[SPEAKER_03]: This is Invest Talk, from KPP Financial, helping investors make sense of the markets one day at a time.

[SPEAKER_03]: Here's your host, Luke Guerrero.

[SPEAKER_01]: Good afternoon, fellow investors, and welcome to the Thursday, July 2nd, 2026 edition of Invest Talk.

[SPEAKER_01]: I'm your host Luke Grey, I'll be with you over the next 55 minutes or so as we round out the stories for the week.

[SPEAKER_01]: Bring you issues that matter and more importantly, more, it's not a word, most importantly.

[SPEAKER_01]: Answer your finance and investment questions before we head off for the long weekend.

[SPEAKER_01]: Now I've mentioned it earlier in the week, I'm sure Justin mentioned it as well to Maro E's a holiday as markets are closed, so we will be having a best of episode.

[SPEAKER_01]: Another issue I wanted to remind you about is that our newest invest talk of wealth webinar beyond the yield, how to invest for your income needs.

[SPEAKER_01]: Was a couple days ago, and if you missed it, it is now available on the Invest Talk YouTube channel, so I encourage you to go check it out.

[SPEAKER_01]: Okay, and just a bit, we'll talk about today's market performance as well as the show topics that I'm bringing to the table.

[SPEAKER_01]: But first, let's tackle this collar question.

[SPEAKER_06]: Hey Justin, and Lou, one of the getting guys to call, for the ask about Cardinal Hall.

[SPEAKER_06]: I've heard some good things about that company.

[SPEAKER_06]: Can you please give me your analysis where they're at today with that be a good choice?

[SPEAKER_06]: I'm trying to hit a little help here in my portfolio.

[SPEAKER_06]: Big fan to the show, go to the podcast or your answer.

[SPEAKER_06]: Thank you.

[SPEAKER_01]: Cardinal health a name that we do a we used to get pretty frequent calls about that sticker CAH is actually the number two U.S. pharmaceutical distributor just behind McCassett.

[SPEAKER_01]: They have 56 billion in quarterly revenue from their drug distribution, specially farm oncology and their ad homesolutions, and they also have their global medical products distribution.

[SPEAKER_01]: So thank you or medical and surgical products, your masks, your items

[SPEAKER_01]: You're to date, this name is up about 16.2% and it's in really well over the past 3 months, up 11.63%.

[SPEAKER_01]: It has, as health care has started to rally over the past couple of months, done far better than the industry.

[SPEAKER_01]: I mean,

[SPEAKER_01]: industry still negative year to date.

[SPEAKER_01]: The thing is outperforming it by 19.3 last year that performed it by 27.2.

[SPEAKER_01]: It has perennially outperform the industry coming out of the pandemic and with the exception of 2024, it's a pretty strong outperformance relative to the S&P 500.

[SPEAKER_01]: That's been a while since it has reported earnings, April 30th looks like was the last time that it reported earnings.

[SPEAKER_01]: But it was pretty solid.

[SPEAKER_01]: Gross profits up 18% year over year.

[SPEAKER_01]: Operating earnings up 18% is well, they beat gap rather non-gap, EPS, about 12.6% that came in as a 35% growth year over year.

[SPEAKER_01]: and toplight in revenue up 11%.

[SPEAKER_01]: I mean, these are pretty, pretty solid numbers that led to a bunch of analysts raising price targets.

[SPEAKER_01]: It is probably the most consistent beat and raise name of the past couple years.

[SPEAKER_01]: I mean, this is not just a one-off event here.

[SPEAKER_01]: We've been seeing it quarter after quarter and a lot of that is driven from there on college and special revenue growth, which is up 30%

[SPEAKER_01]: They also benefit from distribution of GOP ones, and that contributed six points of farm aggroath.

[SPEAKER_01]: If you're comparing it to McCaston, I mean, I like both names.

[SPEAKER_01]: This one's a little bit cheaper.

[SPEAKER_01]: The balance sheet is, I would say a little bit cleaner.

[SPEAKER_01]: We talked about the other day why we don't have price targets as the gospel for anything, but for what it's worth, I mean, it's got 14 by recommendations zero sell.

[SPEAKER_01]: I mean, it's pretty pristine consensus and free cash flows in the 3.3 to 3.7 billion.

[SPEAKER_01]: and a $56 billion market cap.

[SPEAKER_01]: I mean, I'm not seeing a lot that's bad here.

[SPEAKER_01]: And so this name, which is now trading, it about 19.08 times price for looking earnings, looks cheap.

[SPEAKER_01]: I mean, it is a bit expensive relative for who it's been the past five years.

[SPEAKER_01]: But with a technical perspective, it's solid.

[SPEAKER_01]: It's been a big run up in the past three months.

[SPEAKER_01]: I would look for a little bit of consolidation.

[SPEAKER_01]: Maybe around the 220, but this is a great name.

[SPEAKER_01]: It's a great compounder, clean, I, in fact, like it.

[SPEAKER_01]: That is cardinal health, take your C, A, H.

[SPEAKER_01]: We're a great show yesterday, we looked into a story that was really focused on a bit of a score card for the first half of the year.

[SPEAKER_01]: It was a look back at what actually worked and what the consensus predicted in January because most of the time those two things are pretty far apart.

[SPEAKER_01]: We also answered a listener question on ticker XMTR, a specializing manufacturing on demand for high-position of production parts as well as prototyping.

[SPEAKER_01]: That question was actually submitted via the comment section of our YouTube channel.

[SPEAKER_01]: If you have an omiss that show, I encourage you to go check it out and remember the best way to at never miss an episode of Invest Talk is to subscribe wherever you get your podcasts.

[SPEAKER_01]: Alrighty, on to today, where our main story is about the index fund trap.

[SPEAKER_01]: As an example, when the Russell 2000 is up over 20% in the S&P is under 10%.

[SPEAKER_01]: Saying I just own the index means very different things depending on which index.

[SPEAKER_01]: You own, so this story will give me a bit of a chance to explain how market cap waiting has quietly concentrated listeners into a handful of names.

[SPEAKER_01]: Also, we'll touch on the rotation trade, which had another great week this week.

[SPEAKER_01]: But if a story on the risks facing the power grid, and those risks tend to be heightened during the summer in the hotter months, people using more electricity, and a recurring story, that time for blue owl, as they're hit with another nearly $5 billion of redemption requests.

[SPEAKER_01]: We also have some voicemake calls for your play, including one on Oracle and another on Barric Mining Corporation.

[SPEAKER_01]: Some questions from the comment section of the Invest talk at YouTube channel, and hopefully we hear from some of you live before the weekend.

[SPEAKER_01]: We're going into a break and as our first break and it is always a quick one, please remember you can call anytime and leave your questions on the Invest Talk Voice Bank.

[SPEAKER_01]: If you listen to our live stream or possibly on AM1220 in the Bay Area, I encourage you to call now at 888-99 chart.

[SPEAKER_01]: We come back and we'll talk about today's market activity.

[SPEAKER_03]: In the early days, in Vestock was Jerry Klein and Steve Peasley.

[SPEAKER_03]: Now the torch has been passed and a new generation of hosts is on the job.

[SPEAKER_03]: Justin Klein and Luke Guerrero.

[SPEAKER_03]: So when you've got finance and investment questions, don't forget to call in Vestock.

[SPEAKER_03]: 888-99-Chart.

[SPEAKER_01]: stocks today, we're pretty much all over the place, the Dow was up 1.14%.

[SPEAKER_01]: The S&B was flat, the Nasdaq was negative 80 and the Russell 2000 was down 55 basis points.

[SPEAKER_01]: as well.

[SPEAKER_01]: Interestingly enough, something we talked about earlier in the week when the Equal weight S&P underperformed, we'll let out perform today as the RSP set a fresh all-time high, it outperforms the S&P by about 70 basis points.

[SPEAKER_01]: In spite of this, it looks like the Nasdaq and SMP still logged pretty solid gains for the week.

[SPEAKER_01]: I mean, it is a holiday short and weeks on four days.

[SPEAKER_01]: It did pretty well.

[SPEAKER_01]: You know, it didn't do well.

[SPEAKER_01]: It's nice.

[SPEAKER_01]: Memory.

[SPEAKER_01]: They had some weakness yesterday.

[SPEAKER_01]: There was some follow-through on that today, trucking, airlines, regional banks, quantum computing.

[SPEAKER_01]: other underperformers, software, kind of a half in one basket, half in the other basket, and healthcare, continue to do well, hospitals, med tech, all doing well today, energy staples.

[SPEAKER_01]: On the bond side, I mean, you didn't get much movement in the treasury market, it was a bit stronger on the short end where you saw yields falling anywhere between

[SPEAKER_01]: two to three basis points.

[SPEAKER_01]: The dollar was down 50 basis points that was down a bit more for most of the day before calling back some of those losses.

[SPEAKER_01]: Gold up 1.1 silver up 1 crude oil pretty much flat set up 20 basis points.

[SPEAKER_01]: On the data side we did get the June employment report

[SPEAKER_01]: Well below, well below the consensus.

[SPEAKER_01]: I mean, 110,000 was the consensus.

[SPEAKER_01]: There's a big big downer division to May to 129 initially saw 172 April was also revised down 71,000.

[SPEAKER_01]: But not all bad.

[SPEAKER_01]: I mean, you knew the unemployment rate down to 4.2%.

[SPEAKER_01]: It was previously 4.3 and an economist expected to hold.

[SPEAKER_01]: Then you also, the participation rate drop is 61.5.

[SPEAKER_01]: That is the lowest level since March of 2021.

[SPEAKER_01]: Initial claims came in at 215 versus the forecast of 220.

[SPEAKER_01]: So some good news there, continuing claims at 1.814 million versus 1.81.

[SPEAKER_01]: Not much difference there.

[SPEAKER_01]: I mean, overall, right, you have a bunch of moving pieces.

[SPEAKER_01]: You had some data, employment data always has an outsized impact

[SPEAKER_01]: You know, what people are thinking in terms of of rate moves in the future, you had that continuation in an unwinding in momentum and in semis because they I capex and and just escalating input costs

[SPEAKER_01]: software, non-farm payrolls, rates, also with those moves on the front end, had a bit.

[SPEAKER_01]: But overall, what you tend to see in a holiday shorten weeks is not much volume, not much liquidity, moves outside.

[SPEAKER_01]: So we'll see next week what happens in terms of follow-through.

[SPEAKER_01]: In fact, we're going to head to next week.

[SPEAKER_01]: Highlights will include ISM services on Monday.

[SPEAKER_01]: and June FOMC minutes on Wednesday.

[SPEAKER_01]: See if you can squeeze in a quick question from the YouTube comment section question bang this one on MCD.

[SPEAKER_01]: Wanted to get your thoughts on MCD?

[SPEAKER_01]: Thank you.

[SPEAKER_01]: MCD is Mickey D's as the kids call it.

[SPEAKER_01]: McDonald's Corporation.

[SPEAKER_01]: It is the world's largest restaurant brand.

[SPEAKER_01]: Actually,

[SPEAKER_01]: has probably nearly 50,000 locations all across the world, most of which are franchiseed.

[SPEAKER_01]: The dozzles one of those things were when consumer spending tends to look weaker and consumer ability wages tend to grow less than inflation.

[SPEAKER_01]: Well, that's when you start to see people move towards fast food.

[SPEAKER_01]: And

[SPEAKER_01]: Let's see what happened.

[SPEAKER_01]: With most recent earnings in May, revenue of 9% year over year, that was a beat, earnings per share, beat by about 3.3% global comparable sales up 3.8 operating income up 12 U.S. Comps 3.9.

[SPEAKER_01]: I mean, pretty solid numbers here, but they did warn Q2, expected to see meaningful deceleration from those Comps, especially in the U.S. bit of an FX tailwind.

[SPEAKER_01]: to earnings per share at the current rates of that moves against because of how big they are globally that can certainly hinder earnings.

[SPEAKER_01]: But I mean, this thing's a dividend risk crowd.

[SPEAKER_01]: They've got a 50 year history and it's currently trading where's it trading at right now?

[SPEAKER_01]: I mean, it's last time I checked it was in a decent position compared to where it's been.

[SPEAKER_01]: pausing for dramatic effect as my computer loads.

[SPEAKER_01]: Wow, that's taken forever.

[SPEAKER_01]: I mean, here today, it's not 8% of the past two months, it's not 863, it is at the low.

[SPEAKER_01]: Right, the low's 19.1 over the past five years, it's 19.8.

[SPEAKER_01]: So it's a solid compounder that is really, really cheap.

[SPEAKER_01]: It is probably the most iconic franchise on Planet Earth, certainly in the food space.

[SPEAKER_01]: The yield sent at 2.1 is pretty solid.

[SPEAKER_01]: The margins are compressing.

[SPEAKER_01]: in a way that has really, really heard this name specifically on the US side.

[SPEAKER_01]: And so what is the, what is the catalyst to move this thing higher?

[SPEAKER_01]: I mean, they already just decelerated guidance for Q2.

[SPEAKER_01]: I like the name, I like the brand.

[SPEAKER_01]: Everything's become so darn expensive there.

[SPEAKER_01]: That's certainly a problem there as well.

[SPEAKER_01]: But anytime someone downgrade's guidance, well, not the time to enter the name.

[SPEAKER_01]: So I'd keep it on my watch list for now.

[SPEAKER_01]: McDonald's Corporation took her MCD.

[SPEAKER_01]: All right, folks, are 24-7 investors on voice bank, never closes, so you can leave your finance and investment question anytime at 888-99 chart.

[SPEAKER_01]: Our work will continue after this break, so hang on, we'll see you on the other side.

[SPEAKER_03]: This is Invest Talk, now closing in on 63 million downloads.

[SPEAKER_03]: And Luke Guerrero is here taking your questions live.

[SPEAKER_03]: 888-99 chart.

[SPEAKER_01]: We already talked a little bit about the job's numbers today, right?

[SPEAKER_01]: The economy added 57,000 in June, but about half of what economists expected, certainly down from what we already saw in May.

[SPEAKER_01]: And that was a bit of a joke, right?

[SPEAKER_01]: The markets response, in a way was telling.

[SPEAKER_01]: The Dow ripped.

[SPEAKER_01]: I mentioned it was up, I don't think I mentioned it was a record.

[SPEAKER_01]: It was at 595 points.

[SPEAKER_01]: And what that tells you is essentially you have this continued rotation, right?

[SPEAKER_01]: This split is the rotation trade in a single session.

[SPEAKER_01]: You have the money flowing out of AI, you have money flowing out of some of my conductors, and it has to go somewhere.

[SPEAKER_01]: In this case, it's going into health care, it's going into staples, into financials, and into new industrials.

[SPEAKER_01]: The chips that essentially powered the market all-time highs really just a couple weeks ago are suddenly the sector that investors are wanting to sell.

[SPEAKER_01]: Now, the callos isn't because the number was cut in half, right?

[SPEAKER_01]: It's what the number does to expectations what the Fed is going to do.

[SPEAKER_01]: If you looked before today, you'd see that traders put the odds of a July rate hike

[SPEAKER_01]: Those odds dropped by a third to about 20.

[SPEAKER_01]: And the logic straightforward, if the labor market softens, if it can't justify hiking rates in order to fight inflation without risking a recession, they have that dual mandate, price stability, as well as maximum employment.

[SPEAKER_01]: And that suddenly has two legs that are pulling an opposite directions, and that creates space for the Fed to pause, rather than to tighten and certainly rather than to cut.

[SPEAKER_01]: And you know, there was this assumption.

[SPEAKER_01]: that the Fed would be squarely focused on inflation, but now they're gonna have to at least consider the labor side of their mandate as well.

[SPEAKER_01]: If the economy doesn't remain as, let's say, rip-roren as it looked a couple weeks ago.

[SPEAKER_01]: I mean, the equity market in a way, at least for some time is kind of in pricing in this Goldilocks outcome, this inflation cooling, the job market holding steady, rates not going higher A-ironings, just absolutely crushing it and carrying the index,

[SPEAKER_01]: But I think we're probably closer to that than we are in the case for the Fed has to aggressively raise.

[SPEAKER_01]: You know, I'm not necessarily saying that all these things will manifest themselves positively, but I don't see it yet, especially if the conflict starts to wear down.

[SPEAKER_01]: The Fed having to hike aggressively doesn't mean rates aren't going to be meaningfully higher, but aggressive hikes on likely.

[SPEAKER_01]: And really this kind of goes to show how little anybody knows about direction.

[SPEAKER_01]: All street was calling for rate cuts that beginning of the year.

[SPEAKER_01]: Then rate hikes in May now it's back to maybe.

[SPEAKER_01]: Neither nobody knows the markets conviction changes every single time you get new data.

[SPEAKER_01]: What's today's report doesn't it doesn't confirm that the rotation trade is going to continue.

[SPEAKER_01]: It's, you don't see that until you see meaningful follow-through there.

[SPEAKER_01]: I mean, you're moving away essentially from the most dominant theme of the year, and every piece of data that weakens this case for rate hikes kind of strengthens the case for parts of the market that are most sensitive to borrowing, borrowing costs, the ones that did well today, small camps housing.

[SPEAKER_01]: Financial, so if you're positioned for the rotation, I mean, today was a good day.

[SPEAKER_01]: If you're concentrated in AI in semis, it's a reminder, maybe, that the market can,

[SPEAKER_01]: Take away is quickly as it give its.

[SPEAKER_01]: All right, folks.

[SPEAKER_01]: Let's answer one more question before this next break.

[SPEAKER_00]: Hey, I've got a question.

[SPEAKER_00]: Cool.

[SPEAKER_00]: R-C-L.

[SPEAKER_00]: I really like this entry board and support here.

[SPEAKER_00]: What do you think about this for a near-term hold?

[SPEAKER_00]: One to three years and what do you see as the catalyst to reverse the trend from where it's currently at?

[SPEAKER_00]: to start gaining more momentum.

[SPEAKER_00]: I think it's the good entry point and just one of your thoughts.

[SPEAKER_00]: Thanks.

[SPEAKER_01]: Oracle, of course, the enterprise software and cloud infrastructure giant, so they got databases, they got the OCI training platform, bunch of cloud revenue, and their cloud revenue in 2026 hit, roughly $34 billion.

[SPEAKER_01]: They're currently training a 140.

[SPEAKER_01]: This is a $410 billion market cap company that was worth more than a quarter.

[SPEAKER_01]: More than that at the beginning of the year.

[SPEAKER_01]: I mean they're down 28% year today down 40% Over the past 52 weeks

[SPEAKER_01]: They are also one of those names that, you know, as they beat on, what do they report earnings, June 10th, I want to say, they also announced they're issuing a bunch of new debt, right, they're a new financing rather 20 billion in equity 20 billion in debt, you know, that's coming off of.

[SPEAKER_01]: Friendly pretty solid earnings.

[SPEAKER_01]: I mean revenue is up 21% year over year.

[SPEAKER_01]: That was a beat earnings per share was a two eleven that beat the 189 estimate by 11.6% You know, this is

[SPEAKER_01]: One of those names that at this point you got to be pretty high conviction on it.

[SPEAKER_01]: If it's here, I'm not saying I necessarily am, but you'd have to be, right?

[SPEAKER_01]: They have a huge backlog.

[SPEAKER_01]: They have solid growth.

[SPEAKER_01]: They have solid lease commitments.

[SPEAKER_01]: But free cash flows, negative in a big way.

[SPEAKER_01]: I mean, geez, 23.6 billion and negative free cash flow.

[SPEAKER_01]: It's supposed to double next year.

[SPEAKER_04]: Yeah.

[SPEAKER_01]: If you're not certain about AI demand variability, then you've got to stay away from this name.

[SPEAKER_01]: And from a technical standpoint, I mean, there's nothing momentum-wise that's telling you this thing is turning.

[SPEAKER_01]: I'm low conviction on this, especially at this price with the way things are looking for it from a momentum basis.

[SPEAKER_01]: So I keep it on my watch list for now.

[SPEAKER_01]: Thanks for the call.

[SPEAKER_01]: Tomorrow's Market Holiday, we got a best of show ready for you, but we still have plenty to talk about today.

[SPEAKER_01]: So when we come back from this break, we got a main focus point and more answers to your finance and investment questions.

[SPEAKER_02]: At KPP Financial, Accountability means more than advice.

[SPEAKER_02]: It means we invest alongside you, through our parallel investing approach.

[SPEAKER_02]: When we recommend an investment for clients, one or more KPP principles invest their own capital at the same time, same day, same price, same percentage.

[SPEAKER_02]: If your portfolio moves, ours does too.

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[SPEAKER_03]: Loop Guerrero is here now.

[SPEAKER_03]: 888-99 chart.

[SPEAKER_01]: You know, the thing that people often say, which is I just, I just don't the index and it pops up even more in terms of a proof point of how beneficial it is when we're in a bull market.

[SPEAKER_01]: But what does it really mean?

[SPEAKER_01]: A lot of investors don't even bother to think about what it means.

[SPEAKER_01]: And when I hear that, my first question is naturally.

[SPEAKER_01]: which one?

[SPEAKER_01]: Because right now, the Russell 2000, that's an index.

[SPEAKER_01]: That's up over 20% year to date, the S&P, is up about 8% to 9% that's a different index.

[SPEAKER_01]: The Dow is a entirely different index, that's up 7, it's a convolutively created index.

[SPEAKER_01]: And the Nasdech is a highly concentrated index compared to all those things.

[SPEAKER_01]: I mean, despite the AI rally everyone's been chasing, that's only up 11%.

[SPEAKER_01]: just fell on the week jobs day to today.

[SPEAKER_01]: So I just own the index means a wildly different things, depending on which index you actually own.

[SPEAKER_01]: And most people understandably have no idea why.

[SPEAKER_01]: You know, I'm an index nerd of sorts.

[SPEAKER_01]: You can ask Justin about it.

[SPEAKER_01]: It's kind of annoying, but most people don't know why.

[SPEAKER_01]: So let's dive in a little bit.

[SPEAKER_01]: The answer is,

[SPEAKER_01]: Different indices can be concentrated in different ways.

[SPEAKER_01]: And sometimes in ways that may absolutely terrify you.

[SPEAKER_01]: I'm going to ignore the Dow because again, price-weighted, stupid, makes no sense.

[SPEAKER_01]: So let's get market-cap weighted indices, right?

[SPEAKER_01]: The S&P 500, 500.

[SPEAKER_01]: Supposedly 500 companies, practice the top 10 companies, make up 39% of the index, top 3 alone, Microsoft Apple and video.

[SPEAKER_01]: I mean, that's 22% of the index.

[SPEAKER_01]: Mag7 makes up roughly a third of the entire thing.

[SPEAKER_01]: So when you buy the index, what you're really doing right now is making a massive bet on seven tech companies and something that'll realize that.

[SPEAKER_01]: And right now, that bed is underperforming a basket of 2,000 small companies that most investors could not name, and that outperformance is the widest margin since the early 2000s.

[SPEAKER_01]: Microsoft, you know, name we hold in our strategy, say it a lower weight, certainly lower than the index does, that's headed for its worst month since the year 2000, Palantir.

[SPEAKER_01]: A name we constantly got calls on down 58% this year into it dropped 48% Accenture down 42 sales force down 34 You know, they're acting more like the uh, I saw one strategy is called at the Maleficent 7 those names I mean, these are S&P 500 companies that are dragging the index down While the majority of the stocks in the index are actually doing fine.

[SPEAKER_01]: I mean, it's the opposite of what we saw last year

[SPEAKER_01]: 65% of the S&P is outperforming the index.

[SPEAKER_01]: That's the broadest participation we've seen in a really long time, meaning the average stock is healthy, but the concentration in mega caps, that is the problem now.

[SPEAKER_01]: The same time, Russell 2000, recently had all time highs, back in May.

[SPEAKER_01]: And its gains are spread across the index rather than concentrated in a handful of names because of what it's attacking.

[SPEAKER_01]: It is attacking the 2,000 largest names after the thousand largest names in the U.S. market.

[SPEAKER_01]: 65% of its constituents positive returns, 53% gained more than 10% and 34% of them rose more than 25% I mean that breadth is what a healthy market looks like and it's the opposite of what's happening in the S&P where a few AI stocks are carrying the index

[SPEAKER_01]: and these mega-capped spenders are getting punished for their capex, and that's why I'm kind of pushing back here on the conventional wisdom of ION the index because for years the advice has been just by the S&P, forget about it, and that was great advice when the S&P's, you know, big components, the Mag7 were compounding it, 30, 40% annually, and buying back billions of dollars in stock, and

[SPEAKER_01]: But it's less great advice when the same companies are issuing a lot of debt and equity to fund AI infrastructure, and at the same time, slashing bybacks, and seeing their CapEx absorb upwards of 90% of their operating cash flow.

[SPEAKER_01]: I mean, the structural tailwind that made this capwitted index investing strategy good, it made it a one way trade, a shrinking supply of shares, meeting, relentless demand, and that's

[SPEAKER_01]: That is reversing now.

[SPEAKER_01]: It's what we were seeing.

[SPEAKER_01]: Quirnid Goldman looks like net equity supply will actually be flat this year.

[SPEAKER_01]: And you may say, OK, well, it's probably different every year.

[SPEAKER_01]: But I mean, that's the first time since 2003.

[SPEAKER_01]: That's not a coincidence.

[SPEAKER_01]: The last time equity supply stopped shrinking.

[SPEAKER_01]: It was also the last time, small caps beat large caps by this kind of margin.

[SPEAKER_01]: In the valuation gap,

[SPEAKER_01]: Makes it even clearer.

[SPEAKER_01]: The Russell 2013 trades at 18 times for earnings, the S&P nearly 26.

[SPEAKER_01]: Small cap 600, which I've railed on before, I mean, it's not really a small cap in next lot of mid caps in there, but it screens for profitability, it's just at 16 times.

[SPEAKER_01]: That is a 30 year extreme discount.

[SPEAKER_01]: And the gaps only now, beginning to close.

[SPEAKER_01]: Small cap earnings are projected to grow just under 20% in each of the next two years.

[SPEAKER_01]: Large cap earnings growth while strong is decelerating because hyper scalar capex weighs on free cash flow.

[SPEAKER_01]: It's just basic math.

[SPEAKER_01]: Now aside from that there's also a structural reason why small caps have been not performing just beyond your valuation right about 40% of Russell 2000 companies carry floating rate debt compared to under 10% of the S&P 500 why smaller companies get

[SPEAKER_01]: worse fixed rates.

[SPEAKER_01]: The best way to illustrate this is if if Warren Buffett and I went to a bank and asked for a loan, he's a mega cap.

[SPEAKER_01]: He's getting a better rate than me.

[SPEAKER_01]: So when the Fed cuts rates three times last year, immediate cash flow boost for small caps.

[SPEAKER_01]: But large cuts just in need and also didn't really feel.

[SPEAKER_01]: They are predominantly domestic revenue base, also insulates them from currency headwinds, from tariff complications, from these geopolitical supply chain risks that weigh on multinationals.

[SPEAKER_01]: Now, I'm not telling you to dump your S&P index fund.

[SPEAKER_01]: It's still a core holding for most portfolios.

[SPEAKER_01]: I'm telling you,

[SPEAKER_01]: is that if it's your only holding, you are far more concentrated than you think.

[SPEAKER_01]: You are far more exposed to mega-capped AI capex risk than you realize and you've been underperforming a simple small-capped fund by 12 points this year without having any idea why.

[SPEAKER_01]: Now the fix isn't complicated.

[SPEAKER_01]: Add an equal weight S&P 500 ETF alongside your cap weighted one that reduces that mega cap concentration because it waits equal, it waits every name equally, while also keeping your large cap X-Motor add a small cap allocation.

[SPEAKER_01]: Even 15 to 20% of your portfolio that fundamentally changes your return profile.

[SPEAKER_01]: And if you're in the camp, the camp that thinks AI capex is getting overextended and buybacks are disappearing, really.

[SPEAKER_01]: The camp that is just seeing what is happening, tilts towards the parts of the market that don't depend on those dynamics.

[SPEAKER_01]: Make your portfolio more resilient to the exact risks that we've been talking about.

[SPEAKER_01]: I just own the index, and it stopped being a complete answer probably about a year ago.

[SPEAKER_01]: More than ever, which index you own matters more than whether you're in one at all.

[SPEAKER_01]: All right, we got the time.

[SPEAKER_01]: So let's drop in another invest talk, a listener question now.

[SPEAKER_08]: I'm calling from Ralph and County, New York.

[SPEAKER_08]: With just a question about if I should be worried or not about some of my big movers for the last year or so, to particularly our Barric Mining Corp,

[SPEAKER_08]: and agonico eagle mining.

[SPEAKER_08]: I don't have a good outlook on the stock market in the next year or so.

[SPEAKER_08]: I feel like we're in just a weird time and I don't see it last thing.

[SPEAKER_08]: So I'm trying to stick with my solid good earners.

[SPEAKER_08]: But I don't know, last couple of days they've been down.

[SPEAKER_08]: So just wondering, thank you.

[SPEAKER_01]: B and A E M, Barric and Enico Eagle Mines are both names that we hold for clients in various strategies and they had a huge huge run-up coming out of 2023 into 2026 because of the goal miners and so there

[SPEAKER_01]: Return is essentially going to primarily be a leveraged, leveraged bet on gold.

[SPEAKER_01]: It doesn't exactly track the prices.

[SPEAKER_01]: You've got a bunch going on.

[SPEAKER_01]: You've got, you know, idiosyncratic risks from individual mining exposure, regulatory risks from various countries.

[SPEAKER_01]: But both of these are pretty well.

[SPEAKER_01]: diversified and are going to give you a similar return profile of what's going on with gold.

[SPEAKER_01]: So as we're coming off of, you know, this huge run up into really the end of Q1 of this year, you saw one of the worst quarters for gold in quite some time, this most recent quarter.

[SPEAKER_01]: And so I expect at least selling me an AEM is down 24%.

[SPEAKER_01]: You know, Barrick is down in a similar fashion.

[SPEAKER_01]: Now, for us along the way, because we always recommend this, you know, to anybody who's investing, we take profit.

[SPEAKER_01]: You see a huge run.

[SPEAKER_01]: I AM was trading at $67 in March of 2024.

[SPEAKER_01]: It was trading at $340.

[SPEAKER_01]: Sorry, this Canadian dollars in March of 2026.

[SPEAKER_01]: And so,

[SPEAKER_01]: You should never assume that a part chart is always going to go up into the right.

[SPEAKER_01]: You should be taking profits along the way, rebalancing, making sure you're never overexposed.

[SPEAKER_01]: to one thing.

[SPEAKER_01]: And even though over the past quarter you've seen gold fall a bit, it doesn't mean that it changes your thesis and why you were exposed to going the first place because the things that have been driving gold are going to continue to drive gold and long-term.

[SPEAKER_01]: People moving away from US dollar-denominated assets, central banks are buying historic levels of gold.

[SPEAKER_01]: And I imagine

[SPEAKER_01]: When things start to come down geopolitically, they'll probably continue.

[SPEAKER_01]: I've said this before on the show about what drives gold prices.

[SPEAKER_01]: Now, one of those things though the correlations of it looser recently is the opportunity cost.

[SPEAKER_01]: If you can get yield elsewhere as yields become higher elsewhere, you're less like an old gold because it's a non-yielding asset.

[SPEAKER_01]: The other thing is that when things start to hit the fan, when things actually are,

[SPEAKER_01]: in a bad situation.

[SPEAKER_01]: You got to sell the gold.

[SPEAKER_01]: Why?

[SPEAKER_01]: Because you can't pay your phone bill and gold.

[SPEAKER_01]: You pay it in dollars.

[SPEAKER_01]: When you think the future is going to be worse, that's when you buy gold.

[SPEAKER_01]: You hoard it away.

[SPEAKER_01]: You know, because you're worried about inflation, you will have to risk all these things.

[SPEAKER_01]: So yeah, I would hope that along the way you to profit, I would encourage you no matter what your conviction here in these names is.

[SPEAKER_01]: And again, we hold them for clients to take profit as well.

[SPEAKER_01]: If the market starts to see systematic stress, gold tends to do well as a safe haven asset.

[SPEAKER_01]: So keeping them as a meaningful part of your portfolio certainly a good idea in our opinion at least because we hold them for clients.

[SPEAKER_01]: That is B and AEM are the tickers.

[SPEAKER_01]: For the real questions about gold, thanks to the call.

[SPEAKER_01]: So I tune a row from 80 to 99 chart.

[SPEAKER_05]: Hi, my name's Justin from Reno.

[SPEAKER_05]: I bought a stock a few months ago.

[SPEAKER_05]: Symbol is IBRX, immunity bio and company.

[SPEAKER_05]: I was wondering if I should add another position or if that's a bad idea.

[SPEAKER_05]: Because I don't want to make a winning stock for losing stock if it goes back down.

[SPEAKER_05]: If I should wait for a pullback or if you could look into it, let me know what you think for a long-term hold.

[SPEAKER_05]: Thank you.

[SPEAKER_01]: Immunity bio is ticker I, B, R, X, it is a commercial stage immunotherapy company, looks like they have some non-Muslim-vasive bladder cancer treatments, carcinoma treatments, developing cell therapies actually headquartered around the corner for me in Culver City, California.

[SPEAKER_01]: It is a $9 billion market cap company that is up 376.77% year to date up 257% over the past 52 weeks.

[SPEAKER_01]: The reported in May looks like revenue was up 168% year over year.

[SPEAKER_01]: I was a beat driven primarily from the looks like ramp up across their bladder cancer prescribers earnings for share though missed.

[SPEAKER_01]: by 779% they had a net loss.

[SPEAKER_01]: A lot of red, a lot of red looking at their income statement, net margins in the negative 300s, though.

[SPEAKER_01]: A couple years ago those negative 173,000,

[SPEAKER_01]: got to be a million with an amp and so what I'm looking at here is a pre profit company they're not pre revenue because they are making revenues revenues up to 300% on an annualized basis going back to 2020 they got decent pipeline I mean it looks like they're on phase three in some their small cell lung cancer treatments they were endorsed by Jim Cramer looks like so take

[SPEAKER_01]: It is a class action lawsuit that's hanging over them tied to an FDA warning.

[SPEAKER_01]: I mean, listen, the revenue growth is great.

[SPEAKER_01]: They're expanding into various countries, which is, which is solid as well.

[SPEAKER_01]: They have a filing that shows, they have another treatment that's launching in January of next year.

[SPEAKER_01]: They have phase three data on their cancer, treatment coming.

[SPEAKER_01]: They have,

[SPEAKER_01]: These amount of cash, I mean, 242 million in cash is certainly solid, especially for a company right here, but the other day.

[SPEAKER_01]: I mean, you can look at it.

[SPEAKER_01]: If you were looking at my faxette screen right now, you'd see a whole bunch of red.

[SPEAKER_01]: It is a high octane, incredibly speculative biotech.

[SPEAKER_01]: And that's what it is, right?

[SPEAKER_01]: You need to understand the risks here.

[SPEAKER_01]: It's burning hundreds of millions of dollars per quarter in adjusted losses.

[SPEAKER_01]: There is a unresolved FDA warning letter and a class action lawsuit.

[SPEAKER_01]: And it's

[SPEAKER_01]: nine billion dollar market cap is essentially a bet on its antivo platform expand it's not betting on current earnings is a lottery ticket so you need to size this as if you're buying a lottery ticket it's not a core position it has to it should be a very small position of your portfolio and you certainly should not put in any more than you are willing to lose to absolute zero

[SPEAKER_01]: that is IBRX immunity bio-ink, thanks to the call.

[SPEAKER_01]: This is Invest Talk, I'm Lou Greer.

[SPEAKER_01]: We have one goal here, and it's to help you achieve your financial freedom, or where can you do this break?

[SPEAKER_01]: It is our final break before the long weekend.

[SPEAKER_01]: If you've got a question, pick up that phone and dial 888-99 chart.

[SPEAKER_04]: Luke Guerrero is here and ready to tackle your questions.

[SPEAKER_03]: Every investor is working to build a secure financial future.

[SPEAKER_03]: How they get there and when they get there, that depends on many factors.

[SPEAKER_03]: The more you learn about how the market works, the better your chances for success.

[SPEAKER_03]: So don't forget to call, in Vestark, 888-99 chart.

[SPEAKER_01]: So there's this non-profit NERC.

[SPEAKER_01]: And what they do is they monitor the reliability of America's power grid.

[SPEAKER_01]: They did an assessment recently, and there were a couple of freezes in there that they're concerning for not just consumers, but also for investors as well, right?

[SPEAKER_01]: So the CEO said the situation is, quote, a hybrid complex risk environment, and here's my favorite one, a five alarm fire.

[SPEAKER_01]: And that's coming from the organization whose literal job is keeping the lights on.

[SPEAKER_01]: So those aren't really...

[SPEAKER_01]: comforting descriptions, I would say.

[SPEAKER_01]: Now I don't know this, it's not all bad, you know, the good news is a 58.5 gigawatts of new power resources that have come online.

[SPEAKER_01]: A lot of that is solar 30 and a half.

[SPEAKER_01]: It's also some solid battery storage, that's about 16 and seven of natural gas.

[SPEAKER_01]: So there's good diversification there.

[SPEAKER_01]: I mean, that's a record and should handle normal summer conditions.

[SPEAKER_01]: But the bad news is,

[SPEAKER_01]: Nothing about this summer is normal.

[SPEAKER_01]: I mean, I'm sure you've seen it.

[SPEAKER_01]: There's a dangerous heat wave that is hitting the eastern two thirds of the country.

[SPEAKER_01]: Temperatures are topping 100 degrees.

[SPEAKER_01]: Drouts are depleting Western reservoirs.

[SPEAKER_01]: And that's bad because that threatens hydro powers so that weakens the electrical grid as well.

[SPEAKER_01]: And then you see peak summer demand is grown by 11 gigawatts since last year.

[SPEAKER_01]: And it's primarily driven by not you using your AC

[SPEAKER_01]: Now, the part that's really genuinely new and alarming is that in May, this group, any R.C.

[SPEAKER_01]: issued a rare alert.

[SPEAKER_01]: Only the third time they've done it in history, warning utilities to overhaul how they track and manage large data center customers.

[SPEAKER_01]: The reason being that clusters of these data centers,

[SPEAKER_01]: they have been spontaneously severing their grid connections and switching to on-site backup power during minor line malfunctions and when that happens collectively it essentially destabilizes the entire grid and causes these cascading failures which as you can imagine how to good thing.

[SPEAKER_01]: I mean, think about what this means.

[SPEAKER_01]: These facilities consume power.

[SPEAKER_01]: Equal to small cities, when they suddenly drop off, the grid has to instantly rebound and supply and demand.

[SPEAKER_01]: And if it can't, then these power plants fail, and that's why you get blackouts.

[SPEAKER_01]: You know, they're not spinning machines.

[SPEAKER_01]: They're power electronics where things happen instantly, and that induces all kinds of oscillations, and all kinds of other issues.

[SPEAKER_01]: Now, wood McKenzie documented another problem.

[SPEAKER_01]: Data centers are consuming electricity

[SPEAKER_01]: Ways that can't really be predicted.

[SPEAKER_01]: They're swinging power consumption by 50 megawatts or more within minutes.

[SPEAKER_01]: That's equivalent to powering 50 Walmart stores.

[SPEAKER_01]: And so that volatility, it doesn't just threaten the grid.

[SPEAKER_01]: It can damage the data centers on back of equipment, which in turn feeds that first problem that we talked about.

[SPEAKER_01]: Now, PJM, which manages the grid for about 67 million people across the Mid-Atlantic Midwest,

[SPEAKER_01]: They've already received emergency DOE orders, allowing them to curtail power data centers as the last resort.

[SPEAKER_01]: But for you, I mean, cooling costs, I don't got to tell you that they're rising, they're projected at $792 this summer of 10.5% from last year of nearly 40% since 2020.

[SPEAKER_01]: So on the consumption side, you're facing rising costs because of data centers.

[SPEAKER_01]: Now on the investor side,

[SPEAKER_01]: This is a physical real world constraint on AI being built out that doesn't really get enough attention.

[SPEAKER_01]: You can spend 750 billion dollars, a trillion dollars on GPUs and data centers, but if your grid can't rely or bleed power them, you're just going to have a bunch of non-turned-on machines.

[SPEAKER_01]: So the company solving the power problem, your utility scale, battery storage, your grid infrastructure builders,

[SPEAKER_01]: eventually you're nuclear?

[SPEAKER_01]: That's the real bottleneck.

[SPEAKER_01]: The bottleneck is where the pricing power lives and the A-I-Trade can't exist without the power trade.

[SPEAKER_01]: And we're gonna see this somewhere.

[SPEAKER_01]: I mean, the power trade is entering what's probably gonna be the most stressful test that it has faced in a while.

[SPEAKER_01]: That does it for another episode of Invest Talk, Justin and I in the entire Invest Talk team.

[SPEAKER_01]: Thank you for listening and encourage you to tell your friends and family members about our free podcast downloads, which of course you can get an iTunes and Spotify.

[SPEAKER_01]: Why are you over there?

[SPEAKER_01]: We'd really appreciate it if you left us a rate and review.

[SPEAKER_01]: I also want to tell you one more time tomorrow's Market Holiday, so we'll have a best of show.

[SPEAKER_01]: And maybe while you're listening to that best of show right after you can check out our newest

[SPEAKER_01]: how to invest for your income needs, it is posted right now on our YouTube channel.

[SPEAKER_01]: Lastly, today's show may do think about your personal financial circumstances.

[SPEAKER_01]: I encourage you to head over to investtalk.com and schedule a free portfolio review.

[SPEAKER_01]: Independent thinking, shared success.

[SPEAKER_01]: This is Invest Talk.

[SPEAKER_01]: Enjoy your weekend, happy birthday, America.

[SPEAKER_04]: Invest talk is a trademark of KPP financial because of the nature of the interactive dialogue and herringed in the format of this program.

[SPEAKER_04]: It's important for the listener to understand that not all comments made will apply to that.

[SPEAKER_04]: Specifically, nothing says she'll be taken to be investment advice.

[SPEAKER_04]: or shell statements on this program be considered and offered to buy or sell security.

[SPEAKER_04]: Because such advice is rendered solely on an individual basis, and at times will require that the investor review a perspective before investing.

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