Speaker 1: I'm roam. Yeah, but you let me drive? No, no, no, no,
Speaker 1: this is not a toy. Please, I'll do the riding gravels.
Speaker 1: I want to drive. It's a good question, but drive.
Speaker 1: This is the Drive to the Clobell on Bluebird Radio.
Speaker 1: All right, folks, just got about ten minutes left in
Speaker 1: today's trading session. Here Doug Krisner breakdown the trade. We're
Speaker 1: just coming off our highs of this session, but nonetheless
Speaker 1: definitely a risk on trade. Feared really too much in
Speaker 1: the markets today. Let's get to it. The Drive to
Speaker 1: the Close with Dave Gilreath. He is managing director, chief
Speaker 1: investment officer and Innovative Portfolios, joining us on the phone
Speaker 1: from Indianapolis. Innovative Portfolios, by the way, a money management
Speaker 1: firm for registered investment advisors. Hey, Dave, good to have
Speaker 1: you here with Katie and myself. It's been an interesting
Speaker 1: couple of days. We're bouncing back here today. How do
Speaker 1: you see the market environment fundamentally? Does it look like
Speaker 1: we are headed for more gains heading into the new
Speaker 1: year or less? Okyl, thanks for having me back, h
Speaker 1: Katie and uh I appreciate the invite and thanks for
Speaker 1: having me on the darkest day of Yeah, it's getting
Speaker 1: getting lighter from here on. So that's the good news, right, Um,
Speaker 1: as far as fundamentally, I mean, COVID is improving. Um,
Speaker 1: I think most of us a lot of year ago
Speaker 1: say that it had been probably in the rear view mirror.
Speaker 1: But it is improving. And you know that it was
Speaker 1: the economy was and a lot of other things were
Speaker 1: in complete chaos on the way into the pandemic. And
Speaker 1: now we're coming out of the pandemic maybe I think,
Speaker 1: at least slowly. Uh. And so I don't know why
Speaker 1: people are surprised that it's chaotic on the way out,
Speaker 1: but you know, there there is some chaos, but there's
Speaker 1: you know, supply chain is improving. I mean even the
Speaker 1: semiconductor people are saying that today, and most big corporations
Speaker 1: are saying that. And inflation is a problem, but um,
Speaker 1: you know, maybe it's not. It might not be here
Speaker 1: to stay. So wait, I'm sorry, are you glass half
Speaker 1: full of glass half empty? I can't tell am I
Speaker 1: what I'm sorry, glass half full or glass half empty
Speaker 1: at this point, glass half full, glass half full? But
Speaker 1: people would tell me I've been class half of all
Speaker 1: my whole life so um, But I mean commodity prices
Speaker 1: will take care of themselves. They always do. And in fact,
Speaker 1: the CRB index, which is you know it's index, are
Speaker 1: like nineteen different commodities that we use all the time.
Speaker 1: It's down from a tie in October, and it seems
Speaker 1: to be going in the right direction. Um. And labor
Speaker 1: labor is they're flexing their muscles right now, which they can,
Speaker 1: and I don't blame them, but union labor is still
Speaker 1: it's only of all the jobs in the US, so
Speaker 1: you know, the union wage pressure isn't what it used
Speaker 1: to be. So the evaluation of the mark it isn't
Speaker 1: cheap um anyway you slice it. But earnings should grow
Speaker 1: pretty well next year. I mean, the estimate for the
Speaker 1: SMP is like two thirty bucks, so you would think
Speaker 1: the SMP could go to without you know, some other
Speaker 1: big surprise coming and hit across the face. And Dave,
Speaker 1: I want to talk more about inflation because you mentioned
Speaker 1: I mean, if you look at results from Micron, from
Speaker 1: Nike just in the past twenty four hours, there were
Speaker 1: maybe some signs that the supply chains are on snarling themselves,
Speaker 1: but the fact that now we're dealing with a macron
Speaker 1: that we could see more variants to come. I mean,
Speaker 1: does that introduce the possibility that supply chains come under
Speaker 1: even more pressure and maybe that feeds into inflation. Um, well,
Speaker 1: good question, Katie. I don't know. The earlier today you
Speaker 1: had someone on that was talking about how the UM
Speaker 1: the movement that you know, I attracked people's movement and
Speaker 1: all that in Asia and how it's been going up
Speaker 1: and up and up every month. Where tells you? That
Speaker 1: kind of tells me the supply chains are probably improving
Speaker 1: and not getting worse. So and I think they will.
Speaker 1: And as far as variants go, I mean, we're going
Speaker 1: to have it seems like we're going to have more
Speaker 1: and more variants all the time. Um. But we're starting
Speaker 1: to learn to live with it. I mean, in the
Speaker 1: Midwest anyway, the malls, you know, they couldn't find a
Speaker 1: parking lot at lunch today and or parking space in
Speaker 1: the parking lot at Wench today, and office buildings they're
Speaker 1: may be not full, but there's quite a few people
Speaker 1: in them. So it seems like we're learning to live
Speaker 1: with all of this. Um. It does feel like we
Speaker 1: understand we've seen the playbook we've got some tools. But
Speaker 1: I'm curious though, Dave is, all right, where are you
Speaker 1: putting money to work? From my understanding, you guys, you know,
Speaker 1: are really leaning in big time when it comes to industrials,
Speaker 1: names like snap On, like commins um talk to us
Speaker 1: little bit about that play right. So our firm we
Speaker 1: kind of focus on downside risk of a stock versus
Speaker 1: the upside potential UM. And in one of the strategies
Speaker 1: when you're mentioning, we combine the divot into Chiever's index,
Speaker 1: which is the fifty or so stocks that have raised
Speaker 1: are diving into every year for a decade at least,
Speaker 1: and then we score them with these downside risk risk metrics,
Speaker 1: and then we buy fifty stocks and we reconstitute the
Speaker 1: list twice a year UM and right now and so
Speaker 1: the stocks kind of fall through the funnel. We don't
Speaker 1: necessarily make conscious decision to buy certain groups or anything,
Speaker 1: but right now half of the positions are industrials UM,
Speaker 1: which to me is interesting given the fact that there's
Speaker 1: been so much uncertainty of the market, so um, you know,
Speaker 1: right now. And then over and above just buying the
Speaker 1: stocks and holding them, we do an option overlay using
Speaker 1: SMP index options to uh, we use set credit spreads
Speaker 1: and add a little bit of income like three or
Speaker 1: four d basis points a year. So right now, the
Speaker 1: industrial I think, are very cheap. If you look at
Speaker 1: the x l I, which is the spider for the industrials, Uh,
Speaker 1: that chart, if you look at it, it's been building
Speaker 1: this bay for months and months and months. Uh. And
Speaker 1: the industrials as a group have a pretty low forward pe.
Speaker 1: And the ones that I had mentioned to you, snap
Speaker 1: On Cummins a b M Industries, which is a stock
Speaker 1: not a lot of people have heard of, all have
Speaker 1: really low pees forward pees like in the you know,
Speaker 1: thirteen fourteen twelve kind of area. Um. And and if
Speaker 1: not really if, I mean, I think it's pretty evident
Speaker 1: that the global economies are starting to chug back to
Speaker 1: life in a pretty good way. Um, the industrial should
Speaker 1: continue to pick up steam. And Dave just quickly curious
Speaker 1: how you feel about tech, because I mean, I don't
Speaker 1: think anyone would accuse that sector of being inexpensive or chief,
Speaker 1: but it just seems like you can't keep that sector
Speaker 1: down for too long. Yeah, the big tech isn't all
Speaker 1: that expensive quite honestly, Some of the small to the
Speaker 1: unprofitable tech. I guess you might call it um you know,
Speaker 1: the ones that don't have really earnings, those have those
Speaker 1: got really expensive and they've been falling back to earth
Speaker 1: pretty rapidly. But the big tech, you know, I mean
Speaker 1: the big ones that everybody you know, the uh, Microsoft
Speaker 1: and the Google and Facebook and those kind of things,
Speaker 1: those are not particularly expensive right now, and they're continuing
Speaker 1: to gain market share and make money. And they've got
Speaker 1: you know, the zillion dollars of cash on their balance sheets,
Speaker 1: and they're buying back stocks. I mean, that's another thing
Speaker 1: that supports the market, is is the stock buybacks at
Speaker 1: the end of the third quarter was the biggest, you know,
Speaker 1: there's an all time record. So corporate executives got a
Speaker 1: lot of heat. And but it's it's certain it's certainly
Speaker 1: what makes stocks moves. And whenever we see it, you know,
Speaker 1: they cross, whether it's on an earnings announcement or other,
Speaker 1: you definitely see a lot of action on the stock
Speaker 1: when when they talk about buybacks. Hey, listen, we've got
Speaker 1: to run. Dave, thank you so much. Happy New Year's
Speaker 1: Stay safe. Dave Gilreathi's maging director, Chief investment Officer over
Speaker 1: at Innovative Portfolios,