis that
has been basically flat on the year, starting to see a little replacement,
little strength. I'm pretty bullish onenergy. I like the Offshorge thrillers and
services companies Tidewater, take Er,tdw rig Rig, Noble, Nee,

(30:36):
and Valera's va L. These areenergy service the stocks highly highly economically sensitive.
Maybe not for everybody talk to aninvestment advisor, but I am interested.
Tidewater especially is a bigger position forme. Well, you've talked a
lot about about Tidewater, and Tidewaterhas definitely done very well for you.

(30:57):
I mean, I think you startedtalking about tide Water when the stock was
trading about fifteen dollars a share andnobody was really interested. I mean,
the stock is up at seventy onedollars a share over the last It is
my five year old daughter's biggest stockposition. So hopefully, look, hopefully

(31:18):
that pays for Harvard, not forHarvard, pace for college, not for
Harvard. You don't want to sendyour daughter to Harvard. Listen, do
you think by the time jesull hewants to go to Harvard that things will
change. These people don't change.These people are deplorable and I don't like
any of them. And the problem'sa lot worse than just the alegend plagiarism

(31:40):
of the president. But on thatfund note, we'll talk about something else.
Let's stick with We'll stick with thestocks and bonds and mutual funds and
when we come back, that's whatwe'll do. This is Josh Arnold missed
or money Talk with Judd Arnold alwayshere to help you with your investment.
Call us nine five two nine twofive five six oh eight. This is

(32:07):
Josh Arnold, mister money talk withJudd Arnold here to answer your question on
stocks, bonds, mutual fund tel. You should position your investment dollars including
your IRA in four one k.Don't hesitate to give us a call it
nine five to two nine two fivefive six oh eight. You always get
straight talk, not your code ofadvice. Well, it is a few

(32:27):
shopping days till until Christmas in there, and people who buy will say shoes
and particularly athletic shoes might have gottena little coal in their in their stocking.
After Nike reported their their earnings,the numbers weren't that bad. They
beat on the bottom line there inline on the top line, but their

(32:52):
guidance jud was not real good,very very soft over the next two quarters,
and Nike said, hey, we'regoing to be doing some cost cutting
up to two billion dollars. Andit's not only the cost cutting. We're
going to be cutting cutting employees andcutting lines of business and even reducing the

(33:12):
number of styles that they're coming outwith. My sense is, I'll say,
as a as a shoe dog,so to speak, taking that from
one of the best business biographies outthere, Phil Knight's, i'll say second

(33:37):
second book called Shoe Dog. Butto me, Nike, Nike has almost
lost its way, and they're they'reinstead of concentrating on broad sports, they
seem to be concentrating just on basketballand on urban footwear. And when you're
concentrating on that, you're losing agood junk of the population. Thirty one

(34:02):
thirty one times earnings. It wasforty times earnings, it's thirty one now
one point three percent divity. Youknow, everything has to go right.
I know it's a great brand.They got hit by the Red Sea shutdown.
That's going to add a bunch ofcosts to their business. You know,
one hundred and sixty four billion dollarmarket cap. The Red Sea with

(34:24):
the Houthis and whatnot is going tocost them. They think three or four
billion this year. I just sayseparately, I mean there's a lot of
this Red Sea thing is the youknow, the the Israel Hamas war really
has no direct economic impact because oilscontinue to flow and and and so be
it. The shutdown of the RedSea because of the Houthis and Yemen actually

(34:45):
is a big deal. And itis absolutely stunning to me in an in
in a political way as possible thatour navy, that is that has ensured
freedom of navigation throughout the Cold War. Uh, somehow cannot ensure freedom of
navigation against one of the poorest countriesin the entire world. But well that

(35:06):
one without being without being political,I do believe that the rules of engagement
are not coming from the people onthe on the ship, but have been
coming from we'll say, first thePentagon, and the Pentagon takes their marching
orders from I hear you, sixteenhundred Pennsylvania Avenue. Well, I have

(35:27):
no doubt on that front that ournavy, our combined military force if it
wanted to, could wipe Yemen offthe face of the earth. So there's
something going on. We don't knowwho knows what the Saudis want all No,
I would tell you what the Saudiswant. The Saudis want to get
rid of the huties because the hutiesare definitely hurting, hurting the Saudis,

(35:53):
Saudi's business and economic I think it'stwo hundred or three hundred thousand people have
died in the m and E swar. Just awful. But anyway,
we move on. That is anissue with Nike and that's what hit them,
and I would just I use thatpolitics aside. The highlight of this
is an issue on supply chains andas inflation has come down a bunch,

(36:14):
you know, with the supply chainissue during COVID. Look, if they
don't solve the Red Sea issue andwe lose the Suez Canal, that is
a real issue for supply chains andwe're going to see cost inflation go back
up. So well, I wouldjust go back on some other things with
Nike, that being product, productselection, and I'll say the direction of

(36:39):
the direction of the company and ifyou're just concentrating on selling basketball shoes to
a select group in the select population, and you're leaving out everybody else in
the meantime, getting competition from smallerbrands. That's eating into what was your

(37:05):
once core business. And additionally,Nike is suffering and as as true as
other retailers is suffering from the sametype of issue that media companies are suffering
from. The media company saying well, we're going to all go to streaming,
we have the content, and thenwe're going to sell the content separately.

(37:29):
Well, it's a totally different distributionmodel. And you know that the
distribution through streaming has been has hurtall the media companies with the exception of
Netflix. When it comes to youknow, Nike and others that have gone

(37:50):
to direct to consumer method, theyhave shut out a lot of their distribution
network, which actually added to theirbottom line. But they're saying, well,
if we go direct to consumer,yeah, we might distribute last,
but we can sell it at thefull markup rather than a wholesale markup and

(38:15):
keep the money. Well, howis that working out for you? Nike?
Not real? Well, how isthat working out for you? Adidas?
Not real Well, So that wecan pull this up into a few
big takeaways. Number One, businesschange is rarely a good thing to invest
in. It's usually bad. NumberTwo, when you invest in something at

(38:37):
thirty forty, I mean I thinkat the peak over the lap. You
know, a year and a halfago, Nike was training at forty five
or fifty times earnings. That isone heck of evaluation. And Buffett,
with all his big wins, goingback to one Buffett, almost all of
them have come buying into great franchisesthat have traded down to about ten times
earnings and then reinflated back up twentytwenty five times earnings, and then with

(39:04):
earnings expanding as well over that periodof time. It's really hard to make
money when you overpay. Overpaying isprobably the biggest sin there is in well,
buying bad business is a bad sin, but over overpaying is is a
killer. Because even if you buya business that grows earnings substantially, if
you pay forty times for earnings andit d rates to ten, you're you're

(39:27):
in a world of hurt. Soanyway we we we avoid Nike, is
the long winded way of saying,and a lot of other a lot of
other things we avoid. Yeah,and I've got all I have good.
I've got a lot of stories aboutmy relationship with Nike, but right now,
to me, Nike has lost losttheir way and they become more of

(39:54):
you know what, well, Iwon't even go and with a lot of
things. They become more of acopycat player in certain certain types of specialty
shoes rather than being a market leader. End the end of story with Nike.
So well, as we look atyou know, look as we look
out, we like what we own. This is I had a very nice

(40:15):
chat with a client today and Isaid, look, I have a feeling
right now that I always love tohave at the end of the year,
which is one, the year lookingback has been a very nice success number
two of the things that we hold. I'm very excited about the return prospects
going forward. And whether that turnsout to be true or not, I
don't know. The entire year canbe summed up. This year can be

(40:37):
summed up quite simply, which isthe market fighting itself when the Fed is
going to pivot and our is thefact going to drive us into a recession.
The Fed did pivot, a recessiondid not come. And if you
own stocks, you made a tonof money if you try to call bonds
right, which was the same bet, you made money, but a heck
of a lot less than most peoplelost money. America still the same thing.

(41:04):
Own assets, don't lend assets.Markets are going to continue to fluctuate
when we go into twenty twenty four, be prepared for a little bit of
pullback as investors take profits from someof the gains they made in the last
few months before we head into anotherearning season starting in the middle of January.

(41:29):
Do you want to say a MurrayChristmas to all and happy New Year
as well, and we will seeyou next next year, or or see
you next week or into the newyear. This is Josh Arnold, mister
Money. Talk with Judd Arnold.Give us a call nine five two nine

(41:51):
two five five six eight. Wecan help you. We do have an
opinion at a different point of view. Josh Arnold Investment can in Sultan is
a registered investment advisor located in thestate of Minnesota. All securities discussed are
for informational purposes only. Investment containsrisk, including risk of loss. Consult
your investment professional before making any decisionsabout your investment portfolio.