 Ladies and gentlemen, boys and girls and children of all ages, you are now tuned in to the investor show. As always, this is your gracious host, the Prince of Investing, coming to you guys and girls live all the way from a beautiful state of different Colorado. Making sure I adjusted my microphone there a little bit, because people have told me that, hey, sometimes it covers up your halfway of your face. So anyway, guys and girls, I'm live here today. So as you can see today's topic, we're going to be talking about how earnings affect the stock market. Now, when people say earnings, they want to know what are earnings, what is earning season, what does that mean, how can I prepare for it, how does that mean as a better investor? So don't worry about it. That's why we're here for on this show. So first, let's start off. What are earnings in general before we even get into what they do? So the first thing is earnings are pretty much what companies, it's what rules the stock market, how much money somebody makes. So for prime example, it all depends on how much money does Walmart make, right? So a publicly traded company seeks to take money from the public, meaning that they can take money from everyday people. When you go out and you purchase a stock or you purchase a bond, you are giving your money to a particular company in hopes that that company will take your money, do great things with it and, you know, make a return on investment. Now, it's a great thing for a company on one side of the hand. On one side of the coin, you have a company that's taking in money that they're going to turn around used to turn a profit. On the flip side of that, as the investor, you get to own a piece of major companies like Google, Amazon, Apple, Microsoft, Netflix or whatnot or whatever, right? So what you do is you get to put your money in, you get to own a piece of the companies. The companies get to get money from the public for free. In returns, they are obligated by the SEC. The SEC was constructed in 1934 after the stock market crash of 29. We had the worst stock market crash ever, which in 1929, which led to the regulation of the industry via the SEC. So with that being said, the SEC, they require companies to show their earnings. Now, what this does is this opens up transparency with the public. So if a company wants money from the public, they have to be transparent with the public according to the SEC guidelines. Before the SEC came along, before 1929, what used to happen was when people purchased the stock, or they made an investment into a company, they didn't know what happened. A person could take your money. A person could just steal your money. A person could just do whatever they want to do with your money and have no, you know, and just hope a person did deal with your money. So a long story short, the SEC has helped with that by creating what we know as the Security Exchange Commission. Which is the governing body. Now, we kind of know what earnings are. And we kind of spoke about that governing body, which is the SEC. The SEC is the Security Exchange Commission. This is where companies have to turn their money into. Sometimes they're the ones that make the rules and guidelines off of what publicly traded companies can do. Who they can take money from? What do they do with the money? Also being transparent with the public. So you have different forms that are filed with the SEC that includes a company's earnings. For prime example, you have formed 10K, the most popular one, probably the only two, but in the system of the ones I don't know about. But you have the 10K and the 10Q. Often referred to as 10 Quebec or a 10 kilo. Some people say 10K. Some people say 10Q. Some people say 10K kilo. Sounds a little confusing, but it's not. 10K just means the annual report. Annually, what are you going to turn in? Annually, any report on a company, which are going to give you balance sheets, income statements, and cash flow statements, right? That's what included inside of a 10K. Also, besides the finances and what they earn, you have to speak about the company. What I mean, what do you mean you have to speak about the company? You have to talk about the particular company. What is the company doing? What has the company done? Any issues or problems that you have to talk about with the particular company, right? That could affect investors. So what's happening when you have a 10K or 10 kilo, what happens with the earnings report, it gives investors a glimpse of what's going on underneath the hood of the company. So for prime example, we all know what the company Apple is. We know what products they make. They make our favorite iPhone, all the great stuff like that. But how much money do they make? How much debt do they have? How much cash flow? Is the cash flow growing? Is the cash flow declining? Or is the cash flow flatlining? How does that cash flow and money compare to their competitors like Microsoft? How does Pepsi compare to Coca-Cola? The only way you see this is the earnings. And the thing about it is when you see the earnings report, it controls the market, not as in control, but it has an effect on the market because it can make investors happy, which leads to a bull market, or it can make investors sad, which leads to a bear market. So a bull market is when the market goes up, a bear market is when the market goes down. So for prime example, when a company already has the EPS, earnings per share estimates. So for prime example, today is April 23rd of 2020. Companies like Coca-Cola for the rest of year, they have projected their particular earnings. They're projected earnings to what they're gonna be in the first quarter, second quarter, third quarter, fourth quarter. Wall Street also make estimates on these companies. Every quarter, when these companies report their earnings, this is when you see, I'm not all the time, but sometimes you see drastic moves inside of the company. What I mean by you seeing drastic moves inside a company, you see drastic moves in the stock price, meaning investors get very happy or investors get very sad. Why do investors get happy or sad? So we spoke about the EPS, the earnings per share, and we spoke about the estimates. The earnings that the company put out, did they beat the estimates of the investors or did they underperform the estimates of the investors? So those are two big things, beating the expectations of Wall Street guidelines, analysts Wall Street. You have particular people on Wall Street analysts, they're called, they follow Wall Street, they get all the inside information, they get all the good stuff and the juice and stuff, and they predict what this company is gonna do in the future. Now this could differentiate between what's actually real and what they're estimating. So for prime example, let's say if you have a company like Zoom, Zoom for example, it was a company, it's seen a lot of activity due to the coronavirus. Take Clorox Bleach, it has seen a lot of activity due to the coronavirus. So now you see the estimates that Google, not Google, but the estimates that Wall Street has made, now their estimates are no longer valid because guess what? These companies have outperformed the stock market. So when they outperformed, not outperformed the stock market, their earnings have outperformed Wall Street. So if their earnings outperformed what Wall Street had estimated, that could be a good thing, send up stock price to go up. Now on the same token, when companies lose money because the Wall Street, everything is tied to people making money. So if companies are not making money, that means that they are not hiring employees. If companies are losing money, then that mean that they're not hiring and they might actually be laying off a furlough exactly what we're seeing a lot of in the airline industry before the bailout. So when companies are not making money, that mean that they could be stop hiring people, they could stop hiring people, they could start laying people off and if they're not hiring people, if people don't have jobs, who's gonna pay rent? Who's gonna pay the lease? Who's gonna pay the mortgages? Who's gonna buy the car? Who's gonna go to the movies if people don't have money? So that makes Wall Street sad. And when Wall Street gets sad, that starts us into what we know as a bear market, when the market continues to go down and down. Not so good, right? So we'd like to see the market go up. So when we see earnings, if anything, affect earnings. Earnings is the number one thing that drives everything on Wall Street. And it's everything that drives everything on, everything that we do, right? All of our investing. Wall Street is the backbone of our economy here in the United States of America. Meaning that if the stock market is going down, that means business is going down. And when business is going down, that means that when business is going down, when the stock market is going down, that means that real estate could be going down because if business is going down, that means people don't have jobs. If business is going down, that means that earnings are slowing up. That means the stock market is going down. And the stock market is going down. And people don't have jobs. Then that means that real estate is probably going down. That means that business is going to hurt. And that's pretty much our economy, which is pretty much business, stocks, and things like that. So you have to be very careful of what are earnings, right? You have to be very careful of what are earnings and when do they come out? Now we hit these things called earning season. We're going to get off into the earning season. Take a little sip of water here. My mouth is getting a little bit of dry here in the beautiful state of, beautiful city instead of Denver, Colorado, via Tatekawaii and Halu, Hawaii. So the thing about it, we must think about now, is now that earnings, we want to get into earning season. What is earning season and what does that mean? So let's take April 15th of 2020, all the way into May 15th of 2020, it's considered earnings season. For prime example right now, ladies and gentlemen, we're going through a pandemic that the world has never seen with the COVID-19, AKA coronavirus crisis. So with that being said, it has crippled our economy. For prime example, nobody is flying. So the airline industry is being hit. Also, many restaurants have been forced to close. So restaurants are forced to close, guess what? That's another hit to the restaurant industry. So you have, and the list just goes on with so many people that have been raveled by the small businesses that have been raveled by the COVID-19 crisis. So now we're walking into earning season. We all know that company's been hit, but we don't know how bad they've been hit. For prime example, just yesterday, Delta released their Q1 earnings. When I say Q1, that means quarter one. Quarter one, we have four quarters of the year. Quarter one is January, February, March. Quarter two is April, May, June. Quarter three is July, August, September. And four quarter is October, November, December. So about a month after the quarter, we get what we know as the 10K, 10Q reports. They're filed with the SEC. You can look up companies' file on sec.gov. When you look these up, this way you're gonna be able to see the latest 10Q report by Delta. If you read that report, Delta will tell you, hey, we received a five point, over a $5 billion dollar bailout via the CARES Act because of President Trump. And they also will detail to you what did they have to do to get that money, right? So the company, by them doing that, they had to pay 1.6 billion back over 10 years. For the first five years at 1%, for the second five years, from 2020 all the way into 2025, it's 1% they have to pay back. And from 2025 to 2030, they have to pay back 2% on the loan, right? And they have to pay 1.6 billion with about 1.5 billion interest back to the US government. Also with that, yes, the government lent it us money, but they also issue what we know as warrants. Warrants is something that gives, which was a playbook out of Warren Buffett's book, I'm pretty sure he's not the first person to do it, but he was someone who was majored at it with Bank of America back in 2008. Now, the Department of Treasury led by the fearless, the honorable Stephen Munch, I think that's how he says his name, he issued warrants for, I can't remember the price. The price of the stock was 24.39. I can't remember how many of it was warrants, but anyways, about 600, I don't wanna mislead anybody, so I'm not gonna quote, I can't remember that report up top of my head, but essentially what happens is the government said, hey, we're gonna lend you this money, but we're also gonna be able to buy your stock for $24.39 for the next five years. What does that mean? That means that right now, Delta stock is trading for $22. That means that if Delta stock shoots up to $30, $40, $50, the government can go in and purchase millions of Delta shares for $24.39, which could be a great return on investment for investors, right? So now the downside to this is if Delta does not hit the $24 mark, then that means that the government doesn't have to buy the stock, it's not obligated that he has to do it, it's just that the government is pretty much, the government has pretty much brought a call option on Delta when you really look at it. It pretty much brought a call option for five years for $24.39 on Delta. So when you see that type of information, that's great information that comes out via earnings season. So now you're gonna have the airlines, American Airlines, Southwest Airlines, JetBlue, these are all information that's gonna come out via doing earnings season. So now we're gonna see, we all know what the COVID-19 did, but we don't know how he's really affected. Has it hurt Amazon or has Amazon grew during the season? Has it hurt Apple or has Amazon, Apple grew? How much has Zoom really grown? How much have Facebook really grown during this timeframe? What about YouTube and Google? Have they seen an increase in activity? I think Facebook definitely is winning, Home Depot is definitely winning. All these companies are winning because of this, but we can't say because we don't know what their books look like. So every quarter we have the rare opportunity to look at the books of a particular company. And also every year we get an annual report, the 10K, to see the inside of the finance. This is what investors look for, but the greatest investor of all time is the Warren Buffett. This is what they look for, right? So, and what I mean by they look for, they look to read the reports. They look at the numbers. So many times a lot of us read Yahoo Finance, shout out to Yahoo Finance, CNBC, these are great people. But a lot of times we become very dependent upon what do they have to say. And what I mean by becoming very dependent upon, we don't know how to look up the information ourselves. So I have a step-by-step video on my YouTube channel that tells you, at the investor show, that shows you exactly how to go to scc.gov, to go up on the company's violence, search for a particular company's name, and to look up the 10Q and 10K reports, the annual and the quarterly reports. And it's the season, every quarter, we just finished up our first quarter from January, February, and March. We just finished up our first quarter of 2020. Now, companies have to report. All these publicly traded companies now have to report their finances. They have to report their cash flow, their balance sheet, and they have to report the income statements. So these are all statements that have been wrapped up and being served to the public people. So now you can see why this can make investors sad, happy, or whatnot, or whatever the case can be. We know it's gonna be bad. 25 million Americans filed jobless claims in the last four weeks. We have companies receiving bailouts. The airline industry received a bailout. We have $5 billion set aside and another $434 billion that was set aside for small businesses. So we know people are hurting because a lot of companies and businesses now open. Now it's becoming this political struggle of when they're gonna open up the economy. So this is when we're starting to look at what's gonna happen, right? So this is why we see a massive move in the stock market, volatility. Volatility means going up and down via earnings season. So we'll behoove you as a seasoned investor to look over some of these reports, read some of these reports. How much money is the company making? How much money is the company losing? And also you get the insight of the company as they tell you what is the financial wealth of a particular company. This will make you a better investor. There was a time when I only used to look at the price. I only used to look at the chart. I used to only look at the dividends in the name of the company and maybe read a couple of articles that I saw floating around and I thought that was investing. I didn't know how to look up a balance sheet and when I finally did discover a balance sheet I didn't know what none of the crap meant. Then I started to look up an income statement. I didn't know what any of that meant, right? So now I'm teaching you guys and girls how to become more seasoned and better how to look up financial reports. The same questions you would ask a friend to ask you to borrow money. If you had a friend to ask you to borrow money what would you say? You would wanna know how much money do they make? You would wanna know that they lose their income. Is the income in threat? What is their history? You can look at the credit score and how can you judge a corporate company by their credit score? Look at their bond rating. So for prime example, Delta has hit me some very hard times in return Delta has done what? Delta is now issuing bonds at 7% interest. What does that mean, Prince Dix? That means that Delta is now issuing bonds at 7% interest. That means that companies as the lawyer your credit score the more interest you have to pay. So they're going into the category of hey now we're willing to issue debt. That means a company saying hey let me borrow $1,000 not give me back 7% over the next two, three, four years or whatever the maturity may be. These are ways, these are what companies do to raise money during hard times. So now you're noticing that what's happening in that Delta who's haven't made money I won't say haven't made money but who has seen a significant drop? Airlines in general has seen a significant drop in people traveling guess what happens? Now people are wondering can you pay back your bonds? So now the credit score their credit score drops when their credit score drops that mean the interest rates on their loans go up. So those are key things those are key indicators that you must look at when you're watching a particular stock and you only can find these things out via earnings season. Now some people can speculate in gas and all of the good stuff like that but you have the rare opportunity to be able to look at into a company you can look under the hood of a company every quarter or every year. Pretty cool, right? So it will behoove you to figure out how to read particular companies, right? How to look up 10K at cc.gov. The 10K that's the annual report you can start by looking up 2019 annual report on any company. This quarter starting from April 15th all the way to May 15 you're going to see quarterly reports come out 10Q filings and you're going to see stocks make massive moves massive moves to the upside downside which can actually drag the market with it. So we spoke about what are earnings? Why are they important? How to look them up? And most importantly what do they mean and how do they affect the stock market? So I hope you guys are not in this episode. Happy investing. I want to say thank you for tuning in today. That's going to conclude today's episode on how earnings affect the stock market. We are now entering into earnings season and we probably will see more volatility into the market that we've never seen already with the pandemic crisis. So thank you guys and girls for tuning in. I hope you guys are on the way from this and until the next video podcast, Cartoon or whatever it's crazy you see me do around the globe. Peace, be safe. I'm out and thank you.