Wall Street Unplugged
Episode: 943September 7, 2022

How the Fed could force us into a depression

Fed members can’t help themselves: They continue to move markets with their speeches and seem dead-set on crashing every asset class. (And Daniel thinks the Fed is trolling me.)

The Wall Street Journal reports that the Fed may hike interest rates by another 75 basis points later this month… and continue its aggressive path for the foreseeable future. I break down how hard and fast stocks will fall from current levels if the Fed follows through on this plan. In fact, it’s pushing us towards a depression.

Turning to energy, Daniel highlights why all investors should have exposure to oil & gas stocks right now… and one activist investor urging more oil and natural gas production.

But I disagree, and explain the no-brainer way to play the energy markets (which you can get easy exposure to with The Dollar Stock Club)…

Inside this episode:
  • Is the Fed trolling me? [1:00]
  • Why the Fed is scaring the s*** out of me [6:25]
  • The data the Fed should pay attention to [8:15]
  • Hard proof inflation will keep coming down [11:50]
  • Why Daniel is bullish on oil [19:46]
  • What Frank is buying instead of oil & gas stocks [24:22]
  • The “anti-woke” activist investor [33:03]
Transcript

Wall Street Unplugged | 943

How the Fed could force us into a depression

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 September 7th. 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. It’s Wednesday, Daniel Creech Day, senior analyst at Curzio Research, good looking guy, great golfer, awesome analyst.

Daniel Creech: Wow.

Frank Curzio: What’s going on? Today is your day. I’ve got to compliment you, man. What’s going on?

Daniel Creech: I appreciate that. We need to get that on a federal level. Maybe we get everybody a day off one Wednesday out of the year. How about that? Then everybody will come around like in a Hump Day.

Frank Curzio: Or, you could do two or three podcasts with me. This way, every day is like Daniel Day, and I’m going to be nice to you every day.

Daniel Creech: That’s true. That’s a good point, too. Let’s end on a high note. Moving on.

Frank Curzio: So, what’s going on, man? And look, the markets have come down several days in a row. Watching, now it’s getting a little bit of a bid to damn NASDAQ today, which is Wednesday. But we’ve seen that. I think, it’s six straight declines. It’s really ugly out there. You’re seeing rates start to really surge. What was rated almost top 6%, we’re seeing 3 or 3.3. Remember, it was like 2.8, 2.7. And then, this is a signal that people are really worried that the Fed is very serious and believing them, right? It’s not just Fed speak that they’re going to significantly raise rates, and now we’re seeing it in the news, right? We’re seeing some news organizations and some pretty high profile people saying we might not get a 50 basis hike. We might get a 75 basis point hike. What are your thoughts?

Daniel Creech: This is a great Wednesday for you because it’s just teeing up. The Fed just won’t stop. Frank, you’ve asked honestly what I think my analysis opinion is, I think the Fed is trolling you. I think the Fed is listening to our podcast, and they’re just purposely trying to upset you and get you to rant. So, I’m going to tee one up on you here because over the last month, you’ve probably asked at least twice that the Fed just muzzles their Fed speakers, voting members or non-voting members. Put them in a basement safely. We’re not harming anybody here. We’re a family show. Muzzle them, don’t let them talk. And what do they continue to do damn near on a daily basis, Frank?

Frank Curzio: Even today.

Daniel Creech: Even today.

Frank Curzio: Not today.

Daniel Creech: And I love how the headlines capture… We use briefing.com, should be a sponsor on here soon and pay us handsomely. But they don’t yet to my knowledge, unless you’re holding out.

Frank Curzio: No, no.

Daniel Creech: But I love how they frame this. They always say Fed president, or Fed voting member or non-voting member, or Fed such and such, blah blah, blah. And Frank, the high profile guy you were talking about when we were discussing, I believe it was yesterday, the 6th when Larry Fink, BlackRock manager, CEO was on Fox Business with Liz Claman and Charlie Gasparino talking about different things from inflation to policies to ESG. He is the high profile guy you’re talking about here. He’s even thinking it’s policy induced. But every other day, a Fed president or somebody comes out and says, “We need to keep rates higher. We need to keep the pedal to the metal.” They discussed the 75 basis point, Frank, here not only this month in two weeks on the 21st, but maybe the following month.

Frank Curzio: Yeah.

Daniel Creech: All right. Hey, bases are loaded. Tee it up. What happens? Give me a plus or minus on the market if the Fed goes 75 this month and signals 75 next month.

Frank Curzio: The big thing is that if they go 75 or 50, the Fed could alleviate a massive crash just by saying that, “Hey, inflation remains high. However, everything that we’re looking at and most of the things that we’re looking at are getting better. And if they continue to get better, we’re going to slow those rate of increase to the point where we might stop.” They don’t have to say they’re going to ease, they don’t have to say that there’s no inflation, they don’t have to bullshit you, okay? Because that is the truth. We’re seeing now a massive amount of indicators are coming down. You could highlight a few in the rents and stuff like that. But even oil is starting to crash now. Food prices are coming down. You look at corn and wheat are crashing. You’ve seen it across the board. I mean, we’re still seeing it on a consumer level because businesses are starting to get squeezed, so they’re keeping prices high.

Frank Curzio: They’re going to have to lower them because people are changing their habits and they’re going to have to. They have no choice. If the Fed comes out and does a 50 or even a 75 base point and has the same exact rhetoric that they had in Jackson Hole, the market’s going to crash 10, 15% from here, and it’s going to get very, very ugly. There’s a global recession right now. We’re in a massive global recession. It’s massive, okay? We’re going to determine that six months from now, and when you go back and say, “Okay, well, look…” I mean, you look at what’s going on with Europe, sky high inflation, energy through the roof, and they’re aggressively raising rates, taking money out of the system. It’s horrible. It’s one of the worst situations that Europe’s seen. And then, you look at China, is arguably even worse.

Frank Curzio: And China, if you look at the property developers saying this is a once in a century thing that they’ve seen, that’s how bad it is. That’s them, not me saying it. If you look at China, it’s absolutely horrible. They’re still closed, right? They’re still closed due to COVID, some guy sneezes and that’s it. Zero policy, close the whole city. It’s pissing me off because I can’t believe that the Fed and these guys are this fucking stupid. I’m sorry to curse. I know I get emails when I curse. It’s okay. I have to because I can’t believe that it’s this bad. I mean, it’s almost like you were so freaking wrong that you’re going to go so far over to the other side and you are absolutely going to destroy every single asset class. Mortgage rates, you saw the housing market, Daniel, absolutely collapsed. The housing market has collapsed, okay?

Frank Curzio: It’s basically frozen unless you’re paying cash for houses. This is when interest rates went to four, then it went to five. They’re at 6%. If you’re looking at rates that high, you’re looking at 7, 8% mortgage rates. I mean, they’re not buying houses now, right? So, you’ve done your job. I mean, look how much money is going to filter out of the economy. When I see the Fed talk like this, it scares the shit out of me. What scares me even more is the Wall Street Journal, only BlackRock, but Wall Street Journal report that Powell may look to raise rates with 75 base points in the November meeting, okay? The Wall Street Journal, I mean, that worries me because I didn’t think that was really on the table, even though it’s kind of in the odds. You’re seeing what’s going on with the market. You’re seeing rates rise, you’re seeing the money come out of the system, which I’ll go over in a second.

Frank Curzio: But the Wall Street Journal reporting this makes me worry, especially since it’s a front page story. Because whenever the Fed’s going to do something, they link it to the Wall Street Journal. Every single time, they link it to the Wall Street Journal. CPI is expected to come in hotter than expected the last two months. If you look a day or two before the Wall Street Journal actually reported that CPI is likely to come in higher than expected. So, the Wall Street Journal, they leak it to them, and they prepare the markets for it.

Frank Curzio: So, the fact that they’re saying that there could be a 75 base point hike means there’s probably is going to be a 75 base point hike because they leak everything to the Wall Street Journal first. That’s what they do, the Fed. That’s what scares the shit out of me. So now, we’re going to 75 basis point. I said if we go 50 basis points and then slow down, we’ll be fine. They go with 75, and some idiots are talking about another 75 base point hike. I mean, I have no idea what they’re looking at. I mean, this is insane. This is going to crash the entire market, Daniel.

Daniel Creech: Well, to your point, they’re not paying attention to the data right now and a lot of these speakers are saying, “Hey, we have seen some signs of inflation coming down in the last reading.” The Consumer Price Index, the CPI, the next reading, Frank, comes out next Tuesday. That’ll be interesting because no doubt it has to show… It doesn’t have to do anything. It will probably show either a lower growth, or it’ll be lower than the peak of last month, which is going to be a positive. I’m in the camp of… Listen, Daniel Creech thinks that, I’ve already mentioned this, they need to change their mandate if they want to keep this pony show going because there’s no way you’re getting inflation down to 2% from rounding down, call it eight right now without massively increasing rates like they’re saying.

Daniel Creech: I am surprised that they’re not looking at the current data, but at least they understand how bad they messed up. And yes, I think they’re going to overcorrect on the other side. I’m a little surprised that they’re doing this too going into the November elections. We’re going to have to wait and see. But I agree with you. I don’t see a catalyst, and I hate to just say this, but it is very hard to understand how stocks can move higher in this environment, especially over the next month or two when everything hinges on, not only what are they going to do on the 21st of this month, but what is he going to say following that meeting. So, I’m with you on that.

Frank Curzio: Okay, because it’s saying they’re looking at data and that’s been an argument, “Well, they’re looking at data, it’s lagging.” No, no, no. Here’s the data, okay? Let me show you what the data is, okay? The CPI is going to come out little bit high than expected maybe due to the rent, but energy’s mixed. Oil is down 12% in August. Where it was $93 a barrel, it’s like $80, where is it, much lower than that. $83 or whatever is today. Natural gas is up about 10%. That’ll be a wash. So, you’re going to see it coming a little bit high, but it should come in a little lower than expected or lower than it was last month. And don’t worry, the Wall Street Journal’s going to prep you for that because they’re going to write an article about exactly where it’s going to be about a day or two before like they always do, right?

Daniel Creech: That’s what they did.

Frank Curzio: Because they leak it, okay? So, we’re seeing demand fall off a cliff. We’re seeing it in housing, we’re seeing it in retails. Retail companies, it’s crazy. I mean, they order a massive amount. They tried to fix the supply chain concerns. You injected $11 trillion into the market, where you handed cash directly to people, and they started spending it like crazy, which caused one of the biggest supply chain bottlenecks in the history of the world, not just us but everywhere. You couldn’t order anything. You want a car, you can’t order it. So what happens is, these guys took orders and said, “Okay, here’s orders that we’re taking now,” and you put down money for an EV or whatever it was or this or a mattress and what happened? During that time, prices went up considerably. But now, we’re in the recession. Now, you’re seeing money taken out of the system.

Frank Curzio: Now, you’re seeing your portfolios down, your home price is decreasing. You spent a lot of money that you got already. So now, you’re like, “You know what? That car, I’m not going to buy it right now.” So now, you’re seeing industry-by-industry have massive inventory because they over-ordered because here was so much you demand, but the demand was pushed forward. So, you saw it right away with retailers, right? You’re seeing it with houses. Now, you’re seeing it with semis. You’re seeing some semis say, “We have a glut of chips. Holy shit.” You’re building new factories like crazy.

Daniel Creech: Was it yesterday Samsung warned about the second half?

Frank Curzio: Some of them are and some of them aren’t. There are several. Broadcom numbers are pretty good. We have one of our portfolio, its good. Just in the right areas where you’re going to see continued growth, not massive growth that are in the right areas, that are dirt cheap, that decline. But other ones, if you’re thinking Nvidia is going to come back, good luck. I mean, that’s a video game company. Video game is in shambles, right? Yes, they’re purchasing a lot of these companies, preparing for the Metaverse and stuff like that. So, you’ve seen a lot of acquisitions, but man, it’s just demand’s falling off a cliff all so for high-end chips through crypto and mining and stuff like that. So, those who believed Nvidia, they didn’t get that… ARM Holdings was not approved and that stock went up probably 30, 40% based on that news.

Frank Curzio: It was so funny when they said that… The Justice Department in Europe crushed that deal, whatever they did, the stock remain relatively high. You had 30% premium, saying that they were going to take over that company. That’s different. So now, you’re seeing the chips, but we’re also seeing it across different stocks. And you’re saying, “Well, Staples.” Staples, you’re seeing it. I mean Newell Brands just reported it. Newell Brands is a very big company. The LOWE estimates, they’re sitting at a 52 week LOWE now. They say they experience significantly greater than expected pullback in retail orders, which is interesting. So, they said that they’re going to take decisive action to mitigate the impact of these challenges, “By further tightening our belt on cash and cost management and adjusting our supply chains.” They have Rubbermaid, Yankee Candle, Coleman Outdoor Products, you’re familiar with.

Frank Curzio: But more importantly, they are the ultimate back-to-school play. That’s Elmer’s glue, Paper Mate, Sharpie, all kinds of writing products. Bunch of products that are back to school. Well, kids are back in school. This is supposed to be a solid quarter for them. And while some of these purchases, we go to school in Florida probably three weeks early than everybody else, but everyone’s pretty much in school now. So, some of these orders will be pushed out to next quarter. But a lot of these orders are made into this quarter that was just reported. It was supposed to be a great quarter, back to school. Holy shit, it wasn’t. All right. So now, you’re seeing consumer staples, this is like necessities, things that people use or you got to buy stuff for supplies. They’re cutting back even on those supplies, you’re seeing it. Dang, I’m going to go over something, it’s going to take me a minute here.

Daniel Creech: Okay.

Frank Curzio: When the Fed says, right, and this is what they say and this is what the Wall Street Journal, they quoted Powell here with the Jackson Hole speech. It said that, “The Central Bank must continue to raise rates until it is confident inflation is under control.” Inflation is under control, it’s under control. It’s relatively high but it’s under control. It’s slowly going lower. We have control of it now. We’re seeing it go lower and lower across so many different things. It was out of control for 18 months when the Feds watched it go to 5% in 2021 and said, “Oh, it’s going to be transitory, don’t worry about it.” That was the last Jackson Hole speech. That was August. That was last August, right, as I said. And then, it went to 6, 7, 8, 9%. That’s out of control where, “Holy shit, we don’t know what’s going on. You change your mind.”

Frank Curzio: It’s controlled now. It’s taking a little bit longer to come down and it’s going to come down. I can’t stress this enough when you’re looking at the money supply, okay? Because now I did even more research in it because this is evidence and this is data that they have. Daniel, you and I have argued back and forth about the lagging data, and it’s going to get worse, and they’re waiting to see and a lot of Fed gov is like, “Well, we want to see the data.” You want to see the data? It’s right in front of you, just got to look at it, okay? It’s right in front of you, okay? The money growth is absolutely plunging. Okay, I talked about M2, why this is important. Now, I’m going to bring up some charts here, and I’m going to explain them to you.

Frank Curzio: If you want to go on our YouTube page, which doesn’t have a lot of people viewing because we have conservative views sometimes, or we tell them how it is, and we’re not on any of the algorithms, I don’t give a shit. But YouTube subscribers who want to see the pictures of this and see it, you could see it. I don’t give a shit about YouTube. They’re a piece of shit organization. Everyone that doesn’t support the agenda, they’re going to throw off. That’s why the Metaverse is going to absolutely be the greatest thing on the planet. So, if you want to look at YouTube page, go there. If not, don’t worry about it. I’ll explain it to you. But let’s look at a couple pictures here.

Frank Curzio: So, if you’re looking at the last three comparable times to this where you saw surges in M2 growth and surges in inflation, they’re mostly in the 70s. So, if you’re looking at 1970, really ’69, but 1970, inflation went to 9%. It went from 4% to 9%. And then, when you have inflation in ’70, it peaked in… This is ’75 where it went from 12% and in ’73, it was like 2.5%. So, these are comparable times with massive inflation. And then, we had ’78, ’79 where it really took off. ’79, it hit 14, 15%. That’s why we talk about the 80s or early 80s when that inflation took off. So, if you’re looking at these massive inflation trends, what happened?

Frank Curzio: Look at M2, and there’s a great chart here, and this is from Avacorp. Amazing chart, I’m showing it right now. You see M2, what happened when inflation was at these peaks? It absolutely crashed. M2 crashed, and then when it crashed, inflation came down. You’re taking money out of the system. This is the money that flows through the system. You’re taking money out of the system. If you’re looking at the first one day on from 1970, it took about 18 months, and then you went from six and a half to under 4%. In ’74, ’75 we peaked at 12%. And that’s ’75, this is less than 18 months, we went to 4.5% From 12%.

Frank Curzio: And then, we look at the 1980 period, ’79 period where we peaked at 14, 15%, and it took about 18 months, maybe a little bit longer than 24 months before we really lowered below 4%. But we cut this tremendously, and this is the CPI. But you’re looking at the M2 growth in these periods have come down. Now, I’m going to show you one more chart because this is unbelievable. When you look at the money supply growth here, this goes back to 1945 that I’m showing everybody and actually here. It is right here, and I’m going to show the chart right here because I actually didn’t have it up for a second. So, this is the M2 chart. This is the periods of ’70, ’80 and 80s. So now, when I’m bringing up the next chart, this is M2 yearly growth, worst inflation. If you look at 1943 and it’s percentages, it shows you the money supply, how much it’s increased.

Frank Curzio: So, the money supply increases usually never more by 10%, usually 3-4% annually. If you look at this chart, a couple times went above 10%. In 1943, World War II, Daniel, right? What do you expect? You expect money growth, right? They surged because you needed defense spending and stuff like that. It was up 17%. That’s 1943. That was the highest ever in our history, right?

Daniel Creech: That’s a bunch.

Frank Curzio: Which is crazy. And what happened? Inflation was low, but inflation absolutely skyrocketed to 20% back then, which made sense couple years later, right, because you injected a lot of money. Look at right here. We injected 24%, that’s how much money growth peaked, right? $11.5 trillion. And the Fed was saying, “We don’t see inflation. We’re not going to see inflation.” If you look at this chart, every single time you see that black line right here, which is the M2, that’s gone higher, you saw inflation very quickly surge. Almost every single time, it surges. Here, it surges, surges, surges.

Frank Curzio: You look in here, and now, interest rates were at 1%, and then you’re seeing inflation absolutely surge. But what’s here? Look at M2. It’s 24% money growth, Daniel, right now. It’s fallen tremendously, dramatically, dramatically to now money growth is just 5%. It’s below the industry average really of money growth per year, and inflation absolutely has surged. So, as the money growth is coming down, it’s showing you that inflation is surging. That’s what it means. And I’ll tell you right here, it says right here, measure amount of currency M2 as well as less liquid money, but it tells you that during the economy when you see M2 growing, it’s usually a sign that good economy and stuff like that.

Frank Curzio: When it comes down, it’s a sign of recession. It’s absolutely plunging right now. So, we’re seeing a global recession across the board. Now, the velocity of money, which includes M2, how much a dollar filters through the system, we are sitting at levels at 1.1, which we’ve never seen. We’ve never seen and you can go back. I mean, this is 80 years, let’s go back 110 years, and we are sitting at levels not seen basically since the Depression. So, if you want the evidence of how bad the economy is right now and how bad it is going to be going forward, it’s right there. It’s right there for you to see with the M2 money supply, it’s absolutely crashing. It’s associated with inflation coming down dramatically every single time. And what is the Fed going to do? These assholes, they’re going to continue to raise rates, and they’re not raising them by 0.5%, 50 basis points.

Frank Curzio: You’re really going to go 75 basis points here when the current 75 basis point has not even been reflected in stocks, and now you’re saying there’s going to be another one with Larry Fink and a lot of these other guys, another one? We are going to see a monumental crash in stocks if they do it. If come out and do 75 basis points and have the same rhetoric and saying, “Listen, we are seeing no signs of inflation going, and we’re probably going to raise by certified basis points,” 10% lower automatically, immediately, probably in one, two days just like we saw at Jackson Hole, immediately, because everyone’s like, “All right, I think the Fed is close to being done. We’re seeing it, right? You stopped inflation from rising.” Inflation is not rising anymore. It’s started to come down, and when it comes down, it’s going to come down dramatically because you froze the housing market, you froze a lot of these industries. You’re going to see people purchasing, they’re going to be purchasing less stuff.

Frank Curzio: And we’re even see in the energy market as well. The energy market is coming down and people getting margin calls and things like that. And we’ll talk about that in a minute. But Daniel, what I see right here is the Fed can ultimately collapse every single asset class and it can collapse by a wide margin. It’s not going to matter what you own, it’s all up to the Fed. If the Fed comes around and says, “Okay, look,” just like I said, “here’s a 50 base point if you want to go 75 base point.” And then say, “Look, we’re seeing inflation starting to moderate. We’re going to monitor it, just a little bit of an ease tone, that’s going to result in the bottom of the market and you’re going to see a huge spike.” If not, if they have this right, you’re going to see the market absolutely tank. You’re going to probably see a 10 year go to fricking 4%. That’s the danger, That’s the danger. It’s right in front of you. It’s fucking right in front of you. And look, we’ve been rolling on certain things-

Daniel Creech: You can say Florida, can’t say the F bomb at work.

Frank Curzio: Listen, we’ve been dead on. I don’t care what anybody says, we’ve been dead on when it comes to the economy, when it comes economic policy, when it comes to the Fed should have did when we got out of stocks, when we got into stocks, right? I’ve been wrong plenty of times, not more wrong than right or I wouldn’t have this job for 30 years. But over this cycle, the past two years since COVID, I feel like when it comes to the markets, it’s been clear as day. This is clear as day, this is clear as day for the Fed to see. For all these idiots to have that narrative, all these Fed presidents, and you’re a voting member, not voting member, to say that, “We’re not even close, we don’t see any signs, and we’re going to continue to raise aggressively,” these guys are complete idiots, absolute idiots. They’re going to destroy everything. They’re going to destroy everything. And I’m very surprised, like you said, they’re going to do this into an election year. I’m very, very surprised they’re going to do this in election year. So we’ll see, we’ll see what happens.

Daniel Creech: Like Tom Petty late, great Tom Petty sings about, waiting is the hardest part. We’re basically being held hostage here. But I like how you’re saying, it’s plain as day. We do have to wait and see, but listen, this isn’t rocket science. And I think that’s why individual and the regular Joe’s out there listening to us as well as the sophisticated can appreciate it because we break it down. This isn’t rocket science. When you print money like they did and inject it, you can predict inflation with ease. You have to figure it out. Like you said, we’ve had some winners and losers along the way, but we’ve side-stepped a lot of major losses. Turning to another no-brainer is the energy markets. And I know energy is down today, so you can say, “Ah, Daniel, you don’t know what you’re talking about.”

Daniel Creech: It’s still higher, it’s basically given up a lot of the spike from Russia and things. It’s still higher than it was last year, but not significantly in the terms of… The war premium in my opinion has kind of filtered its way out, Frank. However, we still have a no-brainer in energy in my opinion over the long-term. And what I want to tell everybody, if you would give me a minute here, Frank and I have the best job in the world. Well, Frank really because he’s the boss. I have the second best job in the world because I get to be here and do this without all the stress or as much. Yet, we want to provide value. And right now, the easiest, and I think you would agree with me, Frank, not to put words in your mouth, but the best advice right now is to either hide out and play defense or just don’t play at all right now.

Daniel Creech: That doesn’t mean sell all the stocks you have. It just means keep saving, keep accumulating, keep revising, and looking at where do you think money is going to flow best. I think you have to have a longer term and scale into the energy sector if you’re not already. This is like a call to action or a public service announcement, Frank. If you don’t have any exposure to energy, please do so. And if you’re wrong, and you’ve got to give it a year or let this cycle play out, blame me. That’s fine. Because over across the pond, Frank, we’ve talked about higher energy prices, what’s going on in a nutshell. You have central banks raising interest rates and you have governments continuing to print and flood the money, which is a recipe for disaster because you’re trying to tighten and inflate at the same time.

Daniel Creech: Frank, we’ll get into greater detail on upcoming podcast and maybe some issues for newsletter subscribers, in the big picture, you don’t need demand for oil to continue to grow at a massive rate to keep oil high because other energy sources like natural gas are spiking, which means utility companies and everybody else is going to look to transition. Frank, can you imagine an irony world where because of the cost of fossil fuels, it’ll actually in renewables? It could also, in California like places, it could be cheaper to buy a gas powered car and fill it up versus charge it, if you look at different utility rates and things, especially over in Europe. That’s funny, that’s irony. But you have a situation where you’re cutting off Russia or trying to sanction it, they can turn off the energy which is spiking it, which is going to crush the economy from all aspects of Europe.

Daniel Creech: And I don’t want to sound like a doomsdayer, Frank, it’s just very easy to point and say the US is by far the cleanest dirty shirt, which is why the US dollar you’ve talked about that is going to remain strong for the foreseeable future. But energy, you don’t need a reviving economy to keep oil and energy prices higher. That’s a significant shift versus your typical boom and bust, in my opinion. The Prime Minister over in Europe, Liz, or the UK is basically… I think is going along with this $150 billion plan to cap energy prices to offset energy prices for the consumers and things like that. Long and short, that just doesn’t work. When you try to price fix an asset, also an asset you don’t really control… They don’t make their own energy, so that’s interesting in itself.

Daniel Creech: But when you try to put a cap on something, not only are you taking away incentive, you’re disrupting the capital flows that’s going to sustain that over time. Long story short, you have to have exposure to energy. And on days like today, when it’s pulling back and we’re held hostage and just waiting on the Fed, waiting on inflation data next week, waiting on speeches, that’s where you want to reevaluate your portfolio and understand, hey, despite the headlines of today, what tailwinds or what market forces are still in place now, and will be in the foreseeable future, and how can you profit off that? The easiest ones are energy and you can interrupt me now, Frank, and chime in here with me.

Frank Curzio: The thing with energy is I said yesterday that it normally corrects itself when it’s higher. It’s one of the ultimate cyclical markets, and it just does… It corrects itself. I will disagree a little bit with the oil thesis because if you’re looking at China, demand is getting crushed right now. Their economy remains closed. They’re the second largest consumer of oil. So I think it’s, whatever it is, it’s like 13%. So 13 million barrels, I guess, because we’re close to a hundred million barrels of total global consumption and it’s fallen off a cliff, right? It’s down 20%, and this was April, May, and they’re even more closed now. And you’re seeing the property market. So, if you’re going to see a global recession, it’s very rare to see global recession in oil prices spike tremendously. That’s one of the things that worries me about the oil thesis where yes, I understand everyone’s talking about the streets do oil reserves, and they need to be replenished.

Frank Curzio: I get it. People have talked about that for three months, four months, I get it, I understand. And we do supply in this whole green bullshit energy initiative where no more oil ever, electric cars 100%. It’s never in the middle. Let’s go towards electric cars, and let the people decide, and let’s not tell them that they have to use electric cars forever, especially California with your energy grid where no one’s going to be able to get any place because you’re always going to have problem with your energy grid, even 10, 20, 30 years from now and how are you going to drive? I don’t know how you are going to drive. You can’t charge your car. That’s beside the point. But when I look at oil right now, there’s certain things I see and people saying, “Well, oil’s a play.” Oil’s great, the play is uranium. Uranium’s a play. And we talked about this day in terms of how Europe energy firms, these are trading firms, are under pressure.

Frank Curzio: They have margin calls release $1.5 trillion, right, stringing their liquidity. This is derivatives and stuff. A lot of this is electric companies. If they’re reporting $1.5 trillion margin calls, it’s probably at least 25% more higher than that if that’s what they’re reporting just from experience. And when you see disasters, they don’t report the exact amount. It’s usually a lot worse than that, just like it was in the credit crisis, like it was in COVID, it’s a lot worse than what they report, right? Nuclear, to go to nuclear… I mean, Germany is going to coal, and you’re looking at Europe going to coal now. So, how many countries are going to coal, saying, “Okay?” If you look at nuclear, they have to go back to nuclear. I mean, it’s dirt cheap, cleanest for you, 24 hour baseload power. The argument against nuclear is what, Daniel? Why do people not want to use nuclear?

Daniel Creech: Disasters.

Frank Curzio: Disaster. They’re afraid-

Daniel Creech: Meltdowns.

Frank Curzio: They’re afraid they’re going to die even though it very rarely happens. Fukushima wasn’t as bad in terms of people dying and stuff like that and whatever. I mean, you never want to see people die, whatever. Again, that’s an isolated situation and there was a lot of messed up… Even with the control part, even though you did see a tsunami and stuff. And I always joke around that all the freaking nuclear plants are around the ring of fire, which is where 95% of the earthquakes and tsunamis and all that shit takes place, which is alright, whoever made that LOW, whatever. But that’s the argument, that you’re going to die and these things are going to leak radiation. However, that’s the argument against nuclear. It is Fukushima basically. People are going to die a lot sooner, and it’s going to happen this winter if they don’t have heat.

Frank Curzio: And we’re not talking about even in places in the US where in the US there’s places that it’s really, really, really, really cold. Try to go North Dakota, we see minus 30 up there. Montana and stuff like that, in some areas, it’s ice. It’s very, very cold. But we’re talking about places in Russia, we’re talking about places in Europe, we’re talking about a place they don’t have energy, they don’t have it. People are going to die a lot sooner. So, that’s why going back to coal, saying, “Okay, this whole green bullshit initiative, I get it, we want to comply but we don’t want people to die.” So nuclear, the cleanest fuel, 24-hour baseload, means it works all the time. You don’t need the wind to be blowing or the sun to be out, which people won’t talk about, which doesn’t happen all the time so you don’t have 24 baseload power.

Frank Curzio: But the argument against nuclear doesn’t make sense anymore. I mean, it doesn’t make sense to the point where, “Okay, we’re worried.” Well, you should be worried right now. And also, you’re looking at the crazy climate change idiots who hate nuclear. For some reason, they hate nuclear. And they also hate natural gas because it’s fossil fuel. They hate natural gas, saying that, “That’s not a clean fuel either,” when it’s a very clean fuel. This is becoming a joke now. People are going to die. Enough with the bullshit green initiative. You can get back to it when the economy is better, when things are better, the whole fricking woke shit, all that. Enough of it, okay? It’s destroying companies, it’s killing people. People are going to die because of these initiatives. We have to recognize that. Nuclear is the obvious choice.

Frank Curzio: It’s cheap. You’re going to see demand surge. Nuclear fundamentals look good for four or five years. What’s going on right now? The urgency, this is it. This is the catalyst. You always had it. And I’ve heard this argument so many times, and I’ve been in nuclear for a long time, uranium stocks. But if you’re looking at oil, I think you’re better off with nuclear. That’s a better alternative from an investment standpoint. I’m not saying oil can’t go higher, I’m just worried about a global recession. When you see a global recession, demand’s going to fall for cliff for everything, for commercial, construction, all this stuff. And that’s probably why you’re seeing oil come back a little bit. But you’re still going to see relatively high energy prices in Europe. I mean, it’s disaster due to Russia. You chose to mess with Russia who controls 40% of your energy needs. That that’s your problem. And that was a stupid idea. And now look, it’s come back to bite you in your ass.

Frank Curzio: Nuclear to me is a much better play here, Daniel. If you’re a bull in oil, buy oil stocks, but you should be buying uranium because if you really think oil’s going to go a lot higher, for me I think it’s a much better case for uranium to go higher and a lot of these stocks. Buy the producers. There’s UEC. enCore is a company I like. You probably never heard of them, that bought another company that actually I was invested in. That’s how I found out about enCore. But if you look at the management team, the assets they have, they’re incredible. These guys are amazing. It’s under radar play. Those are the two names. Uranium Royalty went to this structure where they call it the ATM structure where it’s ATM.

Frank Curzio: So, you could automatically issue more and more shares to raise more money. I hate that because you’re diluting the shit out of shareholders. And again, I love Melbye, he’s one of my greatest friends and I understand. You’re using that money to buy royalties. But I just hate dilution and any Canadian company, it’s massive, incredible, unbelievable dilution. Like 20 million shares you’ll start with, and then have a billion and the stock will go from 65 cents to 75 cents, but the market cap just went from $80 million to like a billion, right?

Daniel Creech: Yeah.

Frank Curzio: Because that’s how many shares, because that’s what they do when they want to acquire companies. It’s a hundred percent share purchase, never cash. Because a lot of these companies don’t have cash in the balance sheet, especially the smaller ones. Nuclear is definitely the play here if you’re a believer in oil, I think. And for me, that’s what it’s about in the stock market where you could find the greatest idea, always research a competitors because that’s why I found even greater ideas, saying, “Wow, this is a good name, but these guys are much, much better position.”

Frank Curzio: Maybe they have a stronger balance sheet, maybe they just acquired a company where the stock came down, they paid a lot of money for it but now the integration’s there, that’s when you see, that’s when you find the best thing. So if you’re looking to buy different companies, if you look at UEC, look at enCore. I like enCore a little bit better than UEC in terms of valuation, in terms of the assets. But UEC is great premier, awesome company that should do very, very well. But there’s a lot of names. Cameco’s the easiest one to buy that anyone could purchase, which is the large cap and the main producer. But you’re going to see a lot of these uranium companies pop up like they did 15 years ago when uranium was hot, when now they just eliminate the whole industry to do mining. But I just think uranium is much better here.

Daniel Creech: I like it. We can buy both. I like the politics on both of them too. I really do. And I view economics through all the politics. So yeah, UEC has been… Actually, both are good winners in The Dollar Stock Club and stuff.

Frank Curzio: Uranium Royalty is a good great company. With the nonstop dilution… And again, that money’s going to be used to purchase royalties right?

Daniel Creech: Right, yeah.

Frank Curzio: Within the uranium space, that may be a really good formula but I like when it’s controlled. I like when it’s controlled or rather see companies buying back their stock when things are good and generating cash flow, which some of these companies are going to start. They’re going to start producing. They have to produce. And I went to go see UEC’s facilities, they’re in great position. It’s been a shitty market for a very long time, but now is the time. You could buy these things. They’re still well off their highs. Yes, they’ve popped off of their lows recently. But in this industry, if you’re looking right now, I don’t know an industry that you’ll find more catalyst to buy something, especially with all this shit going on.

Frank Curzio: Because as the Fed tightens, the shit gets worse. The whole world has no choice but to go towards uranium, towards nuclear and that’s going to result in skyrocketing prices and it should result in a lot of these stocks. It’s going to be one of the sectors that does very well as the Fed absolutely is going to crush the market if they continue the same rhetoric, which I explained earlier. But with that said, went 30 minute mark, you talk about me and ranting, I want to talk about the woke culture, Larry Fink, the back and forth. What do you think about that?

Daniel Creech: Yes, very quickly, I will rant about this. Frank, there’s a fund. The ticker is DRLL. You ever heard of this?

Frank Curzio: Mm-hmm.

Daniel Creech: It’s the Strive US Energy ETF. And as the symbol implies, this investor whose name is, I’m going to butcher this, Vivek Ramaswamy. Anyway, that’s tough. But he’s anti-woke. He wrote a letter to Chevron CEO, Mr. Wirth, I believe, and is just calling out BlackRock and saying, “Hey, your policies that BlackRock is trying to push on you guys as the largest asset manager and big shareholder in all these companies is terrible. You need to increase production, reward shareholders.” It shouldn’t surprise you that the top holdings in DRLL is ExxonMobil, Chevron, Conoco Phillips, EOG Resources. What I like about this is that A, he’s just out and front calling out the woke criticism on how it’s going to hurt investors’ return on capital and not help them.

Daniel Creech: I do like that. And B, he calls out BlackRock and why do you think he went out after Chevron? I like this guy’s politics because the way he’s framing this argument, he butters up the Chevron CEO by pointing out, “Hey, your leadership is why we’ve already chosen your stock to buy this.” Now, what do you think he owns? He can’t own hardly any of the stock. Buffett owns 8% of it, BlackRock and everybody else owns it. You’ll remember, we’ve talked about this in the past, Chevron CEO has been as outspoken or as direct as you can be in the public course of trying to tell the administration, “Hey listen, you don’t want to paint our industry as a negative. We are good,” energy, oil, gas, renewables, et cetera, et cetera. They’ve pledged billions and billions of dollars to invest in renewables, and help the green movement, and all that kind of stuff.

Daniel Creech: The big takeaway here is that I just like to see the politics go back at it. And BlackRock, or excuse me, the funniest thing here is that this guy, the activist investor is calling out Chevron. Buffett owns 8% of Chevron and Buffett’s Berkshire Hathaway’s annual meeting this year, Frank, do you think they voted for or against more measures to disclose climate, diversity, and gas emissions?

Frank Curzio: Oh yes.

Daniel Creech: Yeah, they did.

Frank Curzio: Yeah.

Daniel Creech: And this is genius. This activist investor is trying to prop up Chevron and say, “Listen, you’re a big dog in this race. You have the guts to stand up to everybody. You’ve already proven that with your letters to our president, just making your case for oil and gas and energy and how important that is. Now you have shareholders in us, we can take this public, fight back publicly.” I like that back and forth.

Daniel Creech: And again, I’m bullish. I don’t think it’s one or the other. I know you’re not saying that either with oil or uranium. I just think that when you factor in spare capacity, the politics, the wars, everything going on, energy prices across the border are going to be sustainably higher than what we’ve been used to. And these companies are no longer just drilling like crazy and firing up cash, no pun intended. They’re being diligent, shoring up balance sheets and rewarding shareholders. So yeah, this will be fun. We’ll kind of continue updating this along the way. And this is the soap opera. This is better to talk about than Twitter and Elon Musk in our business, Frank, so I like that.

Frank Curzio: It really is. You have to understand where these money managers are coming from. And not only not the money managers, but you’re looking at the corporations. Why is Coca-Cola saying that they didn’t want to have the All-Star game in Atlanta, whatever, and all this bullshit? And you’re like, “Stop focusing on politics. It’s about money.” Everything’s all about money with these. So if you have BlackRock’s sitting there with $11 trillion, $11 trillion, which is incredible, and then you have State Street, you have Fidelity, you keep going. B of A, Mellon, I mean, these are the biggest asset managers in the world. When they come into your company, it’s a very big deal. They become very, very large shareholders. Just look at the largest shareholder list in all the largest companies and you’re going to see, Vanguard, State Street, BlackRock, they’re the largest owners because they have so much money, they own every single large cap stock out there.

Frank Curzio: So now, these guys where Larry Fink or whoever’s managing these companies are going with this green initiative and saying, “Okay…” It’s okay to have a green initiative and also be bullish and use oil and natural gas. It’s okay. But no, it’s either/or, right? We got to get off this shit right away. And now, you have the company saying, “We’re going to lose these massive shareholders unless we abide by what they’re saying.” And it sucks that Larry Fink has that control because this is Larry Fink’s views, and I’m sure that’s not the views of every single person that he’s managing across the board, which is the trillions of dollars. He’s managing that for someone. But he has one opinion, and he’s thinking that everyone under his umbrella has that same opinion and they don’t. And that’s where the problem lies.

Frank Curzio: But you could see why the companies are adopting this because it’s money and they want large shareholders in their company because when they have large shareholders, they are shareholders, they all make more money and they don’t give a shit about anything else. So that’s where it lies, where you’re being incentivized almost to follow the woke crowd here on Wall Street and it’s crushing a lot of these companies. It’s destroying business because it’s not the smartest business move. Doesn’t have to be all or nothing, guys. It could be half and everybody agreed, but no one wants that in politics. It’s got to be this or this. “You don’t agree with me, you’re a racist. If you’re a Trump supporter, you’re freaking nuts, you’re crazy, you’re white.” All Republicans are what? We’re extremists. We’re white supremacists now. We hate the world. We are stupid assholes, right? It’s amazing, the attack on certain classes just because if you have a different-

Daniel Creech: I think you’re looking for semi fascist is what they were saying.

Frank Curzio: Yeah, but it’s crazy out there. But again, this is about your money and you have to play it right where, yeah, it’s nice to see a company like Chevron dial back, but that could result in a lot of those big investors saying, “Okay, we’re not going to go there anymore.” Chevron probably doesn’t care because now oil price is a lot higher. But when oil prices weren’t high, they did care. They need investors. When the hit shit hits the fan and the oil’s garbage, they need them. Same with Exxon. Exxon was playing out the dividend and they barely could pay the dividend, which went up to like 78% at one time, right? They were just getting destroyed. The profits were down tremendously. They looked horrible, especially during COVID. And now, you’re seeing them in a position to fight back because oil’s higher. It’s going to be an interesting fight going forward. It’s nice to see Chevron fighting that battle. So, thanks for bringing up. That was really cool, Daniel.

Daniel Creech: Yeah, we’ll continue to follow it. So, that was good. Another good Wednesday in the bucket, Frank.

Frank Curzio: I know, I know. I like to go 30 minutes. Now, it’s almost 40 minutes, but a lot to talk about, especially with the markets, getting lots of questions and stuff and I understand it. So, keep them coming, guys. That’s it for us. Keep those questions coming, frank@curzioresearch.com. Daniel?

Daniel Creech: daniel@curzioresearch.com.

Frank Curzio: Very, very simple, but I’m always going to make you repeat it. So, really appreciate all the support, guys, and I’ll see you tomorrow. Take care.

Announcer: Wall Street Unplugged is produced by Curzio Research, one of the most respected financial media companies in the industry. The information presented on Wall Street Unplugged is the opinion of its host and guests. You should not base your investment decision solely on this broadcast. Remember, it’s your money and your responsibility.

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 Wall Street Unplugged podcast—ranked the No. 1 “most listened-to” financial podcast on iTunes—has been downloaded over 11 million times.

Editor’s note:

Genia’s recommendation in Unlimited Income yesterday isn’t your average oil & gas stock…

It’s sitting on some of the world’s most valuable oil assets… which means it’s about to see its profits soar as energy prices stay on a long-term uptrend.

And it’s one of the highest-yielding stocks in the S&P 500.

Get access to this stock—completely risk-free.

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