[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, Luke Guerrero.
[SPEAKER_00]: Good afternoon, fellow investors, and welcome to the Monday, July 20th, 2026 edition of Invest Talk.
[SPEAKER_00]: I'm your host Lou Gray, I'll be with you over the next hour as we dissect the stories that matter.
[SPEAKER_00]: Talk a little bit about what happened in the market today, and of course answer your finance and investment questions.
[SPEAKER_00]: To that end, before we talk about today's market performance and run it down those show topics, let's tackle this colleague question now.
[SPEAKER_04]: Dave from Ohio, he just hit your opinion on the US Bank Corp.
[SPEAKER_04]: They went for your answer.
[SPEAKER_04]: Thank you.
[SPEAKER_00]: USB is not a company that makes little thumb drives where you store photos or transfer files.
[SPEAKER_00]: It is US Bank Corp.
[SPEAKER_00]: It's not exactly one of the large banks, right?
[SPEAKER_00]: It's about a hundred billion dollar market cap company.
[SPEAKER_00]: It falls into the category of what would be called,
[SPEAKER_00]: super regional banks, so they do consumer banking, they bank for businesses, they got a pretty big wealth management arm division wing, if you will, and they actually have one of the largest payment processing divisions along with what has over the past couple years become a pretty well-expanded market capital market division.
[SPEAKER_00]: A 42% of their revenue comes from that wealth corporate and financial banking consumer business banking is about 31% and I mentioned payment services because it makes about 26% of their revenue.
[SPEAKER_00]: Now recently they reported earnings just last week actually with earnings per share at about a dollar 35 that was a five and a half percent beat.
[SPEAKER_00]: The market definitely liked it.
[SPEAKER_00]: perform pretty well on the back of solid earnings.
[SPEAKER_00]: One of the reasons is being 22% year over your growth in earnings per share.
[SPEAKER_00]: They had a record net revenue that was up 10.1% year over year.
[SPEAKER_00]: Again, excellent growth across the board.
[SPEAKER_00]: And then the thing the market really likes, they actually raised four year revenue guys.
[SPEAKER_00]: Now this name, it's up about 18.3% year to date up 38.19% over the past 52.
[SPEAKER_00]: weeks.
[SPEAKER_00]: Again, this is something that we've been talking about for a while because people are understandably right now wanting to get exposure to financials.
[SPEAKER_00]: But I still worry about the concentration of these regional banks, even this super regional bank, if you will, in spite of its impressive quarter, and its guidance raise.
[SPEAKER_00]: It's gotten to a point where, okay, it's trading above its forward looking price to earnings, trading above its average price to book value and the asymmetric risk you have by being exposed to these regional banks even the larger ones.
[SPEAKER_00]: I think outweigh the benefits compared to just investing in one of those large fortress balance sheet banks.
[SPEAKER_00]: So for right now, I think I'm going to
[SPEAKER_00]: Thanks for the call.
[SPEAKER_00]: We're in a good show on Friday.
[SPEAKER_00]: We looked into how the war has affected bonds versus stocks and how bonds specifically have been responding to the Iran conflict.
[SPEAKER_00]: We also answered a listener question on Netflix.
[SPEAKER_00]: If you have been a missed last Friday's episode, I encourage you to go check it out and remember the best way to it never miss an episode.
[SPEAKER_00]: Now onto today, where our main story is about India and whether or not the U.S. trade deal can survive the Iran oil shock, because you have to understand that India is facing this double hit from the Iran conflict
[SPEAKER_00]: from oil import costs surging, while its rupee is also weakening, and that in turn squeezes corporate margins, and really complicates the country's ambitious trade negotiations with the US.
[SPEAKER_00]: So look at how the world's most populous country is navigating this energy crisis, and what it means for emerging market investors.
[SPEAKER_00]: We also will touch on a statistical change to inflation coming in the near future.
[SPEAKER_00]: Story about the dangers of perpetual future in the crypto market, if you don't know that it is, you'll know after our discussion, it should be a time at the end of the show, we'll touch on how even though it appears all of these AI companies are making massive deals with infrastructure companies, it might not be as locked in as it seems.
[SPEAKER_00]: We also have some voice bank calls ready to play including one on investing factors and another
[SPEAKER_00]: As well as some comments that came in from the rather questions that came in from the comments section of the University of York, YouTube channel and hopefully we hear from some of you live throughout the show.
[SPEAKER_00]: We're going into Break.
[SPEAKER_00]: Please remember, you can call any time and leave your questions on the Invest Talk Voice Bank.
[SPEAKER_00]: If you're listening to your our live streamer on AM-1220 in the Bay Area, I encourage you to call now at 888-99-Charm.
[SPEAKER_00]: When we come back, we'll talk about today's market activity.
[SPEAKER_02]: It's official.
[SPEAKER_02]: Total lifetime downloads for the Invest Talk podcast are now more than 63 million.
[SPEAKER_02]: Luke Guerrero is here now taking your calls live.
[SPEAKER_02]: Invest Talk 888-99 chart.
[SPEAKER_00]: Now the market decided, well it's decided we would start the week a bit negative, some indices performed worse than others, right?
[SPEAKER_00]: The NASDAQ was only down five basis points, a result of 2000 small caps down 67.
[SPEAKER_00]: Excuse me, the Dow Down 59, the S&P 500 down 19 earlier in the session, we did see a bit of a rebound from the semi space, but that kind of lost steam as we moved further into the afternoon, but memory energy AI infrastructure, some of the best performers on the day while banks, credit cards, pharma, building products, some of the worse that we saw.
[SPEAKER_00]: On the bottom side, treasurer is a bit weaker.
[SPEAKER_00]: You did see yields up anywhere between three and five basis points across the curve.
[SPEAKER_00]: Dollar index looks like was up 20 basis points, gold, pretty much flat finished down 10 silver up 1.3.
[SPEAKER_00]: So, interestingly enough, the opposite direction of gold.
[SPEAKER_00]: And despite what has been some noisy headlines through the weekend and into the weekend of at least,
[SPEAKER_00]: WTI actually finished pretty unchanged on the day and and really that was the hallmark of the session.
[SPEAKER_00]: I mean, there's a fairly quiet session, but the narrative again still being dominated by the same things we saw last week with with momentum seeing some stabilization following last
[SPEAKER_00]: amid this ongoing headline noise.
[SPEAKER_00]: The market is a bit more weary, given the recent uptick in kinetic activity and statements from both sides, remaining pretty sharp, but the consensus is still favoring some sort of diplomatic off-ramp.
[SPEAKER_00]: And despite of that, you did still see some upper pressure and rates today, along with that muted oil move.
[SPEAKER_00]: But I can't see really much catalysts this week.
[SPEAKER_00]: I mentioned it at the end of the last week, pretty quiet week ahead.
[SPEAKER_00]: On the macro front, I would say if you see any big market moves, you're mostly gonna see it based on the start of some bigger earnings releases this week.
[SPEAKER_00]: Let's keep things moving.
[SPEAKER_00]: And dip into the YouTube comment section question bank.
[SPEAKER_00]: This one from Derek Johnson 52-19, and it's about in video, just take her NVDA.
[SPEAKER_00]: that question says well my question is would you buy in video now or do you see it going much lower I do still like two of the max seven stocks like meta and Microsoft well but he's been pretty flat for a while flat to down since the end of really the beginning of May they were trading at one ninety eight and they went up to about two fifteen
[SPEAKER_00]: Now, trading about 203, and of course, you know, this company is the Bay Area AI computing platform behemoth.
[SPEAKER_00]: They have all those GPUs.
[SPEAKER_00]: They have their Q to software.
[SPEAKER_00]: They have their DGX systems.
[SPEAKER_00]: Also, it's a products that are essentially instrumental for
[SPEAKER_00]: Any company that has been trying to build out these large language models for a couple years and that's why you've seen just massive growth I mean revenue and their most recent reports of 85% year over year at 20% Quarter over quarter that was a beat earnings per share was up 214% year over year and and in a way they've been able to expand this while for the most part maintaining
[SPEAKER_00]: They're pricing power is as evidence by their gross margins.
[SPEAKER_00]: I mean margins are set to be around 75% this year.
[SPEAKER_00]: They've been in the high 70s going back to 2024
[SPEAKER_00]: For a long time, there has been speculation that revenue growth has to at a certain point to sell it.
[SPEAKER_00]: Now, is it possible that it does disseler it into the future?
[SPEAKER_00]: Yes, we've talked about this on this show, some of the things that would essentially be harmful for a company like Nvidia, namely that these larger, more complex models are better than smaller, more dedicated models, meaning that they
[SPEAKER_00]: demand for their chips is necessary versus being not necessary.
[SPEAKER_00]: And the other is essentially at some point all these hyperscaler spending spending a bit less money, but that doesn't seem to be
[SPEAKER_00]: To be the case right now, this is the most important company probably in the world for the AI era.
[SPEAKER_00]: It is evidenced not just in their growth, but also in the sustainability of the margins.
[SPEAKER_00]: And so the question is, is this a company that you want to buy right now?
[SPEAKER_00]: It's trading at 18.9 times, price to forward looking earnings, trading at about.
[SPEAKER_00]: 19 times price to sales.
[SPEAKER_00]: It's a bit cheaper than it has been in quite some time.
[SPEAKER_00]: I worry with this most recent rotation that effectively at some point investors are going to demand that these companies that are just burning through operating cash flow stop doing that.
[SPEAKER_00]: I think that's one of the reasons why you're to date this name is only up 9% it's actually underperforming its industry by 20.
[SPEAKER_00]: As a core holding in your portfolio I think it kind of makes sense but I would say that there has been evidence recently that, you know, not that people are shifting wholeheartedly away from these anti names but essentially moving towards a different pocket here so
[SPEAKER_00]: I like Nvidia.
[SPEAKER_00]: Again, most important name probably in the whole world for the AI race, but I think the outsize returns that we've seen are certainly gone.
[SPEAKER_00]: Remember, up 238% and 23 up 171 and 224, so you're looking for a blue chip stable company that will continue to grow most likely as the AI trade does.
[SPEAKER_00]: I think Nvidia is a good one, just don't expect those 100% returns, I would say, any more.
[SPEAKER_00]: Thanks for the call.
[SPEAKER_00]: Let's go with another listener question because we got plenty of time.
[SPEAKER_03]: I don't have a lot of time each day to study and dig in like I know is necessary to really understand.
[SPEAKER_03]: Your program has helped a lot, but my question is this basically.
[SPEAKER_03]: If you were in the situation of not working in the field you do, in other words, if you were not a professional investor advisor and were limited on time, how would you pair it down one of the very minimum basic things that you would want to study to understand if we're making a stock investment?
[SPEAKER_03]: I know there's a lot of factors and you do this professionally.
[SPEAKER_03]: Thank you and you have a great show.
[SPEAKER_03]: Keep it up.
[SPEAKER_00]: That is a tough question, I think the reality is a lot of people don't have time with their day jobs, their families to do the kind of research that I would say it requires to really understand what you own.
[SPEAKER_00]: I think it varies in various sectors, understanding what drives chemicals, what drives utilities, what drives energy companies, what drives real estate.
[SPEAKER_00]: I think that
[SPEAKER_00]: The first and foremost, the most important thing with investing is understanding that, yes, you should only invest in companies that are profitable, that are at reasonable valuations.
[SPEAKER_00]: I think historically, that has shown outside outperformance relative to other areas of the market.
[SPEAKER_00]: But I think it's more critical that you understand how the world works, right?
[SPEAKER_00]: Markets are effectively the
[SPEAKER_00]: crossover point, the intersection of economics, politics, governance, all of these things.
[SPEAKER_00]: So without a fundamental understanding and thesis about where the world is and where the world is going, it's difficult to be successful as an investor and pick those companies as industries, those sectors that are likely to outperform, given what is happening in the world.
[SPEAKER_00]: Hopefully that helps, very complicated thanks to the call.
[SPEAKER_00]: This is in Vestock and I work continues after this break.
[SPEAKER_00]: But you can still call any time 24, 7, 8, 8, 8, 99 chart.
[SPEAKER_02]: In the early days, in Vestock was Jerry Klein and Steve Peasley.
[SPEAKER_02]: Now the torch has been passed and a new generation of hosts is on the job, Justin Klein and Luke Guerrero.
[SPEAKER_02]: So when you've got finance and investment questions, don't forget to call in Vestock, 888-99-Chart.
[SPEAKER_00]: Okay, so this one is, if it's subtle, I would say genuinely subtle, but it could matter more for monetary policy than any single data point we've seen in the next three months because the Bureau of Economic Analysis, that the agency that publishes the Fed's preferred inflation measure, that core PCE, they've decided they want to revamp how it calculates three components, software costs.
[SPEAKER_00]: investment management fees and legal services and the net effect according to economists UBS will be able to lower core PCE by roughly two tens of percentage point when the revised data comes out on September 30th.
[SPEAKER_00]: Now you're saying Luke, why do I care?
[SPEAKER_00]: Right, two tenths, that doesn't sound like much, but right now, I mean core PCs at 3.3%, rather normal PCs at 3.3, core CPI is at 2.6.
[SPEAKER_00]: Usually CPI runs slightly above PC.
[SPEAKER_00]: But the PC is running 70 basis points higher than CPI, it's kind of weird.
[SPEAKER_00]: And it's partly because of quirks in how the B.E.A.
[SPEAKER_00]: The Bureau of Economic Analysis measures certain prices.
[SPEAKER_00]: Software, for example, they use a BLS, which is the Bureau of Labor Statistics, computing cost index that includes items like flash drives.
[SPEAKER_00]: Flash at prices, they have sort because of AI driven demand for storage.
[SPEAKER_00]: So the PC software index is showing significant price increases that are actually hardware,
[SPEAKER_00]: The fix here is to effectively blend in video game software and web hosting prices, which are more representative of what you and I would actually pay.
[SPEAKER_00]: That alone would probably knock about a 10th of a point off core PC.
[SPEAKER_00]: then that other issue investment management fees, you know, when the stock market rises, the percentage-based fee advisors, they're charged to go up, charges go up, but that reflects a greater volume of assets being managed, not a higher price for the same services.
[SPEAKER_00]: The VA switching to a more sophisticated method that will separate volume from price and that'll shave off, probably another two tenths.
[SPEAKER_00]: Then you got your legal services.
[SPEAKER_00]: Now, if you are a math guy out there, a math guy out there, you'll notice, hey look, I think he said over 20 basis points already.
[SPEAKER_00]: So legal services actually pushes in the other direction, right?
[SPEAKER_00]: But on net, that's how the revisions will likely lower inflation.
[SPEAKER_00]: Now, understandably, it's a bit politically sensitive.
[SPEAKER_00]: Yeah, there's no evidence that political interference played a role in these changes.
[SPEAKER_00]: The BEA says they're routine adjustments by career staff.
[SPEAKER_00]: And statistical agency, they do revamp their indicators regularly.
[SPEAKER_00]: That is normal.
[SPEAKER_00]: But the timing, right?
[SPEAKER_00]: These revisions are arriving just as the Fed is debating whether or not to high grades.
[SPEAKER_00]: So a slightly cooler inflation reading, even from a methodological change, rather than an actual decline in prices, well, that could weaken the case for tightening in an environment where any hint of political interference and economic data is under high alert, some people are raising eyebrows, not because the changes are wrong, but because the BA hasn't really fully explained why these specific categories were chosen.
[SPEAKER_00]: or exactly what formula they'll use, I mean, understandably across the board for some time, many people have said inflation metrics aren't fully capturing the inflation experience and I agree with that, but I think transparency is good.
[SPEAKER_00]: Now, the FedChair himself can wash the new FedChair new man at the top, he did downplay the significant saying he prefers to focus on inflation to the left of the decimal point, IE, the three or the two, right, 3.3 and 3.1, they both still start with the three, and they are both not good, and fair enough, but the margin and Fed decisions are always the margin.
[SPEAKER_00]: A cooler PCE reading,
[SPEAKER_06]: maybe could play one or two votes and an invited committee one or two votes is essentially the difference between holding and I can see we can play one more listener question now my question is on ticker symbol glpi did a screener and this comes up on a read and it's in the casino and hotel business and I was just wondering what you think about it and what's the support level to get in already on about a half position thank you for
[SPEAKER_00]: GLPI is gaming and leisure properties and what do they do?
[SPEAKER_00]: Well, it is a real estate investment trust that focuses on gaming properties, right?
[SPEAKER_00]: There's spun out of pen national over a decade ago, so they own about 65 gaming and related facilities.
[SPEAKER_00]: now it has had a bit of a rough time the past four years and it's certainly gotten a rougher in twenty twenty six I mean it's underperforming the industry by uh 15.9% it's down about seven basis points pretty much flat on the year but down six point three seven percent over the past fifty two weeks and I think the real problem going on here and it's one of the reasons why I used to love these gambling reads
[SPEAKER_00]: people can gamble anywhere now.
[SPEAKER_00]: And I know they call it sports futures trading or whatever it gets your past regular toy approval, but the necessity to go to a brick and mortar place in gamble is kind of gone.
[SPEAKER_00]: And these companies have suffered for it.
[SPEAKER_00]: So I'm hesitant to enter a gambling read at the moment.
[SPEAKER_00]: Thanks for the call.
[SPEAKER_00]: On the next investor talk, we will look into this question, can the Mag7 earnings hold the market up?
[SPEAKER_00]: With the major earnings season kicking off in the MegaCap tech names and obscure volatility measure is pointing to a potential breakout, but the bar is sky high, and geopolitical headwinds are creating an unusually uncertain backdrop.
[SPEAKER_00]: How these earnings come in?
[SPEAKER_00]: We'll likely determine whether the broader market can hold its current levels or start to break down.
[SPEAKER_00]: That's tomorrow for now I'm Luke Guerrero ready to take your calls any time at 888-99 chart.
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[SPEAKER_00]: Let's talk a little bit about India today.
[SPEAKER_00]: And I know when you hear Indiana financial show most people's, you know, I start to think about how they can make investments in emerging markets.
[SPEAKER_00]: And that's why
[SPEAKER_00]: This matters.
[SPEAKER_00]: It is a case study in the risks and opportunities of EM investing during an energy shock.
[SPEAKER_00]: And if you have any EM exposure at all, any international fund, any global ETF, this affects you.
[SPEAKER_00]: Right, India is uniquely vulnerable to what is happening in the Middle East.
[SPEAKER_00]: And I mean, uniquely, the numbers are pretty stark.
[SPEAKER_00]: India sources roughly 50% of its crude oil from West Asia, about 70% of its LPG and here's the one that really matters, nearly 90% of its liquefied natural gas.
[SPEAKER_00]: So when the straight-of-form is closed, India doesn't just feel a pinch, it essentially loses access to the majority of its energy supply.
[SPEAKER_00]: Now compare that to one of its regional neighbors, China, which has been diversifying its energy sources for over a decade by building pipelines through Central Asia and Myanmar, electrifying its economy, cutting its gold crude import imports in half.
[SPEAKER_00]: since the war started or the United States, which is a net energy exporter, when he doesn't really have those options.
[SPEAKER_00]: It's an importer of essentially every energy related good, and it's primarily supplier just became a war zone.
[SPEAKER_00]: And the Rupert tells this story, it's been trading around 92 to 95 per dollar during this conflict, it dropped as low as the mid 90s on the worst days before the war is closer to the high 80s, 87, 88.
[SPEAKER_00]: I mean it's meaningful to appreciation and what most people miss about this is when you are an oil importer and your currency we can simultaneously, you essentially get hit on the head with hammer twice.
[SPEAKER_00]: oil is priced in dollars.
[SPEAKER_00]: So even if the barrel price is stabilized, it's say 85, just throwing out a random number there.
[SPEAKER_00]: We can Ruby makes the same barrel 10% more expensive for Indian refineries than it was a year ago.
[SPEAKER_00]: Higher oil times weaker currency essentially compounds
[SPEAKER_00]: that pain and that's one of the reasons why the reserve bank of India has essentially been lighting its reserves on fire in order to defend the currency.
[SPEAKER_00]: And estimated 12 to 15 billion has been deployed since the war began on top of the 25 billion we were talking about earlier in the year.
[SPEAKER_00]: I mean total reserves have dropped from over 700 to
[SPEAKER_00]: They've roughly, you know, 74 days of crude oil and poor cover, but the directions wrong.
[SPEAKER_00]: And every dollar spent defending the rupee is a dollar unavailable for other economic priorities and you can start to understand how things these things start to spiral here.
[SPEAKER_00]: Now, Axis Bank estimated that if oil stays at $100 for a year, India's current account deficit would widen by about 80 billion.
[SPEAKER_00]: So that's 2.1% of GDP.
[SPEAKER_00]: and capital L flows, they've been brutal as well, 31 billion has been pulled from Indian debt inequities since the start of last year, the Nifty 50 was trading at 26 times earnings versus 17 for the broader EM benchmark, and it's expensive by any may it measure, and that premiums have been compressing as investors are rotating away.
[SPEAKER_00]: But, and I think this work gets genuinely interesting, any economic confidence hasn't really wavered, and I mean, like, at all.
[SPEAKER_00]: The country has struck more trade deals in the past year than in the previous decade.
[SPEAKER_00]: They've made agreements with you with UK, Oman, New Zealand.
[SPEAKER_00]: A firm stands in negotiations with Wants Washington, I think, has probably surprised most observers who expected India to be more accommodating, given the energy pressures they've been facing.
[SPEAKER_00]: I mean, India's trade reps essentially took the position that the economy is too important and too fast growing to accept any unfavorable terms, and to do that at a point in time where, yes, it's fast growing, but it's at risk.
[SPEAKER_00]: takes a lot, but I mean the confidence in a lot of ways is it's unfounded, they're growing it roughly five times the rate of Britain, it's demographics are young, it's digital infrastructure, is leapfrogging, stages of development that other countries took decades to build, the structural case that we've been talking about for years now, I mean it hasn't changed, which really just changed is the short-term outlook, the near-term entry point,
[SPEAKER_00]: And when things like this happen, it naturally has this ask the question, should we be increasing or reducing EM exposure during a situation like a Middle East oil shock?
[SPEAKER_00]: And the answer is probably which emerging market?
[SPEAKER_00]: I mean, India and other net oil importers like South Korea or Thailand,
[SPEAKER_00]: direct economic headwinds from these elevated costs.
[SPEAKER_00]: Their currencies weekend, their current accounts deteriorate, their central banks have to essentially choose between defending the currency and supporting growth.
[SPEAKER_00]: And that's the wrong side of the trade during an oil shock.
[SPEAKER_00]: But EM as a whole includes oil exporters too.
[SPEAKER_00]: Saudi Arabia, UAE, Brazil, Nigeria.
[SPEAKER_00]: They all benefit from higher crude.
[SPEAKER_00]: Any of equities are now meaningfully cheaper than developed market alternatives on a valuation basis.
[SPEAKER_00]: I mean, if you believe the war eventually ends and oil normalizes,
[SPEAKER_00]: even if the timelines on certain than the current weakness in EM importers like India is kind of creating an entry point that effectively you'll be glad about a couple years down the road.
[SPEAKER_00]: So I would say here the practical approach is to differentiate.
[SPEAKER_00]: Don't own a generic EM fund and assume is diversified.
[SPEAKER_00]: understand that oil exposure of each country and the basket overweight the exporters if you believe the war persists tilt towards the importers especially place like India if you believe pieces coming and want to catch that snapback not just in equities but in currency but understand that anytime you invest in emerging markets you're inherently getting that outside volatility so size your positions appropriately so even though for a lot of these
[SPEAKER_00]: It seems like things are bad, especially for India, the story isn't over, it might just be on a bit of a sale.
[SPEAKER_00]: Let's keep things going and roll in another listener question now.
[SPEAKER_07]: Hi, Justin and Luke.
[SPEAKER_07]: This is Rob from Las Vegas.
[SPEAKER_07]: I just wanted to get your analysis on RTX Corporation.
[SPEAKER_07]: Similar to RTX, it's in the aerospace and defense sector.
[SPEAKER_07]: I picked this up at earlier in the year.
[SPEAKER_07]: The represents about 3% of my portfolio.
[SPEAKER_07]: This would be an ideal position, should I hang on to this or are there maybe just solve the positions to use in other areas looking for to answer in the next podcast.
[SPEAKER_07]: Thank you.
[SPEAKER_00]: All right, so RTX corporation is the corporation that is formerly Raytheon, right?
[SPEAKER_00]: They have their missile air defense, they also have Pratt Whitney, their commercial military jets.
[SPEAKER_00]: And here to date, it's up about 6% up 28% over the past 52 weeks.
[SPEAKER_00]: But it's coming off of absolutely stellar.
[SPEAKER_00]: when it was up 37 and a half and 58 and a half percent uh... respectively and over the past three months it's been it's been down actually down about sixty nine basis points you know that it's in line with the industry that has been underperforming the the s and p five hundred this year and so in spite of revenue being up nine percent year over year i mean they did have an uh... earnings per share me uh... miss in spite of all these things
[SPEAKER_00]: What is going on?
[SPEAKER_00]: Because you would assume that going into a period where there is heightened kinetic activity in the Middle East.
[SPEAKER_00]: When you assume aerospace and defense stocks would do really well.
[SPEAKER_00]: Well, the reality is for a lot of these names.
[SPEAKER_00]: They've run up a lot.
[SPEAKER_00]: This is trading at 26.4 times price to forward-looking earnings.
[SPEAKER_00]: That's in spite of it coming down a bit and It's average over the past five years.
[SPEAKER_00]: It's 20.
[SPEAKER_00]: It's high is 30.
[SPEAKER_00]: It's low is 10.5.
[SPEAKER_00]: It's trading at Three times sales roughly.
[SPEAKER_00]: That's well above its average on a percentage basis and so what's happened is you had it.
[SPEAKER_00]: You had a run up
[SPEAKER_00]: then you had an oil shock.
[SPEAKER_00]: And that matters because one of the reasons why people were really believing, understandably that airspace defense names would do well is because of order volume because of a rearming European countries.
[SPEAKER_00]: But if you're a government, if you're a country, sovereign state, and you all will certainly have to worry about inflation, worry about energy shocks, worry about the availability of energy.
[SPEAKER_00]: There's not a limited money here.
[SPEAKER_00]: So you shift your budget towards those priorities and away from aerospace defense.
[SPEAKER_00]: Now, being said, I mean, this company does have incredible munitions, delivery growth, certainly after the conflict in Iran, the U.S. specifically, is going to need to rearm, and in a lot of ways, this is a bit of a premier aerospace and defense franchise
[SPEAKER_00]: has a bit of a tailwind from NATO demand, but it's a bit expensive, right?
[SPEAKER_00]: If you've been holding this thing for three months, you haven't had the best experience here.
[SPEAKER_00]: I don't think 3% is a crazy allocation, but I don't know.
[SPEAKER_00]: It's a bit expensive for me.
[SPEAKER_00]: I've been of the opinion for some time that these names, especially the majors, have been a bit run up for all the reasons we discussed.
[SPEAKER_00]: So RTX Corporation, thanks for the call.
[SPEAKER_00]: It's good to build from California listening on K-Down.
[SPEAKER_00]: Looks like you got a question on T-Row?
[SPEAKER_00]: Yeah, hey, look.
[SPEAKER_05]: I sold some recently, some blow this price once and some above.
[SPEAKER_05]: I have held it at different amounts, but somewhat continuously since 2022.
[SPEAKER_05]: Some of my first years I bought early in 2022 were higher, I sold them at a loss, but most of my shares, you know, are around.
[SPEAKER_05]: You know, I purchased it a lower price still.
[SPEAKER_05]: But they were still that more expensive, the ones that I had the shares that I'd paid more for, so I was kind of getting, you know, de-risking on that.
[SPEAKER_05]: I still own a few hundred shares.
[SPEAKER_05]: overall position.
[SPEAKER_05]: I'm just wondering, the sheer as I own now, I bought in the 80s and in 90s dollar range 90s and 90s to 100s.
[SPEAKER_05]: I'm just wondering how you look at this going forward in the recent news that's caused the price to run up and whether you think this is a trend that might continue.
[SPEAKER_05]: I will not stock mostly because of the dividend, but I have traded around it for the past few years.
[SPEAKER_05]: I bought shares and mostly long-term, held them for over a year and sold them when they went higher.
[SPEAKER_00]: Yeah, let's take a look at T-Row, which is T-Row price.
[SPEAKER_00]: And it had a rough couple of years heading into this year, which I'm sure you've experienced.
[SPEAKER_00]: I mean, they were down 44% in 2022.
[SPEAKER_00]: And pretty much flat from the next two years, down about 10% last year.
[SPEAKER_00]: Now, about 13.8% I mean, they're up roughly 19% over the past three months.
[SPEAKER_00]: Now, what I like about this company will start there is they have a pretty solid balance sheet.
[SPEAKER_00]: I mean, they have over two and a half billion in free cash flow.
[SPEAKER_00]: They are a roughly 25 billion dollar market cap company, or sorry, $25, yeah, billion dollar market cap company, that's very little debt.
[SPEAKER_00]: I mean, they have under half a billion dollars in debt.
[SPEAKER_00]: It's incredibly pristine.
[SPEAKER_00]: They have nearly two trillion in assets under management.
[SPEAKER_00]: And I think one of the best benefits to them is that a lot of their assets, I think roughly 6 to 700 billion of it are within these target date funds.
[SPEAKER_00]: And so there's tend to be a bit sticky.
[SPEAKER_00]: They redeem slowly, mechanically, people you can kind of create the cash flow understanding how people distribute from those things.
[SPEAKER_00]: And for your main purpose is holding it as a dividend pair, I think that's one of the best parts about it, right?
[SPEAKER_00]: It's had 38 years of a solid dividend growth.
[SPEAKER_00]: They currently have about a 4% dividend yield that's been between 4 and 5 since 2022.
[SPEAKER_00]: But I think one of the things that
[SPEAKER_00]: word is me because we talked a lot about about a lot of good is just this structural shift from an active to passive management.
[SPEAKER_00]: And so anytime you do that fee
[SPEAKER_00]: Fee revenue inherently goes down and when you have an investment manager, fee revenues, fee revenues, the whole thing there.
[SPEAKER_00]: And so although it's good that those target date funds are a bit sticky, they also tend to be a bit cheaper in terms of costs.
[SPEAKER_00]: So I think that's one of the reasons why for the past couple of years and you've seen it across the investment management industry.
[SPEAKER_00]: Multiple has compressed valuations or other prices haven't kept up with the overall financial industry.
[SPEAKER_00]: And this migration isn't really helping as well.
[SPEAKER_00]: Now, in spite of that, I mean, return on equity solid, return assets is solid.
[SPEAKER_00]: I'm not sure to what extent this thing is going to hit a skate velocity here.
[SPEAKER_00]: I think there are just some structural issues that will probably keep the price to press, at least for the foreseeable future.
[SPEAKER_00]: That is it.
[SPEAKER_00]: T-R price.
[SPEAKER_00]: Take a T-R-O-W.
[SPEAKER_00]: Thanks for the call.
[SPEAKER_00]: Have a good day.
[SPEAKER_00]: Well folks, if you have not already, because we were just talking about a company that gives off a solid dividend, I encourage you to head over to the Invest Talk YouTube channel and check out our most recent Invest Talk wealth webinar beyond the yields, because in that webinar, Justin and I went through all the various
[SPEAKER_00]: assets, all the various ways you can construct and structure a portfolio to fit your income needs because most people think about bonds and they think about dividend stocks, maybe they think about preferred stocks, but there is a wealth of options out there.
[SPEAKER_00]: So what type of options should you consider?
[SPEAKER_00]: What type of options should you avoid?
[SPEAKER_00]: What are the benefits and what are the risks?
[SPEAKER_00]: It is our webinar on beyond the yield, was the name of it, and it is available on our YouTube channel right now, just head over
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[SPEAKER_00]: I'm Lou Greer, and we have one goal here.
[SPEAKER_00]: Let's to help you achieve your financial freedom.
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[SPEAKER_00]: Pick up that phone and dial, 888-99 chart.
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[SPEAKER_09]: I wanted to pick your ring about Apple.
[SPEAKER_09]: What did you think about their earnings call?
[SPEAKER_09]: They're just a good time to add to my position.
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[SPEAKER_00]: Alright, so, perpetual futures, or perps, as people call them, are now trading in the United States.
[SPEAKER_00]: And they're growing faster than anything the crypto industry has ever produced.
[SPEAKER_00]: Couchy launched them in May and they had a billion dollars in trading volume in less than a week.
[SPEAKER_00]: The CFTC chairman called it a watershed moment for U.S. capital markets.
[SPEAKER_00]: And I'm rolling my eyes when I read that.
[SPEAKER_00]: Now, let me just tell you what these are, because I think there's a lot of confusion.
[SPEAKER_00]: A perp is a derivative contract that essentially never expires.
[SPEAKER_00]: You're betting on the price of an asset, Bitcoin oil, a stock without ever owning it or taking delivery.
[SPEAKER_00]: There's no settlement date.
[SPEAKER_00]: You can hold it indefinitely.
[SPEAKER_00]: And you can trade with leverage as high as 40 times on onshore platforms, meaning that if you made a thousand dollar bet, that would control essentially $40,000
[SPEAKER_00]: I want certain corners of a tick-tock, which I don't use, and I wish I was making this up.
[SPEAKER_00]: The 19-year-old college students are showing off sports cars.
[SPEAKER_00]: They claim to have bought trading perpetual futures.
[SPEAKER_00]: One kid told the financial times that perps are 100% risk-udent spot trading, and that you can wake up the next morning in your position, can just give liquidated.
[SPEAKER_00]: And then he recommended that.
[SPEAKER_00]: The volume numbers are staggering.
[SPEAKER_00]: Crypto Perps traded roughly 90 trillion in volume last year, up from 30 trillion in 23.
[SPEAKER_00]: And Bank of America confirmed those figures because they sound crazy.
[SPEAKER_00]: Oiling Perps on Hyperliquid during the Iran crisis saw billions in weekly volume, SpaceX Pripyo Perps were trading at 210, that's 40% above the eventual IPO price before a single share was publicly listed.
[SPEAKER_00]: And, you know, I think there's a bit of structural risk here that these TikTokers aren't mentioning, when a traditional futures position goes against you, you get a market call.
[SPEAKER_00]: You have a deadline to post more cash.
[SPEAKER_00]: There's a buffer.
[SPEAKER_00]: With purps, losing bets are essentially instantly look-o-dated, when they hit a threshold.
[SPEAKER_00]: There's no warning, there's no deadline, there's no buffer, and winning trades can be automatically de-leverage, meaning the exchange can close your
[SPEAKER_00]: In October, when Trump threatened fresh tariffs on China, more than 1.5 million crypto traders were liquidated within 24 hours.
[SPEAKER_00]: The global crypto market shed 1.2 trillion, that's 25% of its value in six weeks.
[SPEAKER_00]: I mean, the cascade mechanism is pretty simple.
[SPEAKER_00]: You have instant liquidations, downbassets into a falling market, which depressed prices further, which sugars more liquidations.
[SPEAKER_00]: That's why CME group, you know, is volume, which is operates one of the largest droid of exchanges in the world.
[SPEAKER_00]: It's actually suing the CFTC.
[SPEAKER_00]: They alleged that the chairman's decision to classify purposes futures rather than swaps undid regulations introduced in 2008.
[SPEAKER_00]: CFTC called the lawsuit frivolous, but in a lot of ways, these products are dangerous.
[SPEAKER_00]: And I would say for investors and I use that term loosely because these are gambling, but this is really a message for you, and especially for anyone who has children or grandchildren, that like to trade on their phones, which
[SPEAKER_00]: talk a whole other hour about how that's not good.
[SPEAKER_00]: This matters because they introduce a new source of potentially catastrophic systemic risk.
[SPEAKER_00]: They provide, you know, genuine price discovery on weekends and off-hours, which I think is valuable, right?
[SPEAKER_00]: There is a value to them and understanding the market and looking at the market.
[SPEAKER_00]: But the leverage, the instant liquidation, the lack of buffers, they create a product that amplify volatility in exactly the moment when stability matters most.
[SPEAKER_00]: You can't ignore them.
[SPEAKER_00]: They exist.
[SPEAKER_00]: The demand is real.
[SPEAKER_00]: But the risk is real too.
[SPEAKER_00]: And the regulatory framework is still being written in a real time.
[SPEAKER_00]: But the problem is right now there's actual money on the line.
[SPEAKER_00]: So,
[SPEAKER_00]: As always, the most critical piece is understanding what you own, what you're doing, and in this case, potentially what you're gambling with.
[SPEAKER_00]: Well, folks, that doesn't 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, which you can get at iTunes and Spotify while you're at it.
[SPEAKER_00]: We'd really appreciate it if you left a rate and review.
[SPEAKER_00]: Additionally, I encourage you to head over to our Invest Talk to YouTube channel, check out some of our YouTube exclusive content, and should it any time?
[SPEAKER_00]: You think to yourself, you know what's self?
[SPEAKER_00]: I would love a second set of eyes on my portfolio because I don't know if I'm on track to achieve my financial goals.
[SPEAKER_00]: I encourage you to head over to Invest Talk.com and click on the portfolio review button.
[SPEAKER_00]: It's a smooth process.
[SPEAKER_00]: It's easy.
[SPEAKER_00]: You schedule a meeting.
[SPEAKER_00]: You send
[SPEAKER_00]: We just give you second pair of eyes.
[SPEAKER_00]: Justin and I speak with investors in just like yourselves each and every day, and we can't wait to speak with you.
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