[SPEAKER_01]: This is Invest Talk, from KPP Financial, helping investors make sense of the markets one day at a time.
[SPEAKER_01]: Here's your host, Justin Klein.
[SPEAKER_00]: Good afternoon fellow investors and welcome back to another edition of Invest Talk.
[SPEAKER_00]: This is our June 18th, 2026 edition, and you know Thursday, but it's the final show of the week tomorrow
[SPEAKER_00]: markets are closed.
[SPEAKER_00]: So just to heads up for all of you.
[SPEAKER_00]: So we closed out another week in the books.
[SPEAKER_00]: But as always in today's market, there's a lot to unpack with what's going on in the AI space geopolitically with the IPO schedule.
[SPEAKER_00]: All of this matters as we head into the back half of 2026.
[SPEAKER_00]: The other first half is almost behind us.
[SPEAKER_00]: We actually only have one full trading week
[SPEAKER_00]: the couple days, the following week and then we're into Q3, so that's where we're at setting the stage for this hour.
[SPEAKER_00]: I'm Justin Klein and my goal here is to become help you become a better investor, giving you perspective, data, actionable material that you can make better decisions with your money consistently, week after week, month after month, year after year.
[SPEAKER_00]: And to that end,
[SPEAKER_00]: Big heads up, our new wealth webinars coming up Tuesday, June 30th.
[SPEAKER_00]: On a week and a half away, 12 to 1 pm Pacific time, beyond the yield, how to invest for your income needs.
[SPEAKER_00]: That is the title.
[SPEAKER_00]: So make sure you head over to invest.com and register for free.
[SPEAKER_00]: And in just a bit, we'll talk about today's market performance and run down the show topics for the hour.
[SPEAKER_00]: But as usual, we'll tackle this first call in question now.
[SPEAKER_04]: M. B.
[SPEAKER_04]: It's, uh, bacon, New York, melon, municipal bond infrastructure fund.
[SPEAKER_04]: I was looking at it for taxable portfolio.
[SPEAKER_04]: Again, the ticker symbol is D. M. B.
[SPEAKER_04]: Thank you.
[SPEAKER_00]: Looking at DMB, this is the BNY mailing municipal bond infrastructure fund.
[SPEAKER_00]: This is a what is called a closed-end fund, closed-end fund.
[SPEAKER_00]: It's not a normal ETF.
[SPEAKER_00]: And the expense ratios are very high, about 2%.
[SPEAKER_00]: Very high.
[SPEAKER_00]: Total expense ratio.
[SPEAKER_00]: Oh, sorry, that's interest expense.
[SPEAKER_00]: Advisors 101, total expense is 3.19%.
[SPEAKER_00]: So very, very expensive on that front.
[SPEAKER_00]: So that worries me.
[SPEAKER_00]: Morningstar gives it two out of five stars, so below average.
[SPEAKER_00]: If we look at the performance of this fund, so far, a year today, it's up 2%.
[SPEAKER_00]: That's in the 87th percentile, which means the 87th percent of funds in this category are doing better.
[SPEAKER_00]: last year was in the 84th percentile, the year before that of the 73rd percentile, so doing poorly over the past couple of years.
[SPEAKER_00]: The good news is the 2022 it did fairly well as the market as it sold off or at least the sector sold off pretty dramatically.
[SPEAKER_00]: But the 10 year return is
[SPEAKER_00]: that's in the 77th percent time.
[SPEAKER_00]: That means about over three quarters of funds in this category are doing better.
[SPEAKER_00]: So you have high fees, very below average performance.
[SPEAKER_00]: Then you look at the overall structure of the, by the way to keep on is five percent.
[SPEAKER_00]: Let me look at them at surety schedule.
[SPEAKER_00]: Okay, most of this is very long term 20 to 30 years.
[SPEAKER_00]: That's about 70% of the portfolio.
[SPEAKER_00]: So very long duration on that side as well.
[SPEAKER_00]: I see no reason to invest this.
[SPEAKER_00]: And then, you're talking about taxable account.
[SPEAKER_00]: This is a, one of the biggest mistakes I see people make across the board.
[SPEAKER_00]: That is investing for lower taxes, investing in municipal bonds to avoid the taxes.
[SPEAKER_00]: When they're not in the highest tax brackets, I don't know what tax bracket you're in, but if you're not in the highest tax bracket, you should never be looking at municipal bonds anyway.
[SPEAKER_00]: So I don't know what that is.
[SPEAKER_00]: I don't know if you are not, but these are designed and just the industry is a whole that if the yields get pushed down to a level where it makes sense for the people in the highest tax bracket, which means it does not make sense for those that are not in the highest tax bracket.
[SPEAKER_00]: So make sure even if you go with a different municipal bon fun that you are in the highest tax bracket, otherwise,
[SPEAKER_00]: From a tax-adjusted yield perspective, you rather be in taxable bonds, even though you're paying the tax, your net return is likely to be higher.
[SPEAKER_00]: So you're probably looking at the distribution rate with 5.5%, which seems pretty high for municipal bonds, tax-free, et cetera.
[SPEAKER_00]: So you have a tax adjusted yield, probably in the 78% range.
[SPEAKER_00]: Sounds great.
[SPEAKER_00]: Well, it's again, that's only if you were
[SPEAKER_00]: I've passed on it, especially if you're not in the high stack record, tax break.
[SPEAKER_00]: Now we had a great show yesterday.
[SPEAKER_00]: We looked into the story bitcoins.
[SPEAKER_00]: Identity crisis.
[SPEAKER_00]: Is it a store of value or a speculative toy?
[SPEAKER_00]: We also answer questions about stock SCHW Charles Schwab.
[SPEAKER_00]: That was submitted via our YouTube channel.
[SPEAKER_00]: And if you missed it, go check it out.
[SPEAKER_00]: The best way to get every show is to follow.
[SPEAKER_00]: And that's talk wherever you get your podcast.
[SPEAKER_00]: Now, we have a lot of ground to cover today.
[SPEAKER_00]: Over the next 45 minutes or so, and our main focus point is about the Fox Roku deal.
[SPEAKER_00]: What the Big Media M&A tells us about the streaming economy, whether or not this is also a good deal or not for Fox.
[SPEAKER_00]: The market is reacted poorly, and we'll tell you probably why that is.
[SPEAKER_00]: In addition, we're going to look at, I think this is the most under-reported story, which is the,
[SPEAKER_00]: Boost that AI CapExpending has given to broad market earnings is very one-sided.
[SPEAKER_00]: It's not accounting for the other side, which is the expense side.
[SPEAKER_00]: Which means there's going to be at some point in the coming years.
[SPEAKER_00]: It give back through what's called depreciation.
[SPEAKER_00]: We'll talk about in more detail in a little bit.
[SPEAKER_00]: Also, banks, large banks, pitched the Fed on tweaks to regulatory proposals and that reducing funds they must set aside to absorb potential losses.
[SPEAKER_00]: Well, with that mean, was the ability of the financial system as well as earnings expectations for these banks.
[SPEAKER_00]: Then the Crystal Ball Challenge.
[SPEAKER_00]: I love this one.
[SPEAKER_00]: Basically what it looked at was if you give somebody the headlines from the previous day or that day.
[SPEAKER_00]: Let's say you knew exactly what the headlines were going to be on Friday for the day of Thursday.
[SPEAKER_00]: If you just knew those headlines, could you make the proper trade?
[SPEAKER_00]: Everyone wants to know the future.
[SPEAKER_00]: If you knew the future can you do well by knowing the future?
[SPEAKER_00]: The answer might surprise you.
[SPEAKER_00]: So we'll look at that story.
[SPEAKER_00]: We also have voice bank calls, one is on the cover, the other is on Viking Holdings, VIAK.
[SPEAKER_00]: Then we have some questions that came in via the comment section of the Investor YouTube channel.
[SPEAKER_00]: But most importantly, we'll be your live calls, we are going to take a quick break.
[SPEAKER_00]: Please remember you can call any time, leave your question on the Investor Talk Voice Bank.
[SPEAKER_00]: Or if you're listening via our live stream or on Amazon 20 the Bay Area, you can call right now at 80 to 89 chart.
[SPEAKER_00]: Hang on because they plan to talk about to its market activity in the next segment.
[SPEAKER_01]: This is in Vest talk, now closing in on 63 million downloads.
[SPEAKER_01]: And Justin Klein is here taking your questions live.
[SPEAKER_01]: 88899 chart.
[SPEAKER_00]: 88899 chart in at 9924278.
[SPEAKER_00]: So you can do an answer question on today's show.
[SPEAKER_00]: Let's take a quick look at the market today was very interesting.
[SPEAKER_00]: The S&P and NASDAQ bounce back after a big sell-off yesterday, it's some strength out of the hardware names, really on the back of news that Intel and Apple are going to work together on production of some chips.
[SPEAKER_00]: That was up nearly 9%.
[SPEAKER_00]: on the day, brought them up for my crown of seven to be on two and a half apples flat though on the news Microsoft same, Tesla was down a bit, said some weakness out of health care, a little bit of finance as well, an oil was down once again, oils down about 30% over the past month or so.
[SPEAKER_00]: What else do we have?
[SPEAKER_00]: Yields were down two to five basis points.
[SPEAKER_00]: A little give back after yesterday's big move higher in yield, so that was certainly helpful for
[SPEAKER_00]: It's best day and more than three months, gold finished down 3.1% silver off 6.3% Bitcoin down 2.1% on the day.
[SPEAKER_00]: What else do we get?
[SPEAKER_00]: We had initial jobless claims, initial claims came at 226,000.
[SPEAKER_00]: Right, kind of in line with the consensus, that was down 4,000 week over week, continuing claims.
[SPEAKER_00]: Eight, a 1.8 million.
[SPEAKER_00]: a little bit above consensus as well so the labor market is hanging in there overall.
[SPEAKER_00]: We did close in opx week, so we should see a little bit more, I think, free movement of the market.
[SPEAKER_00]: Next week, a lot of jocking positioning for opx, that's not uncommon to see.
[SPEAKER_00]: So very interesting, like I said, bounce back day, we'll see if it can stick.
[SPEAKER_00]: We still didn't close above yesterday's high.
[SPEAKER_00]: There's a lot of volume today on that opx.
[SPEAKER_00]: So that's what I'll be watching.
[SPEAKER_00]: Really is, look at the weekly chart here.
[SPEAKER_00]: Yeah, I mean, on a weekly chart, you do have a mini bearish pattern on the S&P.
[SPEAKER_00]: So that's of note, do we just shop sideways?
[SPEAKER_00]: I think if we do, if we kind of continue to see this back and forth, that's a bearish sign, at least in the short term.
[SPEAKER_00]: If we can break above the all-time highs here
[SPEAKER_00]: Then I think the bull market can't continue to be on, but I'll talk a little bit later about why I think we are nearing a market inflection point.
[SPEAKER_00]: We might have already seen it.
[SPEAKER_00]: But today, a little more, a little nice little bounce in the midst of some market weakness over the past three weeks.
[SPEAKER_00]: Let's see.
[SPEAKER_00]: from a listener who submitted a form in a website.
[SPEAKER_00]: Said is the stock price of Ali Baba, a good entry point.
[SPEAKER_00]: This is interesting, because overall, the Chinese docks have been selling off.
[SPEAKER_00]: They've been relatively weak.
[SPEAKER_00]: Bob was at a 52-week low.
[SPEAKER_00]: So momentum is very bad.
[SPEAKER_00]: Let me zoom out here, though.
[SPEAKER_00]: Let me give you support level.
[SPEAKER_00]: See if it's entering the support level.
[SPEAKER_00]: Yeah, interesting.
[SPEAKER_00]: This weekly broke below support, which is right around 109.
[SPEAKER_00]: all the way down to 103 we didn't we're not quite there yet so that's kind of the big support.
[SPEAKER_00]: I do think we're getting there we're in that zone of nice support between Alt 100 and 110 right one oh because one of seven in chains today earnings next year so it's been nine dollars in three cents hundred and seven dollar stock price here's my
[SPEAKER_00]: Especially now that we have the Iran war behind us.
[SPEAKER_00]: We had this gone in this way.
[SPEAKER_00]: La, we have the Iran war issue.
[SPEAKER_00]: Well, I don't wanna say behind us, because it's not quite behind us.
[SPEAKER_00]: You know, it looks more like we have a light pan of the tunnel.
[SPEAKER_00]: I wouldn't say we're out of the tunnel yet, but we're getting there.
[SPEAKER_00]: The next worry, and there's a lot of talk behind the scenes that in exchange for China not really doing much,
[SPEAKER_00]: Ukraine, et cetera, is that we won't do anything once they take over Taiwan, or make a run at Taiwan.
[SPEAKER_00]: And that is supposed to happen next year.
[SPEAKER_00]: So I think that's an increasing risk, is that the reason why the Chinese stocks issue to sell off?
[SPEAKER_00]: That would be my biggest worry here, is the geopolitical situation more broadly is becoming more contentious, and certainly Bob will get caught up with that if China starts to
[SPEAKER_00]: Our work continues after this break, so can we come out and eat it at any nature.
[SPEAKER_01]: Invest talk.
[SPEAKER_01]: Tell your friends they can listen live, download the free podcast, or watch Invest talk on our YouTube channel, and they can leave their finance and investment questions
[SPEAKER_07]: I've been listening almost every day since 2014.
[SPEAKER_07]: My recently returned from a biking river cruise.
[SPEAKER_07]: I was impressed with the service, attention to detail, et cetera.
[SPEAKER_07]: Another plus for the company is they have your money at least six months ahead of the trip.
[SPEAKER_07]: I started buying in the $79 to $80 range when I returned.
[SPEAKER_07]: What are y'all thoughts on biking holdings?
[SPEAKER_07]: On the side note, today at BJA's wholesale club with your,
[SPEAKER_07]: BJ credit card, regular gas is two or eight.
[SPEAKER_07]: You got to have a great weekend.
[SPEAKER_07]: Thanks back.
[SPEAKER_00]: Thanks for the thank you for that little tip.
[SPEAKER_00]: At the end, let's take a look at Viking holdings, Viking river cruises.
[SPEAKER_00]: I definitely seen a lot of ads for the never been on one, but I know that they think they do them all over the world.
[SPEAKER_00]: And you go look at the numbers, things look are looking up.
[SPEAKER_00]: Aren't you dollars in 61 cents last year, so starting $3.32 this year, $4.35.
[SPEAKER_00]: Next year, I'm a $97 stock, so you're looking at a low 20s for looking multiple, which is on the expensive side, but then you back up and say, okay, they have no debt.
[SPEAKER_00]: They have good free cash flow about 1.1 billion on a $42 billion market cap.
[SPEAKER_00]: It's not amazing, about 3% free cash flow yield, something around it.
[SPEAKER_00]: They're buying back shares.
[SPEAKER_00]: Return equity, $199 per cent.
[SPEAKER_00]: Return of us a capital, $19 per cent.
[SPEAKER_00]: It's a go based on that.
[SPEAKER_00]: Return of us to capital, usually, just more.
[SPEAKER_00]: Easier to see through less worried about levers, things like that.
[SPEAKER_00]: So I really like that figure in 19% is very high.
[SPEAKER_00]: The wealth of strength there is fantastic.
[SPEAKER_00]: positive 52 week high today.
[SPEAKER_00]: So good momentum, secondly, and like we have boomers retiring with a lot of wealth, and they tend to like to go on cruisers.
[SPEAKER_00]: And for an efficiency standpoint, it seems that these river cruisers are very profitable.
[SPEAKER_00]: It only gets just about holding on to your money, and it's sure that helps they can earn money while they're waiting.
[SPEAKER_00]: But also, they have some decent margins as well.
[SPEAKER_00]: They're gross margins, are about 38%.
[SPEAKER_00]: Operating margins at about 23%.
[SPEAKER_00]: So those are healthy as well.
[SPEAKER_00]: So I would continue to hold, probably buy on pullbacks because of the secular tailwinds, the good balance sheet.
[SPEAKER_00]: Good, strong, free cash flow, et cetera.
[SPEAKER_00]: Let's go answer a YouTube comment question section.
[SPEAKER_00]: Section question, there we go.
[SPEAKER_00]: Jimmy Gustafson says, I think the inflation will be higher for a while, and higher states will probably follow that.
[SPEAKER_00]: I'm pretty skeptical of the current peace between U.S. and Iran, despite all this, having the little price isn't that high, I think.
[SPEAKER_00]: What are your thoughts about this?
[SPEAKER_00]: And one sector besides, for example, materials that I think will do competitively well in this environment is energy, I've looked into some companies that transform oil and gas.
[SPEAKER_00]: I own YPF, a big oil and gas name and Argentina.
[SPEAKER_00]: If you have time, please give your thoughts about the name.
[SPEAKER_00]: If you want, I'm also looking at example, O'Neill or what, and can there more again?
[SPEAKER_00]: Maybe a lot of questions here, but do you think, okay, and can there more again are good names in the situation?
[SPEAKER_00]: Now we have owns, okay, in the past.
[SPEAKER_00]: So we still like it.
[SPEAKER_00]: We're increasingly looking at more of these pipeline names.
[SPEAKER_00]: on the potential bilus to pick back up as the energy patch has pulled back more dramatically.
[SPEAKER_00]: Now, YPS, this was interesting.
[SPEAKER_00]: Start with that.
[SPEAKER_00]: Because you talked about exposure to Argentina, to Argentina, energy company, oil and gas, both up, midstream, and downstream.
[SPEAKER_00]: So, I like that.
[SPEAKER_00]: I like the diversity of these type of businesses.
[SPEAKER_00]: where they have pipeline, businesses, they have petrochemical businesses, and then your traditional EMP, which is drilling for oil.
[SPEAKER_00]: They also have an agribusiness, LNG, all of that, propane, good-free cash flow, about 500 million, excuse me, and 20 billion dollar market cap.
[SPEAKER_00]: So pretty solid-free cash flow yield there.
[SPEAKER_00]: So I'm gonna give this one,
[SPEAKER_00]: A thumbs up, I like the foreign exposure earning so to be an all-time high next year, despite the chart pulling back or the energy patch and general pulling back, okay has been weak as well, recently, but overall, you've YPF and okay are in an uptrend excuse me, and then lastly,
[SPEAKER_00]: PMI, there we go.
[SPEAKER_00]: They've changed their symbol throughout the years multiple times.
[SPEAKER_00]: This one's a bit weaker than OKE.
[SPEAKER_00]: And I think for good reason, earnings growth is pretty bigger, revenue growth is 6% this year, 4% next year.
[SPEAKER_00]: Whereas OKE, their revenue growth is 11%.
[SPEAKER_00]: So that's why the wealth of strength is a bit better.
[SPEAKER_00]: So I'm, if I'm picking one, I'm picking okay, e over Kinder Morgan, but I do like YPF as well as a diversifier, both a broad as well as picking up refining assets, more midstream assets, et cetera.
[SPEAKER_00]: But tomorrow's Markin' Holiday, so we post a new best of show, so you can find wherever you get your podcast, but for now I'm Justin Klein.
[SPEAKER_00]: We're ready to take your calls now on 8.89, shirt.
[SPEAKER_00]: At KPP Financial, Accountability means more than advice.
[SPEAKER_00]: It means we invest alongside you through our parallel investing approach.
[SPEAKER_00]: When we recommend an investment for clients, one or more KPP principles invest their own capital at the same time, same day, same price, same percentage.
[SPEAKER_00]: If your portfolio moves, ours does too.
[SPEAKER_00]: That is alignment.
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[SPEAKER_00]: Our main focus point today is about the Fox Roku deal.
[SPEAKER_00]: Pretty big.
[SPEAKER_00]: acquisition, box corporation, agreed to acquire real coup for $22 billion.
[SPEAKER_00]: Which is notable because that's a pretty hefty price.
[SPEAKER_00]: It's about 10% higher than we are today, so we're at $160 per share, and that's based on next year's earnings at $3.63, so about a 50 times multiple, somewhere in that range.
[SPEAKER_00]: The reaction was not kind, the stock fell about 16% on the news, but combined, it would make it the third largest combined company in US television by share of viewing.
[SPEAKER_00]: Why because Roku reaches more than 100 million households, more than half of US broadband
[SPEAKER_00]: TV platform, an ad supporting streaming destination.
[SPEAKER_00]: And a television operating system used by hundreds of millions of people.
[SPEAKER_00]: So they're getting distribution, data, and much, much more.
[SPEAKER_00]: This is their way to fight against, scored cutting, and transition even deeper to the streaming economy.
[SPEAKER_00]: because they get access to all these people who already have these apps downloaded, but their Amazon Prime, their Prime video, their Netflix, HBO, et cetera.
[SPEAKER_00]: All this is pretty much installed on, once again, hundreds of millions of Roku devices.
[SPEAKER_00]: So it's a direct fight with the Google, Apple, Amazon, et cetera.
[SPEAKER_00]: because Roku influences consumer viewing decisions.
[SPEAKER_00]: This is a distribution battle, really.
[SPEAKER_00]: At a time when these cable providers are kidnapped to a bicycle, cable networks are at the winds of the cable companies, the smartphone or smart TV makers,
[SPEAKER_00]: a Vizio, like an Apple, like a Google, like an Amazon.
[SPEAKER_00]: So it makes a lot of sense.
[SPEAKER_00]: The question is, is it just too expensive?
[SPEAKER_00]: There are also existing partnerships that they have to navigate as well with competitors, Rokus, the partnership with Paramount, and NBC Universal, Netflix.
[SPEAKER_00]: So how do they navigate those partnerships as well?
[SPEAKER_00]: Then you look at history.
[SPEAKER_00]: A history does not look too kindly on content and platform mergers in the media space.
[SPEAKER_00]: The most recent is AT&T buying time Warner for $85 billion back in 2018.
[SPEAKER_00]: Their goal was to boost phone sales, phone business, by bundling HBO Max, for example, when you buy a new smartphone.
[SPEAKER_00]: So what do they do?
[SPEAKER_00]: They sold it to the discovery.
[SPEAKER_00]: Then you go look at time Warner ALL deal back in the day.
[SPEAKER_00]: Usually these big media mergers have trouble.
[SPEAKER_00]: The synergies often don't materialize in the way that they're conceived.
[SPEAKER_00]: Like I said before, they're existing partnerships that may actually cause problems with their other revenue streams.
[SPEAKER_00]: So it's just a huge deal, but I think the market's getting it right here, but they just simply overpaid.
[SPEAKER_00]: We look at there, what are we?
[SPEAKER_00]: Okay, looking at another piece of software.
[SPEAKER_00]: They're trailing 12 months, free cash flow, 411 million.
[SPEAKER_00]: Return equity only 7.7%.
[SPEAKER_00]: Good news, David.
[SPEAKER_00]: Very clean balance sheets of like, now like they're assuming a bunch of debt.
[SPEAKER_00]: That's the positive here.
[SPEAKER_00]: It's just hard for me to stomach $22 billion when your free cash flow is less than 2% of that for years.
[SPEAKER_00]: So I don't think it's going to be a great deal for Fox.
[SPEAKER_00]: Let's keep things moving and drop in another fresh list of the question now.
[SPEAKER_02]: Hey, Investor, I've got a question.
[SPEAKER_02]: I've looked at a trend, my position with my goal stocks, and I want to see about what this be a good time to try to increase my position with SCC.
[SPEAKER_02]: Oh, because I wanted to know, maybe it would be a better to try to get more show and to back into the conference for maybe a little bit of what would be your suggestions.
[SPEAKER_02]: love the show, publish it in the podcast for the answer.
[SPEAKER_02]: Thank you.
[SPEAKER_00]: To me, it's a simple answer.
[SPEAKER_00]: Copper remains from a long-term perspective.
[SPEAKER_00]: One of the most attractive metals materials to investing.
[SPEAKER_00]: I've said this before, it's very important when you're investing in commodities in general, is to understand how easy it is to bring on new supply.
[SPEAKER_00]: You see this in the oil and gas patch.
[SPEAKER_00]: Just recently, prices went up because of what's going on in Iran, and companies around the world found new supply to bring on market and that doled a major price spike, which prevented those companies from really capitalizing too much on the move, at least over any length of time.
[SPEAKER_00]: Copper is unique where it takes five up to 10 years, maybe even longer, depending on the mind to really bring that on.
[SPEAKER_00]: So it's not like if copper rises go up, new supply can easily be added in the short term, at least that not major supply.
[SPEAKER_00]: Aluminums are ready pulling back pretty considerably with the potential of the Straitsformers reopening.
[SPEAKER_00]: There's just more supply response available out there.
[SPEAKER_00]: So I like that you're looking to diversify.
[SPEAKER_00]: Your material's holdings?
[SPEAKER_00]: I'm picking one, or the other copper, or aluminum, and definitely picking copper, and you probably know we've almost saw the copper for a long time.
[SPEAKER_00]: We're clients, so to us, it's still the best.
[SPEAKER_00]: Best operator within the space.
[SPEAKER_00]: Those could take another voicemail question now.
[SPEAKER_05]: Hi there, I'm just looking for some exposure in materials and precious metals,
[SPEAKER_05]: XLB for materials and then XME for precious metals just want to get your guys thoughts on both of those.
[SPEAKER_05]: Thanks so much.
[SPEAKER_05]: Bye.
[SPEAKER_00]: I'm looking at XLB and XL, sorry, XME.
[SPEAKER_00]: This is the S and State Street spiders metals in mining ETF.
[SPEAKER_00]: The top holding here is new core, steel dynamics, cleaving cliffs, reliance, steel.
[SPEAKER_00]: These are all steel producers.
[SPEAKER_00]: Then you go into coal, pre-vart mac ram, which is copper, commercial metals, MP materials, US rare earth, and alcoa.
[SPEAKER_00]: You want to know what I didn't just list off any precious metal producers.
[SPEAKER_00]: The 11th top holding is new mod.
[SPEAKER_00]: That would be a precious metal producer.
[SPEAKER_00]: That's only 4% of 3.8% of the portfolio.
[SPEAKER_00]: Then I go down the list to get choreo mining.
[SPEAKER_00]: That's 3.3 to 1.4% heck low, 3 little over 3%.
[SPEAKER_00]: Yeah, so I see 3 of the top 20 in precious metals.
[SPEAKER_00]: Only adding up to about 10% of the portfolio.
[SPEAKER_00]: That's my issue.
[SPEAKER_00]: I don't see it as a precious metal ETF.
[SPEAKER_00]: If you want precious metals, go buy golden silver.
[SPEAKER_00]: BTF, or what is it, DB, DBP, if I remember correctly, yeah, that's the invest go.
[SPEAKER_00]: DB precious metals fund.
[SPEAKER_00]: I'm not recommending this, but that's something that would be a little more pure play.
[SPEAKER_00]: You have gold and silver, et cetera.
[SPEAKER_00]: Or, once again, like a GDX, something like that, GDX, J, that's how you would get exposure there.
[SPEAKER_00]: XLB, that is materials.
[SPEAKER_00]: And that winds out to a lot of industrial materials, land is the top holdings, 14% which is industrial gas.
[SPEAKER_00]: The second large holding is pneumot, that's 7% of the portfolio there.
[SPEAKER_00]: But then, I still don't see any others in the top 10 there in the precious metal space.
[SPEAKER_00]: does not good either.
[SPEAKER_00]: So neither of these are really great precious metals, ETFs.
[SPEAKER_00]: Thanks for the call.
[SPEAKER_00]: Let's talk a bit about earnings for the AI, or just the market as a whole, really.
[SPEAKER_00]: This is under-appreciated, under-discussed.
[SPEAKER_00]: Analysts expect S&P 500 companies earnings to grow to be 20% for the second consecutive quarter in Q2.
[SPEAKER_00]: A lot of this has to do with dramatically higher profits for semiconductor producers and AI infrastructure companies.
[SPEAKER_00]: The problem is that that money is coming from the hyperscalers with capex.
[SPEAKER_00]: Everyone kind of knows this.
[SPEAKER_00]: They're buying in video chips.
[SPEAKER_00]: They're buying memory.
[SPEAKER_00]: They're buying a lot of industrial infrastructure to go into these data centers.
[SPEAKER_00]: The difference though, when you're looking at earnings, is that that money hits the bottom line right away for those companies that produce the end product.
[SPEAKER_00]: But your hyperscalers, they actually depreciate the assets over the coming years.
[SPEAKER_00]: So at the time, where it's very important to focus on not the earnings, but actually free cash flow.
[SPEAKER_00]: Because they're not going to recognize all of those expenses for a number of years.
[SPEAKER_00]: And oftentimes, they're not recognizing any of the expenses at all, especially if they buy the end product, but it's not fully put in place yet, because the data center is not complete.
[SPEAKER_00]: So it's still in a construction.
[SPEAKER_00]: So you have this window here where everything looks very rosy, revenue and margins look very strong across the AI ecosystem.
[SPEAKER_00]: especially for hardware, suppliers, as well as the big spending.
[SPEAKER_00]: Spenders as well, the hyperscalers, because those expenses are not hitting the income statement, yet which means earnings are staying elevated.
[SPEAKER_00]: But we know at some point they're going to have to recognize those expenses in the form of what is called depreciation.
[SPEAKER_00]: And even analysts are unsure what that depreciation schedule looks like.
[SPEAKER_00]: and there's a few big reasons for that.
[SPEAKER_00]: These are businesses that are historically capital-light, asset-light business models.
[SPEAKER_00]: Only recently, are they capital-intensive?
[SPEAKER_00]: So there's not a lot of historical data that says, hey, when they buy this equipment or these end products, they last a certain amount of time because these AI is such a new endeavor.
[SPEAKER_00]: And then the depreciation expense can vary depending on the year.
[SPEAKER_00]: Right, I think it's three years now, but next year they might come and say I actually think it's four years or maybe it's two years, then a lot of the spending has been financed by off balance sheet entities, which mucks up the picture even more.
[SPEAKER_00]: And this is a great example of what this looks like.
[SPEAKER_00]: S&P 500 companies are reporting one or reported $1.3 trillion a capex last year of that 1.3 trillion, 412 billion were just five hyperscalers.
[SPEAKER_00]: Amazon, Alphabet, Meta, Microsoft, and Oracle.
[SPEAKER_00]: This year, the S&P is up to $760 billion for those names.
[SPEAKER_00]: Yet, the expected depreciation expense this year is only about $211 billion.
[SPEAKER_00]: So there's a lag effect that will eventually show up in earnings, but is showing up now in free cash flow.
[SPEAKER_00]: And for 2026, the combined free cash flow of those five hyperscalers are expected to drop 91% to only $16 billion.
[SPEAKER_00]: Even though net income, profits, earnings per share, projected to rise 25%.
[SPEAKER_00]: Two of these companies, free cash flow is actually going negative,
[SPEAKER_00]: and only slightly positive for meta.
[SPEAKER_00]: Then you look at earnings for shared for the next 12 months and what the market is trading at 22 times, which is slightly above historical average, but when you take a new account, that this is before the depreciation ramp up, that could be a problem as we move into 2027.
[SPEAKER_00]: So a lot of these earnings are showing up on the income statement, the earnings for share for the producers of the AI
[SPEAKER_00]: infrastructure, but it's not showing up quite yet for those hyperscalers, and that is one of the biggest risks I think for the market moving forward.
[SPEAKER_00]: This is Invest.com, Justin Klein, with one goal here each every week day, so help you achieve your own version of financial freedom, and I'm working to use after this final break sketch questions are now at 88899 chart.
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[SPEAKER_06]: Hi, good day Justin and Luke.
[SPEAKER_06]: Matt from Minneapolis here.
[SPEAKER_06]: A long, long time listener to your wonderful show.
[SPEAKER_06]: Hey, I have a quick question.
[SPEAKER_06]: Hopefully you gentlemen can help me out with.
[SPEAKER_06]: I'm trying to take some profit here from MU and Intel.
[SPEAKER_06]: had good returns so far this year.
[SPEAKER_06]: I don't know if the ride is over or not, but I want to take profit and out lose some.
[SPEAKER_06]: I have no real estate at all in my portfolio.
[SPEAKER_06]: I'm looking of course at SPG, which I see morning star gives good ratings to the Simon Properties.
[SPEAKER_06]: And I also have heard, um, I think Luke gave a thumbs up to a VNQ of Vanguard Real Estate Fund.
[SPEAKER_06]: which one of these would you guys deem better than the other or are they both equal?
[SPEAKER_06]: Please let me know which one you give a thumbs up to more than the other and I'm going to definitely look at that one.
[SPEAKER_06]: And thank you so much for your help.
[SPEAKER_06]: I'll be listening on the show.
[SPEAKER_06]: Have a great day.
[SPEAKER_00]: This is a very good question.
[SPEAKER_00]: I like what you're doing.
[SPEAKER_00]: I like what you're you're saying.
[SPEAKER_00]: Okay, I've taken my I've had some big games on my cron or Intel.
[SPEAKER_00]: I'm trimming
[SPEAKER_00]: and I'm going to rotate into an area that I have no exposure to.
[SPEAKER_00]: Especially an area that is actually gaining pretty good momentum.
[SPEAKER_00]: If you look at it, compared to the product market, which is the re-sector.
[SPEAKER_00]: And you have done.
[SPEAKER_00]: So this is smart.
[SPEAKER_00]: This is these are the type of smart decisions good capital allocators make.
[SPEAKER_00]: Thought about lacquer-wide is not selling all or none.
[SPEAKER_00]: It's saying reassessing.
[SPEAKER_00]: So I give this my stamp a approval, but like you said, do you put it in SPG or VNQ and they're same but different.
[SPEAKER_00]: They're both REITs, they're both doing well, they're both good performers, but which one's better?
[SPEAKER_00]: Now Simon Property Group is one of the largest retail REITs out there and it's a history of very consistent strong performance, even if it's not,
[SPEAKER_00]: Gamebuster griff.
[SPEAKER_00]: Funds for operations supposed to be $13.68 next year, that's up from 1310 this year, which is up 6% from $12.34.
[SPEAKER_00]: Last year, $211 stock.
[SPEAKER_00]: It's yield is, where are we?
[SPEAKER_00]: 4.26%.
[SPEAKER_00]: So you're getting a little bit better yield than you're going to get out of BNQ, which is 3.6%, but as I've always said, it's not just about the yield's equality, the business.
[SPEAKER_00]: The issue that you're getting, if you have no read exposure, then you're buying a read, is that, and you go by 7 property group, you're getting exposure just the one small slice of the space.
[SPEAKER_00]: With the NQ you're getting, so exposure to 7 property group, let me see is it.
[SPEAKER_00]: Yeah, it's the fifth largest holding in this BTF, but you're getting exposure to industrial
[SPEAKER_00]: office reads all different types of reads that are out there.
[SPEAKER_00]: So I like that diversity.
[SPEAKER_00]: I really do.
[SPEAKER_00]: Now, if you had other reads, and you maybe you had an apartment read, that was best to read, maybe you had an office read, that was best to read, industrial read, that was best to read.
[SPEAKER_00]: You built out a handful of great reads across different.
[SPEAKER_00]: sub-sectors of the space, then I would say go to Simon Property Group that would fill the hole that may be a retail read.
[SPEAKER_00]: But the fact that you have none tells me I would probably go V and Q.
[SPEAKER_00]: These are pretty low 13 basis points.
[SPEAKER_00]: This is pretty low on the expense ratio side.
[SPEAKER_00]: It gives you that instant diversity.
[SPEAKER_00]: You could also do a little bit of Simon Property Group on the side, but my core position would be in V and Q.
[SPEAKER_00]: Lastly, let's talk about bank regulations.
[SPEAKER_00]: It's kind of boring, but large US banks pitched to the Fed.
[SPEAKER_00]: The Nade, they should reduce their regulatory burden so that they can expand lending.
[SPEAKER_00]: If it's something to watch, as we head into the second half of the years, how does this change?
[SPEAKER_00]: Especially with a new, bad president, kind of a wash.
[SPEAKER_00]: This is probably a lever you could pull to reduce bank capital requirements and allow them to lend even more into the economy.
[SPEAKER_00]: So I'll be watching this as a signal for an economy re-accelerating, precipitated by more bank lending.
[SPEAKER_00]: Will I just incline?
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