Guy, Dan and Danny discuss the BOE intervention (7:30), the S&P 500 below the June lows (12:00), Stanley Druckenmiller predicting a recession (17:50), yield volatility (22:12), why gold can’t get going (29:23), opportunities in the market (31:02), Danny ROTTs on what’s really broken (41:35), and NFL picks of the week (47:02). The co-hosts interview Stephanie Link, Chief Investment Strategist and Portfolio Manager at Hightower Advisors, and talk about how much has changed in the market over the last ten months (53:21), whether things are different this time (56:17), the outlook for earnings (1:02:36), when to pivot on an investment (1:05:21), opportunities in the stock market (1:07:26), and if the market can rally without big tech (1:15:26).
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00:01:20 Yeah, people, yes, I'm back.
00:01:24 Not from Italy, Danny Moses.
00:01:27 Not from Italy, Dan Nathan, but from Sicily.
00:01:30 And I will tell you, if you haven't been, folks,
00:01:33 you need to go to the island of Sicily.
00:01:35 What I find fascinating about Sicily,
00:01:37 we flew in Palermo, an old city.
00:01:39 Actually, oddly enough, not that anybody particularly cares,
00:01:43 but when I got home from Sicily and I was scrolling,
00:01:46 what do they call it when you click
00:01:47 through channels on the TV, Dan?
00:01:48 I was clicking through the channels.
00:01:49 Yeah, clicking through the channels.
00:01:50 I stopped on Patton at the same scene
00:01:53 that George C. Scott was going through Palermo.
00:01:56 What do they call it, like Kismet or something?
00:01:58 It's all meant to be.
00:02:00 My worlds were colliding from Sicily.
00:02:02 It was a wonderful trip.
00:02:03 By the way, you're listening to the
00:02:05 On the Tape podcast, guys, I mean, back from vacation.
00:02:08 Danny Moses, Dan Nathan.
00:02:10 Later on, by the way, we're gonna have
00:02:11 the chief investment strategist from Hightower,
00:02:15 somebody you know and love, a member of the IC,
00:02:17 that's the Investment Committee, Dan Nathan.
00:02:19 Stephanie Link will be joining us.
00:02:22 Perfect time to have Stephanie,
00:02:23 because she looks at things from 30,000 feet
00:02:26 as opposed to what I look at at sort of sea level.
00:02:29 But I was trying to think, we like to integrate music
00:02:32 into our titles, into our podcasts, is that correct?
00:02:36 Back me up, give me, somebody say something!
00:02:38 Yes, we do that.
00:02:38 Yes, we do.
00:02:39 So, yes, so it was February of 1976,
00:02:43 I was 12 years old, I had just turned 12 in December,
00:02:46 and a song came out, Turn the Beat Around,
00:02:49 by the great Vicki Sue Robinson.
00:02:52 Turn, you remember that, love to hear percussion?
00:02:54 So why do I bring that up, Danny?
00:02:56 'Cause I know you have songs in your head.
00:02:57 Because guess what happened this week, Danny Moses?
00:03:00 First of all, let me just say this,
00:03:02 you look younger, you're the most handsome you have,
00:03:04 so it is your home plate, you need to go back there.
00:03:06 You know, it's funny you say that,
00:03:08 actually my wife said the same thing,
00:03:09 she goes, I felt like you felt at home there, and I did.
00:03:13 I felt a kinship with the land.
00:03:14 Love it.
00:03:15 Yeah, I went to Mount Etna, I got my hand in the lava.
00:03:17 So we started the month, right, it was on September 1st,
00:03:21 and I sang a little Neil Diamond,
00:03:22 'cause I needed something depressing.
00:03:23 Do it, can you--
00:03:24 ♪ September morn ♪
00:03:26 Came in today, I'm like, this is the last,
00:03:27 our last show in September, right?
00:03:29 So what should it be?
00:03:30 So I was thinking, song, song, blue, Neil Diamond,
00:03:32 but what's really happening right now, right?
00:03:34 It's a little Bob Marley.
00:03:36 - Do it.
00:03:36 ♪ Redemption songs ♪
00:03:38 ♪ Emancipate yourselves from your fund manager ♪
00:03:42 ♪ None of yourselves in your portfolio ♪
00:03:45 So, hold on, so now, quarter,
00:03:47 and so hedge funds that got redeemed,
00:03:49 they now have to come up with the cash, right,
00:03:50 and all this stuff, and we know what happens
00:03:51 in fiscal year mutual funds happening here
00:03:54 next month, right, Dan, I think it's in October,
00:03:56 and for that, that's why things always get dicey
00:03:58 this time of year.
00:03:59 So, this is the worst day I've seen,
00:04:02 forget about how much the market is down,
00:04:04 the worst action, the worst disappointment,
00:04:07 the worst everything I've seen,
00:04:09 and since we started the show,
00:04:10 today is a defining day, and we are officially,
00:04:13 I don't care what the definition, Dan,
00:04:15 of a bear market, we're here,
00:04:16 and now it's time to really look at your portfolio.
00:04:19 - It feels a little bit more like burning in Luton.
00:04:21 ♪ Burning on with Luton tonight ♪
00:04:24 - Okay. - So, we are Thursday
00:04:25 into the close, last hour of the trading day.
00:04:26 - Is that UB40?
00:04:26 - No, that is also Bob Marley. - It's also Bob Marley,
00:04:28 the great Bob Marley, anyway.
00:04:29 - S&P's down nearly 3%, the NASDAQ is down 3.5%,
00:04:33 Apple Computer, this is a really interesting one.
00:04:35 - Did you say Apple Computer? - Down nearly 6%,
00:04:37 you think of that in market cap terms.
00:04:39 - Hold on a second, Dan, hold on one second,
00:04:40 I thought Apple never went lower.
00:04:42 I watch on the television, they say Apple never goes down.
00:04:44 - It can, it's down today, so yesterday on Wednesday,
00:04:47 there was a Bloomberg report that some of the production
00:04:50 that they had for their 14 Pro was gonna be less
00:04:52 than expected by six million units on a 90 million number
00:04:55 or something like that.
00:04:56 Stock was down four and a quarter on Wednesday morning,
00:04:58 it rallied, the market was screaming, good sign, I guess.
00:05:01 If you're a bull, you'd say, okay, the S&P closed up 2%,
00:05:04 Apple was down 4%, closed down one and a half percent,
00:05:06 but here it is today, down nearly 6% on a downgrade
00:05:10 from Bank of America, you call 'em BOFA.
00:05:13 - Yeah, B of A in Maryland. - But it's interesting,
00:05:14 so the analyst that I know him is a guy named Wamsi Mohan,
00:05:17 and really, I think a good analyst,
00:05:18 he used to cover BlackBerry back in the day,
00:05:20 I'm just saying, but just real quickly.
00:05:22 - No, RIM, BlackBerry? - This stock is down
00:05:24 nearly 6%, it's a $2.35 trillion market cap.
00:05:28 How many stocks, Danny, in the S&P 500
00:05:31 have more than 100 billion in market cap?
00:05:33 Probably less than 50, and this stock is down
00:05:36 more than that today.
00:05:36 - Yep, no, it's definitely not good action.
00:05:39 - What does it say to you, though, back to your redemptions,
00:05:41 because a lot of people, we've been talking about this,
00:05:43 hide out in Apple, and it's--
00:05:45 - But wait, before you opine,
00:05:47 they don't even know they're hiding out in Apple.
00:05:49 They don't even know they're hiding out.
00:05:51 I'll say it the third time, they don't even know
00:05:53 they're hiding out in Apple, why?
00:05:55 Because of the advent of passive investing, Danny Moses.
00:05:58 I'm putting the ball up on the tee for you,
00:06:00 and I'm gonna let you pull your driver out and whack it.
00:06:03 And my concern all along has been,
00:06:06 when passive becomes active,
00:06:08 it ain't gonna be on the way up, sister.
00:06:10 And I think that's what you're seeing right now, Danny.
00:06:13 - In the ETF world, right?
00:06:15 You know how many stock ETFs there were
00:06:16 at the beginning of this year?
00:06:17 Just take a guess, just a number of each.
00:06:19 Forget about, not talking about the asset chat,
00:06:21 but get to the asset. - 500.
00:06:22 - No, more, Danny.
00:06:24 I would say 1,850.
00:06:26 - 8,552 ETFs.
00:06:30 - That's how many listed stocks there are.
00:06:32 - I'm just telling you how many ETFs there are.
00:06:33 - Isn't that correct?
00:06:34 - It's over 10 trillion, or it was over 10 trillion
00:06:36 at one point.
00:06:37 You know how many bond ETFs there are?
00:06:38 - Well, no, I don't know.
00:06:39 - 554 bond ETFs, over 1.2 trillion.
00:06:43 That's obviously grown.
00:06:44 Obviously, we'll talk about that later.
00:06:46 But anyway, to your point,
00:06:47 Apple's probably in a third of those ETFs.
00:06:50 People are hiding, you know.
00:06:51 So the answer is, it's everywhere, all these large.
00:06:53 And we've said it, people have been hiding out
00:06:55 in these names for a long time.
00:06:56 And funds use it as a safe, quote, safe long.
00:07:00 Valuation be damned, they're in it
00:07:01 'cause they know it's a good company.
00:07:03 Well, everything has its price.
00:07:04 Now, the price is being paid.
00:07:06 And so, it's a good company.
00:07:07 It's not going to zero.
00:07:08 It's gonna be a buy.
00:07:09 These are the things you gotta start buying.
00:07:11 - We say it all the time.
00:07:12 It's not about being a good company.
00:07:13 It's got nothing to do with it.
00:07:14 And we're gonna talk about this later,
00:07:15 some opportunities that might be coming around.
00:07:18 There are a lot of great companies,
00:07:20 but it doesn't mean they're great stocks at the time.
00:07:22 And again, Apple's a company,
00:07:24 just to put it in some perspective,
00:07:26 that's gonna have mid-single-digit EPS growth, Dan Nathan.
00:07:29 - Maybe at best, actually.
00:07:30 - At best.
00:07:31 Mid-single-digit revenue growth, maybe at best.
00:07:34 Declining margins.
00:07:36 I understand they have cash on the balance sheet,
00:07:38 which, by the way, has never been really a plus for them.
00:07:40 Maybe in this environment it is.
00:07:42 Trading at 23 times next year's numbers.
00:07:44 That's expensive in this environment.
00:07:46 And I think what's happening now
00:07:47 is the market's coming to that realization.
00:07:49 - Well, the market's realizing a lot of things.
00:07:51 I think we need to obviously address
00:07:53 what's going on with the Bank of England.
00:07:54 - Okay, so hold on a second with the Bank of England,
00:07:57 because I set you up and you were so excited
00:07:59 to sing your frickin' Neil Diamond,
00:08:01 sing it again, please, by the way.
00:08:02 - Which one?
00:08:03 - Any one you want.
00:08:04 You September Morning, it's the other one.
00:08:06 What was the other song?
00:08:06 Song Sung Blue.
00:08:07 Say it, can you just do it for me?
00:08:09 'Cause I love when you sing.
00:08:09 ♪ Investors are coming to America ♪
00:08:11 ♪ They'll drive the dollar higher than ♪
00:08:13 ♪ They're coming to America today ♪
00:08:17 - So that was a nice job, by the way.
00:08:18 I wouldn't even rehearse that.
00:08:19 So my turn the beat around,
00:08:22 Vicki Sue Robinson, February of 1976,
00:08:24 the Bank of England turned the beat around
00:08:28 in a major way, seemingly out of the blue.
00:08:31 And that's the reason on Wednesday, in my opinion,
00:08:33 you saw sort of that knee-jerk rally in the equity market,
00:08:36 'cause people connected to Dotz say,
00:08:37 "Wait a second, the Bank of England just flinched.
00:08:40 "The US is gonna flinch.
00:08:41 "The Federal Reserve is gonna flinch."
00:08:43 Much different situation in England,
00:08:45 specifically England, but overall Europe,
00:08:48 than it is here in the United States.
00:08:49 But the fact that they had a turn on a dime
00:08:52 speaks to the fact that we've been talking about now
00:08:54 almost two years, the bond market's broken,
00:08:57 the currency markets are broken,
00:08:59 and now people are coming to the realization
00:09:01 that's not great for equities.
00:09:02 - This will be looked back as a seminal moment,
00:09:04 not just for the UK, but globally, I think, for the markets.
00:09:08 And here's why.
00:09:09 Liz Truss, new Prime Minister, looking out for the people,
00:09:12 decides to cut taxes and spend money,
00:09:16 government money, to accelerate programs.
00:09:17 - Right in the face of inflation
00:09:19 and the Sterling getting hit versus dollar
00:09:21 and all these things, so it's counterintuitive
00:09:23 to what you should be doing,
00:09:24 so everyone yells at her, whatever.
00:09:25 Same time, you have all these pension fund managers,
00:09:27 UK, that have to manage their bond portfolio.
00:09:29 And guess what?
00:09:30 They use leverage in their bond portfolio,
00:09:31 and it's managed by none other than BlackRock
00:09:33 and Schroeders and people like,
00:09:34 they outsource this manager.
00:09:35 So effectively, we always said in the show
00:09:37 when we started it, the killer of all is leverage.
00:09:40 They basically leveraged it.
00:09:41 So when bonds sold off and the rates started to go higher,
00:09:43 there was a, quote, margin call.
00:09:44 The Bank of England probably got a phone call
00:09:46 from BlackRock and some of these other fund managers
00:09:48 that you got a problem, you guys gotta post billions.
00:09:51 This LDI market is one and a half trillion dollars,
00:09:53 just put that in perspective, that size of the market.
00:09:55 So it's not so much, it's just a posting of collateral,
00:09:57 leverage kills all.
00:09:58 Anyway, Bank of England comes in,
00:10:00 they said, all right, we'll start out
00:10:01 with buying a billion dollars worth,
00:10:03 which you could, a pound and a dollar
00:10:04 are the same at this point,
00:10:05 so what's called a billion dollars of long-dated bonds
00:10:07 will settle the market.
00:10:08 Well, guess what happened?
00:10:09 The market saw right through that.
00:10:10 Here's why it's a seminal event.
00:10:12 For the first time in a developed country,
00:10:14 forget about if a third world country tries to do this,
00:10:16 rates go to 35, 40%, it's over for them,
00:10:18 they can't get financing.
00:10:19 There was actually credit underwriting occurring.
00:10:21 People are starting to look at the budget,
00:10:22 like, hold on a second, they're not giving you low rates.
00:10:24 No one's following you into this because the deficit,
00:10:27 because all this deficit spending.
00:10:29 For the first time, guys,
00:10:30 since we have started this experiment,
00:10:32 this Global Central Bank experiment,
00:10:33 this is why it's a seminal event.
00:10:35 They didn't get away with it.
00:10:36 It was a short-term fix, yes, rates came down,
00:10:38 and they're gonna be there and buy.
00:10:39 They probably thought that rates would go to seven and a half,
00:10:41 8% on the gilts.
00:10:43 We talked about gilts here months ago,
00:10:44 that's something to keep an eye on and watch.
00:10:46 So they feel like they kind of stopped it from happening,
00:10:48 and maybe they have.
00:10:49 But here we are again.
00:10:50 All investors want is that Hail Mary.
00:10:52 Come on, central banks, where are you?
00:10:53 Well, guess what, they got it, and it's not mattering now.
00:10:56 And to me, that's a seminal event.
00:10:58 - Yeah, it's funny, though, that the S&P rallied 2%,
00:11:00 had its biggest update.
00:11:01 They're just waiting for the crack.
00:11:02 They're waiting for the pivot, and it's interesting.
00:11:04 Danny, when do our people, when do we atone for our sins?
00:11:07 What is that, what is the name of the holiday?
00:11:09 - Yom Kippur.
00:11:10 - Yom Kippur, what is the date of that?
00:11:11 - It's the fourth and fifth of next week, yeah.
00:11:14 One of the first market idioms I learned on Wall Street,
00:11:17 probably in the late '90s, was that you sell Rosh Hashanah
00:11:20 and you buy Yom Kippur.
00:11:21 So we've been selling off this week.
00:11:23 Rosh Hashanah was on Monday,
00:11:25 and we're gonna probably have a pretty nasty day
00:11:27 by the time you're listening to this in the stock market.
00:11:29 There's no saving this market.
00:11:30 - No. - Okay?
00:11:31 And then we know that Tuesday and Wednesday are Yom Kippur,
00:11:35 and we will be atoning for our sins,
00:11:37 and maybe that's the thing, the pivot.
00:11:39 - So I learned sell in May and go, which is asinine.
00:11:42 Listen, I'm telling you now,
00:11:43 if you're listening to this podcast,
00:11:45 and if you ever utter that phrase, don't listen ever again.
00:11:49 I'm just saying, I don't wanna lose an audience member,
00:11:51 but you shouldn't be doing it.
00:11:52 And if you're wearing one of those stupid,
00:11:54 what do they call those things, half vests or something?
00:11:56 - We've already been through that before.
00:11:57 - No, don't do that either.
00:11:59 There are a lot of things I don't want you to do as fall.
00:12:01 But let me just say this in terms of the Bank of England.
00:12:04 They flinched.
00:12:04 I guess they had a flinch, they had no choice,
00:12:07 but they flinched.
00:12:07 And now, over the course of the last two weeks,
00:12:09 while I was away, Bank of Japan,
00:12:11 for the first time in a long time, came in intervention.
00:12:14 Bank of England, what happened with the yuan?
00:12:17 Intervention in the yuan.
00:12:18 You're starting to see it in developed currencies.
00:12:20 That's not a particularly good sign.
00:12:22 - Yeah, I'll just say this.
00:12:22 You're gonna be listening to this on September 30th.
00:12:24 That will be the last trading day of this month.
00:12:27 The S&P 500, as we record right now,
00:12:30 is down 8.5% on the month.
00:12:32 It's down 10%, the NASDAQ, on the month.
00:12:34 Think about that.
00:12:35 In the month of September, and people get freaked out.
00:12:37 We come up with all these things, September more,
00:12:39 and wake me up when September ends.
00:12:41 You know, all that sort of stuff.
00:12:43 It's not a great month right here.
00:12:44 And so, my question to both of you is,
00:12:46 when you see this sort of price action,
00:12:48 it all happened all at once, if you think about it.
00:12:50 - As it typically does.
00:12:52 - Okay, so what does this portend?
00:12:53 The S&P is below those June lows.
00:12:55 The NASDAQ are below those June lows here.
00:12:58 - I have an answer, by the way.
00:12:59 - How do you save this thing?
00:13:00 - Price discovery is the answer.
00:13:02 What we're going through right now
00:13:04 is we're trying to find truth.
00:13:07 Price is truth, I say it all the time.
00:13:09 The reason why that hasn't worked for the last 13 years
00:13:13 is because liquidity creates opaqueness in the market.
00:13:16 You have zero clarity.
00:13:18 Now you're starting to get clarity.
00:13:19 On the way to price discovery is very painful.
00:13:22 That's what we're going through.
00:13:23 But we've been pretty steadfast.
00:13:25 I know Danny, for about 30 seconds,
00:13:27 one podcast sort of lost his mind,
00:13:29 'cause Liz Young was here and got a little bullish.
00:13:32 - I just tried to put my bullish hat on every once in a while.
00:13:34 It doesn't work.
00:13:35 I can't do it.
00:13:36 - He was playing devil's ad.
00:13:37 - We've been pretty steadfast in our belief
00:13:39 that this S&P, do the math,
00:13:41 lower valuations is environment.
00:13:43 You're not paying as much for a dollar of earnings
00:13:45 in this environment than you were six, seven,
00:13:47 eight months ago.
00:13:48 That is what it is.
00:13:49 And then earnings are coming down.
00:13:51 And we've been saying that for a while,
00:13:52 that it's just a matter of time
00:13:54 before you start to see earnings revision.
00:13:56 So back of the envelope math,
00:13:58 3,400 in the S&P, which is now 200 or so S&P handles away,
00:14:02 is not as ridiculous as it seems six or seven months ago.
00:14:06 - I always like to look,
00:14:07 one thing of where you are off the highs,
00:14:09 where you're off the lows,
00:14:10 and what is the absolute valuation.
00:14:11 So I don't think the S&P ever should have been at 4,800.
00:14:13 - I agree.
00:14:14 - Okay, but it was.
00:14:15 But if you try to be a rational market,
00:14:16 we actually talked about that.
00:14:17 That was the fourth quarter last year
00:14:19 when we had this kind of melt up.
00:14:20 I'm like, what?
00:14:21 I always said, take off that quarter.
00:14:23 Now I think the S&P at that point was early October of 2021.
00:14:26 Dan's got his FECS set machine up.
00:14:28 I think it was, I want to say 43, 4,400.
00:14:30 I think we rallied roughly 400 points.
00:14:32 - And we talked about the seasonality.
00:14:33 I remember the conversation.
00:14:35 - So I like to use that as the level of the top.
00:14:37 So let's just pretend that 4,400 or 4,800 never existed.
00:14:40 So 20% correction off of there is 880 points.
00:14:43 That gets you roughly to, guess what?
00:14:45 3520, somewhere in that range
00:14:47 where we're quickly approaching.
00:14:49 And that's the other thing in this market
00:14:50 we're going to talk about is how the volatility is insane.
00:14:53 So I think we just are now entering the correction.
00:14:56 Now, that being said, again, take your head out of the sand.
00:14:59 We say we focus on the macro and we focus on the Fed
00:15:01 and we focus on the micro and bottom up.
00:15:03 What the hell is going on right now
00:15:05 is the worst political climate
00:15:08 we've ever been in internationally.
00:15:10 Putin literally just declared,
00:15:12 just took over four territories in Ukraine today
00:15:15 and said, if you try to come back into these territories,
00:15:17 it's now by vote, it's now Russia.
00:15:19 If you come in, we're going to use nuclear weapons.
00:15:21 They sabotage Nord Stream One.
00:15:23 There's four leaks going on.
00:15:25 And I think we're so obsessed.
00:15:26 Is the Fed going to come to the rescue?
00:15:27 What are they going to do?
00:15:28 What is the number?
00:15:29 - Well, listen, if this war steps up,
00:15:31 the Fed is going to have to take their foot off the pedal.
00:15:33 - Let me finish my thought.
00:15:34 So it did step up, okay?
00:15:35 It is stepping up, but if that's your hope tree,
00:15:37 that doesn't happen to 3600, Dan, is my point.
00:15:39 It's lower.
00:15:40 What happened today in Germany?
00:15:42 They went further and put in price caps on energy
00:15:44 to help the consumer out.
00:15:45 But in the middle of all this, let me give you,
00:15:46 I'm going to get to a bullish point in a second.
00:15:48 You have Porsche IPO, successful IPO today,
00:15:51 spinning out of Volkswagen and going, okay, good company.
00:15:54 We can talk about its valuation versus Tesla,
00:15:56 which is insane when you think about the two companies
00:15:58 where they trade in value.
00:15:59 What else happens?
00:16:00 Biogen.
00:16:01 This is what I'm talking about.
00:16:02 Biogen's in over 300 ETFs.
00:16:04 If you're in a biotech ETF or healthcare ETF
00:16:07 and think that you're diversified,
00:16:08 the whole idea here is to become a stock picker.
00:16:10 Biogen trades at a 20 PE.
00:16:12 They have six billion in debt,
00:16:13 but it's a $35 billion company,
00:16:15 so there's no issue with their balance sheet.
00:16:17 My point is that if you're doing your bottom-up work
00:16:19 and you had picked Biogen as one of your two,
00:16:21 guess what you made yesterday?
00:16:22 15, 20, 20.
00:16:23 - Yeah, but those are--
00:16:25 - Just hear me out.
00:16:25 My point is that we're in this wash of liquidity, right?
00:16:28 We're in a washing machine right now.
00:16:29 People feel safety in numbers of owning ETFs.
00:16:31 They think they're diversified.
00:16:32 Let me give you an example.
00:16:33 Let's say that two days ago,
00:16:34 Medicare came out and said,
00:16:35 "We're slashing reimbursement budgets
00:16:37 "for drug companies across the board 20%."
00:16:39 Every one of those ETFs would have been down the same.
00:16:42 Do you agree?
00:16:42 And Biogen would have been taken down
00:16:44 on its market weight accordingly.
00:16:45 My point is this.
00:16:46 If you understand the fundamental,
00:16:47 I'll leave it to you.
00:16:48 My point is, you understand, I get it.
00:16:49 - It's a needle in a haystack in a bear market like this.
00:16:51 Doesn't matter because at some point
00:16:53 in the not-so-distant future,
00:16:54 if the stock market is much lower,
00:16:56 Biogen will fill in most of that gap.
00:16:57 - But you have massive, well--
00:16:58 - No, my point is I don't believe
00:17:00 that a lot of people that watch us,
00:17:02 listen to us are trading the way we're trading
00:17:05 and thinking about things the way we're thinking about 'em.
00:17:07 I mean, they're thinking about 'em
00:17:08 from an investment standpoint.
00:17:09 They're thinking about,
00:17:10 so if you're gonna go in and buy Biogen after the news,
00:17:13 that's not a great thing.
00:17:13 - Dan, let me ask you a question.
00:17:14 Do you think Cathie Wood probably has one good stock
00:17:17 in her entire portfolio?
00:17:18 I'm guessing, honestly, I'm not being a jerk here.
00:17:19 There's probably one or two good stocks, okay?
00:17:21 Hold on.
00:17:22 - Tesla.
00:17:23 - Please.
00:17:23 - It showed really good relative strength, Danny.
00:17:25 - Don't even, he's trying to get me worked up.
00:17:27 - Almost successfully.
00:17:28 - Teladoc or whatever stock you may wanna pick.
00:17:30 My point is this.
00:17:31 They're all gonna go down the same, right?
00:17:33 But if you understand that ahead of it,
00:17:34 my point is that if you look at their portfolio,
00:17:36 you say, what would I wanna own
00:17:38 away from Cathie Wood within that portfolio
00:17:40 that I know she owns 22% of
00:17:41 that is gonna get clobbered?
00:17:43 I'm not in a rush to buy it, Dan,
00:17:44 but you get my point.
00:17:45 My point is that the origination of the stock market
00:17:47 was never this clubbed ETF,
00:17:49 was never active ETF, man.
00:17:51 It was never that.
00:17:52 That just wasn't, and that's why, fast forward.
00:17:54 - And that's created, by the way,
00:17:56 I think this false sense of security,
00:17:58 and when things are going higher,
00:18:00 nobody focuses on the things
00:18:02 that you talk about all the time.
00:18:03 Now that things are going lower,
00:18:05 these things are coming into focus,
00:18:07 and it's somewhat problematic,
00:18:08 but it doesn't mean, as a matter of fact,
00:18:10 I would submit some of the best opportunities
00:18:12 over the next couple months
00:18:13 are probably gonna present themselves
00:18:15 for long side trades.
00:18:16 We'll probably talk about a few of them.
00:18:18 What I found really interesting,
00:18:19 amongst the many things that have been interesting
00:18:21 while I've been gone,
00:18:22 including this Bank of England thing,
00:18:23 which is just, as Danny said,
00:18:25 a seminal moment, I happen to agree.
00:18:27 So Stan Druckenmiller, who is a legend in our world,
00:18:31 was speaking at Seeking Alpha.
00:18:33 - Delivering Alpha.
00:18:34 - It's not Seeking Alpha?
00:18:35 - CNBC's Delivering Alpha.
00:18:36 - You know, it should be called Seeking Alpha.
00:18:38 - Maybe you should trademark that.
00:18:39 - There's a website called Seeking Alpha.
00:18:40 - Desperately Seeking Susan.
00:18:42 That was Madonna, is that right?
00:18:44 Dan has totally tuned me out.
00:18:46 Whatever, Delivering Seeking,
00:18:47 you understand what I'm saying.
00:18:48 He was speaking at a conference,
00:18:49 and I will tell you,
00:18:50 not somebody to speak in hyperbole,
00:18:52 but he said, and I don't necessarily agree with him,
00:18:55 but he thinks the next decade for the equity market
00:18:58 is sort of no man's land, it's going nowhere.
00:19:00 I mean, I don't know if you agree with that or not, Danny,
00:19:01 but when a guy like that says something,
00:19:03 he's not saying it just to make headlines.
00:19:05 He doesn't really care.
00:19:06 - Tudor Jones, Klarman, Gunlock,
00:19:08 these guys have seen seven cycles.
00:19:11 Most people that are trading have seen one,
00:19:12 maybe one and a half.
00:19:13 Listen to them.
00:19:14 They're not trying to be, oh, I told you so.
00:19:16 They're speaking from experience.
00:19:17 They see what's happening.
00:19:18 They've been through eight different Fed governors.
00:19:20 They've been through currency crisis.
00:19:22 They've seen long-term capital.
00:19:23 They've seen bits and pieces of everything.
00:19:25 Listen to them.
00:19:26 Don't go when the market's up 500 points the next day
00:19:29 and say, oh, old man, go back in your, go back home.
00:19:32 Like, whatever, no, they're not trying to be,
00:19:33 they've made their billions.
00:19:35 They're not talking their book.
00:19:36 They literally feel the need to try to help people.
00:19:39 I really believe that's what it is.
00:19:40 Do some people go out there and talk their book?
00:19:42 Sure, Cathie Wood goes out and talks her book
00:19:44 on TV all the time on the long side.
00:19:46 Somehow that's okay,
00:19:47 but when someone comes out and tries to be rational,
00:19:49 it's not okay. - So here,
00:19:50 just back on that, and I totally get what you're saying,
00:19:52 but just to play devil's advocate,
00:19:54 just to sort of level the playing field
00:19:56 so we don't seem too sided or too jilted or jaded,
00:20:00 whatever the word is,
00:20:01 you would expect her to talk her book
00:20:04 because she obviously has conviction.
00:20:06 But I understand what you're saying.
00:20:07 I will tell you something else,
00:20:09 and you mentioned people discounting Stan Drucker.
00:20:12 I get it, so do that at your own peril,
00:20:14 but everybody seems to be discounting
00:20:16 Warren Buffett right now,
00:20:17 and I mention Warren Buffett because this week,
00:20:20 his stake in Occidental Petroleum, Danny,
00:20:22 went up north of 20%.
00:20:24 He now owns almost 22% of the company.
00:20:27 Now, I don't want to play stock market
00:20:28 specifically in that name,
00:20:30 although it is a specific play.
00:20:31 It has more to do with the energy market.
00:20:33 Just let me say this.
00:20:34 Dan Nathan, tremendous call on energy
00:20:36 over the last six months.
00:20:37 You know, when it was trading in the 120s, 130s,
00:20:40 you said this thing is destined to mean revert.
00:20:42 It's probably gonna go back to 75, 80.
00:20:43 Here we are.
00:20:45 That was a great call.
00:20:46 Now, I'll tell you,
00:20:47 I think some of the reasons that I didn't see coming,
00:20:49 obviously the stronger dollar didn't help.
00:20:51 Obviously, zero COVID in China didn't help.
00:20:55 Obviously, this global slowdown
00:20:56 that we're in the midst of didn't help,
00:20:58 but I think what happened was traders, investors, whatever,
00:21:01 front ran the commodity,
00:21:03 thinking that at some point,
00:21:05 you're gonna see demand destruction,
00:21:06 which I totally get.
00:21:07 By the way, it's been a great trade to be short crude oil.
00:21:09 The problem is, again, my opinion,
00:21:12 we haven't seen the commensurate demand destruction.
00:21:14 It's just not there,
00:21:15 so you're waiting for something to happen,
00:21:17 and it might happen,
00:21:18 but it hasn't happened yet,
00:21:19 so the reason I bring up Buffett and Oxley,
00:21:22 I think there's a next leg to this energy trade,
00:21:24 and Bank of England flinched,
00:21:26 which is strike one, potentially.
00:21:28 If this fed our Federal Reserve
00:21:31 into the midterm elections, Dan,
00:21:33 says something like,
00:21:34 okay, the data suggests maybe we're on hold for a while,
00:21:37 the commodity market is gonna scream to the upside,
00:21:40 and I think you wanna be positioned for yourself
00:21:42 and energy under that situation.
00:21:44 - I don't disagree,
00:21:45 but what if what happened to the Bank of England
00:21:47 starts to happen here?
00:21:48 What if the joke is up,
00:21:49 the Fed comes in, guess what?
00:21:51 There's the $34 billion auction
00:21:53 coming here in the one year and the two year.
00:21:55 All of a sudden, we look at our finances,
00:21:56 north of 30 trillion in debt.
00:21:58 And when you start to look at those rates,
00:21:59 it becomes self-fulfilling how hard it is
00:22:01 to basically pay our bills.
00:22:03 That's what's happening right now over in the UK,
00:22:05 and that's the scary part.
00:22:06 I'm not saying, I think we've got a little taste
00:22:08 for what can happen to risk assets
00:22:10 if just a central bank blinks.
00:22:12 We saw what can happen, it's massive.
00:22:13 So the answer is, if the Fed does blink, make no mistake,
00:22:16 all asset prices will go up.
00:22:18 The market will go up a lot.
00:22:19 I'm not gonna say that it won't,
00:22:20 and I'm not saying that it won't happen,
00:22:22 but it won't happen at these levels.
00:22:23 And as it relates to energy,
00:22:25 Guy, I just try to extract the oil prices to these companies
00:22:27 which are still grossly cheap,
00:22:29 which we talked about six weeks ago, eight weeks ago.
00:22:31 Every day that goes by and oil's not below 70 or 75
00:22:35 is another day of cash flow for these companies.
00:22:37 - Interestingly, we're talking about blinking
00:22:39 the next Fed meeting, November 2nd,
00:22:41 a week before the midterms.
00:22:42 The stock market, it feels like things are heating up
00:22:45 to the downside yesterday after the BOE.
00:22:47 We saw the 10-year US treasury yield
00:22:49 trade up massively to above 4%,
00:22:52 the first tick above 4% in a very long time.
00:22:54 Huge intraday reversal, closed at 371.
00:22:58 Today, on Thursday, as the stock market's getting rocked,
00:23:01 rates are barely up.
00:23:02 This is a really important day,
00:23:03 not just for the stock market, for yields,
00:23:06 because are the 10-year, is it starting to price in
00:23:09 the potential for a recession right now?
00:23:11 We've been talking about the difference
00:23:13 between the two and the 10.
00:23:14 And so, if yields start going down,
00:23:17 Carter's been looking at the charts with us
00:23:18 on Market Call each day, the 10-year could easily
00:23:21 be back at 3.5 tomorrow, and then we probably
00:23:24 have a break of trend, and then you see 3%,
00:23:27 and then if you did see the Fed,
00:23:28 if they float a trial balloon,
00:23:30 you know that Fed whisperer, the guy,
00:23:31 Tamorris at Wall Street Journal,
00:23:33 in late October, prior to that November 2nd meeting,
00:23:36 maybe it's political, I don't know,
00:23:38 then you're gonna have a good old-fashioned rip
00:23:40 in your hands, because we've also been talking about
00:23:41 the fact set has been telling us on our Market Call,
00:23:44 our main man, Butters, estimates are coming down
00:23:47 for the S&P 500 faster than they have
00:23:50 the 5, 10, 15-year, 20-year average.
00:23:52 So, could we have a scenario where we get
00:23:55 a few pre-announcements out of the way,
00:23:56 Danny, maybe tomorrow night, a Friday night dirty
00:23:58 on the last night, the last night of the quarter,
00:24:01 okay, think about that, and then you have
00:24:03 a bunch of companies beat lowered expectations,
00:24:06 and then a Fed that's maybe getting a little more dovish.
00:24:08 - Here's the guy's going to be an asshole portion
00:24:11 of the podcast, you ready for it?
00:24:12 - Wait, that didn't start 20 minutes ago?
00:24:14 - No, this is more so, this is me,
00:24:17 'cause you're gonna get mad at me when I do this,
00:24:18 but I'm gonna do it anyway.
00:24:19 Dan Nathan, what's the largest economy in the world?
00:24:23 - Well, it's the EU combined.
00:24:24 - Okay, thank you, the country, specific country,
00:24:27 yes, you're right, the EU combined,
00:24:29 now you're playing your part.
00:24:29 - United States. - United States.
00:24:31 It's interesting, United States,
00:24:32 the largest economy in the world, it is,
00:24:34 and what did you just say before,
00:24:35 that 10-year yields had a 30 basis point,
00:24:38 is that what you said?
00:24:39 - I think that's weird.
00:24:39 - 30 basis point move, Danny?
00:24:40 - I think something's broken.
00:24:41 - Danny, 30 basis point move in United States,
00:24:45 10-year yields, what V word would you use to describe that?
00:24:48 I'm just throwing it out there, Danny, I don't know,
00:24:50 maybe you could throw me a word.
00:24:51 - Volatility. - Volatility, volatility.
00:24:54 And now everybody is talking about the volatility
00:24:58 in the bond market, the volatility in the currency market,
00:25:01 then when we were mentioning it this time last year,
00:25:04 everybody said, oh, you're a bunch of nervous Nellies,
00:25:07 it's not a big deal, blah, blah, blah.
00:25:09 So put that in your pipe and smoke it, number one.
00:25:11 Number two, to answer your question,
00:25:14 I could paint a scenario here,
00:25:15 and I actually think I might wind up
00:25:17 being right on this one,
00:25:18 where 10-year yields actually trade down to 3%,
00:25:22 while two-year yields stay anchored at 4%, if not higher.
00:25:27 And what environment would you call it,
00:25:30 there's a word for it,
00:25:31 I think it sounds like a male deer or something.
00:25:33 - Destruction?
00:25:35 - Stagflation. - Stagflation.
00:25:37 (laughing)
00:25:38 But destruction's a good word as well.
00:25:39 - We're already in stagflation.
00:25:40 - We are. - We are.
00:25:41 - And this is something you talked about last summer.
00:25:44 So here we are, I will tell you again,
00:25:46 the US 10-year yield should not move
00:25:48 five basis points in a day, let alone 30,
00:25:51 but here we are, and everybody seems to normalize it.
00:25:54 - Dan, your comment you made about 10-year yield rallying,
00:25:57 by the way, I'm down with TLT, you know that,
00:25:59 I think it's a buy here.
00:26:00 - That's a song, right? - Yeah.
00:26:01 - I'm long, just, you know, I'm long the GOVT,
00:26:03 which I share as US Treasury ETF,
00:26:06 and I'm actually short of the UUP,
00:26:07 so I actually think there's a very strong likelihood
00:26:10 the dollar comes in, rates come in.
00:26:12 - Yeah, well, okay, well those probably go together.
00:26:14 I guess my point is this, if you said,
00:26:16 hey Danny, the 10-year's going at 3%, guess what?
00:26:19 I think the S&P hit 3,000 at some point before that,
00:26:21 while that's occurring.
00:26:22 So my point is that you're trying to,
00:26:24 and then what is it, 'cause here's the thing, Dan,
00:26:26 it means something different to different industries
00:26:28 and different companies and people.
00:26:29 Rates coming in are positive for credit spreads,
00:26:31 it's positive for borrowing costs,
00:26:33 it's positive, there's a lot of positives.
00:26:34 So if you're a functioning company
00:26:36 and you get the benefit of it, your stock will go up.
00:26:38 And you're a tech company and you're valued at a discount,
00:26:40 I get it, but the point is that for that to happen,
00:26:42 and I think it will happen,
00:26:44 there's a lot more pain to come at it than money.
00:26:44 - Listen, the case for S&P 3000
00:26:47 is becoming increasingly clear.
00:26:49 So Mike Wilson, over at Morgan Stanley,
00:26:52 who's been on the pod,
00:26:53 who we all have a lot of respect for,
00:26:55 he, I think, is one of the first strategists
00:26:57 to lower his 2023 S&P earnings estimate
00:27:01 below his 2022 earnings estimate.
00:27:04 Now that's really important here,
00:27:05 because we've been talking about
00:27:06 how strategists have been offside.
00:27:09 So he's lowered his 2022,
00:27:10 he's lowered his 2023 to $212.
00:27:14 So if the S&P troughs at a 14 or 15 multiple,
00:27:17 so multiply 212 by 14 and you get below 3000.
00:27:22 - 2980.
00:27:22 - Do it by 15 and you get 3180, okay?
00:27:26 So I mean, the point is,
00:27:27 it's actually becoming a number that makes perfect sense.
00:27:30 And to your point, Guy, you've been saying,
00:27:32 when we were saying, well, we should get back to,
00:27:33 this is just a technical level,
00:27:35 and we had a higher multiple on a higher earnings number,
00:27:38 we were saying, okay, that gets you back to 3400,
00:27:40 which is the pre-pandemic high.
00:27:42 So we're gonna overshoot,
00:27:43 it's not like we're gonna stop on a dime.
00:27:45 And that was the one thing earlier this week,
00:27:47 when we had that match low in the S&P 500 from June 16th,
00:27:51 the thought that we would magically stop on a dime
00:27:54 and just rally from there made no sense.
00:27:56 And Carter Braxton Worth,
00:27:58 on CNBC's Fast Money with us the other night,
00:28:00 he actually made a really good point.
00:28:02 He said, here we are in June 16th,
00:28:04 we were right at this level,
00:28:05 and here we are on September 28th at this very same level.
00:28:09 He goes, stocks are not oversold,
00:28:12 they're at the exact same spot they were three months ago.
00:28:14 And think about how much higher the dollar is
00:28:16 and how much higher rates are.
00:28:17 Couple things, since you brought up Mike Wilson,
00:28:20 wouldn't it be great to get him on the podcast
00:28:22 like next week, Dan Nathan?
00:28:23 - I think he's coming on soon.
00:28:24 - Nice. - Stop it.
00:28:26 So Mike Wilson will be on the podcast next week, number one.
00:28:29 And you just mentioned match, what'd you say,
00:28:31 match something?
00:28:32 - Match low.
00:28:33 - Match low, this is how my mind works now.
00:28:34 - Match game?
00:28:35 - No, I love match game.
00:28:36 Gene Rayburn with the stick mic was tremendous.
00:28:38 And Paul Lind and CNR and Richard Dawson.
00:28:43 - Dinosaur maybe?
00:28:44 - Oh, it was the greatest show ever.
00:28:45 I mean, it was really a great show.
00:28:47 No, I think of matched tires,
00:28:49 and that was Robert Duvall and Tom Cruise
00:28:51 in Days of Thunder.
00:28:53 And I gotta tell you something.
00:28:54 - Robin is racing.
00:28:54 - Robin is racing, cold trickle.
00:28:56 What a great, I love the movie.
00:28:58 But these aren't Days of Thunder,
00:28:59 and I'm not putting a title out there, I'm just saying.
00:29:01 And let me just say this, while,
00:29:03 oh, Dan liked that one.
00:29:04 We thought we would celebrate Burning Thunder.
00:29:07 Now, just let me say,
00:29:09 so you don't think it's just us three hacks,
00:29:11 the good looking guy from the big short,
00:29:13 Dan Nathan, who used to be on the Options Action Show,
00:29:16 the old Sicilian guy, Guy Adami.
00:29:18 Credit Suisse, that's a pretty reputable firm, right?
00:29:22 A European firm.
00:29:22 - Full disclosure, I've been an advisor to their technology
00:29:25 at the bank for the last six years.
00:29:27 - Lucky to have you.
00:29:28 - They issued a dire economic outlook titled,
00:29:32 The Worst Is Yet to Come.
00:29:33 And think about what we've been through
00:29:35 over the last eight months,
00:29:36 and Credit Suisse puts out this note.
00:29:38 They just didn't haphazardly put it out.
00:29:40 And they're pointing out all the things
00:29:42 that we have now been talking about,
00:29:44 literally for the last year.
00:29:45 So thank you, Credit Suisse.
00:29:47 Better late than never, as they say.
00:29:49 So Danny Moses, again,
00:29:50 I think you and I both have the tinfoil.
00:29:52 When I saw that Bank of England headline
00:29:54 that we alluded to a little while ago,
00:29:56 I said, holy shit.
00:29:57 If there's ever an environment, a setup, for gold to work,
00:30:02 this is it.
00:30:03 This is what we have been waiting for.
00:30:05 In my opinion, given the sell-off that gold has had,
00:30:08 given the level that it's trading at,
00:30:10 given the fact that nobody's been in it,
00:30:12 given the commitment of trader reports,
00:30:14 there's nobody in the name,
00:30:16 gold should have been up $100 minimum, and it barely moved.
00:30:20 Now, maybe it's going to happen, but what am I missing?
00:30:23 Because this is gold's environment.
00:30:25 High inflation, flinching central banks,
00:30:29 currency disruptions, bond market disruptions.
00:30:32 What am I missing?
00:30:33 - It's funny, I looked at it the other way yesterday.
00:30:35 It was up, I think, 3% or 4%.
00:30:37 Obviously, the market was ripping.
00:30:38 It didn't do the 2X or 3X,
00:30:39 and it actually, last week,
00:30:41 when we had a little bit of a rally,
00:30:42 it also rallied with the markets also.
00:30:44 It was a higher beta play,
00:30:45 but actually, today is more interesting to me, right?
00:30:47 The market's selling off massively.
00:30:49 Gold's holding its own.
00:30:49 It's down small.
00:30:50 It's down, I don't even know, half a percent, not even.
00:30:53 And I'm not going to call the low low
00:30:54 like I did a couple months ago when it was at 1715,
00:30:57 and I'm like, it ain't going below 1700.
00:30:58 It did.
00:30:59 But with the geopolitical part, to me, right now,
00:31:02 is the part where gold's going to start to fill in that gap,
00:31:04 because now it's apparent to me.
00:31:06 So, yes, it trades on a strong dollar, period.
00:31:08 That's kind of been the correlation trade,
00:31:09 but to your point, nobody owns it.
00:31:11 I love it more than ever.
00:31:12 This is where one of the assets,
00:31:14 I would certainly be in here.
00:31:15 Again, it's not a gold bug, anything like that.
00:31:17 I just think from a risk-reward basis from here,
00:31:20 it's hard to really see that it's not going to,
00:31:22 because the only thing that rallies this market
00:31:24 sustainably is a blink.
00:31:26 Now, a blink by the Fed, and gold's going to go to 2000.
00:31:29 I mean, so my point is I'd rather own gold here.
00:31:31 Yes, it doesn't have interest.
00:31:32 Yes, I know it doesn't earn anything,
00:31:34 but it does check a lot of boxes, guy.
00:31:36 - So, you always, again, doom and gloom, blah, blah, blah.
00:31:38 You guys always, first of all, it's not true.
00:31:40 But now is when, if you stand in the pocket,
00:31:43 if you're Joe Flacco and stand like a statue
00:31:45 and the world sort of slows down,
00:31:47 now is when you should be looking for opportunities.
00:31:49 And I will tell you, although I think we're all,
00:31:52 across the board, bearish and think there's still
00:31:54 lower lows to be made here, I think we've talked
00:31:57 about that rather eloquently,
00:31:59 there are going to be some opportunities.
00:32:00 So, my question to you, Dan Nathan,
00:32:02 is how does it manifest itself?
00:32:04 So, for example, Nvidia, that we talked about,
00:32:07 was almost a trillion-dollar company
00:32:09 in November of last year-ish.
00:32:11 Now it's probably trading with like a 300 or so
00:32:14 billion-dollar market cap, a company that's going to earn
00:32:17 30 billion dollars, I can do that math.
00:32:19 It's trading at 10 times revenue.
00:32:21 At its zenith, it was stupid.
00:32:23 At these levels, it's reasonable.
00:32:25 But if you see that trade at X times revenues,
00:32:29 what gets you interested in a name like that?
00:32:31 - Yeah, I mean, listen, the stock nearly ticked 350
00:32:34 less than a year ago.
00:32:34 It's trading at 122, expected EPS growth next year
00:32:39 of 20% in revenues, topping 30 billion dollars, up 14%.
00:32:43 So you have a stock trading at 27 times.
00:32:46 If people are paying 25 times for consumer staples,
00:32:49 wouldn't you rather pay a similar multiple
00:32:52 for a company that is literally on the cutting edge?
00:32:54 My point is, there's a price.
00:32:55 I said to a friend of mine who wants to buy it,
00:32:57 I said, "I'll start buying it at 110 dollars."
00:33:00 It's 122, down from 347 dollars a year ago.
00:33:04 It would take a protracted global recession
00:33:07 for it to be hard to average into this thing
00:33:09 and make money over a five-year period
00:33:11 if you start buying it at 110 dollars.
00:33:13 I mean, let's be frank.
00:33:14 - I think Stuart Sopp brought up, we had him on last week,
00:33:16 and he brought up the point of the unknown with them
00:33:18 might be, what were they selling chip-wise
00:33:21 into the crypto mining space?
00:33:22 And now with the split of Ethereum,
00:33:24 or whatever you guys called that thing.
00:33:26 - The merge. - The merge.
00:33:27 All the miners were selling all their Ethereum
00:33:30 and all the stuff.
00:33:31 Maybe the demand for the chip, yes, it's video games,
00:33:33 yes, you're gonna go into holiday season, yes.
00:33:34 But, I don't know, it's not a stock.
00:33:36 - So let's just talk about this for a second.
00:33:37 - And by the way, if it hit 110, you wouldn't buy it.
00:33:39 - Yeah, so, okay, I'm gonna buy some.
00:33:41 It's just, you know, I mean, like--
00:33:42 - It's a challenge. - But you know,
00:33:43 in late spring, remember my whole spooze and twos
00:33:45 sort of thing? - Yeah, yes.
00:33:46 - So I actually did Qs and Twos.
00:33:47 So I love the idea of the QQQ, the NASDAQ 100.
00:33:51 Again, the concentration risk is a problem right now,
00:33:54 here and now.
00:33:55 I think that's gonna get corrected.
00:33:56 Apple's gonna make a new low pretty soon.
00:33:58 They're probably gonna guide down.
00:33:59 Microsoft's gonna have a difficult quarter.
00:34:01 Amazon was up 50% from its June lows
00:34:04 at its highs last month.
00:34:06 That's gonna make a new low.
00:34:07 Tesla, Tesla, Danny, I'm just gonna say it again, Tesla.
00:34:11 - Does that trade publicly?
00:34:12 - That stock is going to make a match low
00:34:15 at some point in the next few months.
00:34:16 - Match tires.
00:34:17 - You're gonna have a QQQ that's driven by six stocks.
00:34:21 It's gonna make new lows,
00:34:22 but then there's gonna be dozens of stocks
00:34:24 within that index of 100 stocks
00:34:26 that are gonna start to show some good relative strength
00:34:28 that are down 70, 80%.
00:34:30 - It's interesting, Dan, what a great philosophy
00:34:32 to look through an ETF machine
00:34:34 and see maybe it got taken out with Balfour,
00:34:36 and maybe it's a buying opportunity.
00:34:38 I just heard that.
00:34:39 Guy, did you hear that from somebody?
00:34:41 - I did, I did. - So you're saying
00:34:42 I was pushed back. - You just pitched back
00:34:43 my pitch. - Well, I've been pitching
00:34:44 that since the spring.
00:34:45 - No, your blues clues and Qs and 2s
00:34:47 have been-- - My Qs and 2s.
00:34:48 - Yeah, no. - So I actually think
00:34:49 that very soon you start legging into dollar costs,
00:34:52 averaging the Qs, and I think whether it's your TLT,
00:34:55 Guy and Danny, or my GOVT,
00:34:57 I think that that is a portfolio of just a couple ETFs
00:35:01 that works for a whole host of different reasons,
00:35:03 and you get a little dollar weakness in there,
00:35:05 that actually would ask lighter fluid on that
00:35:08 if you were to have the dollar come in meaningful,
00:35:09 especially when you consider the US multinationals
00:35:12 that make up a disproportionate amount of those Qs.
00:35:15 - Who'd you say you had on the podcast?
00:35:17 - Stuart Sop. - I like Stuart.
00:35:18 - You love Stuart. - Did you hear the story?
00:35:19 Did he tell you the story?
00:35:20 Or no, he didn't tell you the story?
00:35:21 - What, when you guys met at some charity event?
00:35:23 - So we went to this, what's that place out there
00:35:26 where they do all the fireman stuff?
00:35:27 It's not Rikers Island, that's the jail.
00:35:29 It's one of the islands.
00:35:30 Randall's Island. - Randall's Island.
00:35:32 - And we had a beautiful night for an event
00:35:34 for the FDNY, right?
00:35:36 It's later in the night, and at my age,
00:35:37 before I get in the car to drive home--
00:35:38 - So it was like seven. - Go to the bathroom.
00:35:40 Gotta take a leak, right?
00:35:41 And they have beautiful bathrooms outside,
00:35:43 but they had a nice facility.
00:35:44 - Like in a trough? - No, no, no, no.
00:35:45 They actually had these things set up.
00:35:47 So I'm walking to the bed, it's a little dark out,
00:35:48 walking to the bathroom, I'm walking slow,
00:35:50 and I walk into the bathroom, up the stairs,
00:35:52 and this dude with a beard that looks like
00:35:54 he's off the set of a Viking movie comes walking out.
00:35:57 And he looks at me, and I look at him, and it was Stuart.
00:36:00 I'm like, what are you doing here?
00:36:01 He's like, what are you doing?
00:36:02 And we embraced, we hugged, I mean,
00:36:03 he just came out of the bathroom,
00:36:05 so I didn't really, but anyway, we had this long embrace.
00:36:08 We had a wonderful time.
00:36:09 We connected dots, we know a lot of the same people.
00:36:11 So Stuart, if you're listening, which you are,
00:36:13 it was great to see you.
00:36:14 By the way, your wife is a complete badass as well.
00:36:16 I think she's cooler than you are, number one.
00:36:19 Number two, and you mentioned stocks.
00:36:21 Again, these are great companies,
00:36:23 but I wanna mention Microsoft real quick,
00:36:25 because we took a lot of shit for this one.
00:36:27 When Microsoft reported last quarter, Dan and Danny,
00:36:31 the stock closed that night at around $255-ish.
00:36:36 They reported, by Microsoft standards, a lousy quarter.
00:36:39 And in the aftermarket, the stock traded down to 242.
00:36:42 I remember watching the frickin' print.
00:36:45 And then they came out and said,
00:36:47 we are not seeing demand destruction.
00:36:49 And the stock subsequently went to 298 or thereabouts
00:36:53 on a broader market rally.
00:36:54 - That's 20%.
00:36:55 - Thank you.
00:36:56 It all lined up.
00:36:57 But we said, be careful, be careful here.
00:37:00 Just go back and look at the quarter.
00:37:01 And the fact that they didn't see demand destruction
00:37:03 was probably not a good thing.
00:37:05 Where's Microsoft trading right now, Dan?
00:37:07 Can you pull it up on your FaxSet machine?
00:37:08 - 237.
00:37:09 - Excuse me?
00:37:10 - 237.
00:37:11 - Which is lower than 242.
00:37:12 - And it's a new 52-week low.
00:37:13 - And it's a new 52-week low.
00:37:15 The point is, you really have to pay attention
00:37:17 to these things.
00:37:18 Price doesn't necessarily mean that things are good.
00:37:21 A lot of times, price action dictates your views on things
00:37:25 and it shouldn't.
00:37:26 The reality was, it wasn't a good quarter,
00:37:29 the stock was still expensive,
00:37:30 and now you're starting to see real price discovery
00:37:33 in a name like that.
00:37:34 - I'm in a very long-winded way
00:37:36 of what Danny says all the time.
00:37:37 Read your K's and Q's.
00:37:40 - Read your K's and Q's.
00:37:40 - Do your work, kids.
00:37:41 That's what, do your work.
00:37:42 - But I illustrated it so well,
00:37:44 I put it out there for you.
00:37:45 - It's a lost art, lost art.
00:37:46 More wisdom from a man who's seen a lot.
00:37:49 - I have seen, see, that's an age joke, by the way.
00:37:51 I'm feeling my age.
00:37:52 By the way, I just want the folks at home to know,
00:37:54 we're gonna be, what's the next month, October, right?
00:37:56 So that's the fourth quarter.
00:37:58 In the fourth quarter of this year,
00:37:59 I will turn 59 years old.
00:38:01 I'm just letting you guys know.
00:38:02 I mean, listen, it's hard to say.
00:38:04 I actually think in the fourth quarter,
00:38:05 I will turn bullish at some point in the fourth quarter.
00:38:07 - You know what, I happen to agree with that.
00:38:09 I like that.
00:38:09 What are you gonna, what do you buy first?
00:38:11 What sectors?
00:38:12 - Housing.
00:38:12 - Really?
00:38:13 And you have been saying that.
00:38:14 You said that--
00:38:15 - I said not yet, I've not said that.
00:38:16 - You think that they've been acting rational, though,
00:38:17 all year long.
00:38:18 - They'll be the ones.
00:38:18 - So what will it take as far as mortgage rates?
00:38:21 For instance, we just, the 30-year just topped 7%.
00:38:24 My point is, there's gotta be a construct
00:38:25 of this view here, right?
00:38:27 - My view is that the Fed stops this QT.
00:38:29 That's gonna be my view.
00:38:30 - That's been your view, by the way.
00:38:32 It's not even happening, even though it's happening.
00:38:34 I think that will be the first.
00:38:35 So that will be the one thing they do.
00:38:36 When they do that, basically, it's all clear,
00:38:39 not all clear, but mortgage rates.
00:38:40 So go back to the BOE for a second.
00:38:42 What do you think was happening in the gilt market?
00:38:44 You don't think that there was professional investors
00:38:46 that knew that pension funds were in trouble?
00:38:47 They're the ones that exacerbated it.
00:38:49 They're the ones that exacerbated that move
00:38:50 and actually made the Bank of England move desperately.
00:38:53 Same thing happened in the mortgage market six months ago.
00:38:55 - They're gonna push it.
00:38:56 - The mortgage traders were widening the spreads
00:38:57 'cause they knew that the Fed was gonna be gone, right?
00:38:59 And the Fed is so moronic in that category
00:39:01 of the lack of sophistication to understand
00:39:03 how their signaling impacts markets
00:39:05 on an actual and on a predictability basis.
00:39:08 And so whether that comes or not,
00:39:09 but Dan, that would be a very consumer-sensitive,
00:39:12 cyclical kind of great play to me.
00:39:14 And I don't know where the builders are on the charts here,
00:39:16 but they're gonna look interesting.
00:39:16 - Real quickly before we go to opportunities
00:39:18 when the Fed does something or this,
00:39:20 one other thing, and people keep asking me this,
00:39:22 again, who are not in the markets day to day,
00:39:24 they keep seeing these headlines
00:39:26 about something's gonna break,
00:39:27 or like Guy's point about the Treasury market,
00:39:30 it's just broken.
00:39:31 And the volatility, and we saw that with the UK.
00:39:33 I was in the UK this summer, I was in London,
00:39:36 and I was still calculating the difference
00:39:38 between a pound for a pint.
00:39:39 It's a lot easier when we're at one.
00:39:41 I was in Europe, same thing.
00:39:43 So there's things that are getting out of whack here.
00:39:45 So my question, Danny, is that,
00:39:47 is the S&P 500 about to break?
00:39:50 We're making new 52-week lows.
00:39:53 We've basically taken out all of the access
00:39:55 to your point that Q4 2021 stuff was just a fugazi,
00:39:58 and the S&P closed up 28%.
00:40:00 Year over year, it doesn't feel that bad.
00:40:02 So is there a down six, seven, 8% day
00:40:06 in the S&P 500 coming?
00:40:07 - Yes.
00:40:08 - And what would be the catalyst at this point?
00:40:10 - Well, you don't really need a--
00:40:11 - You think it just starts to snowball?
00:40:12 - There's so many catalysts, you can pick one.
00:40:14 So if it had done that yesterday,
00:40:15 well, over a two to three day period,
00:40:17 it is gonna do that.
00:40:18 - It's a sovereign thing.
00:40:19 - If it had done it in one day,
00:40:20 you could blame it on it,
00:40:20 you could pick something that you wanted to,
00:40:21 but again, this is the least we've talked about,
00:40:24 meme stocks, what did I always tell you?
00:40:25 I'm gonna use them as a barometer.
00:40:26 They're getting destroyed, okay, they're dying.
00:40:28 So we're halfway there on that, right?
00:40:30 - I thought if you owned them,
00:40:31 as long as you own them, they don't go down.
00:40:32 - You hodl.
00:40:33 - Yeah, you hodl.
00:40:34 Tesla is starting to crack, it is.
00:40:36 - So they're shooting the generals is what you're saying?
00:40:37 - It's not even a general.
00:40:39 I mean, that's--
00:40:39 - It's like a captain.
00:40:40 - That's not even a captain.
00:40:41 - It's a corporal.
00:40:42 - That's just a--
00:40:43 - Did you see Maverick Top Gun, by the way?
00:40:44 - I did, I saw it on the plane.
00:40:45 - Ed Harris brings Tom Cruise in.
00:40:47 - By the way, Ed Harris was in it for a team.
00:40:48 I was so disappointed.
00:40:49 - You're a captain.
00:40:50 How is it you're still a captain?
00:40:51 - One of the great, I mean--
00:40:52 - Horrible, actually, horrible line.
00:40:54 Stop it.
00:40:55 - No, one of life's great mysteries.
00:40:56 - Yes, it is.
00:40:57 You should be a two-star admiral.
00:40:59 You should be a senator.
00:41:01 You're a captain.
00:41:02 Some of the dialogue seriously lacked.
00:41:04 - That's Top Gun.
00:41:04 You can't, don't overanalyze the dialogue.
00:41:06 - I already mentioned Tom Cruise in Days of Thunder.
00:41:08 - Let me get back.
00:41:09 - Sorry, Dan.
00:41:09 - In all seriousness, when Tesla's gonna go,
00:41:11 and until it goes, I know we're not there.
00:41:13 So it'll go, 'cause it's the thing that people still hold.
00:41:15 Everybody owns it.
00:41:17 They've held it because it's working.
00:41:18 It worked.
00:41:19 It's not gonna work anymore.
00:41:20 So how quickly does that thing go?
00:41:21 And it doesn't trade on fundamentals.
00:41:23 And so an incremental delivery doesn't mean anything.
00:41:25 Oh, you're gonna go from a $780 billion valuation
00:41:28 to a 810 valuation 'cause you beat deliveries by 1,000?
00:41:31 It's the dumbest thing I've ever seen.
00:41:33 So it will go.
00:41:34 And when that goes, Dan, I know we're close.
00:41:35 And I think we are close to that thing going.
00:41:37 And whether it's a Twitter trial, I don't really care.
00:41:39 It'll go, I don't care.
00:41:40 It'll go at some point.
00:41:41 - Are we gonna see some Friday Night Dirties?
00:41:43 We got the quarter end tomorrow, as we just said.
00:41:45 Could Tesla pre-announce?
00:41:46 Could Apple pre-announce?
00:41:48 - Pre-announce a fake number?
00:41:49 Maybe.
00:41:50 - They'll probably pre-announce a beat.
00:41:51 They're AI day.
00:41:51 I mean, it's gonna be magnificent.
00:41:52 Robots running around.
00:41:53 - The Friday Night Dirty thing, by the way,
00:41:55 I've embraced that.
00:41:56 - It's catching some steam.
00:41:57 - It's catching some steam.
00:41:58 - Hashtag Friday Night Dirty.
00:41:59 - Hashtag Friday Night Dirty, right?
00:42:01 - This could be a big one, though.
00:42:02 This could be the ultimate Friday Night Dirty.
00:42:04 - All right, so I think this is the portion of the show
00:42:07 that just a lot of people, I think, try.
00:42:09 What do you call it when you fast forward something
00:42:11 to get to something?
00:42:12 - You call it fast forwarding.
00:42:13 - Right, fast forward.
00:42:14 Well, they just wanna hear Danny.
00:42:16 They wanna hear him become somewhat unhinged,
00:42:18 which I think you spend most of your life
00:42:20 on the precipice of being unhinged,
00:42:22 but it's something that we called way back in the day
00:42:25 when we started this thing.
00:42:26 We're almost two years into this, by the way,
00:42:28 which is really remarkable.
00:42:29 It's incredible.
00:42:30 And obviously, folks, thanks for listening,
00:42:32 but something we decided to call ROT,
00:42:35 which is short for, as you know, rip off the tape,
00:42:38 like pulling off the bandaid,
00:42:39 where Danny just sort of goes off on some tangent,
00:42:42 but well thought out tangent.
00:42:44 So Danny, as we like to say on behalf of Dan Nathan,
00:42:47 the microphone is yours.
00:42:49 - Well, listen, we've addressed actually a lot of it
00:42:51 in there, but I just wanted to talk about,
00:42:52 'cause some of the smartest people,
00:42:53 I call them plumbers in the financial system,
00:42:55 James Aitken of the world.
00:42:56 We had-- - Plumbers.
00:42:57 - Macro Alf on here to talk about it.
00:42:59 They'll tell you that the plumbing's quote, working.
00:43:01 So the market quote isn't broken by standards
00:43:04 of what you think is broken.
00:43:05 So I thought about that and I thought about, okay,
00:43:07 well, you can buy and sell something.
00:43:08 Everything has its price.
00:43:09 Maybe that works.
00:43:10 There's a lot of volatility, but I guess that works.
00:43:12 So I started to think about what is broken?
00:43:14 What's broken is capitalism.
00:43:15 When did it break?
00:43:16 It broke in 2007 and '08.
00:43:18 Okay, that's when it broke.
00:43:19 What happened?
00:43:20 We all know what happened.
00:43:21 The Lehman, the Bear Stearns, the AIG,
00:43:22 everything just kind of shut down.
00:43:24 What did we do?
00:43:25 - Hold on, I have an answer.
00:43:26 We capitalized gains and we socialized losses.
00:43:31 So for all you folks out there that say
00:43:32 you don't wanna be socialists, guess what?
00:43:35 You're already there.
00:43:36 The system, you did not allow the system to work.
00:43:40 Back to you.
00:43:41 - So we kind of mass, we put it on a sinking ship,
00:43:43 bubble gum, and we did it and it worked, right?
00:43:45 It's worked for a long period of time,
00:43:46 but it obviously sent people out on the risk curve.
00:43:47 It leveraged out the wazoo.
00:43:49 All these things that were happening,
00:43:50 never believing there would be a time
00:43:51 that we would have to pay the piper.
00:43:53 Started to go back and look at all the things
00:43:55 that have gone into that.
00:43:56 And it's not just about what the Fed did,
00:43:58 Treasury, what they did, Global Central Bank,
00:44:00 it's a lot into it.
00:44:01 Let me go backwards here.
00:44:02 So we had an equity flash crash, May 6, 2010.
00:44:06 So we knew that there's been problems building
00:44:07 within the algo markets for a while, right?
00:44:10 We had a bond flash crash, which you, in October 2014,
00:44:13 which, by the way, I might add,
00:44:15 do you know what that flash crash was,
00:44:17 just to put in perspective
00:44:17 what we called a flash crash back then?
00:44:19 We went from 2.2% to 186% in a minute.
00:44:24 Ooh, how does that pale in comparison now
00:44:27 to these intraday moves we're seeing?
00:44:29 That was a bond flash crash.
00:44:29 And you know what the result of the investigation
00:44:31 by seven federal authorities was?
00:44:34 They could not find a reason for it.
00:44:35 That's October 14, March 2015.
00:44:37 The US dollar dropped 3% in four minutes, right?
00:44:40 Whatever.
00:44:41 August 2015, stock market lost 5% in five minutes.
00:44:44 Yen Aussie dollar, the day that Apple pre-announced in 2019,
00:44:47 that dropped 7%.
00:44:48 So we've had all this stuff go on.
00:44:49 But I'm gonna bring this all back full circle here, Dan,
00:44:51 I promise.
00:44:52 In 2015, the SEC started to investigate
00:44:55 what was called 12(b)(1) fees.
00:44:57 What are 12(b)(1) fees?
00:44:58 Those are mutual fund fees that are paid to brokers
00:45:01 for putting Guy Adami in the Lord Abbott
00:45:04 growth and income fund.
00:45:04 So if I'm a broker, the Lord Abbott guy comes
00:45:07 and takes me out, I'm just using them as an example,
00:45:08 I have nothing against Lord Abbott, full disclaimer,
00:45:10 they come out and take you into a gulf
00:45:12 and you're gonna go sell their funds to me,
00:45:13 I'm your client.
00:45:14 Hey Danny, have you looked at the,
00:45:15 at the end of the day I'm like, sure, put me in it,
00:45:17 'cause it doesn't matter.
00:45:18 But you were getting fees for pushing me into the product.
00:45:19 So the brokers got that, basically,
00:45:21 that revenue stream broken off.
00:45:22 They weren't able to get anymore.
00:45:23 So what did they do?
00:45:24 They changed their business model.
00:45:25 At the same time, their passive investing was growing.
00:45:29 At the same time, they became managers
00:45:31 that would get a fee of 1% for all your assets
00:45:33 that you have and trade you out, all these ETFs,
00:45:35 the advent of passive growth was occurring.
00:45:37 There's a cause for all the stuff that is happening now.
00:45:39 I mentioned before about stock ETFs, how they balloon,
00:45:42 bond market ETFs.
00:45:43 So we talk about bond market volatility,
00:45:45 554 of them over $1.2 trillion,
00:45:48 which have gone in because there's a broker.
00:45:50 Now, there are some good brokers out there.
00:45:52 People call their clients, ask how they're doing,
00:45:54 they're all hiding right now, no one's doing,
00:45:56 and they own ETFs, so they feel like they're diversified.
00:45:58 They don't own individual security, so it's less risky.
00:46:01 But all these things have gone into, quote,
00:46:03 filling an elephant through a faucet,
00:46:05 literally trying to put these things through,
00:46:07 and that's where we happen.
00:46:08 So my definition of broken is capitalism,
00:46:11 throw in ESG investing, which helped break this system also
00:46:14 in terms of how it was implemented,
00:46:16 the logic behind it or not behind it that went in.
00:46:18 So it's not just about it broke,
00:46:20 but we've been living in this fantasy world for a long time
00:46:23 that has been crafted.
00:46:24 - But Danny, is it capitalism that's broken
00:46:26 or market structure that's broken?
00:46:28 - I brought in market structure, but it's capitalism
00:46:30 because to me, capitalism is price discovery, risk reward.
00:46:33 If you take a risk and lose, you lose.
00:46:35 We've been bailed out.
00:46:36 The moral hazard created in 2008, '09
00:46:38 has fueled this leverage in the market.
00:46:40 So there's leverage everywhere.
00:46:41 I mean, what just took down the pension funds
00:46:43 in England was leverage.
00:46:45 It's just pretty simple.
00:46:45 The wilds where they get leveraged.
00:46:47 - When I was in grade school, I had a friend, Charlie.
00:46:50 - Charlie Munger?
00:46:51 - He was a couple years older than I was.
00:46:53 - That was good.
00:46:54 - But he went on, people started calling him Charles
00:46:57 in the later years, and he came up
00:46:59 with something called Darwinism.
00:47:00 And I'm a big fan of corporate Darwinism,
00:47:03 survival of the fittest, and we've taken that out.
00:47:06 We somehow prop up things that we shouldn't be propping up
00:47:09 so to Danny's point, in that prism, capitalism is dead.
00:47:14 - Broken, never be dead, but it's broken.
00:47:16 It needs to be fixed, and it's gonna be,
00:47:18 so you know what fixes it?
00:47:19 S&P at 2800, 29.
00:47:21 It starts to fix itself because you get rid of the,
00:47:23 it starts to fix itself over time.
00:47:25 We never fully realized the pain
00:47:27 that we should have in 2008 and '09.
00:47:28 That's it.
00:47:29 - We are, believe it or not, we're at week four
00:47:33 in the league where they play for pay.
00:47:35 I was away.
00:47:36 - For all of it.
00:47:37 - For some of it.
00:47:38 My New York football Giants got off to a 2-0 start.
00:47:40 They lost to the Cowboys, a game that was in their grasp,
00:47:44 but okay, whatever, it doesn't matter.
00:47:45 But if you do recall, very early on,
00:47:47 we talked about the Eagles being,
00:47:49 and that team, everybody seems to love the Eagles now,
00:47:51 and Jacksonville, surprisingly, 2-1.
00:47:54 But as we get into week four, Danny,
00:47:55 'cause I know you love to do this,
00:47:57 I think you're four and four as we enter week four.
00:48:01 - Not great.
00:48:02 - Which for you is shitty.
00:48:04 - Yeah, well at least I won some money back
00:48:06 from Dan last week on shorting Tom Brady.
00:48:08 - So can I ask you guys a question,
00:48:09 speaking of Tom Brady, how are the Buccaneers at home
00:48:12 favored by one over the Chiefs?
00:48:13 - Is that the line right now?
00:48:14 'Cause I have it actually at even, which is one of my games.
00:48:16 So let me go into my picks here.
00:48:17 But that's a great question.
00:48:18 - I mean, like how, they looked horrible.
00:48:21 - Who looked horrible?
00:48:21 - And I took the Bucs.
00:48:23 - Who looked horrible?
00:48:23 - The Bucs.
00:48:24 - Yeah, Chiefs didn't look much better, by the way,
00:48:26 than the Colts, which I had, by the way.
00:48:28 - And your bills didn't look very good either.
00:48:30 - They were injured.
00:48:30 Can we talk about, I was on Ned's show,
00:48:32 breaking even with the coach.
00:48:33 I took coach again.
00:48:34 - You're yelling at me.
00:48:35 - I had the Colts and I had Packers.
00:48:36 - Really?
00:48:37 - Yeah, he owes me another 200.
00:48:38 And so does--
00:48:39 - 200.
00:48:40 - Yeah, so does Ned.
00:48:41 - By the way, the coach said to me,
00:48:41 if Danny calls me one time for his money,
00:48:44 I'm gonna beat him over the head.
00:48:45 - Well, I'm gonna Venmo request him
00:48:46 right after this show's over.
00:48:47 - You should, actually.
00:48:48 - And I go on their show.
00:48:49 I said, why don't you come on our show and pick stocks?
00:48:50 You kind of looked at me cross-eyed.
00:48:51 Anyway, so Kansas City, I'm gonna keep shorting Tom Brady.
00:48:55 As long as he's favored or even in something,
00:48:57 he does not wanna be out there.
00:48:59 The Chiefs are angry after what happened last week.
00:49:01 Kansas City in a pick 'em is what I see, Dan, in Tampa.
00:49:05 You want Tampa?
00:49:06 - No.
00:49:06 - Oh boy, I don't like my Casey pick as much.
00:49:07 So take the Chiefs there.
00:49:09 All right, the New York Jets.
00:49:10 By the way, while you were in Italy,
00:49:11 a miracle happened in the--
00:49:13 - That was, I read that.
00:49:14 I'm like, this has to be a misfit.
00:49:15 - Yeah, and now, Zach Wilson, the savior's coming back.
00:49:18 Guess what?
00:49:19 Do you think the Steelers are gonna be one and three?
00:49:21 - No.
00:49:22 - I don't either.
00:49:23 So Pittsburgh's laying three against the Jets.
00:49:25 I will take Pittsburgh in that game.
00:49:27 So that's my second pick.
00:49:28 And my third pick is a Thursday night game,
00:49:30 which I will tweet out like I did.
00:49:32 The only first game I wanted to see
00:49:33 was on a Thursday night.
00:49:34 Cincinnati is gonna roll on Miami tonight, right?
00:49:37 Everyone gets healthy when they play the Jets.
00:49:39 They tend to look better the next week.
00:49:41 So Cincy at home giving three and a half,
00:49:43 maybe by the half point,
00:49:44 actually by the half point, minus 120 against Miami.
00:49:47 Miami just came out of that Bills game, right?
00:49:49 I mean, that was a hell of a game, very physical.
00:49:52 Traveling up, it was hurricane week.
00:49:53 God, I hope everybody's okay down in Florida, by the way.
00:49:56 Hurricane week, I don't know.
00:49:57 It's gotta be a little discombobulating to them.
00:49:59 So I like Cincinnati playing three.
00:50:01 And those are my, Dan, do you want any of those?
00:50:03 - No, but what about this?
00:50:04 Bears at Giants, Bears getting three.
00:50:07 - I like the Bears.
00:50:08 - I do too.
00:50:09 - I'm gonna have a horrible week in the NFL.
00:50:10 (laughing)
00:50:11 It's gonna be a horrible week.
00:50:13 Dan, here's the other thing.
00:50:14 I like the Pats getting 10 and a half,
00:50:15 Jacksonville plus six and a half.
00:50:16 - Pats getting 10 and a half versus Pac at Green Bay?
00:50:19 - Yeah, but okay.
00:50:20 Anyway, we'll come up with something else over the weekend.
00:50:22 Podcast is going on too long.
00:50:24 - You know, it's interesting.
00:50:25 - Podcast is going on.
00:50:26 - If you're bored, then the people must be bored.
00:50:28 - You should have just,
00:50:29 that's one of those things where you won the championship,
00:50:32 you basically ended the year undefeated.
00:50:35 You should have never made another NFL bet in your life.
00:50:36 - I know, but you know, four and four,
00:50:38 it's yeah, some people celebrate living in the NFL.
00:50:39 - What about this Jacksonville at Philly?
00:50:41 - By the way, as good as ESMP's done in September.
00:50:43 What's that?
00:50:44 - Jacksonville at Philly, Philly minus six and a half.
00:50:46 - I like Jacksonville, but I'm not betting it.
00:50:48 Anyway.
00:50:49 - I'll take the Eagles, you take Jacksonville,
00:50:50 you're getting six and a half.
00:50:52 - Fine, doesn't count as one of my picks though.
00:50:53 - Doesn't count as one of your picks, 500.
00:50:54 - Okay, you're done.
00:50:55 There's something wrong with that line, by the way.
00:50:58 - Exactly, it should scare you.
00:50:59 - It should scare you.
00:51:00 What else should scare you is the fact
00:51:01 that we've really gone long, but when we come back,
00:51:04 Stephanie Link, Chief Investment Strategist,
00:51:08 member of the IC, you love her on CNBC.
00:51:12 From Hightower, Stephanie Link will join us here on the tape.
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00:53:38 - Stephanie Link is the chief investment strategist
00:53:45 and portfolio manager at Hightower,
00:53:47 a national wealth management firm
00:53:49 that provides investment, financial,
00:53:51 and retirement planning services to individuals,
00:53:54 foundations, and family offices,
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00:54:02 She's also a CNBC contributor.
00:54:04 You know her from the Halftime Report, Squawk Box,
00:54:08 the OT, and more.
00:54:09 Stephanie, welcome back to On the Tape.
00:54:13 Dan, what do they say when you ask somebody to come back
00:54:16 because there was a lot of popular demand?
00:54:18 What's that saying?
00:54:19 - Back by popular demand.
00:54:21 - Oh, so they say back by popular demand.
00:54:22 So in November of last year,
00:54:25 Stephanie Link joined us On the Tape
00:54:28 and obviously back by popular demand, Stephanie Link.
00:54:31 But before you utter a sound, Steph, I will say this.
00:54:36 So I've been doing this quite some time,
00:54:37 as Dan will tell you,
00:54:38 and a lot of people ask about a lot of guests
00:54:42 and panelists on CNBC,
00:54:43 but one of the most frequent questions I get
00:54:46 is about Stephanie Link.
00:54:48 They're enamored by your intelligence, your poise,
00:54:51 and quite frankly, your honesty, and I am as well.
00:54:53 So it's great having you back here On the Tape.
00:54:57 - Thank you both very much.
00:54:59 It's great to be back.
00:54:59 I can't believe it's been so long.
00:55:01 - It's coming up to, what is it, 10 months or so?
00:55:04 And think about what's changed over those last 10 months.
00:55:08 I mean, we'll get into it obviously,
00:55:09 but your job is difficult.
00:55:12 It becomes even more difficult
00:55:14 when we're seeing some of the things we've seen,
00:55:16 not only the last couple of months,
00:55:18 but over the last couple of days.
00:55:20 So maybe just speak to that and we'll get into it.
00:55:22 - Sure, well, I mean, I think this year has been,
00:55:25 all of us can attest to this,
00:55:26 it's been so challenging because there are so many unknowns.
00:55:30 I think when you look at the last three years,
00:55:33 the compounded annual growth rate of the S&P 500 was 28%.
00:55:38 That's not normal,
00:55:39 but people began to believe that it was normal
00:55:42 and anybody could have made money in the last three years.
00:55:45 And a lot of that was driven by the enormous amount
00:55:48 of fiscal and monetary policy stimulus.
00:55:50 We all know that.
00:55:51 So you fast forward to this year,
00:55:53 and now all of a sudden you have more restrictive policy,
00:55:57 both fiscal and monetary.
00:55:59 I know we got a couple of things passed on the fiscal side,
00:56:01 but it's a lot less than it had been.
00:56:03 And the monetary policy, my goodness,
00:56:06 this is a complete about phase with the Fed.
00:56:08 And so in addition to that, you have huge, huge inflation,
00:56:13 and we can get into sticky parts and non-sticky parts.
00:56:16 The point of the matter is,
00:56:17 is you just can't have inflation where it is.
00:56:20 And it's gonna take a while to get that back down.
00:56:22 So you have this Fed that is kind of putting the pedal
00:56:25 to the metal.
00:56:26 And in my career,
00:56:27 I don't know if I've ever seen the speed of the changes,
00:56:31 of the increases in the Fed monetary policies,
00:56:34 meaning higher interest rates.
00:56:35 And we won't feel that until another six to nine months,
00:56:39 'cause there is a lag impact.
00:56:41 And so that's why you've got these unknowns,
00:56:43 the Fed's doing their thing, and then fast forward,
00:56:47 but we were already seeing a slow economy.
00:56:49 What does this do for 2023 in terms of a recession?
00:56:53 All that being said,
00:56:54 I certainly don't wanna start on a really negative note,
00:56:56 'cause you guys know me by now.
00:56:58 I pretty much try to look at the glass is half full.
00:57:00 And I would simply say that S&P is down 23% year to date,
00:57:05 NASDAQ down 31.
00:57:07 And if you think about the long-term average
00:57:10 compound annual growth rate in the S&P 500,
00:57:12 the total return, it's 10%.
00:57:15 So you're gonna have ups and downs
00:57:17 and mean reversions all over the place.
00:57:19 And I think that's really what you're seeing this year,
00:57:21 unfortunately, is not only a mean reversion in equities,
00:57:23 but fixed income,
00:57:25 people forgot they could lose money in fixed income.
00:57:27 Now everyone's losing money in spades
00:57:29 and everyone is so down and out.
00:57:31 These are the kinds of times
00:57:32 when maybe you wanna start looking past some of this stuff,
00:57:36 and we can talk about opportunities for sure.
00:57:38 - Yeah, so Steph, you bring up a really good point
00:57:40 about the average return of the S&P 500.
00:57:42 You also bring up the point of the average decline
00:57:45 of the S&P 500 in a recession.
00:57:47 And right now, like you said, we're down 23%.
00:57:50 The average decline is down about 30 or so
00:57:53 during a recession.
00:57:54 Well, we haven't had the recession yet,
00:57:55 and we have fears of a recession,
00:57:57 because to your point,
00:57:58 the lag in which some of this tighter monetary policy
00:58:01 is gonna take to kind of seep its way through the economy.
00:58:04 I just say, one of the biggest things right now
00:58:07 is if you take out the 2020 recession
00:58:10 that we had in February, March, April,
00:58:12 the spring of 2020 during the pandemic,
00:58:14 and you go back to the financial crisis,
00:58:16 and then you go back to the post dot com period,
00:58:18 in both instances, the Federal Reserve
00:58:21 went from being slightly hawkish to very, very dovish.
00:58:26 And so to your point before,
00:58:27 now they're as hawkish
00:58:29 as they've ever been in our lifetimes.
00:58:30 And so that's why this might be different to me
00:58:34 before we've even had the official bell ring
00:58:37 of the recession.
00:58:37 I'm just curious, is it different this time?
00:58:40 Because again, we've all been just lulled into this
00:58:43 by the dip, and whenever we have any storm clouds
00:58:46 on the horizon, the Fed gets easy.
00:58:48 - Well, yeah, no, I mean,
00:58:49 it's been a by the dip for the last 10 years, right?
00:58:52 And so it certainly is not that this year.
00:58:55 I just don't buy into the fact that
00:58:57 what some of the market pundits
00:58:59 like at Delivering Alpha today, for example,
00:59:01 said you won't make money in the Dow
00:59:03 or the S&P for the next 10 years.
00:59:04 So many things can change.
00:59:06 And the Fed has got to get inflation under control,
00:59:09 but they will.
00:59:10 And in that process, certainly we are going to slow.
00:59:13 We might see a recession.
00:59:15 I have a pretty high odds that we will next year,
00:59:17 but markets are forward-looking mechanisms.
00:59:21 And while we could go down more,
00:59:22 certainly, as you mentioned, Dan,
00:59:24 the average in a recession, the market goes down 30%,
00:59:27 you're down 23%.
00:59:29 So your risk reward is certainly starting
00:59:30 to get more interesting.
00:59:32 That all being said, I think we need the Fed to pivot
00:59:36 for us to really take off,
00:59:38 or at least get hints of them trying to pivot.
00:59:41 Now, the BOE today, the Bank of England,
00:59:44 did change their monetary policy today.
00:59:47 So they went from QT to QE,
00:59:48 and who the heck knows what's going on over there.
00:59:50 But here's the reason why I don't think
00:59:52 the Fed is gonna pivot following this news.
00:59:55 It's because the BOE,
00:59:57 one of their mandates is financial stability.
01:00:01 And their bond market,
01:00:02 their fixed income market was in disarray.
01:00:05 They had to fix the bond market.
01:00:07 And I don't know if these actions actually do fix it,
01:00:09 but they had to calm it all down.
01:00:11 The Fed's mandate, as you both know, it's a dual mandate.
01:00:15 It's jobs and it's inflation.
01:00:16 Well, jobs are okay.
01:00:18 They're actually quite strong.
01:00:19 And inflation is quite high,
01:00:20 as I've mentioned now a couple of times.
01:00:22 So the Fed is gonna have to continue
01:00:24 to at least jawbone talk about being more hawkish
01:00:28 for a bit more time.
01:00:29 I do think eventually they are going to be successful.
01:00:34 We are already starting to see parts of inflation
01:00:36 come down on the commodity side of things.
01:00:39 And so we just have to wait.
01:00:40 We have to wait it out and see,
01:00:42 and it's gonna take some time.
01:00:44 We've made a lot of money over the last many years.
01:00:46 Just take a deep breath.
01:00:48 And this is the time when I look to upgrade my portfolio,
01:00:52 buy number ones and number twos in the industry.
01:00:54 And I know both of you are doing the very same thing.
01:00:56 - When you watch the shows that you're on,
01:00:58 I mean, you're one of the people
01:01:00 that can stand in the pocket.
01:01:01 When the world gets faster, you slow things down.
01:01:03 I mean, that's a skillset and I'm not blowing smoke.
01:01:05 It happens to be true.
01:01:07 You bring up all the time, Stephanie.
01:01:08 It's important.
01:01:09 People forget a lot of this is conversation,
01:01:12 but what it comes down to,
01:01:13 the foundations of the market are earnings,
01:01:15 earnings growth, revenue and revenue growth,
01:01:17 and what you're willing to pay for those things.
01:01:18 And you break that down with individual stocks
01:01:21 and you break it down with the market.
01:01:22 So here we are.
01:01:24 A lot of people are doing back of the envelope math,
01:01:26 coming to different price targets for the S&P.
01:01:29 In the environment that we're in,
01:01:31 and we'll probably continue to be in
01:01:33 for the foreseeable future,
01:01:35 what's the right multiple
01:01:36 and what's your earning sort of outlook?
01:01:39 Because that really is how you get to the S&P number.
01:01:42 - You guys are asking all the right questions
01:01:44 and these are really hard to answer
01:01:45 because you know the long-term average multiple
01:01:48 on the S&P 500 is anywhere from 14 to 16 times,
01:01:51 depending on where interest rates are.
01:01:54 I would kind of lean more towards the 14 times
01:01:57 given where interest rates are, right?
01:01:58 They're a lot higher.
01:01:59 And so here's the thing,
01:02:01 all the things we just talked about,
01:02:03 the economy slowing, the Fed doing their thing,
01:02:05 the global economy is also slowing,
01:02:06 certainly is going to put pressure on earnings.
01:02:09 I'm kind of surprised earnings
01:02:11 haven't come down for next year.
01:02:13 Strategists are still,
01:02:13 and the economies are still expecting
01:02:14 about 8% for next year.
01:02:16 That's way too high.
01:02:17 We know that.
01:02:18 We absolutely know that.
01:02:19 Here's the thing though.
01:02:20 I mean, I feel like
01:02:22 not only are the broader averages down so much,
01:02:24 stocks are down,
01:02:25 some of them are down 40 and 50%.
01:02:28 And so sure, earnings might come down
01:02:31 and so maybe they're not as cheap as we thought,
01:02:33 but they're discounting a lot of bad news.
01:02:35 And so I feel like the broader averages,
01:02:39 I feel are going to be choppy and remain choppy,
01:02:41 but I think you can take advantage
01:02:43 of some of these high quality companies
01:02:44 that I mentioned before.
01:02:45 Number one, number two in the industry,
01:02:47 buying back a whole bunch of stock,
01:02:49 balance sheets are great,
01:02:50 free cash flow is strong.
01:02:52 Those kinds of companies that are down 30, 40, 50%
01:02:54 I think is worth a nibble,
01:02:56 at least if you have a longer term time horizon.
01:02:58 But yeah, for the foreseeable future,
01:03:00 Guy, you're spot on.
01:03:01 It's going to be choppy for sure.
01:03:03 - That's going to be the tell, right?
01:03:04 One of these companies is going to say something,
01:03:06 and I'm not suggesting I know who it's going to be.
01:03:09 They're going to say something that's pretty bad
01:03:11 and the stock action is going to be pretty good.
01:03:13 And then you're going to start looking at things
01:03:15 and say, you know what?
01:03:16 The market's finally discounted it.
01:03:17 Now, the other side of that
01:03:19 is a name like Federal Express.
01:03:21 Now listen, I think most of Federal Express
01:03:23 is Federal Express specific,
01:03:25 but you can't underestimate
01:03:27 some of the things that have happened.
01:03:28 So there's so many cross currents here,
01:03:30 but we're starting to see it.
01:03:31 And I would submit as much as it's a good thing
01:03:34 that we haven't seen demand come down yet,
01:03:37 might be a bad thing as well
01:03:38 because there's an inevitability to all this.
01:03:40 And we're getting hints of it from Apple
01:03:42 and we'll see what happens with some of these other names.
01:03:44 But I think we're closer to that
01:03:47 than we've obviously been in quite some time.
01:03:49 And I would submit stuff that's probably a healthy thing.
01:03:52 - Oh, absolutely.
01:03:53 I mean, I think there are so many people
01:03:54 that are so nervous, that are negative,
01:03:58 that are throwing in the towel.
01:04:00 I talked to a lot of advisors at Hightower
01:04:02 and they are kind of pulling their hair out.
01:04:05 There are many PMs you guys know,
01:04:07 and I know that haven't ever seen inflation like this
01:04:11 or have never seen a Fed this aggressive.
01:04:14 And I barely have seen it.
01:04:15 And I've been in the business for 30 years.
01:04:17 So we know there are some PMs that are running money
01:04:19 that are just scared out of their minds.
01:04:21 And that's a terrible way to invest.
01:04:24 You've got to take emotion out of it.
01:04:25 Everybody says they buy low and sell high.
01:04:27 They don't, they buy high and they sell low.
01:04:30 And we know that to be a fact.
01:04:31 It's really, really hard to buy low.
01:04:34 And when I know it's kind of sort of getting
01:04:36 in the right frame of mind to be buying,
01:04:39 it's like when I'm under my desk
01:04:40 and I'm hitting the buy button and it's really challenging.
01:04:43 And that's really what's going on right now.
01:04:44 It's really challenging.
01:04:45 So look, we have a lot to get through.
01:04:48 We have earnings in a couple of weeks.
01:04:50 We'll get a lot of information.
01:04:52 It's not the worst thing in the world to have a recession.
01:04:54 Recessions happen.
01:04:55 We'll come out on the other side of this just fine.
01:04:59 - Let's talk about earnings because to the point
01:05:01 that you just made with estimates starting
01:05:02 to come down a little bit, that was kind of the story
01:05:05 of the Q2 earnings period into July
01:05:08 where we saw estimates come down.
01:05:09 When we saw the actual results,
01:05:11 they weren't as bad as some had feared
01:05:13 because they're now coming in line
01:05:15 or beating lowered estimates.
01:05:17 And so we had that late July into August ramp here.
01:05:21 I read a stat from FaxSet earlier today
01:05:24 that Q3 earnings have come down far greater
01:05:27 over a five, 10, 15, 20 year average.
01:05:30 So analysts and strategists are starting to get the memo here
01:05:33 for the price action to the downside.
01:05:35 Do you think there's a potential though,
01:05:37 despite the poor visibility?
01:05:38 When Guy just mentioned FedEx,
01:05:40 you have to think the strong dollar is impacting that.
01:05:43 Just all the disruption to global supply chains,
01:05:45 the wars, continued lockdowns in China.
01:05:48 This is not gonna be a great quarter for multinationals.
01:05:51 So do you think there's a chance that investors
01:05:53 with lowered expectations start looking by that?
01:05:55 And to Guy's point, we woke up this morning,
01:05:57 there was a Bloomberg report that Apple is cutting back
01:06:00 some production of iPhones.
01:06:02 They just released it.
01:06:03 The stock was down four and a quarter percent pre-opening.
01:06:06 The stock market's screaming here.
01:06:08 It's only down one and a half percent or so.
01:06:10 Is it a possibility that we see a kind of look past
01:06:14 this current quarter?
01:06:15 - I think there's a very good chance
01:06:16 that we look past this quarter.
01:06:18 I think that companies are gonna use this quarter
01:06:21 perhaps to kitchen sink some things too, right?
01:06:24 I mean, we know all the things that you just mentioned.
01:06:26 We know all the negatives.
01:06:27 Do we know any positives?
01:06:29 How about companies that have pricing power?
01:06:32 How about companies that over the last three years,
01:06:34 they were forced to streamline their businesses,
01:06:37 to think differently, to buy more technology
01:06:40 and get more productive.
01:06:41 US companies are so resilient.
01:06:44 And I'm not saying it's different this time
01:06:46 because the numbers are gonna come down.
01:06:47 We know it.
01:06:48 It's just a matter of how can they manage it
01:06:51 and which companies can get out to the other side
01:06:54 in a healthy fashion.
01:06:55 And when you have some companies,
01:06:57 the bluest of blue chip companies,
01:06:59 Starbucks comes to mind,
01:07:01 Chevron comes to mind,
01:07:03 Meta comes to mind.
01:07:05 When you have these companies that are down so much,
01:07:07 well, Chevron's not down at all,
01:07:08 but you have these other companies that are down,
01:07:10 but they've done such a great job
01:07:11 at generating free cash flow
01:07:13 and they're putting it into shareholder value creation.
01:07:16 And they're also putting it into their businesses
01:07:17 so that they can grow.
01:07:19 These are times when you do want to be buying.
01:07:22 Do you wanna buy in front of earnings?
01:07:23 I don't know.
01:07:24 Maybe you buy a little now,
01:07:25 you buy a little bit on the earnings.
01:07:27 But I do think that the US companies
01:07:29 have been amazingly resilient,
01:07:31 especially on the margin front.
01:07:33 And with commodity costs coming down,
01:07:35 supply chains getting better,
01:07:37 I just think they'll be able to weather the storm
01:07:39 a little bit better.
01:07:40 And again, they're already reflecting a ton of bad news.
01:07:43 - Steph, you wear a much different hat than we do.
01:07:45 So as traders, regardless of thesis,
01:07:50 regardless of whether or not the story changed,
01:07:53 if something moves whatever percentage against you,
01:07:57 it's in our nature to cut your losses and take a fresh look,
01:08:01 because that's what traders do.
01:08:04 But in your seat, it's a lot different.
01:08:05 So in our world, price dictates action,
01:08:08 but in your world,
01:08:09 price doesn't really have anything to do with it.
01:08:11 But sometimes the story does change
01:08:14 and you have to change with it.
01:08:15 Can you sort of speak to that?
01:08:17 Because I think it's a really important distinction
01:08:19 for people.
01:08:20 - Absolutely.
01:08:21 So I do focus on fundamentals.
01:08:24 I do think about, okay, total addressable market.
01:08:27 What is a company's market share?
01:08:29 As I mentioned before,
01:08:30 really good free cashflow and balance sheets and all of that.
01:08:32 If something changes, completely changes,
01:08:36 then it is certainly worth taking a look.
01:08:39 So for example, I owned for a while, Wynn Resorts.
01:08:43 And I owned it because I thought,
01:08:45 well, A, casinos, gaming, white hot in North America
01:08:50 and in China and Macau, we know it's horrible.
01:08:52 And we know that China is eventually going to reopen.
01:08:55 Well, actually recently trimmed that position
01:08:59 because guess what?
01:09:00 It seems like China's gonna be closed
01:09:02 for an extended period of time.
01:09:04 And that's a thesis changer.
01:09:06 Even though it's only 25% of EBITDA for the company,
01:09:09 it used to be 75%, it's a thesis changer for me
01:09:12 because it's just gonna take a lot longer
01:09:14 for the story to work its way through.
01:09:16 Not that it's a bad company, but it's opportunity cost.
01:09:19 I could use that money elsewhere.
01:09:21 And so I actually used that money
01:09:22 and I bought Dollar General most recently.
01:09:25 I just think no matter what environment we're gonna see
01:09:28 in the next year or so, they are able to deliver
01:09:30 because they have an assortment mixed story.
01:09:33 They have margin story.
01:09:34 80% of their business is consumable.
01:09:36 So I am long-term, but if it's gonna take more
01:09:39 than I thought to make the story work
01:09:41 and something happens in my process and my thesis changes,
01:09:45 I have to take the loss and I just have to move on
01:09:47 and kind of forget about it
01:09:48 and just look for the next best idea.
01:09:50 - Steph, are there areas of the market right now,
01:09:52 let's just say you think we're closer to the end
01:09:54 than we are to the beginning of, let's say, this bear market
01:09:57 a lot of the recent price action and equities
01:09:59 has been dictated by the rise in interest rates.
01:10:02 We spend a lot of time talking about that right now.
01:10:04 August 2nd, the 10-year US Treasury yield
01:10:07 was at 2.51 this morning.
01:10:09 It traded 4.01 and it reversed.
01:10:13 And Guy, I'm just gonna let you in here.
01:10:14 It's trading at 3.7.
01:10:16 Do you think that's at all natural there, buddy?
01:10:18 But that was the fuel for equities today.
01:10:20 Here we are, we're talking it's Wednesday into the close
01:10:23 and we're up 2%.
01:10:24 And I just do not think if the 10-year was marching
01:10:27 above four and looks like it was just on a runaway breakout
01:10:31 and the US dollar index was continuing
01:10:33 and it obviously reversed a little bit today too.
01:10:35 I just don't think we'd have this upward price action
01:10:38 in stocks right now.
01:10:39 Talk to us about that dynamic
01:10:42 and then where in this environment,
01:10:44 okay, none of us think that yields
01:10:45 are gonna come crashing down,
01:10:47 but they're gonna be elevated,
01:10:48 especially year over year,
01:10:49 other parts of the equity market
01:10:50 where you really wanna be exposed in that environment.
01:10:52 - So one of the areas where I think people
01:10:54 have just written off our consumer discretionary,
01:10:58 I think people think that the consumer
01:10:59 is just gonna roll right over.
01:11:01 I think the three of us know that the US,
01:11:03 we are a nation of spenders no matter what.
01:11:06 We take on debt if we have to, but we spend.
01:11:08 Now we can argue as a goods, as it services,
01:11:11 it all pins on jobs.
01:11:13 And I know that jobs eventually will come down
01:11:16 because that's what the Fed wants.
01:11:18 They want to see housing down
01:11:20 and they wanna see jobs down.
01:11:21 They wanna see jobs down because wages are too high
01:11:24 and wages and rents are stickier parts of inflation.
01:11:27 But I would say that this sector is just hated.
01:11:29 It's totally ignored.
01:11:31 And I think as long as we do have an unemployment,
01:11:35 let's just say below 4.5%, maybe even at 5%,
01:11:39 I think consumers will continue to spend
01:11:41 'cause I don't think wages are going down.
01:11:43 And at the same time, I think commodity prices,
01:11:46 i.e. especially gasoline coming down
01:11:49 is actually going to make them feel better.
01:11:52 It may not happen right away,
01:11:54 but I do think that 70% of our economy is the consumer
01:11:58 and I'm not writing them off at this point in time.
01:12:00 And the sector is down so much
01:12:02 and so many stocks are just so hated.
01:12:05 So that's an area where I like.
01:12:07 I think interest rates,
01:12:09 you mentioned that they're kind of all over the place.
01:12:11 I personally think that we're still trying to figure out
01:12:13 price discovery because we've got a Fed
01:12:15 that's manipulating the market.
01:12:16 So we have no idea what the real true price is
01:12:19 and what the valuation is.
01:12:22 But I do think that the financials
01:12:23 can actually catch a bit here.
01:12:25 I know they're hated too.
01:12:27 They're very, very cheap and they do benefit.
01:12:29 Many of them benefit from the short end going higher
01:12:32 because they've got very sticky deposits.
01:12:33 And you're talking about one time's book
01:12:35 with very good capital.
01:12:37 The regulators have forced them to have excess capital.
01:12:41 And so this is not 2008 all over again.
01:12:44 I knock on wood, of course.
01:12:45 I still think industrials are an attractive place to be.
01:12:49 And I think that's on-shoring to be honest with you.
01:12:51 I think that is what these stocks are kind of pricing in.
01:12:55 And if the dollar just hangs back just a little bit,
01:12:58 then that sector will do fine.
01:13:00 Everybody wants to buy tech.
01:13:01 Everybody wants to buy growth.
01:13:03 Not a hundred percent sure that works.
01:13:05 Lastly, I would say, I still think energy is attractive
01:13:08 'cause I think structurally that industry
01:13:10 has totally changed in terms of supply dynamics
01:13:13 as well as shareholder value creation dynamics.
01:13:16 - Yeah, let's talk about energy real quick
01:13:17 because I will tell you,
01:13:19 I was one of those people that in the fall of last year,
01:13:22 I thought energy was a place to be.
01:13:24 That proved to be correct.
01:13:26 I think when it spiked the commodity in March,
01:13:29 I believe up to 130,
01:13:30 we all thought it was a bit of a blow off top.
01:13:32 The sell-off was probably a little more precipitous
01:13:35 than I thought, but I did think we'd bounce.
01:13:38 That bounce I thought would take us to new highs.
01:13:40 It didn't happen.
01:13:41 That Dan was all over it.
01:13:41 He thought we'd actually mean revert
01:13:44 to the levels that we find ourselves in now.
01:13:46 I'm with you.
01:13:47 I understand why people are selling the commodity.
01:13:51 They feel that a global slowdown
01:13:53 will see demand destruction.
01:13:55 So they're trying to get ahead of that.
01:13:57 It makes sense coupled with the fact
01:13:59 that the dollar has been on fire
01:14:01 and that creates some headwinds.
01:14:03 With that said, you haven't seen the demand destruction
01:14:06 that everybody's waiting for.
01:14:08 So this is a bit of a rhetorical question, I guess,
01:14:11 but what am I missing here in energy?
01:14:12 Because these companies are run better
01:14:14 than they've ever been run vis-a-vis ESG
01:14:17 and vis-a-vis a time when the front month accrued
01:14:19 with a minus $39 a barrel.
01:14:21 All those things force them to run themselves better.
01:14:24 They're just better companies.
01:14:26 They're cheaper now.
01:14:27 They should thrive in this environment,
01:14:29 but the stocks aren't doing it.
01:14:30 I think they've had a really nice run
01:14:33 and I think people are afraid
01:14:34 and people are taking at any cost.
01:14:36 They're taking their gains where they can.
01:14:38 I think it's very healthy to have a pullback.
01:14:40 And I think that to your point, Guy,
01:14:43 these companies are being run way better
01:14:45 than they ever have.
01:14:46 They're not cowboys anymore.
01:14:48 They used to be.
01:14:49 They are not overproducing when the crude prices go higher.
01:14:53 So you don't have this boom bust kind of scenario.
01:14:56 But what I think is really the reason
01:14:58 why these stocks have come back
01:14:59 is I don't think people believe in the supply story.
01:15:02 And I think they are giving over emphasis
01:15:04 to the demand destruction,
01:15:06 but these companies have changed massively
01:15:09 because of ESG and ESG investors,
01:15:12 and they are getting more clean and more green,
01:15:15 and they have all kinds of plans on doing so.
01:15:17 And instead of overproducing,
01:15:19 they're returning the free cashflow back to shareholders
01:15:22 in buybacks, dividends, and special dividends.
01:15:24 I've lost count how many times, for example, Diamondback,
01:15:28 I think it's been four times
01:15:29 they had a special dividend this year alone.
01:15:31 It's incredible.
01:15:32 The free cashflow stories are amazing.
01:15:35 The break-evens are $40 to $50.
01:15:38 So even oil here at these prices,
01:15:40 they're still minting money.
01:15:42 And perhaps maybe they don't return
01:15:44 their free cashflow to shareholders
01:15:46 as aggressively going forward.
01:15:48 They're still going to do so.
01:15:50 And I think that when you have companies
01:15:52 being more efficient, you have the SPR,
01:15:55 which we've got now at 40-year lows,
01:15:58 we have to go and replenish that.
01:16:00 You have OPEC plus cutting production.
01:16:02 I feel like the supply side of the story
01:16:04 still is very, very lean.
01:16:06 And I also think this one last thing,
01:16:09 we haven't had to pay attention to energy for 10 years.
01:16:12 It got to 3% of the S&P 500.
01:16:15 It is now, after the rally this year,
01:16:18 a whopping 5% of the S&P 500.
01:16:21 So back in the '80s, as you both know, it was 19%.
01:16:26 You had to pay attention to it.
01:16:27 So I think people are non-believers.
01:16:29 I don't think you have all the generalists
01:16:32 understanding the energy market,
01:16:34 not to the extent they should.
01:16:36 And let's get worried when the growth managers
01:16:38 start asking us about which energy stock to buy.
01:16:41 - Yeah, I'm with you.
01:16:42 And this is more statement
01:16:43 that you can respond to if you choose,
01:16:44 but you don't have to take my word for it.
01:16:47 I mean, people should listen to you
01:16:48 long before they listen to me,
01:16:51 but they should listen to Warren Buffett as well.
01:16:53 I mean, you think about it.
01:16:54 It's amazing when he's buying things that they love,
01:16:57 like Apple or something, everybody champions him.
01:16:59 He's a genius.
01:17:00 He buys 19% of Oxy,
01:17:02 and it's like the guy's lost something off his fastball.
01:17:05 Maybe he has, but he clearly sees something as well
01:17:10 in a sector now that everybody seemingly
01:17:12 is sort of brushed to the side.
01:17:14 - Yeah, and I would just add,
01:17:15 I think Warren Buffett is a value investor,
01:17:17 and these are values.
01:17:18 Believe it or not, these stocks, the PEs,
01:17:20 the multiples have actually come down
01:17:22 while the estimates continue to go higher
01:17:24 and the stocks go higher.
01:17:25 So I think there's real value there.
01:17:27 I think you just have to have confidence
01:17:29 in the supply demand story.
01:17:31 And yeah, if we got a deep recession,
01:17:33 would these stocks pull back further?
01:17:35 Of course they will, but find some quality ones,
01:17:38 find some ones that have good dividend yields.
01:17:39 I was buying Chevron when it yielded 9% back in 2020.
01:17:44 I mean, as long as you feel confident
01:17:45 in the balance sheets, right?
01:17:47 And that's why I mentioned free cashflow.
01:17:49 - Steph, let's go back to tech for a second,
01:17:50 because when you're talking about the areas
01:17:52 that you wanna be exposed to in a recessionary environment
01:17:55 or ones that might lead us out of this environment,
01:17:57 you mentioned tech here.
01:17:58 It's not a place that you kinda wanna be
01:18:00 as it relates to growth.
01:18:01 And we know that some of the areas of the market
01:18:03 that have been getting killed long before the S&P 500
01:18:06 topped out on January 2nd was high growth,
01:18:09 high valuation tech.
01:18:11 Now, we also know that the top five names
01:18:14 in both the S&P and the NASDAQ are all tech names.
01:18:16 So, consumer discretionary, as you mentioned here.
01:18:19 So, we have Apple, Microsoft, they're trading about 25 times.
01:18:22 Amazon, obviously the same.
01:18:23 Google, Alphabet, much cheaper.
01:18:25 I'm sure as a value gal, you're probably starting
01:18:27 to kick the tires in a meta.
01:18:28 These are trading at unusual values
01:18:30 relative to the last 10 years.
01:18:32 But is there a chance that the market can rally
01:18:35 without those names?
01:18:36 Because to me, obviously they make up a huge part
01:18:39 of the weight of those indices,
01:18:40 but they also make up a lot of expected earnings growth
01:18:43 and really just from a sentiment standpoint,
01:18:46 expect them to be leaders.
01:18:47 And I don't really see anybody who's ready
01:18:50 to knock them off their incumbency right now.
01:18:52 So, I'm just curious as you think about
01:18:54 maybe the concentration of those names
01:18:56 and their ability to once again,
01:18:58 get back on the horse and lead.
01:18:59 And then also, what about all these names
01:19:01 that have been absolutely murdered down 6, 70, 80%?
01:19:04 - Well, those are the ones that probably don't have earnings.
01:19:08 So that's the one place I don't wanna be buying,
01:19:10 especially as interest rates inch higher.
01:19:12 And I think interest rates are gonna inch higher.
01:19:13 And if they don't inch higher from here and I'm wrong,
01:19:15 I still believe they'll stay high.
01:19:17 And so the non-earners, no touch for me,
01:19:20 unless you wanna take a flyer, one or two,
01:19:22 that's perfectly fine.
01:19:22 Take the one you like and have at it.
01:19:24 But that is not where I want to be focused
01:19:26 as a long-term investor.
01:19:28 Not when I can get some of these FANG names
01:19:30 that are down 20, 30, 40, oh, in the meta 50, 60%.
01:19:35 So, I don't know if they're going to be leaders,
01:19:37 but I do think that the market will struggle
01:19:40 if the tech and comm services as a whole,
01:19:43 if you add them together, if they underperform,
01:19:46 because it's 35% of the S&P 500.
01:19:48 So therefore, you need every other sector to outperform
01:19:51 for the market to do better.
01:19:53 And so I think that's a tall ask.
01:19:55 That being said, I do think that there is a way to play tech
01:19:59 and I think that's like kind of a barbell.
01:20:00 Like I have some value names with some dividends
01:20:03 and I have some growth names
01:20:04 with great total addressable markets,
01:20:06 which are expensive, but I feel very strongly
01:20:09 that their earnings over the long period of time
01:20:12 will remain above average.
01:20:14 Again, because they're in the total addressable market space
01:20:17 of cybersecurity, AI, cloud, data center.
01:20:20 We know all the themes.
01:20:21 And so I definitely want to have exposure there,
01:20:24 but I don't necessarily think you have to have
01:20:25 this broad stroke of just growth and just tech,
01:20:29 especially as rates remain elevated,
01:20:30 but it remains to be seen.
01:20:32 I will say this, I just talked to a colleague of mine
01:20:34 and I thought, well, I own Meta,
01:20:36 unfortunately I've suffered with it,
01:20:37 but actually Alphabet is starting to become
01:20:40 much more interesting to me,
01:20:41 down 30% trading at 17 times forward.
01:20:44 Not there just yet,
01:20:45 but we get another down leg in the market.
01:20:47 I think that's quality on sale
01:20:49 and that's sort of kind of how I invest.
01:20:52 - John Malkovich, Matt Damon, Ed Norton,
01:20:56 great movie, "Rounders", love it.
01:20:58 If it's on, I'm watching it.
01:21:00 Why you say, guy, what the, why you?
01:21:02 Because everybody has a tell
01:21:04 and you just showed your tell.
01:21:07 When you said have at it,
01:21:08 that proved to me that you actually watch "Fast Money"
01:21:12 because that's Dan Nathan's favorite.
01:21:14 Have at it people.
01:21:15 You channeled your inner Dan Nathan "Fast Money".
01:21:19 - I did.
01:21:20 - Don't pretend you don't watch number one.
01:21:23 Anyway, listen, before we get out of here,
01:21:25 the independent advisory world,
01:21:26 that's where everybody's going.
01:21:27 I mean, it's clear the wire housers,
01:21:29 they seem to be dinosaurs, the LPLs of the world,
01:21:32 but Hightower, you got a lot of really cool things going on
01:21:35 under the stewardship of Bob Oros,
01:21:37 who happens to be a friend, full disclosure.
01:21:40 Just speak to that real quick.
01:21:41 - I will, I'm a big fan of both of you
01:21:43 and I actually DVR all the time, "Fast Money".
01:21:46 - Stop it now, okay.
01:21:48 - I do.
01:21:49 - Don't bullshit me, Steph.
01:21:50 Now I know you just, you were doing so well.
01:21:52 - I promise.
01:21:53 - And at the 30 minute mark, you spit the bit.
01:21:55 - My daughter wants to watch it with me.
01:21:57 That's even the better of it all, right?
01:21:58 So she's learning.
01:21:59 No, seriously, it's a great, great show.
01:22:01 I always enjoy it.
01:22:02 I always feel like I'm in the know, the immediate know.
01:22:06 I feel like I know my stuff, but you guys,
01:22:08 you know the minute to minute stuff
01:22:10 and why things are actually acting the way they are,
01:22:12 which is really pretty darn cool and very, very hard.
01:22:15 So thanks for the plug for Hightower, as well as Bob Oros.
01:22:19 We're doing a really great job
01:22:20 in terms of growing both organically and inorganically,
01:22:24 meaning M&A.
01:22:26 And what I really enjoy about the firm
01:22:27 is that it does have the size and the scale in the industry
01:22:31 and the market share,
01:22:32 but it also has that intimate feel
01:22:34 of just good people wanting to grow.
01:22:37 And you guys have been in this business
01:22:38 just as long as I, if not longer.
01:22:40 And you know the financial services industry
01:22:42 is under enormous stress in terms of buy side and sell side.
01:22:45 And well, the independent wealth management channel
01:22:47 is actually growing,
01:22:49 and that's sort of been a fun part to be a part of.
01:22:52 So thanks for the shout out there.
01:22:54 - Well, Steph, they're lucky to have you
01:22:55 as a voice and a face of the organization.
01:22:58 And just right back at you too.
01:23:00 I mean, we really enjoy listening and watching you
01:23:02 on the investment committee.
01:23:03 I saw you on the floor of the New York Stock Exchange
01:23:05 with Scott last week and the OT there.
01:23:08 And it's always fun to listen to your commentary.
01:23:10 So Guy and I, we can't be happier
01:23:12 about having you join us on the tape.
01:23:14 And we hope that you will come back soon, Steph.
01:23:16 - Always.
01:23:17 Thank you so much, guys.
01:23:18 - Thanks once again to CME Group and iConnections
01:23:22 for sponsoring this episode of On The Tape.
01:23:25 If you like what you heard,
01:23:26 make sure you hit follow and leave us a review.
01:23:29 It helps people find our show
01:23:30 and we love hearing from you.
01:23:32 Can also email us at onthetape@riskreversal.com anytime.
01:23:37 Follow and connect with us on Twitter @OnTheTapePod,
01:23:42 and we'll see you next time.
01:23:44 On The Tape is a risk reversal media production.
01:23:46 This podcast is for informational purposes only.
01:23:49 All opinions expressed by me, Dan Nathan,
01:23:52 Guy Adami, Danny Moses, and any other participants
01:23:54 are solely our opinions and should not be relied upon
01:23:57 for specific investment decisions.
01:23:59 (upbeat music)
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