[SPEAKER_02]: This is Invest Talk, from KPP Financial, helping investors make sense of the markets one day at a time.
[SPEAKER_02]: Here's your host, Justin Klein.
[SPEAKER_00]: Good afternoon, fellow investors, and welcome back to another week of Invest Talk.
[SPEAKER_00]: This is our Monday, June 8th, 2026 edition.
[SPEAKER_00]: There's a lot going on.
[SPEAKER_00]: Bounce today is enough to, I don't know, say cancel out, but make Friday relatively irrelevant in the grand scheme of things.
[SPEAKER_00]: We're going to get to that and much, much more on today's show, but most importantly, it will be all about what's on your mind.
[SPEAKER_00]: I can bring topics all day long, but as usual, it's really
[SPEAKER_00]: your show.
[SPEAKER_00]: This is my show.
[SPEAKER_00]: This is your show.
[SPEAKER_00]: Whatever you have top of mind, please bring it here by giving the number of call.
[SPEAKER_00]: You know the number.
[SPEAKER_00]: It's always eight and eight ninety nine chart.
[SPEAKER_00]: You can, and you can call 24 hours a day, seven days a week.
[SPEAKER_00]: We love your live calls.
[SPEAKER_00]: But if you're listening after hours, no big deal.
[SPEAKER_00]: We are excited here for me.
[SPEAKER_00]: We're excited to know what is on your mind.
[SPEAKER_00]: Now heads up, our next wealth webinar is set for Tuesday, June 30th from 12 to 1 PM.
[SPEAKER_00]: The civic time title is beyond the yield, how to invest for your income needs.
[SPEAKER_00]: Okay, we're going to, uh, and if you want to register, just head over to best talk.com.
[SPEAKER_00]: It's free, register.
[SPEAKER_00]: Now, just to be able to talk about today's Mark performance and run down the show topics for the hour.
[SPEAKER_00]: But first, let's tackle this call a question now.
[SPEAKER_06]: long-term listener just curious your opinion on ticker i-i-p-r looking to add some additional re-exposure to my portfolio and I've had my eye on this for quite a while nearly a year you have been watching it and just curious what you think at these levels before the here and on the podcast thanks again back.
[SPEAKER_00]: All right looking at i-i-i-p-r I think we used to use the own for clients
[SPEAKER_00]: It fell at bed.
[SPEAKER_00]: It had some issues with some defaults.
[SPEAKER_00]: They own can at their kids.
[SPEAKER_00]: It's a cannabis room.
[SPEAKER_00]: They own cannabis facilities, grow facilities, dispensaries, things like that.
[SPEAKER_00]: They go and they get these facilities licensed in wherever they're at.
[SPEAKER_00]: and they're able to charge above average rents.
[SPEAKER_00]: Now anything within the cannabis space also runs a little bit higher risk, because some of it's the type of people in that industry, the volatility of the business, regulatory issues that they can run into,
[SPEAKER_00]: all of that.
[SPEAKER_00]: And so they've had some defaults.
[SPEAKER_00]: But recently starting to rally things are improving, earnings expectations are improving up to $7.55 in FFL funds from Operation for next year on a $59 dollar stock.
[SPEAKER_00]: And if you look at the current Divineal 12.8% which is pretty high, but as always when you
[SPEAKER_00]: Getting exposure to that, the question is, is it good risk versus reward?
[SPEAKER_00]: It's never about avoiding risk.
[SPEAKER_00]: You're never going to get rid of the risk.
[SPEAKER_00]: It's about making smart calculated risks.
[SPEAKER_00]: Good risk versus reward decisions.
[SPEAKER_00]: That's what all the best thing is about.
[SPEAKER_00]: That's the frame of mind you have to go into every decision in the investment world about.
[SPEAKER_00]: What are the risks?
[SPEAKER_00]: What are the rewards?
[SPEAKER_00]: Is this a good risk versus reward decision?
[SPEAKER_00]: And the White House recently, rescheduled cannabis.
[SPEAKER_00]: It makes a lot of their businesses that IPR rents to.
[SPEAKER_00]: able to get more financing, get bank financing, bank accounts, things like that.
[SPEAKER_00]: That I think is going to help them overall lower their default rate.
[SPEAKER_00]: And once again, you're seeing that in the funds from operations, so it's supposed to be at 3% this year, 8% next year.
[SPEAKER_00]: And to me, that is great.
[SPEAKER_00]: That is the reason I think this is a good risk versus reward.
[SPEAKER_00]: It's still high risk, but I think it is a good risk versus reward.
[SPEAKER_00]: The chart has been improving as of late, and so I give IAPR a thumbs up.
[SPEAKER_00]: Now we had a great show on Friday.
[SPEAKER_00]: We looked into the story about defense stocks in 2020.
[SPEAKER_00]: Sixth now, the global security boom creators or creates, excuse me, creates long term investment opportunity.
[SPEAKER_00]: We also answered a listener question on PODD, insulate corp around insulin, insulin business good,
[SPEAKER_00]: That's something that we answered.
[SPEAKER_00]: And if you happen to miss it, go check it out.
[SPEAKER_00]: That's the way to get every show is to follow and best talk wherever you get your podcast.
[SPEAKER_00]: Now, there's a lot of ground to cover over the next 45 minutes or so in time, if you're going to get to all of it, our main focus point is about index funds and is it enough to own just index funds in a volatile market, the case for and against active strategies.
[SPEAKER_00]: And with the look for,
[SPEAKER_00]: if you are going to pick an active strategy.
[SPEAKER_00]: What are they?
[SPEAKER_00]: Signs that this is a strategy to maybe potentially pay up a little bit for.
[SPEAKER_00]: Beyond and index fund, okay?
[SPEAKER_00]: Let's take a look at that.
[SPEAKER_00]: We also have other topics on the Docket One is, I don't know, look at the recent development within strategy.
[SPEAKER_00]: Remember, might be called micro strategy.
[SPEAKER_00]: Now it's a strategy all around basically
[SPEAKER_00]: investment strategy, whatever you want to call it, and it's very controversial.
[SPEAKER_00]: So I want to dig in to some recent actions, not words, but actions of the company that might shed some light on the real story behind the marketing glitzing glamour.
[SPEAKER_00]: Also IPO time we have talked a lot about the SpaceX IPO, we have an open AI IPO coming
[SPEAKER_00]: The historical returns for buying an IPO at the end of the first day of trading is it higher or lower a few weeks later.
[SPEAKER_00]: The study looked at 9300, so a lot of IPOs, US listed IPOs from 1980 to 2024, a long time frame, a lot of IPOs, a lot of data to teach you the good and the bad of IPO investing.
[SPEAKER_00]: We'll take your calls.
[SPEAKER_00]: Your voice bank calls, one was, we have us on oil stocks, the others on Nvidia, and then we have some questions that came in via the comment section of the Invest Talk YouTube channel.
[SPEAKER_00]: But most importantly, we'll be your live calls.
[SPEAKER_00]: It ended at 99 chart, but we're going to head into a break.
[SPEAKER_00]: Please, you can, you can have it in any time.
[SPEAKER_00]: Leave your question on the Invest Talk Voice Bank, or once again, if you're listening via the live stream on the Invest Talk website or possibly an AM1220 in the Bay Area, you can call right now at 8.899 chart and up next.
[SPEAKER_00]: I'll comment on today's market activity.
[SPEAKER_02]: This is Invest Talk, now closing in on 63 million downloads, and Justin Klein is here taking your questions live.
[SPEAKER_02]: 888-99-Chart
[SPEAKER_00]: 899 chart and 899 2 4 2 7 8 tell you get through and ask your question on today shows take a look at take a look at the market today after a large cell off on Friday we had a bit of a bounce back day as that goes up about a third of one percent
[SPEAKER_00]: drove the market.
[SPEAKER_00]: You had intel up 11% on a deal with Google, but it's being rumored to help with some of their packaging and their TPUs.
[SPEAKER_00]: But then you had AMD up 5% to God come up up about three after a week earnings report last week.
[SPEAKER_00]: And video up to Apple had their WDC and Syrian announcement around AI.
[SPEAKER_00]: kind of underwhelming there.
[SPEAKER_00]: So marketing like that, Google, Microsoft and Meta were all down.
[SPEAKER_00]: So really it was in video and a lot of the chips name chip names driving the market's higher Tesla 4.5% you add some of the chip manufacturing equipment, manufacturer companies, those also did well.
[SPEAKER_00]: But then there's a lot of red utilities, healthcare, even a lot of the
[SPEAKER_00]: Yeah, a lot of REITs were weak, a lot of the actuals were weak.
[SPEAKER_00]: And the utility's being down is kind of a tell for me and you see that also in just bonds in general.
[SPEAKER_00]: Bonds were weak, you had yields up about one to three basis points across the curve.
[SPEAKER_00]: And this is where the ultimate problem lies for
[SPEAKER_00]: further gains in the equity markets over the coming weeks and months is a more hawkish stance from the Fed.
[SPEAKER_00]: And something I discussed in my weekend video on YouTube, which is, was this the catalyst or the, yeah, I guess the jobs number on Friday was that the catalyst for the start of a hawkish pivot from the
[SPEAKER_00]: They're all pretty much re-accelerating.
[SPEAKER_00]: Jobs numbers, both the Friday payroll number, as well as the ADP number, the private payroll.
[SPEAKER_00]: So it's not something that's being corroborated by what's going on in the private sector, ADP.
[SPEAKER_00]: And then you had ISM manufacturing re-accelerating.
[SPEAKER_00]: Services is not re-accelerating, but it's flat and still in growth territory.
[SPEAKER_00]: I think it's a city-surprise index, is between the surprise of the upside, which means that the Fed has to start thinking about fighting inflation.
[SPEAKER_00]: If there's nothing broadly negative about growth in the economy, they can talk about the K-shaped nature of it and all that in impact and inflation, but that's really what they have to focus on.
[SPEAKER_00]: Now is,
[SPEAKER_00]: Brought to growth is relatively fine, but inflation isn't.
[SPEAKER_00]: You look at services, PMI prices, paid index, that is still at the highest levels in three years.
[SPEAKER_00]: Same in the manufacturing side.
[SPEAKER_00]: All this is signaling that inflation is the issue.
[SPEAKER_00]: And when inflation is the issue and not growth,
[SPEAKER_00]: And the markets have fed out and text stocks peaked right at the end of 2021.
[SPEAKER_00]: And the broader, and that's what you had, the NASDAQ down 33% in that year.
[SPEAKER_00]: The SPU's down about 19% in that year.
[SPEAKER_00]: But remember correctly, the dial wasn't down much, because it wasn't treating a high valuations.
[SPEAKER_00]: And so that is the risk here for markets is that Friday was the start of a major inflection point.
[SPEAKER_00]: Now what I said in the video over the weekend, which was, yes, this could be the inflection point.
[SPEAKER_00]: Doesn't mean it's guaranteed, it's one day, you need to follow through in the coming weeks.
[SPEAKER_00]: Now today was one day at Bounce didn't get a bow Friday's high, so that also tells you that this isn't tell you much today.
[SPEAKER_00]: It's a bounce from a short-term oversold level.
[SPEAKER_00]: That's it.
[SPEAKER_00]: Do we get more falter in the fact that rates were higher today?
[SPEAKER_00]: You had utilities down.
[SPEAKER_00]: You had bond proxies down.
[SPEAKER_00]: That means that there's potential for rates to break back out to the upside just like they did in 2022.
[SPEAKER_00]: And that is the ultimate risk.
[SPEAKER_00]: And you have what's going on in the Middle East.
[SPEAKER_00]: Still frozen.
[SPEAKER_00]: Still, some type of negotiations going on, summer break in the ceasefire, there's rockets still being shot everywhere.
[SPEAKER_00]: It's still a volatile situation where, guess what?
[SPEAKER_00]: The Straits of our moves remain.
[SPEAKER_00]: Straits of our moves remain close.
[SPEAKER_00]: Bottom line.
[SPEAKER_00]: And so, as long as that's happening, inflation pressures are going to mount and that pushes the Fed to potentially tighten policy.
[SPEAKER_00]: Now what else happened today?
[SPEAKER_00]: Dollar Knicks is down point one percent dollar gold finish a little bit lower silver was down point eight percent Bitcoin up five percent I've dropping 17 percent last week's a little bit of a bounce there, but overall that is showing relative weakness WTI was up point eight percent But off it's best the level.
[SPEAKER_00]: So that was the market today once again.
[SPEAKER_00]: We'll see how we fall through for Fridays move throughout the week Those are the best talk and I work continues after this break, so which questions in now at eight to eight ninety nine chart
[SPEAKER_02]: Get ready for an all-new Invest Talk Wealth webinar beyond the yield.
[SPEAKER_02]: How to invest for your income needs.
[SPEAKER_02]: Tuesday, June 30th, noon to one Pacific time.
[SPEAKER_02]: Learn more and register now at investtalk.com.
[SPEAKER_00]: We're going to go up to Sonoma and talk to James.
[SPEAKER_00]: He wants to talk about what everybody is looking at in today's market.
[SPEAKER_00]: And that is SpaceX.
[SPEAKER_00]: Are you, do you get on the IPO?
[SPEAKER_03]: Well, I'm asking, I'm asking, and you guys, I'm sure, have talked about this.
[SPEAKER_03]: So I apologize if I'm going home all the way around.
[SPEAKER_03]: Just to every day, every day, investor, I've had four people have called me in my friend, Jim, you gotta get on this.
[SPEAKER_03]: They're buying these mutual funds that are apparently going
[SPEAKER_03]: have the inside lane on the SpaceX things.
[SPEAKER_03]: And I mean, I own the QQQs, I own a couple of tech funds.
[SPEAKER_03]: I own the ETF.
[SPEAKER_03]: I mean, are you guys going crazy with this too?
[SPEAKER_03]: I'm looking for a voice of reason.
[SPEAKER_03]: I'm the capital investor, the tortoise and the hare.
[SPEAKER_03]: I'm the tortoise.
[SPEAKER_03]: I'm just by the dividend stocks.
[SPEAKER_03]: I move along.
[SPEAKER_03]: I've talked to you guys before.
[SPEAKER_03]: what what what should I do?
[SPEAKER_00]: Well, if you're the the tortoise, then this is the antithesis of what you would want to invest in.
[SPEAKER_00]: This is, I know, egregiously overvalued and this is just exit liquidity for the average investor.
[SPEAKER_00]: And so, you know, there could be short-term pop, sure, absolutely.
[SPEAKER_00]: And if that's what you're getting in it for
[SPEAKER_00]: for a short period of time, you know, weeks, maybe month or two, sure that's certainly a possibility, but I, I, I, I see almost no world where in two to three years, this isn't dramatically lower.
[SPEAKER_03]: So what did you guys do?
[SPEAKER_00]: All right, we're not touching it.
[SPEAKER_00]: Why would we, why would we touch it?
[SPEAKER_03]: We, we, we, that's what I'm looking for the voice of reason here.
[SPEAKER_00]: Yeah, we have zero interest in taking any of this junk.
[SPEAKER_00]: You know, it's trading at nearly 100 times.
[SPEAKER_00]: I mean, anything above 10 times sales is usually too high.
[SPEAKER_00]: 20 times, usually it greets the other value.
[SPEAKER_00]: So what's 100?
[SPEAKER_00]: I mean, it's just insulting, really.
[SPEAKER_00]: So yeah, I mean, you can talk about all the projections.
[SPEAKER_00]: And certainly there's parts of their business that are great.
[SPEAKER_00]: On the qualms, with parts of the business being fantastic, but especially when so much of the valuation is being put on growth of XAI.
[SPEAKER_00]: where, you know, what's going on with anthropic and open AI.
[SPEAKER_00]: And some of the other names, they're just frankly doing bigger and better things in the AI world.
[SPEAKER_00]: I see zero reason why X AI suddenly become a leader in the space.
[SPEAKER_00]: So, you know, and what's gonna end up Starlink is great, and you know, parts of what SpaceX does is great, but,
[SPEAKER_00]: You know, is the growth really going to be enough to justify the valuation.
[SPEAKER_00]: And most importantly, is the earnings at some point in positive cat going to be enough to justify the valuation because they don't make money today.
[SPEAKER_00]: So I mean, that can go on and on and on, but the bottom line is there's nothing about this offering that is attractive from a valuation standpoint.
[SPEAKER_00]: Once again, it's borderline insulting at these levels.
[SPEAKER_03]: Okay, my guys, are you listening to this?
[SPEAKER_03]: I'm talking to you guys now.
[SPEAKER_03]: You listen to your show.
[SPEAKER_03]: You listen to this.
[SPEAKER_03]: I think you're crazy all of you guys.
[SPEAKER_00]: I don't know who you're talking to, but anyone that is looking at it, yeah, you get.
[SPEAKER_00]: My friends.
[SPEAKER_00]: There you go.
[SPEAKER_00]: Well, hopefully, do you listen to the show and hopefully, they're getting a lot out of it.
[SPEAKER_00]: So thank you for the call and appreciate your kind of words.
[SPEAKER_03]: All right, bye.
[SPEAKER_00]: Have a good day.
[SPEAKER_00]: Now let's tackle another YouTube comment question.
[SPEAKER_00]: Navinan says, can you please review PPG and share your thoughts?
[SPEAKER_00]: Does that have a small position?
[SPEAKER_00]: Less than two percent of my portfolio, average cost around 100.
[SPEAKER_00]: Do you think it's a good time to add more?
[SPEAKER_00]: I've been selling monthly cover calls on this as well.
[SPEAKER_00]: We're going to 100 in $12.88 to day up a little bit after hours.
[SPEAKER_00]: What is PPG do?
[SPEAKER_00]: Manufacturing should be paint coatings, and especially materials.
[SPEAKER_00]: It says one of those industrial names that is just consistent.
[SPEAKER_00]: Very consistent when it comes to its profitability.
[SPEAKER_00]: Earnings in 2019 were 622.
[SPEAKER_00]: And it's been consistently increasing its earnings pretty much every year.
[SPEAKER_00]: Last year, it did have a small dip down 4% earnings.
[SPEAKER_00]: But back up 4% this year, up 10% next year, expected.
[SPEAKER_00]: And once again, in the 1864 sense next year, the 4P is only about 14, so mid-teens multiple lower than the normal market, but it is slow growth, right?
[SPEAKER_00]: Not an exciting name, their industrial coding segment has automotive.
[SPEAKER_00]: coatings, I think, of paint for your car, they have industrial coatings, packaging coatings, specialty coatings, all that type of stuff.
[SPEAKER_00]: So wood stains, adhesive sealant things like that.
[SPEAKER_00]: Once again, boring.
[SPEAKER_00]: Mark you have 25 billion, but if you look at return equity, 20.3% return rest of the capital around 10%, which is actually a little bit lower than their 10 year average.
[SPEAKER_00]: So I think there's more room for upside there.
[SPEAKER_00]: So this is one of those consistent businesses.
[SPEAKER_00]: Good.
[SPEAKER_00]: profitability, solid balance sheet only about $6 billion in net debt on a $25 billion market cap free cash flow at 1.2 billion, just a solid business.
[SPEAKER_00]: I would pick it up.
[SPEAKER_00]: I think that these are the type of businesses that are underappreciated in today's market.
[SPEAKER_00]: It will revalue back to market multiples.
[SPEAKER_00]: I think when
[SPEAKER_00]: growth across the market slows down, which I think it'll eventually will.
[SPEAKER_00]: So I like this as a good value name, kind of mid-cap in this market.
[SPEAKER_00]: So I'm getting the PPG of Thumbs Up.
[SPEAKER_00]: Now the next best talk we're looking to this story is the AI trade, over the bear case against hyper-scaler, spending after years of AI euphoria, a growing bear case is emerging around the mega-cap, tech companies pouring hundreds of billion dollars into AI infrastructure.
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[SPEAKER_00]: Accountability means more than advice.
[SPEAKER_00]: It means we invest alongside you.
[SPEAKER_00]: Through our parallel investing approach, when we recommend an investment for clients, one or more KPP principles invest their own capital at the same time.
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[SPEAKER_00]: So our folks point today is about index funds and are they enough in a volatile market in the case for an against active strategies?
[SPEAKER_00]: And what's look for if you are investing in some sort of an active strategy?
[SPEAKER_00]: The most important thing to know about the active versus passive debate is that it's not a binary decision.
[SPEAKER_00]: Don't all the S or I'll know,
[SPEAKER_00]: asset classes and sub genres of those asset classes.
[SPEAKER_00]: So we say, for example, in the generally bond funds are much better active, much better to invest in active funds.
[SPEAKER_00]: That's typically is that because they're taking them more risk than an aggregate bond
[SPEAKER_00]: Also, active funds will be able to easily shift their duration risk and other types of risks.
[SPEAKER_00]: Then, what's going to just pass the funds?
[SPEAKER_00]: On the equity side, if you want foreign exposure, active also is typically better than passive.
[SPEAKER_00]: Then, when you want to go into min and small caps, they tend to be the more active funds tend to be a lot more attractive than the active versions of large cap.
[SPEAKER_00]: equities, U.S. equities.
[SPEAKER_00]: So those are some little nuances you have to understand and just some light on once again, why this is not a binary decision.
[SPEAKER_00]: Now in phase value, index funds have good marketing, low cost.
[SPEAKER_00]: They generally were broad diversification.
[SPEAKER_00]: Unfortunately, that has not been the case now.
[SPEAKER_00]: It's it's moved so far in the direction of just
[SPEAKER_00]: a good argument that you're getting broad versification.
[SPEAKER_00]: So that's kind of been thrown out the window because just the way these funds, the market-capitated funds have been structured.
[SPEAKER_00]: Now the argument for active is that they charge more and they don't always deliver and that's certainly true.
[SPEAKER_00]: But when market dynamics shifts,
[SPEAKER_00]: A new regime emergence, mergers, I always use 2020 to example, because it's fresh in people's minds.
[SPEAKER_00]: It's very unique in a way that it didn't, there's no recession.
[SPEAKER_00]: It was just a higher and straight environment that had impacts on certain sectors and not others, and when that happens, it kind of sheds the light on the risk that you're always taking with passive index funds, but not always feeling negatively.
[SPEAKER_00]: but it obviously in 2022, you did in 2008, you did.
[SPEAKER_00]: In 2016, you did.
[SPEAKER_00]: So active managing management can deliver more than just returns it can actually create true diversification in an environment where index funds don't offer that anymore.
[SPEAKER_00]: It also can be discerning for valuation where once again, you buy an index fund when you buy one, you're not thinking,
[SPEAKER_00]: No one's thinking about what is the valuation of the different sectors, the market as a whole, et cetera.
[SPEAKER_00]: It's just money go in, buy, here's the waiting, that's it.
[SPEAKER_00]: So active management is about selecting the right names, based on risk awareness, valuation discipline, and most of all, a willingness to break from the index.
[SPEAKER_00]: Typically, focusing on quality.
[SPEAKER_00]: Companies that can succeed in that environment.
[SPEAKER_00]: bit of durable earnings growth.
[SPEAKER_00]: And now once again, it doesn't leave the investor dependent on just a handful of names to really drive returns, which is what you're seeing in the major indexes.
[SPEAKER_00]: Now, this lack of suit activity within the indices has created a lot of risk.
[SPEAKER_00]: If just a handful of those names stumble, there's no offsetting, there's no hedge there.
[SPEAKER_00]: There's no buffer, there's no margin of safety.
[SPEAKER_00]: There's no reallocation to more defensive sectors, or more attackally valued sectors or stocks.
[SPEAKER_00]: No risk management, just full participation up and down and it feels good when things are good, but not so good when things are not.
[SPEAKER_00]: In the aggregate, 10 of the 11 sectors right now are priced at a premiums of the historical averages.
[SPEAKER_00]: Only reads the real estate sector are, and that's actually just trading at its historic average.
[SPEAKER_00]: So what to look for?
[SPEAKER_00]: What should you look for when you're thinking, okay, should I turn to active?
[SPEAKER_00]: Once again, I just talked about kind of the sub-genres and asset classes to think about being more active versus just passive.
[SPEAKER_00]: But then within the different strategies, how can you tell if it's attractive?
[SPEAKER_00]: attractive, active manager.
[SPEAKER_00]: Number one is active share.
[SPEAKER_00]: This is basically a different is it than the overall index.
[SPEAKER_00]: Are you just closet index or they call it?
[SPEAKER_00]: Where you add your little bit different, but overall you're 80-90% of what's the broader market is.
[SPEAKER_00]: So you want an active share above 80% this can help you mitigate downside risk and make it so that if you're paying a little bit more and once again, I think it's okay to pay more for active management and you don't pay a greedously more, but more can be very much worthwhile.
[SPEAKER_00]: So they said before, it's not a binary choice.
[SPEAKER_00]: It depends how much more you're paying, it depends on what you're getting and you actually working with a fiduciary advisor like us
[SPEAKER_00]: have your money in, you know, a big broker and you choose an active fund.
[SPEAKER_00]: It's a big question as well.
[SPEAKER_00]: Then downside protection.
[SPEAKER_00]: I always love to use the math, which is if you lose 30% of your portfolio, value, you need to gain it.
[SPEAKER_00]: It takes 43% to get back to even, 43%.
[SPEAKER_00]: And the past 25 years, the SP is falling 30% or more three times.
[SPEAKER_00]: So what does that downside capture ratio?
[SPEAKER_00]: If you have another 2022, and then S&B goes down 19%, the NASDAQ goes down 33% how much downside is that fun capturing of that?
[SPEAKER_00]: Probably gonna be down, because it's just inequities, right?
[SPEAKER_00]: And you have a broad base cell off like that.
[SPEAKER_00]: You're not going to side's double completely.
[SPEAKER_00]: So you can't expect even active managers to
[SPEAKER_00]: be up in those type of years.
[SPEAKER_00]: But, if SPS down 20, and it's only down 9, that's a great, it doesn't sound great, right?
[SPEAKER_00]: You're still down 9, but you're doing much, much better, and don't take, doesn't take much to get back to even.
[SPEAKER_00]: And then consistency.
[SPEAKER_00]: Does the manager consistently land in the top half of their peer group?
[SPEAKER_00]: year after year after year as opposed to maybe being one of the best funds in a particular year if they hit certain theme right or the type of companies they tend to own do very well because maybe liquidity is very good and they're just the most sensitive to it.
[SPEAKER_00]: But the problem is usually when that happens you turn the other way and suddenly it's the bottom quartile.
[SPEAKER_00]: Those are not the managers that you want which you want are consistent or ones that are
[SPEAKER_00]: where it's solid, it can solid returns year after year where the market's really good, average, poor, it's just beating the average.
[SPEAKER_00]: Not the top, not the bottom, but just consistently good.
[SPEAKER_00]: Those are the businesses, or sorry, the managers you want to take advantage of.
[SPEAKER_00]: Let's go to Dave and Freyance, and once I talk about CLK.
[SPEAKER_04]: Correct.
[SPEAKER_04]: I took a small position in it and I'm down about 16%, I'm looking at the charge.
[SPEAKER_04]: They all look like the bottom pretty much in the eye of one to get your opinion of if I should dump it or hang in there.
[SPEAKER_00]: So we actually had on this for clients and we dumped it, I think a couple of weeks ago.
[SPEAKER_00]: Yeah, I would I would dump it the the trends relative strength there's just one the other way and we fact we we wanted to move this into something I had much better relative strength Think they had some rumors of some accounting issues we don't like to see that either so we just moved on I think it's the name you want to move on from and find another telecom name that's working better.
[SPEAKER_04]: Thank you.
[SPEAKER_04]: Appreciate it.
[SPEAKER_00]: Thanks for the columns.
[SPEAKER_00]: TLK.
[SPEAKER_00]: Hey, you and some of you, some, and once again, you see a red flag that maybe didn't see, you know, wasn't there when you first bought it.
[SPEAKER_00]: You have to be honest with yourself and say, hey, I don't like that.
[SPEAKER_00]: I may have liked this name before everything that added up, but this is a new piece of data.
[SPEAKER_00]: Anyhow, I might be down a little bit.
[SPEAKER_00]: But this is capital that could be used better somewhere else where there isn't this red flag.
[SPEAKER_00]: And that's part of professional at management.
[SPEAKER_00]: That's one of the hardest things for the average person to do is to say, hey, this is a new piece of information.
[SPEAKER_00]: It runs counter to what I thought before.
[SPEAKER_00]: And so now my view is not the same.
[SPEAKER_00]: It needs to no longer be part of what I'm doing.
[SPEAKER_00]: and move on.
[SPEAKER_00]: You take the last thing move on, you learn from it.
[SPEAKER_00]: And you also are honest, that, hey, this is part of the investment world.
[SPEAKER_00]: You're buying individual names, they're always gonna have a handful of these every single year or so, that just don't work out.
[SPEAKER_00]: But the winners, kind of balance, losers, and then some.
[SPEAKER_00]: That's ultimately what you're looking for.
[SPEAKER_00]: Let's talk about strategy, or now called strategy.
[SPEAKER_00]: There's a lot of the tractors, there's a lot of doubters, there's a lot of controversy online, but there's a lot of people that love Bitcoin, they love strategy, they love Michael Sailer.
[SPEAKER_00]: But this is a project that is wavering,
[SPEAKER_02]: fluff.
[SPEAKER_02]: A lot of marketing.
[SPEAKER_00]: A lot of what Michael Saylor says.
[SPEAKER_00]: He says things like volatility of Satoshi's gift to the faithful, which I think is nonsense, but it's all great marketing.
[SPEAKER_00]: Unfortunately, we're in a world where the great marketers are winning out.
[SPEAKER_00]: Why?
[SPEAKER_00]: Because people are too lazy to actually look into what's actually happening.
[SPEAKER_00]: So why don't we do that?
[SPEAKER_00]: Why don't we look at what they're doing and not what Michael Sealer is saying?
[SPEAKER_00]: We're gonna go back pretty much the last six months.
[SPEAKER_00]: The first big development was last December.
[SPEAKER_00]: Strategy sold common stock to build the reserves at the 2.25 billion dollars.
[SPEAKER_00]: Why is that important?
[SPEAKER_00]: Because they kept those dollars.
[SPEAKER_00]: They kept those that feat.
[SPEAKER_00]: And they didn't go all in on Bitcoin.
[SPEAKER_00]: And that was after the equity had fallen already by 70%.
[SPEAKER_00]: So it's not like they're issuing those shares at a giant premium at the highs.
[SPEAKER_00]: And they were doing this to service the company's ever-growing preferred stock dividend.
[SPEAKER_00]: And just in six months, that cash buffer has dwindled from two and a quarter billion to 900 million today, which only covers about 78 months of that dividend.
[SPEAKER_00]: The market's wondering, can they keep it going?
[SPEAKER_00]: Now, the second thing they did, they repurchased about half of its $3 billion in $20.29 zero coupon convertible bonds.
[SPEAKER_00]: And that's huge because,
[SPEAKER_00]: They didn't buy back the preferred's.
[SPEAKER_00]: Instead they lost, they launched STRC, which we'll get to in a little bit.
[SPEAKER_00]: But it shows you that management is focused on staying solvent, just in general.
[SPEAKER_00]: Preferred stocks are more expensive because you have to pay the dividend unlike a zero cube on bond.
[SPEAKER_00]: But they don't mature, and you can defer,
[SPEAKER_00]: the payments.
[SPEAKER_00]: So swapping cheap financing for more flexible financing.
[SPEAKER_00]: They cost more in the short term, but less in the long term.
[SPEAKER_00]: So they're trying to avoid an outright default.
[SPEAKER_00]: And that tells you a lot about the psyche and the real fear that they're having.
[SPEAKER_00]: Third thing is they sold 32 Bitcoin recently.
[SPEAKER_00]: Now it's not a lot, but it's contrary contrary to what they've always said we're
[SPEAKER_00]: And when they did that, the stock fell in the other 20%.
[SPEAKER_00]: And then the fourth is that STRC stretch.
[SPEAKER_00]: Remember, it was supposed to be this money market fund alternative yielding 10 plus percent?
[SPEAKER_00]: Well, guess what?
[SPEAKER_00]: That money market alternative went from 100, par, all along, all the way down to 91, on Friday.
[SPEAKER_00]: So it's no longer cheap, or it's no longer safe, excuse me.
[SPEAKER_00]: And what this all adding up to is that,
[SPEAKER_00]: Clearly, they are under major stress, and this whole strategy, pun intended, will eventually be a zero, so it's something you certainly want to stay away from.
[SPEAKER_00]: Now, we're heading to our final break, let's get to questions in now at 8.899 chart.
[SPEAKER_02]: In Best Talk, tell your friends they can listen live, download the free podcast, or watch In Best Talk on our YouTube channel.
[SPEAKER_05]: probably better way to say it, and it seems like they are trading cheaper than they usually do, and I would like to start a position if you guys feel like it's good risk versus reward here.
[SPEAKER_05]: So I'll listen on a show.
[SPEAKER_05]: Appreciate it.
[SPEAKER_05]: Take care, bye.
[SPEAKER_00]: I'm looking in Nvidia, and you're correcting that there are certainly competitors.
[SPEAKER_00]: It's just, yeah, their chips are, when it comes to AI, compute they are the highest in demand, but there
[SPEAKER_00]: companies from A&B to Intel to Qualcomm, et cetera, that are attempting to build competitors, Google has their own CPUs, and clearly historically there's always been a race for better products to be deployed, and I don't think that's going to change.
[SPEAKER_00]: But that probably isn't my biggest issue with NVIDIA.
[SPEAKER_00]: My biggest issue is actually a lot of the circular financing that's happening within the industry that NVIDIA is a part of, you know, where they're investing in OpenAI and OpenAI is investing in NVIDIA chips, et cetera, and that's just one example.
[SPEAKER_00]: But there are a lot of those from Oracle to Microsoft and beyond.
[SPEAKER_00]: And there's just a lot of shady accounting going on within Nvidia.
[SPEAKER_00]: And that's my biggest issue with it.
[SPEAKER_00]: So I would not be investing in it at this point, especially it's really underperformed a lot of the other names as of late.
[SPEAKER_00]: So momentum is certainly waiting.
[SPEAKER_00]: And it's a very over-owned, over-owned stock.
[SPEAKER_00]: And growth is slowing down next year.
[SPEAKER_00]: earnings this year, so so you have 87%.
[SPEAKER_00]: Will the market knows that?
[SPEAKER_00]: But then it's supposed to be up only 40% next year, which sounds like a lot, but once again, growth, slowing.
[SPEAKER_00]: And which makes sense at this size.
[SPEAKER_00]: When you're this size, mark up a five trillion dollars and these valuations, which are not egregious, I won't say they're egregious, they're not.
[SPEAKER_00]: but they are high.
[SPEAKER_00]: So I don't like the relative under performance.
[SPEAKER_00]: I don't like the shady accounting that I think is going on within the industry as a whole.
[SPEAKER_00]: So I don't want to call them out specifically because they aren't the only ones.
[SPEAKER_00]: There's a lot within this space.
[SPEAKER_00]: So if you don't already own it, I just don't see this as a great entry point.
[SPEAKER_00]: Thanks for the call.
[SPEAKER_00]: Lastly, let's talk a bit about how IPOs fare.
[SPEAKER_00]: We have the SpaceX IPO coming up on Friday.
[SPEAKER_00]: And the average US IPO, first day gain, is about 19%.
[SPEAKER_00]: Now, that's an aggregate that's over 9,300 US of the stipios from 1980 to 2024.
[SPEAKER_00]: And if it's a larger name, so there's a lot of small names in that number.
[SPEAKER_00]: But if you have revenue of over 500 million on average, that pop is about 10%.
[SPEAKER_00]: But as I said with that call earlier, if that's what you're going for, that's fine.
[SPEAKER_00]: If you're just trying to get in on it and then dump it, put it really quick, it's a reasonable strategy, although high risk.
[SPEAKER_00]: But for most people, it should I buy this and hold it?
[SPEAKER_00]: You know, is this really a great opportunity where, you know, it could be up to three
[SPEAKER_00]: But history says that the average historical return for buying an IPO at the end of the first day, let's say you didn't get on it.
[SPEAKER_00]: And you went a buy it on Friday.
[SPEAKER_00]: The average return three years later is about 21% lower than what the average market weight index would have returned.
[SPEAKER_00]: To underperform by 21% in three years, like roughly 7% a year.
[SPEAKER_00]: Now, a lot of people will say, well, it's going to be an index.
[SPEAKER_00]: And that's going to get people to buy, or get the force have force buyers.
[SPEAKER_00]: And that's certainly true to degree.
[SPEAKER_00]: But many indices are float weighted, being that reflected only the value of the shares available to trade, not those that are locked up with insiders.
[SPEAKER_00]: And the SpaceX float is only going to be 5%.
[SPEAKER_00]: Initially.
[SPEAKER_00]: So, which also tells you a lot, right?
[SPEAKER_00]: They're trying to manufacture stability at these valuations.
[SPEAKER_00]: which may happen for a short period of time.
[SPEAKER_00]: But like I said, as a two to three year time timeframe, I just think it's gonna be disaster.
[SPEAKER_00]: I'm Justin Klein, my new FKB Financials Parallel Investing when we make a trade for our clients who make the same trade for ourself, same day, same price, same percentage, no front running, no special treatment, and we invest right along side our clients, which are the same risk, and potential for success and you can learn more by investing by heading over to invest.com.
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[SPEAKER_00]: Good night.
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