Wall Street Unplugged
Episode: 952September 28, 2022

One sector the Fed can’t crash

risk management

Why the Fed is a bunch of a**holes who should all be fired… A billionaire who thinks we’re in for a hard landing… Proof the economy is crashing—and could lead to a depression by next year… Why October will be particularly painful for the markets… When will we finally see an end to rate hikes? And one sector that will survive the Fed.

Inside this episode:
  • A billionaire’s advice to the Fed [1:25]
  • All signs point to a depression around the corner [7:40]
  • Prepare for a tough October [16:20]
  • What does the Fed need to see to end rate hikes? [24:05]
  • One sector the Fed can’t crash [35:20]
Transcript

Wall Street Unplugged | 952

One sector the Fed can’t crash

Announcer: Wall Street Unplugged looks beyond the regular headlines heard on mainstream financial media to bring you unscripted interviews and breaking commentary direct from Wall Street right to you on main street.

Frank Curzio: How’s it going out there? It’s September 28th. 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: Daniel, it’s not easy, or I should say, it’s not hard to see what’s really moving these markets, of how crazy it’s been. Absolutely nuts. The Fed’s going bonkers here. We have Delivering Alpha today, where there’s a lot of famous speakers, CNBC hosts… You had Druckenmiller come out and say that we’re going to see a hard landing in 2023, a much deeper recession than many expect. I’m starting to hear that a lot over the past week.

Frank Curzio: Wanted to get your thoughts, since Wednesday is Daniel Creech day, where we always bring you in and have a lot of fun and discuss the markets. But there is kind a lot of discussing because the bad news continues. The markets are up a little bit. They were up yesterday when I first did my podcast. The end of the day, they fell, going to see a lot of that, but they’re up right now. Let’s see what happens. But what are your thoughts? Because the more we’re seeing this progress and higher and higher interest rates, the more we’re seeing more companies warn and more professionals outside of the Fed come out and say, “Listen, I think the Fed needs to take a step back and let these rate cuts, or rate hikes, pass through the system.”

Daniel Creech: To echo your point that you made, I think that’s good overall that you have more people, more strategists, more big names, hedge funds, whatever you want to label them as, pointing to that and saying that. I was talking with a guy yesterday. We’ve joked about this in the past, Frank, our job is kind of not hard. I don’t want to, we’re not looking for a or a handout here, or a pick me up. What’s interesting about us is, we’ve been talking about the Fed, and now we are in this waiting mode again. Right? You made a great point, highlighting Goldman Sachs on your Twitter, has cut their year in target by 16%. And then, what really stood out to me is the following year, their year-end target is only about 9% above where we are, give or take. That’s an eternity. Like, we joke around in politics man, there’s an eternity between now and the midterm elections for politics.

Daniel Creech: That’s an eternity in a market, because if we could go to sleep right now and wake up a year from now, you might have periods where you’re up 20 or down 20% and you might come flat. So, that’s a crazy thing. So for us, you’re right, it’s easy. Our jobs are easy right now. What’s really moving these markets? The Fed. And what are they saying? They’re telling you that unemployment’s going to go higher, and they’re okay with that. They’re telling you economic growth is going to slow, and they’re okay with that. They’re telling you prices are going to remain high, and that they’re sorry for being wrong on inflation being transitory. But now, they’re okay with hell bent on raising rates.

Daniel Creech: From a stock picker’s market, that’s good in several months when shit breaks, and then you can go in and look for value. But until then, it’s kind of in waiting mode. I know we have a lot of good ideas, and we can kick things around. Frank, what’s your take on gold popping 1% today, and I should do better research. I don’t know the last time it popped 1%, but it’s impressive to see that sector get a little bit of relief rally.

Frank Curzio: We saw a little bit, interest rates come down a little bit off of highs. So getting a little, the dollar coming down a little bit, which again, the dollar’s probably going to continue to go higher. It’s definitely going to continue to go higher as we destroy the entire global economy, the Fed does. So, it’s not surprising you’re going to see these moves, daily moves, but every single move, just like we saw when rates were zero, and the Fed was pedal to the metal buying bonds, where every time you had just a little bit of a sell off, it was a buying opportunity. Now, every time you’re going to see stocks go up, just like we saw yesterday. Yesterday, we went to do the podcast, we up whatever, 200 points, 250 points. By the time I even finished the podcast, looked the markets, we were down. You’re going to see constant selling because of the Fed.

Frank Curzio: And I got to tell you something, Daniel, I can’t hold back anymore on this. The Federal Reserve, I mean, these guys are a bunch of assholes. And if you don’t like the cursing, I don’t care. I’ll say my 25 Hail Marys when I go to church. But God’s not going to be mad, because I’m trying to make you guys money. I’m trying to help you guys out, and if I need to curse to get this point across, I just hate the arrogance of these assholes. All right? That’s what they are. They’re complete assholes. And I’m sorry to curse. Actually, I’m not even sorry to curse like that because I can’t think of a better word.

Daniel Creech: No offense, you don’t sound sorry, so keep going.

Frank Curzio: No, I’m not. So, you’re looking at Powell as the Fed chair, totally unqualified for this job. Totally unqualified. And now, you brainwashed the rest of these idiots, Esther George, Kansas City Fed President Barkin, Richmond Fed President Brainerd, Fed Vice Chairman, all of them saying rates need to go much, much, much higher from here, right? Because they’re living on another fricking planet. Okay? Kashkari, Minneapolis Fed President, “Rates must go higher. The Fed must remain United.” United, like they were united last year, right, when we saw a CPI at 5% and all you were united telling us that was going to be transitory, and we’re idiots, right? And this asshole now is voting for a hundred basis point increase, right? That’s what he voted for in a July meeting along with Bullard, who also voted for a hundred basis point increase in July. We got 75 basis points, which is funny, because what did you come out say two days ago? “We should slow down, just a little bit, to see how these current increases are impacting the economy.”

Frank Curzio: I’m sick and tired of the arrogance of these economists that know shit, and that’s what pisses me off. It’s like when you see them, they talk. It’s this condescending. You see it all the time. You see it out of so many people. You see it out of Lawrence Summers. I mean, here’s a guy that told the Winklevoss twins that they were idiots, because Facebook could be worth millions of dollars, and Zuckerberg stole their idea. And he said, he actually mocked them and made fun of them. It was a trillion-dollar idea, okay? It was a trillion-dollar idea. That’s where market cap went. This asshole has been wrong on everything that ever seen, and yet, he still holds positions of power and says, he’s full blown, rates need to go much, much higher.

Frank Curzio: We have Steve Liesman on TV, who’s got his head so far up the Fed’s ass, that you got to be careful as a reporter, okay? I wish he, I hope he listens to me about this, okay, because I think he’s a decent economist. But when you have your head up their ass, this is what happens. You agree with them on every single thing they say. You know why? Because you get to ask the first question at the meetings. “Oh, Steve Liesman, go ahead. You go first.” Oh, you get to go fly fishing with these guys, you can’t get too close to them because your audience is not your Fed. When you’re on CNBC, your audience is the millions and millions, and millions of people that are watching you, that want to know about their finances, what they need to do.

Frank Curzio: And whenever you get on TV, you have this condescending talk. You talk down to people and every single time you have that panel, after the Fed raises rates at the Fed meeting, he’s like, “Well, this is how it really happens.” And all he’s done is agree with the Fed the whole way, the whole entire way. And it’s tough. You can’t get that close to your source. Okay? I do. I’m a research analyst. I talk to CEOs, some of them are my friends, it’s about business. If they’re not doing a good job, I’m going to tell you not to recommend their stocks. If I think they’re cheap, it has nothing to do with whether I’m friends with them or whatever, or what kind of access I have to them. I don’t get paid by anybody. But you have to separate that. Because if you separate that, even with Jim Cramer on TV, he would’ve told you to sell Nvidia and AMD, and so many of these companies.

Frank Curzio: I mean, we have Tim Cook calling him on the 20th anniversary. Look, it’s Tim Cook. I get it. If you called me, I get it. I’m not picking on Cramer here. But you got to be careful about getting too close to your sources here, because you’re repeating the same thing. And not only are you repeating, it’s just you’re talking down to people like we’re idiots. And right now, we have to treat these guys as if they were a football coach. What happens when you’re a football coach? If you have a terrible track record, and you lose your audience, and you lose your locker room, and you have no idea what you’re doing, you get fired. These guys need to be fired. They’re destroying the global economy. Every one of the guys that I just mentioned, Daniel, every single one of them, all of them said that we need rates to go much, much higher. Well, here’s what’s going on right now, because you have no idea what the economy’s doing, because you’re looking at lagging indicators.

Frank Curzio: Here’s what’s going on. The S&P 500 is down 12% in the past two weeks. The housing market is dead. It’s fricking dead. Mortgage demands are at a 22-year low, and you want to raise rates from here. With mortgage rates now surpassing 7%, making housing totally unaffordable, and you’re going to continue to raise rates. This is today, Apple just said today, it’s all suppliers, they’re not to increase iPhone demand. VF Corp, one of the largest power retailers, today lowered earnings by 15%, saying that back to school is weaker than expected, and inventory is surging. DocuSign today, laying off 9% of its employees. Look at Nucor. A week and a half ago, lower earnings considerably, after reporting record earnings last quarter, saying everything was great. That’s how quick this happens. When you raise rates at this pace, where the last two 75 basis point hikes are not even factored in, and you’re talking about bringing rates over 4%, we’re pricing in four and a half, we’re not pricing them.

Frank Curzio: You want to bring the four and a half percent and keep them well above 4% for all of next year. Look at what’s happening to the economy right now, where rates are. Look at every industrial company, almost every one of them were warning. Look at FedEx who lowered and removed guidance. A company’s been using AI to track their consumer trends for over 10 years basically said, “We have no idea what’s going to happen over the next three, six months or next year. We’re removing our guidance. We have no idea.” Because, there’s no way the Fed can continue to raise rates here. Look at the chemical companies, all of them warning. Look at all the semiconductors who are sitting on a globe of chips three to six months ago. They were talking about how demand, record high demand, drastically increasing CapEx to build more fab facilities and meet that demand. Demand’s gone. It’s gone. That’s how quick it’s gone.

Frank Curzio: Look at copper, lumber, oil. Look at the decreases here. Massive 30% plus. Look at the FAANG names who are all laying off people now, along with 50% of the rest of the companies in the S&P 500 that plan on laying off employees over the next six months. Look at the Nasdaq, down 30%. S&P down 23%. Germany down 23%. Hang Seng down 26%. France down 20%. Nikkei down 8% this month. The 30-year is now at 4%, highest in 14 years, while the two year is above that, which is amazing. 4.2%.

Frank Curzio: And now you… We have, what do we have? We have our president who literally can’t count to 20. And I don’t care if you’re a Democrat, I don’t care if you’re, we all know it, Democrats, Libertarians, Republicans. We all know it, right? The guy’s incapable, completely incapable, actually goes on TV and says, “The economy’s fine. We’re doing great, everything’s cool, employment’s great. Look how low it is.” Well, we have six million unemployed, which gives us what, 3.7%. We have another five million that they’re not counting, that they’ve removed from the workforce that say, “We’re not looking for jobs.”

Frank Curzio: If you include those, even half of those we’re going to go well over 5%, which tells you, stop raising rates. Please stop raising rates. Please. You have these blinkers on, that is blind. You’re just like, “We’re going to raise rates, no matter what.” No matter. Look at the data, what’s going on? I mean, every company’s going to be one. You’re destroying industry by industry. Liquidity has dried up. SPACs are done, which they should be done anyway. IPOs are done. You can’t get anything funded in this market. What the hell are they looking at? Think about this, guys.

Frank Curzio: The Fed, everything they’ve learned for 40 years, this current Fed, right? The chairman, everybody else, what they’ve learned, a bunch of these guys who are all 70 years and older, they all should be retired, go to a yacht, whatever. They continue to work, continue to think they understand the economy and people. They believe last year at 5%, with CPI at 5%, which is the highest rate in over 30 years, that it was transitory at 5%. That’s what they believed. Okay, this was nine months ago. Look where we are now. How do you change? How do you not say that it’s transitory. Transitory could be six, could be 12 months, could be 18 months. But that everything you’ve learned, saying it’s transitory, now all of a sudden, you’re raising rates incredibly. And everyone’s like, “We got to go much, much higher. Much to control inflation.” You have inflation under control. You did your job.

Frank Curzio: Last year, it wasn’t under control. You said it was transitory at 5%, and it went to 9%. You had no idea what you were doing, right? Boom, you should have got fired. You didn’t get fired. Fine. It’s hard to fire the Fed anyway. You should have lost your job, right? You lose your job at any other freaking, that, being that wrong, you lose your job no matter where you have it, where your job is. You lose your job for making that call. Now all a sudden, total reversal. You’re controlling interest rates. They’re not out of control. They’ll go up and down a little bit. They’re starting to go down. Yes, we had a little bit, but they’re in control. They’re not going from 5% to 9%. They’re in control right now. You just have to sit back and wait, and you’re raising rates at the fastest pace, at the most it’s been raised in 40 years, and you’re destroying the consumer. You’re destroying the global economy.

Frank Curzio: We’re not going to be heading for a recession, Daniel. We’re going to be heading for a depression. We’re going to be in a depression. If you are going to keep rates, raise them over 4% and plan on keeping them for the entire year, we’re going to have a depression, not a recession. And that’s what’s dangerous, because you could slow down the pace, you could relax, and we could see a lot of this filter out. Inflation came down, and they’re saying we’re not in a recession. Right? They’re going to redefine this recession. Two straight quarters, negative GDP. We’re going to have five out of six quarters of negative GDP. That’s what we’re going to have here. That’s how terrible it is right now with the markets. Everybody’s saying it. All the companies say every, I just reported stuff for you today that happened. This has been happening for the past two months.

Frank Curzio: Little by little, all the companies laying off 20%, 10%, 15% of their employees, more and more, and more. What do you need to see? Stop looking at a CPI, which was fixed in 1993, to make sure that we’ll never have high inflation. This way, the government could spend as much fucking money as they can. Stop looking at it. It came back to bite you in the ass, because now you have a housing market that’s frozen, and you have renters now, that they can’t afford housing so they’re going to rent. And they’re going to rent, and they’re going to pay up to rent, and they’re good renters, right? So now, you’re going to rent, and now you’re going to keep this market, which is 30% component of the CPI, which is the number one gauge, the only gauge you look at for inflation. The number one gauge is going to remain relatively high because shelter is such a large component, and rentals aren’t going down because you froze housing market.

Frank Curzio: So, home prices are coming down, people are going to rent instead of buy, which are going to keep rental prices up, which are going to keep the CPI up. I mean, all prices crashed last month, and the CPI showed a big gain. That’s how much rental income is a part of that, and it’s going to continue. So, what else do you need to see? I don’t know. And I’m getting emotional here because they just don’t get it at all. They don’t even see it. And the only people that see it is outside of their circle. You got Alarian saying, “What the hell’s going on?” You see Druckenmiller say, you seen just a lot of the billionaire fund managers and Jeffrey Gunlock, they’re all saying, there’s going to be a disaster, especially for the equity market. It’s going to continue to be disaster as long as you’re raising rates. We’ve never seen an environment that’s absolutely crashing industry by industry, and you’re raising rates. We’ve never seen that before.

Frank Curzio: What you’re telling everyone is remove all the money you have in stocks and equity market, because no matter what it is, you’re going to get wrecked. No matter what sector it is. I mean, look at gold, would you say about Newmont? Newmont should be a great company in inflationary environment. It should be great. It was in our portfolio. We did well on it because we recommended it earlier. We sold out of it. What is Newmont done?

Daniel Creech: And also, real quick, when you said we were selling that, I thought, what are you crazy? Why are we selling this? And we did sell at higher prices, that was good for a gain. Newmont was a little over $80 a share in April of this year, and now it’s around 40. And it pays a good dividend. It’s a solid.

Frank Curzio: Earnings are growing.

Daniel Creech: It’s one of, you hate to use the word safe, but in the world of investing, when you get in the context and the arena of what we’re discussing, there is arguably not a better minor set up for the long-term. 10 plus. I mean, they give guidance. It’s been a little while since we dug into it, Frank, but I believe if I remember back to our recent write-ups or whatever, updates, Newmont gives guidance for five years or longer on production. That’s to the extent of their mines, their operations, their footprint, their joint ventures. It’s incredible. But guess what? That doesn’t mean anything, because if you’ve held it over the last six months, you’ve seen it drop, what? 40, 50%. It’s wild. Doesn’t have to make sense in the short-term. That’s again, But to your point, yeah. Gold is popping. But hell if I-

Frank Curzio: Where is gold? Do you know what gold price is are right now?

Daniel Creech: 16 and change.

Frank Curzio: 16 and change. Here’s a company along with several of the other majors, Barrick and a bunch of others. Equinox, I follow this industry a lot. These guys are producing gold for $900 an ounce.

Daniel Creech: 16.61, sorry.

Frank Curzio: All right. And 16.61.

Daniel Creech: Spot right now.

Frank Curzio: So, they’re producing. Whatever they’re selling for is a lot. Their margins are incredible. Their margins are incredible right now. This is a company that pays a dividend. These are companies that almost went bankrupt in 2010, ’11 when the market crashed, because they’re all high leverage. Then, they all dialed back, cut employees and everything. Yes, you’re seeing inflationary pressures, and I get it. So, maybe it’s costing a little bit more than a thousand dollars. Their margins are incredible. They’re generating tons of cash flow. They have a solid, safe dividend. Nobody wants to buy them because it’s an equity. And when everything else is getting crushed and you remove it, you’re constantly raising rates, you’re taking tons of liquidity out of the market. Tons and tons of liquidity out of the market. The liquidity is coming out of the market. People are selling their stocks like crazy.

Frank Curzio: And by the way, you have to look at October being a market, where we could actually see a crash. The Fed is not going to do anything in October. They’re going to meet November. The data is going to be horrific. You’re going to have hedge funds where when we sell for capital gains or losses, we have to do it by the end of the year. They have to do by October 31st. All these funds are sitting on massive, massive losses. So, they’re going to sell the stocks that are performing the worst. They’re going to sell them at their absolute lows, which are going to push them down even lower. So, if you’re looking at a stock that you think is dirt cheap right now, wait because it’s going to get cheaper. And I love the word cheaper because earnings are coming down considerably. They’re going to come down considerably across the board. People are not spending; they’re reigning in their wallets.

Frank Curzio: Look at Nike. I saw a guy on tv, said, “You got to buy Nike here. Nike’s cheap. It’s dirt cheap.” It’s at a hundred dollars. It makes a lot of sense. It’s down 40% from its highs. And I looked and said how cheap? It’s 27 times forward earnings, Nike. Nike was always trading at 40 times forward earnings. It’s growth model. You know why they deserve that growth model, Daniel? Because China, their exposure you to China, which is the biggest growth market in the world. The reason why we sold so many stocks, COVID, when they closed China, because you don’t deserve a 20 plus PE on the S&P 500 when you’re closing the biggest growth market in the world. We got a little lucky. We didn’t think COVID would be that bad, spreading like crazy in the US, but we got out of the markets, and we were able to get back in a few months later.

Frank Curzio: China is horrible. I mean, you have to see the news coming out of China. It’s absolutely terrible. And you have to really dig and have good sources and stuff like that because they’re going to report and say everything’s fantastic there. It’s absolutely horrible. Absolutely horrible. And that’s their growth market. I’m not saying you’re removing it; I’m just saying that you’re probably not going to see earnings grow at, and that was the growth model. Now, you’re looking at 27 times forward earnings. But how can you buy Nike here, with the growth based on China, which is kind of a dead market, 60% of its sales comes from overseas. So, the dollar is going to surge. As we raise interest rates, we destroy the rest of the world economies, which you’re seeing. So, the old rushing into the dollar for safety, as the dollar goes higher, companies like Nike get wrecked. They get absolutely wrecked with their earnings.

Frank Curzio: So now, 27 times, I mean, this company, based on the earnings that are going to report, because earnings going to come down, maybe trading at 30 times at this level. So, don’t look at Nike and say, “Wow, it’s 175, it’s a hundred, it’s a bargain.” It’s not, at 27 times forward earnings. And really, the airlines are trading at single digits, and they’re seeing demand at least. And you’re going to continue to see demand and it’s slowing a little bit, but it’s not the apples-to-apples comparison, the same industries. But not only that, I don’t know. When you look at Nike, and this is how you have to look at companies, I’m not sure how much sales you generate outside of digital and their own outlets, when you go to outlets in Nike stores. But I know they generate a lot of sales from resales. Like who? From Dick’s Sporting Goods, from Macy’s, from Kohl’s.

Frank Curzio: You have inventory levels skyrocketing across the board. So, when you go to Dick’s Sporting Goods and you want to buy a shirt, are you going to go to the Nike and say, “Wow, that shirt’s $25,” or are you going to buy the Under Armor Russell Champion shirt for $10? That’s what you’re going to be competing with. That’s why prices are going to low. This is deflationary environment that we’re in, that we just have to wait to play out. The last two rate hikes have not been priced in. We’re not talking about two 25 basis, 75 basis point hikes. And there’s a reason why you’re seeing the odds of a 50% basis point hikes, just in the past couple of days, continue to go higher and higher instead of 75. Because they’re like, you just can’t go another 75. Yet, these guys are talking about going 4.2% by the end of the year, and then keeping them a year. They’re expected to keep them over. And, you know what? The arrogance of these assholes to say, “Dan, you’re going to see a little bit of pain.”

Daniel Creech: Yeah.

Frank Curzio: They’re not seeing any pain.

Daniel Creech: They used pain a lot, Powell did in that speech.

Frank Curzio: Yeah. You’re going to see some pain. Really going to see some pain. But we’re not in, don’t worry, we’re not in a recession. Because they say, “We’re probably going to avoid a recession, and we’re going to be fine.” Remember, you can’t say recession, the word, before an election. You’re not allowed to, because you’re automatically going to lose. But we’re not in a recession. So, we’re going to look you in the face and say, “Everyone watching us and every consumer that pays their bills, that sees their costs going up tremendously, that sees their home prices going lower. It falls down 25%, you’re fine.” You’re an idiot. And, that’s what you’re calling them. You’re calling everyone a bunch of idiots, by saying that, “Everything is fine. We’re not in a recession, we’re going to be fine.”

Daniel Creech: It’s kind of the, “Hey, I know you don’t believe this, but,” as this is good for you, you’re perfect to talk about this. I am not, but I believe it, because everybody says the same thing. It’s like when a parent is about to whip you, well I guess they don’t do that anymore, but a parent’s about to whip you.

Frank Curzio: You’re not allowed to say they do that.

Daniel Creech: And they say, “Hey, this hurts me more than it hurts you.” And when you’re on the receiving end of that, you’re thinking, “Absolutely not. Now you’re insulting me. Not only are you going to hit me, you’re insulting me.” So, the Fed is being our parents, saying, “Listen, there’s going to be a little pain, but this hurts us more than it hurts you.” To your point, it is very bad. The hypocrisy on there, the tone. I couldn’t agree with you more on that sense.

Daniel Creech: The question that I’m leaning towards is, they have to pivot at some point. They’re saying, if you take them at their word, they’re going to keep rates high. We are saying high at 4% for the next year. I don’t think they’re going to do that, simply because look at the UK really quick. The pound is free falling. You don’t have to be a currency expert to notice that, hey, the government’s stepping in and doing something. So now, basically, if I’m not mistaken, you’re hiking interest rates over there at the same time as now printing and buying bonds for quantitative easing. That shows you what kind of goofy situation we’re in.

Daniel Creech: I say all that because the Fed is going to continue until something breaks or something bad happens. And I don’t know exactly what that is. I don’t know if it’s 20% on equities from here. I don’t know if that’s 10%. I don’t know if that’s some of the coming inflation data that we’ll get over the coming months, shows a significant drop in. I’m just trying to, and I admit I don’t know that right now. And we’ve had a lot of good conversations off air about this and we’re trying to figure that out. What are they waiting on to see, I guess to your point, how much pain are they willing to inflict before they say, “Okay, we’ll pause.” Because to your point, all they have to say is, “We’re going to pause and wait, and watch data.” And when they do, you’re going to see a massive rally.

Daniel Creech: But to their point, they’re literally telling you, we’ve covered quotes in the past, Wall Street Unplugged Podcast, of Fed Presidents saying, “I’m glad to see markets react the way they do,” meaning negative and lower. When you have a Fed… We’ve been on the narrative of fighting the Fed now, and how that paradigm shift has happened with interest rates. I’m just curious in trying to figure out, and we’re figuring out for subscribers, what is that pain level they’re willing to tolerate, until they at least signal a change on watching the data?

Frank Curzio: That’s a fantastic, fantastic point.

Daniel Creech: That’s a $10 trillion question, Frank.

Frank Curzio: You know why it’s a fantastic question? Because for them, one is, they don’t understand the pain that’s going on in the markets because they’re looking at just two things. They’re looking at the CPI, which is the same, relatively high because of rentals. And they’re looking at unemployment, which is also, if you include those five million people who say they’re not looking for jobs, who are going to be looking for jobs since we’re finally, well, I don’t know if we are, but we’re shutting off finally the money that we’re handing out to people, that they’re going to have to look for jobs pretty soon. When you’re include at least half of them, you’re going to get the unemployment up.

Frank Curzio: But the two indicators that they’re looking at are the wrong indicators. And that’s the problem here, because everybody’s seeing it. You’re seeing it. You’re seeing it across auto companies. Even Ford, again, they’re doing that lying thing and saying, “Oh, supply chain concern.” It’s not supply, it’s demand. You’re not seeing as much demand for EVs. People are pulling back. Anybody that has a backlog of business, you have to be careful. A backlog of business is, “Hey, we’re going to book with you, and here’s a $300 million contract over the next two years and you have to fulfill it.” They’re going to be cutting back those contracts considerably. Considerably. You’re going to see it. We’ve seen it in recessions in the past, and we’re going to see it, especially in semiconductors. Wait until those guys report.

Frank Curzio: So, for an investor, what are you looking at? Because I would think there’s no way the Fed, and I’m not going to use the word pivot because people think pivot means that you’re going to ease. I’m not talking about ease; I’m talking about stopping and waiting. That’s going to be a massive catalyst, like you said, for the markets. They’re going to have to pause after November and say, “Wait.” The data from now and just to their November meeting, wait. You’re seeing it every day that comes out. Just pull up CNBC, because they love the negative headlines. I mean, they don’t read them themselves, they just make sure they get clicks. So they, they’re like, “Yeah, we’re fine.” And Liesman’s like, “Yeah, the Fed’s got to do their job, inflation’s high.” He’s going to repeat exactly what, it’s like Powell has his hand up his ass like a puppet. And he’s like, “Yeah, the inflation’s high. And we got to,” It’s like, come on man. Just report like you’re supposed to report.

Frank Curzio: You’re allowed to disagree. You’re allowed to disagree. That’s your job. Your job is a report to the people watching CNBC, not to the Fed. I don’t care if you question, you raise your hand and you’re first in line for the question at these meetings. I don’t care about that. So, we have to get away, that this boys’ club just saying, “Oh, that’s the way it’s got to be.” Because this boys’ club is the reason why we’re in this fucking mess right now. Right? It’s because of what they said and what they did for 18 months, even last year. Inflation of 5%, saying it’s transitory and just looking down and talking down, everyone saying, “It’s transitory. Don’t worry.” The President’s going, “Hey, it’s transitory, it’s got to be transitory, It’s fine, it’s fine, it’s fine.”

Frank Curzio: And now you’re doing the same thing, which is as the markets crashing, rates are surging and the housing market, people don’t realize how big the housing market is when it comes to the economy. How much percentage it represents of the economy. It’s huge. When people buy a house, it’s massive. Even not just building it, but buying houses and the amount of things that you spend money on and things that you do, and just the fees that are generated for banks and everyone involved. It’s shut off. It’s turned off completely. And it was turned off with rates hitting five and a half percent. We’re seven and you want to continue to raise rates? This is what I mean. We’re looking at it right now. It’s September. It’s September. You’re talking about into next December. Raising rates much, much higher than where they are right now. And keeping them there for what, over a year.

Daniel Creech: We’re not even talking about ruining this Christmas like FedEx is already warning. We’re talking about ruining next Christmas, Frank.

Frank Curzio: I mean, this Christmas, holy cow.

Daniel Creech: Here’s the thing. So, after November, they have to pause because you think between now, and then there’ll be significant inflation data that comes out, that’s going to show it’s working and there’s going to be a lot more pain. And I say pain, not to play on there, but there’s going to be a lot more announcements, a lot more press releases from companies warning, lowering guidance, laying off employees, telling people that-

Frank Curzio: This earning season’s going to be a disaster. And, you know what? Companies are going to get a pass just like they got a pass in COVID, like FedEx. You’re going to get a pass with saying, “We’re removing guidance.” Usually when you say that, your stock goes down 25% and that’s what we even see with FedEx. It usually happens because when you have uncertainty, is a death of stocks. When you have uncertainty in equity markets, and that’s what we have, uncertainty. Because people aren’t really, we’re like really? Is this really going to happen? I mean, you know how bad it is. So, when we became bullish two months ago and about a week or two before it hit bottom. I’m not saying we’re right all the time, we’re wrong sometimes, the way we say we’re wrong, but insiders were buying their stock like crazy, and you had buybacks coming in. And everyone’s under the impression like, “Wow, okay, inflation’s kind of topping out, and the Fed’s probably going to say, ‘All right, we’ll be done at three, three and a half,'” or whatever.

Frank Curzio: And then the Fed was like, “No way are we done.” And then we got the CPI reading, and now, where are we at the markets? Right now, we tested lows. Would you think, insiders are not buying here? And you know what’s even worse? These companies with buybacks, they’re not buying back their stock right now. Their stocks are down 35, 40% plus if you’re in technology. They’re not using those. When you announce a buyback, you actually don’t have to buy back your stock. You can say, “We’re going to buy back a billion dollars of stock, 20% of your float.” And they’ll buy it at the right times when they see fit, where they think it’s great. Your stock is trading at yearly lows. I mean, you’re down 40, 50% from your highs. And these guys are, this is the data, this is the data that I have yesterday. Bank of America, they’re not buying back their stock here.

Frank Curzio: So, if you’re not buying back, if the insiders aren’t buying and then the corporations, they’re not buying. The board of directors are choosing not to buy back their stock here, why the hell should you be buying here? And what it’s funny is that, everyone’s looking at these technical indicators like they mean something. All-time negative, never been more negative, based on S&P Oscillator and the bull/bear readings and all this stuff. You’re right, maybe we get a temporary rise and we see the markets go up like 500 points. What do you think is going to happen? People are going to sell, because the Fed’s like, “We are raising rates no matter what. In your face, we’re going to continue through next year, and we’re shrinking our balance sheet. We’re going to continue to move liquidity. We need to move more and more liquidity from the market.” So, every rally’s going to be met with massive selling and retesting the lows.

Frank Curzio: As long as the Fed continues to say, “We’re going to raise rates,” there’s no reason right now to actually be buying stocks and thinking that they’re cheap, because they’re going to get a lot, lot cheaper. And anyone that tells you to buy stock because it’s cheap, forever, anytime in your life, if someone says you should buy it because it’s cheap, sell it. You’ll make more money selling it every single time. Trust me, from 30 years of experience, because cheap stocks get cheaper. You don’t want to say you’re buying a stock, you’re cheap. You want to say you’re buying a stock because of the growth opportunities they have ahead of them. Not because it came down to a certain level. They’re trading below their sector or what the average sector, for a reason. It’s the management team. They’re not in the right growth sectors, or if you’re a semiconductor or whatever.

Frank Curzio: So, saying that the stocks are cheap, which they’re not even cheap here. Based on the growth that we’re seeing, where earnings are negative year-over-year, and they’re going to be negative year-over-year going next year as well, we should be trading on a single digit PE. Maybe at a 10 PE, and what are we trading at? 15, 16 still?

Daniel Creech: Ish, yeah.

Frank Curzio: That’s based on the Fed continuing to raise rates. And just sitting there and pretending like you have no… I don’t know if they’re pretending or they’re just complete idiots. They really don’t see what’s going on. I mean, this is an absolute joke, and it’s going to get worse. It’s going to get much, much worse than it is now. And it could all be prevented if the Fed just stops and says, “Okay, inflation’s under control, we stopped it. It’s going to gradually come down.” We’re seeing all these companies lay off employees. So boom, you check the box on unemployment. Yes, you have CPIs going to remain relatively high, because you idiot’s, you just made rentals and shelter a big part of it to keep inflation low, and it blew up in your face since rentals are up 18% last year and the year before. So now, you’re seeing massive inflation in the CPI.

Frank Curzio: But everything else, you’re looking at commodities across the board. Everything is terrible right now. You have to be very, very careful because someone who likes to recommend stops and find ideas, and watching a market that’s down as much as it is, I can’t tell you to buy anything here, with the Fed totally 100% committed to raising rates much, much further than here. Even though they destroy, they’re destroying sector by sector, by sector. And it’s going to get a lot worse if they continue.

Daniel Creech: Absolutely. And for investors, just focus on what you can control. It’s going to be a tough waiting period right now. We have to wait on the Fed, et cetera, et cetera. I would look at today’s price action bounces like this to get out of, or at least trim positions. So, know it young, look through your portfolio, you get a nice pop if it’s a high-risk, high-reward or tech or whatever, maybe look to trim some of that. You want to have cash on the sidelines and you want to be prepared to act when the opportunity strikes. And as Fred, or Fed. Frank-

Frank Curzio: Same thing. Fred, Fed. Everything goes together here.

Daniel Creech: Yeah, exactly. And as Frank said, they’re going to have to pause at some point. We’ll have to see that. Yes. I thought it was going to happen a little earlier. I was wrong on that in the direction. It’s just, yeah. It’s tough right now, and I think it’s great, not to pat you on the back here. I think it’s good that we’re just being honest with investors and not recommending shit to recommend shit. Now you got me cursing, Frank. My family doesn’t know I do that all the time, mostly. But the takeaway there is, just control on, know it young, use bounces to trim up positions. The Fed is telling you the roadmap. It’s frustrating and it’s difficult sometimes to follow it, but continue to follow that. Have cash on the sidelines, because the world is not ending tomorrow, and because the world is not ending, there will be opportunity in the future, and we’ll be able to take massive advantage of those across different portfolios.

Frank Curzio: And it’s good. The whole thing was basically, listen. Ranting, being negative, it’s just to see what they’re doing and they’re all in this little circle, they have no idea what’s going on. Just like you were in the little circle a year ago and had no idea what’s going on. Called it transitory and looked down at everyone that said, “It’s not transitory, and you’re an idiot.” The same thing is happening now. You just have to sit back. And the good news for you is if you’re in cash, which you should be in most of the portfolios, we still have some stocks because I could be 100% wrong. I’ve been wrong before. But just, you’re going to have an opportunity where the Fed’s going to say, “Okay, we have to stop, and we have to just wait for these to filter through over the next six months.”

Frank Curzio: I’m thinking that’s going to be December. Because I’m thinking data is going to be the ugliest it’s been in probably 20… You’re going to see indicators hitting 20-, 30-year lows that we haven’t seen, since we have interest rates. Okay, we haven’t seen interest rates this high in a very, very long time. But it’s going to provide lots of opportunities and great opportunities for you in the future. There’s times to play defense, times to play offense. You have to play defense here with the Fed. Don’t fight the Fed. Just don’t fight the Fed. You can’t fight the Fed. They control the world. They control the global economy. Right now, I mean, man, I’d love to tell you, international stocks and they’ve been getting wrecked much, much more than us in a lot of areas, especially in Europe, are buys. But again, with the Fed raising rates, you see things like you saw at Europe. What are they doing? It’s just the UK. The UK.

Daniel Creech: Yeah, they’re crazy. Don’t get me started on energy. I can’t rant. Where the podcast is going long, I can’t rant. I want to, but you’re right.

Frank Curzio: But just, you have things, they’re doing unconventional things that you’ve never seen before, because nobody knows what’s… These guys have absolutely no clue. It’s just you got to throw out the textbooks you read, everything you read and that’s what they’re doing, basically. But it’s going totally opposite from everything that you learned. It’s really scary right now. It really is scary that there’s, they’re going to continue to raise rates at these levels. I just can’t believe it. I mean, you’re seeing it across the board, you’re seeing a lot of indicators. You have to have someone on there that has common sense. I could see it. Even Bullard who said, again, he said last July meeting, “We should go a hundred basis points. We need to go higher and higher.” Look, this is a month and a half ago, a month and a half. We need to go higher and higher, and higher, crazy higher.

Frank Curzio: Now he’s like, “Whoa, whoa, whoa, whoa, whoa. We need to wait.” A month and a half later. A month and a half later, we’re talking about. We’re talking about Fed policy here. You need time. A month and a half later, this guy is just totally different from what he said a month, month and a half ago. That’s what we’re seeing. Industry and industries from someone like me, I’ve been following this for a very, very long time. I’ve never seen demand destruction at this level, happen this quickly. All controlled by the Fed. It’s happening industry by industry. You and I listen to the conference calls, we’re seeing the numbers come out every single day. Someone’s laying off this, and removing their guidance, and lowering earnings. Every single day. Every single day. We’re seeing that. We’re going to continue to see that for the rest of the year, with this earning season’s going to get very, very, very ugly.

Frank Curzio: And hopefully, they just open their eyes a little bit, the Fed and see what’s going on out there. Because if you’re looking at lagging indicators, those lagging indicators are finally going to catch up to you eventually and you’re going to see it. Hopefully don’t wait too long, because we’re going to be in a lot of trouble. But again, it’s going to create good buying opportunities, hopefully sooner rather than later, we’ll see it. Be careful of October. October could be a really, really, really dangerous month, man. Really dangerous.

Daniel Creech: Yeah, absolutely. Well said. We can. Listen, you got to navigate. Be patient. That’s the best message right now and that’s all right. So, this too shall pass, Frank.

Frank Curzio: Yeah. Okay guys. Well, one sector that we definitely love is uranium. I’ve been investing in uranium for a long time. I haven’t been touting uranium for a very long time, but now with the catalyst that you have, where the Ukraine war, Russia war, where Europe is. Holy cow. We need other sources of energy because Russia basically owns us. You’re seeing a lot of policy, you’re seeing a lot of governments, you’re seeing a lot of mergers and acquisitions in this space. So ,we’re going to have Amir Adnani on. He does this with 15 years’ experience. He’s the Founder, CEO, and President of UEC. They just made a major, one of the biggest purchases in the company’s history, and he is going to talk about it and talk about the future of the uranium industry. Definitely, definitely stay tuned tomorrow, and I’ll see you guys then. 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.

P.S. Tomorrow’s Wall Street Unplugged guest is a leading expert on the Fed-proof sector we discuss on today’s show…

And members of The Dollar Stock Club will get a full writeup of one of my favorite ways to play the space—for just $1.

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