Wall Street Unplugged
Episode: 1007February 14, 2023

Inflation is blowing up the bullish thesis

Happy Valentine’s Day!

First, I take a victory lap for another successful Super Bowl prediction… sort of: I told you not to listen to me, and I was right!

I highlight why this was one of the best Super Bowls in recent memory—despite the fact that my beloved Eagles should have won… and the NFL is a bunch of a**holes who should be ashamed of themselves.

Turning to the markets… The latest Consumer Price Index (CPI) data came out this morning. I break down why the numbers cripple the bullish thesis… and how consumer habits are about to change.

More bad news for the bulls: Earnings estimates keep coming down… and I expect several quarters of lower earnings ahead. I explain why this—combined with several other risk factors—is creating a recipe for disaster.

Bottom line: This market should scare the hell out of you.

Fortunately, there’s a simple move you can make today to protect yourself

Inside this episode:
  • The NFL is a bunch of a**holes [0:30]
  • How this morning’s CPI data hurts the bullish thesis [9:45]
  • The “earnings recession” is just beginning [13:50]
  • Why this market should scare the hell out of you [21:15]
  • The best strategy for today’s market [30:40]
Transcript

Wall Street Unplugged | 1007

Inflation is blowing up the bullish thesis

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 February 14th. Happy Valentine’s Day. 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: So, was I right or was I right? If you listened to my Super Bowl prediction, which was to mortgage your house and put everything you own on the Chiefs, except if the Eagles would win and cover, then you should be sitting very pretty right now. But if you did do that, hopefully, you put a nice bet on it. If you did, sitting pretty again, but invite me to your house for dinner or beers when I’m in your neighborhood and we’ll call it even. It’s like the ultimate guaranteed bet every single year. It hurts a little bit more, because it’s my Eagles and I love the Eagles, but what a Super Bowl. What a Super Bowl, up to the holding call at the end of the game, which ended the Super Bowl with a minute 50 left. One the worst calls I’ve seen in a championship game, and it’s not because I’m an Eagles fan. I’d say the same if it was reversed. And here’s why.

Frank Curzio: Because you have people on TV and the guy admitted, Bradberry admitted that call, and said, “Yeah,” held them a little bit. I’m a basketball referee, right? I was a licensed referee, high square referee for a while, and every game is called differently. We either call it tight, or we let teams play. And we’ll call it tight if we have two aggressive teams that are playing, and they’re pushing people in the back on layups. We’ll make that calls, tight calls right away, to let the coaches and teams know, “Hey, you know what? These refs are calling a tight game, so don’t do anything stupid.” And sometimes, and most of the time, we let teams play, especially if they’re physical, and they have no intent on intentionally hurting other players. You don’t want to foul out the best players on their team because they’re playing aggressive. So, you let a little bit go, right?

Frank Curzio: If you get hit on the hand, you have to call it of course, because it affects the shot. But that’s how you call it as a referee, okay? Being referee licensed, that’s how you do it, and you do it across all sports. In this Super Bowl, there were no holding calls. I saw Frank Clark get held. I saw Reddick get held a few times. So, early on with the wrestling, letting them play with the Eagles, with the defensive backs. I’m not too sure who it was. I mean, they spun the KC wide receiver around on a third down play when he cut to the middle of the field and Mahomes missed the throw, and the refs held their whistle. And I was surprised. I was like, “Wow,” you saw his hand and he spun him a little bit, right? So, they let that go. I’m like, “Okay.” And they let it go. They let it go both ways, which is fine.

Frank Curzio: So, you let the teams play the entire game, allowing slight pulls, slight holds, since you hold on almost every play. I mean, you grab the guy’s jersey in the front, you see it all the time, but you let it go, right? You don’t get too crazy. Yet, on that play, you take out the flag to basically a third string wide receiver Smith-Schuster. I mean, he’s probably the fourth option on that team. He probably wouldn’t have caught that pass, even if Bradberry didn’t slightly tug his jersey, and you ended the game. You ended one of the best Super Bowls. It would’ve been awesome for the hundred million plus fans who are not, most of those, 90 plus percent are not fans of either team. They’re just watching the Super Bowl because they love it and they bet it and whatever, and record bets on the Super Bowl.

Frank Curzio: But it would be nice to see Ertz and the Eagles get that ball back and try to score for the tie, win the game, whatever. Maybe it gets intercepted, but that’s what you want to see. That’s how the game should end. It was sad to end one of the best Super Bowls in recent memory. You might say, “Why was that the best? And how come last year, the year before, whatever, a couple close ones?” It’s rare that you see during a game that both fans of both teams, the Eagles and the Chiefs, you thought that you were going to lose that game. For the Chiefs, it was halftime. The Eagles went up by 10. It was amazing that the reverse of that call, I thought that was interesting. The two biggest calls of the game that got, was the flag at the end against the Eagles and that call for the pass that DeVonta Smith caught.

Frank Curzio: I mean, if you’re reviewing it for 10 minutes, that means you cannot find an angle and all of a sudden, they come and say, “Okay, it’s incomplete.” You reviewed it for 10 minutes, 20 angles and all of a sudden you just come out. I was very surprised at that. That took four points off the table for them, I think, which was fine. But when Eagles went up by 10, Mahomes sprained his ankle just before half. And I know Chiefs fans are like, “Oh man, holy cow, this is over.” And for the Eagles, I thought it was over after the Mahomes went off, scored three straight TDs in the second half, went up by eight with five minutes to go. You’re like, “Wow, man. Holy cow.” Momentum totally shifted. And for the game to end on that ticky tack call is an absolute disgrace. Disgrace for the NFL.

Frank Curzio: With that said, congrats to the Chiefs. Mahomes basically tore up the best defense in the league while having no wide receivers. He threw for 182 yards, three TDs. One thing though, please stop saying he did it on one leg. The guy ran a 4-340 in the third quarter, running away from two of the fast defensive linemen in the league for a 15-yard gain. And Mahomes is awesome, MVP, incredible performance. I love the guy. But enough with the ankle. Stop comparing it to all the people who played injured in the past, the bloody sock, the Knicks, all this stuff. Take it easy. I mean, again, there’s ways to allow that guy to play and he’s perfectly fine, but you’re not running full speed down a field in the middle of the third quarter, running away from two fast guys. So, good job for Mahomes, it’s fantastic.

Frank Curzio: The NFL got exactly what they want. They need another Brady. They need another Rogers, they need all that. I get it. I understand. It just would’ve been nice to see that game won on the field. On the field. Was it a hold? Yes, it was a hold. Did you call the whole game? Absolutely not. And you shouldn’t have called it at that part. It was just a really, really bad ending to the game. And I’m saying that, not as an Eagle fan. I’m saying Chiefs, I talked to Chiefs fans, I said, “Wow, you can’t shut the game off tied, with a minute 50 left because of a penalty. You want to see the game play out.” And I was okay with the Eagles losing. I was okay, interception or whatever at the end of the game, with loss of downs, whatever. But to lose that way was pretty sad.

Frank Curzio: On another note, I’m really, really proud to be an Eagles fan, and they made no excuses for the loss to coaches. No one talked about that at all. My biggest concern was going into the game, the moment might have been too big for Ertz and he didn’t have the experience, but the guy drove his team down field, scored a TD, and then ran the ball in for the two point conversion with basically two guys on his back, to tie the game under five minutes left. And that’s a championship drive, that’s a drive that he’ll remember, that the team will remember because he did not lose that game for them. He had that one mistake, which is fine. It’s that fumble and that’s all right, but holy cow, I mean, I love having this guy as our quarterback now and hopefully for another 10 years. He displayed great character.

Frank Curzio: I don’t know if you saw Sirianni on that catch with Davante Adams and the teams are walking back and forth. Sirianni raised his hand to the Chiefs to come walking back and you saw Ertz push his hand down and say, “Hey, enough of that, have some respect.” And I thought that was really cool. I mean, shows great character. Your coaches are one that should have the respect. And he was like, “Hey, don’t do that.” Right?

Frank Curzio: So, as great as Mahomes played with 180 yards, three TDs, Ertz passed for over 300 yards. He ran for over 70 yards. He had four TDs. He threw passes in that game that I don’t know if there’s a lot of quarterbacks, maybe one or two of them that could throw. There’s three or four passes that had to be perfect by inches, by an inch on each side, and they were. I thought he outplayed Mahomes again. He had that one fumble. If they don’t make that BS call though, say Ertz drives down for the winning drive, the media the next couple days would be talking about if he was a god right now. But again, it’s all about who won. The Chiefs won. Mahomes was great. Congrats to them.

Frank Curzio: One last note on this before I really get into a lot of stuff going on with the market, especially inflation, the NFL is a bunch of assholes. Excuse my language. Actually, don’t excuse my language, because that’s what they are. I can’t think of a better word. You had a month to prepare that field for the biggest championship game in the world. And the field was complete garbage. It’s been garbage in the past. You knew it was. So, you had the outline saying, “Okay, this field usually sucks,” and you had over a month, and it was terrible.

Frank Curzio: The Eagles place kicker almost broke his leg off the first kickoff. We saw at least 20 different instances of players sliding because of those terrible conditions. The second half was a little bit better, because every single player had to change their cleats multiple times to find something that worked on that field. But shame on you at the NFL. The billions and billions, billions of dollars that you made. All this crap and the messages, and all the stupid shit that you do. This was horrible. This was horrible, horrible, horrible to have that game like that. It was terrible to have that field not ready to go for one of the biggest events in the world. Anyway, great job to the Chiefs. Congratulations and congratulations to everyone that listened to me. I hate people that say, “Hey, you know I was right,” or, “I told you,” but I told you so, and you know I was right.

Frank Curzio: And actually, I was wrong, because that’s how I picked the Super Bowl. I break it down. I thought the Eagles totally outplayed them. Their defense was non-existent. But still, I thought they would have a chance at the end to win that game and come back. And I felt like momentum shifted in their favor, that they scored that touchdown. And it was really, really sad that that offense didn’t get a chance to take that field with a minute 50 left, no timeouts. Field goal a tie, touchdown to win, interception, whatever, loss of downs, they lose the game.

Frank Curzio: That’s what the whole world wanted to see, and they should have got a chance to see it. It was a bullshit call because you haven’t called that the entire game. You either call it tight or you don’t call it tight. You don’t decide to call something that you didn’t call the entire game with a minute 50 left and end that game. That was sad. And that’s even coming from Chiefs’ fans. And that would come from me if I was a Chief fan or if it was reversed, the Eagles won the game like that. I’d be saying the same thing. That’s a bullshit call, and the fans deserve a lot better than that.

Frank Curzio: Okay, got that out of the way. As you guys are spending your profits on that call, on that bet. But let’s get to the markets which continue to move higher, no matter how negative the news is on inflation and earnings. We start with inflation. The CPI came out today, no big deal. Markets are relatively flat right now as I’m taping this. I’m taping this around 11 o’clock. Expectations called for a 0.4% increase in January, but it came in at 0.5%, higher than expected. So annually, inflation is up 6.4% last year, year over year. So, it’s up 6.4% from last year, and it’s higher than the 6.2% economists were expecting. So, with 6.4%, think about that. Think about that we didn’t see 9%, 8%, 7% and think that inflation is 6.4%.

Frank Curzio: This market would be crashing right now, but it’s better because we’re able to use the word disinflation, which people are mistaking that word for deflation. Disinflation, we were having disinflation for about five months. Four, five months now. That just means prices are coming down. That’s disinflation, that’s all it is. It’s another way of saying, “Hey, prices are coming down,” and they were. They were 9%, now they’re 6.4%, but everyone’s harping on this disinflation. “Disinflation is great.” Now, if you strip out the food and energy, called the core CPI, right? Maybe you could make it look better than it was. You can’t. It was also higher than expected. And if you strip out food, energy and services inflation, which is called this super core CPI, even that was higher than estimates, showing that inflation is 4% higher than last year.

Frank Curzio: Maybe they should strip out every single component of the CPI. This way it stays at zero forever. This way, there’s no components, right? Maybe you do that, start stripping out every single … I understand, stripping out one component out of 20. Now you’re stripping out like the super core CPI. I mean, you probably never heard of the super core CPI, but this is a big deal now. Because let’s strip out everything that we use, right? Oil, energy, whatever, natural gas, food, services inflation. Everything that we pay for as a consumer, get rid of all that. That shit doesn’t matter. Even though it affects every single, that’s the most, right? That hurt the consumers the most. Let’s strip all that shit out. Let’s just call it to super core CPI. But even they tried to do that, and it still didn’t work.

Frank Curzio: Either way you look at it, this was a horrible number. The data I’m seeing in real-time for February, this is data that’s reported for January. In February, it shows that inflation is starting to rise again. You’re looking at rental properties, used cars, gasoline, food. They’re starting to rise. They can short this number, which is surprising, since Powell talked about disinflation and mentioned that word a ton over the past few weeks, which everyone’s excited about, this number coming out. It indicates two things. It indicates that those expecting for a Fed cut later this year, that’s off the table. It also indicates that those expecting just one more rate hike, some thought they were done, some said one more. That’s not likely going to happen. The Fed’s going to need to get more aggressive since inflation is rising again, okay? You’re seeing it going the opposite direction again. We’re still up tremendously, and what they’ve done so far has not really made a dent.

Frank Curzio: You could say, “Well, it made a dent from 90,” it was still growing at 6%. Holy cow. How are we not negative after all these rate hikes? But that’s the bullish thesis, right? The Fed’s going to stop, and they’re going to start lowering at the end of this year. That’s the one, that’s the only bullish thesis right now. And basically this number, again, it’s one month, but remember, the Fed is not going to F- around with this. This is the biggest mistake that we’ve seen in the history of the Fed since it’s been created. It’s ’79, ’80, ’81, Volcker go back and forth and lowering rates and raising rates, and decide to not raise rates and keep them high long enough, was one of the biggest mistakes in Fed policy. And Powell made it very clear: He’s not going to make that mistake, no matter what. He doesn’t care if he pushes the markets into recession, which he’s trying to do.

Frank Curzio: I said this from day one. This is when they switched in November. I’m talking November 2021 when he said, “Oh, it’s no longer transitory.” The only way to stop this kind of inflation is to force a recession. And we’re not seeing that being forced right now. So, they’re going to be more aggressive. They’re not going to stop and say, “Hey, everything’s okay.” No way. No way. Because if they do nothing right now, you’re going to see inflation go right back up. Now that’s the first thing.

Frank Curzio: The next thing is, let’s turn to earning season, which Q4 is basically over. You have more than 80% of the companies reporting, including almost all the majors across every industry. So, most of them reported. And I just wanted to share one stat from you. I’ve been high in earnings, and it’s very, very important, and I think it’s being overlooked. So, if you look at Q4 2020 earnings per share, we should report it’s forecasted to have contracted 2.2%. So, this is the current quarter. That’s what’s around there. It might be off by a 10th, right? Because again, 180% reported. This is 100% due to margin weakness. So, companies are losing pricing power. This decline comes on top of the major cost-cutting that these firms announced over the last three to six months, and now they’re getting recognition, and that’s driving stock. So, everyone, Facebook, they saw Facebook do it, the stock went up 120%. Now all technology companies are drastically cutting back on CapEx, and I can explain why that’s a big deal, and why you should be concerned, right?

Frank Curzio: So like, all right, cost-cutting. That’s what Wall Street wants to do. It’s like Disney, right? They want to see those numbers going higher, even though no one’s paying for our services, for Disney+. They want, that’s what Wall Street wants to see. That’s driving the stock. Believe me, every CEO knows what drives their stock. It’s not always earnings, it’s not always sales. Sometimes it’s subscribers, it’s same store sales, different things, different metrics, average revenue per user, different things. Everybody knows. Right now, these companies know, “Hey, if we drastically cut costs, Wall Street loves that and our stock’s going to go higher.” So, that’s what they’re doing. And even though they’ve done that over the last three, six months, we’re still seeing earnings contract by 2.2%.

Frank Curzio: But here’s a stat that’s alarming. So, since the close of Q4, and that closed December 31st, 2022, December 31st, every year, earnings per share since then have fallen. These are the estimates, by 1.7%. Now, on average, we usually see earnings rise during this period from January 1st into February, by an average of almost 3%. So, you usually see them rise by an average 3%, and we’re seeing them, these estimates being revised lower by 1.7%.

Frank Curzio: That might not sound like a big deal, but it is, considering this is the largest decline we’ve seen in revisions over this period in 24 years. So, you’re looking at 98 quarters, outside of a few exemptions, right? The exception, which is the 2001 recession when tech stocks fell over 70% through 2002, the financial crisis of 2008 when the markets collapsed over 30%, and then really quick in Q1 2020 during the pandemic, and stocks fell again over 30%. It was the only time periods that we saw this part of earnings being revised this much lower. Usually they go up around 3%. They’ve been revised down 1.7%.

Frank Curzio: Now, let’s look at those periods real quick because they’re important. So in 2001, 2002, it was a disaster. Tech stocks fell 70% from the March 2000 peak, but started moving up in 2003. Why did they move up in 2003? If you go back, the Fed drastically lowered short term rates, from 6% to 1% through 2002. So, the Fed was there to bail out the markets. Let’s look at the financial crisis, 2008, 2009. Markets crashed over 30%. But again, the Fed was there to lower rates to zero, and actually invest money for the first time directly into banks and financial institutions like Fannie, Freddie, AIG, backstopping all the bad debts and said, “Don’t worry about all the bad debts. We got them. Merge all the banks, make them even bigger.” They’re supposed to be avoid, too big to fail. Now they’re even, they’re 3X to 5X bigger than they were back then, because they took all of all the banks that had bad debts and they backed those bad debts. And those bad debts turned out to be very, very good, especially on the mortgage side as the housing market rebounded tremendously since then.

Frank Curzio: But this helped avoid a global catastrophe, where everyone’s over leveraged and the market was crashing globally. Globally, the financial system globally. They did a good job then, even though you hated it, they had to do something and they managed to shore up the system and be there for us. And then we had Q1 2020, which was recently, we all remember the pandemic, lockdowns, nobody models for 80, 90% revenue declines in three months, four months. No one in the world does that. So yeah, the markets fell sharply, 30%. Only from February into March. They quickly reversed. Why? Again, we have that beautiful Fed save the day, awesome. Lowered rates to zero, flooding the markets with liquidity, not hundreds of billions, which was like 450 billion during the credit crisis. No, no, no. We’re going to go like 11 trillion this time, over 50% of GDP, and that includes in 11 trillion fiscal monetary stimulus. And we saw the markets reverse higher very, very quickly, which makes sense when you throw that much.

Frank Curzio: Doesn’t matter if you have revenue, right? Because you’re basically giving money to directly to businesses, directly to people. You’re handing them checks directly. You’re not doing it through the banks like you did in 2008, 2009, where they decided, “Okay, we’re still going to look at credit and see who we lend and be conservative on this,” and whatever. No, no, no. They just gave it to everybody and everybody just spent like crazy. And again, we saw this 2020 and people, the market surged in 2020 during the pandemic, it surged, right? We had the pandemic in 2020 and the market actually took off in 2020. We saw what happened in 2021. The Fed kept the pedal to the floor.

Frank Curzio: So, those are those periods. Today, what do we have? Earnings being revised significantly lower. Even worse, we decline and we will decline around 2.2% Q4, but projected right now to decline by 4.8% next quarter, which is Q1 and to the decline by another 3% in Q3. And by the way, each passing month, these numbers are being revised lower and lower, which is not a good sign. To make matters worse, the Fed was able to bail us out the last three times we saw massive earnings revisions and massive year-over-year declines. However, the Fed during this earnings recession, that’s what it is. It’s a recession in earnings. You’re going to have two, three, maybe four periods of negative earnings, year-over-year. They’re not lowering rates or buying bonds in QE, which save those markets. They’re actually still raising rates. They’re actually shrinking their balance sheet, which is QT, quantitative tightening.

Frank Curzio: And this is expected to continue at least through the summer, likely into Q3 now this year, after this inflation number. This has taken place, while inflation is still up 6.4% year-over-year, and now it’s trending in the wrong direction. And the face of this, what are we seeing? You’d think the markets would be pulling back sharply. Well, not the most risky stocks. The one’s the most heavily shorted. Again, it’s very easy to see. It’s very easy for algorithms to trigger this stuff, because when you short it, you run the cover, as soon as things go higher and higher. They are what, 15% plus, year-to-date? The DOW, S&P also moving sharply higher so far this year. And you may be asking, “Frank, why is this happening? Why is this now? How come we’re seeing? How come we’re not seeing stocks come down?”

Frank Curzio: And for me, I think in past bear markets where we saw 30% plus declines, there was always a catalyst that started that. You had the 2008 financial crisis. A lot of companies going out of business and just again, through 2007, the writing was on the wall. Credit Suisse and their funds and everything, banks leveraged too much. In 2020, we saw the pandemic. This is recently, right? We were like, “Holy cow.” We saw the catalyst. This is different. It’s like a slow drag. You have this tightening process that’s continuing. You have credit card rates are surging. Your bills are surging, right? Everything you pay for is going up, and up, and up. Credit in general is much more expensive and it’s a constant slow drag, where when net wealth is slowly decaying each passing month, it’s going to continue. And it’s going to crush most people, because they’re going to be forced to rein in spending. And you’re seeing that.

Frank Curzio: You’re seeing that right now as companies, what are they doing? The major companies, they have AI, they have data analytics all over everything, even Walmart telling their suppliers, “Look, no more raising prices.” What do they have? Tens of thousands of suppliers, and how many customers that they have data analytics on and spending trends, and they know everything about every customer. One of the largest retailers in the world, if not the largest. Big box, at least. Amazon may be larger. But what are we seeing? Now, we’re seeing companies adjust, to continue to lay off employees regardless of what the unemployment data shows. Just throw that out. We saw massive revisions. We just continue to see more and more layoffs. They’re cutting costs significantly. Why? Because they’re seeing spending trends fall sharply. And this cost-cutting is eventually going to go into business travel, with airlines and hotels.

Frank Curzio: It already started at this year’s CES, in terms of the booth space and area, which it was not exciting. I mean, these booths were significantly dialed down. You had a much better showing than last year, of course. Still not peak, but it wasn’t fun for the first time in 12 years. By fun, I mean, most booths were basic. You’d have robots strolling the floors, drone expos, test-driving EVs like I’ve done in the past years, none of that was available this year. It was mostly someone who goes there to test a lot of these products, and have fun with it and tell you, you’re going to just … You had your people there talking about products, but there was no big displays. I was playing ping pong against robots and stuff like that, all these years of going. Testing these devices, running on these treadmills or playing video games, none of that was there this year. They dialed back significantly, at least 30, 40% on those booths.

Frank Curzio: And it makes sense when you look at, remember the massive EV predictions? “EV, the greatest trend in the world.” These predictions, 65% of all cars are supposed to be EVs by 2030. This is from the IEA and other tons of consulting firms. You can go down the list and just 60 to 65%, right? Saying all cars by 2030 are going to be EVs, with 65% of all cars, right? So, that’s what they were predicting. That was last year they made that prediction. Okay? If you look at how many cars are sold, say an average 70 million cars sold globally each year. Maybe that goes up in five years, I don’t know. But around 70 million, even pre-pandemic was like 71, 72, and I think it was 68 this year, last year. If we’re looking at 70 million on average, that amounts to 46 million new cars that are expected to be EVs by 2030. That was the forecast made last year.

Frank Curzio: Today, it’s been dialed down just a little, yes, I’m being sarcastic. So, just one year later, based on a recent survey of global automotive executives, this is from KPMG, biggest in world, it’s gone from 65% of all cars that’d be EVs by 2030 to 35%, which means, we no longer expect 46 million new cars sold by 2030. Now it’s going to be EVs, we’ll expecting 35%, which amounts to 26 million. You know how big of a difference that is in one year in forecasts? And again, that number is based on a real survey of global automotive executives that are saying, “Whoa, whoa, we have to slow down.” They could bring in supplies. They could bring in whatever. Whatever it is. It’s demand, it’s credit for new vehicles and they’re trying to lower prices, even though Ford right now loses money on every EV they sell, but they’re lowering prices. “Oh, to better compete.” Not to better compete because you have to, because people are not, they’re seeing, right? They’re seeing the trend.

Frank Curzio: I don’t care if to compete, if you have a great iPhone and iPhone’s the best phone out there, arguably, they demand a high premium. They’re not cutting costs because Samsung lowered their costs, because they have a better product. You don’t lower costs to better compete, you lower costs because you’re not seeing demand at that current price, right? You want to price it as high as you can. And what customers, obviously customers, if they were paying for it, Ford would not be lowering prices. GM would not be lowering prices on EV. You wouldn’t see Tesla lowering price on EV. They see this, because they’re seeing demand come down. It’s a different market.

Frank Curzio: But now, let’s throw in all the major growth trends here. Let’s go with forecasting cloud, data analytics. Stuff I talk about all the time. CapEx spending. Huge. Whether it’s trends like AI, EVs, right? I just mentioned, all these forecasts have come out in the past years for 2025, 2030, 2040. They were based on earnings growing at 8% annually and interest rates staying at historical low levels in the Fed, constantly in QE mode. Think about that for a minute. I mean, these numbers are going to come down dramatically in the months and quarters ahead. We’ll see it with EV’s, going to see across all these trends.

Frank Curzio: Why? Because if instead of earnings growing at 8% annually, they’re likely going to decline 20 to 25% from their peak. That’s why we’re seeing the major companies with the largest balance sheets are significantly raining in their costs. They’re not being aggressive and acquiring companies. They’re raining in costs. They keep saying it. Even during this earning season. Microsoft, you look at Amazon, you look at Facebook cutting costs, right? “Oh, well, Facebook’s doing it. This stock went up. That’s what we want to see.” The quarter wasn’t that good. The numbers weren’t that good. So more users, okay, fine. But to go up 20% in a day? You know how much that is? And a market cap that is? Holy cow, a company that size to go up that much. Why? Because that’s what Wall Street wanted to see.

Frank Curzio: Now you’re seeing everybody cut costs, and they are because everybody’s cutting back on CapEx, on advertising, on everything. Advertising is usually a percentage of sales. If your sales are declining, which you’re seeing across the board, they’re coming down. They’re growing a little bit. But again, even as a percentage of earnings or cash flow, you’re seeing those numbers come down. So, you’re going to see advertising budgets shrink and you’re seeing that across cable companies. They’re all talking about it, not advertising as much, not spending as much.

Frank Curzio: And you’re looking at a trend, guys, that’s just beginning. We’re in the early innings, and we’re starting to see second rounds of layoffs from large companies. We talked about, the best way to protect yourself is buying long-dated puts, which they may be out of the money for a little bit, for a couple of months. Big deal. If you’re looking three months from now, six months from now, we’ll likely see the markets pull back significantly. And that’s just from the things I mentioned, like Fed tightening, higher than expected inflation. Expecting to come down much more, and it’s not. It’s reversing. Also, this massive decline in earnings. But that’s just from that picture. I’m not talking about geopolitical risks like Russia. I mean, did we bomb the pipeline? I don’t know. There’s Navy SEALs that are saying it, is it? Whatever you believe or not, I just know that blaming Russia, it’s hilarious that they bomb their own pipeline. It’s like Elon Musk bombing all of his Tesla plants, to better compete with Ford and GM. Something happened there. But I could tell you, Russia probably thinks that we did it.

Frank Curzio: Not to mention we’re supplying Russia’s enemy with weapons, right? That’s like getting into a one-on-one fight with someone, and some guy next to him hands him a bat and he beats the shit out of you with it. Man, I don’t know about you, but when I get my revenge, it’s just going to be on the person who beat the crap out of me with the bat, and also the person who handed him the bat. Isn’t that the same thing? That’s what we’re doing to a nuclear power where, yeah, the president of Ukraine is doing everything he can to start a global nuclear war. I mean, how many times has he, that guy, said, “Where our nuclear plants are getting attacked, they could leak.” I mean, we heard that story about 10 times, right? Doing everything he can.

Frank Curzio: But in terms of Russia and look at China, I mean, tensions have never been greater between the US and China right now. It’s horrible. The balloon, whatever, it’s just policies and tariffs and whatever. I mean, it hasn’t been good. We’re not on very good terms with them right now. I’m not even talking about those risks. Those are additional risks that would normally push down the market or scare people and say, “Hey, we need to position ourselves a little bit, just in case.” The stocks have continued going up for months. It’s common in a bear market to see moves like this, but eventually stocks and the economy are driven by earnings and spending, right? That’s factual, and both declining at a pace that we haven’t seen since 2001, 2008, and recently in 2020 during a pandemic. We’ve never seen these types of declines since then and we know what happened since then.

Frank Curzio: We also know that the Fed was there to bail us out, to provide support. They’re not going to be there this time. That should scare the hell out of you, in terms of risk management and not protecting yourself, and being a hundred percent long in this market. And people say, “Well, you just need to hold stocks long term. You’ll be fine.” You have an opportunity where if stocks do crash and come down significantly, you’re going to be sitting there with a huge cash problem. Not only that, making money off of your puts, not just protecting yourself. Making money. But long. You just learn as much as you can about buying long-dated puts. You can learn by going to, we have an offer, www.mftoffer.com, which we talked about. We lowered the price of that newsletter significantly. You could google it. Learn to protect yourself, learn how to trade these things. They’re very, very easy.

Frank Curzio: But it’s not just to protect yourself. It’s how you could also make an absolute killing if the market does fall significantly over the next year, not the next month. You’re not short the market. You’re only going to lose as much as you put in, which should be maybe 5% of your total portfolio. We explain this in our portfolios, we explain this in our videos that we do, which could take 30 to 40 minutes, and I’m sorry you got to watch my ugly face for 30, 40 minutes, but that’s what paid people get. You get to see me, you don’t get to see someone else writing shit or doing anything. This is how we’ve managed the portfolios. I got to tell you, as we showed with our portfolios, we did not risk much in returns by using this strategy. Portfolios did incredibly well to start the year.

Frank Curzio: Most of them outperformed the markets, even though we protected ourselves. So, it’s worth it to learn this strategy. Again, it’s nothing for me. It’s something for you, if you want it. You want to protect your wealth. If you want to make money. Again, this is something that in the face of right now, in a market, with this craziness, we have stocks ramping higher in the face of lower earnings. They constantly be revised lower and lower, and lower. Higher inflation now, are you kidding me? Inflation reversed now? What happened to the disinflation that he was talking about, which is just inflation going lower, right? We’re not talking about deflation, talking about disinflation, which is the definition is, inflation going lower. You just, that word I guess sparks excitement, because this is mentioned everywhere now. But again, this is in the face of much lower earnings, higher inflation, higher rates, and no Fed help? Container reduces balance sheet, reducing liquidity from the market.

Frank Curzio: I mean, if that’s not enough to worry you, did you see where the six-month treasury is trading? It’s over 5%, the yield. That’s the highest level in 15 years, I believe. When the last two times, it was over 5%, the six-month … I’m not talking about three year, two year, whatever. Not talking about the five-year, 30… I’m talking about the six-month treasury is over 5%. The last two times, it was over this level, 5%, it was in 2000 just before the market crashed, and 2007, and you know what happened after that. All I’m saying is, be careful out there. I could be wrong. I’m not telling you to sell all your stocks and run to the hills. That’s not the message I’m telling you. I’m telling you that you need to protect yourself, because shit’s happening that hasn’t happened in the history of the markets, and especially in the 30 years that I covered it.

Frank Curzio: And I hate being bearish, because I’m the most optimistic person you’ll ever freaking meet. But you have to be smart with this. Try to ride the trend. You should be long in our portfolios. Yes, we covered 5%, and we are down on that part of our portfolio for now. These are long-dated. That’s why it’s important, with Moneyflow Trader, how to do this. Genia tells you exactly how to do it. You can do it right from your portfolio. It takes, it’s very quick to set up. It’s not like this whole learning curve. You just got to do what she says. It’s very easy. It’s why we lowered the price to help you guys, try to protect you guys, because it is going to be a nasty year. You might not see that now, but the writing’s on the wall, when we saw markets like this. Earnings revision, stocks going higher, it only happened during the most severe market corrections and market crashes that we’ve ever seen.

Frank Curzio: And that trend, again, that pattern is happening again. You want to bet against it, good luck, go a hundred percent long and that’s cool. But it doesn’t hurt to protect yourself and not only by protecting yourself, if you’re right and this market crashes, that 5% of your portfolio you’re protecting yourself could be worth 30, 40, 50% of your entire portfolio, because you make an absolute fortune if the market really comes down sharply over the next three, six, nine months. That’s how you play these markets, especially with this kind of uncertainty.

Frank Curzio: So guys, that’s it for me. Wanted to wish my mom a happy 80th birthday. This is like a tough stretch for me these days, because my daughter’s birthday, my oldest daughter’s is February 12th, my mom’s is the 13th. And then we have Valentine’s Day today, which is the 14th. So, my wife and my two girls, three girls there, my mom. I should just call 1-800-FLOWERS and put on auto-renew every year for flowers and flowers and flowers. Just spent $300, $400 worth of flowers for my girls and my mom. But all great stuff. So, happy Valentine’s Day.

Frank Curzio: Last thing here too, guys, we are launching a brand new product called Wall Street UnpluggedPremium, and it’s going to start probably, in two weeks. So, all these podcasts that we do, and Daniel and I in podcasts and stuff like that, is going to be behind a paywall going forward. There’s just going to be one free podcast. It’s going to be about 30 minutes. It’s going to be me and my monologue, and it’s not going to be as detailed as I was today, in terms of how to position yourself, how to make money in this market. We’re going to be talking about general trends in the market, at least during that. But we are going to be offering special recommendations, recommendations every single week from a trading perspective, and a trading newsletter.

Frank Curzio: You’re going to see special documentary type things, where I’m going to be traveling to different areas and showing you different companies, and that’s going to be behind this. So, it’s going to be for a very little amount every month, but a lot of the stuff that we were offering free, that you guys see, has incredible value. We are going to put it behind a paywall, because we do notice that, especially when I listen to podcasts, the value is absolutely incredible. Some people who do have paid podcasts are charging a fortune for it. We’re not going to do that. It’s going to be for a very low price, less than when you pay for a cup of coffee, probably two cups of coffee for the entire month. But everything that we do and all the value that we create, a lot of this stuff is going to be behind that paywall now, and it’s going to be just the special community. This group, lots of live stuff, live videos, live portfolio updates and video updates and things like that, that we’re going to provide for you guys.

Frank Curzio: So transitioning to that, has really, really excited, and you’re going to see that change coming in about two weeks. I’m going to talk more about it and more of the things that you’re going to get, which is a ton through Wall Street Unplugged Premium, which we’re really excited about. Again, it’s going to include a newsletter, which is Dollar Stock Club. You’re going to have a pick every single week though through this, which Dan and I are going to break down that pick and then that’s going to go into the newsletter. We’re going to have bull and bear debates on stocks, talk about different recommendations, really dig in. We are going to have tons and tons of ideas now, but that’s going to be behind the paywall, and we’re really, really excited about it.

Frank Curzio: So, we’ll talk to you more about it over the next couple days, but in about two weeks, you should expect that. And then, we’ll just have one free podcast, which I would be doing. That’s going to be a monologue, probably for about 30 minutes, 20 minutes or so every week. But everything else, a lot of the interviews, not all interviews, but a lot of interviews are also going to be behind that paywall. And much, much more ideas, which would be really worth it for anyone that wants ideas, wants really good research, and wants research from someone that’s been doing this for a very, very long time, that gives a shit about their customers. Because I know a lot of people out there don’t. You guys know that we do. So, really excited to launch that product. You’ll see it in a couple weeks. Again, happy Valentine’s Day for everyone out there. 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 decisions 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 12 million times.
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