Wall Street Unplugged
Episode: 933August 16, 2022

If the Fed does this… sell stocks immediately

buy or sell

This past weekend, I went to Saratoga to watch the races with some lifelong friends. My dad was a huge horse racing fan… and I share some of my favorite memories from our trips to the track.  

Places like Saratoga can tell us a lot about the economy. I highlight what I saw—including the crowd sizes and prices—and whether it lines up with investors’ fears about a recession. 

Speaking of boots-on-the-ground research, I’ll be at the Crypto Connect & NFT Expo in Palm Beach, Florida this weekend. If you’re interested in VIP tickets, go here.

Turning to the market, I highlight what stood out in Walmart’s latest earnings results… and why the company deserves credit for handling the biggest risk to retailers.

The talking heads on Wall Street have been dead wrong about inflation since January. Now that stocks are rising, they’re saying it’s nothing more than a bear market rally. I break down why they’re wrong (again)… 

2022 has been rough for investors. But the Fed’s plan to bring down inflation is working. I cover some of the other risks… and highlight the one thing that would make me want to sell stocks and move to the sidelines.

Finally, I share my thoughts on a biotech… sector that could soon soar.

Inside this episode:
  • What I learned about the economy from Saratoga [0:32]
  • How to get tickets to the Crypto Connect & NFT Expo [9:10]
  • The two biggest risks to the market [15:35]
  • The talking heads are wrong again [23:20]
  • Sell stocks if this happens [29:30]
  • Why you may want exposure to biotech soon [31:20]
Transcript

Wall Street Unplugged | 933

If the Fed does this… sell stocks immediately

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 August 16th. 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. So, I went to Saratoga this weekend, met a couple of my close friends who I know for over 40 years. Though I’m not 60, I’m 50. One of them I’ve known since I’m three. Holy cow. And, we all get together every year, go to the races, used to be Gulf Stream, watch Florida Derby. But now the past two years, it’s been Saratoga.

Frank Curzio: And Saratoga has a lot of history there. So, my dad bought a house of state when I was very young, it was a summer house. He used to go up there the whole entire summer, some of you a little bit about this. Listened to me for 15 years on this podcast. And it’s near Oneonta. It’s a small town in New York. Stanford, New York. Not Connecticut, Stanford, New York, but it’s near Oneonta.

Frank Curzio: And he was one of the biggest, biggest, biggest racing fans ever, to the point where our corporate Christmas party for his company, which he called FXC Investors, right? Frank Xavier Curzio investors. Same name as me, I like that. It was at the metal land in an area called the Pegasus, which set on top of the racetrack. And it was beautiful, right? A beautiful restaurant area where it had all windows and you could just go down and look the races and stuff.

Frank Curzio: And, he used to give $20 to everyone and invite the families of his employees. I’d say we probably had like 20, 30 people there, and everyone loved it. This person hit the race. I had the five, I had the seven and back and forth. We’re eating, drinking and having fun. And, what he used to do every year was sponsor a race. And, when you open up the pamphlet of the book, whatever, it’s usually the name of the race on top, he called the FXC special.

Frank Curzio: So, that’s what it was labeled like at top of the program, it was seven race, eight race, or whatever. So after the race, we got to present the trophy. We used to go all the way downstairs and present the trophy to the jockey and the owner who won. Right? So, we got to meet Angel Cordera Jr., Julie Krohn, and just unbelievable. It was just incredible.

Frank Curzio: Anyway, I’ve been analyzing horses for close to, let’s see, 50 years old, probably since I’m five when I started. And by the age of 10, I probably was at 20 different race tracks. So, he used to take me every place. That was his big thing. But when we lived near Oneonta, we were about hour and a half, two hours away from Saratoga. So, Saratoga’s only open in August. It used to be. Now it’s a couple more weeks, I think, into July and August.

Frank Curzio: And it used to rotate with Aqueduct being open and Belmont being open in New York tracks. So, it was only open in August, and we used to go up there the whole summer. So, my dad used to get tickets, and we used to go every single week. Those four weeks, once a week we used to go, at least once a week. And sometimes after that, we’d go to the harness racing right after it. That’s how crazy it was when it came horse racing. And again, I was just a kid at the time, but just walking around, going back to Saratoga, seeing the paddocks, drinking there, they had the spring water there, which is disgusting when you drink it. But, it’s something they had for many, many, many years, decades. Just walk around outside where 70% of Saratoga, the reason why it’s a great track, is outside.

Frank Curzio: And you could bring coolers, they had picnic tables at the place, you could bring your own chairs. Again, those coolers could have beers in them, whatever you want. You can bring your own food, which by the way, you better bring your own beers because it’s $10 and that’s just for a Budweiser. So, prices went up a lot. We’ll talk about that in a second. Quartets with banjos playing with they’re dressed up, tons of plaques, little areas where you could read, the plaques that have the legends of racing where, especially through Saratoga, John Velazquez is won most races there. Jerry Bailey, Dean Ray Lucas, but it’s just a fun family atmosphere. That’s kept up with the times, which is now digital, but still has that culture intact. The historic sites, the art galleries, people dressing up and it just brought back a lot of cool memories times I spent with my dad and times with my two friends too, who my father also took to a lot of these tracks with me when I was 10, 15 years old.

Frank Curzio: I used to take those two of my best friends with me. So yeah, they know my dad well, but a few things I noticed here is it was unbelievably packed. So like I said, we used to go to Gulf stream, the last two years we went Saratoga. Last year was just following COVID. It is New York, so the restrictions were a little more crazy where people were really nervous, really nervous there. So, it still had a little bit of COVID restrictions in place. When I went last year, it wasn’t that crowded. This year, it was absolutely jammed. Even when we go into the town area where they have bars and restaurants, stuff like that, there were lines out the door everywhere. Some lines that get in some of these bars were like 20, 30, 40 deep. So that, to me was incredible. And not only that, through the airport, I noticed going there… I had to fly to Albany and coming back, 30% of the people still wear masks, at least, 30% of the people, which is crazy.

Frank Curzio: Hey, many of these people under 35 years old. I’m not saying not wear masks, if you have underlying conditions. But, my best friends told me that he was at a basketball game and his dad didn’t have a mask on, but his son was playing against his son, which I think is 11 years old, 10 years old. And, he had the mask on. His dad was like, “Hey, this is the team you’re playing for.” He was like, first game of the season. Everyone’s just learning about where they have to go and stuff. He was playing for a different team against my friend’s son. He happened to be sitting there and his dad’s like, “Hey, they say you don’t have to wear your mask. You could take it off.” He’s like, “No, dad, there’s no way I can’t wear a mask. There’s no way, I have to wear the mask. I have to wear the mask.”

Frank Curzio: And I’m like, “Holy shit.” The way so many people have been conditioned in certain areas and how crazy it is for a little kid like that really has zero risk, right? Zero risk, when it comes to COVID. Maybe .00001%. Right? And just a way like it is. But I was just surprised even today, how many people were wearing masks when you don’t have to wear them on flights and not just on flights, maybe you’re close to somebody or whatever. And I could see, they don’t understand that air gets refiltered. And it’s probably the safest place to be in terms of killing germs and inside the airplane, but even get going there. The cab ride, the terminals, that was surprising. Getting back to the track, everybody was spending money. I mean, they were buying things, lines everywhere inside the track for food drinks.

Frank Curzio: Super expensive. I told you about the beers, $10, sausage and peppers were like $16, $6 for a pretzel, $8 for ice cream in a cup. And, everything was 15, 20 deep, which is good to see because that economy, there’s nothing to do there in Saratoga other than that track. You don’t go there to Saratoga that and say, hey, you bring your family in. You bring a realtor to lake George and other places and stuff like that. But you really go to Saratoga. You go there for the track. That’s their economy. That’s their year, which I think it’s extended to six, seven weeks or whatever it is now, you used to be only four weeks or the whole month of August, which believe it or not, it’s five weeks this month. I know that because you write newsletters every week.

Frank Curzio: So, I have an extra week off, but it was unbelievable. It was nice to see just everybody hanging out, laughing, having a good time, beers, bachelor parties, bachelorette parties. You had the crowds ranging from again, bachelorette, bachelor parties, twenties into sixties, seventies, eighties. Just a nice mix of everyone having fun. Some people dressing up going the clubhouse. Also, I did manage to win $3,500. I was handicapping well, which when it comes to horse racing sometimes be good days in the bad days.

Frank Curzio: It was definitely a good day. Nailed a lot of long shots. I went seven out of 11 races. One of them. I was very lucky since I bet 518, which is my birthday, May 18th. Only because, my dad used to bet that every single race. So, I always bet 518 exacta and triple, right. Box, no matter what. And then, I’ll do the handicap for the race and put a little bit of money on some of the other horses.

Frank Curzio: But the eight was about to get into the gate and through is jockey. And he just started running around the opposite side of the track with no jockey on. They had to catch him. So, they scratched him. So at the last second, I’m like, “All right, let me throw another number in there.”

Frank Curzio: And I don’t know why I picked the 11 and bang, right? Hit the exact, hit the triple, 1400. So that, part was lucky. But yeah, did a good job handicapping and been doing it for very long time. Doesn’t always work out this way when it comes to horse racing, but it was just on fire and it was a lot of fun. And my friends, every time I won were like, he’s got to get cold. He’s got to get cold. He’s got to get cold. They didn’t follow me. They should have followed me. You follow the hot guy.

Frank Curzio: That’s what you do in racing. When guy are hot and they see things, you follow them. Doesn’t happen often. It happened that day for me, I was happy, but it was a good day all around. Just betting, hanging with friends, having some great memories, hanging with my dad, just bringing that stuff up was really, really cool. So, it was just nice to get away, clear my head because now it’s back to work and again, every place I go, I’m actually going to a Palm Beach conference guys, you guys get your free tickets. All I have to do is purchase any one of my newsletters for $5,000. I’ll give you a free ticket. I’m just kidding. I’m pretty sure we still offer a free ticket. You go to our site, curzioresearch.com. I’m speaking at NFT and metaverse conference and it’s going to be Saturday and Sunday. So, I’m leaving there to go to that Thursday.

Frank Curzio: Because it’s a couple events on Thursday and then Friday, we’re going to be setting up more events on Friday. So, guests are free. If you want to see me, send me an email or we’ll get you tickets for free for that event. That event’s going to be really, really, really cool. We went to Vegas couple weeks ago. But everywhere I travel, I’ve been traveling a lot over the past few months, just airports are busy. Their begging people to take other flights and paying them a fortune to do so. Every place has been packed. Restaurants have been packed. I’m not seeing any slowdowns in terms of the consumer and what they’re spending. Maybe a little bit where the lines aren’t as long and you could actually eat dinner on Thursday, Friday night and maybe get a reservation at seven o’clock where you weren’t getting a reservation, probably 3, 4, 5 months ago. Maybe a little bit in that regard, but people are still spending.

Frank Curzio: So, getting back to work now. So far, this week’s been interesting. Notice I’m talking about the economy and spending, because there’s a lot going on and people think we’re going to recession. We’re not in a recession. Markets have come back right stocks have come back, but they’re going to crash. What’s going on with pricing power? We’re seeing inflation everywhere. Food prices are going through the roof. Oil has come down. It’s just these mixed results.

Frank Curzio: Let’s see what happened just this week. We have Walmart reported solid numbers, basically easily beat the estimates, but those estimates were significantly revised lower, which you all know. But, they also maintain their guidance, which is key. It means they’re not seeing a slowdown going forward. Some positive highlights from large retail. Holy cow. Management gets an A. What they’ve done, especially with inventory. Got rid of tons of inventory. They said they had months and months and months of inventory, they were loaded up.

Frank Curzio: Target said the same thing. Kohls said the same thing. It makes sense because you had these supply chain concerns and you’re seeing this massive demand. And we’re like, “Okay, let’s fix it and do everything we can.”

Frank Curzio: Over order everything. And then all of a sudden, we see a slowdown at the wrong time and they’re sitting there going, what are we going to do with all this stuff? Well, we got to sell for lower prices. But Walmart has handled this tremendously. Reduced the number of shipping containers by more than half from last quarter, which makes it in line with historical average. Just listen to that line, that lines from their conference call. So, to reduce the number of shipping containers by more than half last quarter. By more than half. That’s how much they over ordered because of demand. Because they’re saying now that’s more in line with historical average. Canceled billions of dollars in orders to get inventory levels down a lot quicker, which is smart.

Frank Curzio: But how quick was that? So, managers deserve a lot of credit. Many retailers, what do they do when it comes to inventory concerns? It makes sense. It makes sense. You’re going to try to sell it. You have to sell it. You got to get rid of it because now, you have back to school stuff coming, the weather’s changing, whatever it is. You want to sell at the highest price possible, but you have to get rid of it. You have to get it off the shelves, which just almost impossible to do. So, it usually keeps those levels higher for a lot longer. And that, creates a drag on earnings at least for a couple of quarters. Well earnings one quarter. Of the inventory concerns, quarter before wasn’t that great, but that was mostly supply chain concerns. But it took one quarter for Walmart to fix inventory problems, which is the biggest risk to retailers right now. By far.

Frank Curzio: Let’s see what happens. I bet you’re not going to see that with every company. Let’s see what Target says. See what Kohls says. Let’s see what all these guys say, but wow, that was really, really quick of how fast they fixed that problem and good for them. Very good for them. Because it didn’t really hurt their results, in terms of their revised numbers. And they also said spending was very strong for consumers. Able to raise price a little bit, which is very, very good for margins. Kept those margins higher, which is why they met estimates and still plans on buying back 11 billion in stock, which is not too much for the size of this company, but it is significant, but stock’s up 4% today closing in $140, it was 118, two months ago with the warnings. It’s all time high, all time high is 160. So, we’re looking at a stock that’s what, 10%, 12% off of that.

Frank Curzio: Which is insane, when you think about it. If you look at Walmart, you would think it’s down 25, 30%. So, I got 10, 12% from highs. I’m not telling you to go out and buy it here. I think it’s a little expensive at 22 times forward earnings with the rest of the market training is 17, 18 times earnings. But, it’s nice to see basically one of the biggest, not the biggest is a big box retailer, biggest but biggest retailers in the world report good results. Getting revised, lower saying that they’re still seeing consumer demand. Got the inventory levels back in check. This is how you get a real update of how this could lead to other things you may buy or other stocks you want to buy in retail. Let’s see what Target says. A lot of retailers reporting this week, but you have to listen to these calls.

Frank Curzio: This is great. I’m not telling you to go out and buy Walmart. I think it is a little expensive. It’s probably better to buy target here or other companies here. Let’s see. Target might say we still have inventory concerns and margins shrunk. And, they… Remember, Target missed estimates, Walmart missed estimates by a mile, and their stocks fell by the most in like 25 years. Then Target came out like two weeks later and lowered their estimates again. That’s how quick people change the spending habits. These companies will usually give you an indication like Target did even Walmart did. But Target did two weeks later, but they’ll give you an indication into the core. Like, “Hey, demand is really, really slowing.”

Frank Curzio: And they’ll give you a little warning. Happened so fast last quarter, Walmart calls all these guys. They didn’t give us a warning. That’s why they felt 25 plus percent.

Frank Curzio: So, you need to listen to these conference calls. You’re going to see the winners and the losers throughout every industry. Some going to be trading 13 times forward earnings and great. And some of them going to be trading at 22 times earnings and they’re not so great. You have to figure that out because not everything, the S&P 500 has jumped tremendously off its lows. We’re very, very bullish. Eight weeks ago, six weeks ago, four weeks ago. I’m not very, very bullish right now, but I still see lots of ideas that have lots of upside potential. Not the whole S&P 500, because we’ve seen a lot of stocks, 25, 30% off their lows. Granted, there’s still some of them is down 70% from their highs. But, there’s still a lot of ideas that are working and you need to pay attention. That’s how you find new ideas.

Frank Curzio: Also, on the economic front, I want to bring this up. I’ve been talking about it, right? The biggest theme is inflation. So funny, if you hashtag inflation pre November, nothing, nobody cared. Now it’s top five, top 10. If you’re looking at stories are mentioning inflation, you’re looking at Twitter, social media… Again, we get all these statistics of the trends that are taking place. Inflation’s up there a lot.

Frank Curzio: Everybody’s talking about inflation now. So the economic front, what do we see? More signs of inflation easing. Sounds familiar for listeners of this podcast. They say inflation, it’s still going through a roof. Fred’s going to go… It’s easing. We’re seeing. We’re going to continue to see these numbers moderate and come off your highs. So this time, it’s with housing starts till 10% month over month. 10%. 10% month-over-month, while building permits fell 1.3%. It makes sense because those higher rates impact housing the most.

Frank Curzio: I’ve seen people say, wait, I’m going to wait. I don’t want to pay another $700 because six, seven months later, because mortgage rates went from three to five, five and a half, 6%. They’re below 6% now. I don’t know where they are. I haven’t looked. They were five and change. I think they fell below five, a little bit, but a lot more expensive to buy a house today than it was seven, eight months ago. You’re also seeing those supply chains, even the home builders are saying, even permits slowing, and new builds slowing. New York manufacturing indexes. You see that? So now, you’re seeing them order a lot less because they’re nervous over the next six months. But the New York Fed manufacturing index crashed.

Frank Curzio: There’s 11.1 in July, which is terrible, but it’s a negative 31.3 in August. Holy cow. Forget about if you know what that means. You just know that 11 is pretty far off from negative 31, month-over-month.

Frank Curzio: So that’s pretty bad. So, these survey members said the expectancy, demand, slow incredibly and sharply over the next six months. And another sign with the inflation coming down, look at oil broke through to 90, right? Where is it? $89. It was 122, just two months ago. You down close to 30% on oil. We’ll see how interest rates might not impact oil as much, but we are seeing demand get curbed, expenses go higher. People are doing less. They’re figuring it out. Especially gasoline prices coming down and Goldman came out and said, look, we expect oil prices to shoot sharply higher. I think to over one 20 and gasoline prices to shoot sharply higher to end the year, let’s see what happens.

Frank Curzio: I don’t know if we’ll see that demand, right? Because we’re starting to really produce a lot more oil finally, which is good in the US. Who knows, tensions in Russia and Ukraine, if that ends, you’re going to see food prices crashing. You’re going to see oil prices and gasoline prices come down tremendously. Which means Russia right now is in the driver’s seat, because a lot of these companies should be begging them to say, hey, all right. Lay off. You got your point across. Whatever.

Frank Curzio: But it is amazing how heading into November elections, nobody’s talking about the war anymore. Remember when that was the number one story? Russia’s attacking this and Zelinsky needs help and attacking a nuclear plant. Watch out. Holy cow. All this stuff, all this. We’re not hearing too much about it. Right? All of a sudden, we stop caring. Yeah. We’ll give you four or 5 billion in weapons and not account for it and not know where exactly it’s going. That’s okay. Then here you go, just fight your war. But notice that we’re not really talking about that.

Frank Curzio: Not too much anymore. However, if we see that end, which I don’t think it’s a forever war, that’s going to be great for food price, which remain high. Okay? We can’t say anything about that, right? There’s no denying that. Want to see food prices come down and they need to come down. From a personal level, guys, if you listen to this, I’m not sugarcoating. Anything prices are down, but they’re still incredibly high year-over-year. But as prices come down as an investor, that is great. It means the Fed’s doing its job. And yes, you can have the Fed presidents and even Powell will say, we didn’t see more in evidence. We need to see more evidence. We need to see more evidence. We need to see more evidence. They have to say that they can’t say right now that, hey, we’re going to slow in September.

Frank Curzio: Because everyone’s going to go out and buy, the market’s going to take off and everything’s going to be expensive again. So, you’re looking at the Fed in a great position, because it’s clear as day higher rates are work to slow the economy, especially housing. Yes. Rental income remain stumbling high, which is a major component. And CPI. Eventually those will ease as housing comes down. But housing demand is slowing, while supply chains are easing as we’re seeing demand pull back. So, when it comes to the Fed, what are they doing? They’re finally doing their job, which I mentioned last week. You could destroy them and I know it’s great to destroy the Fed. We’ve done it as well, of a shitty job they’ve done, but they’re finally in the right place. I said last week, the Fed is for the first time in over two years ahead of the curve, when it comes to inflation, why?

Frank Curzio: Because they have the ability to continue tightening, if inflation does not moderate. We see gasoline prices, oil prices, food prices continue to surge. Hey, the Fed’s there and they could tighten. They can raise rates. All they can do is slow rate hikes or even stop them. If we see the US economy really start falling from recession, which we are likely to see because those job numbers are going to be horrible. The job numbers are going to get very, very horrible. I don’t know how quick it’s going to be. We might have one month where it’s going to be okay, but we’ve seen it with continuing claims. You’re going see those job numbers. And, you could just look around you and look around all these places that were hiring so much. They’re not hiring as much anymore. And you’re seeing layoffs in the news like crazy, especially for the largest technology companies.

Frank Curzio: You’re seeing it even the financial services industries. Drive the crypto industries. You’re seeing layoffs. They’re generating less money. Growth is slowing. They’re not going to hire people at the same pace, which means you’re going to see wage growth probably slow as well. A little bit. That’s what you got to worry about next. Got to look at those unemployment numbers. But right now, you’re looking at the Fed and what we talked about, they’re ahead of the curve. There’re no surprises here. And what does that do? It creates certainty. Well, if we have inflation going lower or higher from here, the Fed’s pretty much in charge.

Frank Curzio: They do lots of things right now, which makes sense. Ease, tightened. Again, it was a lot different when I said, if Fed doesn’t have to do anything crazy now. Whether we get inflation going higher or lower, of course, we have rates at two and a half. They’re going to be at least at 3% to end this year. Some people think it’s higher. I’ll talk about a minute. But when the Fed is being forced in November to raise rates from zero to two and a half percent, again, in just seven months’ time, because inflation sore to the highest levels in 40 years and you had no clue and didn’t see it coming. That’s when we get 11 out of 12 down weeks in a row. That’s why we’re not seeing this crazy volatility in 3% moves. Especially over the past few weeks of what’s happened over the past two, three weeks. The economic data has been showing that inflation is easing.

Frank Curzio: This creates more certainty. I’m not saying inflation’s okay and we’re good. And you’re not… We still need to come down, but it’s heading in the right direction. It’s going to continue heading in the right direction as long as we keep rates high. Or, where they are right now. With that said, because as I said, certainty is great for the markets. It’s predictable, and when we have uncertainty, that’s when we have a crazy market, something we’ve never seen before, massive deleveraging, nuttiness, craziness everywhere. That’s usually when you have uncertainty. When the Fed has no clue what they’re doing, now back in the driver’s seat. We have certainty in the markets, that’s great. That’s why you’ve seen stabilization. You’re seeing follow through here. We’ve gone up tremendously. Now with that said, go watch TV right now. Go watch CNBC, Fox business, by the way I was on Fox Business the other day with my buddy, Charles Payne.

Frank Curzio: But, if you watch a lot of these channels on who’s getting on, almost every expert, top economist to market pundits, almost every single one of them, and I read all the reports that they put out, believe that the recent surge in stocks is a bear market rally. Almost all of them. I haven’t seen anyone say you have to buy stocks right now. Holy… When have you seen that? Are you seen that right now? No, you’re not seeing that. Pretty interesting. I mean, from technical investors, clearly was seeing more companies above their 50 day movie average. Right?

Frank Curzio: But how many people are coming on and say to bear market, right? Got to be careful. We haven’t hit bottom yet. Don’t believe stocks are going to pull back for me as the Fed will still sharply raise rates from here. I’m hearing four or five more rate hikes. I’m saying in September, you should be done. They might be done. They’re not going to say that now, obviously, but I still think these numbers, which a couple more out today that I mentioned.

Frank Curzio: All prices break in below 90. Wait until you see August numbers. Look at it, oil is down probably another 50% this month alone. And, that’s going to count for where the September’s released. That’s going to count for the August number. So, look at that data almost across the board. It’s going to show that inflation is definitely without a doubt, easing almost across everything with the exception of food and a few other things.

Frank Curzio: So, everybody believes a Fed’s going to sharply raise rates from here. Well through this year, 2020 through after September. Predicted another 25 basis point rate hikes and also through March 2023. Because right now, they’re saying they need to do this. Inflation remains stubbornly high. It’s not coming down fast enough. That’s the consensus. Now, before you jump on this side of the trait and you watch TV and you go, wow, okay. A lot of my names are up like 20%. Maybe I should just take everything out of the market. I don’t want it to happen, what happened the other a couple months ago where it just kept going down and down?

Frank Curzio: Well, the Fed didn’t know what they were doing and nobody knew what the Fed was going to do. And, the Fed’s the strongest body in the world that could force every single country in the world into a deep depression.

Frank Curzio: If they wanted to, that makes them the strongest organization in the world. If they wanted to, but they have the power to do that. Now, before you go out and sell all your stocks, hear this in January, we all know when November, what happened with the Fed. Powell came out and said, holy shit, I’m an idiot. Made a huge mistake. Inflation, not transitory. It’s going a lot higher. It’s going to be below 2%. It’s a three, three and a half percent. It’s going below 2%. Maybe it goes to 4%. They had no idea it’s going to go eight, 9%. No idea. Obviously, because in January, almost the same. Every shop. Goldman Sachs, Morgan Stanley, JP Morgan comments from these firms go in and go on Google and put January… Put three rate hikes, January CNBC and read that article. Clear as day. And that’s not the only article.

Frank Curzio: There’re tons of them, but through January, and this is after November, when the Fed said it’s at about face. Holy cow, we got to raise rates significantly, shrink our balance sheet. All these sales side shops and their economists from the same people that are telling you that the market’s going to crash right now to bear market rally. Interest rates are going to skyrocket from here. These same people. What were they saying?

Frank Curzio: Inflation was transitory. This is in January. We’re going to see a soft landing. And the Fed would only raise rates three times for all 2022. That’s the said in January, go back and look. Three times to 1%. We’re at two and a half percent already going to at least 3% this year. They said 1%. That’s how wrong they were. That’s why so many people stayed into the market when it got destroyed. Okay. Now these are the same people on TV right now that are telling you… That people somehow want to listen to.

Frank Curzio: Right? Even though, they have no track record. Even though, if I did something like that and lost so much money, again, I have my own company, but you should be fired for a call like that. But no, they’re still on TV. These same people telling you they’ve been right all along of, hey, the Fed’s still going to go nuts. And, I can’t tell you how many emails I’m getting from people who listen to this podcast. People who own my newsletters and I love it. I love the emails that I get. It creates great conversation. It creates an awesome community, but they’re like Frank, I’m just not on the side of you. I don’t see it. I don’t see it. The Fed has to raise rates. Its… Inflation’s all over the place. I just don’t see it. Stocks are getting expensive. Again. They’re going to crash. They’re going to crash. Maybe they come down.

Frank Curzio: I don’t know. I don’t have a crystal ball. What I do know is I hate being on the side of everyone else. Of the consensus. That means you’re not being contrarian. For me, I’ve made my life in this industry for 30 years being contrarian, not doing what everybody else does. That’s why you listen to this podcast. No one’s going to influence me. No one’s going to say anything. I don’t have to listen to a higher power or boss where we all have to share the same view, whether it’s politically or whatever. No. And you know that through COVID reporting facts and getting ripped at the facts that you’re seeing all true. Not because I’m a genius. It’s because I had great people who are doctors at leading organizations, emailing me with information, facts about COVID, which I wasn’t reading any place else for some reason, but we know why that was. We now know why that was this whole bullshit, right?

Frank Curzio: But I do not like ever being with a consensus. Consensus, right now saying it’s a bear market rally. You got to sell your stocks. And, the Fed’s going to continue rising very, very, very aggressively after September. That’s the consensus. My opinion, no you’re seeing inflation moderate in almost all places. And you’re going to continue to see that. People aren’t going to suddenly buy houses where interest rates are. They’re not going to be like, okay, let’s get back to demand things… It’s going to continue to ease. And that’s what you need. And it’s going to come down. If the Fed wants to come down a lot faster, then they may go 25 base point hike after September, maybe one more. Stop at three and a half percent. If they go anywhere near 4%, it’s going to be not just a recession, but a very, very, very big deep recession. And I hope they overshoot, because you could see it’s working.

Frank Curzio: They’re asking for evidence. You see evidence everywhere that it’s working. We’re seeing the moderation working. Remember their stance. They thought this was going to happen a year ago. They thought they were going to see this happen a year ago. Interest rates at zero, that we’re going to see high inflation be transitory, because usually inflation takes care of itself. When you have massive inflation people, stop buying stuff.

Frank Curzio: You see demand fall, and that’s how you control inflation. So, it’s transitory. They didn’t think it was going to go 3, 5, 7, 9%. That’s the way they’re thinking. That’s the way their brains are programmed from doing decades, 20, 30 years of research and looking back, that’s usually what happens. Well, it didn’t happen as quick as they thought. It’s happening now, but you thought it was going to happen at zero interest rates. Now you brought them up to, they’re going to be 3% in September.

Frank Curzio: You can’t tell me they don’t think this is going to be transitory now or we’re going to see inflation moderate. We’re seeing it. Don’t overshoot. That’s the worst that could happen. Yes. You could say, well you could just go ahead and lower rates again. As you see, it takes a while to filter through the system. So, it could be really, really, really hard times for six months. If we go past three and a half to 4% of what these guys are predicting, you should be selling stocks, if you think that. You should. Don’t listen to me. But based on everything I’ve said before November, how the Fed has to reverse their stance, adjust in our portfolios, saying inflation is wildly out of control, which anyone that pays their bills knows. They don’t to need to listen to this podcast to know that. Now you’re looking at the markets going, okay, what do I want to do right now?

Frank Curzio: It’s all about today and into the future. Today, you don’t have to get super aggressive. We saw a nice move in so many names, but going forward from here, there’s a lot of stocks I like. A lot of stocks I like. You see an upside of many, many names. Again, not telling you to buy the Walmarts, which are down 12% from their all-time highs here, which I think it should be down a little bit more. I mean, yeah. They revised their estimates sharply, sharply lower. And it’s a different company. Three months ago, four months ago, five months ago. I think it was five months ago when it hit its highs. It’s much stronger ground than it is now.

Frank Curzio: There’s still many names down 30% plus from their highs where insiders are buying companies are buying back shares. They have pricing power, been fairly punished through the massive, massive, massive deleverage caused by the quick rise in interest rates that nobody had, right? Nobody predicted be that fast that we go to two and a half percent in six months because of the Fed was on the wrong side of the trade, which forced… It cost so many fund managers to force selling, right? They were forced to sell. That’s what happened.

Frank Curzio: So, you’re forced to sell even your good names because you’re so leveraged. And this is evident. Look at, if you look at some of the great names in crypto, small caps, biotech, some of these, they fell to levels that were insane. They’re up 30, 40% from their highs right now. Even biotech, start looking at biotech names.

Frank Curzio: They’re trading 30% below the net cash. The balance sheet, some names, good names, but that’s where I’m finding the best ideas. You’re seeing them come up in my newsletters. I just think it’s the stock pickers market right now where maybe I don’t go into Walmart. We’ll see what target says. We’ll see what Kohls said, but there’s going to be retailers that are down 30, 40% and not down just 12% like Walmart that are saying, hey, we solved our inventory concerns. They’re going to say the same thing. We have pricing power. We’re still seeing demand from the consumer, but they’re down 30% from their highs. And they’re probably trading at 17, 18 times forward earnings. Well Walmart’s trading today at 22 times forward earnings and it’s down 12% from its highs. Because people feel a little more comfortable buying a bigger name, that pays a little bit of a dividend.

Frank Curzio: That’s where I’m looking right now. That’s where the opportunity is. And just be careful who you listen to. Because a lot of these guys are saying, they’re going to skyrocket from here and this is a bear market rally, are the same guys that said inflation is. Transitory, you have nothing to worry about in January. And we’re only going to see a couple rate hikes. Go back and look yourselves.

Frank Curzio: Pretty crazy. People forget. And it’s only been what? Seven, eight months. So guys, that’s it for me. Good news. Daniel is back from his ninth vacation this year, which is awesome. So, we need tomorrow to break down the markets. If you have any questions or comments, I’m here for you. Feel free to email me at frank@curzioresearch.com. That’s frank@curzioresearch.com. Really appreciate all the support. 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.

Frank Curzio
Frank Curzio, founder and CEO of Curzio Research, is one of America’s most respected stock experts. His research is regularly featured on media outlets like CNBC’s Kudlow Report, The Call, CNN Radio, ABC News, and Fox Business News. His Wall Street Unplugged podcast—ranked the No. 1 “most listened-to” financial podcast on iTunes—has been downloaded over 11 million times.

Editor’s note: The average pick in Frank’s small-cap Curzio Venture Opportunity portfolio is up 80%… and he thinks this is just the beginning of the small-cap opportunities in today’s market. 

Learn how to get immediate access to his small-cap portfolio—including 3 of his favorite biotechs now.

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