It’s Wednesday, which means Daniel Creech and I are discussing the latest market-moving headlines.
While this year’s Consumer Electronics Show (CES) lacked the usual “fun factor,” I highlight two trends that generated the most buzz.
Next, I break down the current crypto environment, including why Bitcoin and Ethereum prices are holding up even as investors flee… why the SEC needs to regulate the industry ASAP… and why crypto investors should brace for more pain.
Tomorrow is a big day for the market—the latest Consumer Price Index (CPI) data will be released. Daniel and I share our thoughts on how to play the (probable) rally.
WARNING: Don’t fall into Wall Street’s trap. All of these “fake” rallies are a ploy… Wall Street wants everyone to get sucked in by rising stock prices so they can sell as the economy tanks later this year. But you can give Wall Street the finger and make a fortune as stocks fall over the coming months. We’ve been leveraging the bear market using the Moneyflow Trader strategy. If you haven’t, learn how here.
And finally, I highlight one sector that I’m bullish on (after ignoring it for a long time). As inflation comes down, these companies will see a big jump in profit margins… and it will drive their stocks a lot higher.
- A quick rant about Las Vegas prices [0:30]
- Why Bitcoin and Ethereum are holding up in a bear market [4:50]
- The SEC needs to regulate crypto ASAP [15:25]
- How to trade tomorrow’s CPI data [19:10]
- An easy way to flip off Wall Street [29:00]
- This “forgotten” sector will benefit from falling inflation [34:45]
Wall Street Unplugged | 992
How to give Wall Street the middle finger
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 January 11th. All right, I’m Frank Curzio, host of the Wall Street Unplugged podcast, where I break the headlines and tell you what’s really moving these markets. I just came back from the CES, broke it down yesterday. But today, I’m back with my buddy Daniel Creech to discuss the markets. Daniel, how’s it going man? It’s been a while since I saw you.
Daniel Creech: Happy Wednesday, Frank. I know; it’s good to see you. I’m sorry that you got sick in Vegas, now he’s in here trying to pawn it off on me so he can feel better. I understand that.
Frank Curzio: I’m trying to get you sick now. This way, you can get sick, so you can feel it. That’s how people should feel when they get sick. I want you to feel just like me.
Daniel Creech: Yeah.
Frank Curzio: I feel like shit.
Daniel Creech: I want you to be miserable. No, I’m sorry to hear that it was lackluster overall, but it had to be good in Vegas. Gosh, do I miss Vegas. I was talking about that when I was filling in. By the way, I had a great time filling in for you here on the island, that was a blast.
Frank Curzio: Nah, that was awesome man, I really appreciate it. But you know what, one thing about Vegas, I’ve been there so much, it’s not really exciting to me. If I had a choice, I wouldn’t go, because I’ve gone there so many times. Expensive, that’s not even the right word to use. I’m not justifying how much everything costs there. Holy cow, I feel like a hundred dollars is like a penny there, they just take everything. I’m not talking about gambling or anything. Just the fees and everything, especially on the strip for tourist places and stuff like that. Man, it’s insane. Even the bars, they charge 20% on top of everything. It’s getting out of hand now, but overall, I just expect it to be more fun, more things to do for the consumer and stuff, and it wasn’t. There were a few things that were really cool.
Frank Curzio: Just for the average person going, they would’ve been disappointed, compared to if you went pre-COVID, because there’s always so many fun things, and you’d come back and tell 20 stories, and now, you might have told two or three. Even the cars, there wasn’t a lot of cars there compared to last time. GM four wasn’t there with these huge displays, especially Ford I was surprised at, because you get the best lineup of EVs in 2023 ever, then why the hell aren’t you on that show? That’s your consumer show. That’s the consumer, that’s what you want. That’s where you get free publicity, you make your money back, spend a million dollars, but you get 10s, 20, 50 million hits of people blasting everything all over social media, that’s why it’s working for that conference. And I guess people just are cutting back so much, you actually saw that. There was a lot of people there, but overall, it was cool and it was fun. It was all right, but-
Daniel Creech: Now, I was following your Twitter, of course, not because I have to, but I didn’t see any headsets or anything. So, you said you have a headset, because when you got back, I was telling you, because the metaverse made its first presence there, so I was looking forward to hearing about that. And a guy was telling me that he had tried… I believe it’s the latest headset from Meta, formerly Facebook, and he was telling me how awesome it is. I know you said you met one, you looked at the Oculus Killer, you didn’t know, but you said they are a lot better. You said they’re actually realistic.
Frank Curzio: Yeah, they’re realistic. Holy cow, it’s really good. If you have the Quest, it’s really good. My kids use it all the time.
Daniel Creech: He was playing poker, and he said it was just going into a casino and playing poker.
Frank Curzio: It is unbelievable technology. You know it’s going to get better, and now HTC is releasing their Vive, and that’s unbelievable as well. But now, you’ve seen all application, now you’ve seen something that’s really cool, that people could wear; and now, they’re trying to make it into glasses like you and I wear every single day. We’re very far away from that. There was 30 different displays. It was some that didn’t work. Seriously, they didn’t even work. I explained it yesterday. And all of them look like you’re wearing just big bulky glasses that look weird, like you knew something was on, and you’re going to wear a headset instead of that. So, it’s going to get to the point where your phone is replaced by your glasses, and you’re going to be able… It’s going to get there. You’ve seen it. I’ve seen the technology, it’s amazing. We’re still far away from it, probably three to five years, but you’re going to see it. It’s going to get better and better and better and better, and that’s the goal, but-
Daniel Creech: Let me ask you a question. Do you think Bitcoin was rallying in price because the metaverse and Bitcoin was being talked about at the CES?
Frank Curzio: No, it was being talked about. There was a crypto presence there. You know what was great, is the tokenization. There’s finally a tokenization. There was a whole big booth in the middle of the Venetian Expo, one of the main floors, and they’re talking about the tokenization of assets, and I was just looking, and I’m walking by, being like, “Yay, we’re the first person to freaking do that.” It was really cool. And they had 10, 15 companies in that booth alone, and it wasn’t like a booth, it was just like a sound stage, and people get up the stage and talk, and then you have just different companies of stages that are doing tokenization and stuff like that, and it was really cool to see.
Frank Curzio: That’s what NFTs are about. It’s ownership of the blockchain. Instead of getting patents and stuff like that, now you’re showing ownership of your property. NFTs could give you special access; it could be a barcode on your phone. This is the future. You’re looking at…
Frank Curzio: You’re saying Bitcoin… And I get this question a lot, Dan. We’ll start here because we’re definitely going to talk about CPI tomorrow, but when I look at the question I was asking, “How’s Bitcoin, Ethereum, they’re rallying and doing good. How’s it holding up so well, where we just saw FTX, Celsius, Voyager, right? But what about Silvergate coming down a ton? What about Coinbase now? Everyone coming after Coinbase, saying that it’s going to be a major slowdown, which you’re seeing, so you got to upgrade from Coinbase the other day, downgrade today. But how’s it keeping up? It’s because that people are… The holders of Bitcoin are long-term holders, it’s just a matter of where you’re keeping your assets.
Frank Curzio: And when I argue about Silvergate, and Silvergate’s coming down, I said, “I don’t see any fraud there.” And I still don’t see fraud there. However, it is a bank, and people are removing deposits, and when you’re removing deposits… And you can do that for Bank of America. If you feel like something’s wrong with the bank, you’re going to remove your deposits. Now, you’re not seeing people sell Bitcoin. What they’re doing is, they’re transferring that into cold storage, which is offline, and this way, they could hold it someplace else because a lot of people got burned, especially with two companies, Celsius and FTX. Those are companies that were supposed to be reputable, that everybody thought were okay, that really surprised the hell out of everybody, and they got wrecked. And Silvergate, as I was saying, listen, I think there’s no fraud there, but people are going to continue to pile on. If you can get a way to scare the shit out of everyone, where you move your assets for a banking account or something like that, that’s what happened, and now, you had Silvergate come out and say that they had to sell some of their assets, which their assets were in treasuries and other things, they had to sell some of their debt for loss to cover around $8 billion, because a lot of people are removing it because there’s story everywhere.
Frank Curzio: And that’s another story, saying some kind of home loan that they had from three years ago, two years ago, again, they’re going to keep piling on, this is Wall Street. I use this example when it came to Wall Street, I worked there, guys, this is what I do for a living, it’s the most cutthroat thing in the world. Okay, your best friend sitting next to you at Wall Street wants to take you and everything away and wants to steal your wife from you. They want to steal your house, take everything from you. And I use this example, this analogy a lot on Wall Street, and it’s true, because not only will I take it, you’ll be there, just in the street, bleeding with one sock on, they’ll take the sock and burn it in front of you and say, “That’s what you get.” That’s Wall Street. There’s nothing more cutthroat than that.
Frank Curzio: So, once they find a little angle they can come, they cover it, they’re trying to do Coinbase, they’re trying to go after Tether now, they’re trying to destroy the industry, which means when it comes to crypto, still, you got to wait for this to settle out. The companies that are going to be left standing, which is going to be Coinbase, they have a ton of cash on their balance sheet, over $5 billion, a lot of it is institution. You’re going to see trading volume come down, but they also have a lot of employees, which they’re cutting now, which is good.
Frank Curzio: So, Coinbase I think is a survivor, Silvergate… Listen, so that asset, they have the assets. A lot of other companies that run to the banks didn’t have it. Silvergate was able to sell $8 billion, and maybe people keep removing money from Silvergate, and maybe that’s the way it goes under. I don’t see fraud. I haven’t seen fraud, and it would be easy to prove because they’re regulated; they’re a publicly traded US company, US bank, they’re regulated, just like a JP Morgan, so you could see all their financials. I’m sure since FTX, everyone’s been ripping off the books and everything, so when it comes to this, and now you’re seeing…
Frank Curzio: What else we’re seeing? We’re seeing the Winklevoss twins, with Gemini, and Gemini earned, where all these companies that were giving you 8%, 10%, 15%, while interest rates is zero, because the reason why that never happens, the reason why in my newsletter I never suggested doing that staking and stuff like that and earning interest, because I didn’t understand it. I had BlockFi CEO Zac Prince come on, and I talked to him and I asked him questions about it. Still, he wasn’t able to tell me, where I understood how you paying that in. You have to be making it someplace else. Obviously, they weren’t. Okay, so now you have the Winklevoss twins, accusing Silver, that’s DCG, right? So, Digital Group and-
Daniel Creech: Digital Currency Group, yeah.
Frank Curzio: Digital Currency… And they’re going back and forth, and they’re saying that where the trading for Gemini was on how to go through them, and these are the guys that own the Grayscale Bitcoin Trust, and how they were involved in 3AC and that blowup, and lending money to them back and forth.
Frank Curzio: So yeah, so he said she said type thing, and they’re going back and forth, and again, it’s not good for crypto, but the reason why you’re seeing Bitcoin and Ethereum, the two main ones not really getting hit, even though you’re seeing more and more controversy, and more bullshit, and more drama and, prima donna bullshit in the industry is because people who own those assets are not selling them, they’re just taking them out of these places and holding them in cold storage because they’re believers long-term. So, those are two that work. There might be a couple others that work, but the rest of the industry, you have to sit back, wait a little while, and there’s going to be the opportunity of a lifetime in here because it’s not going away, as much as Jim Cramer says it’s going away now. What did you say Coinbase had? I forgot.
Daniel Creech: Well, I was looking back. I forget the number, but I feel like I remember him touting Coinbase as an entry into crypto and all that, and of course, and people can change their minds, that’s fine.
Frank Curzio: Yeah.
Daniel Creech: Jim and I… Today on Decrypt, I was reading this morning that they are terminating their earn program.
Frank Curzio: They have to.
Daniel Creech: Well, you’d think in trying to get that 900 million, that there’s this 900 million figure that they keep tossing back and forth between them and what Genesis owes. It’s a mess, you’re right. That is all good, because to your point, you asked the gentleman the same question, he didn’t really understand it because there is no clear answer. It’s clear as mud, as the fun saying goes. Sam Bankman-Fried was asked the same thing about how these earn programs work. He gave a terrible answer months and months ago.
Daniel Creech: This is definitely a black eye. Outside of a few smaller altcoins, or whatever they’re called, outside of Bitcoin and Ethereum, that you don’t even have to be interested in crypto, you know what those are, or you have at least heard those, I am surprised that volume is hanging out or staying… I’m surprised there’s still as many altcoins as there are, let’s put it that way. Because if you’re the average guy, I don’t know, unless you really want to hang up on crypto completely, which I don’t think that’s the average crypto investor or risk taker, what’s keeping you from going, “Hell with it, I’ll just buy Bitcoin, Ethereum, and forget about this.”?
Frank Curzio: I mean, that’s what we see…
Daniel Creech: Greed, and I don’t mean greed as a bad word, I mean, greed is a good word. Other than greed, what are you taking shots for? That’s an interesting back and forth to think about in a macro view.
Frank Curzio: Looking at this industry four years ago, and really having great contacts in the industry, and going through these tokens, and everybody telling me, “This is great, this is great, this is great, I told you from day one.” And it was even more relevant now than it is back then. 90 to 92% of all the companies are bullshit. These are not companies at equity stake, where you go bankrupt, they can’t make the payrolls. There’s no equity involved. There’s no equity, you don’t see the numbers. This is a utility feature. The token has to be linked to the utility, which is actually powering the technology within the blockchain, and some of them don’t have a utility. Uniswap doesn’t have a utility; yet, billions of dollars valuation. Most of them don’t have a utility.
Frank Curzio: Binance has a utility. You could use that token, and then they burn it, which is like buying it back. Every single quarter, they’re buying it back or burning their tokens, and you could use it for trading fees, you could use it to buy different things. They have a hundred different things you could use a token for, but if you look at all the other tokens, I’m like, “Where are you using it?” “Well, when we make profits.”
Frank Curzio: Well, you’re not making profits for 20 years, 10 years, so basically, you have no utility, and there’s no equity tied to it. So, you’re saying, “Why aren’t they going out?” Because they just leaving it there, and maybe they traded a penny, or they traded 0.0000001 cent, but it just shows you how these things are really securities. They’re all securities. You have to deem them all securities eventually. Other than Bitcoin, Ethereum, and maybe two or three others, they’re all securities. People intend to make money on them, they’re selling them, people own these things, the insiders own them, you don’t know how much it is, they’re dumping the crap out of it while they get being pumped online, and Twitter, and things like that, and that’s been going on for a long time.
Frank Curzio: What I’m surprised to see is that even the best names in this industry are down 70%, 80%, and even that 80%, which leaves you about a good maybe hundred cryptocurrencies that really have good features, that have really good people behind them, they have good investors behind them. You have Andreessen Horowitz behind them. There’s also good investors behind FTX, but you’re seeing how crazy this industry is. But the survivors that are left, it really reminds me of how terrible it went during the dot com. There was a lot of good companies that just had crazy valuations, that leverage themselves too much. There were really, really great companies that went out of business, and then look what happened to those companies. I’m not talking about now, looking at 20, 25 years later, 23 years later, but even 5, 6, 7 years, like 2006, 7, 8, just going into to the credit… How you saw the leaders really emerge and become the leaders even of today.
Frank Curzio: And that’s what you’re going to see in crypto. It’s not going away. This is something that’s real, but it’s nice the FTX thing is… I know it’s hurting a lot of people, people on our newsletter, anyone that’s involved in crypto, it’s a good thing to wash out all the shit, and all the garbage, and all these young kids that I think they can create a token and just be like, “Oh, we got a token.” And there’s no utility features to it, and it’s going to have that cream rise to the top, and again, there’s going to be a time, probably two, three years from now, you’re going to be like, “I can’t believe I bought this at 3 cents or 4 cents or 5 cents, and it’s like 5, 6, $7, and you’re not going to really have that opportunity in the stock market.” Even though some of these names are down 70%, they’re finally trading at 15 times, 17 times earnings, what they’re supposed to trade at, when they were trading at a hundred, even… Whenever it says they’re trading at something times sales, is because they can’t use a traditional PE, because they’re not making earnings and not generating profits, so they’ll use sales estimates. “Well, there’s a great stock trading at 15 times sales compared to the rest of the industry.” Now, the whole industry has come down, and you’ve seen all these names come down tremendously.
Frank Curzio: At technology, unfortunately, there’s still a lot of companies, a lot of companies that are still overvalued. I think Nvidia is an unbelievable company, but it’s still overvalued here. Same with AMD. These are companies you have to be careful with, where just because they’re down 60% from their highs, you think they’re buys, but there’s re-rating going on, it’s no longer a growth market, it’s a value market. People want to see cash flow, and that’s why you’ve see the IBMs hold up well and Intel start holding up well, even though those are two names that got crushed during the growth phase and nobody wanted them. But now, people want those companies now because at least they generate cash flow.
Frank Curzio: So, that’s where we are within crypto. You got to be patient, probably for at least another 6 to 12 months, but a lot of the stuff is washing out. I think most of it is washing out, and then you’re going to see institutions… And I think you’re going to see our big banks, once this is regulating SEC gets off their fucking ass for once in their life and comes in… I shouldn’t say that because the SEC is a political organization now. But once they get off their ass and regulate this once $2 trillion industry, it’s a real industry, it’s integrated within banks and blockchain and stuff like that, you’re going to see some of the big banks really start going all in. And even some of the institutions and money managers are starting to offer Bitcoin in their 401(k)s, which is a good thing, and that’s why you’re seeing Bitcoin hold up pretty well, even though you’re seeing Coinbase come down, you see Silvergate really come down the other day when they had to cover the 8 billion in withdrawals, but they did have the money to do that in treasuries and stuff like that. And let’s see how this plays out, but it’s still going to get worse before it gets better, Daniel
Daniel Creech: Worse. Frank, we got to do something positive then. We can’t talk like that.
Frank Curzio: I said positive where the winners… You’re going to see it. If you’re a long-term holder and you’re purchasing things like Bitcoin, Ethereum, and some of the others, you’re going to get… Some of these names should not be down 80%. They shouldn’t. These are good names within the industry, but the rest of them should be bankrupt.
Frank Curzio: And now, you’re going to see people who launch these tokens, they’re going to be more of security tokens, and that’s why Coinbase got their license for security tokens. “We’re a security token. We show our financials and everything, and you get an actual equity stake just like you would in a stock in our company.” That’s where it’s going to go. That’s where it makes sense for a lot of these companies, and hopefully, we’ll see it go that way. I do think it’s going to go that way. I thought it would go that way a lot sooner, but unfortunately, you have to wait for the whole industry to get blown up like this before you realize, we need more disclosures, we need more regulation, people need to know their money’s safe, and that’s where we are right now.
Daniel Creech: Agreed. The SEC isn’t going to do anything quickly. That’s an aggravating thing, but we’ll get through it.
Frank Curzio: Yeah, which is good, because they haven’t done anything quickly for three years, so hopefully now they’re ready, because they haven’t done anything, they haven’t done anything. They haven’t done anything. “Oh, well, we’re going to… We’re do this, and it looks bad.” Now look. If you’re on the ball, FTX, it might have happened anyway because it’s more an international company than a US-based company. But come on, if you don’t understand this, get people in there that understand.
Frank Curzio: It’s just like hackers. The best hackers are hired by the government because they say, “Hey, you know what, it’s easier to get paid a million dollars a year than go in there and steal his stuff and risk going to jail for life.” So, these are the best people that know the best… You have great people within crypto that could work for the government to help them out to understand this, you just got to get off your ass. You have to get off your ass now because a lot of people getting hurt and it’s unfortunate, and they’re asleep at the wheel, and they have to get off their ass.
Frank Curzio: I never thought I’d say that about the SEC, where you want more regulation. I don’t want it to be over regulated, but you need to know your money safe, you need to know where the capital is, you need to know that it’s not some kind of Ponzi scheme, where FTX is using that capital to fund other investments. What is this, party poker? Remember that site? You think you have all your money on the site, and you go, and they’re taking all the money out, and it’s when deposits stop, the wheel starts turning, you’re like, “Oh, that money’s not really in there because they’re keeping it.” And when people want their money back, they can’t get it.
Frank Curzio: How don’t we know that? Why isn’t that regulated? It’s regulated every place on every brokerage firm here. They all do the KYC AML checks immediately here. They do that. They don’t even tell you they do it because it’s automatic. If you have a warrant for your arrest and you sign up for a brokerage firm, I could tell you within probably a half an hour to an hour, a cop’s going to knock your door and arrest you. That’s all being checked behind the scenes. This should be done. I just don’t understand why it’s not done, because it’s a fascinating industry, there’s really unbelievable technology, it is the future, banks know it, funds know it, everybody knows it, so regulate it, because this is where the future is going, this is where it’s going, but yet, you have to regulate because there’s so much bullshit, and hopefully, we see that regulation coming, but…
Daniel Creech: Moving on.
Frank Curzio: Moving on, before I really get pissed off.
Daniel Creech: Yeah.
Frank Curzio: There’s some piece of data coming out tomorrow that I think it’s going to be a little bit of a big deal, it’s called CPI. What do you think, Daniel?
Daniel Creech: Well, JP Morgan says it’s going to come in, continuing the direction of lower. We’ve passed peak inflation hopefully, knock on wood. For those of you not watching on YouTube, I’m knocking on the side of my head there. And they think though market will rally one and a half to 3%, depending on just how low, Frank, the inflation reading comes in. I don’t think it’s a big stretch to think that it’s going to continue downward. We’ve had energy prices, everything else stabilizing or dropping recently.
Daniel Creech: There is a little bit of lag here, but I think that, to be a broken record, I think if… And the odds are with the stock market rally following that, you ought to use that exactly the way you used a bull… Or excuse me, a bear market rally last year, which is, if you’re in growth in tech, I would look to lighten up on those and take advantage of that upward move if we get it, and move cash to the sidelines to reevaluate what opportunities, because if the market goes up 3%… Let’s cut that. If the market goes up 1% tomorrow, that will start to get people… Beginning of the year’s always slow. All right, nobody’s doing anything a whole lot, everybody’s adjusting back into their normal…
Daniel Creech: The next Fed meeting isn’t until the end of the month, that means we have two full weeks of just financial headlines talking about how inflation is moving lower, how the Fed policies are working, how they’re going to stick to their guns. We’ve had some recent Fed members, both voting and non-voting members… Voting members, excuse me, talk about how interest rates need to be above 5% for a very long time. Jamie Dimon of JP Morgan came out and said that he says he sees the Fed may be raising rates to 6%, Frank, six.
Frank Curzio: Is that what he said, six?
Daniel Creech: 1, 2, 3, 4, 5, 6, and keeping them there. He’s also in favor of pausing rate hikes at some point, of course, because common sense tells you can’t raise forever. I want to go to sleep and wake up at the end of February, frank. I don’t want to miss my birthday on the 23rd. Send all your gifts to email@example.com. Because we have the Fed meeting coming up. After this inflation next week is the producer price index, PPI. This is CPI this week, PPI is next week, followed by the Fed meeting, and then we got more sanctions. I’m not going to go into detail on oil. A good subscriber emailed me, I went back on my word and accidentally talked about energy when I said I wouldn’t, Frank, on a podcast last week. There’s just sanctions going in there, that that’s why I’m excited about the end of February, to really think through the process. It’s not that we won’t place bets before that, but there’s just a lot of things unfolding, and as Tom Petty says, “Waiting is the hardest part.” That’s what’s going on in Daniel Creech’s head. What say you about the CPI tomorrow, Frank?
Frank Curzio: CPI is supposed to come out at 6.5%. The JP Morgan thing is interesting, because last month they said the same thing, and they were right. I believe that with this report coming out, that’s why you’ve seen the market… This is the first time, I believe, in the last four months… Don’t quote me on that, but I’m pretty sure I’m right on this, that the market is rising into the CPI number. That means it’s anticipating a better than expected number, and we’re up pretty sharply.
Frank Curzio: This is why I see the greatest strategy in the world is buying puts. When you look at this as a whole, the inflation’s going to come down, has no place else but to come down, has to come down. We raised rates by the fastest we’ve ever raised in history, but in such a short period. It’s going to come down. We’re going to see it come down. It’s going to come down sharp. There’s evidence showing even the rentals market’s getting crushed now, the housing market’s getting crushed, you’ve seen demands dry up, so the Fed’s going to pause. So, you want to see prices come down. If prices come down, this is the positive.
Frank Curzio: The market is rallying because the CPI is coming down. What that means is that people no longer, and companies can no longer charge those high prices, they have to come down. That means that margins are going to start getting crushed. So as a CPI comes down, that means 100 percent, corporate margins are getting crushed. That’s the bullish case. That’s what you’re hoping for if you’re buying stops right now. And I want you to think about that, because if you look, and say you take out all the bullshit of the CPI or the PPI this month or next month, and let’s go out for a year, because this is what’s going to happen a year from now. The Fed, obviously, probably by February, hopefully they stop raising rates. That’s going to be taken as the greatest thing ever, and the market’s going to go up.
Frank Curzio: Here’s why I say buy long dated puts, because this is a seller at market, it’s going to be like that for at least 24 months. So, you’re looking a year out, and I see this market where margins are going to continue to shrink. As interest rates stay relatively high, people are getting crushed month, over month, over month, over month. It’s not getting better, it’s getting worse. You’re seeing the money, you point out the liquidity part and the trillions of dollars. Remember that stat you were telling me about?
Daniel Creech: Earlier, yeah.
Frank Curzio: Okay, so what was it?
Daniel Creech: 2.3 trillion from the Wall Street Journal, and excess savings during the COVID stimulus and all that. That’s down to about 1.2 trillion now, and some Wall Street analysts, Bank of America, et cetera, are thinking that that will last until October-ish of this year.
Frank Curzio: Okay, so that means all the stimulus is out of the market. So, last time we didn’t have stimulus, the earnings came in at 160, so you had all the stimulus, then earnings were projected to go to 240. They’re going to probably finish 220 this year. People are projecting still that we’re going to grow earnings year over year. Now, we’re coming down tremendously, like I told you. It’s the biggest revision in the earnings I think I’ve ever seen in my life, other than black swan events, which is the credit crisis, and also, recently COVID, where there was a 7% adjustment this quarter, going at 7% earning adjustment. That’s how much earnings go up a year annually if you look back at it historically, if you look back to the fifties, S&P 500.
Frank Curzio: That’s the revision right now, so you’re going to go into earning season two, which starts basically in a week from now. It’s already started a little bit. So, you’re going to see companies say, “Oh, we report earnings and we beat estimates, we beat estimates, we beat estimates.” And everybody’s going to say, “But those estimates have been significantly lowered into this quarter.”
Frank Curzio: Now, when we’re looking a year out, what you’re going to see is that money, like you said, how it’s going to be gone by October. Everyone’s savings, because you’re paying more, inflation is more, even if you have a fixed rate mortgage, that’s fine. But there’s nobody buying houses right now, there’s nobody buying stuff right now, and housing’s one of the biggest drives of the economy. Now you’re seeing those savings shrink, shrink, shrink, and as a shrink, what’s going to happen? What are you going to do when you go to spending, you’re spending less, you’re going to look for alternatives. “Oh you know what, I’m just going to go to Walmart to go shop. And forget it, the grocery store might be too expensive, I’m just going to go to…” You’re start trading down, and you’re seeing it, you’re hearing it.
Frank Curzio: Now, retailers as well, with their high margins, like Chipotle, you’re seeing Chipotle get nailed… Now you’re seeing Lululemon, companies have, well untouchable, we can raise prices forever, and now they’re starting to get hit. So, any companies that have super high margins, buy puts on, just buy long dated puts, because now you’re not worried about, “Okay, JP Morgan’s right, this comes out…” I’d be surprised if it doesn’t come much lower at this CPI tomorrow. So, say the market’s going to go up 2, 3%, I don’t really care. What I’m going to do when it goes up 3%, is I’m going to bet against the market. That’s what we did around a month ago, betting against the Nasdaq. The market went up, and we did that in one of our conservative newsletters, which we only do a Moneyflow Trader, but I just wanted to show people how it works.
Frank Curzio: All right, that put, which was dated, I think nine months, I forget how long it was, Daniel, but five months from now. So, it went up 40% in a month. We saw the market rise the past few days, it’s still up 20%. I don’t care because it’s long dated. I know that the market’s still going to get crushed, because you’re seeing margins come down, earnings drive. It’s an effect of earnings, high margin’s going to be higher earnings, and earnings are coming down, people are cutting costs. Even if they’re meeting their estimates, it’s not pure, it’s not from the top line where you’re seeing strong revenue, it’s because you’re laying off tons of employees and you’re cutting back costs dramatically.
Frank Curzio: They’re not looking to spend. Companies aren’t spending, business aren’t spending, people aren’t spending, and spending drives 75% of the economy, that’s why we’re going to fall into a much deeper recession. I don’t want to sound like the bearer of bad news. This is a great time to start doing your research and looking for great companies that you could own for the next two to five years, because while the total addressable markets shrink, Daniel, they’re going to shrink, because you’re seeing these markets shrink, shrink, shrink. A lot of companies are going to go out of business, and now you’re going to see industry leaders start taking business away from those smaller companies, and then you’re going to see the new industry leaders come out of the next bull market. But you have to look now, because you don’t see markets like this… With the NASDAQ, decline is 33% in a year.
Frank Curzio: You don’t see that. It happens in a month during COVID, it happens in 3, 4, 5 months where you see a big dive during the credit crisis. Then it was a false thing, where the market went up in December, and then it fell, and then boom, we hit the bottom on March 2009, and then we took off. So, I don’t want to throw too many numbers at you, but what you’re going to see is inflation continue to come down, but in reality, guys, that’s bad news. It should be factored in that inflation is going to come down, it’s going to come down sharply. If you want to buy stocks based on that, good luck, because you’re buying that on negative news for the overall economy and overall market.
Frank Curzio: We’re in a no-win situation here, created by the Fed. They’re removing all liquid out of the market, and one of the biggest things nobody’s talking about is quantitative tightening, where they’re shrinking their balance sheet. Forget about rates, they’re constantly shrinking their balance sheet right now, so you’re taking hundreds of billions of dollars out of the market every quarter, which is going to take place at least for the next four to eight quarters. And as you see that, even if they pause interest rates, it’s going to make it where they are not going to lower rates for quite some time, probably through this year, you’re not going to see them lower rates unless we see a really, really massive pullback in the market, but it just sets up that there’s more negativity than positivity. And if you’re buying puts here, which we show you in Moneyflow Trader, Genia is great at doing, you’re probably going to see the market go up tomorrow.
Frank Curzio: You saw the mark come up, that’s the time you want to do it, because now you have long dated puts, because the next year is going to be one of the most difficult environments that you are going to see. It’s just going to be a long slug, it’s going to be very, very tough, it’s like you’re just dragging through the mud, it’s going to be really, really tough. You got to be careful, you got to understand earnings, cash flow and everything, but the next year, guys… Listen, it’s not, it’s contrary to my business needs because we recommend newsletters, and you see even in Curzio Research Advisory, how many stocks we have in there. Sometimes we’ll have up to 2015, we have a lot less than that, and we’re also playing puts a little bit, just like Moneyflow Trader, and we’re not going to do that anymore, that’s for Moneyflow Trader, Genia, and that’s why we discounted that price so much.
Frank Curzio: But when you’re looking at the markets, you have to protect yourself because it’s very dangerous, and puts, it’s not just protecting, it’s a chance to get greedy. You bet against Wall Street, you bet against company who don’t care about you, don’t care about anything, raising prices… This is your chance to get the upper hand. This is your chance to put up your middle finger at Wall Street and say, “Hey, I’m betting against you, and I’m going to make money because of all the BS and all the garbage that you’ve been telling us, and how great everything is, the Disneys and the Fords.” And lying through their teeth of how great everything it was during supply chain concerns. This is your chance right now, because you’re going to see the market go up probably in the next couple weeks, good CPI number tomorrow, use it to your advantage, that’s the chance that you’re going to have to buy puts, long dated puts through this year, and I really think you’re going to make a killing.
Daniel Creech: Oh, well said. The old finger up to Wall Street, Frank. That’s a t-shirt, that’s what we need to do. Curzio Research with a big middle finger to Wall Street.
Frank Curzio: We do, that’s what we need.
Daniel Creech: That’s a marketing idea.
Frank Curzio: That’s what we need. But it’s sad, because usually people don’t know how to play the downside, the average investor, and that’s what we’re here for. We don’t get paid by companies, we’re independent, that’s why I could say, “Hey, you know what, the CES really sucked.” You’re not going to see that any place. No one’s going to say it sucked, nobody. Because they all cover it, and they all have insider access, and they know a lot of the companies there, and it’s this whole big circle within technology. We all like each other, and liberals, stuff like that and San Francisco stuff. So they’re all together, and they don’t talk bad about each other, and I don’t care. My interest is for you. That’s it, that’s all I care about. Why? Because that’s how we sell newsletters, is by helping the individuals make money. If you don’t make money, you cancel your service, it’s that simple, that’s it. I’m not getting paid by somebody else and saying, “Oh, I’m going to recommend…” None of that shit.
Frank Curzio: So, when I see the market, there’s times to really be aggressive, which you had in the last 12 years, and we benefited tremendously through our newsletters and having that growth model. It’s a value market, it’s going to be like that, it’s changing, and a lot of people, especially analysts who’ve been around for 10, 12 years, the only market, Daniel, that they’ve been in is when we’ve had zero rates, and the Fed has been pumping liquidity into this market like crazy. The Fed is not there for us anymore. They’re not going to stop anything. They can’t, otherwise it’s going to create more and more inflation. That’s why it’s very dangerous right now, because as you’re seeing these companies, you’re seeing it in retail. Bed, Bath, & Beyond, you’ve seen them cut stores. I don’t know how retail’s going to make money.
Daniel Creech: Yeah.
Frank Curzio: Great during the holiday season. Who the hell’s at retail sellers right now, buying stuff? Who? Best Buy and stuff, good luck man. They’re going to be selling TVs really at a steep discount going into Super Bowl, but it’s… Yeah, I don’t see the demand there, and demand is falling off a cliff. You need to realize that. So, when you see the positive CPI, positive means it’s coming down, that’s actually a negative for the economy, it shows that we’re falling into recession, and it’s just a double-edged sword. There’s no good news here, you just got to wait it out, and instead of just sitting on your hands and being like, “Holy shit, my stocks keep coming down.” Here’s a way to make a killing.
Frank Curzio: I’m not talking about making 30, 40%, I’m talking about Genia, at closing trades, on average for triple digit gains in months. That’s what you need to be doing in this market, because you’re going to be making an absolute killing, and more importantly, you’re going to have a pile of cash at the bottom of this market, which is exactly how the greatest professionals, the greatest companies in the world, that’s how they play this market. You want to have tons of cash, have a great balance sheet, because that’s going to allow you to buy assets at 10 cents on a dollar, and that’s how you create generational wealth, for not just your family, but your kids’ kids, and their kids’ kids, and it only happens when you have markets like this, so prepare. We’re doing that right now; we’re preparing. There is going to be good news, it’s not like, “Holy shit, the world’s going to end.” There’s a couple stocks I think will do good over this time, but you have to be very, very careful
Daniel Creech: Before the world ends, buy Northrop Grumman and Lockheed Martin, that way you’ll profit as the world ends with world war and all that kind of stuff.
Frank Curzio: Yeah. So, if you have World War III and you have puts, the only thing is, you’re going to be make a fortune, you’re not going to be able to spend it.
Daniel Creech: That’s all right, you still go out on top.
Frank Curzio: It’s like all the people that-
Daniel Creech: If you’re going to die, would you rather know you were right or wrong? I don’t know the answer to that, but I’m assuming we’re all humans, so we’d rather be right than wrong.
Frank Curzio: It’s like the guys that say that the dollar’s going to lose the reserve currency, and they’re betting for it. I was like, if that happens, you’re have people shooting you in your house and total chaos, anarchy everywhere, Mike. I don’t think anybody’s…
Daniel Creech: I don’t know that, but yeah.
Frank Curzio: Since the seventies, right?
Daniel Creech: Yeah.
Frank Curzio: So really, if your money’s no good anymore and all the banks shut down and no one gets their money out…
Daniel Creech: That’s one of those bets that’s easy to make though. Yeah, I agree with that too, because there’s no currency in the history of economic transactions, or history, for lack of better word, that one has lasted, so there’s no reason to believe this one will, and you don’t have the timeline. You’re not going to be around if it does.
Frank Curzio: But how many of those…?
Daniel Creech: That’s the thing, you can say that’s one of those easy, “Oh yeah, it’ll happen at some point.” It’s the same people with oil. “Oh, we’re going to run out of oil.” Yeah, okay, maybe in 10,000 years, but nobody’s going to be right and know about it.
Frank Curzio: I know, just drill deeper and deeper and deeper.
Daniel Creech: It’s funny.
Frank Curzio: It’s funny, but a lot of those currencies… Just to defend that, we won’t get into it, but yeah, to defend that, most of those currencies were under the different leadership, not democracies. You could argue we’re not really in a democracy or whatever, but you could see why it falls so many times, because now, where we’re going right now, and the spending, it just keeps happening. They’re not stopping the spending.
Daniel Creech: Military and energy is all that matters for the reserve currency, and to make it dumb down to my level, and again… But I think, to think that it would never change, I think is silly, because you’re going against every record of economic history that we have. But again, to say that it’s changing tomorrow or next year, or the guys since the seventies have been saying that every year. Of course, that’s just equally as silly, that’s just fun.
Frank Curzio: Yeah. No, it is. That’s a whole discussion for another day, because we can keep going and going and going on that. It’s just for now, I won’t really worry about dollar losing his reserve currency status, but-
Daniel Creech: Don’t worry about it, buy gold, buy Bitcoin, buy Lockheed Martin, and Northrop Grumman.
Frank Curzio: And gold, let’s talk about gold, because you heard me shit on gold for such a long time, and now we’re bullish on gold. I’m very bullish on gold and very bullish on copper. It’s just, the trends are in your favor right now. We’re not recommending them as a safe haven; we recommend it as something that even the large gold companies are like… Yeah, if you look at their fundamentals, there’s things that killed them last year, it is because of the much higher cost, inflation, oil. A lot of these guys are modeling for oil at a 100, 110 dollars, like Newmont Mining and Kinross. Oil is seventies, so you’re seeing inflationary pressures come down tremendously at the same time while gold prices are rising, seven, eight month high now. So, that is going to be an explosion in margins, which I’m not seeing in any of the business right now other than gold and copper, so in mining.
Frank Curzio: So, these aren’t plays like, “Oh, I’m going to buy is a safe haven.” No, these are the new… If you want growth at a reasonable price, gold, copper, start looking for those names now, because it’s rare that you see prices going up and their costs going down tremendously as inflation prices ease. That’s going to result in a boom to margins, one of the few companies I know where margins are going to go higher, much, much higher, where the rest of the industries, we’re not covering all the other industries, you’re seeing margins going lower.
Frank Curzio: Gold, mining, copper, again, these guys are trading 6, 7, 8 months highs. These look like great, great plays. Again, not on the world’s going to end type thing, and holy shit, the market’s going to come down, as a safe haven. No, I’m talking about as really good, just great companies that are growing their earnings. You’re going to see a boom in these names because they’re very, very depressed right now because those inflationary pressures, they’re easing tremendously, those costs are easing tremendously, and now’s the time to actually go in, because they’re very, very, very cheap. So, Daniel…
Daniel Creech: Buy gold like “Austin Powers’ Gold Member.” Go watch that movie.
Frank Curzio: Gold.
Daniel Creech: If I had a soundboard, I would play that, but I don’t yet.
Frank Curzio: Man, I wish he made a hundred of those movies. It was so great. Anyway, Dan, thanks so much for joining. It’s great to be back, and thanks for holding down the fort, man, I appreciate it.
Daniel Creech: Glad you’re back. Cheers everybody.
Frank Curzio: All right, guys, that’s it for me. Questions, comments, feel free to email firstname.lastname@example.org. Daniel, what’s your email?
Daniel Creech: email@example.com.
Frank Curzio: Which I always know, but I love that you say it. So, okay guys, have a great, great day, and come back tomorrow. Take care.
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