[SPEAKER_00]: On radio, on YouTube, streaming live on investtalk.com and for our podcast subscribers, this is Invest Talk.

[SPEAKER_00]: Independent Thinking, shared success.

[SPEAKER_00]: Invest talk is made possible by KPP Financial, a registered investment advisor firm, serving clients throughout the United States.

[SPEAKER_00]: Justin Klein and Luke Guerrero stand ready to take your finance and investment questions and share their unbiased answers.

[SPEAKER_02]: Good afternoon fellow investors and welcome back to invest talk.

[SPEAKER_02]: This is our Tuesday April 28th, 2026 edition and it is a special Tuesday.

[SPEAKER_02]: It's not only Taco Tuesday, which I did have tacos for lunch, but it's also a day where we, you get both of us, Luke is back.

[SPEAKER_02]: Welcome back, Luke.

[SPEAKER_02]: Thanks.

[SPEAKER_02]: Happy Tuesday.

[SPEAKER_02]: Happy Tuesday, it's going to be an exciting Tuesday.

[SPEAKER_02]: A lot to unpack as we head into a very, very busy earnings week, mainly hitting tomorrow after the bell, but lots of discuss today and always in today's market.

[SPEAKER_02]: So we're going to unpack all of it.

[SPEAKER_02]: We're going to answer your finance and investment questions.

[SPEAKER_02]: We're going to give you data and perspective developed with over 25 years of investment experience.

[SPEAKER_02]: And in the end, we hope to make you a better investor, better equipped to make smart decisions with your money.

[SPEAKER_02]: So that's where this hour will be about.

[SPEAKER_02]: But before we dig into it, I want to remind you that Luke and I are hosting our next wealth webinar coming up a week from tomorrow.

[SPEAKER_02]: May 6th, 1 p.m. Pacific Time.

[SPEAKER_02]: It's titled,

[SPEAKER_02]: how to protect your portfolio from inflation where to allocate what to overweight and how to define value.

[SPEAKER_02]: And you can register now for free on imbesttalk.com.

[SPEAKER_02]: Remember, it's next Wednesday, week for the Mario 1PM Pacific time.

[SPEAKER_02]: Now just a bit.

[SPEAKER_02]: We'll talk about today's market performance and run down the show topics, but as usual, we'll tackle a first-color question now.

[SPEAKER_03]: If Luke and Justin really appreciate all the stuff you guys do on the share for us, add a question about the company William Sonoma, stock symbol W and M, or like to know your expert analysis on William Sonoma.

[SPEAKER_03]: Thank you so much.

[SPEAKER_02]: By looking at William Sonoma, WSM is the symbol.

[SPEAKER_02]: It's a retailer niche retailer that, frankly, we used to own for clients.

[SPEAKER_02]: We bought it coming out of the doldrums in 2022, 2023.

[SPEAKER_02]: Ran it up.

[SPEAKER_02]: I think we sold it maybe the 150, 160 range, something like that.

[SPEAKER_02]: I forget exactly the number.

[SPEAKER_02]: We did really nice on it.

[SPEAKER_02]: But it's been kind of shopping.

[SPEAKER_02]: We sold it.

[SPEAKER_02]: I would say, Luke, what about your go?

[SPEAKER_06]: Yeah, I think it was just about a year ago.

[SPEAKER_06]: We did hold on to it for quite some time.

[SPEAKER_06]: We actually did consider adding it back into our strategies.

[SPEAKER_06]: I believe a couple months ago as well.

[SPEAKER_02]: Yeah, we've looked at it.

[SPEAKER_02]: We still like it as a company because it's very profitable.

[SPEAKER_02]: It turned out to be 51% and pretty much no debt on its balance sheet.

[SPEAKER_02]: No real dividend, is it paid in?

[SPEAKER_02]: Oh, that's 1.6% looking at a different slide over here.

[SPEAKER_02]: So, pay us a little bit of a dividend, like we said, great business.

[SPEAKER_02]: It's been chopping sideways though, with the past year relative strength is 43, so kind of a middleing performance over the last year.

[SPEAKER_02]: And maybe talk a little bit Luke, maybe why we didn't add it?

[SPEAKER_06]: Mostly a lack of growth story.

[SPEAKER_06]: You did have a recent revenue beat, operating margins around 20% earnings per share beat.

[SPEAKER_06]: By about 14 cents came in at 304 in the most recent quarter, but comp sales growth projected for fiscal year 2026, was only like two to six percent, and inventory was up about 10% year of year.

[SPEAKER_06]: So we've seen over the past 52 weeks is

[SPEAKER_06]: A bit of ranging, certainly over the past, not 52 weeks, but over the past six months.

[SPEAKER_06]: A lot of that having to do with, well, originally in announcement of higher tariffs, then the White House delaying the higher tariffs to January 1st of 2027 due to ongoing trade talks.

[SPEAKER_06]: And so, you had near-term relief after some choppy trading, but it's really been a range bound for quite some time.

[SPEAKER_02]: Yeah, I peaked in January of last year, and what was this high, right around 220, now we're at 187.

[SPEAKER_02]: Look, you said, just kind of chopping sideways.

[SPEAKER_02]: We've got a little bit ahead of itself from evaluation standpoints and starting to correct over time.

[SPEAKER_02]: At some point, this will certainly be a goodbye.

[SPEAKER_02]: One of the big issues, really, is that this is, it's furniture store, they own pottery barn,

[SPEAKER_02]: And that is, it's typically a good business, but usually the spark to buy new furniture is buying a home.

[SPEAKER_02]: And home transactions remain.

[SPEAKER_02]: near multi year lows.

[SPEAKER_02]: So until we get a catalyst that can improve the amount of home transactions that are being made, it's going to be difficult for them to manufacture a lot of real revenue growth here.

[SPEAKER_02]: So I think long term, I think it's a solid name to own.

[SPEAKER_02]: I just don't see a great catalyst in the short term to pick it up and that's why it's kind of been arranged down for a while.

[SPEAKER_02]: thanks for the call.

[SPEAKER_02]: Now of the next 45 minutes we have a lot to unpack our main focus point is about America's new oil crown.

[SPEAKER_02]: How the Iran war has made the U.S. the world's swing producers.

[SPEAKER_02]: So we'll look at the data, how it's impacting domestic energy stocks, oil prices, our long-term energy independence, and what these geopolitical shifts mean.

[SPEAKER_02]: We also other topics

[SPEAKER_02]: One is in regards to American's losing confidence in their ability to retire.

[SPEAKER_02]: And it all has to do with inflation.

[SPEAKER_02]: So we'll look at that story and why what lessons you can take from it and why you need to kind of shift your mindset with some things for a while from this deflationary bust.

[SPEAKER_02]: Like O8, who will be scared of that to a more inflationary mindset and people are starting to kind of catch on and that's why they're losing confidence in that way.

[SPEAKER_02]: So we'll talk about that.

[SPEAKER_02]: We also want to look at what's interesting is that valuations have actually dropped a little bit in markets, even though we're at a new height.

[SPEAKER_02]: Those earnings are going up, but are those earnings expectations durable.

[SPEAKER_02]: We'll dig into that story, and then if we have time, we'll dig into whether dividend stocks, or we should be looking for income, as total return, when it comes to dividend stocks, or price appreciation.

[SPEAKER_02]: So we'll look at that as well as voice bank calls on errors, test systems, AEHR, and then Franco, Nevada, FNV, and of course, comments.

[SPEAKER_02]: that we received via the Best Talk YouTube channel as well, but most importantly, we'll always be your live calls.

[SPEAKER_02]: So don't hesitate to pick up the phone, but we're going to head to a break.

[SPEAKER_02]: Please don't be called any time and leave your question on the Best Talk Boy's Bank.

[SPEAKER_02]: If you're listening via AM1220 or the live stream, you can call right now at 88899 chart.

[SPEAKER_02]: Up next, we'll comment on today's market activity.

[SPEAKER_02]: It's time again for one of our most popular special events.

[SPEAKER_02]: A new, invest talk, wealth webinar.

[SPEAKER_06]: Wednesday, May 6th at 1 p.m. Pacific.

[SPEAKER_06]: The webinar will focus on a topic.

[SPEAKER_06]: A lot of investors you're dealing with right now.

[SPEAKER_02]: The new, wealth webinar is titled How to Protect Your Portfolio from Inflation.

[SPEAKER_02]: We're going to allocate what's overweight and how to find value.

[SPEAKER_06]: We're going to talk about where investors may want to look when cash is losing value.

[SPEAKER_06]: What parts of the market have historically held up better during inflationary periods?

[SPEAKER_06]: And how to think about finding real value when a lot of the market still feels expensive?

[SPEAKER_02]: And we'll also spend some time on how inflation can distort valuations.

[SPEAKER_02]: because that's something investors really need to understand in this kind of environment.

[SPEAKER_02]: And as usual, we'll close out the webinar with a live Q&A session.

[SPEAKER_02]: It's all happening online Wednesday, May 6th at 1pm Pacific Time.

[SPEAKER_02]: Register now at investtalk.com.

[SPEAKER_01]: In the early days, in Vestock was Jerry Klein and Steve Peasley.

[SPEAKER_01]: Now the torch has been passed, and a new generation of hosts is on the job.

[SPEAKER_01]: Justin Klein and Luke Guerrero.

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

[SPEAKER_01]: 888-99, chart.

[SPEAKER_02]: Luke, let's go check in on the market for today.

[SPEAKER_02]: Overall, it was a down day driven by news around OpenAI, the CFO, Sarah Frire, said the company may not be able to pay for competing contracts if their revenue growth does not accelerate from where they're at.

[SPEAKER_02]: They missed their own targets, have new users, revenue, and raise concerns that they'll be able to continue to spend

[SPEAKER_02]: as much they are on their data centers which kind of hit the tech industry as a whole and that's what you saw the NASDAQ down was in about 1% on the day, that's some key down about a half a percent.

[SPEAKER_02]: Do you think this is just a headline or is this the first cracks in the air narrative?

[SPEAKER_06]: I don't know if it's the first cracks in the air narrative.

[SPEAKER_06]: I think a lot of the demand going around for products that have supported air infrastructure is certainly real, the cash is real, the contracts are real.

[SPEAKER_06]: But I do think that the market is priced in such a way, especially with all these macro issues, let's say, that are essentially being looked through market is priced in such a way that the expectations better be met.

[SPEAKER_06]: And so any shake in that narrative is understandably going to cause

[SPEAKER_06]: a downward pressure.

[SPEAKER_06]: You do have big tech earnings this week and so there'll be more scrutiny on AI capex and with the Iran war at a bit of a standstill and again the market really looking through that anyway.

[SPEAKER_06]: That's going to be the dominating factor.

[SPEAKER_06]: What comes about from earnings from big tech and what guidance is moving forward about how much money is going to be thrown

[SPEAKER_02]: Yeah, that's a big question.

[SPEAKER_02]: How much is priced in to this market?

[SPEAKER_02]: And if you just get a modest disappointment from the growth expectations, you could easily see a lot of these names pull back considerably.

[SPEAKER_02]: You saw that a bit today.

[SPEAKER_02]: You had names like Sandist on 6% Rod come down for Oracle down for Micron down about four.

[SPEAKER_02]: Applied materials down 6%.

[SPEAKER_02]: So anything kind of linked to the AI infrastructure, it's certainly took it on the chin.

[SPEAKER_02]: Now that is coming off of for most of these names, 52 weeks high, so it's not like their uptrends are violated because of one a little cell-off.

[SPEAKER_02]: But well, I think we'll know a lot more, like you said with the...

[SPEAKER_02]: the earnings that come really in earnest this weekend in tomorrow after the bell tomorrow you have a massive day Amazon alphabet Microsoft and Meta basically all the hyperscalers are reporting on one day after the bell.

[SPEAKER_02]: pretty crazy so you're gonna see some major major volatility most likely tomorrow after an on Thursday on the open and after the bell tomorrow you also get apples results after the bell on Thursday little less tied to the AI story but those other four certainly are

[SPEAKER_02]: are indicative of what's going on with AI.

[SPEAKER_02]: Are they pulling back?

[SPEAKER_02]: Are they accelerating their spending?

[SPEAKER_02]: Are they hedging their bets?

[SPEAKER_02]: We know that Microsoft and open AI just kind of went through a little breakup.

[SPEAKER_02]: Many breakup would you call it?

[SPEAKER_06]: He's caught that.

[SPEAKER_02]: Yeah, mini breakup.

[SPEAKER_02]: So a lot to, a lot for the market that I just after the belt tomorrow will certainly know a lot more.

[SPEAKER_02]: There.

[SPEAKER_02]: Treasuries were a bit weaker.

[SPEAKER_02]: You saw yields up 3 to 4 basis points on the short and dollar index of 0.2 percent.

[SPEAKER_02]: Gold finished down.

[SPEAKER_02]: 1.8% silver off 2.4 Bitcoin futures down 0.7%.

[SPEAKER_02]: WTI though settled up 3.7% just below $100 per barrel, you continue to see strength out of the energy patch.

[SPEAKER_02]: So that was the market today.

[SPEAKER_02]: Once again, I'm not expecting a whole lot of fireworks until after the bell tomorrow.

[SPEAKER_02]: Bill's go and answer a YouTube comment question.

[SPEAKER_02]: Long short extension strategies for tax loss harvesting.

[SPEAKER_02]: Invest in a visor from Schwab mentioned that as a potential way to offset gains in concentrated positions, I haven't heard this, long short extensions, is that being short against the box?

[SPEAKER_06]: Is that what they're talking about?

[SPEAKER_06]: It's a 130, 30 strategy, essentially we go 130 long, 30% short, so the short positions effectively generate losses that can offset gains from selling your concentrated stock position.

[SPEAKER_06]: So you diversify out of that concentrated, holding while still managing some of the

[SPEAKER_02]: God, it giving you more opportunity to tax loss harvest.

[SPEAKER_02]: What do you think about that strategy?

[SPEAKER_06]: It works, right?

[SPEAKER_06]: They tend to be pretty high-feet though, because they're high input.

[SPEAKER_06]: So you know, you could be paying, I don't know, one and a half percent on top of whatever your advisory fee is just to kind of manage that.

[SPEAKER_06]: Obviously, short selling also has costs, so there's fees to borrow, there's margin interest.

[SPEAKER_06]: There is also the risk of unlimited losses on the short.

[SPEAKER_06]: It'll be a bit complex, right?

[SPEAKER_06]: Because it requires active management for your rebalancing.

[SPEAKER_06]: And so if you don't understand what's going on, I think that's one of the first rules of invest talk, understand what you own.

[SPEAKER_06]: It's not a good idea.

[SPEAKER_06]: Right, you're also not really, you're not eliminating your taxes, right?

[SPEAKER_06]: You're just deferring them.

[SPEAKER_06]: Eventually, the tax man always gets paid.

[SPEAKER_06]: And for somebody who doesn't have a large account, maybe in the 500,000 million upward, it doesn't really make

[SPEAKER_06]: sense given the level of complexity and the fees.

[SPEAKER_06]: So, I think for somebody who is at that asset level, can understand the complexity it can be a good tool, but we also do things that KBP like direct indexing, which is a simpler, far lower cost and strategy for managing your risk exposures in your capital gains as well.

[SPEAKER_02]: and certainly gives plenty of opportunity for tax loss harvesting.

[SPEAKER_02]: So I don't think you need to go all the way to this 130-30 complex strategy.

[SPEAKER_02]: Like you said, higher fees when a simpler, uh, direct indexing strategy can do just as well with, uh, a lot, in a lot simpler way.

[SPEAKER_02]: Now with more than 62 million downloads, this is in Vestock, hang on, we are heading for break and I work into news.

[SPEAKER_02]: But give us a call now, at 80-909 chart.

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[SPEAKER_02]: Luke, I don't know if you know this, but there's a bit of a conflict going on in the Middle East.

[SPEAKER_02]: Have you heard about it?

[SPEAKER_06]: I have not, tell me.

[SPEAKER_02]: You, okay, okay.

[SPEAKER_02]: Well, there's somewhat of a ceasefire and a blockade in the streets of our mues.

[SPEAKER_02]: And about 13% of the global oil supplies have been basically closed off to the rest of the world.

[SPEAKER_02]: And gold producers shut in about nine million barrels per day of output, which, as you would imagine, is a bit of a problem for especially countries that are dependent on energy, right?

[SPEAKER_02]: But the United States, we're not one of them.

[SPEAKER_06]: Yeah, I mean, that's, uh, I think some of the people don't understand is yes, opaque produces a lot of oil.

[SPEAKER_06]: Yes, the United States is still the largest producer of oil in the world.

[SPEAKER_06]: It has been since around 2018, 2019, but it doesn't matter how much oil you produce if the way you get it to market is closed.

[SPEAKER_06]: You know, Goldman Sachs is estimated the Persian Gulf crude output is down 14.5 million barrels per day.

[SPEAKER_06]: That's 57% lower.

[SPEAKER_06]: then pre-war levels, and you've even started to see Saudi Arabia, you know, Pek's de facto leader, try and maximize output through its alternative red sea pipeline, but it doesn't really handle the full volume there.

[SPEAKER_06]: And so, in a situation where the way to move oil to market is shut down for OPEC, of course, the United States then becomes

[SPEAKER_02]: And totally US oil exports through this month, hit an all-time high of 12.9 million barrels per day.

[SPEAKER_02]: Now a lot of that is refined product.

[SPEAKER_02]: So that's a big factor here.

[SPEAKER_02]: It's not just raw crude.

[SPEAKER_02]: It's 60% of that number is refined product.

[SPEAKER_02]: So even though we're not opening or a lot of new refineries here in the United States, we still have a lot of them.

[SPEAKER_02]: We export that to the rest of the world.

[SPEAKER_02]: Mainly to Asia.

[SPEAKER_02]: C-born U.S. oil exports are set to be a record 9.6 million barrels per day in the month of April with most of that going to Asia, doubling from pre-war levels of 2.5 million barrels.

[SPEAKER_02]: is good for tax receipts, obviously corporate earnings.

[SPEAKER_02]: But then, you know, how durable really is it?

[SPEAKER_02]: A lot of this, the strategic low reserve is being drawn down from about $415 million to $425.

[SPEAKER_02]: So there's still a lot of,

[SPEAKER_02]: ample reserves left to kind of fill in the gaps, I think, in the near term.

[SPEAKER_02]: The question is, once again, is this durable should investors be chasing companies that are benefiting from this change?

[SPEAKER_06]: Well, I think one thing that you can't get away from is the fact that despite oil being sustainably above $90 a barrel, US producers are not rushing to drill, right?

[SPEAKER_06]: The Dallas FED did a survey which showed a rig counts actually declined.

[SPEAKER_06]: Even after a month of 90 plus dollar oil, oil executives are saying that the price swings are a bit too wild and they can't really stomach it moving based on tweets and paper market manipulation and it effectively makes it impossible to plan capital budgets.

[SPEAKER_06]: And in the Permian Basin, obviously an important critical area, you're seeing a lot of operators saying that they're seeing rising costs, they're saying declining well quality, and that's creating real headwind.

[SPEAKER_06]: So, you know, Washington can't instruct companies to raise or cut output and will.

[SPEAKER_06]: There's no

[SPEAKER_06]: authority to do that.

[SPEAKER_06]: And so you're seeing kind of the makings of why this might not be sustainable or be that big of a benefit down the road because at the end of the day the worst thing for businesses uncertainty.

[SPEAKER_02]: Yeah, and nothing's more uncertain than what's going to happen right here in the Middle East.

[SPEAKER_02]: There's a lot of bluster, a lot of a lot of PR, shall we say, and not really a

[SPEAKER_02]: how we're either sidestands or things are likely headed.

[SPEAKER_02]: And like you said, it makes it very difficult for these companies to really dig in and make smart decisions with their capital allocation budgets.

[SPEAKER_02]: And then you look at things like these sanctions.

[SPEAKER_02]: They've loosened sanctions on Russian oil and the Iranian oil, which is pretty crazy, which about 13, they're record high level of Russian oil stored in tankers, just a couple months ago, 13 million barrels at the end of January, now it's down to 2.9 million barrels.

[SPEAKER_02]: So that's a lot of barrels hitting the market.

[SPEAKER_02]: So clearly, that's something that probably also isn't sustainable.

[SPEAKER_02]: So there's a lot of cross currents here.

[SPEAKER_02]: Ultimately, I think the geopolitical environment will stay a bit rockist will muddle through.

[SPEAKER_02]: And I do think that these names are probably good buys on pullbacks, because of the infrastructure that's been damaged within the Middle East.

[SPEAKER_02]: And so I am expecting elevated oil prices for some time, and probably a lot of American companies are going to bet

[SPEAKER_06]: Well, you know, you got to understand, though, going into the midterms with costs being a big issue to, uh, for, for American citizens, do you get to a certain point where corporate earnings have gotten to a level where export bans are proposed?

[SPEAKER_02]: That's probably the biggest rest of these domestic resources.

[SPEAKER_02]: Now the next and best stock will look into the story behind the headlines.

[SPEAKER_02]: The apartment concession wave.

[SPEAKER_02]: What record landlord giveaways tell us about the rental market, nearly 40% of landlords are now offering concessions to tenants.

[SPEAKER_02]: That story is tomorrow, but for now I'm just inclined with Lucreira and we are ready to take your calls any time on 8.89 chart.

[SPEAKER_01]: Get ready for an all-new in Vestock, wealth webinar.

[SPEAKER_01]: It's all happening online Wednesday, May 6th, 1 p.m. Pacific Time.

[SPEAKER_01]: The free webinar will focus on a topic a lot of investors are dealing with now.

[SPEAKER_01]: Inflation.

[SPEAKER_01]: So mark your calendar for Wednesday, May 6th, 1 p.m. Pacific.

[SPEAKER_01]: And register now at investock.com.

[SPEAKER_04]: Hey, Justin and Lou, this is Jason from Atlanta.

[SPEAKER_04]: It was calling about air test systems, A-E-H-R with all the hype around data centers and EVs, GPUs, and CPUs.

[SPEAKER_04]: This is a small company that does all the high and burning testing for the CPUs and GPUs for both data centers and GPUs.

[SPEAKER_04]: any other kind of application for them.

[SPEAKER_04]: So I was wondering maybe if this was a good play to get into.

[SPEAKER_04]: I just wanted to get thoughts.

[SPEAKER_04]: I appreciate it.

[SPEAKER_04]: I wasn't too on the show.

[SPEAKER_04]: Thanks.

[SPEAKER_02]: Looking at air systems, AEHR, air test systems, AEHR is the symbol.

[SPEAKER_02]: Small cap name $2.6 billion market cap.

[SPEAKER_02]: It has boomed Luke.

[SPEAKER_02]: It was trading just last April one year ago.

[SPEAKER_02]: got around seven dollars per share.

[SPEAKER_02]: Today, even though dropping seven percent today to eighty two dollars per share is elite to the game.

[SPEAKER_06]: that answer is clear.

[SPEAKER_06]: He is very late to the game.

[SPEAKER_06]: Now they've had a real revenue growth right they're most recent quarterly report should about 44% year over year revenue growth earnings per share beat by about 29% albeit it was still negative and negative five cents though the consensus was negative seven but the big thing was it's bookings 37 million plus in Q3 bookings

[SPEAKER_06]: and it effectively had the highest level of backlog that it's ever had.

[SPEAKER_06]: So what you want, what you're banking on here is realization of backlog, right?

[SPEAKER_06]: If they can scale the revenue, then this is a good company at the right time for what has been a structural AI infrastructure bet.

[SPEAKER_06]: But it's trading at 695.7 times for looking earnings.

[SPEAKER_06]: You know, it's, it is a legitimate AI infrastructure pagan as a explosive bookings momentum, but it's moved like 800% in the past 52 weeks.

[SPEAKER_02]: What about, what about, what about, what about the first month and then last month?

[SPEAKER_06]: It was trading at 30 and now it's at 82 and now yeah, yeah, and so this is an incredibly voluminous, incredibly voluminous.

[SPEAKER_02]: I'll give you another number.

[SPEAKER_02]: Let's see if it gets what number it is.

[SPEAKER_02]: 18.7% would number do you think that is?

[SPEAKER_02]: Short interest.

[SPEAKER_02]: There you go.

[SPEAKER_02]: That's the short interest.

[SPEAKER_06]: So we didn't prepare this in advance.

[SPEAKER_02]: We did not prepare this in advance.

[SPEAKER_06]: Right there.

[SPEAKER_02]: So what does that tell you this?

[SPEAKER_02]: Let's move.

[SPEAKER_02]: It's just probably for a squeeze, right?

[SPEAKER_02]: Yeah.

[SPEAKER_02]: So now you missed it.

[SPEAKER_02]: Move on.

[SPEAKER_02]: Find another name.

[SPEAKER_02]: And find another name that actually has a history of producing consistent profits.

[SPEAKER_02]: This is kind of all over the place.

[SPEAKER_02]: Let's talk a little bit about inflation, Luke, and how... What's that?

[SPEAKER_02]: What's inflation?

[SPEAKER_02]: What are we ever?

[SPEAKER_02]: Is this, is this jeopardy?

[SPEAKER_02]: It's all.

[SPEAKER_02]: So, investors are feeling or Americans in general are feeling a little bit less confident in their ability to retire.

[SPEAKER_02]: 61% of workers are very or somewhat confident in having enough money for retirement.

[SPEAKER_02]: That's down from 67% last year, and a recent high of 72% in 2021.

[SPEAKER_02]: That's the lowest level in nearly a decade.

[SPEAKER_02]: And most people are focused on inflation.

[SPEAKER_02]: Some other concerns as well, mainly inflation.

[SPEAKER_02]: So what has this last four or five years done to the psyche of the average American?

[SPEAKER_06]: Obviously, it's not done good things.

[SPEAKER_06]: You know, I'm frankly surprised that 61% or that it is 61%.

[SPEAKER_06]: I always assume it would have been a lower, you know.

[SPEAKER_06]: But I think that people look at it in isolation.

[SPEAKER_06]: Obviously, we went through a large inflationary impulse in the wake of COVID in the wake of the Russian invasion of Ukraine in 2022.

[SPEAKER_06]: Now, we have this induced

[SPEAKER_06]: issues that are being kind, energy-related, inflationary spike, and seeing where that goes.

[SPEAKER_06]: But I think it also puts it within the context of the 2010s, where inflation was non-existent.

[SPEAKER_06]: And so people get used to what things were, and then when they change, that's what shocks them.

[SPEAKER_06]: I think everybody coming out of the Volker era would have been extra happy just as much as everybody coming out of COVID is extra sad about how much everything costs.

[SPEAKER_06]: It makes sense to me.

[SPEAKER_06]: Again, I'm surprised 61% of people are confident because it is a seriously issue.

[SPEAKER_06]: Now, they say that unemployment affects some people inflation affects everybody.

[SPEAKER_06]: It's something that everybody feels across the board.

[SPEAKER_02]: You know, I think it's still that high because of an unemployment still relatively low.

[SPEAKER_02]: Yeah.

[SPEAKER_02]: So you have a job.

[SPEAKER_02]: You probably feel fairly decent about your prospects for the future.

[SPEAKER_02]: Among retirees, 41% that retirement spending had been higher than they expected when they first retired.

[SPEAKER_02]: So it just goes to show you that it's both workers and retirees that are feeling the inflation.

[SPEAKER_02]: crunch.

[SPEAKER_02]: And it's a reminder that something I talk to clients, we talk to clients a lot about, which is it's art of war and the generals tend to fight the last war.

[SPEAKER_02]: And while there's the COVID, and we didn't see so little inflation as of the last few years, really, the major crisis of most people's recent memory is, oh wait, is the financial crisis.

[SPEAKER_02]: And that was a big deflationary impulse, but the previous crisis is usually not the next crisis.

[SPEAKER_02]: The next crisis usually something very, very different.

[SPEAKER_02]: And in this instance, it really is inflation.

[SPEAKER_02]: That the risk for most people's portfolios is that inflation,

[SPEAKER_02]: continues to eat away person power and prices continue to rise over time, which means earnings continue to rise over time, which means stock prices tend to rise over time.

[SPEAKER_02]: And when you're

[SPEAKER_02]: to conservative, well, that also your real returns for a lot of things, a lot of investments, can suddenly turn flat to very negative and it makes the retirement picture a lot less optimistic.

[SPEAKER_02]: So to me, that's what I see here in aggregate.

[SPEAKER_02]: Those keep things moving and play another listener question now.

[SPEAKER_05]: I was calling about Franklin Nevada Corporation.

[SPEAKER_05]: I was calling the sea because I'm looking at, you know, the current economic situation we're in now.

[SPEAKER_05]: So I'm trying to find a nice, uh, precious metal or gold, you know, play or stock to get into.

[SPEAKER_05]: And I was looking at this one and I didn't want you to, um, just give me your thoughts on this one.

[SPEAKER_05]: I was thinking about buying this, letting me know, I'll listen to it on the forecast.

[SPEAKER_02]: Thank you so much, looking at Franco, Nevada, this is the name that we've actually owned for clients for.

[SPEAKER_02]: an extended period of time.

[SPEAKER_02]: So we've done very, very well on it is pulling back as of late like a lot of the gold miners are, oh, this is a bit different.

[SPEAKER_02]: This is a streamer.

[SPEAKER_02]: Now, what is a streamer?

[SPEAKER_02]: What they basically do is they partner with the mining companies and they help finance the mines.

[SPEAKER_02]: So they basically own a piece, so an stream of the revenue coming out of the, uh, from the mines, and it changed their investing, their, their helping,

[SPEAKER_02]: reduce the overall risk that these miners are taking when they're putting their own cat backs in to build out these mines.

[SPEAKER_02]: So it creates a very steady revenue stream.

[SPEAKER_02]: They also tend to stay, they tend to trade at higher multiples than your typical miner because their

[SPEAKER_06]: Yeah, I mean, you said the business is safer.

[SPEAKER_06]: You didn't get explicit on why the business is so safe.

[SPEAKER_06]: And more, maybe I missed it.

[SPEAKER_06]: It was zero debt.

[SPEAKER_06]: You have absolutely zero debt.

[SPEAKER_06]: So it is the purest, cleanest gold price proxy amongst these gold exposed names.

[SPEAKER_06]: It's why we've held it for so long.

[SPEAKER_06]: It's why it has done.

[SPEAKER_02]: so well yeah earnings this year expect to be $8.65 that's up 55% from last year and then earnings are expected to go up another 18% next year to $10.20 and all time high and

[SPEAKER_02]: It's trading at $232 per share, and the forward PE ratio is around 22, 23, and historically that's actually pretty low.

[SPEAKER_02]: So these do tend to trade at pretty high multiples.

[SPEAKER_02]: Back in 2023 is trading at 40 times for looking earnings.

[SPEAKER_02]: So even though it's trading a bit of premium to the overall market, it's still pretty cheap.

[SPEAKER_02]: Let's pivot and talk a little bit about

[SPEAKER_02]: the valuations in the market.

[SPEAKER_02]: So we had a lot of tech stocks peak out in the fall, but now they're at a new high after this recent rally.

[SPEAKER_02]: But what's interesting is that even though since the October peak, the market's barely up, the actual P ratio has declined to from 23 times earnings, to 22 times earnings.

[SPEAKER_02]: And a lot of this has to do with the fact that the earnings expectations, a lot of AI stocks, especially AI infrastructure stocks like memory producers, like a micron, who's earnings this year, expected to be what?

[SPEAKER_02]: It was supposed to be $19 per share next year, about $100 per share this year.

[SPEAKER_02]: So let me see.

[SPEAKER_02]: It, you know, the lot of these are maybe potentially flash in the pan, earnings numbers.

[SPEAKER_02]: Numbers, margins, that a lot of these companies have never produced.

[SPEAKER_02]: So the question is, how durable is the recent upgrade to S&P earnings projections for this year and next?

[SPEAKER_06]: So I'm saying $57 in 10 cents.

[SPEAKER_02]: And then by that $95 next year.

[SPEAKER_06]: Yes in 27 minutes correct.

[SPEAKER_02]: Crazy.

[SPEAKER_06]: I think that you know you have a situation where typically what you expect is valuations are falling stock prices are falling.

[SPEAKER_06]: Right.

[SPEAKER_06]: That's just math.

[SPEAKER_06]: It's price to forward looking earnings.

[SPEAKER_06]: So typically prices go down as multiples go down.

[SPEAKER_06]: But here you have a situation where maybe, over the past year, things were priced really well and stocks are growing into these valuations and so you're not seeing, because the earnings are real, your earnings are certainly there, you're not seeing prices fall, but at the same time, go back to the history of microns, earnings.

[SPEAKER_06]: I will read them from 2020 to 2025, 237, 514, 774, negative $5 and 34 cents, $70 and 59 cents.

[SPEAKER_06]: So I think the question is, not our earnings real today, but are they sustainably real, moving forward or are we just at a point in time where things are at the right position cyclically, right?

[SPEAKER_06]: Markets are forward looking.

[SPEAKER_06]: We are all investing on a forward-looking basis.

[SPEAKER_06]: is that it's not a super cycle, it's just a normal cycle.

[SPEAKER_02]: Well, it's not just that it's, it can still be a super cycle.

[SPEAKER_02]: It's just, is a super cycle going to be a strong and are they going to be able to extract as much margins as the market is expecting over the next 12 to 18 months when historically they have it.

[SPEAKER_02]: Historically, when memory prices go up, which they've never gone up this level.

[SPEAKER_02]: Historically, yeah, this quickly.

[SPEAKER_02]: Historically, more capacity comes online.

[SPEAKER_02]: And therefore, you have overcapacity, eventually, and then prices come down, margins come down and they come back down to more reasonable long-term averages.

[SPEAKER_02]: I mean, if you ran a statistical analysis of microns, earnings, or sea gates, earnings, or sandus, earnings, and you looked at the expected earnings for this year next year,

[SPEAKER_02]: maybe eight who knows, you know, it's, it's, it's never been seen before.

[SPEAKER_02]: So I just don't think this is durable the last peak in earnings for micron was $8.35 in 2022.

[SPEAKER_02]: So, and now it's just that over 10 times that next year, it's just not likely to be durable.

[SPEAKER_02]: And then on top of that, you, well, the disruption of the release is problem.

[SPEAKER_02]: for a lot of companies like oil companies, some industrial companies, it's actually benefiting them because they can still produce whether that's oil, obviously the refining margins are improving because there's a lot of refining product coming out of the middle east that is not being pushed through the streets or moves and so it's coming from

[SPEAKER_02]: our refineries that we talked about before and they're able to jack higher margin there as well.

[SPEAKER_02]: So how much of this is a temporary boost or something durable?

[SPEAKER_02]: I'd say that a lot of this is going to correct itself as the crisis you think.

[SPEAKER_02]: Resolve itself.

[SPEAKER_02]: What do you think?

[SPEAKER_06]: I mean, you would, but you're also kind of, the market's walking and chewing gum at the same time, right?

[SPEAKER_06]: It's trying to have it both ways here.

[SPEAKER_06]: It's looking through and sure you can say, okay, on one side, this being a bit longer, but not devolving means energy prices are going to be higher sustainably, but then

[SPEAKER_06]: On the other side, they're not too concerned about helium prices, which, in effect, would drive the costs of semi-conductors up in such a way that it would be impractical to continue this level of capex, just for return basis.

[SPEAKER_06]: So I think there's a lot of a lot of asymmetric downside risk out there that inevitably has to show itself over time.

[SPEAKER_06]: We're pretty deep into this conflict now, and we seem to be at a stalemate.

[SPEAKER_06]: I would think that something breaks

[SPEAKER_02]: Yeah, so definitely a 10-US new high markets as you saw today.

[SPEAKER_02]: Well, no, a lot more after earnings tomorrow.

[SPEAKER_02]: That was the best stock.

[SPEAKER_02]: I'm Justin Klein with Lucura and we have one goal each and every week day.

[SPEAKER_02]: And that's helped you achieve your own version of financial freedom.

[SPEAKER_02]: And I work continues after this final break.

[SPEAKER_02]: So if you have a question, you need to get that in right now at 80 to 99 chart.

[SPEAKER_01]: You've got two for the price of one.

[SPEAKER_01]: Justin Klein and Luke Guerrero are here and they're taking your finance and investment questions now.

[SPEAKER_01]: 888-99 chart.

[SPEAKER_02]: Luke, let's talk about dividend stocks versus non-dividend things, stocks and what should investors focus on?

[SPEAKER_02]: And we talk a lot about total return that it's capital appreciation as well as any income.

[SPEAKER_02]: And for many decades, especially in the 1970s, dividends contributed 73% of the total of the market's total return in the 1970s.

[SPEAKER_02]: And a lot of that had to do with right, inflation rising and multiples contracting across the market, et cetera.

[SPEAKER_02]: So there was not a lot of capital appreciation in that decade.

[SPEAKER_02]: But since then, over the past four decades, the percentage of the total return in markets that came from dividends has range between 12 and 16%.

[SPEAKER_02]: So most of it has been capital appreciation.

[SPEAKER_02]: So the question for the average investor is, should you focus on dividends or when you're only focused on dividends, are you narrowing your potential return or your potential opportunity set when you're doing that?

[SPEAKER_06]: That, that one.

[SPEAKER_06]: I think that, I mean, historically speaking, dividend stocks, at least over the past 15, 20 years, have underperform non-dividend stocks.

[SPEAKER_06]: So that's something I have to keep in mind.

[SPEAKER_02]: Sure.

[SPEAKER_06]: Secondly, yeah, it absolutely narrows your opportunity set in a way that you don't want it to.

[SPEAKER_06]: I think we talk about this all the time.

[SPEAKER_06]: You should not build a portfolio based on dividends.

[SPEAKER_06]: Dividends can be a piece of the puzzle because it alludes to something.

[SPEAKER_06]: It alludes to it can allude to consistent revenue streams.

[SPEAKER_06]: The ability of a company to pay a consistent dividend is a good sign because of what it says about the company.

[SPEAKER_06]: But I've had this conversation with countless people, they feel as though they are earning something when they get a dividend.

[SPEAKER_06]: This is passive income by getting a dividend, and that's just not the case, right?

[SPEAKER_06]: Centers, therapists, all things being equal.

[SPEAKER_06]: If a company pays out a cash dividend, its price should drop.

[SPEAKER_06]: Its market cap should drop by the amount of cash roughly the amount of the cash that we use to portfolio.

[SPEAKER_06]: And so you are trading optionality for an income

[SPEAKER_06]: For dividend stocks, you are trading that option now, which means you have to recognize the taxes when they want you to recognize it.

[SPEAKER_06]: Whereas if you just have a portfolio, you can create your own income stream through long-term capital gains on your schedule.

[SPEAKER_06]: So to sum up my gripe here is that people, I think, misunderstand what dividends are and misapply dividends of their portfolio.

[SPEAKER_02]: Yeah, it's a, it's a, it's a capital allocation decision at the end of the day, but by, by management, right, what do they do with this, this earnings, this excess cash flow, do you pay the dividends, do you buy a back stock, do you reinvest it in the business?

[SPEAKER_02]: And that's the way you really need to look at it.

[SPEAKER_02]: Now, I have a bit of a mixed view on this because I do think that dividends, as you said, send a signal.

[SPEAKER_02]: And if you look through studies, is what it does is it does instale a bit

[SPEAKER_02]: Discipline.

[SPEAKER_02]: When it comes to that capital allocation decision by management.

[SPEAKER_02]: Because when you're the CEO, the leader of a company that's paying a dividend, probably paid a dividend for many years before you, maybe even decades before you.

[SPEAKER_02]: You want to be the first one to cut that dividend?

[SPEAKER_02]: Probably not.

[SPEAKER_02]: So in many ways, it kind of pushes them to

[SPEAKER_02]: Think twice about making egregiously bad decisions, especially big acquisitions that unreasonable prices that happens a lot when they just have money burning a hole in their pocket.

[SPEAKER_02]: So I think it's really about not being dogmatic and saying, okay, just want dividend paying stocks.

[SPEAKER_02]: It's like you said, opening yourself up to all types of investment opportunities.

[SPEAKER_02]: And then you have to balance and analyze their couple of location decisions.

[SPEAKER_02]: Now, one drawback of paying a dividend is your double taxation issue.

[SPEAKER_02]: Now, it's not as since 2003, it's taxed at more advantageous rate than it used to be.

[SPEAKER_02]: It used to be taxed at your ordinary income tax rate.

[SPEAKER_02]: So that's helped a little bit.

[SPEAKER_02]: It'll, you also get lower volatility.

[SPEAKER_02]: So for example, the Vanguard high-dividing yield index had a standard deviation of the past 15 years of 13 versus the total stock market of 14.6.

[SPEAKER_02]: So there is, especially older investors, retirees, the walk-in-come.

[SPEAKER_02]: I still think it can be a good thing to incorporate dividends and lean on dividends.

[SPEAKER_02]: But like you said, being dogmatic about it and never investing in non-native things stocks, I think that creates a drag on portfolio.

[SPEAKER_02]: about doesn't.

[SPEAKER_02]: I'm Justin Klein with Luke Graer, reminding you about KB Financial's parallel, investing when we make a trade for our clients who make the same trade for ourselves, on the same day, same price, same percentage, no front running, no special treatments, which means we invest right along the side of our clients.

[SPEAKER_02]: You can learn more by heading over to investtalk.com.

[SPEAKER_02]: Please tell your friends and family about a free podcast downloads.

[SPEAKER_02]: And don't forget to register for the new wealth webinar coming up on May 6th and just over a week where we dig into inflation and how it will impact your portfolio.

[SPEAKER_02]: You can learn more on at bestdoc.com, independent thinking, sure it's a success, it's a bestdoc.

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