[SPEAKER_04]: on radio on YouTube, streaming live on investtalk.com, and for our podcast subscribers, this is invest talk, independent thinking, shared success.
[SPEAKER_04]: Invest talk is made possible by KPP Financial, a registered investment advisor firm, serving clients throughout the United States.
[SPEAKER_04]: Here is KPP Financial Chief Executive Officer, Financial Advisor, Justin Klein.
[SPEAKER_01]: Good afternoon fellow investors and welcome back to Invest Talk.
[SPEAKER_01]: This is our February 19th edition of Invest Talk.
[SPEAKER_01]: And we're here to really distill what's going on in markets and to your questions and talk a lot about the main topics for today's show.
[SPEAKER_01]: We can talk about what's going on in the Middle East.
[SPEAKER_01]: it looks like tensions are ramping up there and obviously there's uh in the midst of the earnings season.
[SPEAKER_01]: We're getting new earnings announcements.
[SPEAKER_01]: We have inflation data tomorrow so a lot going on in markets and we're here to help with all of it.
[SPEAKER_01]: So whatever is on your mind don't hesitate to reach out with your call.
[SPEAKER_01]: It's always aided at 99 chart.
[SPEAKER_01]: All right.
[SPEAKER_01]: And
[SPEAKER_01]: Through this, throughout this hour, I'm going to be giving you actual data.
[SPEAKER_01]: So the G become a better investor, and we'll talk about today's Mark performance.
[SPEAKER_01]: We'll run down the show topics, but as usual, we'll tackle this first color question now.
[SPEAKER_06]: Yeah, hi.
[SPEAKER_06]: My name is Cody.
[SPEAKER_06]: I'm from New Hampshire.
[SPEAKER_06]: I just have a question about C.E.G.
[SPEAKER_06]: Constellation Energy.
[SPEAKER_06]: I recently purchased it on the dip.
[SPEAKER_06]: And that was just wondering what you think about it if it's a good purchase or not.
[SPEAKER_06]: Thank you.
[SPEAKER_06]: I'll be listening.
[SPEAKER_01]: And looking at constellation energy, it is kind of a mixed bag here.
[SPEAKER_01]: It's kind of utility, but it also has a lot of alternative energy exposure as well.
[SPEAKER_01]: That operates in the Mid-Atlantic Midwest, New York,
[SPEAKER_01]: other power regions as well, but for the most part, it is a utility.
[SPEAKER_01]: And as negative free cash flow don't love that return equity is 20% that's good, but that goes back to it's it has other aspects to its business that make it a lot more a lot riskier.
[SPEAKER_01]: Okay, so if you look at it's big business segments,
[SPEAKER_01]: Yeah, mid Atlantic is 23%, other power regions 23, midwest 20, and then other would be 33%.
[SPEAKER_01]: So third of a bit of its business is fairly risky.
[SPEAKER_01]: And that's why if you look at it's longer term,
[SPEAKER_01]: profitability kind of ebbs inflow.
[SPEAKER_01]: So I don't love that.
[SPEAKER_01]: Now earnings are expected to be up 34% this year and then flat.
[SPEAKER_01]: Sorry, 34% for 2025 once they report earnings and then flat this year.
[SPEAKER_01]: So growth is slowing and that is the issue is that it's trading at a pretty high multiple.
[SPEAKER_01]: and when growth slows into a high multiple, you get a market correction.
[SPEAKER_01]: And if you go look at the utility sector as a whole, compared to constellation energy, the utility sector broader sector is outperforming.
[SPEAKER_01]: So this is drastically underperforming, really over the past two, three months, and I don't love that.
[SPEAKER_01]: So I don't like the momentum.
[SPEAKER_01]: I don't like the valuation.
[SPEAKER_01]: And if I want to buy a utility, I'll buy a utility that's going to pay a higher dividend yield than half of a percent, is not trading at high multiples.
[SPEAKER_01]: And it doesn't have negative free cash flow.
[SPEAKER_01]: So I'm passing on constellation energy.
[SPEAKER_01]: I don't like that relative performance in the near term.
[SPEAKER_01]: Thanks for the call.
[SPEAKER_01]: Now, we lot of ground to cover over the next 45 minutes or so, and our main focus point is about trade wars in wine and the new global tariff map and a new report reveals how recent trade policy shifts are drastically redrawing the global competitive map, so we'll analyze some of the winners and losers and various markets and what the tariff regime has meant for trade policy globally since liberation day since we're what we're coming up on the for the full one year anniversary.
[SPEAKER_01]: Now, we also have other topics on the docket.
[SPEAKER_01]: One is a new study from the journal of financial economics.
[SPEAKER_01]: And they looked at different investors from institutional investors, short sellers, the firms themselves, meaning buybacks, and issuance, as well as retail investors.
[SPEAKER_01]: Through the smartest, who made the best rates?
[SPEAKER_01]: We'll look at that.
[SPEAKER_01]: Also,
[SPEAKER_01]: We have an economy that unfortunately, more and more, is about grift, and it's about betting markets like Halshye.
[SPEAKER_01]: And what does this mean for the broader economy over the longer term?
[SPEAKER_01]: Look at that.
[SPEAKER_01]: And then if we have time, the commercial real estate market.
[SPEAKER_01]: There's a lot of can-kicking over the past five years, post-COVID, within that space, but that is starting to change.
[SPEAKER_01]: banks are starting to call in those loans, so we'll talk about that and what that might mean for the sector and the broader economy.
[SPEAKER_01]: We also have voice bank calls, one is on options, the other is on Reddit, and then we have some questions that came in to be the comment section over on the Invest Talk YouTube channel as well.
[SPEAKER_01]: And of course, most importantly, we'll be your live call.
[SPEAKER_01]: So whatever's on your mind, eighted it 99 chart is how you get through and ask your question during this hour.
[SPEAKER_01]: Or after hours, either one, we're gonna head to a break, please remember that you can call any time and leave your question on the best stock voice bank.
[SPEAKER_01]: But if you're listening to your live stream, or maybe on the AM-1220 in the Bay Area, you can call right now at 888 99 chart.
[SPEAKER_01]: So hang on, cause I plan to talk about today's market activity in the next segment.
[SPEAKER_02]: When you tell your friends about Investork and they ask you why you listen, let them know there are many reasons and one is parallel investing from KPP Financial and Investorkos Justin Klein.
[SPEAKER_02]: Parallel investing means Justin invests right alongside KPP financial clients.
[SPEAKER_02]: He makes the same trade for KPP financial on the same day at the same price and the same percentages as KPP clients.
[SPEAKER_02]: There's no front running and no special treatment.
[SPEAKER_02]: In this way Justin and KPP financials share the same risks and the same potential for success.
[SPEAKER_02]: Parallel Investing aligns the interests of Justin and KPP Financial with those of his clients.
[SPEAKER_02]: Justin, Klein and Luke Guerrero are ready to answer your questions about Parallel Investing.
[SPEAKER_02]: And you can learn more anytime at Investalk.com.
[SPEAKER_02]: The Vestalk phone lines never closed, and now Justin Klein is here taking your calls live.
[SPEAKER_02]: In Vestalk, 888-99 chart.
[SPEAKER_01]: Let's take a look at the market today, and it was a modest down day, and really on the back of News of Blue Owl.
[SPEAKER_01]: So, not all people might know what blue owl is, but it is a private, let's call it private equity, private credit, fun this year.
[SPEAKER_01]: And it's,
[SPEAKER_01]: made a deal to sell a bunch of assets, really to shore up the balance sheet, shore up the these funds.
[SPEAKER_01]: And basically what it did is it took its portfolio and it sold a lot of the good stuff to some pension funds, insurance companies, etc.
[SPEAKER_01]: But it really called into question and I also they gated their dimensions on their funds as well.
[SPEAKER_01]: And I've been talking about this for a couple of
[SPEAKER_01]: that this is the space where the bad lending happened.
[SPEAKER_01]: This is where the stupid misallocation of capital happened in this cycle.
[SPEAKER_01]: In the last major cycle, it was subprime mortgages and cdos.
[SPEAKER_01]: Now it's cilos and private credit, private equity, all of that.
[SPEAKER_01]: And Blueow, now they are one of
[SPEAKER_01]: the problems initially.
[SPEAKER_01]: And I think this is a Bear Stearns type moment where there's more cockroaches there.
[SPEAKER_01]: This is just
[SPEAKER_01]: the beginning.
[SPEAKER_01]: Now does that mean it's all going to fall apart tomorrow?
[SPEAKER_01]: No, definitely not.
[SPEAKER_01]: But it's going to go through a multi-year process.
[SPEAKER_01]: And I think it's pretty interesting.
[SPEAKER_01]: The industry is trying to get ETFs approved.
[SPEAKER_01]: Funds approved to go into 401k is basically make the retail investor the bag holder.
[SPEAKER_01]: But in many ways, and you see this with many of these funds, including blue out and blue out the BDC funds,
[SPEAKER_01]: It's shedding light.
[SPEAKER_01]: The market is, it's trading freely.
[SPEAKER_01]: Whereas private equity private credit, they just tell you what it's worth, right?
[SPEAKER_01]: When the reality is, it's probably not worth that.
[SPEAKER_01]: And, but the market is saying, you know what?
[SPEAKER_01]: I don't think these are worth 100 cents in the dollar.
[SPEAKER_01]: They're worth maybe 80 cents or 70 cents.
[SPEAKER_01]: And it's shining light on the bad lending.
[SPEAKER_01]: And it's in many ways going to be their demise.
[SPEAKER_01]: Because for years, they were hiding behind the wall of marked model and basically, in some ways, making up the current value of these assets.
[SPEAKER_01]: And they may be able to do that for extended period of time.
[SPEAKER_01]: But that's no longer really a choice,
[SPEAKER_01]: they're investors.
[SPEAKER_01]: They're not having the exits that they want, at the prices that they want.
[SPEAKER_01]: And so that is the issue.
[SPEAKER_01]: And this will be the epicenter of the next credit crisis in the economy.
[SPEAKER_01]: Once again, doesn't mean it has to really come to a head this year or next year could be a number of years on the line.
[SPEAKER_01]: But it's clear that this is, this is where the cockroaches
[SPEAKER_01]: Then what else do we have today?
[SPEAKER_01]: Filly fed manufacturing posted a 16.3 positive consensus was 4.8.
[SPEAKER_01]: So you had some nice move on the manufacturing side.
[SPEAKER_01]: The index is now at the highest level of September of last year.
[SPEAKER_01]: New orders did fall and the shipment index fell.
[SPEAKER_01]: And the employment index dipped in the negative territory.
[SPEAKER_01]: But the price is paid index decline pretty considerably from 46.9 to 38.9.
[SPEAKER_01]: So this is some indication, at least on the manufacturing side, that inflation is calming down a bit.
[SPEAKER_01]: Now what did the market do overall?
[SPEAKER_01]: You had the NASDAQ down about 71 points, about a 31% and S&P down 19 points, about a quarter of 1% Dow down to 40,400 roughly and down about half percent on the day.
[SPEAKER_01]: So that was the market today.
[SPEAKER_01]: Let's see what else did you have?
[SPEAKER_01]: Gold was down 0.2% on the day, but other miners were up.
[SPEAKER_01]: Dollar index was up 0.2% on the day.
[SPEAKER_01]: Treasuries were flat, overall in WTIT crew was up 2.1% really on fears of an escalation in the Middle East.
[SPEAKER_01]: And the fact that we are building up our military
[SPEAKER_01]: Presence in the Middle East right now, what looks to be in preparation for some sort of military action.
[SPEAKER_01]: Now maybe it's a one and done type of strike or it's more drawn out, but either way, the oil market is starting to price in that particular risk.
[SPEAKER_01]: So that was the market for February 19th, 2026.
[SPEAKER_01]: Now, as you probably know, we receive listed questions from the comments section over on best talk.
[SPEAKER_01]: And there's talk YouTube channel.
[SPEAKER_01]: So let's answer one of those questions right now.
[SPEAKER_01]: Jake Samuel says, hi, guys, give me your thoughts on IMAX, a very strong brand diverse audience demographics and competitive against the streaming services.
[SPEAKER_01]: Their box office system signing and system installations hit records last year, 2026 guidance
[SPEAKER_01]: Well, first off, the one thing I like is it's trending positive.
[SPEAKER_01]: 84 relative strength.
[SPEAKER_01]: Those are $1.61 next year, it's a $37 stock.
[SPEAKER_01]: Obviously, he's got a run, so it's not cheap.
[SPEAKER_01]: But as you said, you kind of like the trends in the business.
[SPEAKER_01]: And I think more and more theaters, like you said, with streaming, you're going to need eye max.
[SPEAKER_01]: You're going to need their systems because this is,
[SPEAKER_01]: that you differentiator to going to the movies now, for the most part, you know, home theater systems have gotten so good that you're just going to a regular movie theater.
[SPEAKER_01]: Well, what's the experience upside?
[SPEAKER_01]: It's not as much.
[SPEAKER_01]: There.
[SPEAKER_01]: Bob, you'll have 85 in screens.
[SPEAKER_01]: Surround sound, all of that.
[SPEAKER_01]: But nobody has the full IMAX experience.
[SPEAKER_01]: So I like the trends here.
[SPEAKER_01]: I don't love the valuation.
[SPEAKER_01]: That's my biggest worry, as I don't think it's cheap.
[SPEAKER_01]: But as a momentum play, I'm fine with it, and I don't think it's overvalued, but it's certainly not cheap.
[SPEAKER_01]: Now we're heading to a break, and we thank you for helping us achieve more than 62 million downloads in our history.
[SPEAKER_01]: So,
[SPEAKER_01]: With that said, give me a call.
[SPEAKER_01]: With your question.
[SPEAKER_03]: I ate it eight, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine, nine
[SPEAKER_02]: Every investor is working to build a secure financial future.
[SPEAKER_02]: The more you learn about how the market works, the better your chances for success.
[SPEAKER_02]: In Vestock, 888-99 chart.
[SPEAKER_08]: Hey Justin and Luke, this is Marlow from New York.
[SPEAKER_08]: Thanks for everything you do for us, a long time listening.
[SPEAKER_08]: I'm a long-term investor, not a trader.
[SPEAKER_08]: but I've been learning about options.
[SPEAKER_08]: And what I've always done in the past if I have a thesis around a company by in two or three batches over a period of time, is to kind of manage price, especially if I'm wrong.
[SPEAKER_08]: But what I've been experimenting with lately is buying options, leaps that are kind of deep in the money a year out.
[SPEAKER_08]: And the way that I've been thinking about this is it's a way of kind of managing risk.
[SPEAKER_08]: So if I happen to be wrong and the stock breaks lower, yes, I've lost that premium, but usually that's a lot less than if I had bought a full position in the stock over that first year.
[SPEAKER_08]: And if I'm right, then yes, I lose the initial upside of that initial premium, but then the rest of the journey.
[SPEAKER_08]: is a return for me.
[SPEAKER_08]: And again, I'm a long term holder and investor, not a trader.
[SPEAKER_08]: So generally, I'll make a position full position and hold it for two, three, five years.
[SPEAKER_08]: I've never been an options trader.
[SPEAKER_08]: I've done a little bit of covered calls, but I'm just curious.
[SPEAKER_08]: Like, it is using leads this way.
[SPEAKER_08]: Something you would advise for building a new position.
[SPEAKER_08]: but at the same time managing risk if you get the timing quite wrong or maybe the whole investment thesis.
[SPEAKER_08]: I'll listen for your answer on the podcast and thanks again for everything you do for us.
[SPEAKER_01]: This is a great question.
[SPEAKER_01]: And the simple answer is yes.
[SPEAKER_01]: When buying on, this is probably what the average investor gets wrong the most.
[SPEAKER_01]: If they're dabbling in options, is they see the big upside of buying short term options and just slightly out of the money or something and the big potential upside.
[SPEAKER_01]: And the reality is the best way to utilize options is to give yourself more time.
[SPEAKER_01]: As the caller said, he's a long term investor, he has a thesis and he wants to, you know, benefit the most if this thesis plays out and you can buy the underlying and there's nothing wrong with that.
[SPEAKER_01]: But buying a leap gives you a little more leverage.
[SPEAKER_01]: And if you're right, then great.
[SPEAKER_01]: You made a higher return.
[SPEAKER_01]: If you're wrong, well, you lose that premium,
[SPEAKER_01]: a good amount anyway.
[SPEAKER_01]: If you're wrong, because that's usually what happens with these things.
[SPEAKER_01]: They don't usually just chop sideways, either go in one direction or the other.
[SPEAKER_01]: And so, leaps, and for everyone else out there, leaps are long-term options.
[SPEAKER_01]: You're talking at least a year, ideally two years.
[SPEAKER_01]: I would love if I'm buying a leap, I would be going out two years or more, and reasonably out of the money, 20, 30, 40% out of the money.
[SPEAKER_01]: And so that's a great use of options.
[SPEAKER_01]: Now is that the only way you should position yourself, I would say probably not, it probably depends on the implied volatility of that underlying position, meaning how expensive are those leaps, versus just buying the underlying?
[SPEAKER_01]: If the implied volatility is in the teens or in the 20s, well, that's not very high and it could make sense to buy those leaps.
[SPEAKER_01]: If you're getting a 50, 60, 70 on the implied volatility, that means those options are going to be very, very expensive.
[SPEAKER_01]: And you could be right, but the premium costs just kind of outweigh those price movements.
[SPEAKER_01]: So there's a lot of factors that go into options.
[SPEAKER_01]: In many ways, it's like operating in 3D versus a 2D chart.
[SPEAKER_01]: price, and then you have, obviously, the time here it is, it goes, goes by.
[SPEAKER_01]: When you have options, you had a layer of what we call convexity, and you had a layer of more very bit, more variables, time decay, implied volatility, more variables that can move.
[SPEAKER_01]: let's say, of ingest price in time.
[SPEAKER_01]: So I love that you're looking at options as a way to gain exposure, but don't go overboard.
[SPEAKER_01]: Don't you say, oh, I know I like leaps.
[SPEAKER_01]: You have to look at them in context to the best way to play that particular position.
[SPEAKER_01]: Nose play another.
[SPEAKER_01]: Call a question now.
[SPEAKER_09]: Hi, guys.
[SPEAKER_09]: I was wondering what you guys think of the staff, Albert van, symbol A, C, I.
[SPEAKER_09]: I've owned it for years.
[SPEAKER_09]: You haven't done good in the last few years.
[SPEAKER_09]: I'm wondering if I should just get out of it now just wondering about your opinion on it.
[SPEAKER_09]: Thank you.
[SPEAKER_01]: Looking at Albert Sins and is one of the largest brochures in the United States.
[SPEAKER_01]: And they were, I think there was a merger proposed, but the due to antitrust it was shot down.
[SPEAKER_01]: And then that kind of put it into a tail spin that really hasn't recovered from.
[SPEAKER_01]: The good thing here is that it has good cash flow.
[SPEAKER_01]: The bad thing is has a lot of debt.
[SPEAKER_01]: It has about $15 billion in long-term debt and what's this in $90 billion mark a cap.
[SPEAKER_01]: So that cash flow, well, it's good, is being used to pay down debt and not to go to you, the shareholder.
[SPEAKER_01]: And that's why the dividend is just stayed static for five plus years.
[SPEAKER_01]: I guess it's trying to write such a balance sheet, and that's why it's struggling.
[SPEAKER_01]: And so I would move on, I think there's a bunch better uses.
[SPEAKER_01]: Uh, of your capital.
[SPEAKER_01]: In this market, the trends are obviously poor relative strength their own these early 23.
[SPEAKER_01]: So yeah, I would move on from that.
[SPEAKER_01]: The next and best talk we'll look into the story.
[SPEAKER_01]: The behavioral finance, your brain versus your portfolio.
[SPEAKER_01]: That story will be for tomorrow, but for now I'm just inclined and ready to take your calls at 8.89 chart.
[SPEAKER_02]: There are a few things that make KPP financial special.
[SPEAKER_02]: One of them is parallel investing.
[SPEAKER_02]: This means they invest right alongside their clients.
[SPEAKER_02]: Here's how it works.
[SPEAKER_02]: When KPP financial makes a trade for their clients, just in client makes the same trade for himself and KPP.
[SPEAKER_02]: On the same day, at the same price and same percentage.
[SPEAKER_02]: No front running, no special treatment.
[SPEAKER_02]: Learn more about Parallel Investing at InvestTalk.com.
[SPEAKER_01]: Now, my main focus point today concerns a story.
[SPEAKER_01]: Trade wars in line and trade policy changes can shift who wins and who loses in the global marketplace.
[SPEAKER_01]: We know that we've seen that recently with the US and the trade measures and how they played out in practice.
[SPEAKER_01]: We're almost a year into this and industries and companies have started to adjust.
[SPEAKER_01]: But what's clear is that the impact has been pretty uneven across different sectors, different countries, et cetera.
[SPEAKER_01]: And a good example of that, US imports of South African wine are roughly 17% points more expensive relative to the other wine exporters.
[SPEAKER_01]: of been from the previous year.
[SPEAKER_01]: Rice on the other hand, from Italy, has become about 12 percentage points cheaper than those from other employers.
[SPEAKER_01]: Yeah, other suppliers, excuse me.
[SPEAKER_01]: So depending on how this all settles out, these gaps influence how products move throughout the world, not just here, because the impact or the tariff on different countries is different size.
[SPEAKER_01]: And so sometimes that creates a uniform, shift in other times, a lumpier shift in trade flows.
[SPEAKER_01]: Now an aggregate developed economies have actually improved their advantage.
[SPEAKER_01]: Why?
[SPEAKER_01]: Because the weaker economies have become more disadvantaged or the developing economies, shall we say?
[SPEAKER_01]: Because they're more reliant on exports, they're more reliant on a small subset of industries.
[SPEAKER_01]: And so these tariffs have a larger impact.
[SPEAKER_01]: Developed economies have seen their relative disadvantage in the global marketplace grow from one to three percentage points.
[SPEAKER_01]: And what's interesting here is the dispersion of how this impacts different sectors.
[SPEAKER_01]: For example, the tariff on iron and steel is up 37%.
[SPEAKER_01]: Now that's had kind of a uniform impact on.
[SPEAKER_01]: the market on the steel market here in the United States and others have had very little impact at all.
[SPEAKER_01]: For example, coffee and tea.
[SPEAKER_01]: Why?
[SPEAKER_01]: Because we don't produce coffee and tea.
[SPEAKER_01]: And so it hasn't really impacted trade flows.
[SPEAKER_01]: because there's no alternative.
[SPEAKER_01]: We can't onshore, or you just kind of have to deal with it.
[SPEAKER_01]: Now, what sectors have felt the biggest impact?
[SPEAKER_01]: Mainly textiles in a peril.
[SPEAKER_01]: The tariff is not the largest is about 17% increase.
[SPEAKER_01]: But it's about a had a 9% impact on the overall industry.
[SPEAKER_01]: And it's been lumpy.
[SPEAKER_01]: Some sectors or some countries have really felt the impact than others not so much.
[SPEAKER_01]: but depends on the country, depends on the raw material.
[SPEAKER_01]: Metalers, the tariff is only 5%, but it's having a was a 9% dispersion, which means that there's a lot of variability to its impact.
[SPEAKER_01]: And in the car market, the United States is nearly 20% of the global imports.
[SPEAKER_01]: And so it's average tariff is increased by almost 20%.
[SPEAKER_01]: And as you would imagine, there's major repercussions for that.
[SPEAKER_01]: because we rely so much on imported cars.
[SPEAKER_01]: And so the moral of the story here is it's very complex.
[SPEAKER_01]: Companies are still adjusting.
[SPEAKER_01]: They're doing diversion tactics.
[SPEAKER_01]: They're maybe not exporting directly from China, but maybe to one of the country.
[SPEAKER_01]: They added another little piece to it, maybe packaging, maybe another widget to the end product and then they export it from that country and now they're around some of the tariffs.
[SPEAKER_01]: So that's what's happened here.
[SPEAKER_01]: more mitigated because of this.
[SPEAKER_01]: And I think that will continue.
[SPEAKER_01]: I think most of the tariff impact on our economy is behind us.
[SPEAKER_01]: Let's go talk to Stephen Atlanta.
[SPEAKER_01]: I want to look at QQQI.
[SPEAKER_00]: Hello, Justin.
[SPEAKER_00]: I hope you are doing well.
[SPEAKER_00]: First of all, just I want to thank you for through the years and everything we've learned from the show.
[SPEAKER_00]: It's amazing.
[SPEAKER_00]: What I learned from the show should not be interested with the QQQI for two reasons.
[SPEAKER_00]: It's high expense ratio and the second thing.
[SPEAKER_00]: I learned from the show that I should not do or deal with ETF that I don't understand it, which is I don't understand that one.
[SPEAKER_00]: So, but it sounds interesting, so I thought I would call and ask you about it.
[SPEAKER_00]: I really don't know what is the post, how's the option, how is that work, I don't know.
[SPEAKER_00]: But I thought I would ask the question.
[SPEAKER_01]: First question that I have for you before I say anything about QQQI is, what attracted to you to it originally?
[SPEAKER_00]: Really when I looked at it and this,
[SPEAKER_00]: My portfolio is really very simple, I have SMPN, they have B&D as bonds, and this is just for income.
[SPEAKER_00]: I looked at it and it looks like at this point, as of today, it's like 13.85 income, and they thought, really I need some income in my portfolio, but that's about that.
[SPEAKER_01]: Okay, and this is exactly what I assumed.
[SPEAKER_01]: But this is something I've been talking about for well over a year now that all of these is what it's called a covered call ETF.
[SPEAKER_01]: It buys the Q's, the NASDAQ 100.
[SPEAKER_01]: And then it sells out of the money calls around three to five percent out of the money.
[SPEAKER_01]: Now some sell kind of at the money, some sell out of the money.
[SPEAKER_01]: This one's out of the money.
[SPEAKER_01]: Either way, it produces income from those call options, or it produces premiums, shall we say?
[SPEAKER_01]: Now, do you call that income or not?
[SPEAKER_01]: That's debatable.
[SPEAKER_01]: That's very debatable.
[SPEAKER_01]: But what's clear is that you shouldn't think of this as consistent real income.
[SPEAKER_01]: What you're doing is you're selling upside in the queues,
[SPEAKER_01]: and you're getting a premium.
[SPEAKER_01]: Now, we run a cover call strategy, which much rather own a different mix of stocks than the cues.
[SPEAKER_01]: I would do things like sell out of money calls through to five, maybe 10% of the money.
[SPEAKER_01]: So, in many ways, this is similar to the option side to what we do, but we don't call this all-income.
[SPEAKER_01]: It's total return.
[SPEAKER_01]: And as what you want to do with all of these cover call ETFs, you absolutely 100% ignore the income.
[SPEAKER_01]: This is not income like Proctor and Gamble Pazzy-Wincome, okay?
[SPEAKER_01]: And what most people are doing is they're chasing that number, 13 sounds high.
[SPEAKER_01]: I'll look at that high income.
[SPEAKER_01]: I mean, the problem is that is not income.
[SPEAKER_01]: It is selling, call, options, and it really is to lower the overall volatility of the underlying investments, which in this case is the queues.
[SPEAKER_01]: And that can be a good thing.
[SPEAKER_01]: But don't think of it as income.
[SPEAKER_01]: Look at the total return of the fund.
[SPEAKER_01]: And what's the queues?
[SPEAKER_01]: What is this doing so far this year?
[SPEAKER_01]: Well, it's down about 6.68%.
[SPEAKER_01]: Now let's go take a look at what the queues have done this year.
[SPEAKER_01]: And compare it.
[SPEAKER_01]: Because that's what you want to look at.
[SPEAKER_01]: What's the difference if I just don't sell the cover calls?
[SPEAKER_01]: Well, what would I do?
[SPEAKER_01]: Q's are down 1.39%, so it's doing a bit better than the Q's, why?
[SPEAKER_01]: Because it's hedging on the downside, it was just doing what it's supposed to do.
[SPEAKER_01]: But last year, the Q's were up about 21%.
[SPEAKER_01]: And this was only up about 18.6%.
[SPEAKER_01]: So what you can see here is that it's doing a supposed to do.
[SPEAKER_01]: It is reducing the overall volatility of holding the Q's.
[SPEAKER_01]: And that's fine, if that's what you're looking for.
[SPEAKER_01]: But if you're looking for income,
[SPEAKER_01]: This is not what you're looking for.
[SPEAKER_01]: Don't think you're getting 13%.
[SPEAKER_01]: What you're getting is a covered call strategy on the NASDAQ 100.
[SPEAKER_01]: That's it.
[SPEAKER_01]: Okay.
[SPEAKER_01]: And as you said, the transfer ratio is 68.
[SPEAKER_01]: Base is points kind of high.
[SPEAKER_01]: But yeah, this is not an income fund.
[SPEAKER_01]: Even though I'd say high income ETF, know what you own.
[SPEAKER_01]: And that's what this is.
[SPEAKER_01]: And it's a covered call ETF.
[SPEAKER_01]: Ignore the yield that is posted on the website or wherever you see.
[SPEAKER_01]: Thank you so much.
[SPEAKER_01]: Thanks for the call.
[SPEAKER_01]: Let's tackle another YouTube comment question.
[SPEAKER_01]: It says first I suggest I suggest you have for future wealth webinars to cover all the different options for gaining foreign exposure.
[SPEAKER_01]: I currently have ADRs, foreign OTCs and US companies that mainly do business overseas, but are there.
[SPEAKER_01]: Better options like internationally, TFs, or maybe even purchase stocks on a foreign exchange.
[SPEAKER_01]: What are all the risks to consider liquidity, currency, risks, foreign taxes?
[SPEAKER_01]: fees, lack of data.
[SPEAKER_01]: Also, what is a good percentage of waiting of foreign exposure at this time?
[SPEAKER_01]: I've always tried to have some diversity outside the US, and it seems like continuing to classify as more important now than ever, but I want to make sure I do it wisely, and consider all the options.
[SPEAKER_01]: I do like that idea.
[SPEAKER_01]: We are working on our next wealth webinar, so that'll probably be announced in the next few weeks.
[SPEAKER_01]: But what comes to foreign exposure?
[SPEAKER_01]: Yes, you do want a good amount of foreign exposure.
[SPEAKER_01]: And what that number is,
[SPEAKER_01]: for an aggressive investor at least 30% right now, probably closer to 40% of the portfolio.
[SPEAKER_01]: Another way to get foreign exposure, ADRs, these are American depository receipts, meaning that you gain exposure on U.S. exchanges, and there's a lot of those.
[SPEAKER_01]: that's the easiest simple way to get exposure to foreign stocks then you can buy foreign OTC stocks that could come with a commission.
[SPEAKER_01]: So make sure you you consider that and then US companies that mainly do business overseas, that's not really I think a good way to get exposure because most of those are already own.
[SPEAKER_01]: One of the big reasons for moving money into these
[SPEAKER_01]: and U.S. companies are over-owned.
[SPEAKER_01]: And so, yeah, there's a lot of big U.S. companies that are foreign exposure.
[SPEAKER_01]: But that's not what's happening is about flows.
[SPEAKER_01]: Money flows out of U.S. and into these foreign markets.
[SPEAKER_01]: So the first two, I like, now there are international ETFs.
[SPEAKER_01]: You can do that, that's a good way to gain exposure to maybe eight U.S. companies that aren't.
[SPEAKER_01]: that don't have ADRs here.
[SPEAKER_01]: So something simpler in that way.
[SPEAKER_01]: And then what are the risks to consider?
[SPEAKER_01]: Liquidity is absolutely one especially when you're buying OTC Forens Docks.
[SPEAKER_01]: Currency risk is always a risk with any foreign investment.
[SPEAKER_01]: Now, the risk is that the dollar will go up and those foreign currencies will go down.
[SPEAKER_01]: I think right now with our fiscal situation, our political situation, the dollar is, who path the least resistance is probably lower.
[SPEAKER_01]: For Intaxes, another good question.
[SPEAKER_01]: Yes, dividends, a lot of times it depends if we have a,
[SPEAKER_01]: agreement with that country on foreign taxes, a lot of times it's foreign taxes withheld from dividends that are paid out.
[SPEAKER_01]: So I don't know if that's a risk, but it is could be a cost if you're looking for income from those investments.
[SPEAKER_01]: fees.
[SPEAKER_01]: There's not usually really fees.
[SPEAKER_01]: I mean, I guess you can have commission commissions that are paid for buying foreign equities.
[SPEAKER_01]: There's fees with any TFs or mutual funds that you might buy.
[SPEAKER_01]: And then lack of data is probably another good one.
[SPEAKER_01]: There is risk there where a lot of foreign companies, you're only getting semi-annual updates or it's quarterly updates that you get with US publicly listed companies.
[SPEAKER_01]: So there, and it's hard to just get that data.
[SPEAKER_01]: You need to subscribe to a fee like we have faxed.
[SPEAKER_01]: So we get a lot of that data that you might not get and traditional data sources around the web.
[SPEAKER_01]: So there's definitely issues with that as well.
[SPEAKER_01]: So hopefully that gave you a broad overview of how to think about foreign investing in today's market.
[SPEAKER_01]: Now let's hit another caller question now.
[SPEAKER_07]: Thank you, Luke and Justin, little from Philadelphia here, talking about ticker symbol, IREN, and IREN Limited and Integrated Data Center that's had quite a runoff for the last few years.
[SPEAKER_07]: And one of the good truth thoughts, if this can be a good idea, stop to possibly take out a position and proposition.
[SPEAKER_07]: Don't be bored right here in what you guys think and love what you guys do on the shelf.
[SPEAKER_01]: Looking at IREN, IREN, and this is interesting one because it's a vertically integrated data center business powering the future of Bitcoin, AI and beyond with renewable energy.
[SPEAKER_01]: Now what's interesting about this is it's kind of has some exposure to Bitcoin and there's clearly a correlation here because it has been struggling as of late and that's a big strike against it in my mind.
[SPEAKER_01]: But a lot of those data centers that were built for maybe Bitcoin mining are.
[SPEAKER_01]: that a lot of those capabilities are a double in the a data center space.
[SPEAKER_01]: And so I think that's what's been helping them and allowed them to rally, turn some profits, turn profits.
[SPEAKER_01]: They have a good balance sheet, that's good.
[SPEAKER_01]: What I don't like is that they continue to issue more and more shares.
[SPEAKER_01]: The cash flow is negative.
[SPEAKER_01]: I don't love that.
[SPEAKER_01]: And it continues to.
[SPEAKER_01]: power to the negative side.
[SPEAKER_01]: And now earnings are expected to go into negative territory next year, as well.
[SPEAKER_01]: And I don't like that.
[SPEAKER_01]: And it's awesome.
[SPEAKER_01]: It's well meant to them, too to agree.
[SPEAKER_01]: Made a lower high recently.
[SPEAKER_01]: So I don't like it, especially as Bitcoin is unlikely to bottom in 2021.
[SPEAKER_01]: That was the best thought I'm just in decline.
[SPEAKER_01]: We have one goal here each and every week.
[SPEAKER_01]: They help you achieve your own version of financial freedom.
[SPEAKER_01]: And our work continues after this final break.
[SPEAKER_01]: So good to questions in right now at 8-899 chart.
[SPEAKER_02]: No two court folios are alike, and every investor has a unique set of circumstances.
[SPEAKER_02]: So don't forget to call, Invest Talk.
[SPEAKER_02]: 888-99, chart.
[SPEAKER_02]: Hey, Lucas.
[SPEAKER_05]: Hey, Lucas.
[SPEAKER_05]: This is Casey from Backtoville, California.
[SPEAKER_05]: I've been listening to you guys for about a year now, and I really love your content.
[SPEAKER_05]: I'm just calling to ask about a company called Reddit, ticker symbol RDDT.
[SPEAKER_05]: I've been dollar cost averaging.
[SPEAKER_05]: They've been at, uh,
[SPEAKER_05]: $282.95 is their 52-week high and recently they're down to 148.
[SPEAKER_05]: I have an average cost of about 160.
[SPEAKER_05]: and they just recently had a pre-significant earnings speed, this wondering what you guys think of this stock.
[SPEAKER_01]: Thanks for your time.
[SPEAKER_01]: Are looking at Reddit and it's a relatively recent IPO back in 2024, and but it's pulled back from its high around 280 over the last year, now it's at 146.
[SPEAKER_01]: So it's been cut in half roughly, but earnings are expected to continue to accelerate to 408 this year and 579 next year.
[SPEAKER_01]: And frankly, if that is the case, I think it's a buy here.
[SPEAKER_01]: One thing I like about this, you know, now it is expensive and if it doesn't hit those numbers, it could continue to go down.
[SPEAKER_01]: So, can't be out there.
[SPEAKER_01]: But what I like about this is that, think about all the media platforms that are out there.
[SPEAKER_01]: From Instagram, Facebook, Twitter, et cetera,
[SPEAKER_01]: They're all kind of owned by some billionaires, where Reddit is kind of that last bastion of online places that, you know, it's ugly.
[SPEAKER_01]: It's not really user friendly, but, you know, it's not controlled.
[SPEAKER_01]: And so, I think long term, there's some benefits to that.
[SPEAKER_01]: It's profitable, recharge flow continues to go up.
[SPEAKER_01]: It does no debt.
[SPEAKER_01]: Now, I don't like that it continues to issue shares.
[SPEAKER_01]: So, that if it can stop issue sharing shares, I would love it.
[SPEAKER_01]: But the fact that continues to issue shares makes me a bit worried.
[SPEAKER_01]: But after this drop, I think it's a reasonable price with the expected growth going forward.
[SPEAKER_01]: Now lastly, let's talk a bit about base study.
[SPEAKER_01]: I love this study and it's a lot of great lessons here.
[SPEAKER_01]: And it comes from the journal of financial economics and it looked at different types of traders from institutional investors, short sellers, the firms themselves with the buying back shares, the issuing shares, and then individual retail investors.
[SPEAKER_01]: This looked at investors from 2006 to 2017.
[SPEAKER_01]: There's some big takeaways.
[SPEAKER_01]: Firm's emerge as the best traders.
[SPEAKER_01]: Why?
[SPEAKER_01]: Companies with the lowest expected returns issued the most shares?
[SPEAKER_01]: Well, those are the highest expected returns we're most likely buying back stocks.
[SPEAKER_01]: So it shows you, share your issuance or buybacks is very important.
[SPEAKER_01]: Insiders know whether their company's expensive,
[SPEAKER_01]: or it's cheap.
[SPEAKER_01]: So pay a big attention to that.
[SPEAKER_01]: I know we do.
[SPEAKER_01]: Love you will love focus on dividends, but we focus a lot more on buy-back yields, how much of their shares they continually buying back with their cash flow.
[SPEAKER_01]: Who came in second?
[SPEAKER_01]: Well, short sellers.
[SPEAKER_01]: They were the most in second most informed group.
[SPEAKER_01]: They shorted low-expective return companies and they didn't short a lot of high-expective return companies.
[SPEAKER_01]: and positioning is they did it with public information.
[SPEAKER_01]: Who would the worst track record as you expected retail investors, but there are some caveats here.
[SPEAKER_01]: No overall over the long term they bought stocks with low expected returns and they sold stocks with high expected returns.
[SPEAKER_01]: But if you're measuring on the short term,
[SPEAKER_01]: basis measured in the weeks, they saw positive returns if they bought stocks, a stock in the short term, it actually had pretty good predictive power.
[SPEAKER_01]: The problem was is time went on that wore off and the stock turned over.
[SPEAKER_01]: So it shows you is that the average retail investor are good momentum traders.
[SPEAKER_01]: but they're not good long-term investors.
[SPEAKER_01]: They buy the hotstock, they buy when it's already rallied and the future return expectations are low.
[SPEAKER_01]: Now, institutional investors kind of was a mixed bag, honestly.
[SPEAKER_01]: Hedge funds were the most interesting.
[SPEAKER_01]: They excelled at short selling once again, but their long equity positions were pretty bad.
[SPEAKER_01]: So what do they take away here?
[SPEAKER_01]: Be humble, retail investors tend to underperform.
[SPEAKER_01]: Follow the corporate insiders, whether they're issuing shares, that's a red flag, if they're buying back shares, that's a green flag.
[SPEAKER_01]: Short interest, high short interest, does tell you something.
[SPEAKER_01]: It reflects informed analysis.
[SPEAKER_01]: And then, institutions are not magic, because the big company doesn't mean that they have a leg up on other type of investors.
[SPEAKER_01]: Well, that does it.
[SPEAKER_01]: I'm Justin Klein.
[SPEAKER_01]: I remind you that about KP financials parallel investing, when we make a trade for our clients, I make a trade for myself.
[SPEAKER_01]: Same time, same price, same percentage, no front running, no special treatments, we invest right alongside our clients.
[SPEAKER_01]: So we should have the same risk and potential for success, and you can learn more at investtalk.com.
[SPEAKER_01]: Please tell your friends and family about a free podcast down those which provide any time at iTunes, Spotify, or over on our YouTube channel, as well, and please be sure to rate and review on iTunes.
[SPEAKER_01]: In the bed and thinking, shared success, this is the best talk.
[SPEAKER_01]: Good night.
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