[SPEAKER_00]: On radio, on YouTube, streaming live on investtalk.com, and for our podcast subscribers, this is Invest Talk.
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[SPEAKER_00]: Justin Klein and Luke Guerrero, stand ready to take your finance and investment questions and share their unbiased answers.
[SPEAKER_02]: Good afternoon fellow investors and welcome back to Invest Talk.
[SPEAKER_02]: This is our Monday July, twenty eight, twenty twenty five edition and we only have a few more trading days in in the month of July and to celebrate our final Monday of July.
[SPEAKER_02]: I have Luke Garrow back with me.
[SPEAKER_02]: Thanks for being here Luke.
[SPEAKER_08]: Thanks for having me.
[SPEAKER_02]: Now our goal for this hour is to help you become a better investor, give you perspective and data that can help you take these topics back to your own personal situation and make better decisions with your money.
[SPEAKER_02]: That's what this is all about and it's not about one good decision.
[SPEAKER_02]: It's about
[SPEAKER_02]: making good, consistent, risk versus reward calculations so that you are putting the odds in your favor.
[SPEAKER_02]: No-in bats a thousand, no matter who you are.
[SPEAKER_02]: So don't feel bad if you make a mistake, just pick yourself up, dust yourself off, and move forward, and continue with your education.
[SPEAKER_02]: That's what we do as professionals.
[SPEAKER_02]: We have to do that, and that's what you have to do as a novice investor as well.
[SPEAKER_02]: Now, in just a minute, we'll talk about today's market performance and run down the show topics.
[SPEAKER_02]: But first, let's tackle this color question now.
[SPEAKER_01]: Justin Luke calling in regards to tech resources limited, ticker symbol TECK down, twelve percent last five days, twenty percent year to date, thoughts on a long-term hold.
[SPEAKER_01]: Thank you.
[SPEAKER_02]: All right, looking at tech resources actually name we do own four clients and they did have earnings that were a bit disappointing point disappointing.
[SPEAKER_02]: There you go, disappointing.
[SPEAKER_02]: That's the word.
[SPEAKER_02]: And it had a lot to do with one of the largest minds that were they had some trouble with.
[SPEAKER_02]: So, you know, it fell on that news and the big question is, can it bounce back?
[SPEAKER_02]: I think over time it will.
[SPEAKER_02]: But near term, there's obviously some
[SPEAKER_02]: So, uncertainty around the future of earnings and that major mind, they didn't have some positive news about some of their other minds.
[SPEAKER_02]: Luke Tech is a diversified minor, not just focusing on copper, which was what that mind focused on.
[SPEAKER_02]: So, do you think this is a reason to jump ship?
[SPEAKER_02]: Obviously, we haven't quite yet.
[SPEAKER_08]: Yeah, we haven't.
[SPEAKER_08]: Excuse me.
[SPEAKER_08]: We haven't jumped ship and, you know, I think one thing to consider with any of these miners right is they're completely tied to the performance of the underlying commodity.
[SPEAKER_08]: And even though there's been some potential catalysts right to copper, obviously this is a diversified miner, about sixty one percent of its business and copper, thirty nine percent of its business and zinc.
[SPEAKER_08]: And I think one of the reasons why you have a situation such where poor earnings or or disappointments associated with one of their big mines can cause price movement like this is because of the amount of leverage, right?
[SPEAKER_08]: It's got about six point nine billion dollars debt on a sixteen billion dollar market cap company the interest coverage ratio is about one point five, but that works on the flip side as well right leverage also amplifies returns on businesses and so it's I think you benefit in this name by having that diversity
[SPEAKER_08]: not fully being tuned to copper, getting a different catalyst that can drive this higher.
[SPEAKER_08]: Certainly for us, we're still holding onto this name.
[SPEAKER_08]: We do think it's a good name, but as with any copper industrial metal mining name, more of a medium to long-term hold is there's not really a big catalyst for industrial demand to pick up in the short term.
[SPEAKER_02]: Yeah, I mean, long term copper has a lot of tailwinds of demand, but from quarter quarter, and month of month that can certainly have inflow.
[SPEAKER_02]: But we think this is a more of a buying opportunity, longer term versus something to jump ship on.
[SPEAKER_02]: Thanks for the call.
[SPEAKER_02]: Now, let's pivot over and touch on what we have planned for today.
[SPEAKER_02]: We have about forty-five minutes left and our main focus point is about seven to financial considerations when downsizing for retirement.
[SPEAKER_02]: And retirement planning can be challenging.
[SPEAKER_02]: And most people's
[SPEAKER_02]: Biggest asset when entering retirement is their home.
[SPEAKER_02]: And a lot of times, a good source of action is to downsize, unlock some of that equity and utilize that for income, for investments, et cetera.
[SPEAKER_02]: So we'll look at some of these factors and have to think about the downsizing process.
[SPEAKER_02]: In addition, we want to look at small caps versus large caps.
[SPEAKER_02]: How has the indexing craze impacted the structure of the market?
[SPEAKER_02]: Also, we have an EU deal.
[SPEAKER_02]: It looks like, at least that's what has been announced by the Trump administration.
[SPEAKER_02]: But there is a pledge to buy two hundred fifty billion dollars in US energy imports.
[SPEAKER_02]: How realistic is that?
[SPEAKER_02]: We'll take a look at the numbers.
[SPEAKER_02]: And then lastly,
[SPEAKER_02]: We'll take a look at the first half.
[SPEAKER_02]: evolution of electricity prices or electricity demand and where the sources are coming from.
[SPEAKER_02]: So look at that data as well.
[SPEAKER_02]: If we have time, we also have questions about national gas as well as Papa John's pizza.
[SPEAKER_02]: And then questions that came in via the comment section over on the AvSTalk YouTube channel as well.
[SPEAKER_02]: But most importantly, we'll be your live call.
[SPEAKER_02]: So don't hesitate to reach out right now at eight and eight and nine United chart with any questions that you have when you're related.
[SPEAKER_02]: But we're going to head into a break and your finance investment questions are welcome right now.
[SPEAKER_02]: No question is too simple or too complex.
[SPEAKER_02]: So you set the agenda for this next hour.
[SPEAKER_02]: It's given best luck or call at eight and eight ninety nine chart.
[SPEAKER_04]: Okay, gotta get serious with my finances.
[SPEAKER_04]: I've been working a long time and I know there's still gotta be more that I can do to build my wealth quicker.
[SPEAKER_04]: I don't wanna have to work forever.
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[SPEAKER_02]: With our professional oversight, you can potentially enhance your investment performance by an average of three percent annually.
[SPEAKER_02]: At KPP Financial, we provide a comprehensive four-of-one K-management program designed to optimize your retirement savings.
[SPEAKER_02]: Our approach includes creating custom investment allocations tailored to your goals and risk tolerance.
[SPEAKER_02]: That can make a big difference in your favor.
[SPEAKER_04]: and maybe it's time to tune up my retirement plan.
[SPEAKER_02]: For more information on how you can take control of your retirement savings, visit our website KPPFinancial.com KPPFinancial sounds good.
[SPEAKER_05]: You've got two for the price of one.
[SPEAKER_05]: Justin Klein and Luke Guerrero are here and they're taking your finance and investment questions now.
[SPEAKER_02]: Let's go take a look at the market today.
[SPEAKER_02]: It was expected to be a big day with some headlines around the EU trade deal, but ultimately the market faded really throughout the day, and we closed about flat.
[SPEAKER_02]: The S&P closed up one point.
[SPEAKER_02]: The NASDAQ was up seventy points, but it's about third of one percent the Dow ended up in negative territory.
[SPEAKER_02]: What was your takeaway in today's market?
[SPEAKER_08]: I mean, there were a couple of bearish things that pushed the market down a little bit.
[SPEAKER_08]: Treasury supply after a pretty weak five-year auction.
[SPEAKER_08]: Certainly something the market didn't like.
[SPEAKER_08]: Some extended position and sentiment may be over over reaching a little bit.
[SPEAKER_08]: You've seen the run up and meme stocks over the past couple days.
[SPEAKER_08]: And probably a realization that, okay, maybe we do have
[SPEAKER_08]: Some form of a trade deal with the EU, certainly Japan is already walking back on the details that the president announced last week with the trade deal supposedly with Japan.
[SPEAKER_08]: But even at this point, right, a fifteen percent tariff on the EU, this pushes our effective tariff rate up to its highest levels in a hundred years.
[SPEAKER_08]: And so you have the forms of a deal, but the deal makes the status quo more expensive for consumers, more expensive for businesses.
[SPEAKER_08]: And when things are more expensive for businesses, that means earnings are inherently lower.
[SPEAKER_08]: And what is the price of a company, but based upon its expected future earnings?
[SPEAKER_08]: And so I think that you just had a push poll of trade narrative, of structure within the balance sheet of the government that kind of caused that oscillation throughout the day.
[SPEAKER_02]: Yeah, and definitely, I think, a big part of it is maybe the market starting to realize that these trade deals are not real unless they are agreed to by wheel size.
[SPEAKER_02]: And especially the case with you, right?
[SPEAKER_02]: Because it's going to take all the member countries to kind of agree to this.
[SPEAKER_02]: Yeah, that's just, historically it's very difficult for the European Union to agree on anything, much less something as contentious as a trade deal that was thrust upon them and really pushed obviously by.
[SPEAKER_02]: the current Trump administration.
[SPEAKER_02]: So I think that's part of it as well.
[SPEAKER_02]: And you know, we're going into a very consequential week overall.
[SPEAKER_02]: And I think there's even more important items on the docket than this tentative you deal.
[SPEAKER_02]: We have four of the seven mag seven names reporting earnings this week.
[SPEAKER_02]: You have Amazon Apple, Meta, and Microsoft.
[SPEAKER_02]: You also have the Fed meeting coming up on Wednesday.
[SPEAKER_02]: We all know they're not going to change rates, but the market has been really pricing in a couple of Fed rate cuts by year.
[SPEAKER_02]: And, and guess what, after Wednesday's meeting, there's only three more meetings between now and the end of the year.
[SPEAKER_02]: And so, you know, that means they really need to get on their horse and start to signal that these rate cuts are truly
[SPEAKER_02]: going to come to fruition.
[SPEAKER_02]: Otherwise, I think the market might move on the lack of clarity around a Fed break cut.
[SPEAKER_02]: So that's going to be important.
[SPEAKER_02]: You have obviously a more economic news, you know, the end of the week.
[SPEAKER_02]: We have the non-formed payrolls on Friday.
[SPEAKER_02]: So we'll get color there.
[SPEAKER_02]: And so
[SPEAKER_02]: There's just a lot more in the next week or two that I think will be a market moving events.
[SPEAKER_02]: And you saw the dollar strong today.
[SPEAKER_02]: Maybe front running potential that meeting that won't be as delicious as everyone's kind of expecting.
[SPEAKER_02]: You had yields up one to four basis points across the curve.
[SPEAKER_02]: So maybe pricing in once again a more hawkish fed gold was down eight they eighty basis points point eight percent Bitcoin was up point eight percent and WTI up to point four percent.
[SPEAKER_02]: So that's really where you saw strength in in markets today was in that energy patch and let me pull this up here.
[SPEAKER_02]: I'm showing my screen.
[SPEAKER_02]: There we go.
[SPEAKER_02]: if you're watching on YouTube.
[SPEAKER_02]: And what you can see is you have consumer staples.
[SPEAKER_02]: Those were those struggled on those higher rates.
[SPEAKER_02]: And really the strength was out of the energy patch and some in the tech space, especially the chip names, the names that Qualcomm, AMD, Broadcom and video.
[SPEAKER_02]: Some of these were really the strong part of the market as well as those energy names.
[SPEAKER_02]: So pretty interesting day markets as we're over bought and I think set for potential disappointment throughout the week.
[SPEAKER_02]: Now, every day, we receive questions from the comments section of the investor talk YouTube channel.
[SPEAKER_02]: And here's one that came in earlier.
[SPEAKER_02]: Rich Pete said, great show.
[SPEAKER_02]: Really nice to see you on YouTube.
[SPEAKER_02]: What is your valuation of United Health?
[SPEAKER_02]: Is it good buy now for the long term investments given the bad news?
[SPEAKER_02]: It's facing.
[SPEAKER_02]: What do you think, Luke?
[SPEAKER_02]: United Health, the down, what are we down from?
[SPEAKER_02]: It's a tattoo archive.
[SPEAKER_02]: It's seventy, eighty percent.
[SPEAKER_02]: Are we there yet?
[SPEAKER_08]: Well, those of you don't know, right?
[SPEAKER_08]: United Health was in the news for the murder of the CEO.
[SPEAKER_08]: That was a couple of weeks, a couple months ago.
[SPEAKER_08]: Yeah, I don't even know.
[SPEAKER_08]: Time flies, man.
[SPEAKER_08]: That was some time ago.
[SPEAKER_08]: But that's not the way the stock is down, right?
[SPEAKER_08]: The stock is down because they had to replace people who were executives of the company on the backs of an investigation into Medicare fraud.
[SPEAKER_08]: Right?
[SPEAKER_08]: And so any time a health insurance company is investigated for Medicare fraud, there is a threat that they will be cut out of the Medicare Advantage program, which makes up a large portion of United Health is revenue.
[SPEAKER_08]: So it's down fifty percent over the past year.
[SPEAKER_08]: So it's down forty four percent year to date.
[SPEAKER_08]: Now they say that they are cooperating with this investigation, but I mean a potential five plus year ban for a Medicare Advantage.
[SPEAKER_08]: would really hurt the bottom line of this company.
[SPEAKER_08]: And so the regulatory risk here is pretty high.
[SPEAKER_02]: Yeah, that's certainly the case, but also just the bad PR that the murder of the CEO has brought to light is just how much they deny claims.
[SPEAKER_02]: And clearly, there's a lot of backlash around that as well.
[SPEAKER_02]: And so it looks like they're starting to approve more claims, which is going to hurt their profitability.
[SPEAKER_02]: This is one of those healthcare names that
[SPEAKER_02]: really focused a lot on the bottom line and streamlining efficiency and I'm sure in many cases that hurt their customers, their patients.
[SPEAKER_02]: And so they're trying to recalibrate that part of the business as well.
[SPEAKER_02]: So I think there's just a lot of murkiness that tells me I wouldn't touch this, the technicals.
[SPEAKER_02]: It fell back in
[SPEAKER_02]: what April may timeframe and it's just been going sideways.
[SPEAKER_02]: This is what we call a bearish consolidation, meaning if any rally is not gaining any traction and hasn't recovered any major moving averages, it's still in a downtrend and analysts continue to downgrade earnings expectations for this year and next year.
[SPEAKER_02]: So I see no reason to jump on this train you're trying to catch a falling knife and history says that as a bad strategy to avoid.
[SPEAKER_02]: Thanks for the question.
[SPEAKER_02]: Now we're moving to a quick break.
[SPEAKER_02]: Still to come.
[SPEAKER_02]: Our focus point for today and more answers to your questions.
[SPEAKER_02]: We encourage you to call right now on the best stock at eight a day, ninety nine chart.
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[SPEAKER_02]: on a best talk today is about downsizing for retirement and some underrated financial factor to consider when doing so.
[SPEAKER_02]: Now, I do think we need to preface this conversation with what are the truly most important factors when it comes to where you live in retirement, but frankly,
[SPEAKER_02]: throughout your life.
[SPEAKER_02]: And that is health and social relationships.
[SPEAKER_02]: That's ultimately what will keep you healthy and happy for a long period of time is putting those factors first.
[SPEAKER_02]: Would you agree with that, Luke?
[SPEAKER_08]: Yeah, I definitely would agree with that.
[SPEAKER_08]: I think it reminds you back when I first started working on my old job, dimensional, and Ken French, who's a Nobel Prize-winning economist, was giving a presentation about consumption and retirement and the glide path of investing.
[SPEAKER_08]: And one thing he pointed out is there are things in life that you can change that will make you happy.
[SPEAKER_08]: One of which is a commute, right?
[SPEAKER_08]: The lower amount of time that you're commuting, that you're spending not doing things that you
[SPEAKER_08]: don't want to do happy you're going to be same situation here you don't want to be living ten thousand miles away from everybody that you love you're going to be close to the things that you want to do and thousand miles are as though it's like around here almost yeah it's almost on the other side there
[SPEAKER_02]: Yeah.
[SPEAKER_02]: That's definitely true.
[SPEAKER_02]: So, especially when it comes to your primary residence, what's again, in retirement or not, it's a utility number one, okay?
[SPEAKER_02]: It's an utility for your life and your lifestyle and your happiness and your health.
[SPEAKER_02]: So, now that we got that, we have that behind us.
[SPEAKER_02]: Let's talk about the financial side though, because that is a factor.
[SPEAKER_02]: It is important.
[SPEAKER_02]: We all have to be able to forward where we live and
[SPEAKER_02]: It's more than just about the price of the home.
[SPEAKER_02]: It's also the ability to get where you want to go, to live the lifestyle that you want, and know that that is how you are going to live day to day.
[SPEAKER_02]: If you don't,
[SPEAKER_02]: If you don't spend any extended time in the area that you're going to live in retirements, then you don't know what's like to be a resident.
[SPEAKER_02]: I'm not talking about going there for a few days.
[SPEAKER_02]: I'm talking about staying for a month or two in an area of Airbnb.
[SPEAKER_02]: I think that's a great way to maybe get comfortable with the area that you might live rent a place for a month.
[SPEAKER_02]: go grab coffee and an act like you live there.
[SPEAKER_02]: So I think that's number one and get a full picture of your tax rates and maintenance costs, et cetera, which is important as well.
[SPEAKER_02]: Why don't you get into number two, Luke?
[SPEAKER_08]: And number two is understanding the state and inheritance access, right?
[SPEAKER_08]: If you are in retirement, that means you are towards the end of your life cycle, if you will, which means something that you do need to consider is how am I going to pass down my assets to my loved ones on after I pass?
[SPEAKER_08]: And so the amount of the state is going to take through inheritance taxes through state taxes can vary widely from none to quite a lot.
[SPEAKER_08]: Some states don't have an inheritance tax.
[SPEAKER_08]: Most states it's going to be at a minimum asset level, usually in the millions of dollars.
[SPEAKER_08]: So a lot of people don't have to consider that.
[SPEAKER_08]: But if you are somebody of means with a lot of assets that you're going to pass along, certainly would be consideration that.
[SPEAKER_02]: And the next would be state income tax.
[SPEAKER_02]: Now, nine states have no income tax, but there are actually certain states that don't have income tax on your distributions from a pension, from Social Security, from a four or one K or an IRA retirement assets.
[SPEAKER_02]: So make sure you understand that part as well.
[SPEAKER_02]: And the picture is not always black and white either, because it's not just about
[SPEAKER_02]: that level of tax on the state level.
[SPEAKER_02]: There's county taxes potentially.
[SPEAKER_02]: And then most importantly is what number four here is property tax and places like Florida and Texas, a lot of people look at that and they say, oh, there's low income tax and that's certainly no income tax.
[SPEAKER_02]: That's certainly true and that's great.
[SPEAKER_02]: But it's oftentimes more than made up for by
[SPEAKER_02]: property tax and very high property tax.
[SPEAKER_02]: In fact, I talk to a recent client and he lives in Florida and his girlfriend wants him to move to Arizona.
[SPEAKER_02]: And I said, well, and he said, why don't I pay the state income tax?
[SPEAKER_02]: Well, I said, you know, state income tax.
[SPEAKER_02]: There's only only two and a half percent.
[SPEAKER_02]: But the property tax there is usually much lower than Florida.
[SPEAKER_02]: And so net net, you might actually come out with a similar tax burden, obviously we had to run the numbers, but don't automatically rule out Arizona just because there is some tax there.
[SPEAKER_02]: You have to look at the whole tax picture, right?
[SPEAKER_08]: Yeah, I think that's an important point, right?
[SPEAKER_08]: People often talk about how expensive how high taxes are in California when the average tax in California is actually about the middle of the road in terms of income tax.
[SPEAKER_08]: It was country, right?
[SPEAKER_08]: It's the top tier, the upper high tier tax here in California that is so high.
[SPEAKER_08]: And so it's not just about understanding the tax situation broadly.
[SPEAKER_08]: It's about understanding your tax situation.
[SPEAKER_08]: You mentioned the state that don't have tax and social security on retirement distributions.
[SPEAKER_08]: That also comes into the other part of people's taxation.
[SPEAKER_08]: It's just sales tax.
[SPEAKER_08]: Don't be too distracted by the facts that you can buy things without a sales tax.
[SPEAKER_08]: Understand your full effective tax rate is going to be very important.
[SPEAKER_08]: Not just in retirement, but in life in general.
[SPEAKER_02]: Yeah.
[SPEAKER_02]: So bottom line here is consider the qualitative factors around social cohesion and health that are vital to understanding where you should live from a lifestyle perspective.
[SPEAKER_02]: But then also on the quantitative side, you have to dig deeper than just, oh, the price of the house is X.
[SPEAKER_02]: You really need to understand the tax burden and what the total cost of living will look like in that new area if you do sit beside to move and downsize.
[SPEAKER_02]: Now, the next step of messed up, we'll look into this topic.
[SPEAKER_02]: Seven things you may not know about reinvesting dividends.
[SPEAKER_02]: It'd be wise to take the time to learn about dividend reinvestments, including tax considerations, and how this strategy fits various financial goals and market conditions.
[SPEAKER_02]: That story will be for tomorrow, but for now, I'm Justin Klotten with Luke Rare, and we're ready to take your calls at eight and eight, man.
[SPEAKER_02]: You nine chart.
[SPEAKER_05]: Twenty twenty five rolls on, and you've got finance and investment questions for Justin Klein and Luke Guerrero, call in Vestock eight eight eight ninety nine chart.
[SPEAKER_02]: Let's go take a live call, James, from New York, New York, is looking at Lulu Lemon.
[SPEAKER_02]: Do you own it or looking to buy it?
[SPEAKER_06]: I'm looking to maybe buy it as a trade.
[SPEAKER_06]: Maybe it's well-resolved and I was thinking to be getting it.
[SPEAKER_06]: Just a trade, not necessarily a long term position.
[SPEAKER_02]: Ooh, um, as a trade, what are you seeing that tells you this might be a short-term bottom?
[SPEAKER_07]: I mean, I think like it's trying to find a bottom, but it seemed like I was going to sell off such a place earlier.
[SPEAKER_07]: It's kind of dramatic, I don't know if there is a lot more bottom to go.
[SPEAKER_02]: Yes, it's already tested.
[SPEAKER_02]: Uh, uh, uh, the low recently.
[SPEAKER_02]: It's good to back to daily China's looking at the chart here.
[SPEAKER_02]: Uh, the low recently back in June was right here around to twenty one.
[SPEAKER_02]: And we try to get a bounce on Friday.
[SPEAKER_02]: It didn't really recover that level.
[SPEAKER_02]: And then was down again today about one and a quarter percent.
[SPEAKER_02]: And so to me, there's nothing about this that screams this is going to turn in a short term.
[SPEAKER_02]: If there was a spike in volume, I might buy that.
[SPEAKER_02]: pun intended, I guess.
[SPEAKER_02]: But I'm not seeing that.
[SPEAKER_02]: It's just the same volume as it's been for the past couple of weeks.
[SPEAKER_02]: And then if I zoom out to a weekly chart, you're really not seeing major support until about one seventy five.
[SPEAKER_02]: And it's at two sixty now.
[SPEAKER_02]: So I think there's still more downside there.
[SPEAKER_02]: And then, yeah, between, yeah, one seventy one seventy five.
[SPEAKER_02]: That's the area that I think it could get a bounce.
[SPEAKER_02]: from that I could buy, you know, especially if I get in that zone, then you see a spike in volume.
[SPEAKER_02]: That could tell me, okay.
[SPEAKER_02]: There's some short-term capitulation here.
[SPEAKER_02]: There's a reason for this to have a counter trend bounce at the very minimum.
[SPEAKER_02]: But I'm not seeing anything at these levels after it already bounce, right?
[SPEAKER_02]: And it was a week bounce.
[SPEAKER_02]: Once again, it got down to around the two, twenty level.
[SPEAKER_02]: Back on was at June, twenty-third.
[SPEAKER_02]: It bounced up to around two, fifty.
[SPEAKER_02]: And it's just been in a steady downtrend since.
[SPEAKER_02]: And so,
[SPEAKER_02]: It failed at the twenty-day moving average.
[SPEAKER_02]: It's below all the major moving averages.
[SPEAKER_02]: I see zero reason to be buying this for trade, right at the moment.
[SPEAKER_02]: Thanks for the call.
[SPEAKER_02]: That makes sense.
[SPEAKER_06]: Thank you.
[SPEAKER_02]: No problem.
[SPEAKER_02]: Yeah, look for that one seventy one seventy five range to potentially play a countershen bounce.
[SPEAKER_02]: Let's keep things moving and drop in another listen a question from eight to eight nine new inch art.
[SPEAKER_09]: I guess it will come calling today about the qualified natural cast and how to invest in this.
[SPEAKER_09]: I'm curious if you guys invest in it and if you look specifically into domestic companies versus international companies.
[SPEAKER_09]: I own a few, I do own Canadian natural resources to get in queue as well as Williams company WMB.
[SPEAKER_09]: But I'll just curious if something like TGS, which is the Argentinian liquid but natural gas coming to this matter, if it's international, do you think this company is just a good way to invest in the LNG and kind of
[SPEAKER_09]: diversify my exposure in case of tariffs or prices or whatnot.
[SPEAKER_09]: You can let me know just a little bit of information on allergy, though.
[SPEAKER_09]: If you'd like to appreciate the show, thank you very much.
[SPEAKER_02]: All right, looking at an LNG name, a foreign LNG, a matter of Argentina, TGS is the symbol, not even going to attempt to pronounce it with the name.
[SPEAKER_02]: But if they do operate within this space, and it looks like they have a good balance sheet.
[SPEAKER_02]: Certainly some good earnings growth last year, going from forty-two cents earnings in twenty-three to two dollars and thirty-eight cents last year, but earnings are so as to fall to twelve percent.
[SPEAKER_02]: This year, back up five percent.
[SPEAKER_02]: Next year, no dividend yields.
[SPEAKER_02]: Look, what do you make of this name in this idea?
[SPEAKER_08]: I'm seeing strong cash flow, seeing improving profitability, relative strength is still okay, right?
[SPEAKER_08]: It's down to four point nine, five percent here today, but the rest of the industry is down even more than that, right?
[SPEAKER_08]: It's that performance industry, about twenty two.
[SPEAKER_08]: point eighty percent this year.
[SPEAKER_08]: It is the largest, I believe, of the natural gas transporters.
[SPEAKER_08]: They have about nine thousand kilometers of pipeline.
[SPEAKER_08]: They transferred about sixty percent of Argentina's natural natural gas.
[SPEAKER_08]: And so it is a critical company and a critical industry in the country that has for
[SPEAKER_08]: I don't know.
[SPEAKER_08]: Decades struggled economically, right?
[SPEAKER_08]: And so you would anticipate that even though there's a lot of public sector cuts and a lot of funding cuts and money being cut from budgets in Argentina that a critical industry and company like this would be spared and would in fact still have a lot of strong government support.
[SPEAKER_08]: It's had decent earnings.
[SPEAKER_08]: I would say in the past couple quarters it looks good.
[SPEAKER_08]: They've been expanding.
[SPEAKER_08]: I just kind of worry about the fragile nature of the Argentinean economy.
[SPEAKER_08]: But I do wonder, maybe you can give a little bit more take a look at this.
[SPEAKER_08]: Yeah, I see where the revenues come from.
[SPEAKER_02]: Yeah, like anything in South America, you have elevated political risk.
[SPEAKER_02]: Yeah.
[SPEAKER_02]: And so that's why this does look pretty cheap.
[SPEAKER_02]: I like the diversity.
[SPEAKER_02]: I like getting that foreign exposure, especially
[SPEAKER_02]: South America where I do think the political risk is a bit overblown and I think there's good risk versus war not to say that there's not risk.
[SPEAKER_02]: It's just the evaluations you're getting are super attractive and a lot of these South American names especially compared to our domestic companies where
[SPEAKER_02]: There's so much money in capital has flown into.
[SPEAKER_02]: And so I like the idea of natural gas is needed throughout the world.
[SPEAKER_02]: It's kind of become the swing molecule.
[SPEAKER_02]: It's even more important now than oil in many respects.
[SPEAKER_02]: And so the fact that places like Japan, even China,
[SPEAKER_02]: Lots of Europe is really dependent on natural gas especially with Russia being cutting off cut off from exporting a lot of their natural gas especially to Europe so I like this name I like the diversity I like the valuation and profitability and the technicals look pretty fine.
[SPEAKER_08]: So what if I told you that seventy six percent of its revenues from selling inside the country that's what I'm concerned with
[SPEAKER_02]: Okay, so you're done.
[SPEAKER_02]: So that messed it up.
[SPEAKER_08]: Yeah, they're not really getting a lot of exports.
[SPEAKER_08]: That's kind of the thing that I was concerned about with the company such as this is now you're relying on the health of the Argentinian economy and isolation because so much of your revenue is coming from the domestic source.
[SPEAKER_08]: Only six percent from the US for a percent from China.
[SPEAKER_08]: Everyone else below one percent.
[SPEAKER_02]: Well, whatever you think of Malay, the Argentina stock market has certainly improved dramatically since he was elected.
[SPEAKER_02]: And so, you know, this is kind of a play on that, is that continuation of recovering of the Argentina economy.
[SPEAKER_02]: And, you know, historically Argentina has been, was one of the great economies of South America.
[SPEAKER_02]: So, you know, I think it still has a lot of potential in that sense.
[SPEAKER_02]: So, I'm going to give this one a thumbs up in my book.
[SPEAKER_02]: Thanks for the call.
[SPEAKER_02]: Let's touch a bit on small caps versus large caps.
[SPEAKER_02]: Luke and you know we're in the era of indexing and historically small caps had outperforms.
[SPEAKER_02]: Makes sense if you go talk to one of your
[SPEAKER_02]: What would you call Eugene Fama with that be sort of number of board members number of the board okay so he's uh he's somebody that you you studied and respected throughout the years and he had what is called the size premium meaning the small of the company over time you should get better returns but since
[SPEAKER_02]: It's kind of in the opposite, right?
[SPEAKER_02]: The bigger the company, the smaller, the bigger the returns and vice versa.
[SPEAKER_02]: A, do you think this is just simply a product of indexing?
[SPEAKER_02]: And B, do you think there's a time where it might return to small caps suddenly outperforming as they should based on economic principles?
[SPEAKER_08]: I think you have a problem statistically sometimes when you try and go for a narrow or time periods versus wider samples and things that can become really noisy.
[SPEAKER_08]: And so how much of the
[SPEAKER_08]: Under performance of small caps relative to mega caps is a result of structural things like flows, right?
[SPEAKER_08]: When people contribute to their formal case every month they're IRAs, what have you, that money is oftentimes just said it and forget it.
[SPEAKER_08]: It's flowing into the S&P, the Qs.
[SPEAKER_08]: And yes, it does drag those stocks upward because of it because there's a lot of demand there.
[SPEAKER_08]: So how much of it is associated with that and how much of it is associated with an era of zero interest rate unicorn text docs that were bit up the wazoo with no profits.
[SPEAKER_08]: Tough to say, that's why you shouldn't really take, in my opinion, you know, small sample sizes in seventeen eighteen years is a pretty small window compared to the history of markets.
[SPEAKER_08]: And so, you know, if you see this
[SPEAKER_08]: Over wider timeframes, twenty-thirty years, maybe I start to buy the theirs.
[SPEAKER_08]: There's evidence of it, but still this seems a little bit too narrow for me to think that the reasons why small caps tend to outperform over time are no longer the case.
[SPEAKER_02]: Well, I think it's just simply a market structure thing.
[SPEAKER_02]: As you said, so much for a one K money and just pass a money as flowing into these indexes that are market cap weighted and active managers tend to invest in smaller names, either tends to be better valuations because there's that size premium, but the size premium now has become so large that
[SPEAKER_02]: the smaller cap names, so just better values.
[SPEAKER_02]: And so as money flows from those active names into the passive indices, more money just tends to flow toward those larger names.
[SPEAKER_02]: And I think there's a market distortion that's happening here that the big question is when will that reverse?
[SPEAKER_02]: I think it reverses when you go through some sort of reversal of these
[SPEAKER_02]: force trends, meaning layoffs, really, right?
[SPEAKER_02]: And also you could also have the boomers generation who they have a lot of money in these targeted funds as well as they retire and they want to get more conservative or they just naturally sell off those positions to fund their retirement.
[SPEAKER_02]: I think those could be factors as well.
[SPEAKER_02]: So the big question is, I think, when will this reverse?
[SPEAKER_02]: Because economic gravity is economic gravity.
[SPEAKER_02]: You can't have these market distortions go on forever.
[SPEAKER_02]: And so, I think some years have decent amount of time, but I don't equate it to, oh, small happened best thing is suddenly worse.
[SPEAKER_02]: It's just the matter of flows, flows, chain move prices, more than anything, more than sentiment over the long term rates.
[SPEAKER_02]: Where is money?
[SPEAKER_02]: flowing, too.
[SPEAKER_02]: We talked about how so much money is flowing into domestic equities.
[SPEAKER_02]: From foreign markets, now that's starting to reverse, and that is shifted the dynamics.
[SPEAKER_02]: And so I think it's just underrating how and how and how and flows are to market dynamics.
[SPEAKER_08]: Yeah, I got agree to disagree here.
[SPEAKER_08]: You have you have measurement bias and in seventeen years is not a long time frame for any type of you just don't get enough sample there and so you have especially because you have such a unique Fed driven era that overwhelmingly supported
[SPEAKER_08]: Large cab growth and mega cab growth and mega cab tech names that it's just there's so much noise in there.
[SPEAKER_08]: You can't even really have an isolated understanding of what's going on.
[SPEAKER_08]: There were periods in the past, right?
[SPEAKER_08]: We're interest rates were low.
[SPEAKER_08]: We're inflation was starting to kick up again.
[SPEAKER_08]: What happens?
[SPEAKER_08]: Well, caps under performed.
[SPEAKER_08]: And so because so much of this time period, it was from two thousand nine to twenty twenty one, which was a historically weird time to be capitalizing a company.
[SPEAKER_08]: I just think you got to say yes, maybe there are some issues with fund flows, but I wouldn't chalk it up to you know, four one case being the primary driver here and discount the amount of power the Federal Reserve has had going back all the way to the great, the financial crisis.
[SPEAKER_02]: Yeah, certainly there's there's an argument there.
[SPEAKER_02]: I my I still think the flows are underrated and I do think that we'll look back in history at some point over the next probably couple decades and say
[SPEAKER_02]: constructing indexes based on market cap is deeply flawed and creates distortions, not just in markets, but also in society, right?
[SPEAKER_02]: Just think of how wealthy the founders of the mag seven companies are.
[SPEAKER_08]: How would you create a benchmark?
[SPEAKER_08]: You wait.
[SPEAKER_08]: But thank you very much.
[SPEAKER_08]: I find it mentally overweight.
[SPEAKER_08]: tiny names that have zero pricing powers zero revenue zero profitability.
[SPEAKER_02]: Well, you take, but you, but you can, but the, the index providers, they pick the names, not saying you have to buy every name in the market.
[SPEAKER_02]: Not all of the same.
[SPEAKER_08]: The SNP does by committee, but most of the next providers do the name count approach, right?
[SPEAKER_08]: Pretty, the S&P is inherently murky, and they just have a bunch of people deciding.
[SPEAKER_08]: Everybody else, the reason why they do a market cap-weighted like Russell Fletzi, MSCI, is because they take the whole investment universe, and they say, okay, well, if this company has twenty percent of the revenue of the global market, it should probably not be the same size as a company that has zero point zero zero zero, one percent of the revenue.
[SPEAKER_02]: Yeah, well, I mean, I just think there's a better way to do it.
[SPEAKER_02]: We'll see how I think that evolves, but that's just, that's just my take.
[SPEAKER_02]: But, uh, interesting topic, and we'll see how small cap investing evolves over time.
[SPEAKER_02]: Let's play another invest.com question now.
[SPEAKER_03]: I was hoping you guys could take a look at top of John's pizza.
[SPEAKER_03]: Ticker is PZVA.
[SPEAKER_03]: I love pizza.
[SPEAKER_03]: I feel like a lot of people do.
[SPEAKER_03]: And what I could see it look like the company, you know, makes good money.
[SPEAKER_03]: Piza, you've got a four percent dividend.
[SPEAKER_03]: and looks like they've done a good job.
[SPEAKER_03]: I hope you're able to afford that dividend.
[SPEAKER_03]: I'm going to look like it's near some long-term support.
[SPEAKER_03]: So I was looking at it as a, you know, a potential.
[SPEAKER_03]: I'm going to call it turnaround or just a cyclical play on something that I enjoy.
[SPEAKER_03]: I'll listen on a show.
[SPEAKER_03]: Thanks.
[SPEAKER_03]: Bye.
[SPEAKER_02]: Well, who doesn't love pizza?
[SPEAKER_02]: I just got a lot of so much.
[SPEAKER_02]: I love pizza too.
[SPEAKER_08]: He's right.
[SPEAKER_02]: I guess maybe some people don't like pizza, but most people do.
[SPEAKER_02]: And if you love pizza, well, this is the least a ticker symbol for you, PC, ZA.
[SPEAKER_02]: And let's pop a chance.
[SPEAKER_02]: Look, what's your favorite pizza place?
[SPEAKER_08]: The pizza that I make no of the you know chains the chains I don't know man I really think Domino's got a lot better after they changed their crust and did all those things and you can track it on the website I think it's good pizza Papa John's I think is number two for me though
[SPEAKER_02]: Okay, yeah, I used like Papa John's back when I ate, and I usually if I'd eat like from a local sport, the local businesses type of thing.
[SPEAKER_02]: And I think there's better pizza from locally.
[SPEAKER_02]: So I don't tend to buy from the big chains, but you know, Papa John's is a pretty good one.
[SPEAKER_02]: We're gonna head to a break, though.
[SPEAKER_02]: Costco Pizza.
[SPEAKER_02]: Costco pizza.
[SPEAKER_02]: Definitely us bang for the buck.
[SPEAKER_02]: That's for sure.
[SPEAKER_02]: Especially looking at calories.
[SPEAKER_02]: But we're going to go to a quick break.
[SPEAKER_02]: But after the break, we'll answer this question about Papa John's pizza.
[SPEAKER_02]: If you have any questions that you want to add to this, give us a call now at eight a day.
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[SPEAKER_05]: Invest talk eight eight eight ninety nine chart.
[SPEAKER_02]: Now before the break, Luke and I were bantering about who our favorite pizza chain was.
[SPEAKER_02]: You're saying Domino's, I'm gonna still stick with Papa, Papa Jones.
[SPEAKER_02]: And that's what we're talking about here at Colorado asked about.
[SPEAKER_02]: And they had some controversy some years back, the original Papa left.
[SPEAKER_02]: And Shaq is now, I think a major spokesperson and everybody loves Shaq, right?
[SPEAKER_08]: Again, except for a big man from the early, two thousand.
[SPEAKER_02]: Yes, that's very true.
[SPEAKER_02]: But when it comes to their business, their business is not done too hot lately.
[SPEAKER_02]: They're in three dollars and fifty one cents during the pandemic when nobody could go out to eat and they still people still needed to eat and they ordered a lot of pizza.
[SPEAKER_02]: But since then earnings have come back down to earth.
[SPEAKER_02]: So as we had dollars sixty nine this year down twenty eight percent of them bounce back next year.
[SPEAKER_02]: I think that's my biggest worry is that the is the recent trend.
[SPEAKER_02]: But is that all priced in because this has been in a long downturn since twenty twenty one when it picked out about a hundred forty dollars per share.
[SPEAKER_02]: Now we're down to forty three dollars per share.
[SPEAKER_02]: And if it looked technically, it had a nice reversal back in May on the charts.
[SPEAKER_02]: And I'm starting to like the longer term chart of a full potential reversal.
[SPEAKER_02]: But what are you seeing on the fundamental side?
[SPEAKER_08]: Yeah, on the fundamental setting, cash flows kind of falling profitability has been flat for years coming out of the pandemic.
[SPEAKER_08]: They don't have much debt and they don't really issue shares.
[SPEAKER_08]: They have eleven point nine, six percent short interest out there.
[SPEAKER_08]: Maybe on the back of this run up that we've seen over the past three months, a lot of people think that that's too much for this pizza company.
[SPEAKER_08]: But what are the reasons why I think they've done well in this turnaround, right?
[SPEAKER_08]: Is they have simplified a lot of operations.
[SPEAKER_08]: They've, I think they came up with a loyalty program.
[SPEAKER_08]: But most importantly, they took a page out of the Domino's toolkit, tool book, instruction manual, whatever you want to say, and Domino's was really successful from an equity perspective because it became a tech company that sold pizza, right?
[SPEAKER_08]: The pizza order routing, the pizza tracker, everybody loves a good pizza tracker.
[SPEAKER_08]: And so Papa John's kind of started to do the same thing, leveraging technology to do the most difficult thing it is for a business to do, which is find the customers where they are.
[SPEAKER_08]: And so you have seen some growth internationally, you know, same store sales up two percent year over year revenue growth in general up about one percent.
[SPEAKER_08]: Is it enough to change my entire sentiment on a company that's been struggling for a really long time?
[SPEAKER_08]: Probably not, but it is looking pretty cheap right now relative to where it has been, you know, the average for looking price earnings, twenty seven, training about twenty one times, training about point seven sales at the moment.
[SPEAKER_08]: But I'm not really seeing a big catalyst for it to really take off back to where it has been before all these controversies and really before the pandemic.
[SPEAKER_02]: Yeah, but that price of sales ratio around point seven.
[SPEAKER_02]: That's near the lows that's ever been so I like that and there the return of us to capitals twenty four percent which is still a very strong number selling pizzas is typically a very profitable business.
[SPEAKER_02]: They're dividend yield of four percent.
[SPEAKER_02]: It's
[SPEAKER_02]: Probably isn't going anywhere.
[SPEAKER_02]: It's staying at that level.
[SPEAKER_02]: I don't see a lot of growth.
[SPEAKER_02]: It's kind of pushing up the higher end of what it should pay out to perishes, seventy seven percent.
[SPEAKER_02]: So I like it at this point.
[SPEAKER_02]: I think there's a good risk versus reward after this recent reversal.
[SPEAKER_02]: All right, lastly, Luke, let's talk about the EU deal and the report is that
[SPEAKER_02]: They're going to the EU's going to buy its one or fifty billion dollars worth of energy from the United States per year over the next three years.
[SPEAKER_02]: Do you think that's possible?
[SPEAKER_08]: I think the problem isn't that it's whether or not it's possible.
[SPEAKER_08]: The problem is whether or not the people that negotiated IE, the people of the European Union really have the authority to make those kinds of promises.
[SPEAKER_08]: We talked about at the top of the show.
[SPEAKER_08]: You have to get the member states to agree and the member states are the ones doing the purchasing.
[SPEAKER_08]: It's not like the European Union is this continental body that is buying energy for the member states themselves, right?
[SPEAKER_08]: So there's a lot of hurdles here to actually getting something like this done, but as with any administration, oftentimes you really want the headline.
[SPEAKER_08]: Going back to the Japan trade deal about all the investment, only really going to be about one percent of that, five, fifty billion.
[SPEAKER_08]: So the question is does the headline stick and the reality not really meet the road and does anybody care?
[SPEAKER_08]: Do you mark this?
[SPEAKER_08]: Keep pumping.
[SPEAKER_02]: But even if they try, they, the EU imported about two hundred thirty six billion dollars of crude last year, about forty billion dollars in LNG, sorry, fifty billion dollars in LNG.
[SPEAKER_02]: And then you had coal as well, metallurgical coal.
[SPEAKER_02]: And so,
[SPEAKER_02]: What the end result here though is that US exports are barely that much.
[SPEAKER_02]: So we would have to ramp up our production, which we may or may not have as much.
[SPEAKER_02]: And just the numbers don't really line up to where.
[SPEAKER_02]: And even if it happened, it would majorly disrupt the energy markets worldwide.
[SPEAKER_02]: And so it's pretty clear that this is a headline number that won't come to fruition.
[SPEAKER_02]: Maybe we get part of it, which would be obviously helpful.
[SPEAKER_02]: But like you said,
[SPEAKER_02]: to line up all these countries to agree to it.
[SPEAKER_02]: I think it's a very tough task and I think that's one of the reasons why the mark isn't really your act too much on this news once the market opened.
[SPEAKER_02]: Well, that about does it.
[SPEAKER_02]: I'm Justin Klein with Luke Guerrero and if today's show made you think about your own financial picture in any way, your investments, your strategy, your taxes, your retirement planning, maybe your downsizing of your home.
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