[SPEAKER_03]: This is Invest Talk, from KPP Financial, helping investors make sense of the markets one day at a time.
[SPEAKER_03]: Here's your host, Justin Klein.
[SPEAKER_02]: Good afternoon, fellow investors, and welcome back to another edition of Invest Talk.
[SPEAKER_02]: This is our Thursday, July 30th, 2026 edition, which means that we only have one more trading day in the month of July and move on to August.
[SPEAKER_02]: And then we start closing up the summer.
[SPEAKER_02]: I don't wanna say it.
[SPEAKER_02]: Let's say it now.
[SPEAKER_02]: Summer's still a lot of summer in front of us.
[SPEAKER_02]: But things are heating up in the air as well as in the markets,
[SPEAKER_02]: strong bounce and markets today after the fed meeting yesterday.
[SPEAKER_02]: But a lot of volatility overall.
[SPEAKER_02]: So we're going to unpack as much as we can in this hour.
[SPEAKER_02]: We're going to give you data and perspective so that you can make better decisions with your money and we're obviously going to answer your finance and investment questions as well.
[SPEAKER_02]: So the number is always is 8 to 899 chart.
[SPEAKER_02]: 8-8-9-9-2-4-2-7-8, so I get through and ask your question on today's show.
[SPEAKER_02]: So I'm excited for this hour and in just a bit, we'll talk about today's mark performance and run down the short topics, but as usual, we'll tackle this first call of question now.
[SPEAKER_06]: Alright, looking Justin, this Justin here in Colorado, it's called about Parker Hannifin, Papa Hotel, bought it back in 2020 and it's done really well.
[SPEAKER_06]: It's about four and a half percent of my portfolio and I was wondering if I should maybe trim a little bit or maybe add to the position.
[SPEAKER_02]: looking at Parker and a fan.
[SPEAKER_02]: They instead around for a long, long time.
[SPEAKER_02]: It's market cap is what do we add?
[SPEAKER_02]: Now, $120 billion.
[SPEAKER_02]: So, large name, it what does it do?
[SPEAKER_02]: Manufactured's motion and control technology systems, mainly through diversified industrial and aerospace systems segments.
[SPEAKER_02]: So, it's in a, it's an industrial name,
[SPEAKER_02]: Historically, it's a very well-run business of turn equity around 25%.
[SPEAKER_02]: But it has started to lose momentum.
[SPEAKER_02]: It peaked back in February.
[SPEAKER_02]: It's been kind of chopping sideways since here right around $1,000 per share right now we're closing at 962 with the close today.
[SPEAKER_02]: Good balance sheet, as I said, good profitability.
[SPEAKER_02]: David and Yield, not crazy, but it's
[SPEAKER_02]: growing its dividend.
[SPEAKER_02]: So it's dividend is little below 1%.
[SPEAKER_02]: But this is a perfect example of why you don't just focus on high dividend payers.
[SPEAKER_02]: You want to talk about, you want to invest in dividend growers.
[SPEAKER_02]: Back in 2017, it's dividend was 66 cents a share.
[SPEAKER_02]: Now it's $2 a share.
[SPEAKER_02]: So think about that growth of its dividend, it's tripled over the past couple of years, or past decade.
[SPEAKER_02]: over the dust in years is 24%.
[SPEAKER_02]: Five years is 26%.
[SPEAKER_02]: Three years is 34%.
[SPEAKER_02]: Over 15 years, 18% annualized.
[SPEAKER_02]: Very, very good performer.
[SPEAKER_02]: So type of name that should be on everyone's watch list.
[SPEAKER_02]: The question is, is it too expensive?
[SPEAKER_02]: Right, now, especially with interest rates going up.
[SPEAKER_02]: If you have high multiple stocks, they often come back down to earth and multiples become multiple shrink.
[SPEAKER_02]: And this is about 20 times forward-looking enterprise value to EBITDA, that is near the highest levels, it's been in over the last 10 years.
[SPEAKER_02]: So this is a name because of the technicals and the valuation.
[SPEAKER_02]: I would at least trim.
[SPEAKER_02]: If you hold it, it's 4.5% of your portfolio.
[SPEAKER_02]: Bring that back down, cut it in half.
[SPEAKER_02]: They bring it down to 2% of your portfolio.
[SPEAKER_02]: You're on sell it all, I'm not against that, but make sure you have it on your watch list to buy it if it does come down considerably.
[SPEAKER_02]: Cause that's one of the issues with selling winners, all together is that you forget about it.
[SPEAKER_02]: You sell it and then, you know, it pulls back and you forget about it, you moved on.
[SPEAKER_02]: And then by the time you look at it again, well, it had a 30% pull back, you should have bought it and then it rallied 50% from there.
[SPEAKER_02]: And you should have just never sold it in the first place.
[SPEAKER_02]: So there's a process of doing that, but I do think it is expensive, but it is a very good business, and I like the secular trends.
[SPEAKER_02]: So what I would probably do like I said, cut it back down to 2% of your portfolio, take a bit of profits off the table, and then be ready to add that back.
[SPEAKER_02]: As I go to three, maybe back to four, if it gets into really value territory, which it's not really there right now.
[SPEAKER_02]: A great company, Parker, and it's in pH.
[SPEAKER_02]: So in the great show yesterday, we look into this question.
[SPEAKER_02]: Is the U.S. dollar losing its edge?
[SPEAKER_02]: It's got the dollar outlook and the age of oil shocks and geopolitical risk.
[SPEAKER_02]: And then we answer listed questions on Amazon.
[SPEAKER_02]: And if you happen to miss it, go check it out.
[SPEAKER_02]: Best way to get every show is to follow invest hot court ever you get your podcast.
[SPEAKER_02]: And we've got a ground to cover over the next 45 minutes or so and time remaining will get to all of it.
[SPEAKER_02]: Our main focus point today concerns a story.
[SPEAKER_02]: AI spending problem.
[SPEAKER_02]: AI-themed ETFs are now struggling after surging in the first quarter, but they're facing challenges.
[SPEAKER_02]: The industry is a whole, anthropic rolling out cheaper models, China rolling out competitive models, capex spending, dominating earnings calls without really an understanding of where the returns are going to come from.
[SPEAKER_02]: When does the AI infrastructure boom actually translate into profits?
[SPEAKER_02]: We'll take a look at what is necessary for these companies to make money on this massive is an understanding.
[SPEAKER_02]: It's literally the largest investment in American history.
[SPEAKER_02]: That's how big it is.
[SPEAKER_02]: Bigger than the highway system, right?
[SPEAKER_02]: The energy of the highway system.
[SPEAKER_02]: So this can be a big topic to cover.
[SPEAKER_02]: Also, the concentration risk on AI is not just in equities.
[SPEAKER_02]: We know that it's very concentrated.
[SPEAKER_02]: We're on the S&P, you're on any of the broad indices, the targeted fun, whatever that is.
[SPEAKER_02]: You're very tied to the outcome of the AI buildup.
[SPEAKER_02]: But it's bond investors that are also becoming a lot more exposed as well as these companies are issuing a lot of debt.
[SPEAKER_02]: So we'll take a look at that story.
[SPEAKER_02]: The AI backlash is an underappreciated aspect of the ass story.
[SPEAKER_02]: So a lot to talk about around AI today, I know we've been talking about it this is pretty focused on the excited for this hour.
[SPEAKER_02]: We also have voice bank calls, one is on Fibonacci extensions, and then CrowdStrike, CRWD.
[SPEAKER_02]: And of course, questions that came in be the comments section over on the investment of YouTube channel as well.
[SPEAKER_02]: Now we're going to head into a break.
[SPEAKER_02]: Please remember to call any time and leave your question on the investment like voice bank.
[SPEAKER_02]: And if you're listening to our live stream, or on the aim towards running the Bay Area, you can call right now at 8.899 chart.
[SPEAKER_02]: Up next, I'll comment on today's market activity.
[SPEAKER_03]: In the early days, in Vestock was Jerry Klein and Steve Peasley.
[SPEAKER_03]: Now the torch has been passed and a new generation of hosts is on the job.
[SPEAKER_03]: Justin Klein and Luke Guerrero.
[SPEAKER_03]: So when you've got finance and investment questions, don't forget to call in Vestock.
[SPEAKER_03]: 888-99-Chark.
[SPEAKER_02]: It didn't 99 chart.
[SPEAKER_02]: It did 992, 4, 2, 7, 8.
[SPEAKER_02]: So I could do and ask your question on it today's show.
[SPEAKER_02]: Let's go take a look at the market.
[SPEAKER_02]: It was a very interesting day.
[SPEAKER_02]: You had meta down 8% on the day.
[SPEAKER_02]: But then you had some names like Microsoft, a 15 and a half percent of the day.
[SPEAKER_02]: It was really a bounce from a major cell off that the story was an unwind of a fund called the situational awareness fund.
[SPEAKER_02]: the lead trader there, but he became something kind of like Kathy Wood, where got a big name in the era where is just the the windows that they're back and in a market that is a structure that's very reflexive, meaning there's a lot of leverage built in the system and when
[SPEAKER_02]: and when everything's marketed in the price of these stocks go up they get more flows from passive investors and all this there's a lot of structure in this and this is why you're seeing a lot of these sectors go up dramatically in a short period of time overshoot fundamentals and then crash back down to earth.
[SPEAKER_02]: saw that in 2022 or try 2021 and it's 2022 and the crash happened with a lot of the zooms of the world but now you're seeing this in a hat.
[SPEAKER_02]: So the balance was about hey this situation awareness fund that had a lot of leverage and it was four times leverage or some leverage or something like that.
[SPEAKER_02]: It had to force liquidate and that's what you saw a lot of those names down big yesterday but nice bounce back today.
[SPEAKER_02]: Assuming that the pressure is off the problem is is that guess what they're not the only fun chasing the AI trade I think of all the leverage ETFs that are out there
[SPEAKER_02]: on single stock names, like micron, et cetera.
[SPEAKER_02]: I don't because it's over.
[SPEAKER_02]: I think we're probably gonna sell off an AI at least into the fall is my best estimation.
[SPEAKER_02]: We'll see how it evolves from there.
[SPEAKER_02]: But when everyone says the AI trade is over, that's actually probably what you're gonna be picking it up.
[SPEAKER_02]: To me, the AI trade just really cracked and earnest.
[SPEAKER_02]: And so that usually brings a lot of volatility that big down days like yesterday, big rallies like today.
[SPEAKER_02]: So it shouldn't shock you that this is the way that it's going.
[SPEAKER_02]: What else do we get?
[SPEAKER_02]: Oh, yeah, an intervention.
[SPEAKER_02]: This was big as well.
[SPEAKER_02]: The yen really two and a half percent this morning.
[SPEAKER_02]: And it looks like
[SPEAKER_02]: The Japanese Central Bank is the fending the currency.
[SPEAKER_02]: And the big risk here is that it could create a yen carriage or done wind of, remember, we did that couple years ago, two summers ago, around this time, actually.
[SPEAKER_02]: Now it's one day, but certainly could precipitate more short covering in the yen, which when you're unwinding the carriage trade, you have to sell your dollar denominated asset,
[SPEAKER_02]: and then you cover your short position.
[SPEAKER_02]: And that's certainly what could happen here in the short term.
[SPEAKER_02]: So be aware of that.
[SPEAKER_02]: That is one risk that's on the table here.
[SPEAKER_02]: And there's even more risk from this speed meeting yesterday that really pushed the Fed.
[SPEAKER_02]: I don't know what's saying to a box, but the market was not happy with that press conference.
[SPEAKER_02]: Pretty clear.
[SPEAKER_02]: That's what's signaling.
[SPEAKER_02]: And so that's why interest rates can see you go up now.
[SPEAKER_02]: They were, they did come back down today, mostly.
[SPEAKER_02]: But overall, treasuries were mixed.
[SPEAKER_02]: Let's see, short term, treasuries were about flat.
[SPEAKER_02]: The long end, also about, actually, it was up earlier, but didn't really close that strong to be honest with you.
[SPEAKER_02]: So it was really just a pause day for yesterday's sell-off.
[SPEAKER_02]: We'll see if we get a resumption of the sell-off in the bond market.
[SPEAKER_02]: I think that's suddenly could feed
[SPEAKER_02]: dollar was off, 1% mainly because of the yen, but the euro was strong as well.
[SPEAKER_02]: So as the Swiss Frank, so Frank was up 1.3% of the day.
[SPEAKER_02]: So it wasn't just the yen rallying the dollar certainly sold off in a material way.
[SPEAKER_02]: I think there's worries in the market that I
[SPEAKER_02]: Kevin Worst is buying his time.
[SPEAKER_02]: He, we know that there's political pressure from the White House for him to cut rates.
[SPEAKER_02]: It's clear with the data, they can't cut rates.
[SPEAKER_02]: But if he's maybe Mark Sarton thing, are you just buying time?
[SPEAKER_02]: Until there's a clear indication that the risk to inflation may be breaking, you know, he actually called out the run war as a catalyst for higher inflation.
[SPEAKER_02]: So maybe sticking that will go away.
[SPEAKER_02]: Obviously that those little shade on the current White House, but the bottom line is the market is a little bit worried about this.
[SPEAKER_02]: Does that could push the dollar down, goals up one and a half percent of the day, silver up 1.6, Bitcoin up 1.9, WTI crew did finish down 1 percent on the day, however.
[SPEAKER_02]: So, very interesting day.
[SPEAKER_02]: Overall, a bit mixed.
[SPEAKER_02]: You had names like a Lily in Johnson & Johnson down.
[SPEAKER_02]: You had consumer staples down, as higher interest rates are in inflation are biting.
[SPEAKER_02]: But really, it was just a bounce back day.
[SPEAKER_02]: I'm not buying too much into it and we'll see what happens as we close out the week in the month, tomorrow.
[SPEAKER_02]: We are best luck.
[SPEAKER_02]: In best luck, voice bank never closes so you can leave your finance and invest some question any time that I did at 99 chart, or work continues after this break.
[SPEAKER_04]: Got a question for Justin or Luke?
[SPEAKER_04]: You're the best person to ask it.
[SPEAKER_01]: I wanted to pick your ring about apples.
[SPEAKER_01]: What did you think about their earnings call?
[SPEAKER_01]: It's just a good time to add to my position.
[SPEAKER_04]: Call in Vestock.
[SPEAKER_04]: 888-99 chart.
[SPEAKER_03]: It's official, total lifetime downloads for the Invest Talk podcast are now more than 63 million.
[SPEAKER_03]: Justin Klein is here now taking your calls live, Invest Talk 888-99 chart.
[SPEAKER_02]: It did 99 chart, it did 99, 2, 4, 2, 7, 8.
[SPEAKER_02]: And before we get to our main focus point, I want to highlight something that's underappreciated in that.
[SPEAKER_02]: Well, we know the major indices, the S&P, the Russell 3000, whatever index you're probably owning, that's a market cap weighted, is going to be heavily exposed AI.
[SPEAKER_02]: 35% of the S&P is represented by large cap companies benefiting from the AI investment cycle.
[SPEAKER_02]: There's crowd of positioning across the market.
[SPEAKER_02]: But increasingly, it's not just about the equity markets.
[SPEAKER_02]: The financing landscape is evolving just as rapidly as technology.
[SPEAKER_02]: Recent industry estimates place the AI build out at several trillion dollars the coming years.
[SPEAKER_02]: and an estimate of $2 trillion in AI financing is set to come from the investment grade market alone according to JP Morgan.
[SPEAKER_02]: That means hyperscalage could account for nearly 25% of the roughly $7 to $8 trillion in U.S. high grade issuance in the coming years.
[SPEAKER_02]: Right now it's only five percent.
[SPEAKER_02]: So it's going to dominate the bond issuance issuing market.
[SPEAKER_02]: And then what about the high yield market as well?
[SPEAKER_02]: It went from next to nothing to estimated $40 billion outstanding in just a year.
[SPEAKER_02]: And a currently accounts for about 3% of the U.S. high yield index, going from 0 to 3% in a year.
[SPEAKER_02]: So these hyperscalers are making big bets.
[SPEAKER_02]: And the bond market is backing it.
[SPEAKER_02]: Hyperscalers have issued more than $220 billion in bonds so far this year alone.
[SPEAKER_02]: It's the largest driver of a near record US high-grade issuance.
[SPEAKER_02]: Double doubling their share of the IG market over the past year.
[SPEAKER_02]: And the market is starting to shift.
[SPEAKER_02]: Earlier this year, these issuance were oversubscribed by five times.
[SPEAKER_02]: That was in February.
[SPEAKER_02]: Now it's only two times.
[SPEAKER_02]: And hyperscaler market of the bonds backing them are starting to underperform the broader investment grade index.
[SPEAKER_02]: So the market is starting to show signs revolting.
[SPEAKER_02]: Now we say the bond market is smarter than the equity market.
[SPEAKER_02]: And the hyperscalers have now displaced the largest domestic banks at the top of the IG index.
[SPEAKER_02]: So it's no longer dominated by big banks.
[SPEAKER_02]: It's dominated by the hyperscalers.
[SPEAKER_02]: This is all well and good when it's a risk-off environment, liquidity is good.
[SPEAKER_02]: Their balance sheets are strong because they have good cash flow and very little current debt.
[SPEAKER_02]: But it's time goes on.
[SPEAKER_02]: As CapEx could tease to go up as balance sheets become more levered as cash flows become more scarce.
[SPEAKER_02]: This could shift.
[SPEAKER_02]: And so when you're in a targeted find, you're just in some broad index, whether it's now on the equity side or the bond side,
[SPEAKER_02]: you will be exposed to this in a major way.
[SPEAKER_02]: So that's why there's increasing risk in everyone's portfolio if you're just indexing.
[SPEAKER_02]: Let's drop in a fresh, voicemail question now.
[SPEAKER_07]: Hi, and that's Fog Justin Luke.
[SPEAKER_07]: You guys are not through a great job.
[SPEAKER_07]: Keep the good work.
[SPEAKER_07]: I had a question about State Street, STT.
[SPEAKER_07]: I've had this thought for a few years.
[SPEAKER_07]: I feel like it's gotten overpriced to explain to me.
[SPEAKER_07]: I really love the Nullier of Penny Nye.
[SPEAKER_07]: Again, the ticker is STT, State Street.
[SPEAKER_07]: Thanks, and keep it going to work.
[SPEAKER_02]: All right, looking at state street, STT is the symbol.
[SPEAKER_02]: It's a name that we own for clients.
[SPEAKER_02]: earnings are up 32% year over year this year, 12% next year.
[SPEAKER_02]: So if you go based on next year's earnings, not expensive at all.
[SPEAKER_02]: You're talking about $180 stocks, so it's earned $15 and 16 cents next year.
[SPEAKER_02]: That's relatively cheap.
[SPEAKER_02]: Now, it does have a decent amount of debt, but that's kind of their business.
[SPEAKER_02]: They're financial institutions.
[SPEAKER_02]: And they provide services to institutional investors.
[SPEAKER_02]: They do commercial and financial loans, commercial real estate loans, et cetera.
[SPEAKER_02]: So it's a great business.
[SPEAKER_02]: Return equity is about 12%.
[SPEAKER_02]: Not gang investors, but solid consistent.
[SPEAKER_02]: They continue to raise their dividend.
[SPEAKER_02]: 10 years ago, they are paying 38 cents a share.
[SPEAKER_02]: Now, it's up to 84 cents a share.
[SPEAKER_02]: And still plenty of room for that to go up, because their pay ratio is only 30%.
[SPEAKER_02]: So is it cheap at these levels?
[SPEAKER_02]: I wouldn't call it cheap, but don't mistake in that went up for being expensive.
[SPEAKER_02]: It went up because it has great business behind it.
[SPEAKER_02]: So I would keep say it's State Street, STT is simple.
[SPEAKER_02]: On the next and best talk, we'll look into the story.
[SPEAKER_02]: Terrific star here to stay, how permanent trade barriers are reshaping long-term investing.
[SPEAKER_02]: Uzam, the long-term investment implications for our world were tariffs are the new normal.
[SPEAKER_02]: That story, but for now, I'm Justin Klein, and I'm Rade Taker calls anytime at 8.899 chart.
[SPEAKER_04]: Justin Klein is here and ready to tackle your questions.
[SPEAKER_04]: I've heard you say multiple times that you prefer shorter duration Treasury Barnes.
[SPEAKER_04]: Can you explain to me why it is more advisable?
[SPEAKER_04]: Call in Vestock, 888-99 chart.
[SPEAKER_02]: At KPP Financial, Accountability means more than advice.
[SPEAKER_02]: It means we invest alongside you, through our parallel investing approach.
[SPEAKER_02]: When we recommend an investment for clients, one or more KPP principles invest their own capital at the same time, same day, same price, same percentage.
[SPEAKER_02]: If your portfolio moves, ours does too, that is alignment, that is transparency.
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[SPEAKER_03]: You best talk.
[SPEAKER_03]: Tell your friends they can listen live, download the free podcast, or watch invest talk on our YouTube channel, and they can leave their finance and investment questions any time
[SPEAKER_02]: Our main focus point is about the AI spending boom and where is the beef, as they said, was that in the 70s?
[SPEAKER_02]: I think, where's the beef for I wasn't alive then, but that was a pop of the commercial, I remember that in the 70s.
[SPEAKER_02]: I think it was a Burger King commercial, remember correctly?
[SPEAKER_02]: Anyway, yeah, where's the beef?
[SPEAKER_02]: Where's the revenue with all the spending?
[SPEAKER_02]: Wendy's, that's what it was, Wendy's commercial.
[SPEAKER_02]: Now last year, America's biggest technology companies spent $450 billion in infrastructure, mainly to power AI.
[SPEAKER_02]: Sounds like a lot, but this year, it's gonna be at $900 billion.
[SPEAKER_02]: Next year, it's expected to be $1.4 trillion.
[SPEAKER_02]: And as I said earlier with the bond segment that they bought about $400 billion, this year, in order to fund this buildout.
[SPEAKER_02]: the largest investment surge in history, think about that.
[SPEAKER_02]: But will it provide positive returns for investors?
[SPEAKER_02]: The market is starting to price like that is not a certainty.
[SPEAKER_02]: Those names, the Mac 7 names, peaked in June, July about 20% with the biggest AI firms.
[SPEAKER_02]: Since the June Heights.
[SPEAKER_02]: Meta-Report earnings on July 29th, shares about 7%.
[SPEAKER_02]: And Zuckerberg defended spending an AI.
[SPEAKER_02]: But their cash flow, free cash flow, was eaten away dramatically because of it.
[SPEAKER_02]: And by rough calculations, they need to produce about $2.5 trillion per year in revenue to make the current investments justified.
[SPEAKER_02]: The problem is that only a very small percentage of consumers and a minority of businesses are willing to pay for the technology.
[SPEAKER_02]: So right now, that revenue is way far off.
[SPEAKER_02]: Only 20% of the American firms use AI in any business function over the past two weeks.
[SPEAKER_02]: That's according to Census Bureau.
[SPEAKER_02]: In May, economists at the Census Bureau reported that AI used for main relatively steady in many sectors over the last six months, meaning that growth is slowing.
[SPEAKER_02]: A survey by University of Texas, around that 33% of people now use AI at work, down from a peak of 46% in the middle of last year.
[SPEAKER_02]: Now, to reach that $2.5 trillion revenue mark, a third of companies in the OECD
[SPEAKER_02]: would have to spend about $100,000 a year on average.
[SPEAKER_02]: And most of these companies are small businesses.
[SPEAKER_02]: $100,000 is not nothing.
[SPEAKER_02]: BCB late last year did a survey.
[SPEAKER_02]: And they found that a tenth of year-old area companies use AI intensively.
[SPEAKER_02]: One in 10.
[SPEAKER_02]: In England, this might be the average American.
[SPEAKER_02]: Exactly.
[SPEAKER_02]: If you use AI for 1.7 hours a week, that was the bank of England, excuse me.
[SPEAKER_02]: So what's happening is most of the AI users are using just cheap free models.
[SPEAKER_02]: About half the businesses that use AI, they don't even pay for it.
[SPEAKER_02]: They either use it free tier of American model like a Gemini or a Cloud or an Open AI or a Jesuit BT.
[SPEAKER_02]: Or an Open Source Chinese model.
[SPEAKER_02]: $10.60 cents and into it, a software company attracts medium and small businesses across America, Britain, Canada.
[SPEAKER_02]: They said, one in ten paid for a dedicated AI tool.
[SPEAKER_02]: Now, a lot of people would say, well, there's a lot of room for growth, and that's certainly true, and there's certainly growing fast.
[SPEAKER_02]: But where are we today with all this growth?
[SPEAKER_02]: Where are we today?
[SPEAKER_02]: Halfway through, over halfway through, 2026.
[SPEAKER_02]: By one measure, it's about $175 billion in total across the industry, $175 billion.
[SPEAKER_02]: I just said, they invested $900 billion this year, $450 billion last year, and $1.4 trillion next year.
[SPEAKER_02]: Expect it.
[SPEAKER_02]: Got some putted at $220 billion, others putted at $170, but if you look at, you add up the big boys.
[SPEAKER_02]: anthropic pulled in about 75 billion and utilized as of the recent quarter.
[SPEAKER_02]: Open AI makes about tens of billions.
[SPEAKER_02]: Google's Gemini and Microsoft probably a little less than that.
[SPEAKER_02]: SpaceX only a few billion there.
[SPEAKER_02]: Met a few billion.
[SPEAKER_02]: So the big boy is about 150 billion and then some of the smaller guys, obviously, a lot less.
[SPEAKER_02]: And that's where you end up in the 175, the $200 billion.
[SPEAKER_02]: and token use is growing faster than revenue.
[SPEAKER_02]: So they're not finding ways to monetize it.
[SPEAKER_02]: And one of the bigger worries is that they are using this compute capacity as a loss leader.
[SPEAKER_02]: To try to get, we've dropped models.
[SPEAKER_02]: We used to use, judging by T for a little bit, we still use all of them to some degree.
[SPEAKER_02]: You check your T originally, then Gemini for a little while, and now we're deep in the cloud.
[SPEAKER_02]: But we have subscriptions to all of them, so we're actually a fairly heavy user of AI.
[SPEAKER_02]: So I'm not poopoing the value of AI.
[SPEAKER_02]: I think it's great.
[SPEAKER_02]: It's just where is the revenue going to come from?
[SPEAKER_02]: 9 and 10 executives report no impact on AI on the first productivity over the past three years.
[SPEAKER_02]: 9 and 10, 90 percent.
[SPEAKER_02]: I would be the one, frankly.
[SPEAKER_02]: So the point here is that this is why it's faltering.
[SPEAKER_02]: This is why when you go look at a lot of the names within the space, you have to take the earnings projections over this year, next year, or their giant green assault, because what I think is going to happen is going to be very similar to Zoom.
[SPEAKER_02]: I use Zoom as a great analogy.
[SPEAKER_02]: Because we all know during the pandemic, everyone was jumping on Zoom, everyone was doing video conferencing and their business boom.
[SPEAKER_02]: From only 35 cents in 2019,
[SPEAKER_02]: to $5.07 in 2021 and the stock crashed and the stock went from let's say it was $800 per share now it's at 92 that's after rallying from a low or full of stuff full of chart does not grow operating with me for the point is
[SPEAKER_02]: Zoom still, this year is gonna make $6.4 cents that's after buying back a ton of shares recently.
[SPEAKER_02]: So it's not like their businesses got better.
[SPEAKER_02]: Zoom went to size 580, as it was.
[SPEAKER_02]: Then it reached at low around 60 bucks.
[SPEAKER_02]: Is that 90%.
[SPEAKER_02]: Now, are all these names going down 90%.
[SPEAKER_02]: No, but the growth will temper.
[SPEAKER_02]: And a lot of them will have negative growth.
[SPEAKER_02]: because there was just too much spending in a short period of time, that's what the market is reacting to right now, that's what the market is starting to price in, and that's why you have to be very careful within this industry.
[SPEAKER_02]: Let's keep moving and drop it another fresh listener question now.
[SPEAKER_00]: Good day Justin and Luke.
[SPEAKER_00]: Matt from Minneapolis here, of course I love your show, you guys are great.
[SPEAKER_00]: And I have a quick question for you, hopefully you can give me a little insight on this.
[SPEAKER_00]: semi-stacks and stuff or down, of course, like a lot of them in the video in tell and so forth.
[SPEAKER_00]: Don't know how to recover those losses.
[SPEAKER_00]: I should have taken profit sooner I did.
[SPEAKER_00]: I'm still up on them for the year.
[SPEAKER_00]: I'm wondering if I should just get out now, take some profit of intel on that.
[SPEAKER_00]: I don't know when they'll recover in the future.
[SPEAKER_00]: I'm sure they will someday, but when it's someday is a
[SPEAKER_00]: It's had a good year.
[SPEAKER_00]: I noticed that just did a split.
[SPEAKER_00]: The future looks good on it.
[SPEAKER_00]: So it seems to have customers and stuff on the line.
[SPEAKER_00]: What would you think of doing a move like this?
[SPEAKER_00]: Would this be foolish?
[SPEAKER_00]: Should I just hang on to Intel and the video and wait for him to turn around?
[SPEAKER_00]: Or would CrowdStrike be a good move?
[SPEAKER_00]: Be listing on the show for your answer.
[SPEAKER_00]: Thank you.
[SPEAKER_00]: Have a great day.
[SPEAKER_02]: All right.
[SPEAKER_02]: It's not a lesson to be had from this call.
[SPEAKER_02]: Number one.
[SPEAKER_02]: don't think that it's going to turn around and all of a sudden everything's going to be fine.
[SPEAKER_02]: Okay, just because they were at that high doesn't mean micron may never hit those highs ever again, I mean, it was just massive, massive, massive, massive increase in price.
[SPEAKER_02]: Or micron was trading at $65 this spring of last year, hit a high of $1,200 recently,
[SPEAKER_02]: The margins for Micron may never come again.
[SPEAKER_02]: So that very well could be like a 20 year thing where it doesn't go back to even.
[SPEAKER_02]: I'm not saying this also can happen with Nvidia, but don't assume anything.
[SPEAKER_02]: But that's also why when you have these fever pitch moments, you need to be good at recognizing them and taking profits at the bare minimum.
[SPEAKER_02]: Now, we own Intel, but we trimmed dramatically at 120, ish, in that way, another exact number, but around 120.
[SPEAKER_02]: Now, it's at 91, we'll be buying them on a pullback.
[SPEAKER_02]: Because we think that,
[SPEAKER_02]: We're going to have I think we're going to we're going to we're going to look a lot more like China in the future is in a sense that we're going to have state sponsored companies like Intel think it's going to be more of a thing.
[SPEAKER_02]: Yeah, you had a Republican start that process you think something a Democrat won't continue with it.
[SPEAKER_02]: I think they will.
[SPEAKER_02]: So I think there's some national security concerns that will probably
[SPEAKER_02]: So that's number one.
[SPEAKER_02]: So that's what I would probably continue to hold.
[SPEAKER_02]: Nvidia who knows?
[SPEAKER_02]: That's a more complex picture there.
[SPEAKER_02]: You know, a gigantic AI has a more balanced demand from both CPUs and GPUs, and so will you need as many Nvidia products as you would before, I digress.
[SPEAKER_02]: The point is, don't be dogmatic of like, oh, it's, yeah, it's come back.
[SPEAKER_02]: It's just gonna return back to where it was.
[SPEAKER_02]: It won't necessarily do that.
[SPEAKER_02]: You have to have a thesis for why you own it over the long term.
[SPEAKER_02]: Especially when you have these hype moments like we had just a couple months ago, and now you have a peek.
[SPEAKER_02]: The question is, what are you now?
[SPEAKER_02]: Now, I would probably still sell in video.
[SPEAKER_02]: But would I put it in like a crowd strike?
[SPEAKER_02]: No, I would go out of tech.
[SPEAKER_02]: Out of tech, the market is rotating.
[SPEAKER_02]: Haven't talked about this.
[SPEAKER_02]: Go watch my YouTube videos for the last months.
[SPEAKER_02]: The market is rotating.
[SPEAKER_02]: It's been rotating for the few months.
[SPEAKER_02]: Really since the mag seven feet.
[SPEAKER_02]: Anyway, what has been rotating it rotating into?
[SPEAKER_02]: Dustrails, materials, healthcare,
[SPEAKER_02]: That's not where CrowdStrike is.
[SPEAKER_02]: And he's talking about the demand for CrowdStrike.
[SPEAKER_02]: It's great that they're good business, but this whole thing should be showing you, you have to pay attention.
[SPEAKER_02]: The valuation in CrowdStrike's valuation is just absurd.
[SPEAKER_02]: Enterprise value EBIT is 101, 101.
[SPEAKER_02]: So not the type of name that I would own, especially if this recent run.
[SPEAKER_02]: broaden your horizons.
[SPEAKER_02]: I know it's not as exciting, it's not as sexy, but that's where the market's going.
[SPEAKER_02]: I'm seeing a lot of healthcare names that were down there luck starting to fly.
[SPEAKER_02]: That's where you want to go.
[SPEAKER_02]: Into another sector that's not tech.
[SPEAKER_02]: Let's tackle a question that came in.
[SPEAKER_02]: View the investment on YouTube channel, Sam Klein, spelled Kale I and E, different than mine.
[SPEAKER_02]: Said, I just an eluc would appreciate if you could look at ticker Simroll symbol m li.
[SPEAKER_02]: Let me guess, you know, it's so interesting.
[SPEAKER_02]: But you don't typically get questions on the show that are highlighting companies that are great opportunities, great values.
[SPEAKER_02]: Usually after a big run.
[SPEAKER_02]: Now, I'm Euler, manufacturing sales
[SPEAKER_02]: But the business is boom because a lot of these products go into the identity centers.
[SPEAKER_02]: That's why up until last year, you had a meandering earnings picture.
[SPEAKER_02]: They're in 291 in 2022 and 265 in 2023 and then 266 only up a penny in 2024.
[SPEAKER_02]: And then boom, last year up 29%.
[SPEAKER_02]: So this is all around piping systems, industrial metals, and climate, climate.
[SPEAKER_02]: What do these dead centers need?
[SPEAKER_02]: They need HVAC systems.
[SPEAKER_02]: The cool, the hot machines running, the Nvidia GPUs, et cetera.
[SPEAKER_02]: So that's why their business has done really well, but the stock peak to the beginning of the year,
[SPEAKER_02]: Obviously, it's called February, beginning of February.
[SPEAKER_02]: And it's down since then.
[SPEAKER_02]: Just chopping sideways.
[SPEAKER_02]: It's losing that momentum.
[SPEAKER_02]: So my issue here is that historically, it's kind of a math business.
[SPEAKER_02]: Turn equity is 26% today, but that's usually more than the height.
[SPEAKER_02]: So it's actually now that it's a decent business.
[SPEAKER_02]: Not an amazing business.
[SPEAKER_02]: Good balance sheet, but actually net cash and it's balance sheet.
[SPEAKER_02]: Enterprise value of even going forward is 10 times, but historically it doesn't trade like that.
[SPEAKER_02]: Trade's closer to three or four times.
[SPEAKER_02]: So I think this is a name that would be very patient on.
[SPEAKER_02]: If this gets back to in the four low 40s, that's probably going to pick it up, but it's 66 to expensive on passing on MLI.
[SPEAKER_02]: This invest stock, I'm Dustin Klein, we have one goal here, each navigate thing, so you achieve your own version of financial freedom, and I work to use after this final break.
[SPEAKER_02]: It's a good question to you now at 8.899 chart.
[SPEAKER_03]: The total lifetime downloads for the Invest Talk podcast are now more than 63 million.
[SPEAKER_03]: So tell your friends.
[SPEAKER_03]: When they have financial investment questions, don't forget to call Invest Talk 888-99-Chart.
[SPEAKER_08]: Good afternoon, Luke and Justin.
[SPEAKER_08]: This is Rob from Las Vegas.
[SPEAKER_08]: had the question about profit taking.
[SPEAKER_08]: I don't think I'm alone, but I really struggle with when to take profits and some of the positions in my portfolio.
[SPEAKER_08]: I don't want to take profits just for the sake of taking profits.
[SPEAKER_08]: I know there's a lot of different nuances, allocations versus the rest of the portfolio, maybe position is increased, and now makes up more of a percentage of the portfolio a lot has to do with the kind of your risk tolerance and what sector you're
[SPEAKER_08]: In the past, I've used Fibonacci retracement to enter position based on some of your guidance.
[SPEAKER_08]: So I really do appreciate that.
[SPEAKER_08]: But I didn't know if you look at Fibonacci extensions for either exiting or trimming a position.
[SPEAKER_08]: I just wanted to see if you could comment on Fibonacci extensions.
[SPEAKER_08]: That's something that you look at or if it's just the novelty.
[SPEAKER_08]: So I appreciate your help with answering this question.
[SPEAKER_08]: Thanks a lot.
[SPEAKER_02]: Even if they are charting, they know the basics of Fibonacci.
[SPEAKER_02]: Basically, Fibonacci is the pattern you see throughout the world in nature, mainly.
[SPEAKER_02]: It was used like what it looks like, what it hurricane looks like from above, for example, or the spiral of a flower, things like that.
[SPEAKER_02]: And then those patterns repeat themselves in markets.
[SPEAKER_02]: And so that gives you oftentimes a support level when a stock pulls back when it retraces, say, the numbers are 0.25, so quarter retrace, 0.322, 50% and then 0.618, which is the strongest retrace.
[SPEAKER_02]: But then there's the extension is, okay, pull back and then it broke out, then there's
[SPEAKER_02]: Uh, whatever that measure move is, if there's there's 25% above that, then there's 38% above that, then there's 50% above that, that move.
[SPEAKER_02]: And so that's the extension that's where there can be resistance.
[SPEAKER_02]: So I think yes to an extent, but what I say with charting in general is you don't want to use one factor, you want to use it as a factor along with other support levels, maybe maybe it's moving average that's pulling back for example.
[SPEAKER_02]: or if there's broader red flags, as a example right now, right?
[SPEAKER_02]: We know that these were blowing out to the upside and there was sentiment was extreme.
[SPEAKER_02]: You had fun companies issuing the DRAM ETF, for example.
[SPEAKER_02]: And that's a sentiment check.
[SPEAKER_02]: You see things that are on CNBC, talked a bit at a little time.
[SPEAKER_02]: This pattern repeats over and over, just like Fibonacci.
[SPEAKER_02]: So you can add these things on top of each other.
[SPEAKER_02]: And yes, they can signal a time to maybe trim your position, extensively.
[SPEAKER_02]: So yeah, use that as part of the puzzle.
[SPEAKER_02]: Nothing I love to see when the market's going at where stock's going up is to see high volume.
[SPEAKER_02]: and you get this capitulator to where you drop where bad news happens, stock goes down, everybody in their mother's selling, volume is super high.
[SPEAKER_02]: It means all the weekends are gone.
[SPEAKER_02]: And that's the case for the opposite when it's in a bull market and all the shorts kind of capitulate out.
[SPEAKER_02]: It might go up and high volume maybe reverse.
[SPEAKER_02]: That can be a signal as well.
[SPEAKER_02]: That's squeezing one more question now.
[SPEAKER_05]: Hi, Justin Luke, I would like to hear your opinion about K-M-I.
[SPEAKER_02]: Thank you guys for your time to answer my question.
[SPEAKER_02]: Thanks, bye.
[SPEAKER_02]: You can kind of kinder, Morgan and corporate operate pipelines for natural gas, or fine petroleum, crude oil, renewable fuels, etc.
[SPEAKER_02]: This is one of those midstream names that I kind of talked about that I'm starting to like more long term or these companies that just collect a toll for moving product from the wellhead to where it's refined or used.
[SPEAKER_02]: I like those type of businesses.
[SPEAKER_02]: You can do more again, turn equity, 11% now, amazing.
[SPEAKER_02]: These amount of debt, but nice dividend about 3.7%.
[SPEAKER_02]: Let's look at, let's take a bit of raising that dividend.
[SPEAKER_02]: It is still raising dividend, not as it fast as it was in 2018, but still consistently raising it.
[SPEAKER_02]: I like this name.
[SPEAKER_02]: Not gonna knock your socks off.
[SPEAKER_02]: You're after year, but it's gonna be probably fairly consistent.
[SPEAKER_02]: It's all doing nicely.
[SPEAKER_02]: I'm getting Kinder Morgan to come up.
[SPEAKER_02]: Well that about doesn't I'm just inclined reminding you about KPP financials parallel investing and make a trade for our clients.
[SPEAKER_02]: Make the same trade for our self same day, same price, same percentage, no front running, no special treatment.
[SPEAKER_02]: We invest right alongside our client, same risk, and potential for success.
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[SPEAKER_02]: Independent thinking, sure it's success, it's the best stock.
[SPEAKER_02]: Good night.
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