The Planstrong Financial Forum: Saturday, January 25, 2024

Episode Transcript

Speaker 1 (00:07):
It's time for the plan Strong Financial Forum. You're a
weekly hot topic update from a leading Boston area investment advisors.
It's smart investing simplified. Now here's your host, Ken Carberry
with the president of plan Strong Investment Management Paul Parsons.

Speaker 2 (00:24):
Ed Welcome to the plan Strong Financial Forum.

Speaker 3 (00:26):
I'm your host, attorney Ken car Very, along with financial
advisor Paul Parsons. And Paul it's been cold up here recently,
but you know, those of you who go down south
for the warm weather, you were a little surprised this
past week.

Speaker 4 (00:39):
I think it's the coldest it's ever been since I've
ever come to Florida. This last week it was rainy
and cold. And when I say cold, I don't mean
you know Florida cold where they it's their way of
bragging where it's you know, sixty and they have to
we're a light.

Speaker 2 (00:54):
Sweater kind of thing.

Speaker 4 (00:56):
No, no, no, We were in the high forties in
the in the middle of the night or early morning,
and maybe it would push fifty during the day, but
I can't ever remember it being this call down here,
So yeah, it was.

Speaker 2 (01:09):
You seem a little happy about that.

Speaker 4 (01:11):
Guy, Yeah, I know, watching your style you are. You
don't look that concerned that my week wasn't all that good.

Speaker 2 (01:18):
Now, we've been in the single digits a lot up here, Paul,
so we're not too concerned.

Speaker 4 (01:22):
So the forties and fifties looks pretty good from that
exact angle.

Speaker 2 (01:26):
Right exactly. Yeah. Meanwhile, it was a pretty big week
when we haven't the new administration since last we spoke, was.

Speaker 4 (01:35):
There, I think, so I hadn't even Okay, yeah, that
is true, and you know, we'll talk a little bit
about the whole inauguration and all that, but I'm going
to try to just stick to the business topics today
and especially talk about really, you know, how we had
that topic a few weeks ago, kind of what are
the five key events that investors should keep their eye

(01:59):
on in January for clues as to kind of what
direction is this market heading, Because don't forget, the market
peaked in November early December, and then it started to
kind of go the other way a little bit. It
got up to six thousand, and then it started to
retreat a little bit. It actually retreated under six thousand

(02:21):
by the end of the year, and the question was, well,
will that continue on in twenty twenty five. And the answer,
based on what I said to listeners over the last
few weeks, was well, there are five key events that'll
really tell us if if that's going to happen or not.
And so we got four of the five key events

(02:41):
have now happened. They're in the history books, so I
can actually report kind of what does it look like,
So we'll start with that. Then I've wanted to get
to this for a while. But the theme that I've
been saying for the last several oh gosh months now
is with the market as high as it is, trading

(03:03):
it what a twenty one forward multiple almost a twenty two.
You know, when you get into that kind of rare air,
it's very hard for the market to then have additional
gains on top of that, even if earnings are supposed
to grow substantially. And so one thing that we've been

(03:23):
talking about with our clients is using an investment design
for a flat market. In other words, a market that
doesn't have that much more upside to it may have
some downside to it if some bad things happen. You know,
there's plenty of risks out there, and so I wanted
to specifically talk about that today, So that's going to

(03:43):
be the second topic I talk about. And then there
was some big news over the last week that really
involved two of the most popular companies that investors watch
around the United States over the last week or so,
and they were Apple and Netflix, and it was kind
of the tale of two cities. So I want to

(04:04):
talk about why they were in the news and and
kind of what investors should make of all that. And
then another favorite out there is Tesla, and and when
I say favorite, it's a favorite of many investors given
its investment performance. But you know it's also a contentious

(04:24):
stock because you know, Tesla makes evs, and evs and
Donald Trump don't exactly look like they're, you know, best
of buddies. So I wanted to talk about some good
news and some bad news for Tesla, and believe it
or not, I'm gonna say something positive about Tesla.

Speaker 2 (04:43):
And yeah, I know I've been, you know, not the.

Speaker 4 (04:45):
Most positive person on Tesla, not because they don't make
a beautiful product.

Speaker 2 (04:49):
They do.

Speaker 4 (04:50):
It's I always shade any results when when they're based
on government involved because that same government involvement that can
help them with its with its absence, can hurt them, right,
And so you know, I've always looked at those as

(05:11):
you're you're at the whim of politicians when you get
into that. Could it be a good investment maybe, but
you know, to quote Clint Eastwood, do you feel lucky?

Speaker 2 (05:19):
Well? Do you pump?

Speaker 4 (05:21):
You know? So to me, it's a harder call when
you start to invest in a company or an industry
like EVS that are so heavily dominated by policy.

Speaker 2 (05:33):
So I wanted to talk about Tesla and.

Speaker 4 (05:36):
Then I heard somewhat of an alarming, I don't know
headline in the last week that was about Eli Lilly
and you know, we have been talking about Lily and
Novo Nordisk as the real kings of this whole weight
loss drug megatrend, and there was a concern learn that

(06:00):
there was some cold water being tossed on the enthusiasm
for that this last week from Lily, and so I
wanted to talk about what happened and what does it
mean and was it really cold water on weight loss
drug enthusiasm. So I'll hit that, and that's something that
I get asked a lot by our clients. Also, is
you know, there's so much noise out there about all

(06:24):
these different policy decisions. You know, now that we've got
President Trump and we don't have President Biden, we've gone
from from famine to feast. As it relates to, you know,
how many discussions people get into in one day and
the guy I'll sit down with you pick him, and
I'll start to, you know, spout all kinds of policy

(06:46):
to them. That's completely the opposite of this whole insular
approach they had with President Biden over the last four years.
And in so many ways it's refreshing, but in some
ways it's hard.

Speaker 2 (06:59):
To keep up with it.

Speaker 4 (07:01):
And so what I wanted to talk about was for
those that are kind of getting dizzy with all of
these policy discussions that are going on, I wanted to
talk about the policy decisions that will impact the markets
the most. So here are the ones you should listen to.
Your ears should perk up to the rest of them.

Speaker 2 (07:20):
They're nice too.

Speaker 4 (07:21):
If you're worried about them from a social perspective or
something else, knock yourself out. But as it relates to
your investment portfolio, they are a handful that are really
important for what will impact markets. So I specifically wanted
to highlight what those are and specifically what the number
one priority is as it relates to what's going to
impact the markets the most. Okay, and then finally, I

(07:43):
hope we have time for this because I love this
topic and it's a fun, interesting investment idea a la
Peter Lynch. You remember Peter Lynch. He was the fund
manager for the Magellan funded Fidelity back in the seventies
and eighties, and you know he he said one of
the ways that he picked his stocks was he would

(08:05):
go and try the product. And I think probably his
most famous example is Lakinta Hotels where he would travel
out to California. I know he worked in the East Coast,
worked at eighty two Devonshire Street in Boston, but he,
you know, travel all these places and you know, try
out their different hotels. And he said, you know, the
Laquinta Hotels, they're they're clean, and they're not expensive, and

(08:29):
they give you exactly what they're supposed to give you.
They're reliable, and you know what, they're a really good
deal for travelers. I think this hotel chain may do
very very well. And so he decided to buy into
Laquinta Hotels when it was a much smaller entity, and
guess what, it did incredibly well. But that really was
an example of how his management philosophy worked, which was

(08:53):
almost take it for a test drive. And if you
really love the product and you love also the business
circumstances around the product and the business, well hey, maybe
that's something you should think about investing in. And so
I have one of those, and it isn't lacking to hotels,
and it's.

Speaker 2 (09:10):
One that is near and dear to my heart. Kenny,
how's that? Okay?

Speaker 3 (09:14):
All right, Well, it sounds like we have a show
just chuck full of good information. Do you want to
start out with the results of the January events that
you investors should be looking out for?

Speaker 4 (09:25):
No, I want to start out with the college football Championship.
Oh of course, Sorry, Well, what do you think this
will be the last time I talked about college football
this year?

Speaker 2 (09:35):
Okay? Thankfully? Okay, Paul, are you happy about that? I
think you are.

Speaker 4 (09:41):
I'm still trying to decide that after Ohio State won
the national championship, and boy did they play well, I
still am not sure if it was considered a victory
for Ohio State, because, after all, during the year they
lost to Michigan and Ryan coach Ryan Day is one

(10:01):
and four against Michigan, and I think that hurts him
more from winning a.

Speaker 2 (10:07):
Pile a national championship.

Speaker 4 (10:09):
I think the people in Michigan in Ohio like, yeah,
that's nice, good congratulations, good job, but next time, beat Michigan, right,
And I'm not going to give you donations unless you
win against against Michigan.

Speaker 2 (10:23):
So you know, it is a fascinating fan base.

Speaker 4 (10:26):
Not that Boston fans would do anything like that with
the Yankees or anything.

Speaker 2 (10:30):
But that's just a different issue anyway.

Speaker 4 (10:33):
So but it was I thought it was great to
see those two teams actually duke it out. They were
the two best teams at the end of the year,
so it was appropriate that they were in the National
Championship game. But at the same time, Ohio State came
out just blazing and Notre Dame, not as much as
I would have liked. So even though it was a

(10:55):
thirty four to twenty three score, it was actually thirty
one to seven, you know, early in the game, So
you know, unless Ohio State the wheels completely came off,
you knew they were in pretty good shape to take
the whole thing.

Speaker 2 (11:06):
So overall, I was happy with both of them.

Speaker 4 (11:09):
And best of all, you know, so many of my
friends who were BC grads, who you know by proxy,
then adopt Notre Dame.

Speaker 2 (11:16):
Of course, at least I.

Speaker 4 (11:18):
Don't have to listen to them this year talk about
Notre Dame's football team. Fair point, Okay from a Bostonian's perspective,
just saying, all right, So when we come back, Paul,
we're going to talk about you were saying at the beginning.

Speaker 2 (11:31):
We have the results out of four of the five key.

Speaker 3 (11:34):
January events that investors have been looking out for that
we've been talking about all months so far. So we
have those results, we'll look at them and find out
what happened to what it means for investors all of that.
When we return, it's the plast Drawing Financial Forum.

Speaker 4 (11:47):
This is Paul Parsons, president of Plan Strong Investment Management,
and you're listening to the plan Strong Financial Forum. If
you like what you hear on our show and want
me to take a look at your investments in retirement
plan called my offsite eight eighty nine seven two seven
five two six eight eighty nine seven to two seven
five two six. That's eight eighty nine seven to two

(12:08):
plan or go to plan strong dot Com.

Speaker 5 (12:11):
Securities and advisory services offer to Commonwealth Financial Network member
funeral at SIPC, a regitional investment advisor, nin Navy Washington Street.

Speaker 1 (12:17):
Dotaments from the plan Strong Broadcast Studios at the epicenter
of Capitalism. This is the plans Strong Financial Forum with
Paul Parsons, President of plan Strong Investment Management, and welcome.

Speaker 2 (12:30):
Back to the plan Strong Financial Forum.

Speaker 3 (12:32):
I'm your host, Attorney Ken Carberry, along with financial advisor
Paul Parsons and uh, Paul. You set up a very
busy program at the beginning of the show, so let's
get to it. As you mentioned, we have the results
of four out of the five key January events that
you've told us and investors really have been looking for
for clues as to what direction the market should be

(12:53):
heading in.

Speaker 2 (12:54):
So what happened and what does it mean for us?

Speaker 4 (12:56):
Okay, so you actually set that up beautifully. So the
question is, you know, don't forget we had to pullback
at year end, and the question is would that pullback
be extended? And so let's talk about the four out
of the five things we've gotten the results to so far.
Starting with the speaker of the House election. And you know,

(13:16):
this was certainly seen as a preliminary indicator of how
united the Republicans are and essentially how quickly markets can
expect pro growth measures to be implemented. But because Mike
Johnson was elected quickly, actually on the first view vote,
after a little arm twisting, it was viewed by the
market as more Republican unity than investors may have hoped for,

(13:41):
and as a result, a likely speedy implementation of campaign promises.
And you know, since that election has occurred, we are
seeing rapid movement on a bunch of stuff, So that
rings true so far. The next thing we got was
the December jobs report, and because you know, this was
article because the market is very sensitive to a growth scare,

(14:04):
and the December's jobs report had to be kind of goldilocks.
It had to be good enough to quell any growth
slow down fears while not being so good that it
would require the Fed to not cut rates as planned.
And you know, essentially it was looking for this. The

(14:24):
goldilocks job ads number was call it one hundred and
sixty thousands. What they were looking for an unemployment rate
in the low four percent range. That's what the market
was looking for well, wor did it come in two
hundred and fifty six thousand job ads and an unemployment
rate slightly decreasing from four to two to four to one. Essentially,

(14:46):
it was a strong report, maybe even stronger than expected
or even hoped, but not too strong. So one area
of concern, at least for me, ken there are now
eight point one million open jobs in the US. We
get that from the Jolts Report, and at the same time,
the Employment Situation Report tells us the total unemployed looking

(15:09):
for work is six point nine million, which means there
are one point two million more open jobs than there
are people looking for work, okay, And because of that,
if that gap gets big, that creates all kinds of
wage pressure.

Speaker 1 (15:26):
Right.

Speaker 4 (15:26):
If you've got a bunch of open jobs and not
enough literally human beings to fill them, that creates wage pressure.
And we actually saw that gap increase in the last month.
It was only seven hundred thousand the prior month. This
past month it grew to one point two million. And
what does that mean. It means upwards inflation pressure on wages.

(15:48):
So I would say the jobs report was very good,
but not too good. But the one concern is inflation
and a specifically wage inflation when it comes to the
whole employment situation in the United States.

Speaker 3 (16:05):
Okay, right now, of course we've talked about earnings. We're
just getting some Q four earnings, and earning season is
starting now, and that was very important. We're paying really
very close attention to earnings.

Speaker 4 (16:16):
I am so glad that you've been listening over the
last months and months, and just you know, just for
our listeners out there, you know, don't forget. Earnings are
supposed to grow in twenty twenty five for the S
and P five hundred to two hundred and seventy three
bucks a share. That's up from two hundred and thirty
eight in twenty twenty four. So that's about fifteen percent

(16:40):
growth versus the nine percent growth we saw last year. Okay,
so that's an acceleration in earnings growth, and going into
twenty twenty five, investors are really carefully watching these Q
four results for any warning signs on earning growth, especially
from the Magnificence seven and other artificial intelligence names.

Speaker 2 (17:03):
And so far earnings have come in.

Speaker 4 (17:05):
At or above expectations, especially with the financials, communications, and
tech sectors. So it's been a good start, But the
really important data will be one the Magnificent Seven report.
They actually report their actual earnings and provide their forward
guidance for this upcoming quarter and the next year. And

(17:28):
that happens in the last week of January and the
beginning of February for essentially all of the Magnificent Seven
except for Nvidia. So you know that's going to be
the really critical thing going forward. But I would essentially say,
so far, so.

Speaker 2 (17:45):
Good, okay, Paul, So what's the fourth thing we should
look out for?

Speaker 4 (17:49):
Well, inflation, And specifically, we got the Consumer Price Index,
so CPI relatively recently, and you know, don't forget, had
recently guided to fewer rate cuts in this year in
twenty twenty five because of the bounce in inflation metrics
at the end of last year. So all eyes were

(18:11):
on the latest CPI reading, especially because the Fed had
kind of taken this position that this bounce in inflation
was transitory, and we know how well that worked out
the last time, so we wanted to see if the
data could confirm that, okay, And so what the market

(18:32):
was looking for was if CPI came in below expectations,
say core inflation three point three percent headline at say
two point eight percent year over year, that would be
really viewed as an increased probability that inflation is going
to fall back towards the fed's target of two percent,
and that would probably support more rate cuts. But what

(18:57):
we got was kind of a mixed result. Actual results
of core inflation slightly decreased from three three to three two,
and that was good news, but actually headline slightly rose
to two point nine, and so it reflected not terrific
progress on inflation. But if I had to pick one

(19:18):
of the two ken to improve, it would be core.

Speaker 2 (19:23):
And I'm glad that core.

Speaker 4 (19:24):
Went from three to three to three two because it
doesn't include kind of the more sickle cyclical stuff like
you know, energy and stuff like that that impacts the
headline number more. So it's progress in the right direction.
But boy, it's been sticky in the low threes for
quite some time for core inflation, and you know, I
certainly don't see you know, the FED saying, oh, look

(19:46):
at that. You know, the inflation's really coming down rapidly
and we can really cut rates more, you know, I
don't think so.

Speaker 3 (19:53):
Okay, Well, so that's four out of five of the
key January events to look out for.

Speaker 2 (19:57):
So what's the fifth.

Speaker 4 (19:58):
Well, at the end of the month, we're going to
get the results of the FED meeting to gauge if
it appears the FED remains committed to two further rate
reductions that they forecast for twenty twenty five. Now, if
the Fed and Powell specifically implies to FED may have
paused its rate cutting cycle, then look out below, that'll

(20:22):
be viewed negatively by the market.

Speaker 2 (20:24):
Ken, Okay, But also let's wrap it up bottom line
this what does it all mean? Well, so we got
four of the five, right, we got the Speaker of
the House. We can see what Congress is doing.

Speaker 4 (20:32):
It looks like, you know, they're pretty serious about getting
stuff done. The December jobs report overall, pretty strong Q
four earning season, no problems. The are yet CPI progress
in the right direction, but not nearly as much progress
as you know, we'd like to see. It's still pretty sticky,
and you know, we're just waiting now on the FED.

(20:53):
My guess is enough has changed for the Fed to
change their position. I think it's unlikely, based on the
data that we've gotten, that they will say, hey, we're
going to pause the rate cutting cycle based on this stuff.
And so overall, the fundamentals for the market are mostly
good as we start the year, and really the only
category not cooperating is inflation. But you know, I would

(21:18):
say overall, relatively good place to be, and that gives
us comfort that the market shouldn't retrench down a whole
lot from where it is today.

Speaker 2 (21:27):
And now it's just time for inflation to cooperate. Okay, Paul,
moving on a bit, as you've discussed it, With a
somewhat limited upside to the current stock market, what can
an investor do to enhance their returns now and this
kind of a market.

Speaker 4 (21:42):
Well, you know, we've talked extensively how fully priced the
stock market is today, trading it a forward earnings multiple
of literally twenty two times forward earnings, and that is
really dependent on two things, you know, substantial earnings growth
and inflation coming down so that interest rates can come down, right,
And in light of that environment, it's possible and some

(22:05):
say likely, that the S and P five hundred may
underperform in twenty twenty five. You know, think about it
underperformed compared to the last two consecutive years of twenty
five percent plus annual returns. Right, you know, it's kind
of like saying, well, I didn't bat a thousand this year.
Oh yeah, you underperformed, you had a great year, but

(22:25):
you just didn't make twenty five percent. So it's a
very high bar that we're looking at for twenty twenty
five after these two years of twenty five percent plus
type returns. And so if that's the case and the
market is much flatter, if you will in twenty twenty five,
are essentially are there ways for investors to earn more

(22:46):
attractive returns? And the answer is there are, and some
portfolio managers are including these vehicles to help enhance what
could otherwise be underwhelming returns.

Speaker 2 (22:58):
So let me talk about this.

Speaker 4 (23:00):
There are a whole class of funds and exchange traded
funds that are called covered call funds that own a
portfolio of stocks, and then what they do is they
sell out of the money call options to collect premium
income to supplement their returns.

Speaker 2 (23:17):
Now, that's the good news.

Speaker 4 (23:18):
The strategy can pay some dividends and you may get
some option premiums and even some limited amount of stock
price upside. But the bad news is if the stock
market goes up a lot, you won't participate in that

(23:38):
nearly as much. Good the really good news is if
the underlying stock portfolio does poorly, in other words, the
underlying s and p. Five hundred for example, well, you
are greatly protected from a downturn in these kinds of vehicles.
So they have a bunch of positives to them, but
probably the biggest negative to them would occur if there

(24:01):
were a substantial increase in the market, because your participation
in that would be capped to a degree. Sure, So
you know, essentially, for investors who believe that market upside
is quite limited in the coming year, they may really
want to consider allocating a portion of their alternative investment
bucket to this kind of investment, recognizing the benefits and

(24:24):
the risks of the strategy. And of course, if you
want to learn more about how we use these in
portfolios that we manage, call our office.

Speaker 2 (24:31):
Paul Sophie number eight eight eight nine seven two seven
five two six eight eight eight nine seven to two.

Speaker 3 (24:37):
Plan and when we return, Paul, we're going to look
at a couple of notable companies in the news over
the past few weeks, including Apple and Netflix. What's going
on with them. That's when we returned. It's a Plan
Strong Financial Forum.

Speaker 4 (24:48):
This is Paul Parsons, president of Plan Strong Investment Management,
and you're listening to the Plan Strong Financial Forum. If
you like what you hear on our show and want
me to take a look at your investments and retirement
plan ca on my office at eight eighty nine seven
two seven five two six eight eighty nine seven to
two seven five two six, that's eight eighty nine seven

(25:08):
to two plan or go to plans drawing dot com.

Speaker 5 (25:11):
Securities and advisory services offered to Commonwealth Financial Network member
funeral at SIPC, A regitional investment advisor n Navy Washington
Street Deedlements.

Speaker 1 (25:21):
Who says financial talk can't be exciting and informative. Well,
at least it's informative. It's the Plan Strong Financial Forum
with Paul Parson's, president of Plan Strong Investment Management.

Speaker 3 (25:34):
And welcome back to the Plan Strong Financial Forum. I'm
your host, Attorney Ken Carberry along with financial advisor Paul
Parsons and Paul As we discussed a busy week, a
very busy week. On Monday, we got a new president
and well same old a different president, but still a
new president.

Speaker 2 (25:50):
It's hard to describe since this has never actually happened before. Well,
it's happened once before, got in our lifetimes. Yeah, that
never happened before in our lifetime unless you are very old, right,
very old.

Speaker 3 (26:00):
It's so interesting though, because such a news were the
president and inauguration, and yet one of the top stories
was actually about what the first lady wore to the inauguration.

Speaker 2 (26:11):
Are you talking about her hat? Yeah? That big story.

Speaker 4 (26:15):
I actually looked into that thing because did you have
the same reaction I did?

Speaker 2 (26:21):
I couldn't see her eyes. No, it's absolutely I actually
liked it.

Speaker 3 (26:25):
But listen, as I mentioned, we we've talked about a
lot of things in this program.

Speaker 2 (26:29):
Very seldom do we discuss women's fashion, so our listeners
are better off for that. No, I liked I liked it.
Everything she wears looks good to me. But what do
I know?

Speaker 4 (26:37):
Well, I mean she's so you know, the high cheek,
bombs and the whole thing. But on the other hand,
did you see the president trying to get his spouse
a kiss and he couldn't figure out how to kind
of around the hat without knocking the hat off her head?

Speaker 2 (26:52):
And you're like, oh, man, oh man. And can you
tell if she's more worried about the hat or the makeup? Right?
You know?

Speaker 4 (26:59):
But either way, if you're the spouse and you're doing that,
you're like, oh boy, I got to be really careful.

Speaker 2 (27:04):
He touches that hat, he's in trouble. Yeah, he ruins
the look.

Speaker 4 (27:10):
But can I tell you something What was interesting was
the guy who designed it. It was like the pinnacle
of his career. And I have to tell you for
somebody who is she's somewhat I think glamorous because certainly
compared to Best Truman, okay, right, I mean, you know,
Jackie O is probably the closest thing we ever had

(27:32):
to a really elegant, glamorous first lady. And I think
Melanias is way up there as it relates to how
you know, she was a model and all that, right,
so obviously.

Speaker 2 (27:45):
A very pretty woman, but the whole fashion thing.

Speaker 4 (27:49):
I just felt bad for the president because I thought
I would have no clue if my spouse wore something
like that. I'd have to stay very far away from
because I'd be afraid of touching it, you know, And
then want to make a Carrie Underwood, speaking of which, well,
you know, you have to you have to give credit
to a professional because she was able to roll with

(28:09):
the punches. Well, you know, you you do shows, you
do plays, right, and so I'm sure you've had mishaps
where you know, the music's supposed to come on, or
the orchestra screws up or something. I know that actually
happened in my daughter's wedding where the recessional after they
were married, they were supposed to play a song and

(28:30):
it didn't play. And I saw my wife looking up
towards the lady who was supposed to be, you know,
pressing the button to make the music happen, and I thought,
oh man, I wouldn't want to be that lady right now.
I would not want to be that lady. And Carrie Underwood, though,
did a great job, you know. I mean, she just
sang a cappella, which again, thank god they selected a
musician who actually is a good musician, because I would

(28:55):
hate to hear some of these people try to sing
a cappella that made zillions of dollars because I don't
know if they can carry.

Speaker 2 (29:03):
A tune or not. Well she can, we know that
that's a fact.

Speaker 4 (29:06):
So anyway, yeah, it was kind of an interesting inauguration,
but fun, you know, just to see those Certainly those
two little side shows were interesting for us, absolutely, all.

Speaker 2 (29:15):
Right, Paul. So there were a couple of notable companies,
as you mentioned in the news over the past few weeks,
including Apple and Netflix, that you wanted to talk about.
What's happening there. Let's do the bad news first.

Speaker 4 (29:25):
You know, Apple's smartphone sales in China fell sharply in
Q four and they were really hurt by the popularity
of local rivals like Huawei and others who have been
expanding into that premiums market that smartphone market, and sales
were down eighteen percent compared to the same period a

(29:47):
year ago for Apple, Huawei saw their share increase by
fifteen percent, so that tells you wow.

Speaker 2 (29:56):
And Apple actually.

Speaker 4 (29:57):
Dropped from the number one spot a year ago to
the number three provider of smartphones in China in Q
four and now they're behind both Huawei and Shaomi, so
really a big change for them. And one reason for
the loss though ken in their market share is that
Apple is not sending artificial intelligence enabled phones to China

(30:20):
while their local rivals are offering the services and Apples
right now holding talks to partner with a Chinese company
to roll out the Apple Intelligence in China. And by
the way, the China market isn't the only market with
troubles for Apple. Recently, another market research firm reported that

(30:41):
global iPhone unit sales fell four percent during Q four
of twenty four. And there are additional concerns about the
really limited traction for the AI features rolled out so
far by Apple. You and I've talked about them, right,
he said, You know what it really cause you to
go and say, Okay, I gotta get rid of my hands.

Speaker 2 (31:01):
It's a half to have.

Speaker 4 (31:03):
Our reaction is not really and Apple stock, as a result,
has the dubious distinction of being the only megacap tech
stock to be in the red since the beginning of
twenty twenty five. It's down eleven percent year to date,
after earning shareholders, you know, thirty one percent last year

(31:23):
and outperformed the market last year, but having a tough
beginning of the year this year.

Speaker 2 (31:27):
Yeah, all right, all right, what about the good news?
I knew you'd want good post. Sure. How about Netflix?
I don't know about you.

Speaker 4 (31:33):
I've been watching Netflix a lot lately, and boy, you
know I'm not the only one, apparently, because a Netflix
actually announced that they were raising prices across their existing
US plans after posting record subscriber games gains in Q four.
Now their ads supported tier is looking They're going to

(31:55):
have prices go up from seven bucks to eight bucks
a month. The premium tier is increasing from twenty three
to twenty five bucks a month. Considering they last raised
prices in October of twenty three, so essentially a little
over a year ago, year and a half ago.

Speaker 2 (32:14):
This price increase came.

Speaker 4 (32:15):
Along really quite quickly, and they announced that they had
brought in almost nineteen million new subscribers. Now they have
about three hundred million worldwide subscribers, but nineteen.

Speaker 2 (32:27):
Million, it's one quarter is incredible.

Speaker 4 (32:31):
It's a forty four percent increase for the quarter compared
to the same period of year prior. And from a
revenue perspective, Netflix grew by seventeen percent for the whole
year in twenty four and his forecast to grow another
twelve percent in twenty twenty five. And at the same time,
their earnings grew substantially, grew sixty five percent and twenty

(32:54):
four and its forecast to increase another twenty three percent
in twenty five and boyd is a company have inenviable
profit margins with earnings before interest in taxes a margin
there twenty seven percent.

Speaker 2 (33:09):
That's a nice margin. That is not the grocery business. Baby.

Speaker 4 (33:13):
Okay, So lots of viewers flocked to the service to
watch the second season of Squid Game, which I haven't
watched yet, but a lot of people like it. Well,
the action thriller movie carry On did really great. I
did watch that. That was actually quite good. Netflix has
also pushed into live streaming events, as you know, we

(33:35):
talked about it over Christmas time when they did the
NFL games, right, But because of the rising court cost
of sports, it's going to be challenging for Netflix to
do more than kind of one off games. And while
ads don't generate a lot of revenue yet, the company
expects that, you know, that revenue segment to increase substantially

(33:56):
over time. And finally, ken they announce to plan to
allow premium subscribers to add family members through password sharing
for nine bucks an extra member, or seven bucks a
month on the ad supported plan. So, based on all
that lots of demand and higher prices, how's the stock done. Well,

(34:18):
it was up eighty three percent in twenty twenty four.
I'd see that was pretty good. So it's sit down
just slightly in twenty five, down a couple percent, and
it's trading at about a forty.

Speaker 2 (34:29):
Times forward earnings multiple.

Speaker 4 (34:31):
So it's had a heck of a last year and
some small change.

Speaker 3 (34:35):
Yeah, and well, we're talking big time stocks. Tesla released
some delivery results with Q four and they introduced a
new model, So tell us about that.

Speaker 4 (34:44):
Yeah, you know, the delivery results weren't terrible, but they
were slightly worse than twenty twenty three's numbers. And you know,
for investors that are looking for growth numbers, numbers that
are lower this year than last year, that's negative growth.

Speaker 2 (35:00):
That's not what you're looking for, right, And.

Speaker 4 (35:02):
Tesla reported delivering four hundred and ninety five thousand vehicles
in Q four of twenty four. That was up from
last year's four hundred and eighty four thousand, but for
the full year, it reported slightly fewer deliveries essentially one
point seven nine million versus one point eight one million
and twenty twenty three, so just you know, a few

(35:24):
less but essentially flat. Okay, Now, the actual deliveries were
slightly below consensus estimates of five hundred and five thousand.
The stock fell by seven percent the day after the announcement.
But don't forget this stock has been up huge in
twenty twenty four. It's up sixty three percent for the

(35:44):
year and exceeded the prior all time high price in
mid December. Remember the last time it was at that
level was in late twenty twenty one, and why because
investors were pretty pumped up that musk had a very
good relationship with incoming President Trump, and it's It's essentially
been quite a turnaround following a twenty nine percent decline

(36:08):
in Q one of twenty four, as the company was
contending with declining sales despite price cuts and incentives for buyers.

Speaker 2 (36:17):
Now.

Speaker 4 (36:17):
One analyst said that Tesla made a mistake by not
bringing more affordable evs to the market in twenty four
and that cyber trucks are piling up on used car
lots and that rings true to me, and especially when
you look at competitors picking up share in Europe, Tesla
seeing a big drop in their sales in that region

(36:37):
as well. In Q four is down fourteen percent compared
to the same period of the year prior. And while
sales are growing in China, they're not keeping up with
the overall Chinese market growth rate thanks to a Litania competitors,
especially byd And. Tesla remains the dominant EV provider in
North America, but it's had to offer incentives and price

(37:00):
cuts to drive sales, and even so they're still building
up inventory here.

Speaker 2 (37:06):
Okay, Paul, when we come back, I want to hear
about the new model Q from Tesla. We'll look at
that when we return. It's a plan Strong Financial Forum.

Speaker 4 (37:13):
This is Paul Parsons, president of Plan Strong Investment Management.
And you're listening to the plan Strong Financial Forum. If
you like what you hear on our show and want
me to take a look at your investments in retirement,
plan called my office at eight eighty nine seven two
seven five two six eight eighty nine seven two seven
five two six. That's eight eighty eight nine seven to

(37:33):
two plan or go to plan Strong dot Com.

Speaker 5 (37:37):
Securities and Advisory Services offer to Commonwealth Financial Network member
fit SIPC I Reddition Investment Advisor, n Navy Washington Street Detaments.

Speaker 1 (37:52):
Finally, a radio show that is not trying to sell
you insurance or annuities. This is the plan Strong Financial Forum.
Paul Parson's, president of plan Strong Investment Management.

Speaker 2 (38:04):
Hi, welcome back to the plan Strong Financial Forum.

Speaker 3 (38:06):
I'm your host, attorney Ken Carberry, along with financial advisor
Paul Parsons.

Speaker 5 (38:11):
And Paul.

Speaker 2 (38:11):
I know you're a fan of watches, for men's watches.
Well you are too, Kenny, I am.

Speaker 3 (38:16):
We both enjoy our watches, but I don't think we're
in Mark Zuckerberg's category of watch loving or collecting.

Speaker 4 (38:24):
Well, yeah, I think that's a very fair comment. I mean,
first of all, why do we like watches, Kenny? At
least to me, it's the only socially acceptable form of
jewelry that a man can and should wear.

Speaker 2 (38:37):
Okay, yes, I know.

Speaker 4 (38:39):
I think many people that are Catholic will wear a
cross or something, which is that that's fine, Usually it's
under the share, yes, But you know, other than that,
you know, certainly no bracelets or any of the other stuff.
Right And anyway, So I do love watches because it's
literally that my wedding band or the only two pieces
of jewelry where sure, Sam, So I did find it

(39:03):
interesting though, that mack Mark Zuckerberg wore a Grooble Force,
a handmade one in his recent video announcing the end
of fact checking at Meta. Now I'm wondering if he
paid for this watch by cutting the fact checking staff
at Math. Okay, because in the video he had a black,

(39:28):
short sleeved sweater, undoubtedly cashmere, but a short sleeve, and
he had this watch on that cost about nine hundred
thousand dollars.

Speaker 2 (39:38):
If you have one of those, Kenny.

Speaker 4 (39:40):
Let me see No, no, no, I checked, no, my,
I do not have one of those. Does and listen,
I really think mechanical switch switch watches are beautiful and complicated.
I'm not sure I get the price tag on this one.
You know, the company makes only a few hundred per year,
and each one takes one hundredds of hours to assemble

(40:02):
and hand finish. And you know, I would essentially put
this one in the same category as Rafael Nadell's Reshard
Meal watch at one point two million to two million
dollars a copy.

Speaker 2 (40:14):
Do you have one of those?

Speaker 1 (40:15):
Uh?

Speaker 2 (40:15):
No, I do not. I checked my. I don't have
that either.

Speaker 4 (40:18):
Those, though, are made of titanium and or carbon and
they can withstand an immense amount of G forces now
you're saying to yourself, why do I need it to
if the human body can't handle let me g forces,
why is my watch?

Speaker 2 (40:33):
I'm going to be dead. Yeah, so he didn't make it,
he didn't survive the fall from the airplane. But his watch,
his watch is cat on ticking baby.

Speaker 4 (40:41):
But anyway, this whole thing, I mean, it is a
beautiful watch. But nine hundred thousand bucks or a million
bucks or two million bucks for a watch, Kenny genius piece, Luise,
a little much.

Speaker 3 (40:52):
Probably all the kind of investments that you put most
of your clients in.

Speaker 4 (40:56):
As I said, you know, it's probably you know, by
firing all those people on the you know, the fact
checking department, maybe send them out everybody in the company
who knows.

Speaker 2 (41:06):
Anyway, kind of an interesting story. Let's get back to Tesla.
We're talking about the fact that the delivery results kint
of some mixed results.

Speaker 4 (41:13):
Yeah, not so great and losing share, right, not growing
and losing share especially in China. Right, But there was
good news, and I have to tell you I was
I was ready for it not to be good news,
but Musk, especially because they hadn't offered this this lower
cost vehicle that people have been waiting for a long time,

(41:38):
for a long time, but looking forward, Musk has said
that Tesla expects to be offering lower cost and autonomous
vehicles this year in twenty twenty five, and that should
lead to twenty to thirty percent volume growth over twenty
twenty four. And to that end, I actually saw a
detailed video review of the most recent new Tesla vehicle,

(42:01):
the Model Q, a new somewhat compact version of a
combination of the Model three and the Model X, and
its list price can seventeen thousand, five hundred.

Speaker 2 (42:15):
What uh huh? What now it's going to break thirty.

Speaker 4 (42:20):
This isn't an Econo box either. It is very attractive
and it can keep. If they can keep to that price,
Musk may actually hit some of his delivery targets for
this upcoming year. You know, it goes zero to sixty
and six and a half seconds as a range of
up to three hundred miles on a charge, and you
know it's I got to tell you, it's an attractive

(42:41):
looking car. As I've said before, Tesla makes good product.
It's just what's the demand going to be for it
and what's it priced at? And you know they got
to come up with how are they going to make
money at this thing with you know, with it being
priced at seventeen thousand, five hundred bucks, but on the
news the stock up another five percent this year and

(43:02):
it's now trading at a stratospheric one hundred and twenty
seven times next twelve months earnings. Okay, So, and by
the way, one other thing I didn't mention, Kenny, We'll
have to see how this works out, especially if the
Trump administration eliminates EV credits from the tax code as
is widely expected. Right, And also how long is it
going to take for some real EV infrastructure to be

(43:25):
built around the US to get rid of.

Speaker 2 (43:26):
This whole range anxiety thing.

Speaker 4 (43:29):
So when I look at Tesla and ask the obvious question,
how can the company support such a lofty forward earnings multiple,
I'd say the Model Q is a very necessary addition
to their lineup.

Speaker 2 (43:43):
But to me, a much more.

Speaker 4 (43:45):
Important play for Tesla's future is their role in robots
and robotaxis.

Speaker 2 (43:50):
Given their real value add.

Speaker 4 (43:52):
To economic productivity, the extent of their use and their
cost efficiency should drive the company's ortunes over the longer term,
at least as long as battery technology stays where it
is today, and supply of fossil fuels in the US
continues to be abundant. So building lots of low priced
cars with thin margins is a tough way to.

Speaker 2 (44:14):
Make a lot of money. Yeah, right, Paul.

Speaker 3 (44:17):
Another story that kind of had a scary headline had
to deal with had to do with investors who are
making some money on the weight loss mega trend.

Speaker 2 (44:25):
So what's that story? What's going on there?

Speaker 4 (44:27):
Well, depending on the news outlet, there were several versions
of this headline quote revenue for GLP one drugs misses
the mark.

Speaker 2 (44:36):
I don't know about you.

Speaker 4 (44:37):
That caught my attention, Okay, because the fates and valuations
of certainly Novo, Nordisk and Lily are dependent on the
success of these drugs. Just to put this in perspective,
the share prices of Novo and Lily have tripled and
quintupled in the past five years, thanks in large part

(44:57):
to the GLP one treatment for weight loss. Recently, say,
in the last five months starting in September, both stocks
are down substantially, with Novo down greater than forty percent
and Lily down greater than twenty percent, and recently Lily
released updated forward guidance, with revenue for its GLP one

(45:17):
drugs projected to commit below expectations for the most recent quarter.
In fact, on January fourteenth, Lily released guidance for Q
four and all of twenty five, and they projected the
Q four revenue was going to grow by forty five
percent versus the same period of year prior. But that
was below the guidance previously provided by the company, and

(45:40):
the key numbers for Munjaro and Zepbound weren't great. So
the diabetes treatment Munjaro they projected a revenue miss of
about twenty percent. The weight loss drug zet Bound, they said,
as it projected to commit about ten percent below prior estimates.
But all the news isn't bad. Overall, guy for twenty

(46:00):
twenty five shows Lily projecting between fifty eight and sixty
one billion dollars in sales. That's higher than the prior
expectation set by analysts at the fifty eight billion. So
why has the stock price have Lily done so poorly recently?
Because it was priced for perfection before the town term.
It was priced at forty five times next twelve months earnings.

(46:23):
Even now it's trading at thirty three times next twelve
months earnings, and NOVA was at thirty five times, and
now it's close to the market average of twenty one times.
So I just keep coming back to this. Ken Investors
should remember that sometimes with THEJLP meds, it can be
tough rolling them out to new markets and making sure
they're a sufficient supply. Missing sales expectations for a quarter

(46:47):
or so can look bad, but it's not necessarily indicative
of a longer term problem.

Speaker 2 (46:52):
For the business.

Speaker 4 (46:53):
Both of these businesses are experiencing twenty percent sales growth
and forty to fifty percent earnings before interest and taxes margins. Okay,
these are good businesses, and I'd say they're great businesses,
but their greatest vulnerability comes from competitors trying to enter
the market. And there was certainly policy risk, as we've

(47:14):
seen with the back and forth on covering the cost
of these meds under Medicare. And then there's the government
price negotiations that were codified in the Inflation Reduction Act,
where government can essentially dictate whatever price it wants to
the company for government programs, and that can drastically reduce margins.
But so far lack of demand is not one of

(47:38):
the problems facing either company for their weight loss drugs
and Kenny, there was a late breaking news on Friday
of this week with Novo Nordisk where their stock popped
on new phase one data for their newest weight loss drug.
It actually rose about eight percent on Friday because the

(48:00):
drug delivered favorable results with weight loss of up to
twenty two percent in early stage trials. So very very
good news for Novo there, and again, you know, it
just raises the bar further and further higher and hire
for any competitor that wants to get into this game.

Speaker 2 (48:15):
Okay, Paul, just a.

Speaker 3 (48:16):
Couple of minutes left, but let's talk about with all
the attention being paid to the new Trump administration, what
are some policy and politics things that matter most to
markets right now.

Speaker 4 (48:27):
Well, believe it or not, Kenny, debt and deficits are
the most important thing, and I wanted to make sure
our listeners heard that. And what the market is looking
for is not just progress on decreasing the amount of
the deficits, but they need to see credible steps taken
towards curtailing the growth of government spending. When tax cuts

(48:51):
are extended or expanded. They're not looking for the government
to say, oh, we'll grow our way out of this.
They're looking for a reduction in government spending.

Speaker 2 (49:01):
Okay. The second thing they're looking.

Speaker 4 (49:03):
For is tariffs and how quickly tariffs are going to
be implemented, and most importantly, are they applied to targeted areas.
If they're broad reaching, it could create all kinds of problems.
If they're targeted and they really do good work, then
the market would be much happier with that and would
to a great degree give a pass to tariffs. As

(49:25):
it relates to taxes, the extension of the Tax Cuts
and Jobs Act is obviously critical. It would be especially
helpful to the markets in twenty twenty five if the
extension comes early. Why because then we're not waiting the
whole year wondering if they're going to have lower taxes
or not for the upcoming years. The earlier that that

(49:48):
gets decided, the better it'll provide more certainty to the markets,
be better for the markets. And then finally, immigration, the
key thing here is as long as we're not deporting
exists listing workers, okay that disrupts the existing labor supply,
then I think the immigration policies aren't going to be
a big problem for the president. But if they start

(50:11):
to do broad reaching deport everybody who's not here legally thing,
that'll disrupt the labor supply and that would be bad
for the economy and markets. So investors should keep their
eyes on the ball, and specifically, the debt and deficits
are going to be really important and it's going to
really have to be addressed through spending cuts. That's what

(50:34):
the market's looking for over the long term for the
sustainability of our economy.

Speaker 2 (50:39):
Pulstal free number eight eight eight nine seven two seven
five two six eight eight eight nine seven two plan
or go online to planstrong dot com. Paul, thanks so much.
We'll see you next week. Hope everybody has a great weekend.

Speaker 3 (50:51):
It's the plan Strong Financial for plan Strong Investment Management
is located at nine eighty Washington Street, Deta, Mass two
two six. It can be reached at eighty eight nine
seven two seven five two six. Securities and advisory services
offered through Commonwealth Financial Network member Finra SIPC, a registered
investment advisor, Paul Parson's representative. This radio show is for
informational purposes only, and is not a solicitation or recommendation

(51:14):
that any particular investor should purchase or sell any particular security.
The information contained herein is obtained from sources believed to
be reliable, but its accuracy and completeness are not guaranteed.
Neither Commonwealth Financial Network nor your representative provides tax advice.
Indexes are not managed, and do not occur management fees,
cost or expenses, and cannot be invested indirectly. Past performance
of an index does not guarantee future results