0:05

At a time when investors are

0:08

confronted with market volatility and a

0:10

variety of challenges fueled by the

0:12

uncertainty of inflation, unsettled

0:14

geopolitical tensions, and

0:17

economic pressures, Justin

0:19

Klein and Steve Peasley stand ready

0:21

to take your finance and investment

0:23

questions and share their unbiased answers.

0:27

This is Investalk. Independent

0:29

thinking, shared success. Investalk

0:32

is made possible by KPP

0:34

Financial, a registered investment advisor

0:36

firm serving clients throughout the

0:38

United States. The

0:41

clarity for your path forward

0:43

starts now. Here

0:45

is KPP Chief Executive Officer,

0:48

Financial Advisor, Justin Klein.

0:52

Good afternoon fellow investors and welcome

0:54

back to Investalk. This is our

0:57

Wednesday, April 24, 2024 edition. I'm

1:00

Justin Klein and I'm excited for this

1:02

hour with you to help

1:05

you become a better investor and

1:08

navigate this crazy market environment. Last

1:11

night after the close, we had Tesla earnings

1:13

that were way worse than expected. Stock

1:16

was up. Meta after hours today,

1:19

better than expected. Stock is down. These

1:22

things confuse people, but for

1:25

a seasoned investor like myself

1:27

or Luke or Steve, we

1:29

know how this works and

1:32

it's not surprising to us. We

1:35

are here to help give you some

1:38

context of the market moves, the data

1:40

that comes in and help you

1:42

understand how to implement this into

1:44

your process, into your strategy so

1:47

that you have the right mindset

1:49

and data. Your

1:51

eyes are wide open and you're not

1:53

confused and you have

1:56

clarity to what you are doing

1:58

within your portfolios. That

2:00

is the goal each and every weekday

2:02

on Invest Talk and of course we're

2:04

going to run down the marked performance

2:06

for today as usual and the show

2:08

topics. But we love hitting our

2:11

first caller question first. Hi,

2:14

this is Neil from Chicago. Thanks

2:16

for taking my call. Really appreciate your

2:19

show. I had

2:21

a question about Brunswick Corporation. They

2:23

cost them both $2.00. These

2:26

are the guys who manufacture

2:28

and sell boats on the

2:30

Repreational Marine stuff. What do you

2:33

talk about this company? Do you think it's fairly

2:35

valued? I do own some

2:37

of them. Should I be

2:39

adding to my position or

2:41

would you think more to be answered on the

2:43

show? Alright,

2:46

looking at Brunswick Corporation. I always

2:48

think of Brunswick as the bowling

2:50

company. But it's

2:52

no longer that. It is a boat company. It's

2:55

a leading manufacturer of marine

2:57

recreation boats. The

3:01

firm has one of 60 different brands. It

3:07

has what's called a Freedom Boat

3:09

Club. It's a shared ownership collective

3:13

as well as Boateca,

3:15

which is a facilities transaction. It facilitates

3:17

transactions in the used boat market. So

3:20

it's all about boats. And during

3:22

the COVID crisis,

3:24

business was booming. Everyone

3:27

was trying to get out and enjoy the

3:29

outdoors, get away from maybe

3:32

spreading the virus indoors, etc. And

3:35

their business went from earning $4.33 in 2019, $5.07 in 2020, $8.27 in 2021,

3:37

and 2022 peaked out at $10.02. But

3:48

over the last couple of years, earnings

3:50

have started to mean revert. And this

3:52

year, earnings are only supposed to be

3:54

$7.38. So

3:57

To me, this looks like it's going back

3:59

to... The type of business it had. For.

4:02

Car without taking a little longer the

4:04

still some remnants of the Cove it

4:06

environment that they're benefiting from. Fights.

4:09

To me I don't like this this trend.

4:11

And. Earnings expectations for this year and

4:13

next year continue to come down and

4:15

it's trying to make a series of

4:17

lower highs and lower loves. Now it's

4:20

a good company. I know issue

4:22

with the company. It's just that earnings trend here.

4:24

They do have some that about two and half

4:26

billion on about a six billion dollar market cap.

4:29

That's. Not. Agree. Just started

4:31

time but it's something something to

4:33

consider and appraised value at around

4:35

seven point seven. Once again if

4:37

eve it on earnings into needed

4:39

trend down. That. Multiples going

4:41

to head up in I don't

4:43

really like that so. I

4:46

would. I would pass on it. Frankly,

4:48

I just want to see the earnings

4:50

friends level out, get back to some

4:52

semblance of growth. if it can do

4:54

that, And. I can see

4:57

a level offer on the seventy dollar

4:59

range. I think that it's cheap, it's

5:01

it's a good company or to buy.

5:03

but the technicals are neutral to slightly

5:05

bearish and I don't like the earnings

5:08

train some going to pass on Brunswick

5:10

Corporation. Know.

5:12

A lot of ground cover over the next

5:14

forty five minutes or so. Our main focus

5:17

point is regards to something. Almost.

5:19

everybody thinks about. In today's

5:21

world where mortgage rates are

5:23

high, interest rates are high.

5:26

And. Maybe. You

5:28

are earning a lot in your cash.

5:30

Maybe you have a mortgage that's stuck

5:32

down at three percent the of those

5:34

golden handcuffs needed. That's. Great.

5:37

But. I don't like having cats.

5:39

may gonna pay that down. Yeah.

5:41

These are the questions like the last himself.

5:44

Should. You pay off your mortgage early

5:46

or invest that money. We get this crushed

5:48

no time. So we're going to drill down.

5:50

On to this story. In addition, We're.

5:52

Going to cover a few more topics

5:54

one is in regards to the Arc

5:56

funds cast The Word. She. Came

5:59

to prominence. During Twenty Twenty Twenty

6:01

Twenty One and unfortunately the Art

6:03

ones biggest inflows came. In

6:06

February of Twenty Twenty One near the

6:08

peak of. The. The

6:10

tech. Boom! The Toby

6:13

Tech boom shall we say and.

6:16

According. To Morningstar. The.

6:18

Art funds have now destroyed

6:20

more wealth and any other

6:22

asset manager over the previous

6:24

decade. Think. About that. And

6:27

there are a lot of lessons to be learned here, so

6:29

we're going to dig into that story. Also.

6:31

What are the hidden risks in the financial system? And

6:34

then lastly, if we have, we have time Where to

6:36

go? Over. The current state of

6:38

the mutual fund industry and look back.

6:41

Many. Years as well get some

6:43

context to see. Where. That

6:45

is street is ultimately had it.

6:49

Wealth. As a voice, bank questions one as

6:52

regards to growth investing in the other is

6:54

U P S. Also. Have questions

6:56

that come from our comments section in the

6:58

Invest Talk You Tube channel and of course

7:00

I welcome your fights and of us some

7:02

questions right now on Aged Eight Ninety Nine

7:04

chart. There. Were going into a short

7:06

break and the other side will talk about

7:08

today's market activity amply Germany going time. Leave

7:11

your question on the best. Like Boys Bank

7:13

Eighty Nine he thinks you're. In

7:20

today's world of variety of factors

7:23

are affecting the stock markets. Serious

7:25

investors know. Building. A secure

7:27

financial future requires hard work and

7:29

determination. That's why now more than

7:32

ever. When it comes to the

7:34

planning, execution and maintenance of your

7:37

portfolio, you need Invest Talk. With

7:39

total download surpassing fifty million each,

7:41

Invest Talk podcast should be one

7:44

of your t Financial Planning an

7:46

educational tools. Invest Talk is a

7:49

free download and host. Just and

7:51

Klein and Steep easily stand ready

7:53

to provide their unbiased guidance and

7:56

professional. Analysis developed from real

7:58

time data research. The

8:00

years of Investing experience. Twenty

8:02

Four Seven. Rain or Shine

8:04

During smooth sailing or on

8:06

rough weather days, the Invest

8:08

Talk listener line is open

8:10

and waiting for your questions.

8:12

You set the agenda. Don't

8:14

forget to call Invest Oct

8:16

Eight Eight, Eight Ninety. Three,

8:25

This is where. The

8:31

more you learn about how

8:33

the market works, the better

8:35

your chances for success. Invest

8:37

Talk Eight, Eight Eight Ninety

8:39

Nine Chart. Know

8:45

think a quick look at

8:48

the market today was a

8:50

mix day over all and

8:52

the As M P close

8:54

slightly higher. Rod Us

8:56

market was up literally one

8:58

basis point. You. Had

9:01

the Nasdaq. that was

9:03

the. Best. Performer of the

9:05

major indices. Up sixteen points,

9:08

that's only point one percent. However,

9:10

small caps are down slightly mid

9:12

caps or up a little bit.

9:14

It. Was frankly a very.

9:17

Muted makes day I in the midst

9:20

of earning season obviously tussles up twelve

9:22

percent even though they're still down. You

9:25

know, thirty plus percent since the beginning of

9:27

the year. Are. You had

9:29

some. Outs Any

9:31

big losers of know, Teledyne was down

9:33

eleven percent. Hell enjoy. Nine and a

9:35

half percent. Those are kind of the

9:38

big movers. Down of tomorrow

9:40

we have. The. A

9:42

metre. Is reaction

9:44

from at his earnings after hours today

9:46

that will be due to tomorrow's earnings

9:49

are him Amaro Markets we like. We

9:51

have a down day and market's going

9:53

former the midst of a market pullback

9:55

really and but so far it's been

9:57

pretty healthy. Nothing out of the already.

10:00

Eerie. You're not seeing the credit

10:02

markets really blow out or anything

10:04

like that. It's going to give

10:06

you a worry about some sort

10:09

of broad brace face credit event

10:11

that brings down the value of

10:13

equities more than you know, Tens

10:16

while percent. It's

10:18

hard to get a large drop

10:20

in. Equities with

10:23

out some. Requisite.

10:27

Come up and so shall we

10:29

say within the credit markets and

10:31

the fact that inflation still remains

10:33

relatively elevated right? sticky high in

10:36

the three to four percent range.

10:38

Frankly, I. Know that

10:40

sounds terrible, but it's three says

10:42

that's actually a very good place

10:44

for equities or for for inflation

10:46

to be in for equities to

10:48

stay upright. Because.

10:51

It's not so high the fed us to

10:53

get super hawkish. But.

10:56

It's not so low

10:58

that you get deflationary.

11:01

Bias. Credit events things like that. It's.

11:06

The. Minute seem healthy, but it's healthy

11:08

from an equity standpoint. And.

11:10

So. Markers. Overbought.

11:13

Seasonally, this is a time where you

11:15

do tend to get some softness in

11:18

asset prices. Before. We head into

11:20

the late spring summer time. Or.

11:22

And that's likely what we are we're going

11:24

to get now. Could we get another move

11:27

down to say forty eight hundred. On.

11:29

The Snp. However, we call

11:31

commissar and B C padding. We just

11:33

finished the A. First. Down leg

11:35

into support ride around forty nine

11:38

fifty or so on the S

11:40

M P can support bounce yesterday.

11:43

As I bounced Monday and yesterday flat

11:45

day to day just the a really

11:47

a pas de. Ah, as

11:49

we continue through this a discerning

11:51

season. And bucket we get

11:54

that next like down over there of

11:56

weeks that certainly a possibility into that

11:58

Meters for lobby get past forty. then

12:01

maybe you get something more to

12:03

worry about when

12:05

it comes to a broader pullback beyond

12:07

that. Okay, well

12:10

that about does it for the market

12:12

wrap and I hope you've been telling your friends

12:15

about our Investalk audio podcast that it's

12:17

also available in video form on our

12:19

YouTube channel and it seems

12:21

that every day now we receive finance

12:23

and investment questions from the comments section

12:26

of our Investalk YouTube channel and

12:28

here's one that came in recently.

12:31

We actually had two questions on

12:33

the stock. This one came from

12:35

Jim Lay says, what do you

12:38

think of CVCO stock for a

12:40

long term? Well CVCO is

12:42

the symbol. Now this is a name

12:44

that has been certainly in an uptrend.

12:46

Let me pull this.

12:48

It bottoms around $240 per share

12:50

in November. It peaked around

12:53

$400 in late let's

12:55

see, beginning of April and now we're

12:57

at $366. So it is

12:59

pulling back with the broader market but what they

13:01

do is they manufacture homes,

13:04

manufacture homes. They manufacture manufactured homes.

13:06

So think of mobile

13:08

homes and not the

13:10

homes that your typical home builders are building

13:13

and in a

13:15

time when you kind of have a housing

13:18

affordability crunch, the

13:21

ability to buy a manufactured home at a

13:23

much lower price has become

13:26

appealing and their business booms

13:28

post COVID. They earned $8.10 in 2020 but

13:32

$21.34 in 2022. Now this year that is supposed to come down

13:34

to about $18.70

13:37

down 31% from last year but you're talking about a

13:40

20 times

13:47

earnings that is a bit.

13:51

That's kind of a market multiple but

13:53

the trends and earnings are negative. Last

13:55

quarter you had negative 11% revenue growth

13:59

year over year. negative 36% earnings growth

14:01

year over year. Once

14:04

again where it is this level out? There's

14:06

a lot of names that benefit in the

14:08

COVID era that their

14:11

business is coming back down to earth. It's mean

14:13

reverting and until I

14:15

get some sort of clarity,

14:20

some confidence that that is going to level

14:22

out at a much higher level that

14:24

we're not just going back to pre-COVID levels

14:27

then I'm gonna wait. I

14:30

need to see that because at $8 a share

14:32

like it did earned in 2019, 2020, and 2021,

14:37

$366 per share is

14:40

not the level it

14:42

should be trading at. But

14:44

if it's gonna earn around $20

14:47

per share, I think

14:49

this is reasonable. So I

14:52

don't love it. It just started a downtrend. It

14:54

is a very good business. I will say that.

14:58

But I need some clarity on those

15:00

earnings. And until then I think the

15:02

risk is too high because if you

15:04

get one more bad earnings announcement that

15:06

makes it look like it's turning back

15:08

towards $10 per share in earnings, this

15:11

is going to take a much much

15:13

bigger hit. But a name to keep

15:15

on the watch list because it does

15:17

have some nice profitability but I would

15:19

pass for now in CVCO. Now

15:22

I'm going into a short break. My phone

15:24

lines are open for your live calls and

15:26

they are welcome anytime at 88899chart. Justin

15:37

Cline is here and ready to

15:40

tackle your questions. I've heard you

15:42

say multiple times that you prefer

15:44

shorter duration treasury bonds. Can you

15:46

explain to me why it is

15:48

more advisable? Call Investalk 88899chart. In

16:05

today's market, more than ever,

16:07

you need unbiased investing guidance

16:10

because it can help you

16:12

achieve financial freedom. Well,

16:14

you've come to the right place. Invest

16:17

talk, 888-99 chart. Let's

16:24

go to Mike in Utah looking at Budweiser.

16:26

Do you own it or look into buy

16:28

it, Mike? I

16:30

own some and I'm wondering if

16:32

this price range is sustainable or

16:35

I know they had some controversy

16:37

a while back. They

16:39

dropped for a while. So I'm

16:41

wondering if this $60.28 is a

16:43

good buying point to add to

16:45

it. Well,

16:48

it's definitely pulled back from around $66 was as high

16:50

earlier in the year in January and

16:53

a low at 57 just last week. Now

16:56

we're at $60.26, 1.1% dividend yield. Earnings

17:01

though are headed higher, expected $4 in earnings next year from

17:04

$3.43 this year and

17:07

$3.05 last year. So

17:10

I do like that recovery here.

17:13

The question would be what multiple

17:16

do you want to pay on that? $4

17:18

next year, that's about a 15 times multiple. So

17:23

long-term earnings growth here is only going

17:25

to be mid-single digits. So it's not,

17:28

you shouldn't pay a high multiple. I

17:30

would say right now it's about

17:32

fairly value. It's a fair price right now

17:35

and I like that earnings momentum.

17:37

So it

17:40

depends on your expectations

17:42

for the brand. Will

17:45

it continue to recover? It's

17:48

been in a long-term downtrend. It's

17:52

the world's largest brewer and

17:57

the seltzer market has certainly eaten into.

18:00

their business and I think that's really the

18:02

big issue because 2019

18:04

they're in $4.08 and

18:06

so $4.00 next year's is getting back to

18:08

where they were pre-covid Yeah,

18:11

so that's the struggle here

18:13

is will there be a bounce

18:16

back in? In

18:20

market share for beer over shelters

18:22

and What

18:26

type of growth can you expect Because

18:28

it's so large on 21 billion dollar market

18:30

cap. It's already the world's largest brewer. So it's

18:32

not like it's going to Expand

18:35

its market share dramatically Within

18:38

the beer category. It's just a matter

18:40

of consumer taste So

18:42

I think it's fine.

18:44

I don't love it. I don't hate it.

18:47

I think it's about fairly valued I

18:49

just think you could probably use

18:52

this capital better elsewhere, but it's

18:54

relatively low risk Good

18:56

solid business at a fair price, which you know,

18:58

you can't you can't be mad about Okay,

19:03

perfect. I appreciate it. No problem.

19:05

Thanks for the call now

19:07

Our main focus point is about

19:09

the age-old question of whether or

19:11

not you should pay off your

19:13

mortgage early or not Now

19:16

a decade ago. This question was

19:18

a lot easier Most

19:22

people had mortgages around the three to

19:24

four percent range and the cash in

19:26

the bank was not earning you much

19:30

Effectively zero maybe

19:33

a little bit above zero, but not much and so

19:38

When you took that cash and you

19:40

paid it pay down the mortgage you

19:42

were guaranteeing yourself you were saving That

19:45

interest you were avoiding that interest payment.

19:47

And so that's

19:50

a Easy

19:52

calculation for most people that

19:54

spread but now interest have moved up dramatically

19:57

the Fed has raised rates 11 times the

20:00

calculus is a lot different. Now

20:05

the yields and expected returns on safe

20:07

investments are usually higher. But

20:13

there are some questions you have to ask yourself.

20:15

The first is, do you need liquidity? Do

20:19

you need access to this money in the future? If

20:23

you do, I'm going to

20:25

say future, the near future. Two,

20:29

three, four, five years, something like that. If you

20:32

do, then

20:36

the answer might be no. Now

20:40

you can always get a home equity on a credit to

20:44

access your equity, but

20:48

obviously that's pain. Dipping

20:50

into your savings account and brokerage account

20:53

is much easier. And

20:59

then you have to compare the returns. Now

21:03

the core return from paying down debt is very straightforward,

21:05

whatever your mortgage interest rate is. As

21:07

of middle of last year, Redfern

21:10

reported eight in ten homeowners had a

21:12

mortgage rate, interest rates under five percent.

21:17

So right now, eight in ten

21:20

homeowners pretty much can earn more on

21:22

their cash than they're paying on a

21:24

mortgage. Now

21:26

one-fourth had a rate below three percent,

21:29

a huge gap. Now

21:33

what return you should expect on the investment

21:35

side, that's a little bit more difficult. Some

21:39

people say over the long term, equities

21:44

are going to do even better than cash, even

21:47

better than this seven percent mortgage that most people

21:49

are getting on new mortgages today. But

21:52

that's assuming you have long term, some people don't.

21:58

The best and simplest way is

22:00

the most conservative investment, treasuries,

22:03

cash. And right now you can get five

22:05

and a quarter, five and a half on

22:07

treasuries, short term. And

22:10

that is probably your

22:12

benchmark. You

22:14

could use equity returns, but

22:18

I like to use cash returns. Now,

22:21

what stage of life are you in? What's your

22:23

time horizon? What's your

22:25

risk tolerance level? If you don't have a high

22:27

risk tolerance level, that return on equities

22:30

doesn't matter. And

22:34

if you're close to retirement, that

22:36

means your time horizon

22:38

to begin tapping this money in your

22:40

portfolio has shortened. So that's a big

22:42

question as well. Those are

22:44

the first three questions and I'm going to get

22:47

to the last four right after this break. Now

22:49

on the next and best talk, we'll look into

22:51

the story, understanding the difference between CPI and PCE

22:53

indices. That story tomorrow, but for now I'm Justin

22:56

Klein. I'm ready to take your calls at 888-99 chart.

23:01

E-MAY Motors is here for the

23:03

ride. Remember when you first

23:05

saw the potential and then

23:07

through some elbow grease, fresh installs and

23:09

a whole lot of love you transformed

23:11

a hundred thousand miles and a body

23:14

full of rust into a drive that's

23:16

all your own. Look to

23:18

your left, look to your right. It is

23:20

official. No one's got a ride like

23:22

this. There's nothing else that

23:24

sounds like, feels like or looks

23:26

like the set of wheels in

23:28

your garage. With over 122 million

23:32

parts, you can make sure your

23:34

number one ride or die stays

23:36

running smoothly. So there's no limit

23:38

to how far you can take

23:40

it. Brake kits,

23:42

turbochargers, engines, exhaust kits,

23:44

roof racks, LED headlights,

23:47

bumpers, whatever your baby

23:49

needs. E-MAY Motors has

23:51

it. And with E-MAY Guaranteed

23:54

Fit, it's guaranteed to fit

23:56

your ride the first time, every time

23:58

or your money back. Plus,

24:00

at these prices, well, you're

24:03

burning rubber, not cash. Keep

24:06

your ride or die

24:08

alive at ebaymotors.com. Eligible

24:11

items only. Exclusions apply. No

24:19

two portfolios are alike, and every

24:21

investor has a unique set of

24:24

circumstances. So don't forget

24:26

to call InvestTalk. 888-99-CHART. Now,

24:32

before the break, we were going

24:34

over the variables that

24:37

you have to think about when you are trying to

24:39

decide whether to pay down your mortgage or not. The first

24:41

is liquidity. Again, do

24:43

you need this money in the near term? If

24:46

not, then that's

24:48

one check box towards

24:50

maybe paying down that mortgage. If you do,

24:53

obviously, you want to keep that cash more

24:55

liquid. Number two is comparing the returns. What's

24:57

your mortgage rate versus the returns you can

24:59

get on investments? And

25:02

that bleeds into number three, which

25:04

is what is your life stage?

25:06

If you are far away from

25:08

retirement, then you could potentially use

25:10

expected equity returns as

25:13

your proxy for the investment

25:16

return expectations. If you are

25:18

closer to retirement, then you need

25:20

to use something more conservative, like the

25:23

return on cash. And

25:25

then what are the tax implications? Now, before

25:28

the 2018 tax cut, many people

25:31

itemized. And

25:36

they used their mortgage interest as

25:38

part of the itemized

25:40

deductions. However, in 2018,

25:44

the standard deduction went

25:46

up so much that 90% of taxpayers now

25:49

use the standard deduction rather than itemizing.

25:51

So for 9 out of 10 of

25:53

you, it's no

25:55

longer tax deductible. And even if it

25:58

is tax deductible, you are itemizing. You

26:00

cannot not deduct interest for new mortgages

26:02

that exceed 750,000

26:06

so any amount over 750,000 that

26:08

part is not tax deductible Now

26:14

if you it another

26:16

consideration is the tax Implications

26:20

of the investment side right taking

26:22

that money that you have that

26:24

cash and Putting into some sort

26:26

of tax deferred account think of

26:28

like an IRA or 401k also will

26:34

making that contribution or that pay down

26:36

of your mortgage affect your ability to

26:41

Receive your full retirement match

26:43

or company match in your retirement account, for

26:45

example And

26:47

that could be money that you're giving up Okay,

26:52

so Not only what

26:54

is the tax implications? What are

26:56

the tax implications of paying down the mortgage?

26:58

But what about the money you

27:00

are investing as well? Okay,

27:02

and then any other carrying costs one big

27:04

one is PMI So

27:08

if you are paying PMI, you don't have

27:10

20% equity in your home. Well

27:13

avoiding that PMI is a big

27:16

factor and that is a Big

27:19

check mark towards paying down the

27:21

mortgage getting to that 20% equity

27:23

maybe refinancing and getting out of

27:25

that your mark And

27:30

then a prepayment penalty. Do you have a

27:32

prepayment penalty on your mortgage? Most do not

27:34

but you definitely want to check that out.

27:36

And then lastly, it's peace of mind But

27:40

how secure is your job? How

27:43

secure is your income If

27:46

it's maybe you're in sales and it

27:48

can go up and down depending on the

27:50

economy Or

27:53

maybe you're in a government job and

27:55

you are not going to get fired

27:57

you feel confident in that And

28:01

now that mortgage might make more sense than those that

28:03

are in careers where

28:05

their incomes have been low. So

28:09

those are the things to think about. It's

28:12

definitely not straightforward. There are

28:14

multiple factors to consider and

28:16

hopefully that rundown gave you

28:18

an understanding of how

28:20

to tackle that question. So

28:22

let's go ahead and drop in to another Invest

28:25

Talk listener question from 88899chart. What's up, Invest

28:27

Talk? I had

28:29

a question about UPS. Just had

28:31

earnings today. Also come down quite

28:33

a bit from its highs back during the COVID times

28:36

when it was sky high. So

28:38

now that it's back down, I'm looking to see if

28:40

you guys think that we're approaching a

28:42

time where we could enter into UPS for a

28:44

long-term hold. I'll listen on the

28:47

show. Thanks guys. Bye. All

28:50

right. Looking at UPS. And

28:53

this is the name. It's the

28:55

world's largest parcel delivery company. And

28:59

they have 500 planes, 100,000 vehicles,

29:02

tons of sorting facilities, and

29:04

they average about 22 million

29:06

packages per day delivered to

29:08

businesses and residences across the

29:11

globe. And so it's

29:15

a wonderful business, frankly. If you

29:17

look at its profitability, return on

29:19

equity, about 35% turn invested capital

29:21

around 16%,

29:24

17%. And

29:26

once again, a great business. Free cash

29:28

flow about 5 billion on a market capital of 125 billion.

29:33

Debt of 22 billion. That's not crazy

29:35

for this level of a business

29:39

debt. It is pretty capital intensive. Enterprise

29:42

Value Diva is right around 11. And

29:45

historically, the average is around 13 times. So,

29:51

to us, it's a bit

29:53

undervalued. We recently started to pick up

29:56

some shares for clients. And we'll say

29:58

that. percent

30:00

dividend yield. And

30:03

the fact that they had earnings, they

30:07

weren't great, but they weren't terrible either and the stock

30:09

was up on. So we

30:11

like UPS down at these levels. We think

30:14

it is modestly

30:17

undervalued, not dramatically undervalued,

30:19

but modestly undervalued. And

30:21

for our income seeking investors, this

30:24

is a quality name with a quality business.

30:27

Thanks for the call. Now

30:30

let's talk a bit about Cathie Wood.

30:32

Cathie Wood and the ARC

30:34

funds and so many people during

30:37

2020 and 2021 piled into the social media sensation that was

30:39

Cathie Wood

30:45

that she launched the ARC funds

30:47

in 2014, but

30:50

times are a changing. The

30:55

amount of assets in the

30:57

ARC funds peaked at $59

30:59

billion, but just

31:02

over the past few months,

31:05

investors have pulled a net $2.2 billion

31:07

from six of their most actively

31:10

traded ETFs. And

31:12

that dwarfed the outflows of all of last

31:15

year and total assets

31:17

in those funds have dropped 30% in less

31:19

than four months to $11.1 billion. So from $59 billion

31:21

to $11 billion, over 80%

31:29

drop in the assets

31:31

in the fund. Now part of that is

31:33

money being pulled out, but part of that is also the

31:35

drop in the value of

31:38

these funds. If I just

31:40

look at the ARKK, their flagship

31:42

fund, ARC innovation, it

31:44

peaked out at $100, let's see what the

31:46

all time high was, $159.70 today

31:51

and that was in February of 2021.

31:55

So in just a little

31:58

over three years, it's gone from

32:00

$159 to $43.90. What's

32:07

that, about a 70% drop? Nearly.

32:15

And so far this year, with all

32:17

the AI craze and

32:20

everything surrounding tech

32:23

in many ways doing well outside

32:25

of Tesla, the

32:28

ARK Innovation Fund is down 16%. The

32:32

S&P is up 6.3%. And

32:39

one of the problems here is that these funds

32:41

are highly concentrated. Many

32:44

of them have just 7, 8, 9,

32:46

10 stocks. Seven

32:51

stocks make up half of the Innovation

32:54

Fund. Tesla

32:57

is its largest holding, down 40% this year. That

32:59

was before this recent pop. But,

33:02

still down 30% plus. Roku

33:07

down over 30%, Unity Software down over

33:09

44%. These are other top

33:11

holdings within the Innovation Fund. And

33:15

so it's pretty clear that everyone

33:17

fell in love because they saw AI pop

33:19

in returns over a short period of time, but

33:22

frankly, she was in the

33:24

right place at the right time. She

33:29

was talking about

33:31

these innovative companies that were

33:33

going to take over the world, and

33:36

she spun a fantastic

33:38

story at a time when people

33:40

were looking, when there were new investors, new

33:42

amateur investors that did not know what they were doing.

33:48

That easily fell prey to the promises

33:50

and the

33:53

dreams and

33:55

the stories that she spun. And

33:58

she got a lot of the money. airtime because

34:02

what does CNBC do? They don't care whether you make money,

34:04

they just care whether you watch and

34:06

more people watched her

34:10

exciting stories than you know

34:13

the boring analysis of some

34:16

industrial company. And

34:19

so they brought her on again and again and again.

34:27

And in 2020 alone the ARC

34:29

funds brought in 20 billion dollars.

34:34

People made shirts with their face on it, they

34:36

called their mom a Kathy and you

34:39

know it was kind of a cultish following.

34:43

But as I said at the top of

34:45

the show by the end of last year Morningstar which

34:48

analyzes all the mutual funds ETFs that are out there

34:51

is that ARC funds have destroyed more wealth

34:53

than any other asset manager over the previous

34:56

decade. Losing a collective

34:58

14.3 billion dollars. And they also

35:00

say that

35:04

you know it's kind of about her win. Sometimes

35:07

she hits it big, sometimes she doesn't.

35:09

Let's look at Nvidia. She

35:12

really didn't have a good reason why Nvidia

35:14

wasn't in her funds, in fact she sold

35:16

it in January of last year right before

35:18

it quadrupled. So

35:22

she's kind of the

35:24

liability here and her star power is

35:27

dimming and frankly it

35:30

should. She should be

35:32

the opposite of what you look for in

35:34

somebody to trust,

35:38

to take

35:40

their opinion seriously. But

35:44

you will probably continue to see her because

35:46

the CNBC's the world will only

35:48

care, will always only care about

35:51

whether you watch, they do not care for

35:54

one second whether you make money or not

35:56

and this is a perfect example. Another

36:00

question from our YouTube channel.

36:02

Jason Will says, what about

36:04

TSP investments and percentages? I'm

36:07

12 years from using the money. Back

36:09

in 2020, you helped by giving out some advice

36:12

on air. Wondering if you might feel different now.

36:15

Well, here's the thing. TSP

36:21

funds. Let's start over. TSPs

36:24

are Thrift Savings Plans. This is

36:26

the retirement plan

36:29

that most government workers have. And

36:31

you literally only have five

36:34

funds, the G fund, the F fund, the C fund,

36:36

the S fund, and the I fund. Now,

36:41

the G fund is short-term

36:43

treasuries. The C fund is

36:46

the S&P. The I fund is

36:48

IFA, the Foreign Investments.

36:51

So EFA is a

36:53

good proxy ETF. The S

36:55

fund is the Dow. Sorry,

36:58

the Dow Jones Complete Total Stock Market Index. So

37:00

a little bit broader than just the S&P 500.

37:04

And then the F fund, which is the

37:06

Bloomberg aggregate bond index. So

37:09

here's the issue. I think this is criminal, that

37:11

the government only gives you those options.

37:13

Now, there are lifestyle funds, but it's

37:15

just a mixture of those five funds.

37:20

Now, what your allocation should

37:22

be, frankly, depends

37:24

a lot on your

37:26

risk tolerance level, your

37:29

view on the markets. So

37:32

I'd rather have, for example, if I'm going to

37:34

be in equities, I'd rather be in the S

37:36

fund than the C fund, because I'd rather have

37:39

much broader exposure to equities than just the S&P,

37:41

even though the SP is fairly broad, but they're

37:43

broader. The

37:45

I fund, it's IFA,

37:48

E-A-F-E, Europe, Asia, and Far

37:50

East Index. It's

37:52

a widely followed index, but it's

37:55

not a great one. You Know, how

37:58

much Mexico exposure is there? Very.

38:00

Little. right? You're

38:06

gonna have a lot of exposure of lifers the

38:08

China which and I'm you want? On

38:11

So. What? I would say his. Unit

38:15

you need a professional. Were. Actually

38:18

watching a. Workplace.

38:20

Retirement. Ah, Advice:

38:25

Strategy. So if you

38:27

want reach out to us and get more information

38:29

on that are please do. On.

38:31

So I can't really give you the

38:33

best advice here because I don't know

38:35

response level. And frankly the as

38:38

soon as you can get out of that. Maybe.

38:42

A road into an Ira. I would

38:44

encourage you to do that Asap. Got.

38:47

A I squeeze in one more call a question.

38:49

Now let's play. A Stephen

38:51

Just and Mrs Riot in Seattle. I'm

38:53

calling about that company, our allies, or.

38:56

Ticker. Symbol are L I This is

38:58

an insurance company I've been looking at

39:00

vs Brainer and I'm just curious if

39:02

you guys have any thoughts on the

39:04

company itself and whether or not this

39:06

is likely to remain a low beta

39:08

stock over a long period of time.

39:10

I always done show that you. Are

39:14

right looking at our Ally Corp

39:16

and you got another one large.

39:18

Our listeners are pretty smart. As.

39:21

The name of we own for

39:23

clients and they underwrite property Casually

39:25

insurance through it's subsidiaries is not

39:27

a big company. Six Point. Eight

39:29

billion dollar market cap. Or.

39:31

If you look at it's profitability, it is

39:34

very strong return of as the capital around

39:36

twenty one percent return equity around twenty. Three.

39:38

Percent the five year average on

39:41

our oh he is but twenty

39:43

five percent. So it's a very,

39:45

very good business. Minimal Dad actually

39:47

net cash on it's balance sheet.

39:50

And. I. Like

39:52

it! I love the trains here if

39:54

you look at it, if

39:58

you look at it's cash flow $458

40:01

million. So about a 8% free

40:04

cash flow yield based on enterprise value.

40:06

I really like that. And

40:10

it does. It

40:12

is trending higher, making a series of higher

40:14

highs and higher looks. So we like

40:17

RLI Corp and it's a

40:19

very good business. The chart trend looks very

40:21

good. It's still a bit volatile, right? It

40:24

moved from 150 down to 136 recently,

40:27

now back up to close to 150. So I

40:30

wouldn't say it's low beta or low

40:32

vol, but it's a very good business

40:35

in an uptrend. And we like this.

40:38

Now, this is Invest stock. I'm Justin Klein. We have one

40:40

goal here each and every weekend that's helped you achieve your

40:42

own version of financial freedom when our work continues after this

40:44

final break. So we got your questions in now at $88.99

40:46

chart. Every

41:04

investor is working to build

41:06

a secure financial future, how

41:09

they get there and when they

41:11

get there. That depends on many

41:13

variables. The more you learn about

41:15

how the market works, the better

41:18

your chances. So don't forget

41:20

to call invest talk 88899 chart.

41:25

Hi, Duncan from New York. Thank you for all that you do.

41:27

I am now looking

41:29

at a ETF for India

41:31

after listening to your podcast

41:34

multiple times. It seems like there's going to

41:36

be some opportunity there. Don't know anything about

41:38

India or the stocks there. So I'm looking

41:40

at an ETF I O

41:43

P P. It is

41:45

a simplify Tara India opportunities ETF. Heard

41:47

this over a other podcast for investing.

41:49

I don't know much about this, but

41:52

yeah, I would like to get a

41:54

fundamental analysis and just get your two

41:56

cents off of it. Looking forward to

41:58

hear from you. I'm also going

42:00

to put this under my retirement account for a very

42:02

long term. So thank you very much and have a

42:04

great day All

42:07

right looking at simplify ETF Simplified

42:11

Terra India opportunity ETF that is

42:13

the title and You

42:17

know, it's just been around for a couple

42:19

of weeks now really since beginning

42:21

of March March 5th was the first day of

42:23

trading I See right

42:26

here the top ten holdings. What I would

42:28

need to understand is why is this different?

42:31

If the expense ratio is 70 basis

42:33

points 70 basis points now There's

42:37

the India fund the IFN and

42:39

there's a few others here. That's

42:41

a closed end fund And

42:44

that one let me see what the race

42:47

is for IFN

42:50

And that one's a

42:52

little higher about 1.4% so I definitely wouldn't

42:54

go with that so it's cheaper

42:56

than that I like that Let

42:58

me see here. Let me find the better.

43:00

Yeah, there's the I NDA. That

43:03

is the iShares India

43:05

ETF and that's about a 65 basis

43:07

point expense ratio. So this one isn't far off

43:11

So for five more basis points You

43:15

know, is it giving you something that is More

43:19

effective more efficient. I think it's too early

43:21

to tell I really have to dig into

43:23

its process but

43:26

I like the fact that it's relatively

43:28

low cost compared to It's

43:32

likely cheapest competitor. I share is is

43:34

usually are usually funds are usually pretty

43:36

cheap So if there's 65

43:38

basis point 70 basis points is reasonable

43:40

my basis point expense ratio So this

43:42

one isn't far off. So

43:45

for five more basis points You

43:49

know, is it giving you something that is More

43:53

effective more efficient. I think it's too early

43:55

to tell I really have to dig into

43:57

its process But

43:59

I like the fact that it's relatively

44:02

low cost competitor.

44:06

I shares is usually are usually funds

44:08

are usually pretty cheap. So

44:11

if there's 65 basis points, 70

44:13

basis points is reasonable. So

44:16

I don't hate it. I like India long

44:18

term. I think there's issues to consider.

44:20

There's still

44:23

problems within India and their

44:25

ability to manage

44:29

through the complexities

44:31

of what China did,

44:33

which is build out a lot of infrastructure

44:36

to take on manufacturing

44:40

capacity and then build manufacturing

44:42

capacity. It's something that they've

44:45

always had the ability to do with the

44:47

amount of workers that they have,

44:49

amount of people, amount of human capital that

44:51

they can deploy. But it's

44:54

a country that is historically

44:58

fairly corrupt and they kind of look down

45:00

on those that are in

45:04

say the lower lower income categories.

45:07

And so it's been difficult for them

45:09

to capitalize on that. So

45:11

there's still a lot of challenges with India.

45:13

I like it as a part of a

45:16

diversified portfolio long term and I think this

45:18

fund is reasonable for

45:20

that. Now let's

45:22

talk a bit about the

45:24

sovereign credit market, sovereign debt

45:26

markets and post financial crisis,

45:29

the world worked

45:32

to de-risk the financial system. Pretty

45:36

similar to what happened in the 1930s

45:39

but in a different way. And

45:41

what you're seeing as of late though is the

45:45

ramifications of that is you

45:47

can't get rid of all

45:49

risks that are in there at the market,

45:52

you just move those risks around. And

45:54

that's typically what happens. And that's why we

45:56

say that everyone's looking

45:58

in the wrong place. Everyone is

46:00

looking at 08 and they think that the

46:02

next crisis is going to look like 08

46:04

and the reality is that every

46:07

crisis is different why because we have

46:09

memories we're human and We

46:12

go back and we say okay. What

46:14

happened in this period that

46:16

we remember And

46:19

how do we avoid that how do I

46:21

avoid that feeling again? And

46:24

they move some things around on all they

46:26

do all the powers that be do is move

46:29

the risk from one part of the French system

46:31

to another and now it's

46:33

pretty clear the risk is in the bond

46:35

market and not in mortgage

46:38

bonds it's in government

46:41

bonds and With

46:43

inflation continued to stay relatively

46:46

high and our fiscal situation

46:48

pretty much spiraling It's

46:51

pretty clear that the quote-unquote risk-free rate

46:53

is no longer that that There

46:58

is a trend towards a financial

47:01

system that has a lot more debt

47:04

on the sovereign level and that

47:06

the powers that we are going to do what they

47:08

can to plaster over the Imbalances

47:11

that causes and that's what happened with Silicon

47:13

Valley Bank and that's what you will likely

47:15

see going forward So you're

47:17

looking for issues. Don't look in

47:20

the housing market Now

47:23

we're heading a dozen a

47:25

dozen for invest talk We think you're listening we encourage you to

47:27

tell your friends and family about a free podcast Cast

47:30

downloads if you can find any time at

47:32

iTunes Spotify or Google Play and be sure

47:34

to rate and review on iTunes as well

47:36

And check out us on video form on

47:38

our YouTube channel independent thinking should

47:41

success is the best off good night Invest

47:44

talk is a trademark of KPP financial

47:46

because of the nature of the interactive

47:48

dialogue inherent in the format of this

47:50

program It's important for the listener to

47:52

understand that not all comments made will

47:54

apply to them Specifically nothing

47:57

said shall be taken to be investment

47:59

advice or shall statements on

48:01

this program be considered an offer to

48:03

buy or sell security. Because such advice

48:05

is rendered solely on an individual