[SPEAKER_06]: This is Invest Talk, from KPP Financial, helping investors make sense of the markets one day at a time.
[SPEAKER_06]: Here's your host, Luke Guerrero.
[SPEAKER_03]: Good afternoon, fellow investors, and welcome to the Monday, June at 22nd, 2026 edition of Invest Talk.
[SPEAKER_03]: I'm your host Lou Grinnelly with you over the next 45 minutes to an hour as we dissect what went down in the market today.
[SPEAKER_03]: Talk about the stories that matter and answer your finance and investment questions.
[SPEAKER_03]: Now, before we get rolling, I do want to remind you all that our next new wealth webinar set for Tuesday, June 30th from 12 to one Pacific time.
[SPEAKER_03]: It is one week from tomorrow.
[SPEAKER_03]: It is called beyond the yield, how to invest for your income needs, and it is free, but as always, you must register and invest talk.com.
[SPEAKER_03]: All right.
[SPEAKER_03]: Before we talk about today's market performance and run down those show topics, let's tackle this color question now.
[SPEAKER_02]: I wanted to ask a question about the aerospace and defense sector.
[SPEAKER_02]: I was looking at a ETF, PPA, the Sun, Biscoe, Aerospace and Defense ETF.
[SPEAKER_02]: I just wanted to get some more exposure into these sectors and wanted to know if this was a good way to get some product exposure into these industries and let's see if this would be a good bet.
[SPEAKER_02]: Thank you so much.
[SPEAKER_03]: Bye.
[SPEAKER_03]: PPA is the Invesco Aerospace and Defense ETF.
[SPEAKER_03]: It is a passive ETF that tracks the spade defense index.
[SPEAKER_03]: And it vests in U.S. companies systematically, important to defense military homeland security.
[SPEAKER_03]: and government space operation.
[SPEAKER_03]: So you're going to see aerospace names, defense names, defense electronics, IT services for government, and cybersecurity alongside your traditional defense primes.
[SPEAKER_03]: Now the companies that are the top of this fund are ones that you have probably heard of.
[SPEAKER_03]: GE Aerospace Boeing Company RTX Corporation Lockheed Martin rounding out the top four, which makes up about 30% of this portfolio.
[SPEAKER_03]: In fact, the top 10 make up about 55.41% of the overall
[SPEAKER_03]: portfolio.
[SPEAKER_03]: Now, here to date, this thing is about 11.96% from a price perspective.
[SPEAKER_03]: Over the one year, up 30.46 versus its category, about 54 points.
[SPEAKER_03]: Sorry, 45.64.
[SPEAKER_03]: That is a meaningful underperformance versus the peers primarily driven by
[SPEAKER_03]: less exposure to European defense names because this is a U.S. only ETF and the recovery drag from Boeing.
[SPEAKER_03]: Now, I understand why you want to own an aerospace and defense ETF.
[SPEAKER_03]: I mean, you're looking at the Iran War, you're looking at,
[SPEAKER_03]: NATO's 2% GDP commitments you're looking at the Chips Act and their domestic manufacturing, and the fact that the president has promised on top of the largest defense budget ever this year to have the largest defense budget ever next year.
[SPEAKER_03]: But at the same time, for this fun specifically, your pain 58 basis points for passive exposure that, again, is meaningfully underperforming peers.
[SPEAKER_03]: And I will say that I think one of the largest areas where we've seen progress in the defense space is internationally.
[SPEAKER_03]: Why?
[SPEAKER_03]: Because of European rearmament.
[SPEAKER_03]: Now, we recently spoke on a previous show about why that may be drying up a bit, I.E.
[SPEAKER_03]: country saying who now in a position where yes the run wars waging but we got to choose between fighting domestic issues i.e.
[SPEAKER_03]: inflation cost of living and bolstering our military Germany's stepping back so overall the theme i think as a long-term macro driver is good
[SPEAKER_03]: In the short term though, you see a lot of run up names and shifting government positions towards what they want to give a priority for either way.
[SPEAKER_03]: I think if you want aerospace and defense exposure, you want to have international exposure as well and certainly do it for less than 58 basis points.
[SPEAKER_03]: Thanks to the call.
[SPEAKER_03]: It was a great show for you last Thursday because of course Friday was a best of show with the Juneteenth holiday.
[SPEAKER_03]: But on Thursday we looked at the Fox Roku deal and what big media M&A told us about the streaming economy.
[SPEAKER_03]: We also answered a question on the stock OKE10 that was submitted through our YouTube channel.
[SPEAKER_03]: If you didn't catch this episode, I encourage you to go check it out and remember the best
[SPEAKER_03]: is you subscribe wherever you get your podcasts.
[SPEAKER_03]: Onto today, where my main focus point is gonna be taking a look at if the market today is at 2022 all over again, and what we need to be looking for in terms of a risk checklist for 2026 because the market does look a lot like 2022 in three uncomfortable ways.
[SPEAKER_03]: And investors, or nervous about inflation, interest rates are still driving market behavior and expensive growth stocks where they are vulnerable to sharp resets.
[SPEAKER_03]: But 2026 is not a copy and paste.
[SPEAKER_03]: And investors who understand the similarities, but most importantly, the differences are going to be less likely to panic, less likely to chase, and less likely to rebounce at the wrong time.
[SPEAKER_03]: Also, touch on why all this capital, absolutely flowing into AI,
[SPEAKER_03]: May actually be a warning sign.
[SPEAKER_03]: Also, a lot of unicorn companies over the past decade in Silicon Valley will touch on the zombie unicorns.
[SPEAKER_03]: And should we have time with the end of the show?
[SPEAKER_03]: We'll talk about how some companies are trying to make a compute a financial asset.
[SPEAKER_03]: We also have some voice bank calls ready to play, including one on Bitcoin and another on Alison Transmission Ink, ticker ALSN, as well as some questions that came in from the
[SPEAKER_03]: Well, folks, we have a lot to do today, but we are headed into our first break.
[SPEAKER_03]: It is always a quick one.
[SPEAKER_03]: Please remember, you can call anytime and leave your questions on the Invest Talk of Voice Bank.
[SPEAKER_03]: And if you're listening in the Bay Area on AM 1220, give me a call now at 8.899-chart.
[SPEAKER_03]: We come back.
[SPEAKER_03]: We'll talk about today's market activity.
[SPEAKER_06]: Serious investors are certain to have finance and investment questions.
[SPEAKER_00]: I'm looking at an EPS in Goldman Sachs, Nasdaq.
[SPEAKER_06]: And the best person to ask your question in the right way is you.
[SPEAKER_06]: If that would be a good hold to having a Roth IRA for the long term horizon.
[SPEAKER_06]: And 24, 7 rain or shine, just in decline and Luke Guerrero stand ready to provide their unbiased answers.
[SPEAKER_06]: This isn't really a copper plate, this is a iron ore plate with some aluminum copper.
[SPEAKER_03]: If you're looking at each of these, you have to hold so few names that are so top-heavy.
[SPEAKER_03]: I think it is probably ill-advised to pay.
[SPEAKER_03]: An expense ratio like this in order to get exposure that you could really get yourself.
[SPEAKER_06]: Your participation makes an invest talk better.
[SPEAKER_07]: Hey guys, Brian from Rooker, on here, I'm a big fan of the show.
[SPEAKER_07]: I haven't missed an episode in over five years.
[SPEAKER_06]: So don't forget to call in Vestark, 888-99 chart.
[SPEAKER_06]: It's happening soon, online in free of charge, and all new in Vestock, wealth webinar beyond the yield, how to invest for your income needs.
[SPEAKER_06]: Tuesday, June 30th, noon to one Pacific time, but you must pre-register at investalk.com.
[SPEAKER_06]: And now the Invest Talk phone lines are open.
[SPEAKER_06]: Justin Klein and Luke Guerrero are waiting for your finance and investment questions.
[SPEAKER_06]: 888-99 chart.
[SPEAKER_03]: I would say that the best way to describe stocks today is probably mixed.
[SPEAKER_03]: You had big tech weakness, weighing on the headline indices, while breadth underneath.
[SPEAKER_03]: I would say told a bit more of a constructive story.
[SPEAKER_03]: The Dow gained three tenths of a percent, the Russell 2000 hit a fresh record close up eight tenths.
[SPEAKER_03]: But the S&P fell 40 basis points, the Nasdaq dropped 1.3 percent, stocks did end a bit of the worst levels, but still.
[SPEAKER_03]: for the most part negative on the day.
[SPEAKER_03]: Now, the big tech underperformance, that was obviously the main story because of how much weighting that has in the indices.
[SPEAKER_03]: Alphabet was notably lower following another high profile AI leadership departure space X has now sought off more than 30% from last Wednesday's peak Netflix decline and several other Mac 7 names were weaker.
[SPEAKER_03]: However, the impact on broader sentiment, if it's softened by this continued strength,
[SPEAKER_03]: in semis and continue to strengthen memory where the AI demanded remains for the most part firmly intact ahead of microns earnings that headlines around supply chain constraints and higher memory pricing.
[SPEAKER_03]: But nevertheless, the rotation in the sick holes and into financials continued.
[SPEAKER_03]: Money center banks, investment banks, energy airlines, parcels, logistics, off price retail, all outperformed on the day, while software China tech home improvement, home builders and defense underperformed.
[SPEAKER_03]: Oil.
[SPEAKER_03]: Continue to sell off on progress out of the U.S. Iran talks in Switzerland, and a pick-up in straight-of-hormous transit with W3I crude settling down 2.6%, but the falling oil isn't bringing down treasure yields.
[SPEAKER_03]: The way it once might have yields rose five to six basis points.
[SPEAKER_03]: Across the curve, as the market's focus has shifted squarely,
[SPEAKER_03]: To the fed and rate hike expectations, they are building meaningfully, but the market now pricing about 40 basis points of tightening through year end.
[SPEAKER_03]: Both B of A and Deutsche Bank are now calling for a hikes this year.
[SPEAKER_03]: B of A looking for 75 basis points in Deutsche looking for 50.
[SPEAKER_03]: There's also growing discussion about how the fed shipped away from forward guidance under Worsh could boost bond market volatility and in turn strengthen the long end.
[SPEAKER_03]: Elsewhere the president said he no longer considers anthropic a national security threat.
[SPEAKER_03]: Microsoft CEO criticized the dominance of Frontier LLMs and highlighted a strategy for cheaper more user-friendly AM models.
[SPEAKER_03]: Intel hired a former CEO to lead its Foundry business and Abby confirmed it will acquire
[SPEAKER_03]: The dollar edged higher golden silver slipped about 1% and looking ahead for the rest of the week.
[SPEAKER_03]: Tuesday will bring June flash PMI's and Richmond Fed Manufacturing along with a $69 billion to your auction and Thursday's PC report is the Week's main macro event.
[SPEAKER_03]: All right.
[SPEAKER_03]: Let's take a look at this next question this time.
[SPEAKER_03]: We're gonna take a look at a question that came in from the Invest talk.
[SPEAKER_03]: YouTube channel in the comment section because as you're over there watching our videos, remember we do have YouTube exclusive content.
[SPEAKER_03]: I encourage you to leave a question in the comment section rather than picking up the phone or doing something else.
[SPEAKER_03]: We make it as easy as possible.
[SPEAKER_03]: for you to submit your questions.
[SPEAKER_03]: Now, this one says, I own a small amount of youth, and I'm down about 41% probably more after transaction fees.
[SPEAKER_03]: I've held on to it for five years as a worth hanging on to, or should I cash it out and reallocate.
[SPEAKER_03]: From what I understand, youth has some utility contrary to Bitcoin.
[SPEAKER_03]: Now, you know, this is rough in any asset to denown 41% especially after a long holding period.
[SPEAKER_03]: What we've seen is a collapse in the ETHBTC ratio.
[SPEAKER_03]: It's at like 0.025 and it's level not seen since early 2023 and far below the peak of about 0.09 in 2021.
[SPEAKER_03]: I mean, ETH is on track for its first ever three consecutive red quarters.
[SPEAKER_03]: So the underperformance is not as bad luck.
[SPEAKER_03]: It has structurally underperform Bitcoin.
[SPEAKER_03]: Over the period, now you are correct, it does have more utility than Bitcoin.
[SPEAKER_03]: It powers most of decentralized finance in the stablecoin economy.
[SPEAKER_03]: It's the primary settlement layer for tokenized real-world assets and smart contracts, NFTs, decentralized apps.
[SPEAKER_03]: They all run on Ethereum, but here's the problem with utility argument right now.
[SPEAKER_03]: Record usage is actually coinciding with falling fees.
[SPEAKER_03]: base layer fees, drop me a 50% in Q1.
[SPEAKER_03]: Ethereum is deliberately sacrificing short-term fee revenue to scale via layer two solutions, and that's originally smart long-term, but means the token isn't capturing value from all the activity.
[SPEAKER_03]: Now, you know, the case for holding
[SPEAKER_03]: is that, given where the price is, you're seeing a lot of flows, and that's essentially all cryptobias.
[SPEAKER_03]: And cryptodes historically move in violence cycles, but at the same time, I mean, a 41% loss is brutal.
[SPEAKER_03]: You have seen a wild opportunity cost from other markets, and the utility argument has a really
[SPEAKER_03]: translated into price performance.
[SPEAKER_03]: Now if it's a taxable count, it's a juicy loss.
[SPEAKER_03]: I think selling that creates a capital loss that can offset capital gains elsewhere, and losses carry forward indefinitely, right?
[SPEAKER_03]: They do not expire.
[SPEAKER_03]: If you have gains to offset, this is a great way to use it.
[SPEAKER_03]: If it's a small position and you can stomach more volatility,
[SPEAKER_03]: I mean, I have no problem with having small allocations to crypto, I think anything beyond Ethereum and Bitcoin is even more gambling than Ethereum and Bitcoin themselves.
[SPEAKER_03]: And if you want to stay in crypto and you're frustrated with eth, I think swapping it, the bigger benefit is you're going to get that tax loss harvesting.
[SPEAKER_03]: But no one knows where this is going.
[SPEAKER_03]: You know, the forecast range from $1,500 to $8,000, this is the longest duration asset there.
[SPEAKER_03]: Is, well, we do know that the opportunity cost of holding it a climbing asset over five years is real and every dollar sitting at 41% loss is a dollar not compounding in something.
[SPEAKER_03]: It's a bit more productive where the utility actually bears itself out in real cash flows.
[SPEAKER_03]: Thanks for watching and thanks for leaving it your question in the comments section.
[SPEAKER_03]: All right, we're going to break.
[SPEAKER_03]: Still to come, my main focus point on whether or not this is 2022 all over again.
[SPEAKER_03]: And as always, more answers to your finance and invested questions.
[SPEAKER_03]: So you have one burning in your mind.
[SPEAKER_03]: Pick up that phone and dial, eighted it, 99 chart.
[SPEAKER_05]: Look, the railroad is here and ready to tackle your questions.
[SPEAKER_01]: I wanted to pick your ring about Apple.
[SPEAKER_01]: What did you think about their earnings call?
[SPEAKER_01]: It's just a good time to add to my position.
[SPEAKER_05]: Call in Vestock, 888-99 chart.
[SPEAKER_06]: This is Invest Talk.
[SPEAKER_06]: Now closing in on 63 million downloads.
[SPEAKER_06]: And Luke Guerrero is here taking your questions live.
[SPEAKER_06]: 888 99 chart.
[SPEAKER_08]: This is Shred from California.
[SPEAKER_08]: I'd love to find out your analysis on ALS and Allison transmission holdings.
[SPEAKER_08]: He sent me a solid company.
[SPEAKER_08]: He had some defense in there.
[SPEAKER_08]: Shracking companies that truck the products.
[SPEAKER_08]: I would thank all over the world.
[SPEAKER_08]: I just thought there was just a good trucking company.
[SPEAKER_08]: I just wanted to see what you're at your whole now.
[SPEAKER_08]: This would be a good stock for long term.
[SPEAKER_08]: Thank you.
[SPEAKER_03]: Allison Transmission Holdings is a name that we are definitely familiar with here.
[SPEAKER_03]: because it is a name that we used to hold for clients.
[SPEAKER_03]: I believe that we sold out a bit earlier in the year some time in April or May, but what it does is it is a fully automatic transmission
[SPEAKER_03]: for commercial and defensive vehicles company.
[SPEAKER_03]: They have two segments after this acquisition.
[SPEAKER_03]: They're Allison transmission core on highway, defense, trucks, buses, military vehicles, and they're Allison off highway.
[SPEAKER_03]: So they're mining construction, ag equipment.
[SPEAKER_03]: And they're actually the world's largest manufacturer of medium and heavy duty automatic.
[SPEAKER_03]: transmission.
[SPEAKER_03]: Now it is a transformed company after the beginning of this year.
[SPEAKER_03]: They nearly doubled their revenue from their acquisition of Dana off highway all year over your comparisons because of this or bit distorted by M&A.
[SPEAKER_03]: So you want to focus on your adjusted metrics on your organic trends and also note that today there's actually term loan refinancing which should reduce their interest
[SPEAKER_03]: Yeah, revenue was up 884% year over year, beating by 1.9%, adjusted earnings per share was only about 6% though that did beat, and adjusted EBITDA was up 22% year over year, and they had margin sitting at 26%.
[SPEAKER_03]: All right, it's pretty stellar, right?
[SPEAKER_03]: And it's coming out of an acquisition.
[SPEAKER_03]: They're defense segment.
[SPEAKER_03]: Saw 64% year over year growth.
[SPEAKER_03]: That is the strongest growth amongst any segment.
[SPEAKER_03]: But at the same time, core Allison transmissions.
[SPEAKER_03]: Saw about 4% year over year contraction.
[SPEAKER_03]: So this acquisition is off highway.
[SPEAKER_03]: Contributed to nearly half.
[SPEAKER_03]: of total revenue.
[SPEAKER_03]: Now, with any acquisition, you have now to bet on execution.
[SPEAKER_03]: In recent guidance, they said there's about 120 million in annual run rate synergies, but that's not expected to really be realized until the next couple years.
[SPEAKER_03]: Now, here to date, it's about 23.72% up 33.39% over the past.
[SPEAKER_03]: 52 weeks.
[SPEAKER_03]: And this production in interest cost was announced.
[SPEAKER_03]: Certainly to the benefit of a company that for some time had been a bit technically weak.
[SPEAKER_03]: I mean, you didn't see it fall nearly 3% after earnings despite massive adjusted beats because of some of the issues.
[SPEAKER_03]: going on, right?
[SPEAKER_03]: Because of that core organic business contraction, because net margins fell within that core business on those integration costs from about 25% to 8%.
[SPEAKER_03]: Because the North American highway market, the foundation of the original business, it remains very uncertain.
[SPEAKER_03]: But I mean, there are positives, right?
[SPEAKER_03]: At the same time, you have defense revenue growth, 64% year over year, you have 120 million in those synergies that they hope to realize.
[SPEAKER_03]: You have six
[SPEAKER_03]: This is tough because I like this company.
[SPEAKER_03]: I like this company.
[SPEAKER_03]: We held it for a very long time.
[SPEAKER_03]: But it's fundamentally different.
[SPEAKER_03]: It is executing a large industrial acquisition.
[SPEAKER_03]: A time when the core business is soft.
[SPEAKER_03]: And so, you know,
[SPEAKER_03]: This is a one that I probably would keep on my watch list for now, because July 23rd is when they reported as the first clean post-integration read.
[SPEAKER_03]: And so you need to decide whether these synergies are going to arrive fast enough.
[SPEAKER_03]: And if that justifies paying about the highest multiple they've had in the past five years, again, I want to see a little bit of proof in the pudding before I would dive back into this one, which is, as you mentioned, a great company that is Allison transmission,
[SPEAKER_03]: It's making two in a row for May to eight ninety nine chart.
[SPEAKER_09]: Hey Justin and Luke.
[SPEAKER_09]: This is John from Georgia.
[SPEAKER_09]: I was just calling the two guests not about advanced auto parts, ticker is AAP and I was just wondering, is it a good time to buy?
[SPEAKER_09]: I'll listen for the answer on the show.
[SPEAKER_03]: Advanced auto parts is about 41.02% year-to-date of about 12.14% over the past 52 weeks after having a real rough 2023 and really a boring 2024.
[SPEAKER_03]: So this is really a deep turnaround story.
[SPEAKER_03]: I mean, these still don't have a single by target amongst their analysts.
[SPEAKER_03]: It's an automotive after market parts retailer.
[SPEAKER_03]: That hasn't seen much growth.
[SPEAKER_03]: I mean, to get turnaround story.
[SPEAKER_03]: Growth is only about year over year 1% in terms of revenue.
[SPEAKER_03]: earnings per share though.
[SPEAKER_03]: Came in at 77 cents crushing, by about 79% of the strongest comp quarter in about five.
[SPEAKER_03]: years.
[SPEAKER_03]: You know, I'm six, seven months ago when I said stay away from this thing.
[SPEAKER_03]: You'd be crazy.
[SPEAKER_03]: But it's a very surprising automotive turnaround this year that earnings per shared beat is real.
[SPEAKER_03]: They have their five year best comps.
[SPEAKER_03]: They have about 4.1% margin expansion.
[SPEAKER_03]: But I still think it's in the midst of a turnaround.
[SPEAKER_03]: You know, this is a big show me quarter that should answer whether this Q1 was genuine inflection or a 1 quarter set up and then until you see kind of follow through from this most recent quarter report, I would keep this one on my watch list.
[SPEAKER_03]: Thanks for the call.
[SPEAKER_03]: On the next invest stock, we'll look into this story, AI spending paradox, hyperscalors left behind as the trade evolves.
[SPEAKER_03]: That's tomorrow, but for now, we still got plenty to talk about.
[SPEAKER_03]: I'm Lou Guerrero and we're ready to take your calls anytime at 888-99 chart.
[SPEAKER_06]: There are a few things that make KPP financial special.
[SPEAKER_06]: One of them is parallel investing.
[SPEAKER_06]: This means they invest right alongside their clients.
[SPEAKER_06]: Here's how it works.
[SPEAKER_06]: When KPP financial makes a trade for their clients, just in line makes the same trade for himself and KPP.
[SPEAKER_06]: On the same day, at the same price, and same percentage.
[SPEAKER_06]: No front running, no special treatment.
[SPEAKER_06]: Learn more about Parallel Investing at Investalk.com.
[SPEAKER_03]: Kevin Worsh, just chaired his first FOMC meeting this week.
[SPEAKER_03]: The Fed held rates at 350 to 375, the median committee projection call for one to two rate heights in 2026 and the fur of the first time, the dot plot has pointed towards tightening since the hiking cycle began in 2022.
[SPEAKER_03]: After the announcement, the S&P hit 7420 near all time
[SPEAKER_03]: But with all this CPI, it's running at 4.2, and the equity risk premium, the extra return investors earn for owning stocks over bonds, two basis points.
[SPEAKER_03]: That's among the lowest readings on record.
[SPEAKER_03]: Stocks are offering essentially zero compensation, over risk free treasury, so the first time since the dot com bubble.
[SPEAKER_03]: That combination looks uncomfortably familiar.
[SPEAKER_03]: 2022, the S&P 500 fell 28% over nine months as inflation surged.
[SPEAKER_03]: The Fed hiked aggressively and expensive growth stocks got reprised.
[SPEAKER_03]: The question, therefore, listeners are asking, whether explicitly you're in the back of your minds is whether 26 is setting up for a repeat, the answer is yes and no.
[SPEAKER_03]: And understanding the distinction is what separates investors who navigate the environment from those who will inevitably get hurt.
[SPEAKER_03]: The similarities are real, and up front we have to acknowledge them.
[SPEAKER_03]: First inflation is once again the dominant macro variable, and early 2022 CPI was accelerating past 7% today at the 4.2 lower, but certainly moving in the wrong direction after being at 2.4% in February.
[SPEAKER_03]: The Fed went from promising transitory inflation to emergency hikes.
[SPEAKER_03]: Today, the Fed has gone from projecting rate cuts to projecting hikes, the pattern
[SPEAKER_03]: Central Bank behind the curve, forced to tighten faster than market's expected, certainly rhymes.
[SPEAKER_03]: Second, interest rates are driving market behavior more than fundamentals.
[SPEAKER_03]: In 2022, the 10 year yield surging from 1.5 to 4.2, that was the single biggest driver of soccer turns.
[SPEAKER_03]: Every upper tick crushed growth stock valuations through the discount rate mechanism.
[SPEAKER_03]: Today, the 10 years risen from 396 pre-war 2448, the 30 year hitting in 19-year high 518, the market's obsession with every fed statement, every inflation printed, every rate high probability, shift, it's identical, it's between 22, third, expensive growth stocks are vulnerable to sharp resets.
[SPEAKER_03]: In 22, the Nasdech fell 33% metal loss 65 in video drop 50.
[SPEAKER_03]: The Mac 7 hadn't been named yet, but their predecessors were decimated.
[SPEAKER_03]: Today, the P.H.L.X.
[SPEAKER_03]: semi-conductor index has pulled back from its highs with a 3.6% drop on a single day last week.
[SPEAKER_03]: More than 1 trillion has been wiped from the Mac 7 since SpaceX filed for its IPO, gross stocks are priced for perfection.
[SPEAKER_03]: At a time when the rate environment is actively hostile to high multiple companies.
[SPEAKER_03]: But the differences, those are just as important.
[SPEAKER_03]: And this is where investors do panic in a 2022 playbook could make a mistake.
[SPEAKER_03]: The biggest differences that today's companies are genuinely profitable.
[SPEAKER_03]: In 2022, many growth stocks were pre-revenue were barely profitable.
[SPEAKER_03]: The correction reprised businesses that didn't have earnings to fall back on.
[SPEAKER_03]: In 26, S&P 500 companies are beating profit estimates by 18.2%.
[SPEAKER_03]: Tech earnings are growing 43% annually, Microsoft Nvidia alphabet meta, they generate massive free cash flow.
[SPEAKER_03]: The AI capex isn't being funded by burning venture capital.
[SPEAKER_03]: It's funded from operations.
[SPEAKER_03]: That earnings floor did not exist four years ago and it provided evaluation support.
[SPEAKER_03]: That limits downside even if multiple start to compress.
[SPEAKER_03]: The second difference, the macro backdrop.
[SPEAKER_03]: Four years ago the Fed was hiking from zero to nine into a nine percent inflation environment.
[SPEAKER_03]: Today, the Fed's at 350 to 375, with inflation at 4.2, the gap between the policy rate and inflation, far narrower, which means the Fed doesn't need to hike as aggressively to restore real positive rates.
[SPEAKER_03]: One or two quarter point hikes, which is what the dot plot projects is a very different regime than the 525 basis points of tightening delivered four years ago.
[SPEAKER_03]: The third difference,
[SPEAKER_03]: is what's causing inflation.
[SPEAKER_03]: In 2022 inflation was driven by demand sidefourses by pandemics stimulus flooding the economy with cash, supply chain issues, the Fed could address that by cooling demand through higher rates.
[SPEAKER_03]: In 26 inflation is driven by a supply shock.
[SPEAKER_03]: The warmest closure removed, 15, 20% of global oil, supply shocks are harder for the Fed to solve because hiking rates does not open the street.
[SPEAKER_03]: The family you signed this week holds an oil normalizes much of the inflation pressure evaporates without the Fed doing anything.
[SPEAKER_03]: That asymmetry where the inflation problem could resolve itself through geopolitics rather than any Fed action that's a key distinction from 2022 the fourth difference is market breath
[SPEAKER_03]: And 22, the correction was broad-based, everything so-lough.
[SPEAKER_03]: This year the rotation has been much more selective, energy materials, industrial, consumer staples, they've all outperformed.
[SPEAKER_03]: The Equate S&P, that's beaten the cap-weighted version by the Y-D's margins since the 1990's, the average stock.
[SPEAKER_03]: They'll in fine.
[SPEAKER_03]: It's the MegaCap Tech Correction, which represents roughly 35% of the S&P.
[SPEAKER_03]: That's vulnerability to it.
[SPEAKER_03]: If you're diversified across sectors and not just fully weighted there,
[SPEAKER_03]: The risk is manageable.
[SPEAKER_03]: The practical rate checklist, or rather risk checklist.
[SPEAKER_03]: For the second half of this year, comes down to three variables, oil.
[SPEAKER_03]: If MOU holds in or moves normalizes inflation to sell rates, the high-grisk fate, bullish.
[SPEAKER_03]: If it collapses, we're back in crisis mode.
[SPEAKER_03]: Then you got earnings.
[SPEAKER_03]: Q2 reports starting in July will be the first to fully capture the war's impact on consumer spending and corporate margins.
[SPEAKER_03]: That is the real stress test.
[SPEAKER_03]: and rates.
[SPEAKER_03]: If the 10 year stage blow for 5, stocks can grind huckers.
[SPEAKER_03]: If it pushes above 5, that equity risk premium goes negative and repricing accelerates.
[SPEAKER_03]: The key here is this is not 2022, but it's not 2023 or 2024 either.
[SPEAKER_03]: The market is in a transition zone between the AI, bulkace, and the rate, hike, bear case.
[SPEAKER_03]: The investors who understand which parts of their portfolio are exposed to each scenario and size their positions accordingly will come through this period intact.
[SPEAKER_03]: The ones who treat every pullback as the beginning of a crash or every rally is proof that nothing can go wrong.
[SPEAKER_03]: certainly will not.
[SPEAKER_03]: It's keeping things moving and dropping another listener question from 888-99 chart.
[SPEAKER_04]: Good day, Justin Luke.
[SPEAKER_04]: Long, long time listener to your show here from the Midwest.
[SPEAKER_04]: Thank you guys for everything you educated us on.
[SPEAKER_04]: I appreciate it.
[SPEAKER_04]: My question today is on a ticker symbol and E.M. Newmont mining.
[SPEAKER_04]: I believe that company does mind gold, copper, and silver if I'm not mistaken.
[SPEAKER_04]: And I know I've heard from the shoulder that silver is really booming right now.
[SPEAKER_04]: However, a new month has just been after a good year last year.
[SPEAKER_04]: It's just been treating it a ranger from the mid-up or 90s to like 125 or so, and it won't break above its ceiling there.
[SPEAKER_04]: I'm not sure if this really has a future ahead of it, or if I should just dump it completely and head to golden like GLD,
[SPEAKER_04]: all the time.
[SPEAKER_04]: I'm just questioning what are your thoughts and feeling about this move is new mount worth holding on to or should I dump it and go to something else like GLD.
[SPEAKER_04]: Thanks a listen for your answers on the show.
[SPEAKER_04]: Have a good day.
[SPEAKER_03]: This is a classic question.
[SPEAKER_03]: Should you hold physical gold or should you hold the gold minor at all though they do both give you exposure to that shiny yellow metal they are definitely carrying different risk profiles
[SPEAKER_03]: Now, we've covered GLD plenty of times, it's a 40 basis point gold ETF.
[SPEAKER_03]: It is the spider gold shares ETF.
[SPEAKER_03]: They track spot gold prices directly, so they got gold bars, sending a lend-in vault.
[SPEAKER_03]: They have no earnings, they got no management, they got no operational risk.
[SPEAKER_03]: This is pure, pure commodity exposure.
[SPEAKER_03]: And yeah, a new month corporation is one of the world's largest gold miners.
[SPEAKER_03]: They have operations in the U.S. and Canada, Mexico, Australia, Ghana, Peru, pretty diversified business.
[SPEAKER_03]: And as mentioned, they produce copper, they produce silver, they produce zinc, they produce lead.
[SPEAKER_03]: It is also, I believe, the only gold miner in the S&P 500, and it's a massive company.
[SPEAKER_03]: They got nearly 32,000 employees globally.
[SPEAKER_03]: Now, Q1, they had an absolute blowout quarter.
[SPEAKER_03]: They beat estimates by 13.5% earnings per share, beat by 29% net income was up from 1.19 billion, the previous quarter to 3.26 billion.
[SPEAKER_03]: They returned 2.7 billion to shareholders, through dividends and through buybacks.
[SPEAKER_03]: And what you'll see,
[SPEAKER_03]: between these two, because these are the fundamental differences.
[SPEAKER_03]: GLD, that's one to one.
[SPEAKER_03]: Gold up 10, GLD up 10.
[SPEAKER_03]: New on?
[SPEAKER_03]: This is about two to three times the gold price move.
[SPEAKER_03]: Gold up 10, new on up 20, 30.
[SPEAKER_03]: Why?
[SPEAKER_03]: Because mining costs are relatively fixed.
[SPEAKER_03]: If it costs $70,000 an ounce to mine, and gold goes from 3,000 to 3,300, new month's profit per ounce jumps from 13 to 1600.
[SPEAKER_03]: That is a 23% increase in profit.
[SPEAKER_03]: From a 10% increase in gold.
[SPEAKER_03]: This works in reverse too.
[SPEAKER_03]: If gold drops new month, probably falling much harder than GLD.
[SPEAKER_03]: Now, where GLD wins is if you want pure play gold exposure.
[SPEAKER_03]: You want zero operation risk.
[SPEAKER_03]: You're hedging a portfolio where buying insurance.
[SPEAKER_03]: The gold prices flattered declining GLD just sits there.
[SPEAKER_03]: Anym, they get crushed by fixed costs.
[SPEAKER_03]: Now, new month wins when gold is in a sustainable uptrend, which even despite recent movements, it's still kind of this.
[SPEAKER_03]: If you want a company generating real cash flows, you believe that gold is staying, above systematically, $3,000.
[SPEAKER_03]: It's also trading in only about 9.9 times for looking earnings.
[SPEAKER_03]: But you get that risk right in the mind collapsed, the country's specific risk cost inflation.
[SPEAKER_03]: I think the bottom line is here if you want to, if you're bullish on gold and want maximum upside, new mine is the better play.
[SPEAKER_03]: The operating leverage, the dividend, the shareholder returns, if you want gold as insurance and don't want to think about it, that's when you go GLT.
[SPEAKER_03]: If you think gold is peaked or could pull back, Jailty loses less, but then maybe you don't wanna have as much gold exposure as you do.
[SPEAKER_03]: I think maybe the smart play is a little bit of both, though, 30 other ETFs, not gonna mention it, but there's another ETF similar to Jailty, that has a little bit lower liquidity, but if you're position sizing isn't that high, you do get a lower fee.
[SPEAKER_03]: You know, I would say generally speaking, we're very bullish on gold, you know, we tend to be in the mining space,
[SPEAKER_03]: Thanks for the call.
[SPEAKER_03]: SpaceX $60 billion all stock acquisition of Carceter, the AI programming assistant that popularized vibe coding is the kind of deal that makes strategic sense, but should set off alarm bells for the broader market.
[SPEAKER_03]: The strategic logic is clear.
[SPEAKER_03]: SpaceX's Grok Chatbot hasn't gained the traction that Claude and Chad GBT have, cursor which has become the go-to tool for AI assisted software development that gives a musk a genuine presence
[SPEAKER_03]: Incorporate AI, but zoom out in the pattern is concerning.
[SPEAKER_03]: Companies always have a choice between issuing debt and issuing stock to finance acquisitions and capital spending.
[SPEAKER_03]: Stock valuations are high, equities cheap for companies to issue.
[SPEAKER_03]: The legendary investor Ben Graham thought of the market as a manic depressive offering daily prices.
[SPEAKER_03]: Sometimes too high, sometimes too low, companies as a group choose to sell stock aggressively.
[SPEAKER_03]: They're telling you they
[SPEAKER_03]: That's exactly what's happening here.
[SPEAKER_03]: Goldman Sachs estimates net equity supply and new shares hitting the market minus shares are moved from buybacks.
[SPEAKER_03]: We'll be roughly flat in 26 for the first time since 2003, alphabet raised 85 billion in a historic equity offering meta, reportedly planning something similar, spacex, of course, raised 86 in its IPO, snowshing 60 billion more in stock for cursor.
[SPEAKER_03]: Companies are financing almost half.
[SPEAKER_03]: The cost of current quarter M&A deals was stock.
[SPEAKER_03]: A level matched only during the dot com bubble and the 20-20-21 spec maniac.
[SPEAKER_03]: The historical precedent, it's a bit uncomfortable.
[SPEAKER_03]: In the dot com era, two thirds of M&A was financed with stock.
[SPEAKER_03]: In 2020, 2021, it was 45%.
[SPEAKER_03]: Both periods proceeded sharp market declines.
[SPEAKER_03]: The current quarter running at about 49% equity finance.
[SPEAKER_03]: As one commonist of the Wall Street Journal noted, when lots of companies are raising cash to chase the same opportunity, in this case, AI.
[SPEAKER_03]: There are three possibilities.
[SPEAKER_03]: The opportunity is so huge.
[SPEAKER_03]: It absorbs all the capital and delivers fat profits.
[SPEAKER_03]: The opportunity is real, but over supply destroys margins.
[SPEAKER_03]: Or the AI claims are wildly overhyped.
[SPEAKER_03]: And the money, poof, goes up and smoke.
[SPEAKER_03]: The danger isn't that any individual deal is bad.
[SPEAKER_03]: SpaceX buying cursor may prove brilliant Apple, raising 85 billion to fund AI may generate returns for decades.
[SPEAKER_03]: The danger is the collective signal.
[SPEAKER_03]: When the companies that were buying back their stock for the past decades suddenly reverse, start selling it, they're telling you something about where they think valuation stand and historically.
[SPEAKER_03]: That signal has been more reliable than traditional valuation metrics.
[SPEAKER_03]: We're about to head to our final break, but before we do, I want to mention yet again that our newest upcoming Invest Talk Wealth webinar Beyond The Yield, where we will be talking all about how you can strategize for your income needs, is coming up a week from tomorrow June 30th from 12 to 1 p.m. Pacific time, as always.
[SPEAKER_03]: This webinar is free.
[SPEAKER_03]: As always, we will have a Q&A live Q&A session after we go over the topic.
[SPEAKER_03]: And as always, we can't wait to see you there.
[SPEAKER_03]: So head over to investalk.com and to sign up for the newest Investalk Wealth webinar, June 30th, sign up today.
[SPEAKER_03]: This is Investalk.
[SPEAKER_03]: I'm Lou Greer, we have one goal here and let's to help you achieve your financial freedom.
[SPEAKER_03]: Our work will continue after this break.
[SPEAKER_03]: So if you want your question answered today, you got to pick up that phone and dial 88, 99 chart.
[SPEAKER_05]: The Guerrero is here and ready to tackle your questions.
[SPEAKER_07]: Is it a good idea to sell your losses in a Roth IRA and just use whatever you have left to reinvest in the better stocks?
[SPEAKER_07]: Just wanted to ask you about one stock that I'm looking at, in Turkey, E.T.R.
[SPEAKER_05]: Call Invest on 888-99 chart.
[SPEAKER_06]: Every investor is working to build a secure financial future.
[SPEAKER_06]: The more you learn about how the market works, the better your chances for success.
[SPEAKER_06]: In Vestark, 888-99 chart.
[SPEAKER_03]: While the public market has been captivated by the Gigah IPOs and the AI rally, a slow-motion disaster is unfolding in the private market.
[SPEAKER_03]: By May of this year, 332 of the 1900 Unicorns tracked by Stanford, Professor Ilius Treblev, had raised money and evaluation at her below their previous peak of those to 112 were valued at under 1 billion meaning they'd lost their unicorn status entirely.
[SPEAKER_03]: Another 383 unicorns had disclosed no new funding in the previous three years.
[SPEAKER_03]: The economists has dubbed these a company's zombie unicorns.
[SPEAKER_03]: Companies that were once valued at a billion dollars or more.
[SPEAKER_03]: But, are now shadows of their former selves.
[SPEAKER_03]: Cameo, the celebrity video platform is valued at 1 billion in 2021.
[SPEAKER_03]: It's now worth $82 million.
[SPEAKER_03]: Sondermine, a mental health platform, went from 1.1 billion to 7 million.
[SPEAKER_03]: These aren't outliers.
[SPEAKER_03]: They're the visible tip of a systemic repricing.
[SPEAKER_03]: The zombie problem is the direct conflict consequence, rather, of the zero interest rate era.
[SPEAKER_03]: When cheap money, encouraged investors to poor capital and the VCs funds, regardless of the quality of the underlying businesses.
[SPEAKER_03]: VC fund raising, peaked it $223 billion in 2022, collapsed to $66 billion last year as interest rates rose and returns, unsurprisingly, deteriorated.
[SPEAKER_03]: The startups that received inflated valuations during the boom, they are now stuck.
[SPEAKER_03]: They can't raise at their old prices.
[SPEAKER_03]: They can't IPO without accepting massive markdowns in their VC backbackers, or increasingly unwilling to throw good money after bad.
[SPEAKER_03]: pitchbook expects net valuation cuts up between 500 billion and one trillion dollars as firms repris scrambled to find buyers or even just go under that puts their estimated total the unicorn universe below the ten most valuable companies that puts their estimated total the unicorn universe below the ten most valuable companies is worth about five trillion
[SPEAKER_03]: And the timing pressures building nearly half the firms on that database that raised at or below their peak had their last round in 2021 from late next year, their investors, they're going to start demanding results, VC agreements often allow investors to veto public offerings if they think they'd get a better outcome by waiting, but waiting only works if someone's willing to invest more.
[SPEAKER_03]: Today's VCs are focused on the handful of AI superstars, not on froping up aging companies with fading business models.
[SPEAKER_03]: For investors, you may be asking yourself, I didn't throw any money into cameo.
[SPEAKER_03]: Why do I care?
[SPEAKER_03]: Well, the zombie unicorn reckoning matters because of the indirect effects.
[SPEAKER_03]: VC funds that are returning less money will make their limited partners,
[SPEAKER_03]: their pension funds, their endowments, their front offices, less willing to allocate to venture capital.
[SPEAKER_03]: What does that do?
[SPEAKER_03]: That titan's fundraising for early stage companies broadly, not just the zombies, and the spillover into public markets, it's real.
[SPEAKER_03]: If zombie unicorns can't IPO, the Giga IPO pipeline says concentrated in a handful of mega companies rather than broadening into the mid-market listings that historically support a healthy market ecosystem, and so as the biggest problem for the past couple years has been breadth, the issues of the zombie unicorns may in the near future make that concern worse.
[SPEAKER_03]: Well that does it for another episode of Invest Talk, Justin and I thank you for listening and encourage you to tell your friends and family members about our free podcast downloads or your course, you can get iTunes and you can get Spotify and while you're over there we'd really appreciate it if you left us a rate and review.
[SPEAKER_03]: If you haven't already, I encourage you to check out the Invest Talk YouTube channel, or tell you about YouTube and search Invest Talk with two T's, because we have YouTube specific content, and we dive deeper into one focus point a week.
[SPEAKER_03]: My last reminder of the day, our next wealth webinar is set for Tuesday, June 30th from noon to 1pm Pacific Time, the title, Beyond the Yield, how to invest for your income needs.
[SPEAKER_03]: If you want to join us and we hope that you do, head over to www.investalk.com and sign up for the free wealth webinar.
[SPEAKER_03]: Lastly, if today's show made you think about your specific financial circumstances and whether or not you're doing everything you can to achieve your financial goals, just in a nice speak to investors just like yourselves each and every day.
[SPEAKER_03]: I encourage you to have it over to www.investalk.com and schedule a free portfolio review.
[SPEAKER_03]: Independent thinking, shared success.
[SPEAKER_03]: This is Invest Talk.
[SPEAKER_05]: Good night.
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