After yesterday’s market selloff, investors are processing a lot of negative news…
I break down the details of the latest inflation numbers… why yesterday’s Consumer Price Index (CPI) data doesn’t paint an accurate picture of what’s really going on… and why the Fed should be focused on today’s Producer Price Index (PPI) numbers—which tell a completely different story. Plus, why there’s more pain ahead for the stock market…
Despite the 10% pullback in Bitcoin yesterday, Daniel has some exciting news for the crypto industry: Some of the biggest names on Wall Street have joined forces to launch a new crypto exchange—EDX Markets.
Finally, I share a no-brainer solution to the chaos in the global energy markets… (which you can get easy exposure to with The Dollar Stock Club)…
- Breaking down yesterday’s market plunge [0:30]
- The difference between CPI and PPI [4:40]
- How the Fed will cause more pain for stocks [11:38]
- Wall Street’s biggest names have teamed up on crypto [23:14]
- You need exposure to this no-brainer energy play [31:40]
Wall Street Unplugged | 946
The 2 sectors investors should focus on now
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 Wednesday, September 14th. 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. So, it’s Wednesday day, Daniel Creech day. I can’t talk. Senior analyst of Curzio Research. It’s either Tuesday, Wednesday. I can’t talk. What’s going on, man? How’s everything?
Daniel Creech: It’s well, even though the markets are trying to ruin our fun Wednesday, midweek day, we’re not going to let it happen. So, that’s okay.
Frank Curzio: Yeah. And now, I can make fun of myself because I have a mess. We just had to tape it over really quick, because I said, “It’s Tuesday,” and he is like, “It’s Wednesday.” Now, I can’t even pronounce Wednesday. But yeah, I guess the market goes down, that’s how you feel. So, it gets a little crazy, but-
Daniel Creech: That’s right.
Frank Curzio: It’s Daniel Creech day either way. Senior analyst, Curzio Research. So, what’s going on, man? It has everything.
Daniel Creech: It’s good. Like I said, obviously, the market rout yesterday caught some people by surprise. It was funny, because I was reading a couple different articles across different platforms about how the commodity traders associate CTAs and all this. Had all money and the pain trade was up. And then, you get this blip in the inflation data. And man, the pain trade went from moving markets higher to significantly lower. Sentiment Trader, Frank, had an interesting stat and I believe I’m going off memory here, but it was on your Twitter account. To your point this morning when you came in, you said every NASDAQ 100 stock dropped yesterday, and that’s only happened, call it a handful or 10 times in several years. And basically, the punchline was, “Hey, time to sell stocks.” And if you look, I believe that if you look 12 months out after one of those days like yesterday, so 12 months from yesterday, each and every time, those stocks were higher year-over-year. I think that was the case.
Daniel Creech: And that’s always kind of funny, because you see, you got to look for the shining light at the end of the tunnel. I mean, yesterday was just terrible. You have risk on. We were talking at about 3:30. I had looked at the markets a little after three, and I was doing some other research. You hollered at me and said something about 3:30. And the market went from like 800 to 1200 down, and going into the close, we knew it was like, “Oh, this is going to be an absolute blood bath.” So, we’ll see how it plays out. But listen, there was a lot of bad news knowing that hey, inflation is still going higher or at least moderating a little bit. Not enough for Jay Powell and the pointy shoes, they’re going to pedal to the metal. So, now you got to be really nervous, Frank.
Frank Curzio: Yeah. I’m just watching CNBC. I love that they put, the Dow coming off a 200-point loss, and they have to make sure every single time they mention that today, and even yesterday, it’s a seventh largest point loss in history. And S&P 500 coming off 170 points plus loss, the fifth largest point in the… and I just love the headlines. Right? So, let me scare the shit out of you so we can get viewers. But the bottom line, if you want to know the truth, we were up what, the previous week? 6%, and we gave back like 4%. Right? So, when you look at that perspective, it’s different, but there’s like you said, we don’t try. It’s not like I want to give you optimism when everything’s negative, or just be negative when everybody is optimistic.
Frank Curzio: I like looking at it. That’s how I’m trained, because if you could find what’s wrong, go against the consensus, you could make a lot of money. And I think the consensus changed to, okay, maybe in Jackson Hole, the Fed wasn’t really true, saying they’re going to go crazy and raise rates, because holy cow, that’s nuts. And we’re seeing a lot of indicators. Everyone’s seeing it. That inflation is moderating. So, the CPI came out, and it just threw everything for a loop. Again, this is a lagging indicator. Caught everyone off guard, and now everyone believes that holy shit. I mean, we’re pricing in well over 4.25% rates by early next year, from where are we? Two and a half? So, 3.25 in a week, we’ll be… It’s scary. It really is. And I was saying yesterday, I wish they could ignore this number, which they can’t. And everyone’s going to say, “Well, inflation’s going up.” It’s going to come down considerably.
Frank Curzio: It’s just a matter of, we want it to happen so much quicker than it’s going to happen. We have to realize that when we have these hikes, when we have, even when we’re lowering interest rates, it takes a while to filter through the system. It takes at least nine months, six to nine months minimum, which means that a lot of these rate hikes that just happened over the last couple months, aren’t even factored in, but you’re seeing it. You’re seeing a total halt to the housing market. You’re seeing a total halt to, not a total halt to retails, but look how the retails warned immediately and said, “Holy shit,” and that was a surprise, too, because you saw power prices go up, even though a lot of these companies have inventory on their books. But wait, just wait a couple months. You’re going to see a big change.
Frank Curzio: I think what Daniel, what people have to realize is there’s a big difference between CPI and PPI. And I’m not talking about, the CPI is the consumer price index. And you’re looking at the PPI is producer price. I’m not talking about that, but you’ll get the PPI. It came out today, the producer price index, and it was good in terms of it showed that inflation is declining modestly, which we’re going to see. It takes a long time. You don’t just turn on, turn it off and inflation’s gone, inflation’s here. It takes a while. So, you want to see it gradually get lower. And that’s where we thought we were for the CPI. CPI, and I’ll get to it in a minute, because the PPI came out. It was down 0.1% month-over-month. It may not sound like a lot, because it’s still up 8.7% year-over-year, but the core was a pretty big deal. I mean, you saw that decline and it was not even at a decline. It increased at the lowest rate in 16 months. That shows moderation.
Frank Curzio: But the big difference in CPI and PPI, is the CPI is a lagging indicator. That’s a lagging indicator. And it’s important for you to realize that, because it’s not a true reflection of what’s going on now. And you could see what happens, Daniel, month-by-month, based on what these companies are saying. I’ll get to Nucor in a minute, who’s another company that just warned. And they didn’t just warn. Last quarter, they had record profits and they said, things were fantastic and great. And they lowered from like 950, which they earned last quarter, and they said, they’re probably going to earn more like 625. That is massive. That is turning the light switch, just turning it off. And you’re seeing that in the chip sector, you’re seeing it in housing. You see all of a sudden, we’re building more plants for chips. And now all of a sudden, there’s a glut.
Frank Curzio: It’s happening very, very quickly in real time, and the PPI is a leading indicator. So, the fact that it’s going down, it’s moderating, means that these guys are probably not going to pass on those costs. No longer pass on higher costs that they’re seeing from inflation to consumers. And we need to look at that and put that in perspective. But I think the PPI almost guarantees that we’re not going to go to a 1% rate hike in a week, but what are your thoughts? Because man, that was a surprise yesterday. You can see why the market crashed. But again, I feel like it’s a false indicator, and you have to be very careful because the Fed is in panic mode. They’re going to overshoot incredibly. You should listen to Kyle Bass on TV today. I’m not saying it because he has the same opinion. I like people who have different opinions, but just listen to what he was saying.
Frank Curzio: They’re going to wildly overshoot here and it’s going to be a fricking disaster. It’s going to be worse than the mistake that they made when they said it was transitory. Because, I mean, you look at the debt numbers, and the global debt and where we are, Daniel, holy shit. I mean, the amount of payments for debt, in terms of our national debt and how much is going to payments now. And I think it’s well over 10% of the national debt is just interest only. And we are going to raise rates considerably higher. And you’re seeing these rates go incredibly high, with the two-year to 10-year inverted. And it’s a scary environment right now, as much as I want to find those positives and some of those things that we can invest in. It’s not easy to find if the Fed is going to considerably raise rates from here.
Daniel Creech: That’s going to make it very difficult. Absolutely. Like we’ve talked about in the past, we’re fighting the Fed now by entering a lot of… Basically, if you’re buying the stocks, you’re fighting the Fed right now, versus just fighting alongside them during the low interest rate environment. I think 75. I read an interesting article today and I forget who it was, but now it’s next week on Wednesday, the 21st. So next Wednesday, the fun Wednesday, is when Powell and them, they’ll bump it up. I’m going, 75 is a shoe in now. I don’t think they’re going to go to one. We’ll see. They probably should, just for the Band-Aid effect of getting it over with. But I read this morning, it’s 75, 75 at the next meeting, and then 50 or 25. And to your point, they got to give above four. That’s where the market consensus is. There’s going to be a lot of pain.
Daniel Creech: To your point, the aggravating thing on my side is that you’re going to have a lot of mixed signals between now and just the end of the year, which is a very long time when you are watching stocks day to day, and a very short time in the mass scale of things, as products develop and things filter through the economy. To your point on, wait until Black Friday and look at inventories and things. So, you have inflation continuing to be stubbornly high. The Fed feels like it has to act even faster, even though like you said, what’s happened isn’t made its way through the market yet, the previous rate hikes. The Swedish appliance maker, who is the second biggest behind Whirlpool, I believe, just warned on Europe and US appliances and things. So, to your point, not only are you going to get great deals for Black Friday on TVs, but maybe that’ll make its way into washers and dryers and all kinds of stuff.
Frank Curzio: I hope so. My house is being built, because holy shit, I can’t afford it anymore. Got to put a hood on the outdoor grill. I mean, I sound like a spoil brat, but yeah. Oh, well, that’s going to be another, everything’s 1400. It’s going to be another house here.
Daniel Creech: Too bad it rains every day here, because a grill lid, other than keeping the heat in to cook your food sucks.
Frank Curzio: I mean, it’s an outdoor grill that they’re putting in, which a lot of people have on their houses, but it’s, so there’s supposed to be a hood because it’s underneath the little thing. And I mean, it was priced in, but everything’s like 1200. Anyway, I’m glad that, hopefully when we’re buying it and furnishing the house, that prices do come down, and I think you will. But you’re also looking at, look the yields where they are. 10-year, 3.45. Two-year, it is, I mean, it’s scary at 3.8%. So, the yield curve, it’s been inverted, but it’s widening. Which again, it’s scary that, that’s the recessionary indicator, right? It’s this big flash right here. Here it is that you have to worry about, and sometimes we’ve seen it. I think it’s like 55% accuracy where that predicts the next recession. But we haven’t had a recession where we haven’t had an inverted yield curve, I think, before that.
Frank Curzio: But we’ve had it where we haven’t had a recession, if that makes sense. But we have it and it’s not just a little blip, and it just, it’s you’re seeing it widen. But 30 years is the highest level in 2014. And what is that resulting is, you’re seeing the dollar do great, right? I mean, higher rates. We’re the best game in town by far, if you’re looking at every country when it comes to currencies, even though everyone hates the US dollar. If you hate the US dollar, you must really hate every other currency outside of maybe the Ruble, which is really strong right now. The Russian Ruble.
Daniel Creech: Yeah. Good luck buying that.
Frank Curzio: Yeah, which is funny. But you see the dollar up against everything except the Ruble, I think, but maybe you’ll find some crazy currency. I don’t know, but you’re seeing a rush into dollars from other countries. And when you look at indicators, Daniel, you’re seeing the indicators, and I’m going to cover this in my Curzio Research Advisory newsletter later today. A lot of these things are at, they’re not like 10 years or the 20-year level. That they have record levels that we’ve not seen, when it comes to the barriers of people, the amount of cash and balance sheets. People more worried when you’re looking at the surveys that they’re taking of Fortune 500 executives, that they believe at the highest level almost ever, that there’s definitely going to be a recession coming. So, you would think all this negative stuff would be priced into the market and say, “Okay, we’re due for a short-term bump.”
Frank Curzio: And I think that’s what we saw last week, and with a little hope that, “Hey, you know what? Maybe the Fed won’t get too crazy here.” And then, the CPI threw a wrench in that. But I tell you, it’s not easy to find catalysts. Just like for bears. How many times do we hear over a 12-year period of how many stocks are terrible, and the market was going to crash, and people revising books and it’s going to crash. And again, these guys were looking and saying, “Wow, we’re so expensive. Look where they are.” And they were right. But we had zero interest rates, which changes the landscape. So, that multiple could trade at 2025. You see technology companies like Nvidia trade, 60, 70 times earnings. You have the growth behind it. That’s fine. But now, you’re removing 100% of the growth out of the market, because you’re not getting it from China. Wait until they report GDP. Holy shit. It’s going to be the lowest level in decades, probably.
Frank Curzio: I mean, you guys know what’s going on with Europe and energy. I mean, it’s a major crisis there. And now, you look at the US, where we’re seeing demand destruction every place. So, it’s basically a global recession in the face of you aggressively raising rates, looking at a lagging indicator that showed rentals are up a lot. It showed a lot of areas up a lot, but rentals are actually coming down, if you look at real-time data. This is real-time data, have come down. So, or they’re going to have a much, much, much slower pace. They were going up 4X. Again, we’ve seen an 18% increase in rentals year-over-year. And then the next year, another 18% increase in rentals.
Frank Curzio: When you get a rental, it’s over six. I know in Florida, when you get a rental, it’s got to be seven months. I don’t know if it’s tax purposes or something, but you can’t really get a rental and I’m not talking about Airbnbs, but actual rent. They won’t rent it for three, four, five months. You got to do seven months. So yeah, that price is going to stay. It’s hard to get that price down, and you’re going to see it elevated for some time. Which means if you’re going to be looking at the CPI, you’re going to go to four and a half percent and you’re really, really going to crush these markets. I mean, the amount of debt we have in the balance sheet, it’s a little scary out there. You have to worry. I’m hoping that we’re going to see a lot of this demand destruction that we’re seeing, it’s going to result in profit and companies lowering their estimates considerably this quarter, next quarter, and the quarter after.
Frank Curzio: You’re going to see the market really come down, you’re going to see prices come down, which we’re seeing in a lot of areas. And when that happens, the Fed is probably going to be like, “Okay, enough’s enough.” I think that’s going to happen over the next two months. I think you’re going to see numbers that are the ugliest numbers that we’ve seen in decades. And the Fed’s probably going to have to say, just say, at least, “Listen, we’re not going to go pedal to the metal anymore. We’re not going to tighten and just go nuts.” Because as long as they’re raising rates, it’s very difficult to make the case to own stocks. I’m not saying all stocks. You’re going to find diamonds in the rough. There’re areas we’ll cover in a minute. It’s very difficult to own stocks while the Fed is continuing to raise rates. Just like it’s hard to sell stocks and short stocks, and you could go to Chanos and look at the best short sellers in the world, and trying to short every single stock over the past 10, 12 years.
Frank Curzio: It’s very difficult to short stocks when you have zero interest rates, and you have the Fed buying bonds and constantly bailing out what’s just there, so you just throw money into the system constantly. It makes it impossible. Now we have the opposite effect and you have to be very, very careful here. Let’s see. It’s all about the Fed. Let’s see what they do, but the PPI was definitely a good number. I think it ensures that we’re just going to get a 75. Just a 75-basis point hike, which is unprecedented. We’re going to do three in a row at 75 basis points. Holy shit. I mean, look out.
Daniel Creech: Three in a row. One, two, three, Jerome Powell, that’s good.
Frank Curzio: I mean, from being so wrong to saying, “Okay.” I mean, you’re looking at this data. Home buyer mortgage demands just came out. It’s fell, it’s down 30% compared to last year. 30%. That’s massive. I mean, makes sense. Mortgage rates are around 6% now. You had, I highlighted yesterday, a bunch of companies that they’re laying off people. Twilio is the latest. Now they’re laying off 11% of their staff. You’re going to see hundreds of companies laying off. I mean, profits are down, year over year. If you take out energy, profits are down, and they’re going to be down considerably going forward. We’re seeing it for everything. They’re going to be done considerably. So, because you still have inflation working their way in the system, you see more and more companies not having that pricing power, which is the double negative. It’s going to crush them.
Frank Curzio: And that’s why you’re seeing companies like Nucor, out of nowhere, listen to their last quarter. Holy cow, they’re high fiving each other, drinking freaking champagne. This is the greatest world. You lowered your earnings. I mean, the stock’s down 8% today and it’s well off its high already. It was trading in the middle of the range, but the last quarter was a record in earnings per share. And they were so bullish going forward. But when you’re telling me the record profits that you had in $9.67 last quarter, in Q2, and now you’re lowering to $6.30, $6.40… I mean, just to put that in perspective, not only is that considerably lower, right? Almost a third, but last year it was at $7.28. So, you’re lowering it, year-over-year, which is, that’s big. I mean, you should still be seeing stronger demand. That’s why we’re seeing prices still up, year-over-year. But this came out of nowhere.
Frank Curzio: Again, it’s coming out of nowhere because you’re seeing very quickly, how demand is just falling off a cliff. And, it’s a not easy market. Listen, you listen to this podcast to get ideas. You’re subscribe to my newsletter to get ideas. There’s going to be some ideas, but there’s certain times that you have to be very, very careful. This is one of those times. This isn’t different. I know all the indicators, if you’re a contrarian, it’s going to be telling you, “You know what you? You should be buying.” And like you said, the beginning, what did you say about the NASDAQ falling that much?
Daniel Creech: Yeah. Each stock in the NASDAQ hundred. That was on Sentiment Trader, I think. Yeah. And when all the big tech stocks or something fall in the same day, then year-over-year, they give different projections for month out, three months, six months out. And again, I’m going off memory. It’s on the Twitter, on the Twitter, but I believe it was, all of them showed one year out for positive returns. So, their thing was, “Hey, don’t sell just because you have a sea of red kind of mentality,” is what I was picking up and that’s good. You never just want to throw in the complete towel and all that, but it’s okay to know that, “Hey, tough times are ahead. You got to be selective. It’s okay to build more cash and things.”
Daniel Creech: Just like a lot of your indicators are showing that you’ll break down later, but it’s okay to be nervous right now because a lot of things are out of your control. And the powers that be are pulling levers that are trying to cause pain. Hell, Powell said in his speech a week or two ago. He used pain how many times? It’s like a drinking game, Frank.
Frank Curzio: It’s funny because I saw Biden speaking, and here’s the thing about the current administration. Here’s why I was bullish a couple months ago where the market sold off completely. And we’re still up 10% from the lows. I mean, we could test them. I don’t know. Let’s see what happens over the next month or so. It’s going to be very important with the indicators that are coming out, what the Fed’s going to do, what they’re going to say. But when I’m looking at Biden, he continues to say the economy is great, and they’re citing two things. They’re citing the job market and they’re citing wage growth. And those two things are going to disappear very quickly. I mean, you’re looking at tons of companies, tons, hundreds, hundreds of companies are going to be laying off employees. Now, if you look at the past few years, Daniel, you know what? If you’re an employee, you’re in the driver’s seat. Just like when it comes to housing, sometimes it’s a buyer’s market and sometimes it’s a seller’s market.
Frank Curzio: Well, it used to be a buyer’s market in terms of when you’re looking for jobs, because people needed jobs, and you needed people because demand was through the roof, and we needed people and good people to fill these jobs. And sometimes it’s hard to find great talent in certain industries. If oil’s through the roof, you can’t just hire a whole bunch of freaking people who’ve never been on a rig before. You got to train them and stuff like that. So, the guy who has experience can be like, “You know what? I want three times if you want me.” And they’re like, “Okay, we need it. Oil’s at 120. We need it.” It’s a different market. Now, it’s at seller’s market, because now the companies are going to be in control.
Frank Curzio: Why? Because you’re going to see all these layoffs, and a lot of them going to be executive positions and talent and stuff like that. Those are guys who are making the most money. It’s all about profits for them. Profits are down. They’re going to be laying off. You’re seeing it across the board with all, so many major companies and it’s, you’re going to see every single day that goes by. More layoffs, more layoffs, more layoffs. And they’re not talking about 3%, 4%. It’s all 10% to 20% of their staff that are laying off. So now, you’re going to have a whole bunch of talent that are going to be fighting for jobs because they need to pay their bills. And what is that going to result in? It’s going to result in wage growth slowing, and it’s going to slow. That those are two indicators that could slow considerably over the next two to three months. And what is Biden going to do, because the most important factor in any election is the economy.
Frank Curzio: And you’re going to have the Fed raising rates while you’re seeing demand destruction, and you’re out there telling everyone everything is fine, when everything is not fine for the majority of people, especially on the low-income levels. I mean, it’s worse for them. I mean, higher energy prices really hurt them, but what are you going to do, going into an election cycle that’s very, very important for both sides. For both sides, with the Senate and the House up for grabs. So, for me, looking at the markets and being bullish, I’m like, okay, the Fed and the president, this again, this is supposed to be executive, it’s supposed to be different from, separate. We know it’s not separate. Even with Trump, it’s not separate. He was like, “Okay, now we got to start lowering rates,” and they lower rates. Remember, the Fed, just like the SEC. The SEC’s not going to come after the people that of trading, all the centers that are trading, because the centers are the ones that hire the people at the SEC. So, they’re going to be very, very careful.
Frank Curzio: Same thing with the Fed, and you like your job and everything. So, you’re not going to say to the President, give him the middle finger, because they’re the one that appoints that and the vice-chairman’s as well for the Fed. So, it’s usually hand-in-hand, but I was thinking, okay, he has to turn around and say, “We got to somehow lower rates.” But if they’re not going to lower rates, Daniel, into the election cycle, I mean, it’s going to be crazy. I don’t know what they’re going to do. They have to come out with something.
Frank Curzio: Again, a lot of this political, you need to pay attention to it, because if you paid attention during Trump, as soon as they raised rates, Trump’s like, “We need to lower rates immediately.” They started lowering rates. They did the tax breaks and stocks surged. I don’t care if you hate Trump or not, stocks absolutely surged. Here, you want to see the same thing. This current administration has to do that, where people feel better about the economy and they don’t see recession, but how are you going to change that within a month and a half, with the elections coming up in two months? I don’t know. I really don’t know. So, I thought it was a given that the Fed were coming out and be more, just take a more easy stance. But if they’re not going to, we could see this market fall considerably from here, over the next month, month and a half.
Daniel Creech: Oh, absolutely. Yeah. And the way I think, all politicians, both sides now, they’ll just come up with different stimulus things. Look across the pond. You want to look into the future, it’s easy. Look at Europe. Supply chain, energy, all that at some point in some effect will come here to America, because you have lack of investments, political headwinds versus energy, energy independence, what types of energy and all that. We’ve talked about that in the past. That’s fine, but they’ll do something. Europe is already doing bailouts. They want to nationalize some utility companies. They want to do stimulus checks for power to help people pay their bills. That’s just the same game plan. There is nothing new under the sun on that front. So here in America, what are you going to do when unemployment stuff, all that happens, you just stimulate. You do whatever you can. They’ll promise all they can. And like I said, everybody does that. That’s not taking a shot. I take enough shots as it is, but this isn’t one of them.
Daniel Creech: Turning to something I do like, meaning that is energy. And you can scale into over this. I know that recessions draw down energy, I would say. And to open up for email@example.com for the easiest teeing off and haters out there, I just don’t think that energy will follow the same type of path during the recession we’re experiencing now. And will, because of the war, lack of investments, overall issues like that. I think you can scale into that. One other thing I want to talk about, is not to be a cheerleader because everything sucks right now, including my golf game, Frank. That’s how bad things are. My swing is hurting on top of the markets.
Frank Curzio: I feel so bad for you.
Daniel Creech: One good thing is though, is that you continue to see, and I’ve been wrong on this so far. Bitcoin continues to trade like a tech stock. It drives me nuts. At some point it will diverge from that, break away from that, but it hasn’t yet. Case in point. Consumer price index comes out yesterday, Frank. What happens? Bitcoin drops 10%. All the naysayers can easily say, “Hey, look at that. It’s too volatile,” and all that. However, at the same time all this is happening and even beforehand, because that just happened yesterday, Frank, there’s a couple of quick stories I want to touch on.
Daniel Creech: Did you see any news on Fidelity offering Bitcoin to its clients? Now, we’ve talked in the past about Fidelity doing it through retirement accounts. This latest report out of the Wall Street Journal, is talking about Fidelity opening up 30 million in change. I think it’s 34. Let’s just round down. It’s 30 million brokerage accounts that they have, that could potentially get asset or excuse me, asset access to buy Bitcoin. That’s a breakthrough. And then just yesterday, did you see the news about edX? If I say edX, what comes to mind, Frank? Nothing. Right? No. edX exchange, they’re building this.
Frank Curzio: I know where you’re going with this, because I read that story. You happened to read that story again.
Daniel Creech: Who’s behind that? There’s some big backers there. This is from Bloomberg. We have Charles Schwab, Fidelity Digital Assets, which is a wing of Fidelity that we just talked about. Paradigm Hedge Fund. I don’t know who that is actually.
Frank Curzio: Huge. Very, very huge, and very, very huge.
Daniel Creech: Sequoia Capital, BigONE, Citadel Securities, and Virtue Financial… Those two are unique because they do flow of funds, trades, front running and all that kind of stuff. They’re all edX markets. They’re all building this crypto exchange out. I believe this is going to launch in November. The key takeaway to this is goes hand in hand with Fidelity offering the access to Bitcoin to their 30 million plus. This is a big deal to me because if Fidelity can keep you in house and not make you go somewhere else to buy something, it’s going to be much easier. And a rising tide lifts all boats. You don’t have to make this complicated. If you’re going to open access to, if you got to go in through a door and you only have a couple of doors and a lot more people are trying to go into that, you’re going to have a huge influx of people.
Daniel Creech: That’s a good thing for the industry as a whole. To see that during bear markets and price crashes, however you want to describe that to get attention, that is hugely popular. And that is something that you have to hold onto and realize, listen, it’s difficult in our world because we want instant gratification. We all want to get rich tomorrow, including and led by me. I am the most greediest person that would rather be rich tomorrow versus today than anybody else.
Frank Curzio: I think everybody is.
Daniel Creech: Yeah, but I admit, me too. I would love to be a billion. I would still work for a while. If I woke up a billionaire tomorrow, Frank. If I hit the lottery, I’m not quitting right away.
Frank Curzio: That’s good to know. Thanks.
Daniel Creech: Exactly. Yeah. I don’t play the lottery, so you’re stuck with me. But my point is, is that those are good things. And yes, it’s difficult when you see Bitcoin drop 10% in a day. And it’s difficult when you have to look at 24/7 trading and all that. However, just if it bugs you that much. Quit looking at it for a while. You don’t have events like this, and processes like this, and moves like this being made during bear markets, if it’s not a huge risk or reward for the individual investor, and that’s where you need exposure. I know I sound like a broken record to an extent, but that’s still the path you’re on.
Frank Curzio: When you look at Bitcoin, they say, “Well, people liked it because they want an asset that’s uncorrelated. And if you could find an asset that’s uncorrelated to the market, you’re going to see trillions flow into it.” And it was kind of uncorrelated. It went up a lot more than the markets, but lately it’s been correlated. But I just think that’s lately. If you look at oil, where oil went through the roof and then it crashed recently, it was down 35%. Most stocks got nailed. But then as it went up, it went up over the past month or so and surged right off those lows. As oil was going up, the market was crashing. And this was before we just, last week when we had five, six consecutive days of the market going off before this crash. So, oil was like a safe haven, but it was just a safe haven briefly for a month or two.
Frank Curzio: And I think you’re going to see that too, where it’s going to decouple from the market. It is a speculative asset, but to me, Bitcoin was a young person’s, it’s digital gold. You’re looking at it, digital gold. But it’s a very easy story to tell because there’s so many people that hate the dollar. They hate what politicians are doing. For example, why are they spending so much money? We’ve never spent a trillion dollars, I think, before the credit crisis. Now we spent 11 and a half trillion dollars. We spent trillions like nothing and 500 billion for the student loan. So, we’re throwing around these numbers like they’re nothing. But when you put it in perspective, it’s like, “Holy shit.” What is it like 40, 45 cents of all the dollars created, were created in the last 18 months or something? So, it’s an easy story to tell to even people who like gold, where if you want gold as an inflation hedge or a safe haven or something, that’s a hard asset or whatever. To me, what you see what’s going on, the spending, this is an easy story to tell.
Frank Curzio: Not only that you’re looking at, there’s a reason why Fidelity’s getting in it. Fidelity loved cryptos and Bitcoin. They were in very, very early. The earliest, probably, out of the major firms. You said JP Morgan was shitting on it. There’s a lot of hedge funds that was shitting on it going, “It’s garbage, garbage.” And then all of a sudden, they’re like, “All right, I’m starting to get it now. I understand it.” And now with Fidelity in it, now it’s almost forcing, because so many people want it and say, “I want an allocation to this.” Two, 3%. “I should’ve had an allocation to this.” But if you go through certain funds or you go through, I think it was Schwab, now recently they’re starting this. The reason why Schwab is on this, this edX platform, is a lot of their clients want it. If you don’t offer it, they’re leaving. They got to take money out of your brokerage house and put it someplace else.
Frank Curzio: And that’s why you’re looking at BlackRock as well, where their Latin platform has $22 trillion. They have 11 trillion in assets under management. This is 22 trillion. This is their software platform that everybody uses. Some of the top people. I think they have 200 clients, 230 clients or something, but those clients happen to be Fannie and Freddie, and the biggest companies in the world. And that 22 trillion might be 20 trillion after yesterday. But now, they partner with Coinbase. So now, they’re giving access to Bitcoin. So, when you look at those numbers and the amount of money that’s coming in, where Bitcoin has a market cap of 400 billion now, holy shit. I mean, if you have a three-to-five-year time horizon with that and Ethereum being, Ethereum going through the merge and stuff like that, and don’t get crazy, you save money on electricity costs and stuff like that.
Frank Curzio: It was supposed to happen three years ago, two years ago. Now it looks like it’s finally going to happen, but that is the number one currency for smart contracts, and NFTs and stuff, which I’m going to cover NFTs tomorrow in a special interview. You’re going to see how much money’s flowing into this. Even though you’re seeing this crazy market, which is incredible. But people want access to this and they’re giving it to you, but now, you’re looking at trillions having access to it. Not everyone’s going to come in, but even at a one, 2% position, you’re looking at a tripling in Bitcoin pretty easily. Again, I don’t know when it’s going to happen. It could happen in six months, three months, or it could happen in three to five years, but buying at these levels where it is and how it continues to trade around 20,000, with everything going wrong, what all the freaking scams and schemes that you’ve seen in other currencies, that it was supposed to bring it down, and it was pushing considerably higher.
Frank Curzio: Again, it’s linked to the market right now. It’s considered a speculative asset. And if the market comes down, you’ll probably see it come down. But man, in between 17,000 and 22,000, I mean, have an allocation to this. Just buy a little bit. It’s not that difficult to buy, to buy at certain. Just have a little bit of allocation. Just what if, but yeah, there’s massive demand coming. There’s trillions now that you have access to, that never had access to Bitcoin and now you’re going to see it. You’re going to see people trading it, because it is a speculative asset. It is linked to the market in terms of when the market sells off, it sells off of speculative. But man, it’s… People get excited about Bitcoin. They want it and now, they finally have access to it. And this is one of the first times they’re going to have access to it, with these major institutions. And it’s going to continue.
Frank Curzio: There’s still trillions of dollars that are going to have access to this, whether it’s State Street, whether it’s B of A. Just all the largest asset managers in the world, right? One by one, unless they want to lose that money and that money’s going to come out and go to Fidelity now, or go to BlackRock, or go someplace else. They have to get into Bitcoin, and it’s here, and you’re going to see more regulation around it coming forward. But it’s something that I’m incredibly bullish on and you should have at least a small allocation to it. At least a small allocation to it.
Daniel Creech: Oh yeah, absolutely. So, Bitcoin, energy, and we’ll just have to be at the mercy of inflation data and Fed speak for a while. That’s all right, though.
Frank Curzio: And look, uranium, I think, works here too. You’re seeing energy prices come down and, in a recession, they usually come down. They come down further. But I think people got the hint where, when you shut off the best, clean, cheapest, 24-hour base load of fuel, and you completely shut it off because of a random event, like a tsunami. And again, it’s still one of the safest. You’re seeing what that does, especially when you go all alternative. And you’re seeing in California where they have special alerts going on, and you got to just make sure your thermostat, you got to turn your thermostat up. Don’t charge your cars and that’s going to continue. That’s going to continue. Right? I mean, that’s what happens when you go to solar. I mean, look, Europe is a great example of this and holy shit, now you turn off fossil fuels where 40% is fueled by Russia.
Frank Curzio: I mean, they’re not going to let that happen again. You don’t want to be at the mercy, especially when it comes to energy of other countries. That’s why it was the greatest thing in the world, we’re fracking. How we discovered fracking. I mean, we just revolutionized the oil market. We became one of the larger producers in just a few years by fracking and horizontal drilling, which was huge. Because depending on OPEC, they have us by the you know what. They do. They don’t have it. They can’t do anything now. They used to manipulate oil prices based on our economy. Keeping them even lower than. They wanted to keep them lower than $50, $60 when our fracking took off, because they knew it was still a new technology and we couldn’t drill at 45, 50 back then. Now, we could drill at 35, 40, 45 on average. Inflation, a little bit, probably 45. They no longer can control that.
Frank Curzio: So, it’s very important. When you’re looking at uranium, I think people, you’re going to see more of these places get turned on. They shut off a lot of the reactors. You’re seeing that in France. You’re seeing that in Japan. Just because energy prices are down a little bit, it’s not a reason to be like, “Okay, no, forget about uranium.” They don’t want this to happen again. They don’t know the future. They don’t know the politics. They don’t know the geopolitics, the wars and stuff like that, and what’s going to happen. But if you’re a country that’s heavily dependent on another country giving you energy and supplying your energy concerns, and you’re sitting there with uranium plants that are closed, you better freaking open them, and they’re opening them right away. So, that’s a good industry.
Frank Curzio: Healthcare. It never comes down, ever, ever comes down. So, prices never come down, thanks to the government. So, margins just stay elevated. So, if you see that sector get hit a little further. And one other thing I like and this crazy market, a name like Costco, who’s not passing off those higher costs to consumers. And you might say, “Wait a minute, Frank, that doesn’t make sense. It’s going to result in low profits.” No, it’s going to result in more people going to Costco, them stealing market share, huge market share. And what do you do when you go to Costco, is your pay their membership fee. And then you get discounted bulk and stuff like that. So, you’re seeing that, you’re seeing Costco hold up well, but there’s a couple of diamonds in a rough year. But you have to be careful, especially with growth, especially with speculative stocks. We’re at the mercy of the Fed right now.
Frank Curzio: And it looks like the Fed’s going to aggressively raise rates through next year. Well, not all the way through next year, but at least through January, February, and we’re pricing in four and a quarter 4.3, 4.4 right now in March and April. And if we go up there, man, I can’t see huge catalyst for stock. I can’t know. I could find a growth catalyst, almost any place. I don’t know what the growth catalyst is when you see a global recession that’s happening right now, where you raise rates that quickly, two and a half percent, and you want to go to four, four and a half percent? I mean, look out. That is a massive, massive overshoot. And I think the Fed, I’m worried. I think they’re spooked. And I think they’re going to go a lot higher. So hopefully, we get data that’s easing, Daniel, over the next couple months that shows, hey, okay, we’re seeing it right now. I always highlighted data.
Frank Curzio: Again, you still have inflationary concerns here and there. They’re going to moderate. They’re going to come down, but we don’t need the inflation rate to go down to 2% tomorrow. We need to go there through, over the next year, 18 months or so, and constantly just moderate, moderate, moderate, moderate, and get lower, lower, and lower. And if we have that playbook, hopefully they won’t raise rates considerably. Because if they do, they’re going to overshoot, and man, it’s going to be very, very dangerous for stocks.
Frank Curzio: So, hopefully I’m wrong on that. That’s one prediction, I really, really hope I’m wrong on that. Seriously. I hope I’m dead wrong. Get ready to email me and say, “Frank, you’re an idiot. You’re wrong.” I really hope I’m wrong because if I’m right, a lot of your portfolios are going to be down a lot. It’s going to get crushed. There’s going to be no place to hide. If we go to four and a half, four and a quarter, it’s going to be a really bad six, nine months, 12 months, where it’s going to be really, really bad. Okay. It’s a forecast I hope I’m wrong on.
Daniel Creech: Yeah. Well, like I said, if they keep, yeah. It’s not always rosy at times. It’s okay to have a negative outlook, depending on what the data and what moves are being made. Investors need to prepare for a lot more pain ahead, because like I said, you don’t tinker with the system as long as we have and inflate economies as long as you have, and then have the problem spike, reverse, and be okay in a very short amount of time. That doesn’t mean there’s not opportunities. We’ve just talked about a few, but hey, the world isn’t ending everybody. So, let’s not get too negative. Have an adult beverage, relax and turn the TV off for a little bit. Just tune in here each and every day.
Frank Curzio: Each and every day. Yeah. We’ll break down the markets for you. Try to find ideas for you like we always do. Dan, thanks so much for joining us today. Really, really cool.
Daniel Creech: Cheers everybody. Happy Wednesday.
Frank Curzio: All right, guys. Any questions, comments for the email? Frank@curzioresearch.com. Daniel, email address?
Daniel Creech: firstname.lastname@example.org.
Frank Curzio: All right, guys. Really appreciate all support. 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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