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[SPEAKER_02]: On radio, on YouTube, streaming live on investtalk.com and for our podcast subscribers, this is Invest Talk.

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[SPEAKER_02]: Independent Thinking, shared success.

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[SPEAKER_02]: Invest Talk is made possible by KPP Financial, a registered investment advisor firm serving clients throughout the United States.

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[SPEAKER_02]: 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, Luke Guerrero on this beautiful Friday, February 27th, 26th.

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[SPEAKER_00]: And we have a lot of great things that planned for you over this next hour.

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[SPEAKER_00]: But before we start the fun, I'm thrilled to announce, once again, our third annual Invest Talk Market Madness contest,

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[SPEAKER_00]: As you all know, instead of basketball brackets, we will be watching companies perform head-to-head in an epic showdown.

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[SPEAKER_00]: Participants can compete for the $1,000 grand prize and demonstrate their market prowess by locking in their stock victory predictions.

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[SPEAKER_00]: And get this.

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[SPEAKER_00]: If the contest winner is also following the Invest Talk YouTube channel, we will bump that prize up to $1,500.

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[SPEAKER_00]: So if you're ready to test your skills in the unique competition, do not wait.

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[SPEAKER_00]: It's free to join.

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[SPEAKER_00]: And frankly, I think a whole lot of fun.

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[SPEAKER_00]: visit in vestalk.com and subscribe to your Submit your bracket predictions to enter.

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[SPEAKER_00]: The clock is ticking.

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[SPEAKER_00]: Head over to our website and search in vestalk market madness to fill out your bracket before the deadline on March 18th at 11.59 p.m. All right, let's get things going before we talk about today's market performance and those show topics.

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[SPEAKER_00]: This show is definitely about your finance and investment questions, so let's tackle

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[SPEAKER_03]: along Justin and Luke.

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[SPEAKER_03]: I had a question in regards to Apple.

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[SPEAKER_03]: I've been dollar cost averaging it's a bit for the past year and I wanted to tell you guys not about it, which is for a while.

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[SPEAKER_03]: So I just wanted to know when you guys thought about it.

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[SPEAKER_03]: Thank you.

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[SPEAKER_00]: I don't think many of you need to know what Apple does, but I'm going to tell you anyway because Apple designs and manufacturers consumer electronics software and services.

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[SPEAKER_00]: It's built around the most valuable consumer ecosystem on the planet.

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[SPEAKER_00]: And most of its revenue comes from their hardware segment.

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[SPEAKER_00]: Think iPhones have makes up nearly 60% of its hardware revenue.

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[SPEAKER_00]: Mac makes up another six iPads, wearables, and accessories.

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[SPEAKER_00]: Then they also have their services segment, so your app store, your Apple Music, your iCloud, your Apple Pay, and your Apple TV.

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[SPEAKER_00]: And I mean, it's a massive company, 4.1 trillion dollar market cap.

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[SPEAKER_00]: Now it's at a rough time this year.

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[SPEAKER_00]: Not as rough as some of the max seven, but rough nonetheless, it was down 3.21% today, which makes it down 2.82% year to date, down 4.82% over the past three months.

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[SPEAKER_00]: But I mean, it's still trading at pretty elevated valuations, it's forward price to earnings multiple, sitting at about 30.9, near the upper end of its range over the past five years.

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[SPEAKER_00]: What's really been driving this stock that will iPhone 17 delivered one of the strongest cycles in history, Q1 iPhone revenue surge 23% year over year to 85.27 billion absolutely demolishing the 78.65 billion estimate.

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[SPEAKER_00]: And I mean, frankly, Tim Cook kind of nailed it, right?

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[SPEAKER_00]: He said that demand was simply staggering.

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[SPEAKER_00]: A record high across a geographical segment.

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[SPEAKER_00]: Their services hit 30 billion for the first time.

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[SPEAKER_00]: Apple Intelligence, one of probably the worst parts of their entire suite of offerings, stands to have an upgrade in the future, partnering with Google Gemini as a theory alternative rather than building their large-scale platform and they have a new product coming out this next hardware cycle in their first

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[SPEAKER_00]: foldable iPhone.

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[SPEAKER_00]: I mean, frankly, capital return is is truly extraordinary at scale as well.

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[SPEAKER_00]: Apple spent 32 billion on buybacks and dividends in a single quarter of that piece.

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[SPEAKER_00]: Apple set to retire 3% of its float per year through repurchases alone.

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[SPEAKER_00]: And it stood up pretty well compared to its

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[SPEAKER_00]: surrounding AI right they haven't made very many AI investments and so this is really a name that frankly is just a cash behemoth that 54 billion in cash on hand their free cash flows projected be 133.9 billion and for a company the size they're still seeing very solid revenue growth projected to grow more than 10% year over year into 2026 so what you're seeing is a bit of a

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[SPEAKER_00]: Coordinated drawdown, I would say.

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[SPEAKER_00]: You're seeing a lot of tech rotate, and this name is a bit expensive, but there's a reason why we hold it for our clients.

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[SPEAKER_00]: We think going into the future, given its position, given its ecosystem, Apple, still more so than a lot of other Macs, seven names is a good staple to have within your portfolio.

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[SPEAKER_00]: That is AAPL, thanks for the call.

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[SPEAKER_00]: We've got a lot of ground 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]: The 24-7 stock market revolution trading never sleeps.

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[SPEAKER_00]: The traditional 4-PM Eastern closing vell is becoming a bit obsolete, as stocks transform into 24-7 digital cash with around the clock trading.

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[SPEAKER_00]: This fundamental shift in market structure is changing how investors think about timing liquidity and global market dynamics.

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[SPEAKER_00]: Also, we'll touch on tech, because there's been a lot of talk recently about a tech apocalypse, jobs, jobs, jobs, being the casualty of the AI revolution, but that's been said before.

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

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[SPEAKER_00]: And we also got another story about how UK mortgage collapsing, UK mortgages collapsing, rather.

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[SPEAKER_00]: Might.

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[SPEAKER_00]: And he is scaring Wall Street about other hidden, bad, debt.

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[SPEAKER_00]: We also have some questions that came in from the comment section of the University of YouTube channel.

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[SPEAKER_00]: And of course, I welcome your finance and investment questions now, or any time throughout the show.

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[SPEAKER_00]: It's Friday and we still have things to look into before we wrap up the weekend.

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[SPEAKER_00]: But we're going to go into our first break, please remember you can call any time and leave your voice mail on the Invest Talk Voice Bank or give me a call now at 888-99 chart.

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[SPEAKER_00]: Hang it because when we come back we'll talk about today's market activity.

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[SPEAKER_01]: When you tell your friends about Investork and they ask you why you listen, let them know there are many reasons and one is parallel investing from KPP Financial and Investorkos Justin Klein.

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[SPEAKER_01]: Parallel investing means Justin invests right alongside KPP Financial clients.

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[SPEAKER_01]: He makes the same trade for KPP Financial on the same day at the same price and the same percentages as KPP clients.

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[SPEAKER_01]: There's no front running and no special treatment.

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[SPEAKER_01]: In this way, Justin and KPP Financial share the same risks and the same potential for success.

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[SPEAKER_01]: Parallel Investing aligns the interests of Justin and KPP financial with those of his clients.

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[SPEAKER_01]: Justin, Klein and Luke Guerrero are ready to answer your questions about Parallel Investing.

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[SPEAKER_01]: And you can learn more anytime at InvestTalk.com.

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[SPEAKER_01]: The Invest Talk phone lines never close, and now loop Guerrero is here, taking your calls live.

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[SPEAKER_00]: Invest Talk, 888-99 chart 888-99 chart is the number if you want to get through live before the weekend, but we have some things that we need to talk about, including a little bit of a market wrap up.

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[SPEAKER_00]: U.S. equities finished a bit lower on Friday, capping off a down week and closing out February with the biggest monthly loss for the S&P and NASDAQ since March of last year.

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[SPEAKER_00]: The down finished down 1.05% today, S&P 500 down 43 basis points NASDAQ down 92, Russell 2000 down 1.68%.

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[SPEAKER_00]: That being said, breath was actually positive on the day.

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[SPEAKER_00]: Under the surface, the session featured another clear rotation in the defensives in the quality and the low volatility names, and away from those cyclicals, particularly financials and small caps.

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[SPEAKER_00]: Big Tech was mostly lower, led to the downside by Nvidia, high beta names, retail investor favorites, most short stocks they all underperformed on the day.

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[SPEAKER_00]: On the winning side, energy caught a bid with crude oil settling up nearly 3%, while entertainment, home builders, pharma, biotech, staple retailers and telecoms, I mean they all held up pretty well as well.

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[SPEAKER_00]: We had several dynamics continuing to weigh on this sentiment.

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[SPEAKER_00]: You have AI fatigue, remaining a theme with renewed concerns around AI driven job displacement, which we'll talk a little bit about later on in the show.

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[SPEAKER_00]: You had software selling pressure, you had questions about capex sustainability and this circularity in the AI trade as companies fund other companies which purchase their products.

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[SPEAKER_00]: a couple of cautious developments in the private credit space and as well added to this, you know, overall risk off-tone, another thing we'll talk about a little bit later on.

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[SPEAKER_00]: Treasuries rallied pretty hard with the curve bull steepening the two-year yield dropped below 340 of the lowest since August 2022, while the ten-year fell back below that four percent for the first time since October.

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[SPEAKER_00]: Now that strength and bonds right came despite a hotter than expected January a PPI print headline PPI came in at five tenths of a percent month over month versus the three tenths consensus while corp CP PPI surged eight tenths eighty basis points well ahead of the thirty basis points expected.

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[SPEAKER_00]: On a brighter note, Chicago PMI printed at 57.7, that's the highest reading in nearly four years.

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[SPEAKER_00]: Elsewhere, the dollar index slipped 20 basis points, gold added 1% and silver surged 6.5% on the day, while Bitcoin fell nearly 3%.

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[SPEAKER_00]: Looking ahead to next week, ISM manufacturing on Mondays expected to command outside detention, give it its importance to gross sentiment and cyclical rotations.

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[SPEAKER_00]: The consensus is looking for a slight pullback to 51.8 from January's unexpectedly positive 52.6, we also get ISM services in ADP on Wednesday and the big one, non-farm payrolls on Friday, Wall Street is looking for a roughly 60,000 gain following January's 130,000 print.

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[SPEAKER_00]: Alright, let's keep things moving and get back to our Invest talk comment section question bank.

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[SPEAKER_00]: This one came in a bit earlier, looks like it actually came in, well this one's fresh off the presses just right from today and it's on MSFT, which is Microsoft, says hi, do you guys think now is a good time to buy Microsoft as I just bought some as my first ever stock.

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[SPEAKER_00]: Congratulations.

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[SPEAKER_00]: Could you talk about it on the show?

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[SPEAKER_00]: Sure, let's take a look at Microsoft.

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[SPEAKER_00]: Sticker, MSFT.

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[SPEAKER_00]: Microsoft is of course one of those mag seven names, roughly three trillion dollar market cap coming down to about $392 per share, well off of those all-time highs that we saw in the past 52 weeks and it was trading up near 530.

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[SPEAKER_00]: So it's down 18.79% year to date down 19.11%.

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[SPEAKER_00]: over the past three months, and in fact, it is flat now over the past year, and that is in spite of solid revenue growth, 14.5% on an annualized basis, very little debt only 100 billion in debt on a $3 trillion market cap company, stellar free cash flow at 71.8 billion.

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[SPEAKER_00]: But now's really trading well below its average price earnings at 22 times for looking price earnings, 18.7 times

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[SPEAKER_00]: It has had a bit of a drawdown with a lot of those software names, but I think that Microsoft is being treated a little bit unfairly when you talk about these softwares as service.

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[SPEAKER_00]: names because Microsoft more than any other AI hyperscaler has a just ingrained massive mode in terms of how integral it is to their or rather to enterprise, right?

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[SPEAKER_00]: The office suite and no one's ever really been able to touch that.

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[SPEAKER_00]: Then you add on top of that, there is your segment and how much growth they've seen from their cloud business.

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[SPEAKER_00]: To me, Microsoft

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[SPEAKER_00]: The market being critical about how much cap X is going in to the AI build out specifically from companies like Microsoft, Amazon and all these hyper scalars that are spending hundreds and hundreds and hundreds of billions of dollars.

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[SPEAKER_00]: But like I said, Microsoft is different.

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[SPEAKER_00]: They have the second largest cloud platform globally and it's fast growing.

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[SPEAKER_00]: They have

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[SPEAKER_00]: They have all these different segments that other companies that are suffering and that have drawn down certainly don't have.

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[SPEAKER_00]: Is there at 39% growth year over year in Q2?

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[SPEAKER_00]: That's crazy.

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[SPEAKER_00]: Copilot is beginning to monetize at scale.

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[SPEAKER_00]: But I think the market just wants more proof now.

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[SPEAKER_00]: And when you see these amps drawing down.

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[SPEAKER_00]: They're still training a decent valuations, 22.1.

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[SPEAKER_00]: To me, this is a time where software is becoming a bit more reasonable to wear, it should be and not something to be worried about.

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[SPEAKER_00]: That's why Microsoft is one of the names we've been looking at to add to one of our strategies.

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[SPEAKER_00]: And right up here, maybe a good time to start picking it up.

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[SPEAKER_00]: And it's MSFT.

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[SPEAKER_00]: Thanks to the call.

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[SPEAKER_00]: We're going into break.

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[SPEAKER_00]: Next up, my main focus point about the 24-7 stock market revolution, and I'll have more answers to your finance and investment questions.

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[SPEAKER_00]: So if you want to get one through live, if you want to jump this line of comment section questions and voicemails, give me a call now at 888-99 chart.

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[SPEAKER_01]: The weekend is here or almost here, but you've got finance and investment questions, so step up and call in, in Vestalk, 88899 chart.

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[SPEAKER_00]: Alright, so today's focus point is something that I think could really be one of the most consequential shifts in how we trade and own stocks in our lifetimes.

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[SPEAKER_00]: We're talking about tokenized equities and why 2026 might be the year that this goes from a crypto buzzword to actual Wall Street infrastructure.

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[SPEAKER_00]: So if you're not familiar, let me break this down for you.

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[SPEAKER_00]: A tokenized equity at its core is a real share of stock, Apple Tesla, an S&P 500 ETF that gets wrapped or reissued as a digital token on a blockchain.

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[SPEAKER_00]: Now the key distinction here is these are not synthetic crypto tokens that just track a price they're actual equity interests.

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[SPEAKER_00]: Back to one to one by real shares held in regulated custody.

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[SPEAKER_00]: So you get the same QCIP number, the same dividends, the same voting rights.

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[SPEAKER_00]: The only difference is that ownership is recorded on the block chain instead of

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[SPEAKER_00]: Now, what does that matter?

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[SPEAKER_00]: Well, there are three reasons.

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[SPEAKER_00]: First, liquidity and flexibility.

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[SPEAKER_00]: In theory, tokenized shares can trade 24, 7.

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[SPEAKER_00]: They settle almost instantly.

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[SPEAKER_00]: There's no more waiting for this T plus one settlement period.

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[SPEAKER_00]: You're not stuck in this system.

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[SPEAKER_00]: Where if you sell a stock at 359 p.m. Eastern on a Friday, the cash actually doesn't land for a day or more on chain that can happen in seconds.

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[SPEAKER_00]: Second reason matters.

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[SPEAKER_00]: Fractionalization.

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[SPEAKER_00]: You want a tenth of a share of Berkshire Hathaway, Class A, tokenization can make that accessible.

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[SPEAKER_00]: It lowers the entry barrier for smaller investors and opens up expensive stocks to a much broader audience.

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[SPEAKER_00]: Third, and this is the one that gets the finance nerds excited, programmable finance.

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[SPEAKER_00]: Once the share is on-chain, it can be used as collateral in defy protocols, deployed, in smart contracts used in yield strategies.

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[SPEAKER_00]: These are things that are simply impossible when your share sits in a traditional brokerage custody account.

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[SPEAKER_00]: Now here's where 2026, in a way can become the pivotal year.

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[SPEAKER_00]: Nasdaq filed a proposed rule change with the SEC back in September of last year to allow tokenized versions of securities to trade right alongside traditional shares on its existing order book.

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[SPEAKER_00]: Same exchange, same rules, same protections, just a different settlement method on the back end.

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[SPEAKER_00]: The SEC's Division of Trading and Markets published the amended filing in January of this year and Nasdaq has said that the DTC process, that the depository trust company, the backbone of new US securities,

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[SPEAKER_00]: could be available by the second half of 2026.

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[SPEAKER_00]: So we could potentially see the first tokenized settled trades on a major U.S. exchange by Q3 of this year.

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[SPEAKER_00]: And this isn't just Nasdaq acting alone, the SEC gave no action relief to DTC in December 2025 for a pilot program.

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[SPEAKER_00]: They're going to start with securities in the Russell 1000, those large caps, and DTF's

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[SPEAKER_00]: So we're not talking about some obscure microcaf experiment.

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[SPEAKER_00]: This is blue chip, main stream equities.

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[SPEAKER_00]: On the retail side, it's already happening.

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[SPEAKER_00]: Cracken's x-stocks product would let you tote trade tokenized versions of major US stocks, 24 hours a day during weekends.

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[SPEAKER_00]: surpassed $10 billion in total transaction volume by late last year.

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[SPEAKER_00]: and Galaxy digital launched an on-chain version of its class a common stock on Solana the first tokenization of SEC registered public equity on a major public blockchain.

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[SPEAKER_00]: So the natural question is who wins, who loses?

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[SPEAKER_00]: Well the potential losers are traditional brogages and this is the

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[SPEAKER_00]: Robin Hood Morgan Stanley.

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[SPEAKER_00]: These firms generate enormous revenues from activities that tokenization could displace.

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[SPEAKER_00]: That Schwab net interest income from cash sweeps and securities lending made up nearly half their total revenue in Q22025, 2.82 billion out of 5.85 billion.

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[SPEAKER_00]: at Interactive Brokers net interest income.

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[SPEAKER_00]: For margin loans, had 87 million and Q4 2024 dwarfing.

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[SPEAKER_00]: Their 477 million in commissions.

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[SPEAKER_00]: Robinhood got 42% of its Q2 2024 revenue from net interest.

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[SPEAKER_00]: If tokenized equities allow investors to unlock liquidity without selling shares, borrowing against on-chain positions, using them as defy collateral, that deeply threatens the cash sweep and margin lending model,

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[SPEAKER_00]: Beyond brokerages, clearing houses, the entire post-traid infrastructure advices pressure if settlement moves on chain and peer to peer.

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[SPEAKER_00]: The role of central clearing shrinks.

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[SPEAKER_00]: Now the potential winners are the digital first platforms.

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[SPEAKER_00]: custodians, token issuers, blockchain native finance platforms that are digital first, Kraken is already vertically integrating, by acquiring back-end the issuers behind its products.

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[SPEAKER_00]: Now here's the reality check, there's still a tightly permissioned pilot, not an open free-for-all tokenized stocks today.

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[SPEAKER_00]: They can lack certain shareholder protections depending on the structure liquidity on second markets.

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[SPEAKER_00]: is still thin, and major industry groups have warned that broad-exemptive relief could let tokenize venues, side-step core, security rules around best execution.

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[SPEAKER_00]: But here's the bottom line.

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[SPEAKER_00]: If you own broker stocks, you need to understand how much of their earnings come from activities tokenization could displace, and if you're watching this space develop, the gap between framework announced and market structure locked in will be measured in quarters, not years.

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[SPEAKER_00]: Traditional brokerages do have one advantage.

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[SPEAKER_00]: They still hold customer relationships.

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[SPEAKER_00]: But if they wait for perfect regulatory clarity before building, they'll find the rails already laid by others.

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[SPEAKER_00]: 2026 is when tokenization stops being theoretical, and the power map of equity markets is about to get redrawn.

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[SPEAKER_00]: On the next invest talk, we'll look into this story, the S&P 500 Identity Crisis, historic shift, free shape America's index.

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[SPEAKER_00]: That's Monday.

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[SPEAKER_00]: I'm Luke Guerrero and we're ready to take your calls at 888-99 chart.

22:42.518 --> 22:46.204
[SPEAKER_01]: There are a few things that make KPP financial special.

22:46.785 --> 22:49.029
[SPEAKER_01]: One of them is parallel investing.

22:49.069 --> 22:52.776
[SPEAKER_01]: This means they invest right alongside their clients.

22:53.237 --> 22:54.198
[SPEAKER_01]: Here's how it works.

22:54.739 --> 23:07.902
[SPEAKER_01]: When KPP financial makes a trade for their clients, just in client makes the same trade for himself and KPP, on the same day at the same price and same percentage.

23:07.882 --> 23:11.126
[SPEAKER_01]: No front running, no special treatment.

23:11.186 --> 23:15.891
[SPEAKER_01]: Learn more about Parallel Investing at Investalk.com.

23:18.554 --> 23:20.477
[SPEAKER_00]: It's good to see me in San Francisco.

23:20.637 --> 23:22.259
[SPEAKER_00]: Thank you for waiting.

23:22.279 --> 23:23.921
[SPEAKER_00]: Looks like you got a question about Oracle.

23:24.121 --> 23:25.182
[SPEAKER_00]: You don't want it to be looking to buy it.

23:26.323 --> 23:27.345
[SPEAKER_04]: I'm actually looking to buy it.

23:27.785 --> 23:30.328
[SPEAKER_04]: I would like to get your point of view on a good entry point.

23:30.528 --> 23:32.091
[SPEAKER_00]: Okay, let's take a look at Oracle.

23:32.732 --> 23:43.491
[SPEAKER_00]: It is a nearly 50-year-old enterprise technology company and it's in the midst of, I would say one of the most dramatic business transformations in its history.

23:43.511 --> 23:53.869
[SPEAKER_00]: It's moving from a legacy on premises database and ERP software vendor into one of the world's fastest growing cloud infrastructure platforms.

23:53.849 --> 23:56.375
[SPEAKER_00]: Now, the company has three revenue streams.

23:56.455 --> 24:00.985
[SPEAKER_00]: It has its cloud services and license supports, it's about 80% of its revenue and it's highly recurring.

24:01.566 --> 24:06.237
[SPEAKER_00]: It has its cloud service and on-premise license and then it's hardware and services.

24:06.818 --> 24:12.972
[SPEAKER_00]: But the real story is about its cloud infrastructure which is emerged as a credible fourth-hyper scalar.

24:12.952 --> 24:21.784
[SPEAKER_00]: And, you know, it is the preferred destination for AI training and inference workloads, due to its GPU cluster density.

24:22.164 --> 24:31.977
[SPEAKER_00]: Now, when they first announced the amount of money they were spending, I would say the market was actually a little bit excited about that, but since then, there's been a bit of a drawdown, right?

24:32.678 --> 24:33.559
[SPEAKER_00]: The

24:33.826 --> 24:45.024
[SPEAKER_00]: I would say, you know, the RPO is the most extraordinary number in enterprise tech right now and the market is struggling to price it, Oracle's remaining performance obligations.

24:45.525 --> 24:52.736
[SPEAKER_00]: It's contracted revenue not yet recognized search from $96 billion to $523 billion.

24:52.777 --> 24:55.581
[SPEAKER_00]: That is a 433% increase.

24:55.561 --> 24:56.322
[SPEAKER_00]: in 12 months.

24:56.362 --> 25:11.144
[SPEAKER_00]: So for a company doing 67 billion in annual revenue, that huge backlog means maybe 70 years of revenues already booked at current run rates, but it's growing by tens of billions each quarter and the question is not whether Oracle has demand.

25:11.224 --> 25:17.633
[SPEAKER_00]: It's how fast can it actually convert that contracted backlog into recognized revenue.

25:18.034 --> 25:22.480
[SPEAKER_00]: Looking at earnings,

25:22.460 --> 25:27.306
[SPEAKER_00]: The core problem is that there's still a supply demand of mismatch.

25:27.426 --> 25:33.414
[SPEAKER_00]: Oracle is signing these contracts faster than it can build the data centers to fulfill them.

25:33.454 --> 25:48.973
[SPEAKER_00]: So you have this multi-year, multi-cloud database strategy that's genuinely disruptive and maybe a bit under appreciated, but the balance sheet tension is real operating cashflow over the training 12 months was 22.3 billion, but CapEx was 36.

25:48.953 --> 25:56.542
[SPEAKER_00]: making free cash flow, materially negative, oracles taken on significant debt to fund its data center buildup program.

25:56.662 --> 26:02.109
[SPEAKER_00]: Interest expense is rising, and so that's a bit of the core bear case in what we have seen.

26:03.010 --> 26:08.436
[SPEAKER_00]: It is probably one of the most unusual setups in terms of the large cap tech companies, right?

26:08.476 --> 26:12.261
[SPEAKER_00]: Because again, they have 523 billion in backlog revenue,

26:12.241 --> 26:19.263
[SPEAKER_00]: But I think the market is signaling what you should be seeing in a lot of these hyper scalars and maybe that's what the start of what we have been seeing recently.

26:20.005 --> 26:25.221
[SPEAKER_00]: In that, it has given a lot of leeway to spend a lot of money, but we're moving towards the

26:25.319 --> 26:31.526
[SPEAKER_00]: I would say put up or shut up area of the hyperscaler life cycle, which is we want to see some monetization here.

26:32.107 --> 26:35.010
[SPEAKER_00]: And so it's down 30% over the past three months.

26:35.711 --> 26:38.615
[SPEAKER_00]: It really hasn't found any level of support.

26:39.255 --> 26:41.178
[SPEAKER_00]: So for now, I would still keep it on my watch list.

26:41.238 --> 26:44.522
[SPEAKER_00]: We did use to hold it, but we sell it off a long time ago.

26:45.062 --> 26:47.385
[SPEAKER_00]: I wouldn't be comfortable moving back into this thing just yet.

26:47.905 --> 26:48.606
[SPEAKER_00]: That is Oracle.

26:49.127 --> 26:49.668
[SPEAKER_00]: Thanks for the call.

26:50.008 --> 26:55.174
[SPEAKER_05]: Let's drop in another listener question now.

26:55.711 --> 27:05.286
[SPEAKER_05]: There's a possibility of us be going into recession within the next 18 months and it's an understand recession, such as happen, all of a sudden, it's time like a gradual slide into them.

27:05.867 --> 27:08.831
[SPEAKER_05]: I was calling regarding retirement allocations.

27:08.971 --> 27:21.010
[SPEAKER_05]: I have a third savings plan and I was calling just to see what recommendation I could get regarding how to allocate money within that

27:21.445 --> 27:26.830
[SPEAKER_05]: fun, the small cap fun, the S&P fun, the bond fun and the cash fun.

27:27.671 --> 27:28.712
[SPEAKER_05]: I appreciate it any insight.

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[SPEAKER_05]: Thanks.

27:29.453 --> 27:29.953
[SPEAKER_05]: I love the show.

27:30.934 --> 27:32.636
[SPEAKER_00]: So that's a very complicated question.

27:33.577 --> 27:46.610
[SPEAKER_00]: The reason why it's a complicated question is I don't know enough about you to give a general or rather to have a general sense of the important things to know before making these decisions.

27:47.671 --> 27:48.752
[SPEAKER_00]: How?

27:49.070 --> 27:51.956
[SPEAKER_00]: much assets you have relative to what you're going to need.

27:53.379 --> 27:55.183
[SPEAKER_00]: And I don't mean dollar value.

27:55.223 --> 27:58.630
[SPEAKER_00]: I mean taking into consideration the traditional growth of those asset classes.

27:58.691 --> 28:01.056
[SPEAKER_00]: How far away are you from retirement?

28:01.116 --> 28:02.298
[SPEAKER_00]: How old are you?

28:03.120 --> 28:05.405
[SPEAKER_00]: All of these things change the math.

28:06.066 --> 28:08.732
[SPEAKER_00]: If you're in your 30s, you have a long time horizon.

28:08.712 --> 28:14.077
[SPEAKER_00]: With 30 plus years until retirement, you can afford to write out a recession even if one hits in the next 18 months.

28:14.157 --> 28:18.962
[SPEAKER_00]: History shows markets recover well before what your retirement date would be.

28:19.062 --> 28:24.668
[SPEAKER_00]: So maybe you want to have 40 to 50% of the S&P 20 to 25% in small caps.

28:24.688 --> 28:27.050
[SPEAKER_00]: 2015 to 20% in international.

28:27.130 --> 28:31.554
[SPEAKER_00]: Very low bond exposure for that cash treasureied fund and that bond fund.

28:31.574 --> 28:35.158
[SPEAKER_00]: If you're in your 60s though, the calculus changes significantly.

28:35.138 --> 28:44.077
[SPEAKER_00]: The recession with an 18 months could hit right as you're starting to draw down, which is what we call sequence of returns risk.

28:44.097 --> 28:49.890
[SPEAKER_00]: Therefore, you would want a more defensive posture, maybe 30 to 40% cash, 15 to 20% bonds.

28:50.562 --> 28:55.808
[SPEAKER_00]: 20 to 25% SNPs, way less risky exposure which would be your small caps.

28:56.489 --> 29:02.516
[SPEAKER_00]: And so that's to say, the core of your question about a recession the next 18 months and generally they do happen more orderly.

29:02.716 --> 29:07.362
[SPEAKER_00]: You always remember the ones that are disorderly that happen all at once, but recessions are inevitable.

29:07.742 --> 29:18.535
[SPEAKER_00]: They are the inevitable part of the business cycle, but how much time you have left before you need your retirement is a key component that one must know before you make those investment allocation decisions.

29:19.276 --> 29:20.097
[SPEAKER_00]: Thanks for the call.

29:20.532 --> 29:21.053
[SPEAKER_00]: That's Friday.

29:22.094 --> 29:26.901
[SPEAKER_00]: And as you all know, we generally make time to fit in a quick rundown of key benchmark numbers.

29:27.842 --> 29:32.348
[SPEAKER_00]: The two-year treasury yields at 3.383% today, last week, that was 3.482.

29:32.368 --> 29:35.753
[SPEAKER_00]: 217 weeks back, it was 0.64.

29:35.773 --> 29:41.881
[SPEAKER_00]: 10-year, under 4% today, at 3.949, last week it was 4.088.

29:41.901 --> 29:46.287
[SPEAKER_00]: 214 weeks ago was 1.762.

29:46.975 --> 29:51.921
[SPEAKER_00]: Gold 5278 per ounce that is $277 higher than it was last week.

29:52.602 --> 29:56.046
[SPEAKER_00]: 30 weeks ago is 3348 and 209 weeks back was 1806.

29:56.326 --> 30:02.994
[SPEAKER_00]: Silver 9372 per ounce that is $10.76 higher than one week ago.

30:03.014 --> 30:07.099
[SPEAKER_00]: 107 weeks ago is 2280 and looking back 200 one weeks.

30:07.159 --> 30:07.620
[SPEAKER_00]: It was 2394.

30:08.100 --> 30:14.788
[SPEAKER_00]: Oil 6702 per barrel that is 71 cents higher than last week.

30:15.005 --> 30:23.659
[SPEAKER_00]: 75 weeks ago is 67.79, 170, 117 weeks back it was 74.30 and 216 weeks ago it was 66.62.

30:25.141 --> 30:30.530
[SPEAKER_00]: National average for a gallon of regular gasoline is 298 per gallon, five cents higher than last week.

30:31.692 --> 30:41.367
[SPEAKER_00]: 143 weeks ago it was 3.56, 191 weeks back it was 4.25 and four years ago a gallon of regular gas cost 357.

30:42.308 --> 30:48.624
[SPEAKER_00]: California was averaging 464 per gallon, five cents higher than last week, 120 weeks ago.

30:48.704 --> 30:51.210
[SPEAKER_00]: It was 532 and 196 weeks back.

30:51.250 --> 30:52.453
[SPEAKER_00]: It was 587.

30:52.923 --> 31:01.250
[SPEAKER_00]: For comparison, in Oklahoma, gas is averaging 246 per gallon today, that is $2.18 less than gas in California.

31:01.791 --> 31:08.537
[SPEAKER_00]: So unless you've been living under a rock, you've seen the AI jobs panic hitting a bit of a fever pitch this week.

31:08.617 --> 31:19.487
[SPEAKER_00]: Yesterday, blockjet is at Jack Dorsey's company behind Square and Cash App announced its cutting 4,000 employees, nearly 40% of its workforce, and Dorsey didn't sugarcode.

31:19.567 --> 31:22.069
[SPEAKER_00]: He said intelligent tools have changed.

31:22.201 --> 31:28.813
[SPEAKER_00]: And they've changed what it means to build and run a company and he believes most companies will reach the same conclusion within the next year.

31:29.514 --> 31:32.860
[SPEAKER_00]: Stock jumped over 20% on the news, but that's again.

31:32.881 --> 31:36.447
[SPEAKER_00]: The market rewarding cutting nearly half of a company's workforce.

31:37.051 --> 31:38.714
[SPEAKER_00]: Now, that was a specific case.

31:39.555 --> 31:48.108
[SPEAKER_00]: He actually tweeted that, well, one of the reasons he laid people off is because they overheard, which they did, they are going back to pre-pandemic levels.

31:48.909 --> 32:02.130
[SPEAKER_00]: And so, you're going to see a mixture of companies that are legitimately firing people and laying people off because they're more efficient, as well as companies that are just using it as an excuse to lay people off, like I think, for the most part block was.

32:03.106 --> 32:15.260
[SPEAKER_00]: Just this past Monday, markets sold off after a viral report from satrini research painted a fictional but chilling scenario for 2028, where AI driven unemployment tops 10% and the S&P takes.

32:15.921 --> 32:25.992
[SPEAKER_00]: It described a single GPU cluster in North Dakota generating the output of 10,000 white color workers in Manhattan, which sounds like some pretty scary stuff.

32:26.393 --> 32:32.279
[SPEAKER_00]: So the question every investor is asking, is AI actually about to destroy the job market and trigger a recession?

32:32.659 --> 32:43.610
[SPEAKER_00]: Well, it's looking at the evidence, because the data tells a more nuanced story than the hell headlines and the, what I call the fan fiction-doom stories like that research paper.

32:44.732 --> 32:51.118
[SPEAKER_00]: Software developers, the group everyone assumed is most vulnerable, are actually up 5% in employment year over year, as of January.

32:51.841 --> 32:55.948
[SPEAKER_00]: That's according to the Labor Department data analyzed by Boston University.

32:56.849 --> 32:59.153
[SPEAKER_00]: That's consistent with the trend over the past two decades.

32:59.754 --> 33:08.107
[SPEAKER_00]: Neither the developer number nor programmer numbers shifted meaningfully after Chad and GPT launched in late 2022, and compensation keeps rising.

33:08.127 --> 33:18.203
[SPEAKER_00]: In 2024, the median young computer science is graduate or in 63% more than the typical young grad, up 47% up from 47% in 2009.

33:19.465 --> 33:25.254
[SPEAKER_00]: Business spending on software, jumped to 11% in Q4 last year, the fastest pace in nearly three years.

33:26.135 --> 33:28.218
[SPEAKER_00]: That tells us demand is elastic.

33:28.238 --> 33:32.244
[SPEAKER_00]: As AI makes software cheaper per unit, companies are buying more of it, not less.

33:33.226 --> 33:36.731
[SPEAKER_00]: This is the same pattern we've seen throughout economic history.

33:37.272 --> 33:38.834
[SPEAKER_00]: ATMs didn't kill bank teller jobs.

33:39.275 --> 33:42.840
[SPEAKER_00]: More ATMs meant banks could open more branches cheaply.

33:43.124 --> 33:50.172
[SPEAKER_00]: Spreadsheet software wiped out bookkeepers, but the number of accountants and financial analysts who were empowered by those tools grew even faster.

33:51.233 --> 33:54.477
[SPEAKER_00]: Now, here's where I do think we need to be honest about the risks.

33:55.318 --> 34:11.697
[SPEAKER_00]: A block is different from past AI law of announcements, as I said, Dorsey explicitly said the business is strong, profits are growing, profitability is improving, and he's cutting anyway because AI tools make the workers unnecessary, although again, probably because he overhired in the first place.

34:12.638 --> 34:17.584
[SPEAKER_00]: That's a qualitatively different signal, than trimming fat after pandemic over hiring.

34:19.126 --> 34:21.789
[SPEAKER_00]: But it doesn't mean it's entirely true.

34:23.251 --> 34:27.096
[SPEAKER_00]: The real risk for investors isn't the apocalypse scenario.

34:27.116 --> 34:27.636
[SPEAKER_00]: It's two things.

34:29.198 --> 34:33.764
[SPEAKER_00]: One, a recession starts for some other reason and employees accelerate a hydrogen layoffs.

34:34.725 --> 34:36.587
[SPEAKER_00]: They were already contemplating these things.

34:37.833 --> 34:39.154
[SPEAKER_00]: And that may deepen the downturn.

34:39.875 --> 34:46.281
[SPEAKER_00]: And two, and this is the one with actual precedent, tech investment gets ahead of demand and triggers a bust.

34:47.162 --> 34:54.209
[SPEAKER_00]: After the dot com bubble, tech workers lost jobs not because the interest made them obsolete or rather the internet made them obsolete.

34:55.390 --> 35:04.178
[SPEAKER_00]: But because the bubble popped, right now, data centers spending far exceeds the revenue AI's actually generating.

35:05.221 --> 35:07.163
[SPEAKER_00]: That's the scenario with a historical analog.

35:07.224 --> 35:08.305
[SPEAKER_00]: And it's the one worth watching.

35:09.466 --> 35:10.928
[SPEAKER_00]: If you're a portfolio, don't panic.

35:11.169 --> 35:14.032
[SPEAKER_00]: Don't sell your tech positions because the AI doom narrative.

35:14.533 --> 35:22.303
[SPEAKER_00]: But do pay attention to which companies are generating actual cash flow from AI versus which ones are just burning capex on hope?

35:24.325 --> 35:25.447
[SPEAKER_00]: This is Invest talk.

35:25.467 --> 35:27.709
[SPEAKER_00]: Let's keep things going and play another question now.

35:28.330 --> 35:33.777
[SPEAKER_06]: Hey guys, I appreciate you showing us if you're there in Charlotte.

35:34.162 --> 35:49.925
[SPEAKER_06]: on-risk market, which is F-F-M, wanted to know what you all thought was a good entry point, a little bit down right now, and didn't know if you thought like now's a good time, get in or you see it, if and now a little bit before I get into it.

35:50.426 --> 35:51.007
[SPEAKER_06]: Get a position.

35:51.688 --> 35:52.569
[SPEAKER_06]: I appreciate all you do.

35:52.749 --> 35:53.270
[SPEAKER_06]: Thanks so much.

35:53.911 --> 36:03.325
[SPEAKER_00]: Sprouts Farmers Market is a name we recently held for clients before selling off in the middle of

36:03.490 --> 36:08.722
[SPEAKER_00]: What they do is they are especially natural and organic grocery retailer.

36:08.742 --> 36:13.633
[SPEAKER_00]: They are effectively the anti-hole foods, right?

36:13.653 --> 36:14.595
[SPEAKER_00]: They have smaller stores.

36:14.676 --> 36:16.700
[SPEAKER_00]: They have open air farmers markets layouts.

36:17.262 --> 36:18.965
[SPEAKER_00]: They have a bit more affordable positioning.

36:19.587 --> 36:22.714
[SPEAKER_00]: But they do cut from the same health and wellness cloth.

36:22.998 --> 36:25.361
[SPEAKER_00]: Now, the company targets a very specific consumer.

36:25.641 --> 36:37.314
[SPEAKER_00]: The attribute forward shopper who's seeking organic, plant-based, gluten-free, keto, paleo, non-GMO, any other acronyms you want to throw in there, functional food products.

36:37.374 --> 36:47.065
[SPEAKER_00]: They have about 470 stores across 25 US states, and they saw a significant growth.

36:48.293 --> 36:54.720
[SPEAKER_00]: For a retail grocery store market, 6.4% growth in an annualized basis, I mean, that's pretty solid.

36:54.740 --> 36:56.202
[SPEAKER_00]: And margins are also solid as well.

36:56.262 --> 36:58.945
[SPEAKER_00]: You typically see three to four percent margin in this space.

36:59.366 --> 37:01.708
[SPEAKER_00]: They're sitting closer to six as of 2025.

37:01.848 --> 37:04.652
[SPEAKER_00]: And they were training at some high valuations.

37:04.672 --> 37:05.973
[SPEAKER_00]: That's why we got rid of them.

37:05.993 --> 37:08.736
[SPEAKER_00]: They were training closer to 40 times price to forward looking earnings.

37:08.796 --> 37:18.267
[SPEAKER_00]: Now they're back down to 13.4, which is more in line with what you see from Crowger, 12.7, natural Grocerys, 12.6, Albertson, 7.8.

37:18.247 --> 37:23.987
[SPEAKER_00]: And so you're come to a spot where, okay, now it's trading at a more realistic valuation.

37:24.288 --> 37:29.456
[SPEAKER_00]: Now, you know, the question is, what really drove this stock from $181 to $70.

37:29.656 --> 37:32.901
[SPEAKER_00]: So the amount of 52 weeks, it's cut nearly in half.

37:32.941 --> 37:35.945
[SPEAKER_00]: It's treating it's trading at $73.87 now.

37:36.446 --> 37:46.120
[SPEAKER_00]: The core reason, after running $7.3% comps for the full year, 2025, they guided Q1, 2026 comps at negative 3 to negative 1.

37:46.601 --> 37:50.667
[SPEAKER_00]: That is a double digit swing in Comptrjectory in a single quarter.

37:51.862 --> 37:59.873
[SPEAKER_00]: And so, you know, running on this incredible com momentum has become something that is not possible anymore.

37:59.893 --> 38:07.204
[SPEAKER_00]: And as momentum fades, investors that were paying 30, 40 times for looking earnings, they're not going to go back.

38:07.224 --> 38:08.886
[SPEAKER_00]: And so this is a story of slowing growth.

38:09.507 --> 38:20.603
[SPEAKER_00]: And any time you have this slowing growth, understandably, investors are repricing things.

38:20.971 --> 38:41.822
[SPEAKER_00]: And so, for me, this is another situation where you're seeing an orderly drawdown after a period of maybe a bit more sharp drawdown following earnings guidance, as a reason why we sold out of it, it's become a bit more reasonable and it's pricing, but I don't really expect that ridiculous growth we saw in price from 2023 into 2025.

38:42.122 --> 38:46.469
[SPEAKER_00]: So for now, probably going to keep it on my watch list that is Sprout's Farmer's Market.

38:46.769 --> 38:47.350
[SPEAKER_00]: Thanks for the call.

38:48.460 --> 38:56.359
[SPEAKER_00]: Head it into our final break of the weekend, but our work continues, because we still got up five, six minutes to show left.

38:56.961 --> 38:58.885
[SPEAKER_00]: If you got to get your question in, you gotta do it now.

38:59.086 --> 39:01.592
[SPEAKER_00]: Pick up the phone, dial 888-99 chart.

39:09.723 --> 39:15.651
[SPEAKER_01]: In the early days, in Vestock was Jerry Klein and Steve Peasley.

39:16.111 --> 39:21.598
[SPEAKER_01]: Now the torch has been passed and a new generation of hosts is on the job.

39:22.019 --> 39:24.722
[SPEAKER_01]: Justin Klein and Luke Guerrero.

39:25.203 --> 39:31.651
[SPEAKER_01]: So when you've got finance and investment questions, don't forget to call in Vestock.

39:32.112 --> 39:34.115
[SPEAKER_01]: 888-99 chart.

39:34.675 --> 39:37.519
[SPEAKER_04]: Hey, I'm calling from Los Angeles, California.

39:37.938 --> 39:45.789
[SPEAKER_04]: And what I want to inquire about is company called Sunrun, ticker symbol, are you in?

39:46.631 --> 39:52.479
[SPEAKER_04]: It took a beating today, I'm guessing, because well, not guessing, but it's because of their forecast.

39:53.040 --> 40:02.754
[SPEAKER_04]: But what do you think in terms of long term, they've been making money, but I'm not sure how does the market feel about it, what do you think about it?

40:03.195 --> 40:04.677
[SPEAKER_04]: I'll be listening in the podcast.

40:04.937 --> 40:07.000
[SPEAKER_04]: Thank you for all your information, good day.

40:08.549 --> 40:21.215
[SPEAKER_00]: Sun-Ren Ink, ticker R-U-N is a 5.3, or sorry, 5.7 billion dollar market cap company that year-to-date is down 27.99% today.

40:21.536 --> 40:25.444
[SPEAKER_00]: It's down 35.11% on the back of earnings.

40:26.403 --> 40:27.444
[SPEAKER_00]: So that's a bit of a rough time.

40:27.925 --> 40:28.425
[SPEAKER_00]: What do they do?

40:28.485 --> 40:32.951
[SPEAKER_00]: Well, it is America's largest residential solar and energy storage company.

40:33.451 --> 40:38.718
[SPEAKER_00]: They operate on a subscription-based model, rather than selling panels outright.

40:39.398 --> 40:50.892
[SPEAKER_00]: They install solar plus battery systems on homeowners rooftops, then sell the electricity generated under long-term customer agreements, usually 20 to 25 years, or leases the equipment.

40:51.715 --> 40:55.383
[SPEAKER_00]: The company manages over a 1.1 million customers.

40:55.683 --> 41:06.265
[SPEAKER_00]: Nearly a quarter million of them have battery storage and is increasingly operating those batteries as a networked virtual power plants or what they called distributed power plants.

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[SPEAKER_00]: Now Q4, I had a bit of a beat, but that was partly a financing structure artifact.

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[SPEAKER_00]: The 124% revenue search and massive EPS beat are really the result of Sunrun accelerating into asset sales structures where it builds those storage plus solar systems.

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[SPEAKER_00]: So cash generation is the metric that matters.

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[SPEAKER_00]: For years, they were, years they were incinerating cash,

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[SPEAKER_00]: They had a perpetual almost their narrative, 2020-25 cash generation.

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[SPEAKER_00]: It was about $377 million, that was the middle of its range.

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[SPEAKER_00]: But the issue here is more associated with this company's very high leverage.

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[SPEAKER_00]: They've about $12 billion in debt on a $5.7 billion dollar market cap company.

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[SPEAKER_00]: And they're joint ventures that they entered into, that they contracted into, not too great.

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[SPEAKER_00]: being a positive event and cash generation being good.

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[SPEAKER_00]: The balance sheet is just very, very worrisome here and guidance was not great.

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[SPEAKER_00]: So for me, looking ahead, I'm not sure if I want to enter into this name, which sounds very odd when you have a 24.1% surprise on revenue and you have a 23% surprise.

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[SPEAKER_00]: Or sorry, 23% surprise on revenue and a 24.1% surprise on bottom line growth.

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[SPEAKER_00]: Markets telling you something here.

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[SPEAKER_00]: I certainly wouldn't catch a falling knife down 35% today.

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[SPEAKER_00]: A little bit of scary number.

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[SPEAKER_00]: Yes, they finally moved into a bit of profitability, but heading forward is that sustainable.

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[SPEAKER_00]: And by the way, they're still training at 55 times priced for looking earnings.

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[SPEAKER_00]: So for now, probably gonna keep it on my watchlist.

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[SPEAKER_00]: That is, sun run, ticker R, U, N.

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[SPEAKER_00]: Well guys, we made it through yet another week before we head off, I wanted to plug one more time that soon we will be starting the invest talk market madness.

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[SPEAKER_00]: It is our third annual year of doing what is I think a pretty fun competition we do every year for those of you who have not done it yet.

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[SPEAKER_00]: Effectively, it is like March Madness, except we are having stocks compete head to head to see who wins their daily price return matchups.

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[SPEAKER_00]: That sounds interesting, head over to investalk.com where you can submit your bracket and potentially win the thousand dollar surprise.

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[SPEAKER_00]: And oh, by the way, if you're a subscriber to our YouTube, we will bump that prize up to $1,500.

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[SPEAKER_00]: That about does it, I'm Lou Guerrero, and thank you for tuning in to another episode of Invest Talk.

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[SPEAKER_00]: We encourage you to tell your friends and family members about our free podcast download which you all know you can get an iTunes and get it spotify and while you're over there, on iTunes, please be sure to leave us a rate and review.

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[SPEAKER_00]: One other thing I want to highlight, for the weekend is our process of parallel investing.

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[SPEAKER_00]: When we make a trade for our clients, at the same time we trade for ourselves, on the same day at the same price, the same percentage, no front running, no special treatment, we invest right along side our clients, we share the same risks and potential for success.

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[SPEAKER_00]: Not a lot of RAs, not a lot of companies do that.

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[SPEAKER_00]: I think you should head over to investhok.com and learn more about parallel investing.

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[SPEAKER_00]: Independent Thinking shared success.

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[SPEAKER_02]: Enjoy your weekend.

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