The Fagan Financial Report

November 5th, 2023

Episode Transcript

(00:01):
Good morning, and welcome to theCapitol District's Money and Investment Program. You're
listening to the Fagan Financial Report.I'm Dennis Fagan, sitting here with my
son Aaron, as we do everySunday right here in News Talk A ten
and one oh three one w gY. Just kind of recovering this morning
from the five hour babysitting stint yesterday. I had a great time. I
appreciate it. I appreciate it.We appreciate it. Yeah, Jude get

(00:25):
out a little bit, got outwith my cousin Sarah and her husband Bob,
and it was, oh, really, what'd you do? Is kind
of grow him around a little bit. Went to a movie. Yeah,
good, nice, nice, nice, sounds good. It was fun.
But Jude had a great time.He loves that museum. New York State
Museum is number And you know,if you have kids, the weekend is
the best time to go because Ithink that kids all go during the week

(00:50):
with school. So if you goon the weekend, there's nobody there and
it's super open, so he kindof just runs around. There's tons of
things to look at. You know, they have the Wooly Mammoth, they
have their errors. You have owls, the loons, the loons, yeah,
you have all the Native America NewYork. Yeah, in the long
House, in the Longhouse. Soyeah, he he loved it, and

(01:10):
you know, obviously appreciate it.Is that what you want? You wanted
to thank you on you know,we wanted to thank you on air.
I thank you. Yeah, okay, I thank you, thank me to
thank you. Once in a bluemoon we get to watch Hude so and
that was that's totally tongue in cheek. We watch him, you know,
as often as you want. Welook forward to it. But I would
say, you know, from froma grandparents perspective, man, you can

(01:32):
let that kid run around. Hewas all carpeted pretty much. Yeah,
you know it's all carpeted. Yeah. So you know he loves this level.
A few rams she stairs, butyou know he has to learn how
to go up and down him anyway, so yeah, you know he does.
I think we've been there. He'she's eighteen months, eighteen months two
days ago. I think we've beenthere six times. He can't beat it

(01:53):
to kill a couple hours, yeah, you know, a nice lunch.
He went to Old like two weeksago. We went there on a Sunday
and then has anything moved in thelong House at all? Nothing? Nothing
from the cost mastodon. Yeah yeah, right by the co host falls bird
bird exhibit. Now there is areally nice New York State bird exhibits And

(02:15):
there's also that one where you canpress the speaker like it makes there and
you're into birds, and Jude's kindof been to birds a little bit there.
Yeah, he's trying, you know, I'm trying to get him up
there. Yeah, up to snuff. So so it was good. It
was good. Then we went overto Indian Ladder Farms. They had a
oyster pop up. We went there. We went there a couple of weeks
ago. From the to the farmsof the orchard. The orchard. Yeah,

(02:38):
no, we went to the IndianIndian Ladder Brewery. I think it
was a brewery. It was abrewery in Boyesville. It was in Vooriesville,
Yeah, And I just followed theGPS. Is it like outside,
yes, yeah, I think it'sthe same thing, is it? I
don't know, Yes, it is. I think it is. It is
the same thing. Did you reallynice? Apple picking? On my birthday?

(03:00):
It's funny when you know you havea kid, you kind of just
do whatever they want to do allthe time, you know exactly, you
know, run around or but youknow, there's three minutes in. I'm
sure people are sick of hearing ustalk about ourselves. They are, but
I'm by a lot of people havekids or grandkids that are listening and that
you know, Jude's our only grandchild, and he's just a wonderful little kid.
Really, you and Lauren are doinga great job with him. He's

(03:22):
he's peaceful, he doesn't complain alot, you know what I mean.
He likes to do things. He'sinterested, you know what i mean.
So it's fun. It's fun.Yeah, I mean, candy helps and
soda home kid. Never I know, my god uncle Mike was there and
he's like, you know, he'sgoing to get We went out to get
a soda for for Carolyn, formy wife, Jude's grandmother. So they

(03:46):
didn't have any coke, which shewanted. So he got a Shirley temple.
So he's walking on the way back, you know, he's like,
hey, can I give Jude someShirley tell like, don't even go near
him with that thing. It mightjust kind of leak on him a little
bit, you know what I mean? And I don't know I'm ever taste
that that sugar when I'm around,no reason to, no reason to,
and Lauren would kill me. Soyou know, even yeah, anyway,

(04:10):
you didn't give it to them becauseyou wouldn't have said something. No,
no, not at all not.We did give them pizza, the Jeesus
pizza. Anyways, stocks rally fortheir best weeks thus far this year.
The Catalyst included basically in ten shortcovering great. Yah. You know,
I was just looking at that inour market weekly. We have a lot
of data. We have a lotof and you know, one of them
is the Bear's Bulls Survey. Soyou know, you see on October twentieth,

(04:34):
thirty one percent, October twenty seventh, no, October twentieth, thirty
four percent. It went up toforty three percent last week. This week
is at fifty percent. There's alot of people have a lot of money
on the sidelines, a lot ofbears sentiment, and that's usually a contrarian
indicator. And what we saw thisweek was, hey, you know,
maybe they will pause for longer,but I think we're what I think people

(04:57):
took from that was, Hey,we're getting to the end of this rate
hiking cycle, so you know youhave a market route. I'm not taking
too much into account here. Istill think we're in a trading range,
as you said in the Weekly,and I think that's sorry to take take
over a little bit, but youknow, I think what you wrote was,
yeah, we're most likely in atrading range with the bias to the

(05:18):
upside. And that's kind of whatI think for the short term, you
know, three to six months,you know, and I can't. I
can't. I can. I lookedback and I can say, yes,
I don't know, means I hope, I hope. We're we're fairly objective
on this show. You know,we're longer term secular growth investors on the

(05:40):
stock side, generally speaking, butsecular growth can also imply value style companies.
We have Energy. Yeah, energyhas been somewhat of a downer this
year. We still like it overthe longer term. But you know,
last year was more of a difficultyear for US than the more market.

(06:00):
But this year has been great relativeto the market for for individual stockholdings.
For our clients, bonds will dowhat bonds do. We invest in stocks
for growth and bonds for income.Generally speaking, the income component of that
side is subject and I'm going tosay from our investment standpoints solely uh subject
solely to movements and interest rates.Because we're high quality bond investors, not

(06:27):
very often do we cross the aisleover to UH over to growth. On
the bond side, we have beensaying recently that you know, longer term
bonds merit a look, but we'dstay an intermediate term curve. I think
I mentioned on the show last weekI bought a twenty year treasury for myself
and and and mom, uh smallportfolio, that type of ahead. And

(06:48):
just from the from the most simple, I guess point of view in talking
about bonds, and I think that'swhere you and as an investor, try
to try to think about. Youthink about, hey, you know,
if you want to go out onduration. But by going out on duration
means you think you're at the youknow, maybe the peak of this of

(07:10):
this interest rates cycle, which alsomeans rates will go down, which means
the markets should do good. Sothat's I think the conundrum for people is,
hey, you know, if youwant to go out from you know,
five six seven years. That meansthat, hey, you think you're
at the peak of this rate cycle. But you know, it's hard to
it's hard to actually pull the triggerwhen that historically means the markets should do

(07:32):
well as rates go down. Soyou know, sometimes I think you have
to as an investor, and youknow, as we talk a lot about
on the show, investing, whenyou invest, especially I think a lot
of our listeners are older. Youknow, you invest for, you invest
for you know, I can't thinkof the word right now just speaking on

(07:55):
the show, but you invest forwhat your distributions need. You know,
you invest for your objectives. Andif that means you need a four percent
distribution rate, go out on thatfive to six percent. But you know,
if you have a pension, youhave you know, your pension covers
your your your expenses, You're you'resaving a little bit for you for your
kids. You know, it's hardto pull the trigger on on you know,

(08:20):
the five plus year duration bonds.In my opinion, you know,
if if something I know, no, I guess I would say that one
of the things you said this weekthat made sense it may fly in the
face of what you just said,was you know, the ten year treasure
at five percent and one hundred thousanddollars is going to give you five thousand
dollars a year income today. Andthis is what the tenure was within the

(08:43):
past two or three weeks. Rightnow it's at four point five seven percent,
and we'll get into the reasons whyin a few minutes. But you're
really only giving up, you know, not about it's four hundred and thirty
dollars a year on a ten yeartreasure forty three hundred dollars, you know,
five percent versus four point five sevenhundred thousand dollars. So you don't
want to really try to tick thetop in the bond market, which would

(09:05):
be interest rates as opposed to prices, bond prices working versely the interest rates,
So you know, you know,it depends. I think the bottom
line I think is it depends whatyour objectives are in risk tolerance, your
your ability to really lose some principle, you know, how kind of and
in what your lifespan is, whatyour objectives are, you know, what

(09:26):
your spending patterns are, those typesof things. How far out you go,
you know, I would say,you know, I would say seven
years, you said five, Iwould say seven. But we're both in
the intermediate term, intermediate portion ofthe yield curve. You know, right
now, if the five year treasuryis sitting at you don't know if you
have that screen up, but fiveyear treasure sitting at I got it four
forty nine, the seven year fourfifty five. So you're going to get

(09:50):
a little better yield on the sevenyear than your the five And that's kind
of a normalized curve, believe itor not, versus two weeks ago,
the five year was at four eightysix, the seven year was at four
ninety three. So you know,you're probably ten percent or so off the
highs everyone and says, you know, you invest in the stock market in

(10:11):
I don't know why people think theycan tick the top in the bond market
as opposed to the stock market.But you know, there's an old saying
on Wall Street you leave the lastten percent on either side, the top
or the bottom to somebody else.You try to gather that middle eighty percent
of the move, you know whatI mean. So I think, you
know, the bond market still representsan appealing trade and appealing investment for people,

(10:31):
you know, as as their distributionrate, you know, maybe as
four. You know, the newdistribution rate now is going from four to
four point. So we talked alittle bit about that last week. Maybe
we'll talk about it again, butI think things look decent in here.
We're talking before the show where youkind of said, we're not. We
don't have much of a different opinionthis week as opposed to last week.
Last week we said we're most likelyin a trading range with the bias to

(10:52):
the upside. You know, thisweek we just added despite the gains thus
far this year, we can't No, actually we did not. We had
this. We had the same thinglast week and for the prior few weeks,
the generally speaking, this this phrase, and I'll start again because I
think I you know, kind ofgarbled myself a little bit. We are
most likely in a training range withthe bias to the upside, despite the

(11:13):
gains thus for this year. Wecounsel patients, there's no need to be
a hero, we say, wesay that after big gains as well.
I don't think the market's going torun away with itself, do you No,
Yeah, And I think that'd bethe worst thing for the market.
You know, why do you thinkthat I think just the FED would have
to take that more into account.So you know, I think, yeah
again, I think as we keepsaying, I think we're in a trading

(11:35):
range. You know that said itwas a nice week. You know,
all major indices up significantly. Iwant to say more than five percent,
Yeah, more than five percent.So you know, well to get into
the particulars there if you got aminute, because I think we haven't.
We don't do it every week,and I think it's good for well,
not because I agree, you know, I think it's it's good to see
where where where the indices are,you know, especially you know now,

(11:56):
I think we we're seeing a lotof people look at the technical you know,
when you see a volatile market,you see people look at the technicals.
You see people, you know,see where the Dow Jones is,
where the NASDAC is. So solet's take it slow and if I have
a question or comment, I'm goingto raise my hand absolutely go. Dow
Jones industry leverage up one thousand andsix forty three to close that thirty four
thousand and sixty one, up fivepoint zero seven percent for the week that

(12:18):
brought the Dow into positive territory uptwo point seven six percent for the year,
trailing twelve month, up five pointone two percent, SMP five hundred
up two forty to close that fourthousand and three fifty eight, up five
point eight five percent for the week, up thirteen point five one percent for
the year trailing twelve month, upfifteen point four five nine percent, and

(12:39):
as that composite up eight thirty fivetwenty seven to close at thirteen thousand and
four to seventy eight, up sixpoint six one percent for the week,
up twenty eight point seven eight percentfor the year trailing twelve month, up
twenty eight Yeah, and I'm seeinga raised hand, raised hand, you
know, and what you didn't raiseyour hand? I raised my head.

(13:00):
Well, can the difference? Youknow, the Dow outperformed the S and
P by a wide margin last year. We're seeing the reverse this year,
with the S and P five hundredand the NASDAK out performing the Dow to
a certain extent. Last year,you looked at the Dow down I think
about six or seven percent, downeight point seven eight percent, the S
and P down nineteen, the NASDAKdown thirty three percent. Now we're seeing

(13:22):
the reversal. You know, arethings in? Are things in? I
guess in balance now between these indicesor you know how to First of all,
if you look at the NASDAC,the leaders in the NASDAC, the
Apples and Microsoft of the world arealso those are the because the S and

(13:43):
p's and market capitalization weighted in nextthey're also very heavily weighted there. You
know, does the NASDAC out performnext year? Do we do we bring
things back in the in the prettymuch balance is let's say, let's say
the market's gonna be a B eightypercent next year. And I'm not saying
it is or isn't. I youknow, we very rarely get prognostications,
but what will the S and Pfive want to be up about that and
then NASDAC be up about that oror it was going to be seeing substantial

(14:07):
outperformance? Is AI gonna lead thelead the market next year like it did
this year, or are we gonnasee more rational approaches or what do you
see really? With with UH?I think we'll see more rational approaches.
It's hard to think, you know, tech on like an equal weighted tech
will do that well with with ahigher interest rate environment. You know,

(14:28):
we have a pretty big election comingnext year too, so I think on
a number of you know, Ithink it'll be I think it'll be like,
uh, you know, you know, the summer duldrums, as you
would say, all year. Ithink that's kind of what I'm thinking.
And that's the first time i've really, you know, thought, you know,
exactly what I think of the marketspecifically next year. I know we're
only a month out, but youknow, from a from a whole year

(14:50):
standpoint, and I think it it'sgonna be a tepid year a little bit,
and that there's a lot going on, you know, especially it's it's
backloaded it with you know, youhave I think thirty one percent of US
bonds come due at the end ofnext year. Towards the end of next
year, you have the elections,So, you know, I think it's
going to be I think investors arenot going to make any substantial moves next

(15:13):
year because there's a there's a there'sa lot of unknowns, and let's say
twenty twenty five, you're also Imean at this point in time, and
anythings can change at any minute,both positively and negative. I think Israel
Hamas certainly weighs heavy on the market. You know, I think China's relationship
with with Russia and then Russian Ukraine, our funding of the Ukraine along with

(15:41):
Israel, or maybe not funding theUkraine because of Israel, or or maybe
not. You know, my pointis not funding the Ukraine or with with
Russia. You know, I thinkthe East versus the West. I think
valuations. I think the I thinkthe market, and that's you know where
we talked about a few minutes ago. The market is, you know,

(16:02):
relatively fairly valued. Our companies aredoing well. We'll talk about it probably
in the second half that you know, eighty percent of the companies beat their
earnings estimate, but only sixty percentbeat their revenue estimates. So they're getting
more from gun and you know,I think we were talking about a little
bit about that on the beginning ofthe show. And I think, you
know, what we what we thinkabout a higher interest rate environment is hopefully

(16:25):
companies will become more responsible with howthey spend money. The better better run
companies, better managed companies will dobetter in a higher interest rate environment.
I think you're seeing that a littlebit in this earning season. You're seeing
good companies, maybe getting a littlecautious as we're seeing with top line and

(16:45):
revenue, but earnings continue to beat, which means they're doing something right from
a cash management standpoint, And Ithink that's what you want to see in
companies in a higher interest rate environment. Maybe it took them a little bit
too long to get this way,but hey, you know, I think
we're seeing a lot of positivity withhow companies are run. Yeah, that's
important in this type of interest rateenvironment. It's it's usually a positive really

(17:11):
that really responsible capital is going tobecome much more responsible in how it's deployed,
as opposed to an indistrates to threepercent of the cost of capital is
going up to about eight or ninepercent. Yeah. You know, we
have a credit line here that wedon't have any money out on it,
but I think the it's two overprime prime is eight eight eight and a

(17:33):
half, I believe, And soyou know a rate even for a company
Cars has never really borrowed money otherthan we have a mortgage on this place.
You know, it's ten and ahalf percent. Prime is eight.
Quite the hurdle, it's quite thehurdle to overcome, so that that that's
going to generate a slowdown. Ithink we you know, I don't Ben
Carlson had a note. I can, I can pull it out quickly.

(17:55):
Oh yeah, I have it righthere, right there. Just you know
basically that in a hundred thirty ifyou if you go into a thirty year
mortgage today on a three hundred andsixty two thousand dollar house, you will
pay four hundred and seventy seven thousanddollars in interest two years ago, two
years ago, Over two two yearsago, two three years ago, you

(18:17):
would pay one hundred and fifty thousanddollars. That's a three hundred and twenty
five to even twenty seven thousand dollarsmore in interest. Over a thirty year
period you'll pay. So divide itby divide it by thirty years. You're
basically talking about a thousand bucks amonth more. Yeah, that's amazing,
and that is going to it's goingto do two things. I think it's
gonna take money out of consumers pocketsand you get a lot of like the

(18:40):
Blue states that uh, you maynot get the deduction on the interest that
you're once getting because it's the SAALtax cap at ten thousand dollars you're probably
gonna have. You've got to haveAnd that's the thing that I think we
haven't seen yet. We've you've gotto have stagnation in how housing prices,
if not a decline in housing pricesat some point in time, something's got

(19:04):
to give, you know. Yeah, it is a little bit different though,
because this is a supply and demandissue right now. So I think
you have to figure out the supplyand demand issue before you figure out this
next issue. Right you think youhave to get supply up into the market,
into the market, and then Ithink you'll have to take you know,
market economics that'll have to almost takeover to drive prices back down.

(19:26):
But you need to get the supplyup in my opinion, first. But
at the same time, it's reallyhard for builders to build in this type
of environment with a lot of unknowns. Hey are people going to buy a
house at ten percent? So Ithink you're going to see a lot of
innovation almost in the home builder sectorwith how they can work with customers to
maybe have a little bit of alower interest rate, whether that be buying

(19:48):
down your your interest rate, puttingmore money down or yeah, you know,
well they also I think you youyou know, and look, this
is creative, but you also seethe government involvement, perhaps you know,
with with tax credits. You alsocould see the conversion of longer term leases
that are will be rolling off foroffice space and the like being converted to
condom miniums. Once. I've saidthat for years and you know, you

(20:11):
don't see you don't see a lotof condominiums in in the capital district.
You don't see where you can actuallybuy your apartment. That's a huge market
in in larger urban areas. ButI think you'll begin to see that where
you are now not going to berenting your apartment, you will be buying
your co op or condo or thisor that. I think, and I

(20:33):
think you're seeing a little bit ofthat right now in the I think you
have to buy an administration announced newsteps Friday and sure access to affordable housing.
But you know, I thought thatthere was over you know, four
hundred billion dollars. Yeah, Ithink we're going to see some grants to
maybe convert commercial space into residential housing. And I think you'll see things like

(20:56):
that. Yeah, all right,I will tell you. But you know,
so the other thing too is Iknow, I raised my hand in
the nas that composite and the differencebetween the performance in the NASUK up twenty
eight seventy eight versus the Dow twoseventy sixty year, you know. Going
on to some of the further indices, yeah, forgot the you know,
US total market up two thousand andfour to seventy one to close at forty

(21:17):
two thousand, three eighteen. Alsoup six point zero five percent for the
week, up twelve point four tosix percent for the year, trailing twelve
month up fourteen point one one percent. Russell two thousand, biggest gainer,
up one twenty three seventy seven toclose at one thousand and seven to sixty,
up seven point five six percent forthe week. I think there was
a two day stretch that it wasup six percent in total, still down

(21:37):
point zero three percent for the weekfor the year, for the year trailing
twelve month, down two point oneeight percent. Utilities had a nice week
up eight sixty, up forty sevento close at eight sixty. I'm sorry,
up five point eight percent for theweek, still down eleven point one
percent for the year, trailing twelvemonth down five point eight percent. Transports
up nine to fifty six to closeat fourteen thousand, five twelve, up

(21:57):
seven point zero six percent for theweek, up eight point three seven percent
for the year, trailing twelve monthup seven point seven one percent. You
know what I would say about acouple of things there, I think you
know, I'm not I'm not soldon the mid caps. No, me
neither. Yeah, they had arold on anything that is moving just in

(22:18):
my opinion because of interest rates.True, I think you're seeing the Russell
two thousand move so drastically because we'reseeing a maybe a plateauing of interest rates,
and the same with utilities, youknow, up five point eight percent
for the week. Also in myopinion, higher diven end payers, so
they could be attractive. Well,one thing I would say to that,

(22:40):
though, is the Russell two thousand, and you mentioned as the plateauing of
interest rates. The Russell two thousandis the second third thousand largest American companies.
They have much greater borrowing needs thanthe S and P five hundred,
and the credit quality is not asas sound. So that's why a movement
down in an interest rates spurs theAlso two thousand, the utility average,

(23:03):
you know. I just you're gettingto the point here. Here's what I
would say to that, Utilities andI think preferred stocks. Again, we
don't have to tick the bottom toget a good deal over the longer haul,
you know, That's all I wouldsay about that. I don't think
we're gonna see interest rates really spiralto the upside, nor do I think

(23:26):
they're gonna plummet, you know whatI mean. I think we're And we
mentioned this last week. You knowa lot of people call something, oh,
we were in the new normal rightnow. If you consider the last
let's say, thirteen years after theGreat recession that ended in early nine through
let's say twenty twenty one, Let'ssay that thirteen year period or whatever,

(23:48):
early twenty one. If you callthat the new normal, then this is
the normal. You know, youcould call this the new new normal.
But I would say prior to thepen prior to that great recession, that
was the normal. And I forgetwho who's where I saw it. But
interest rates are within a stone's throwof three hundred year averages right now as

(24:11):
far as the ten year treasuring,like, that's about it, though,
I think we're twenty four or twentyfive minutes into this air. You know,
right now it's ten thirty on thestation you depend about for news,
whether information, new stock, Gayten on one of three one WG.
Good morning, Welcome back to thesecond half hour of the Capitol District's Money
and Investment Program. You're listening tothe Faguean financial report. First four minutes
we talked about Jude. The lastminute was a hard break because we kind

(24:33):
of lost track of time, soyou know, I apologize to the listeners
out there. But let's we weretalking a little bit about, you know,
the difference in the markets and theindices, and the Russell two thousand
being the second third thousand largest Americanstocks down point zho three percent this year
as opposed to the S and Pthat's up thirteen to five. The US
total marketing next up about twelve fortysix their market capitalization weighted indices. So

(24:59):
the bigger the company, the moreimpact they have on the market. You
know, you know, as opposedto the Dow. The Dow is a
price weighted index. So you geta company like Goldman Sachs, which is
traded at you know, two orthree hundred bucks a share will have more
of an impact on that index thanan Intel would trading at you know,
thirty five dollars a year. Soyou know, for us, you know,

(25:22):
I don't know what's the best indexto track your own portfolio is probably
going to be the US Total MarketIndex. You know, I still don't
like that it's market capitalization weighted periodbecause of the fact that you know,
the larger cap stocks will have moreinput than the smaller cap stocks for those
of you who you know, forme, you know, you look at
that and you also just juxtapose itagainst the RSP which is the equal weight

(25:45):
in the index. And you know, thus far this year, I think
if you take a look at that, you know that index you know,
has risen. Let me see here, probably about I don't know if you
got that from yeah, one pointsix two percent one point six two percent
year to date. So you know, the you know, like a well

(26:06):
balanced portfolio, you know, maybeis up seven or eight percent this year.
As far as I'm not talking aboutbalance, I'm talking about just on
the equity side, maybe up sevenor eight percent this year. If you
look at the Vanguard Total Bond MarketIndex from a mutual funds perspective, VbN
D. You know that is up, that's down about point five percent,

(26:30):
so point so you're probably you're probablylooking at bonds down maybe one. You
know, stocks up maybe eight.If you're fifty to fifty, portfolio up
four and a half or five percentthis year. I you know, I
don't know. I think that's asign of things to come, you know,
we you know, so, soI kind of think a five or
six percent total return to portfolio.And by the way, for those of

(26:52):
you that are sixty and older retiring, that's kind of nice. You know,
if you can get half, youknow, half of your return from
your stocks in half of your returnsyour bonds. You know, you dove
into the the information. I thinkthis the data is the stock market this
week. I think I think wecan say the data the market this week
was influenced by a plunge in interestrates brought about by the Fed's refunding.

(27:15):
You know, what debt they're bringingto market is going to be more on
the shorter end than on the longerend. So if you bring a lot
of supply to the longer end,that supply, you know, if you
if you have consistent demand, isgoing to push prices down and yields up,
So the FED decided to you know, take care of their fourth quarter

(27:37):
debt needs at the at the shorterend relative to the longer end. So
I think that's what we saw there. So the ten twenty thirty year bonds
came down. And I also thinksome of the comments from the Fed this
past week are post fo MC meeting, you know, more more I guess
conservative than or or more dubbsh.I think, you know, brought them

(28:03):
brought stocks to the four yeah,you know, you know, And I
think that's uh. And also thereason I wouldn't take too much into you
know, this week, I'm notthinking too much on it. It's been
a rough couple of months too,you know, so let's not beat around
the bush there. You know,if you're just looking at the S and
P five hundred, you know,it's three months is I would say,

(28:27):
down, you know about can youget that up? Yeah? I got
it up. I can do itright here. The S and P five
hundred is, you know, it'slike down down about six percent since the
end of July of twenty twenty three. So yeah, we're just getting back

(28:48):
a little bit of a loss andbut you know, so we just buide
our time. I think there's noneed to be a hero. We closed
out some of our captions with that. But I think if you take a
look at some of the comments fromChair Palell first within changes to the policy
statement, recent indicator suggests that economicactivity expanded at a solid, at a
strong pace in the third quarter.Change rooms has been expanding, you know,

(29:11):
you know, I think there's alot of good things happened for the
market this this week and that cansupportive. Yeah, economic data that is
supportive of the stock market. Youknow, you have economic data that,
as you said, just came outvery strong. But you also had a
weakening job market, which should begood for the stock market as well.
So you are seeing a little bitof weakness in the job sector, but

(29:33):
a strong economy overall, and thatkind of signals maybe a mild recession or
soft landing, and I think eitherway that's positive for the market in my
opinion. I think so with youknow, we can't you know, we
can't. What's what I think youcan't kind of Also, what you can't
ignore is that a soft landing iswhat probably is being priced in what PUS

(30:00):
price did in this week, youknow, a cessation of FED rate hikes,
and I do think whether or notthe FED raised too much for too
long still does remain to be seen. And yet comments from Powell, you
know this week, I still believein my colleagues for the most start still
believe it's unlikely that it's likely tobe true that we will need to see

(30:22):
some slower growth and some softening inthe labor market to fully restore priceability.
So he says, Okay, we'regoing. We still need to see more
data. He says, also theidea it will be difficult to raise rates
again after stopping for a meeting ortwo, and they just they've paused for
two consecutive meetings. The committee willalways do what is it's appropriate at the
time, So he sounds a littlelittle shot across the bather says, say,

(30:44):
just because we stopped, it doesn'tmean it's a skip, not a
pause. And a few good monthsof data are only the beginning of what
it will take, you know,So he says that. And yet the
payroll data, as you mentioned justa few minutes ago, air suggests that
the labor market is sawting. Youhad would you have non farm payrolls,
you know up this past during themonth of October. Uh, you know,

(31:07):
and I don't have that in frontof men. If you're again,
non farm pails was by one fiftybut slightly below consensu assessment of one two.
And we had a revision of bothboth revision of down in non farm
payrolls in September and August too,for a net loss of one hundred and
one thousand. So you know,you are seeing a slowing labor market.
I think that's what the Fed haswanted to see. Two stop you know,

(31:33):
raising rates. So you know,I know Powell said, hey,
you know, we're not saying we'redone, but you know, I think
there's still a twenty percent chance ofan interest rate hike in December. But
what what I'm seeing is I thinkwe're at least getting to the end of
it. We're getting to this cycleof raising rates. But you know,
I think what's still on the tableis how long we're gonna pause pause,

(31:55):
Well the other thing too, andkeep rates higher around this is he gonna
The only thing you're questioning really isyou're getting he's getting to the end based
upon the economic data. But ifyou have a renewal in inflation data.
I think that's what's going to causehim to have to raise rates regarded regardless
of where the economy is. Rightnow, you have the labor force participation

(32:16):
rate at sixty two point seven percent. That's historically low, so there is
there's some kind of ability or someroom in the labor market to continue to
grow there. Uh, we haveyou know, average hour of the earnings
have kind of moderated the growth there, the duration of employments kind of moderated
around twenty twenty two weeks and aroundthere you have the long term unemployment at

(32:39):
around you know, seven or eightweeks there. So you have you have
data that that's suggesting that the FEDshould be done based upon the economy.
I think what you have though nowyou know, and I think a lot
of times you hear people on CCNBCor we're at whoever that want to say,
hey, the stock mark and theeconomy aren't the same thing. But

(33:01):
you know, the FED has totake that into account. You have ten
thousand people to turn sixty five everyday, which means you have x amount
of people that need to draw fromfrom their retirement plans to to to maintain
their lifestyle, which means that youknow, the stock market going up means
those portfolios are going up, whichcould in turn have inflation go up.

(33:22):
So you know, I think theydo have to take into account where the
market is, obviously, and Ithink they do. And if you see
a you know, rapid increase inthe stock market and in stock prices,
you know that could be inflationary.So you know, I think the Fed
has to continue to you know,play it month by month, which they
have been doing for about a yearand a half two years. And the

(33:42):
stock market in the economy, andI know you're speaking about other people A
and B over the short term,the stock market in the economy is the
same thing. I think what makesit different is that you know, the
pundits out there try to make usthink that we got to look at it
day to day and when there's whenthere's a I guess, uh non parallels

(34:04):
move in the stock market as comparedto the economy or vice versa, that
there's an issue, you know,oh my god, what aren't we seeing?
What aren't we seeing? And Ithink you have to realize, and
I often say it, that you'recomparing the weather to the climate. You
know, the day, the daybefore Samantha was born in nineteen eighty seven,
we had snow in the Capitol district. But that doesn't mean that that

(34:24):
is the climate, you know,that is that's an aberration. So I
think the stock market's relatively predictable overthe long term, you know. And
I do think these higher period thishigh the higher interest rates, should they
persist, and we think that theywill in this normal environment, you know,
I think along with valuation, youknow, puts a cap on the

(34:45):
market at about earnings growth, whichis six or seven seven eight percent,
which is fine. Yeah, it'sgood, which is fine. So whenever
you get too bearish on a shortterm basis, whenever the market, as
you mentioned earlier the American Association ofIndividual vest bear sentiment gets too high,
as it is a contrarian indicator,you buy. And when bullish sentiment gets

(35:06):
too low, too high, maybemaybe you trim a little bit and you
go from there. So the FED, the FED, kind of the Fed
along with Treasury, due to thestructuring of their their refunding, kind of
signaled that they're concerned about the longend. From the Treasury's perspective and from
the Fed, we're kind of gettingto the point that we need to be

(35:30):
any particular earnings ere as we can. Yeah, I just was going to
say, you know, I thinkwe only have probably ten fifteen minutes left,
so I think it's smart to talkabout Apple's earnings, you know,
as well as AMDAMD is coming outwith a new chip that they expect to
sell. I think they said twohundred billion dollars or something like that,
something that go ahead. You know, AMD gives soft fourth quarter guidance,

(35:51):
but expect to sell two billion dollarsof AI chips next year. So you
have that coming out, you haveApple, you know, one forty six
versus one thirty nine, you know, eighty nine point five billion on revenue
verse eighty nine point two eight,so beat on the top of line.
MAC revenue was down, did notyou know, consensus eight point six billion,
but we only saw seven point sixbillion in revenue sales, so that

(36:14):
was down. iPhone revenue forty threepoint eighty one, right in line with
expected, So you know, Applewas down. I think about like,
you know, I don't know ifit's for a day down, but you
know, I think maybe a percentor two. Uh, you know,
I think Apple it's one of thosecompanies, not one of you, one
of the only I think that,you know, it was so large that

(36:39):
yeah, I think it's just kindof run away, run away a little
bit. Nothing in their earnings blewanything out of the water. Gross margins
were forty five percent versus forty fivepoint two verse forty four four point five.
So that was good. But youknow, I didn't have much to
take away from from those earnings.No, they're all pretty much in line.

(37:00):
China was a little weak. Youknow. You had Apple flat or
down a down a dollar on Friday. Projected earnings next year six dollars and
fifty seven cents. That's the consensus. It's trading at one hundred and seventy
six dollars a share, So you'retalking about a company trading app you know,
roughly twenty six times next year's earnings. And I talked to Doug Goody
on Friday on gy and we're ona station and when we were just saying,

(37:23):
oh, hey, it's our largestholding. We're comfortable with it.
I think we're gonna you know,I think over next week or so,
we'll take a look at maybe trimmingit, depending upon the movements in the
market and some other items. Well, you know, we talk a lot
about on the show that the markets, the market doesn't like unknownnn but at
the same time, they also don'tlike expectations. Nothing in Apple's earnings was

(37:47):
surprising to the downside, which isgood, but also to the upside.
So I think every few years Applegoes through a a little uh time where
people want to see where they're reallywhere their next revenue builder is going to
be. You know, you sawit in wearables a couple of years ago,
you saw it in services. Nowpeople are like, all right,

(38:09):
we know all this. What's nextApple, right, you know, for
being a multi trillion dollar company andone of the things you know, And
I think it's the same thing withBerkshire. Berkshire yesterday reported strong earnings.
Berkshire has one hundred and sixty somebillion dollars in cash. I think Apple
has one hundred and fifty some andI may be wrong, but you know,
a lot of money put it.Whire has one hundred and fifty seven

(38:30):
or something like that, so,you know, and then I think I
saw someone talk about Microsoft too,So they all have all of this cash.
Now, what's good for them isnow they can earn five percent on
this cash. So that's the hurdlerate for these large companies to undergo projects.
You know, well, your pornin equity be more than a return
on investment, more than that fivepercent that's needed because that market can sit

(38:50):
in you know, that cash cansit in a money market account. At
least get your five percent right,you know. Or do they raise their
dividend? I think it's hard toyou know, a lot of people think
Apple should raise their dividends. InBerkshire, which doesn't even pay one should
pay a dividend. But they're earning. They're earning five percent of that money.
Yeah, and that flows down throughto earnings, despite the fact that

(39:13):
it's earnings from investments rather than youknow, earnings from uh, you know,
business operations. You know, wewill see what they do. I
think what was interesting about Apple isservices revenue was above estimates, about a
billion dollars above estimates. I thinkservices are going to become a big and
bigger component of that. You know, Starbucks also beat. You know,
Starbucks is such a well run company. Earnings per share of a buck,

(39:34):
we you know, we own aboutone hundred thousand shares of Starbucks for the
benefit of our clients, or wedon't own it that our clients own it.
We just you know, we wehave discretionary authority on their accounts,
so we do manage that account accordingto our own belief as to what's in
their best interest that they signed sayinghey, you could do this for us,
obviously, but yeah, So weown about one hundred thousand shares of

(39:57):
Starbucks that had good earnings up tenpercent, outperforming in ES expectations. Revenue
came in above, earnings came inabove. China traffic increased eight percent,
which I think is huge. Ithink one of every two stores they're opening
now is in China. So youknow, I think if that continues to
work for them, Starbucks will continueto work. Same store sales increase five
percent out out of North America's samestore sales in North America increased eight percent,

(40:21):
So you know, all is goodon the Starbucks front. I think,
you know, I think they gothrough periods as well that I think
investors get a little bit nervous witha lot of their growth coming out of
Asia and so many variables coming inAsia. But you know, good news
out of Asia I think means goodnews for Starbucks. I agree, and
I think, you know, whydon't we bring up individual companies. Perhaps

(40:44):
you're a client and you own them, that we own them for your benefit,
that's one thing. But bring upApple to kind of give you the
tenor of the consumer and also thetenor of technology in general, and the
tenor of a company that's the largestholding in the in the S and P
five founded Starbucks is more of theconsumer, both domestic and abroad. And
also you compare that, no,you compare that to the McDonald's, which

(41:07):
also had good earnings. And onthe flip side there both solar REGI and
engine Yeah, you know, Ithink solar edge is a good thing to
talk about. I think solar regionin phase were down I think ten plus
percent at least twenty percent this pastweek. And you know that's tied to
interest rates. So you know,although we are talking about individual companies,
you're seeing you know, a lotof obviously solar panels in the like get

(41:29):
finance, so you know, ahigher interest rate environment, As you said,
the primary eight plus percent will doa lot of damage to industries like
the solar industry that relies on financing. So you know that that's kind of
an interest rate talk as well.You have a MD with you know,
that's more of an AI play itis. I think it's our largest semiconductor
holding as well that are in Vidia. I know they kind of go they

(41:50):
teeter tottered or with what what withwhat with what our largest holdings are,
and obviously Apple in video we ownabout where's in video? Yeah, I'll
bring it up about eleven million dollarsworth and then a MD just about the

(42:13):
same. Yeah, they're going back. But I think solar edge is an
indication that large projects, if youlook at both on the residential and commercial
side, that have to be financed, these higher interest rates are taking a
bite. You know a m D. Did you did you go through a
m D already a little bit?Yeah, you know, they had a
week quarter at actually I think ithad earnings on Wednesday. Maybe the stock

(42:35):
was down about four right after earnings. I guess it fought its way back
to about even when the market openedthem. I think it finished the day
up seven or eight. Yeah,it was, it was up thirteen or
fourteen, had a good day.I think, you know, it's hard
to sell chips in my opinion.I know they're cyclical, and I know
you kind of want to play themnot thematically but tactically. But you know,

(42:58):
I do think we're in a newenvironment that you know, that whole
uh you know, cyclic cyclicality ofchips is true, don't get me wrong,
But I think we're in a longwe will be in a long term
upwards trend in in chips. Asyou know, we kind of talk about
them as not only the foundation twotechnology going forward, but also I think,

(43:19):
in my opinion, the foundation tobuilding up the middle class. And
I think that's extremely important for forthis country, uh the stock market as
well, and also diversifying away fromjust reliance on China, you know what
I mean. And I think thatyou're right that does bod well. Although
it will come as we saw withthe negotiats with the U a W and
you know, stillantis GM and Ford, it's going to come in across.

(43:40):
I also think I've been reading overthe weekend and it just makes a lot
of sense, And for me,it didn't. I should have thought about
this now. The U a W'sgoing after Toyota, Honda Tesla, you
know, for for unionization of thoseshops. So, uh, they got
a good shot at it. What'sthe name of the fine what's the UAW

(44:01):
leader forget? Oh, I don'tknow, yea sewing Is it showing something
faint? Yeah, because I thinkyou know, so Sean fa So I
don't think he's stopping at those,you know. And again, you know,
there's three million more jobs available thanpeople looking for jobs. So you
know, I think you're going tocontinue to see and with social discord,

(44:23):
with with with with where we are, with you know, even the media,
I think we're going to see alot of there's a lot of power
in the employee right now, andI think that'll continue to be important in
the next decade or so. Yeh, I agree with you. You know,
we mentioned the Payroll Report, youknow, given the FED a little
bit of a leash there. Youmentioned just uh, not by name,

(44:45):
but the Jolts Report, the JobOpening and Labor Turnover survey. Uh,
that came out this past week aswell and showed that you know, interest
rates were excusing that interest rates ninepoint five million people looking for jobs or
excuse me, jobs available as opposedto know about five million people looking for

(45:07):
jobs. So there's more jobs availablethan people looking for jobs. I'm sorry,
six million people looking for jobs,so that leaves a gap of about
three point six million jobs available asopposed to people looking for jobs. I
think that's what, as you mentionedthere, puts the balance of power in
the hands of labor rather than management. Yeah, you know, I would

(45:27):
not want to be an executive ofa company that relied on labor. Yeah,
as one of their largest expenses rightnow. But we are a services
economy, and that's that's tough,you know, it's tough. We had
mentioned the third quarter earnings. Accordingto be Spoke Investment Group, the cohort
of this is quoting from them,the cohort of eleven hundred and twenty six

(45:51):
companies that have reported earning so farthis quarter have beat at EPs estimates per
share at a seventy one point twopercent rate. That's an eighty second percentile
of all earning seasons since two thousandand one. As opposed to revenue,
which is only people only, thenumber beating is only sixty point three percent,
which is very low, and Ithink we'll see more of that,

(46:13):
more, more companies reporting earnings beatsthan s and then revenue beats and I
think we'll see more of that,which which indicates, you know, somewhat
of a slowing economy. There whatelse, you know, I saw something
that said mf it's an MSS surveyhad it so they I think every month
or every quarter they survey asset managersand you know, here in this survey

(46:37):
they said fifty two percent of peoplesurveyed are increasing duration within fixed income.
And I thought that was interesting bothon that's a high number and a low
number, fifty two percent. Soyou know, what I'm kind of getting
at is, you know, andI think that's tough, is you know,
you want to increase. It's almostlike an account by account and a

(46:59):
client by client basis, And Ithink that's what's so important about you know,
I guess like like a customized portfoliobecause you know, just because your
X age or have X amount ofmoney or need x distribution, like every
every person, every person's duration shouldbe a little bit different. In my
opinion, Yeah, because I thinkthat's pretty Yeah, I don't know,

(47:20):
I think I think that's it's toughto to you know, Okay, I
have a growth and income portfolio,which means I have forty percent of my
money out of the market, whichmeans my duration should be what you know,
I think every person is is alittle bit different in what their duration
should be and what's needed I guess, yeah, to satisfy their needs.
I mean, you can certainly putthese the client or people into a bucket,

(47:44):
and we do. We have throughmanaged stream we manage free portfolios.
But you know, I you know, I think you're writing as much that
every every every client is also anindividual that tends to view uh, the
environment, the financial environment through alot of different lenses, one being political,

(48:05):
second being their health, third beingtheir family, fourth being risk tolerance
and life. So you just gotto be careful that you yeah, going
you know it's increasing your duration isa big step. Yeah, you're in
it. You're in it for thelong haul. So once you pull that
trigger, there's not you know,there is going back. Don't get me

(48:25):
wrong. You can always sell it, but you know, you when you
buy something, you don't expect tosell it, right, So you know,
it's something that I think you haveto put a lot of thought in
and it's a difficult it's a difficultchoice. I think I think we've got
ad duration a little bitar portfolio.We have too much shorter duration, and
we've been in the process of it, and we do think we have time

(48:46):
left and we'll be doing that,all things being equal, over the next
a few weeks. That'll just aboutdo it. Give us a call during
the week five four, check usout on the web with Figanasset dot tim
or like us on Facebook. Asalways, thanks for listening, thanks for
your patience, and we're not professionalsin at disc with professionals at investing money,
so give us a call. Takecare,