Wall Street Unplugged
Episode: 997January 24, 2023

Inflation is surging again

We had a wild start to the trading day, as a glitch caused some big-name stocks—including McDonald’s (MCD), ExxonMobil (XOM), and Wells Fargo (WFC)—to drop double digits in seconds… 

Before diving into the markets… I give a shoutout to my beloved Philadelphia Eagles, who are heading to the NFC Championship game against the San Francisco 49ers. 

Stocks are rallying as more investors are anticipating a soft landing for the economy. But the truth is that the market is incredibly dangerous right now…

I break down several headwinds—including why the upcoming rate hikes will rattle the market… why China is no longer a growth engine… proof that inflation is surging again… and a warning from one of the most accurate Wall Street analysts.

Bottom line: Investors need to be more cautious than ever. I share the perfect strategy to protect your long positions and make a fortune as a recession drags down the market.

Inside this episode:
Transcript

Wall Street Unplugged | 997

Inflation is surging again

Editor’s note: This is an unedited transcript.

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:

What’s going on out there? It’s January 24th. I’m Frank Curzio, this is the Wall Street Unplugged podcast where I break down the headlines and tell you what’s really moving these markets. It’s going to start off with the Eagles, which I’ll get to in a second, but taping this early in the day, market just opened and it was kind of weird. I don’t know if it’s going to be a big story later, probably not. But Exxon opened up down seven was up seven, Wells Fargo was down 11%, McDonald’s down 6%. They started halting stocks. They had a tech glitch. I don’t know if they figured it out. I think they finally figured it out, but it’s just weird. I’m hoping that it’s not going to be a bigger story. I don’t think I’ve ever seen that happen before with just a glitch in certain stocks. Not every stock, but it’s usually like, oh okay we have big glitch, whatever.

But to see, be careful with those, just throwing those orders in the market because you might’ve got triggered and you might’ve got screwed today. It’s going to be interesting when people talk about it later, but again, but it might be nothing. It might be something. It was just something that’s different that I have never seen before and it looks like it’s straightened out right now. It’s going to be interesting what they say about it later because I haven’t really heard any excuses. Hopefully it’s just a glitch or software patch. But yeah, it was a little crazy. Anyway, just wanted to start with that just in case it becomes a bigger story by the time you listened to this later on, but let’s go Eagles! Took care of the Giants and I mean the Giants I didn’t think were a good team all year. I just thought the Eagles were better than them in every facet of the game.

They kept it close last time, but again, the Eagles were coming out a little rusty. They kicked five field goals. If they had touchdowns it would’ve blown them out this time. They did have touchdowns, they had four touchdowns for the first four drives, they were 28, nothing. And look great in every aspect. Offense, defense Hurts looked great passing. That was a question mark at running, but the running game in general, I think that’s what separates them from the field and everybody else left it in the playoffs and they can control the game running and if you’re going to load up that line to stop the run, they have two of the best wide receivers in the game and one of the best tight ends in the game. So they look really great on both sides of the board again. And what just Giants, I think they always said did the same thing to Minnesota, but now they’re going to play the 49ers who are also great.

Although if Dak just had a decent game, the Cowboys would’ve won. They needed like Trent Dilfer, right? Someone who manages the game doesn’t make mistakes. The inceptions he threw were terrible. It was really, really ugly and he should have had more inceptions so he should have got to pick six when they got the ball about two and a half, three minutes left before they got stopped. Punted and never got the ball back, I don’t know why I didn’t go forth down. Just the mistakes that they were making, it’s got to be hard to be a cowboy fan. They have talent, but I thought they would do much, much better. They played good, it just Dak didn’t play good, right? That was a big thing. But they exposed the 49ers, they put a lot of pressure on Purdy who, who’s a rookie, wasn’t used to getting sacked that much.

They could have intercepted two passes, but again he didn’t because Dallas dropped the ball on a couple of them. But they’re going to patch those things up, right? They’re going to patch those holes up heading into Philly. It should be a great, great game on the other side, same thing with the Jags. They should have won that game if the Mahomes got hurt, and Mahome’s just incredible quarterback. I mean I love him. How don’t you like him? You can’t not like that guy and I hope he’s healthy. You know, want to beat teams when they’re the best. I’m a competitor. If we were playing a championship game and somebody got hurt, I always wanted to play against the best player that, no excuses, team’s healthy and everything. That’s why I played. I wasn’t like hoping someone got injured so we won. That’s not the way, I don’t think any competitive athlete really wants that.

Even if you’re an Eagles fan, you win that game, you want to see Mahomes 100%, you don’t want to win with Mahomes like hopping around and he went back out there. But his biggest asset by far is he makes his best plays when he is running around like crazy. And either way I think it’s going to be hard to beat Cinci, Cinci owns them, which by the way, how the hell was Cinci underdog to the Bills by five and a half? I have no idea. I could see the three offensive lineman being hurt, but they stepped up, got good replacements, you got to get the ball out quicker because you might not have that much time. They’re the best wide receiving chord. The defense playing great, the won, what is it, seven or eight in a row, but they control the Bills basically beat the crap out of them.

I mean they didn’t even have a shot. And look, the snow probably helped because you can’t rush the quarterback as fast, which might’ve helped. So let’s see. But they just look really good. These are the best four teams you would say. Well the best four teams always making, not all the times. Sometimes you’ll see an upset and it’ll just, it’ll get really crazy and you’re rooting for a team and then they get absolutely destroyed. Kind of like TCU did when TCU won. I mean wish Alabama was in there or TCU didn’t beat Michigan because then you got a game that’s over and after the first quarter. But all four of these teams are great. All of them can win the Super Bowl and it should be an incredible someday. So I have to talk about the Eagles guys just to start off.

Wonderful, great, love it. They’re going to be great for a long, long time because they got a lot of number one picks coming up, a lot of extra number one picks, so it should be really, really cool for them and I’m hoping that they can continue to play the way they are because it is going to be a good game and they’re going to need their best game against the 49ers.

Now let’s get to the markets, which keep going higher and higher and higher. NASDAQ’s now up 8% for the year. Most of major ins are up, what, five, 6%. You go to Russell, S&P, the Dow Jones, I mean everything’s doing very, very well. Analysts, I’m watching the media because I make sure I pay attention to CNBC. I always have it open the background TV all day because I like to hear some stories, but that’s how you get sentiment of how everyone’s talk about all the analysts coming on and I feel like everyone’s super bullish and say, “Oh, it looks like we’re going to have a soft landing earnings coming better than estimates.”

Economic data is showing inflation is moderating, at least moving in the right direction. You’re seeing lots of upgrades of big tech stocks, at least upgrades of firms. Reiterating, I’m going to reiterate and reiterate my strong buy on Microsoft, Google, Apple, AMD, Netflix. We’re going to lower our estimates, but I’m going to reiterate why the stock price is going to go higher, even though I’m going to lower my estimates. But lots of optimism out there and rightly so with the market having a good January, which is kind of normal in bear markets to see markets move this, it’s really common. But here’s what I see, and by the way, if you’re a subscriber to one of our Curzio Venture Opportunities, it’s like our flagship product. That’s where I cover small caps and all my life it’s you even Stocks Under $10. When I did it for Kramer, I did low price newsletter, which I hated the low price name for Stansberry and I had Porter.

You guys saw that interview last week. Thank you so much. You got lots of great feedback. I mean overwhelmingly positive, but some of it was a few things. People just, again, he’s got a bold personality, not everybody likes him, but a couple lessons there is you never want to burn your bridges. I’ve never burnt a bridge, I’m friends with Kramer still. I could call him anytime and hang out with him and yeah, he is really cool, but you never want to burn your bridges and I never took things like that personal for me whenever I got laid off or I just looked at it as that was a great opportunity for me and I wouldn’t be doing this for you guys if that didn’t happen. So it’s good for them, good for me. I never took it personally unless they took it personally, but I never wanted to burn bridges because you could always go back to that and have lots of friends in the industry.

Again, I focus on that for most of my career because I was very emotional when I was younger and again, I used to be really fat and be made fun of and all that stuff and played basketball and for me, I always looked at it like I’m going to destroy you instead of getting down on myself. I did everything I can to be the best and greater than everybody, who actually had to talk about and that’s how I made my living even in this industry. So I just kept pushing forward, pushing forward and never took anything personal. But hopefully you guys like that interview. But for Curzio Venture Opportunities, small caps, that January issue is coming out later on today I’m going to be breaking down all the data I’m about to share with you. Much, much more in detail though along with brand-new small cap pick I think has incredible upside potential in this market.

A name I’ve never talked about before is definitely not on man most people’s radar and you’re going to get that genuine issue again after the close today. But here’s what I see. I see an incredibly dangerous market where growth, the growth engine, this is how we grow. We got to grow earnings, you got to grow the markets. That’s how you get higher multiples when you have growth. The growth has been taken off the table first with the Fed, with the Fed no longer keeping rates historically low, which we know. Again, repeating this, I’m not going to tell you anything new for now. I’m going to get to a lot of good details in a minute, which is really talking about, but instead of buying bonds, which is QE, quantitative easing, they’re selling bonds, right? QT or shrinking the balance sheet, which removes liquidity from the market.

They’re going to be selling hundreds of billions in treasuries and to be technically correct on letting them mature either way, but removing hundreds of billions of dollars off its balance sheet every quarter for probably another six to eight quarters. You have this drag on the market. It’s like you have this rope around your chest and you’re trying to run and it keeps pulling you back, keeps pulling you back, keeps pulling you back. Where at the end you had someone when it was QE and low interest rates, every time you slowed up you had two hands behind you pushing you forward to make sure you could still go forward, right?

Used to buy stocks no matter why today go down, who cares? Bad earnings are going to come back. Low interest rates, money’s for free. It’s a different market. So let’s get back to growth, right? First with the Fed, that’s removed now, they got to control inflation and no longer injecting money into the market. That’s massive, massive, massive. Second with China. China’s was also the main growth driver of the markets for decades and people forget China was growing in excess of 6%, basically 20 years plus, dating back to 2000. I mean sometimes nine, I think actually a double digit growth, but over 6% every year dating back 2000, pre-COVID. However, China is only expected to grow, what? 3% next year. Some economists see 4%. That’s the big discount compared to 6%.

But the three to 4%, this is what I have a problem with, okay? One, it’s still well below that 20-year average, but two, how is China going to grow that three to 4%? I want you to think about this for a minute because where do they see most of their growth from? I mean the US expected to go into recession this year with demands falling off a cliff due to much higher rates. I don’t know if you saw the growth that’s expected quarter after quarter, but I think it’s like 0.2%, 0.1% and then a negative and 0.1%. That’s four quarters. We’re not talking about 1%, 3%, minus 4%. No, this is steady, very, very slow growth. Every single quarter for 2023. There’s a shot that we can go four straight quarters of negative GDP. It’s very, very likely that we could do that. And we’re looking at on average a 0.2% growth per quarter over the next four quarters.

That’s what the economists are predicting. Now the US accounts are 20% of China’s exports. Not to mention that we’re also doing everything in our power to be less reliant on China. We’re moving investments, opening up new factories and fat plants in other Asian regions and in the US, trying to do less with China. How the hell is China going to grow that much when you’re taking their biggest growth driver is going into a recession? Yes, they’re opening, but it’s not like it’s going to be this massive 6%, even three, 4% growth. I mean this is a super older population that’s scared to death. They have bodies piling up like crazy, which is the saddest thing in the world because we know COVID is for real when it comes to older people, especially older people that have underlying conditions. There’s nobody that doubts that. What we doubt is forcing this freaking needle and shots and everything else down the throats of children or people who really don’t need it, which we now know was all bullshit.

And the booster shots and the amount of profits that Pfizer made now finally admitted that it doesn’t prevent COVID, right? You didn’t tell us that, right? You lied to us. So it’s okay though you’ve been in bed for with the FDA for a long time. That’s why you got to fined so many different times. You have the leader, someone who’s basically on the board of directors of Pfizer, who’s the main person that we’re listening to, which is Gottlieb, right? I mean if that’s not the biggest bias ever, that’s freaking crazy. Now we know a lot of this bullshit, however, in China, COVID is very, very serious. I mean bodies are piling up. This impacts a lot of their population because there’s a much, much older population and not just going to run out and go to work and everyone’s going to be fine.

They’re seeing this, it’s like September 11th when that happened. Everyone’s like, well, where were you? Remember when they shut down all the airlines and all the flights were grounded and they did it for a couple days when they opened up, people, even myself, were looking outside. You were thinking like an airplane’s going to crash into something near you. That’s how scared you were. That’s how you’re thinking. That’s your mind going, holy shit when something dramatic happens, these people are seeing their grandparents, parents dying from COVID.

They’re not going to run out really quick. It’s very, very scary over there. But I don’t see China growing three to 4% where you’re taking out their main growth driver, which is the US which is going to go in a recession and has announced their intentions to lower their investments in China, which we’re doing right now. So I don’t see China becoming a major driver for US growth for a long time and that’s driving this market. In the meantime, what do we see? The Fed just raise rates, continuous raise rates, fastest pace since the Fed ever and may believe, hey, you know what the Fed’s close to done, they’re close to done, the Fed. You got a couple more hikes until March. Terminal rate at five, maybe five and a quarter.

I got to say really? Because I’m a person, you have to look at the data and I’m someone that looks at the data constantly and I’m going to share something which I’m not seeing being shared any place else, really. I’m not saying that as this so you pay attention more. Just listen to what I’m saying here. It’s very, very important. Because I’m going to make a bold prediction that we may see another 50 basis point hike in the future this year or a lot more 25 basis point hikes than are projected. I’m talking about through the second quarter, maybe into the third quarter, which nobody is predicting. We’re looking at March, maybe April, some of looking at a five, five and a half percent terminal rate. We could be well over 6%. You say, “Frank, that’s crazy.” Hear me out. Hear me out first before you start yelling and cursing at me.

You look at the Fed, they said they’re not going to pause until they are sure our inflation’s under control and were near historical 2% rate, right? And one thing’s for certain over the past eight, nine months, you got to believe the Fed, they did everything that they said they were going to do, whether you agree with it or not, whether you hate the Fed. Exactly to a tee they’ve been doing everything, they told you they’re going to raise aggressively. You knew the rate height. No, there has been no surprises in terms of rate hikes. There’s surprises in how they’re speaking and sometimes it’s getting misinterpreted and that could be their fault. But every single hike, I mean it’s predicted right on the button and this is what they’ve been doing. They said, okay, we’re going to slow the rate of these hikes or the percentage which they did, they’re still raising, but they sold 25 basis points and that’s what they said they’re going to do.

Now they want to get that rate closer to 2%, which is going to be very difficult. So as much as everything’s treading in the right direction, CPI is still at 6% right now, which is insane. If it didn’t go to nine, 10% and it was at 6%, we’d be in panic mode right now. But since we saw 9%, now it’s 6%. We’re like, wow, it’s trending in the right direction, so everything’s fine. You’re right. And even when you look at other things, I mean things are declined and retail sales have pulled back. Even the PPI, most inflation gauges have showed that we’re moderating. But let’s look at the present. Have you seen what gasoline prices are right now? There are up 20% from the November lows. So the average price right now is $3.60. We have to look at everything pre-COVID of where the market was pre-COVID because after COVID, everything was crazy.

We saw one month of a decline in the markets before the fed said, “Hey, let’s just keep printing as much money as we can. It doesn’t matter. It’s not a limit. There’s no accountability. Let’s keep going.” 1 trillion, 3 trillion, 7 trillion. That gets 11 and a half trillion dollars. Now we’re removing all that liquidity from the markets. That’s why everyone’s laying off seeing slow demand, much higher rates. So we have to go to a pre-COVID market, right? Let’s eliminate COVID because that’s a good comparison because that’s where they’re going to be, removing this liquidity. So we look at gasoline prices on $3.60 on average, right? So pre-COVID, that’s the highest gasoline prices have averaged. And I went back on annual basis pre-1993 at 360. So I know the guys in Washington are going to be like “They were $5 at $3.60, you guys could afford, it’s not a big…” It’s $3.60.

Do you see them going lower? I don’t know. I mean it’s nice when you have this massive strategic oil reserve that you just unloading and now you’re going to have to replenish it. But it’s interesting because now oil prices are going up, up over $8 a barrel. Again, let’s go back to pre-COVID. I know we sold a hundred dollars a barrel. Oh my god, we saw zero in over a hundred and like a year and a half, right? For oil with the futures. But pre-COVID, the last time we averaged $70 a barrel was 2013. So you going from 2013 into the end of 2019 beginning of 2020 oil prices, they never even got above $70, the average. We’re over 80 right now. Have you seen what copper prices are? They’re surge they’re $4.20. It was $3.20 in July, eight month highs.

Remember that crashing used cars? Used cars are full of, they’re crashing. We never seen anything great. Everything’s working at six straight months of declines. Well, let’s look at the present according to the Manheim Used Vehicle Index, this is the most accurately, widely used gauge in this industry when it comes to used cars, used cars increase by one and a half percent for the first half, at least the price, first half of January, which currently marks the second month in a row that used vehicle prices are rising. Did you know that? Did you know used vehicle prices have been rising the last two months? Did you see what copper prices are? Did you see what natural gas prices are? The feds trying to control inflation right now we’re looking at a market that’s surging, which has given them the okay to continue, but now you see inflation start to come back.

Have you seen food prices? Look at the dining index. This is according to OpenTable, their seated index, which a lot of people use. I’m not just picking out components, this is what people base this stuff on. Most popular gauges, right? So you’re looking at the OpenTable seated index with dining and dinings starting the surge again, the prices also supermarket prices are starting to surge again. So you’re looking at food prices going up, oil prices going up, energy prices going up, copper going up. Remember rent’s coming down. That was a big thing. Rent’s coming down. It’s the biggest component. Jeremy Siegel, “Well, we’re looking at realtime data and rents are coming down. If you’re looking at realtime data.” I want to see what he says next time he’s on TV. Because Zillow Rent Index. Again, another measure that people that widely they use gage. The Zillow Rent Index rose in December and this is falling off its highs from July where we saw, again, treading in the right direction, we’re no longer trending in the right direction.

And then we have the wonderful stock market with the most risky assets, which includes in NASDAQ. NASDAQ’s up 8% this year. Most heavily shorted names are up tremendously. And what do you think the Fed’s going to do? The Fed can’t say, Hey, I mean the next meeting, where’s CPI going to be mean? All these things are broken out. You may see energy’s going to be higher, food price are going to be higher. Maybe you see rentals again, they should be higher. Maybe again, it’s back looking data, so maybe you’re going to see it lower. But what the Fed is seeing right now is not an indication that they’re going to stop anytime soon, they can’t because inflation is not just well, it moderates, it’s going up sharply. So now we have [inaudible 00:20:07] why is that happening? If you want to look at what all this is related to, it’s related to one thing.

It’s the dollar, the dollar’s falling. That’s why gold’s going higher. That’s why stocks going higher, everything’s good. But when the dollar falls, inflation goes through the roof again. So this is a double-edged sword that the Fed has. I mean there’s no easy solution here. Even the fed’s going to keep raising because we’re seeing this inflation surge or we’re going to see the markets come down tremendously and everything come down again and really crash from here because that’s what the Fed needs to see because we have no growth going forward yet, stock prices are going higher. So the NASDAQ up 8% this year. At the same time the major tech companies are doing what? They’re laying off tens of thousands of employees. Every one of them go through them. Every one of them. Tens of thousands of employees. Maybe it’s 2% of our workforce, maybe it’s 6% of our workforce, some of it’s 12% of our workforce.

But they’re laying off all these employees. And by the way, getting back to earnings, those earnings, when everyone said, oh, they’re beating estimates, and I’ve mentioned this before, they’ve been revised by an incredible 7% plus lower over the past three months heading into this quarter. I’d never seen a revision that much other than black swan events like COVID or a credit crisis where we didn’t know the full extended of the damage. 2008 by the way, which I’ll show to Curzio Venture Opportunities subscribers, wait till you see the market moves from October into the final lows in 2009. So October 2008, we kind of bottomed the market went up around 16%, then came down, then went up like 30% from its lows, or over 20%, 25% from its lows and before it crashed completely and hit the absolute low in March. So what we’re seeing here is normal within the bear market.

So now you see earnings come in ahead of estimates, but the estimates have been revised sharply lower. And to make matters worse, even with the company’s reporting, I mean today let’s talk about the company’s reporting and outside of oil energy, those companies, Halliburton and good numbers, solid numbers. You see natural gas energy companies reporting solid numbers, talking about giving more capital back, right? Because they’re printing money right now, even with oil at 70, they were printing money at 80, 90. It looks like oils continue to trend higher. But let’s talk about some of the other companies like GE, Verizon, 3M, all guided down for 2023. So I look at earnings, the S&P 500 are expected to generate around $230 in earnings per share in 2023. That’s all the earnings for all the S&P companies combined. It’s a very important number You need to understand because that number was 160 at the peak pre-COVID in 2019.

Which is the full year 2019. So January 2020, that number. Now they’re all up to 240. They’re still 230. How are we going to predict… Their lowing estimates? How are we going to get to 230? And I had this number at 180, at 190, which is a significant decrease from where this is. And you may be like, “Frank, you’re nuts.” But you know what? Let’s go with someone who’s been predicting this market for a while for a very, very long time because it’s in line with the bearish case with Morgan Stanley. With Mike Wilson, again, dead right on this mark for the past few years. He just tweeted this, I think it was like a day ago and I’m quoting him here. He goes, “All work shows further erosion and earnings with the gap between our model and the forward estimates as wide as it’s ever been.” The last two times our model was this far below consensus. The S&P 500 fell by 34% and 49%.

Pretty scary. And I went back and looked at their earnings predictions. These guys have a great track record for predicting forward earnings. If you go back all the way to 2000, they have a chart of it and they’re pretty close within the guidelines and they have that chart compared to what was really reported. And they’re pretty much within that range. Right now, they’re more than 30% off from their earnings compared to what’s expected in 2023, 30%. Holy shit. So what do we have? We have a market that’s surging while earnings are coming down sharply. Meaning that the market’s getting more and more expensive, right? The margin go up 300%. If earnings go up 500%, you’re still going to have a cheap market. It’s all about earnings, right? In relation to pre price divided by earnings. But you have the price going higher in the earnings going lower, look out.

Cause if you’re looking at the NASDAQ right now, it’s trading at 27 times forward earnings. I think the highest rate of it traded was 40 times earnings, I think during the .com era. But if you want to put the 27 times in forward earnings in perspective, if you look at the 10 years, again, pre-COVID, right? Which is the market that we were in, and remember that market was with rates at zero, Fed in QE mode, quantitative of easing. The average PE for the NASDAQ was 18. We’re 27 right now heading into a recession. Rates at the highest level since the eighties. Inflation still high and going higher now, inflation. In so many key categories which affects consumers.

This is food prices, this is energy prices, this is gasoline prices. These affect consumers directly, who are already shrinking their wallet and starting to spend less who already you’re seeing credit cards go up tremendously. Along with what these banks are doing, they’re raising the credit card rate. They’re not raising your savings rate though, isn’t it amazing? Got to love the banks anyway, in the middle of this, right? Heading to recession rates, high levels and decades. Inflation’s so high. While every major tech firm is laying off tens of thousands of employees and you have to ask yourself why now? And this is over the past week, week and a half, all the major ones. You look at Microsoft, I’m pretty sure Apple did. You had Google announced recently. Hey Netflix announced a little while ago. They’re doing a little bit better. The stock price is doing better. Starting to surge again. I think it’s way well ahead of itself.

But when you see all these companies laying off employees, ask yourself why? Why are they laying off these employees? Which in a tech sector, I don’t think they’ve done since the .com era. I don’t even remember 2008, 2009 them laying off a ton, which they probably did, I just don’t remember as much. But there’s a reason why they all have special letters going out to the employees, apologizing.

It’s our fault for the layoffs. You don’t see that ever. You don’t see that from other companies. You might see an eternal letter here or there, but every letter like Spotify’s letters out there, Google’s letters out there from the CEO, the Microsoft letters out there, “Oh we’re sorry.” And you don’t see that they’re not used to doing this. They’re used to laying off employees. But why are they doing it right now? Because the only way you would be laying off employees right now is if you see the future growth is going to come down tremendously. They’re telling you that, otherwise if they really believe that this is real and NASDAQ is coming back, we’re back. We see it kind of getting better. They wouldn’t be laying off employees right now.

So bringing this all together, what does it mean? Be careful here. Don’t get sucked in. We’ve talking about buying puts and I love it. You know why? Because right now if you said well you have puts and you’re buying long dated puts and it requires taking a position and I said around 5% of your portfolio. So if the NASDAQ goes up 30% big deal? You lose 5% of your portfolio, every of the stocks up tremendously, you’re up tremendously. However, if the NASDAQ does crash, that 5% portfolio that put can go up three x, five x and go tremendously. That’s why you need that strategy. It’s very important. You might be looking at going “Ah, the markets going up!” The market’s going up, your portfolio’s doing fine, your long positions are doing fine, you’re doing great. Who cares? It’s your not shorting the markets here.

You’re only losing the amount of money you put into that put. That strategy works when you have… It’s not just a market coming down, it’s an incredibly volatile market that goes all the way up, comes all the way back down, all the way up comes all the way back down. And that’s what we’re seeing. And we’re going to continue to see that as long as the Fed continues raising rates and even pauses. Cause if you think of 2023 that they’re going to lower rates, you’re out of your mind. The only way the lowering rates, if the market crashes 30% from here and everything prices fall off and unemployed but goes well above 6%, 7% even.

That’s when things change. That’s when the Fed might be like, “Okay, we’re ready.” Right now the market’s searching, be like the Fed is trying to control inflation and the face of the market up 8% in three weeks. Risky assets are probably 15, 20% in the face of earnings coming down sharply, more layoffs. And we’re expected growth wear of 0.2% on average for every quarter, on average through 2023. I mean those could simply easily be negative, which are basically negative. Who cares if you grow 0.01%, it’s a recession. Is that much different from negative 0.1%? No, but it is a recession just not defined. Which is again, it’s not even defined as two straight cause a negative GDP anymore. It’s not. We changed definition last year when we lied about the jobs number, right? We’re adding a million jobs numbers, a million two, we’re fine.

I don’t care about GDP, doesn’t matter. This is a different definition. And yes, it’s because election’s coming up in four or five months. Yes. And now we just figured out that those million you had it was they grew 10,000 instead of 1.1, 1.2 million. We only grew 10,000. The revision by the Philly Fed, not by some idiot, not by some person who’s just out there trying to make this is by the Philly Fed, revising those estimates. Say, hey, the amount have been calculated wrong. What do you think it’s going to happen with that jobs number when we calculate the third quarter and then the fourth quarter, which is going to be coming in the months ahead? Probably be revised a lot, lot lower. So be careful here. It’s not a time to be super optimistic. It’s time to be very, very cautious. When you see slower growth and stocks are still going higher, you need to be careful here.

I know it’s tough because in your head you’re watching TV and you see the market go higher, you think you’re missing it. Be very, very, very careful the markets and that pendulum swings a lot to the other side before it comes back. Meaning you’re going to see the markets go up a lot higher than you think and go a lot lower than you think. Right now they’re going up a lot higher than you think. And maybe it continues and you see a little short covering because people were betting that the market’s going to come down. But what I see for technology, what I see for risky assets, what I see right now when there’s no growth in the market right now, and the fed’s not going to be there to bail your ass out like they were for the last 12 years. Be careful. Protect yourselves.

I give a shit. Okay, yes, I hope the market goes up 30, 40% from me here. Big deal, you lose a little money on some of those puts. Big deal, you’re doing great in your portfolio. This is a forecast, I hope I’m freaking dead wrong on, I swear. I hope I’m dead wrong on it, but I don’t think I’m going to be been doing this for a long time and it’s very, very scary out here and I don’t see a lot of people on TV telling you and highlighting how scary it is. But when you see these numbers go up, go back and I’ll cover this in Curzio Venture again. Curzio Venture Opportunities. That newsletter, which is the January newsletter, is… I’m going to be covering a lot of these numbers in much more detail, much more detail. I’m also going to be showing you a great name that’s ripe to surge in this crazy volatile market.

But I’m going to break everything down that newsletter and what you’re going to see over the next 12 to 24 months. Because when you see earnings going lower, while stock prices are going higher, it’s a very, very dangerous recipe. Okay? It’s seen it before. If you’re looking at 2008 ago, say [inaudible 00:31:28] reach your opportunity I’ll cover it a little bit more. But if you look at 2008, look at the periods when you get a chance, you can’t really see them too much cause it goes so far back. So you need a certain charting system. This way you could really put in the right dates. But if you look at the second half, 2008 to absolute low and mid-March, it was March 12th, 2009 in that we had a 16% move higher, a booming 25% move higher before we absolutely crashed from those lows. And the higher we go, the more risk we have in this market, especially with the Fed continuing to raising rates, inflation’s starting to reverse and go higher.

Just protect yourselves. Again, I hope I’m wrong, you protect yourselves because what buying puts, you’re only going to lose the money that you put into that put, however, and if the marks go higher, you’re fine. But by protecting yourself, the markets do come down that represent, that 5% can represent 30, 40% of your portfolio because that’s how much that put can go up. If you’re right, if you’re betting against the right things. Again, this is a very good strategist in the market, you need to be very, very careful. And that’s what I’m seeing. So that’s it for me, tomorrow we’ll be coming in a lot of great stuff with the one and only Daniel Creech to cover the markets, including Microsoft’s earnings, which by the way, can’t… There’s no way Microsoft could blow out those numbers tomorrow. You know that, right? There’s absolutely no way. If Microsoft blows out those numbers you know the pushback they’re going to see, you just laid off 10,000 employees.

Imagine blowing out those numbers. And I mean what those employees are going to say, “Hey, your earnings are freaking great.” So they’re going to probably report in line to a little weak estimates. But just from a political standpoint, man, if you’re laying off employees, you better not blow out those numbers unless, you’re going to have a big freaking target on you. So it’s going to be interesting to see what they report and the revision. So they might report numbers of, Hey, these are good, but this is what we see in the future. And I expect those estimates to come down.

They have to come down or that you wouldn’t be laying off employees, there’s no way you could report. You can’t lay off 10,000 employees the week before you report and report fantastic numbers and raise those numbers next year. That ain’t going to float well, especially in this market. And man, you want people protesting outside, that’s the way to do it. But Dan and I become those numbers tomorrow morning. A lot of big companies still set to report. We’re probably in the third inning of earnings. Got a lot more to go and we’ll be sure to break everything to you as soon as it happens. So guys, that’s it for me. Questions, comment through the email of frank@curzioresearch.com. That’s frank@curzioresearch.com. Let’s go Eagles! I’ll see you guys tomorrow. Take care.

Announcer:

Wall Street Unplugged is produced by Curzio Research, one of the most respected financial media companies in the industry. The information presented on Wall Street Unplugged is the opinion of its host and guests. You should not base your investment decision solely on this broadcast. Remember, it’s your money and your responsibility.

Frank Curzio
Frank Curzio, founder and CEO of Curzio Research, is one of America’s most respected stock experts. His research is regularly featured on media outlets like CNBC’s Kudlow Report, The Call, CNN Radio, ABC News, and Fox Business News. His Wall Street Unplugged podcast—ranked the No. 1 “most listened-to” financial podcast on iTunes—has been downloaded over 12 million times.
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