[SPEAKER_08]: On radio, on YouTube, streaming live on investtalk.com and for our podcast subscribers, this is Invest Talk.

[SPEAKER_08]: Independent Thinking, shared success.

[SPEAKER_08]: Invest Talk is made possible by KPP Financial, a registered investment advisor firm, serving clients throughout the United States.

[SPEAKER_08]: Here is KPP Financial Portfolio Manager, Luke Guerrero.

[SPEAKER_03]: Good afternoon, fellow investors and welcome back to another episode of Invest Talk.

[SPEAKER_03]: I'm your host Luke Guerrero and today is Wednesday, July, thirty, twenty, twenty, five.

[SPEAKER_03]: And it is not an ordinary Wednesday.

[SPEAKER_03]: It is a Fed Wednesday, which always tends to move markets in one direction or another.

[SPEAKER_03]: But as we've seen this year,

[SPEAKER_03]: Well, every day seems to be a market moving day.

[SPEAKER_03]: And when so much is being thrown at us, it becomes more and more important to be able to sift through what matters and what does not.

[SPEAKER_03]: And so we here at Invest Talk take our mission very seriously.

[SPEAKER_03]: That mission is to help make you a better and more informed investor.

[SPEAKER_03]: Now in order to do that, we bring some educational, educational, and actionable material each and every day.

[SPEAKER_03]: Maybe a story that we find interesting, a story that we find that matters, maybe a warning about some financial scam, maybe a checklist of things you should be considered.

[SPEAKER_03]: For the most important part of this show is your finance and investment questions that you submit on YouTube.

[SPEAKER_03]: On our any time listener line or live throughout this show.

[SPEAKER_03]: Before we talk about today's market performance and run down those show topics, I have for you all.

[SPEAKER_03]: Let's tackle this color question now.

[SPEAKER_03]: Okido, let's look at PRHSX, the T-Rot price health sciences fund the aim for long-term capital appreciation by broadly investing in health sciences stocks.

[SPEAKER_03]: You can see here by the sector waiting.

[SPEAKER_03]: A lot of biopharma, a non-system biopharma, a healthcare support, general medical devices, pretty broadly diversified across the spectrum here, though most of its holdings as a percentage are in this system-specific biopharma area.

[SPEAKER_03]: In terms of the market cap coverage, it is fairly well diversified.

[SPEAKER_03]: It certainly tilts more towards small and mid caps than the segment benchmark does.

[SPEAKER_03]: It doesn't look like there's much of a name cap at all because eleven point seven percent is Eli Lilly.

[SPEAKER_03]: Striker makes up about five percent.

[SPEAKER_03]: United Health Group makes up four point two eight percent.

[SPEAKER_03]: Let's take a look and see if they cap anything here within this description.

[SPEAKER_03]: I'm not seeing that they do.

[SPEAKER_03]: This is an active fund, says the portfolio managers have a full discretion to adjust holdings at any time, but essentially it's looking for these four area criteria looking for names that have according to the managers, a higher propensity for growth.

[SPEAKER_03]: Now, given that it's an active fund and it's a sector specific fund, it tends to be on the more expensive side of about sixty-seven basis points, which are investing primarily in U.S.

[SPEAKER_03]: large caps, tends to be a little bit expensive.

[SPEAKER_03]: How has it done here today?

[SPEAKER_03]: About three point five one percent in the negative year to date, the five year annualized return three point three percent.

[SPEAKER_03]: Distribution yield, dividend yield, about seventy basis points lower than the segment.

[SPEAKER_03]: Benchmark price to book is higher, so it's more growthy.

[SPEAKER_03]: Price to cash flow, far higher price to sales, higher and weighted average market cap again, smaller because we're looking at this in terms of its size profile.

[SPEAKER_03]: Sixty seven percent of its revenue from the United States, so again, mostly US based, if not all US based companies.

[SPEAKER_03]: And about ninety percent invested, eight percent in cash.

[SPEAKER_03]: You know, I think that sector specific funds, especially one that is as broadly diversified as this, should not be this expensive.

[SPEAKER_03]: If you're looking to get this broad exposure, a hundred and thirty total names, you might as well put it in a broadly diversified passive fund or a less expensive systematic fund that's going to reduce your expense ratio by probably forty to fifty basis points versus what you have here.

[SPEAKER_03]: So overall I'm seeing a fund that has not really performed well on any of those bases going back ten years that is also expensive.

[SPEAKER_03]: And so for the T-Row price health sciences fund to your PRH SX going to half to pass.

[SPEAKER_03]: Looks like we got our first wrought live call from Richard in the Bay Area.

[SPEAKER_03]: Has a question about CWTD?

[SPEAKER_03]: I wanted you looking to buy it.

[SPEAKER_02]: I'm looking to buy it.

[SPEAKER_02]: Thanks for taking my call.

[SPEAKER_02]: I have a lot of cyclical stocks and I'm trying to rebalance things and preparation for the fall and I think the chip stocks specifically have done well.

[SPEAKER_02]: So I'm looking to see more, I'm looking to recruit the portfolio with on cyclical stocks and this was in my watch list from a long time ago.

[SPEAKER_02]: So I'm wondering if it's cheaper for a really good reason or if it's a good time to buy.

[SPEAKER_03]: Okay, so what you're looking at, and you cut out a little bit, but what I believe you said is you wanted to move out of some of your cyclical names, a diversify into more non- cyclical names, just in case there's a little bit of market turbulence later in the year, which is always a good idea to diversify.

[SPEAKER_03]: Now, CWT is the California Water Services Group, and is a regulated water utility across California, Washington, New Mexico, Texas, and Hawaii, meaning a hundred percent of its revenue comes from the United States.

[SPEAKER_03]: On a relative performance basis compared to its industry, it has underperformed the past two years.

[SPEAKER_03]: Instead of about fifteen point eight one percent over the past fifty two weeks down, about ninety seven basis points over the past year.

[SPEAKER_03]: I'm sorry, you're today.

[SPEAKER_03]: One thing that is good about this name and anytime you're investing in utilities is really you probably want to focus more on the income side of things.

[SPEAKER_03]: Not a lot of capital growth here.

[SPEAKER_03]: If you want an income play, they've had three hundred and twenty-two consecutive quarterly dividends reaffirmed.

[SPEAKER_03]: This is a name that has about two point seven percent dividend yield.

[SPEAKER_03]: They also have been making some strategic acquisitions.

[SPEAKER_03]: And from a credit perspective, they look pretty decently stable.

[SPEAKER_03]: It's a two point six billion dollar company with about one point four billion dollars in debt.

[SPEAKER_03]: You mentioned their valuations come down a bit about eighteen point three times as where they're sitting at, which is near the low over the past five years.

[SPEAKER_03]: Frankly, I think if you're gonna play in the utility space, I would be more likely to move toward some of those names that have done particularly well in the wake of the secular demand for energy, natural gas utilities, electrical utilities.

[SPEAKER_03]: This name is really not looking good on a technical basis, at all, it's been on a consistent downtrend over the past twelve months, cash flows, flatline, it's highly regulated, and so profitability is limited to the upside anyway.

[SPEAKER_03]: They've also issued a bunch of shares.

[SPEAKER_03]: up from fifty million to sixty million.

[SPEAKER_03]: So I think that I do like what you are trying to do here, diversify out of cyclicals.

[SPEAKER_03]: I would just look for a different utility.

[SPEAKER_03]: That is CWT California Water Services Group.

[SPEAKER_03]: Thanks for the call Richard.

[SPEAKER_03]: Now I'm moving into a break.

[SPEAKER_03]: On the other side, we will briefly talk about today's market activity, as well as preview those show topics.

[SPEAKER_03]: Stay with me.

[SPEAKER_07]: Okay, gotta get serious with my finances.

[SPEAKER_07]: I've been working a long time and I know there's still gotta be more that I can do to build my wealth quicker.

[SPEAKER_07]: I don't wanna have to work forever.

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[SPEAKER_00]: For more information on how you can take control of your retirement savings, visit our website KPPFinancial.com KPPFinancial sounds good.

[SPEAKER_06]: The calls are free.

[SPEAKER_06]: The unbiased answers are free.

[SPEAKER_06]: So what are you waiting for?

[SPEAKER_06]: Call in Vestock.

[SPEAKER_03]: Now we are off to a good start already answering one live called two questions thus far in the first ten minutes of the show, but we do have a lot of ground cover in the next forty minutes, including my main focus point, which touches on the behavioral side of finance.

[SPEAKER_03]: It concerns this headline, understanding behavioral finance, how psychology shapes financial decisions.

[SPEAKER_03]: Apparently, psychology influences and biases affect the financial behaviors of investors and also markets.

[SPEAKER_03]: helping to reveal that people often make irrational choices driven by emotion and mental shortcuts rather than strict logic and rationality.

[SPEAKER_03]: Also, got a bunch of interesting stories including a deeper dive into US's Q-II GDP first preview and showing that even though the number was positive, beat expectations, it is still masking some underlying slowing growth.

[SPEAKER_03]: Also, touch on a story we didn't get to yesterday on U.S.

[SPEAKER_03]: companies that are using hot markets to try and cut borrowing costs.

[SPEAKER_03]: And should we have time at the end of the show?

[SPEAKER_03]: We'll have the U.S.

[SPEAKER_03]: Treasury in spite of comments made by Scott Besant during and before the election and during before his appointment is continuing the trend of short-term debt that the Biden administration used.

[SPEAKER_03]: Also, we have some voice bank calls ready to play, including one on after hours trading, and another on the eye shares, Gold Trust here at IAU.

[SPEAKER_03]: And as always, some questions that came in from the comment section of the investment token.

[SPEAKER_03]: YouTube channel and hopefully more live calls throughout the show.

[SPEAKER_03]: Alright, let's talk a little bit about the market today.

[SPEAKER_03]: U.S.

[SPEAKER_03]: stocks mostly lower on the day.

[SPEAKER_03]: The Dow is down thirty eight basis points S&P five hundred down about twelve basis points NASDAQ positive up fifteen small caps Russell two thousand down about forty seven.

[SPEAKER_03]: Now they were trading

[SPEAKER_03]: Pretty positive up until the fed press conference, post announcement, and did finish near their wet and worst levels of the day.

[SPEAKER_03]: You doesn't pee now down for two consecutive days after snapping its six day winning streak on Tuesday.

[SPEAKER_03]: Worst of the performers included energy, copper, trucking, parcels and logistics, as well as chemical and paper packaging names.

[SPEAKER_03]: Big tech was mostly lower, though.

[SPEAKER_03]: In the after hours trading, we did get Microsoft and Meta earnings.

[SPEAKER_03]: I did see Microsoft at one point up, eight percent after hours.

[SPEAKER_03]: The best performers included managed care, farm names, hospitals, exchanges, and casual diners, as well as some entertainment names, across the board doing pretty well.

[SPEAKER_03]: The bonsai treasuries were weaker, you saw the curve flatten a bit, the policy sensitive to your yield, up about six basis points on the day.

[SPEAKER_03]: The same time, dollar was the dollar index was up one percent, tracking for its best week since October of last year, while gold finished the opposite direction down about eighty basis points.

[SPEAKER_03]: All in all, stocks gave back the earlier gains that we saw during the first part of trading throughout the day.

[SPEAKER_03]: As the market was reacting to Fed Chair, Jerome Powell's post meeting commentary, right?

[SPEAKER_03]: It was a little bit more hawkish than some people anticipated.

[SPEAKER_03]: In fact, it really pushed down that September rate cut odds below fifty percent from sixty percent before the release and the policy statement and the press conference.

[SPEAKER_03]: Mark, in fact, now looking towards the next batch of mag seven earnings, I mentioned meta and Microsoft reported after the close today, Apple and Amazon, I believe, after the close tomorrow.

[SPEAKER_03]: That comes on the back of a busy earnings calendar with as usual, some pretty mixed takeaways.

[SPEAKER_03]: I'll be at revenue, EPS.

[SPEAKER_03]: Beats are continuing to run on elevated levels.

[SPEAKER_03]: On the economic data side, data largely positive today, ADP private payrolls, beating and the first read of Q-II GDP ahead on solid consumer spending, as well as lower imports on the back of a lot of that front running that we saw in Q-I.

[SPEAKER_03]: But we'll dive a little bit more into that later in the show.

[SPEAKER_03]: On the trade front, the Trump administration announced that India will pay a twenty-five percent tariff.

[SPEAKER_03]: I believe Russia tariff is what he called it.

[SPEAKER_03]: And Brazil to pay an additional total fifty percent tariff.

[SPEAKER_03]: Also announced today on the tariff side, fifty percent tariff on copper, though excluded were refined products.

[SPEAKER_03]: As well as I think the bigger story which didn't get a lot of coverage is an ending of the diminimous exemption on commercial shipments.

[SPEAKER_03]: For those of you who don't know, there was a dollar threshold under which a tariff would not be charged, the duty would not be charged.

[SPEAKER_03]: And so this could increase cost on less expensive, smaller goods across the board.

[SPEAKER_03]: As expected, the Fed did hold the policy rate at four, twenty five, two, four, fifty, two governors, Waller and Bowman both notably gunning to replace Powell in May of next year, dissents.

[SPEAKER_03]: In fact, the first two dissent meetings since nineteen ninety three.

[SPEAKER_03]: The press conference I thought was pretty interesting.

[SPEAKER_03]: Paul talking about how, well, there is a reasonable base case where tariff inflation could be short-lived, but also may be a little bit more persistent than we would like.

[SPEAKER_03]: Therefore, we're a little bit more worried still about the inflation side of the mandate than the labor side of the mandate.

[SPEAKER_03]: All in all, it was anticipated to be not too much of an exciting meeting, and it did not disappoint.

[SPEAKER_03]: Not much news, not much change and expectation going forward.

[SPEAKER_03]: When we come back, we'll answer more of your questions and get to our main focus point on behavioral finance.

[SPEAKER_03]: Stick with me.

[SPEAKER_03]: In fact, if you'd like to talk to me live, give me a call at eight eight eight ninety nine chart.

[SPEAKER_06]: Have you heard about the new Invest Talk store?

[SPEAKER_06]: That's right, you'll find great merch for the savvy investor.

[SPEAKER_06]: It's all there for you now at InvestTalkStore.com.

[SPEAKER_06]: Luke Guerrero is here now, taking your finance and investment questions live.

[SPEAKER_06]: Call Invest Talk.

[SPEAKER_03]: Now often investors focus more on the statistical aspect of investing.

[SPEAKER_03]: But that doesn't mean that behavioral finance and behavioral biases don't play a role in how markets move.

[SPEAKER_03]: And so behavioral finance is an area of economics that studies how psychology affects financial decision making, challenging this idea that is inherent in most models of markets, pricing, that people act

[SPEAKER_03]: consistently rationally.

[SPEAKER_03]: The whole basis of this is that there are certain biases that affect all of us, loss of version, confirmation bias, resency bias.

[SPEAKER_03]: The idea that we don't want to lose money, we are more often more worried about losing money than gaining money.

[SPEAKER_03]: The idea that we look for things that confirm what we believe, all of which can lead to poor investment decisions.

[SPEAKER_03]: mental accounting and anchoring also can be a problem.

[SPEAKER_03]: This is the idea that how you perceive money and risk can often leave lead to irrational spending and investment choices.

[SPEAKER_03]: Often we talk about momentum, technical factors.

[SPEAKER_03]: Does it make economic sense that just because a company's price is doing well, that it will continue to do well?

[SPEAKER_03]: Well, you can make an argument that the driver of its return, its profitability, its growth, any of these things could be continually driving things forward, but there's also a little bit of something called hurting behavior in there.

[SPEAKER_03]: People tend to want to follow the group.

[SPEAKER_03]: In this case, they want to follow stocks that have done particularly well.

[SPEAKER_03]: Maybe you work for a company.

[SPEAKER_03]: You own shares in that company.

[SPEAKER_03]: You may be subject to familiarity bias, which leads you to under diversify.

[SPEAKER_03]: You're favoring those local or well-known or familiar names rather than looking for better, more diverse opportunities elsewhere.

[SPEAKER_03]: Now the behavioral finance contradicts the efficient market hypothesis, the idea that companies information, or rather company stock prices, are good representations of all available information.

[SPEAKER_03]: All public available information.

[SPEAKER_03]: Showing that maybe there is a little bit of this pricing here between what the fair value of a company is and what it is trading in.

[SPEAKER_03]: Now one issue

[SPEAKER_03]: is how do you overcome this?

[SPEAKER_03]: How do you realize that you have biases, that there are things that are leading you to do things that are irrational, that are against your own self-interest?

[SPEAKER_03]: Well, the first key is to understanding and identifying where these gaps exist.

[SPEAKER_03]: try and get diversified information sources.

[SPEAKER_03]: Don't try and pre-judge things based on your experience, try to understand them through the experience of others, through other's educational experience.

[SPEAKER_03]: Understanding behavioral finance can help you move beyond the traditional lens through which people tend to identify investments within markets.

[SPEAKER_03]: Because behavioral finance is the study of real psychological biases that affect each and every one of us.

[SPEAKER_03]: All right, let's head over to the Invest talk of YouTube comment question bank.

[SPEAKER_03]: Answer this question on unum group, unum group ticker u and m.

[SPEAKER_03]: And it says UNM pulled back significantly.

[SPEAKER_03]: However, revenue looks above expectations is it a buying opportunity.

[SPEAKER_03]: Well, you know, group is a name that we own for our clients in one of our strategies down about

[SPEAKER_03]: twelve point one eight percent today not a good day for this name on the back of what looks to be slightly disappointing earnings right year earnings per share surprise negative six point six percent to the downside albeit revenue was a little bit more positive a little bit more positive in terms of the expectation there nearly one percent relative to the upside

[SPEAKER_03]: Now, this miss and expectations doesn't really lead this company to perform poorly.

[SPEAKER_03]: You're today, it's now down two point six three percent of the past three months down eight point four three percent, but in spite of that, it's up thirty one point zero one percent over the past fifty two weeks.

[SPEAKER_03]: Now this name is a financial product name, right?

[SPEAKER_03]: They sell disability insurance, life insurance, accident insurance.

[SPEAKER_03]: And from a relative strength perspective, it's been a really, really strong coming out of the pandemic.

[SPEAKER_03]: It had a strong start to the year, right?

[SPEAKER_03]: Hitting that fifty two week high on the back of some pretty strong valuations, but even early on, you started to see some profit pressure emerge.

[SPEAKER_03]: That being said, this name is not trading in an expensive way at all whatsoever.

[SPEAKER_03]: It's the upper end of its five-year range, but you're looking at about one point four times price to book value right now.

[SPEAKER_03]: On a company that has had earnings per share growth around two point five percent, three percent on an annualized basis.

[SPEAKER_03]: And so this name, which is still trading in a reasonable valuation that still has pretty solid net earned interest growth, right?

[SPEAKER_03]: Look at this growth rate over time.

[SPEAKER_03]: It's growing and expanding.

[SPEAKER_03]: Although you're seeing some profitability pressure right now, we still think Unim Group is a good long term investment.

[SPEAKER_03]: That is Unim Group, ticker U and M.

[SPEAKER_03]: All righty, we are about halfway through the show, which means we are halfway through your opportunities to call in and ask your question live.

[SPEAKER_03]: Can't wait to hear from you when we come back.

[SPEAKER_03]: We have plenty of stories to talk about.

[SPEAKER_03]: Plenty of voice bank questions are ready to play.

[SPEAKER_03]: Maybe another YouTube question.

[SPEAKER_03]: And as always, more information here on Investock.

[SPEAKER_06]: No two portfolios are alike, and every investor has a unique set of circumstances.

[SPEAKER_06]: So don't forget to call Invest Talk.

[SPEAKER_01]: Hi, this is Duncan from New York.

[SPEAKER_01]: Thank you for all that you do.

[SPEAKER_01]: I have a quick question on stockpicker.

[SPEAKER_01]: I, A, U, it's the ice here as a gold trust.

[SPEAKER_01]: I bought this on April, twenty first, because we were all talking about gold.

[SPEAKER_01]: And right now, currently looking at what it did for me, it has actually gone down by two point six eight percent.

[SPEAKER_01]: And I know that there's other gold stocks or something like that that's actually going higher.

[SPEAKER_01]: So I just feel like I'm missing something right now.

[SPEAKER_01]: I know gold should be like a long term thing at the end of the day.

[SPEAKER_01]: But I'm hoping that someone could help me out.

[SPEAKER_01]: Look forward to the answer to the podcast and have a great day.

[SPEAKER_01]: Bye.

[SPEAKER_03]: The eye shares gold trust ticker IAU is into company.

[SPEAKER_03]: It is a trust that mimics the return, the price return of physical gold.

[SPEAKER_03]: So if you want to hold gold, you are gold exposed.

[SPEAKER_03]: You can hold the bricks.

[SPEAKER_03]: You keep the bricks stuff somewhere in your house in a safe in the bank and a safety deposit box.

[SPEAKER_03]: But bricks aren't liquid.

[SPEAKER_03]: Obviously they're solid, didn't mean that joke.

[SPEAKER_03]: But they aren't very liquid if you need to trade them.

[SPEAKER_03]: Meaning that you have to find a physical gold dealer.

[SPEAKER_03]: Now one way to avoid that is to invest in something like the, like IAU, the I-Share's gold trust.

[SPEAKER_03]: It's incredibly liquid, relative to physical gold, but it still gives you the same level of price exposure.

[SPEAKER_03]: Now, here to date, this fund is up, twenty six point six two percent.

[SPEAKER_03]: The past three years, it's up in annualized, twenty three point two seven percent.

[SPEAKER_03]: And we all know that the price of gold has gone through the roof of the past couple years driven by a lot of factors, a lot of uncertainty, a lot of deficit spending, a lot of adding to the debt, a lot of erosion of the power of the dollar and the spending power of the dollar.

[SPEAKER_03]: And so, those conditions,

[SPEAKER_03]: are really changing we added more to the deficit deficit was blown out by the big beautiful bill right three point six trillion roughly as the low estimate over the next ten years and so understanding that well we're going to have to print a lot of money as well inflation may pick up as a result of tariffs and being invested in gold seems to be a necessity now that being said what you could be seeing is gold miners

[SPEAKER_03]: doing better, despite you being down about two percent.

[SPEAKER_03]: But gold is a long-term play.

[SPEAKER_03]: Gold is a long-term hold that helps you benefit as things become more uncertain as the spending power of fiat currency becomes less and less.

[SPEAKER_03]: And so for us, we have gold exposure.

[SPEAKER_03]: I'll be in through gold miners and all of our strategies.

[SPEAKER_03]: Either way, if you're looking to get the benefits of holding physical gold without having to hold physical gold, the eye shares gold trust is a good way to go about it.

[SPEAKER_03]: Thanks for the call.

[SPEAKER_03]: It's keeping us going and play another listener question now.

[SPEAKER_04]: Hi there.

[SPEAKER_04]: Scott from Florida.

[SPEAKER_04]: Have a question about after hours trading or because maybe trading futures, who can do it, who can't do it, advantages, disadvantages to it, I guess.

[SPEAKER_04]: And then kind of a related question out of kind of an offshoot of it.

[SPEAKER_04]: If people can trade after hours,

[SPEAKER_04]: Why wouldn't the market just be open?

[SPEAKER_04]: You know, either twenty four seven or twenty four hours a day, five days a week type thing.

[SPEAKER_04]: Just want to get your take on it.

[SPEAKER_04]: Thanks.

[SPEAKER_04]: All right.

[SPEAKER_03]: So trading after hours is not something that I generally think people should do.

[SPEAKER_03]: It is open to most retail investors through their brokerage accounts as long as they're a broker allows it.

[SPEAKER_03]: But it is a session that happens after the close.

[SPEAKER_03]: But with a little caveat here, right?

[SPEAKER_03]: There are fewer participants, which means that liquidity is lower.

[SPEAKER_03]: And, inherently, if there are less shares trading, fewer shares trading, that means it spreads or wider, means the cost of trading is more.

[SPEAKER_03]: Because there's also fewer shares trading, it means market impact tends to be larger as well.

[SPEAKER_03]: And so I feel as though for ordinary investors, there is no immediacy that you can have.

[SPEAKER_03]: The demands you trading shares at a time where you're going to get worse prices because there are fewer people trading.

[SPEAKER_03]: Now, why don't they just keep it open twenty four hours?

[SPEAKER_03]: Because we all need to sleep.

[SPEAKER_03]: Now, as a joke, but as the same time, the reason they don't keep it open twenty four hours is because you have processes called EOD end of day instead of day processes by which these clearing houses, these custodians, these brokers, all need time to recon, sort through their data, make sure that things match, reconcile trade data,

[SPEAKER_03]: And so because of that, you can't really have the markets open, twenty-four-seven in their current iteration and in their current technology.

[SPEAKER_03]: Either way, when you see these after-hours trades and these big after-hours price swings, sometimes they can be justified, but oftentimes it's just because liquidity is so low that trading its size can push prices.

[SPEAKER_03]: So even though you can, doesn't mean you should.

[SPEAKER_03]: All right, let's talk a little about GDP gross domestic product.

[SPEAKER_03]: We did get a first look through at the Q to GDP number today and that number was pretty positive.

[SPEAKER_03]: It beat expectations up about three percent.

[SPEAKER_03]: But the boost was mainly due to a two factors.

[SPEAKER_03]: The one that was covered the most was the thirty point three percent drop in imports.

[SPEAKER_03]: If you recall, we all knew that liberation day was coming in early April.

[SPEAKER_03]: Now if you're business and the president of the United States as you are going to have increased prices, at least guidelines what prices are going to be increased to, in April.

[SPEAKER_03]: When you get a buy stuff, probably March.

[SPEAKER_03]: It's called front running.

[SPEAKER_03]: Now after all of this massive front running of importations, understandably, inventories were built up.

[SPEAKER_03]: Now the companies didn't need to import as much in April, May, and June.

[SPEAKER_03]: Now GDP is calculated by taking the consumption spending, business investment, government spending, and net exports of a country.

[SPEAKER_03]: So, as imports goes down, being that now exports is exports minus imports.

[SPEAKER_03]: GDP would go up.

[SPEAKER_03]: It's not because you're exactly subtracting out imports, it's because mostly you don't want to double count them when they're produced into final goods that are sold to consumers.

[SPEAKER_03]: But for these purposes, let's just say, as imports go down, GDP as a number goes up.

[SPEAKER_03]: Now, when you have exogenous factors like this, it's probably best not to look at GDP in quarters, but smooth them over longer periods, like six months.

[SPEAKER_03]: What does GDP look like given the massive amount of imports in Q-One, and the lack of imports in Q-Two?

[SPEAKER_03]: What is the first half of your look like?

[SPEAKER_03]: Well, what you see is slowing growth.

[SPEAKER_03]: Another factor, consumer spending, grew one point four percent.

[SPEAKER_03]: Beat expectations, up from point five percent in Q one, but still historically soft.

[SPEAKER_03]: Why did it beat expectations?

[SPEAKER_03]: Let's play this game.

[SPEAKER_03]: Well, if you know that your money is going to be worth less.

[SPEAKER_03]: Next year.

[SPEAKER_03]: And you need to buy something.

[SPEAKER_03]: Wouldn't you buy it when you would need to spend less money?

[SPEAKER_03]: If you're anticipation, if your expectation of inflation is higher,

[SPEAKER_03]: You're more likely to spend your money today.

[SPEAKER_03]: Now looking through business investments, load pretty sharply.

[SPEAKER_03]: Equipment investment, up just four point eight percent versus twenty three point seven in Q one residential investment fell by four point six percent.

[SPEAKER_03]: Inventories drag GDP by three point one seven basis points.

[SPEAKER_03]: That consumer strength is pretty uneven low income households hurt most by higher rates and tariffs.

[SPEAKER_03]: And with all of that, we still have not seen the lagged effect of the implementation of tariffs that have put us towards the highest effective tariff rate in about a hundred years.

[SPEAKER_03]: Through it all, economists now expect full-year growth near one point five percent, far below the twenty twenty four rate of two point eight, and the feds at one point eight percent non-inflationary benchmark.

[SPEAKER_03]: It is unlikely that tariffs on their current course will send us into a deep recession.

[SPEAKER_03]: What is more likely is we lose half a percent percent of growth that we never recover.

[SPEAKER_03]: At the same time, things become more expensive.

[SPEAKER_03]: Either way, the key lesson here is don't just look at the headline.

[SPEAKER_03]: Diving, understand what is driving the headline number, because you can only really start to understand what's going on when you open it up and dig a little deeper.

[SPEAKER_03]: All right, let's talk a little.

[SPEAKER_03]: Take a look at this question that came in earlier to the YouTube comment section.

[SPEAKER_03]: And it's on ticker and OTE.

[SPEAKER_03]: It says, great to see on YouTube.

[SPEAKER_03]: I'm a long time podcast listener.

[SPEAKER_03]: I have a question.

[SPEAKER_03]: What is a reverse stock split?

[SPEAKER_03]: I was looking at fiscal note to your NOT and it looks like the stock price dropped after news of a reverse stock split.

[SPEAKER_03]: looking forward to your response.

[SPEAKER_03]: Well, fiscal note is a tech and data company using AI machine learning and other technologies with analytics.

[SPEAKER_03]: It is down about sixty four percent over the fifty two past fifty two weeks down forty seven point one five percent year to date.

[SPEAKER_03]: And the reason why it's down is not because

[SPEAKER_03]: of a reverse stock split.

[SPEAKER_03]: Now, we all know what a stock split is, right?

[SPEAKER_03]: There are a hundred shares of a company, let's say, for math purposes.

[SPEAKER_03]: They're doing a two for one stock split.

[SPEAKER_03]: Once it goes through, there's now two hundred shares of a company.

[SPEAKER_03]: If you own one share, well, after it goes through, you now own two shares.

[SPEAKER_03]: So, we reverse stock split is the exact opposite of that.

[SPEAKER_03]: Oftentimes, people split stock because it's too expensive, right?

[SPEAKER_03]: Share prices too high.

[SPEAKER_03]: And so by splitting the stock, sheer price goes down, because there's nothing really happening except for something on paper.

[SPEAKER_03]: There's no additional assets being added to the company.

[SPEAKER_03]: And so if you had your hundred dollars a stock trading a one dollar, now it's two hundred dollars a stock, math tells you it's trading at fifty cents now.

[SPEAKER_03]: The opposite direction.

[SPEAKER_03]: A reverse stock split.

[SPEAKER_03]: Let's say a two for one reverse stock split.

[SPEAKER_03]: You have your hundred shares of stock of the company.

[SPEAKER_03]: It's two for one tomorrow.

[SPEAKER_03]: You're going to have fifty shares and they're going to be trading at two dollars instead of one.

[SPEAKER_03]: Why might a company do that?

[SPEAKER_03]: Well, sometimes prices can also be too low.

[SPEAKER_03]: I don't know if you know this, but

[SPEAKER_03]: exchanges have pricing requirements.

[SPEAKER_03]: You can get a warning letter from the New York Stock Exchange saying your company trades for two few dollars.

[SPEAKER_03]: Therefore, unless something changes, we're going to de-list your shares.

[SPEAKER_03]: And so this could be the case here because it's trading at fifty six cents per share.

[SPEAKER_03]: Could it be that the stock price fell because of her stocks with maybe though mechanically nothing really happens there.

[SPEAKER_03]: Either way, reverse stocks split think about a normal stock split exactly the opposite.

[SPEAKER_03]: Thanks for the question.

[SPEAKER_03]: All right, let's head back to the invest talk of voice bank for this color question.

[SPEAKER_09]: Just had a question for you.

[SPEAKER_09]: It's about can fail capital.

[SPEAKER_09]: bigger symbol k n s l. It's a position I've had for a long time and I've done really well.

[SPEAKER_09]: I'm just wondering is this a time where I should take profits and put it back on my watch list for a few quarters or is this a time to buy more and write it out.

[SPEAKER_09]: Appreciate any insights you guys have.

[SPEAKER_09]: Again, thank you so much for everything you do.

[SPEAKER_09]: Bye.

[SPEAKER_03]: Kim Sale Capital Group, ticker KNSL is the ticker in the name.

[SPEAKER_03]: Kim Sale is a property in casually insurance company, gaging in the provision of the excess and surplus lines market in the United States.

[SPEAKER_03]: It has a bunch of underwriting expertise as well.

[SPEAKER_03]: A hundred percent of its revenue comes from the United States.

[SPEAKER_03]: Pretty evenly split between the three business segments.

[SPEAKER_03]: Now, the best year, it's down about three point seven, five percent, year to date, it's down four point four, one percent, but the growth and net interest earned pretty high.

[SPEAKER_03]: About thirteen point eight percent is what you're supposed to see into this year.

[SPEAKER_03]: Net income, growing pretty consistently as well.

[SPEAKER_03]: In terms of a relative valuation, it's trading at about six point one times price to book value,

[SPEAKER_03]: Near the low end of its range over the past five years, they had pretty strong Q-two results net operating EPS rows to force seventy-eight beating consensus by about eight point four percent.

[SPEAKER_03]: For an insurance company that is pretty solid, B. Their operational metrics look solid as well.

[SPEAKER_03]: It's a combination of produce seventy-five point eight percent in underwriting income rows, investment income surge, thirty percent in Q-two,

[SPEAKER_03]: Look at that relative strength going back to twenty nineteen pretty pretty impressive.

[SPEAKER_03]: In twenty nineteen and twenty twenty it outperforms industry by sixty eight and ninety nine percent that's pretty wild but it's obviously since come back down to earth.

[SPEAKER_03]: Either way, I think what you're seeing is generally in the insurance industry with some rate uncertainty, with some rising rates, which kind of weighs differently on both sides of an insurance company.

[SPEAKER_03]: You're seeing pretty flat movement here.

[SPEAKER_03]: Even though it looks cheap, even though it looks cheap, I wouldn't say it's crazy cheap.

[SPEAKER_03]: Twenty-three times forward-looking earnings on growth that has slowed down a bit.

[SPEAKER_03]: If you're up,

[SPEAKER_03]: I don't think that it's ever a bad idea to start taking some profit.

[SPEAKER_03]: Maybe trim out of this name and maybe some other insurance names as well and look elsewhere.

[SPEAKER_03]: That is, KinSale Capital Group, Take Your Can, SL.

[SPEAKER_03]: All right.

[SPEAKER_03]: So this is an interesting story because as we all know, bonds are financing is loans are the lifeblood of

[SPEAKER_03]: Pretty much the entire economy.

[SPEAKER_03]: Credit is such an important aspect of everything.

[SPEAKER_03]: And what we're seeing now is US companies.

[SPEAKER_03]: or having some record loan repricing because of how hot the market is.

[SPEAKER_03]: Yes, companies are priced over one hundred and fifty three billion dollars in leverage loans in the month of July a new monthly record surpassing the previous high which came in December of twenty twenty three and you may ask yourself, look, why do I care?

[SPEAKER_03]: Well, these loans are too highly indebted companies often backed by private equity firms.

[SPEAKER_03]: Lower repricing means these firms can cut interest costs without taking on new loans.

[SPEAKER_03]: And so, when we get back from the break, we will dive more into this story, talk about how investor demand and tariff related uncertainty has driven this market such that companies are able to lower costs at a time when the rest of us may be facing higher costs.

[SPEAKER_03]: This is Invest Talk.

[SPEAKER_03]: I'm Luke Grayer.

[SPEAKER_03]: We have one goal here to help you achieve your financial freedom.

[SPEAKER_03]: I work into these after this break, so get your questions in now at eight, eight, eight, nine, and chart and don't forget, cruise over to the new Invest Talk store.

[SPEAKER_03]: It is open now at InvestTalkStore.com.

[SPEAKER_06]: Twenty twenty five rolls on and you've got finance and investment questions for Justin Klein and Luke Guerrero call in Vestock eight eight eight ninety nine chart

[SPEAKER_03]: So before the break we were talking about how some companies are using a hot market to refinance some of their debt and in effect lowering borrow costs on average shaving point for two percentage points off of borrowing rates in July you're seeing spreads tumble the average spread on leverage loans dropped to four point three four percentage points

[SPEAKER_03]: A little bit below the five year average, the junk bond risk premium is also tightening narrowing to point eight to percentage points.

[SPEAKER_03]: Even with market improvements though, banks are still selling the debt they have on their books at a discount.

[SPEAKER_03]: Five point five percent on secured notes and ten percent on term loans, they'll less steep than we've seen in the previous months.

[SPEAKER_03]: And so you may be asking, why do I care about company financing?

[SPEAKER_03]: Why do I care about private equity jumping in and resuming refinancing three point six billion dollars in the debt of one company alone?

[SPEAKER_03]: Well, the ability to refinance this dead and get it off the books means that it can weigh less on bank earnings and financials.

[SPEAKER_03]: Certainly, if deal flow continues to be strong, bank companies, or bank stocks can continue to do well as well.

[SPEAKER_03]: All right, we've got time for one more question.

[SPEAKER_03]: Let's try and fit this one in now.

[SPEAKER_05]: That's right.

[SPEAKER_05]: Read you, or Luke.

[SPEAKER_05]: I'm looking at thicker civil S in Y. I know this stock.

[SPEAKER_05]: What do you think the outlook is for this going forward?

[SPEAKER_05]: Do you think I would be more profitable by shifting the funds for this stock and going into copper?

[SPEAKER_05]: I've probably got a couple of copper stocks both over and over and over three percent of my total portfolio.

[SPEAKER_05]: What do you think about this and why?

[SPEAKER_05]: I appreciate your advice and I'll listen to your answer on the show.

[SPEAKER_05]: Thank you.

[SPEAKER_05]: I have a good evening.

[SPEAKER_03]: S and Y is Sonofi, S a sponsored ADR.

[SPEAKER_03]: It is a French company, a global healthcare leader, headquartered in Paris.

[SPEAKER_03]: They specialize in pharmaceuticals.

[SPEAKER_03]: Vaccines on college and rare diseases.

[SPEAKER_03]: Over the past three months, performance has been pretty solid.

[SPEAKER_03]: They were ordered revenue growth in specialty care and vaccines.

[SPEAKER_03]: Overall though, the trend on growth is not two great, one point nine percent.

[SPEAKER_03]: But look at that projected growth from

[SPEAKER_03]: of twenty twenty four to twenty twenty five from forty four billion to fifty two billion.

[SPEAKER_03]: Same time margins expanding from thirteen point three percent to about twenty one point four percent.

[SPEAKER_03]: In terms of debt they got about thirteen billion in debt on a hundred twenty two billion dollar market cap company meeting.

[SPEAKER_03]: Well they're not overly.

[SPEAKER_03]: Leopard at the same time analysts have been consistently upgrading this name and upgrading earnings over the past couple months.

[SPEAKER_03]: It's a good relative valuation, trading about ten point one times forward looking earnings.

[SPEAKER_03]: Below, it's average over the past five years.

[SPEAKER_03]: And what's really driven this company marginally higher year today, right up to two point one one percent is really what's going on within that pipeline progress on clinical trials and continued revenue growth in a time where you haven't really seen that post pandemic, right?

[SPEAKER_03]: Growth was really, really slow.

[SPEAKER_03]: They actually lost revenue.

[SPEAKER_03]: in twenty twenty three.

[SPEAKER_03]: Now this is kind of difficult because I think that you're operating on two different time frames here.

[SPEAKER_03]: Copper is more of a long-term play.

[SPEAKER_03]: Copper is instrumental in the EV transition.

[SPEAKER_03]: It's instrumental in the industrial space just in general.

[SPEAKER_03]: Whereas healthcare names, pharmaceutical names have really been beaten down globally over past couple quarters.

[SPEAKER_03]: And so when I look at a company that has pretty solid growth, pretty solid revenue growth once again, pretty solid margins decent free cash flow.

[SPEAKER_03]: I mean, look at that free cash flow.

[SPEAKER_03]: And it plays a pretty stable dividend.

[SPEAKER_03]: I just think these serve two purposes.

[SPEAKER_03]: I don't think it's one or the other here.

[SPEAKER_03]: This is a more stable name that's returning to revenue growth has promising trials.

[SPEAKER_03]: Carber is going to be highly volatile.

[SPEAKER_03]: Either way, I think they are both good investments and they both have a place with any or portfolio that is SynofiSA sponsored ADR.

[SPEAKER_03]: Well, that about does it for another episode of Invest Talk.

[SPEAKER_03]: Justin and I thank you very much for joining us on, or joining me, that is, on this beautiful Wednesday.

[SPEAKER_03]: As always, we hope that we succeed in our mission here on Invest Talk to help make you a better and more informed investor.

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[SPEAKER_03]: This is Invest Talk.

[SPEAKER_03]: Good night.

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