Wall Street Unplugged
Episode: 1079October 4, 2023

McCarthy’s ousting will draw out the selloff

I just returned from a business trip to Miami… and start today’s show with a rant about how consumers are getting “fee’d” to death.

Stocks are selling off as investors digest higher-for-longer interest rates and lingering inflation. And I see way more downside ahead…

I share some data on the impact of student loan payments, which have resumed after a three-year pause. I also highlight the biggest headwind for the economy (hint: it’s a rising cost that none of us can escape).

I’ve been pounding the table on how this is one of the most dangerous markets I’ve ever seen… Despite the fastest pace of rate hikes in history, some of the riskiest stocks have been surging. But this irrational bull run is coming to an end. I explain why the Fed won’t be able to pull off a soft landing… and why we should brace for more pain throughout the housing sector, community banks, and consumer spending.

Shockwaves are rippling across the political aisle as House Speaker Kevin McCarthy (R) was ousted this week. I explain how this changes my thesis on ridiculous government spending… and why it will lead to a long, drawn-out selloff in stocks. 

But that doesn’t mean you should sell everything and move to cash. Tomorrow on WSU Premium, I’ll share exactly how to position yourself for this market—including a new Dollar Stock Club pick… from a sector I’ve never recommended before in my entire career.

Inside this episode:
  • We’re getting “fee’d” to death [0:30]
  • What’s behind the market selloff? [7:30]
  • Consumers can’t escape this rising cost [10:45]
  • Why this irrational bull run is ending [20:35]
  • Why McCarthy’s ousting will trigger more declines [28:25]
  • Don’t miss tomorrow’s WSU Premium [40:20]
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.
Transcript

Wall Street Unplugged | 1079

McCarthy’s ousting will draw out the selloff

This transcript was automatically generated.

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 October 4th.

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.

One thing Daniel Creech for covering me last week was in Miami, had a business trip, spent time in the management team for a company webinar, Curzio Venture Opportunities portfolio.

A lot of great things going on, believe it or not, in this crazy market I want to see for myself.

But I am traveling a lot this month, all on business.

This is a time where you wanna work the most.

’cause this is when you find the best ideas.

Not everything is gonna go higher, a lot of things are going lower.

You have to look at management teams, they matter, which have experience and higher interest rate environments, which we haven’t seen in 12 years.

I mean, you have a company that’s 10 years old, you’re like, Hey, this company’s mature, they’re great, it’s awesome.

Management team’s smart, but they never lived an environment like we have today.

But going to Miami is interesting.

One of the most booming economies in cities, I would say in America.

And just a building taking place there.

People spending money, lunch traffic.

It’s just, it’s just booming.

You’re not seeing that in other places.

In Florida, in Jacksonville, you’ve seen slowdowns, the homes, see home sales scene slowdowns in areas.

I’m hearing, hearing that in Texas, you know, Miami just booming, just booming right now.

And when I got there, I stayed in Coconut Grove, really nice area.

And I stayed at Hampton Inn.

I was there for about two days and I got there like 9:00 PM I drove there from Jacksonville.

It’s about four and a half hour drive, which I like, right? You’re away from everything.

You get to make your phone calls.

It’s, it’s really cool.

I don’t mind the drive.

It’s better than flying there because time you get to the airport, get outta the airport, get an Uber and stuff like that.

It’s kinda the same thing.

A little less stressful with driving.

And as I check in and keep in mind, I travel a lot guys.

I travel, I’m say dozens and dozens and dozens and dozens of hotels since COVID.

Uh, and I’m getting sick of the, of the charges, right? And the charges are getting higher, higher.

It’s just like these fees, right? You used to be able to book on Expedia and they’re like, this is the full cost.

And then when you get to the hotel, it’s not the full cost, right? So somebody’s lying and it’s getting to the point where it’s a lot, it’s 25, $50 extra a day sometimes.

So as soon as I walk into the hotel lady’s there and she’s like, oh, you know, do you have a car? I’m like, yeah.

She’s like, okay, it’s $22 a day for parking.

So right off the bat I’m like, all right, here we go.

I was like, what else are you gonna charge me for? Well we have to keep your credit card on.

I said, are you gonna charge me? No, no, no, just incidentals, whatever.

Uh, and I start giving her s**t a little bit ’cause I’m p****d off ’cause because I just stayed at a hotel in Orlando where you could only park in that area ’cause it’s a big area.

It’s a conference.

Uh, and they charged me $60, right? For parking.

They banged you out for another $25 and you kind of get sick of it, right? So, so I’m stuck giving this lady a little s**t.

And she’s like, do you have a Hilton’s card? I Hilton card? And I’m like, yeah, I do.

I I think I do a Hilton account.

I filled it out a while ago.

I have zero points.

I gave her the number.

She’s like, okay, you know, do you want water? And they had like cookies there, Lauren doing cookies.

I’m like, what are they like $10 each or whatever.

She’s like, no, they’re for free, you know, for your account.

And, and before I knew it, the lady was being really nice and when I went there, it, it was frustrating because I’m like, here you go.

You know, I’m just conditioned that I’m gonna get banged out.

And she didn’t really bang me out, right? Coconut Grove, you can’t really park anywhere.

So $22 parking isn’t the worst thing in the world.

That was the only fee that they charged.

They didn’t charge for incidentals like a refrigerator fee or here’s your Wi-Fi fee and all the garbage that they charged for.

But I’ve been to Vegas where it’s $75 extra for the night.

And when I went to Consumer electronics show, I didn’t even get the chance to talk to anybody.

’cause you it’s automated systems and they’re like, oh, it’s extra, this, this, this, this for all these incidentals that I don’t use.

So what does this mean? You know, I’m here, I am as, as a customer given some late, you know, I’m expecting to get, you know, what? Right up my, you know what? So, because this happened to me literally at every single hotel I stayed at.

So, so right away I’m giving ’em an attitude that results in her going back to her boss and them being like, listen, if people are gonna give us an attitude then let’s just charge ’em fees anyway.

But this is the new way of the world, right? Where you’re seeing massive fees everywhere.

I mean I went to get an oil change and I just looked at the bill and it says service fee 5 99.

So I asked the kid, I’m like, what’s, what’s the service fee? He’s like, I don’t know.

I was like, aren’t you providing a service for me? Aren’t I, I mean call it something else or tell me you’re raising prices because your cost went.

Don’t tell me you’re just adding something on there.

A line item is a service fee just to add and you don’t even know what it is.

I’m going there for a service, right? You’re servicing me.

You’re going to charge me an extra five nine for nothing.

And I’ll never go to that place again.

Now it’s been happening everywhere.

Comcast came here, my, my internet that the Ethernet cable didn’t work.

And they came and said, oh well you know the problems with your Ethernet cable And I didn’t know that ’cause it’s not coming directly into my computer.

I only have Wi-Fi.

So they come here, they, they wound up not fixing it and they charged me like $120 for the service call.

I was like, how are you charging me? I said, you didn’t even fix the problem.

They’re like, well it’s the Ethernet cable.

And when we tried didn’t work.

I’m like, it’s your Ethernet cable.

They’re like, no we can’t touch the Ethernet cable ’cause then we could damage your computer and we don’t wanna damage equipment.

I said, so lemme get this straight.

When you came here five years ago, you came here with the cable box, you came here with the router and you think that I came here with my Ethernet cable and said, okay you guys ready? Okay, I’m plugging in play.

It works you guys khali, you really think no, you had to Ethernet cable and now it doesn’t work.

So they didn’t even fix the problem and they charged me and, and it was ridiculous ’cause they didn’t, you know.

But this isn’t just Comcast, this isn’t me about venting.

This is happening with everyone I talk to with the massive fees.

And why is it happening now? Why are you seeing it even more? Why are you seeing it where you know, service is terrible.

Customer service is terrible.

You call someplace you can’t even get anywhere on the phone before you go through.

I mean now you go through, used to hit like star and hit star 10 times or the pound 10 times and zero, If you do that and make you call again to get through their automated system, which asks you 20 questions.

Then you get to the person, the person gets on and they ask you the same fricking 20 questions again, what’s your account number? We gotta ask you security.

I just did that to get to you.

And then after you do it, you say a problem and they, they put you through to somebody else.

It’s horrible.

So the custom experience is hard.

This is what happens when you’re cutting costs and this is what happens when you have inflation going through the roof and you say, whoa Frank, it’s coming down in some areas, not all areas.

But now what are we seeing the effect of higher interest rates? Okay, this is something that I’ve talked about and talked about and talked about because it’s hitting all of these companies.

It’s hitting consumers.

This isn’t like the credit crisis.

Holy s**t, let me get the hell out.

I dunno what’s going on.

This isn’t COVID.

Oh my god.

I mean could everybody die tomorrow? Get everything outta the market.

You got punished for coming outta the market when you, everything told you you should have for the first six months of the year.

So you’re buying these expensive stocks because the market’s going high.

It makes it one of the most dangerous markets I’ve ever seen.

So now we’re seeing this sell off and it’s kind of catching people by surprise.

But the sell off if you look under the hood is a lot worse.

It’s just not like a 2% here.

Like 500 points seems like a lot in the do.

It’s nods 1%, whatever it is.

Yeah.

But you’re seeing like this gradual selloff and this is what happens.

And when you’re looking under the hood on Monday, the breath was horrible where I think we would lower and then we finished a little bit higher and the S&P 500, the S&P 500 hit the green on Monday I think.

But when I looked and it was probably like 3 15, 3 30 out of 500 stocks, And the SS and P was either maybe flat or up.

I mean that’s insane breath.

That’s terrible for the markets on Tuesday, what do we see? Markets sold off pretty hard.

Again, markets are mixed today mid-afternoon.

But stocks have been gradually selling off of the last three, almost four weeks due to one major reason.

Interest rates.

Interest rates, interest rates.

And they’re surging.

And it’s a big deal.

I a 10 year is now at 4.

7% 16 year high.

They might be saying what does that actually mean? And some people really think they know what what it means and some people know what it means in certain areas.

But I’m gonna explain it to you of what this means and how it filters through the economy.

’cause it takes time and when it happens, this is a long drag, not something quickly, oh get in, get out.

We don’t agree with tariffs in China.

Get in, get out.

Alright we, we solve that problem.

The dead ceiling, the government’s gonna close.

Holy cow.

Get outta the market.

Okay, we fixed it.

Get back in.

This isn’t that, this isn’t a one-timer, this isn’t a write down.

You have to take this and I’m not gonna say permanent, but this is for several years.

So when you have rising rates, it results for higher costs for people, especially in debt which most American families are in, right? okay? No surprise they had, they’re cutting back but they’re doing this at the same time that their expenses are going much, much higher.

And you could say, well that’s the reason for the cutback.

It’s the reason that they’re gonna have to cut back much, much more because we have credit card rates at record highs.

They’re over 20% interest on credit card, which a lot of their debt stood in credit card and they were okay and paying moving your credit card back and forth and having a six month or a three month period where you pay 1%, whatever it is, it’s 20% across the board.

And this is at a time when credit card debt just hit a record high surged over to 1 trillion, it’s over $1 trillion.

That’s how much Americans have a credit card debt for the first time ever.

Student loan forgiveness is over.

It was a three year pause.

starting this month.

They’re gonna have to pay an extra $400 in expenses.

And when it comes to consumers and even most businesses, there’s one cost that impacts us the most and it’s not food.

We could shop at different areas.

You have like buy one, get another one in some areas, especially if they have, you know, meat and they didn’t sell it as quick as they wanted to and they have sales, you can go whatever supermarket you get.

Hell, you could grow your own food, right? You could find ways to try to lower your expensive food.

One thing you can’t lower is oil and energy gas.

I mean every business you say, well what about a software company? Well they send a lot of stuff out, right? So they send things out, they have suppliers and, and, and you know, how do they get all these supplies back and forth? Everything back and forth.

How do they do this? I mean it impacts almost every single company.

Much more so in manufacturing, much more so in so in retailers for for the targets to Walmarts Airlines, but also consumers with their bills going higher.

Electricity prices.

I don’t know about you and I’m curious frank@curzioresearch.com.

My electricity prices, my electricity prices at the house I’m trying to sell because we just built a new house, right? We’re still trying to sell it and the market’s been s****y.

They’re higher now that I’m not living there than they were last year when I was living there.

That’s how much they raised them in Florida.

I don’t know about you, but they’ve jacked them up.

You have energy prices, right? Gasoline prices, what are you paying $6 in California right now? Holy cow.

$6 a gallon.

It’s insane.

And we have oil up, what, 25% in the past three months or so.

So also when we have super low rates, which we have for a long time, it results in this massive housing boom.

And it’s not only ’cause you could buy a house borrowing money under 4%, which a lot of mortgages are there, but as home prices go higher, which they have considerably and they’re still sitting at those levels, the equity in your home goes high.

If you bought a house for 300 and it’s 900, right? No matter what your mortgage is, it’s gonna be lower than 300,000.

And it could be 500,000, 600, 700,000, whatever it is, it’s higher.

All that is that equity.

If you sell it, that’s equity.

That’s money made in the house, that’s in your house right now.

A lot of people have a ton of equity in the house and they were taking out like crazy with low interest rates.

But now home equity loans, you’re gonna pay 10%.

And a lot of banks are like, no, I dunno if I wanna do that.

I don’t know.

It’s not that easy.

Banks are tightening their lending standards.

So this is less money that you could take that you could filter into the economy, you could buy more, fix up your house, buy that new car.

You had that option for the past 10, 12 years with higher rates like this.

A lot of people don’t.

That’s why you’ve seen the HELOCs through the roof, which caused, not caused.

But a big part of last crisis is subprime loans and leveraging those home equity lines of credit start out a very low interest rate.

But they’re, they’re, they’re surging at banks right now.

People don’t wanna pay 10% on their loan on a home equity loan.

So it’s not easy to get these home equity loans.

I mean home prices is stable.

They’ve come down a little bit still by a much, much higher compared to past 18 months, two year, 10 years, five years.

But they come down a little bit, not too much.

So you’re seeing this, this is what high interest rates cause you’re seeing this throughout the markets right now.

And make no mistake, this is exactly what the Fed wants.

It’s what they have to do.

It’s what Powell said he was going to do.

The one thing I hate about Powell, and I’ve been kind of nice about it, everybody criticizes him to death or whatever.

And the one thing that I hate and a term that he should not be using is soft landing.

Because you are not gonna have a soft landing no matter what you do.

This cannot result in a soft landing.

It’s like someone who weighs 500 pounds, it’s gonna go to a diet by eating McDonald’s.

It cannot happen.

We cannot have a soft landing.

It’s going to be incredibly painful.

And the way they’re doing it now is it’s gonna be painfully slow for ’cause that’s how long it takes for this to happen.

We’ve been raising rates for 18 months, we’re finally starting to see the impact of it.

Listen to conference calls, listen to retailers, listen to what they’re saying about the consumer.

It’s happening at a time where oil prices are going higher.

Major costs for most people.

Most prices are not coming down, they’re still going higher.

We’re up tremendously on prices.

So even if they go down to the 2% rate, they’re still up how much? 15, And they’re not going down.

They should be going down.

They’re not.

So getting to the 2% rate doesn’t mean that everything’s gonna be cheaper.

It means that it’s not gonna, prices aren’t gonna rise as fast, but they’ve already risen three x four x our normal inflation rate based on a CPI.

But for the Fed it’s gonna be impossible to achieve the soft landing.

It needs to bring down inflation, which means it has to remove trillions the excess money that was put into the system in 2020 for COVID 2021.

Which is remarkable as every asset class hit all time highs at the end of 20, still petted to the Metal.

’cause these are all politicians and no accountability.

Nobody cares.

And even in 2022 and in 2023, in 2023, we’ve been saying one of the most dangerous markets where sometimes you see things and you get the hell out, I don’t wanna be in it.

This was like if you got the hell out in January, February, you’re watching stocks surge go higher and higher and it’s crazy.

Anyway, taking rates up from 0.

25% to 5.

5% of 18 months, the fastest pace of rate hikes in the Fed era.

This should have resulted in stocks getting crushed or at least pulling back 10 to 15% in early 2023.

After all mortgage rates went from four to 8%, should have crushed home stocks.

It didn’t.

Oh we have these, we don’t have as much supply on the market.

Should these stocks be sitting at all time highs before the market came down the past few weeks? Should they be rising? I mean maybe stable or they’re, they’re better shape than they were during a credit crisis.

I get it.

These companies, management teams are, are 20, 30 years experience.

They understand the ups and downs and interest rates and things, but should they be going up and rising at their fastest pace ever? These stocks, when we’re seeing rates surge by the fastest pace that we’ve ever seen in the history of the Fed, surging interest rates should have crushed tech stocks.

They did in 2022, but all of a sudden 2023, everything’s okay.

I mean these are highly interest rates.

Sensitive stocks, high rates result in CapEx budgets getting cut.

Most tech companies have margins at incredibly high, but their, their customers are cutting costs.

And when the margins so high, it’s not as easy for those companies to cut costs as it is for say a manufacturer that could close plants that could maybe use different suppliers.

There’s not a lot of suppliers to use when you have that edge.

I mean you’re gonna use a different supplier than Nvidia for ai.

No you can’t.

There’s nobody out there.

Other areas already commoditized within that industry.

Whether it’s, you know, for Wi-Fi or different components that you’re putting in.

Some of them are just commoditized where they’re cheaper and cheaper.

You put others where you’re gonna get AI chips, where you’re gonna get all this stuff to build these systems ’cause you’re gonna be at a significant disadvantage.

So it’s not easy for these companies to cut costs as is for everyone else.

That’s why you usually see tech companies, especially the largest ones get nailed.

But now they’re not getting nailed.

People saying, well Apple has a hundred billion balance sheet and they’re generating interest, a ton of interest on it.

It’s nothing compared to the amount of sales that they’re gonna lose.

It’s a drop in the bucket.

I mean generating what, 225 billion a year in sales, maybe more for Apple.

I mean it’s really a drop in the bucket.

If that’s the case, they would take all their cash and wouldn’t even go into business anymore and just say, okay, we’re gonna generate 5% interest and we’re good forever and we don’t have to do anything.

Believe me, that’s not a good trade off.

It helps compared to the companies that are in debt and have to restructure their debt.

Maybe it’s why you saw utilities get absolutely annihilated down 5% in a day.

When have you seen that? And this happened without the markets crashing.

Utilities, a safe haven, steady cash flow, people have to pay those utility bills to get electricity shut off higher interest rates.

When you look at the seven largest tech companies, not only did they surge the first six months of the year with interest rates surging and with Apple and many of these other companies, many of the top seven seeing earnings decline year over year sales declined for three straight quarters year over year for Apple.

And that stock rose tremendously, I wanna say probably added a trillion in market caps.

And they not only hit all time highs became trillion, multi-trillion dollar companies during this type of environment, yet the most heavily debted companies actually went higher.

Even with clean energy and the bills coming out now you’re seeing a lot of ’em get nailed.

Growth stocks are traded, crazy valuations.

And these stocks usually have weaker balance sheets.

They surge as well for the first five, six months in 2023.

But now what are you seeing? You see reality set in and it’s not often, you see the utilities sector fall 5% in a day.

The sector not a utility, the sector.

And as that sector was crashing, tech stocks went higher and NASDAQ went higher that day.

Now I’m gonna share a few interesting charts with you.

So if you’re on our YouTube channel, which is for free, you could see, so yesterday 11% of the S&P 500 made a new 52 week low 11%.

And when you look at this chart and you can say, well 11%, what does that mean? That’s the highest since October, 2022.

What happened in October, 2022? Do you remember where the markets back then, they were a lot lower than they are now.

A lot lower.

Another scary chart.

When we see interest rates rise at this level and this is much, much higher, right? We’ve said, it said it numerous times the highest, it’s the fastest pace of rate hikes in a Fed pace, right? 18 months.

We’ve never raised rates like this, like this percentage.

I think it’s something like, you know, seven, 8000% every time we saw a spike spike.

Again, these spikes are, I’m not gonna say similar, I’m gonna say these spikes.

We saw a spike in rates, okay? And this one is much, much greater.

But if we go back to 1985, I mean you’re looking at, at bank failures, you’re looking at 1987 market crash.

What happened is when rates went higher.

So my dad was talking about in his newsletter back then, rates are high, we’re gonna see the biggest crash we’ve seen.

It’s gonna be bigger than a PRI previous three combined.

And he was right.

That’s how he got famous.

It was TV vans every place.

And it wasn’t like CNBC where 20 people say it’s going higher and 20 people say the mark’s gonna crash.

Everybody has different opinions.

It was only like 10 people back then when CNBC that that, you know, they listened to.

My dad was one of ’em and everyone else was calling, even Lane Gelli got credit for the, for the crash.

He was saying Mark’s gonna go higher.

He was the only one.

And writing.

That’s what happened.

19 87, 19 90 recession rates were going higher.

Mexican peso crisis.

This is 1995.

Yeah, we’re looking at, at rates going higher.

The Asian crisis, The tech bubble burst rates were going higher into that before it burst for three years, the great financial crisis rates were going higher.

That’s what Cramer the Fed knows.

Nothing.

Nothing.

They were raising rates into that you the Euro credit crisis, which was a couple of years later, the taper tantrum, which is emerging market sold off.

That was 2016.

And then we look at 2018, you’re looking at this guys, I have it up.

Take a look at the chart.

It’s great research.

And a global sell off in 2018 was led because we were raising rates in Now we’re seeing rates spike tremendously.

And what has happened, what is broke? Really, really nothing.

So a small banking crisis, that’s it.

Immediately.

What did the Fed do? Bail them out.

It was a bailout.

They’re gonna tell you it wasn’t a bailout, but it was a bailout.

So now when you see things like this happening for the first time, for the first time, for the first time, and you know, I keep saying that for the first time, I haven’t seen this, these start adding up, there’s a lot of leverage out there.

A lot of debt.

There’s a massive amount of shorts in in the bond market.

Huge shorts in the bond market settled at everybody.

Massive shorts.

You have no idea.

The research I’ve been digging into, if you look, if there’s any way, and this is what happened with that mini banking crisis, what was it a few months ago, is all these bonds are down tremendously.

Apple’s bonds are down 40%.

If you hold maturity, you’re fine.

But what happens if you’re forced to sell? If you’re forced to sell, you’re gonna take enormous losses.

It’s gonna push it even further down.

Could this happen? I don’t know.

Could this be forced? I don’t know.

’cause I know hedge funds and the people involved in, in a lot of those banks that failed, they knew, they saw it coming.

I mean, signature Bank had Barney Frank on the board.

And that guy knows more about regulation than anyone, whether they like him or not.

He, you know, Dodd-Frank, that’s the credit crisis bill.

The ratios, tier one ratios have to be hot.

All that stuff.

Make sure banks are fine.

He didn’t even see it coming with Signature Bank, but they knew at California Bank, they saw how much of the assets were not insured above that, you know, whatever it is that Mark 200,000 or whatever it is that the F D I insurers.

And it was easy to spread rumors that holy s**t, you know, you better get below that level, which forced all these deposits to come out of the bank, which kind of forced a run on the bank.

And, and what do they have to do? Because they have to meet those ratios.

They had to sell one year treasuries, which are supposed to be the safest asset in the world at massive losses, which caused the bank to fail times that by a hundred.

Those are the, the government bonds in the marketplace right now.

Not saying they’re gonna be forced to sell, but what happens if some of ’em are, because they have mortgage rates at the highest since September, 2000.

So the housing market’s gonna sell off and it’s one of the biggest drivers in our economy.

I mean, housing affordability is at a record low, which combines mortgage rates and rising home prices.

And, and when you compare that to income growth, it’s at levels we’ve never seen before.

There’s no way people go, you have cash is a great time to buy a house.

Most people don’t.

Credit card delinquencies starting to surge highest level since the credit crisis earnings are getting crushed.

Three straight quarters of earnings declines.

We’re expecting to go higher.

But let’s take out the top seven because we take out the top seven companies instead of earnings declining by just a few percentage, they declined 8% for every other company outside the big seven community banks.

Holy cow.

Imagine you’re a community bank right now.

So demand is plunging, right? These are banks, you know, home loans, loans in general.

People are worried and they, they, they’re taking their assets outta these banks and they’re putting ’em into the biggest banks.

So, you know, you couple this with our wonderful F T C and Justice Department that hates m and a and these guys can’t even merge together to create a bigger company, a better company.

And oh, we’re gonna merge.

I mean, what is it, they can’t even merge.

They’re not allowed to merge, right? Our government’s supposed to say, Hey, you know, the, the bank’s too big to fail.

That’s what the credit crisis is about.

We gotta, we gotta do something about that.

Yeah, they’re four times bigger now.

They’re gonna be eight times bigger after this s**t goes away.

And this’s gonna be a couple of years.

I mean all these banks, if you wanna talk to Citigroup, talk to JPMorgan.

I talk to people at these places, listen to the amount of assets that they’re seeing come into the banks.

They’re all leaving these small banks in droves, which is gonna, you know, do we need them? Is it gonna, I don’t know.

We saw last time it didn’t do anything.

Couple of small bank failures and okay, we’re fine.

August signature wasn’t that small, but it’s much, much, I think they’re ranked 19th, largest, but much, much smaller than the top four.

So now you’re seeing the four major banks getting tons of more capital in and assets right now, making ’em bigger than ever.

And now they’re way, way, way too big to fail.

Never, ever fail again.

The opposite.

What the Fed wanted to accomplish, we’re bailing ’em out in 2008.

And then we have the kicker here, which we talk about politics and we always get s**t about it, which is fine on the political front.

Don’t discount what just happened to McCarthy getting removed.

The speaker.

Listen to Matt Goetz.

It’s all over every place you can go on YouTube.

You, I mean, I don’t know if the news covers it as much as, as you could see it on TikTok, it’s great.

A lot of stuff’s unfilter on TikTok.

You see it on X and platforms and stuff like that.

But listen to what he’s saying.

It’s eight people at dissented from the party.

I think it’s eight people from the Republican party, right? Which resulted in every Democrat was gonna vote no as a speaker.

They have, you know, they, they say, well we have to, we can’t really say.

Yeah, I think that’s a big mistake by Democrats, by the way, hear me out.

So they all voted no.

And since the house is very close in terms of votes, all you need is a few people to dissent.

And that’s what happened.

And he was removed the speaker.

But when you listen to Getz, speak to reporters, I didn’t see grandstanding.

Here’s a guy that knew, again, I don’t even, I don’t know the guy, I don’t like the, I don’t even care, right? Forget about Republicans or Democrats.

I, I’m seeing a guy that knows that his party’s gonna hate him.

If you saw the interviews yesterday, the party ripped him.

They’re like, we should kick these eight members outta the party.

We hate this.

It’s the last thing you wanna do, right? Because these, these are people that help you raise money for funds and stuff like that.

That’s why every Democrat, no matter if you’d like a bill or not, you’re gonna vote Democrat.

You have to or you’re not gonna be part of the establishment.

Same with the Republicans.

So you’re going against them.

And he had this speech saying that we’ll promised this and we didn’t get it.

And, and he cursed.

He said, where is the fing budget? We do not have a budget by low after by, and we just keep kicking the can down the road.

Like we could spend money forever, forever and ever.

And I heard two of those, two other dissenters, same thing.

They’re like, we have to get a budget in pla we need to get a budget in place.

We have to stop kicking it down the road.

And we spent guys, our national debt just grew a trillion in two months.

A trillion we’re at 33 trillion.

I wanna put in perspective, ’cause people put in perspective different ways.

We’re paying 3 billion in interest per ta per day on this debt.

While our government is borrowing 14 billion per day.

It’s an unsustainable trend.

This is different levels of debt.

This kind of debt matters.

This is what can get us in trouble.

I mean it’s massive and there’s no end in sight.

There’s no end to climate to change.

It doesn’t matter.

Spend trillions and trillions.

I don’t care if we get re most people believe in climate change.

Let’s have accountability.

There’s a reason why everything the government touches is s**t.

The healthcare industry is s**t, right? We’re forced.

You’re looking at, at our school system is s**t.

It’s horrible run by the government, right? Which pays student loans and allows these kids to go to these colleges and allows these colleges to raise price forever and ever.

And on top of that, the colleges and the major college, support the regime.

It makes sense.

I mean, I don’t get p****d off when I see as a Republican that, and again, I’m not far right by any measure at all, at all.

But it p****s me off where I see people who I respected in the media for a long time and people on today’s show, and you have, you know, this Russian three years, of lying about something and nobody and then pushing this agenda and nobody apologizing and nobody’s saying anything, right? You have this agenda out there, but I don’t blame them because do they wanna lose their jobs? They get paid a s**t load of money.

Of course you’re gonna do what your boss says to do at that level or you’re gonna lose your job.

So I I’m, I’m not blaming them.

I understand perfectly.

And same if it’s on the Fox business side or whatever.

If you’re not pushing the agenda then you know, good luck.

Not Fox business, but Fox in general, sometimes it’s, you know, ultra conservative way, right? And I get it because if you don’t, you’re gonna lose your job.

As soon as you start talking a little bit of that, you know, you look at Tucker and talk about, you know, healthcare companies, I think we’re one of two countries in the world that allow healthcare to advertise and media, right? And we see it, we see, you know, this kind of advertising and we see with COVID and how important scare the s**t outta you and all this crap.

And then after a while you learn like, wow, really this is the political environment we’re in.

But, but you know, I get it the back and forth.

But when I hear gets, this is what I saw.

I saw someone that, that wants to hold Congress accountable and have a budget.

And you may say, Frank, you know what? He’s grand state.

Regardless, that’s not even the point.

The point is that if the Republicans get elected, which is likely based on everything that’s going on with the country, based on the current polls, we’ll see if it’s Trump or not Trump, whatever.

This market’s in a lot of trouble.

It’s in a lot of trouble.

And I covered this area for 30 years.

I need you to hear me out on this for 30 years, okay? I’ve seen almost everything, every scenario which move stocks higher and lower.

You know, just throughout the years of the economy.

And I try to bring this education to you.

Everything I’ve learned over that time period, you could throw out the freaking window, especially in the past six months.

I mean the only reason why stocks have surged is because of government spending.

That’s it.

And you look at earnings down three straight quarters, massive jump in interest rates, US affordability at an all time low.

The housing market’s in a lot of trouble.

Companies are cutting costs like crazy.

Companies don’t cut costs unless you know things are bad.

They don’t do that when things are good.

Deficits, totally outta control.

Worst stuff we’ve ever seen, consumers are cutting back at a level not seen in decades.

Listen, listen to just a, any retailer you could listen to pro I, I think I highlighted about three dozen last quarter and I listened to these conference calls.

Listen to what they’re saying.

Macy’s, exporting goods, whatever, it’s target, Walmart, even Walmart’s doing good, even Costco.

Listen to what they’re saying.

It’s a lot, lot worse than we thought it would be.

The consumer is cutting back and they’re finding ways to make their profits, even food companies.

And they’re gonna, you know, not only are they keeping prices high, but they’re giving you less product.

We’re seeing that everywhere.

You know, that they’re finding ways.

But how much longer can you do that under these conditions? It doesn’t promote higher stock prices yet we’ve seen one of the biggest bull markets it to to begin a year for the NASDAQ in history.

I’m being taught that what drives earnings, consumer spending and corporate earnings that drives stocks, both have gotten crushed this year and stocks went higher.

So now we may not have this massive government spending to keep stocks afloat, which so many people are predicting, especially bulls and other people.

And you know, they’ve read, they’re looking at the past and saying, Hey, an election year the Fed ‘s not gonna mess up the market.

They’re gonna keep this going.

There’s no way you’re gonna see it really.

Well now you don’t have a speaker, which you can’t get anything through.

And how, or the Republicans going to handle this.

They say, oh we’ll get someone next week or whatever.

And who knows? It could be McCarthy again, who’s gonna run again? Who knows? But I could tell you the next people they get in, if they want those eight votes, they’re gonna be focused on having a budget and you can’t go over it.

And if they don’t do the next 45 days, we’ll gonna get a government shutdown, which is not the end of the world.

As Wells Fargo highlight during government shutdowns, the market goes higher, the market goes higher when earnings get crushed.

And we have government shutdowns when interest rates go to the highest level we’ve ever seen in the history this fast.

I mean the market goes higher no matter what.

Everything goes high.

If the government continues to spend, the government can’t continue to do that anymore.

Their debt levels are too high and inflation is well outta their target range.

So now we’re seeing this is what high interest rates.

Again, I wanna sound like the bear of bad news and you gotta sell everything.

You don’t have to sell everything.

I’m not saying that.

What I’m saying is the removal of the speaker, that that changes the bullish thesis for me in, in terms of massive government spending coming into this market.

For me, that’s my opinion.

I think it’s a big deal and that’s gonna impact your portfolio.

I don’t see this as being like, hey this quick sell off again.

Like we, so during the credit crisis, credit crisis was what? Eight, nine months? Not even.

There was a period, I think from February to March, 2008, a three month period, the markets went up.

They shot up like 25% before coming all the way down.

Then they went up a little bit into December and then went down again.

COVID was what, 45 days maybe of a crash.

And then immediately we bounced back.

When you have higher rates, it’s not this one time event, it’s this long term drag on the economy.

And for me, knowing that the Fed was still going to raise rates and that and so many people who had a bullish thesis in the first part of this year were like, oh, they’re gonna start lowering and that’s why stocks are gonna go higher.

Like Tom Lee still saying stocks are gonna go up 20% from here, 17%.

He is on CNBC yesterday.

I had no clue what he was saying.

I’ve interviewed this guy, I don’t know, I won’t say anything.

All I’m saying is this thesis for stocks going higher was totally wrong, but stocks went higher.

So pat yourself in the back, good for you.

But we have higher rates for longer.

And even those who think the Fed , oh they’re gonna lower rates.

Look how long it takes for this to hit the market.

they’re probably gonna do it what? Every meeting two months or so.

And they’re probably not gonna do it through this year ’cause inflation’s still high.

But maybe they start next year or maybe they start sooner.

’cause the market really, really falls apart.

So now in 2024 you have this low interest rate cycle.

You think that’s gonna result in people spending more money immediately.

I mean these people are losing fortunes.

They get, they just money constantly dragging out of their accounts for bills and higher interest rates.

Companies can’t restructure their debt.

It’s so hard with interest rates this high.

It’s insane.

So they have to cut costs even more, which is employment.

That’s why you’re gonna see employment numbers start getting weaker or weaker.

It’s just a matter of time.

The biggest source of expenses for almost every company is is salaries.

You’re gonna see it.

So even if the Fed the size of lower rates, it’s gonna be at this slow pace with meetings every two months or so.

But it’s gonna take years to filter that into the economy.

Again, that’s the market we’re in right now.

You wanna say a soft landing? What is a soft landing? I mean it’s soft landing is all right.

We’re not gonna see a 30% crash in two months, but we’re gonna see the market fall 30% over two years.

That’s not a soft landing to me.

It’s not to stop using that term soft landing when that is impossible to achieve.

It’s an impossible goal.

And I know so far, oh, it’s been good.

The market’s held up.

I can’t even these guys, they’re like, I can’t believe the market’s held up so much.

It’s resilient.

Holy cow.

In the face of all these risks, now you’re seeing what happens when interest rates go higher this high, it impacts everything.

And guys, I’m not saying to sell everything.

I’m not.

I mean small caps are more cheap compared to large caps in like 25 years and these stocks were already down 25%.

Now you look at at at what the Dow and the, and the Russell Law down, down on the year and outside of the major seven companies at SS a P, the rest trade around 15 times forward earnings, which isn’t crazy.

Meaning you’re gonna find names if you look hard enough that trade 10, have good business models, solid balance sheets and staples.

Utilities look pretty attractive to me.

These are safe havens that have gotten annihilated, but they have steady revenue.

They have steady growth.

These companies are good people are gonna have to clean their houses still.

They’re gonna have to pay their utilities, pay their phone bills and stuff like that.

It makes sense.

What’s a Verizon yielding? 7% plus now whatever.

And tomorrow at Wall Street Unplugged Premium, that’s our premium podcast where Daniel Creech myself actually give you individual ideas, actionable ideas.

I’m gonna tell you exactly how to play this market ’cause we’re providing a great opportunity for you.

This is the reason why I was saying, hey, you know what? You protect yourself if you can by inverse ETFs.

That’s the easiest way.

It’s not the best thing to do.

But buy puts and the first six months of the year was terrible.

It was terrible.

But if you’re buying puts and say you’re doing that with 3% of your portfolio, you lost 3% of your portfolio in the first six months, but you’re probably up on everything else, that’s okay if you’re still doing it.

You are an amazing position right now and you’re about to make a shitload of money and that’s why long dated and you’re gonna be, it’s not gonna work in bull markets.

Markets like this, holy cow.

’cause some things are down 30, 40, 60, 70%.

Biotech names down 70.

Some of these names get annihilated right now.

But one specific name, or I should say sector I’m gonna share with you is something that I, I never invested in my career.

And it’s not just something to get into the short term.

It’s something for the next three to five years.

And it’s an unbelievable opportunity.

Unbelievable.

And I’m gonna share that tomorrow again, that with our premium members.

So wall show our premium.

If you’re interested in learning more, go to our website, curzioresearch.com.

It’s $10 a month for this service, okay? Includes a new recommendation every week, which goes into our Dollar Stock Club newsletter.

We provide one page writeups the research and things like that, as well as a buy up to price.

And we track these stocks in our portfolio.

And more importantly, on this podcast, we talk about a lot of different sectors ideas, okay? You’ll see us be more, more rants, definitely more rants, more emotional in certain things that, that Daniel and I talk about in debate.

But also we break down the research of that stock in that podcast.

And we say here, these are the three, four reasons and we put that in a one pager, but we break that down for you.

That’s way you could see, hey, just don’t buy this stock because we think, you know, the market’s coming down are going higher.

It’s more than that.

It’s certain catalysts that are going to happen over the next few weeks or months that could push the stock high or low.

We go everywhere.

You, you’ll see stocks in there, you’ll see shorts in there, you’ll see, puts in there, you’ll see cryptos in there.

A lot of different things in there.

So it’s not just that we’re gonna go anywhere we can and try to make money for you.

And it’s a really good discount.

Thank you so much for so many people subscribing to that.

We’ve gotten amazing feedback and it’s a really great value in terms of the amount of ideas, the research, everything that you get.

And that’s why we put it behind a paywall.

So again, gonna share all that information with you tomorrow.

That’s it for me.

I’ll see you guys then.

Questions or comments? I know it’s a crazy market, guys, feel free to gimme a shout.

Frank@curzioresearch.com.

I’ll see you 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.

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