Today, I welcome first-time guest Anthony Scaramucci (“The Mooch”), former White House director of communications and founder of SkyBridge Capital.
The Mooch gives his thoughts on whether Congress’ historic $2 trillion stimulus package is enough… what he’s hearing from his wide-ranging contacts about market volatility and the global lockdown… and how long he thinks the economic pain will last [35:40].
I also ask him whether President Trump should be doing anything else at the federal level…
In my educational segment, I explain why this market still scares the hell out of me…. the recent Fed actions… and how to position yourself today for the next big market opportunity [1:02:08].
- Guest: Anthony Scaramucci, former White House Director of Communications and founder of SkyBridge Capital [35:40]
- Education: How to position yourself today for the next big market opportunity [01:02:08]
Wall Street Unplugged | 714
Former White House insider breaks down the $2 trillion coronavirus stimulus
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: How’s it going out there. It’s March 25th. 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. No, the answer to your question is no. You should not rush in to buy stocks here. Not yet. That’s the question I’m getting like crazy. Is it time? Should we get back in? I’m going to be honest with you. Most people have been credited for making bold calls, whether it’s a top or bottom.
Frank Curzio: But they usually not right both on the bottom and the top. So I’m putting that in perspective and letting you guys know that up front, because were very, very well ahead of this in early February, saying that the markets would fall and then just continue to, as the virus spreads saying much more risk ahead. But picking a bottom is not going to be easy. People are looking for the exact date, but be very careful here.
Frank Curzio: Be very careful. I have to admit, I love the rally in stocks on Tuesday. The market surged 11%. Whatever throw whatever set you a biggest point increase, I believe in history. The top 10 largest gains on the market all came. If you date it back to the depression, they all came during bear market times. Which kind of makes sense when you think about it. Just putting things in perspective. Now we saw this surge, why?
Frank Curzio: Well Fed came out with massive stimulus plan, which basically included backstopping everything and anything. Employees, small business, whatever it takes. They actually said that, whatever it takes. Unlimited. Pretty crazy when you think about it. But the biggest calcite thought from that initiative was for the government to purchase investment grade bonds and even bond ETFs, which basically means the government is printing money and investing it in our companies.
Frank Curzio: That’s what that means. They didn’t say that. They avoided saying that. Nobody’s looking at it that way, but that’s really what it is. We got our politicians finally pass a plan. Good for them. Amazing. They got together to do this, always got to be a pain in the ass for these guys. But it’s a $2 trillion plan. This plan, I believe with that 11% move, they’re mostly priced into the market. I’m doing this around noon on Wednesday.
Frank Curzio: Doing the podcast, doing videos for our newsletters. Just say more timely, because think about if I tape some of this stuff on Monday. I mean the market moves in 1,000, 2,000 point increments lately on a daily basis. So you’re going to get this today a little bit later. But it’s 12 o’clock, the market’s been flirting back. It’s actually up now, two percent the Dow, but it was up, I think three percent or four percent and then came down one percent and now it’s up again.
Frank Curzio: So I think a lot of this is really priced in. The rally is, I’m talking about the $2 trillion plan. Because we knew it was going to happen it was just a matter of time. So the rally was nice. I mean, we needed it from a sentiment standpoint because people just looking at their TVs and it’s just crashing and crashing and crashing and crashing. We need it from a financial standpoint, because there’s a ton of investors who did not sell, they were down 35% before this rally.
Frank Curzio: Now the market’s down around 25%. So it was needed. What that said, guys, okay. You want to put things in perspective. I’m trying to stay ahead, as we all, well ahead of this and I can give you my thoughts here. Because when we look at a rally like this, every sentiment indicator, every, every sentiment indicator. These are technical indicators. I told you forget technical indicators because most of these showed the most oversold conditions like ever.
Frank Curzio: 100 years, 50 years, 30 years ever. They showed oversold conditions when it was down 15%, 25%, 25%. That’s why I said you have to know these things. But we were due for something like this, a massive snapback. I mean even if you’re short, you have to cover your positions, which is buying. We’re due for a pretty big rally. Now, what I did not like about the rally.
Frank Curzio: The safest sectors, consumer staples, healthcare, they underperformed, while high leverage industries saw individual names increase by 30 to 40%. I guess that makes sense. Have you think everything’s going to be okay and these are the stocks that were down the most. But you looking at cruises, airlines, retailers, I mean L brands up 40% in a day, on that Tuesday.
Frank Curzio: Autos, GM popped 25%. Norwegian Cruise Lines surged 40%. MGM Casino popped 30%. Remember every company that I just mentioned that popped are closed and going to be closed for another four to six weeks. How are they going to pay their employees? I don’t know. The government says don’t lay off anybody. Okay. You try to running a business and you’re generating no revenue for a month and you still have to pay your employees.
Frank Curzio: Let me know how that turns out. Let me know what the government’s doing for you and have they paid you that money already? Absolutely not. They’re still going through the paperwork. Even though we’re closed, were shut down. So when I see a move like this, it was a risk on trade. What that means is, a lot of this is computers, algorithms, and just pushing this thing all over the place.
Frank Curzio: But it’s kind of saying that everything’s going to be fine the second half of the year. Not just the second half of this year. Even Ben Bernanke came on TV today and was like, hey this isn’t the great depression. No kidding. We know that and we’re going to be fine. This is going to snap back. Guys, I’m not there. I mean I’m just not there. So if we put this 11% increase in perspective and that’s what we need to do.
Frank Curzio: It’s basically just a rebound of the past two trading days where the markets fell 10% on Friday and Monday. So we’re looking at that those three days, were a wash. Also, if you look at this rally, despite an 11% massive increase, one of the biggest increases, since the depression. Largest point gain ever, whatever. Whatever headline floats your boat, feel free to use. That’s what they do in the media.
Frank Curzio: Despite that rally, this month, March, it’s still going to be the worst in terms of performance since 1987. Again, that’s after this rally. Now before you go out and buy everything aggressively and think, wow, here’s the bottom, these stocks are going to surge higher, here is some things that worry me. Again, this is from someone that’s been really ahead of this and trying to stay ahead of this. A lot of things are being reported.
Frank Curzio: We’re reporting weeks ago, weeks ago. So one of the things is the stories I’m hearing from everyday folks. Keep emailing email@example.com this is so important guys. Let me know what you hear, what your business is. Let me know what you’re hearing in your neighborhoods. Are people out? What stores are closed? Over here, One of the stores that have closed is Starbucks.
Frank Curzio: Most Starbucks, their drive-thru’s are open. That was surprising to me. But the stories I’m hearing is from oil workers. Hundreds of people writing in saying, they getting laid off. Restaurants. I mean the seven million workers are about to lose their jobs. I mean, think about if you’re a restaurant owner, how much money you have to put up front to just run operations and get all your food and make sure it’s all fresh all the time. All this stuff.
Frank Curzio: A lot of these companies may have a little leverage, may have some loans. But you just shut down revenue and no one’s coming in for just a week. That’s how long really the lockdowns been. What, like a week and a half, two weeks really. If you’re in New York City? Seven million workers expected to lose their jobs. How’s the government going to save them? I don’t know. I don’t what the plan is.
Frank Curzio: I have one friend who is retired, he owns his own security firm. He said you know what, the company, they didn’t pay him yet. He said, what’s going on? He’s laying us off or whatever. They said, no, no, no, we’ll pay you. This is an industry leader. It’s a large company in the space. Not talking about, it’s not like a Microsoft though, but it’s just an industry leader in the space. It’s a reputable name that every one of you heard of.
Frank Curzio: I just don’t want to bring it up. So he owns his own security firm and they pay him and he hires employees to do the security. It’s two different places. One is in New York and another one’s in, I believe in Los Angeles or California somewhere. So he’s told me, he’s like, “I got to go to the bank, try to take out a loan, or I can’t pay my employees because I’m not getting paid by my company.”
Frank Curzio: He said, “It’s up to a $100,000 right now that they owe him.” So companies just not paying him and didn’t really tell him. Again, these are legit companies. This is a small business trying to work around a few things. Very surprised. But when I look at this and the stories that are coming in right now, I mean you haven’t seen nothing yet. I mean from the unemployment, afraid it’s going to get a lot worse from the growth fry.
Frank Curzio: We saw shutdowns last for how long in China? Around 10 weeks. They’re going to say, well it was like four or five. It was 10 weeks. It was 10 weeks. From the start, believe me, I covered this from the start when they started saying, okay, we’re going to close certain businesses down and it’s about 10 weeks in total before you opened up. By the way, China, even guy came out and said, our stores are open. It’s not the point.
Frank Curzio: I mean that’s a start. But you’re seeing a lot of this capacity, I mean completely shut off. It’s still down tremendously. There’s not a lot of people shopping right now or going to stores right now. It’s going to take a long time. Long time to get back to normal. But what are we? Week two maybe? I mean, you look at Goldman Sachs, expect GDP now. They thought GDP, it was going to be a snapback. I think they had it for second quarter, minus one or two percent when I started doing my research.
Frank Curzio: When the coronavirus started hitting maybe in the third week of February, minus two then a quick V shape recovery basket. But now Goldman Sachs expects Q2 GDP to fall by 25%. That’s unheard of guys. That’s unheard of. Morgan Stanley says it’s going to be like 30%. You know what? Fed President Bullard says GDP is going to fall in Q2 by 50% and unemployment will hit 30%. Ben Bernanke is saying, we’re not in a depression.
Frank Curzio: You’re right, I get it. But these are depressionary numbers. I have to tell you, if Bullard’s right, we are no way factoring GDP is going to have 50% decline? Unemployment 30%? I love it. Companies say, yeah, we’re going to pay our employees, we’re America, it’s the right thing to do. How could that be sustained? We are not generating revenue. I know it’s a nice thing to say. It’s cool and I know the government’s behind you saying, hey, just don’t lay off your employees. We’ll protect you.
Frank Curzio: But still, how are you doing that? Looking at Marriott. You’re looking at Hilton. You’re looking at the airlines. You look at Airbnb. You look at all these travel industries, the airlines they’re running out of money. They’re running out of money. How are they going to pay their employees? They can’t even tap credit lines. Are almost through them. There’s no business. There’s nothing coming in. It’s shut off. The government says it’s going to help. What’s the process? Nobody knows it yet. Oh, great.
Frank Curzio: Unlimited. Whatever. We’re going to be here. Whatever it takes. Well, tell me what does it take? What do we do? How do these companies pay their employees? How are they going to get reimbursed by the government? What’s going on? Because companies are running out of money. I have to tell you, most are rushing into cash right now too. Not looking to hire anybody. Not looking to acquire anybody. They’re looking to preserve their capital.
Frank Curzio: Just in case the whole entire world on television is wrong, saying this is going to be a snapback. It’s a V shape, now it’s a U shape. What if it’s not? You have to ask yourself that question. What if it’s not? It’s a logical question. So I know you’re assuming, well Frank, the market is still down 25% is this factored in? I really don’t know. I hope it is. I don’t see it. For when I see every CEO going on TV. Every major CEO’s gone on TV.
Frank Curzio: We’re going to get a snapback. This is America. Second half of the year is going to be great. How do you know that? You don’t even know what earnings are going to be. You’re not even reporting your numbers. You pull guidance. You’re not even giving us a maybe this could happen or this is what’s going to happen. How much we’re going generate? Nothing. It’s crazy. Well, I love that Nike. Nike’s up. Say, wow China’s shops are back up. Well, every other one of your shops are closed and no one’s really shopping that much in China.
Frank Curzio: And that was your biggest growth engine. People was shopping more than ever at your stores. That was their growth engine. That’s turned off. That’s going to be negative for a long time. I know that stock got hammered. But is it all priced in? I don’t know. It would be nice to see numbers. We don’t have them. There’s still uncertainty. It just scares the hell out of me. Company has no clue what they’re going to earn this year.
Frank Curzio: They can’t even give us a ballpark figure. But so many people on TV are optimistic saying that we’re cheap right now. Cheap based on what? Show me your research. What are you expecting earnings to be? Because I have to tell you, when I look at a sell side, they’re like hiding under there fucking desks right now. You look at Apple, 27 analysts had buy ratings on it. All of them still have their buy rating on it. Even though the stock crashed.
Frank Curzio: You’re looking at earnings estimates. They barely lowered their earnings estimates for 2021. Expecting a full recovery. Everything back to normal. Everyone’s going to jump on planes again. I mean, come on. There’s a lot of risk out there. But these guys have their models and what they’re updating for. You’re left scrambling when your job is to model, which means I’m looking at numbers that the company is forecasting and giving me and coming up with a price target and a rating. It’s hard to do your job when companies like, we don’t have any idea what we’re doing this year.
Frank Curzio: We don’t even know when we’re going to open. But how don’t you downgrade the stock to neutral and say, wait on the sidelines? You still have buy ratings on these companies? Are you crazy? This is what you earned those massive, massive fees for? It’s how to not update your people and say, hey, things are going to be okay or not going to be good, or what? Don’t even updating, I know, I have access to all this stuff. They were reporting, they try to get ahead of it. They’re still so far behind.
Frank Curzio: I mean, I bet you if you took a look, usually I think, don’t quote me on this, but I think it’s about 15%, it mandated this. That 15% of the stocks covered in your universe and you have sell ratings or something like that? Even if Goldman or Morgan Stanley covers an entire industry, they can’t have a buy rating on every single stock in the industry. They have to put a couple sales in there.
Frank Curzio: But even with this massive fallout, I’m curious to see how many downgrades or how many companies are sales or even neutrals. I bet you it’s hardly changed. Got to say 80% of the companies had buy ratings. Maybe 70% of the companies had buy ratings, I bet you it’s 65% now through this whole downturn. They’re hoping, they’re praying. I know people, I have friends in these industries who manage these funds and brokerage accounts and things like that.
Frank Curzio: They’re just telling their clients, hold on, we’ll be okay. Hold on. That scares me. They’re not even that nervous. It’ll come back. Remember the credit crisis. Don’t worry. Another thing that scares me, we’re definitely not factoring the possibility of a secondary outbreak. Wuhan, no longer on lock down where the virus originated. Don’t call it a Chinese war on virus.
Frank Curzio: I don’t know why. Whatever. Things to talk about that are fun. That annoyed people, which doesn’t matter. It was originated in China. Yeah. We closed our borders in late January and China got really pissed off at us and said, why are you doing that? Even though they knew they had an outbreak, so they basically wanted it to spread everywhere. That’s what China wanted to do. They silenced everybody, the whistleblowers. Unbelievable.
Frank Curzio: That’s where I am. That’s a whole other problem when this thing ends, guys. Whole other problem. Not going to go over another major problem that nobody’s talking about. But the secondary outbreak, everyone going back to work at Wuhan. Not everybody, but it’s opened up now. No more lockdown. What happens if somebody gets infected and all of a sudden they infect 20, 40, 60 people? We’ll never know because China will never tell us that. But when we start opening up, what’s going to happen?
Frank Curzio: You got to run to Disney parks, the cruises, book vacations. I look to the NBA gets the approval to, hey these guys got to go back to work and maybe we see the play off for the NBA. What happens, one player gets tested positive for the coronavirus after the lockup? We have several players that have tested, that tested positive. Not even giving out the names of the NBA players anymore. But how’s that going to impact you? You got to shut down the league again?
Frank Curzio: I mean we’ve seen players like Michael Jordan play with the flu and then win a championship games, the play off, some great game. We’ve seen that before, but now you’ve got to shut down the whole league and quarantine everybody again? Is that what’s going… I don’t know. You tell me what’s going to happen. Are you going to go to see an NBA game where maybe a fan’s infected and it gets out that that’s where it’s originated from?
Frank Curzio: I mean you’re right sitting on top of everybody. It’s not like you could avoid anybody. The person in the seat next to you, I mean unless you know them or not, but you’re on top of each other at a game. People sharing the same cup holder sometimes. Might be drinking someone else’s soda by accident, whatever. I mean are you going to go there? I don’t know.
Frank Curzio: But a secondary outbreak, I mean that is nowhere near priced in, and again, these are things I’m hoping don’t happen. But they can and this isn’t looking at the probability, looking at odds saying, no way this is going to happen. I mean I’m not throwing things at you that are like the market is going to remain terrible for two years and all this stuff’s going to come out and the whole world’s going to get affected. I’m not throwing crazy things at you. This is like logic. This is common sense. Don’t you think if everybody goes back to work, it’s going to be one person that has it and it’s going to affect other people?
Frank Curzio: I mean, isn’t that possible? How do you handle that situation? You get to go on lockdown again. Another thing that worries me that probably the biggest risk right now, the biggest guys is Europe. I mean, China was already dead. China was horrible before the coronavirus. I mean, with the trade. People were moving their supply chains out of China. Companies, they have protests in Hong Kong and now this.
Frank Curzio: You have no choice but to lie, to say things are good. Who knows what’s going on there. But the whole world is watching. We’re trying to follow a model of a country that lied to us and spread this everywhere on purpose. Right? They could have stopped it. They had everything there to stop it. But they didn’t and they got pissed when everybody closed their borders. You do the math on that.
Frank Curzio: Europe. Man, Europe is in big trouble. Big trouble. Nobody’s talking about Europe right now. I’m going to give a shout out to the Fed here. I know you guys are going to turn this off right now. But you got to hear me. I know it’s normal. Criticize the Fed. Everybody hates the Fed. They’re the worst. I get it. I get it. I understand. Yeah. That’s the business we’re in.
Frank Curzio: But I’m a fair guy and I have to give the Fed credit here. Basically mandated that our banks have enough capital on hand to withstand a negative 5% declining GDP, a 30% market crash and attempts on unemployment rate. If you listened to this podcast over the past four years, I’ve been saying, okay, we got to ease this up a little bit because these conditions never happened. Not even during the great depression all at the same time.
Frank Curzio: Because the way it frees up. I said that because I don’t want to give away my financials, but I bought a house for my mom and I had easily enough money to cover it several, several, several times over in cash. And when I tried to get a loan, they said, no, you can’t. This is your second home, you can’t. I was like, what are you talking about? It just cuts restrictions. Just because in the computer it says no, that’s it. They don’t ask any questions. They don’t want to see my cash balances, so I had to pay for it in cash. I said, this is a joke. Now does it seem like a joke because our banks fully capitalized ends.
Frank Curzio: They could withstand a lot of this right now. Remember where we came from guys. We came from a super strong market where our banks had the best balance sheets ever. You’re seeing record profits. Again, they’re going to get hit, they’re going to get nailed, but we came from a super strong base. Europe didn’t. I mean even after the credit crisis, they didn’t recapitalize their banks. I mean you want to look at Europe and the top five economies. The top five economies are Germany, U.K., France, Italy, Spain, they count for 70% of the E.U. in terms of GDP. Germany being the highest 21%, UK 15%, France and Italy around 12%, Spain 10% a little bit lower than that.
Frank Curzio: But I went back and looked at the past two quarters of GDP, pre-coronavirus which is the last two quarters. Germany grew 0.2% and most recent quarter they didn’t grow at all, zero. U.K. 0.5% and then the past quarter before coronavirus 0.0%. France 0.3% growth, last quarter negative 0.1%. Italy 0.1% and the recent quarter, negative 0.3%. In fact, if you go to Italy, you look at the past eight quarters, Italy hasn’t grown at all. This is pre-coronavirus. This is before you shut down Europe and your banks are not fully capitalized. Nobody’s really talking about this.
Frank Curzio: The U.K., Brexit, they’re out. How do these… How aren’t you… I mean this is going to create so much turmoil. What I’m thinking right now is way, way too far ahead. And I was talking to this with a good contact where what happened after the Great Depression? What did it lead to? World War II. With Italy and Germany, I mean you’re looking at a scenario that’s eerily similar. Again, I’m way too far ahead right now, but that’s the way I’m thinking.
Frank Curzio: But how terrible is Europe right now? How terrible is the rest of the world? They don’t have what we have here and we were by far, especially developed nations, just the strongest in terms of GDP growth, unemployment low. We’re coming from a very high base and we’re struggling to deal with this. How are these countries going to? And India is another one. Just shut down, lockdown, 1.3 billion people.
Frank Curzio: But everything’s okay. Go out, buy stocks, we’re fine. And maybe it is priced in when we’re down 25%, maybe. I said even down 30% based on valuations we’re probably close, but sentiment was we can go a lot lower. Let’s see what happens because I can tell you the fed is not done. The fed is definitely not done because every day that goes by, it’s another market, especially within the credit markets, that become frozen and they’re getting a call with things they have to do. So the President’s going to be on TV a lot, probably almost every day, and I bet at least every week is going to come out with another stimulus plan to block this, to back this.
Frank Curzio: I’m going to get to that later on. Guys, I’m going to blow you away later on with statistics. And it’s not going to be crazy, but there’s one market that’s crazy that the government is not even talking about right now that’s starting to freeze. But when you look at Europe, what does it mean that Europe is going to shut down? I mean there’s basically in a recession pre-coronavirus, now you shut down the whole economy. And we’re going to see a flight to quality where governments are going to be buying U.S. dollars like crazy, right? Flight to safety, they’re going to push the dollar higher. And people are saying go into gold and gold has had a nice rally recently, but gold usually doesn’t do well when the dollar is strong. There’s a fight right now between gold bulls and bears. I’m not sure what side I’m on yet.
Frank Curzio: Tried to pick away at a couple from my Curzio Venture Opportunities, but stopped that right away. Now a lot of these gold stocks have after falling 30, 40 percent during the last four weeks, bounced back. Gold pushed higher after the fed announced we’re going to spend whatever it takes. But I like to see this decouple to get away from the dollar here when it comes to gold. But I don’t know what side I’m on. I think there’s gold companies you could pick away at. But something that’s interesting, right? What’s Europe going to do?
Frank Curzio: So again, companies have no idea what earnings are going to be this year and even next year. I’m just surprised to see every CEO on TV believes that everything is going to be fine in 2021. I mean, to me I think that’s actually crazy. You don’t know that to assume everything’s going to go back to normal. That’s telling everybody you should buy stocks right now no matter what. You can’t. These companies aren’t generating revenue. They’re going to be locked down for at least another three weeks. Wait until you see the news coming out of New York? The hospitals have no more supplies. And someone sent me an amazing stat that it was over 80% of the people who die from the coronavirus in Italy died in their homes.
Frank Curzio: I think that was in Lombardy region, but I was blown away by that. Why? Because they said they didn’t die in a hospital in ICU. They sent them home, we can’t take you. And they wound up dying. Could that happen here? Because I could tell you the people who do contract this virus, especially over 60, and if they go into ICU, there’s a much better chance than if you tell them to go home. But if there’s no hospital beds, what are you going to do?
Frank Curzio: But just this assumption that everything’s going to go back to normal, guys. I mean you think everyone’s going to run the Disney parks? They’re going to go back on cruises right away? Are you? Put yourself in this position. Forget about what the economists say. Forget about what the so-called experts say. Forget about them charging fees like crazy. And, again, some of the people that I’m seeing just should not be giving anyone advice and it’s sad. But are you going to book vacations? Are you going to take an airplane right away?
Frank Curzio: You think they’re going to spend money immediately after their portfolio just declined 35, 40 percent. You guys bounce it back a little bit. I mean, I mentioned the NBA. I mentioned a lot of these things. Major league baseball comes to, are people just going to rush to stadiums and start watching these games? What happens if someone gets tested for the coronavirus maybe three weeks from now, four weeks from now? We assume that no one has it anymore. It’s all gone. Stay patient here. Again, I know we’re down 25% in a month, still down 25%, but lots of uncertainty, lots and lots of uncertainty and you can’t just say, okay, I’m going to buy this.
Frank Curzio: I mean, look, I picked away at Boeing. I’m probably up a little bit in position, but I got smoked on Boeing. I bought my first one at 160, then I bought at 120. I think it went down to 90, now it’s a lot higher, whatever, 130, 140, 150, wherever it is. But this is something I look at three years from now that makes sense, but you have to be willing to take a beating. Because this market’s going to be like this. It’s going to be like this for at least another 30 to 45 days at least. And if any of the risks I just mentioned come to fruition, which I hope they don’t, other than Europe, you’re not going to avoid that. Europe is in a ton of trouble. Load of trouble, guys.
Frank Curzio: I mean with a lot of this stuff, any of this stuff, any of these risks, I mean we’re looking at another three, four months and that is not factored into stocks right now. So just be patient a little bit. Now you saw some of these stocks go up 30, 40 percent. They still had their operations closed. How can you buy a cruise right now when not only is it closed, when are they going to open up? Probably later than anybody. And when they do, who’s going to go on a cruise? Yeah, maybe the government backstops their debt and tries to pay their employees. It’s not going to result in more people going on cruises right away. It’s just not.
Frank Curzio: And if you want a little more uncertainty, what the hell is the plan in the U.S. right now? What’s the plan? Are we on lockdown? Are we not? If you live in California, if you live in New York, you’d say yes. In Florida, we’re definitely not. Most states, probably just like Florida, they’re not. Again, it makes sense for heavily populated areas to be on lockdown. Now the President comes out and says, hey, you know what? I’m thinking of letting young people go back to work hopefully by Easter. I mean now you’re doing this after you initiated a kind of lockdown? That’s confusing to people.
Frank Curzio: And look, I get the move. I mean of course it’s an election year and you can’t keep the economy closed, but I understand this move to do this. I get it because before the 11% rise in the market and, yes, we’re doing pretty well today, we were down almost every single day in the last month. I mean it was crazy. At one point you have to ask yourself, is sacrificing the economy worth all of this? And that is a tough, tough, tough question.
Frank Curzio: Do you make it like, hey, this is the flu, let people get it and, yes, we know that older people could pass away? A politician could never ever say that. Or is it worth it to… Does the cure hurt much worse than the disease? When you shut down the economy, it could result in more deaths. It could result, I mean just a negative effects can be 25x compared to treating this like the flu. I’m not saying we should do it. I’m saying I understand the argument and that’s the argument right now.
Frank Curzio: What happens if this continues? Should we push people back to work? Because I can tell you, there’s a lot of things not factored in. I mean, guys, go on Curzio Research YouTube. I just did an amazing interview and it’s a video interview on Skype with Ed Karr. So Ed Karr is the CEO of U.S. Gold, which went up 100% yesterday on really good news, but that’s not why I interviewed him. Again, it was down a lot, but now it bounced back. A lot of gold stocks are bouncing back. But he is in Florence and he’s on lockdown. He’s telling me things are different there. Lines are much longer. Most store shelves, we see it where they’re kind of empty, but if we go on a different day and go where it’ll be in, he said, “No, it’s not like that.” And people are losing patience. There was an old lady that cut a line and they were screaming on her and yelling at her. He said patience are running thin.
Frank Curzio: Their patience is just, they don’t… I mean, you’re in your house. You’re with your kids all day. I mean, you got locked up. It’s pretty crazy. I mean, you do it for a week. All right. Two weeks. But you doing it for a month or six weeks, 10 weeks? Wow. Again, things that are not factored in. But I was telling you about that decision and how do we talk about it because it could result in more deaths where do we continue to lockdown or do we say, hey, let the young people go back to work? Again, I’m not advocating for this. I’m saying I see it, but this is a topic I’m going to discuss with my guest.
Frank Curzio: First time guest on Wall Street Unplugged, the name that I’m sure almost every one of you heard of, since he has the best nickname in the world, which is Mooch. Anthony Scaramucci is here. If you’re not familiar with Anthony, he’s the founding managing partner of SkyBridge Capital. Been in pretty much the hedge fund industry, the investment industry, worked with Goldman Sachs for eight years, but you might know him as the former White House communications chief for Donald Trump, which he was only there for I think a week or two weeks. And he and Trump had plenty of back and forths over the past two years. This interview is not about that. I know that’s the entertaining part. It’s about coming up with a plan for the coronavirus risk in terms of how much stimulus we need. Are we going to need more fiscal monetary health? How we can do to protect ourselves right now that maybe you’re not really hearing in the news. And Mooch is very, very connected in the hedge fund community. Again, he worked for Goldman Sachs for eight years, has his own firm. Also very connected on a political front.
Frank Curzio: So he’s going to share some of the things he’s hearing out there, the negatives and the positives. Going to be a great, great interview. It’s coming up in a minute. In my education segment, I’m going to share my game plan with you. Told you I’m working harder now than I ever worked in my entire career. And even if you’re in cash, you should be doing the same exact thing. Trying to find new ideas. Who has exposure, who doesn’t? Diamonds in the rough. What’s going to come back? Early stage cyclical companies that bounce back tremendously. Small caps. You should have these on your radar. Companies that are likely to spend their dividends. Like the Chevron CEO goes on TV and says “The most important part, the most important thing for our company is to maintain the dividend.” Why the hell is that the most important thing for your company? Who cares? The most important thing is to preserve capital.
Frank Curzio: I mean if your dividend is like seven, eight percent, cut it to four. It’s still going to be one of the highest needs on our freaking industry and in the S&P 500. But then you could use that money to buy all these fricking companies who are cash strapped right now that you could buy for five cents, pennies on the dollar. That makes more sense to me. But for you to go on TV and say that is the biggest thing, our dividend it’s safe. And I heard it from Kinder Morgan, same thing, said the same exact thing. And this is whatever, three, four years ago when oil prices in 2015 were flying with, I did the math, there’s no way they could send a dividend. Then they finally cut. And the company went all the way down and came all the way back. But that’s your biggest concern as a CEO? We’re maintaining our dividend.
Frank Curzio: You don’t even know what’s coming up. If oil prices stay below $30 a barrel for six months, how are you going to maintain that dividend when you’re not making money? How are you going to pay them? All right, well, we’re going to cut our workforce by 35% but we’re committed to maintaining the dividend. I’m like, this guy’s on another freaking planet.
Frank Curzio: Anyway, prepare. Look at different companies. There’s a lot out there. I’m going to show you what I’m buying, what I’m looking to sell. Also what I’m hearing out there from my best sources, which includes a large independent bond fund manager who’s pretty nervous right now. At least that’s how he made me feel after the points he brought up. And one of them is a massive market that’s starting to freeze that very few people are talking about. Going to be a must listen to education segment on what to do now with your money.
Frank Curzio: And before we get to that, he’s my interview, Anthony Scaramucci, otherwise known as The Mooch. Anthony Scaramucci, thanks so much for coming on Wall Street Unplugged.
Anthony Scaramucci: Hey, I’m doing great, Frank. If you hear kids screaming in the background, that’s real live reality radio podcasting. Okay. I am in a bunker in my house.
Frank Curzio: It’s the new norm, right? I had two interviews. Same thing. Kids running in, going crazy. It’s kind of crazy.
Anthony Scaramucci: Yelling. Everyone’s mad at each other. I think my wife filed for divorce four times since I’ve been home. But that’s fine. I haven’t even been home a full mooch. You know what a full mooch is, Frank?
Frank Curzio: No.
Anthony Scaramucci: It’s 11 days. It’s 11 day period of time. Okay, that was my time in the White House. So I think I’m four days away from a full mooch and the place is going crazy and I’m probably losing a little bit of my hair.
Frank Curzio: What happens if this goes another two months?
Anthony Scaramucci: Yeah. So I mean I think the likelihood of it going another two months is low. Just what I know about the President and what I know about the American economy. And I know the epidemiologists would like it to go longer, but I sort of think this is a three or four week exercise for the American people. I don’t see it going the three months. Certainly three months would flatten the curve. But we’re not set up to do that as a group of people. It’s not communist China, unfortunately. Well fortunately, but you know what I mean? For the purposes of this, they’re not going to set up the quarantine the way they did.
Frank Curzio: No, it makes sense. Now most people know you as the founding managing partner of SkyBridge Capital. You mentioned already former White House communication chief, but you worked at Goldman Sachs around seven, eight years, investment banking, been around this world most of your career, private wealth management. So you’re familiar with the numbers, you’re familiar with the data, especially in terms of the stimulus that’s being thrown out right now for the coronavirus. I heard you throw out a number there. We heard Ray Dalio, 4 trillion. We’re seeing maybe 1.8 trillion about to get passed as we’re doing this interview on Monday afternoon. But you said 3.2 trillion. Could you tell me how you come up with that number? Because, again, there’s numbers all over the place. I’m just curious.
Anthony Scaramucci: No, no, but I’ll give you the math. I want you to know we did a lot of homework on this. Of course, I supplied all this math to the guys inside the administration and Treasury. The first thing I did, and first of all, Ray Dalio may be correct. By the way, more is always better in a situation like this. In a crisis, there’s a couple of different decision-making modules. One should never underreact and one is always try to gauge if they’re overreacting. But any financial crisis that’s concomitant to a healthcare scare, a little bit overreaction wouldn’t hurt anybody. So I wouldn’t mind four trillion, but I’m saying 3.2 trillion.
Anthony Scaramucci: I did the adjusted gross income numbers for all 50 states. I backed out each person’s savings rate. I then backed out the per unit consumption, but also recognizing that their consumption is going to be down about 40 or 50 percent, meaning they’re not on an airplane, they’re not in the local restaurant. They may be ordering takeout, but they’re not going to the legion of stores in their local main street or up and down Fifth Avenue or somewhere in the miracle mile in Chicago, something like that. A result of which they need money for the utility, they need money to pay their water bill, they need money for food for their families, and obviously their cable bill, et cetera. When you do that math and you reconstruct that consumption for the nation’s consumers, the people that need it most, it’s about $800 billion. So that would be $3,000 per adult, $1,500 per child. That would get you through the crisis. That’s sort of the helicopter money part of this where you’re helicoptering money into areas that need it the most.
Anthony Scaramucci: Second piece of this thing is a tax furlough. I would be calling on the President to create tax amnesty for anybody that’s making less than a $100,000 a year. So you don’t have to pay income taxes in 2020 that calendar year, that’s 250 billion. And just stay with me, I’m almost done. $2 trillion in an accordion-like structure, so you may not get to two trillion, but you have it there to help all businesses. Okay. And I’m calling it a giving, granting, or lending program. And so you’re giving it to small businesses, you’re granting it to universities that may need it, and you’re lending it to the country’s largest corporations. So you have a plan for the barber shop and Boeing in the two trillion and you can set up an agency that could help facilitate that and sort of deliver that into the marketplace immediately.
Anthony Scaramucci: My last piece, and this is where you get to the three two, is $150 billion to the nation’s hospitals. We are woefully under-bedded in the United States. We obviously don’t have enough ventilators and you would need literally a Marshall Plan for our healthcare systems. The plan that’s on the table right now as we’re speaking is 75 billion. It’s just not enough. And I just want to draw a context for you. 331 million people in the United States. We have one million hospital beds, 300,000 of which are ICU units. If we don’t bend the curve, and even if we just do partial mitigation, the math looks like there’ll be three and a half to four million people that will need a hospital. And many of those obviously will need ICU and a lesser portion, but many, will also need a ventilator.
Anthony Scaramucci: So we’re in a healthcare crisis and I’m going to propose that the U.S. government create a cabinet level position to deal with pandemics, almost like a secretary of war for viral pandemics going forward. Very similar to what we did in 9/11 with homeland security. How’s that for off the top of my head, Frank? Was that ok?
Frank Curzio: Love it. Love the numbers. Love the details. So here’s my next question, which is interesting. So you saw David Tepper get on TV. Big deal because David Tepper was one of the ones that told us in 2011 should buy everything, government’s backstopping everything and it’s going to go higher. So everyone wants to hear his opinion.
Frank Curzio: He obviously said we need to get out of this lockdown, we had the President Tweet that he’s talking about this with his contacts and staff where a lock down may be worse than actually just having young people go back to work. Lloyd Blankfein saying those at low risk should return back to work. I think right now in the middle of this that there’s an argument being okay, things are going to get so bad in an economic side where we’re seeing Goldman Sachs 25% decline the GDP second quarter, Morgan Stanley 30%, Fed Bullet even said 50%. Are you seeing this, because you have great contacts in the industry both in politics and in hedge fund world? Are you hearing this as well, where people wait a minute, okay, this lockdown can’t last so if we don’t even see it subside in terms of that belt, that curve, do you think that that’s an option where we might just say, okay, let’s go back to work and just have the older people stay home?
Anthony Scaramucci: So listen, it’s a very complicated question. It’s a great question and a very complicated question, you often give a very complicated answer. So I don’t want to oversimplify things, but here’s what I would say to you. After analyzing the situation, knowing the culture of the United States and knowing the political situation that this is an election year, what I would be calling for right now is a $3.2 trillion dollar stimulus, I would shut the United States stock market and the banks down for five days and I would say that would happen in the next two trading days. So if you need to get money out of your bank, you can go to the bank now, the Fed will have the window open to let you get as much money as you need, but everybody take a chill, we’re going to shut the banks in the U.S. and stock and bond markets down for 5 days like FDR did during the great depression. Only thing we have to fear is fear itself.
Anthony Scaramucci: Number two, I would be imposing a 21-day national quarantine-like shelter at home order that you’re finding in New York State and California. And I would ask every American to make that sacrifice to pretend that we’re back in 1942 and rather than getting drafted and fighting off the shore of the United States of war, the way we need to fight this war is some level of aggressive social distancing and social containment. At the end of that 21-day period, I would tell the people of the United States, based on the epidemiology, we may go for two more weeks and we may not, and I’ll let you know as we get close to the end of the 21 days, but have it in your head that we’ll be locked down for 21 days. And so some of the fear in the marketplace, Frank, is that people think it could be three months, it could be six months. There’s a lot of nonsense in social media and a lot of conspiracy theory and apocalyptic garbage.
Anthony Scaramucci: The government would be way better served talking the way Andrew Cuomo’s talking, very clear, very open. I think the more information that’s accurate and people can trust, the better off everybody will be. Should we go longer than that? If I was an epidemiologist and we were living inside a bubble, yes, possibly. But I would recommend that we not do that because you don’t want what Lloyd Blankfein is saying or what others are saying, that the cure is actually worse than the disease itself for the entire nation.
Anthony Scaramucci: So it’s a very difficult decision because people’s lives are at stake. So I don’t want to make light of that morally, but I think that’s where we need to go, and hopefully people inside the administration will start thinking more like that. But this sort of half-measured, half-locked down, half-not locked down, I think is furthering the contagion.
Frank Curzio: Yeah. And I appreciate your answer to that because there’s no right answer to that, and that is an extremely tough question. It’s just that’s what we’re seeing on both sides right now and I’d hate to be the one to make that decision because we are dealing with lives. One of the things that you said, and I’ve been in this industry for 25 years, lived in New York most of my life before I moved my family out to Florida, worked on Wall Street, lived in Queens, so it’s not in my best interest to say this, but I’ve been arguing that we should shut down the stock market and the bond market and the commodity markets, in terms of you said five days, as long as… it’s very difficult to shut down the economy without the markets and when I look at the positives, there’s very few positives.
Frank Curzio: We’re not going to get a vaccine, we’ve already seen some of the stimulus, it’s probably going to be a lot more, but on a negative side, if you bring up any news site, I don’t care how far left or how far right, whatever you watch, it’s all negative. We’re going to see bailout after bailout for a lot of these companies, the airlines, travel industries, you know all this as well.
Frank Curzio: Do you think it should be longer than five days? Do you think this is really crazy? Because you know what, the only person I heard say this, and I want to make people clear that this is not my best interest. I mean, we have a financial publishing firm, but this isn’t about me this is about everyone. And I just see the retirees looking at that portfolio, it’s down 25% already, how much more could they take, they don’t have any working power. The negative news flow to me just makes sense to maybe shut down the market.
Anthony Scaramucci: Well, listen, I mean I think if you shut the market down for longer than a week, I think that that would be a real cataclysm. And so I’m not recommending that we do it longer than a week because it’s an international market, it’s a global market, it’s the most secure and diverse market in the world. And you have to remember, you want people to have confidence in that market.
Anthony Scaramucci: So, I would also tell people that are retired right now who are watching a down 33% from the record highs of the S&P 500, take a breath, you’re back to where you were in December of 2016, which wasn’t that bad of a place given where we were in 2009, and this will pass. And when it does, the world’s going to be awash in liquidity, there’s going to be very industrious people in the economy working and there’s going to be a lot of spring loading and pent up demand, and so I wouldn’t mark the market to where you are right at this second. I would just take a breath and even if you’re an older person listening to this podcast, try to see through this thing for one, two or three years. I think the market is woefully oversold here and will come back in a vengeance, but it’s going to need a little bit of time.
Frank Curzio: Now if you talk to, and that’s great. I love people that have different opinions than me, I wanted to throw it out there so I appreciate it to that question. But so the people that you talk to, the analyst, you know as well as I do when it comes to sell side, it’s all about looking at historical to try to draw complete conclusions and create this kind of cashflow models for the future, okay? But this has never happened in the history of mankind where we had countries on complete, complete lockdown because of a virus. Have you talked to, because we have a supply problem, we had it even in China, some of it’s back online, even supply here is down, we know what the lockdown in the U.S. and most countries demand problem as well and just like you did, we can model for this and say okay if the market’s closed one month, three months, six months, this is how much it’s going to cost, this is trillions of dollars, but you can’t model for sediment and which we just talked to.
Frank Curzio: Is anybody concerned about that in your circles? Because I know they go very, very high, much, much higher than mine, especially in politics, where are they afraid that these people, where it’s easy for you and I to say, well I’m 47 but someone who’s 65, 70 years old who just lost 30% of their savings and they have 30 years to spend that, now it’s down to 20 years, 15, they can’t really stand the working powers, so they can’t see it go down a lot more than that. Is anybody worried about the sediment side where people just going to have to be in cash, otherwise, if this goes down another 30, 40% I could be in trouble.
Anthony Scaramucci: Yeah. Well, okay, so then I would say to those people that we’d have to… I would say to those people take a breath and have the right asset allocation. So somebody in the 60s should probably only have a 30, 35% allocation to stocks. If they have a 100% allocation of stocks and they just saw 30% of their life savings get hit here, I would say that that was probably not the best asset allocation for them unfortunately. But yet 30% in stocks, 70% in cash and bonds at age 70 I would actually argue in a situation like that to move some of the money from the bond side into the stock market, I think that would be a better bet for you right now, given everything that I know that’s going on in the marketplace. So but if you’re saying a person has 100% in stocks and they’re age 70, well then I would certainly tell you yes, we have to get that person in a better position.
Frank Curzio: So you talked about Cuomo earlier and I’m living in Florida now with my family and just watching him, I don’t care what side you’re on, Republican or Democrat, it’s just he gets it, when I see him he understands that he’s telling it how it is. Is there anything that you think, I know your history with the President and stuff like that and I won’t even go there, but is there any the President should be doing now that he’s not doing on the federal level and what’s it going to take for Democrats, Republicans, Trump supporters, and non-Trump supporters to come together? We know it’s an election year, we get it, but just right now it’s a circumstance that’s really impacted people and people are actually dying. Do you see that where people coming together in your circles or it’s kind of people still worried about the election year, and what else could the President actually be doing now to help everyone?
Anthony Scaramucci: Well, I mean listen, I mean I have been very critical of the President starting last August, I said there’s something wrong here, he’s either not thinking properly. I mean for him to be attacking me and then viciously attacking my suburban housewife was a sign to me that there was something either chemically wrong with him or he’s just not operating with full faculties. He goes through the impeachment process, it was an illegality, and then the crisis, when we get up to the crisis, he’s not paying attention to his advisers, the intelligence agencies, yet he’s got his friends in the Senate are paying attention, they’re selling all their stocks in advance of the pandemic.
Anthony Scaramucci: So to me I was very critical, he said, and let’s just go over this, I think it’s important for people because they may be watching Fox News and maybe not getting all the facts, he said that it was a no big deal, it was one person, he had it under control, he said there were 15 people going to zero, he said they would disappear by April, but the epidemiologists and all the people working on this said no, that’s not the case, this is a global health crisis.
Anthony Scaramucci: And then last week he did a 180 and started to take measures that I think were appropriate to be taken from the Federal Government. So I don’t want to be on this call criticizing him now. I do believe that we are at war, we’re at war with an invisible enemy, it’s a global war and it’s on our shores and it’s going to wreak havoc on the American people and our healthcare system. And so we need the American President to do well, and I’m rooting for him and I want him to do well.
Anthony Scaramucci: But I think he would be better served taking a back seat here. And as I said, if he worked with the Congress to get a stimulus through, the second vote just failed on the advanced stimulus, and so they would be better putting down their swords and figuring out a way to get that stimulus through to help the average American. And if he did those two other measures, a 21 day national quarantine and a five-day market pause, I think that people would calm down, I think there would be less panic selling, I think there would be less panic in the overall marketplace, and that would be more in line with the way Andrew Cuomo frankly is operating.
Anthony Scaramucci: So again, not to be overly critical of President Trump, but when he’s doing these press conferences and he is saying something that’s not scientifically true, and then we have to get people up there from the NIH like Dr. Fauci or people from the Coronavirus Task Force to correct the medical information that the President is sending out, it’s not helpful. It’s not helpful to the markets, it’s not helpful to the average American, and forget about what my feelings are about the President or any level of partisanship, I’m running $10 billion of capital, I don’t run it with any level of partisanship, I run it with a very clear eyed analysis of what’s going on and I think he took $2 trillion out of the stock market with some of the nonsensical press conferences.
Frank Curzio: Now let’s switch to this here really quick. I want you to give us a perspective of what you see in New York, I don’t know if you’re in Long Island, again, I have lived in New York most of my life, because New York right now is ground zero, more than half the cases are there. We have a lot of New York listeners that download this podcast, but it also goes global and every place else. So can you give us a perspective what’s actually going on there, are you allowed to actually go out to stores, are you seeing a lot of people on the streets, are they following those rules, six feet apart and stuff? Because really like you said earlier, you’re in a house with your family, same with me here, it’s not as bad in Florida as the lockdown is in New York, but explain to us what’s going on a little bit to give your perspective you can.
Anthony Scaramucci: Well listen, I mean the social deal, it’s America, this is a very free nation. I mean they had predator drones and they had police and military force in China quarantining everybody. Certainly if we did something like that, I think it would be too distressing to the American population I think. I think that unfortunately we’re going to have to accept some deaths and I would go back to The Mask of the Red Death, which is a very famous short story by Edgar Allan Poe, it was published in 1842 and it was about the death of Prospero where there was a plague going on, but there was a very wealthy group of people that were hosting a masquerade party and so somebody who had the plague dressed up like one of the wealthy people and went into the masquerade party and literally infected everybody in the masquerade party, then took the mask off and gave a soliloquy about you’re not thinking clearly, you’re not caring for your neighbors. And a result of which by not caring for your neighbors, you’re actually hurting yourselves.
Anthony Scaramucci: And so we’re at a crisis point in America. The policy since 2008 has created a very big wealth divide. You now have this crisis, which is a pandemic. If we don’t figure out a way to put money in the hands of people on Main Street and make the bailout more related to main street, it’s not going to work. And when you’re looking at the country just empirically, we’re just not doing enough social distancing and we’re not going to do enough social distancing. So unfortunately we’re going to, like in the death of Prospero or The Mask of the Red Death, we’re going to have a level of death related to this disease that’ll likely be three or four times the seasonal flu, if not more. And I think that’s a difficult place, and I think it’s going to shock people.
Frank Curzio: Yeah, definitely is a shock. And I guess there’s just one more question here because I know you said earlier that you manage $10 billion, if you could say this, if you can’t I understand it is, but are you starting to pick away here or have you been invested and just worried?
Anthony Scaramucci: Oh yes, no, no, no. Listen, the opportunity is in the bond market. The stock market is still priced for a recession, but not for a steep recession, not to scare your listeners, but a steeper session. The peak of the market was 30,000, the market would have to go down to 15,000 and it’s 18,000 now so we’re 10, 15% away from a bottom. If you’re looking at where the bonds are, the bonds are priced for a financial apocalypse. So I think neither of those are going to happen. And I think you have to be patient. I’m in the business 31 years, it’s a little bit like the military when shots are fired, if you’re not trained, you run away from the shots, but if you are trained and you went to Parris Island with the Marines, when you hear the shots, you run towards them. So in a situation like this we have to run towards them.
Frank Curzio: Okay. And we’ll end with this note. So we spoke about probably a big recession, massive stimulus on the way, lockdowns, potential bankruptcies. All right so a lot of negatives there. What’s the light at the end of the tunnel? Because I’m trying to do this with my interviews where it’s just not 100% negative, we want to be fair and just, but what is the light at the end of the tunnel that you see?
Anthony Scaramucci: Well, I hope to God I haven’t been 100% negative, if anything I’ve been trying to be very, very fair and very, very balanced.
Frank Curzio: Absolutely.
Anthony Scaramucci: I would say to you that the light at the end of the tunnel is a restoration of the economy combined with that stimulus, combined with a marshall plan for our nation’s hospitals. I think a year from now we’ll be on much stronger footing, we’re not going to go back to the robust growth that we were experiencing before this debacle because people are going to hedge a little as it relates to their consumption, they’re going to be worried about another pandemic, and they’re going to want to keep some powder dry. But I do think that we will be in a position that will work for everybody and I think if you’re two or three years out from now, anybody that’s selling right now would regret it, and people that have powder dry that are buying will be very happy about it.
Frank Curzio: All right, so we’ll leave it there. I just want to say thanks so much for doing it, I know how busy you are, you’re getting the calls every place to go on different shows and things like that so.
Anthony Scaramucci: My pleasure, I appreciate being on, let’s stay close and stay optimistic.
Frank Curzio: You got it, will do, take care, bye. Great stuff from The Mooch, actually I enjoyed that interview, I was hoping it wasn’t going to be a Trump bashfest because at this time we need to put politics aside. I think the governor of California, I think the governor in New York are doing fantastic jobs, they really are. We need to come together during this time. We understand it’s an election year, I get it, let’s try to figure this out first and believe me, you’re going to point millions of fingers, if you hate Trump, you can point millions of fingers at him afterwards. Again, this is something that’s new, everyone’s going to make mistakes, on both sides you’re going to have plenty of points to argue what they did right, what they didn’t do wrong, but just right now when people are dying, when you don’t have enough beds for people, let’s get together, please let’s get together just for now, okay?
Frank Curzio: Because I know most people really, really care about other people, which is important, so I love where that interview went, I love that he put numbers behind everything, he’s someone that’s very connected in so many different industries, especially politically, of what’s going on, hedge fund industry, what’s going on. He was optimistic, more optimistic than a lot of people that I’ve spoken to, which is great, but really, really appreciate him coming on.
Frank Curzio: And these are the types of interviews we’re going to have going forward. I mean this podcast is growing, it’s getting bigger thanks to you guys, getting more subscribers in the never, Twitter followers, everything, Curzio YouTube, well over 1,200 now I think, I thought followers was 600 I think a month to two months ago. So thank you for spreading the word, and we want to continue to stay on this and just provide really, really great interviews for you so I’m glad Mooch came out and let me know what you thought of that at firstname.lastname@example.org, that’s email@example.com and again, when you let me know what you thought about it and if you put politics aside, okay, I don’t care if you hate him, you like him, Trump supporter, not Trump supporter, I know he’s on CNN all the time, just let me tell what you thought about his plan, his numbers, and stuff like that. Again, we don’t want to argue politics right now, we’re going to have plenty of time to do that in a couple months.
Frank Curzio: Anyway, when you guys listen to me in this podcast, right, and even when you go to the Curzio Research YouTube page, I do live daily videos every day pretty much for three, four weeks now I think, and they can all be found there, some of them I have on Twitter as well, but I’m offering my opinions, right? It’s my opinion. But these opinions aren’t just hey, random feelings and gut checks, they’re calculated, they’re based on tons of research and what I’m hearing from my contacts, what I’m hearing from you, and…
Frank Curzio: I want to share all of that. So here are some of the things I’m hearing, and I talked a little bit about this before, but it’s important. Italy, more than 80% of the people who died from coronavirus had passed away in their own homes so they couldn’t go to ICU’s, that’s what I’m hearing. Workers in the oil, airline, retail, restaurant industries, the layoffs have just started, it’s going to get a lot worse.
Frank Curzio: Remember, nobody’s traveling, which means hotel industry, airlines, casinos, still shut down or basically shut down when it comes to hotels. It’s going to be that way well into April. A lot of these companies have debt payments to make, hopefully it’s going to be backstopped by the government, but how do you play in pay your employees when you’re leveraged and you’re not generating revenue? I don’t know. Answer that question for me. I don’t know the answer. It can happened for a little bit, but eventually you got to dwindle. And now look at where your financials are going to be when we come out of this. You think these guys are going to spend and go crazy? First of all, it’s not going to go back to it to the same levels when it comes to the airline industry. Not going to come back to the same levels as the casino industry, hotel, industry, airlines, all that.
Frank Curzio: So now you basically depleted your reserves, taxed credit revolvers. Again, you’re still looking to get back with the airlines. I mean, look how long they went through that period of being in so much debt and then coming out of it and the massive cashflow that they were generating. It was perfect for them and now look what happened now. The cost to manage these companies, fuel, flying, just unbelievable, and they were making a fortune, but when you turn off the revenue, no one’s flying anymore, you’re not generating money.
Frank Curzio: Another thing I’m hearing from a good friend, bond fund manager, saying how liquidity is not really the problem right now, which I was surprised to hear. It’s much more than that as firms are going into cash. Why? This is really important here, guys. Very, very important for you to understand. You got to go back to the credit crisis, because if you could invest in a credit crisis before it happened, if you could invest in something safe as a firm, and you have a safe investment, you want to leverage yourself as much as you can. As much as you can, right? This is what happened in the credit crisis. We found a way to package subprime debt into huge debt vehicles, they’re called mortgage-backed securities, MBS, and also collateralized debt obligations, which are CDOs. These are forms of securitization.
Frank Curzio: When we had loans, good loans, prime loans, it was fine. Everything was cool. Then we went to subprime loans. Once we had these MBSs, CDOs, Wall Street paid the rating agencies to stamp AAA ratings on this, which means what? It meant that Wall Street cannot leverage the F, I won’t curse here, out of these investments to generate even more income. So, this misconception out there where it’s subprime loans were the cause of the credit crisis. It wasn’t, it was just a $1.3 trillion market. We just passed a $2 trillion package just today. It was a massive, massive leveraging of these loans. Collateral debt obligation says it was times 10, times 20, times 30. And the leverage on this was incredible when we only needed to see a 5% decline in default rates and that was it, this market was going to crash, because everybody had a coat of cash. They didn’t have the money. It’s like getting a margin call.
Frank Curzio: It was a massive leveraging of these subprime loans that caused the crash because the collateral was deemed to be safe, and we all know what happened. Right? We all know what happened with the market, wasn’t as safe. These vehicles weren’t as safe as everybody thought and it winded up causing the credit crisis. Why am I revisiting this? Why is this so important? Stay with me here.
Frank Curzio: There’s another market that few people are talking about. It’s pretty scary right now. This is from my close contact in the bond industry told me. Collateralized loan obligations, CLOs. They’re another form of securitization where payments from usually multiple mid-size large business loans are pooled together, sounds familiar, and they’re passed on to different classes of owners in various trenches. Right? Sound familiar.
Frank Curzio: Now CLOs are different because most contain corporate loans that have low credit ratings. Keep that in mind. Low credit ratings. Not investment grade ratings where the government’s investing. Low credit ratings. They pull these together to make them safer. If you want an example, it’s like leveraged buyouts made by private equity firms, which are hues, those are not investment grade where… First data with KKR, there’s so many examples where they take out enormous amounts of debt and these things have lower credit ratings and they’re patched together again. CLOs are then sold to investors saying, “Hey, these things are kind of safe.”
Frank Curzio: This is a huge, huge, huge market that’s super highly leveraged. And what do you think firms are doing right now? They’re deleveraging. This is causing the system to freeze. They’re going into cash. Why? Because all of the credit ratings on these companies, which are already low, already risky. If they haven’t been downgraded, they’re going to be downgraded significantly over the next few months. There’s no revenue coming in.
Frank Curzio: And you look at Fitch Credit Agency just came out, downgraded like 80 companies. This included Ford’s credit rating, putting their investment grade status in question. Also cut airlines. They downgraded Disney’s credit from stable to negative. And Disney four days ago, just raised an emergency $6 billion, that was on Monday. Nobody talked about that. Disney raising money? Yeah, they had to raise money. 6 billion, pretty high interest rate, think 4, 5%, but they closed that out on Monday.
Frank Curzio: But now you’re seeing all these get downgraded, which is going to make these investment vehicles in trouble. And this is a problem few people are talking about right now. This is major. It’s a huge market. When everything’s supposed to be safe, it’s been safe, especially since the credit crisis and pre-credit crisis. You don’t have investment grade ratings on these loans. They’re risky loans, but you don’t see them default. Now look, all the downgrades. You shut off the economy, you shut off the revenue, you shut off everything, practically everything. Nobody’s talking about this. These are things you have to worry about if you’re thinking about jumping in the market with both feet here.
Frank Curzio: So lots of risk out there. It doesn’t mean, again, I’m not working my ass off, doing more work than I’ve ever done. Everyone listening to this should still have most of their money in cash looking to pick away. For me, things I’m looking at, large cap names, especially retailers, which stores that are open right now that buy necessities. Not many of them, but these are companies that are going to generate a shit load of sales. They’re going to report strong earnings easily over the next 12, 18 months and that’s a certainty they can model, we could see that. These are companies I could look at and say, “Wow, these guys are going to generate X amount.” And these companies have held up well. Some have even been up during this whole month and a half, month, whatever downturn. But the sales and earnings these companies are going to generate are incredible over the next 12, 18, 24 months. That’s going to continue.
Frank Curzio: And again, you can see it, you can model for it. You see business getting better and better. They are hiring more employees. That’s a certainty here. That’s what I like to see. Medical device companies going to be operating at full capacity for years. Masks, ventilators, Becton Dickinson, you have Medtronics and lots of these companies. Again, this is just starting in other places in the world where these ventilators are not just going to be for here, but this is a problem that’s going to last for a while, and then you know they’re going to be stocking up on this, too. Once again, just in case we run into a problem like this again. That’s what we do.
Frank Curzio: Gold stocks. Again, it’s a tough market that’s whipping around like crazy, but I have to tell you, I’m looking at gold companies and a lot of gold companies with the financials, they use a base price. So they’ll be using $1,000, $1,100, mostly using 12.50 an hour, 1,600 an ounce. And some of these companies are now updating these estimates and saying, “Well here’s our IRR, here’s how much we’re going to generate.”
Frank Curzio: Say if it’s a junior minor company and it’s a good project that’s going to get developed maybe 10 years from now and the costs were $1,100, $1,200 and you’re like, “Ah, I don’t know, that’s kind of close. Maybe that company’s worthless.” Now 1,600, no longer worthless. And they’re these estimates and when they’re putting them out you’re seeing a lot of these stocks go higher, where a lot of them were modeling for 1,250 an ounce.
Frank Curzio: Not saying that we’ll say it’s 1,600, I think we’re going to go much higher. I’m just not too sure why that hasn’t happened yet. Maybe it happens over the next year, maybe not. Again, I’m picking away, I would say about 8% of my holdings are in gold stocks, and gold vehicles, and things like that, and I haven’t sold anything yet. But I’m in for the long-term and I think it’s going to be good long-term. Short-term, you’re going to see a lot of volatility here. Risk on, risk off, but you’re going to see majors start investing in the minors, not necessarily taking them over, but investing in a lot of these names at much cheaper prices over the next three months probably.
Frank Curzio: So, there’s a lot of hidden gems out there that got smoked that I’m looking at, specifically looking at ones that do not need to raise cash, have high grade assets with low production costs, well that’s their forecasting, and ones that have strong management teams with high insider ownership. That’s what I’m looking for. And there’s about four or five that come across and you’re going to see them probably in CVO within the next few weeks. My Curzio Venture Opportunities newsletter. Not all gold stocks are the same, guys. There’s some that have gone down just as much as the garbage. And I’ve seen this market. When you have a bull market in gold, these things don’t go up 200, 300%, they go five X 10 X 20 X, and it’s been a horrible market for a long time outside a few pockets here and there.
Frank Curzio: But with very central government throwing everything at this. Trillions of dollars going in and more and more is going to be announced, I’m telling you, over the next three weeks. They’re not done. It’s the only catalyst for the markets. It’s the only catalyst. There’s nothing that’s going to be positive other than at the Saudis and Russia come to a deal with oil and push oil prices higher, maybe. But we’re going to see explosion in cases, all this negative news, so you’re going to see the governments go on and continue to print money like crazy.
Frank Curzio: I’m looking at small caps. A lot of them are still down 50% plus. Dangerous, dangerous market. Some of these names that cast positions are now more than 50% of their total market cap, which is insane. So I’m finding ideas right now, not tons, but some. It’s being very careful.
Frank Curzio: My Curzio Venture Opportunities newsletter, you’re going to see a video update newsletter just like we did with Curzio Research Advisory, which is mostly mid-caps and large caps. This is focused on small caps. Going to put that out tomorrow. A lot of research for you right now. And the reason why I’m doing video updates is because I was writing 19 page reports, but look how much changed. In the last four trading days, we saw an unlimited package by the government saying that we’re going to invest in investment grade bonds. We’ve seen a $2 trillion package on the fiscal side from our politicians. We’ve seen the market decline by 5% and 6% back to back days and then increase 11%, so you can’t write these reports that take a long time, two to three days sometimes to write, when so much is changing. So now we’re doing video and getting a lot of positive responses for that.
Frank Curzio: But anyway, in the CVO newsletter, you’re going to see a video update tomorrow. I’m going to provided screens of stocks I’m looking at, because, again, a lot of really good names worth picking at. And I got offered three to five X upside, and I’m not talking about long term, I’m talking about the next two, three years, probably being conservative on these projections. There’s going to be an incredible buying opportunity, maybe bigger than 2009, but you still have to be patient. The companies you’re investing, it can’t be a guess. They need to have a little bit of certainty, at least when it comes to sale, potential earnings, their business model, what they’re doing here. So I’m starting to come across a lot of names like that, especially the small cap sector. Again, if you’re a CVO subscriber, expect several of these names to make their way in the portfolio in the next few weeks.
Frank Curzio: And putting this all together, look, we could see more pain ahead. It’s likely. Too much uncertainty. But for me, I’m starting to pick away at names that have strong balance sheets, that do not have tons of exposure to coronavirus, which is not easy to find. Almost every company has at least a little exposure, especially if you’re leveraged. Every company that’s leveraged has exposure. But just focusing on companies that could actually give us some sort of forecast of what they believe sales earnings should be in 2020, 2021 and that’s what Nike did today and look at where their stock. Their stock really took off last night. They just gave you a forecast, I don’t really believe it too much, but at least they’re saying, “Our stores are open, here’s what we’re seeing.” That’s what people want to see. They just want to have some kind of certainty. And when we have that, that’s when it’s going to be time to jump in.
Frank Curzio: Don’t worry about missing a four or 5% move here or there. These things are still down tremendously a lot of these names. Just want to be smart here. You don’t want to buy and be down 20, 30, 40% and just you got run over by a truck. Because being out of cash and being on the sidelines is going to be worthless if you just threw all your money into the market maybe two weeks ago and you’re down another 15%.
Frank Curzio: A lot of names that look good. You see them come out in my newsletters. Just be very, very careful. A lot of people asking me, “How’s the best way to play this?” We came out with something for all the subscribers and a lot of people on our list where we offer a deal for our newsletter, Moneyflow Trader, which is an incredible product right now. It’s how to use option strategies to bet against individual names.
Frank Curzio: It’s very few positions. Genia Turanova, amazing analyst goes, “Few of them could go short, most of it is just options. So you’re only going to lose the money that you put in.” But the gains that she’s booked… and this is going to continue. I know you’ve seen the market go up right now the past couple of days, but you’re going to see whipsaws back and forth. Starbucks booking a 500% gain in Starbucks, Teva 140%, Bed Bath and Beyond just sold 150% gain. Shake Shack was up 70% in a few days for her. Just the gains that you’re seeing in that newsletter and some of them from that experience, again, I’m honored that she’s working for us.
Frank Curzio: But I lowered the price for that newsletter for everybody. I cut it in half, if you’re interested. That’s one way, that’s what I’m doing with my money, as well. So if you guys are interested, we’re not offering that price to anyone outside of our list. It’s just our list and we’re going to sell it probably for three or four times the amount that we’re selling for now, because that’s how good that newsletter is and it’s going to be relevant for a very long time, at least for the next few years, because there’s going to be a lot, a lot of uncertainty out there. It’s going to give you a great chance to pick off some of these names that are going to bounce back tremendously and then probably go down a lot more.
Frank Curzio: Not everyone’s immune. Some companies are going to see long-term effects to this. Movie theaters, airlines, travel industry, where a lot of restaurants could come back online they might see revenue a lot quicker, but it’s pretty crazy out there. So guys, if you’re not a subscriber at all to any of our newsletters, you want to learn more about the coronavirus, and want to learn more about us, just go to our website curzioresearch.com. I still have free reports on there, even older ones so you can see exactly what we’re saying since early February, before the market crash. And these are absolutely free.
Frank Curzio: Also, if you’re looking to try out our newsletters and give a test ride, Curzio Research Advisory. This is a couple of days ago, I ran a bunch of screens of stocks that should be on your watch list. I included about a hundred of them and these screens included ones with strong balance sheets, early cycle names, rebound once we do hit a bottom, names that performed the best, our inflationary times, deflationary times, and also names that are likely to cut their dividend. So I ran those screens, sent them to my subscribers. That newsletter is $50, not a month, but for the entire year. Again, not going to keep it that price long, but I really want people to get exposure to this, because the information I’m hearing out there, it’s dangerous. There’s a lot of guessing out there.
Frank Curzio: Yeah. For me, I’d love for people to provide a low price. Again, it’s 50 bucks, it’s not going to make me a billionaire or anything, but that’s the newsletter. Kind of a star newsletter, large caps and mid-caps that you can take a look at. And we’ve done very well over the past few years since we started that, so I’m really proud of that newsletter. But again, we lowered that price for everybody. If you’re interested, you can just go to our website to subscribe. It’s curzioresearch.com.
Frank Curzio: And I say this a lot, but this is absolutely for free, our Curzio Research YouTube page. Doing live videos, doing a lot of podcast interviews, getting a lot of page views. I even had conferences, those are taped. I throw all that on our YouTube page so you guys could see and if you subscribe it automatically alerts you. So, we’re getting a lot of traction there, too, and I really love doing these videos and updating everybody. So that, and even on my Twitter account, @FrankCurzio, is where you can get a lot more updates and not just a weekly podcast.
Frank Curzio: So man, covered a lot today. Just stay safe guys, be patient, have fun with your families. I know it’s not the easiest thing being at home, the interviews that I’ve done over the past couple of weeks, they had the kids running around and stuff like that. It’s a crazy world right now and I get it, but I still think there’s a lot more risk out there. Just be a little bit more patient and you’ll see me start picking away in my newsletters over the next few weeks. So that’s it for me. Thanks so much for listening. Really appreciate all the support, all the emails coming in at firstname.lastname@example.org, and I’ll see you guys in seven days. Take care.
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P.S. In early February, I predicted stocks would crash. They did. I predicted the earnings of dozens of companies would be crushed. They have. I predicted the government would cut rates and pass a stimulus to try to calm the markets. They did both. What’s happening next? That’s the focus of my new 5-minute video.
Warning: My predictions will probably shock you. (Facebook censored my last report.) Click here to watch it now.