Guy, Dan and Danny are joined by Mike Wilson, Chief Investment Officer and Chief US Equity Strategist for Morgan Stanley, to discuss his thought process on the market (4:43), how the S&P 500 could get to 3,000 (8:00), what’s happening with central banks (14:40), bank earnings kicking off next week (23:35), and what would make Mike bullish (30:35). Later, Cannabis advocate and operator Brady Cobb drops by to breakdown President Biden pardoning thousands of people convicted of marijuana possession and ordering review of federal pot laws (36:30).
Link:
https://riskreversal.com/podcasts/on-the-tape-podcast-fair-warning-with-mike-wilson-of-morgan-stanley-and-breaking-news-from-brady-cobb/
Link:
https://riskreversal.com/podcasts/on-the-tape-podcast-fair-warning-with-mike-wilson-of-morgan-stanley-and-breaking-news-from-brady-cobb/
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01:20 Okay, welcome to On the Tape.
01:22 I'm Dan Nathan.
01:23 I'm here with DMO, Danny Moses,
01:25 you know the man, the myth, the legend.
01:26 He was just called a legend by our guest right here,
01:29 Mike Wilson, who is the head equity strategist
01:31 at Morgan Stanley, also the CIO.
01:33 Welcome back to On the Tape, Mike Wilson.
01:36 - Great to see you guys.
01:37 - Mike, it's almost like we can just leave now
01:39 because everything you say I completely agree with.
01:41 So we can just--
01:41 - Really?
01:42 - I agree with everything this guy has been saying.
01:45 - But now we gotta put it on the tape, right?
01:46 - I make this promise.
01:47 If and when you do turn bullish,
01:48 I will turn bullish with you.
01:49 - Really?
01:50 - Yes, when he does it--
01:51 - All of our listeners are waiting for that moment.
01:53 - I will do that.
01:54 - All right, well, you know who else is waiting?
01:55 Guy Adami is in the, what tunnel?
01:57 The Lincoln Tunnel AD or the Holland, one of the tunnels.
01:59 - He doesn't even know.
02:00 - He doesn't even know, but I will tell you,
02:02 he's probably fit to be tied.
02:03 So he's gonna show up, hopefully, in a little bit here.
02:05 We're gonna get into it.
02:06 All right, Mike Wilson, as Danny just said,
02:09 not only do we think you are the best strategist
02:11 on the street, both of us go way back with you.
02:13 You and I, when you were in tech sales,
02:16 you were working with our friend Billy
02:17 back in the late '90s, and I was at a hedge fund.
02:19 You were covering me, and you were a standout salesman.
02:22 You went on to run equity research.
02:24 You went on to be a strategist, CIO now.
02:27 You have a lot of titles at Morgan Stanley.
02:29 Talk to us about that, what, 25-year career
02:32 at the same bank?
02:33 That is unheard of, generally, isn't it?
02:35 - 30 years, but who's counting?
02:36 Working on 31, but the key to my success
02:38 is that I move on before they figure out I'm useless.
02:41 I get into the next job, you know,
02:42 create that new job, and they say,
02:43 "Oh, I forgot about that guy," and next job's not--
02:45 - Really?
02:46 I don't think that's the case.
02:47 - Look, it keeps it interesting.
02:48 I mean, I never would have been able to stay
02:49 at one place of work doing the same thing.
02:51 I would go crazy.
02:52 So, look, on one hand, I've been extremely fortunate
02:55 'cause they've given me that opportunity.
02:56 I mean, they usually give me too much to do,
02:58 and then we just figure it out.
02:59 So I've been fortunate, been a great place,
03:01 spent a hell of a ride, by the way, at Morgan Stanley
03:03 and all the investment banks for the last 30 years,
03:05 and it feels nice because I do feel like Morgan Stanley
03:08 is in a really good position now.
03:10 - I would say that you and I both started
03:11 in the business same year, 1991.
03:14 Started MBIA and Muni Bonds, and then went to Oppenheimer,
03:17 but because you've been there so long,
03:18 and Morgan Stanley has been so involved in everything,
03:20 everything to do with capital markets,
03:22 and recently really built out retail,
03:24 and retail's been a main focus, obviously,
03:25 in the last several years, you get to see a lot.
03:27 And when you came in here, I told you that I know
03:29 a lot of private wealth guys at Morgan Stanley.
03:31 Yeah, they pay attention to the other research,
03:33 but really, how they get paid is to take your research
03:36 that you send out, kind of make notes,
03:37 and send it to their clients.
03:38 So you've seen a lot of things,
03:40 and I think going to your current viewpoint here,
03:43 that's why you're just logical.
03:44 And people always say, "You're bearish to me,"
03:46 or, "You're bearish to me."
03:47 It's just kind of logic that we're gonna have
03:48 a reversion here, like burn back through the atmosphere,
03:51 I kind of called here.
03:52 We talk about your current mindset here,
03:54 how you're seeing things, because like I just mentioned,
03:56 I won't go in it again, but you've dealt with companies
03:59 on roadshows, you've lived every life at Morgan Stanley,
04:02 and I think that's important for people to understand,
04:04 you're not just coming from nowhere.
04:06 - Yeah, we call it, that's a nice way of saying I'm old.
04:08 Got a lot of experience, so it's true.
04:09 I mean, experience, there's no better teacher
04:10 than experience in living through these different cycles
04:13 and periods and doing different jobs.
04:14 You see these things, so that when they pop up again,
04:16 you recognize them.
04:17 You say, "Oh, I've seen that before,"
04:19 and this is the way it usually plays out.
04:21 We don't get everything right,
04:21 but we are familiar with these things,
04:23 and I think you said it right, Danny, it's just logic.
04:25 We're not trying to make some big, bold call necessarily,
04:29 but when the logic is out of,
04:30 the markets have been illogical a lot in the last 15 years
04:33 because of QE, the markets haven't always traded logical,
04:37 and the last couple of years,
04:38 we're actually reverting back to logic,
04:41 because they're withdrawing some
04:42 of this extraordinary policy,
04:43 and that normalization process,
04:45 okay, it was just gonna make the normal,
04:47 was something we saw early,
04:49 because we've seen the way the world was pre-QE, pre-GFC,
04:52 even pre-tech bubble, and that process is painful.
04:54 Extracting heroin, if you will, from the patient,
04:58 it has been a painful year.
04:59 Now, I think we'll get through it.
05:00 The patient will survive, okay,
05:01 but this bear mark is not over yet.
05:03 - All right, so talk to us a little bit
05:04 about the thought process, at least,
05:05 in Mike Wilson's head, because there was a point in 2021
05:09 where you were very bullish,
05:10 and we know that you come on with Guy and myself.
05:12 You're on CNBC a lot, and you have a Monday piece
05:15 that, to Danny's point, is a very widely followed piece
05:18 in the investment community,
05:20 and there was a petering off of that bullishness
05:22 at some point in kind of early 2021,
05:24 and what were you seeing in the buildup?
05:27 You weren't buying the transitory argument here.
05:30 Did you see this inflation?
05:31 And Danny, just in the summer of 2021,
05:33 he really started introducing the idea
05:35 that we are gonna be in a very stagflationary environment
05:38 if a lot of the things that continue,
05:39 and largely having to do with what the Fed
05:41 was probably not acknowledging at the time.
05:44 So talk to us how you changed your tune in 2021,
05:47 and how did it feel being really on an island
05:50 for major bulge bracket strategists
05:52 and starting out 2022 particularly bearish?
05:55 - It's really funny.
05:56 I mean, we do get pegged to be perma bear, whatever,
05:58 and, you know-- - Join the club.
06:00 You should wear that with a badge of honor.
06:02 - I mean, I'm a fiduciary, right?
06:04 So you gotta tell it like it is.
06:05 But the reality is is that we were extremely bullish
06:07 in 2020 for the same reasons we were bearish, right?
06:09 So we saw the inflation coming,
06:11 which when inflation is picking up,
06:13 it's extremely bullish for stocks,
06:14 and people were slow to catch on to that,
06:16 and so there was this huge earning cycle
06:18 that actually went even further than we expected.
06:21 So to be fair, we probably got the train
06:23 a little bit early.
06:24 Okay, we left a little bit on the table at the end,
06:25 but I'm okay with that,
06:26 leaving the party a little early
06:27 to make sure you don't get taken away by the cops.
06:30 And that's what we did.
06:31 So what we really saw in the spring of 2021
06:33 was that M2 growth peaked.
06:34 Okay, we're cycle analysts.
06:36 That's all we do.
06:36 We're really dedicated to it.
06:38 We understand it.
06:39 - That's money supply for those people out there.
06:40 Sorry, go ahead.
06:41 - Yeah, money supply M2,
06:42 and it's not just the Fed's balance sheet,
06:43 but also the velocity in the economy.
06:45 I actually think that most of the inflation
06:46 is due to fiscal stimulus more than monetary.
06:49 Now, monetary had its hand in it,
06:50 but that was really the--
06:51 - The gravy.
06:52 - Yeah, that was really the train.
06:53 That's who paid for it.
06:55 But we had M, think about this.
06:56 We had M2 growth in March of '21 of 25%.
07:00 So anybody who didn't think that inflation was coming,
07:02 I mean, it's crazy, right?
07:03 Inflation is a monetary phenomenon.
07:05 M2 growth today is 2%.
07:07 Now, if you recall going back to March of '21,
07:09 that's exactly when crypto peaked, SPACs, IPOs,
07:12 all the high unprofitable companies.
07:14 So that was the beginning of the bear market.
07:16 And we got way out of the way of that stuff early.
07:19 And then it lingered on, the market rotated around,
07:21 went to quality and everything else.
07:22 And we went full on defensive in November,
07:24 almost a year ago,
07:26 under the idea that it was this fire and ice narrative,
07:28 that the Fed was finally going to put out the fire.
07:32 That was the first part of this year.
07:33 Multiples got crushed for everything.
07:35 But now what we have to deal with is the slowdown, the ice.
07:38 Our out of consensus call now is on earnings.
07:40 We think earnings are going to disappoint significantly,
07:44 even without a recession.
07:45 The key point that we're making with clients now,
07:48 and I don't think it's fully appreciated yet,
07:50 this goes back to experience,
07:52 is that operating leverage cuts both ways.
07:54 So we had positive operating leverage
07:56 when inflation was going up.
07:58 Guess what?
07:59 As inflation peaks,
08:00 you actually get negative operating leverage
08:01 'cause the costs are actually still increasing
08:03 at a faster rate.
08:04 So we're just starting that process now.
08:05 Last quarter was the first one
08:06 we started to see that degradation.
08:08 This quarter it'll get worse.
08:09 And what we don't know the answer to yet
08:11 is when will the market price
08:13 where we think earnings are ultimately going.
08:14 We think it's sometime between basically
08:16 this month and February.
08:18 It could take two more quarters and we just don't know,
08:20 but the price point we know is too high still.
08:22 - So let's stick with that for a second.
08:23 I wanna come back to something else.
08:24 So if S&P earnings, I think you're $212 for 2023,
08:29 is that or 200?
08:30 - 212 is our base case,
08:31 but our bear case is sort of 190, 95
08:33 and we're leaning towards the best case.
08:35 But that's what we're leaning in that direction.
08:36 - So let's call it 200.
08:37 - 200 is the right number.
08:38 - Do you believe that within the year of 2023
08:41 that we will trough at some point,
08:43 meaning what I'm trying to get at is
08:45 and what that number would be.
08:45 So if we just think of,
08:46 I know I've read your research,
08:47 you and I think alike,
08:48 14 to 15 type multiple on that number,
08:50 we're probably gonna dance around the 3000 level in the S&P,
08:53 but we tend to overshoot on the way up
08:54 and we tend to overshoot on the way down.
08:55 I think that's what you're talking about.
08:57 What I wanna get to is this,
08:58 you just nailed it on the head.
08:59 So there's a large group of investors
09:01 that have only known that the Fed has had your back.
09:03 For that matter, global central banks have had their back.
09:05 So they'd never been tested to really
09:07 go underneath the covers
09:08 and look at some of these companies.
09:10 And you can punch people in the face all you want,
09:11 but it takes earnings misses,
09:13 earnings degradation to actually put pen to paper.
09:16 That skill set, it's certainly out there
09:18 and there's a lot of professionals that get it,
09:19 but that's why I feel like we're only in
09:21 the second or third inning of that realization
09:23 that you just touched on.
09:24 When is the punch in the face?
09:25 Is it this quarter that's gonna be reported now?
09:27 Or where are we in that?
09:29 - Well, first of all,
09:29 we've already been punched and kicked in the face
09:31 with the Fed.
09:32 So on that note, I think the market actually gets a joke.
09:34 Like I think rates are probably peaking now.
09:37 The Fed's probably already gone too far.
09:39 They probably know it,
09:40 but they wanna make sure they finish the job.
09:41 So they'll go too far.
09:43 And we'll have a probably a mild recession at some point.
09:45 We're 50/50 on that as a house,
09:47 but it doesn't really matter.
09:48 The earnings are gonna get smashed.
09:49 Now, as you know,
09:51 stocks will discount the earnings trough
09:53 six months in advance.
09:55 Our model, what I would suggest to you strongly
09:57 is that the trough rate of change,
09:58 which is what matters year over year growth in earnings
10:00 will happen sometime probably late second quarter,
10:02 early third, which once again argues
10:05 that maybe we bought them sometime
10:05 between November and February.
10:07 The market is really smart.
10:09 It's really dumb and then it's really smart.
10:11 It's really dumb because it doesn't think forward.
10:14 It has to be told.
10:15 It needs what I call the engraved invitation
10:17 from companies to say, okay, take your numbers down
10:19 and the market adjusts.
10:20 And that process usually happens at the end of the year
10:23 because companies kind of kitchen sink it
10:24 or at the beginning of the year
10:26 when they're forced to guide for the full year
10:28 and then you get the full reset.
10:30 That's why the timing is kind of now.
10:32 As far as the multiple goes
10:33 and then like how we get to 3000,
10:34 it's a little bit different than that
10:36 because it won't trough when the earnings trough,
10:38 as I just said, it'll trough when earnings
10:40 are 30% of the way done going to its ultimate destination.
10:44 This is where the market's really smart.
10:46 As soon as you're 35% done with it,
10:47 it just knows that we're 35% of the way done.
10:49 That's when the multiple bottoms
10:51 and we've been using sort of 225.
10:53 That's the third of the move to 200 from 240,
10:56 which was the peak.
10:57 And we think it's 13, 13 and a half.
10:59 That's your trough multiple, 13, 13 and a half times 225.
11:02 That's around 3000.
11:03 I mean, can we be that precise?
11:05 No.
11:05 Is it a really good framework?
11:06 Absolutely.
11:08 - So Mike, what's it feel like being on an island
11:11 as a strategist for one of the largest
11:13 investment banks in the world
11:14 and just everything was coming your way
11:16 with your fire and ice call.
11:18 It was all happening.
11:19 It was a large part though, your competitors,
11:21 a lot of your major clients, the pushback there,
11:25 they just thought it was gonna be something
11:26 that was also gonna be transitory.
11:27 We're gonna have this sort of thing
11:29 where we're gonna get back to buying the dip
11:30 and that sort of, what does it felt like?
11:32 We're literally through nine months of the year.
11:34 We're through three quarters
11:35 and almost everything that you're predicting,
11:37 even though you were a little early in 2021,
11:40 it's all happening.
11:41 So now all of a sudden we're starting to see
11:43 some of those promo bulls throw in the towel here
11:46 and they're gonna probably get it right
11:48 for that move back to like the low 3000s and the S&P 500.
11:52 But people like Danny and me and Guy, we have long memories.
11:55 - I'm glad to hear it.
11:56 Well, thanks.
11:56 It's nice for you to recognize it.
11:57 Some people don't.
11:58 Clients have recognized it.
11:59 They've been great.
12:00 We've helped them hopefully navigate this.
12:02 - Being on the island, to be quite honest, is exhausting
12:05 because you're always defending your position.
12:08 But it's no different than being an investor.
12:10 An investor, a lot of times,
12:11 you're having to defend your position in the market
12:13 and the market's not wrong, you're wrong.
12:15 So it's the same thing.
12:16 The investment process and the investment business,
12:18 if you're committed, I told it to somebody yesterday,
12:20 if you're really committed to this business as an investor,
12:22 as somebody who's trying to help investors
12:25 or be an advisor, and I kind of do both, it's exhausting.
12:28 And that's just the life we've chosen.
12:29 - Speaking of exhausting, and then a godfather quote,
12:32 look who's here, Guy Adami.
12:33 - Story's loud.
12:34 - Guy Adami, put your mic on.
12:35 Look who's, we got Mike Wilson, we got Danny Moses.
12:38 - So Guy, perfect timing, have a seat.
12:40 I was just about to get into the Fed,
12:42 so there really was no reason for you to speak
12:44 until this exact moment.
12:44 - But Mike Wilson just said,
12:46 "This is the business that we have chosen."
12:48 He just said it.
12:50 - So I'm coming in late here.
12:52 First of all, it's great to see,
12:53 what do they call it in real life, Dan?
12:55 - IRL.
12:56 - In real life.
12:57 - In real life, right.
12:58 So Mike Wilson, IRL here.
13:00 You know I have the utmost respect for Mike,
13:01 but so I've gotten this thing where I do song lyrics, right?
13:04 And it comes to me in the car.
13:06 By the way, got in the car at 1:37 p.m. East Coast time.
13:10 Now this is First World Problems,
13:11 don't effing at me on Twitter, I am not interested in it.
13:15 It is now 3.16 as we're doing this.
13:17 You can do that math, that's a long ass trip.
13:20 Shouldn't take that long.
13:21 - Path train.
13:22 - Excuse me?
13:23 - Path train, aren't there things--
13:24 - Oh, what, you just create a path train?
13:26 You just make one up.
13:26 - I'm just saying, you could take the train.
13:28 - You're Barbara Eden.
13:29 - Mike, where do you live?
13:30 - White Plains.
13:31 - Okay, easy enough.
13:32 28 minute train, nothing, yeah.
13:33 - Fourth studio album from the mighty Van Halen
13:36 was, you might remember, Fair Warning, right?
13:38 Fair Warning.
13:39 Just keep that in mind, Danny Moses, Fair Warning.
13:42 At night I walk this stinking street
13:45 past the crazies on my block.
13:47 Everybody thinks we're nuts, they've thought that for a while
13:49 and I see the same old faces and I hear the same old talk.
13:53 Listen to this.
13:54 And I'm searching for the latest thing,
13:56 a break in this routine.
13:58 I'm talking some new kicks, some like you ain't never seen.
14:02 Now, why do I bring that up?
14:03 Because we've been giving people Fair Warning
14:06 literally since we started this thing.
14:08 And there are mean streets, but for a guy like Mike Wilson,
14:11 and you talk about this all the time, Danny Moses,
14:13 and his job has never been in jeopardy,
14:15 I'm not suggesting this, but to make the call
14:17 that he's made and been steadfast on
14:20 for the last at least year, if not longer,
14:24 I mean, that puts you at some risk in a world
14:26 where you can just fade into the ether with everybody else.
14:29 You buy the dip, buying opportunity,
14:31 all the bullshit you typically hear
14:33 because there's no ramifications
14:36 for being bullish and for being wrong.
14:39 That's what I would like to sort of add
14:40 to this great conversation I'm certain you already had.
14:43 - I would say that we use the word logic,
14:45 being logical, and that's where we were
14:47 in this exact process, talking about earnings degradation,
14:49 where we're gonna hopefully trough
14:51 and where that's gonna be and how I would give anything
14:52 to be bullish and how, when Mike does turn bullish,
14:55 I promise to follow him, even though on that episode,
14:57 I'm gonna say, do you believe Mike turned bullish?
14:59 Is he crazy?
15:00 I'll just be with that now.
15:01 But Mike, so let's get into the Fed for a second
15:03 and this reliance, 'cause something big
15:04 has been happening over the last, well, last six months,
15:07 but specifically in the last couple of weeks, right?
15:09 The heroin that you just referenced
15:11 was trying to come back a little bit, left the clinic,
15:13 I promise I'm cured, put the heroin back in.
15:15 RBA, Reserve Bank in Australia goes 25,
15:18 ooh, BOE comes in to undo this trustless mess.
15:21 So it's really interesting today
15:22 at what the GILTs are doing.
15:24 They're having a massive move higher again, why?
15:25 'Cause the BOE didn't buy anything the last couple of days.
15:28 Even if the Fed stops, which I think,
15:30 I wanna hear your opinion, I know they're overshooting,
15:33 I believe their first move is gonna be to stop QT,
15:36 because I believe that will settle
15:37 the mortgage market a little bit.
15:38 It may not, but the perception will be,
15:40 and it will settle the treasury market.
15:42 And I'll end with this, because they have a lot
15:44 of financing needs over in England.
15:46 And all of a sudden, they're gonna have
15:47 these huge auctions coming and the BOE only put this
15:49 in place for basically a month, this kind of stopgap.
15:52 Anyway, I want your thoughts on that addiction,
15:54 and then your thoughts specifically for Guy especially,
15:57 about what the Fed is doing wrong right now.
15:59 - Yeah, I mean, I'm actually not a big critic of the Fed,
16:01 because they have a tough job.
16:03 They're reactionary by design.
16:04 So they're always gonna, I mean,
16:05 they're looking at employment data
16:07 and they're looking at inflation data,
16:08 which is backward looking.
16:09 So they're always gonna be late to start and late to finish,
16:11 but that's by design.
16:12 So I don't really bespare this sort of central banks.
16:15 Once again, I think fiscal policy was the real reason
16:18 we got this blowout inflation, because look,
16:20 that's the difference between the GFC and today, right?
16:22 The only difference between the two periods
16:24 was that we didn't actually put the money into the economy.
16:26 That's what got the inflation going.
16:27 That's the thing that people, I think, don't appreciate.
16:29 But the reality is, is that what's going on right now
16:31 is M2 growth is now negative on a global basis, okay?
16:34 So whenever that happens, stuff breaks.
16:36 UK market, gilt market was the first thing,
16:38 kind of big one, where we got the first major bank
16:41 to reverse course.
16:42 So as I wrote this weekend,
16:44 is this a light at the end of the tunnel?
16:45 Meaning has the reversal process began?
16:48 Yes, the BOE is reversing, RBA only did 25,
16:51 Polish National Bank only did zero.
16:53 So they're starting, but it doesn't matter
16:55 because the only--
16:56 - How many bankers did it take to do that?
16:57 (Danny laughs)
16:58 - Sorry. - Probably more than it should.
16:59 But the reality is, is that the Fed
17:01 is the only central bank in the world
17:03 that can actually print the dollars.
17:05 We're short dollars.
17:07 That's what's going on right now.
17:08 It's a global phenomena,
17:09 and the Fed will eventually have to pivot.
17:11 So I totally agree with you, Danny.
17:12 It's going to be, they stop QT.
17:15 They're not gonna cut rates that much.
17:16 They're gonna stop QT because that's the problem.
17:18 And they'll probably have to do QE at some point.
17:20 Not tomorrow.
17:21 It is a hope trade for now, but it's the right idea.
17:24 I just think it's too early.
17:25 - Right, and where the market's valued right now,
17:27 it's not, right, it doesn't make sense regardless.
17:29 So there's a lot more pain to come before, right?
17:31 - Well, not just that, but the Fed
17:32 really shouldn't be pivoting yet
17:33 because we haven't had a financial accident
17:35 that really is big enough for them to care about.
17:37 That's number one.
17:38 It has to be closer to home.
17:39 And secondly, the jobs market is still booming
17:42 and CPI is still too high.
17:44 So they have to keep going to regain their credibility.
17:47 - One of the things that I posited is,
17:49 for the first time in a while,
17:50 and I may be 100% wrong,
17:52 but this Federal Reserve seemed laser focused
17:54 on the stock market for years,
17:56 to their detriment, by the way.
17:57 This one doesn't seem to be nearly as concerned.
18:00 So for me, I don't think they start thinking
18:03 about reversing course until the S&P
18:06 is somewhere around 3,000-ish.
18:07 That to me is sort of, if there's a put, that's where it is.
18:10 In terms of unemployment, they want it to go higher,
18:13 so they're hoping the number goes up.
18:15 The thing that's gonna spook them, again, my opinion,
18:18 is the credit market or the credit markets.
18:21 They're showing cracks.
18:23 You do much more thoughtful work than I,
18:25 but can you speak to that?
18:26 'Cause if the credit markets start to go,
18:28 then all bets are off with this entire thing.
18:31 - Totally, so let's look at the last two times
18:32 they pivoted in 2019.
18:34 There was the funding markets.
18:35 They had the reverse repo operations.
18:37 That was sort of a new facility that now is permanent.
18:40 So they have that ability to do some of that stuff again.
18:42 That's why those markets are actually quite stable still.
18:45 - Still. - Still, for now.
18:46 And the other one was in December of '18
18:49 when the credit markets, the funding markets in longer term,
18:52 and also the year-end constraint from the banks
18:54 really forced their hand.
18:56 So I totally agree, and that's our house view as well.
18:58 It's usually the credit markets they care about.
19:00 The S&P could trade 2,500 if credit markets are still okay.
19:03 I mean, that's the reality of it.
19:04 I think when we get to 3,000, if we get there,
19:07 other things will be happening that really flips their hand.
19:09 And it could be labor or it could be credit markets,
19:11 but you're spot on.
19:12 It's something in the markets
19:14 that inhibits the functioning nature of the economy.
19:17 That's what the Fed will care about.
19:18 - It's interesting you mentioned the repo,
19:20 and I'm not looking to get in the weeds here.
19:22 I'm not looking to make people's eyes glaze over,
19:24 but in September, I think it was the 17th,
19:27 Danny probably knows the exact date, 2019.
19:30 So before anybody even heard of COVID,
19:33 if you remember, Danny, the overnight repo market blew up.
19:35 - I talked about it while you were in Italy
19:37 a couple weeks ago, that exact thing, exactly right.
19:39 - So that to me, now people will blame COVID.
19:42 I get it, causality, the whole thing,
19:44 but we started talking about that and say,
19:46 hey folks, look under the hood,
19:47 'cause something happened here
19:49 that I haven't seen in a long time.
19:51 So to your point about the overnight repo markets,
19:53 that's to me, and I'm glad you brought it up,
19:55 'cause I think that's of vital importance.
19:57 - So to Mike's, let me just echo Mike's point.
19:59 So what's happening is, for people out there,
20:01 again, to explain, you pull money out of banks
20:02 'cause you're not earning anything on your deposits.
20:04 You can park it.
20:05 Banks can't use the reverse repo, right?
20:07 So it's everybody else that kinda comes in there.
20:09 Intermediaries, when you drain deposits from the banks,
20:11 they can't lend as much 'cause the ratios are all off course.
20:13 So I think we're a lot of mini breaks.
20:15 And we've had, I don't know,
20:17 22,000 bond market flash crashes globally
20:19 in the last six months.
20:21 I mean, the flash crash we were all crazed on years ago
20:23 was from 222 to 176 or something
20:26 in a period of five minutes.
20:27 We have that in minutes now.
20:29 I mean, today, just in England.
20:30 Anyway, yeah, so your thoughts on that,
20:32 because we do have many little breaks,
20:33 but I don't have faith that Powell or the Fed
20:35 even understands what they're looking at,
20:37 to be honest with you, Mike.
20:38 - Yeah, I mean, like once again,
20:39 I'm not in the weeds on Fed policy.
20:41 I'm not in the business of besmirching them
20:42 because there's a lot of other things going
20:44 that we can analyze, like earnings,
20:46 like the economic cycle, like valuations
20:49 that are still out of bounds.
20:50 I mean, we're heading in that direction, right?
20:51 So like it or not, the Fed is doing their job now.
20:54 I mean, it's funny, like a year ago,
20:55 everybody's like going, "Well, why didn't you raise?"
20:57 Now they're complaining that the Fed wasn't doing their job.
20:59 Now they're doing their job
20:59 and they're complaining about that.
21:00 So I find investors to be a little bit more,
21:03 they complain too much about like,
21:05 "Look, they're just doing their job."
21:06 So the flash crashes and things like that,
21:08 yeah, we're seeing these little pop-ups,
21:10 but none of them have been big enough
21:12 for the Fed to change course.
21:14 And there will eventually, we wrote about this,
21:17 there will eventually be something if they stay this course.
21:20 So I told you before, I'll just give you some numbers.
21:22 We look at global M2 in dollars.
21:26 That peaked at 87 trillion in March.
21:29 It's now 83 trillion.
21:31 So it's down 4 trillion, that's a lot of money.
21:32 And there's a lot of reasons for that.
21:33 It's not just the fact that the Fed's tightening
21:34 or other central banks are tightening,
21:36 it's that there's regulatory squeeze,
21:38 there's less velocity in the real economy,
21:40 i.e. housing and things like that.
21:41 So everything's kind of coming in in a way
21:43 where M2 in dollars is negative on a year-over-year basis.
21:46 If we go further negative,
21:47 there is going to be an either economic
21:50 or financial accident that will change their course.
21:53 That should be in the next three to six months,
21:55 if all stays the same.
21:57 What I don't know the answer to,
21:58 and this is probably something you know better than I do,
22:00 the plumbing now has been changed.
22:03 They've created so many facilities
22:06 where they can get dollars into the economy in other ways,
22:09 besides the traditional QE process.
22:12 And that is an area where we could be kind of fooled,
22:15 where they're doing something
22:17 that is not necessarily fully transparent.
22:18 I don't know the answer to that.
22:20 It's more of a conspiracy theory.
22:21 - Well, that'll be the SLR adjustment for the banks, right?
22:23 They'll allow banks to hold treasuries
22:25 and not have all the capital ratio requirements
22:26 that they would need.
22:27 That will be what they will do.
22:28 When you see that, people are gonna extrapolate that
22:30 into Fed's here, they're changing, they're doing that.
22:32 That might indeed happen.
22:33 But Jamie Dimon, next week we can talk about JP Morgan,
22:35 not Morgan Stanley here, but you're gonna hear, I think,
22:38 one of the greatest earning calls in history
22:40 that's gonna encompass everything.
22:41 And one of the things I think-
22:42 - Or you won't.
22:43 - What do you mean, like greatest as far as-
22:44 - No, like greatest hits.
22:46 It's gonna be as great as-
22:46 - Theater. - Theater.
22:47 - Theater, I'm sorry.
22:49 And what I was gonna say at the end was that
22:50 if you're the CEO of a publicly traded company,
22:53 and you just mentioned, Mike,
22:53 people give year ends normally time to recalibrate,
22:56 what do you do?
22:57 Especially if you have a balance sheet,
22:58 especially you have to refinance debt,
23:00 especially, you know, use commercial paper market,
23:01 whatever it might be.
23:03 That's where the instability, it's not just in the plumbing,
23:05 and that's fine, that's temporary.
23:07 But that's, I think, is very frustrating for,
23:10 I wouldn't say that the Fed's not transparent.
23:12 I would say that they're just overshooting.
23:14 And so you gotta play that game as a CEO,
23:15 and I think a lot of them are gonna try to send a message
23:17 during earnings season to the Fed.
23:19 - Well, look, I mean, I think they're getting what they want.
23:20 I mean, they're getting an economic slowdown,
23:22 probably not as fast as they want,
23:23 but you have to break this thing out, right?
23:25 So the labor market is still red hot.
23:27 Housing market is a standstill.
23:29 The car market now is basically coming to a standstill.
23:32 These are two really important markets.
23:33 - I agree.
23:34 - And that's- - Shipping market.
23:35 It's destroyed. - Shipping market, I mean,
23:37 cost of inventory, inventory is ballooned.
23:39 And this is all permutations of what happened
23:40 during COVID, the lockdowns,
23:42 and then the supply chain issues, and logistical problems.
23:44 This is a lot to absorb for an economy
23:47 in a short period of time.
23:48 So things are gonna break.
23:49 We think, ultimately, it turns into real earnings problems.
23:53 We already talked about that.
23:54 Like, we think earnings are way too high,
23:56 and there's a lot of reasons, okay?
23:57 It's not just your typical economic recession.
24:00 There's all this financialization
24:01 which has to come out of the economy.
24:03 - All right, so next Thursday and Friday,
24:04 we get Q3 earnings season kicked off.
24:07 We're gonna have Citi, Wells Fargo, Morgan Stanley,
24:09 JP Morgan, so probably 50% of the XLF starts reporting.
24:13 And we all know this.
24:14 We've been doing this a long time.
24:16 Sometimes the way the market trades
24:17 into the beginning of the earnings cycle,
24:19 and some of the things that we've seen,
24:21 JP Morgan gapped down 3%, 4% after its results,
24:24 and everyone feels like, ah, this is gonna be
24:26 one of those long earnings periods,
24:28 and then all of a sudden, you get to that week
24:30 and a half later when all the mega cap techs are reporting,
24:32 and it just has a different feel to it.
24:34 How do you think this is gonna go?
24:35 Because again, we know that a lot of these companies
24:38 that are gonna be reporting,
24:39 that are dictating the course of that earnings
24:41 that you're expecting to be declining next year in 2023,
24:46 they got a lot of dollar exposure,
24:47 they got a lot of fixed costs
24:48 that are really being impacted by input costs,
24:50 and their ability to continue to pass them on,
24:53 whether it be to the consumer.
24:54 We've seen peak margins.
24:55 How does this shake out in Q3 earnings season?
24:58 Are we gonna see a meaningful downgrade to Q4 estimates?
25:02 And then will that be extrapolated out to 2023 earnings?
25:05 Because you're one of the only guys
25:06 calling for it right now.
25:08 - Yeah, I think people have piled on, though.
25:09 I do feel like it's getting a little more crowded
25:11 in the room on the earnings story.
25:13 I don't think they've had the precision
25:14 that we have necessarily, the confidence.
25:15 But here's where I have confidence,
25:17 here's where I don't know.
25:18 Well, first of all, the leading revision factors
25:19 are telling us that the fourth quarter's
25:21 gonna come down pretty hard.
25:22 What I don't know is, will people extrapolate that into '23?
25:27 I think if you get enough companies pulling guidance,
25:30 that'll freak people out,
25:31 or they may guide Q4 down enough on the top line
25:34 where you have to extrapolate
25:35 or you lose all credibility as an analyst.
25:37 So I think there's a 50/50 on that.
25:39 But the market, just to be clear,
25:41 the market won't go down hard to my targets
25:44 on the downside until the forward numbers
25:47 come down in a more meaningful way.
25:49 And that's the missing part.
25:50 So there's a higher chance it happens now
25:52 than it did in 2Q,
25:53 'cause they're closer to the end of the year.
25:54 It may need to bleed into the January reporting season.
25:57 - I've always said that the banks,
25:58 forget about owning long, short, the banks in general.
26:01 I don't wanna talk about that.
26:02 But the banks have been the key to all this
26:03 because we have such a financialized global economy
26:06 as you just mentioned before, so much debt.
26:08 And it is so crucial that people pay attention,
26:10 not just to Jamie Dimon, but to all these quarters,
26:12 because we know the write downs
26:13 that are occurring in the debt market.
26:15 We know these deals that are hung.
26:16 We know, or people are now realizing
26:18 that the M&A market lives off of debt
26:20 because you have to finance these deals.
26:22 And you're seeing right before our eyes,
26:23 Citrix and some of these things get repriced
26:25 and Twitter and stuff.
26:26 So to me, that's my takeaway next week.
26:28 And whether or not you own these stocks or don't,
26:30 you have to pay attention to what they're saying,
26:31 because to me, they're gonna tell you,
26:33 what is their industrial loan book?
26:35 Are they growing their C&I loan,
26:36 as we call it, personal loans?
26:38 What do delinquencies look like to the consumer?
26:40 To me, it tells you everything.
26:41 And having been trained in financials,
26:42 you can extrapolate that and take to all the other sectors.
26:45 - You alluded to some, this is a human being question.
26:47 And I know the way I'm wired,
26:49 and I'm obviously not a normal person,
26:51 which I think is what-- - That's a good thing.
26:52 That's why we're friends. - Exactly.
26:53 I happen to think it's a good thing as well.
26:55 But as I mentioned when I came in,
26:57 you are on that island pretty much by yourself
26:59 in terms of this call that's come into fruition.
27:02 You just alluded to the fact that
27:04 the room is getting a little more crowded.
27:06 On a certain level, I think you feel there's a vindication.
27:10 The market has created that vindication.
27:12 Now, people coming around to your way of thinking
27:15 has done as well.
27:16 But does it scare you now?
27:18 Do you look at this and say, holy shit,
27:19 now everybody's thinking the way I am.
27:21 Maybe I gotta do another deep dive and say,
27:23 maybe this isn't getting along in the tooth.
27:25 'Cause I know that's how my brain works.
27:27 - Yeah, I mean, we always were paranoid schizophrenics.
27:30 Like I said, we're friends in business, so you have to be.
27:32 And yeah, it's getting more crowded.
27:33 We don't like that.
27:34 However, our fundamental work,
27:36 we're getting more confident that we're so far out of bounds
27:39 on the earnings estimates
27:40 that we're gonna trust that work.
27:41 Once again, I go back to the timing.
27:42 I don't know if it's this quarter or next quarter,
27:44 but at 3,800, 3,900, the risk reward is pretty poor
27:47 at the index level.
27:48 One thing I wanna just spend a second on,
27:50 'cause we have some guys who do good work on this.
27:52 So in September, obviously we're down 10% in the S&P
27:55 and some stocks are much worse.
27:56 Worse September we've seen in a long time.
27:59 And we basically saw some of the asset owner community,
28:01 retail specifically, and the CTAs sell out.
28:05 So I'll give you some rough numbers.
28:06 So the CTAs we think sold $75 billion worth of equities.
28:10 It's a huge number, okay?
28:11 And they're not quite as--
28:13 - Can you explain to our audience what those are, CTAs?
28:15 - CTAs are just trend following momentum players.
28:18 Usually--
28:18 - And they're levered, and they're normally levered.
28:19 - They're now levered, and they only buy
28:21 basically S&P futures, NASDAQ futures,
28:23 maybe Russell futures, or they'll buy other futures.
28:26 And just to put it in context,
28:28 they're not as underweight equity exposure
28:31 as they were in June, but they're close.
28:33 So there's a lot of buying power that can come back
28:35 if the market just hangs around for two or three weeks,
28:37 which is possible, because while I agree
28:40 the financial sort of companies are important,
28:42 what the market really will tank on is the tech names.
28:45 It'll tank when those guys finally give it up,
28:48 because that's the bulk of the earnings.
28:49 That's what people really care about.
28:51 And we won't know that for three weeks.
28:52 So the market could kind of drift higher
28:54 as that buying power kind of comes in.
28:56 That's where I get nervous,
28:57 but that's where we have a great team of people
28:58 who can tell me, look, this is more technical.
29:01 Our fundamental view is still not played out yet.
29:03 And that's why we have this risk reward framework
29:05 where we say, look, it's just not attractive at 3,800.
29:07 - Mike, I think it's important to point out the CTAs.
29:09 We've talked about the leverage in the system,
29:11 and all of a sudden you're six, seven times levered.
29:13 You're borrowing at zero,
29:15 and then you're six or seven times levered
29:16 borrowing at four to 5%.
29:19 The tap on the shoulder that we all know,
29:20 the famous Wall Street tap on the shoulder
29:22 that a guy might get in trading energy
29:23 or whatever it might be.
29:24 But that to me, that's not coming back.
29:26 That leverage isn't coming back anytime soon.
29:28 You're right in the sense of the exposure,
29:29 but I'm curious your thought on that
29:31 because I don't think they're gonna be ramping that back up
29:33 with rates where they are now.
29:34 - No, and they're not going back to where they were,
29:36 say, at the end of last year, right?
29:37 They can't.
29:38 So your point is the rates are much higher
29:39 and their cost of capital.
29:40 So they're not gonna be allowed to,
29:41 but they could, they could buy back to 75,
29:43 and that's a decent number.
29:45 And then it kind of builds on itself.
29:46 So I'll say this, and we talked about it
29:48 in our pod that we did this morning.
29:50 Give it a shout out, what's it called?
29:52 - It's called Equities Unplugged.
29:54 - All right, you guys smash your subscribe buttons
29:56 for Equities Unplugged.
29:57 Mike Wilson, smash it.
29:59 Let's crush that thing.
30:01 - Once every two weeks.
30:01 - Once every two weeks, all right.
30:03 Should we do a home and away?
30:04 - Absolutely.
30:05 - Do you want to be on the tape, Bear?
30:06 - Morgan Stanley does not want us.
30:08 - They would kick our asses out.
30:09 - They'd kick my ass quickly.
30:10 - There wouldn't be anything on, it'd be all censored.
30:13 - Bleep, bleep, bleep, Fed, bleep, bleep.
30:15 Listen, we only have a couple minutes left.
30:17 And one of the things that I just gotta say,
30:18 Guy, you've been doing Fast Money for what, 27 years?
30:21 - It'll be, yeah, 27 years next week.
30:23 - January, yeah, and I've been doing it for 10.
30:25 Is there a better thing in our A Block
30:27 when Mel comes to us and we're just talking
30:30 this and that or whatever,
30:31 and then a guest like Mike Wilson comes on
30:33 and he'll just roll in and be like,
30:34 you know, Dan made a really good point.
30:36 The guy just kind of nailed that.
30:38 Is there a better Fast Money guest than Mike Wilson
30:41 who will just give you a shout out?
30:42 - I love that.
30:43 - Right, fair enough?
30:44 - And it's funny is what you don't see on camera
30:46 is if Mike were to do that or if anybody would do,
30:49 especially with me, I will flex.
30:51 - Oh, no, we'll all be pointing.
30:53 - I will point at myself, like,
30:55 look at the big brain on Guy.
30:56 So listen, Mike, you know the way we feel about you.
30:58 That's why you're here.
30:59 Before you run out of here,
31:01 there are all different metrics that you look at
31:03 and there are a lot of inputs to this thing.
31:05 Is there one thing that's gonna turn
31:07 that you're gonna say, all right, guys and gals,
31:09 we might start thinking about turning this boat around?
31:12 - Yeah, it's easy for us.
31:13 I mean, we wanna see those numbers down
31:14 to about 225 on a forward basis.
31:16 We wanna see equity risk premium at least close to 400.
31:19 And quite frankly, I mean,
31:20 I'd like to see the PMIs closer to 45.
31:22 Those are the things we've really been highlighting
31:24 for folks.
31:25 We're pretty disciplined in that.
31:26 It doesn't mean that markets can't overshoot
31:28 on the upside on a tactical trade,
31:30 perhaps the next couple of weeks.
31:31 We're trying to stay true to our work
31:33 and we tend to be early.
31:34 Doesn't mean we're always right.
31:35 Early is wrong sometimes,
31:37 but it's unlike that we're gonna be late.
31:39 - Did you get nervous this summer
31:41 that the nearly 20% rally in the S&P 500
31:44 from the June lows to the mid-August highs?
31:46 Does price sometimes make you rethink
31:48 a little bit your thesis?
31:49 - Of course, now I will tell you this.
31:51 I was much more nervous in March
31:53 when we got back above the 200-day moving average
31:54 and we hadn't really started
31:55 the earnings revision cycle yet.
31:56 And I thought, oh man,
31:57 this thing still has some gas in the tank.
31:59 The reason I wasn't nervous this summer
32:00 is because our revision breath date had already plummeted.
32:03 So I was like, this thing can run.
32:05 It maybe goes to 200-day
32:06 and then literally stopped the 200-day to the penny.
32:09 It was amazing tactical.
32:10 Like if you were starting a technical analysis class,
32:12 just pull that chart.
32:13 - Yeah, Carter Braxton Worth, Worth Charting.
32:14 - And Mike, I wanna end with this
32:15 because I think you just hit on something.
32:17 I don't try to think about
32:17 where the market is off of its highs.
32:19 I look at it on a bottom-up kind of basis.
32:21 And I am still to this day,
32:22 I'll never understand Q4 2021.
32:24 That run from 43 or 4,400 to 4,800.
32:27 I like to take that and just mark it off
32:29 and use kind of 43, 400 as the rational beginning point.
32:32 Do you concur with that?
32:33 I still-- - Totally.
32:33 - Okay. - We overshot to the upside
32:34 by 400 points.
32:35 That was exactly our number, 4,400.
32:37 Now if a market's overshoot
32:38 and we got laced in the press,
32:40 I mean, rightly so.
32:41 Like, oh, this guy's an idiot, man.
32:43 You know, it was true.
32:44 We missed 400 points.
32:44 We were pressed.
32:45 - There was a seasonality thing going on there as well.
32:47 - But to Danny's point, it's important
32:48 because what it means is that we always overshoot fair value
32:51 both on the up and the down.
32:53 Now, it's interesting.
32:54 The markets are rounding tops
32:56 and they're usually spike bottoms.
32:58 So when we go, if we go to the low 3,000s,
33:00 we ain't gonna spend much time down there.
33:02 - Yeah, I'm with you.
33:03 - We're all gonna nail the bottom together.
33:04 - Yeah. - Okay.
33:05 We're set right here on the tape.
33:06 - Remind me when I say when Mike turns, I turn,
33:08 and when I don't, hunch me in the face.
33:09 - And sincerely, I think the listener can tell
33:11 how much respect we do have for Mike Wilson.
33:13 We've all known him for a very long time,
33:14 both professionally through the media.
33:16 And obviously, we are so glad to have you join us
33:18 on the tape.
33:19 We hope you'll come back really soon, Mike.
33:20 - Really appreciate it, guys. - Thanks.
33:21 Stick around, everybody.
33:22 We got a lot more.
33:23 We got Demos picks.
33:23 - Stop it. - What else we got?
33:24 - We got a lot.
33:25 There's a big cannabis news that came out.
33:26 - Yes, I was showing you that.
33:28 - Stick around.
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35:51 (upbeat music)
35:55 All right, we're back.
35:56 It is great to have Mike Wilson in real life.
35:58 That's great. IRL.
35:59 I love this.
36:00 Yeah, I learn these things.
36:01 When they say, there are other lines,
36:03 those letters they use.
36:05 LOL?
36:06 Law, that means laughing out loud.
36:07 LOFL?
36:08 What is it?
36:09 Well, laugh out, laugh out for you.
36:11 Whatever, I mean, it's just dumb.
36:12 Just say it.
36:13 It's nice having him in real life.
36:15 And obviously we admire not only him as a person,
36:18 but his work has been extraordinary.
36:20 And he said, typically early is wrong in our business.
36:23 Well, he happened to be early and spot on.
36:25 So it was a real pleasure having him.
36:27 And by the way, I didn't realize Dan,
36:28 this was a call-in show,
36:30 but in a few minutes we're gonna get a call-in
36:31 from that great linebacker from Florida State University.
36:35 Brady Cobb?
36:36 Exactly, Brady Cobb,
36:37 because there is groundbreaking news.
36:40 Groundbreaking, it really is.
36:41 It is, in the cannabis space.
36:43 It truly is, he's gonna call in.
36:44 He's gonna call in, but Danny, before he gets on,
36:46 I mean, this seemingly came out of the blue.
36:48 I didn't know about it.
36:49 You obviously have a lot closer to this.
36:51 Brady's been tweeting this for several months,
36:53 but even earlier this week,
36:55 something was brewing in Washington.
36:56 There was some weird news.
36:57 There was like, appointed a person to the FDA
37:00 that understood marijuana reform
37:01 from the state of New York.
37:02 There was a lot of chatter that Cory Booker,
37:04 who wanted all these social reforms,
37:05 Jared Brown wanted these social reforms
37:07 as it relates to cannabis offenses.
37:09 And so he can only do stuff on the federal level, Biden.
37:12 So basically, and this is in real time,
37:13 we're gonna get Brady on to explain it better,
37:15 but he's basically pardoning anyone on the federal level
37:18 for possessing marijuana, that's one.
37:21 And two, he's imploring at the state level to do the same.
37:24 And then they're also directing the HHS,
37:27 Department of Health and Human Services,
37:29 to basically look at descheduling the drug.
37:31 So for those out there,
37:32 the reason that you can't bank cannabis
37:35 is because it's a quote, "schedule one drug," like cocaine.
37:38 I mean, fentanyl is not schedule one, let's just be clear.
37:41 If you go to schedule two,
37:42 it's not money laundering, banks can start to do it.
37:44 So anyway, this is the step.
37:46 We were waiting for safe banking.
37:48 I'm gonna imagine Brady's about to say,
37:50 "This is one step bigger."
37:51 - There are many sexy men out there.
37:53 There are many sexy, smart men out there.
37:56 There are many sexy, smart men with colored histories.
38:00 There are many sexy, smart men with colored histories
38:03 that played linebacker at Florida State.
38:05 And then there's Brady Cobb.
38:07 - There you go. - What is going on?
38:08 - Oh, man. - Gentlemen.
38:09 - Brady, I just butchered, I think,
38:11 I was trying to explain,
38:12 'cause I literally read your text to me when it happened,
38:15 and we were recording something else.
38:16 So take it from the top, what just happened?
38:19 What does it mean, and where do we go?
38:21 - Yeah, so President Biden just did what he promised to do
38:25 on the campaign trail,
38:26 which I've given him a lot of shit for taking too long,
38:29 but he just held a press conference
38:32 where he said he's signing executive orders.
38:34 The first one will be to pardon anybody
38:37 that has a federal possession charge for cannabis,
38:40 which is around 6,600 people,
38:42 which I can't tell you the impact of that
38:44 for those people's lives.
38:46 Weldon Angelos, who I serve on his board
38:48 at the Weldon Angelos Project,
38:49 has been advocating for that alongside so many others.
38:51 It's massive.
38:53 The second thing that he did
38:54 that I can't overstate how important it is
38:56 is he has ordered Department of Health and Human Services
38:59 to conduct a review on the scheduling of cannabis,
39:03 meaning it should not be scheduled where it is,
39:05 and he actually referenced the fact
39:07 that cannabis is scheduled next to LSD and heroin
39:10 on schedule one, and actually fentanyl is on schedule two,
39:14 which is ludicrous, and he noted correctly
39:17 that that is something that this country's dealing with
39:19 from an overdose standpoint.
39:20 Canada should not be there.
39:22 So those two steps, I can't explain to you
39:24 how massive they are.
39:25 The first one is long overdue piece of social justice reform.
39:29 Should have happened quite some time ago,
39:30 and it sets the precedent and makes the passage
39:32 of safe banking that much more likely in the lame duck
39:36 because it's a social justice piece that we can check off
39:39 'cause that's the one complaint
39:40 from the more liberal side of the Democratic Party
39:42 is safe banking doesn't do enough for social justice.
39:45 The second piece is an absolute showstopper
39:47 for the cannabis industry
39:48 because if cannabis were to be rescheduled,
39:50 say, to schedule three, it's not gonna go to schedule two
39:53 based on the president's own press release
39:56 where he said schedule two is where fentanyl is.
39:58 It'll go something lower than schedule three,
40:00 and you guys are the market masters.
40:03 You can tell me that there's plenty of companies
40:05 that sell schedule three and below drugs
40:06 that are listed on US exchanges.
40:08 So put your chin strap on.
40:10 - So Brady, let's talk about what that actually means.
40:13 So safe banking everyone was focused on.
40:15 This supersedes that,
40:16 but let's talk about the states for a second.
40:18 So he's imploring the states to follow his lead.
40:21 And then I don't think there's gonna be
40:22 federal legalization,
40:23 which we don't need to have all these things occur.
40:26 Can you just explain the difference?
40:27 And I know he's imploring the states.
40:28 And I wanna say one other thing.
40:29 You're being humble and modest in this.
40:31 You've been very involved for years in this.
40:34 And it always happens, not when you least expect it
40:36 'cause you were expecting it at some point, but it happened.
40:38 And it was the Republicans who finally came around
40:40 and I think forced the hand of the Democrats
40:43 because they were stealing the issue from them.
40:45 To your point you made that Biden,
40:47 when he was running for president,
40:48 this was one of his things he was standing on
40:50 and he never did anything until now.
40:51 So I know those are like three questions
40:53 and things I just mentioned in there,
40:54 but can you just address those?
40:56 - Yeah, so the federal government doesn't have the power
40:58 to effectuate changes with respect to state law
41:00 and state convictions,
41:01 but in the signing of executive order
41:03 that implores the state governors
41:05 to also issue pardons or sentence commutations
41:08 for people with marijuana possession charges,
41:10 which is again, massive.
41:12 And one of the things I would note on that piece
41:14 is I've been working with representative Dave Joyce,
41:16 one of the leading Republicans in the US House.
41:19 And Dave actually crafted a bill
41:22 that I helped work on the framework of
41:23 probably four years ago called the HOPE Act,
41:25 which would provide federal funds for the states
41:28 to process expungements.
41:30 And that's the bill that's been talked about the most
41:32 that would be combined with safe banking and a lame duck.
41:34 So again, it makes everything, the pieces are,
41:36 it's been a long, miserable walk in the dark.
41:39 The sector's gotten pounded, there's been no hope.
41:42 And as I've always just said, it's gonna be a catalyst.
41:44 And when it happens, watch out.
41:46 And the pieces are starting to come together.
41:49 This is the day that I've been waiting my entire life for,
41:51 with everything my father went through.
41:52 - It's been 50 years.
41:54 - And by the way, not to say I'm anything special,
41:57 but I put a tweet out on Monday saying,
41:58 "Keep an eye on DC this week."
42:00 And I got a lot of hate back saying,
42:01 "The boy who cried wolf."
42:02 So it's finally nice to get one right.
42:05 - So suck it, Twitter.
42:07 - Yeah, exactly. - Yeah, fight me.
42:08 - But Brady, it's good.
42:09 So hopefully, I mean, this is a big moment.
42:11 Forget about the stocks.
42:12 Honestly, I'm not even thinking about the stocks right now.
42:14 - Me either.
42:15 - This is 50 years in the making.
42:17 Undoing Nixon's policies and all the things that have gone on.
42:20 This is a major win for everybody.
42:21 And I just would not take that lightly.
42:23 - So Brady, it's me here, Guy Adami speaking.
42:25 Big fan, as you know.
42:27 This to me now, all these companies
42:29 have been waiting patiently on the sideline.
42:31 All the big cap pharma names, all the beverage names.
42:34 My sense is the M&A landscape is gonna change considerably
42:39 over the next few months.
42:40 But am I looking at this correctly?
42:42 - Yeah, you're looking at this correctly.
42:44 And I'm gonna focus on industries
42:45 that I think will be the first movers
42:47 to come in and pull the trigger.
42:48 It'll be alcohol.
42:49 I mean, they're already in.
42:50 There's been a huge push in DC from a lobby standpoint.
42:53 Alcohol's gotten behind it because they see the threat.
42:56 They can't let seltzer happen again.
42:57 Seltzer went and took 50, 60 share points off of Bud Light
43:01 and they can't let it happen again.
43:03 Cannabis presents a real threat to alcohol
43:05 from a wallet and a share stomach standpoint.
43:07 And by the way, alcohol has been lobbying.
43:09 If you saw Nancy Mace's bill, the State's Reform Act,
43:12 that bill is largely set up in the same way
43:14 that alcohol is currently distributed,
43:15 which is state by state
43:16 on a three-tier distribution system.
43:18 I firmly believe cannabis will ultimately be regulated
43:21 the same way, state by state,
43:23 after the rescheduling occurs.
43:24 So I would be focused on alcohol and tobacco in the short term.
43:28 I think pharma will come later.
43:29 - Really amazing, Brady.
43:30 I know we'll have a lot to catch up on later,
43:32 but timing-wise, honestly, we're in the studio
43:34 and to get you on the phone
43:35 and get your thoughts is tremendous.
43:36 And congrats on all the work you've done.
43:38 I know there's still a lot of work to do in the sector.
43:41 - Yeah, I just wanna say one thing.
43:42 I've gotten to know Brady through Danny,
43:44 as Guy has over the last, what, year, year and a half?
43:46 You've been so generous coming on the pod
43:48 and really giving not only just your take
43:49 on what you just did here about,
43:51 just from a legislative standpoint,
43:53 from an investment standpoint,
43:54 you alluded to something that I think if any of you guys,
43:56 and I know, Danny, you know this in and out,
43:59 Brady, you just said this is something
44:00 you've been waiting for 50 years.
44:01 It's very personal to you.
44:03 And so hopefully, I think your guidance
44:06 for a lot of people, including us, on this topic
44:08 is really important and we thank you for it.
44:10 So everybody listening, go Google Brady Cobb.
44:13 - Follow him on Twitter, FBCobb Law.
44:16 - Fascinating life story associated with this topic.
44:19 So check it out.
44:20 - Yeah, there's something called Sunburn
44:20 that he started recently, so out there.
44:22 Anyway, Brady, you're the man.
44:24 I'll call you in a bit.
44:25 - Thanks, Guy. - Thanks, buddy.
44:26 - Love Brady Cobb.
44:27 And listen, Constellation Brands, obviously,
44:29 is way ahead of the curve,
44:30 but something happened literally today.
44:33 They say if it wasn't for bad timing,
44:35 I'd have no timing at all.
44:35 - Right, exactly.
44:36 So they made a multi-billion dollar investment
44:38 in Canopy years ago.
44:40 Cost a lot of people their jobs, I think, at Constellation.
44:42 Their whole idea is that we cannot let seltzer happen again
44:45 to the alcohol industry, what they did.
44:46 They came in and made all these seltzers and stuff.
44:48 And so THC beverages is what their mindset is.
44:51 Well, just this morning, they wrote down, I think,
44:53 a billion dollars of their investment in Canopy
44:56 because obviously, they have to start writing it down.
44:58 Well, maybe tomorrow morning,
44:59 the list should be-- - We talk about
45:00 this seltzer thing. - 8K and right here.
45:01 - When we were in high school and college--
45:02 - Bartle and James was the-- - No, no, hold on a second.
45:04 We were crushing the worst canned beer,
45:07 Waukee's Best, what we call it.
45:09 All that stuff.
45:10 The kids today, you see 'em, they have these slim cans.
45:13 They look too slick.
45:15 It's all clear.
45:16 Guy, have you seen these?
45:17 The Neuners and all this stuff, the Trulies and stuff.
45:19 It's horrible. - I was just in my son's
45:21 apartment refrigerator.
45:22 - It's horrible, it's embarrassing.
45:23 - No, they had natural light.
45:24 - Okay, so you felt a level of respect.
45:27 - Yeah, yeah. - Okay, fair.
45:28 - Natty Light, right?
45:29 Guy, what was your crap beer?
45:30 - Stroh's on tap at the Tombs for you, Georgetown.
45:33 - Yeah, the Tombs, exactly.
45:35 All right, what are we gonna do?
45:35 - Well, soon, they'll have THC in 'em, so.
45:37 - Danny, what are we doing?
45:38 - What are we doing?
45:39 - When are we gonna get your guys and what are we doing?
45:40 Just shout, listen, guys, if you're listening to this
45:43 and you like what we do, but you also like what Danny does
45:46 with Vinny and Porter and the whole idea of what are we doing
45:49 will you please tweet at them?
45:50 We gotta get them on the mic.
45:51 - I was driving to Boston the other day
45:53 and Brady had posted this and I didn't really talk about it,
45:55 but we got invited to speak at Harvard Business School.
45:57 Harvard looks good now.
45:58 We just had Brady speak in their entrepreneurial class
46:01 two days ago and I'm driving in the car
46:03 going up to meet Brady in Boston
46:05 and I get on the phone with Vinny and Porter.
46:06 We're on the phone for 22 minutes just shooting this shit
46:08 and I go, guys, how would you not just record this?
46:11 It was just a back and forth of like, what are we doing?
46:14 We were talking about energy, we were talking about rates,
46:16 we were talking about Tesla, we were talking about everything
46:18 and so they'll do it, we'll get 'em on, it's happening.
46:21 They're making too much money,
46:22 I can't pull 'em off the screen.
46:23 - All right, so we've got an action-packed show here.
46:25 Guy came in mid-Mike Wilson, we had Brady just dialing in.
46:28 We got a little call-in show here.
46:31 What else do we gotta get?
46:32 As you're listening to this, we will already have known
46:34 the September jobs report, okay?
46:36 How important do you guys think this is gonna be?
46:37 - Okay, that's a great topic.
46:38 - Okay, let's talk about it.
46:39 - So you could give me the number right now.
46:41 - Wouldn't know what to do.
46:42 - So the estimate is 270, 275.
46:44 You could hand me 350, I'll make a bullish,
46:46 and bearish argument.
46:47 You can hand me 175, I'll make a bullish,
46:49 and bearish argument, right?
46:50 I think people wanna see that number right down the middle
46:52 'cause no one wants to have to evaluate
46:54 because here's what's gonna happen.
46:55 If it's a bad number, the Fed probably won't recognize it.
46:58 They'll come out and they're all out there,
47:00 Kishkari, your favorite guy, guy,
47:01 they're all out there saying, hope you're listening.
47:03 We're still very hawkish.
47:04 So that would be like stagflationary.
47:06 - I'll just say this real quickly, guy,
47:07 and I'd love to get your take.
47:08 If it is a really hot number, market's going down.
47:11 - Yeah, I agree with that.
47:12 - And SESAP is filling in that gap and it's going down.
47:14 - I think the unemployment number,
47:15 the three point whatever it's gonna be,
47:17 whether it's eight or 3.9 or whatever it's gonna be,
47:19 is a more important number than the job number.
47:20 - Fair enough, but anything north of 350,
47:23 the market craters.
47:24 And in terms of unemployment rate,
47:26 we'll see how it shakes out.
47:26 - But think about what you're saying.
47:27 So we saw the lag impact from rate hikes, believe me,
47:30 I'm not bullish on that.
47:31 (laughing)
47:32 I'm trying to paint the picture of 350.
47:35 See, I told you we're still functioning, employment,
47:37 we can handle these rates going up
47:39 and all the other inflationary things
47:41 are starting to tick down.
47:42 This is the best of all worlds.
47:43 I mean, I'll paint you the bullish picture on it.
47:45 - I've lived through that, believe me.
47:46 I'm just throwing it out there.
47:47 Again, you're right.
47:49 I say it to Melissa all the time on Fast Money.
47:51 If you had told me these numbers a day ahead,
47:53 I'd be wrong half the time at best.
47:54 And that's just the market we find ourselves in.
47:56 By the way, speaking of somebody
47:58 who's been wrong half the time,
47:59 that's Danny Moses in this year's NFL, by the way.
48:02 - I'm above 500, I'm 65.
48:03 - Okay, you understand what I'm saying, wise guy.
48:05 Okay, that's not nitpick, 'cause I gotta tell you,
48:08 when you're playing at 85%,
48:10 six and five ain't nothing to write home about.
48:12 - Well, listen, so I started out this season one and two.
48:15 - Yeah, it wasn't great.
48:16 - Yeah, no, yeah, I started out one and two,
48:18 first time I've had a losing record
48:19 as a member of On The Tape.
48:21 So I'm now six and five, but Dan--
48:22 - Wait, wait, first things first.
48:23 - Dan is doing to me, no, I wanna say what you're doing.
48:25 You're doing to me right now what I did to you last year.
48:27 I'm now taking the other side of your picks,
48:29 and I am back down $1,000 too.
48:31 - You are not doing that.
48:32 Just first things first, so Thursday night, guy,
48:35 we haven't told you this,
48:36 Danny and I were with Joe Marchese.
48:37 - Oh my God, I forgot about that.
48:38 - Friend of the pod, and we were watching
48:40 this Cincy game, okay, in a bar, and Danny--
48:42 - On a phone.
48:43 - On a phone, and you gotta see him.
48:45 He's doing all those things, like, you know,
48:48 he's doing all this stuff, and his hands are moving,
48:50 and then we had a bartender, nice guy,
48:52 but this kid--
48:53 - Degenerate.
48:54 - Oh my God.
48:55 - I love him.
48:55 - And Danny actually had a little sidebar with him.
48:57 - Stop.
48:57 - Yeah, he did, and he's like, listen, guy,
48:59 you gotta turn it down a little bit,
49:01 you know what I mean?
49:02 It was like a little intervention.
49:03 - Yeah, the kid McPherson, the kicker, kicked it,
49:06 and I paid you $100.
49:07 I go, Dan, I'll give you 100 bucks if he makes it.
49:09 - No, no, I took 100 bucks from Danny.
49:12 He pulled it out of his wallet,
49:13 and then I gave it to the kid behind the bar,
49:15 'cause he was getting killed.
49:16 Wasn't he losing that game?
49:18 - He was, and then, yeah.
49:19 - He appreciated it.
49:20 - All right, so week five in the league
49:21 where they play for pay, six and five, Danny Moses.
49:23 By your standards, that's just an atrocity.
49:25 What do you got for us?
49:26 - All right, so Cincinnati,
49:28 speaking of Cincinnati in that game,
49:29 that was a Thursday night game, wasn't it, Dan?
49:31 - Yep.
49:32 - That gives them an extra three days, doesn't it, guys?
49:34 They're going into Baltimore, right?
49:36 That was a tough loss for Baltimore.
49:38 Bad coaching, by the way.
49:39 Harbaugh's done a bad job this year.
49:40 - I agree with that.
49:41 That's a game they should've won.
49:42 - Very good coach, right?
49:43 Bills came in and whatever.
49:44 Since he's getting three points in Baltimore.
49:46 - Live dog.
49:47 - Live dog.
49:48 - A live dog to win outright, but I like Cincinnati.
49:50 Plus three, Dan, you want any action on that one?
49:52 - Nope.
49:53 - All right.
49:54 I love Jacksonville.
49:55 I realize--
49:56 - Hold on a second, stop.
49:57 Who talked about the Jacksonville Jaguars?
50:00 - You did.
50:00 - Thank you.
50:01 - You also talked about the Eagles
50:02 and you're right on the hose, by the way.
50:03 - Thank you.
50:04 - You've been very good.
50:05 - I'm just putting it out there.
50:05 Jacksonville's two and two, by the way,
50:06 should be three and one, but doesn't matter in the league.
50:08 - Could've been four.
50:09 I mean, they were up 14-nothing.
50:10 But anyway, they're coming home, right?
50:12 They're coming back home again
50:13 and they're playing a horrendous Houston team.
50:16 The line is seven.
50:17 I can't believe I'm saying it.
50:18 I love Jacksonville minus seven
50:20 'cause I think this is their true coming out.
50:21 I think they are a very talented team
50:23 and they're just not in a market where people are seeing them
50:25 and so I love Jacksonville minus seven over Houston.
50:27 Dan, would you like Houston?
50:29 - Nope.
50:29 - All right.
50:31 I'm gonna give four picks this week.
50:32 - Wow.
50:33 - With the hope of going three and one.
50:34 - I have a couple that I'd like to see.
50:35 - Oh, you're getting cocky?
50:37 Okay.
50:37 All right, Bears plus seven and a half in Minnesota.
50:40 I think Minnesota stinks and I love Justin Fields.
50:43 He keeps them in games.
50:44 I realize you're G-men.
50:46 Hold on, oh God, Guy's gonna take action.
50:48 - No, I'm not taking any.
50:49 - I'll take the Bears plus seven and a half in Minnesota
50:52 and then my last one is, and I'm most nervous about,
50:55 both these two teams are Jekyll and Hyde.
50:57 I will take Tennessee minus two in Washington.
51:00 I feel like this is when Tennessee gets on track here.
51:02 So, Tennessee minus two, Jacksonville minus seven,
51:04 Bears plus seven and a half, Cincinnati plus three.
51:07 Four picks.
51:08 Dan?
51:09 - None of those.
51:10 What about this?
51:11 I wanna take Atlanta.
51:11 - I love Atlanta.
51:12 - I wanna take Atlanta plus nine and a half.
51:13 - I've been short Tampa all year.
51:15 - Okay, fine, I know you have
51:16 and they do not look particularly good
51:18 so you don't want Tampa.
51:19 The other one would be Green Bay minus eight
51:22 over the New York Giants.
51:24 I wanna take that.
51:25 - You want Green Bay?
51:25 - Yeah.
51:26 - All right, Guy and I will split together.
51:28 - You gotta take the Giants, Guy.
51:29 - No, I don't.
51:30 - That's not your team.
51:31 - I don't do that.
51:32 That's the, you put the ultimate, you put the horns.
51:33 - I'll take the Giants, not one of my picks.
51:34 - I don't do that.
51:35 - Not one of your official picks.
51:36 - You just 'cause Chano's and Liz Young,
51:37 just wanna be friends with them, you've taken the Packers.
51:39 They already love you, Dan.
51:40 You don't have to do that.
51:41 Just--
51:42 - By the way, I gotta tell you something.
51:43 Packers defense is good.
51:45 That offense is not very good.
51:47 And that Giants defense gets better each week.
51:49 No, I don't bet on sports.
51:51 - All right, so Dan--
51:52 - It's not my thing.
51:53 - I'm taking the Giants.
51:53 What number do you see?
51:54 Eight?
51:55 - I see Green Bay minus seven and a half.
51:56 - All right, I'll take Giants plus seven and a half
51:57 for 500.
51:58 - Thanks.
51:59 - Okay, very good.
52:00 - Ladies and gentlemen, this has been one of the more
52:02 interesting--
52:03 - Wait, we're not done.
52:03 We have one more.
52:04 - Oh, hold on a second.
52:05 - We have a rot, we have a rot.
52:06 - We don't have a rot, but we have one more thing.
52:07 We have to talk in my interpretation of,
52:10 I know you guys have talked about it all week
52:12 on this Tesla Twitter.
52:13 Danny, what is your take on all this?
52:15 - Danny, what's your take on this whole Twitter,
52:17 Tesla, Elon Musk thing?
52:18 - Here's what's interesting.
52:19 These banks, remember we talked about Citrix?
52:22 That was a January deal that was a 13 to 14 billion dollar
52:26 that's gonna cost the banks 600 million,
52:28 and now they're gonna actually have to buy six billion?
52:30 You know what, all the bank pandering to Musk,
52:33 all that stuff, oh, the guy's a money machine for us.
52:35 Well, if he goes through with this deal,
52:37 you're looking at half a billion dollar write down
52:39 and probably the carrying of some of this debt.
52:40 Remember how he financed this thing,
52:42 with the term loans, with the security,
52:43 with the unsecured, that's the first part.
52:45 The other piece of news to come out today
52:46 that was interesting was on Tesla specifically,
52:48 which is S&P upgrading the debt
52:50 for the first time to investment grade.
52:52 That would be from BBB to BBB, Dan, right?
52:55 - Yeah, I saw that.
52:56 - Do you remember September there was a tweet from Musk
52:59 about Moody's is irrelevant?
53:01 I find that interesting that Moody's isn't the one
53:02 that upgraded, it was S&P.
53:04 And also, listen, everything happens for a reason.
53:06 I mean, I truly believe that.
53:07 Now, I don't know, I don't think it's bullish necessarily.
53:10 Supposedly, they're free cash flowing,
53:12 but people read into that like,
53:13 oh, they must know something.
53:15 What they know is that deliveries were worse,
53:17 the numbers are gonna continue to get cut,
53:19 and that Musk is gonna have to sell
53:20 a lot more stock at this deal.
53:21 - And again, Tesla's had a really bad week.
53:23 There was a day it closed down 8%
53:25 after those September deliveries.
53:26 The one thing I'll just say is that
53:28 I think that there was probably him selling that day
53:31 because that was the night that he came out
53:33 and said that he's gonna close on the deal.
53:35 And I think he also knows because--
53:37 - That would have to be out already.
53:38 The way the filing would have to be out
53:39 that he sold stock, I would think, but keep going.
53:42 - But it closed down 8% on the day
53:43 when the market was up 2% that day.
53:44 - I mean, the desk could be doing it for him
53:46 and then he puts it on slot, but yeah, it's fair.
53:48 - So my point is is that he's probably
53:50 been selling stock Friday night on the close.
53:52 This came out, the stock closed at 49.42,
53:54 it closed at 52 the day after he said
53:57 it was gonna close that deal.
53:59 The deal is for 54.20, so we're now two, three bucks
54:02 below that, and there's really a lot of talk
54:05 about this debt contingency,
54:06 whether the banks are gonna wear this thing,
54:08 because the truth is they're not in a position
54:10 to take hundreds of millions of dollars of losses
54:13 and sell this thing to their clients at those losses.
54:15 So the question, we saw Apollo pulled out
54:18 from the equity standpoint, so if he's gonna close
54:20 this thing, he's gotta sell more Tesla,
54:23 or, and I heard this, and it's just a rumor,
54:25 I heard there was secondary SpaceX for sale this week.
54:28 - Yeah, it wouldn't shock me.
54:29 - Yeah, so then the question is,
54:31 does the richest man in the world,
54:33 who basically-- - In a world.
54:34 - In a world where all of his wealth
54:36 is tied up to a publicly traded stock
54:39 and a private one at SpaceX that was last valued,
54:41 I think at 120 or something like that, billion,
54:44 is he gonna overpay 20 or 25 billion dollars
54:48 for a company that, when he takes it back out public,
54:51 what do you think is gonna--
54:52 - 'Cause he overplayed his hand,
54:53 and because he doesn't wanna be deposed,
54:55 because if you're deposed, you have to answer questions
54:57 about literally everything in your life,
54:59 and it's worth $25 billion extra not to go down that road,
55:03 and we have talked about this for a while.
55:06 Tesla, very quietly, is down now some 43%
55:09 from its all-time high, and I gotta tell you something,
55:12 not to dogpile on the Cathie Wood rabbit,
55:14 but that ARK ETF is in a world of hurt in this environment.
55:17 - One last point, I would just say this
55:20 on that Tesla situation. - I have one more point, too.
55:21 - So it sounds like he's gotten out.
55:23 If he can't get the debt financing--
55:26 - Nope, nope, nope. - Are you sure?
55:28 - He tried to make that a new condition--
55:31 - Twitter said no. - If he agrees,
55:32 and Twitter said no.
55:33 So, just so you know, Dan, that did not,
55:35 so he tried to say, all right, I'll do it at 5420.
55:38 Let me back up a second.
55:40 I used to compare it to the Wizard of Oz.
55:41 This goes back five years of the must.
55:43 You get to the curtain, the Tin Man, the Lion,
55:45 they're all coming looking for hearts and brains
55:47 and courage and all these things, right?
55:48 And you pull the curtain back and you see this guy.
55:50 - Hearts and thoughts, they fade.
55:51 - Yeah, fade away. - Just fade away.
55:54 All right, so listen, shame on everybody
55:55 who deserves what's coming to them.
55:56 The banks deserve it, investors deserve it if they're long.
55:59 Take a step back.
56:00 He bid 5420 as a joke.
56:02 They started to read his emails.
56:04 He was gonna be deposed.
56:05 It was supposed to happen actually today, right?
56:07 Which is why he's paying,
56:07 and the judge is not taking any shit from him.
56:09 It's like, we're moving forward, like we're doing.
56:11 So he's so nervous.
56:12 You know the other thing of this genius?
56:13 He started to read, I don't know if he took the time
56:15 to read the emails, he probably didn't,
56:17 when he was reaching out to Larry Ellison.
56:19 Was there anything behind this that was even calculated?
56:22 You came up with a number 'cause it was the 420,
56:25 put the 5420, it's a joke.
56:26 Do you think that he can run a SpaceX, a Tesla, a Twitter?
56:31 I'll close with this, just saying, again,
56:33 I've always said this is the culmination
56:35 of everything in these markets, but--
56:36 - Listen, I don't think this deal's happening.
56:39 I'm just telling you because if you think about
56:41 since late April when he made this bid,
56:43 when you think about where credit is,
56:45 you think about equity valuations, you think about--
56:48 - It's gonna be legal.
56:49 The judge is gonna say you have to do it.
56:50 I'm not saying that,
56:51 but he's not gonna get out of it legally.
56:53 You're saying it's not gonna happen.
56:54 He's just gonna say, "I'm not doing it."
56:55 Regulators never punish 'em like they should
56:57 for his 420 secured, and this is where we are.
56:59 - Listen, we've had plenty of companies
57:01 over the history of the stock market
57:04 massively overpay in M&A.
57:06 We've never had an individual do this to this.
57:09 - It's unique, and the story keeps riding itself.
57:10 Anyway, where's Barry Diller in Activision?
57:12 - All right, should we get out of here, guy?
57:13 You wanna wrap this up?
57:14 But again, homage to Frank Morgan,
57:18 the Wizard of Oz, by the way.
57:20 And homage to Larry Ellison, who, as we said,
57:22 that Friday, what do you call that Friday fun day
57:24 or drop day or Friday? - Friday night dirties?
57:26 - Remember, that was a Friday night dirty.
57:28 - No one's ever even asked him about it.
57:30 It's never been a story written about it.
57:31 - We talked about it.
57:33 This has been a fascinating, enjoyable,
57:35 on-the-tape podcast.
57:36 I hope you've enjoyed it.
57:38 And what do you say, Dan, leave us critiques or messages?
57:42 - Be careful, 'cause I got ratioed.
57:43 You know what that means, you gotta get ratioed?
57:45 Someone tweeted something about me
57:47 and the amount of comments versus the amount of likes.
57:51 It was disproportionate about the comments.
57:54 - Noted.
57:55 - Okay, we'll learn that about that next on--
57:57 - Let's get guy ratioed, all right.
57:59 Thanks everyone, we will see you all next week.
58:02 Thanks once again to CME Group and iConnections
58:05 for sponsoring this episode of On the Tape.
58:08 If you like what you heard, make sure you hit follow
58:11 and leave us a review.
58:12 It helps people find our show and we love hearing from you.
58:16 You can also email us at onthetape@riskreversal.com anytime.
58:21 Follow and connect with us on Twitter @OnTheTapePod,
58:25 and we'll see you next time.
58:27 On the Tape is a Risk Reversal Media Production.
58:30 This podcast is for informational purposes only.
58:33 All opinions expressed by me, Dan Nathan, Guy Adami,
58:36 Danny Moses, and any other participants
58:38 are solely our opinions and should not be relied upon
58:40 for specific investment decisions.
58:42 (upbeat music)
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