A Chinese “spy” balloon was shot down in South Carolina over the weekend. Daniel and I joke about how Trump would have handled the situation. But on a more serious note, I’m concerned about the narrative around China—and how it gets a “free pass” thanks to its global trade influence.
The stock market rallied following Fed Chair Jerome Powell’s dovish comments at the Economic Club of Washington yesterday. Daniel shares why the meeting’s vibe didn’t sit right with him… and I explain why the market would drop 10% if the Fed announced a rate cut.
Next, we discuss billionaire Ron Baron’s recent interview on CNBC—including his investment philosophy… why he emphasizes people as well as ideas… and why he believes the market will return to 2021 levels by the end of next year.
- The drama over the Chinese “spy” balloon [1:00]
- Why China gets special treatment on the global stage [4:10]
- The disconnect between the Fed’s comments and the stock market [11:40]
- Will the market return to its 2021 highs by next year? [24:54]
Wall Street Unplugged | 1005
How Trump would’ve handled the Chinese ‘spy’ balloon
Announcer: Wall Street Unplugged looks beyond the regular headlines heard on mainstream financial media to bring you unscripted interviews and breaking commentary direct from Wall Street right to you on Main Street.
Frank Curzio: What’s going on out there? It’s February 8th. I’m Frank Curzio, host of the Wall Street Unplugged podcast, where I break the headlines and tell you what’s really moving with these markets. I feel like I’m saying this all the time with Daniel Creech day. It feels like it’s more than one day a week for some reason. I don’t know why, but what’s going on, man? How’s everything?
Daniel Creech: It’s just because there’s so much fun, Frank. It’s only one day a week. Don’t check your calendar. It’s okay. It’s good. Another beautiful day here. We have some fun stuff, actual news going on. Sometimes, we’re grasping at straws or revising things, but we got some action going on this week, Frank. It’s exciting. Where would you like to start?
Frank Curzio: I know. Earning season’s always cool, but I think it’s funny. Why is this balloon thing getting so much press?
Daniel Creech: Because we’re on the verge of World War III, Frank.
Frank Curzio: It’s floating around in our airspace, letting it float around in our airspace. We’re not doing anything about it. I don’t know if it’s an overreaction to all of this, depending on what side of the aisle you’re on, you got to think differently. I just thought it was a funny situation just watching this whole thing. I don’t know. Maybe it’s me, but I think it’s nonsense.
Daniel Creech: Well, it’s crazy politics because now… Personally and regardless of Republican, Democrat, I was happy to see him shoot this balloon down just for the cause of it just seems like a game of chess and knickknack with world leaders. No doubt we’re doing constant things to piss other people off, world leaders around the globe. No doubt they do it to us. Whether it be hacking on the internet or through computers, whether it be spying, whether it be in embassies. That’s just part of it.
Daniel Creech: I’m not saying that’s good or bad. I’m just simply saying that, hey, that’s the way the world works. I lean much more conservative than I do liberal. That’s not going to shock anybody that’s listened for more than 30 seconds. I was surprised how they were taking… As soon as it was either in Alaska or Montana, which was one of my former home states, why don’t they shoot it down right away? Maybe it’s transporting all this data back. Does it make me worry? Absolutely not. I do think it’s ironic that in the world of great tech, drones, missiles, whatever you want to have it, we have this gigantic three size tour bus floating around. Remember how they survived in the movie Waterworld with Kevin Costner?
Frank Curzio: Mm-hmm.
Daniel Creech: It’s essentially a balloon like that floating around. China says, it’s all about doing the weather. “Hey, this is just a big misunderstanding.” I don’t know.
Frank Curzio: Yeah, honestly, the way I thought about it is I was thinking of when they first told Biden about this and he was sitting down. That’s what I was thinking. I was like imagine just someone going up to Biden and being like, “There’s this big balloon floating around,” and he’s like, “Balloon?” He’s like, “What color is it?” I picture him just being like, “It’s remote control. It could be a big deal.” I can just picture him being like, “Oh,” like nothing. That conversation of first telling him, I’m just trying to think how his reaction was. Similar to what we see in his speeches and everything, but I was just laughing like, “I wonder how that conversation went?” He’s probably like, “Oh, I’ll talk to Hunter about it.” Right?
Daniel Creech: Yeah.
Frank Curzio: It’s so crazy when I think about it because the way I was thinking about this, I thought this was a non-story, so people can kid me about it. It’s something that I thought was funny. But I thought about that and then I thought about this is one of the times I wish Trump was still president because he’s a guy that just would’ve went in with an Air Force One and drove right through it and said, “I did this.” He never gives credit. “I’m the only president.” Just to see him and his reaction on this.
Frank Curzio: But more importantly, I think the bigger picture, we’re not without joking around. I like picking on politicians because they deserve it because they’re all assholes, but the bigger picture here is I find it amazing that every one of our politician’s on the take from China. There’s so many documented records, you can catch them no matter what. You see it every place. You see it on the Hunter Biden laptop, you saw it. It’s all there for us to see, all the dealings and stuff like that. But again, nobody cares. But just to see how we’re not allowed to say anything bad about China compared to Russia. Russia, you blame every single thing on because they’re not a big trading point or whatever.
Frank Curzio: But if you look at China and this type of country, where you can’t practice religion that you believe in and your choice, you get arrested for expressing your own opinions. Sometimes you disappear. Countless reports a torture, rape, forced ingestion of drugs. I mean, crazy, crazy stuff that you hear from members of minority religious groups, state-controlled media, state-controlled population, all this stuff. But when you have everyone on take, when you’re paying everyone and they’re all making a fricking fortune, it’s why we ignore them, right? It’s like… You can’t say anything bad about them. You can’t say anything about the Hong Kong.
Frank Curzio: So, why not? Why can’t we as Americans have an opinion about that? Why do they control our media where we can’t say… We couldn’t even call this a China virus or whatever, even though every other virus is named… Right away, Google, YouTube, Twitter, Facebook, even though those sites are limited, or some of them aren’t even in China, not allowed to be, because there’s no freedom of speech, can’t have your own opinions or anything. But even the control that they have over some of our biggest organizations, the World Health Organization. I mean, they praised China for the transparency response to COVID in January. This is what really pissed me off. They issued this statement, this is in January, saying that, based on China’s data, by the way, China did not let… Because they didn’t let the WHO go into Wuhan. But they said based on their data from China, that there were only 44 cases of COVID, and there’s no evidence of person to person transmission.
Frank Curzio: WHO actually published that statement because they’re listening… China wouldn’t let them in there. They wouldn’t let them in there. They wouldn’t let anyone in there. Don’t worry about it. No, but that’s actually what they published. So basically, saying this while the virus starts spreading across the planet, killing tens of millions of people. And you have this organization, the World Health Organization is your name, that fully makes a fortune from China. But I just think it’s funny how it doesn’t seem like such a big deal; yet, if this was from Russia or whatever, it would’ve been every single place in the world. But this story just came out of nowhere and everyone was talking about. I know you were talking about it, everybody’s talking it. It’s like for me, I don’t know, I just like the funny reactions and stuff like that. Because it’s such a difference of what Biden would do compared what Trump would do with a situation like this. And it’s a totally different response.
Daniel Creech: Well, we can never get past Trump because there are calls now from his party… People came out and said, “Hey, this happened during the Trump administration.” Of course, he came out and said that didn’t happen. Now there’s Republicans and people calling for investigations. If it did happen, why didn’t anybody get let known? It’s a total fiasco. To your point on the World Health Organization wording, remember that’s what they do. They call things, whether it be the Inflation Act or how about the Federal Reserve, to be a quote, quote, “independent.” That’s the best naming of all. Hey, speaking of Federal Reserve-
Frank Curzio: Well, before we get to the Federal Reserve-
Daniel Creech: Oh damn it. That was a good segue.
Frank Curzio: I want to say this subject, even though it’s going to… Because when do you think that there’s going to be a time when everyone just says, “Fuck you,” to all politicians, every one of them. I mean, we all know, we all see it, of their job in a democracy is to represent your constituents, which none of them do. They all have their own agendas. They don’t represent the people who hire them, nothing. You can’t even go in there. Even now, it’s so bad that if you come in as an independent, and you’re not as right or you’re not as left, but you’re in the party, it forces you. If you want to get any support at all, get reelected, have a job, have any power at all, you better support your party and vote on party lines every single time or you’re done. If not, if you push back, then they’re going to give you a whole bunch of stuff.
Frank Curzio: But when does it come to a point where all the information that’s readily available where we’re able to see YouTube channels of people talking out both sides of their mouth supporting things, not supporting things. Supreme Court, that add extra seats is a joke. And now, the Democrats are like, “Oh, we have to add more seats because there’s more conservatives on it.” It’s just the back and forth that you see and all the bullshit and the lies and shit, is there ever going to be a point where America is just like, “Enough,” because these are the people who are really destroying our cultures? These are the people who want this, right? I mean, they want us to fight. Do you ever see that, people just saying, “All right, enough is enough with these fucking assholes”?
Frank Curzio: I mean, we vote for them, but yet why do we keep voting guys like Chuck Schumer in all the time? Why do we keep voting guys across the board, like the Republican who just got voted in, who lied about his resume? Holy shit, how is he still in office? And back in the day, you just take that guy out and beat the shit out of him. I mean, how is he still… He’s like, “I’m not stepping down.” When does it come to a point where Americans are just like, “We’re done with this shit” and what could they do about it?
Frank Curzio: Because it’s getting progressively worse. And the fact that we have access to real-time information this the half a second when it’s released and seeing all this shit, I see this among a lot of people where they’re just Fed up. I think they stopped watching a lot of these political channels that are just so left, so right, and so far out there that it’s like, “Listen, I’m done with this because every time I watch this shit I’m pissed at everyone and I hate everyone.” And most people aren’t like that. Most people like each other. Most people help each other. They don’t care what political party they’re from. But once you throw politics in it, there’s like this argument, this hate, this anger. It’s kind of like road rage. I don’t know. For right now, it seems like it’s very close to blowing up. I don’t know what’s going to happen when it does.
Daniel Creech: I agree with that. To answer your question, yes, I do think there will be a point. I wish I knew the exact when because we could make billions off of the trades and things. From 10,000 feet, though, big changes in societies happen when, unfortunately, things hit the fan. And you need to have a big fear of either a war, in my opinion… And I’m not saying this is gospel and I’m right. I’m simply saying that you need some kind of event. You need a nervousness about your currency. You need somebody to step in and save the day. You need a big boogeyman to cause this. And real quickly here, the exciting thing is as bad as things, everything could be fixed overnight. I mean, we are literally a snap of your fingers… And that sounds like LaLa-land or once upon a time stuff. That is not true.
Daniel Creech: If you want to fix 85 to 90% of all politic scandals get term limits in. And you’re finally starting to see a little bit of people go on TV and start talking about term limits, not that has a snowball’s chance in you know where anytime soon. But my point is that you can point to everything about how chaotic it is and how partisan things are and extreme things are, and that’s all true. My point is, just before you get too crazy or too upset, or let it get to the point where it ruins your day, no, this can be fixed. It will be fixed at some point.
Daniel Creech: Thank goodness we still are the world’s superpower when it comes to a military force, which is why you should have exposure to Lockheed Martin and/or ITA, the defense ETF basically that holds a basket of those world peacekeeping do-gooders that they like to present themselves as. But yes, it could be fixed. It will get fixed at some point. I’m not putting this argument or these words in your mouth, but don’t get to the perma-bear point of view where you’re just upset and… Oh, we’ve seen the best. We’re past peak prosperity and stuff. That’s all BS. Don’t bet against capitalism until it changes and it’s under attack. It always has been, but it’s not changed yet. So, don’t worry about that.
Frank Curzio: I can’t believe I just heard you say something optimistic about politics.
Daniel Creech: I’m telling you, it’s easy.
Frank Curzio: Holy cow. Things are crazy, man.
Daniel Creech: That’s why I have confidence in stuff like this because it’s easy to point to what’s wrong and how to fix it. It’s easy.
Frank Curzio: I thought I’d never see the day. All right, let’s get into some of the Fed stuff. Powell was talking yesterday, and he was talking about more details about what he said because everyone thought… I felt like he was just going to… He should have come out with this top hat and dancing and singing. He was so happy during the Fed the Fed meeting from last week. But he just kind of explained further what was going on. And the word disinflation is such a powerful word, powerful, powerful word that I really think that’s what really was a big change. Which basically disinflation means that inflation’s coming down, which we all know it’s coming down in some areas. But he was very adamant with this interview that was yesterday that we’re not done. We’re not close to done. We can go a lot higher than this.
Frank Curzio: It makes me think we’re going to go to five and a half, 6% very easily because we are seeing a lot of indicators start turning around and going higher. Not all of them. Again, I name them all the time, not going to bother naming them, but there’s a lot of things out there that you’re seeing that they’re reversing right now. And you’re seeing more inflation. The market’s doing better. And they keep harping on this unemployment rate, which is so low, and it’s so difficult to see these numbers when you’re seeing tens of thousands of layoffs almost announced on a daily basis right now and the restructuring plans that everyone’s doing. Because now Meta has the blueprint, right? Meta’s results were bad, right? They’re like, “All right, we added more users or whatever, but the results were bad.” It didn’t matter. They said, “We’re cutting billions in costs.”
Frank Curzio: And now, everyone says, “Holy shit, their stock went up 25%.” And you’re seeing even more companies that really weren’t on the docket to kind of cut their costs are cutting costs saying, “Okay, this is what Wall Street wants to see.” And it’s what they do. They love providing Wall Street what they want to see because that drives the stock price. Just like Disney. I don’t give a shit if they’re not paying for… It doesn’t matter. People just want to see a subscriber growth. Let’s get to a hundred million, let’s get to 150 million. We’ll beat Netflix. Who cares if they’re paying a dollar? And they were right and they drove the share to $190 before they realized, holy shit, this company’s going to lose money for the next 10 years. But now, they’re seeing like, okay, this is the playbook. Look what Meta did. And the reaction is stock price. I think it’s going to result more layoffs.
Frank Curzio: But I’d love to understand it a little bit more and dig in, I’ve dug into economics really, really deep, just understand to the job report. Because it seems like a transfer of jobs from jobs that are college high-paying technology jobs that are getting lost to maybe services jobs. And I don’t know if that includes the hourly wage and wages, which they include, but you really have to look at the details of how they look at this data and how it’s calculated. Because if you’re telling me that the job market’s strong right now, I think you’re crazy. I mean, you may say that where you have a restaurant or something like that, but the job market being strong right now, the layoffs that you’re seeing across so many different industries, you can’t tell me that it’s strong right now. I don’t see it. I don’t feel like if you leave your job, you’re going to have three or four different offers and you can go wherever you want.
Frank Curzio: It’s not that kind of job market, but yet, that’s what you think by looking at the data. But the common sense or your feeling about it sentiment wise, it doesn’t feel that way. And that’s a big deal because you’re looking at a data point that you continue to base your entire policy on, which is jobs. As long as jobs are strong, we’re going higher and higher. Jobs are strong. I have no idea why the bull case is suggesting that… And the Fed hasn’t said this, and they’ve done everything that they said they were going to do for the past year, everything they said they were going to do to a T that they’ve done. And they’re like, “We’re not stopping. We’re going to continue.” And there’s this whole sentiment out there that they’re going to stop very, very soon, very soon, maybe next quarter or maybe this was the last one, which I don’t see.
Frank Curzio: And there’s also sentiment out there that they’re going to start lowering at the end of this year, which I think is absolutely insane to think that when you have some inflation indicators, lumber, copper, some commodities, gasoline prices, food prices, they’re starting to move back up again. So, I don’t see this, but it was a weird reaction to the market. It was flat, up 2% with the NASDAQ, then it came all the way back down and mix and stuff like that. But just the back and forth, just so there’s a confusion. But man, there’s a lot of optimism price into this market considering how fast and how far earnings are coming down right now for companies. And you saw that really a ton during this earning season so far.
Daniel Creech: Yes. So, I watched most of this Q&A with Powell yesterday at the economic whatever it was in Washington, DC. And personally, I’m going to flag this, Frank, because I want to look back on this day or that day, February 7th, because the tone… First of all, did you read the transcript or watch it or see highlights? Did you see the back and forth or the mannerisms or the tone?
Frank Curzio: A little bit, yeah. It seemed like it was very happy-go-lucky, fun, and laughing. Yeah.
Daniel Creech: Yes. And I admit, I’m going to be a little old man-ish here, I thought that that was ridiculous. We are talking about something extremely serious, the most powerful financial institution in the globe, as I like to say, the combination of Willy Wonka and the Wizard of Oz. And they’re out there on stage joking about, “Hey, would you have done the same thing? Basically, the market wants to hear and they don’t believe you.” And if you knew this strong jobs number ahead of your time, which they point out, he said disinflation 11 times in the Q&A or the conference, or excuse me, the post FOMC meeting. And it was just this very lackadaisical… The audience at this Q&A yesterday was laughing every time. I mean, he was asking, “What do you do to de-stress?” “Oh, I play music. I play the guitar. I ride my bike.” And they’re kicking it back and forth.
Daniel Creech: Listen, I get that there’s some natural banter back and forth or easygoing thing. I just really have to admit, this made me want to pull my hair out. These guys aren’t taking anything serious. It just shows you they don’t take something serious. And the fact that the market was rallying higher in spite of Fed, in spite of the fact that the Fed at the meeting, and then yesterday during his Q&A, said, “We are going to continue hiking rates. We are going to keep rates higher for longer than the market anticipates.” And the market was rallying, then it gave back a little bit and then it was kind of… But my point is that this is one of those special times where in a month, two months, three months, I can’t wait to look back on this day. And maybe I could be totally wrong. I just think the lackadaisical humor built into this bear market rally, it’s just another piece of data, the straw that broke the camel’s back.
Daniel Creech: It’s just another data point to put on the teeter-totter that I believe is so completely out of balance. And that’s okay. Things can stay out of balance for a long time. When you pay attention to goof goofiness and goofballs like this enough, when you see things that stand out that, it makes me pay closer attention. And I just think that the lackadaisical… He didn’t say anything of any merit. He just reiterates himself. And it was just a waste of time, to be honest. And it’s sad that it has such a huge impact on the financial markets around the globe.
Frank Curzio: It does. I mean, one of the things that he says is if we continue to get… I’m quoting Powell, “If we continue to get, for example, strong labor market reports, higher inflation reports, it may well be the case that we have to do more and raise rates more than as priced in.” I think that’s when the market did come down a little bit and came back just back and forth and stuff like that. But it’s everyone trying to get ahead of the Fed. But it’s almost like I feel like if the Fed came out and said, “Okay, we’re going to start lowering rates,” I think this market would probably go down like 10%. I really do.
Frank Curzio: I think it’s just going to be the opposite where if they’re lowering now… And it’s no coincidence that every time they actually officially started to lower rates, that’s when the market has crashed the most. You see that almost every single time, when they reverse that tightening cycle and start easing, right at the beginning of that, that’s when the market falls the most, right? Because you’re trying to stimulate the market actually, right?
Daniel Creech: Yeah.
Frank Curzio: So, it makes sense if you think about it. They’re not trying to stimulate the market at all. So, why would you lower rates if you think about it?
Daniel Creech: And quickly, I want to rant real quick because they haven’t fixed anything. They haven’t solved inflation. Yes, inflation has come down from a peak, thank goodness. Okay, so let’s not clap and give credit for doing one’s job too much. This is like football players making a tackle. That’s great. It’s why we pay you millions of dollars. Way to go. Or basketball players. I’m not picking on one sport or the other. That’s an important key. They haven’t fixed anything, and we’re still not out of the craziness. Frank, Bed, Bath, & Beyond was up a hundred percent one day earlier this week. So, the meme stock rally, while it’s not as robust and high in numbers as it was during the peak craziness, that’s not even funneled through the markets. We’re not even past Blue Horseshoe likes Anacott Steel, for all you wonderful Wall Street fun people out there.
Frank Curzio: Do you know Bed Bath and… And you know what happened?
Daniel Creech: Yeah, hell yeah, I know what happened. They took… And they should have. They did the exact right thing from a strictly capitalist standpoint because this is real people. This isn’t a game.
Frank Curzio: I got in close with the WallStreetBets crowd through a gentleman named Chris Berrios, who runs the Facebook part of that. He’s a great, great guy, been in a lot of conferences with him, just a really, really cool young person, great. And these kids are real investors, and they support these things. And of course, they were able to almost put a hedge fund out of business, multi-billion dollar hedge fund. And I get it. But it’s funny how Wall Street continues… I don’t know why, when you’re looking at the AMCs as well, AMC did the same thing, and you’re looking at Bed, Bath, & Beyond, you have a huge support system with the WallStreetBets crowd and a lot of these meme investors that support these stocks. And it’s so funny to see how AMC and Bed, Bath, & Beyond always, if you have kids in a car, close your ears, love fucking the best people that love their companies the most.
Frank Curzio: These are the people that you’re screwing the most. When it goes all the way up and you do like… You raise money right in their face and you dilute the shit… They’ve been doing that the whole entire time because their business models are both broken, don’t work. So, the business models are broken. So, what do you do? Whenever the stock goes high, whenever you could pump it, whenever you could create and the preferred with AMC and the Apes and stuff like that and all this shit, everything that they do is for themselves. Wall Street will take everything from you. And it sucks that they have to learn this lesson because these people are really big supporters. All right? This is more than just, “Oh, I want to make money in short covering.” A lot of these people are like, “I’m never selling AMC. I’m never selling Bitcoin. I’m never going to sell Bed, Bath… GameStop.” That’s how they’re investing.
Frank Curzio: And it’s funny how these companies constantly use those people, their best investors, and just give it to them right up the you know what, and say, “Well, money’s first. Wall Street’s first. And we got to make sure.” Just the Bed, Bath, & Beyond situation is hilarious to me. So companies like that, they go bankrupt. I hope they do because the management teams are such shit that the CEOs make an absolute fortune. The shareholders are making shit and get wrecked. They make money no matter what. It’s the way the Wall Street system is, and there’s nothing you can do about it. But there actually is something you could do about it, and there’s ways to really screw these people.
Daniel Creech: Hey, just like term limits, you could fix that easily too. If the SEC actually enforced certain things and did things, it would be easy.
Frank Curzio: And that’s the power of DAO. That’s the power. If you don’t know what DAO is, look it up. I mean, it’s the power of voting, the community votes. You think you get a vote with shareholders. You really don’t. Because most of the ownership, unless you have a massive, massive large cap company that’s been around for 40 years, but a lot of that’s controlled, just like BlackRock controls all the voting rights for a lot of these fricking companies because they’re the larger shareholder in these companies. It’s why ESG, they push agendas that have nothing to do with why you’re buying the stock in the first place, why you’re part of BlackRock, because you want to invest in their funds and make great returns, but they have their own agenda.
Frank Curzio: But just to see this and how you’re constantly getting screwed, and investors are constantly getting screwed, just like what they did in SPACs, which provides the easy way for the investors to get out a lot quicker and throw it right in your face. So, we got to hype this shit up as much as we can and hype up… Do you know that there has been no lawsuits or anything with SPACs? Have you seen any lawsuits with SPACs? All the bullshit, all the warrants, all that they didn’t have to disclose, all this stuff, all the people getting a dollar, $2, $3, they’re able to sell the shit out of this thing, they buried everybody. Everybody got wrecked. Who would own the SPAC? I don’t even know anyone who’s made money in SPACs.
I’m sure there are, but to your point, nothing like you should see it across major headlines.
Frank Curzio: Hardly anything, right? Nothing that doesn’t start… That these guys aren’t launching something else. And it’s amazing how that trend went on, how all the billionaires and all those assholes have jumped on the bandwagon, trying launch their own. Free money, you give it away. All right, I’m going to take it. It’s like the government. It’s like Al Gore. “Hey, let’s create this whole freaking climate change. We’re all going to die in a couple years. But the government’s going to fund me, and I’m going to increase my wealth from 2 million to 3, 400 million dollars.” Good for you. Listen, you played the system right. But it’s nice to know the system up front because when you don’t, you get your ass kicked. And a lot of people got their ass kicked supporting these stocks, which was just sad.
Frank Curzio: You can say, “Well, do your own homework,” or whatever. That’s fine. You’re right, you’re right. But the bottom line is they’re getting screwed on purpose by the people, not just by the investors and short sellers or whatever. I’m saying they’re getting screwed by the actual company that they’re supporting, that they’re choosing to say, “Okay, we’re going to back you. We’re going to buy.” And they’re like “F you,” with your finger in their face saying, “We don’t really care if you support us or not. This is what we’re going to do to survive.” The CEO will leave. He’ll leave with a fricking nice parachute and then $25 million package. He’s CEO of another company a week later. It’s the way it is. It’s just the way it is. Funds blow up, they start new funds, billion dollar funds. But a week later, it’s fucking… It’s incredible.
Daniel Creech: That’s the best. That’s the best.
Frank Curzio: It’s incredible. It’s incredible. It’s incredible. It really is. It really is.
Daniel Creech: Hey, that rabbit trail was my fault. But it was funny because Monday, I think it was Monday, the stock was up, call it a hundred percent.
Frank Curzio: A hundred percent.
Daniel Creech: Then Tuesday was down 45, 47. I don’t know where it exactly… Yeah, but how funny, I know. But I’m just saying, hey, whatever.
Frank Curzio: Whatever it is. One of the things too I wanted to get to is Ron Baron, who I’m always a big fan of-
Daniel Creech: Speaking of funds and good performance.
Frank Curzio: I mean, that guy’s got a fantastic performance. And I don’t know if you… Have you ever gone to his investment conference?
Daniel Creech: I have not.
Frank Curzio: So, this thing is awesome. There’s a 29th annual, which I did this year, and the last two years, I think, because of COVID, they didn’t have it. So, he holds it at the Lincoln Center every year. And I went two years in a row, and I was working at TheStreet.com. And anyone who owns any fund or whatever, I believe just a couple shares in the fund or whatever, you can go to this thing. And it’s amazing. It’s an amazing event. A ton of people attend, a ton of famous people attend, famous investors and stuff like that. But this guy throws a show that’s unbelievable, and he has live entertainment. He’ll have amazing, amazing guests. He has lunchtime, and after lunch the fund managers speak. It’s actually entertaining. And then at lunchtime, I think it’s a two-hour break or something, and you can go to three or four different events, and he’ll have Broadway shows and he’ll have all these performers.
Frank Curzio: And then they’ll come back, and at the end of it… And they give you food and everything. At the end of it, they have a surprise performer. It’s always someone big. And I’m talking about, so Paul McCartney, Sting, John Bon Jovi, Rod Stewart, Jerry Seinfeld, Bette Midler. And they’ll perform, right? And it’s a surprise. This year is Bruno Mars. I mean, Bruno Mars, that’s easily a $2 million expense. But the party that this guy throws is insane, and people love going there. But just his outlook on investing, I love. You mentioned it. I’ll let you go into it a little bit more. But he doesn’t care about what’s going on in one year, two years, three years. And just to add to that, if you look at his performance in Tesla and how much shit he got being an early investor, it’s incredible. But he was on Squawk Box yesterday morning. It was really cool. And I thought it was great when you was talking about Tesla and everything else. I know you were impressed, right?
Daniel Creech: Yeah. I caught the interview. And my big takeaway… And I’m not taking a shot here, he’s brilliant. I believe it was on… What’s the early CNBC with Becky Quick.
Frank Curzio: Squawk.
Daniel Creech: Yeah. And they were asking him good questions. Anytime you’d want to get a specific answer or people want to know what to do right now, or “Hey, what are you thinking right now?” And honestly, Frank, you made me laugh out loud because if it wasn’t the very first thing, it was near the very beginning of the interview. And he explained how he exercises in the morning for an hour, and he watches their program. And he said, very nonchalant, very kind… This proves one of my theories in life that you can say anything with a smile. He said, “Yeah, I watch you guys every morning. It really doesn’t affect… or I don’t do anything with the information as far as investing, but I am entertained by you, and it’s great while I’m exercising.”
Daniel Creech: And his point was, hey, you guys do a good job of showing what short-term moves and markets or stocks, what have you, earnings, major news. Every time they try to nail him down to say, “Hey, what do you think about timing the market?” I’m paraphrasing some of their questions. Or, “Hey, what do you think about inflation right now? Is that affecting any of your decisions right now?” And he stuck to his guns. And Frank, it’s easy when you’re a billionaire, right? Because you’re already a billionaire. But the big takeaway that I have from a younger and a lot to learn investor analyst is he said, “Hey, listen, I assume inflation’s four to 5% every year, and I’m going to double my money six to seven years because I’m buying better than, I’m buying quality companies that have advantage over other companies in their sectors.”
Daniel Creech: So, think Warren Buffett’s… The way he says it is, “I want companies with moats around them.” Harder people to come in as competition and hurt your margins. Okay, that’s great. Then he says, “I want to invest in people.” And he goes into the Elon Musk thing. And I believe, Frank, I don’t know if you caught it, but I think he said that they have invested about 400 million in Tesla, and their earnings are over 5 billion. Okay, well that’s pretty impressive, even know you’re a long time in the stock. My big takeaway was try to ignore the short term, even though that’s incredibly difficult. Just trust the billionaires. Trust Buffet, Icahn, Ron Baron. Trust those guys. If you need the money in four months from right now, I’m sorry to say this, as an employee of Curzio Research, then don’t invest right now because your risk-reward is not in your favor and your emotions are going to get the best of you and you’re going to go crazy.
Daniel Creech: So, throw out the short-term, but focus on people, and focus on great quality companies. And now, no better time because fundamentals actually matter. He said the same thing for the last 10 years, but yet, this interview had more merit because now you can actually see the results from fundamentals and stuff. He’s always had the Teslas and high-flyers and that kind of stuff. I’ve not researched Hyatt Hotels, but he made an interesting comment how he’s trading at a cheaper valuation-
Frank Curzio: Hyatt or Hilton?
Daniel Creech: I think he said Hyatt.
Frank Curzio: Oh, okay. I wasn’t sure.
Daniel Creech: And then he said Figs, an apparel manufacturer. And he was just pointing to these. So, if you’re an investor, go look at some of those. Go try to think about, hey, what is he seeing long term? Switching billionaires real quick. This thing with Xerox has perplexed me for a long time. Carl Icahn owns a huge position, massive position in Xerox. And for the life of me, I have no Florida idea why, Frank, other than maybe he just likes to, hey, it’s going to generate 400 million in free cash flow and they’re going to pay dividends. But why you have such a huge percentage of that, I’d like to know. My point is that, keep looking. But Baron’s advice on focusing on quality companies and people, A, coming from him will be great for more ears other than coming from a guy like me. And B, it’s great timing because as you’ve said, fundamentals actually matter now. And I think that’s a huge deal going forward. Boring is going to make great returns going forward. And that’s good for the individual investor in my opinion.
Frank Curzio: Yeah, I mean, I thought that would happen before this year, but no, because fundamentals really don’t matter. If you if you’ve seen some of these stocks and how much they’ve gone up, and again, the most risky stocks that have gone up, incredible.
Daniel Creech: Yes. But fundamental stocks are going up as well. Not as much, but yes, they’re going up.
Frank Curzio: But Ron Baron’s five-year total return, 26% annualized basis, 10-year return, 20%. I mean, that’s incredible. He said that in 2017, he was getting a lot of shit for backing Elon Musk. He said, “I really like him. I think he works really hard. He’s trying to change the world. He’s trying to do things he’s never done before. He’s a young man, incredibly successful. And he drives himself to extremes.” But I mean, he saw that at a very young age. And he knew his personality was crazy. And then, he got investigated by SEC or whatever, and he said that was a good thing to calm him down a little. But time and time again, I’ve seen him go on CNBC over the years. This is ’17, ’18 when people are saying it was a fraud, it’s garbage. You don’t know what I’m talking about.
Frank Curzio: And he just said, “This is going to be my biggest investment ever.” And it is. It accounts for 30% of his portfolio waiting in his Baron fund. You can say, “Well, it’s up 80% year-to-date, still down 35% for the 12 months.”
Frank Curzio: But I love when he said, “This is the safest car in the world.” I actually saw that, when he said he believes that, yeah, it’s the safest car in the world. And he said that someone tried to commit suicide, drove 250 feet off a cliff. And I actually saw it, because I just… I looked at it. And he said it was 70 miles per hour and they lived. He goes, “Well, if you’re going to kill yourself, use a Bentley to commit suicide,” or something. And you mentioned that you have to hear that line. And it was funny because when I saw the replay of it, I noticed that everyone was very quiet, not laughing. I would’ve been hysterical because the fact that he said that so nonchalant. “If you’re going to commit suicide, do it in this car.” I love humor like that. I’m sorry. I really love humor like that.
Daniel Creech: I do too. You think that that’s because he’s a billionaire, or because he is 79 or both? Because you could say that you…
Frank Curzio: Saying billionaire, it doesn’t even tell you how rich the guy is because I think it was 2014 he bought a 40-acre, or 2016, something like that, 40-acre Hampton house for $130 million. I’m sorry, that was in 2007. I think that was the most expensive purchase for a house at the time.
Daniel Creech: Good timing on housing.
Frank Curzio: I mean, I guess. What’s that house going for now?
Daniel Creech: No, that was right before the crash though. Short-term, it looked terrible. I bet.
Frank Curzio: Well, depends on what time in 2007. But yeah, that thing probably went down like 30% right away, which he didn’t care. But I like Baron a lot. I think he’s just a straight shooter, really cool. And yeah, going to that point really quick, where you invest in people, for 30 years I’ve been very fortunate, Daniel, to be around great people like my dad, who’s a great investor. Cramer taught me everything about growth over the five-year period I was in. Yeah, even learned a little bit from Porter and stuff in terms of writing and marketing and stuff like that. But being around great investors and learning from them and listening to how they became successful helped me tremendously. Being in the room, not reading their freaking books for some reason. I don’t know, I don’t get pleasure in reading their books compared to talking to them, which I’ve been fortunate to be in some of these circles.
Frank Curzio: Rick Rule is the guy who used to say that to me all the time. He used to say, “Invest in people. Invest in people, especially in the mining industry.” And I did. I invested in people. But I could tell you, a lot of times people say that’s the most important thing. It’s not the most important thing. And I’ve learned that the hard way because the most important thing is understanding the market conditions, the markets. And sometimes that’s hard to do, and I feel like I have an edge there, just doing it for such a long time in terms of when to really put your foot on gas and when to hit the brakes a little bit. But you can invest in the greatest guy in the world with the greatest business model. But that sector’s going down, you’re still going to get your ass handed to you.
Frank Curzio: And gold mining, that’s a great example of that because they are great people that I’ve met personally, I invest behind. I did okay in some of these investments, some of them I didn’t. But when the whole industry comes down, it doesn’t matter who you invest in it. Maybe it instead something going down 80% it goes down 6%. Look at crypto. There’s great crypto people, great crypto projects. Some of those went down 75, 80% just as much as the all coins. And you could say, “Well, I invested in a good person.” So, you have to be aware of your surroundings too, because you can invest in good people.
Frank Curzio: But if you’re investing in a pure growth stock, their business model is based purely on growth, that they’re going to lose money over the next five years, you better be careful investing in that company in this type of environment where interest rate’s higher, much, much higher, when you’re going to see a slower growth environment. Where you’re seeing it now, earnings have come down to the point where they were expecting four, five, 6% growth at one time. This is in September. They’re expecting 6% growth for this quarter. Right now, the quarter, and about 65, 70% of the companies reported, right now, this quarter, you’re going to show negative 5.3% growth. That’s what we’ve projected with 70% of the companies reporting.
Frank Curzio: That’s how different in five months… And from one month, it’s more than a 2% difference, which is massive. That’s how much the estimates have come down. So, if you see all these guys saying, “Hey, we beat estimates, we beat estimates,” be careful because those estimates have been revised pretty much by like 10% lower heading into this earnings. And it’s easy to beat that number. But you have to be careful and understand the market conditions that you’re in, where growth is great with 0% interest rates, you have a Fed that’s there, they’re flooding the market with money.
Frank Curzio: But there’s a lot of variables, and you have to be willing to change. There’s no one style that works. If there was one style that worked, everyone would use it. I know, because I know 50 styles, and I try to use different styles. You have to be willing to adapt to current market conditions, which made me extremely wealthy. I don’t want to say that. That sounds bad. But that’s accounted for the most part of my wealth is the investment portion and being able to notice that, where okay, when to buy, when to sell, when to get aggressive, when to put on the brakes. And right now, listen, the market’s doing great. You have to have some kind of protection. Buy puts, be smart. I could be wrong, and maybe the market continues to go higher, but be smart. Because once you lose your money, it’s gone.
Frank Curzio: And if it doesn’t work out and you lose money in your puts, that’s fine because the rest of your portfolio’s going to be doing great. But you have to have some kind of insurance in your portfolio because it’s very… I’ve never seen it in the course of history where you have a market that screams higher and earnings are plummeting going down tremendously. That’s a recipe for disaster. Okay? It’s always been a recipe for disaster, just a matter of the timing. So, be careful. Maybe it doesn’t happen for a year, maybe it happens six months, maybe it happens three months. But you need to protect yourself because that’s what’s going on right now. You’re seeing earnings absolutely crash. 10 out of 11 sectors have seen their earnings lowered just from January, just from January 1st till now. We’re talking about a month ahead. 10 out of the 11 sectors. Only utilities is positive.
Frank Curzio: And when I see that and earnings crashing and coming down, and you’re seeing better earnings reports and markets going higher and stock’s going higher, be careful because we’re at a super, super expensive valuation considering interest rates are not done going higher yet, at least from the Fed’s point of view. So, be safe. But anyway, Baron, big fan. And I definitely suggest buying a little bit of one of his funds because you’ll get access to the Lincoln Center every single year they have it. And man, that thing is… Seriously, it is a lot of fun. I always saw Gabelli there, I saw Elaine Garzarelli there. You see so many big shots there. It was a lot of fun when you attend. It’s a really, really cool conference. Everyone’s hanging out and talking. And it’s good. The presentations are very, very good too because they always have pretty cool stocks and they have really good stuff. So man, covered a lot as usual, right?
Daniel Creech: Another good Wednesday in the books.
Frank Curzio: I’m sure we’ll get some emails on the first half of that section. What do you think?
Daniel Creech: Probably.
Frank Curzio: The magical balloon, oh my god, that everyone’s going to be talking about, probably, a week from now. But major, major story. Okay, guys, that’s it for me. Any questions, comments for me, email firstname.lastname@example.org. Daniel, email address?
Daniel Creech: email@example.com.
Frank Curzio: All right, guys, that’s it for me. And I’ll see you guys 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.
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