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[SPEAKER_06]: On radio, on YouTube, streaming live on investtalk.com and for our podcast subscribers, this is Invest Talk.

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[SPEAKER_06]: Independent Thinking, shared success.

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[SPEAKER_06]: Invest Talk is made possible by KPP Financial, a registered investment advisor firm serving clients throughout the United States.

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[SPEAKER_06]: Here is KPP Financial Portfolio Manager, Luke Guerrero,

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[SPEAKER_00]: Good afternoon, fellow investors, and welcome back to Invest Talk.

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[SPEAKER_00]: I'm your host, Lou Guerrero, and today's Friday, December 5th, 2025.

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[SPEAKER_00]: December, wow!

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[SPEAKER_00]: I cannot believe that we are already almost fully through this year.

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[SPEAKER_00]: A year that has been chaotic at times, but certainly not boring.

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[SPEAKER_00]: The fourth quarter is racing.

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[SPEAKER_00]: to the finish line, but just as you end a year, just as you end a race, you all know that you cannot lose focus.

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[SPEAKER_00]: It is a critical time.

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[SPEAKER_00]: A time where you're concerned about taxes, a time where you're concerned about the holidays, about spending about all sorts of things.

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[SPEAKER_00]: And so we hear it in Vestock, hope.

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[SPEAKER_00]: that we make the difficulty of times like these just a little bit easier by bringing you those stories, by bringing you that information, by bringing you the relevant facts so that you can make informed investment decisions.

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[SPEAKER_00]: And we don't just do that through this daily podcast, this radio program, our YouTube content.

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[SPEAKER_00]: We also do that from time to time with wealth webinars.

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[SPEAKER_00]: And so, and only four days on December 9th, Justin and I will be hosting a new in Vestock wealth webinar.

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[SPEAKER_00]: The title really tells the story.

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[SPEAKER_00]: It's called Yearend Tax Toolkit.

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[SPEAKER_00]: that will be about RMD planning, about tax loss harvesting, about deferral strategies, and frankly about a lot more, because as 2025 wraps up, now's a great time to identify and lock in your smart, year-end moves.

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[SPEAKER_00]: We are ready to help you with this new Invest talk well, 11 on.

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[SPEAKER_00]: We'll share those important money saving tips that information, all the stuff you'll need to manage your taxable income.

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[SPEAKER_00]: If that sounds interesting, it's all happening as always free of charge this coming Tuesday, December 9th from 11 a.m. to 12 p.m. Pacific, be sure to go over to investsock.com to pre-register now.

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[SPEAKER_00]: Now, just a bit, we'll talk about today's market performance and run down those show topics.

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[SPEAKER_00]: But let's tackle this color question now.

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[SPEAKER_02]: Hello, can you guys review upwork?

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[SPEAKER_02]: Please, the ticker is UPWK.

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[SPEAKER_02]: Thank you.

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[SPEAKER_00]: Upwork is a global freelance work marketplace.

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[SPEAKER_00]: So what it does is it aims to connect clients, in this case, businesses, small companies, enterprises, with freelancers and agencies across a pretty broad range of categories.

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[SPEAKER_00]: So you got design, you got marketing, you got customer support, you have software development in some cases.

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[SPEAKER_00]: It handles everything, right?

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[SPEAKER_00]: They do the matching, they do the contracts, they do the payments.

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[SPEAKER_00]: It's a pretty collaborative tool for talent sourcing, for invoicing and all sorts of other services.

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[SPEAKER_00]: So, you know, they're working on two sides here.

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[SPEAKER_00]: They're working with clients on one side of those businesses seeking seeking employees, and then also on the other side those freelancers who are seeking work.

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[SPEAKER_00]: Now, here to date, it's up 22.81% up 21.40% over the past 52, except 24% over the past three months.

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[SPEAKER_00]: And it's revenue, although if you look back, you know, from five years ago to today, it looks pretty positive up from 300 million to about 769.3 million in the most recent completed year.

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[SPEAKER_00]: Well, growth has really started to slip off a bit.

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[SPEAKER_00]: In fact, from 2024 to 2025, growth's supposed to slip from 769, or rather revenue is supposed to rise, but it is lower pace from 769,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000

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[SPEAKER_00]: But I mean, not by too much.

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[SPEAKER_00]: Sure, you're seeing margins jump a bit from 2023 to 2024.

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[SPEAKER_00]: I mean, they weren't even making money until 2023, but you're seeing margins come down.

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[SPEAKER_00]: Net margin coming down from 28% to 15.9 where it's projected to be return on equity falling from 45 to 27.7 and so that's one of the reasons why it's had a bit of a fall off, you know, it really fell off coming out of the pandemic and it's been trading sideways for the better part of, I don't know, two, three years and so the question is is now a good time to really dive into this well, you know, a lot of the things that it works on design software

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[SPEAKER_00]: Those are things that are being worked on from an AI perspective, from these large language models, which is one of the reasons why it's now trading at a pretty relative valuation, right?

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[SPEAKER_00]: That's the context that could show some of these structural risks that this company faces.

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[SPEAKER_00]: And again, you're not seeing that explosive growth that you saw coming out of the pandemic, growth is far more modest justifying evaluation in the low to middle teens.

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[SPEAKER_00]: It's a pretty small company too, right?

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[SPEAKER_00]: $2.4 billion.

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[SPEAKER_00]: $2.4 billion, it's like almost 400 million in debt, but really double that in cash.

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[SPEAKER_00]: So their net debt is actually in fact negative.

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[SPEAKER_00]: And their free cash flows headed in the right direction.

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[SPEAKER_00]: I think for me, I'm a little bit concerned about the growth here, right?

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[SPEAKER_00]: The bull case generally rallies around the idea of an uppercase scalable.

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[SPEAKER_00]: It's very capital-like, which is true.

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[SPEAKER_00]: That's why they have very little debt.

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[SPEAKER_00]: And it's benefiting from these secular shifts.

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[SPEAKER_00]: towards remote work, but at the same time, a lot of the work, the freelance work, that it is matching people with businesses, there's a lot of threat out there from computerized counterparts.

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[SPEAKER_00]: So I think the growth is the big picture here, certainly slowed and I think slowed for a good reason.

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[SPEAKER_00]: So for now, even though it looks cheap, I would stay away from Upwork, ticker UPWK.

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[SPEAKER_00]: Thanks for the call.

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[SPEAKER_00]: And we've got a lot of ground to cover in the next 45 minutes or so.

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[SPEAKER_00]: So here's a little bit of what we have planned.

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[SPEAKER_00]: My main focus point concerns this story.

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[SPEAKER_00]: AI credit market footprint financing the data center boom.

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[SPEAKER_00]: We'll talk about how the AI Arms Race is triggering a massive big tech debt issuance to fund these data centers, to fund their construction, and what this mega issuance means for these stability and bond spreads of the investment grade credit market.

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[SPEAKER_00]: That's not the only thing we'll be talking about today.

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[SPEAKER_00]: We do have a lot to talk about, including target date funds.

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[SPEAKER_00]: originally a pretty simple way of getting that bond ladder rather than that glide path exposure through retirement, but they've become a bit more complex over time.

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[SPEAKER_00]: So we'll touch on that story.

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[SPEAKER_00]: Also, I went a lot of mergers happening recently, you know, mega mergers.

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[SPEAKER_00]: Another one announced fast 24 hours netflix and Warner Bros.

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[SPEAKER_00]: Discovery.

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[SPEAKER_00]: And, you know, mergers is supposed to add value,

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[SPEAKER_00]: that some of these synergies don't work out.

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[SPEAKER_00]: So we'll touch on the threats behind some of these mega mergers.

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[SPEAKER_00]: And should we have time at the end of the show?

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[SPEAKER_00]: Some Vaughn investors are worried.

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[SPEAKER_00]: They are worried that if Kevin has it becomes Fed Chair, well, that blow up some of the credibility of the Fed.

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[SPEAKER_00]: So we'll touch on that should be of time at the end of the show.

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[SPEAKER_00]: We also got some voice bank calls ready to play, including one on Costco Tigger COST.

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[SPEAKER_00]: But they're on Vanguard Total Stock Market Index fund ETF.

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[SPEAKER_00]: That is Tigger VTI, a very well-known one.

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[SPEAKER_00]: And as always, I welcome your finance and investor questions now or any time throughout the show.

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[SPEAKER_00]: We're going into Blake, a break, rather, not a Blake.

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[SPEAKER_00]: Going into New Break.

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[SPEAKER_00]: Please remember, you can call anytime, leave your questions on the Investor Voice Bank.

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[SPEAKER_00]: If you're listening, if you are a live stream or possibly on M1220 in the Bay Area, give me a call now at 808-99 chart.

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[SPEAKER_00]: Hang on, because I'm gonna talk about today's market activity when we come back.

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[SPEAKER_05]: For the holidays, KPP Financial is excited to introduce a high-value limited time offer.

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[SPEAKER_05]: And now the phone lines are open and waiting for your finance and investment questions 88899 chart.

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[SPEAKER_05]: Now with 62 million downloads in Vestark, 88899 chart.

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[SPEAKER_00]: So I got a little bit about the market today and wrap up this week pretty quiet day overall in markets, you know?

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[SPEAKER_00]: A lot of positivity for the most part of some P500 up 19 basis points, Dow up 22 NASDAQ up 31.

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[SPEAKER_00]: Small caps though, under performers on the day down 38 basis points.

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[SPEAKER_00]: Big Tech mixed, meta-faring pretty well on the day on the news that they are going to pair back some spending related to the metaverse with the exception of their very popular glasses.

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[SPEAKER_00]: Our performers included Beauty, Alta, Big Winner, Semis, China Tech, Internet, Apparel, Airlines, all good performers on the day.

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[SPEAKER_00]: Underperformers included entertainment names, auto parts, steel, home builders, insurance, and biotech.

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[SPEAKER_00]: Treasuries, they're weaker, you did see yields up 3 to 4 basis points across the curve, but at the same time, dollar index was unchanged, and gold ending unchanged as well after reversing some of the earlier gains we saw in the day.

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[SPEAKER_00]: Crude oil settled up 70 basis points back above that $60 a barrel level for the first time since November 18th.

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[SPEAKER_00]: Still struggling to find some sort of definitive direction.

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[SPEAKER_00]: Live volumes, I think, is the big story, right?

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[SPEAKER_00]: There was not much going on beneath the surface.

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[SPEAKER_00]: You got the latest consumer data.

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[SPEAKER_00]: You got some news that really didn't affect.

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[SPEAKER_00]: Really much about the Fed, rate cut pricing.

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[SPEAKER_00]: And that's because it's so beautiful waiting game.

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[SPEAKER_00]: For the Fed and also for some notable AI events, Broadcom Oracle earnings, a new open AI model that all comes next week, the big developments really revolving around this continued retreat in volatility, small caps being squeezed.

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[SPEAKER_00]: A little bit of upward pressure on rates into that Fed meeting.

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[SPEAKER_00]: On the economic data front, we did get a December Michigan Consumer Confidence.

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[SPEAKER_00]: It did beat 53.3 up from the November print that was the lowest since June of 2022.

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[SPEAKER_00]: One year in the longer run inflation expectations, both fell to 11 month lows of the one year reading of 4.1%, still well above that January 3.3%.

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[SPEAKER_00]: Level.

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[SPEAKER_00]: So Timbercore PCE, also number we got today.

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[SPEAKER_00]: 20 basis points, month over month that was in line with expectations.

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[SPEAKER_00]: Well, the 2.8% year over year print was down at 10 basis points, also in line with the consensus.

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[SPEAKER_00]: Subtimer personal income was in line as well as personal spending a bit.

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[SPEAKER_00]: Light, looking ahead to next week, the big, big, big day will be December 10th.

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[SPEAKER_00]: Big macro highlight as we get a fed decision on rate cuts and also the path moving forward.

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[SPEAKER_00]: All righty, let's keep things moving and answer another listener question now.

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[SPEAKER_02]: Hey, big fan of and best talk.

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[SPEAKER_02]: I'd love to put a quick question

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[SPEAKER_02]: I own VTI, and it's skyrocketed soon after I got an initial position.

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[SPEAKER_02]: I have about $4,000 on the sidelines.

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[SPEAKER_02]: Is it better to wait for it to call back down?

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[SPEAKER_02]: Or is it better to just throw money and invest in it, rather than have it sit on the sidelines?

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[SPEAKER_02]: Thank you.

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[SPEAKER_00]: You know, one of the hardest things, especially when you're talking about a market

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[SPEAKER_00]: One of the hardest things is trying to predict the price movements, right?

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[SPEAKER_00]: You don't really know where prices are going to fall and frankly, you can be a little bit less concerned about that when you're talking about these broad market ETFs.

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[SPEAKER_00]: Now, you know, if you think based on recent trends that earnings for a specific company is going to move the stock one way and earnings is in three days, well, then maybe you want to wait and not be part of that earnings traffic, but this is a completely different story.

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[SPEAKER_00]: This is a broadly diversified ETF.

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[SPEAKER_00]: You know, it's passively invested, that's why it's three basis points in expense ratio.

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[SPEAKER_00]: It's one of the most held ETFs in existence, the 560 billion in AUM, and we're really signaling here from your voice.

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[SPEAKER_00]: You sound like a young guy, meaning that you have a very long investment horizon.

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[SPEAKER_00]: I actually said this to a person who did a portfolio review the other day.

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[SPEAKER_00]: And that was, you know, you got all this cash on the sideline.

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[SPEAKER_00]: And you're deciding whether or not you're going to put it into an ETF here.

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[SPEAKER_00]: When you are 34 years down the road, you aren't even gonna think of yourself darn.

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[SPEAKER_00]: I could have bought it in 2% lower, 3% lower.

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[SPEAKER_00]: On an ETF that is barely, barely, barely going to move or be that volatile on a day to day basis.

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[SPEAKER_00]: And that doesn't mean that it is never smart to have cash on the sideline.

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[SPEAKER_00]: I think it's a good idea to take profits from time to time and wait for other opportunities to reinvest, but generally speaking, if you're talking about these broad market ETFs,

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[SPEAKER_00]: There's not much benefit to timing the market.

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[SPEAKER_00]: The best thing you can do to put yourself in a positive position is be invested, be invested for the long term.

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[SPEAKER_00]: That is VTI, the Vanguard Total Stock Market ETF.

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[SPEAKER_00]: Thanks for the call.

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[SPEAKER_00]: We are headed into a break, still to come a lot of information, more answers to your questions, some really important stories, and also my main focus point about the AI credit market footprint, how financing the data center boom has started to affect credit markets.

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[SPEAKER_00]: That all next, here on Investock.

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[UNKNOWN]: Thank you.

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[SPEAKER_05]: In the early days, in Vestock was Jerry Klein and Steve Peasley.

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[SPEAKER_05]: Now the torch has been passed, and a new generation of hosts is on the job, Justin Klein and Luke Guerrero.

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[SPEAKER_05]: So when you've got finance and investment questions, don't forget to call in Vestock.

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[SPEAKER_05]: 888-99, chart.

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[SPEAKER_00]: A.I.

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[SPEAKER_00]: Credit Market footprint.

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[SPEAKER_00]: What does that all mean?

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[SPEAKER_00]: Well, the credit market in late 2025 is navigating this new reality.

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[SPEAKER_00]: His big tech is shifting from years of self-funding with revenues, to tapping the bond market at an unprecedented scale.

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[SPEAKER_00]: For much of the past decade, these hyper-scale is relied pretty heavily on free cash, so to support all these capex.

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[SPEAKER_00]: But that pattern broke pretty sharply in September.

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[SPEAKER_00]: A lot of major players in fact every major player has started to move to raise external capital and this pivot is to happening even as their core businesses are accelerating.

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[SPEAKER_00]: So it's creating this unique moment where fundamentals are strong get the appetite for debt is sore.

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[SPEAKER_00]: Investors have effectively given these companies the green light to keep expanding, recognizing that AI infrastructure is now viewed as both a strategic necessity, as well as a competitive mode and the speed and magnitude.

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[SPEAKER_00]: absolute magnitude of issuance has been unlike anything seen before meta oracle alphabet they're leading a financing wave and now qualifies as a true mega issuance cycle oracle set this boom off with an 18 billion dollar deal including a pretty rare tronch a 40 year tronch price just 165 basis points of

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[SPEAKER_00]: They had one of the largest non-MNA bond deals in history.

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[SPEAKER_00]: Raising 30 billion on top of a separate 27 billion off-balance sheet financing for its massive Louisiana data center campus, Alphabet, then said, okay, well, I want to get in on this.

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[SPEAKER_00]: 6.5 billion euros, alongside their 17.5 billion dollars.

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[SPEAKER_00]: Expanding its balance sheet debt load by nearly 70% in a single day.

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[SPEAKER_00]: Combined Techuit, issuance in 2025, has sorts of roughly 93 billion dollars.

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[SPEAKER_00]: Drurving, dwarfing, anything in prior capex cycles and well beyond the traditional telecom or cloud-based errors.

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[SPEAKER_00]: These dead deals are being priced sub 5% average rates.

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[SPEAKER_00]: And that's allowing these hyperscalers to lock in long duration capital at cost far below their expected AI returns.

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[SPEAKER_00]: The expectations reflect the scale of this ambition.

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[SPEAKER_00]: Consensus spending for 2026 has exploded from 314 billion at the start of the year.

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[SPEAKER_00]: To more than 518 billion today.

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[SPEAKER_00]: 30% year over year growth.

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[SPEAKER_00]: That's a super cycle that rivals the largest investment booms and modern corporate history.

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[SPEAKER_00]: The scale, this is incredible.

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[SPEAKER_00]: Even with strong investor demand, the market is kind of pushed back of it, requiring meaningful new issuance premiums of 10 to 15 basis points for even the strongest of companies.

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[SPEAKER_00]: And that incremental cost is starting to reflect concern about the sheer volume of supply that is hitting the market.

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[SPEAKER_00]: And more than that, the likelihood of continued heavy issuance for the next couple of years and for non-tech companies, the supply flood has consequences, tight spreads that once favored corporate borrowers, well, stop narrowing, and borrowing costs are no longer drifting lower.

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[SPEAKER_00]: That sudden shift is pretty visible if you look at the data, technology-triple-be spreads that once traded tighter than the rest of corporate credit.

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[SPEAKER_00]: They're now in line, erasing the premium they previously had.

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[SPEAKER_00]: The market investment grade spread has widened by about 10 basis points from its lows, a small move, but a clear sign that text needs are absorbing significant investor capacity.

20:13.744 --> 20:23.759
[SPEAKER_00]: And as more dollars get allocated to hyperscaler issuance, other sectors are going to find themselves paying slightly more to attract attention, especially if supply remains elevated.

20:24.460 --> 20:29.648
[SPEAKER_00]: And so this dynamic introduces a subtle what we call crowding out effect.

20:29.813 --> 20:36.685
[SPEAKER_00]: where big-text dominance in the credit market begins influencing pricing for companies far outside of the AI ecosystem.

20:37.787 --> 20:44.659
[SPEAKER_00]: Other than today's credit quality remains pretty strong, the long term question is, what happens if demand for AI infrastructure slows?

20:45.280 --> 20:48.666
[SPEAKER_00]: What happens if projected revenue fails to materialize?

20:49.642 --> 21:00.461
[SPEAKER_00]: They slow down could leave these companies, these hyper-scaleers with more leverage, slower growth, and in a position that investors are not currently expecting a combination that typically pressures spreads wider.

21:01.122 --> 21:04.368
[SPEAKER_00]: And that scenario, credit markets could become more volatile.

21:05.330 --> 21:10.519
[SPEAKER_00]: As investors are starting to reassess how much debt the system can really even absorb.

21:11.798 --> 21:33.486
[SPEAKER_00]: Now the risk is not default, these firms have pretty pristine balance sheets, but rather repricing risk if the market begins questioning the payoff timelines for AI capex, a softening and AI momentum could also cause spreads to widen across the board, as investors demand higher compensation for a sector that has aggressively re-levard.

21:33.466 --> 21:43.856
[SPEAKER_00]: and given tech's weight and corporate indices, many disruptions, or rather any disruption in the segment could have outsized effects on benchmark yields and portfolio flows.

21:45.678 --> 21:48.581
[SPEAKER_00]: Now that all sounds complicated, that's all thinking about the future.

21:48.641 --> 21:50.903
[SPEAKER_00]: For now the fundamentals remain pretty exceptional.

21:50.923 --> 21:59.872
[SPEAKER_00]: Revenue's growing, free cash flows, robust, credit ratings for the most hyper-scalers sits in the double A tier, but that could change.

22:00.052 --> 22:02.815
[SPEAKER_00]: What's clear is that AI is in an arms race.

22:03.554 --> 22:05.237
[SPEAKER_00]: when it's reshaping the credit landscape.

22:05.277 --> 22:11.669
[SPEAKER_00]: It's turning traditional cash-rich giants into some of the heaviest users of bond financing.

22:12.230 --> 22:22.710
[SPEAKER_00]: As long as gross sales strong, the market is preparing to fund these hyper-scalers for the long haul, but the next few years, we'll hinge on whether AI returns just to find the capital behind it.

22:24.682 --> 22:31.356
[SPEAKER_00]: On the next invest talk we'll have this topic on deck U.S. dollar volatility, the choppy path to stabilization in 2026.

22:31.898 --> 22:32.399
[SPEAKER_00]: That's Monday.

22:32.659 --> 22:36.227
[SPEAKER_00]: For now I'm lookrary to take your calls at 80-89 chart.

22:41.911 --> 22:49.943
[SPEAKER_05]: The weekend is here or almost here, but you've got financial investment questions, so step up and call in.

22:50.544 --> 22:53.849
[SPEAKER_05]: Invest talk, 888 99 chart.

22:54.911 --> 23:00.840
[SPEAKER_04]: Hi Justin Luke, longtime listener to the show here from Midwest area.

23:00.860 --> 23:01.601
[SPEAKER_04]: I love the show.

23:01.641 --> 23:03.164
[SPEAKER_04]: Thank you for everything you teach us.

23:03.785 --> 23:07.691
[SPEAKER_04]: I've had Costco in my portfolio for a number of years.

23:08.732 --> 23:09.994
[SPEAKER_04]: Made a lot of money in it.

23:10.244 --> 23:12.607
[SPEAKER_04]: more than double that since I purchased it.

23:12.888 --> 23:17.995
[SPEAKER_04]: My question is, should I sell it or take some profit off the table?

23:18.015 --> 23:30.653
[SPEAKER_04]: It was over a thousand dollars, I know at one time, now we're down into the 900's and it doesn't seem to be going back up at all at a steady pace and I don't know off any pace.

23:31.514 --> 23:38.985
[SPEAKER_04]: I know it has a lot of good finances and balance sheet and everything you say

23:39.370 --> 23:42.170
[SPEAKER_04]: I don't know, has it hit a ceiling as my question?

23:42.633 --> 23:45.111
[SPEAKER_04]: It's frustrating to me, or should I just...

23:45.445 --> 23:51.131
[SPEAKER_04]: sit and wait for time and it will go over a thousand dollars again and everything will be wonderful.

23:51.431 --> 23:51.892
[SPEAKER_04]: Thank you.

23:52.132 --> 23:53.674
[SPEAKER_04]: Look forward to hearing it on the show.

23:53.794 --> 23:54.495
[SPEAKER_04]: Have a great day.

23:54.755 --> 24:02.283
[SPEAKER_00]: Well, I always hope that everything will turn out wonderful and certainly I can't predict the future, but I can talk a little bit about Costco.

24:02.784 --> 24:06.568
[SPEAKER_00]: Now, Costco is one of my favorite companies at which to shop.

24:06.608 --> 24:11.453
[SPEAKER_00]: In fact, it's the really the only place where I get groceries.

24:12.091 --> 24:15.281
[SPEAKER_00]: three Costco rotisserie chickens a week but that's besides the point.

24:15.301 --> 24:21.139
[SPEAKER_00]: Costco is a membership only warehouse club so they have a global footprint.

24:21.389 --> 24:31.967
[SPEAKER_00]: And what makes this business unique is that a large portion of its profitability actually comes from membership fees versus just retail margins.

24:32.007 --> 24:36.855
[SPEAKER_00]: And that's helped it maintain a stable business model through economic fluctuations.

24:36.875 --> 24:40.001
[SPEAKER_00]: They also sell a lot of gasoline.

24:40.522 --> 24:44.308
[SPEAKER_00]: Now, despite these solid business operations and despite

24:45.166 --> 24:50.788
[SPEAKER_00]: I mean, help performance or like kind performance versus the S&P 500 going back to 2019.

24:52.134 --> 24:55.969
[SPEAKER_00]: The only time they underperformed the underperformed by 10 BIPs in 2022.

24:56.810 --> 25:13.115
[SPEAKER_00]: Despite all that, they are at 19.2% underwater compared to the S&P 500, down 2.36% on absolute basis this year, but they've had a historic run-up, and you look at their valuation, their reals of valuation, and you're growing dang!

25:13.135 --> 25:21.248
[SPEAKER_00]: 43.5 times for a warehouse store, crazy, and one point they're training at 56.8 times.

25:21.987 --> 25:27.439
[SPEAKER_00]: Now, we did for a while own Costco in one of our strategies.

25:27.499 --> 25:32.510
[SPEAKER_00]: We started to trim it when it was on the up and up and fully exited at some point.

25:32.530 --> 25:37.701
[SPEAKER_00]: That's not because it's a bad company, because it was a good company that was very expensive.

25:37.867 --> 25:44.495
[SPEAKER_00]: And at the same time, growth has started to slow down a bit, margins have started to compress a bit.

25:45.136 --> 25:51.143
[SPEAKER_00]: And so this high valuation steady retailer maybe has limited upside compared to what it did have.

25:51.203 --> 25:54.367
[SPEAKER_00]: Now again, great company, great company.

25:54.648 --> 25:58.913
[SPEAKER_00]: But we're talking about the stocks performance and sometimes those things start to diverge a bit.

25:59.467 --> 26:05.074
[SPEAKER_00]: Keep in mind they do have upcoming earnings on December 11th, and retail companies, stores, brochures.

26:05.094 --> 26:17.109
[SPEAKER_00]: They've had a pretty solid couple of weeks of earnings in Costco could as well, but for us, it's all about having a finite amount of capital to allocate and the growth and the margin compression.

26:17.389 --> 26:25.779
[SPEAKER_00]: Rather than the growth and the margins in general, didn't really justify holding on to this particular name at this relative valuation.

26:26.260 --> 26:28.022
[SPEAKER_00]: That is Costco.

26:28.002 --> 26:29.965
[SPEAKER_00]: COST.

26:29.986 --> 26:30.567
[SPEAKER_00]: Thanks to the call.

26:31.328 --> 26:38.801
[SPEAKER_00]: As you are well aware today is a Friday and on Friday we generally make a little bit of time to run down key benchmark numbers.

26:38.821 --> 26:41.185
[SPEAKER_00]: So let me hit you with those right now.

26:41.867 --> 26:51.664
[SPEAKER_00]: The two year treasury yield was at 3.554% today to expect the numbers 3.507 and 205 weeks ago the number was 64 basis points.

26:52.201 --> 26:56.748
[SPEAKER_00]: At the same time, the 10-new treasure yield is at 4.129 today, two weeks back, it was 4.065.

26:56.788 --> 27:00.873
[SPEAKER_00]: 200, three weeks ago, it was 1.762.

27:01.594 --> 27:07.423
[SPEAKER_00]: Gold, 42, 38 per ounce, that is $175 higher than two weeks ago.

27:08.324 --> 27:10.607
[SPEAKER_00]: And way higher than 18 weeks back when it was 33, 48.

27:11.569 --> 27:15.054
[SPEAKER_00]: And higher still than 197 weeks ago when it was 1806.

27:15.234 --> 27:21.583
[SPEAKER_00]: Silver, 58, 99 per ounce today, $9 higher than just two weeks ago.

27:22.812 --> 27:27.298
[SPEAKER_00]: 95 weeks back that number was 2280 and 189 weeks ago that number was 2394.

27:27.739 --> 27:35.310
[SPEAKER_00]: Oil was selling for $60 in 38 cents per barrel today, $2.41 higher than two weeks ago.

27:35.330 --> 27:44.483
[SPEAKER_00]: 63 weeks back that number was 6779 and 105 weeks back, 7430, 204 weeks ago that number was 6662.

27:45.931 --> 27:53.300
[SPEAKER_00]: The national average for a gallon of regular gasoline is 2.97 per gallon, 12 cents higher than it was two weeks back.

27:53.320 --> 28:05.655
[SPEAKER_00]: 131 weeks ago that number was 356, 179 weeks ago that number was 425, and 199 weeks ago a gallon of regular gas cost 3.57.

28:06.115 --> 28:14.065
[SPEAKER_00]: California gas is averaging 4.49 per gallon today, a 13 cent decrease compared to two weeks back.

28:14.247 --> 28:20.633
[SPEAKER_00]: But lower than 109 weeks ago, and it was 532, as well as lower than 185 weeks ago, and then it was 587.

28:22.455 --> 28:33.045
[SPEAKER_00]: For comparison in Nebraska, gas is averaging $2.57 per gallon today, that is $1.92 less than gas in California.

28:33.845 --> 28:37.489
[SPEAKER_00]: Let's talk a little bit about target date funds.

28:38.750 --> 28:44.035
[SPEAKER_00]: Target date funds were created to be this simple solution.

28:44.403 --> 28:53.439
[SPEAKER_00]: for retirement investing in an automatic low-cost glide path that protects savers from their own worst instincts.

28:53.459 --> 29:08.605
[SPEAKER_00]: But Wall Street has they tend to be beginning to complicate that once clean idea loading these funds with extra holdings, new layers of fees, and these opaque structures that stray far from their original purpose.

29:09.513 --> 29:22.471
[SPEAKER_00]: Today, target date funds which already anchor more than two-thirds of 401k participants increasingly hold dozens of underlying strategies instead of a handful of basic index funds.

29:23.232 --> 29:37.512
[SPEAKER_00]: Managers are slicing portfolios into growth, value size factors, profitability screens, defensive filters, and strategic or discovery funds creating this complexity that often

29:37.677 --> 29:40.945
[SPEAKER_00]: ads cost without improving returns.

29:41.967 --> 29:44.454
[SPEAKER_00]: Even so, the biggest shift is structural.

29:44.895 --> 29:54.859
[SPEAKER_00]: Employers have moved sharply from mutual funds to collective investment trusts, also known as CITs, which now make up more than half of all target day assets.

29:54.839 --> 29:59.123
[SPEAKER_00]: Now, when you look at them on the surface, C-H-E-C-I-T's appear cheaper.

29:59.523 --> 30:09.232
[SPEAKER_00]: But they also come with far less transparency, limited disclosure of holdings, murky fee structures, and almost no S-E-C oversight compared with their mutual fund counterparts.

30:09.573 --> 30:21.724
[SPEAKER_00]: And that lack of visibility creates an opening for private market managers who are eager to wedge in liquid, high fee assets like private equity, venture capital, and non-traded real estate into retirement portfolios.

30:21.704 --> 30:36.159
[SPEAKER_00]: On the opposite end, mutual funds face pretty strict SEC caps on illiquid assets, but on the CITs do not, meaning they could legally pack 20% or more into private investments that may not trade for months or even years.

30:37.503 --> 30:38.886
[SPEAKER_00]: That raises

30:39.338 --> 30:40.359
[SPEAKER_00]: fundamental questions.

30:41.260 --> 30:42.702
[SPEAKER_00]: How will these assets be praised?

30:42.722 --> 30:44.044
[SPEAKER_00]: Will valuations be fair?

30:44.104 --> 30:49.230
[SPEAKER_00]: And will the true cost ever be clear to the ordinary 401K saver?

30:49.851 --> 30:52.935
[SPEAKER_00]: Private asset managers, see a huge prize.

30:53.095 --> 31:03.608
[SPEAKER_00]: And the for trillion dollar target date market, steady payroll contributions, investors who really trade, an asset that's sit untouched for decades.

31:05.309 --> 31:17.385
[SPEAKER_00]: For savers, that means the most hand-off investment product on the menu may soon require a far more hands-on approach, at least to understand what's under the hood.

31:18.967 --> 31:34.827
[SPEAKER_00]: Targeting funds still offer enormous benefits, but as Wall Street crowds into the space with products that look more complex and less transparent, investors will need to watch carefully

31:35.532 --> 31:38.357
[SPEAKER_00]: Now it's 62 million downloads.

31:38.377 --> 31:39.199
[SPEAKER_00]: This is Invest Hawk.

31:39.860 --> 31:40.240
[SPEAKER_05]: Hang on.

31:41.002 --> 31:44.548
[SPEAKER_05]: Are you worried about what your tax bill will look like this year?

31:45.109 --> 31:50.959
[SPEAKER_05]: As we head into the final weeks of 2025, now is a good time to get proactive.

31:51.440 --> 31:59.194
[SPEAKER_05]: And you can do that by joining Justin Klein and Luke Guerrero for the upcoming Invest Hawk wealth webinar.

31:59.174 --> 32:06.221
[SPEAKER_05]: Year-end tax tool kit, RMD planning, tax laws harvesting, and deferral strategies.

32:06.682 --> 32:13.969
[SPEAKER_05]: This hour-long session is your chance to get their expert insights on navigating the complexities of year-end tax planning.

32:14.530 --> 32:26.903
[SPEAKER_05]: Just an in-loop will cover everything, from managing those mandatory RMDs to using tax laws harvesting to offset gains to effective income deferral techniques.

32:26.883 --> 32:33.311
[SPEAKER_05]: Mark your calendar for Tuesday, December 9 from 11 a.m. to 12 p.m. Pacific time.

32:33.852 --> 32:39.700
[SPEAKER_05]: The wealth webinar is free, but you must pre-register at investalk.com.

32:40.181 --> 32:42.624
[SPEAKER_05]: Hurry, December 9 is coming up fast.

32:43.225 --> 32:56.502
[SPEAKER_01]: Come calling to see the guys spots on onto innovation, ticker symbol O and T O. I'm actually employee and get a 15% discount on the stop with

32:57.089 --> 33:06.238
[SPEAKER_01]: I've taken some profit off the table within the last couple of years and including this year, but I was wondering if I should trim more or hold off.

33:06.607 --> 33:10.373
[SPEAKER_01]: It's a small position, one of the different portfolios of my accounts.

33:10.514 --> 33:12.457
[SPEAKER_01]: So I was wanted to know what you guys think.

33:12.798 --> 33:13.038
[SPEAKER_01]: Thanks.

33:13.719 --> 33:17.786
[SPEAKER_00]: Tigger, oh, and T-O is on to innovation.

33:18.487 --> 33:23.015
[SPEAKER_00]: What they do is there is semi-conductor equipped company, so they design the development manufacturer.

33:23.035 --> 33:30.428
[SPEAKER_00]: And the support the process control tools used in semi-conductor and advanced electronics manufacturing.

33:30.448 --> 33:31.770
[SPEAKER_00]: In effect,

33:31.750 --> 33:41.425
[SPEAKER_00]: They supply critical equipment and software that chip manufacturers need to ensure quality and a yield process that is accurate.

33:42.626 --> 33:46.092
[SPEAKER_00]: Now, the most recent quarter earnings have been pretty solid.

33:46.112 --> 33:51.420
[SPEAKER_00]: They did beat consensus estimates on revenue and bottom line earnings per share.

33:53.022 --> 33:54.745
[SPEAKER_00]: I'm sorry, they actually only beat on earnings per share.

33:54.785 --> 33:56.307
[SPEAKER_00]: They did not beat on revenue.

33:57.113 --> 33:58.957
[SPEAKER_00]: Some of their margins, and how those have been fairing.

33:58.997 --> 34:05.571
[SPEAKER_00]: Well, net margin is down a bit, EBITDA margin, though, on the rise as is EBIT margin earnings before interest in taxes.

34:06.172 --> 34:11.443
[SPEAKER_00]: And return assets, although it's down, return on equity is a bit higher.

34:12.571 --> 34:19.821
[SPEAKER_00]: Perial devaluation perspective, they're trading at 26.6 times, price to afford looking earnings, 3.9 times price to book value.

34:19.841 --> 34:35.323
[SPEAKER_00]: So in the middle of their range over the past five years, number of past three months, up 51.24% and get this in spite of that, still down 5.56% year to date.

34:36.745 --> 34:42.173
[SPEAKER_00]: Now what's driving, would really drove them higher over the past three months,

34:42.406 --> 34:50.296
[SPEAKER_00]: They're placed in semi-conductor demand, AI, and the advanced chip tailwind.

34:50.316 --> 34:52.919
[SPEAKER_00]: They've also had a bit of profitability resilience, right?

34:52.939 --> 34:54.421
[SPEAKER_00]: Your earnings for share is beating.

34:54.922 --> 35:00.308
[SPEAKER_00]: Your margin strength looks decent, in spite of your revenue, not beating.

35:00.909 --> 35:02.271
[SPEAKER_00]: The growth is falling a bit.

35:03.032 --> 35:07.317
[SPEAKER_00]: In the most recent quarters, valuations all be it, lower than they've been.

35:07.803 --> 35:08.666
[SPEAKER_00]: are still a bit high.

35:08.687 --> 35:13.988
[SPEAKER_00]: And maybe high dependency on the chip making cycle, not to mention there's a recent acquisition.

35:14.068 --> 35:15.414
[SPEAKER_00]: So there's some execution risk there.

35:15.454 --> 35:18.707
[SPEAKER_00]: So, you know, if you're trying to look for is okay.

35:18.839 --> 35:23.066
[SPEAKER_00]: We just reported earnings, earnings isn't for a while, potentially no more catalysts.

35:23.887 --> 35:27.032
[SPEAKER_00]: How are headwinds within the sector gonna affect this company?

35:27.553 --> 35:28.795
[SPEAKER_00]: And that's for somebody else.

35:29.275 --> 35:32.581
[SPEAKER_00]: But I have another thing I wanna mention to you because you are an employee there.

35:32.601 --> 35:39.031
[SPEAKER_00]: And I always tell people who do portfolio reviews, clients, who have concentrated stock positions and you said it is a small position.

35:39.592 --> 35:41.815
[SPEAKER_00]: So it's not too heavily weighted in your portfolio.

35:42.176 --> 35:46.703
[SPEAKER_00]: They you don't wanna have an asset base that is heavily correlated to your employment income.

35:47.797 --> 35:49.879
[SPEAKER_00]: Now, I'm not saying this company is going to go under.

35:50.900 --> 36:04.634
[SPEAKER_00]: But if it were, and the stock were to fall, if the stock were to fall, and they were going to be layoffs, you might lose money, not only in your assets, but also money in your income all at the same time.

36:06.055 --> 36:14.884
[SPEAKER_00]: And so, when you get this type of deal, where you get a discount, I think when it vests, it's always a good idea to take some off the table,

36:15.202 --> 36:23.031
[SPEAKER_00]: limit risk, limit your downside, protect your whole portfolio from this multi-layered level of concentration.

36:23.071 --> 36:27.677
[SPEAKER_00]: That is on to innovation, ticker, oh, NTO, next to the call.

36:28.217 --> 36:42.154
[SPEAKER_00]: Now, not sure we will have enough time to get to the answer, but we do have plenty of time to play this next question.

36:42.303 --> 36:45.588
[SPEAKER_03]: That's worth buying and not, I don't know, and yeah, thank you.

36:45.608 --> 36:51.157
[SPEAKER_00]: Let's take a look at P-A-N-W that would be Palo Alto Networks.

36:51.177 --> 36:53.300
[SPEAKER_00]: And again, we won't necessarily have time to tackle this whole thing.

36:53.400 --> 36:54.942
[SPEAKER_00]: Let's briefly talk about what they do.

36:55.663 --> 36:59.349
[SPEAKER_00]: It is a major cyber security company.

36:59.369 --> 37:09.745
[SPEAKER_00]: It's core business includes firewalls, cloud security, end-point protection, and a broad suite of network and AI-driven security services.

37:09.725 --> 37:16.316
[SPEAKER_00]: They work with governments, they work with businesses, they work with service providers, and they also do it globally, right?

37:16.336 --> 37:24.290
[SPEAKER_00]: They have a large client-based across over 150 countries and many of the largest firms in the world.

37:24.751 --> 37:26.474
[SPEAKER_00]: That's just a high level of who they are.

37:27.796 --> 37:34.568
[SPEAKER_00]: When we come back, we'll talk more about this company and if right now, it makes sense to add it or keep it in your portfolio.

37:36.337 --> 37:41.157
[SPEAKER_00]: This in Vestock, I'm the girl we have one goal here to help you achieve your financial freedom.

37:41.840 --> 37:46.600
[SPEAKER_00]: Our work continues after this break, our final break so get your questions in now at 888-99 chart.

37:51.338 --> 37:59.792
[SPEAKER_05]: For investors, the goal of achieving financial freedom requires unbiased information, strategic planning, and determination.

38:00.252 --> 38:01.374
[SPEAKER_05]: Congratulations!

38:01.835 --> 38:06.883
[SPEAKER_05]: You've found the podcast that is dedicated to helping you succeed in Vestock.

38:10.508 --> 38:19.078
[SPEAKER_00]: For the break, we were talking about Palo Alto Networks, a very large 136 billion dollar cyber security firm.

38:19.098 --> 38:28.729
[SPEAKER_00]: I mean, as you can probably imagine in the age of the building of AI and the internet and digitization of everything, security is most of the big topic.

38:28.769 --> 38:36.058
[SPEAKER_00]: In 2023 and 2024, we're very kind to this company, 111.3% was its return in 2023.

38:36.078 --> 38:39.722
[SPEAKER_00]: 23.4% its return in 2024,

38:39.702 --> 38:40.964
[SPEAKER_00]: But things have started to slow down.

38:41.024 --> 38:46.010
[SPEAKER_00]: Only up 9.3% this year, underperforming its industry, underperforming the S&P 500.

38:46.110 --> 38:50.236
[SPEAKER_00]: Now the broader demand has not really changed, right?

38:51.678 --> 38:56.884
[SPEAKER_00]: And platform momentum, strong platform momentum, that hasn't really changed either.

38:56.924 --> 38:59.868
[SPEAKER_00]: There are favorable macro tailwinds here.

38:59.968 --> 39:00.529
[SPEAKER_00]: So,

39:01.522 --> 39:04.288
[SPEAKER_00]: What's going, well, what is really high valuations?

39:04.308 --> 39:07.837
[SPEAKER_00]: They were trading at 75 times, priced to 4 looking earnings at one point.

39:07.857 --> 39:10.122
[SPEAKER_00]: They've come down to a still very high 48.6.

39:10.162 --> 39:12.127
[SPEAKER_00]: It's cyclical.

39:12.568 --> 39:20.526
[SPEAKER_00]: There's a lot of competition in cybersecurity, and they've been pretty aggressive in M&A, and there are some risks there.

39:21.670 --> 39:33.874
[SPEAKER_00]: Revenue is not really slowed down in terms of growth much supposed to, rather they did grow from 8 billion in revenue to 9.2 to the same time net income actually fell in that time period.

39:34.090 --> 39:39.658
[SPEAKER_00]: that margins fell, EBITDA margin remained the same return on assets or turn on equity took a big dip.

39:39.718 --> 39:42.702
[SPEAKER_00]: And so I think this is a really competitive space, right?

39:42.722 --> 39:52.877
[SPEAKER_00]: These relationships are hard to build and certainly it's hard to get out of a rather, you know, inertia is a powerful thing in these types of relationships of taking other people's customers is difficult.

39:53.658 --> 39:59.045
[SPEAKER_00]: But for me, I'm seeing a business that is slowing down has some risks and is doing it all at a pretty high valuation.

39:59.125 --> 40:03.051
[SPEAKER_00]: So, you know, it's been trading sideways for quite some time.

40:04.465 --> 40:07.749
[SPEAKER_00]: I don't see a big catalyst on the horizon to push this guy out of its funk.

40:07.769 --> 40:28.296
[SPEAKER_00]: So for now, I would still stay away from Powell Alto Networks to Group EA and W. Speaking of M&A, corporate dealmaking is eroding, and 2025 has delivered a wave of merger Mondays, Tuesdays, Wednesdays, and really every other day of the week, as executives are unleashing these record profits and taking advantage of lower.

40:28.276 --> 40:28.977
[SPEAKER_00]: Interest rates.

40:28.997 --> 40:36.263
[SPEAKER_00]: The headline transaction is Union Pacific's 85 billion bid for Norfolk's Southern, the largest global takeover since 2019.

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[SPEAKER_00]: While Hollywood was watching a pretty fierce bidding war for Warner Bros.

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[SPEAKER_00]: Discovery, even Samsung has mobilized a dedicated M&A arm backed by a massive 74 billion dollar cash pile.

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[SPEAKER_00]: In total 32 mega deals were 7 billion of already been announced

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[SPEAKER_00]: With more than 10 billion plus deals, then any, or rather with more 10 billion plus deals, dollar deals, then any year on record.

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[SPEAKER_00]: Seals are continuing to believe that they can defy history, even though decades of research suggests that 70 to 90% of mergers fail.

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[SPEAKER_00]: that each leader confidently assumes his belongs to the successful minority, to test whether outcomes have improved.

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[SPEAKER_00]: Researchers examined every $10 billion deal completed between 2010 and 2020 and tracked buyers financial performance for five years.

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[SPEAKER_00]: The results are pretty middley.

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[SPEAKER_00]: Buyers grew revenue and operating profit, about 6% per year.

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[SPEAKER_00]: But their valuation stayed flat, and their returns on capital actually fell.

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[SPEAKER_00]: Shareholder outcomes split already half be their industry benchmark by collective 2.8 million trillion.

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[SPEAKER_00]: Well, the other half lagged by nearly the same amount proving that modern M&A success remains essentially a coin flip.

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[SPEAKER_00]: The broader studies suggest companies are slowly improving with serial acquires delivering stronger, long-term shareholder returns, aided by better due diligence, and a shift towards strategic capability, driven by deals still.

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[SPEAKER_00]: Many of today's transactions are

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[SPEAKER_00]: Pretty staggering in size.

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[SPEAKER_00]: The median deal equals the only half of the buyer's market value.

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[SPEAKER_00]: And some, like the Union Pacific's bid, stretch the balance sheet even further.

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[SPEAKER_00]: With AI points to reshap cost structures, revenues, competitive dynamics, boards we need to reconsider whether huge high stakes mergers are wise to this moment of rapid technological change.

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[SPEAKER_00]: And while today's confidence is fueled by strong profits and friendly regulators, very friendly regulators, the underlying math hasn't changed.

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[SPEAKER_00]: Mega mergers still offer only zero, 50-50 odds, a reminder that even the boldest CEOs aren't immune to the laws of corporate gravity.

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[SPEAKER_00]: I'm Luke Graham, this completes another Investon program.

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[SPEAKER_00]: We thank you for listening and encourage you to tell your friends and family members about our free podcast downloads which are available at iTunes and Spotify.

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[SPEAKER_00]: Independent thinking, shared success.

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