[SPEAKER_08]: This is Invest Talk from KPP Financial, helping investors make sense of the markets one day at a time.
[SPEAKER_08]: Here's your host, Luke Guerrero.
[SPEAKER_03]: Hey there everybody and welcome to the Thursday, Mark May 21st, 2026 edition of Invest Talk.
[SPEAKER_03]: I'm your host Luke Guerrero and I'll be with you over the next 55 minutes or so.
[SPEAKER_03]: We dissect what went down in the market today and bring you the stories that matter.
[SPEAKER_03]: To that end, before we talk about today's market performance and run down our show topics, let's tackle this color question now.
[SPEAKER_07]: I have a question about A-on, ticker symbol A-A-O-N.
[SPEAKER_07]: I bought a small position in the high 70s.
[SPEAKER_07]: I would like to add to this position as a play on the growing demand for HVAC systems.
[SPEAKER_07]: What are your thoughts in general about the company as a long-term hold?
[SPEAKER_07]: I would love to get a price point that you find attractive to buy some more.
[SPEAKER_07]: Thank you and love the show.
[SPEAKER_03]: ticker a, a, o, n is a on ink.
[SPEAKER_03]: It is a 10.9 billion dollar market cap company.
[SPEAKER_03]: What they do is they manufacture commercial age vaccines for rooftop units, air handlers, energy recovery units, but most importantly, through its bass ex segment, which is modular precision
[SPEAKER_03]: They make custom data center cooling solutions.
[SPEAKER_03]: They were a first mover in high density liquid and air cooling for a IGPU infrastructure.
[SPEAKER_03]: And so that has really helped them grow.
[SPEAKER_03]: In fact, revenue as a May 7th was up 54.3% year over year, absolutely crushing estimates by about 30.4%.
[SPEAKER_03]: earnings per share, beat by about 65.5% total backlog was up 107.4% you are over year.
[SPEAKER_03]: Those are all new records.
[SPEAKER_03]: Now the same time, gross margin, down, a little bit from 26.8 to 25.1.
[SPEAKER_03]: A lot of that was temporarily unabsorbed fixed costs from one of their new facilities.
[SPEAKER_03]: Now, majority of this is actually being driven by that bass X.
[SPEAKER_03]: about 143% growth in that particular segment.
[SPEAKER_03]: And so it's understandable then, this company's up 73.63% year to date, up 31.72% over the past 52 weeks.
[SPEAKER_03]: Now, it absolutely shot into the stratosphere after earnings, because before earnings, it was trading about $93 per share, then it rocketed into 132 on the back of just an absolute,
[SPEAKER_03]: banger of an earnings report, but now it's trading at 50.5 times price to forward looking earnings.
[SPEAKER_03]: That's pretty darn expensive.
[SPEAKER_03]: I mean, should it be?
[SPEAKER_03]: They did raise growth, revenue estimates to 40 to 45% from their prior 18 to 20%.
[SPEAKER_03]: I mean, that's really what was driving that price higher.
[SPEAKER_03]: So you're looking at record sales.
[SPEAKER_03]: You're looking at a record backlog.
[SPEAKER_03]: You're looking at a company that really has the only independent manufacturer with this modular precision cooling at scale.
[SPEAKER_03]: But margins are declining.
[SPEAKER_03]: Their PDE is expensive.
[SPEAKER_03]: I would say this is probably one of the most explosive AI infrastructure picks outside of pure play tech with that revenue growth, with that backlog growth, with that guidance
[SPEAKER_03]: you're getting inside or selling, you're getting margin compression, you're getting a trailing PDE near 100, a forward-looking PDE near 50.
[SPEAKER_03]: It could be justified if this Memphis capacity ramps up and they execute on schedule, but it's a bit expensive for me.
[SPEAKER_03]: You chew bought it in at 70-ish.
[SPEAKER_03]: I would certainly be looking to take some profits here.
[SPEAKER_03]: that is A-A-O-N, A-On-Inc, thanks to the call.
[SPEAKER_03]: Now you have a great show yesterday looking into that story about the war's $25 billion tab and how the Iran conflict was hitting corporate earnings.
[SPEAKER_03]: We also answered a great listener question that came into our YouTube channel, considered grab holdings limited to your GRAB.
[SPEAKER_03]: So, if you haven't checked out that episode from yesterday, feel free to go check it out.
[SPEAKER_03]: As always, the best way to never miss an episode of Invest Talk is to subscribe to the show, wherever you get your podcasts.
[SPEAKER_03]: Now looking ahead to today, we got another great show for you including a main focus point on how Americans are fleeing and what the record and migration trend means for US wealth.
[SPEAKER_03]: Americans are leaving the United States in record numbers and many are spending hundreds of dollars just to learn how to do it.
[SPEAKER_03]: This is signaling a level of dissatisfaction with the domestic economic and political environment that really cannot be ignored.
[SPEAKER_03]: So we're going to take a look at what the capital and talent flight trend means for the U.S. economy, for the tax base, and the long-term investment thesis.
[SPEAKER_03]: We also have a couple other great stories today.
[SPEAKER_03]: And that's a fairly great depending on you look at it.
[SPEAKER_03]: Right, mortgage rates hit a nine month high.
[SPEAKER_03]: I wouldn't consider that a great story, but it's an important one.
[SPEAKER_03]: Also touch on the, what's rattling bond markets and should we have time at the end of the show?
[SPEAKER_03]: A warning perhaps about crypto platforms, trying to launch derivatives linked to SpaceX, which is set to IPO soon.
[SPEAKER_03]: We also have some voice bank calls rated playing, including one on a cord energy corporation, a thicker CHRD, and another on a writer system's ink ticker are.
[SPEAKER_03]: As always, we got questions from the comment section of the Invest hockey YouTube channel.
[SPEAKER_03]: And hopefully, we hear from some of you live throughout the show.
[SPEAKER_03]: Now headed into Quick Break, please remember you can call any time and leave your questions on the Invest talk.
[SPEAKER_03]: Voice bake, if you're listening to our live stream, or possibly on AM-1220 in the Bay Area, give me a call now at 80-899 chart.
[SPEAKER_03]: When we come back, we'll talk about today's market activity.
[SPEAKER_03]: Now, U.S. stocks reversed what was some early losses to finish higher on Thursday after reports of a potential breakthrough in the Iran conflict.
[SPEAKER_03]: The Dow gained just over half a percent, the S&P added two tenths of a percent, Nasdaq edged up a tenth in the Russell 2000 lead with a nine tenths of a percent advance.
[SPEAKER_03]: Sox did finish a bit off of their worst levels, but overall still positive.
[SPEAKER_03]: Now, we have to return around was.
[SPEAKER_03]: triggered by a Saudi media report that a mediated ceasefire agreement could be announced later today.
[SPEAKER_03]: Early details included an immediate ceasefire freedom of navigation in the straight, though notably nothing on the nuclear question.
[SPEAKER_03]: The headline sparked a rally in treasuries, particularly at the long end.
[SPEAKER_03]: There was an oil cell off and slightly flatter fed
[SPEAKER_03]: Now, W.T.
[SPEAKER_03]: had crude settled down nearly 2% of versing earlier gains in the day.
[SPEAKER_03]: If it holds, this would be the most concrete step towards resolution since the conflict began.
[SPEAKER_03]: Now, the A.I.
[SPEAKER_03]: demand narrative also provided a bit of a tailwind today.
[SPEAKER_03]: Nvidia posted a strong beat and actually raised and what has been driving in video of course, of course it is the insatiable data center demand.
[SPEAKER_03]: You had takeaways pretty positive on a $200 billion CPU addressable market.
[SPEAKER_03]: You had new segmentation and front to your sharegates.
[SPEAKER_03]: Reports that anthropic revenues projected to double the nearly 11 billion in Q2, achieving its first operating profit, kind of reinforced this compute as a demand thesis, and so semis and memory they firmed up, and the momentum trade continued its rebound after what has been.
[SPEAKER_03]: Pretty big sell-off recently, but the consumer side of the ledger, you've got some flags there, Walmart, disappointed with Compton earnings.
[SPEAKER_03]: Only roughly in line, Kroger's CEO told Bloomberg, the company is looking at big price cuts to win back market share.
[SPEAKER_03]: May flash PMI's added to inflation concerns, and but costs jumped at their steepest rates in
[SPEAKER_03]: Manufacturing headline did beat at four beat eight at a four year high, but services cool to its lowest sensitivity and overall employment weekend.
[SPEAKER_03]: Now looking deeper into the individual sectors, networking a pair of multis of pharma, biotech, cruise lines, airlines out performed alongside semis, which we talked a little bit about earlier software machinery staples, energy, some of the worst performers on the day.
[SPEAKER_03]: I'll swear that all
[SPEAKER_03]: Tomorrow brings a final May Michigan sentiment and a notable milestone, Kevin Worsh will be sworn in as the new Fed Chair President Trump said this week he'll let Worsh do what he wants on rates.
[SPEAKER_03]: All righty, let's tackle a question.
[SPEAKER_03]: From somebody who took the time to leave a review on iTunes, we always appreciate that.
[SPEAKER_03]: It really helps us greatly to propel this show forward for all of us.
[SPEAKER_03]: And this question is about BLDR or UEPI.
[SPEAKER_03]: It says, which one's better?
[SPEAKER_03]: Sorry, UFPI, which one's better?
[SPEAKER_03]: BLDR or UFPI.
[SPEAKER_03]: which is ticker BLDR, boulder, oh, it's builder, not boulder.
[SPEAKER_03]: It is at builders' first source ink.
[SPEAKER_03]: Builders first source ink is a $7.6 billion market cap company.
[SPEAKER_03]: What they do is they supply a manufacturer building materials.
[SPEAKER_03]: And then let's take a look at UFPI.
[SPEAKER_03]: I can't type today, sorry about that.
[SPEAKER_03]: UFPI is UFP Industries.
[SPEAKER_03]: UFP Industries is a $4.5 billion market cap company, which should surprise products primarily manufacturing from wood and non-wood composites.
[SPEAKER_03]: Now, both are getting pretty beaten down, if I do say so myself recently.
[SPEAKER_03]: And it's because they're suffering from the same macro-hitwind.
[SPEAKER_03]: Housing weakness.
[SPEAKER_03]: But of course, they're very different companies.
[SPEAKER_03]: As I went to build the art, largest US manufacturer and supplier of structural building products, I think trust is wall, wall panels, windows, doors, lumber, they're vertically integrated, so they got manufacturing, they got distribution, they got installation, and they primarily serve single family home builders.
[SPEAKER_03]: Now, UFPI, on the other hand, is a diversified.
[SPEAKER_03]: Holding company that works with retail, works with packaging and works with construction.
[SPEAKER_03]: So they got lumber, they got engineered wood, they got composite decking, they have packaged solutions.
[SPEAKER_03]: It is more diversified and markets than BLDR does.
[SPEAKER_03]: Now recent results from BLDR.
[SPEAKER_03]: Not great.
[SPEAKER_03]: Net loss 47.4 million versus net income of 96.3 million a year ago, adjusted earnings per share down 82% and it sails down 10% year over year, grows margins down 2.2% full year guidance revenue at 14.6 to 15.6.
[SPEAKER_03]: They slashed 2026, EPS estimates from 327 to 258, and so because that you had a bunch of people downgrading this stock.
[SPEAKER_03]: Now you have PI, head earnings were shared down 32% construction sales felt 10% site built volumes down 17%.
[SPEAKER_03]: There were a couple of bright spots for UFPI at least.
[SPEAKER_03]: They do have that decorator's growth engine.
[SPEAKER_03]: Sales up about 44% packaging and retail segments did give a bit of diversification away from pure housing as well.
[SPEAKER_03]: But I mean, housing isn't a deep freeze.
[SPEAKER_03]: And this is hurting both companies because affordability is at the worst in decades.
[SPEAKER_03]: Mortgage rates remain elevated, consumer confidence.
[SPEAKER_03]: is muted.
[SPEAKER_03]: But then at the same time, housing supply is structurally short in the United States.
[SPEAKER_03]: So when the cycle turns, these stocks are probably going to absolutely rip.
[SPEAKER_03]: So between these two, I think UFPI is the safer pick right now because it has diversified revenue.
[SPEAKER_03]: It's got a stronger balance sheet, pays a dividend, it generates real cash flow.
[SPEAKER_03]: Field DR a bit more of a high beta housing recovery bed.
[SPEAKER_03]: It's cheaper from a valuation perspective, but they got more operating leverage.
[SPEAKER_03]: So if you think housing is gonna recover in 12 to 18 months, BLDMore, BLDR probably has more upside.
[SPEAKER_03]: If you think housing stays weak, we get more and are use recessionary environment, UFPI is probably right B, but right now, both are deeply out of favor.
[SPEAKER_03]: So unless you're a strong contrarian with a strong conviction, I think for now, I would probably stay away from both.
[SPEAKER_03]: Keep them on my watch list.
[SPEAKER_03]: As we get closer to an environment, we're housing starts to turn.
[SPEAKER_03]: Thanks for watching, and thank you for leaving a review.
[SPEAKER_03]: Reddit in New Break, and my main focus point is coming up on Americans fleeing the United States.
[SPEAKER_03]: It has always, we've got plenty of questions to answer.
[SPEAKER_03]: If you want to get your question answered today, pick up that phone and dial 80-99 chart.
[SPEAKER_08]: 24-7, Rainer Shine, there's always value in the Invest Talk podcast.
[SPEAKER_08]: 888-99, chart.
[SPEAKER_03]: Last week, CNBC reported that Americans are leaving the United States in record numbers with some spending hundreds of dollars just to attend seminars on how to do it.
[SPEAKER_03]: And the date behind the trend is...
[SPEAKER_03]: more substantial than just a lifestyle story.
[SPEAKER_03]: It has real implications for the US tax base for the labor market and the long-term investment thesis for domestic assets.
[SPEAKER_03]: So here's the numbers, an estimated 180,000 U.S. citizens, emigrated in 2025, according to Pew Research Center data analyzed by global citizen solutions.
[SPEAKER_03]: That's the largest outbound migration of U.S. citizens in decades.
[SPEAKER_03]: For the first time, since the Great Depression,
[SPEAKER_03]: The U.S. recorded net negative migration approximately 150,000 more people left than arrive driven by both reduced immigration inflows under Trump's enforcement policies and increased emigration outflows.
[SPEAKER_03]: The Brookings Institution expects the trend to deepen through 2026.
[SPEAKER_03]: Citizenship renunciations are surging at the same time in Q1 of last year alone, 1285 Americans formally renounced a 102% increase from the same quarter of the previous year.
[SPEAKER_03]: The four year 2025 figure is projected to exceed 6,000, which would be an all-time record.
[SPEAKER_03]: The global queue for anunciation appointments now exceeds 30,000 people, creating a year's long backlog of U.S. consulates, and the State Department recently dropped the renunciation fee from $2,350 to $450 effective April 13, which could accelerate the trend further.
[SPEAKER_03]: Now the profile who's leaving has evolved it.
[SPEAKER_03]: The stereotype of the young liberal fleeing to Canada is outdated.
[SPEAKER_03]: Global citizen solutions found that the Americans acting on emigration are typically informed, financially stable professionals, making deliberate quality of life calculations.
[SPEAKER_03]: A gout mon with composite survey found 42% of Americans have considered leaving within the next two years.
[SPEAKER_03]: The top destinations, Portugal, Mexico, Spain, France, and Costa Rica countries offering lower cost of living, digital nomad visas, and healthcare systems that don't bankrupt their residents.
[SPEAKER_03]: When wealthy Americans move assets and residency offshore, the impact on U.S. tax revenues is both direct and measurable.
[SPEAKER_03]: The U.S. is one of only two countries in the world.
[SPEAKER_03]: The other is Richard.
[SPEAKER_03]: The taxes citizens on worldwide income, regardless of where they live.
[SPEAKER_03]: This means that as long as your U.S. citizen, U.O.
[SPEAKER_03]: the IRS taxes on money earned anywhere on earth.
[SPEAKER_03]: Renouncing citizenship is the only way to fully exit the U.S. tax system.
[SPEAKER_03]: But renouncing comes with its own tax consequences.
[SPEAKER_03]: The X-Patriation Tax sometimes called at the Exit Tax.
[SPEAKER_03]: Applies to so-called covered Expatriotsus, net worth exceeds $2 million, or whose average annual tax liability over the prior five years exceeds roughly $206,000.
[SPEAKER_03]: covered expatriates are treated as if they sold other world-wide assets at Firmarkard value on the day before its patriation triggering capital gains on unrealized appreciation above an exclusion amount of about $886,000.
[SPEAKER_03]: So if you built a $10 million portfolio in the United States and rounds, your capital gains on the gain above the exclusion potentially millions of taxes
[SPEAKER_03]: before you walk away.
[SPEAKER_03]: For the broader US economy, the significance depends on who's leaving.
[SPEAKER_03]: If it's primarily retirees, seeking lower cost of living in Mexico or Portugal, the effect is pretty modest.
[SPEAKER_03]: They take their social security checks and spending power with them, but their product product of years are behind them.
[SPEAKER_03]: If it's working age professionals on entrepreneurs, high net worth individuals, which the data increasingly suggested is.
[SPEAKER_03]: The consequences are more serious.
[SPEAKER_03]: They take their income tax revenue, they take their capital gains, they take their business formation, their innovation, and their consumer spending with them.
[SPEAKER_03]: And they exit the buyer pool for U.S. real estate, which it's a tangible downstress, a tangible downstrum effect on domestic housing markets.
[SPEAKER_03]: Now, whether this constitutes a meaningful economic indicator, or just a niche story, is the central question.
[SPEAKER_03]: Historically, sustained brain drain and capital flight have preceded periods of economic underperformance.
[SPEAKER_03]: The UK saw, in the 1970s, during its stagnation crisis, it contributed to a prolonged period of relative economic decline.
[SPEAKER_03]: Argentina's recurring cycle of capital flight have consistently preceded or accompanied economic crisis.
[SPEAKER_03]: Russia has seen substantial
[SPEAKER_03]: Now the US is an Argentina, or Britain in the 70s, the economy remains the world largest, the dollar is still the reserve currency, and the AI built out is creating growth that most countries can only dream of, but the signal shouldn't be dismissed.
[SPEAKER_03]: net negative migration for the first time since the depression.
[SPEAKER_03]: Record renunciation cues, a U.S. passport ranking that has fallen from first in 2021 to 14th in 2025.
[SPEAKER_03]: These are data points that suggest the U.S. is becoming less attractive on a relative basis to a meaningful number of its own citizens.
[SPEAKER_03]: For investors, the practical implications are threefold.
[SPEAKER_03]: First, the trend supports the case for international diversification that we've been discussing all year.
[SPEAKER_03]: The Americans are voting with their feet against the U.S. the relative attractiveness of international assets, European equities, emerging market opportunities for real estate, that deserves fresh look.
[SPEAKER_03]: Second, the emigration trend removes higher-ening taxpayers from the U.S. fiscal base at exactly the time when debt to GDP just crossed 100.
[SPEAKER_03]: And deficits are running near 6% of GDP.
[SPEAKER_03]: fewer taxpayers funding larger deficits is not a sustainable equation.
[SPEAKER_03]: Third, the housing market already frozen by high rates and prices, faces an additional headwind as emigration households, liquidate US real estate, and permanently exit the buyer pool.
[SPEAKER_03]: Now this may be overstated, but as an economic signal, about affordability, quality of life, tax burden, and the relative attractiveness of the US as a place to build wealth, certainly as a data point that deserves attention, rather than dismissal.
[SPEAKER_03]: On the next invest top, we'll look into this story while rising sovereign debt could become a bigger market risk in 2026.
[SPEAKER_03]: Governments around the world are carrying significantly more debt than they were just a few years ago.
[SPEAKER_03]: And now, much of that debt is rolling into a much higher interest rate environment.
[SPEAKER_03]: That's tomorrow, but for now, we still got plenty of show when I'm ready to take your questions in 80 to 99 chart.
[SPEAKER_03]: John, from North Carolina, hang on, you will be next.
[SPEAKER_04]: At KPP Financial, Accountability means more than advice.
[SPEAKER_04]: It means we invest alongside you through our parallel investing approach.
[SPEAKER_04]: When we recommend an investment for clients, one or more KPP principles invest their own capital at the same time.
[SPEAKER_04]: Same day, same price, same percentage.
[SPEAKER_04]: If your portfolio moves, ours does too.
[SPEAKER_04]: that is the KPP difference.
[SPEAKER_04]: Visit www.investtalk.com to get your free portfolio review.
[SPEAKER_08]: There are a few things that make KPP financial special.
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[SPEAKER_08]: When KPP financial makes a trade for their clients, just in line makes the same trade for himself and KPP.
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[SPEAKER_03]: It's going to join for more with Carolina.
[SPEAKER_03]: How can we help you?
[SPEAKER_02]: Hey, thanks for taking my call.
[SPEAKER_02]: My question is about, I have looked into your show for many years, and I'm also a client.
[SPEAKER_02]: And I have gotten halfway decent at picking winners from time to time.
[SPEAKER_02]: And so now I have the problem of knowing when to trim a stock that's had a good run.
[SPEAKER_02]: So I'd love to hear practical guidelines or practical advice for using tools like trailing stops or average true range, maybe technical tools that we could use.
[SPEAKER_02]: That would help us take some of the emotion and timing out of it.
[SPEAKER_02]: If you have any rules of thought that you could share, to help us know when to
[SPEAKER_02]: a third of your position if it had a really gangbusters streak.
[SPEAKER_03]: Yeah.
[SPEAKER_03]: Well, that's a great question.
[SPEAKER_03]: You know, I think that any holistic portfolio construction needs to first take into consideration what you want to have your weight in sectors B.
[SPEAKER_03]: And then when you construct what you want your weight in sectors to be, then you can dive into those names that you want to hold.
[SPEAKER_03]: But that in and of itself creates targets for where you want to be in both sectors and in those names.
[SPEAKER_03]: And so the best way to not round-trip, not round-trip trades, but ride the roller coaster all the way up and all the way back down, is to be disciplined in not necessarily how you're setting your, you know, stop losses to, to lock in gains, but in how strict you are with your tolerance levels at those two inputs that we just talked about, your sector weights, and your individual target weights for your securities.
[SPEAKER_03]: For us, we are pretty strict, right?
[SPEAKER_03]: We have strict construction around how much we're willing to go overweight or underweight the segment benchmark.
[SPEAKER_03]: When we constructed portfolios in the first place.
[SPEAKER_03]: And so if we go below or above, we are very strict in cutting names, trimming down on names, maybe some of the position, maybe all of the position.
[SPEAKER_03]: Now, there's some things we know, right?
[SPEAKER_03]: We know that stocks that exhibit positive momentum can tend to continue to do so in the short to medium term, so within the next 10 to 12 months, we know that names that are exhibiting poor momentum, tend to continue to do so over the next 10 to 12 months as well.
[SPEAKER_03]: And so it's difficult to have a hard and fast rule.
[SPEAKER_03]: There are times when, you know, we are people, we see names, they have very strong momentum.
[SPEAKER_03]: You're gonna wanna ride that momentum.
[SPEAKER_03]: But I think it is,
[SPEAKER_03]: You know, the enemy of good is perfect, right?
[SPEAKER_03]: And so in order to have the probability of having the best investment experience, sticking to those constraints you put on your target weights for your securities and sectors is really your best friend.
[SPEAKER_03]: You may want to ride that momentum with this name that you want to hold 4% of.
[SPEAKER_03]: But there's a reason why when you enter that position, you should already have that exit plan, right?
[SPEAKER_03]: Say, if I get above 6%, I'm trimming back down to four.
[SPEAKER_03]: If this gets to this target value, I'm exiting it completely.
[SPEAKER_03]: If it gets to this valuation, I'm exiting it completely.
[SPEAKER_03]: And to an extent, maybe it's okay to have a little bit of tolerance beyond that 6% if it's a really positive momentum name.
[SPEAKER_03]: But understand, there are certainly risks, right?
[SPEAKER_03]: You created this plan,
[SPEAKER_03]: at the outset to stay disciplined to avoid some of the pitfalls that investors tend to make.
[SPEAKER_03]: And so having those strict constraints on yourself, I think is the best way to remain disciplined and when you decide to sell a position.
[SPEAKER_03]: Thanks for the call, John.
[SPEAKER_03]: All right, let's play another listener question now.
[SPEAKER_00]: Hey guys, interested to see with index fund ETF for someone to invest in for a long-term and retirement.
[SPEAKER_00]: They can contribute to regularly, something like VTI or B-O-O, or if it's a good idea to contribute to both.
[SPEAKER_00]: Thanks a lot.
[SPEAKER_03]: So it's a great question.
[SPEAKER_03]: Obviously, VTI and V-O-O are two of the most well-known ETFs on the market V-O-O, the Vanguard S&P 500 ETF, so it tracks the S&P 500, very cheap, three-base disappoints VTI, the Vanguard total market ETF, so that actually tracks the crisp US total market index.
[SPEAKER_03]: So you're gonna get small and mid-cap microcap exposure.
[SPEAKER_03]: Now, between these two, we know this isn't something we've seen over the past decade because of the mega performance of some of those larger names, but it's directly speaking going back to the 20s, the 1920s, while we're already in the 1920s.
[SPEAKER_03]: The 1920s, we've seen small, outperform mid, which app performs large, we've seen value upperform growth, we've seen high profitability securities outperform low profitability.
[SPEAKER_03]: And so I like to think that if you were building a portfolio, right?
[SPEAKER_03]: This is what our old CEO and DFA used to say is if you're building a portfolio, the market portfolio is a great starting point.
[SPEAKER_03]: It's a great starting point.
[SPEAKER_03]: And as a US investor, the US market VTI is more in tune with the market portfolio is than VOL is.
[SPEAKER_03]: But generally speaking, I think you can do better than the market portfolio.
[SPEAKER_03]: are characteristics of securities that tend to do better, reasonable valuations, higher profitability, higher recurring revenue streams, all these things, strong balance sheets, all these things, but over time, give you a higher probability of success.
[SPEAKER_03]: And so if you are trying to between these two ETFs, do a little set it and forget it, I think that VTI is probably better because it
[SPEAKER_03]: I think that it's also a great part of a total portfolio that does a baseline of ETI and then tilting elsewhere based on what you want to overweight in your portfolio.
[SPEAKER_03]: Thanks to the call.
[SPEAKER_03]: Now mortgage rates rose above six and a half percent this week, the highest level since August and the spring home buying season is now officially a bust for the fourth consecutive year.
[SPEAKER_03]: This was supposed to be the year the housing market thought.
[SPEAKER_03]: When rates dipped below 6% in February, the industry genuinely believed.
[SPEAKER_03]: That pin-up demand would finally be released and it wasn't.
[SPEAKER_03]: The timeline.
[SPEAKER_03]: Really tells the entire story of 2026.
[SPEAKER_03]: Rates, fell through late 2025 as the Fed cut.
[SPEAKER_03]: They dipped below 6% in February, spurring optimism.
[SPEAKER_03]: Then the Iran War started on the 28th of February oil surge in inflation expectations, spiked treasure yields climbed.
[SPEAKER_03]: And more GDRAITs followed them right back up.
[SPEAKER_03]: Existing home sales, we're flat in April up just to 20 basis points versus the 3% economists expected.
[SPEAKER_03]: Purchase applications are still below where they need to be for a meaningful recovery.
[SPEAKER_03]: Well, the Fed minutes, released Wednesday, revealed something that shifts the outlook further.
[SPEAKER_03]: Several officials expressed support for rate hikes, inflation proves persistent.
[SPEAKER_03]: Before the war, the Fed was leaning towards another cut now.
[SPEAKER_03]: The internal debate has moved from Wendekut to win to signal that I was possible.
[SPEAKER_03]: That's an enormous shift.
[SPEAKER_03]: In the span of only three months, and it directly affects where mortgage rates go from here.
[SPEAKER_03]: If the market starts pricing in, a genuine probability of a Fedhike.
[SPEAKER_03]: Reads could push above 675 or even 7%, territory that would freeze the market even further.
[SPEAKER_03]: Now the map is simple, but sometimes simple can be devastating, and a 6% mortgage rate.
[SPEAKER_03]: A buyer with a $2,500 monthly budget and a 20% down payment can afford a $400,000 house.
[SPEAKER_03]: It's 6.5, that drops to 384.
[SPEAKER_03]: a half-point in rates, eliminate $16,000 in purchasing power, and for every tick higher, the pool of qualified buyer shrinks, later on, rising insurance costs, climbing property taxes, HOA fees that have searched 26 to 29% since 2019, will now the total cost of ownership is far higher than the sticker price of a house.
[SPEAKER_03]: Find out rates.
[SPEAKER_03]: I read about a couple in Reno got their builder to buy their rate down to five seven, which made the monthly payment on a new build comparable to older home's price lower.
[SPEAKER_03]: I kind of create of dealmaking is becoming the Norman Market's.
[SPEAKER_03]: We're inventory is ever more available.
[SPEAKER_03]: And as always, the geographic divide is persisted.
[SPEAKER_03]: Northeast and Midwest markets remain competitive with limited inventory.
[SPEAKER_03]: The South and West have inventory above pre-pandemic levels, prices softening and days on market rising.
[SPEAKER_03]: To go home, sold it in April, sat for 32 days, up from 29, just a year ago.
[SPEAKER_03]: The industries that depend on housing activity, brokerages, mortgage lenders, builders,
[SPEAKER_03]: furniture manufacturers, they're bracing for another year of pain and the political pressures building.
[SPEAKER_03]: Trump pushed Congress to pass housing legislation, but the fundamental constraint has not changed.
[SPEAKER_03]: Until mortgage rates, meaningfully decline below 6% and probably towards 5.5.
[SPEAKER_03]: The locked-in homeowner sitting at 3% mortgages will not sell, and the sideline buyers can not afford to buy.
[SPEAKER_03]: The sea
[SPEAKER_03]: If the ceasefire agreement that they are talking about possibly having collapses, that relief is not coming anytime soon.
[SPEAKER_03]: Let's keep things moving and answer another listener question now.
[SPEAKER_06]: Hi, Luke.
[SPEAKER_06]: Justin.
[SPEAKER_06]: Thank you for all your valuable insights.
[SPEAKER_06]: I had a talk which I have a small profit and I want to see if I could add a little bit more.
[SPEAKER_06]: each party.
[SPEAKER_06]: I would really appreciate it if you could give your insights.
[SPEAKER_06]: Thank you so much.
[SPEAKER_03]: Let's take a look at ticker CHRD, which is Cored Energy Corporation.
[SPEAKER_03]: A Cored Energy Corporation is a Houston-based ENP.
[SPEAKER_03]: They're a pure play,
[SPEAKER_03]: It's like about 160,000 barrels of oil per day.
[SPEAKER_03]: These speak called Oasis Petroleum, but they did rebrand after merging with Whiting Petroleum in 2022.
[SPEAKER_03]: They're really one of the largest pure play back in operators in the US.
[SPEAKER_03]: Now, last quarter,
[SPEAKER_03]: They'd be adjusted earnings per share by 38%, they'd be revenue by 43%, they'd be adjusted to EBITDA, free cash flow at 324 million, all of that greatly exceeded expectations.
[SPEAKER_03]: In the same time, they were turned $145 million to shareholders via base dividend and share repurchases.
[SPEAKER_03]: They had a 37% reduction in drilling and completion costs.
[SPEAKER_03]: So they are gaining revenue on one side.
[SPEAKER_03]: Then on the other side, they're cutting costs.
[SPEAKER_03]: In terms of guidance, they guys to an increase in barrels per day from 160,000 to about 162,000 were prior advice was unchanged.
[SPEAKER_03]: They're seeing 40 plus million more in incremental free cash flow at 80 West Texas intermediate pricing.
[SPEAKER_03]: You did it, they're 54.1%, up 57.78% in the past 52 weeks, and in terms of debt, they don't have much, about 1.1 billion in debt.
[SPEAKER_03]: And so what you're looking at is a company that has really industry-leading capital efficiency.
[SPEAKER_03]: I mean, 37% cost reduction per foot over four years, 342 million in free cash flow in a single
[SPEAKER_03]: Now there are risks, right?
[SPEAKER_03]: Only a third of it, it looks like only a third of their oil this year is hedged, so they have a lot of exposure.
[SPEAKER_03]: If oil price swing to the downside quickly.
[SPEAKER_03]: But I mean, there's something to be said.
[SPEAKER_03]: About a company with this kind of cost structure to them and improvement in efficiency, coming off of, hidden it out of the park on earnings.
[SPEAKER_03]: Now from a relative valuation perspective, they're still looking pretty cheap, training their average price to forward looking earnings.
[SPEAKER_03]: I don't know, even though it's run up to a 52 week high, nearly a 52 week high, I still like court energy.
[SPEAKER_03]: It is CHRD.
[SPEAKER_03]: Thanks to the call.
[SPEAKER_03]: excited we got time for one more question here.
[SPEAKER_03]: So let's pick one off from the comment section to the investor on YouTube channel and it is on ticker W. E. And it says, what's your thought on Wendy's as a turnaround play?
[SPEAKER_03]: Interesting.
[SPEAKER_03]: Well,
[SPEAKER_03]: is a dining experience, not a big fan of Wendy's.
[SPEAKER_03]: I did like their hot chicken.
[SPEAKER_03]: Hot chicken nuggets were always very good, but they're gonna rough time.
[SPEAKER_03]: Wendy's, of course, the fast food operator known for its, I think they have square patties.
[SPEAKER_03]: But anyway, what they're really known for over the past year is dropping off from $20 a share at the beginning of 2025 to where they are right now.
[SPEAKER_03]: 7.62.
[SPEAKER_03]: They are down 8.5% year to date.
[SPEAKER_03]: They're down 34.42% over the past 52 weeks.
[SPEAKER_03]: They've underperformed their industry since 2022.
[SPEAKER_03]: They recently appointed a new CEO.
[SPEAKER_03]: And by recent, I mean, today.
[SPEAKER_03]: Yeah, 21st is today the 21st.
[SPEAKER_03]: Yeah, recently appointed a new CEO today or yesterday.
[SPEAKER_03]: Soak price still fell 1.68% from yesterday.
[SPEAKER_03]: That looks like it did.
[SPEAKER_03]: Come up a little bit on the news for a little bit before dropping off.
[SPEAKER_03]: $8 a share is where it was.
[SPEAKER_03]: Now, I don't know.
[SPEAKER_03]: This is a situation where same restaurant sales was down 7.8% that's concerning.
[SPEAKER_03]: EBITDA was down 10.6.
[SPEAKER_03]: That's concerning.
[SPEAKER_03]: They have more sell ratings and they do buy ratings.
[SPEAKER_03]: That's concerning.
[SPEAKER_03]: There's really no physical traffic recovery despite,
[SPEAKER_03]: them trying to rebuild.
[SPEAKER_03]: And so, I don't know, it kind of looks like a broken brand with a 7% yield.
[SPEAKER_03]: They have a new permanent CEO of a potential to take private from Nelson Pelt's.
[SPEAKER_03]: But you're essentially betting on either a turnaround or a buyout.
[SPEAKER_03]: And maybe you get that compensation as you wait.
[SPEAKER_03]: But that seems to me like a deceptively high yield,
[SPEAKER_03]: I don't know, I think on Wendy's, gonna have to pass.
[SPEAKER_03]: This is Invest Talk, I'm Luke Guerrero, and we have one goal here to help you achieve your financial freedom, or we're continues after this break, and is our final break, so get your questions in now, and 80 to 80, 99 charts.
[SPEAKER_01]: Got a question for Justin or Luke?
[SPEAKER_01]: You're the best person to ask it.
[SPEAKER_05]: I wanted to pick your brain about apples.
[SPEAKER_05]: What did you think about their earnings call?
[SPEAKER_05]: To this at Good Time to add to my position.
[SPEAKER_01]: Call in Vestock, 888-99 chart.
[SPEAKER_08]: There are a few things that make KPP financial special.
[SPEAKER_08]: One of them is parallel investing.
[SPEAKER_08]: This means they invest right alongside their clients.
[SPEAKER_08]: Here's how it works.
[SPEAKER_08]: When KPP financial makes a trade for their clients, just in client makes the same trade for himself and KPP.
[SPEAKER_08]: On the same day, at the same price and same percentage.
[SPEAKER_08]: No front running, no special treatment.
[SPEAKER_08]: Learn more about Parallel Investing at Investalk.com.
[SPEAKER_03]: The Wall Street Journal published a piece this week asking a question that probably should unsettle every bond investor.
[SPEAKER_03]: Why are you all tired?
[SPEAKER_03]: 30 year at a 19 year high of 5.18% on Tuesday, the 10 year reach 467, both pulled back Wednesday on Hormuz reopening hopes with the structural forces pushing yields higher are not going away with the ceasefire.
[SPEAKER_03]: Three forces are converging, and none of them is temporary.
[SPEAKER_03]: First, debt.
[SPEAKER_03]: U.S. deficits have averaged 6.2% of GDP from 2023 through 26 unprecedented outside war resessions or emergencies.
[SPEAKER_03]: That's up from 4.8% in the 2010s and 2.3% from 2002 to 2007.
[SPEAKER_03]: The government is spending $1.33 for every dollar it collects.
[SPEAKER_03]: The deficit this fiscal year is projected at 2.1 trillion.
[SPEAKER_03]: Trump has requested a record 1.5 trillion for the Pentagon, and now he's proposed to spending the federal gasoline tax, which would cost 3.5 billion a month.
[SPEAKER_03]: Every dollar of new debt is another bond that investors need to absorb, and the more bonds on the market, the higher the yield investors demand to buy them.
[SPEAKER_03]: Second inflation.
[SPEAKER_03]: For 2020, economic shocks tended to push inflation lower.
[SPEAKER_03]: China's WTO entry, the mortgage crisis, the shale revolution early COVID, central banks fought to keep inflation from falling below 2%.
[SPEAKER_03]: Since then, every major shock has pushed inflation higher.
[SPEAKER_03]: Coates supply chains, Russia Ukraine, tariffs, now-ormous.
[SPEAKER_03]: If the world is structurally more prone to supply shocks from war, geopolitical rival re-protectionism, extreme weather, then the disinflationary era that led investors accept low yields is over.
[SPEAKER_03]: Central banks will need to keep rates higher to control inflation and bonds stop working as insurance against falling stocks.
[SPEAKER_03]: Third Populousum.
[SPEAKER_03]: And the U.S. Britain, Japan, and across Europe popular slators are on both the left and right are making deficit reduction politically impossible.
[SPEAKER_03]: Britain's tier-starmer faces resistance to spending cuts from labor's left wing, Japan's prime ministers proposing new spending for energy relief, greater Manchester's mayor, Andy Burnup.
[SPEAKER_03]: A potential challenger to Starmer has said Britain shouldn't be in hawk to the bond market.
[SPEAKER_03]: When politicians explicitly reject bond market discipline, bond investors demand higher yields
[SPEAKER_03]: The most alarming dynamic is the potential doom loop between debt and inflation.
[SPEAKER_03]: Higher inflation forces central banks to raise rates.
[SPEAKER_03]: Higher rates increase the government's interest cost, which already consumes one in seven federal dollars.
[SPEAKER_03]: Higher interest costs increase a deficit.
[SPEAKER_03]: Larger deficits mean more bond issuance, more issuance pushes yields higher than committee for a responsible federal budget.
[SPEAKER_03]: Estimates the recent rise in rates if sustained for a year.
[SPEAKER_03]: Would add $200 billion to deficits over a decade.
[SPEAKER_03]: Kevin Worc.
[SPEAKER_03]: who takes the oath as Fed chair, tomorrow.
[SPEAKER_03]: Thought he could cut rates as AI boosted productivity.
[SPEAKER_03]: He might, eventually, there's no cost pressure from the labor market, but earning the bond market's confidence, may require overseeing higher rates than either he or Trump expected.
[SPEAKER_03]: The bond market is telling you,
[SPEAKER_03]: that the era of structurally low rates is over, not because of one crisis, but because of the accumulation of debt, because of inflation, and because of political dynamics, that make fiscal discipline impossible.
[SPEAKER_03]: Well, folks, that does it for another episode of Invest Talk.
[SPEAKER_03]: As always, Justin, I and the team over here at Invest Talk.
[SPEAKER_03]: Thank you for joining us and encourage you to tell your friends and family members about our free podcast downloads.
[SPEAKER_03]: You can get those podcasts at iTunes and Spotify and while you're over there, we'd really appreciate it if you left us a rate and review.
[SPEAKER_03]: Good news.
[SPEAKER_03]: We have posted our latest wealth webinar over on our YouTube channel.
[SPEAKER_03]: So if you have not already, please head over to YouTube and type in Invest talk with two T's to check out our webinars as well as our YouTube specific content.
[SPEAKER_03]: Lastly, I wanted to mention our practice of parallel invested.
[SPEAKER_03]: Parallel investing is a process by which we invest alongside our clients and our strategies that we manage ourselves.
[SPEAKER_03]: There is no front running, there is no special treatment, we get the same percentage of shares, the same price on the same day.
[SPEAKER_03]: By investing alongside our clients, we share the same risks, we share the same potential for success.
[SPEAKER_03]: If that is the type of quality you want into your advisor, head over to Investalk.com and schedule a free portfolio review.
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