[SPEAKER_04]: This is Invest Talk, from KPP Financial, helping investors make sense of the markets one day at a time.
[SPEAKER_04]: Here's your host, Luke Guerrero.
[SPEAKER_02]: Good afternoon, fellow investors, and happy Friday.
[SPEAKER_02]: My name is Luke Guerrero, this is the Friday July 17th, 2026 edition of Invest Talk.
[SPEAKER_02]: As always, we've got plenty of things to talk about today, decidedly negative week for markets, rising tensions in the Middle East, but we'll get to that in a little bit.
[SPEAKER_02]: We will also get to what happened today in the market.
[SPEAKER_02]: We will run down our main focus point in all those show topics that we have for you as well.
[SPEAKER_02]: But why don't we kick off this show by answering one of your finance and investment questions now?
[SPEAKER_08]: Hi, I've got a question.
[SPEAKER_08]: I was curious about the security symbol
[SPEAKER_08]: I, India and Mary, just back to know what your thoughts are.
[SPEAKER_08]: I was hoping to buy some, thank you.
[SPEAKER_02]: Zim integrated shipping services is a container shipping company out of Israel.
[SPEAKER_02]: They have just over 100 container ships that operate Trans-Pacific Trans-Atlantic and also through the Suez Canal.
[SPEAKER_02]: It is also a national security asset for Israel.
[SPEAKER_02]: And there's a little bit of a, let's say, acquisition battle going on right now.
[SPEAKER_02]: So all the price movement you're seeing is a little bit distorted relative to what is going on with the company.
[SPEAKER_02]: Now, before we dive into that, we'll talk about earnings.
[SPEAKER_02]: Because earnings weren't great.
[SPEAKER_02]: They missed in their most recent reporting on May 20th.
[SPEAKER_02]: This about 13% on revenue.
[SPEAKER_02]: They had a net loss.
[SPEAKER_02]: of 86 million versus it net income, roughly 300 million.
[SPEAKER_02]: A year ago, EBITDA was down 60% earnings per share, was negative 71 cents versus 245 positive, a year ago, carrier volume is down.
[SPEAKER_02]: I mean, they had Pandemic era highs and they pretty much sharply fallen from that.
[SPEAKER_02]: One of the reasons why we'll cost are going up.
[SPEAKER_02]: What do shipping containers run on?
[SPEAKER_02]: We're shipping ship, what do ships run on?
[SPEAKER_02]: They run on fuel, fuel is a bit more expensive.
[SPEAKER_02]: But again, there's a merger arbitrage opportunity going on here.
[SPEAKER_02]: This is not a fundamental shipping story at this point.
[SPEAKER_02]: Right?
[SPEAKER_02]: They have two companies.
[SPEAKER_02]: There's a pag Lloyd who offered $35 a share.
[SPEAKER_02]: That was approved by 97% of shareholders.
[SPEAKER_02]: But then Sakao Group bid 3750 as the Israeli government actually was opposing the Hibag Lloyd deal.
[SPEAKER_02]: That's one of the reasons why the stock is actually currently trading.
[SPEAKER_02]: Roughly 25 to 30% discount to the value of the merger.
[SPEAKER_02]: I don't know, unless you are somebody who's trying to bet on this merger specifically, this is pure, pure merger arbitrage.
[SPEAKER_02]: If you're buying it below 35, and it goes through, you're gonna make some money.
[SPEAKER_02]: If it doesn't go through, this thing is gonna drop a little bit further.
[SPEAKER_02]: So if you're trying to get shipping exposure, not really the thing to invest in right now.
[SPEAKER_02]: This is once again,
[SPEAKER_02]: Thanks for the call.
[SPEAKER_02]: We got a good show for you yesterday.
[SPEAKER_02]: We talked about the AI rally and how it is seemingly up into recently ignored geopolitical threats.
[SPEAKER_02]: We talked about how it is very analogous to dangerous psychological situations where markets in the past have shrug things off until they become incredibly apparent.
[SPEAKER_02]: So again, I think it's a very important story.
[SPEAKER_02]: We also answered a question on Berkshire Hathaway.
[SPEAKER_02]: So if you have an MS yesterday's episode, I encourage you to go check it out.
[SPEAKER_02]: And remember the best way to never miss an episode of Investock is to subscribe wherever you get your podcasts.
[SPEAKER_02]: Now on to today, where my main focus point is about war bonds versus war stocks and how treasuries are really responding to the Iran conflict, because contrary to the traditional flight to safety playbook, bond guilds are rising along soil prices as this war driven inflation and the fears about it are overwhelming demand for US treasuries
[SPEAKER_02]: as a haveness so we'll talk about why this unusual bond market behavior matters for every investor who holds fixed income and what it signals but the durability of the post pandemic rate environment.
[SPEAKER_02]: We also have a couple more stories as well including how incredibly high deficits are threatening the bond market because of how much borrowing the U.S. government needs.
[SPEAKER_02]: A story about the SEC, who is expected to change quarterly earnings rules despite massive public backlash, and should we have time at the end of the show a bit of a dive into gas prices and why it's likely they will continue to rise if, you know, I'm most and minimum probably stay where they are, even if oil comes back down.
[SPEAKER_02]: We also have some voice bank calls rated play, including one on investing factors and another on Netflix that's ticker NFL X.
[SPEAKER_02]: And some questions that came in from the comment section of the Invest talk in YouTube channel.
[SPEAKER_02]: We're headed to New Break.
[SPEAKER_02]: Please remember you can call anytime and leave your questions on the Invest talk of voice bank.
[SPEAKER_02]: If you're listening via our live stream or on AM-1220 the Bay Area, I encourage you to call now at 888-99 chart.
[SPEAKER_02]: When we come back, we'll talk about today's market activity.
[SPEAKER_04]: There are a few things that make KPP financial special.
[SPEAKER_04]: One of them is parallel investing.
[SPEAKER_04]: This means they invest right alongside their clients.
[SPEAKER_04]: Here's how it works.
[SPEAKER_04]: When KPP financial makes a trade for their clients, just in client makes the same trade for himself and KPP.
[SPEAKER_04]: On the same day, at the same price, and same percentage.
[SPEAKER_04]: No front running, no special treatment.
[SPEAKER_04]: Learn more about Parallel Investing at Investalk.com.
[SPEAKER_02]: Another negative day pretty much across the board.
[SPEAKER_02]: The Dow was down 77 basis points, that's in P500 down 1.01, Nasdaq down 140, Russell 2000, not as bad, but still down 42 basis points on the day, meaning makes US indices negative on the week.
[SPEAKER_02]: The semis were a lower once again, max seven names were mostly down, banks weren't doing well, payments weren't doing well, a parallel homebuilders, no, those were doing well.
[SPEAKER_02]: You know, it did do well, energy, insurers, managed care, grocers, and again on a relative basis, small caps.
[SPEAKER_02]: The relative outperformers, yes, there wasn't really much green anywhere in the market.
[SPEAKER_02]: On the bond side, not really much to glean from treasuries or the dollar, I mean, they were mixed and flat, respectively.
[SPEAKER_02]: Golden silver were up, though just barely gold was up 70 bit, silver was up 20.
[SPEAKER_02]: Cruddle though, I mean up 4.5% it was the biggest weekly gain since the month of April.
[SPEAKER_02]: But most of it was, as it has been for some time now, just AI and momentum names coming under pressure, the environment is leaning more towards risk off than rotation today.
[SPEAKER_02]: And so you saw S&P declineers outnumbering gainers,
[SPEAKER_02]: more than two to one.
[SPEAKER_02]: You saw socks, you know, closing at bare market levels.
[SPEAKER_02]: You have to remember, they had an all-time high on June 22nd.
[SPEAKER_02]: Now it's more than 20% down.
[SPEAKER_02]: It's its worst weekly performance since the tariff-down draft of April of last year.
[SPEAKER_02]: You have technical dynamics that haven't really been helpful.
[SPEAKER_02]: Meaning a geopolitics, you have higher oil, that is certainly adding pressure.
[SPEAKER_02]: There was an Axios report today, the U.S. is sending more refueling planes to Israel in what is possibly a prelude to expanded strikes.
[SPEAKER_02]: Now, the consensus is still expecting diplomacy to prevail, but I mean, there's not really any evidence that either side is eager to negotiate and more importantly, eager to compromise.
[SPEAKER_02]: On the date of front, got a lot of data today.
[SPEAKER_02]: You got preliminary July, Michigan, consumer sentiment, and also 54.4, which is above the consensus of 51.
[SPEAKER_02]: You had your head inflation expectations, dropped to 4.2 from last month, 4.6, so the five-year, it held steady at 3.3.
[SPEAKER_02]: The adieu housing starts, well-head of expected, and well-head of consensus, you have.
[SPEAKER_02]: June import prices up 30 basis points out as a smallest number since December export prices fell more than expected whole bunch of data industrial production up 10 basis points now contrast that next week not really much going on because you know and it's along with there not being much data instead of or rather
[SPEAKER_02]: Not much data, aside from where I'm looking for July flash PMI's, which is on Friday.
[SPEAKER_02]: It's also a blackout period.
[SPEAKER_02]: If that is in a blackout period, because they're July 29th policy decision, which is widely expected to be a hold, is on the horizon.
[SPEAKER_02]: So pretty quiet week next week, but you know what?
[SPEAKER_02]: We'll still be here.
[SPEAKER_02]: Alrighty, why don't we keep things moving and answer a listener question now.
[SPEAKER_08]: If you need to adjust, don't feel guilty to your calling or about Netflix, ticker and FLS.
[SPEAKER_08]: We'll show you what's going to happen with these.
[SPEAKER_08]: I want you to go and get your thoughts.
[SPEAKER_08]: If there are earnings, it's talked about 10-11 percent.
[SPEAKER_08]: My fair value I have around 58-60-ish.
[SPEAKER_08]: There are 66 now.
[SPEAKER_08]: Wanted to see if you guys thought that would be a good spot to buy.
[SPEAKER_08]: What do you guys do?
[SPEAKER_02]: Have a great day.
[SPEAKER_02]: No, I don't think I've to tell anybody what Netflix is as a company.
[SPEAKER_02]: I think we've all, I want to say wasted, but spent countless hours on that platformer, at least most of us have, it's the streaming giant.
[SPEAKER_02]: They've over 300 million paid subscribers, and they recently reported earnings, and I mean,
[SPEAKER_02]: Ned didn't come beat, that's good.
[SPEAKER_02]: Be by one cent, burning's for share at least.
[SPEAKER_02]: The gravity missed pretty significantly.
[SPEAKER_02]: Operating margins were down from 34 to 33 versus a year ago.
[SPEAKER_02]: You know, we had expansion of user base, mostly concentrated around live events.
[SPEAKER_02]: But a lot of that didn't really sustain itself.
[SPEAKER_02]: But most importantly,
[SPEAKER_02]: you had a lowering of guidance.
[SPEAKER_02]: And so Netflix off on that news, let's see what it fell off today.
[SPEAKER_02]: And down about 7.26% on the day, and if this question would have come in the day before, I would have said my traditional answer, which is I tend not to want to buy something,
[SPEAKER_02]: around earnings because the two weeks before and two weeks after you tend to be paying more for earnings volatility and earnings bet that you actually do for fundamentals.
[SPEAKER_02]: But I don't like seeing a miss on revenue earnings is one thing, but revenue and guidance is is bad.
[SPEAKER_02]: You know, it's not sure.
[SPEAKER_02]: Okay, never goes to giant.
[SPEAKER_02]: I will say that right they have under.
[SPEAKER_02]: 50% household penetration globally.
[SPEAKER_02]: That means there's enormous room for growth.
[SPEAKER_02]: Growth.
[SPEAKER_02]: They still have massive free cash flow.
[SPEAKER_02]: Free cash flow at, pull this up on my other screen here.
[SPEAKER_02]: Bear with me.
[SPEAKER_02]: Free cash flow was at, yeah, I mean, 12 billion is where it's projected to be this year.
[SPEAKER_02]: They still have a $27 billion buyback, but momentum-wise, they're very poor.
[SPEAKER_02]: I mean, and it's been poor since the beginning of,
[SPEAKER_02]: July of last year, they're down 45.89% on the 52 weeks, so in spite of it being a dominant streaming platform with 50 and change billion in annual revenue, there is reduced engagement and understandably investors are growing a bit impatient about capturing what should be a meaningful growth factor.
[SPEAKER_02]: Until this thing turns over from a momentum perspective, I mean, it's trading at 20 times price to four looking earnings.
[SPEAKER_02]: The low is 14.3, the average is 32.
[SPEAKER_02]: You've been a situation where it gets a bit cheaper and I tend to not want to buy things on the back of a downgrade in guidance.
[SPEAKER_02]: So for now, I would keep netflix on my watch list that is ticker NFLX, thanks to the call.
[SPEAKER_02]: Right, folks, this is Invest Talk.
[SPEAKER_02]: Tomorrow is the weekend.
[SPEAKER_02]: Should be a big weekend.
[SPEAKER_02]: I know I'm gonna be hanging out with some friends, watching the World Cup final in Sunday.
[SPEAKER_02]: Should be pretty exciting.
[SPEAKER_02]: Not sure how many of you are soccer slash football fans out there, but I hope you have a good weekend.
[SPEAKER_02]: No matter what your plans are.
[SPEAKER_02]: That being said, we still have plenty of time left in this show.
[SPEAKER_02]: You got to main focus point, plenty of stories, and most importantly, you're finance and investment questions.
[SPEAKER_02]: Hang on, our work will continue after this break, and in the meantime, if you feel like it pick up that phone and dial 888-99 chart.
[SPEAKER_05]: Lupi Raro is here, and ready to tackle your questions.
[SPEAKER_00]: Is it a good idea to sell your losses in a Roth IRA and just use whatever you have left to reinvest me to better stocks?
[SPEAKER_05]: Just wanted to ask you about one stock that I'm looking at, inter-G, E, T, R. Call in Vestock.
[SPEAKER_05]: 888-99 chart.
[SPEAKER_04]: It's official, total lifetime downloads for the Invest Talk podcast are now more than 63 million.
[SPEAKER_04]: Luke Guerrero is here now, taking your calls live.
[SPEAKER_04]: Invest Talk 888-99 chart.
[SPEAKER_02]: So Kevin Worsh, a new Fed chair, told Congress this week, and I'm quoting him,
[SPEAKER_02]: But then he added something, an escape clause.
[SPEAKER_02]: He said, in periods of crisis, like the 2020 pandemic and the 2008 crisis, central banks by design, need to step into markets to create a fair price.
[SPEAKER_02]: I would say that escape clause kind of matters a bit more than the headline, because the treasury markets structure has
[SPEAKER_02]: changed in ways that make a crisis more likely, not less.
[SPEAKER_02]: On the surface, I mean, everything looks fine.
[SPEAKER_02]: Trillion, two, and daily turnover, we're up 11% this year.
[SPEAKER_02]: Oxions are covered at two and a half times.
[SPEAKER_02]: I mean, the market survived the Iran War without notable dysfunction.
[SPEAKER_02]: That's great.
[SPEAKER_02]: Surface is common.
[SPEAKER_02]: Underneath, three things have changed that should, maybe give you a little restlessness at night.
[SPEAKER_02]: One, the patient money is leaving.
[SPEAKER_02]: In 2007, price incentive holders, those central banks, your sovereign wealth funds, the Fed itself, commercial banks, own 75% of all treasuries.
[SPEAKER_02]: Today, 52.
[SPEAKER_02]: The rest is in the hands of your hedge funds, your asset managers, other players who will sell the second conditions change.
[SPEAKER_02]: Headphones alone have gone from four and a half of treasury ownership to about eight and a half in the past two years.
[SPEAKER_02]: And here's the thing, they're not betting on rates.
[SPEAKER_02]: They're doing a leverage basis trades.
[SPEAKER_02]: They're financing bond purchases with overnight repo loans from a small number of banks.
[SPEAKER_02]: These banks pull back.
[SPEAKER_02]: For any reason, Reaper rates, they spike, hedge funds, they liquidate yields, start to jirate a bit.
[SPEAKER_02]: That's almost exactly what happened if you remember all the way back to March 2020, the Fed had to flood the system with liquidity in order to stop it.
[SPEAKER_02]: The second thing, dealers have started to retrieve it.
[SPEAKER_02]: In 2010, they bought 40 to 50% of treasury's at auction this year.
[SPEAKER_02]: 10 to 15, whether that's because end users are crowding them out or dealers don't want to hold the risk either way.
[SPEAKER_02]: There's less market-making capacity when you need a most.
[SPEAKER_02]: Three, the government is short-name maturity.
[SPEAKER_02]: In order to hold down long-term rates, they did it in the last administration.
[SPEAKER_02]: They're doing it now.
[SPEAKER_02]: Treasury bills are now 22%.
[SPEAKER_02]: Of total debt, if you go all the way back to 2019, which feels like a lifetime ago is 15.
[SPEAKER_02]: headed towards 25% by 2028, above 20 and you're rolling over so much debt so frequently that any spike in short term rates immediately becomes fiscal problem and here's the kicker starting in the next two years, pandemic year, a debt needs to be refinanced.
[SPEAKER_02]: JP Morgan calculates the treasury will fall
[SPEAKER_02]: roughly a trillion dollar short of what it means.
[SPEAKER_02]: Some point, they have to start issuing more long-term bonds, and that will push yields up, which pushes deficits up, which pushes issuance up, and you start to see how these high deficits become a problem, which was kind of funny that he decided to leave himself in a skate clause, because given what's going on with our fiscal deficits are lending situation and rates, he's probably gonna need it.
[SPEAKER_02]: All right.
[SPEAKER_02]: We got a live call.
[SPEAKER_02]: Dawn from Arinda.
[SPEAKER_02]: It's like you have a financial planning question.
[SPEAKER_02]: How can I help you?
[SPEAKER_06]: Yeah.
[SPEAKER_06]: It's a pretty few figure out if I should be talking to you or a CPA.
[SPEAKER_06]: I'm seven years old.
[SPEAKER_06]: I'm retired.
[SPEAKER_06]: My wife and I are retired.
[SPEAKER_06]: We're living on my social security and pension.
[SPEAKER_06]: We're finding actually stable.
[SPEAKER_06]: And the question comes.
[SPEAKER_06]: We're also both on Medicare.
[SPEAKER_07]: Yeah.
[SPEAKER_06]: If you go over a certain amount of an Medicare, you have all kinds of extra fees.
[SPEAKER_06]: So I now have my wife's social security.
[SPEAKER_06]: I mean, you know, when to implement that, I have an inherited eye on where I need to play with.
[SPEAKER_06]: I have the R&D use penalty.
[SPEAKER_06]: So I need to talk to someone about how much I can take each year.
[SPEAKER_06]: Is that you?
[SPEAKER_02]: Yeah, so it's, it's a little bit of both, but primarily this is something we do for clients all the time.
[SPEAKER_02]: You know, what you're talking about is the income-related monthly adjustment allowance, it's essentially a surcharge on your Medicare premiums, if your income exceeds certain thresholds.
[SPEAKER_02]: So Medicare Part B and Part D, they're income tester, right?
[SPEAKER_02]: If you're modified, adjusted, gross income, we call magic, exceed certain levels.
[SPEAKER_02]: You essentially pay more than the standard premium.
[SPEAKER_02]: Now I'm not going to dive all into that because it's a bit complex, but this is something that we face with clients all the time.
[SPEAKER_02]: Part of our services for our clients, part of
[SPEAKER_02]: I hope most fiduciary advisor services for their clients is to not only do the investment side of things, but also do the financial planning side of things.
[SPEAKER_02]: Now, when you're actually executing things that have tax consequences, it's always good to run it by a CPA, but I would say the planning side is certainly something that we could help you with and something that we help clients with all the time.
[SPEAKER_02]: So, if you want to have more of a specific, you know, talk about your specific circumstances kind of situation, I certainly encourage you to head over to invest.com.
[SPEAKER_02]: and schedule a free portfolio review because these are some of the reasons why people come to us all the time.
[SPEAKER_02]: Thank you very much.
[SPEAKER_02]: Awesome.
[SPEAKER_02]: Thanks, Don.
[SPEAKER_02]: Hopefully, I'll see you soon.
[SPEAKER_02]: On the next and best talk, we will look into this story.
[SPEAKER_02]: India's U.S. trade deal in 2026 can it survive the Iran oil shock.
[SPEAKER_02]: India is facing a double hit from the Iran conflict, oil import costs are surging, and the rupees weakening, and that is squeezing corporate margins and complicating the country's ambitious trade negotiations with the United States.
[SPEAKER_02]: So we will look at how the world's most populist country is navigating this energy crisis and what it means for emerging market investors.
[SPEAKER_02]: That's Monday, but we still got plenty of time today to answer your finance and investment questions.
[SPEAKER_02]: My name is Luke Graer and we're ready to take your calls any time at 888-99 chart.
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[SPEAKER_01]: Accountability means more than advice.
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[SPEAKER_01]: 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_04]: So weekend is here or almost here, but you've got finance and investment questions, so step up and call in, invest talk, 88899 chart.
[SPEAKER_02]: Okay, so in a talk about something that's, I think, fundamentally changes how you should think about your bond allocation and I really don't say that lightly because here's the fact, yields have risen during the war, but 60% of the time, not falling, risen.
[SPEAKER_02]: Now, the textbook would tell you that a geopolitical crisis tends to send money into government bonds.
[SPEAKER_02]: Yields go down, prices go up.
[SPEAKER_02]: That's the playbook.
[SPEAKER_02]: Except it depends entirely on what kind of crisis you're in.
[SPEAKER_02]: It's deflationary, so think banking collapse, 2008.
[SPEAKER_02]: Think pandemic.
[SPEAKER_02]: Yeah, bonds work.
[SPEAKER_02]: Money floods in, yields drop, you're poor folio, there's a bit of a cushion, but if the crisis is inflationary, Fitsaia, oil stock, for example, don't know why I pulled that example out, but if it's an oil shock, it dries up prices across the entire economy.
[SPEAKER_02]: Bonds don't save you.
[SPEAKER_02]: In some ways, they may make a worse.
[SPEAKER_02]: And it's exactly what's happened here.
[SPEAKER_02]: February 27, day before it strikes.
[SPEAKER_02]: 10 year yields at 394, 30 year, 461, that a month, 10 year was up 49 bits, 30 year rose 36, and as of Kevin Worsh's first FOMC meeting in June, 10 year was at 448, the 30 year, 518, a 19 year high.
[SPEAKER_02]: Trading economics ran the same line three days in a row in early March, the typical safe haven did.
[SPEAKER_02]: in bonds.
[SPEAKER_02]: Fail the materialize.
[SPEAKER_02]: Over no.
[SPEAKER_02]: Because inflation fears were simply overwhelming the flight to safety impulse, and look, the mechanics here not complicated.
[SPEAKER_02]: Oil surges 50%, inflation expectations go up.
[SPEAKER_02]: The fixed coupons on your bonds worth less in real terms, so it's faster sell.
[SPEAKER_02]: yields rise and when the fed shifts from protecting cuts to protect or projecting cuts to projecting hikes, which is exactly what happened between January and June, the whole curve reprises upward.
[SPEAKER_02]: The safety of getting your principal back in 30 years doesn't help when 4.2% inflation is eating that principal every single year along the way, but here's what I think people are missing though, right?
[SPEAKER_02]: This isn't temporary.
[SPEAKER_02]: This is a regime change.
[SPEAKER_02]: Before 2020, every major shock was deflationary.
[SPEAKER_02]: Financial crisis, Eurozone mess, COVID, shale revolution, central banks were fighting to keep inflation above 2% not below it.
[SPEAKER_02]: Bonds were the perfect hedge because every crisis brought lower rates.
[SPEAKER_02]: Since 2020, it's been the opposite.
[SPEAKER_02]: COVID supply chains.
[SPEAKER_02]: Russia Ukraine.
[SPEAKER_02]: or moves, every shock pushes inflation higher.
[SPEAKER_02]: And in that world, bonds don't ensure your portfolio, they amplify your losses.
[SPEAKER_02]: So what do you actually do?
[SPEAKER_02]: Because sell all your bonds is definitely not the answer, either.
[SPEAKER_02]: I mean, if you're a tirey, if you're income-focused, you need to accept that bonds in 2026 aren't income sources, they're not a hedge.
[SPEAKER_02]: And that matters because you're getting four and a half on a 10 year, that's, that's real income, that's valuable, but don't expect that bond to go up and price when stocks go down, definitely not in this environment.
[SPEAKER_02]: The correlation actually between stocks and bonds has been positive for much of this year, both fell together during the worst of the crisis.
[SPEAKER_02]: That means you're 60, 40, it didn't diversify, right, both sides lost.
[SPEAKER_02]: something we've been saying for quite some time now.
[SPEAKER_02]: Stay short underation.
[SPEAKER_02]: Money markets.
[SPEAKER_02]: One to three your treasuries, that's where you want to be.
[SPEAKER_02]: You get the income, you avoid the price sensitivity.
[SPEAKER_02]: Tips exist for this exact reason.
[SPEAKER_02]: They adjust for exactly this kind of inflation, even though rising yields amuded their returns.
[SPEAKER_02]: Short amount of charities investment grade corporates, I mean credit spreads of state remarkably tight because if you look at the market and you look at the data and you look at the fundamentals Corporate fundamentals are still solid Now this happens from time to time, right?
[SPEAKER_02]: Does that mean that it's always going to be the case can treasuries At some point regain their safe haven't said as sure
[SPEAKER_02]: But it's going to require one of two things, either the war ends decisively, and inflation drops back to 2%.
[SPEAKER_02]: Or, the less friendly version, we get a recession that's severe enough that the Fed cuts aggressively in yields punch.
[SPEAKER_02]: Now, the first scenario is possible if the MOU gets revived, if it is actually specific, about,
[SPEAKER_02]: What both sides get, if there's compromise?
[SPEAKER_02]: I know the words coming out of my mouth, make me realize how hard all that is.
[SPEAKER_02]: And the second would be painful for everything else in your portfolio.
[SPEAKER_02]: Neither is really a comfortable bet here, given the situation in the Middle East and given what we continue to see in the labor market and other economic data.
[SPEAKER_02]: And so the honest answer,
[SPEAKER_02]: And projecting honesty, I think, is more important, especially from an advisor, or somebody who's trying to help educate you and confidence.
[SPEAKER_02]: Is that bonds have permanently changed from this automatic protection that we saw in the past 20 years to a protection on conditions?
[SPEAKER_02]: And that's OK.
[SPEAKER_02]: It just means you have to be a bit more.
[SPEAKER_02]: create it and how you allocate for your portfolios.
[SPEAKER_02]: You can understand that they work in demand shocks, but they're going to fail in supply shocks.
[SPEAKER_02]: And we're going to supply shock right now.
[SPEAKER_02]: Until that changes, your fixed income allocation needs to reflect reality and reflect the environment we have today, not the one we had 10 years ago.
[SPEAKER_02]: Well, folks, it is Friday, which means tomorrow, we will be sending out our newest KPP premium newsletter.
[SPEAKER_02]: In the KPB Insight section, we discussed how markets tend to behave in election years, specifically midterm election years, because that's where we are.
[SPEAKER_02]: And what one might expect for the next six months, and how you might think about positioning your portfolio.
[SPEAKER_02]: Stock idea section.
[SPEAKER_02]: We talked about an AI infrastructure company and a payments company.
[SPEAKER_02]: And then in the portfolio management section, we did a bit of a discussion on a term we throw around all the time and people throw around all the time, economic modes.
[SPEAKER_02]: What the heck is it?
[SPEAKER_02]: How can I see one?
[SPEAKER_02]: And how can I incorporate more companies with them into my portfolio?
[SPEAKER_02]: If you're interested in learning more, I encourage you to head over to investtalk.com and subscribe.
[SPEAKER_02]: Subscribers will see the newsletter in their inbox, Saturday afternoon.
[SPEAKER_02]: like we have plenty of time.
[SPEAKER_02]: So why don't we roll in another listener question now?
[SPEAKER_08]: How about the banking sector?
[SPEAKER_08]: I'm looking at Zion Bank Corp symbol DIO in.
[SPEAKER_08]: If you could look that, if there's anything you see that as why I shouldn't buy out at this price, I think it looks really good.
[SPEAKER_08]: Thank you.
[SPEAKER_08]: Love you.
[SPEAKER_02]: Stick look at Zion Bank.
[SPEAKER_02]: So Zion Bank is a full service banking company.
[SPEAKER_02]: They do lending, they have deposits.
[SPEAKER_02]: They're pretty spread out, though.
[SPEAKER_02]: They're fully focused in the United States.
[SPEAKER_02]: About 23% of their businesses from California bank interest and energy, it's about 22, and then Zion's bank is about 27.
[SPEAKER_02]: It is mostly focused on the West Coast, you got Nevada, you got Arizona, you got Washington, it's actually headquartered in Utah.
[SPEAKER_02]: And performance has kind of been all over the place.
[SPEAKER_02]: I mean, they have under performed the industry, each of the past four years except for this year.
[SPEAKER_02]: They are currently trading.
[SPEAKER_02]: above their five year average.
[SPEAKER_02]: I mean, this is this is a classic regional bank here.
[SPEAKER_02]: Now, there are most recent earnings did show a pretty strong beat.
[SPEAKER_02]: I think that's why the companies do it well this year up 23.45% be by 9.4% on earnings per share, be by 10 on revenue, net income was up 39% year over year,
[SPEAKER_02]: I think that compared to some of the regional banks, I've seen this one is a bit more diversified.
[SPEAKER_02]: They have a solid dividend about two and a half percent.
[SPEAKER_02]: They have a great track record of paying out that dividend and growing that dividend actually over the past 10 years.
[SPEAKER_02]: And it's got like a 25, 30 percent payout ratio.
[SPEAKER_02]: So I mean, that leaves enormous room for increased dividends, buybacks,
[SPEAKER_02]: But it's still regional bank.
[SPEAKER_02]: It's still concentrated in a specific region, namely the Western part of the United States.
[SPEAKER_02]: It's still, is uncomfortable for me because the regional banking crisis of O3 looms in my head
[SPEAKER_02]: Among the regional banks, I think we answered a question yesterday about the financial sector.
[SPEAKER_02]: And we talked about the reasons why if you're going to be invested in banks, I would tend to tilt towards the larger ones that have fortress balance sheets because in times of economic stress, they tend to be able to weather it better.
[SPEAKER_02]: I just think there's some structural risk here.
[SPEAKER_02]: I don't know enough about their loan book.
[SPEAKER_02]: There's heavy deposit competition amongst regional banks.
[SPEAKER_02]: Commercial real estate exposure is still a problem and it's concentrated in them.
[SPEAKER_02]: And so for me, I do like financials, but I just, it's tough for me, given this environment to want to be in regional banks specifically.
[SPEAKER_02]: Doesn't mean they're not gonna perform,
[SPEAKER_02]: And, fall more quickly.
[SPEAKER_02]: That is Zion's Bank Corp to Grzio in.
[SPEAKER_02]: All right, let's do a quick rundown of key benchmark numbers for you all.
[SPEAKER_02]: The two years at 4.16 last week, it was 421 and 237 weeks ago is 64 bits.
[SPEAKER_02]: 10 year, 4.54 last week, it was 4.56, 234 weeks ago, it was $1.762.
[SPEAKER_02]: Gold, $4,12 an ounce, that is $100 less than it was last week.
[SPEAKER_02]: But 50 weeks back, it was $33.48 and 229 weeks back, it was $18.06.
[SPEAKER_02]: Silver 5606 per ounce today that it's $3.75 less than two weeks ago.
[SPEAKER_02]: 127 weeks back it was 2280 and 227 weeks back.
[SPEAKER_02]: It was 23.94.
[SPEAKER_02]: Oil 8272 per barrel that is $11.19 higher than two weeks ago.
[SPEAKER_02]: 95 weeks back it was 67.937 weeks back it was 74.30.
[SPEAKER_02]: 236 weeks ago is 66.62.
[SPEAKER_02]: National average for a gallon of regular gasoline is $3.98, a 10-cent increase compared to the one we could go.
[SPEAKER_02]: 163 weeks back, it was $3.56 to 11-ile weeks back.
[SPEAKER_02]: It was $4.25, going all the way back to 231 weeks ago.
[SPEAKER_02]: It was $3.57, California was $5.43 per gallon that's four cents higher than last week.
[SPEAKER_02]: 140 weeks ago is 532, 216 weeks back.
[SPEAKER_02]: It was 587.
[SPEAKER_02]: I filled up at Costco today and diesel was 649.
[SPEAKER_02]: That hurt.
[SPEAKER_02]: Now for comparison, Kentucky gas, 365 per gallon that is $1.78 less than gas in California.
[SPEAKER_02]: Why don't we go with another listener question now?
[SPEAKER_03]: Hello Justin and Luke.
[SPEAKER_03]: This is Matt for Minneapolis.
[SPEAKER_03]: Giving you guys a call today.
[SPEAKER_03]: I'm getting frustrated with a stock I own and the M new month mining.
[SPEAKER_03]: Isn't doing anything anymore, it doesn't seem to.
[SPEAKER_03]: I don't know if mining is still gonna be going up here in the future at that.
[SPEAKER_03]: It doesn't seem to be, it's been going down.
[SPEAKER_03]: The stock has here for a while or just staying sideways.
[SPEAKER_03]: with the economy kind of changing.
[SPEAKER_03]: I don't know if it's something good to hold on to or for just kind of dead money.
[SPEAKER_03]: I've been considering dumping it, getting out of it, and I'm looking at ticker symbols on EIX, Edison, and also ADM, Arthur Daniels, Midland, considering getting into one of those, I was wondering what you thought of those two stocks if one looks better
[SPEAKER_03]: please look forward to hearing your feedback on all that.
[SPEAKER_03]: And if one of those stocks looks better to you, thank you, have a good day.
[SPEAKER_02]: Sure, so first let's touch on the gold piece because gold is a pretty big part of our strategies for our clients, gold commodities copper.
[SPEAKER_02]: Mine has been hit really hard.
[SPEAKER_02]: I mean, you had a situation where you had a huge run up.
[SPEAKER_02]: And a bit of a technical breakdown and a turn yields rising has certainly pushed people away from commodities and a higher yield environment that always happens.
[SPEAKER_02]: We still think the longer term structural reasons why commodities will be important, namely copper, gold, silver are held, but it doesn't mean there's actually short-term volatility.
[SPEAKER_02]: And when these things tend to move, they tend to move quickly.
[SPEAKER_02]: Now, if you want to move to another company, like Edison International or Archer Daniel Midland,
[SPEAKER_02]: Let us in international.
[SPEAKER_02]: It's a Southern California utility.
[SPEAKER_02]: It's the parent company of so-called Edison.
[SPEAKER_02]: It has had a lot of tailwinds from AI Power Center demand in electrification.
[SPEAKER_02]: But I hesitate to get into any electrical utility in California because there is a huge
[SPEAKER_02]: huge wildfire liability.
[SPEAKER_02]: Now I know it's up nearly 30% year to date, but this is an asymmetric risk profile that creates essentially existential tail risk.
[SPEAKER_02]: If something happens, this thing is falling, I don't even know whatever falls harder than a rock.
[SPEAKER_02]: That's how hard it's falling.
[SPEAKER_02]: So that's on that one.
[SPEAKER_02]: Are there Daniels Midland?
[SPEAKER_02]: That's an ag processors, so they got grains, oil seeds, ethanol, it's up about 30% year to date.
[SPEAKER_02]: They had recent beats on estimates, on Q on estimates.
[SPEAKER_02]: They uped guidance, they're actually expecting 40% earnings growth.
[SPEAKER_02]: Over the year, which is phenomenal.
[SPEAKER_02]: I think that between these two, if I had to choose ADM looks like a better valuation at current levels, I mean, earnings are inflecting higher, those clear catalysts, trying to act purchases, ethanol margins, food cost inflation being some of them, and it kind of ties into the inflation theme that we've been talking about.
[SPEAKER_02]: Again, yeah, it's a fine utility, but that tail risk is a bit scary.
[SPEAKER_02]: really going to hurt.
[SPEAKER_02]: That is EIX and ADN.
[SPEAKER_02]: Thanks to the call.
[SPEAKER_02]: This is Invest Talk.
[SPEAKER_02]: I'm Luke Guerrero.
[SPEAKER_02]: We have one goal here to help you achieve your financial freedom.
[SPEAKER_02]: Our work you did these out for this break is our final break so get your questions in now at 888-99 chart.
[SPEAKER_08]: I would like to know more about a company which I've been tracking for some time.
[SPEAKER_05]: Luke Guerrero is here and ready to tackle your questions.
[SPEAKER_07]: And I was just wondering, are there any investments accounts with different banks that you would recommend something that that may offer a good resources?
[SPEAKER_05]: Don't forget to call.
[SPEAKER_05]: In Best Talk, 888-99 chart.
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[SPEAKER_04]: In Vestark, 888-99 chart.
[SPEAKER_04]: Alright, so the SEC received some 200,000 comments on a proposal.
[SPEAKER_02]: because they went to earnings to only be reported twice a year.
[SPEAKER_02]: And that's a record.
[SPEAKER_02]: And they are overwhelmingly negative.
[SPEAKER_02]: And like not close, overwhelmingly negative.
[SPEAKER_02]: This idea proposed by Chairman Atkins and May backed by the president is to let companies report financial results two times a year, set accordingly.
[SPEAKER_02]: The argument is that quarterly reporting encourages short termism and makes being a public company to burden some and get the argument, I do, but I think it's wrong and I want to explain why.
[SPEAKER_02]: A public school teacher named Laurie Ammon wrote a comment letter that honestly probably said it better than any economist could.
[SPEAKER_02]: Her question, the SEC, if you have school age children, I'm quoting her.
[SPEAKER_02]: Based on your request to reduce the paperwork burden of US corporations, I can only conclude that you wouldn't mind if your child's teachers only reported out twice a year.
[SPEAKER_02]: A child who'd cancer non-profit little warrior foundation wrote that a quarterly update revealed a supplier loss that would have disrupted an immunotherapy clinical trial.
[SPEAKER_02]: Without that information, there's a quote, we would have misplaced donations and wasted time that kids with cancer don't have.
[SPEAKER_02]: Now, I mentioned it was overwhelmingly objections in that 200,000 to who supported, well, little small companies like Exxon Mobile, which like Exxon has a massive investor relations operation.
[SPEAKER_02]: I mean, they disclose material information
[SPEAKER_02]: all the time, continuously.
[SPEAKER_02]: For them, the quarterly reports duplicate it, right?
[SPEAKER_02]: You're doing it already.
[SPEAKER_02]: For the thousands of smaller public companies that issue quarterly reports is their primary form of shareholder communication.
[SPEAKER_02]: It is not duplicative.
[SPEAKER_02]: It is the whole thing for them.
[SPEAKER_02]: Now, Europe, they dropped quarterly reporting in 2013-ish.
[SPEAKER_02]: The UK did it about a decade ago, and you know what?
[SPEAKER_02]: Many European companies, they still report quarterly, voluntarily, because their investors demand the information.
[SPEAKER_02]: Making it optional doesn't reduce the burden.
[SPEAKER_02]: It just creates a two-tier system where companies with nothing to hide and they keep reporting.
[SPEAKER_02]: Companies with something to hide, maybe they stop.
[SPEAKER_02]: And a problem there is, do you start to read into companies that are only reporting twice a year?
[SPEAKER_02]: Do investors then think those that don't want to maintain quarterly reporting must be hiding something?
[SPEAKER_02]: What does that do for the expected return of those types of companies?
[SPEAKER_02]: Would you even want to invest in them?
[SPEAKER_02]: What does that do to liquidity?
[SPEAKER_02]: You can see there are all sorts of issues here.
[SPEAKER_02]: Now the SEC for what it's worth is expected to just ignore all the opposition and plow on ahead.
[SPEAKER_02]: They may adjust the language, but it seems, like as of now at least, and in spite of probably close to 199,999 objections, this is how it's going to be.
[SPEAKER_02]: And in a market that's already worried about earnings bubbles, about how opaque, private credit, private debt is, and all of this round tripping of money from hyperscalers.
[SPEAKER_02]: reducing the frequency of audited financial disclosure is, honestly, there's no other way to say it, moving in exactly the wrong direction.
[SPEAKER_02]: All right, folks, that does it for another episode of Invest Talk.
[SPEAKER_02]: Justin and I and the team over here, thank you for listening and encourage you to tell your friends and family members about our free podcast downloads.
[SPEAKER_02]: As always, you can get those iTunes and Spotify and while you're at it, we'd really appreciate it.
[SPEAKER_02]: If you left us a rate and review, there's a go long way.
[SPEAKER_02]: It's a couple seconds of your time, maybe.
[SPEAKER_02]: A really meaningful, really helps us out over here.
[SPEAKER_02]: Also, given that we are halfway through the year, it could be a good time to have a...
[SPEAKER_02]: half year resolution of doing a little check up on your portfolio because at KBB Financial, Justin and I speak with people just like yourself each and every day.
[SPEAKER_02]: So I encourage you to head over to invest.com and click on the free portfolio review button.
[SPEAKER_02]: Can't wait to see you.
[SPEAKER_02]: Independent thinking shared success.
[SPEAKER_02]: This is Invest talk.
[SPEAKER_02]: Enjoy a weekend.
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