On the 3/29/2019 edition of Stock Talk, Chris talks about the “Wizard of Oz,” Federal Reserve Chairman, Jerome Powell, and the recent Fed announcement that may have changed the course of the stock market for the rest of 2019. Chris Perras: This is Chris Perras, Chief Investment Officer at Oak Harvest Financial Group. Welcome to the March 29th edition of our weekly Stock Talk Podcast: Keeping you connected to your money. Each week, we try to share with you our views on the market. Try to talk to you about what’s coming down the pike for the economy and the stock market. We also try to educate you to how the stock and bond markets work. This week’s episode is entitled Pay No Attention to the Man Behind the Curtain at Your Own Risk. When I was a young boy, the movie, The Wizard of Oz terrified me. It was a movie filled with fear, losing one’s home and family in a tornado, evil hunting witches. It even had flying monkeys. It had it all. At every turn, Dorothy had disruptions galore as she tried to find a way to Oz along the yellow brick road, which would ultimately lead Dorothy back home. When she finally arrived at Oz, she in the movie as the audience discovers that a godlike wizard is just a man, a regular man operating behind the scenes. “Pay no attention to the man behind the curtain,” the wizard declares as he tries to hide from his viewers. The investment world and investors’ experience in a stock market can be as terrifying as the path Dorothy took to the wizard. There are daily, weekly, and monthly economic and macro events and headlines that appear very scary at first. On our website, we provide a timeline and list of annual economic crises that have been concerning since the 1930s. Go to our website, oakharvestsfg.com. Look for the investment management tab. Then look for the lessons from the market tab, and then look for the piece entitled, I don’t…

What does Deja Vu have to do with investor behavior in the stock market? Join Chris Perras for the 3/22/2019 edition of Stock Talk as he discusses how patient investors may be able to take advantage of repeating phenomena in market cycles. Chris Perras: This is Chris Perras, Chief Investment Officer at Oak Harvest Financial Group. Welcome to the March 22nd edition of our weekly Stock Talk Podcast, Keeping You Connected to Your Money. This week’s episode is titled, As Yogi Berra said it’s Deja Vu All Over Again. This podcast is really a case study in behavioral finance. It’s really ultimately if we’re patient investors, how would you take advantage of one, other investors emotions, two, the tendencies of investors to repeat the same behaviors over and over again, and finally three, this is my own observation, it’s the same people managing the same money in the same ways, so the outcomes are biased to be the same. I want to give you three examples of how the current economic environment from 2018 through 2019 is playing out almost exactly as the same period from 2015 through 2016, and how investors in stock market reactions have been almost identical. First, China. In the second half of 2015, China’s growth slowed dramatically. The government launched its second-biggest stimulus spending bill ever. By the second half of 2016, their economy re-accelerated and the Chinese stock market rallied 22% in the first quarter of 2016. Fast forward to 2018. In the second half of 2018, China growth, it’s slowed dramatically due to the Trump-China tariffs that started in the first half of 2018. China pledged its third-largest stimulus ever, and the China markets have recovered 19.5% off their first quarter of 2019 lows. Europe, the second case. On March 8th, 2016, in response to slowing economic growth, driven largely by slowing trade, as well as concerns of the upcoming Brexit vote, the European central bank lowered its economic forecast and announced a monetary stimulus policy to stimulate growth. This year, on March…

The final installment of our first five part series “The Politics of Stocks” In this episode, CIO Chris Perras discusses the Federal Reserve and how “The Fed” can exert a powerful effect on the stock market. Chris: This is Chris Perras, chief investment officer Oak Harvest Financial Group. Welcome to the March 15th edition for a weekly Stock Talk Podcast, Keeping You Connected To Your Money. This week episode is titled The Politics of Stocks, The Part Five, The Federal Reserve. After earnings, the federal reserve is probably the most important component or factor that politics affect in the stock market. The chairman of the federal reserve is nominated by the acting president of the United States. The chairman serves a four-year term. The chairman is the acting executive officer of the entire central bank in the United States. Congress established the federal reserve’s three key objectives. Those being, to maximize employment, two, to stabilize pricing and inflation, and three, moderating long-term interest rates. More recently, the federal reserve’s duties have expanded to include regulating banks, maintaining a stable financial system, and providing economic research to the financial community. For a moment, reflect on how important and big those responsibilities are. Think about how many ways the federal reserve can change or affect the investing world with their policies. Think how many ways the federal reserve can change or affect the three components of stock market return. They can affect earnings by way of their policies, they can affect PEs and valuations easily through their policies. They can affect the company’s ability or mainly their desire to pay dividends as well. The federal reserve controls how difficult or easy it is to get credit. They set short-term interest rates, which affects the banking system’s ability or desire to lend money versus holding money as deposits. This in turn helps accelerate or decelerate overall economic activity. In turn, this changes most companies’ marginal return on invested capital. Companies that have very fast growth, only marginally affected because their core secular growth…

Can political policy impact a company’s dividends? What impact can the tax code have? Join Chris Perras for the 03/08/2019 edition of Stock Talk as he discusses these and other questions on part 4 of “The Politics of Stocks”!   Chris Perras: This is Chris Perras, Chief Investment Officer at Oak Harvest Financial Group. Welcome to the March 8th edition of our weekly Stock Talk podcast, Keeping You Connected to Your Money. This week, I wanted to title it, “The Politics of Stocks, Part 4: Dividend Yield.” This is continuing with our five-part series on how political policies can affect stock market returns. Last week, we covered price earnings ratio and valuations. This week, we focus on the third component of stock market total return, that would be dividend yield. This material can all be found at oakharvestfg.com, under the investment management tab, and then look for the ideas and insights subtab. What is dividend yield? It’s the third component in investment return, and all it is is the dividend divided by the company’s current market share price. Remember, dividends are not contractually guaranteed by a company. They have zero legal obligation and a requirement that they’re paid every year. However, most management teams do everything within their power to pay them once a trend has been established. The percentage distribution of a company’s earnings is decided on by a company’s board of directors, then it’s paid out to shareholders and its dividend. This transfers economic value almost always in the form of cash from the company directly to shareholders. At Oak Harvest Financial Group, we love cash. Cash is king. Alternatively, some companies usually in growth mode, think of Netflix, think of Facebook, usually use 100% of their free cash and profits internally to hire people or to go out and spend money on capital equipment to try to grow their companies. How do political policies affect dividends? They affect them generally through three ways, and they’re all related to taxes. First, the current tax policy discourages companies from…

On the third part of our five part series “The Politics of Stocks,” Chris digs into the details of stock returns. Join Chris and learn how valuation, the P/E ratio, and marginal ROIC drive equity returns — and what part politics can play. Chris: This is Chris Perras, Chief Investment Officer at Oak Harvest Financial Group. Welcome to the March 1st edition of our weekly Stock Talk Podcast, Keeping You Connected To Your Money. Each week, we try to recap the prior week’s events, share with you our views on the markets. We also try to educate you a little bit along the way. This week’s episode is titled The Politics of Stocks, Part 3 Valuation Price-earnings Ratio. A few weeks ago, a client came in and asked about the impact of politics on stocks and the equity market. With the 2020 presidential election moving into focus later this year, we’ve chosen to address this topic in a five-part series, entitled the politics of stocks. This is the third installment in our series. Last week, we covered how political policies can change earnings and free cash flow for publicly traded companies. This week, we’ll focus on how policies in the government can change evaluations or price-earnings ratios. All of this material can be found on our relaunched website, oakharvestfg.com. Once again, that’s oakharvestfg.com. Under the sub-tab Investment Management, and then look for the area that says Ideas and Insights. All of this material is there. Today’s focus is how politics can change the second component of a stock’s total return. That would be valuation. Some of you know, it is a price-earnings ratio or abbreviated PE ratio. The PE ratio is the current price of a stock divided by a company’s current earnings per share. Many factors drive a company’s absolute future PE ratio, including the overall inflation rate of the economy, company sector growth, and a company’s individual growth rate. In general, the easiest question to ask is, is the government policy going to make things better or worse…

On the 2/22/2019 edition of Stock Talk, CIO Chris Perras takes a look at one of the key components of stock returns, earnings per share, and discusses the impact that politics can have on it.   Chris Perras: This is Chris Perras, Chief Investment Officer at Oak Harvest Financial Group. Welcome to the February 22nd edition of our weekly Stock Talk Podcast: Keeping You Connected to Your Money. Each week we try to recap the prior week’s events, share with you our thoughts and views on the markets, try to educate you a little bit along the way. This week’s title is the Politics of Stocks Parts Two Earnings Per Share. Two weeks ago, we had a client ask about the impact of politics on stocks in the market. It’s a great question with the 2020 election moving into focus this year. This is a second part of our five-part series on the topic. The politics of stocks. Much of this material is on our website at oakharvestfg as in financial group .com. It’s under the investment management tab, under the sub-tab ideas and insights. Then look for the tab labeled lessons from the market. As we discussed last week, there are three components of equity market returns. First component is a company’s earnings per share and free cash flow. The second component is the change in valuation or multiple priced earnings multiple, a lot of you know about. Third component of stock market returns are dividend yield. Today, we’re going to focus on how politics can change the first component, earnings per share and free cash flow. Now earnings per share is the most important variable in determining a share price of a stock. It’s the portion of a company’s profit after paying all costs, including product costs, salaries, wages, rents, interest on a company’s debt if they have it outstanding, and finally, taxes to the government. After you pay all of those costs, what’s left over is allocated to each share of stock. When an investor buys a…

Join Oak Harvest CIO Chris Perras as he begins Part One of a new series, “The Politics of Stocks.” Chris dives into the components of stock returns and the impacts of politics on markets here on the February 15th, 2019 edition of Oak Harvest’s Stock Talk: Keeping You Connected to Your Money! Chris Perras: This is Chris Perras, Chief Investment Officer at Oak Harvest Financial Group, with a February 15th edition of Keeping You Connected to Your Money. Each week, we try to recap the prior week’s events, share with you our views and thoughts on what’s in store for the market in the weeks and months ahead. Additionally, we try to educate you a little bit along the way. This edition and the next four are going to be of the educational variety. I’m going to title them, The Politics of Stocks. This is the introduction to the politics of stocks. This week, we had a client come in and ask us, what is the impact of stocks by politics? What’s going on in Washington, the policies, the behaviors? It’s a great question. I’m going to cover it in the next five calls. Much of this material is going to be on our website. You can go to our website at oakharvestfg.com. It would be under the heading of investment management. You can look for that tab on our website at oakharvestfg.com. Look for the investment management tab, then look for the ideas and insights subtab. When you go down to that subtab, look for the lessons from the market. Almost all of this material that I will be talking about over the next three weeks is going to be on our website in that location. To answer the question about how do politics affect stocks, we first have to answer the question of what drives stock market returns over time. Are the returns random, or are they rational? Is the behavior of stocks just totally a casino, or is there actually rational behavior over time that drives stock…

Chris: This is Chris Perras, Chief Investment Officer at Oak Harvest Financial Group, bringing you the February 8th edition of Keeping You Connected to Your Money. Each week, we try to recap the prior week’s events and share with you our views, and thoughts on what’s in store for the market ahead. This week, I want to title our segment, Emotional Investing 2.0, quote, Be Quick, but Not in a Hurry. I didn’t understand what that phrase meant when I was 16 years old when I heard it for the first time on the basketball court from one of my old basketball coaches. It took me almost 20 years to understand it and start dealing with the public equity markets. I want to give you an example, a real-life example that saw here this week at Oak Harvest and try to educate you into what we look for in a company and when we want to sell a company, and when we want to panic. On Monday, this company called Electronic Arts which many of you are aware of, and they’re known from their games that operate largely in the sports field. They’ve produced Madden football, and a number of MLB games, and some FIFA Soccer World Cup games. They were out to report earnings this week. On Monday, the stock was trading at $89, supposed to report on Tuesday, the stock traded up to $93, the stock is halted as all stocks are for earnings report. The company came out, beat numbers by about a penny, and then they reduced their guidance for 2019 which we were holding it, expecting. Apparently, there were some people, they’re largely referred to as pajama traders by a couple of analysts on TV that had not been expecting it. They traded the stock down from $93 to $74.75 in a span of one hour, that’s with nothing else, except for a press release from the company. No conference call by management, no analysis, no nothing. You turn on CNBC in the after-hours and…

Chris Perras: This is Chris Perras, Chief Investment Officer at Oak Harvest Financial Group, with February 1st edition of Keeping You Connected To Your Money. Each week, we try to recap the week’s events and share with you our views and thoughts on what’s going to happen in the markets in the weeks and months ahead. I’m going to title this week’s edition, Giving Thanks. Now, we’ve been trying to do a better job of communicating our thoughts on the markets by way of this email and audio podcast. We’re going to start putting this up on the website. We think we’ve been doing a little better job. We received little to no, I received no panicky calls during the volatile months of November and December, as well as January, from our clients. Hopefully, our messaging is helping. Hopefully, we are removing some of the emotional angst that can happen during periods of these high volatilities. We personally at Oak Harvest want to thank you for listening to these audio calls. It would have been really easy to turn on the financial press, turn on CNBC or Fox News, listen to the headlines in December, and hear it’s the worst Christmas Eve since the Depression. That was 80 years ago. None of our clients I think were alive at that time, but it sounds great. Now it could be equally as emotional listening to the ridiculous headlines on CNBC and the other financial channels. “January, up 7.9%, it’s the best month in the market since 2015, it’s the best January since 1987.” Those are all headlines that are trying to get you emotionally involved in the market and what we’re trying to communicate and what we are trying to do for our financial planning clients is remove that emotional angst that comes during periods of high volatility. As we said on podcasts weeks ago, volatility is an opportunity even in your retirement so long as you have a good financial plan and you have some cash available to take advantage…

Chris: This is Chris Perras, Chief Investment Officer at Oak harvest Financial Group with the January 25th edition, Keeping you connected to your money. Each week, we try to recap the prior week’s events to give you a little insight into what we think is going to transpire in the weeks and months ahead, I want to label this week’s edition 2019, The Tale of Two Markets. The first half of 2019, I want to call it rotation nation, and in the second half of 2019, I’ll call it the bull market resumed. We talked for about nine months about the rotational nature of the stock market. In 2018, it was very similar to 2015 where the market went from group to group to group rotating trying to find leadership and overall the market didn’t really go anywhere. The market peaked on all that optimism of the Trump tax cut back in January 24th through 28th, 2018. We did make a marginal new high in late September. That was entirely led by about five to 10 tech stocks, including Apple and Amazon and Netflix, and a few others. As we’ve spent said on previous calls, 2018, very similar to 2015. We’re starting out 2019 almost exactly the same as we started out 2016. We’ve spoken to this model going forward as the one that we’re looking to for the whole year of 2019. It’s transpiring that way largely because the Federal Reserve was tightening monetary policy, all of 2018, slowing down credit, trying to slow the markets and the economy down. They were concerned about inflation. We are not concerned about inflation here. They were just concerned that things were getting a little too frothy. What happened in late December after the market plunged on all the year-end tax selling and on the $150 billion that left the market in November and December, Federal Reserve said, “The data’s starting to say that we’re slowing. Almost every country in the world has slowed already maybe we should start talking a little…