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Could we see a short-term shutdown in the stock market?

With all the coronavirus volatility in the markets… some folks are wondering whether we’ll see a temporary shutdown in the stock market.

That’s the question Frank asks Luke Downey, cofounder of Mapsignals and new contributing editor for Curzio Research. Luke has worked for some of the most popular Wall Street firms. Today, he shares where he’s looking for opportunities right now… and his favorite names for the long term [21:08].

The coronavirus is—unsurprisingly—having a ripple effect across the airline sector… which is now seeking a bailout. There’s still a lot of market pain ahead… but there are still ways to make money during these volatile times [58:12].

Inside this episode:
  • Guest: Luke Downey, cofounder of Mapsignals [21:08]
  • Education: How to make money during these volatile times [58:12]
Transcript

Wall Street Unplugged | 713

Could we see a short-term shutdown in the stock market?

Announcer: Wall Street Unplugged looks beyond the regular headlines heard on mainstream financial media to bring you unscripted interviews and breaking commentary direct from Wall Street right to you on main street.

Frank Curzio: What’s going on out there? It’s March 18th. I’m Frank Curzio, host of the Wall Street Unplugged Podcast where I break down the headlines and tell you what’s really moving these markets. I thought thousand-point moves in the Dow were insane. Now we’re seeing 2000-point moves which amount to more than 10% in the major indices, something that we’ve really never seen before. I mean it’s crazy with the volatility. I guess it’s to be expected because this is something that we haven’t seen ever in the history.

Frank Curzio: I’m going to bring up some points and different things I’m hearing that I want to talk to you about because these are major points that are being mentioned throughout the media and I want to cover them. Before that, look, if you listen to this podcast, I’m getting tons of emails thanking me, saying that, “Your thesis made so much sense. I came out of the market.” I really appreciate those emails and I get it. I don’t deserve 100% of the credit. I mean I sold out a lot of positions in our portfolios, but I still kept a few and we stopped out of some of those.

Frank Curzio: I recommended two gold stocks, which I thought they would be fantastic. They were down tremendously. They’d even have good balance sheets, amazing assets, and just great, great management teams and they stopped out like a month and a half later, a month later. Don’t think that anyone’s a genius with this market or anything is crazy. It’s nuts because you’re trying to pick pockets and I’m looking for different things to buy. Here’s an example. I bought Boeing at 160 and took probably one-fifth position and it went down to 100, 110. I’m going to add to it because I think that there’s going to be tons of people lined up to lend them money since they have 5000 orders. The MAX plane’s going to come online.

Frank Curzio: It’s probably good because they got an extra three, four months to actually work on it since they’re not going to be able to do deliveries and everything’s shut down anyway. But at the end of the day, I mean you could have Warren Buffett come in and make a deal with them, which makes sense. It’s basically a monopoly domestically and if you’re looking at globally, there’s only two companies that make airplanes. They control over 90% of the markets. That’s Airbus, which is at full capacity, and also Boeing, which has all these orders ready to go. So you’re going to see a lot of things going on. My point is be patient here. I mean for even me personally trying to pick away here and there.

Frank Curzio: This market can make you look like an idiot right away. It’s a lot of people unfortunately that are still in this market, which is a shame. I get it. It’s tough. I mean if you have a long-term time horizon, I really do think you’re going to be fine, with all the stimulus coming in from central banks all over the world. I mean this is going to end. It’s a temporary problem. But just be patient here. I keep telling people, “Be patient.” Again, it’s not in my best interest for my company where I sell newsletters and recommend stocks to say, “Let’s be patient here.” But I’m providing an incredible value. I provide a bunch of screens, over 100 different stocks in my Curzio Research Advisory that I’m looking at right now based on the screen.

Frank Curzio: These are early cycle names that I would buy once this thing turns around, also names that are going to do well during inflation every time, names that are going to do well during deflation every time, companies that have the best balance sheet based on net cash to market cap, just safe stocks to own, so even smaller names to own in that early cycle. So this is where I’m looking providing that fact because we all know. I think we’re all on the same page where this is going to be an incredible buying opportunity. But everything’s shut down right now. The economy’s shut down. Nobody’s going to be buying anything other than if they’re going on Amazon and groceries and things like that.

Frank Curzio: But it’s pretty crazy right now. So you’re going to see the next two months, it’s going to be horrible, horrible news on the economic front that we’re going to report and there’s going to be few positives. What are going to be the positives that move this market? The Fed’s already throwing money at this like crazy. They did that already. The interest rate’s zero, close to zero. We’re not going to come up with a vaccine any time soon. It’s going to take at least four, five months where we’re probably going to see these hard numbers which are going to skyrocket, start coming down by then. We’re seeing that in Italy. We’re seeing it in China, if you believe their numbers, also South Korea too.

Frank Curzio: But just interesting times. But again, be patient. There’s no rush. You should have most of your portfolio in cash. I wish I could have sold out all of our positions. Most of the ones that we sold out are down 35, 40% from those levels that we sold from, which is fantastic. But I’m still hesitant to start picking away. I want to start picking away a little bit and every time I do, it kills you. Again, someone who has 25-plus years of experience, just be careful. Okay? You got to be careful who you listen to. These are times that never happened before. That’s one of the things I want to talk about here. Because when you’re looking at technical levels or if you look at people who say, analyze the market historically and say, “Well, the last 10 times, this happened and the market fell 20%. It bounces back 7% the next year and then it generates 9% …” Whatever.

Frank Curzio: Be careful with that shit. Please be careful. Please be careful when people are modeling, like Goldman Sachs. I mean I have no idea what they’re doing right now. I love the fact they’re changing their mind. They’re predicting that we may see negative growth in GDP, not just first and second quarter, but maybe third quarter, into third quarter. Again, we didn’t report first quarter yet. We didn’t report first quarter yet. That’s coming. So if we’re looking at the next… We’re looking into September, October, where they’re expecting numbers to be horrible, but yet they believe that the S&P is going to finish 30% higher this year from where it’s trading right now. 30% higher. I don’t get it.

Frank Curzio: You’re cutting your estimates. You’re cutting your earnings estimates across the board. You’re predicting that it’s probably going to be a recession, which is just two quarters a day of GDP growth. We’re going to see a global recession. Everyone’s going to be negative almost, all the major economies basically. China might be a little bit positive, but we’ll see. But whatever they report, they report. But again, you got to throw this stuff away. Just the past three weeks, I’ve seen so many analysts tell you… looking for pockets to buy. I mean it’s very dangerous. I mean I saw people upgrading WIN two weeks ago, three weeks ago, upgrading like Las Vegas Sands and WIN and airlines.

Frank Curzio: You got to be crazy. I mean just you got to take a step back sometimes and look at common sense, because when you’re looking on TV it’s used to a certain system that they use. They use a system where, okay, let’s look at history. Okay, when we see SARS, it’s a V-shaped recovery. This is why I came out with my call because I looked at the sales side and realized they have no clue what the fuck’s going on because this is not SARS. How can you compare it to SARS? China was nothing in 2002. It counted for 3% of the global economy. It’s 17% now. They counted for 50% of the global growth last year. It’s a monster. It’s the growth engine of the world and you took the growth engine and shut it down completely and put it on lockdown for a couple months. Yet, we trading at a super high growth multiple.

Frank Curzio: Once this thing started spreading outside of China, all bets are off. Please just be patient here. When people are mulling and saying, “Well, we’ve seen this happen. When the market falls 30%, it usually…” It’s not the same. I mean the credit crisis, how much stimulus did we throw into this market? How many companies did we back stop? Are you going to compare that to the previous recession from 2011 or 2001, 2002, the different time periods? So just be careful when you hear things like that because a lot of people jump into this market way, way too early and they’re down 15, 20, 25% on some of these stocks in days, which is insane. I know a lot of you are conservative investors that are just buying stuff you want to hold and buying some great names.

Frank Curzio: I get it. I mean that’s okay, even at these levels, the market down 30%. I mean I would say we’re at fair value. But another thing I want to talk about is the stock market. I don’t know how you can close the entire economy and not close the stock market. I don’t know how that could happen. I’m not smart enough to tell you. All’s I know is you can’t leave one market open and leave commodities market. I mean people are going to look for liquidity and it destroys different areas. I know you have the options market and expiration dates. I get it. But the amount of negative news is going to come out in the next two months because nothing is going on right now. What is that going to result in sentiment-wise? That’s what we have to look at and use our common sense.

Frank Curzio: Forget about the numbers. I know the numbers. I know the earnings numbers. I was telling you how terrible they’re going to be. Believe me, I know the growth numbers. I know that was going to be terrible. I’ll tell you what the numbers are going to be. Anyone could figure out the numbers and forecast whatever. Forget that. It’s garbage. Throw it out. Use your common sense. What’s going to happen to people who haven’t sold yet, who have retirement accounts that are down 25, 30% in their retirement accounts? And then they see this bad news constantly coming out. I mean I seen in CNN, and I’m not ripping apart CNN, they’re doing their job. But they were interviewing Dr. Fauci, who’s the president’s right-hand man who loves the media.

Frank Curzio: I mean I don’t think I know anyone that loves the media more than that guy. That guy’s on 10 times a day, different media channels. This guy loves it. I get it. Okay, good. He’s talking about trying to help. CNN said, “So what’s the worst case scenario? Could millions of people get infected?” He’s like, “Yeah.” It’s like, “Could we run out of tests?” “Of course, we’re modeling for that worst case scenario. But let’s be realistic.” What did CNN post all over their website? “Dr. Fauci says millions could get infected.” These are the headlines. They’re doing their job so you’ll click the story even though he really didn’t say that. I mean he did say that, but you’re taking it out of context to the point where, listen, we’re modeling.

Frank Curzio: Cases are going to go higher and we’re hoping that they’re going to go lower. If they don’t, we’re going to improvise. Of course, if you have the worst case scenario… I mean if you look at Tesla, the Morgan Stanley analyst had a base case. I remember looking at his base case. This is before Tesla took off. His base case was like 400. Then his most optimistic one that provided the worst that could happen. So the best that could happen, I think he had a $750 price target. The worst was $35. So for me to look at that report and say, “Morgan Stanley believes that Tesla could fall to $35,” it’s not really true. I mean I’m not telling the whole story here.

Frank Curzio: But that’s what’s going to happen. That’s the media’s job. I’m not picking on them at all, believe me. I’m not picking on them, because they need page views, especially now. No live sports. I mean I know people are staying home watching TV. But man, the advertising dollars, again, these companies spend when it comes to advertising as a percentage of revenue and revenue’s going down tremendously. You’re going to see advertising go down a ton for these companies, which is how so many of them make their money. But just you’re looking at these times. It’s definitely different. Just be careful what you’re listening to. Okay, just use your common sense because the market closing makes sense to me.

Frank Curzio: If you’re closing everything else, how do you leave the market open when all you’re going to see is negative… What are these people going to do when they see these headlines? They’re going to sell. “I can’t take it no more. I can’t afford to lose another 30%. I don’t have any working power.” You’re going to result in this market coming down another 10, 15% if you keep it open over the next two months because there’s zero positive news that’s going to come out, other than the Fed keep just injecting liquidity. We’ve seen that that’s scaring people more than helping people. We know it’s going to help long-term. But it’s not going to help in the short-term, especially fiscal policy.

Frank Curzio: That’s another topic I wanted to talk about. When you look at the Fed, and it’s so easy to bash them. It’s so easy to bash the Fed. Everyone’s bashing them and talking bad about them. If the Fed wasn’t there, unemployment would definitely be over 20% if we didn’t have them. Paulson, Ben Bernanke, I know if you’re listening to this you might hate me saying that, but it’s true. I mean what they came up with stabilized the system. I don’t like it. They had to bail out the big banks. If there’s no banks, what are you… You can’t take out your money. I mean people don’t realize how terrible that environment was. I can’t believe they kept that stimulus in place through for another seven years, which is crazy, before they finally started to raise rates.

Frank Curzio: But even when you’re looking at fiscal as well, I mean why give people money and hand them checks when all the stores are closed? What are they going to spend it on? You can spend it on Amazon. You’re going to get deliveries probably in two weeks now. Amazon’s hiring 100,000 people. That’s how busy they are. But when I look at the Fed, just right away, it’s like a… You threw everything out right away. For me, I would have looked at this as more of timing. Again, it’s easy to play Monday morning quarterback. But I mean for me, if you close the markets and then a week before they’re going to open then you provide fiscal stimulus to everyone so they could spend money, now everyone’s supply chain is in order.

Frank Curzio: They know they got their products. Everyone’s ready to go. It’s like you’re opening up and everything’s trading at the same time. Then you have all this stimulus and the coronavirus risk is subsiding. That seems like a pretty cool scenario to me. But now it’s let’s keep the markets open. We already provided tons of stimulus. Yeah, more fiscal stuff will come and they’ll pay us direct money, checks and stuff like that. It’s not really going to help. But you just got to be patient and wait on the sidelines. But when I look at the Fed also, when people are bashing them, I mean look what they did with the banks, with the stress test that they have every year. This includes me too.

Frank Curzio: I was like the banks are the most healthiest they’ve ever been in history because every year they have to have enough capital to withstand the 30% market collapse, -5% GDP, and 10% unemployment. I said that never happened in the history of our markets where we saw all three of those things happen at the same time. We may see that. But the fact is, they have enough capital to withstand that. Yeah, we’re going to have liquidity problems and different markets are going to show up with liquidity problems, which we’re seeing. But the Fed’s on top of it. It’s not 2008 where we have no clue what’s going on. Wait, AIG’s involved in this? How’s AIG? AIG’s insuring the whole entire industry? That’s interesting.

Frank Curzio: That was 2008. They had no idea. They had no idea to the extent of how big this was. We know how bad this is. It’s on the table. So that’s why we’re able to adjust. Another topic that I see is bashing the president, not even bashing the president, but even if you’re bashing Pelosi or Schumer. I get the bashing the president. I understand he’s arrogant. We all know that. I know he changed his mind, thinking the coronavirus wasn’t that big of a deal. He’s given himself a perfect 10 for handling this crisis. Now he’s like, “Wow, this is a big crisis going on.” So there’s no humility, nothing. I get it. With that said, on both sides, it’s time to come together.

Frank Curzio: We need all the governors coming together, everybody on the same page here. Just forget about politics. Believe me, you’ll have plenty of time to see how bad he did and play Monday morning quarterback later on. No matter who the president is, this is a new situation. You have to be willing to adapt. You can’t come out and just… Again, for someone that’s changing their mind because even from my perspective, you’ve seen me. You have to be willing to change your mind based on the data. The data is changing tremendously from day to day. The Feds lowered rates tremendously. It’s a different environment than it was a week and a half ago.

Frank Curzio: You got to be willing to change going forward. I thought closing stores and putting us on lockdown was absolutely crazy. The alternative is this problem lasts till five, six months instead of two or three. That uncertainty’s going to destroy the market. So maybe it is a good idea. You have to be willing to change your mind. Again, when this ends, you’re going to be going to political season. All bets are off. Everyone go after everybody. I get it. But just right now, man, take a break. Because I’m looking at CNN, I’m looking at MSNBC. I’m looking at Fox. I want to get the news story of the coronavirus and there’s always a bias to it. It’s Fox, again, “The president’s doing a great job.” You listen to CNN, “Look at what he did.” Just enough. Just enough, man.

Frank Curzio: The people don’t want to hear that right now. They really don’t. If you’re mad, just go on your social media accounts, whatever you need to do. But just it’s a time to come together, man. People are dying. We need more tests out there. We need to do different things. Again, you’ll be able to pick apart whoever you want to pick apart after this. But just for the next two, three months while this is going on, we need to be together here. We really do. But I’m looking at these topics and I wanted to address some of them, just like the technical levels and people tell you. Just draw them out. They mean nothing. They’re nothing. They’re nothing. Crazy. So many people tell you to get into this market as it’s been coming down and you’re getting destroyed.

Frank Curzio: This is different. It’s different this time. This has never happened before. You can’t compare it to other events, guys. People are going to get killed doing that. Use your common sense. The whole economy’s shut down. Relax. I think I could definitely buy names now. I think my Boeing position, I’m going to start adding to it because they will get bailed out. They’re going to have to get bailed out unless the whole entire airline industry is going to collapse, airlines as well. These are companies who are making big profits. You look at GE. You look at the highly-leveraged companies that are coming out of it because sales are starting to pick up.

Frank Curzio: They were generating free cashflow. Now you stop that for five months, the leveraged companies are getting destroyed. That’s why energy’s down so much. So again, just pay close attention. Do a lot of reading. If you’re a subscriber to my Curzio Research Advisory or Curzio Venture Opportunities. I’m providing screens for you, the stocks that I’m looking at that we’re going to get into. You got to be patient. Just be patient. There’s no rush here. We want to see certainty. We want to see a bottom to this market. We want to see Apple come out and say, “Okay, for this year, this is what we’re reporting in earnings. Next year we’re expecting this to bounce back. Here’s what we’re going to do with our supply chains. The 12 phone is going to come out on time,” whatever they’re going to call it. “We’re going to fill those supplies or we’re not going to fill those.”

Frank Curzio: Even if it’s bad, as long as we have clarity, as long as we have some kind of a certainty, then that’s going to… Then you could model for it. Then you could do, okay, try to figure it out on an analytical basis. But right now, use your common sense. Things are crazy right now. There’s no reason to rush in, especially if you’re listening to this podcast, because I know a lot of you, even based on your emails, it’s great. You listen to me. You should be sitting in cash or have most of your portfolio in cash. You’re happy because there’s a lot of great names trading down 30, 35%. Just be patient. If you got to pick away, do what I did with Boeing because you never know if whipsaws where they’re down 30% on a position. But I only took a one-fifth position.

Frank Curzio: So I’m going to add a little bit here and then add a little bit more. I think you’re going to see a Buffett come in or somebody come in and announce a major deal just like they did with Goldman Sachs. It just makes sense to me. I mean they have future revenue that’s guaranteed as soon as that MAX gets up in the air, and it will. They’ll fix it. So that’s what I’m doing right now. I’m going to provide other ways of how you can make money in this market. I’m going to cover that in my educational segment because there’s one term that you guys should be paying close attention to. If you hear a company mention it, watch out. It probably means you should sell and not be in that position.

Frank Curzio: Unfortunately, a lot of companies are mentioning this term right now. I’m going to cover that again in my educational segment. But first, I have a great guest for you, first time. His name is Luke Downey, co-founder of Mapsignals.com. It’s a quantitative stock research firm focused on unusual institutional activity and how to take advantage of it. How does Luke come up with this and start his company? Because he worked at a lot of institutions. He was head of ETF sales at Cantor Fitzgerald. You’re not going to see more institutional flows and what’s going on with the market than that. He was also senior vice-president of derivatives at Jefferies, another major firm, so dialed in.

Frank Curzio: I want to start getting more guests on, different opinions, and see how they feel about this market. But he’s going to tell you how to track the big money, the institutional money, where it’s flowing, how mom and pop investors could benefit and take advantage of this. Very important since we’re in crazy times where the market is basically still crashing. So by watching institutional money flows give you a clue to where these guys think the bottom is in some of these stocks, some of these sectors. So great, great interview. You know what? Let’s get to it with Luke Downey right now. Luke Downey, thanks so much for joining us on Wall Street Unplugged.

Luke Downey: Thanks, Frank. That’s a perfect name for what’s going on right now.

Frank Curzio: I can tell you, just before we started this interview, you said, “Look, I’m doing this from home and the kids may run out.” So if they do, if they run in by accident, that’s the world we live in right now. Isn’t it crazy? All the interviews on CNBC are actually taking place at home as well.

Luke Downey: Listen, just thank God for Frozen II. I mean the kids love it, phenomenal movie. But yeah, that is the world that we live. You know what? We’re going to live in it, so that’s it.

Frank Curzio: I know, I know. It’s pretty crazy times. You know what? Let’s start. You’re a first-time guest here on Wall Street Unplugged. You focus on quant research that basically targets or focuses on unusual trading activity. Explain that a little bit more in detail, in layman’s terms to my audience of what that means.

Luke Downey: Yeah. My background, I really need to describe that. For a number of years I was on these big derivative desks. So I ended up working at Cantor Fitzgerald and in Jefferies. My business partner now actually was my boss at the time. While we were dealing with options and variance and all types of exotic products, I was able to see some really cool stuff. The best part of my job was whenever I started handling large order flow for pension funds and a lot of these huge big money accounts, learning the way they trade, how they trade, why they trade, et cetera.

Luke Downey: To make a long story short, we put our heads together. This is me and Jason, business partner now. I said, “Man, we are seeing some pretty amazing stuff here. Why don’t we try and build an algo that would look for this unusual big money activity?” So basically the whole idea was is someone building a position in a stock, so they’re buying it day after day after day after day or are they getting out? The whole idea was that could be a phenomenal edge. I know that people have been trying to do that for decades and decades. We really found something unique and it’s got a phenomenal track record. We use this info. We call it big money. We sell this in a newsletter and also sell the data.

Luke Downey: But ultimately, what it’s really looking at is if you look at thousands of stocks every single day and you try and measure the different relationships between how a stock is trading and also the price and the volume and volatility and things of that nature, so basically it’s just kind of like a really good educated guess. Is money coming into this stock? Is it coming out of this stock? That’s really great. That’s kind of like our wheelhouse is finding these outlier companies, these phenomenal companies. But when you’re doing this on a large scale, thousands of stocks, you start to see patterns. You start to see sector movement. You start to see what we’re having now, where it’s just complete capitulation.

Luke Downey: I think that’s what really makes us unique and a lot of our subscribers really gravitate to, because it’s information that’s not anywhere else and it tells a different story from the lens of data.

Frank Curzio: Now, I have to tell you, I love this because it just opened up so many different questions. I guess, let’s start with this question. When I was looking at this market a month and a half ago, which made me nervous, is that, one, is China shut down. I had no idea the coronavirus was going to expand globally. China was shut down and they accounted 40% of global growth in 2019, according to IMF, and we were trading at a huge growth multiple. But the big thing for me is when I looked at these analysts and I saw them talking about coronavirus like it was going to be V-shaped because they were comparing it to SARS. It’s not even in the ballpark of SARS. It wasn’t at the beginning, it’s not…

Frank Curzio: So it’s almost like I saw them leaning the wrong way a little bit, which means it’s probably going to accelerate to move down. So my question to you is during this time we’ve seen so many institutions come in, and especially over the first two weeks when this market started coming down, they’re all looking for pockets. You should buy here. You’re seeing a lot of institutional money flow into there, but yet these things really took a downturn. Now it seems like Goldman, it doesn’t seem like Goldman just changed their stance. JP Morgan says we’re going to have a global recession now. These are guys that all predicted a V-shaped recovery.

Frank Curzio: So my question to you is following the money works a lot. I’m not too sure if it worked now. How do you tell the difference? I mean is it just like, “Hey, all this money’s coming in?” Because I saw a lot of money from institutions come in and the market still fell. Could you determine that? I mean is it like the institutions are always right or usually right? I think you get what I’m trying to ask here.

Luke Downey: Yeah. There’s a bunch of questions here. The ultimate thing is big money can be different things that happen at different points in the market. So sometimes big money can be ETFs. Some points, it could be hedge funds. Some points, it could be quant funds. It could be a whole host of things. It doesn’t matter who’s moving what, what’s moving what, what ETF is doing to whatever basket of stocks. The point is, is a lot of these players are so big that they have to start piecemealing their order flow and then that sets off a whole bunch of different dominoes, which is a perfect analogy for what’s going on right now because it’s just a complete liquidity crunch. I mean there’s no liquidity.

Luke Downey: So if we could go back to, say, January, what we were seeing in the data was just absolutely incredible buying. In fact, we were out there saying that this is unsustainable buying because we can look back historically. We’ve got data going back to 1990. We’ve been in business just over six years. We were starting to paint the parallels of this looks exactly like prior times of say, January 2018, I believe, before we had the crypto. Everybody was just so bullish and the world just was going to be lollipops and balloons and everything like that, where we were telling everybody, “Listen, this is not at all sustainable buying.” Not only that, we started to see one of the best triggers that almost always tell us that a pullback is near.

Luke Downey: There’s two things. One is we have this thing called a big money index, which once it reaches above this level that gets into the red, it basically tells us historically you don’t want to be adding stocks up here because we have to pull back. Ultimately, the buying is so unsustainable that there’s no point. I mean it’s almost like it’s a 50-50, and we don’t like 50-50 bets. That’s not a good way to make money. That’s not a good way to manage risk. That’s not a good way to live your life in the finance world. But then something else started to happen is we started seeing this extreme buying in ETFs, what looked like extreme buying in ETFs.

Luke Downey: Every time, Frank, whenever you see this, almost always like clockwork we see just a huge shakeout that ends up happening. That was the setup going into January was, “Hey, hey, don’t be adding risks. This is great. Don’t expect these returns. This is unsustainable. There’s absolutely no selling.” Shorts were getting destroyed. I mean it was just insane. I’m a long guy. So I’m constantly long stocks, constantly reinvesting my dividends. This is what I love to do. This is the game that I play. But I wasn’t adding anything. I was like, “I’m not here to add risk. This doesn’t make any sense. I’m waiting for a pullback.” And then something started to change.

Luke Downey: Right at the end of January, we started seeing that big money index start to decline and decline for the whole month from January to February. That was a big piece of evidence that we were telling everybody, “Listen.” I live and die by this data. This is my newspaper every morning. Literally, I open it up, run the model. Let’s see what’s going on. Whenever that indicator is going lower, it’s saying that, “Hey, buying is slowing,” which is the first step that you need to pay attention to when we’re overbought. And then ultimately, selling starts to pick up. So then if we can kind of go back to where you’re talking about coronavirus. The interesting thing is I’ve been on Reddit reading.

Luke Downey: I knew this stuff was not good. Had I known that it was going to cause this global pandemic? No, didn’t know that. But some of the hedge funds that are our clients, I was having conversations with them. They were absolutely clueless. Never did that discussion ever come up in their thoughts, in their meetings, anything like that. So they basically looked at me as though I was crazy to even mention that that was a potential worry. When you talk about analysts, I think a lot of those guys, a lot of the smart money, they’re depending, they’re leaning on analysts to kind of give them clues. I kind of think everybody was behind the ball on this.

Luke Downey: So I don’t know if that answers your question. That’s kind of where we were. Now things have gotten a little crazier since then.

Frank Curzio: Yeah. I just wanted to see the thought process, guys. Even my audience listening out there where none of us have the answers. This is one of the things I wanted to bring up with you too because we all talk about different levels and even from an evaluation perspective, I mentioned earlier how sales side analysts, who I have tons of friends in that industry. They’re looking at past events historically to compare to and they’ll develop this kind of cashflow model to try to predict the future. But when it comes to technicals too, because I know that someone asked you on your blog. Guys, you can go to Luke’s blog on Mapsignals on his site. It’s fantastic.

Frank Curzio: But someone said, “What’s next for the market? When’s the selling going to be over?” You said, “Great question.” You said, “You look at prior times with huge selling grip in market similar to now.” You said you found 27 times when selling was eight times larger than the 50-day moving average. As for when to buy the average, bottom of the market happened 21 calendar days later, three weeks. So according to this data, three weeks from last Friday, we can expect the market to basically bottom out.

Luke Downey: Yep.

Frank Curzio: You provide an amazing chart. So I’ve seen this too. I’ve seen throughout CNBC and a lot of people going on at CNBC and Fox Business, looking at those technical levels. Does this stuff make sense in an environment that never ever happened before? We’re comparing this to other times and we’re saying, “Well, it’s not 2008.” I know you said that as well. But what I get worried here and, again, this is a question I don’t even know the answer to. But you’re looking at the markets. But do you follow things like this considering this is historic? We’ve never seen anything like this in history, so everything’s really different.

Frank Curzio: I mean a 30% market collapse this quickly and almost the entire United States going to be on lockdown just like China was. Do you throw this out the window or do you pay even more attention to it? I want to see from your point of view how do you look at this data in an event that isn’t like… It’s kind of like a 2008 type event where it’s like a Black Swan type of thing nobody ever saw before.

Luke Downey: That’s a great question. I mean ultimately it is a changing landscape. We have to start somewhere. We have to make some assumptions whenever the selloff started, the crash of 2020. Ultimately, we have to look back in the data to try and figure out have we ever seen anything similar to what we’re seeing? What the picture was at the time, was we’re overbought. Big money’s going into ETFs. All these signs that the weak hands are the last ones in, are the first ones out type of thing. So you have to sit there and say, “Okay, so where are we now? What’s starting to happen? What’s starting to make more questions come in?”

Luke Downey: Ultimately, a couple weeks ago things were different than where they are now. So even if we go back to that study that you’re referring to where they talk about 21 days, if I remember correctly, that probably puts us right around either this week or next week. I’d have to go look of when that actually was posted. But ultimately, it lines up with our big money index being oversold. So that’s probably going to happen later this week, which quite honestly means I’m going to be buying some stocks because that’s just something that I do personally, just historically it’s a great time. However, whenever you look at it and you say, “Okay, so what’s next? Could this last for a long time with all the news that is coming out?”

Luke Downey: I really try to separate the news from the data, and sometimes it’s really hard to do that. So I’m going to answer it in two ways. Number one, our subscribers rely on us to focus on data. If we start to pivot and we start to change and start to make different types of thought processes and all of that, I think they’re probably going to say, “That’s not what we come to you guys for.” However, I was on the front lines in 2008 and 2009. Leman was our client. Literally, we’d come in every single day and you’d pick up the phones. People were gone. Literally they were just out of business. We’re starting to see that now with conversations that I have with my friends, my colleagues, people that work with us.

Luke Downey: It’s bad. It’s really bad. Ultimately, I think this stuff is going to have to get worked out. I really do. I’m just a bullish person in nature. When it comes to finding levels, when it comes to finding discounted cashflow and all these types of things that are the classical way of valuing companies and markets and things of that nature, I think you really just have to have a two-pronged approach. You’ve got to look at the data and then you also got to say, “Okay, well, I’ve been doing this for over a decade now. Have I even seen anything that was similar to this?” The only thing that I can point to with this much of a liquidity crisis is going to be 2008 and 2009.

Luke Downey: So we start to weave that into the data. The data’s always going to be the most important thing, but try and tell a story and a narrative of why this might actually last longer. Because even if you go back and you look and you say, “Okay, there was 29 instances,” some of those instances were really long in terms of how bad the weakness was for the market, how long the selling persisted. So this one is probably going to be more of this, is going to follow more of that type of a narrative just because of how bad the liquidity issues are. So hopefully I answered that. I just kind of wanted to…

Frank Curzio: No, I hear you because we’re all walking through it. So it’s a good question. I don’t want to put you on the spot like there’s a right answer for it. But we’re all used to our methodologies and I’ve always said that you have to adapt. One of the biggest things that you could have is common sense. When I look at this event and see that it hasn’t compared to anything else, you have to kind of adjust here. You can’t just say, “Well, this happens all the time. Over the past 10 years, we saw this.” I think people get caught up in that. A lot of people came into the market pretty much way too early. That’s to be determined. Because we even saw, which you know, you covered the credit crisis where I saw just like we’re seeing today.

Frank Curzio: There’s more insider buys today than since the credit crisis. We saw the same thing in January, in late December and in January. So the credit crisis, let’s talk about 2008, 2009. So January 2009, a lot of people came into the market. It started going up a little bit and then it took another leg down of 30% to March lows and that’s when it came up. So in reality, January was still a great opportunity. It’s just you wish it could have… Everybody wished that they could buy at the absolute low and sell at the absolute high. So it may be a buying opportunity. But just to hear your thoughts about it and how thinking of what we have to look at, I mean we’re all there.

Frank Curzio: So there’s no right answers or anything. But I just wanted to pick your mind on that because I think we’re all learning here. But let’s get to the big money. I love the fact that even your background is stock derivatives. You were at Cantor Fitzgerald, head of ETF sales, which has to be huge because you’ve seen this market growing tremendously. Jefferies, you’re senior vice-president of derivatives. I know that’s how you came to basically form your own company for Mapsignals and co-founded it. But when it comes to ETFs, it seems like everything is correlated. I mean you look at Amazon. It’s probably in 500 different ETFs. It’s in ETFs that have nothing to do with retail. It’s crazy.

Frank Curzio: Some of them, it makes up 35%, 40%. How do you track the money? Is it simple? Do you just look at the ETFs in general or is it are you looking individually where it might filter down to 13Fs where you might want to see exactly who these institutions are, maybe if it’s Carl Icahn or a very, very, very large fund like Bridgewater, even though it’s all algorithms? But how do you determine the flowing into the ETFs? I see you put charts. Is it just here’s the gauges and we take it like a big point of view? Here’s the institutional money coming in? Or is it you also separate individually and say, “Well, Carl Icahn’s a smart guy and he’s coming in too, so maybe we should buy this?”

Luke Downey: Yeah. So it really has nothing to do with 13Fs or anything like that. It literally just has to do with how are the ETFs trading, literally the actual listed ETFs. So I mean if you’re tracking all of those, and there’s really only so many of them that are institutionally tradable. A lot of those are just a graveyard. They don’t trade. It might be 75% of all the listed ETFs just they don’t ever get any AUM. The three big houses basically dominate all the ETFs that trade.

Luke Downey: So what we are looking at is actually how those ETFs are trading. How is the volumes trading? Was it trading as the price is going up? Was it trading as the price is going down, et cetera? How are those moving in and out? Then we can also look and see what stocks are actually feeling that big money coming in or coming out because basically whenever you see all these ETFs trading in these big volumes and you can see the price dislocations and things of that nature, there’s going to be stocks that are going to be impacted. Because all these dealer desks, they’re taking the other side. They’ve got to trade the components.

Luke Downey: That’s really what we’re looking at is to ultimately say, “When do you see the same type of activity happening with hundreds and hundreds of ETFs?” That’s the critical point. That’s what we’re starting to see right now. Those are extreme, very, very, very, very rare. So to answer your question, it’s really just looking at the data of how that ETF is trading, how those stocks are trading on a given day. It has nothing to do with 13Fs or anything like that.

Frank Curzio: Okay. So before we get into the fun stuff of what you’re seeing today, I wanted to ask you this because I find this very interesting. When I hear the words, quant signals, patterns, I think short-term trading, maybe day trading. But that’s not your strategy. I mean you even mentioned earlier, “Hey, I have stocks that pay dividends and reinvest those dividends.” I mean you’re not saying, “Hey, these ETFs are good. It’s day trading.” You’re looking at a longer time horizon, say, six or 12 months or even longer, right?

Luke Downey: Yeah. That’s exactly right. When we first started building models and looking at how the market trades and all of that, you first start out as a day trader. You start to think about, “Okay, here’s the stocks that are moving.” Then you probably get into swing trading. You start to say, “Okay, maybe I can do a one to three-week trade.” Since we’ve been doing this so long, me and my business partner, we began to realize that it’s the same stocks that are the top-scoring names, the ones that continue to get all of this capital, all this big money. So names that we would all know would be like the Netflix of the world, the Apples of the world, the Googles of the world, which I own these stocks and I hold them.

Luke Downey: But that’s what’s really started to happen is as we’ve grown as a business is really isolating the few stocks that really determine almost all the gains for the market. A cool way to say it is we have this big money indicator that you can look at our charts for stocks. Basically these big green bars and what that references is just the top stock that we have in our data. We’ve written whitepapers on this stuff. If you just invested in those names and they just constantly, constantly recur and that’s the theme. They are these outliers. That’s ultimately what we’re trying to show our subscribers. That’s what we do. That’s the walk that I walk every day and the talk that I talk every day.

Luke Downey: So yeah. It is a long return. We’re trying to get people out of the day trading thought process, the swing trading, and really open their eyes to where the big money… I mean there’s fast money to be made and then there’s big money to be made. It’s a longer term hold of great, great, great companies.

Frank Curzio: So let’s get into it now. What are some of the things that you’re seeing in the marketplace based on your signals, your patterns, the quants that you’re looking at, and including the inflows or even outflows of ETFs? What are you seeing right now that looks attractive that maybe you’re telling your clients? Of course, I don’t want you to give anything away that people are paying for, but just even if you could generalize.

Luke Downey: Well, definitely as you look across the board, everything has been for sale. So if you look at any stock that’s been outperforming or doing relatively well, I think those are the stocks that you’ve got to be worrisome about in a liquidity environment like this. So you could look at a name, talk about like Home Depot or something. Yesterday I believe it was down 20%. I think all things being equal, it was hanging in there decently. But then there’s this big worry about any company that had debt. Maybe they’re not going to be able to pay their bills. I mean people are just thinking worst case scenario.

Luke Downey: So what we’re seeing is this theme of just money coming out of stocks in an extreme way, in an unprecedented way. Clearly that just means there is no liquidity. People are forced to just hit the bids. We’re seeing it in commodities, whether that’s expressed through a gold ETF, gold stocks. I mean you look at crypto, the whole space, you start to see bonds. All of these names, everything is so correlated. A lot of this stuff, all this money, a lot of it is in ETFs. There is just this search for liquidity that’s happening. That’s really the main message. So whenever we look at it, we try to step back and say, “Wow, this looks a little different than the pullback of last year or the pullback two years ago or three years ago, even five years ago.”

Luke Downey: The only thing that this really looks like is 2008, 2009. So what we’re telling our subscribers, and ultimately, they want to know what we have to say now. It’s so interesting because even in that bull market and you’re picking great stocks and people are making money or you think they’re making money because your picks are going up and all that, you don’t hear from anybody. Nobody cares. Nobody cares when your stocks are going up. But when everything starts to go down, when prices start to have these sharp drops, everybody starts to ask questions. So it’s actually a good time to come out.

Luke Downey: Really our whole process has been, “Remember in January we told you we were going to be preparing for a dip? Well, the dip has come.” We didn’t think the dip was going to be this big. I don’t think anybody was thinking anything like this. But we’re basically just telling people, “Find the great stocks.” They know which ones they are. It’s the ones that are constantly in our research. It’s the names that have low debt, phenomenal companies, make lots of money, big margins, probably not in the travel industry, probably not in airline stock, et cetera. And then pick your spots. I mean you can kind of name your price in these environments.

Luke Downey: So that’s really the message. That’s what I’m doing personally. I think a lot of people are weathering this relatively well, considering. If they have money, we have customers that reach out and they say, “Listen, I’ve been in cash for two months. What do I do? What do you want me to do?” Ultimately, we can’t give personal advice. But if you think about it, periods like this, this is going to be such an opportunity whenever you start to look multi-years from now. When you look back and our kids are in school, Frank, and they’re at the university and they’re like, “Oh wow. What went wrong in the crash of 2020?” I want to be able to say, “You know what? It was crazy. It was scary. But look at all these stocks we bought.” That’s been the message is don’t give up. Don’t give up. Hang in there.

Frank Curzio: Yeah. So let me get your opinion on this because right now we’re seeing where the government mandated almost everything closed in a lot of states. I’m in northern Florida. Our bars are still open. We’re okay. Again, other places, everything’s closed. I get it. We haven’t heard any infections close to here yet. I’m sure there will be. For me, looking at these markets and seeing everything is completely closed, the economic data and the numbers that are going to come out the next two months while everybody’s kind of on lockdown or being locked down eventually, it’s going to be absolutely horrible.

Frank Curzio: I mean there’s no positive catalyst here. I mean you’re not going to see a vaccine soon. We heard from the leading doctors. The Fed is already throwing tons of money backstopping a lot of markets. They’re probably going to bail out the airlines and different cruises, just different industries, maybe even energy, and help out there. I’ve argued that I don’t know how it could happen, but if the markets aren’t closed, if the markets remain open, the data that’s going to come out over the next two months is going to be disastrous. We saw China where 94% decline in passenger car sales, I mean numbers you’ve never seen on big economic indicators.

Frank Curzio: What are your thoughts on what they should do? Is it good to just keep the market open? There’s so many ripple effects. I mean you’d have to close commodity markets. If you leave some markets open, it’ll be crazy. It’s nuts. But I just think with having everybody at home, closing all the stores, not allowing people in restaurants, only through drive-thrus, everything’s going to be terrible at least over the next two months. Leaving the market open with really no positives, what’s that going to result? That could result in a lot of people with their 401Ks and retirement plans looking at this saying, “All right, I’m just out of the market where this thing can come down 10, 15%.”

Frank Curzio: Are you looking at that? Do you think it’s an option for them to close the market or not? I mean that’s a drastic measure. How are you positioning yourself?

Luke Downey: Well, I mean we get people that reach out all the time. Again, I probably have a pretty decent network of people that are in the finance world. I start to kind of look at all my friends and unfortunately that’s kind of the crowd that I hang out in. In the New York area here, that’s my network. A lot of people are saying or they’re worried that the markets could shut down. I don’t think that that’s going to happen. I mean ultimately, yes, restaurants are getting closed. People are getting quarantined. There’s a curfew at 10:00. You cannot be outside unless… I don’t even know what the requirements are for you to be outside.

Luke Downey: But yeah, the data’s going to be bad. It’s going to be horrendous. Ultimately, that’s what’s happening to the markets. Everything’s broken. Everyone knows what’s going to happen, that it’s going to be really bad data, really bad numbers. The market already reflects that. It’s really hard to find anything positive. I look around and I’m like, “Man.” The only thing that I saw was Tom Hanks was sent home from the hospital.

Frank Curzio: That’s positive.

Luke Downey: That got me excited this morning. If Tom Hanks, he did well with that, he did well with Castaway. You think about all the stuff he’s been through and now he’s out of the hospital. I’m being silly. But ultimately, my position is when I’m talking to my wife, when I’m talking to… I’m even talking to my kids. They’re five almost and three. I’m pulling up stock charts and I’m showing, “Listen, you see this? This is opportunity.” They probably think I’m crazy and have no idea. But ultimately, just telling people, “Hunker down. It’s probably going to be a rough couple of weeks, probably a rough couple of months.”

Luke Downey: I don’t expect that the markets are going to close. I mean that is a source of liquidity. But again, all bets are off in this type of an environment. Anything is possible. I do have to believe at some point, central banks, the Fed, Treasury, you name it, there is going to be a wide, wide stimulus package. I mean this is just me. I have no idea. No one’s telling me this. I mean they are the last resort. It’s always been the case. So that’s what I’m fully expecting in the days or weeks to come, something that is going to be big, unexpected, and ultimately is going to be more than enough for what the market needs. I mean that’s really it.

Luke Downey: The wage worker, where are they going to get their money? How are they going to pay their bills? How are they going to receive income? And then the small business, I’ve got so many friends that have small businesses. What if people cancel this? What if they don’t come? What if they do this? Then they have to make hard decisions. I really feel like the administration, while they are getting a lot of heat and a lot of negative press, I got to feel like they are on top of this stuff a little bit better than 2008, 2009. That’s just from my perspective. It seemed like they really weren’t aware of how bad it was back then, whereas now what’s starting to affect Ms. Mary in Idaho, Johnny in Alabama, I really think that they have to be putting something together that is going to ultimately unlock some stimulus.

Frank Curzio: Yeah. I hear you too, even with small businesses. People don’t realize too, they’re looking at it from a US problem. But I mean we could take it on a bigger scale, like Apple. You look at its supply chains where tens of millions of iPhones and they shut down China. So you’re like, “Okay, let’s try to model for what it’s going to be.” Now it comes to the US and they’re shutting down all stores across the US or everything outside of China. So this isn’t like a two-month problem for Apple. This is a four to five-month problem for Apple now. A lot of companies, especially if they have leverage in China, I think it’s not like, “Well, two months from now it’s going to be great.”

Frank Curzio: They have to realize it’s not two months that a lot of companies have been affected, especially if they have the supply chains in China. It’s long. It’s much longer than that. I think we’re all hoping that this goes back a lot quicker than… Again, we’re going to see infections rise tremendously in the US as more and more tests get taken and finally available. But yeah, it’s just pretty crazy times. I want to finish with this because my audience always loves individual stock ideas. I don’t know if you want to throw out any of them. You can talk about different sectors and everything, things you would avoid. Leverage and consumer staples are doing okay right now.

Frank Curzio: But is there any individual names that you saw? I know you mentioned it broadly and said there’s so many great names trading at levels that if you buy them, two, three years from now you’ll be fine. You want to share some of those thoughts? If you can’t, I totally understand. I always try to get picks out of my guests though.

Luke Downey: Yeah, definitely. No, I’ll tell you exactly names that I’m looking at. Again, these make sense for me. This makes sense for what I think is ultimately going to be maybe not a V-shaped recovery, but maybe it’s going to be a U-shaped recovery. I really think that if you have some cash on the sidelines and you’re brave, you’re courageous, you planned a little bit, all that, a company like Microsoft, I really have to believe… I’m a longtime holder of Microsoft. I’ve got shares way, way lower priced than where they are now. That’s something that I’d be interested in.

Luke Downey: If somebody were to come in and say, “Hey, what’s a great stock?” I think they’re going to be fine. I think a company like Home Depot, phenomenal company, own that one as well. I think they’re going to be able to weather the storm. Does that mean we’re at lows? No. But it does mean that these are the types of companies that I think are going to do well. These are names that I’m adding to on pullbacks. I think another one is Visa. It’s another name that I’ve owned for a long time, great cashflows. I think that’s the type of company that you want to bet on.

Luke Downey: Ultimately, I’ve always told myself, Frank, I’ve been preparing the past couple years. I was like, “Whenever the crisis comes, I’ve got to be ready. I’ve got to pick my spots and just deploy as the prices go lower and lower and lower.” Because I wasn’t able to do that in ’08 and not ’09. I didn’t have enough money. I was freaked out. I was young. But now whenever you get the opportunity, and I don’t want to minimize what’s going on and death and people getting hurt and all that type of stuff. But it’s very easy to sit there and watch the screens all day and get nothing done and the day just goes by. If you’re really trying to find great places and you’re really looking at great stocks, great companies, I think right now is going to be a phenomenal opportunity one, two, three years from now.

Frank Curzio: That’s perfect. Luke, thanks for sharing those ideas. Thanks for coming on. I mean it is a different environment. It is crazy, where most people are at home and doing interviews and everything, which is not the easiest thing. I understand. So I appreciate you coming on. Let’s end with this. If someone wants to find more information about you, about Mapsignals, how could they do that?

Luke Downey: Yeah. Go to Mapsignals.com. You could sign up for our free blog posts if you want to see some really cool, interesting data and insights that you won’t find anywhere else. That’s it.

Frank Curzio: All right. Perfect. So we’ll leave there, Luke. Thank you again. Thanks so much for joining me. Crazy, crazy times, and some great advice there. I really appreciate you coming on, buddy.

Luke Downey: Cool. Thanks, Frank. Bye.

Frank Curzio: Great stuff from Luke. Great guy. I have to tell you, usually when I do interviews, they go perfectly fine. We never have to edit. We had to edit a little bit. It’s the sign of the times. Because he’s working from home and he’s got two young ones. I think he’s got a five-year-old and three-year-old that he mentioned, that ran in really quick and said, “Daddy, Dad.” He’s like, “Hold on one second.” Get used to that. Get used to that. He apologized. I said, “No reason to apologize.” I mean I saw on Tuesday, Carl Anthony was interviewing an economist through Skype and it froze.

Frank Curzio: He’s like, “Oh sorry.” Then we’re back again and then it froze again. Carl said, “These are the signs of the times.” I mean everyone’s doing interviews from home now. They’re doing them through Skype. They’re doing different services, but they’re all home, working from home. So get used to this environment. It’s pretty crazy. But I love his take on the markets. It’s trader and quant, but he does, he focuses on six, 12 months, and even longer. I really like his style of investing. So let me know what you thought. I mean this podcast is about you, not about me. I want to start bringing on people, just give you different opinions on what to do, again, really smart people like Luke.

Frank Curzio: But again, it’s not about me, it’s about you. Let me know what you thought of that interview at frank@curzioresearch.com. That’s frank@curzioresearch.com. Now, let’s get some educational segment. We’re looking at the airlines who are basically saying, not basically, they’re saying that they could lose over $100 billion in sales this year if the virus continues to spread for another four, five months. They’re asking for assistance from the government in the tune of 50 billion. I think they’re going to have to get it. I mean these are companies that weren’t highly leveraged. These are companies that have generated a huge amount of cashflow and trading cheap.

Frank Curzio: But if you shut down operations for three, four months, I mean it’s going to hurt. You look at small businesses. You think they’re going to hurt. I think if a large business, like the Deltas and even the GEs and things like that, you shut down their business, the Fords, I mean look what happens. Now small businesses, it’s even worse. But I’m not sure if anyone’s really paying attention to this because when I’m looking at sales side firms, like they always do, again, I’m not picking on them. They try to look at history as a comparison to model for the future and their comparison to the airline industry is September 11th. I mean look, traumatic event, and I get it. I understand.

Frank Curzio: I mean I lived in New York when it happened. I understand. But the airline industry recovered like one week later. One week later it started recovering and then it got better and better. This is totally different. This is easily a three-month problem, probably longer, four, five months, and it could be even longer than that because it’s not like they’re going to announce and say, “Okay, it’s okay to fly.” I mean old people are still going to take those precautions. They might not fly. You think anyone’s going to get on a cruise right away once all the bans are lifted and everything? The coast is clear and, all right, no more coronavirus. People are still going to be skeptical.

Frank Curzio: They’re not going to travel as much. So this could be like a year, year and a half problem, much, much different. And then modeling for it, they can come back. These airlines know. They’re like, “Look, we need help here.” I get it. These aren’t companies that leverage themselves into a crate. No, they were doing the right job. But if you shut down an industry for four, five months, and again, you’re going to shut it down but it could have a longer impact. They are going to need help. They are. I mean we need the airlines. So the airlines announced that they’re tapping their credit revolvers. I want you to pay attention to that term, guys, because credit revolver is basically a loan that can be used any time.

Frank Curzio: So at Curzio Research, maybe we have a $5 million credit revolver and I’m just going to leave it there. Maybe we’re spending part of the money on advertising and we’re going to generate money, whatever it is. I may say, “Okay, here’s a million dollars to pay my employees.” You pay it back as soon as possible. Why? Because the interest rates on these are extremely high. They’re there for safety reasons. A lot of companies are starting to tap this, tap their full credit revolver. So Extended Stay America, the airlines, Southwest Air, draws down full revolving credit facility, Caesars, the casinos, energy companies, Dominion Energy, Norwegian Cruise, Micron actually said they’re going into… I’m very surprised that a technology company would say that.

Frank Curzio: Balance sheets are supposed to be much, much stronger. But it just goes to show you how important that is. Because a lot of these companies are operating as, “Hey, we’re going to get paid in 30 days or 40 days or two months or whatever.” Once that stops, they’re not getting paid. That’s a big problem. So now they’re cutting into these credit revolvers. If you see a company mention it, be very, very careful. Because not only are the interest rates very high on that, but a lot of these companies are going to get downgrades, just like Boeing did, and especially ones that are mentioning credit revolver. When they do, those interest rates are going to go high. Those rates are going to go higher, which is very dangerous.

Frank Curzio: So for now, if you see, the reason why I’m asking is because I’ve seen at least 30 companies, big name companies, talk about their credit revolvers. If you see it, be very, very careful. Boeing was talking about it when the stock was at 220. Then it came down to 160. Again, I think it was bottom, but it came down even further. You had a downgrade from S&P to say those cashflows aren’t going to be… S&P downgraded Boeing because of cashflows and said they’re not going to be as strong as expected. That’s every single company. That’s every single company right there. So you got to expect a lot of these companies are going to get downgraded.

Frank Curzio: So buying leveraged right now is absolutely crazy. It’s absolutely crazy. These leveraged companies, those huge debt loads are… You’re not generating tons of money. Maybe if you’re an AT&T, fine, you have checks coming in. They’re going to have risk to advertising. I get it. But at least you have that cashflow continuing to come in because people are paying their bills automatically. For a lot of companies, you don’t have that. I mean Boeing, I went to the Boeing facility. They have well over 100 suppliers. We made money in CVO by betting suppliers during that big boom in the industry where so many plane orders are coming in and the MAX out.

Frank Curzio: Since there was part makers that were much better buys than buying the underlying stock in Boeing and they took off. We took profits in them. We did good. But think about all those suppliers who are going to be impacted. It’s crazy. But you have to be really, really careful. For this segment I wanted to show you how to make money, how we’re making money, just being patient. Avoid companies that say credit revolver. But one of the best things that we have here at Curzio Research is Moneyflow Trader. Moneyflow Trader, I launched this about two years ago for times like these, not that I knew the coronavirus. It didn’t even exist.

Frank Curzio: However, the market was up for nine straight years, the longest bull market ever. I knew stocks were eventually going to come down. I said, “How do we benefit as a company, as a corporate? How do we create a newsletter that’s going to work?” We created Moneyflow Trader. The markets went higher and we actually made a change there to a new editor. So, this is a product that we have, Moneyflow Trader, that focuses on conservative option strategy to bet against stocks. It’s not that you’re going short where you have unlimited risk. You’re only going to lose as much money as you put up for each trade. But we have a person named Genia Turanova on this product.

Frank Curzio: I interviewed her probably about two, three months ago. I love her. She’s one of the best analysts that I’ve worked with. That’s saying a lot since I’ve been in this industry for 25 years and you know how many people I’ve interviewed on this podcast over the last 12 years. Just brilliant, somebody that I follow. But she is absolutely killing it in this market. Again, it was even before the market fell. But she’s an options specialist. She’s very smart when it comes to options. She’s also very smart when it comes to income. We’re going to launch another newsletter for an income and it’s going to be a low-priced newsletter. It’s going to be a front-end newsletter so everyone could buy.

Frank Curzio: I really believe that income stocks are going to be the next growth stocks, since yield is zero all over the place and trillions of dollars need to find some kind of yield. But if you’re looking at a way to make money, I mean this product is it. I mean she closed out of a Starbucks position. She made 177% on the first leg of her position and 450% on the next leg of her position. Teva, 140% gains. Bed Bath & Beyond, just sold for 150% gain. She puts on the semiconductor index up 140% in just a few weeks. Shake Shack, 70% she’s up in just a few days. These are monster returns.

Frank Curzio: There are the things that I’m doing. These are the people I’m following. This is why I created this newsletter. If you’re interested in it, please let me know, frank@curzioresearch.com. If you’re not, it’s fine. But every question that I’m getting, hundreds and hundreds and hundreds, “Thanks so much. We’re on the sideline. How can we make money now? When are we coming back?” This is the way you make money now. You got to be a little patient going along here. But we’re going to see the markets eventually come back, but pockets, like energy, advertising. I mean these are things that aren’t going to bounce back right away.

Frank Curzio: There’s going to be so many ways to make money on the downside with some of these companies, especially over the next year or two, that to see what she’s doing in this newsletter is unbelievable. What I love about Genia is she’s not a person that’s going to tell you, “I told you so.” You’re not going to see her on Twitter saying, “Look at what I did.” She’s not like that. She’s just a humble person. She’s brilliant. That’s why I have to come out and say, “Listen, guys, she knows what she’s doing here. It’s a great product.” People have been making a fortune, especially over the past month and a half and even before that when she took all the product around six months ago.

Frank Curzio: Again, we’re building up a franchise around her. She’s that good. But Moneyflow Trader, guys, that is the product I created for this type of environment when how do you make money at stocks and individual names and sectors sell off? How are you able to hedge yourself? This is it. It’s doing fantastic now. It’s going to continue to do good going forward because there’s going to be so much uncertainty. Again, working with Genia, talking to her, listening to her, I mean she was ahead of this as well. She was ahead of this as well. Just honor to have her on the staff. Again, guys, want to check out Moneyflow Trader, let me know. Just email me at frankcurzioresearch.com.

Frank Curzio: But again, the gains in this newsletter have been incredible. I just want to commend her. Great hire. Glad we made the change on that newsletter. I’m very happy for subscribers who still own Moneyflow Trader. Doing very, very well. So guys, a lot of stuff going on. I told you the credit revolver is one to avoid and Moneyflow Trader is a way to play this. We had a great, great interview on today, just giving you a little different perspective of what he likes, just some trading, following institutional money, a lot going on here. Notice the questions I’d asked Luke, I feel the same way. We’re like, “Well, this is what we’re doing but we have to be able to adapt.” You have to be willing to adapt.

Frank Curzio: You have to be willing to change your mind in a day if the situation changes, and the situation is going to change. If I see more downgrades of Boeing, I’m not going to be buying it anymore. You have to be willing to change because there’s going to be a lot. This is brand-new and we’re going to throw everything at it. Unfortunately, it’s going to be reactionary and not pro-action. But we’re going to respond after the fact, things happen, because we don’t know. All we know is these test cases. More and more people are going to get affected. It’s going to explode higher and tail off.

Frank Curzio: What we’re hoping for is this is a two to three-month problem and not a five-month problem. If you notice, on Monday when the market was down 7%, when the president started speaking at 3:30 he said, “This could go on till August.” The market tanked. That’s when the market tanked, completely tanked, because no one’s modeling for August. June, July, maybe, but most people, even in May, thinking this problem’s going to end and then we’re going to see cases subside and get better. But we don’t know. We don’t know. So just be very, very careful in the market. Keep listening to the podcast.

Frank Curzio: Again, I’ll let you guys know when it’s a good time to go long. But if you want to buy right now, you’re looking for a way to make money as this market’s pretty crazy, Moneyflow Trader is the answer. A lot of stuff going on. You want to learn more about the coronavirus, just go to our website, curzioresearch.com. If you’re not a subscriber, we have reports on there for free just to show you what we’re doing to try to get you prepared. We’ve been putting out a lot of free stuff and really good details and the actual stock picks or stocks that we’re looking to buy, I mean a screen of over 100 names that I’m just going to put out today for Curzio Research Advisory.

Frank Curzio: I’m going to do the same for Curzio Venture Opportunities next week. These are what my subscribers are getting. It’s preparing. We’ve been ahead of this so far. We’re trying to stay ahead of it. What we’re going to do, if you want to learn more, again, just you could email us. Go to our website or subscribe to one of our products. Again, you could do that through curzioresearch.com. Also, all the videos I do, I’ve been doing a lot of videos, which is cool. We’ve been getting a huge following on YouTube because of the live videos I do from my phone every day. Just we’re uploading to YouTube. You’ll see some of them in Twitter. But if you want to get just a good perspective, I’m trying to do them every day when the market’s open.

Frank Curzio: I’m not doing them on weekends. But you could see those daily live videos on our Curzio Research YouTube page. So be sure to subscribe. You’ll be able to get it sent to you directly. If you want to follow me day by day, guys, just to go Twitter @FrankCurzio. I’m posting a lot on Twitter as well. So that’s it for me. Thanks so much for listening. A little bit long of a podcast today. But as always, I really appreciate all your support. I try to do as much as I can to help you guys and I’m going to continue to do that going forward. So I’ll see you guys in seven days. Take care.

Announcer: The information presented on Wall Street Unplugged is the opinion of its host and guests. You should not base your investment decisions solely on this broadcast. Remember, it’s your money and your responsibility. Wall Street Unplugged, produced by the Choose Yourself Podcast Network, the leader in podcasts produced to help you choose yourself.

P.S. Like me, Luke believes this market crash could lead to a huge buying opportunity. Find out when Luke expects this opportunity to hit right here: When this rare stock market signal turns green, I’m buying big

Frank Curzio
Frank Curzio, founder and CEO of Curzio Research, is one of America’s most respected stock experts. His research is regularly featured on media outlets like CNBC’s Kudlow Report, The Call, CNN Radio, ABC News, and Fox Business News. His weekly Wall Street Unplugged podcast—ranked the No. 1 “most listened-to” financial podcast on iTunes—has been downloaded over 8 million times.

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