Ignore the headlines: Fears of a credit crisis are overblown…

Doom-and-gloom headlines are nothing new.

As a rule, they’re generally best ignored. Like headlines warning of a coming credit crisis…

Today I explain why we’re not even close to another 2008-level market crash… and why national debt fears are overblown. 

Then, in-house junior analyst Daniel Creech takes us through the process of putting together a newsletter… shares a few investment ideas… and what he’s researching right now [29:37].

In my educational segment, I explain the difference between secular and temporary risks… and how the latter can create buying opportunities—like it has with one popular company [57:05].

Transcript

Wall Street Unplugged | 686

Ignore the headlines: Fears of a credit crisis are overblown…

Announcer:

Wall Street Unplugged looks beyond the regular headlines heard on mainstream financial media to bring you unscripted interviews, and breaking commentary. Direct from Wall Street right to you on Main Street.

Frank Curzio:

How’s it going out there? It’s September 11th, and I’m Frank Curzio, host of the Wall Street Unplugged podcast, where I break down the headlines and tell you what’s really moving these markets.

Frank Curzio:

I just created a new indicator. It’s called the bullshit indicator, where we call bullshit on some of the crazy predictions we see, there’s so many, of the so-called experts on Wall Street. Now, why am I starting off with this segment? Right at the intro? Because lately, I don’t know, might be me, I comb the market just like you guys, but I’ve seen tons of end of the world stories throughout all financial media.

Frank Curzio:

And not only am I seeing them on these sites, but a lot of these sites list, when you scroll to the bottom, the top five stories, and they’re always in the top five. In fact I can’t remember a day that’s gone by, and I mean this, I should say over the past couple months, it’s been over the past six, seven years, but it’s really getting crazy right now. Where you don’t see some crazy, outlandish prediction of where the markets are headed.

Frank Curzio:

One of the headlines, “Next recession will destroy millennials.” Or, “Signs of the US debt fueled economy might actually collapse.” “Drowning in debt, the road to thirty trillion dollars.” “How federal debt will soon destroy the US.” These are real headlines, guys. “Our debt to GDP ratio is over 100%, that’s the danger zone.” Not going to break down where these stories are, but they’re all from very quality, very popular financial media outlets that we all look at and read.

Frank Curzio:

But every single day that goes by, more and more of these are starting to show up on these sites. So what I want to do today is cut through all the BS. There’s many of these calls are like being part of WW wrestling. I mean, hey, it’s very entertaining. People love it, it’s great. I grew up on it as a kid. But watching wrestling is harmless. We all know it’s entertainment, so many people enjoy it, and that’s cool. Giving the people what they want.

Frank Curzio:

The people in the financial media making these calls, they’re influencing your lives. That’s a big difference from just being entertained for a TV show, or something like WWE, or whatever. Or an interesting story. They’re influencing your life. How? By making you do the wrong thing with your money over the past 10 years. Think about that. That’s money you could’ve used to put your kid through college, retire early, take your family on a nice vacation, buy a new house, have some extra money to pay your ex-wife after your divorce, whatever. Whatever.

Frank Curzio:

But I’m not playing Monday morning quarterback where, “Hey if you invest you could do it all over.” But there were signs out there that showed that the markets were going to go a lot higher, that frankly the bears don’t even care about. Why? Because most of these people have an agenda. They want to sell you something, and the best way to do that is to tap into your emotions. Especially your fears. Telling you, “Hey, you’re going to lose everything if you don’t do this,” and of course they’re going to provide a date, right? Usually within three to six months.

Frank Curzio:

Some of them have a specific date, saying, “The market’s going to crash on this date, if you don’t do this, this, and this.” And it’s funny that they’re selling financial newsletters and they’re telling you it’s going to crash. I don’t know how they’re going to help you make money. What are they going to tell you, to go into cash? I don’t know. But it’s just funny when you see it.

Frank Curzio:

But that specific date, why? Because it creates urgency. “Whoa, I really need to see what this guy’s saying, he really thinks next month the market’s going to crash that day. Holy cow!” That’s the game.

Frank Curzio:

For example, if you take Peter Schiff’s book from 2011, Crash Proof, it was called, How to Profit From the Economic Collapse. And then he published another one in 2012 called, The Real Crash: America’s Coming Bankruptcy – How to Save Yourself and Your Country, that was 2012. How to Save Yourself and Your Country.

Frank Curzio:

2016, same book, except he updated it. He actually called it The Real Crash: America’s Coming Bankruptcy – How to Save Yourself and Your Country – Updated. He add the word updated in there, so he updated that book. I won’t even say 2010, 2011, let’s start 2012. So what do we have here? Very scary titles, taps into your emotions, New York Times Bestseller. You get scared, you buy his book, and then you’re in his ecosystem of email barrages, sales pitch to buy gold, invest in his funds, whatever. I’m highlighting Schiff as an example because Schiff is someone that I think … you guys know how I feel. But there’s a lot out there.

Frank Curzio:

If you want to put all this into perspective, what’s not being told is when you look at 2012 when he made that prediction, from 2016 … again that’s the time when he revises America’s Coming Bankruptcy book. The S&P 500 went from 1400 to 2600. It surged 65% from 2012 to 2016. I’m not picking on him because he’s wrong. A lot of us get it wrong from time to time. There’s a reason why I’m bringing him up.

Frank Curzio:

So in 2016, when he wrote the updated version, the S&P 500 went from 2600 to, where is it? Around roughly 3000 today? Give or take a few points. So again, putting all this in perspective, you have a guy like Schiff who’s been predicting America’s Bankruptcy pretty much since 2010. I won’t take the generational low though, I won’t go there. Which was really from March 2009, not from 2010.

Frank Curzio:

But again, let’s just use 2012 as an example. That’s when he wrote his first America’s going bankrupt book. And the S&P 500 again, trading at 1400, today it’s close to 3000. So not only do you miss gains on one of the biggest bull markets of the generation, marks up 135%, the S&P after dividends. Which only cost you 0.04% to own the Vanguard S&P ETF.

Frank Curzio:

But more important, Schiff is charging as much as 4.5%, which is the max sales charge he charges for his funds. 4.5%, you know why they’re not in America now. 4.5%! On the way in, you probably don’t know you’re going to get charged on the way out. Even if you lose their money, you leave. Bye, bye. You get another fee. Crazy. Insane.

Frank Curzio:

When you think about that, 4.5% to put money into his funds. Which, by the way, just about every one of his funds, including his goal fund, is underperforming in the markets over the past three years, one year, six months, three months, you pick the timeframe. Most of them since inception.

Frank Curzio:

So not only did the people listening to him miss one of the biggest bull markets ever, even if the market crashed 50% from today’s levels, the S&P 500 would still be higher, because it’d be around 1500, right? It’s 3000 today. Compared to when he made his crash call in 2012! Even if it declines 50%, which he’s going to say, “I told you so,” it’s still going to be higher than when he made his original predictions.

Frank Curzio:

Now, I’m going to say a few things here. And at first you’re going to think I’m crazy. I’m sure most of you disagree, you’re going to think I’m on drugs, hear me out first. Because there’s a lot of fears out there, like deficits. And I’m going to let you know a little secret. Deficits don’t matter. How crazy is that? You probably shout at the pod, “What are you talking about deficits …”

Frank Curzio:

We’re sitting on twenty-two trillion of debt, which keeps rising. And it looks very, very scary on the surface. Yeah, it’s twenty-two trillion, it makes for a great story, it’s awesome. But you know people have been warning about our massive deficits since the 1970s? Even the 70s and 80s, there’s still some analysts out there today, they’ve been doing this that long. And you can take what they’re saying today, and if you see them do a conference or a video, you wouldn’t even know it, but it’s the same exact thing from the 70s and 80s. “Country’s going to be destroyed. Move your ass outside of the US. The dollar’s going to get destroyed. Riots in the streets.” Same thing, same thing.

Frank Curzio:

Let me tell you something, you’re alive back then? I was born in 72. Or should I say maybe old enough to invest in the 70s, and didn’t take any money out of the market, even the 80s, congratulations. You’re a very, very rich person. Now, when it comes to our debt, believe it or not there’s not one economist on earth that can prove high debt levels, alone, are bad for an economy. Any economist that tells you different is not a true economist. Because debt usually fuels economic growth.

Frank Curzio:

People and business have more money to spend, and most of the lending, which is done by banks and large financial institutions, it’s carefully analyzed. Where banks are not lending a billion dollars to a company generating two million in sales. No, it doesn’t work that way. They’re very, very careful when it comes to who they lend money to.

Frank Curzio:

Similar to an insurance company who knows every single risk before writing you a policy, which is 100%, 100%, 100% all the time in their favor. “Wow, if I die I’m going to get ten million dollars,” believe me, they know you’re not going to die. They know. They have algorithms and numbers. Yes, that rare instance when that happens by accident, god forbid, but most of the time they know exactly what they’re doing. They know the numbers, they analyze everything. Again, it’s in their best interest to know that.

Frank Curzio:

Their job is to take money from you, and not pay you. That’s their job. They’re not going to tell you that, they’re going to say, “Hey, you should be safe with your family,” and this and that. But in reality, there’s a reason why the insurance companies are the biggest businesses, the most high margin businesses in the world. There’s a reason why hedge funds have created re-insurance companies, which is insurance on insurance companies, so they can take that pool of money, because it’s one of the only businesses that you pay money up front for something in the future that probably won’t happen. And they take that, and they invest it within their fund to generate more returns, and if something happens they pay out, big deal. It’s the greatest industry in the world, insurance. They know exactly what they’re doing.

Frank Curzio:

But getting back to debt here, debt fuels an economy. Now saw we have another 2008-like credit crisis, which is going to be really tough to happen since it’s not going to be caused by the banks, since they barely leverage today due to new regulations, Dodd-Frank. Which were put in place during the credit crisis. I know a lot of you might disagree with that, but they were super leveraged … I say this all the time, subprime did not cause the credit crisis, it was the leveraging of subprime.

Frank Curzio:

If nobody leveraged subprime, there would’ve been a pullback in the housing market. Yeah, a couple firms here and there. It was the leveraging, where people have to put up the money … it was leveraged 40, 50 times … synthetic of synthetic of synthetic, CDOs, that’s what crushed the markets, guys. Not subprime. It was the leveraging of subprime, that’s what killed it.

Frank Curzio:

Banks are barely leveraged today, compared to how leveraged they were historically. Let’s go back to an example where we have a complete meltdown. I know the black swan event that crashed the goal of markets and puts us on the brink of total worldwide collapse. My question to you, what do you think the government’s going to do? They bailed out everyone during the credit crisis. You know what? They made an effing fortune.

Frank Curzio:

Fannie and Freddie paid over $300 billion in combined dividend payments to the government already. $300 billion. If you want to put that in perspective, the total amount of the bailout was $470 billion when all was said and done. Fannie and Freddie paid over $300 billion in dividends, combined, to the government already. The banks paid back $245 billion dollars. Versus the $545, again, the bailout was $470.

Frank Curzio:

And not only that, the banks paid that back by 2012. Four years later. Throw in the bailouts for AIG, GE, the auto companies, everyone else, and the government made an absolute fortune bailing everyone out during the credit crisis. Which you may say, “Well, okay, that’s good because now it put us on much better footing.” People forget, if that would’ve happened when our unemployment rate would’ve been … it would’ve been the Great Depression. And we might still be in it today if that would’ve happened. That’s how dangerous that was.

Frank Curzio:

I don’t know, some people are against it, for it, regardless. Regardless. What you need to understand is, it wasn’t a good thing that the government made a fortune bailing everyone out. Because what do you think the government’s going to do if the market falls 35%, or another black swan event. And you remember towards the end of last year, the market corrected by 20%. Again it was up like 15%, so it wasn’t like the market felt that. I think if it was down like 6% on the year … and what happened? I mean Trump quickly made sure, he started talking to China again, relationships are not that bad anymore, and the market really surged the first few months of the year in 2019.

Frank Curzio:

Now you’re talking about providing more tax incentives again. I mean it’s like everyone’s afraid the market’s going to come down, it’s crazy. But remember, America has a printing press. We can print money forever. I hate that fact, you should hate it, but I’m not talking about it from a political view. I’m not talking about trying to tap into your emotions here. I’m talking about how you make money off of this, which is the only thing you should care about.

Frank Curzio:

You can go on social media, you can hold up a sign in front of the White House. Do whatever you want, I don’t give a shit. My job is to make you money. And that’s what pisses me off about all these bears, because lowering interest rates to near zero, backstopping all the debt, and you’re still keeping your bear forecast on their means that you have an agenda. You don’t really care about people.

Frank Curzio:

But you look at it as America with the printing press, again, I don’t like that fact. I’m not saying like, “Wow, America’s got a printing press, you got nothing to worry”- No. I’m telling you what the government’s going to do if this happens again. They’re going to bail out everyone, because they made a fortune. You’re looking at the dollar, the dollar is the world’s reserve currency. Everybody wants it. By everybody I mean every country because it’s safe.

Frank Curzio:

Now, this will end badly one day. Especially if our debt levels keep going higher and higher and higher. If we don’t see economic growth, because economic growth is essential when you have debt on your balance sheet. So I say these deficits don’t matter, we’re growing the economy. If we continue to grow the economy, if it continues to go forward, we’re going to be fine. Especially when interest rate’s low.

Frank Curzio:

That’s one thing you can say when debt is terrible, if you’re not growing, or excess debt, I should say. That’s bad. But let me tell you something, if we do see the tides turn when it comes to our debt, and all those fears that you worry about, that people have been telling you at least over the past 10 years that you can remember … that’s why I bring everyone on board. Because everyone just always wants to talk about last 10 years. “Dow is going to collapse, the market’s going to collapse, everything’s terrible. Everything’s horrible.”

Frank Curzio:

Say if they’re right, you’re going to have plenty of time to see it before it happens. And you remember the credit crisis. 2006, 2007, look at the news flow. You can go into it now and Google it. Mortgage companies started to go bankrupt, default subprime mortgages start to skyrocket. Again, 2006, 2007, AIG took insurance from every brokerage firm for all the shit, the backstop, that we didn’t know behind the scenes. But we saw the writing on the wall of what was happening.

Frank Curzio:

So what’s going to happen this time? You’re going to see defaults rise sharply for businesses. If you’re worried about debt, and debt becomes your major concern, which is not happening. Foreclosures skyrocket, which is not happening. Interest rates surge, which is not happening. GTP falls sharply, which is not happening. You’re going to see it on the bank’s balance sheets, which still have to go through extensive stress tests every single year.

Frank Curzio:

Which, by the way, banks are reporting record earnings, some of the highest credit quality and low metrics. Near record common equity tier one capital, a very important measure. You don’t have to know it, don’t write it down. It’s just basically … it’s the funds a bank has on its balance sheet to absorb losses, in case … without seizing operations. So they have to keep a certain amount, basically, in reserves if there’s any record highs.

Frank Curzio:

Which explains what? They have to keep that much money on their balance sheets because we’re scared of another credit crisis … again that pendulum swings all the way to one side, that’s how it is at regulation … so what are these banks doing? They can’t really grow, they can’t really take on as much risk. What are they doing? They’re raising their dividends like crazy and buying a shit load of their floats.

Frank Curzio:

Citigroup, Wells Fargo … in the next two years, because it’s basically a three year process, they’re going to buy back 20% of their floats. 20%! And these companies are paying what? Two, three, four percent yields. That’s how much money they have. People don’t want to talk about this, they want to scare the shit out of you. It’s like, “No, Frank, you have no idea what you’re talking about.” Whatever. Whatever.

Frank Curzio:

We’ve been in the market, we’ve generated a lot of money over that time, you can do whatever … it’s your money, it’s important. I just want you to hear the other side. And don’t be like a left or right politician where it doesn’t matter what you say to religion, I don’t care. Listen to what I’m saying. Disagree with it, do your own homework. See if what I’m saying is here.

Frank Curzio:

But you’re looking at the banks, more powerful than they’ve ever been in the history of our nation. Throw in interest, going to remain a historical low for a very, very long time. I wouldn’t say forever, for a very long time. Which allowed our government to borrow indefinitely. But for now, please do me a favor. Stop worrying about the debt, the deficits, the twenty-two trillion that people talk about since 1970, “It’s going higher, and higher, and higher.” And breaking it down between Obama and Trump, and how much money they’re adding to it, and why they’re terrible, whatever. It’s nonsense, it’s noise. It’s noise.

Frank Curzio:

It’s being brought out today because we have an election coming up. You’re going to see all this crap coming out, scare the crap out of you. But stop worrying about the debt. Because this risk alone has kept so many of you on the sidelines for nine years. For nine years, where the market, and almost every asset has significantly increased in value. And even if you didn’t get it right in 2009, or 2010, or 2011, by 2012, the writing was all the wall that our government … all in, and doing everything they can to inflate the markets, keep interest rates at zero, which is a recipe for almost every asset to skyrocket in price, which is happening. And it didn’t really skyrocket that much, I’ll get into that in a minute.

Frank Curzio:

That’s relative to earnings and what’s going on. But if you’re looking at super low interest rates, huge deal. We have earnings growth over the past five years, along with sales growth. Unemployment is basically zero, consumer spending is still strong. So it’s funny how many stories are out there right now, or even over the past few years, just telling you, “Hey the markets are so expensive. So expensive.” You know how expensive the markets are? They’re so expensive you won’t find one expert anywhere that’s telling you the stock market is cheap right now. Nobody would tell you that. “Stock market’s cheap right now,” no. It’s like if you’re in Hollywood you can’t say that you like Trump, or you’re blacklisted. You’re not allowed to say that in financial media. It’s crazy. That’s a great thing, because that’s a huge contrarian indicator. Nobody believes the stock market’s going to surge from here. Nobody.

Frank Curzio:

Very few people. I’ll tell you something else no one’s going to tell you. That our stock market is cheaper today than it was four years ago. That’s a fact. You can look at the numbers. The S&P 500 is trading at 16.6 times earnings right, forward earnings. The five year average is 16.5, we’re right on it. If you’re looking at the markets, they’re not expensive today. And they’re even trading at a discount to where it was trading in 2011, 2012. Based on the P/E base, full P.

Frank Curzio:

And maybe you’re thinking, “Curzio, you know what? That makes zero sense. I mean stocks are up huge since then,” and you’re right. But it’s about earnings growth. Because earnings are also up huge. Which is why the P and the S&P 500 is cheaper today than it was five years ago. Even though the market’s higher. I wouldn’t go out there and say, “Hey, the markets are dirt cheap, you got to go all in and buy,” no. But they’re definitely not expensive.

Frank Curzio:

And you’re looking at earnings down slightly year over year, which is maybe expected. Since we had the tax cuts go into effect last year. But for 2020, expect to grow close to 10% again. Throw in super low interest rates, this environment’s going to stay here for a long time. A near two percent yield in the S&P 500, which was actually higher than the 30 year Treasury, that yield, a few weeks ago.

Frank Curzio:

And stocks are definitely not expensive. It provides a good alternative, especially in the global markets where everything doesn’t look all rosy out there. Again, something you won’t hear in the media. Why? Because it doesn’t sell. Greed of course sells, but nobody’s predicting the S&P 500’s going to 5000 anytime soon. You don’t see any of those predictions. If you did, then they’ll get people interested. Most are predicting a 30%+ crash, because that’s really interesting too people. They will click on a story like that, they’re like, “Whoa, if that happens what’s going to happen to my 401K?” And that’s why a guy like Peter Schiff is still quoted everywhere. TV, gets paid to speak at conferences, huge draw, good for him. Because he gets that despite having a terrible track record, and being wrong for nine straight years.

Frank Curzio:

So what kind of person do you want to be? Do you want to be a follower or a leader? If you want to be a follower, go follow the guys with these crazy predictions. It’s fine. I’m not a permabull or a permabear. When I see the data telling me that we’ve got to get out of the market I’ll be the first to let you know. But it’s not saying that right now. So I’ve been telling you to buy almost every single dip for a while. I got nervous before the tax reforms and said, “Look, we’re getting a little top heavy,” but the tax reforms changed the game. They added more earnings growth. Companies are paying less taxes, generating more money.

Frank Curzio:

When you’re looking at people like that, it’s entertaining. People love to read stories, watch videos of crazy market predictions, which essentially means more pageviews, right? Or more money to the networks. That’s their motivation. They need you to click on stories. And today, everything’s a 24 hour news cycle, as you know. Especially when it’s not earning season. There’s nothing to talk about for even three hours, two hours. Maybe there’s one good story in the market.

Frank Curzio:

Same with ESPN. I mean now you have football, which is good. But a couple weeks ago, before football, they’re talking about how Jerry Jones pissed off Ezekiel Elliott by saying, “Ezekiel who?” And that offended him. I mean, that’s what they’re talking about. Because they have to talk about something even though it’s meaningless and it means nothing. It’s the same in the markets. It’s a lot of noise out there, and you have to be careful.

Frank Curzio:

The point of this mini rant, if you want to call it, don’t fall for, “The Dow is going to lose its reserve currency status,” stories. Don’t fall for, “The market’s going to crash by 40% by the end of October,” which, October is the month where we see the biggest crashes. Or if we have an inverted yield curve, every single time, “It’s a recession, we’re going to have a recession.” Where people aren’t telling you that the S&P 500 goes up an average of, I think it was 17, 18, 19% around that level. I had that quote, it was amazing. Great research. Before the actual recession. Nobody tells you that. That the market surges before you actually have that recession.

Frank Curzio:

Think of 2005/6/7. Before we had 2008, and how much the markets went up. Look at the internet bubble, how much the markets went up before you got a bubble. We’re not in a bubble. We’re not in a bubble. We’re not in bubble because everybody predicts the market’s going to crash. That’s how you know we’re not in a bubble. How many markets have crashed when everyone’s predicting? Let me know, I’ve been doing this 25 years. It never happens. You had only a few guys predicting that the housing crisis, and how that market was going to happen. That’s when you see it. Not when everybody’s talking about and being worried about it. Everybody’s cautious, it’s on the table, we all see it, we see the risks.

Frank Curzio:

And please, please, please don’t fall for, “The US has too much debt, and it’s going to go bankrupt,” story. Which, by the way, if it happens, why would you care about reading what anyone has to say? You should buy a cave and protect yourself, weapons. I mean if that happens, it’s going to be mass chaos. But, “You should buy my newsletter, for $100. Because this is going to happen next month,” it’s great. It’s entertainment. We live for entertainment, we all do, we love it. That’s why we have to be on our phones, we have to be do something, I get it. But this is your money. Your generational wealth.

Frank Curzio:

That’s what these people are fucking with right now, and they don’t get that. They don’t get how many people are listening. When Schiff goes on, he doesn’t understand how many people listen to every word he says. And so many people have been out of this market and say, “Hey you know what, I’m going to trust you. I’m going to go into your funds. They’re underperforming, well I’m going to get out of it.” “Okay, here. Here’s the two percent charge because you’re getting out of it.” “Really?” “Yeah.”

Frank Curzio:

Four and a half percent fees. Four and a half percent fees. That’s great. Unbelievable. Be smarter than that. Be smarter than these people. Because at the end of the day, it’s about making money for you and your family. I’ve been doing this for over 25 years, I love what I do, and I can tell you, most people don’t give a shit about you. They give a shit about making money for themselves. And if you have that mentality, especially when you’re seeing these crazy headlines and stories, you’re going to think a lot differently going in, and that’s what I’m trying to help you with.

Frank Curzio:

Now, end of the rant. Let’s move on a little bit. Because I have a really cool interview for you today. It’s with Daniel Creech. Daniel’s an analyst at Curzio Research, worked side by side with me for two years when I hire him. Interviewed him a little over a year ago, and remarkably I got a lot of questions from you listeners. “Hey, how’s Daniel doing? I’d like to hear what’s going on. Maybe a little bit of backstory, you haven’t had him on in a long time.” But Daniel’s been an amazing hire. I mean I have to kick the guy out of my office because he loves his job. “Get out of here, go, go, go.” He’s always here, he loves what he does.

Frank Curzio:

And you’re going to see this in a minute, but he’s turned into a full-fledged stock analyst who is going to be writing a few of his own publications soon. Very soon. Now, this is going to be a straight up interview. Dan’s not going to kiss my ass because he works for me. It’s going to give you a behind the scenes look at what it’s like to work right next to me for a long time. The positives and the negatives. One of the negatives might be my daughters come into the office and say hi sometimes, and they like Daniel, they think he’s a great guy. They go in there. Which I know he kind of likes.

Frank Curzio:

But Daniel’s also going to talk about the tools he uses to research stocks, including several methods you can do right from your home. And he’s going to share his favorite picks with you. They’re not my favorite picks, they’re his favorite picks. I never tell my analysts what to write, what to recommend, nothing. So these are different stocks that, trust me, you’re not going to hear of any of these names. Maybe one or two. There’s going to be about four or five stocks, new ideas to look into, really cool.

Frank Curzio:

And just a quick heads up, because if Daniel’s wrong on any of those picks, or you want to write in criticizing Daniel, just know that he is 6′ 7″. If he finds you he’s going to kill you. I’m kidding. I’m not kidding about the 6′ 7″ part, he’s a big fella who could actually hit a golf ball a mile. So really, really great interview coming up. You’re going to be surprised I think. Because you guys listen to all my interviews and analysts, wait til you hear him in just two years, it’s going to be pretty remarkable.

Frank Curzio:

Then on my educational segment I’m going to break down a very popular stock that had a PR nightmare, one of the biggest. Cut its stock in half. Today, it’s trading at an all-time high. So the statement’s going to be about risk. More specifically, the difference between a secular risk, which is long-term, and a short-term risk. Because if companies can turn it around, and a lot of times when you have that PR nightmare these stocks get crushed. But once they figure it out, and most do, their stock prices go a lot higher and you’re able to buy them for dirt cheap because they just sold off. That’s what happened with this company.

Frank Curzio:

So, the best part … now I’m going to break down, this company’s at an all-time high, I won’t give it to you. Maybe you know it is. Just by some of the things I’ve been saying so far. But I’m going to give you a stock that’s in a similar position today, going through a PR nightmare, that could follow the same fate as this once hated name. It’s going to be a great segment, trust me on this, where you get great stock picks. Something that’s come down a lot, that I think is a [inaudible] and buy right now, because they’re going to figure out this problem. Just like so many companies.

Frank Curzio:

But a lot of times when you see brand name companies and great names really mess up, most of the time they become stronger, put new measures in place, and that stock price benefits years later, tremendously. And you’re able to buy it at a discount. So, fantastic segment, trust me. It’s going to come up in a minute.

Frank Curzio:

Before we get to that, let’s get to my interview with Curzio Research Analyst, Daniel Creech.

Frank Curzio:

Daniel Creech, thanks so much for coming back on the podcast.

Daniel Creech:

Hey Frank, thanks. Great to be back.

Frank Curzio:

Basically you could just walk over one office and really do this interview, but you’re not back in Arizona, and talk about that a little bit. Because you worked for us for two years, just to give everyone … I’ve interviewed Daniel, I think it was after one year you were here. I think it’s now around two years. And now I have you back on, give you like an inside scoop of what’s going on.

Frank Curzio:

Talk a little bit about the transition, because when you came here I said, “Look, whoever’s going to work for me, who I hire as an analyst, I want to come here for a six month period,” and you decided to stay pretty close to two years. Again, now you’re back in Arizona, but talk about that whole process. Moving here, and how it was. Because the amount of work that you’ve been doing for us is amazing, but even before we get to that, talk about the whole transition and how that was for you.

Daniel Creech:

Yeah, it was a drastic change. That’s for sure. It took me a couple days, I packed up and just drove from Arizona to Amelia Island. Just had fun with it, enjoyed seeing the country and taking a road trip. And now you can blame me for not being able to read a map because I actually left the island, I ran out on break when the hurricane was looking like it was going to hit us.

Daniel Creech:

I’m originally from Ohio, so I actually drove to Ohio, which is where I’m at now. And I’m going to make a big loop, basically around the country, make my way back to Arizona probably in the next month or so, to tell you the truth.

Daniel Creech:

But yeah, the deal was to live on the island for six months. But, not to sound arrogant, but I have to be in one of the top running’s for the best job and the best life in the world. Because I’m not married, I don’t have kids, so after six months of living on the island and working right next to you, you twisted my arm and said, “Hey man, you can stay a little longer if you want.” So I took advantage of being, like you said, right next door in the office. And then hitting the beach whenever I could.

Daniel Creech:

It was a big change, but it’s been amazing. It’s been a great experience, and looking forward to the next couple years and beyond.

Frank Curzio:

Now, like most people, we put out a resume for research analysts or anything, a lot of people are familiar with the industry. Maybe they’re for Agora branches, it’s Money Map, or Stansberry, their subscribers too, or Agora Financial, or even some outside of the Agora networks.

Frank Curzio:

So a lot of people are familiar with this industry. What was so different when you actually … because I knew that you read newsletters, I think you might’ve read my newsletter when I was at Stansberry, before I started Curzio Research. What did you learn about this industry that you didn’t really know about once you got here, or within those … especially those first few months that you started really getting everything down pat, and just throwing you right into the system?

Daniel Creech:

Yeah, I started … my background, I’ve been interested in the newsletter business for several years now. You’re right, I started reading your work when you were at Stansberry. I have a background in finance, I was in the brokerage world for a short time and have an insurance background. But the biggest thing I learned was that you can … if you put in the hard work, you don’t have to go through your typical brokerage avenue, or the typical financing avenue to go work at an investment bank.

Daniel Creech:

You mentioned how you didn’t look at typical resumes when you hired me, you just threw it out on your podcast. And basically, it helped me tremendously because I didn’t go to a popular school that you’ve ever heard of. I graduated, but like I said, if you don’t have this Yale or big time college name, it’s kind of hard to break into some of the investment world.

Daniel Creech:

The nice thing about what you did was you basically just said, “Hey, tell me why you would be good at this job.” So if you put in the hard work, and you have somebody … you know I’m grateful to get to work next to you, who’s grown up in this business, and obviously had some success. A lot of success. But the exciting thing is just to say, hey … it really brought it home to me that, hey, if you’re willing to learn, and you’re willing to put in the time, it’s a lot of time and a lot of work. But if you’re willing to do that, you can really make a great living, and you can help a lot of people make a lot of money.

Daniel Creech:

That was really kind of the full circle for me. I’m thinking, “Hey how do you break in this?” And almost one of those things where, can it happen to you sort of thing.

Frank Curzio:

Yeah, now that is interesting too. Because it’s … and I say this all the time. And even if there’s business owners that listen to this as well, you can teach everything that you know. You could teach, whatever it is. Whatever business you have. It’s a mechanic or whatever, you can bring someone in, you can teach. What you can’t teach is a hard work ethic. You can’t teach that.

Frank Curzio:

So if you have that, and are willing to learn, and put your ego aside, you can learn almost anything. You can do almost anything. In that interview process, that’s what people want to see. So it’s not so much a resume, you could’ve went to wherever, which means, “Hey, maybe I’m good at remembering things. I did good on all my tests,” if it’s an Ivy League school, I’m not putting them down at all because it’s a very tough process. And a lot of those guys are pretty much set up once you graduate there to go to numerous places.

Frank Curzio:

But with this job, and even some of the Ivy League people that I’ve interviewed, there’s a little bit of chip on their shoulder. And I don’t know if they know how to get their hands dirty, if they know how to work hard, if they’re going to have to work on the weekends if that happens. For me I’m always pushing people out of the office and saying, “Hey, guys, make sure you have time, don’t get overloaded. I don’t want you to hate your job.” But at the end of the day you really have to like what you’re doing.

Frank Curzio:

And that’s what I wanted to get to the next question is, what are some of the things that you’ve learned, especially when it comes to the analytical side? I mean the research engines that I have access to, and guys I try to provide so much free information for you, where … things you can find out, different research engines. But, we probably pay anywhere from $75 to $100,000 a year for the research engines. We need that, because it gives me stuff very, very quick.

Frank Curzio:

And now that you have access to that, talk about that research process. Because now that you’ve helped me write up stocks, and going over names that you like, talk about that whole process. Because I’m sure that was a little bit different from what you thought when you did get here.

Daniel Creech:

Yeah, absolutely. Obviously I know there’s going to be a lot of research, but it was a little overwhelming at the time, but all in a good way. Because when you sit down to … one of the coolest experiences was just kind of … you know, it’s funny. When you first get there, your expectations, you know, you’re a small company. Your expectations are relatively low so you’re just soaking up and learning. As you’re there a little bit more you gain responsibility, and you need to pull your own weight, and contribute.

Daniel Creech:

It was just so neat to see the process of, “Hey, you screen for stocks, you talk to all your contact.” You just sit down and really think about, “Hey, what’s going on right now? What are most people thinking? Is that correct or is that wrong?” And we’re always looking for data to back it up.

Daniel Creech:

It’s just amazing how … take you, for example. You always have a list of stocks, I always have a list of stocks now, that you’re constantly looking at our monitoring, and thinking about writing up. And then you start the process of looking through transcripts, and company reports, and looking at earnings.

Daniel Creech:

One of the biggest things I learned was to think about a catalyst. And I know that this is repetitive for your listeners because you drive this home, but honestly it really didn’t sink in for the first six or eight months that you were like, “Listen, revenue and earnings drive stock prices.” And you can look at a lot of different companies that do a quick screen, they look like solid companies or brand names, but if they’re not growing, it’s basically dead money for a while.

Daniel Creech:

So that whole research process on trying to figure out, “Hey, what’s everybody thinking about? Why are they right or wrong? And we need data to back it up.” You mentioned how you pay a lot of money for some research engines, Capital IQ is one of the best ones out there, in my opinion. That is a paid for subscription. But it’s just wonderful to, at your fingertips, be able to pull up all kinds of company reports, and types of numbers and ratios from any number of years going back. And really see, has management been sticking to their word? Can they deliver on their promises? And really focusing on that catalyst, and what’s coming up next.

Frank Curzio:

Now Daniel, talk about the writing process. Because one of the most difficult things, guys out there, if you’re thinking about getting into this business, I get a lot of emails … and we’re going to get Daniel’s favorite picks soon, I know that’s what this podcast is about. But I like giving you an inside scoop where you’re not hearing it from me, you’re hearing it from one of my employees who worked.

Frank Curzio:

And Daniel’s one of the few people, because a lot of my employees are mobile now, we’re up to 17 employees here. And he’s one of the ones that was in the office all the time, so he knows everything about me. I mean one of the negatives is probably that my kids coming in whenever, randomly, and you know they love you Daniel, and say hello and everything. And another thing is probably my mascot, I don’t know if you wanted to mention that. It’s something that you really hate in our office, right?

Daniel Creech:

Yeah. For those of you that don’t know, the biggest thing I can tell the public about the inside scoop of Frank Curzio is that he’s basically like an animal whisperer, or basically starting his own zoo. We have all kinds of interesting animals. Well you have a snake, and a rabbit, and I will say I was disappointed when I didn’t hear it was Thumper. But yeah, the snake is definitely not my friend at all. I’m not a snake fan. Everything’s in cages and stuff.

Daniel Creech:

But yeah, the work environment was awesome. Yeah, the kids running in, make sure you tell the family I said hello. I’m interested to see when I come back here soon and visit, what the office looks like.

Frank Curzio:

Yeah, my daughters love snakes. My daughters love snakes, you believe that? Insects, all kinds of crazy things. So yeah, sometimes it’s just easy to have it in the office really close to the house.

Frank Curzio:

Getting more into the process, and I asked you this at the beginning before we got to this, on a little sidetrack. The writing part, because in our industry, it’s very difficult, it just doesn’t match. It’s kind of like … I guess you could say a good example is baseball. You usually don’t see … I think there’s like four main qualities. Whether it’s strength, are you getting home runs, you get the fielding, you have speed. And it’s very rare to have all those, and when you do you have someone that’s perfect.

Frank Curzio:

In our industry it’s very difficult to get people that are great analysts, that know how to write. Talk about the writing process, because when I say you know how to write, people know how to write, but, what we do is we’re going out to … this isn’t institutional. I worked on that side already, where I could just say, “Hey, this company’s trading against five times EBITDA. It’s a cheap discount, and these are the [inaudible 00:39:42].” And that’s all I need to write on the institutional side.

Frank Curzio:

It’s much more detail, sale side analyst, to have discounted cash flow models, it’s mostly numbers. But they don’t tell stories, and our job is to get mom and pop interested. And dial it down, and get to the details, and explain everything. So when we say EBITDA we tell you, Earnings Before Interest Tax, you know.

Frank Curzio:

So we’ll say all of that, but talk about the writing aspect. Because that’s something that even someone, for me, who’s been in this industry for such a long time, you’re always learning how to communicate. Because at the end of the day, we’re communicators. We want to communicate to you, and if we’re not communicating an idea that makes sense, or that you understand, you’re never going to invest in it. Talk about that process and how detailed it is.

Daniel Creech:

Yeah, absolutely. The short answer is it’s the most humbling thing I’ve dealt with professionally. It’s funny to sit down and work for hours and hours on something, and rewrite, and try to make it flow. And like you said, we have to engage with our customers, our subscribers, we have to get them excited about something because a lot of times they’ll just ignore it. If we don’t catch their attention, they may just, “Eh, whatever. We’ll look at next month’s issue,” or whatever.

Daniel Creech:

But it’s just incredibly humbling when you put in the time, you send it off to editing, and you even gave me, you still warn me to this day on it. You say, “Hey, don’t take it personal, it’s going to come back with a lot of edits, a lot of red ink on there. It’s just a learning process.” You just have to go through it. Me, in general, I just nod my head, “Yeah, yeah, yeah, okay.” But boy when you get it back and you think, “Gosh, it was that bad?” Or you read the same thing, or write it over and over over again, and then you kind of get glossy eyed, and your edits come back and you make really silly mistakes here or there.

Daniel Creech:

The editing process has been great, though. It’s fun to send it off, you get that sense of adrenaline and accomplishment. Hey, I turned in an issue. Or we turned in this segment. And then you have that little time period where you can work on something else, you know edits are coming back. And then you get to go the back and forth and really hammer out, “Hey, this is what I’m trying to say. This is why. What’s the simplest and easy way we can say this to reach a massive, massive audience?”

Daniel Creech:

And like you said, “If we have to use that lingo, and financial terminology, we break it down.” I love the example you always give of, “Hey man, just act like you’re sitting on a bar and talking to somebody, and relax. Just be normal.” Good thing for me, I’m comfortable doing that, and I like having a drink at a bar every once in a while.

Frank Curzio:

No, I hear you. And I’m glad we’re talking about this, because a lot of you out there … and, listen. We’re doing a little bit of a different interview style today. We do have an analyst on, he’s going to give picks and stuff like that. But I get a lot of questions, “Hey, how’s Daniel doing? You had him on over a year ago, I’m curious.” So I just wanted to definitely give you guys an update.

Frank Curzio:

But what you’re used to if you’re a subscriber to our services is, the product. Most people publish on Wednesdays, most of our services. And you get it on Wednesday, and everything’s cool. But the process before, people have to work through the weekend, it’s going through editorial, you’re putting charts and graphic designs in there. So we have a graphic designer. You’re looking at, again, that whole publishing … then making sure it goes out to everybody, and your systems are working. It’s a very difficult process where, it’s pretty cool.

Frank Curzio:

And again it’s, behind the scenes for any business is a difficult process. Because what you’re seeing is just the end product that you’re buying. But it is … you need a really great time to really make this business work. You can’t do it by yourself. You can’t just say, “Hey, this is what I’m going to write,” you need people to check your work. You need people to make sure.

Frank Curzio:

Because how busy we are, you want someone to fact check, making sure they’re going over everything. You might’ve wrote a number wrong because … not that we have … I do have tons of numbers in our research, and making sure that you understand it. But you need that whole team to come together, really, to get everything to work. And it’s really cool that you just took us through that process, Daniel.

Frank Curzio:

Now I want to move on here, because what people love is new ideas. Some of the things that you’re looking at … and by the way, Daniel’s an analyst, and every one of my analysts, I never tell anyone what to write. I may have different opinions than them, which is fine. That’s great. So I don’t even know what pick Daniel’s going to say, or what he’s going to say or anything. But this is from him, this isn’t, “Hey, we researched these stocks, Daniel. Mention this.” No, this is freestyle. I tell him, “Don’t kiss my ass, give people the real scoop.” Because I like that, that’s real. And that’s what I love about this business, there’s just a lot of real people in it. At least the people that we hired.

Frank Curzio:

But talk about some of the stock picks that you like.

Daniel Creech:

Yeah, I’ll give you a couple from two different views. The first one … as you know from just being right next to you for so long, and getting a lot of that down time, and talking throughout the day, I like looking at things from a macro view. I love politics, I love the back and forth banter, and arguments, and ridiculous on both sides. Thank goodness I can laugh at it, because it’d probably drive me crazy like it does most people, and they get so frustrated and yelling at the TV. Hell, half the time you don’t know if they’re watching a sports game or the news. Which just cracks me up, to tell you the truth.

Daniel Creech:

But from a macro perspective, and I believe you touched on it in the last Curzio Venture Opportunity, there’s so much algorithmic trading going on. And you see these massive swings, and large … it doesn’t matter if it’s a large cap or a small cap stock … a few to several weeks ago Target, which is a massive company, over forty billion dollar market cap reported earnings, and the stock went up 18 to 20%. I remember standing in the doorway in your office, and we were laughing. We were like, “Yeah, in 24 hours, this is worth 20% higher now.” Because they had strong earnings, and everybody thought retail’s dead, and now it’s okay.

Daniel Creech:

So the volatility is kind of crazy. And what that’s kind of pushed me towards is … I explain the politics because what I think is going to happen in the stock market is relatable to politics. And what I mean by that is, right now you have a lot of division in the political sediment. You have the right and the left, not even really wanting to hear each other out or talk at all, and I think that’s going to transition over to the stock market in the sense that people are going to continue to go after the specific brands, and tastes that they like.

Daniel Creech:

What I think is going to come from all this going forward, even though we’re going to have to deal with more volatility, I would like to see, and I’m hoping, that individual stocks start trading on individual bases. So it’s not going to be a sense where … and we’re starting to see some of that now. You have massive swings in the overall stock market, but individual stocks are kind of bucking the trend, either up or down.

Daniel Creech:

So I’ve been pushed towards higher priced stocks. I want to take a small rabbit trail here and explain. One of the things that you and I had talked about a lot, and if we could teach the individual investors something, especially the younger investors around my age, in their mid, young, low 30s, is that the price of the stock is basically irrelevant. I have met a lot of people, both successful, and in the investment business, and just regular investors, that will not buy a stock if they can’t buy 100 shares, or 200 shares, or an even number, or something like that. That is just crazy to me.

Daniel Creech:

You have to remember, it doesn’t matter how many shares you own, it’s all about the amount of money invested. So whether you have one share, or 10 shares, or 100 shares, if that stock goes up 25%, you’ve made 25% return. I say all that to, I would push people to look at higher priced stocks. Booking Holdings is, give or take, $1800 a share. It’s got incredible margins, it’s a wonderful cash flow business, and it’s a great pulse on not only the US economy, but nationally. Because people are booking flights all over.

Daniel Creech:

And when you read through their conference calls, you hear things about, “Well, there’s this holiday over here in this region, or this sports game, or venue going on, or World Soccer Cup, and we’ve seen people in traffic go up or down.” And it’s just amazing to kind of get that pulse. So I like Booking Holdings, even though it’s “a high price stock.” The stock has sold off recently, and I think the management is doing a great job on looking to invest, and continue to have huge margins, and made great acquisitions. I think that company has a good opportunity to at least reach its past highs.

Daniel Creech:

Even though they’re household names, the high price stocks like Amazon … I remember when you wrote that up in CRA, we kind of joked and said, “Nobody’s going to buy this, because it’s such a high priced stock.” We even put a note at the bottom of that issue explaining, “Don’t worry about it,” the high price, “it’s all about money invested.” And that turned out to be a huge winner for us. Hopefully everybody bought that. I would probably say a lot of people ignored that because it’s a household name, and it’s a high price stock.

Daniel Creech:

Facebook is another one. I would look into any companies that are about to get … news broke just the other day about Google, I think, having 49 or 50 Attorney Generals looking into their business practices. Facebook’s the same way, Apple, all these anti-trusts. If that gives you a knee jerk reaction and the stock price to go down, I would look at buying some of those just on sheer … even if they get broken up, they’re going the be massively powerful and produce tons and tons of cash flow.

Daniel Creech:

I would almost look at that as an opportunity whenever you hear politicians say, “We’re going to go after them and break it up.” Look at what that did for Rockefeller and Standard Oil. Politicians are not going to be in the business of transitioning power on the corporate level yet. They’re all about just getting votes, and they’re going to say whatever they need to do that. Any pullback from Google, or Apple, or Facebook, I would look to be a buyer on.

Daniel Creech:

The other stocks I like are high dividends. I think yesterday was incredible, and I think there’s a lot of foreshadowing to that. I know you saw the news where Elliott Management, which is a billionaire hedge fund outfit, took over a three billion dollar position in AT&T. And you saw that stock … I think it closed at 4%, but at one point I believe it was up 7 to 10% yesterday. Just on that news. And again, here you have a massive company, with a huge dividend, but you have a shareholder coming in, and shaking up a 200 billionaire dollar plus company.

Daniel Creech:

I think if you screen for high dividend stocks, you can expect more of that management. And with interest rates being low, and the Federal Reserve basically telling you they’re going to be low for damn near forever, I think more money will flow into high dividend stocks, and you’ll see more activists in that.

Daniel Creech:

And then kind of dialing down to the micro level, I want to focus on strong brands. From a trading opportunity I look at Yeti. They make crazy expensive coolers and mugs to drink out of, but I see them flying off the shelves here in Ohio, got a lot of camping and outdoors people here in southwest Ohio where I’m at. There’s a lot of Yeti cups and Yeti coolers, and everybody just loves them. If we can get a growth … growth stocks have sold off recently, but if we can get some calmness on the China/US trade deal, and growth picks back up, which I think it will, I think Yeti can outperform and continue its rise higher too.

Daniel Creech:

There’s a handful of stocks, I don’t know if you want me to go on? I feel like I’m rambling a little bit.

Frank Curzio:

No, that’s what people love. They love that. I’m glad you brought up Amazon because I recommended that for Curzio Research Advisory, that’s our lower price newsletter, a lot of you have subscriptions to that who listen to this. I knew that few people would buy it. And I know that people aren’t paying for my service to buy Amazon, right? You can get that from any place. You don’t need me to tell you.

Frank Curzio:

But that was through heavy screening of cloud companies. That was through heavy screening of everything. And I really dialed down, and when I looked at Amazon and it was in the 900s, I was like, “It’s cheap right here. It’s going to skyrocket, go through the roof.” There’s nothing I can recommend in that space that would have bigger gains. You might’ve seen a few stocks here and there that have, in the cloud space. It was just right for that stock to go much higher.

Frank Curzio:

I recommended it, like you said, we put a note in there and said, “Look, guys, we understand this stock is high. We understand where it is, and I get it. But this is a stock that we’re very confident it’s going to go a lot higher,” and it almost doubled for us and we took half off. But remember guys, just to get into it further, what Daniel was saying with higher priced stocks, because the market is going up.

Frank Curzio:

You see more companies, $60, $70, $80, over $100 stock prices. When you look at that, it’s all about percentages. If you put $1000 into a $150 stock and it goes up 20%, you’re going to make 20% of your money. It’s the same thing that happens if it’s a stock trading at a dollar, right? It’s the same thing percentage-wise, it’s just don’t get caught up in the shares, like you said. Because the price is meaningless.

Frank Curzio:

It’s all about the underlying fundamentals, and some companies may have more shares outstanding. One company could have $150 stock price and have a twenty million dollar market gap. And another one can have a twenty-five billion dollar market cap. It’s all about shares outstanding, and like you said, with catalysts, in this market today, nobody likes value. You really have to focus on what’s the catalysts that are going to turn things around, and they should be short term within 12 months.

Frank Curzio:

But I like that you covered all that, Daniel. That was really important, and I just wanted to elaborate a little bit more.

Frank Curzio:

Moving on here, I want to just kind of end this, because you did provide a lot of great ideas here. I want to make sure that you’re practicing golf, because the last time we went out I did pretty well. Probably the best I shot since we’ve been here. And Daniel and I try to go out, if I had to guess, we got to get out once a month, twice a month, because we’re really busy. But I used to get out twice a week before I started my business. But Daniel’s a very good golfer, but I’m just hoping you’re practicing. Because last time I think might have been the first time that I actually beat you out of every time we ever went.

Daniel Creech:

I’m telling you, that was hilarious. You guys got to give Frank credit for continuing to play with me. I think I lost seven golf balls off seven tee boxes. Yeah, I was really hacking. You know I got out last weekend. I didn’t play … you know what? The game sucks right now Frank, I’ll be honest with you and everybody else. It’s frustrating.

Daniel Creech:

But I will say, I will get a lot better when I get back to Arizona. I will practice a lot more and my game will come back around. Yeah, it’s great to get out. That’s one of the escapes you and I both use to kind of unwind a little bit from the business. Yeah I definitely look forward to it. But not practicing enough yet, but I’ll get back to it. Next time I come back on we can recap on that and we’ll see if I can get some more birdies.

Frank Curzio:

All right, you got it man. So listen Dan, thanks for taking the time to come on. I was amazed at how many of you emailed us saying, “Hey I just want to see how Daniel’s doing.” Daniel’s going to be writing his own products pretty soon, everything’s amazing as you can see. Just in two years of … for me, Daniel, I just want to thank you. I mean you brought it every day, you still bring it every day, it’s great. And it’s because you’re passionate about what you do and it’s awesome.

Frank Curzio:

I really appreciate you coming on, you will be coming on in the future. Guys out there if you have … part of the Curzio Research ecosystem, you are going to start seeing Daniel’s name on a lot of different things, especially his new products, which we’re trying to launch pretty soon. Some really good stuff and Dan, thanks so much for coming on, man.

Daniel Creech:

Hey man, thanks Frank. Great talking to you.

Frank Curzio:

All right guys, great stuff from Daniel. And I wanted to hear from someone that’s not me about the financial newsletter industry. I mean, Daniel is the one person that works with me all the time. That knows exactly what I’m doing, where I’m going. What we’re eating for lunch together. Yeah he can give you that bird’s eye view of everything that I do, which is cool.

Frank Curzio:

But that dedication, and him being here for so long, you can see it, right? He’s a full-fledged analyst, he probably is smarter than 90% of the stock analysts in the world. I’m not saying that to be arrogant, but here is kind of like my education when I went to Jim Kramer. You get thrown into the fire, you need to know everything. You’re going to learn how to write, you’re going to learn about every stock, every sector, everything. And if that’s something that you love, then those are the people we like to hire.

Frank Curzio:

Especially for me, because I’m in charge of hiring analysts here. We have other divisional heads for editorial, and copywriting, that they’ll hire who they hire and I trust them to do the right thing, and they’re in a managerial position. For me, that’s what I look at. I look at someone who’s a diehard, that wants to be successful. Because if you have that drive in this industry, people are going to hire you. They’re going to see it in your eyes.

Frank Curzio:

Because anyone can write anything they want on a resume, but to get in the door you want to be different. And how do you be different? You’re going to work harder than anything else. First one there, last one out. That’s what they love to see. Because that’s when they’re going to open up to you, those bosses, the people who are smarter than you, and say, “Hey, this guy really wants to learn, he’s worth my time,” compared to people looking at the clock waiting to leave. It’s not for everybody.

Frank Curzio:

Some people are like, “Hey, I only want to work five hours a day, eight hours a day, I want to go home.” That’s fine, that’s cool. There’s nothing wrong with that. But for this job it’s different, and you see how far he’s come, and now going to head at least one or two products going forward. Really, really good stuff. Happy with the job he did and he’s a great guy.

Frank Curzio:

But guys, that interview … it was a different interview, we did give stock picks. We got a lot of requests to get him back on, but this podcast is about you, it’s not about me. Let me know what you thought. Frank@curzioresearch.com, that’s frank@curzioresearch.com. Again, most interviews we bring in analysts just like Daniel, but they’re giving you the inside scoop of everything that’s going on. But I know I get a lot of questions on that, so hopefully you guys enjoy it.

Frank Curzio:

Now, let’s get to my education segment. It’s going to be a good one. Chipotle was on fire from 2010 to 2015. Everyone loved the food, the stock, couldn’t do no wrong. The stock was trading around $60 in 2010, surged to more than $700 by 2015. More than 1000% returns in … what is that, around six years? But in 2015, you guys know this, Chipotle had an E. coli outbreak. Stocks started crashing since the outbreak spread to six states and affected 45 people.

Frank Curzio:

And then in 2016 they had food poisoning issues at their restaurants where hundreds of customers got food poisoning. When all was said and done, the stock fell from over $700 a share in 2015 to $270 in October 2017. So a 60% decline. I covered this thing extensively during this period, largely telling you to avoid the stock when it was trading over $500. And that call was in part due to you, as hundreds of you writing and telling me, most of the stores … you guys, just like me like Chipotle. And these are places that had lines out the door, and over 90% responded. I’m talking about over 100 emails. A good sample size in the US. That these places are no longer crowded.

Frank Curzio:

And when I look what management was saying, basically telling the public that they’re going to continue to see huge growth. And seeing store sales in 2016, 2017, during that food crisis. I said no way is that going to happen guys, a lot more risk. And we were right, thanks to you guys. That’s what’s good about this podcast. That’s why I love when you guys write in, frank@curzioresearch.com.

Frank Curzio:

Fast forward to today, Chipotle is trading at $830 a share. Which is a new all-time high. Pretty remarkable given the huge problems the company faced from 2015 to 2017. Now, food poisoning, E. coli, obviously not good things. Especially if you’re a restaurant. But management did a fantastic job addressing the problems. This is something that few restaurants ever voluntarily do. I mean they closed every store across the US, and this was on February 8th, during a lunch rush, to hold a companywide meeting to discuss these changes.

Frank Curzio:

This included a new safety program, which was also a new DNA testing of ingredients before being shipped to Chipotle locations. They made changes to food preparation, sterilized chicken and steaks before they serve them. New employees were trained, it was mandatory, they had to be trained on safety standards before they started working there.

Frank Curzio:

And, I thought this was cool, they paid workers for taking sick days. So, “Hey, if you’re sick, stay home. This way you’re not handling the food. We don’t know what you have, but you’re handling food. So stay home,” and they said, “we’ll pay you for staying home.” Obviously you can’t take advantage of that and say you have a cold every three weeks, but you don’t really want to see people handling food when they’re sick, have the flu, or have a contagious cold.

Frank Curzio:

They also spent over ten million dollars to help local farmers meet their new safety standards. In short, what happened to Chipotle was not something that was secular. It wasn’t long-term. It’s not like the streaming movie industry came here and no one’s buying DVDs anymore. And five years ago you saw the writing on the wall, seven years ago, eight years ago. And you know DVDs are not going to be around pretty much. They still are.

Frank Curzio:

Actually I was in a line at Walmart and someone bought … what was it. Tommy Boy, on DVD. Some guy bought Tommy Boy on DVD. I was like, “You can’t get that anywhere?” He paid, I think it was like $14. Anyway, getting off track here.

Frank Curzio:

But with Chipotle, it was a short term problem, it wasn’t secular. It was a temporary problem. It was a problem that lasted for a few years because it wasn’t just E. coli, it was food poisoning. They needed to fix that right away, and by doing so, what did they do? They strengthened their brand.

Frank Curzio:

We all fall, all of us. None of us are perfect. What defines us, what defines character, what defines a business, is what they do when times are bad. Because when times are good, everybody wants to be your friend. You know who your true friends are? When things are bad, and you’re in the gutter, things aren’t good, and the people who are there, those are your true friends that love you.

Frank Curzio:

With businesses too, they’re identified of how they go through these boom and bust cycles. Same with the gold market, that’s why you see not every junior miner’s going higher, even though gold price is going higher, because a lot of these guys diluted the hell out of the stock. They still have shitty projects. Management teams are not that good. They weren’t buying more of their stock when everything was down. They were raising money to make payroll instead of going out and buying assets that were dirt cheap because the market crashed, which you like to see. Big difference.

Frank Curzio:

You look at Chipotle, they strengthened their brand. Which is why the stock had a huge comeback. I’ve seen this happen numerous times. You take McDonald’s, 2014. The out of date meat that made its way to numerous restaurants in China, Japan, customers stopped going to these McDonald’s in these areas. Which accounted for what, 10% of sales? Stock got crushed on the news. It was like a four year period where McDonald’s didn’t move before really surging.

Frank Curzio:

But again, it took a while to gain the public’s trust back. McDonald’s put better safety measures in place, and the stock more than doubled from its 2014 lows. Go back to the 80s, J&J, seven people died. Remember cyanide laced capsules? I know millennials listen, it’s a little bit before your time maybe. But a lot of people, especially if you’re retired, you definitely remember that story.

Frank Curzio:

What did J&J do? Immediately pulled Tylenol from the market. Thirty-one million bottles, took them all off the market. And you know what that led to? The creation of tamper proof bottles. So they used a negative and turned it into a positive. Yes the stock got hit, yes it was terrible, but the company did the right thing and said, “We have to avoid this problem going forward.” Just like Chipotle, just like McDonald’s. J&J, last I heard, is a pretty big company today.

Frank Curzio:

The purpose of this segment is to know the difference between a risk that’s secular, where if it’s secular maybe the business is actually being disrupted, you have to worry about, from a temporary risk. Because temporary setbacks, especially that result in a PR nightmare where it’s everywhere, it usually crushes the stock. That was the case in every example I just mentioned.

Frank Curzio:

If you do your homework, have a little patience, and can handle a little volatility because it’s not going to be a straight line back up … since you never know, it could be like Chipotle and take several years before they get their act together. You can make a ton of money on these names. Why? Because they fall to levels that are dirt cheap where nobody wants them, and they’re hated. And buying hated stocks, especially good brand name stocks, that just had these temporary setbacks, created amazing buying opportunities.

Frank Curzio:

Where am I going with this? There’s one company right now on the market going through … a lot of companies, but one specifically, I’ll let you all know, it’s going through a PR nightmare, and that’s Boeing. I covered this extensively with you guys, I told you guys, “Hey, this is with their 737 Max jets.” If you don’t know, the planes that crashed were 737 Max jets. But, Boeing has been conducting safety tests. The problem was supposed to be fixed right now but it’s still not, it’s still ongoing.

Frank Curzio:

These resulted in several customers canceling their orders for the Max, they lowered their growth outlook for how many Max’s they’re going to sell. Airline companies still have these planes grounded. I’m going to put the 737 Max in perspective, like I did when I told you to avoid the stock after this first happened. And it’s done a lot since then. Roughly one third of the 24000 global passenger planes right now are 737 Max’s. And about 2800 of them are in the high, usually at one time. Give or take. When these planes are actually working. Pretty crazy.

Frank Curzio:

Now, you’re looking at Boeing, watch the stock fall hard since the first crash took place, and that was in October 2018. While another Max 737 crashed in March, a few months later, people don’t know this, I don’t think this was much of a headline, because it just got dismissed, but in November 2018, so right after the October ’18 crash, there was another plane that had an emergency landing. Its automatic safety system kept pushing the nose of the plane down. So it was an emergency landing, and nobody really talked about that, because you hear about that a lot.

Frank Curzio:

But then when you had the crash again, which was in March, then everything was like, whoa. There’s something wrong with these planes. Now the stock traded as high as $440 earlier in the year, this was about February, one month before the second crash. And Boeing right now, still struggling to get the right safety measures in place, to get the plane back in operation. They’re pretty close, but the stock is trading around $350-ish.

Frank Curzio:

This is a problem that’s not going to last forever. In fact, probably not going to last longer than six months to a year before they get these planes back up and everything is cool. And that’s important, considering Boeing, there are 100 customers still waiting for over 5700 of these planes to be delivered to them over the next few years. 5700 of unfilled orders. Why so many? Because the Max provides 10 to 20% fuel efficiency, which results in massive profits, and extra profits for airlines, since fuel is their biggest expense.

Frank Curzio:

So once everything passes FAA, they get this figured out, Boeing’s going to be back on track. Back on growth. In the meantime, looking at Boeing. This is a name I told you to avoid for over nine months, if you listened you definitely saved some money. But today Boeing reminds me of Chipotle back then. Except it’s not going to take years for the company to recover and hit a new high. We can see this happen a lot sooner.

Frank Curzio:

And even if it takes a little bit longer, say 12, 18 months, two years, you’re getting paid at 2.2% yield to weight, which is a nice dividend in a market where … what do we have? Zero interest rates and 17 trillion in government bonds have negative yields. Not bad. But this problem is close to being over. It makes them a stronger company. Again, we’re talking about your money here. Okay there’s people that actually died from this, which is terrible. I get it.

Frank Curzio:

I’m talking about the stock here. And if you look at Boeing, where it is, and this news is just temporary. Yes they saw a couple of orders get canceled, but most of these guys are still waiting for their planes over the next few years, 5700 of them. And now they’re coming out with a new plane that, if you noticed, just had a few safety issues. A minor safety issue. They put it through crazy turbulent conditions and the doors blew off. So it’ll be interesting, but they’ll be able to fix that problem too.

Frank Curzio:

But at the end of the day, there’s huge demand for these planes. These are going to be more safer than ever, because there’s going to be conducted through numerous, numerous tests before they go back up there. And once they do you’re going to see the orders start flowing again, and this company’s easily going to make their earning … everyone dialed down their earnings finally for Boeing, it’s a much cheaper stock than it was a year ago. And I can see it following the same fate as Chipotle.

Frank Curzio:

So, real quick to sum it up, this education segment, guys, be smart when you see these companies, these big PR nightmares when something happens. Especially if they’re brand name companies. It doesn’t mean you go out and buy them right away, but there’s’ going to be a long period of time, usually like a year, six months to a year, where they go through all of this, “Hey, we’re going to make our company better.” It’s going to be a nightmare, and they might miss earnings, and estimates a couple quarters, just like Chipotle, McDonald’s, J&J, and even Boeing. But at the end of the day, these are temporary problems. Most of these great companies have tons of money, billions of the balance sheet, where they can withstand this. And more times than not, it creates a great long-term buying opportunity.

Frank Curzio:

Long podcast today. I covered so much, which is really cool. Love covering a lot for you guys. But, I say this all the time, questions, comments, anything, I’m here for you. Email me, frank@curzioresearch.com, that’s frank@curzioresearch.com. So guys that’s it for me, thanks so much for listening. I’ll see you in seven days, take care.

Announcer:

The information presented on Wall Street Unplugged is the opinion of its hosts and guests. You should not base your investment decisions solely on this broadcast. Remember, it’s your money, and your responsibility. Wall Street Unplugged, produced by the Choose Yourself podcast network. The leader in podcasts produced to help you choose yourself.


Editor’s note: Unlike a lot of the folks on Wall Street, Frank doesn’t believe the world is coming to an end. Quite the contrary—he believes if you know the right people and have access to the right information, there are countless moneymaking opportunities in the markets.

And one of his favorite opportunities today is an under-the-radar weapon being tested by police departments around the country… and it could return 20x your money.

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