Global Shipping Under Siege: How Hormuz, the Black Sea, and Red Sea Threats Hit Your Investments

This is Invest Talk from KPP Financial. Helping investors make sense of the markets one day at a time. Here's your host Justin Klein. Good afternoon fellow investors and welcome back to Invest Talk. This is our Monday, August 17th, 2026, edition of Invest Talk, a lot to unpack during this hour. We have some great topics to cover, but most importantly will be your topics. Whatever's on your mind, we want to hear from you. That's what the show is about. It's not about me. I can say to you, I can talk for a long time. I do this every day. I've done it for, geez, 20, almost 20 years now. I've investing for over 25 years. This is old hat to me. What I love is hearing new questions, new faces, or new voices, shall we say. We got a great one. I think it was last week. Last Monday we had a boy I think he was nine. He was nine. I called it and that was great. So, anybody of all ages, come on in, ask your question, whatever's in your mind, we are here to help. Help you become a better investor, and we are here to help you become a better investor. We are here to help you become a better investor. All of that much much more. Then we have other topics. One is private investments as a whole. Now there is private equity, private credit, private wreath. Now there is private equity, private wreath. There are a lot of different types of private non-traded assets that are often sold by a lot of the big wirehouses. There are a lot of the big wirehouses. I would say the Morgan Stanley Merrill inches of the world, etc. You are dealing with a broker. You are not dealing with an RA, most likely. Because they are getting a big commission. But I really want to dig into how do you vet that if you do have an advisor that is pitching? Because not all private funds are bad. But it is just a very high-hearled gover. So what questions do you ask to feel comfortable with making that decision? So we will go look at that. Rates are up. Interest rates are higher. Is that a lot of people say that it is because of the debt situation. We are at $40 trillion in debt. We have about an 8% debt to GDP ratio in a non-recessionary environment, which is massive. To give you some context, usually in a non-recessionary environment, our deficit is 2% to 3% in GDP. So it is anywhere from about 3 to 4 times its normal level with this economic backdrop. And so people will say, well, that is because that is why rates are up. But there are other reasons for that. A lot of it has to do with going on in AI. So we will get to that. And then we have voice-paint questions. One is on equity and retirement. And of course, another question. It is not a question on Avalan Bay, a VB. We also have some questions that came in. Be the comment section over on the Invest Talk YouTube channel. And we are going to head into a quick break. Please remember you can call anytime and leave your question on the Invest Talk Voice Bank. If you are listening via our live stream or possibly on AM 20 in the Bay Area, you can call right now at 8.99. [Music] It's official. Total lifetime downloads for the Invest Talk podcast are now more than 63 million. Justin Klein is here now taking your calls live. Invest Talk, 888.99, chart. [Music] We have a new week in front of us. And the first day of trading is behind us. And it was a overall pretty negative day in markets. I said this on the weekend video. I'm starting to get a bit. I don't want to say bearish. But I'm getting. I feel this rally here is from the from the lows couple weeks ago. It's getting a little heavy. But I said over the weekend, obviously it a bit of that today. You had Nasdaq down about 3rd of 1%, S&B down about half a percent, Russell 2000 down a 30%, the Dow down half a percent. Markets are really driven to the downside by tech. You had Microsoft down 3, metadown 3.5, Oracle down 2.5. What other tech names were down? Service now down 5%. And then you had financials. Broadly read. Yet a few in the green. But most of the major banks were lower. And that's a bit of a bit of a different look than we've seen. Financials have been one of the strongest sectors for a while. So I'll be watching that. Treasuries were a bit weaker with yields up five basis points on the long end. 30 are now above 5.3%. Dollar index was off 0.1%. Goal finished up 0.8% more strength. They're silver up 1.7%. Bitcoin did have a nice bounce though. Up 2.3%. WTAC crude. Up 2.5%. You continue to see oil prices, input costs to the broader economy. Just slowly grind higher. I think the first 4-5 months of the war, the supply chains were finding solutions. One of those solutions in the oil market is the strategic oil reserve being drawn down. And they're still doing that. But that is finite. that will end. at some point and we're getting closer and closer to that. So I think this is the major issue that we're hurtling towards. And the midterms are not that far away. It's about two and a half months, right? It's a very interesting market. This is why I'm starting to, at least in the back half, say we're probably entering a more choppy environment, instead of a very trendy environment. Could be wrong. That's my read of it. Now let's go answer a YouTube question. Nautilus 49 says, "I love the show. I have a question about two reats. I-I-P-R." This is the innovative industrial properties of the cannabis reap. And Veechi properties. Do you think RE either is attractive at current prices for long-term position? I know I-I-P-R is still dealing with tenant issues. Veechi, the financials look solid to me. So I wonder if the recent weakness is mainly due to current environment or if there are other concerns I'm missing. Okay. So on Veechi, let's go look at, if you're looking at the broader in-train environments, saying that's going to impact the re-sector, usually that is true, but if you actually look at the XRE, which is the spider select real estate sector ETF, which is a bunch of reats same with I-I-R, it's another I-Share Trust. Real estate ETF look very similar. Those are both all above the 100 and moving average in an uptrend. So higher interest rates are not hurting the sector as a whole, at least right now, very much. However, Veechi is near a 52 week low. And to me, that is because of where their properties are mainly located. That is Las Vegas. Las Vegas is struggling. Part of it is, I think 30% of their tourists were Canadian. Maybe it's not that high, but I always a large number. And with the kind of fight between a current administration and Canada, a lot of those Canadian tourists went overseas. They didn't, they for vacation. They went to other countries. So that's a big part of it. Also the Veechi is part of this issue. So one of the reasons Vegas has got more expensive is because a lot of these big casino companies, they sold their properties to companies like Veechi and then they leased them back. And so they got a big cash infusion, but over the long term that raises your costs of operating. And so I think the economy of Vegas is going to continue to struggle. So I would stay away from that one. Now, IAPR has its own risk, like you said. But I think this is a much better risk versus reward. Not to say that it's not risky, 'cause it certainly is. It's in the cannabis space. But you're seeing a rebound in funds for operation. And I think it's a good risk versus reward. Even if it is high risk, which, so if you're looking for something safe within the read space, this is not it. This is one of the highest risks in the read space, but doesn't mean it's a bad risk. It's just high risk. Now the next investment stock, actually, we're heading into a break. I'm ready for your calls now or 24/7 voice bank. Never closes. So give me a call now at 8-899. In the early days, Invest Talk was Jerry Klein and Steve Peasley. Now the torch has been passed and a new generation of hosts is on the job, Justin Klein and Luke Guerrero. So when you've got finance and investment questions, don't forget to call Invest Talk, 888-99, chart. Let's talk about private investments in general. Between now and 2030, estimates are that financial advisors will move $2 trillion of the client's monies into alternative funds. This is where-- and that's probably a better way to classify it as alternatives. This is an area that is very murky. It carries very high fees. The marketing is grandiose, but the closures are many. But probably won't read them. You're going to quote unquote trust your financial advisor, right? So let's talk about how to vet these type of investments if you ever are pitched one. There are a lot of questions you should be asking. The first would be is have them critique it. What are the costs? What are the risks? What is the reduced liquidity? What have them argue against it in some way shape or form? Because that's the good-- that's every investment should be looked in that light. What are the pros and the cons? They should be able to tell you the cons, not just the pros. Then what about the cycles in history? Usually, individual investors come in at the end of a cycle, not the beginning. Usually it's big institutions that put their money in first. And they've already seen that huge amounts of endowments and pension funds have been buying these type of assets for a number of years. Why are we not at the end versus the beginning? How have they answered that? Then, kind of like an IPO, why aren't the best investors buying this? Why am I getting it? Why is this average guy or gal getting pushed this? They're looking at the fund at the past history. Can they absorb more capital? It's easy to invest $10, $20 million in a few great ideas, but what about hundreds of millions-- if not billions and billions of dollars? How is it going up and at AUM going to change the way they invest? And then if they paid a dividend like a private credit fund, how much is that covered by actual investment income, as opposed to maybe taking out some sort of loan to create leverage, identify where's the contribution coming from? How tax efficient is it? Is there a K1, 1099? What is it? Then, legality, what happens if something goes bad? What recourse do you have? Do you see the fund? Do you see the manager who's liable if things go badly? And then liquidity. What are the limits on my liquidity? And the fees apply if I need money. Am I going to get what the statement says? And then why are the fees actually justifiable? So these are things that you have to ask and make sure that you are confident in their answers as they go through these questions. Let's keep things moving and pivot back to the Invest Talk voicemail. Hi, good day, Justin and Luke. Matt from Minneapolis here, I have a quick question for you, gentlemen. Looking to expand, I guess, world investments and so forth. And I have found fund here VT. And I was wondering what your thoughts are of that fund? Is that thumbs up or thumbs down? Something I should look at getting into in the future or keep looking for something better? Thank you. Look forward to listening to your thoughts and everything on the show. Have a good day. All right. VT, looking at a more global portfolio. This is the Vanguard Total World Stock Index ETF. And this is a start. But it's not really a great start. Why? Because 61% of this portfolio is still US equities. 38%. It's foreign. So if you're just going to buy this as a whole, as a total target allocation, I think this is a good target allocation to have as a portfolio-- or maybe your equity slice of your portfolio. 60, 40, domestic versus foreign. I think it's a good place to be in this environment. But then, Zalegus is the only one you're going to own. You're going to own a lot of other things and just throw this in. It probably will up your foreign exposure, but it's not going to get you all the way there. So that's where I talked about it stepping back and seeing the big picture. What is your allocation to these different asset classes? This will help. But it's not going to help in a dramatic fashion because it's only 40% in foreign. But low fee, solid portfolio, and solid benchmark to look at your equity allocation. Now, the next investor talk we look into the story-- the trillion dollar interest bill nobody votes on. By the government's own borrowing cost, now shaped monetary policy, that story is for tomorrow. But for now, I'm just inclined. And then, right, take your calls any time at 88899, shirt. Justin Klein is here and ready to tackle your questions. I've heard you say multiple times that you prefer shorter duration treasury bonds. Can you explain to me why it is more advisable? Call Investor, 888-99-Chart. At KPP Financial, accountability means more than advice. It means we invest alongside you through our parallel investing approach. 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. If your portfolio moves, ours does too. That is alignment. That is transparency. That is the KPP difference. Visit InvestHawk.com to get your free portfolio review. The markets react to uncertainty. Are you prepared? Is your portfolio balanced? Is it optimized? Our financial future depends on the answers to those questions. Justin Klein is here now and ready to talk with you. Our main focus point today is about global shipping being under siege. Not just the straight-ahorn moves, but the black sea, the red sea as well. There are threats there. This is causing problems globally. This is part of the general inflationary backdrop. Yes, we have a little bit of drop as of late inflation, but a lot of that is base effects. More than actual decline in the price of underlying goods. Yes, gasoline and oil is fluctuating rapidly. Anything else is going through a consistent uptrend. Many because there is not a strategic fertilizer reserve, for example. These are arteries of global trade across various sectors. We talked many times. We know straight-ahorn moves is 20% of global oil run through that. That is well known. We know that 30% of fertilizers move through that area. This is why you are starting to see this feed into the cost of food. Initially, we didn't have a big impact because the fertilizer that was growing the food at the current time, early on the year, was already paid for. As we move into new growing seasons, the more fertilizer, and then eventually those costs are going up. That is pushing prices at your grocery store, at your restaurant. Then there is consumer goods manufacturing. That area is a choke point for shipments from Asia to Europe and even to the East Coast. Usually the Red Sea and the Suez Canal. A lot of them are having to reroute around Africa that is adding 10 to 14 days in transit time, increasing costs, delaying retail goods overall, and shipment of auto parts. Then there is the Black Sea. This is where a lot of grain and metals come through. Think wheat, corn, sunflower oil. It is impacting food inflation and industrial supply chains of many kinds. There are a lot of concurrent pressures that are building tightening capacity overall. The transit tolls are a part of this as well. I said at the top of the show, there are a lot of losers. Mainly the consumer. They are seeing real wages turn negative once again. Real wage growth, meaning inflation is now higher than wage growth. But this feeds into certain sectors like consumer goods where just in time inventory from Asia is no longer as easy as the ones was. It was higher freight costs to move physical products from around the store shelves that is tightening margins. Automat manufacturer's industrial suppliers, they are seeing critical components delayed. The efficiency, I think, is one of the big reasons why the efficiency of the economy is not picking up. Productivity, despite what is going on with AI, it is not picking up. Things are just taking longer. You are not the only one that deals with higher food costs. You do so indirectly as well. Not just at your grocery store. Think airlines, they are buying food. All things are stocked their planes. Transport companies, think of all the moving parts of a plane or buses or chips. All these things take a lot of power and industrial might. And the classic type of company that struggles in an inflationary environment is your package food producer. They are exposed up and down the supply chain from the actual input costs, talking about raw corn and grain to packaging, to transporting those goods to the distribution centers and then to the stores. And then the workers are labor supplies basically flat to negative. Our population is growing 1% year-of-year and most of that labor supply is being eaten up by retiring baby boomers. So that's why it's becoming difficult to find good workers and yet to pay them one. Beneficiaries are the oil companies. We've seen that and I think that will probably continue for a little bit of time. But I think it's going to be relatively short lived at some point. These things kind of add in a flow. But most of all the shippers, the shippers are the ones that are benefiting the most. Come, we're willing to pay more. The delays means that these ships are difficult to build. They get stuck at ports for longer. There's a lot of issues that are causing the price to ship products to go up. This is the best way is to get commodity exposure, get exposure to oil companies, downstream companies, refineries. Those are I think the big winners over the long term. Now let's bring back to our Invest Talk voice bank for a fresh question that came in earlier. I'm calling to ask about a refinance that I'm currently in the middle of. So I'm refinancing a rental property that I own. And I was wondering that you have a good bit of equity in that property. And I haven't quite been maximizing my raw contribution every year. So would it be smart to take some of that equity out of my house and actually just put it into my Roth IRA where I feel like it can make better returns and possibly beat what my home might be able to bring in terms of equity in the future. Look forward to hearing your answer. Thanks so much. Bye. Well, I think a simple answer is yes, if you're in a relatively low tax bracket. The number one thing you have to ask yourself when you're putting money into a Roth though that's a contribution or it's a conversion from a traditional IRA is what tax rate in my in right now. If you're now if you qualify for a Roth to contribute, you probably are not that in that high tax bracket. So that's probably fine. But when you're converting, that's where it can be an issue. So most likely, yeah, it's good idea. And remember, you're probably limited, sound relatively young, probably under 50. So your contribution limit is still 7,000. 3,500. There we go. Change this year. It's always some years it changes. Some years it doesn't. You remember, but yeah, 7,500. So not a lot. But if that's what it takes to pull that out of your equity to contribute to a Roth, I think that's a good idea. Now let's play two in a row. This is put on calling from the Bay Area. Thanks for the show. I wanted to get you guys to stay on Williams, Sonoma, ticker symbol WSM. Just wanted to get your guys to stay on it. If it is a good time to buy and start a position. It is holding. Thank you. And you have a good day. Okay, looking at William Sonoma. This is an interesting one. We have owned this in the past four clients. We don't know it currently. It's one of those ones we. sold it, we did really well, we bought it back, I think we bought it really, really well in the 50s or 60s, ran it up into the, I think the 150 range out, it's a 240. So it continues to do well, but to me it's just a little too expensive. It's a cyclical business. Earnings are $10.31 next year expected, $9.43 this year. It's a $240 stock. So it's about $10 to $24 times forward looking earnings for a cyclical name. Now the positive here is the turn equity is fantastic. 52% for cash flows about a billion dollars and they have no debt. $29 billion enterprise value. And if I use value to ebit, it's right around 17. The issue is that that's the highest it's been over the last 20 years. Definitely the highest it's been in the last 10 years. So while it's a good company, it's just too expensive. And this is a very cyclical business. What are those Williams don't do? They sell home furnishings, think pottery barn, Westown, Williams Sonoma obviously, pottery barn kids, etc. So once again, great business, too expensive, keep it on your watch list. I think in the next down cycle, one of those names you want to pick up. Let's go pivot and answer a question that came in via our website. So as long time listener, first time question, article in Wall Street Journal seems to say some big tech earnings are house of cards. As it includes unrealized stock investment gains, how can one spot that? What reported earnings numbers do not include those ethereal earnings? So this goes back to making adjustments in the footnotes. This is some of you learn in when you get licensed, but understanding how to adjust for the footnotes. Now there are something called adjusted earnings where it's that's a non operating earnings. So that's what I'd be looking at non operating, sorry, operating income, excluding non operating income. You could look at operating free cash flows as well. That's another way to weed out whether it actually is real earnings or cash from operations. If you look at the cash flow statement, for example, that's what that's where you want to see continue to grow. So if I look at, just look at cash from operations, 130 billion. Now that continues to go up, but we know that cash from investing activities is deeply negative. Now at negative 139 billion, so that's going the other way. So those are the kind of the line items I'd be looking at on the income statement and the cash flow statement. And that would give me a clear picture of the real earnings trajectory. But yes, there are, I wouldn't say it's complete fuguese. I would say that it's just something that you have to account for. And I do agree that we are probably near peak earnings. The question is, is it just a level out of these growth levels? Do you see some sort of major deceleration or is it minor? But it's minor. The market can chop around and empower through it eventually. If it rolls over on earnest, and this is more of a one time flash in the pan, well, yeah, I think more downside is to come. Let's play another listener question from eight to eight nine unit chart. Hi, I'm calling about one oak, okay, one ring is now is a good time to pick some more of it up or if I should wait for another opportunity. I'll be listening on your show. Thanks so much for all the good information. All right, looking at one oak. Okay, he's a symbol. This is one of those names. We're actually looking at this amongst others. Some mid cap is not yet we can midstream names that we'd want to. What do they own? What do they do? They gather, process, sell and transport, natural gas, natural gas liquids, oil, etc. It's a great business. $60 billion market cap with decent amount of debt, but return equity 16%. But this is the type of name that you want own in this geopolitical environment. Because clearly we need more, we need to continue to present produce energy here in America, like oil, natural gas, defeat AI data centers. I remember they they make money off of toll, basically. It's good business. It's all about the flows. As long as our flows continue to grow, they're going to make money. Earnings are supposed to be $5.72 this year, $6.20 next year. It's a $95 stock. Now it has ran up from below in the 60s, low 60s. Now we're at 95. So it's had a pretty good run. But the technicals are solid. And this is once again, a type of name that you want own. I do like the refinery is a bit better. But I don't have a we used to own OK, but we're still looking at whether or not we want to buy a different midstream name. So it's definitely near the top of our list. This is Invest Doc. I'm Justin Klein. We have one goal here each and every week days. I'll be chief your own version of financial freedom. But I will continue after this final break. Let's get your questions in right now. It is a nice chart. I'm curious if you think it'd be better for me to let it go and spend money elsewhere. Well, first off, never take one man's opinion as gospel, including my own. Invest Doc is ready 24/7. When you give a recommendation on your show for a buy-in, like an entry point to buy a stock, it's already on it. Should I go ahead and be looking to sell it? Don't forget to call Invest Doc 888-99 chart. There are a few things that make KPP financial special. One of them is parallel investing. This means they invest right alongside their clients. Here's how it works. When KPP financial makes a trade for their clients, Justin Klein makes the same trade for himself and KPP. On the same day, at the same price and same percentage. No front running, no special treatment. Learn more about parallel investing at investtalk.com. Hello. I'm Marianne and Oakland, California. I'm listening on K-Dow. Do you have an opinion about holding or selling Alon Bay? It fell off the S&P 500 today. I started with 100 shares. I own 567 shares now from reinvesting continuously over years and years. And I'm wondering if I should do anything. Should I just hold on to it until after the merger to form a new company or sell part of it or all of it now? I don't know whether to expect that it's going to go up or down or what's going to happen to it. And the advice you can give would be very much appreciated. I love your show. Thank you. Appreciate it. Looking at Alon Bay, this is one of the best run apartment reats out there. And so you've known it for a long time. It owns a lot of apartments in major cities. And it's interesting is those struggles kind of post-pandemic, but then that started to turn around as of late and actually rents in those areas are starting to increase again. Voices like New England, New Jersey, New York, Mid-Atlantic, here in Southern California and Northern California, Seattle, those markets still remain strong. So yeah, it did pull back. Like you said, jumped off the S&P, but that doesn't change underline characteristics of the business. In fact, a lot of times that forced selling actually creates a buying opportunity. So I would continue to hold Alon Bay. Now, lastly, let's talk about interest rates. Interest rates have continue to go up. You see I talked earlier 30 or 5.3% of the 10 year approaching 5% again. This is impacting mortgages and the cost of capital all across the economy. A lot of people think it's going on with the deficit, but it's not just that. There's a crowding out theory that there's a finite level of capital and certain sectors of the economy demand capital. Well, that's less capital from other parts in the cost of capital goes up. And you're seeing that now with the AI companies. No more securities estimates that roughly $200 billion of borrowing by the biggest tech companies alone is equivalent to roughly 25% of US treasury net issuance to private investors. That's five times more than it was last year. And investment grade companies have sold one and a half trillion dollars of bonds this year. That's up 36% from a year earlier. So we're on pace to break the record that we saw in 2020. Remember 2021 was 2020 we had rock bottom interest rates. Now, it's rates are much, much higher yet. They're still borrowing. Alphabet's borrowing at 6.4%. Meta paid over 7.5% in their recent issuance. And if you think you're not exposed to this, you are. Why? Most likely you own a targeted fund. Most likely that's targeted fund has a indexed bond fund within it. If it's an indexed bond fund, what is that doing? Is it just mirroring the entire bond market? And so it's taking a slice of that. This goes back to what I think long term index funds are not really great stewards of the capital markets because they're just price agnostic. And ultimately that's not a good thing. It's not a good thing for capital markets. Capital markets are supposed to weigh the data and make a capital allocation decision based on the fundamentals of an investment. That's not really happening anymore, both on the equity side and the bond side in a lot of cases. So you can't just blame the deficit for why interest is going up or the Fed, but also the AI companies borrowing immensely. Well, that about does it. I'm just in client reminding you about KPP financials, pair alone investing and make a trade for our clients and make the same trade for ourselves. Same day, same price, same percentage, no front running, no special treatments, which means we invest right alongside our clients. And we show the same risk and potential for success. So you can learn more by heading over to investtalk.com. Please tell your friends and family about our free podcast downloads, which at about any time that iTunes or Spotify. And watch our videos on YouTube as well. And please be sure to rate us on iTunes. Independent thinking shares success. It's investtalk. Good night. Investtalk is a trademark of KPP financial because of the nature of the interactive dialogue inherent in the format of this program. It's important for the listener to understand that not all comments may be applied to them. Specifically, nothing said she'll be taken to be investment advice or shall statements on this program be considered an offer to buy or sell security. Because such advice is rendered solely on an individual basis and at times will require that the investor review a prospectus before investing. Investtalk is a copyrighted program of client, Pavless and Peasley financial, a registered investment advisor firm, which retains all rights. For more information regarding KPP's investment advisors, call 1-800-557-5461. Thank you for listening. And your comments and questions are welcome on our 24-hour listener line at 888-99-Chart.