[SPEAKER_01]: This is Invest Talk, from KPP Financial, helping investors make sense of the markets one day at a time.
[SPEAKER_01]: Here's your host, Justin Klein.
[SPEAKER_05]: Good afternoon, fellow investors.
[SPEAKER_05]: And welcome back to Invest Talk.
[SPEAKER_05]: This is our Wednesday, July 8th, 2026 edition of Invest Talk.
[SPEAKER_05]: Hope everyone had a wonderful fourth of July holiday weekend.
[SPEAKER_05]: Luke did the show the last couple of days.
[SPEAKER_05]: So this is the first time I'm speaking to you.
[SPEAKER_05]: So it's been to new half of the year.
[SPEAKER_05]: A lot of fireworks.
[SPEAKER_05]: Shall we say pun intended, I guess?
[SPEAKER_05]: So we're going to look at what is going on in markets, how that relates potentially to your portfolio.
[SPEAKER_05]: And what lessons you can glean from the first half of the year as well as the current market trends.
[SPEAKER_05]: Markets are adjusting their shifting as we head into the back half.
[SPEAKER_05]: So what does that mean for your portfolio and how can you become a better investor?
[SPEAKER_05]: That's what this hour is about.
[SPEAKER_05]: I'm Justin Klein and that is our mission each and every weekday to help you become a better investor by giving you actionable data and perspective as well as answering your finance investment questions.
[SPEAKER_05]: Another way that we help is through our wealth webinars and Casey missed our latest wealth webinar beyond the yield, how to invest for your income needs is now posted over on our YouTube channel.
[SPEAKER_05]: So, it's free to watch.
[SPEAKER_05]: So, make sure you head over there.
[SPEAKER_05]: Now, just a bit, we'll talk about today's Mark performance and run down the show topics, but as usual, we'll tackle this first-collect question now.
[SPEAKER_04]: He was Robert, and I'm a frequent listener.
[SPEAKER_04]: I had one question.
[SPEAKER_04]: I wanted to start day trading.
[SPEAKER_04]: I wanted to know if you guys can help me on where to start with.
[SPEAKER_04]: Thank you so much, and I look forward to hearing your response on your podcast.
[SPEAKER_05]: First off, day trading is very difficult.
[SPEAKER_05]: Know that nine and a ten traders, they flame out.
[SPEAKER_05]: They, they don't have a, they don't have the discipline.
[SPEAKER_05]: They don't have a strategy that they follow and understand
[SPEAKER_05]: Most of them kind of fly by the seat of the pants, things go well when the market's going well and the market shifts and they no longer are successful.
[SPEAKER_05]: That's very, very common.
[SPEAKER_05]: You also have to throw out anything that does to do with valuation, dividend, cash flow, all of that.
[SPEAKER_05]: It really doesn't matter day to day.
[SPEAKER_05]: over extended period times, yes.
[SPEAKER_05]: But day to day, just flows, markets, sentiment, shifts in expectations for different sectors, the broader economy, interest rates, et cetera.
[SPEAKER_05]: Currency, all of that matters in the very short term and what will impact the market movements or movements within individual companies, sectors, and obviously the broader market.
[SPEAKER_05]: So if the reframe your mindset completely, focus all on the charts, find patterns that work, thus find a strategy that works consistently, and stick to it.
[SPEAKER_05]: You're going to lose, yet to be willing to take some losses.
[SPEAKER_05]: That's difficult for new people.
[SPEAKER_05]: They want to hold until they get back to even, that's very common,
[SPEAKER_05]: psychological barrier that most investors, whether they're day trading or swing trading or just long-term buying holders, that they have struggled too to deal with.
[SPEAKER_05]: So really it's a battle of your own psyche that will make you successful.
[SPEAKER_05]: And frankly, that's the strategy secondary to that is making sure you're risk managing properly, that you are
[SPEAKER_05]: not getting caught up in your feelings and emotional, but you have a strategy developed for good reason and you're sticking to it.
[SPEAKER_05]: If you can do that, then you might be able to be successful.
[SPEAKER_05]: So we have a great show yesterday.
[SPEAKER_05]: We looked into a story concerning this question.
[SPEAKER_05]: What happens when the bubble pops?
[SPEAKER_05]: Bloomberg is reporting that one of the key signals driving the eye trade is losing its reliability.
[SPEAKER_05]: That is raising critical questions for investors.
[SPEAKER_05]: We also answer a listener question on Adobe, as well as, which is an American software company, based in San Jose.
[SPEAKER_05]: So make sure that if you missed that show, go over to our YouTube channel, or check it out wherever you get your podcasts.
[SPEAKER_05]: Now, we've a lot of ground to cover over the next 45 minutes or so, and here's what we have time permitting.
[SPEAKER_05]: Our main focus point is the story.
[SPEAKER_05]: Defense Tech Stocks in 2026 is this the new growth sector investors have been waiting for, which on the warfare, drones, advanced defense technology, or forcing Wall Street to completely rethink how defense companies are valued, moving them closer to tech multiples than old school defense contractor models.
[SPEAKER_05]: With NATO spending commitments rising in geopolitical risk still elevated, the defense tech theme may be one of the most compelling macro investment stories of 2026.
[SPEAKER_05]: So we'll look into that in much, much more, including dividend investing.
[SPEAKER_05]: How has it changed over the last number of years?
[SPEAKER_05]: Especially last 10, 15 years.
[SPEAKER_05]: We'll look at that, especially when you are comparing it to buybacks, dividend investing.
[SPEAKER_05]: Very different than it has been in the past.
[SPEAKER_05]: Then there's AI backlash, what does that look like both here in America and abroad?
[SPEAKER_05]: How that might impact the sector?
[SPEAKER_05]: And then if we have time, we'll go back in time.
[SPEAKER_05]: I look at one of the first bubbles in American history.
[SPEAKER_05]: Just to celebrate the 250 year anniversary, with a genome that wanted to be very first stock market bubbles
[SPEAKER_05]: We declared our independence in 1776, just a dozen, little over a dozen years later around 1790, and you won.
[SPEAKER_05]: You had another big IPO cycle.
[SPEAKER_05]: There are some lessons to be had from that as well.
[SPEAKER_05]: So that's what's on the docket for me as well as voice bank questions on KARO, Kuru, as well as dividend stocks and we have some questions that came in via the comments section
[SPEAKER_05]: But we're gonna head into a quick break.
[SPEAKER_05]: Please remember, you can call anytime.
[SPEAKER_05]: Leave your question on the Abestalk Voice Bank, if you're listening via our live stream, or possibly an aim.
[SPEAKER_05]: Until 20 in the Bay Area, you can call now at 88899 chart.
[SPEAKER_05]: Up next, I'll comment on today's market activity.
[SPEAKER_01]: The numbers are in.
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[SPEAKER_05]: It hit 99 chart, it hit 9924278.
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[SPEAKER_05]: Let's go look at the market today.
[SPEAKER_05]: It was, it decidedly negative day overall, even though the NASDAQ did it out a small gain.
[SPEAKER_05]: You have the Russell 2000 down, you have the 1% doubt down over 1%.
[SPEAKER_05]: As it peed down about a quarter of 1%.
[SPEAKER_05]: Decent bounce back day after a huge sell-off in tech yesterday, did not erase.
[SPEAKER_05]: don't believe it erased yesterday's losses or even got to the high.
[SPEAKER_05]: Yeah, we still closed below the high from yesterday.
[SPEAKER_05]: So it was really more of what we call an inside day, just a pause, even though we did rally off of the lows.
[SPEAKER_05]: And that's really, really was the,
[SPEAKER_05]: The story of today's market was that you didn't get fall off to the downside, even though you did get names like Meta, Microsoft and Google were down, Tesla down to 2% a lot in the finance sector.
[SPEAKER_05]: We're down, JP Morgan, Bank of America, American Express.
[SPEAKER_05]: Those were down considerably.
[SPEAKER_05]: That was really the the biggest issue.
[SPEAKER_05]: You still you have
[SPEAKER_05]: geopolitical uncertainty with what's going on in the Middle East as the war in Iran looks to be ramping up, which I expect this going forward.
[SPEAKER_05]: This is one of the reasons why I said, you know, starting to be less bullish over the long term on some of the MP energy names, but it wouldn't be something I would be rotating to immediately or out of immediately because I do think we'll get another bout of hostilities
[SPEAKER_05]: And now, that's what we're seeing.
[SPEAKER_05]: So you're seeing oil prices rally once again, and there's about a Bloomberg noted that 63 million barrels of rain oil are currently on the water, which puts the global supply chain of oil in limbo.
[SPEAKER_05]: You saw a WTI back above $72 a barrel, the highest since June 22nd after falling below
[SPEAKER_05]: So that was really the big news.
[SPEAKER_05]: You have the dollar, was flat, gold, finished down 1.8% silver down 4.6% Bitcoin futures down 2.6 WTI.
[SPEAKER_05]: It was up 4.4% overall, like I said, above $72 a barrel.
[SPEAKER_05]: You had the curve flattening yields were up about 1 to 4 basis points, kind of on the long end.
[SPEAKER_05]: So you continue to see another resurgence of rates
[SPEAKER_05]: the hope of inflation coming down starts to do.
[SPEAKER_05]: fade a little bit with oil features rising.
[SPEAKER_05]: So that was a big factor today.
[SPEAKER_05]: A lot of red in the screen, even though like I said, the NASDAQ got a game, that was in really in video three and a half percent and brought, come up, five, Apple up nearly 1% in the day.
[SPEAKER_05]: But it's heck hardware after a recent sell-offs, got a bit of a bounce, although I do think that this is more of a countertrend pause or a small bounce before a resumption of,
[SPEAKER_05]: that rotation and markets that we've seen over the past month or so, I think that will continue as we head into Q3 or Q3 actually.
[SPEAKER_05]: Here we go.
[SPEAKER_05]: Let's go tackle a YouTube comment section question.
[SPEAKER_05]: Jimmy Gustafson says, give your thoughts on constellation software.
[SPEAKER_05]: That's the name I actually wanted you to respond to.
[SPEAKER_05]: Sorry for the misunderstanding in the long text.
[SPEAKER_05]: All right, looking at constellation software, constellation, there we go.
[SPEAKER_05]: That symbol is Cn.
[SPEAKER_05]: C is in Charlie and is in Nancy S as in Sam W as in Water, F is in Frank, C and S W F. So this is one of those names that was a secular growth company, where they were buying software names, a lot of smaller names, and they had a strategy to plug that into their distribution
[SPEAKER_05]: And start to extract a lot of cash flow right now at two free cash flows to 0.5 billion, you went 6 billion really right near an all-time high with a mark cap of 43 billion in their president of 46, so very little down at $3 billion in net debt and it's balance sheet.
[SPEAKER_05]: So very clean balance sheet pays a little bit of a dividend, very low payout ratio, it's certainly increased that that's for sure.
[SPEAKER_05]: It's one of those names that you might look at it currently at the close to date, turning it $2,034.90.
[SPEAKER_05]: Sense, you would say it's expensive, yeah, I mean, sounds expensive, but when it comes to their forward-looking PE ratio, let's see, it is still pretty high, but price to enterprise value eaves around 12, which is very low for a software name.
[SPEAKER_05]: I think long term, this is a good buy.
[SPEAKER_05]: However, in the near term, the obviously could be more pressure to the downside as software names are getting lower multiples, once again, it's already come down from this 52 week high, pretty considerably, about 46% off of the 2 week high, but it's starting to rally from the bottom in February.
[SPEAKER_05]: So, I'm going to give constellation software a thumbs up based on this valuation.
[SPEAKER_05]: Our 24-7 voice bank never closes, you can leave your call right now, 8-8-99 chart.
[SPEAKER_01]: The Investalk phone lines never close and now, Justin Klein is here, Call Investalk 8899 chart.
[SPEAKER_03]: Hi there, Duncan from New York.
[SPEAKER_03]: Thank you for all that you do.
[SPEAKER_03]: I have a quick question on stop ticker, K, A, R, O, Cowrow.
[SPEAKER_03]: I don't know why it's so many O's.
[SPEAKER_03]: They came up on my one of my screen detectors the other day and it looks like that is a great return on equity over 30% and return on assets above 20% and I'm looking for some additional exposure obviously outside of the U.S. and it kind of caught my attention would like a just quick fundamental and technical analysis on your part and it would be a good time to go in but I'm really interested in this one.
[SPEAKER_03]: Thank you very much and have a great day.
[SPEAKER_03]: Bye.
[SPEAKER_05]: Looking at Karoo, yes, I say that because there are a lot of O's, it's a two one, two, there's five O's, K-A-R-O-O-O, limited.
[SPEAKER_05]: At a central Singapore, a software name, small mark cap, 1.78 billion dollars, with zero dead in its balance sheet.
[SPEAKER_05]: That's really nice.
[SPEAKER_05]: Free cash flow, 113 million.
[SPEAKER_05]: So, you're talking about a pretty solid free cash flow,
[SPEAKER_05]: is near and all time.
[SPEAKER_05]: Hi.
[SPEAKER_05]: And you look at what do they do?
[SPEAKER_05]: They've had mobility data and a litre exclusions for the transportation industry.
[SPEAKER_05]: So it's all about logistics, software as a service type of business.
[SPEAKER_05]: To me, these are the type of businesses that are difficult to disintermediate and they
[SPEAKER_05]: is they typically have data that is hard to come by, right?
[SPEAKER_05]: So who are the servicers of that last mile for delivery, for example, that can be difficult to gather that database of businesses and what their costs are, prices, et cetera?
[SPEAKER_05]: So I'd like this business, the technicals have broken out.
[SPEAKER_05]: It sold off kind of in the fall
[SPEAKER_05]: But Phil from about $60 per share to a low around 40s.
[SPEAKER_05]: So actually not that bad of a drop, about 33% it sounds like a lot, but many other softeneres have fallen much, much more.
[SPEAKER_05]: Just talked about constellation software that Phil much more than that.
[SPEAKER_05]: And now we're almost back to 60F, 57, and change now.
[SPEAKER_05]: It's still a good value.
[SPEAKER_05]: So to me, this is the type of software name that you want to get an exposure to, especially having, being a foreign market, which are likely 30%, still high profit margins, 2% dividend yield, 68% payout ratio, they've also been, they just recently started paying the dividend back in 2022, and there was 60 cents back then, now it's a dollar 25.
[SPEAKER_05]: So we like that as well.
[SPEAKER_05]: We're going to give Carl Carrue, a-a-r-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o-o
[SPEAKER_07]: In order for you to actually be making money does the stock over the next year need to go up 7% minimum, so you can be able to have covered the price of that dividend, it just may be wonder, you know, with how stagnant a lot of the markets have been, is that normal to expect a game like that and then still get paid your dividend?
[SPEAKER_07]: I'm just wondering if
[SPEAKER_07]: Some of these stocks are just eating themselves while they pay you out of your own money and not really go up.
[SPEAKER_07]: Thank you.
[SPEAKER_05]: Bye.
[SPEAKER_05]: Well, you're, you're hitting on something that is very important is that the stock does need to have price appreciation over the long term as well.
[SPEAKER_05]: This goes back to something that we discussed on our webinar, which was the fact that there are a lot of ETFs that are out there, especially where our closed-end funds, funds of different types, so where.
[SPEAKER_05]: The headline yields is very high, but over time, the actual NAV net asset value declines and the total return oftentimes is pretty meager oftentimes mid to low single digits, even though it seems like it pays out of high dividend yields.
[SPEAKER_05]: Because it could be return of capital, it could just the erosion of your capital for whatever reason.
[SPEAKER_05]: et cetera.
[SPEAKER_05]: So you're saying, yeah, what you're saying is true when a stock was ex dividend, I thought usually 7% in one ex dividend member, whatever the dividend yield is, it's usually spread out over the over four quarters, sometimes it's bi-annually, but usually four quarters.
[SPEAKER_05]: And it will drop the amount of that dividend.
[SPEAKER_05]: the next day especially because remember if you bought it at the clothes the previous day you are you get that dividend.
[SPEAKER_05]: You're entitled to that dividend.
[SPEAKER_05]: So when it opens the next day, it's going to drop that out because whoever buys it at the open is not subject to get that dividend.
[SPEAKER_05]: So that's why it drops.
[SPEAKER_05]: Now over time, if it's a good company and it's creating
[SPEAKER_05]: Then it will likely continue to go up.
[SPEAKER_05]: And that's one of the issues with we call dividend traps.
[SPEAKER_05]: When you say there are paying 7% like you, your example, oftentimes those that are paying 7% socially individual company, it's at that rate for a reason because it's a melting ice cube for whatever reason.
[SPEAKER_05]: And over time, it's going to pay the dividend, but every time it pays that dividend, the balance sheet gets a little more stretched.
[SPEAKER_05]: And future dividends are more in jeopardy and peril.
[SPEAKER_05]: So, yes, what you're saying is correct and you need to make sure you are in dividend rowers.
[SPEAKER_05]: Now, we're heading to a break.
[SPEAKER_05]: You may call now 8-8-9-9 chart.
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[SPEAKER_05]: Let's go talk to Sammy in San Francisco looking at alphabet or Google, however you want to call it.
[SPEAKER_10]: Hey, thank this thing for thinking my calls.
[SPEAKER_11]: Yeah, I would like to get to a point of view on those will do think this is a good time to get in.
[SPEAKER_05]: Do I think it's a good time to get in not necessarily because I think the mag sevens in general have been lagging and we'll probably continue to lag for some time mainly because These hyper scalers are throwing a ton of capital out there without really a sense of whether or not this is a good business.
[SPEAKER_05]: AI is a good business or not.
[SPEAKER_05]: It's great for those that are selling the nuts and bolts.
[SPEAKER_05]: then the technology around AI, but from a software perspective, you're seeing those that are utilizing AI from a corporate perspective trying to pull back there at their token usage and just their whole AI budget, but more in line with what is actually producing efficiencies within their business.
[SPEAKER_05]: There's still a lot of feeling out of this, and it's clear that near term,
[SPEAKER_05]: These hyperscalers are probably going too far.
[SPEAKER_05]: With that being said, if I'm going to bed on any of the hyperscalers, it's actually Google or alphabet, however you want to say it for a few reasons.
[SPEAKER_05]: One is the business is still pretty diversified.
[SPEAKER_05]: They have good revenue coming from advertising and their traditional search business.
[SPEAKER_05]: They also own YouTube, which is to continue to grow and be a great source of revenue.
[SPEAKER_05]: Then you have Waymo, which is blowing anything Tesla is doing out of the water when it comes to autonomous vehicles.
[SPEAKER_05]: And they have quantum computing, they also have the TPUs that are becoming more important in efficient AI queries, efficient processing of AI queries, and they're looking to sell some of those TPUs to other competitors.
[SPEAKER_05]: They're just very well diversified within the tech industry, as well as still has that exposure over the long term to AI's inevitable growth.
[SPEAKER_05]: But like I said, near term, there's a, I think sentiment shift that is just started and hasn't gotten to a fever pitch of negativity.
[SPEAKER_05]: I think it's just starting to enter the phase of, should we call it, skepticism, but you're just starting to get there.
[SPEAKER_05]: And until that fully shifts to negative viewpoint, I think that's when, Jin generally the hyperscalers will be good buys and Google will probably be the best of the breed.
[SPEAKER_10]: Yeah.
[SPEAKER_10]: No, that makes sense.
[SPEAKER_10]: So do you have a recommendation on the price target for this or the entry point?
[SPEAKER_05]: I mean, this is difficult because it's, it's, it's, it's just a sentiment thing in my mind.
[SPEAKER_05]: Because there's so much, there's, there's so much bullet, there has been so much bullishness around AI in the, in the build out.
[SPEAKER_05]: And now that tied is turning that pendulum is just started to swing.
[SPEAKER_05]: where that fever pitch of negativity comes out at, I don't know, and where Google will be at that point, or after that, it will be at that point.
[SPEAKER_05]: I don't know.
[SPEAKER_05]: But I would be looking at that saying, okay, when when what is Wall Street Journal writing about how poorly these hyperscalers have allocated their capital and how there's tons of cancellations of AI data center
[SPEAKER_05]: growth rates across the industry have plummeted.
[SPEAKER_05]: You know, that's when I would be like, okay, now it's time to buy these names, right?
[SPEAKER_05]: That is the trigger for me to go be aggressive and picking up an alphabet.
[SPEAKER_05]: Got it.
[SPEAKER_05]: Thank you.
[SPEAKER_08]: No problem.
[SPEAKER_05]: It's this very important concept everybody should understand is, the markets that it's always
[SPEAKER_05]: You know, you ever see this?
[SPEAKER_05]: The ball moving back and forth from one side to the other, growth is called.
[SPEAKER_05]: It's never in the middle, right?
[SPEAKER_05]: It's only in the middle for a fraction of a second until it moves the other way.
[SPEAKER_05]: And that's how the marketo is this.
[SPEAKER_05]: It's going back and forth.
[SPEAKER_05]: Settlement is bouncing back and forth.
[SPEAKER_05]: And the sentiment to me just reached its Nadir and now it's or Nadir and Nadir would be the bottom.
[SPEAKER_05]: It's the top and it's moving back into negative territory.
[SPEAKER_05]: Don't positive territory, but it's moving closer to the negative territory.
[SPEAKER_05]: It's when you get to that fever pitch, the opposite of what you felt month or two ago.
[SPEAKER_05]: That's when you will find great buying opportunities.
[SPEAKER_05]: Which you have to do now is hold on to that.
[SPEAKER_05]: Remember all the positive aspects of what AI was going to bring when you get the opposite of that sentiment.
[SPEAKER_05]: It's going to take your ability to recall and be like, you know what, this has gone too far.
[SPEAKER_05]: The other way, now I need to pick up the opportunities.
[SPEAKER_05]: Let's focus on our main talking boy.
[SPEAKER_05]: And that is about defense spending.
[SPEAKER_05]: Is this the new growth areas, especially with.
[SPEAKER_05]: AI sentiment starting to wane a little bit.
[SPEAKER_05]: You have geopolitical volatility, ping-ponging back and forth.
[SPEAKER_05]: The memorandum of understanding is now ripped up, it's gone.
[SPEAKER_05]: We're back into war, in the Middle East.
[SPEAKER_05]: I guess what?
[SPEAKER_05]: This is not ending anytime soon.
[SPEAKER_05]: I think this drags well into 2027.
[SPEAKER_05]: Maybe you get some sort of ceasefire once again, but it's pretty clear that we're in the forethurning.
[SPEAKER_05]: This should not shock anybody.
[SPEAKER_05]: This is how these periods
[SPEAKER_05]: culminate with increasing domestic and geopolitical volatility, which usher's in a reassessment of how the world works.
[SPEAKER_05]: And one of those recessions is European defense spending, which feeds into the fence budgets which feeds into earnings for the defense companies and it's not just your traditional
[SPEAKER_05]: defense contractors, everyone thinks of Lockheed Martin and Boeing and North or Graman, et cetera, and certainly they could get a piece, but also they could be out-innovated at this point.
[SPEAKER_05]: I've said this before, and I'll say it again.
[SPEAKER_05]: What you're seeing now, both in Ukraine and in Iran, is two smaller powers that are using
[SPEAKER_05]: Defend themselves from a much larger, much more powerful military and they are doing it successfully.
[SPEAKER_05]: They're doing it much cheaper and much more efficiently.
[SPEAKER_05]: So over time, it would make sense that smart countries would see that and they would put a lot more money into that type of technology than fighter jets and aircraft carriers and submarines.
[SPEAKER_05]: Not to say that money won't go there to some degree.
[SPEAKER_05]: But clearly, the defense paradigm has shifted, and it's shifted for NATO as well.
[SPEAKER_05]: I believe President Trump is over in Europe currently talking with NATO, I'm trying to remember where he is exactly.
[SPEAKER_05]: Turkey, there you go.
[SPEAKER_05]: He's in Turkey.
[SPEAKER_05]: But last June, NATO's summit produced a target that is going to reshape the entire industry for the next decade.
[SPEAKER_05]: NATO Alliance members committed to spending 5% in GDP on defense by 2035.
[SPEAKER_05]: Split between 3.5% of for core military capabilities and for 1.5% for resilience and security that covers things like cyber defense, critical infrastructure, and supply chain innovation.
[SPEAKER_05]: Global Defense Outlays reached 2.6 trillion last year for the first time.
[SPEAKER_05]: And every NATO ally met the previous 2% GDP4.
[SPEAKER_05]: But that's headed towards 5.
[SPEAKER_05]: In the next decade, Poland, the Balticsics, and Greece are already spending above 4%.
[SPEAKER_05]: So everyone is moving in that direction.
[SPEAKER_05]: And then you have the Pentagon's proposed budget for fiscal year 2027, which starts in the fall, totaling 1.45 trillion dollars.
[SPEAKER_05]: Yes, that's a 44% increase.
[SPEAKER_05]: We'll see if we get there.
[SPEAKER_05]: We'll see if Congress members will go along with this level of spending.
[SPEAKER_05]: I think that's gonna be a big swing factor and then what do they spend it on?
[SPEAKER_05]: So Europeans' defense sector is really where the growth is though.
[SPEAKER_05]: Because I don't think that, I mean, that's already spending a trillion, and it means that it won't have trillion, I don't know.
[SPEAKER_05]: But clearly in Europe, that's where it's much easier to see growth.
[SPEAKER_05]: Going from a very undervalued market to a central focus of government, which is, makes it one of the region's fastest growing sectors.
[SPEAKER_05]: So how do you get exposure to it?
[SPEAKER_05]: You know, ETF like an ITA, that's covering the Dow Jones U.S.
[SPEAKER_05]: Select Aerospace and Defense Index.
[SPEAKER_05]: It's very market-cap weighted.
[SPEAKER_05]: So you're really investing in the big names from Jim Dynamics, Lockheed Martin, Northward Grumman, Boeing, et cetera.
[SPEAKER_05]: G Aerospace has 19% of the portfolio.
[SPEAKER_05]: Raytheon is 17, Boeing's nine, then there's a bunch that are around five.
[SPEAKER_05]: So you're getting very concentrated in the large names.
[SPEAKER_05]: Which covers that three and a half percent core defense tier?
[SPEAKER_05]: But is that really where most of the money is going to continue to go?
[SPEAKER_05]: Or is it going to go towards the rest of the defense market?
[SPEAKER_05]: That's where you probably want something that leans more mid in small cap.
[SPEAKER_05]: That gives you exposure to those within the drone industry, like an arrow environmental
[SPEAKER_05]: Autonomous systems, counter UA, capabilities.
[SPEAKER_05]: To me, that's a much better place, which with much better growth potential over the long term.
[SPEAKER_05]: Then there's things like the spade defense index,
[SPEAKER_05]: This is the full defense ecosystem.
[SPEAKER_05]: So you're talking about defense electronics, government IT contractors, cyber security, software vendors that serve federal agencies.
[SPEAKER_05]: That's another type of index that will give you much broader exposure that covers civil preparedness, supply chain innovation, that kind of, that one and a half percent that I talked about earlier.
[SPEAKER_05]: And to me, in Frank, frankly, it's probably even more important, especially when you're thinking about what's happened over the past five, six years since COVID really.
[SPEAKER_05]: European governments are forced are looking at things like under Cables, government networks, energy grids, ports, those are all critical infrastructure, points that need to be short of.
[SPEAKER_05]: So when you're looking at gaining exposure here,
[SPEAKER_05]: your non-traditional defense names.
[SPEAKER_05]: Let's put it back to the best stock voice bank for the, and you know that it's 80 to 90, and you're entered.
[SPEAKER_02]: My guys, I love the show.
[SPEAKER_02]: I have a question about GDX.
[SPEAKER_02]: What do you guys think what the current sentiment about gold is that precious metals?
[SPEAKER_02]: I love your feedback, I would love your answer on the show.
[SPEAKER_02]: Thanks, Mike.
[SPEAKER_05]: Yeah, I think your,
[SPEAKER_05]: You're hitting a very good point here, is that I do think, I'm going to talk about that pendulum swing.
[SPEAKER_05]: January, the bullishness of Golden Silver was extremely high.
[SPEAKER_05]: It was breaking out to the upside.
[SPEAKER_05]: You have another push higher in February, and then you had a pretty big reversal into late March, the end of the first quarter.
[SPEAKER_05]: We had a choppy sideways downward path.
[SPEAKER_05]: and Q2, and now I think you're starting to get sentiment moving the other way.
[SPEAKER_05]: To an extreme the other way.
[SPEAKER_05]: I'm starting to see articles about gold to decline, et cetera, part of this is higher interest rates higher value of the dollar, all of that.
[SPEAKER_05]: And did you think there's there's some Middle East sellers that maybe aren't getting
[SPEAKER_05]: It's much revenue from oil sales because this clothes the street of our moves, I think that's part of it.
[SPEAKER_05]: But ultimately, if you go look at what central banks are doing, they continue to accumulate.
[SPEAKER_05]: So, I do think we're very close now.
[SPEAKER_05]: Could there be one more flush lower?
[SPEAKER_05]: I think that's possible.
[SPEAKER_05]: But we're, you know, 8th or 9th inning of to me this pullback in gold and silver in thus GDX.
[SPEAKER_05]: So this is an area you certainly would if you're underweight the space you want to be legging in slowly and if you get a major reversal to the upside, then you would be more aggressive getting it.
[SPEAKER_05]: to the rest of your position.
[SPEAKER_05]: Now this is the best thought I'm just inclined and we have one goal here each and every week they help you achieve your own version of financial freedom.
[SPEAKER_05]: So, I'll work continues after this final break.
[SPEAKER_05]: So, if you have any questions at all, don't hesitate to reach out.
[SPEAKER_05]: If your questions are now at 8.89 in chart.
[SPEAKER_08]: Invest talk is ready 24-7 for your finance and investment questions.
[SPEAKER_08]: My five year old son and I listened to your podcast every night, so thank you very much for putting it on.
[SPEAKER_08]: Justin Klein is here and ready to tackle your questions.
[SPEAKER_12]: Is it a good idea to sell your losses in a Roth IRA and just use whatever you have left to reinvest into better stocks?
[SPEAKER_00]: I'm wondering, what you thought about this read is it would be a good time to get in?
[SPEAKER_09]: I wanted to pick your brain about apples.
[SPEAKER_09]: What did you think about their earnings call?
[SPEAKER_09]: So this is a good time to add to my position.
[SPEAKER_08]: Don't forget to call.
[SPEAKER_08]: In Best Talk, 888-99 chart.
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[SPEAKER_05]: Let's talk about dividends.
[SPEAKER_05]: We just had our webinar, which discussed income investing overall.
[SPEAKER_05]: But what I want to talk about is the shifting shape of corporate America, and how dividends are not like the used to be.
[SPEAKER_05]: There's not as many companies paying dividends.
[SPEAKER_05]: There's not as many companies paying high dividends.
[SPEAKER_05]: value traps and total returns tend to be fairly muted because their businesses returns tend to be struggling or declining.
[SPEAKER_05]: You know, years ago companies were showing we're paying dividends because they show wanted to show shareholders that they've cash flows that it wasn't just about accounting gimmicks, they're able to grow those dividends because they
[SPEAKER_05]: And it showed that the boards approving those dividends show that they had confidence in their ability to continue to generate those high feature cash flows.
[SPEAKER_05]: It also made the leaders of those companies more careful when it came to
[SPEAKER_05]: M&A activities so that they didn't stretch their balance sheet and force them to cut through dividend because that's something no leader wants to be a part of, be the ones who actually cut the dividend for whatever reason, especially for those companies that have been paying for decades.
[SPEAKER_05]: And really since the late 90s, the corporate American landscape has changed dramatically.
[SPEAKER_05]: Why?
[SPEAKER_05]: Because there's never that there's not that company anymore that you can just put in a drawer and forget about it.
[SPEAKER_05]: Just to be that, there's very few of those companies.
[SPEAKER_05]: Why?
[SPEAKER_05]: Because it's not easier to
[SPEAKER_05]: Start a new business, start a new division to compete with a company that maybe is is growing dramatically and taking market share.
[SPEAKER_05]: I just think of Netflix as a good example.
[SPEAKER_05]: Netflix kind of started the streaming industry.
[SPEAKER_05]: And then others followed and maybe they haven't been as competitive or as built a good business as Netflix.
[SPEAKER_05]: But a lot of them don't print fairly well.
[SPEAKER_05]: It's a changing landscape here.
[SPEAKER_05]: And nothing says more about the changing landscape of corporate America like the consumer staples industry.
[SPEAKER_05]: You will go there and you will find many companies that pay very high dividends, 5, 6, 7, 8% or more.
[SPEAKER_05]: But if you dig into the quality of those dividends and the quality of the business, you'll see that many of them have stretched balance sheets.
[SPEAKER_05]: They have high payout ratios.
[SPEAKER_05]: The businesses that are melting ice cubes, why is that?
[SPEAKER_05]: Well, because advertising has become disintermediated, they used to just be able to advertise on the big TV shows or TV channels, get broad distribution of their brand and brand recognition, and that would translate into loyal customers.
[SPEAKER_05]: But now with social media, it's more difficult to get those brands in front of as many people at scale.
[SPEAKER_05]: So you have more influence here marketing, you have private labels at places like Costco, then you have GLP ones that are reducing demand for sugary products.
[SPEAKER_05]: And a lot of these names are slashing there, dividend or at risk of.
[SPEAKER_05]: And many that are a dividend quote about dividend or restaurants are just holding on by a thread.
[SPEAKER_05]: Names like Colgate, Paul Malliv, Cisco, Stanley Beck, Black and Decker, they're all raising their dividend by just one cent
[SPEAKER_05]: Compliance with the dividend aristocrats.
[SPEAKER_05]: Then you have the liquor companies that are declining because less people are drinking and more and more companies are focusing especially younger ones on buybacks, which are a lot more flexible, the more tax efficient.
[SPEAKER_05]: which means that when you, that's why when you look at the DS&P500, the dividend yield is very low, but the buyback yield is often much, much higher.
[SPEAKER_05]: In fact, buybacks of an outpacing dividend payouts for most of the last couple of decades.
[SPEAKER_05]: About 15, 16 years, really since 2010.
[SPEAKER_05]: So, when you're looking at being a dividend investor, you have to understand this.
[SPEAKER_05]: It's no longer just about the dividends about the buyback.
[SPEAKER_05]: That's what you have to focus on more is the shareholder yield, not just the dividend.
[SPEAKER_05]: Because dividends in many ways are now passing.
[SPEAKER_05]: I'm Justin Klein, reminding you about KP financials, parallel investing, we make a trade for our clients and make the same trade for ourselves, and the same day, same price, same percentage, no front running, no special treatments.
[SPEAKER_05]: We invest right alongside our clients.
[SPEAKER_05]: We share the same risk, and potential for success.
[SPEAKER_05]: Head over to investtalk.com to learn more and please remember, you can tell your friends and family about a free podcast download, and find any time that iTunes or Spotify.
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[SPEAKER_05]: Independent thinking, shit's success.
[SPEAKER_05]: The same best talk.
[SPEAKER_05]: Good night.
[SPEAKER_08]: Invest talk is a trademark of KPP financial, because of the nature of the interactive dialogue inherent in the format of this program.
[SPEAKER_08]: It's important for the listener to understand that not all comments made will apply to them.
[SPEAKER_08]: Specifically, nothing said she'll be taken to be investment advice.
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[SPEAKER_08]: Invest talk is a copyrighted program of Klein, Pavlis, and Peasley Financial, a registered investment advisor firm, which retains all rights.