[SPEAKER_04]: On radio, on YouTube, streaming live on investtalk.com and for our podcast subscribers, this is Invest Talk.

[SPEAKER_04]: Independent Thinking, shared success.

[SPEAKER_04]: Invest Talk is made possible by KPP Financial, a registered investment advisor firm serving clients throughout the United States.

[SPEAKER_04]: Here is KPP Financial Portfolio Manager, Luke Guerrero,

[SPEAKER_07]: And welcome everybody to the Friday May 8th, 2026 edition of Invest Talk.

[SPEAKER_07]: I'm your host Luke Grey, and I'll be with you over the next 50 or so minutes while we round out the week and send ourselves off into what hopefully is a calm and relaxing weekend.

[SPEAKER_07]: As always, we got a bunch of stories to talk about today.

[SPEAKER_07]: We have plenty of questions to answer.

[SPEAKER_07]: Before we get started with that, I do want to remind you that we did wrap up our latest Invest Talk Wealth webinar on Wednesday, where we talked all about inflation.

[SPEAKER_07]: As always, we did about a 50-50 split between a presentation on how you can orient your portfolio in inflationary times.

[SPEAKER_07]: And then the other half answered,

[SPEAKER_07]: finance and investment questions from our audience.

[SPEAKER_07]: If you missed the webinar, which was on Wednesday, it's not available yet, it should be available soon over on our YouTube channel.

[SPEAKER_07]: Just head over to YouTube and search in Vestock with two teas.

[SPEAKER_07]: Now, just a bit, we'll talk about today's market performance and run down those show topics.

[SPEAKER_07]: But why don't we start off this show by answering a fresh color question?

[SPEAKER_03]: I'm calling in about CVS.

[SPEAKER_03]: I've bought a little bit here wanting to know what you guys think about kind of going all in or keep by little by little as it keeps coming down.

[SPEAKER_03]: Or do you see obviously your major support levels and the information on what you think about buying in on it would be appreciated.

[SPEAKER_03]: Thanks.

[SPEAKER_07]: CVS is of course the behemoth CVS health corporation

[SPEAKER_07]: It is an integrated healthcare giant, they operate under three segments, their healthcare benefits, so at an insurance as well as Medicare Advantage, their health services, so think caremark, the prescriptions, and their pharmacy and consumer wellness that they're 9900 retail pharmacies, global, they are the only company that is actually simultaneously a top three incher, a top three pbm,

[SPEAKER_07]: in the largest pharmacy chain in America.

[SPEAKER_07]: So it's pretty large company 111 billion dollar market cap company about 185.7 in total by abilities.

[SPEAKER_07]: Now they recently reported earnings on May 6, which was two days ago where they had a massive beat on both revenue and earnings per share, as well as raising full year guidance, but in spite of that, stocks still fell 1.6% at earnings day, and then today it was up 3.65%, but...

[SPEAKER_07]: Regardless, in past month or so, since the beginning of April, prices risen from about $73 per share to about 955, and near-to-date it's up 14% now compare that to the rest of the health care industry.

[SPEAKER_07]: Not doing too hot.

[SPEAKER_07]: Now, along with that guide, they also shot a soft healthcare benefits for your just an operating income to about 4 to 4.3 billion, that's up 420 million from their most recent guide.

[SPEAKER_07]: It's really been, I would say the most dramatic, large cap healthcare recovery story of 2026.

[SPEAKER_07]: It's up 55% from its 52 week low, and the turnaround has really shown, as we can see, this most recent print.

[SPEAKER_07]: It's been showing tangible results, and that's in spite of reimbursement pressure from their pharmacy, from Medicare Advantage Medical Cost Trends.

[SPEAKER_07]: Because that really does remain the persistent structural overhang that the market hasn't fully dismissed, right, you're not seeing crazy movement here for most of 2024 and 2025, it was a range bound.

[SPEAKER_07]: I would say, I mean, the 16 plus percent earnings per share beat in the guidance race, that's real, the 9.5 billion plus operating cash flow yield at current prices, that's real.

[SPEAKER_07]: But the 1.6% drop on this massive beat is the market essentially saying, prove it again in Q2, especially the Vietnam origins that you had.

[SPEAKER_07]: And that's exactly the right challenge to frame your state of mind as we approach

[SPEAKER_07]: their next quarter's earnings in July.

[SPEAKER_07]: And so right now it's trading about 11 times, price to forward looking earnings that is near the high of its range.

[SPEAKER_07]: It's kind of dividend to you about 3.4% and spite of all that.

[SPEAKER_07]: I really do like CVS.

[SPEAKER_07]: So I'd probably think to open a half position here, you don't want to see those cough pressures really beat it down in the second quarter and find yourself on an off-sides on this trade.

[SPEAKER_07]: So we'll keep it back down to the,

[SPEAKER_07]: 80, 85 level, I probably think of opening a half position.

[SPEAKER_07]: And then once it shows you, whatever it shows you in Q2, you can make a full decision there.

[SPEAKER_07]: That is CVS Health Corporation.

[SPEAKER_07]: Thanks for the call.

[SPEAKER_07]: Now we got a lot of ground cover in the next 45 minutes or so.

[SPEAKER_07]: And I'll start off with my main focus point about the Arms Race for AI Capital.

[SPEAKER_07]: We'll talk about how anthropic, goldmen, and private equity are re-shaping investment, and how all these ventures are targeting private equity owned companies, signaling that AI monetization is moving decisively beyond Silicon Valley and into mainstream corporate finance.

[SPEAKER_07]: This is more than anything a landmark moment for understanding where the real AI money is going to be flowing.

[SPEAKER_07]: Also, touch on two stories that we didn't quite get to yesterday, one on the rising cost of jet fuel and how airlines are dealing with that and another on memory and how that has been a hot, hot, hot sub sector within the tech space.

[SPEAKER_07]: We also have some voice bank calls ready to play, including Domino's Pizza, Tigger DPC, my favorite closet food chain that's actually tech company, and value stocks.

[SPEAKER_07]: As well as some questions that came in from the comment section of the Invest talking YouTube channel.

[SPEAKER_07]: And of course, I welcome your findings and investment questions now or any time throughout the show.

[SPEAKER_07]: We are going into a quick break.

[SPEAKER_07]: Please remember you can call any time and leave your questions on the Invest talk voice bank.

[SPEAKER_07]: If you're listening to our live stream or on AM-1220 in the Bay Area,

[SPEAKER_07]: Call me now at 80-80-99-chron.

[SPEAKER_07]: Up next, we'll talk about today's market activity.

[SPEAKER_02]: When you tell your friends about Invest Talk, and they ask you why you listen, let them know there are many reasons, and one is parallel investing, from KPP Financial and Invest Talk Host Justin Klein.

[SPEAKER_02]: Parallel investing means Justin invests right alongside KPP financial clients.

[SPEAKER_02]: He makes the same trade for KPP financial on the same day at the same price and the same percentages as KPP clients.

[SPEAKER_02]: There's no front running and no special treatment.

[SPEAKER_02]: In this way, Justin and KPP financials share the same risks and the same potential for success.

[SPEAKER_02]: Parallel investing aligns the interests of Justin and KPP financial with those of his clients.

[SPEAKER_02]: Justin, Klein and Luke Guerrero are ready to answer your questions about Parallel investing.

[SPEAKER_02]: And you can learn more anytime at investalk.com.

[SPEAKER_02]: The calls are free.

[SPEAKER_02]: The unbiased answers are free.

[SPEAKER_02]: So what are you waiting for?

[SPEAKER_02]: 8-8-9-9, chart.

[SPEAKER_07]: U.S. stocks closing higher today with the S&P and Nasdaq setting of fresh record closes on the back of, you guessed it another semi-led tech rally.

[SPEAKER_07]: The Nasdaq surged 1.7% on the day.

[SPEAKER_07]: The S&P gained 80 basis points.

[SPEAKER_07]: Brett's told a overall different story, the equate S&P lagged the cap weighted by about 50 basis points.

[SPEAKER_07]: Under scoring once again, there are serious concerns about concentration.

[SPEAKER_07]: And those concerns have been building over time.

[SPEAKER_07]: Now, some eyes and memory had a very strong session.

[SPEAKER_07]: They extended the AI Compute and CapEx demand themes that's really been the dominant market story

[SPEAKER_07]: Mechanical Dynamics continue to provide support, though the ramp in superlatives and froth concerns hasn't really gone away.

[SPEAKER_07]: Tesla and Vidion Apple led the mag 7 networking managed care refiner's and oil services also app performed on the day.

[SPEAKER_07]: There's a strength while integrated

[SPEAKER_07]: Show that strength on Thursday?

[SPEAKER_07]: Bit of a reversal, right?

[SPEAKER_07]: You saw those names lagging today.

[SPEAKER_07]: The job support was overall positive April non-Farm payrolls came in at 115,000 newly doubled the 62,000 consensus, and March was actually revised up to 185,000.

[SPEAKER_07]: The unemployment rate at the same time held at 4.3% and average hourly earnings came in a bit softer, which is really a Goldilocks combination.

[SPEAKER_07]: Early analysts take suggest a little impact on the right narrative, the fed scene, remaining on a holding pattern.

[SPEAKER_07]: Hey, I relate to job cuts.

[SPEAKER_07]: They do continue to show and generate headlines over time, but I mean, the broader labor market, it's still holding up.

[SPEAKER_07]: Now consumer sentiment, that was a different story.

[SPEAKER_07]: Preliminary May, Michigan sentiment dropped to 48.2 a fresh low in data stretching back to 1952.

[SPEAKER_07]: Current conditions being the big drag here with a release noting a surge in concerns about high prices and buying conditions for major purchases.

[SPEAKER_07]: Now on the inflation front, your head expectations actually ticked down to 4.5 from 4.7.

[SPEAKER_07]: And the five-year measure dipped as well.

[SPEAKER_07]: It's a small positive in what was an otherwise gloomy consumer read.

[SPEAKER_07]: Now, on the geopolitical front, the latest U.S. Iran flare-ups continue to be treated as more noise than news with the U.S. insisting the ceasefire remains intact and expectations for a diplomatic solution still a bit elevated.

[SPEAKER_07]: Now, pockets of skepticism, they do persist, given key nuclear and straight-of-war moves sticking points and reported diplomatic traction doesn't really alleviate the physical supply disruption.

[SPEAKER_07]: Because of this crude oil settled up marginally, but was down more than 6% for the week.

[SPEAKER_07]: Now, in earnings, more than 89% of the S&P 500 has now reported for Q1, 89%

[SPEAKER_07]: And a lot of those, beat and guidance races.

[SPEAKER_07]: Treasuries a bit firmer with yields down two to three bases point the dollar slip to 10% and gold and silver both edge to bit higher.

[SPEAKER_07]: Now next week, the earnings calendar gets a breather but macrosays pretty busy with the US inflation data and Trump G summit.

[SPEAKER_07]: The latter has been complicated to say the least by the Iran conflict, but the market will be watching closely for any signs of a trade deal around where earths, around ships, soybeans, or discussions around the Rhin-Mindi.

[SPEAKER_07]: Alright, let's put it back to the Invest talk voice bank for another listener question.

[SPEAKER_01]: Hey guys, I am inquiring about Domino's, D.P.Z.

[SPEAKER_01]: They went down, came back up again, trying to retest the all-time high, but then since then has been going downhill.

[SPEAKER_01]: What is going on with this, what do you guys think?

[SPEAKER_01]: And also, I was looking at some of the financials.

[SPEAKER_01]: It doesn't have a price to book ratio, or one of the applications said that the price to book value per share is negative.

[SPEAKER_01]: What does it really mean in terms of,

[SPEAKER_01]: Does it have a lot of liability or I'm not understanding something right?

[SPEAKER_01]: I will be hearing that in postcast.

[SPEAKER_07]: Thank you guys again for all the information.

[SPEAKER_07]: Bye.

[SPEAKER_07]: US store sales only makes up about 33% of the revenue they're international franchises about seven percent and they really have an asset light model about 20 billion in annual global system sales.

[SPEAKER_07]: Now they recently hit a fresh 52 week low of $322.

[SPEAKER_07]: And 17 cents yesterday and the stock is in a pretty active decline.

[SPEAKER_07]: from earnings on April 27th, they missed on revenue by about 2% earnings per share missed by about three and a half to four percent and that income declined 6% year over year.

[SPEAKER_07]: Now this stock was a darling prepandemic, right?

[SPEAKER_07]: This was a company that people said was a pizza company,

[SPEAKER_07]: Why?

[SPEAKER_07]: Because they integrated technology early relative to other businesses in their supply chain.

[SPEAKER_07]: People would order online orders would be routed online.

[SPEAKER_07]: It would be fulfilled online.

[SPEAKER_07]: One of the biggest problems that some companies like Starbucks, for example, face is that they have so much demand without being able to efficiently service customers in this company in a lot of ways, solve that problem.

[SPEAKER_07]: But,

[SPEAKER_07]: One thing I would say here is that it's that it's cheap evaluation in years.

[SPEAKER_07]: I mean, this thing used to trade at 37 times, price to forward looking earnings.

[SPEAKER_07]: It has a buyback running at 52 week lows.

[SPEAKER_07]: But I think that the US seems to our sales trajectory needs to improve materially before I would look to enter here.

[SPEAKER_07]: You don't want to buy this coming off of that earnings.

[SPEAKER_07]: Now, to quickly answer your question, there is no price to book on this because the book value of equity is negative here.

[SPEAKER_07]: That's when your total assets minus your total liabilities is negative.

[SPEAKER_07]: The company owes more than everything it owns on paper, and that's because it's an asset-light model.

[SPEAKER_07]: It's not necessarily a bad thing.

[SPEAKER_07]: It's just about the accounting of what the business owns.

[SPEAKER_07]: We're headed into New Break.

[SPEAKER_07]: My main focus point is coming up.

[SPEAKER_07]: And of course, more answers to your findings and

[SPEAKER_02]: In the early days, in Vestock was Jerry Klein and Steve Peasley.

[SPEAKER_02]: Now the torch has been passed and a new generation of hosts is on the job, Justin Klein and Luke Guerrero.

[SPEAKER_02]: So when you've got finance and investment questions, don't forget to call in Vestock.

[SPEAKER_02]: 888-99-Chart

[SPEAKER_07]: So on Monday, and Thropic, the company behind the Claude AI model announced a 1.5 billion dollar joint venture with Blackstone, Helman and Friedman and Goldman Sachs, Apollo, General Atlantic, Leonard Green, GIC and Sequoia Capital are also backing the effort.

[SPEAKER_07]: Anthropic Blackstone and Hellman in Freemann are each contributing roughly 300 million.

[SPEAKER_07]: Goldman is in for another 150 million and the rest comes from that broader consortium.

[SPEAKER_07]: Now, this isn't a fund.

[SPEAKER_07]: It isn't a consulting contract.

[SPEAKER_07]: It is a standalone company that will embed Anthropic Engineers directly inside mid-sized businesses, primarily private equity portfolio companies in order to redesign their operations around AI.

[SPEAKER_07]: Now, the firm will deploy Claude into core workflows across health care, across manufacturing and financial services and logistics and retail.

[SPEAKER_07]: Blackstone alone has hundreds of portfolio companies and goldmins, Apollo and General Atlantic's portfolio.

[SPEAKER_07]: You're looking at a built-in client pipeline spanning a thousands of businesses.

[SPEAKER_07]: This is a landmark moment for understanding where AI monetization is heading and it tells you something very specific about where we are in the technologies maturity cycle.

[SPEAKER_07]: The past three years, AI Revenue has been overwhelmingly concentrated in infrastructure.

[SPEAKER_07]: Think, Nvidia, selling GPUs, cloud providers, selling compute, and data center operators building capacity.

[SPEAKER_07]: The model providers themselves, your anthropics, your open AI, they generated revenue through API access and subscription products.

[SPEAKER_07]: But the real prize has always been enterprise transformation, taking AI models and embedding them into how companies actually operate.

[SPEAKER_07]: The problem has been a massive talent bottleneck.

[SPEAKER_07]: There are simply aren't enough engineers who understand both Frontier AI and real-world business operations to deploy the technology at scale.

[SPEAKER_07]: Having the model alone doesn't change your workflows or how you operate, you actually need the people who can combine the technology with what's actually happening in the business.

[SPEAKER_07]: Now this venture's anthropics answer to that bottleneck rather than waiting for companies to figure out AI adoption on their own or relying on traditional consulting firms like McKinsey or Accenture to do it, anthropic is essentially building its own deployment arm with captive capital and a captive customer base.

[SPEAKER_07]: Fortune framed it as anthropic taking a shot at the consulting industry itself.

[SPEAKER_07]: In the economic support that framing, for every dollar company spent on software, they spend roughly six on services.

[SPEAKER_07]: The consulting and systems in a great-in market is measured in trillions.

[SPEAKER_07]: If AI native firms can capture even a fraction of that service spend, the revenue implications are huge.

[SPEAKER_07]: Now the competitive landscape between AI companies and traditional enterprise software, it's shifting.

[SPEAKER_07]: Open AI is reportedly pursuing a near identical structure with TPG and Bane.

[SPEAKER_07]: So both leading AI labs are now building PE back to poignant engines.

[SPEAKER_07]: This means AI models aren't just competing against each other on capability benchmarks, they're competing on distribution.

[SPEAKER_07]: The lab that gets embedded inside the most companies is going to win because once you've redesigned a company's workflow around your specific model, switch costs become very high.

[SPEAKER_07]: It's the same playbook that made Salesforce Oracle and SAP, SAP dominant, not by being the best software, but by becoming the operating system that businesses can't remove.

[SPEAKER_07]: Now for private equity specifically, this deal reveals a new value creation thesis.

[SPEAKER_07]: P firms have always tried to improve the operations of companies they acquire by cutting costs or optimizing processes or professionalizing management, but AI gives them a dramatically more powerful toolkit for that work.

[SPEAKER_07]: If Blackstone can deploy cloud across the portfolio company and reduce head count by 20% while improving output, the return on that investment is immediate and measurable.

[SPEAKER_07]: The question of whether AI is a genuine value creation tool or still largely hype gets a clear answer from this deal.

[SPEAKER_07]: When companies like Blackstone and Goldman and Apollo collectively commit 1.5 billion to deploy a specific model inside real operating businesses,

[SPEAKER_07]: They've, I presume, done the diligence.

[SPEAKER_07]: These are firms that measure returns in basis point.

[SPEAKER_07]: They don't write $300 million checks for hype.

[SPEAKER_07]: The fact that Venture is structured as a standalone services company, and not a research flip.

[SPEAKER_07]: Not a fun, tells you the focus is on implementation and measurable outcomes, not theoretical potential.

[SPEAKER_07]: For retail investors, getting a exposure to AI's financial services application requires thinking beyond the obvious names.

[SPEAKER_07]: And Thropic is not a publicly traded company that was reportedly in talks or financing that could value it at $900 billion.

[SPEAKER_07]: Neither is open AI.

[SPEAKER_07]: First, you might want to look at the PE firms themselves.

[SPEAKER_07]: Those companies give you indirect exposure to value creation this venture.

[SPEAKER_07]: is designed to produce.

[SPEAKER_07]: Second, the infrastructure providers.

[SPEAKER_07]: Anthropics models run on Cloud Infrastructure, primarily AWS, which is also in major Anthropic Investor.

[SPEAKER_07]: The NEM RECHIP makers, they benefit from the compute demands as well.

[SPEAKER_07]: Third, the enterprise software companies that are either partners or targets.

[SPEAKER_07]: Inthropic announced a full Microsoft 365 integration alongside the venture meeting Claude now operates inside Excel, Word, and Outlook, companies like Palantir, which pioneered the forward deployed engineer model that this venture replicates and sales force, which is building its own AI agents, are both potential winners and potential losers depending on whether they're partners or competitors.

[SPEAKER_07]: Now, the bottom line here is the AI Capital Arms Race is entered a new phase.

[SPEAKER_07]: The money is moving from infrastructure to implementation.

[SPEAKER_07]: The lab that wins, the enterprise deployment race, not just the benchmark race, will generate the most durable revenue.

[SPEAKER_07]: And the fact that the world's most sophisticated financial firms are backing the deployment with billions of dollars of their own is the strongest signal yet that AI is crossed from theoretical potential to measurable business value.

[SPEAKER_07]: On the next investor talk, we'll look into this story.

[SPEAKER_07]: The market is hot, but this is where investors get hurt.

[SPEAKER_07]: Stocks are pushing highs, but inflation oil rates and housing, they're all flashing state-to-schooled.

[SPEAKER_07]: That's Monday.

[SPEAKER_07]: For now, I'm Luke Guerrero ready to take your calls anytime at 808-99 chart.

[SPEAKER_02]: weekend is here or almost here, but you've got financial investment questions, so step up and call in.

[SPEAKER_02]: Invest talk.

[SPEAKER_02]: 888 99 chart.

[SPEAKER_05]: I'm 70 year old retired.

[SPEAKER_05]: I have about 25 to 30% in cash and bonds and considering the current state economy, is it worth considering or looking out of bonds and going into value stocks, more and value stocks.

[SPEAKER_05]: Thanks for all of you.

[SPEAKER_07]: Bye.

[SPEAKER_07]: That's a great question, especially for somebody who is in the phase of their life where they're starting to draw down and rely on income generated from the portfolio or divesting from some of those assets to create their own income stream.

[SPEAKER_07]: Now, traditionally speaking, and certainly this was true in the 2010s, you could do a lot better by, you know, you could you could fulfill that need by relying on bonds.

[SPEAKER_07]: But in the past couple of years, look what happened coming out of 2022.

[SPEAKER_07]: People who relied on bond income and most people invest in bond ETFs not the individual bonds of themselves, which means they're not getting the value back at maturity.

[SPEAKER_07]: Just look what happened at GLT, a historic level of wealth destruction.

[SPEAKER_07]: And so in this inflationary environment that may lead to higher rates,

[SPEAKER_07]: can hurt because the thing you're concerned about in this phase of your life isn't about wealth generation or growth.

[SPEAKER_07]: It's about your assets keeping up with the costs of living and so certainly in an inflationary environment diversifying a way in two value stocks which tend to do better in times of high inflation.

[SPEAKER_07]: And I'm not saying put your portfolio 100% in stocks, but having a larger slice than you otherwise might in a neutral environment, I think is beneficial in these inflationary times.

[SPEAKER_07]: Thanks for the call.

[SPEAKER_07]: We're going to do a voicemail next, from maybe to 99 chart.

[SPEAKER_00]: Hey, this is Jake from Northern California.

[SPEAKER_00]: I'm calling to ask about PSCE, the invest co-small cab,

[SPEAKER_00]: currently own it.

[SPEAKER_00]: It is about 6% of my overall portfolio and retirement account.

[SPEAKER_00]: I like energy.

[SPEAKER_00]: I'm really just calling to see what you guys think of this small cap fund.

[SPEAKER_07]: But if you guys think this is something that I should get out of, that'd be great.

[SPEAKER_07]: Thank you.

[SPEAKER_07]: And so you see the S&P small cap 600 and you think this is a small cap index, but the S&P is not a rules based index, like the Russell is, where they just do a name counter approach.

[SPEAKER_07]: The S&P 600 is constituted by committee, meaning, oftentimes, the names in there are small caps.

[SPEAKER_07]: In fact, 87% of this portfolio has been capsule about 12% of the portfolio is small caps.

[SPEAKER_07]: And so there's nothing wrong with that, right?

[SPEAKER_07]: There's nothing wrong with holding a midcap ETF, midcap tracking ETF, but I think the number one rule is understanding what you own.

[SPEAKER_07]: So when you're running this, you're not really holding an energy, small cap index.

[SPEAKER_07]: You're holding an energy, a midcap index.

[SPEAKER_07]: Now, here to date, this thing has gone gangbusters.

[SPEAKER_07]: It is up 41.2%, 41.2%, year to date.

[SPEAKER_07]: It's large as names are familiar in the midcap space, our drug SM energy company, noble corporation.

[SPEAKER_07]: And it has just done well because energy has done well.

[SPEAKER_07]: It's one year return is also stellar.

[SPEAKER_07]: When you return of 73.25% given that it is a midcap index, I would expect it to have a little bit higher expense ratio.

[SPEAKER_07]: It also has a cap.

[SPEAKER_07]: To make sure that no individual security is over four and a half percent of the portfolio, there is a little bit of active management and reallocation here that kind of does justify that slightly higher expense ratio.

[SPEAKER_07]: Now, it is a smaller fund only $123 million in spite of it being around for just over 15 years.

[SPEAKER_07]: And so the bulk case here is small cap energy, or in this case mid cap

[SPEAKER_07]: But beta work's both ways, volatility works both ways.

[SPEAKER_07]: And so, should you have a steep drop off?

[SPEAKER_07]: This thing is gonna fall like a rock as well, even more accentuated than the rest of the energy market.

[SPEAKER_07]: These companies send to have the most operating leverage so every dollar increase in oil goes almost straight to the bottom line.

[SPEAKER_07]: And so, I will say the long-term track record, not great.

[SPEAKER_07]: If you invest it in this thing 10 years ago, the price return is negative, 1.3%, 5% annualized.

[SPEAKER_07]: And so I think if you're up a lot on this thing, if you're up at all on this thing, because if you've been holding it for the past year, you certainly would be.

[SPEAKER_07]: I was there to trim that down, 6% on mid-cap energy, I think is a pretty high weight, and should oil prices fall, this thing is going to fall accordingly and dramatically.

[SPEAKER_07]: That is PSCE, the Invesco S&P SmallCap.

[SPEAKER_07]: It's really mid-cap, energy ETF.

[SPEAKER_07]: Thanks for the call.

[SPEAKER_07]: That's Friday, and on Friday, we tend to make a little bit of time to run down key benchmark numbers.

[SPEAKER_07]: The two year treasure yields at 389-7 today, last week it was 388-6.

[SPEAKER_07]: 227 weeks back it was 64 basis points.

[SPEAKER_07]: 10 year, 4.368 last week, 4.378 and 224 weeks go, 1.762.

[SPEAKER_07]: Gold was $47.24 per ounce today that is at $97 higher than last week.

[SPEAKER_07]: 40 weeks back, it was $33.48 and $219 weeks back, it was $180.06.

[SPEAKER_07]: Silver $80.46 per ounce, $4.60 higher than last week.

[SPEAKER_07]: 117 weeks ago was $22.80 and 217 weeks back, it was $23.94.

[SPEAKER_07]: Oil!

[SPEAKER_07]: Don't know if you've heard, it's gotten pretty expensive recently.

[SPEAKER_07]: Well, it was trading at $95.41 per barrel, $6.59 less than last week.

[SPEAKER_07]: 85 weeks back that was 67.79, 127 weeks back it was 74.30, and 226 weeks ago, 66.62.

[SPEAKER_07]: National average for a gallon of regular gasoline is 454 that is 15 cents higher than it was last week.

[SPEAKER_07]: 153 weeks ago it was a 356, and 211 weeks back it was 4.25.

[SPEAKER_07]: California, who have to pause for this?

[SPEAKER_07]: California gas was averaging $6.16 per gallon, a 10 cent increase compared to last week.

[SPEAKER_07]: 133 weeks ago is 532 and 206 weeks back.

[SPEAKER_07]: It was 587, for comparison in Hawaii, an island.

[SPEAKER_07]: Gas is averaging 565 per gallon today that is 51 cents less.

[SPEAKER_07]: and gas in California.

[SPEAKER_07]: Speaking of gas, stock about jet fuel.

[SPEAKER_07]: Spirit Airlines ceased operation on May 2nd, making it the first corporate casualty of the Iran Wars jet fuel crisis.

[SPEAKER_07]: The low-cost carrier already in bankruptcy protection from competitive pressures couldn't survive the surge in fuel costs according to their CEO.

[SPEAKER_07]: And Spirit won't be the last airline casualty if the horror moves disruption continues into the summer.

[SPEAKER_07]: Now, the numbers are stark.

[SPEAKER_07]: Jetfield prices have soared since the conflicts began.

[SPEAKER_07]: Global demand for jetfield averaged about 7.8 million barrels per day in 2025.

[SPEAKER_07]: Of that 2 million barrels were internationally traded with 360,000 coming directly through the straight-of-war moves.

[SPEAKER_07]: But the indirect impact, that is far larger.

[SPEAKER_07]: The lack of crude supply to Asian refineries that produces jet fuel may create an additional fort shortfall of 800,000 barrels per day in May.

[SPEAKER_07]: Together that represents about 15% of total global demand simply missing from the market.

[SPEAKER_07]: And airlines are responding predictably.

[SPEAKER_07]: The fans are France, Kail M, United Delta, Air Asia.

[SPEAKER_07]: They have all cut flights.

[SPEAKER_07]: And the second half of April, 13,000 scheduled flights were canceled for May.

[SPEAKER_07]: And yet paradoxically, the total number of flights is still set to increase through to 6% this summer compared to last year.

[SPEAKER_07]: Airlines need to keep selling tickets to maintain cash flow, so their public schedules remain optimistic even as the fuel to fly those routes.

[SPEAKER_07]: Gross scarce.

[SPEAKER_07]: Now the geographic impact is, as it often is, uneven, which matters for anyone planning traveler investing in airlines.

[SPEAKER_07]: The US should remain relatively well supplied as a major oil producer and refiner, but the West Coast is vulnerable.

[SPEAKER_07]: It's not connected to the pipeline network east of the Rockies and imports nearly a fifth of its jet fuel supply with 85% of that from South Korea, which is now struggling with the loss of Gulf Crute.

[SPEAKER_07]: Europe has 38 days of commercial jet fuel stock climbing to 57, if you include government reserves, but Britain, which has no strategic reserve at all, is down to about 29 days, Portugal's at 23.

[SPEAKER_07]: The level where the IEA says rationing becomes necessary.

[SPEAKER_07]: American fighters have increased C-born jet fuel exports by 60% to 280,000 barrels per day with most going to Europe, which is essentially out-bid Asian buyers.

[SPEAKER_07]: That's left Asian carriers, scrambling.

[SPEAKER_07]: For investors, the airline sector is bifurcated, carriers with natural hedges like Delta, which owns a refinery in Pennsylvania, they're outperforming.

[SPEAKER_07]: Airlines heavily dependent on imported fuel in Asia and Europe, are most at risk of falling spirit.

[SPEAKER_07]: The summer travel season will test whether airlines can sustain the ticket prices, or sustain ticket prices increases needed to cover fuel costs without destroying demand.

[SPEAKER_07]: If they can't expect more capacity cuts,

[SPEAKER_07]: more cancellations and potentially more bankruptcies.

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[SPEAKER_02]: This isn't really a copper plate.

[SPEAKER_02]: This is a iron ore plate with some aluminum copper.

[SPEAKER_07]: If you're looking at each of the whole so few names that are so top-heavy, I think it is probably ill-advised to pay an expense ratio like this in order to get exposure that you could really get yourself.

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[SPEAKER_00]: Hey guys, Brian from Rookerhontah here.

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[SPEAKER_07]: Evdits, faxet, research, systemsing, is a name we used to hold, and a tool that we still use.

[SPEAKER_07]: Now, they did recently report earnings in March, so their next earnings are actually due up in late June.

[SPEAKER_07]: And they beat estimates revenue up 7.1% year over year earnings per share up 4.2% year over year was a beat as well.

[SPEAKER_07]: And free cash was up year over year 23.6%.

[SPEAKER_07]: Percent, but at the same time, operating margins, they compressed down about 2.3% year over year.

[SPEAKER_07]: I was marking each compression from AI and cloud investment.

[SPEAKER_07]: It's kind of the key narrative that has been driving this stock downward.

[SPEAKER_07]: I mean, it was training at near $500 per share in May of last year, one year ago.

[SPEAKER_07]: It's now down about 50% in the past 52 weeks.

[SPEAKER_07]: Inspired of the growth because margins matter.

[SPEAKER_07]: That margin compression matters.

[SPEAKER_07]: And so you've seen a lot of price target cuts from a lot of analysts.

[SPEAKER_07]: Most analysts now holding this at a neutral or hold, but it's got a wide target dispersion.

[SPEAKER_07]: I mean, 195 to 425 that's genuine uncertainty about AI disruption and whether or not this company can defend against it.

[SPEAKER_07]: Now the bold case here is they got 6% organic as V growth, accelerating feet, cash flows up 23.6% guidance

[SPEAKER_07]: And to have about 95% client retention.

[SPEAKER_07]: The tool I like, the tool I like, but Bloomberg, or Finnative S&P Global, they're all investing heavily in AI.

[SPEAKER_07]: We're starting to use Bloomberg as well.

[SPEAKER_07]: They have their own access to their own AI model, which leverages their data and frankly, have not seen good AI utilization within the tool itself.

[SPEAKER_07]: Now, anthropic announced AI tools that connect directly with FACSET, if a Jantic AI workflows embed FACSET data as the primary source for financial research automation, I mean, it does transform FACSET.

[SPEAKER_07]: From a workstation company into an AI data infrastructure layer, but that's yet to be seen.

[SPEAKER_07]: So this deeply discounted financial data compounder, it's recovering from its worst drawdown in 20 years.

[SPEAKER_07]: And until I see, personally, because again, I use this,

[SPEAKER_07]: I worry that they're not going to be able to defend from the coming storm, that it's facts-set data services, FDS.

[SPEAKER_07]: Now, before we head to our next break, I want to briefly mention the newest KPP Premium newsletter, which will be distributed tomorrow.

[SPEAKER_07]: This week at the KPP Insight section, we discussed the tariff picture, because there's still a lot going on there, including a recent court case that struck down the additional 10% tariff, the president tried to live, he's gonna talk about that.

[SPEAKER_07]: Stock idea section, we mentioned a freight railroad operator in a payroll company.

[SPEAKER_07]: In the portfolio management section, we touched on balancing quality and valuation in assessing businesses.

[SPEAKER_07]: If you're interested in learning more, visit investalk.com to hit subscribe.

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[SPEAKER_07]: You're listening to Invest Talk.

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[SPEAKER_07]: Memory chip stocks have been on an absolute terribly and honestly it rivals energy stocks this year and that comparison I just made I did on purpose because both are benefiting from supply constraints Meeting explosive demand Sandisk is up nearly seven times in six months Seagate western digital and nearly tripled Samsung Electronics just joined the trillion dollar club

[SPEAKER_07]: both micron and S.K.

[SPEAKER_07]: And S.K.

[SPEAKER_07]: Inex have more than doubled this year and now carry higher market caps than Xon.

[SPEAKER_07]: In the middle of booming oil market, we supply shortages.

[SPEAKER_07]: And the driver's AI, every AI system requires massive amounts of specialized, drain memory to function.

[SPEAKER_07]: The models running on those systems produce enormous data volumes that need to be stored and fed back at high speeds.

[SPEAKER_07]: And as AI systems get more powerful,

[SPEAKER_07]: The memory requirements increase exponentially.

[SPEAKER_07]: Meanwhile, production of high-end AI memory is crowding out capacity for memory used in everything from smartphones to cars, driving up prices across the board.

[SPEAKER_07]: Even Apple, known for its supply chain prowess acknowledged on its earnings called at memory prices, will drive an increasing impact on our business.

[SPEAKER_07]: And the margins are extraordinary.

[SPEAKER_07]: Micron and Sandis are generating about 80 cents of gross profit for every dollar revenue.

[SPEAKER_07]: That compares with historical ranges as low as single digits.

[SPEAKER_07]: On paper, those margins look unsustainably high for companies in the capital intensive business of physically manufacturing chips, but the unique economics of chip making explains why they could persist.

[SPEAKER_07]: I'll be at probably not as high.

[SPEAKER_07]: New fabrication facilities take years to build.

[SPEAKER_07]: You can't just flip a switch in that capacity.

[SPEAKER_07]: Meanwhile, Microsoft has raised its capex forecast by $25 billion and met a added another $10 billion of its own.

[SPEAKER_07]: Both, they're citing rising component costs.

[SPEAKER_07]: The biggest AI spenders are accelerating not the accelerating.

[SPEAKER_07]: With genuinely novel here, about this cycle is the shift in business practices.

[SPEAKER_07]: Memory has historically been one of the most of volatile sectors in tech.

[SPEAKER_07]: Boom, bust, boom, bust.

[SPEAKER_07]: Cycles driven by 30-day spot contracts that allow prices to whips off.

[SPEAKER_07]: That's changing.

[SPEAKER_07]: Major buyers are now signing long-term contract stretching three to five years to ensure access to critical components.

[SPEAKER_07]: Sandis signed a new business model agreements with five major customers

[SPEAKER_07]: Western digital has agreement stretching into 2029 if these long-term contracts become the norm, they could fundamentally reduce these sectors's cyclical volatility.

[SPEAKER_07]: Despite the enormous gains, some memory stocks still surprisingly cheap.

[SPEAKER_07]: Sanchez Micron traded just seven to nine times projected future earnings.

[SPEAKER_07]: Well, the median semi-conductor stock on the PHLX index trades about 37 times, a discount.

[SPEAKER_07]: It reflects the market's ingrained skepticism about memory margin sustaining.

[SPEAKER_07]: A skepticism that maybe warrant it, certainly if you look at history, but could be wrong about the cycle if the long-term contract model sticks.

[SPEAKER_07]: Bottom line here.

[SPEAKER_07]: Memory is the picks and shovels play on AI that most investors are overlooking because they're focused on GPU makers like Nvidia.

[SPEAKER_07]: The shortage is real, the demand drivers are structural in the business model maybe evolving in ways that make these stocks less volatile that their history suggests.

[SPEAKER_07]: Memory prices won't stay at these levels forever, but if the current shortage leads to a more sustainable industry structure, these stocks could shed their boom bus reputation once and for all.

[SPEAKER_07]: Before we head off for the weekend, I want to remind you once again that our newest invest talk of wealth webinar is available.

[SPEAKER_07]: On our YouTube channel, I just checked to make sure before I said that, because I did not want to lead any of you astray.

[SPEAKER_07]: It is the most recent video on our invest talk podcast clips.

[SPEAKER_07]: You'll notice that it says how to protect your portfolio from inflation.

[SPEAKER_07]: People enjoyed, maybe I'm a little biased, but why don't you go check it out for yourself?

[SPEAKER_07]: Well, that does it for another week of invest talk.

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