Wall Street Unplugged
Episode: 817November 9, 2021

The greatest market conditions you’ll ever see… and why you should be nervous

Congress has finally passed an infrastructure bill, and it’s now heading to President Biden’s desk… Here’s what that means for inflation and supply chain issues… [0:30]

Right now, we’re in the best market conditions I’ve ever seen: Stocks are near all-time highs as we come off an excellent earnings season… Bitcoin and gold are both moving higher… 

But this can’t last forever—especially since the Fed can’t afford to misstep. Here’s how to prepare… [6:40]

Just this morning, online gaming platform Roblox reported strong earnings… and the momentum is primed to continue. This incredible company gives investors exposure to what will become one of the most important trends of our lifetime… [27:30]

Finally, I explain General Electric’s split into three separate companies… and whether it’s a good idea. [30:05]

Inside this episode:
  • What the infrastructure bill means for inflation and supply chains[0:30]
  • These market conditions can’t last forever: How to prepare [6:40]
  • Roblox offers exposure to one of the most important trends of our lifetime [27:30]
  • Why is GE splitting into three separate companies? [30:05]
Transcript

Wall Street Unplugged | 817

The greatest market conditions you’ll ever see… and why you should be nervous

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 November 9th. I’m Frank Curzio, host of the Wall Street Unplugged podcast, where I breakdown headlines and tell you what’s really moving these markets. So, lots of fun right now. Stocks are up for like the 50th straight day, at least it feels like. Many new records. This comes on the heels of an infrastructure bill just passed through the House, which means it’s a done deal. The president’s going to sign it, he said, before Thanksgiving. We got politicians in an infrastructure bill. Man, these guys have like no soul. I mean, they will destroy you… They’ll destroy your reputation. They could do that, right? Use media sources to write fake stories about you, destroy your life, right? They can get authorities to investigate you about anything they want. We’ve seen that on both sides. They’ll do that if you get in their way. It’s crazy.

Frank Curzio: When you’re looking at an infrastructure bill, we’ve been trying to pass this for how long? I mean, a decade? Over a decade? Everybody’s going to pass an infrastructure bill. Everybody agreed on both sides. They just couldn’t come to terms, whatever. It’s just all politics. But the original bill called for Biden to pass a $3.5 trillion spending infrastructure bill all combined, which included all kinds of crazy shit like free community college, right of relief to millions of immigrants that just crossed the border, 25 million for anti-biased healthcare training. I didn’t know that was a thing. Then again, I didn’t know that white supremacy was a thing either, so it’s just… Whatever they say in the media, right? Whatever. But a very small portion of that bill, 3.5 trillion, was going towards infrastructure and the rest was… Look, it was a lot of bullshit.

Frank Curzio: So, Republicans fought the bill in the Senate, along with one Democrat, that was Joe Manchin, who was against a huge spending bill. What did Democrats do? They went after him. Then, finally, after closed door meetings with Schumer, Al Sharpton, and the president himself, he magically voted yes. Wonder what happened behind those closed doors in order for you to change your mind. And the bill moves to the House where, again, they couldn’t get the votes. But after some concessions and lowering the amount by two-thirds, so 1.2 trillion, the bill finally passed. We have an infrastructure bill.

Frank Curzio: But there were 13 Republicans in the House that supported the new infrastructure bill and six Democrats that voted against it, so these are people that went against the party lines. What happened? You had conservative sites post pictures of these people who dissented to make sure everyone knew exactly who they were. “These are the people you need to go after to vote against.” Liberal sites posted names and pictures of the six who opposed it. Making sure everyone from their respective parties could come after them. I mean, think about how insane that is. Yeah, cross party lines are just… “Vote with your heart or something you truly believe and not only will we put your career in jeopardy but maybe even your life in danger.” You’re posting the pictures of, “Hey, this is what this person did. If you see him here he is.” That’s politics now. “You disagree, and we will destroy your life and discredit you.” Welcome to the new world.

Frank Curzio: Anyway, I’ll come back to this in a second. The reason why I’m going into that not about politics because there’s a lot of positive news in the past week, earnings season was fantastic. It’s almost over. Only 80% of the companies reported, and they beat expectations. Actually, it’s more than 90% reported, 80% of those companies beat expectations. And despite a 3.5% rise a unit cost on average, so the cost went up 3.5% on average for each company… And we’ll talk about the S&P 500. Profit margins stayed the same. What’s that mean? It means companies have pricing power. They’re able to raise prices and pass off those higher costs to their customers.

Frank Curzio: Then what happened? Scott Gottlieb came out and said the COVID pandemic will be over in two months. Holy cow, in two months. Can’t believe it. International restrictions were lifted and reopened stocks when gangbuster. Which also came on the heels of blowout earnings and positive commentary from Airbnb, Expedia, that’s a CRA holding. You have Delta saying it saw 450% increase from bookings from outside the US. Again, lots, and lots, and lots of positive. The icing on the cake? Positive news resulted in the 10-year falling below 1.5%. No one get their bonds in 10 years because I’m going to bore the hell out of you. But you need to know that that 1.5% number was a big deal. In September, October, we went from what? Lows 1.2, 1.3. And this is September, October, where 10 year rose to 1.7, what happened? The S&P 500, especially in NASDAQ, took a big dive. More than 5%. That happened within a couple weeks. But you know what? That’s old news. Who cares? We’re up 10% from those early October lows. Now, you’re seeing a 10-year fall, it’s below 1.5% again.

Frank Curzio: An interesting fact, the real yield on the 10-year right now… What’s that mean, real yield? The real yield accounts for inflation. All right, that includes inflation. So, the real yield on the 10 year is a negative 1.16%, that’s right now, which is at the all-time low. So, all is rosy, right? We have record home prices, record stock market, record earnings, record assets across the board. Record household wealth, $140 trillion! You want to put that in perspective? It was 110 trillion just before the pandemic hit. It’s now 140 trillion. You think we’re back? Think things are normal now? Much, much better. People are sitting on $16.5 trillion in cash waiting to spend on anything and everything they possibly can, now that many COVID restrictions, and this is outside of Communist New York City and LA, have been lifted. Still you got to show your vaccine passport in mass. I mean, holy cow, it’s still crazy over there.

Frank Curzio: So, we may be sitting… I’m not going to say we may be, I’m going to say we’re sitting on the best market conditions that I ever seen in my 27-year career doing this. The best market conditions right now. It doesn’t get better than this. You account for everything I just said, these conditions have never together existed before. Not even close. We’re talking trillions, trillions, trillions. We’re talking about low interest rates, record low interest rates, record earnings, record… None of this. I mean, it’s incredible.

Frank Curzio: Conditions that suggest stocks are going much, much higher from here, which everyone in the media, if you’re watching whatever channel you watch, is saying right now. They’re always bullish as stocks go high, they’re always bearish as things… Remember when the 10-year started rising, 1.6, 1.7, everybody was like, “This is it! Earnings have peaked! They’ve peaked! Watch out!” The same people only two weeks… That was like two weeks ago, two and a half weeks ago. It think the S&P 500 went up every day since then, pretty close to every day. But conditions suggest that they’re going much, much higher. It’s hard to argue against it.

Frank Curzio: Except! Except, except for one small trend that’s being completely ignored by the Fed. The Fed’s a pretty big deal. All right, they happen to control the supply of money, which they inject into the economy; continue to pour money into the markets despite record high everything; control rates. Right, they’re a pretty big deal. But right now inflation at 30 year highs. I mean, did you see today’s PPI number? Producer Price Index number? Where wholesale prices rose by 8.6% year over year, highest ever on record. Highest ever on record. But if you’re looking at the trend that’s being completely ignored, and it’s being completely ignored because this happened just in the past few days because once the House passed the infrastructure bill what two asset classes soured in value? I’m talking about stocks. I’m talking about bitcoin, new highs, and gold. Gold, believe it or not, is quietly sitting a two-month high above $1,800 an ounce. Bitcoin and gold. What does this tell you?

Frank Curzio: I mean, it tells us pretty much what every one of you listening to this podcast already knows. Actually, I’ll go even further than that and say it’s telling us what every American who owns a car, a home, has a job knows and what every CEO of a major company knows. That inflation is about to spiral, spiral, spiral out of control. Spiral out of control. I’m not talking about today. I’m not talking about what happened. But gas prices are insane, food prices up tremendously. How every company is raising prices like crazy. I mean, according to the PPI where they do surveys for this 66% of companies surveyed said they’re going to raise prices. Less than 1% said they’re not raising prices this year. Everybody’s raising prices. We all see it. So, I’m not talking about the current inflation of every market or environment where, again, that PPI came out today showing 8.7% rises in prices year over year.

Frank Curzio: And they’re trying to sugarcoat it saying, “Well it’s flat month-over-month. That’s good.” It’s great. I love it. I love it. But it’s the highest on record by the way. It’s the highest on record. As much as you try to sugarcoat it, it’s the highest on record. And it’s something I warned you about 10 months ago when we actually published an inflation report that many of you read. But I’m not talking about that PPI is highlighting what happened in September, the past, October. I’m talking about the coming inflation which is about to explode now that the infrastructure bill has passed.

Frank Curzio: Now, let’s use common sense here. Okay, this is common sense. Forget about the sell-side analysts, the economists, the Fed, everybody, all these people who are so-called brilliant. Let’s just use common sense here because you don’t have to be a genius to figure this out, especially if you’re going to listen to this podcast, because right now, we have the worst supply chain crisis in our country’s history. There’s total, total, total gridlock. And if you look at companies, they promised this was going to ease six months ago. Six months ago. But now most are projecting it’s going to last through second half 2022 and likely into 2023.

Frank Curzio: Now Joe Biden, who is suddenly a world-class economist, is predicting… And actually, Joe’s not predicting but whoever wrote his speech is predicting, and made him say this publicly… Okay, the president of the United States went on TV and said the $1.2 trillion infrastructure deal will solve inflation pressures, since it will lower costs for working families. He actually said that. So, by injecting $1.2 trillion into the economy, or three times the amount of TARP, which was used to help stabilize the entire world’s financial system… Turned out to be about 450 billion when all’s said and done. It originally passed for 700 and whatever billion, but they only needed 440 to stabilize the entire world financial system, right? But he’s saying by injecting 1.2 trillion, again three times the amount of TARP, that’s going to lower inflation. But if that’s the case Joe why not spend five trillion or 10 trillion? Try to push through 20 trillion if that’s great and it’s going to lower inflation, right? But he actually went on TV and said this.

Frank Curzio: But getting back to the supply chain issue, something I’ve covered a lot through this podcast. I mean, tracked extensively through numerous sources who report supply chain data on a weekly basis, right? They’ve been doing this for over a decade. But his market, who again, again… And this is as of yesterday’s report that came out, lowered North American light vehicle production estimates in Q4 because they tracked trip supplies, which shows the supply chain issues, at least for cars, which really means chips, technology as well that goes into cars, it’s still getting worse not bottomed. It’s still getting worse! Maybe we’re close to bottom finally, but it’s still getting worse.

Frank Curzio: Now, here’s my concern… Not just a concern, a question I would love to be answered by the Fed. With ports still totally backed up, as of last week, a huge container shortage to transport these goods; a massive truck driver shortage… Guys, just go to lots of… I mean, there’s lots of sites that are reporting this. The industry needs over 100,000 truck drivers over the next 12 to 18 months to meet freight demand. 100,000 truck drivers! I mean, I don’t even know how many truck drivers there are currently. 100,000 of them! But my question is how in the hell will we be able to transport raw materials when we have nothing available in the supply chain to do so? I’m talking iron or steel, aluminum, copper, oil. Yes oil, since we have to import oil now as our current administration does not believe in energy independence.

Frank Curzio: We’d rather cut oil production to save the world… We need to save the world, but we’re not talking about saving the United States from climate change, right? Since climate change impacts the world, which means we need help from everyone, everyone, to lower CO2 emissions. We need help from everyone, which China is doing right now because they have the Olympics in a couple months. But after that, I mean, look what Beijing was. They’re not going to do anything and they shouldn’t.

Frank Curzio: So, we cut oil supply to save the environment, China and the Middle East are ramping up production to meet demand, which, again, they’re producing the same amount that we stopped producing; which the same amount of CO2 is being released into the air, which then means the environment is still getting screwed, except our US leaders would rather see our own people struggle and pay outrageously high gasoline prices, energy prices, while our enemies’ economies get stronger, and stronger, and stronger. That’s the one thing they had over us in history is, we needed oil. OPEC, we had to rely on other countries for energy. Without energy, forget about technology. Energy runs the world. Without energy, we’re screwed. We became energy independent using technology. Now, we’re getting rid of that. We’re getting rid of it at a time where, “Hey, we shouldn’t drill that much. It’s not a good idea.” Well, how about you have something to replace those fossil fuels before we get rid of them? Wouldn’t that be a good idea? This way, we don’t see prices surging? I mean, come on. It’s not going to ease up any time soon. It’s getting nuts.

Frank Curzio: But getting back to our shipping problems, I mean, how do we ship plastics, chips, machinery, electrical components? You can’t ship them right now. I mean, how are we going to transport this stuff? We don’t have the capacity to do it right now and won’t for another 18 to 24 months, at least. Forget the people working overtime trying to make ends meet, who are stressed to the max and probably have migraines right now. Not a good thing since the US imports 95% of its ibuprofen from China. Massive bottle exits everywhere. The prices are about to skyrocket out of control.

Frank Curzio: That’s why we’re seeing bitcoin going to an all-time high. We’re seeing institutions put money into bitcoin as a store of value. They’re worried about… We have no idea how we’re going to pay for this. They say, “We’re going to tax this. We’re going to tax that.” I mean, we have no idea how we’re going to pay for this. We’re just throwing money, continue to print it, which is fine. They don’t care. Politicians don’t care. That’s what they want. They make a fortune. They make a fortune. They’re the richest people in the world, are politicians. The most powerful people in the world.

Frank Curzio: You look at gold prices, that’s the reason why it broke out two months high. Gold. Gold of all things! Gold has been so terrible for such a long time, breaking out now. Because look at the current conditions. Look, it’s going to result in strong profits from companies that have pricing power. But when you see gasoline prices take another leg up, another 20%, 25% up over the next six months; when you’re seeing food prices go up another 25% over the next few months; and that cost of living for everyone is going to continue to rise more and more but there is a limit. There’s only so much consumers can take before they say, “Holy shit, we need to stop or change our spending habits.”

Frank Curzio: You can’t see that now because everything’s fantastic and great. And it’s not going to happen before Christmas. We have way too much money on our balance sheets. Probably won’t happen through Q1 and Q2 but trust me it’s going to happen. You can’t continue to raise prices and print money forever because they’re actually stopping. They’re not handing out free checks as much anymore. Tapering little by little. But we can’t go through this path of unlimited government spending, surging prices, and every single company aggressively raising those prices. And for some reason, which I don’t know why, the so-called smartest guys in the room, the Fed, seem to have no fucking clue at what’s happening in the real world.

Frank Curzio: I mean, think about it, you created a target for inflation, a 2% target in January 2019. And yeah, COVID threw a wrinkle in it, but we’re back. We’re back. We’re fine. Earnings are record high, everything’s at record highs. We’re back. We’re back. GPs surging, we’re back. You’ve injected tons of money into the system. So, that 2% means, for the Fed, “That if we go over 2%, we’re going to slowly consider raising rates because that’s our benchmark. We’re going to put that out there, 2%.” That’s what the Fed said, right? The Fed, who we trust, this is what they said. We’re over 5% now. Every asset at a record high. Companies are raising prices at a faster clip than any other time in history. Earnings surpassed pre-pandemic levels. So, for the Fed, why aren’t you following the rules that you outlined?

Frank Curzio: I mean, think about it, where we are right now because I know things are great. But you know what? Things were good in 2006 and the beginning of 2007 but look what happens when you’re late to the party. We see all the warning signs, bitcoin and gold, and just inflation everywhere. We see it. We see it. I was warning you about this 10 months ago. Again, first time I’ve ever warned inflation ever because you’re handing money directly to frigging people. Then when the economy opens up boom, what’s going to… You have to have inflation. It just makes sense. You’re going to see prices being raised across the board. Massive demand, we have supply chain issues. But what happens when you’re late to the party like the Fed was in 2007? Hard to believe, but rates were over 5% back then. What happened with the Fed? They continued raising rates through mid-2007.

Frank Curzio: This was while two Bear Stearns hedge funds, holding subprime mortgages, blew up. This is while New Century Financial filed for Chapter 11. Large mortgage providers. While HSBC reported massive, massive losses linked to US subprime mortgages. And while BNP Paribas, telling its investors… They actually told their investors this, that they can’t take any of their money out of several of their funds since they cannot value the assets they own as liquidity, completely evaporated. The bank actually said, “That you can’t take that because we don’t even know what the value of these things are.” Imagine that. Imagine investing in something and somebody tells you that. “Hey, I want my money back.” “We can’t. We don’t even know what these things are worth right now.” “What? Where’s my money?” All of this happened before the Fed announced its first rate cut in August 2017.

Frank Curzio: So, what’s the playbook? Where am I going with this? Don’t run for cover, not yet. Still lots of room for this bull market to run. Lots and lots of positives. Yeah, people have tons of cash on the sidelines they’re dying to spend; the reopened trade; travel; a lot of these names where in our portfolios, doing very, very well. People doubted these when early enough where they went up a lot and then people were doubting these over the past few months. Listen, I mean when you have airlines, you have companies with pricing power, travel-related stocks, and people have tons of money to spend that’s going to lead to massive, massive profits. And profits are going to be accelerated because a lot of these companies have cutback and they’re more leaner than they’ve ever been due to COVID. That’s how you see stock prices surge in value. You’re lowering your costs, your productivity has stayed the same, and now you’re seeing massive demand come back and you could raise prices. Holy cow. That’s how you run a business. Doesn’t happen often, but it’s happening now.

Frank Curzio: So, people are going to spend, even though prices are going to continue to go higher, at least for now. So, just owning bitcoin, which I’ve been telling you to do the past four years… If you’re going to invest in it today at these levels take a 20% position and scale in over time. It’s going to be volatile. Start building positions in your favorite gold stocks. I know that’s not easy to do, but think about the people who established positions in uranium stocks even six, seven years ago and waited a long time. Man are they happy. 300%, 400% gains in some of those stocks. That might not seem a lot if you’re on WallStreetBets, but those are massive returns within a 12- to 18-month period, as uranium continues to go higher and higher, and these stocks are doing fantastic now. But start building positions in your favorite gold stocks. Talked a lot about these over the past seven, eight years. We’re doing very well in them. Sometimes, we stopped out of them, depending on time periods and cyclical market. Right now, gold’s going to shine, and it is. And it’s starting.

Frank Curzio: Own companies have pricing power. I know, the entire world is saying this. You have a lot to choose from today. I mean, on a conservative basis you go with Coca-Cola, Caterpillar, Pepsi, McDonald’s, Chipotle, Expedia, any hotel, airlines. Probably 80% of consumer related companies, the S&P 500, have pricing power, at least right now, based on the quarters that they had. They showed rising costs but able to pass on those costs to consumers and they beat estimates, but not all of them. I mean, look at Clorox; look at Peloton; look at Intel; look at TripAdvisor look at Disney, lowering Disney+ to $2 a month for new users and the ones that left through a special promotion before they start charging $8 a month ago, even though they don’t have any new content. Chegg, Starbucks doesn’t have pricing power. They can’t get any of their places filled with anything. I mean, what a nightmare for Starbucks.

Frank Curzio: But that list I just said, that negative list, is going to continue to grow. I mean, wait until next earnings season. Wait until these companies have to report and give guidance, it’s going to be tougher and tougher because they have to continue to raise costs in order for their margins to expand, their profits to expand and meet those estimates. And it’s going to get more difficult as time goes on. You can’t continue to raise prices forever. Eventually, people are going to change their spending habits, especially as everything… Every single thing that they buy the price of it continues to surge. Then, we also throw in the money flow train from the Fed or at least handing checks directly to people is slowing down now, is going to stop, and a little bit of tapering.

Frank Curzio: So be very careful. This is where you have to be a little worried when everything’s absolutely perfect. Now, we have even the biggest bears coming out and saying, “Well it’s going to take a little…” That’s when you have to worry. When you have a market where people are calling for a crash, which we see all the time, and… I won’t name the guys who’ve been calling a crash since 1980s. When you don’t see those guys in the media anymore, and they’re kind of backtracking that’s when you have to worry. You don’t see too much negativity in the market. Everyone’s bullish right now. They should be. Conditions to own equities have never been greater, factoring the trillions in stimulus. Crazy low rates. The reopening of the world’s economy as the pandemic wanes.

Frank Curzio: But when everyone’s leaning to one side I don’t need to tell you, I’ve been doing this for a long time, that’s when you have to put your guard up and start putting it up. Don’t be afraid to take some profits. You guys have lots of winners throughout the portfolios to write your own picks, you could have threw a dart and everything. Conserve that. You want to see… You know what? Crashes or market pullbacks are great for people that are prepared. If you’re prepared, you’re able to buy assets at a much cheaper price when everyone’s selling them. A lot of that is foreselling because there’s so much leverage in the market when you take it out these guys are running for the exits. It’s almost like a reverse short squeeze, what we saw with Avis. Go up to $500 bucks because that short position went from 12% to over 20% just ahead of the quarter. They beat the numbers of 14% and wind up going up like 115% on that day to over 500 before pulling back down. Same happens in reverse when you take the leverage out of the market.

Frank Curzio: When that happens that’s when you want to have money on the sidelines to buy shit. That’s how you make a fortune in the markets, not when you’re buying stuff at all-time highs and things are great. You get it when… You’re buying things that everybody hates, nobody wants, and we’re going to see that time come. I’m not too sure when but we cannot continue to stay on this path of rising prices, raising these prices no matter what. It’s going to impact consumers. They’re in great shape now. They’ve been handed checks, handed money, assets are going crazy, they’re all on fire. But once that ends, you’re going to see a massive change of spending habits, and you’re probably going to see it happen mid-first quarter into second quarter, where companies are going to be like…

Frank Curzio: PayPal came out today, I don’t know if you saw it, they said, “Look, we’re nervous.” Their stock is getting nailed. Saying a lot of people are going directly to stores instead of online shopping now but we see that there is a little bit of change in consumer spending. I mean, they would know. That was weird. I haven’t heard that from payment processors, I haven’t heard that from Visa or Mastercard, but interesting. They have lots of data on whatever, hundreds of millions… Or how many people they have that use PayPal. So, interesting commentary. You’re going to see it hit lots of companies going forward. The small amount now. Just be prepared.

Frank Curzio: Let’s get to a couple questions really quick. So, Chris asks, “Frank, thanks for Roblox. You believe this huge move will last, since it looks like shorts are getting squeezed?” I do. I think I might pull back a little bit, but Roblox is the ultimate metaverse platform, as more people talk about it and it’s being mentioned on CNBC every day, now that Facebook changed their name to Meta. That’s the platform. I mean, and it’s incredible. Anyone who has kids understands this, but if you’re looking at the numbers that they came out… Average daily active users 47.3 million, up 31% year-over-year. Hours engaged 11.2 billion. Is there that many hours in the quarter? 11.2 billion, an increase of 20% year-over-year. My kids love it.

Frank Curzio: It’s unbelievable but the reason why this stock really took off… Again, you do have a little short squeeze there, but they broke out monthly metrics, which they never do. So, they said, “Here’s what we did in October.” Remember during the holiday, which was Halloween, for three days this site shut down. So, this includes three days of this site being shut down. Bookings were between 177 million to 179 million, up 30% to 34% year over year. Daily active users… Again, they had 47.3 million, this is talking about the last three months. For October, already had 50.5 million. That’s up 43% year over year. Again, that includes the outage for three days where Roblox went down.

Frank Curzio: But another big part of this story is how developers are building off big media themes like Squid Game. There was 140 million households downloaded Squid Game, so now, they’re building Squid Game, where you can do the red light and green light game, and all this… And kids love it. They’re going crazy. But think about all the themes, whether it’s the Avengers or whatever, how you could build in this. You get paid to build it. It’s unbelievable. It’s unbelievable. I love the compliance they have in place, the safety they have in place. I mean, this is a great, great company seeing massive growth. And now, that everyone’s going to be talking about metaverse this is the pure play, outside of Decentraland, that everyone’s going to refer to as Facebook starts building their metaverse universe.

Frank Curzio: So yeah, I like it a lot. I think momentum’s going to come… Maybe you see a little bit pullback from that short sale. But yes, I like this. I own it personally. I was down a little bit on it. Now, I’m up because, I think, due to a short squeeze, at least today it was up 25% plus recently. But this is a name that I mentioned to you guys, why I liked it. I covered it on the podcast, and I still like it here, so thanks so much for writing in.

Frank Curzio: I’ll take one more quick question here, and it’s from Brian. He asks, “Frank, does GE splitting into three separate businesses change your thesis on the stock?” I tell you, for me, you guys know my history with GE. Don’t ever ask me about GE. That turned out to be one of my worst picks ever. The mistake I made is I believed in management. I believed that they were going to make their earnings. But most importantly my thesis on it, if you read it back then, was GE splitting into separate companies because their industry leaders in so many different divisions that are not… They don’t complement each other though. I mean, healthcare doesn’t compliment aviation. You have GE Digital, yeah maybe it could be used on top of different things but with GE Power… Basically, they’re taking GE Aviation, GE Healthcare, and then GE Renewable Energy, which they’re also going to add in GE Digital and GE Power to the renewable energy segment, to form three publicly traded companies.

Frank Curzio: These are going to be three leading companies within those respective sectors. That’s the case now. That was the case whatever it was… Six years ago, whatever. Recommending that stock that was the case. But we had a really crappy management team spending money like crazy. Again, the GE Power division lagged, Alstom acquisition was really bad timing. But if you’re looking at the future of this company and these divisions now separate publicly traded companies, going to be able to raise money for those. Now, you’re going to be able to pay off a lot of that debt which has hurt them so much, get the investment grade ratings back. Now, you’ll be able to tap debt markets even further, which is… At much better rates, at much cheaper cost. Now, you can use that money for what? To acquire. And you’re acquiring businesses within that’s going to compliment your aviation business or your healthcare…

Frank Curzio: Aviation’s going to explode guys. Explode beyond belief. Beyond belief aviation’s going to explode. Anything within aviation is absolutely going to explode. It was about to explode, you were just seeing it, and then, we had COVID and everything got cut back. Then you had Boeing, who is basically one of two companies that make planes in the world, their MAX plane, which is amazing, had I think over 5,000 orders. Then the whole… Whatever. You guys know the story now, right? Safety concerns and things like that. But aviation’s going to kill it.

Frank Curzio: I mean, GE Healthcare, come on healthcare. The best growing secular trend in the world, healthcare, healthcare. And now, Renewable Energy’s your other division, which is forcing trillions… People are predicting hundreds of trillions of dollars over the next 10 years to be going into this industry, which GE is a part of. Holy cow. So yeah, I like the move. But maybe I’m the last person you should ever listen to when it comes to GE because I beat myself up about that. Again, I’m beating myself up about all my losers, but great move. But I don’t know why it took so long to do this. Maybe you had to clean up a lot of this, and that’s what Fole did, he cleaned up a lot of this garbage and now they’re able to do this. But yeah, this move was obvious.

Frank Curzio: And I didn’t base my thesis on summer parts, which I say if any company talks about summer parts you should sell it because when you talk about summer parts that means nothing else is going right for the company, so you’re looking to… But this was different. You’re talking about industry leading divisions across the board, which they could split up, which would be worth a hell of a lot more. I don’t know how the management team ran all these businesses. Again, there’s no synergies. Hardly any synergies. They’re all over the place. I mean, you have to learn… Imagine being the expert in healthcare and then you come over as a vice president or a president, or whatever, and you move up the chain, now you got to learn about aviation and renewable energy. I mean, what the hell? How do you do that? I mean, people 30 years in that industry that are still learning.

Frank Curzio: Hey these are the divisions they had, they didn’t complement each other. But now, it’s actually happening, it makes sense, it’s a good job. Again, I don’t know if you want to listen to me about GE, but I think GE goes a lot higher from here. Very good move.

Frank Curzio: So guys, that’s it for me. Again, really detailed information. I know things are great and I meant that. Best conditions I’ve seen in my career, when you factor your low interest rates, trillions on the balance sheets, you’re seeing liquidity beyond belief, everything gets funded these days, very easy to raise money. Those conditions are going to exist. But as prices continue to get raised and infrastructure is just, holy cow, throwing gasoline all over… All over. I mean, you think you see inflation now, it’s going to get insane because we can’t transport anything right now. And yet, everyone’s going to be dying for these raw materials once this passes. It’s going to be really, really crazy. It’s probably going to happen sooner than later. I would say over the next six or nine months. You want to adjust your portfolios. There’s going to be companies that benefit tremendously and others that are going to struggle because they’re no longer going to have that pricing power, because they can’t. You can’t continue to raise prices.

Frank Curzio: Eventually people are not going to pay $20 for a Snickers bar. They’ll pay $1, they’ll pay $2, they’ll pay $4. They really like it maybe you get some of these to pay $5. But when you go 10, 15, they’re like, “There’s no way.” You change your… Prices force you to change your habits, so they can’t keep going up forever, especially in this market. You can do it now, lot of money sloshing around, but listen to this podcast. If you’re subscribed to any of my newsletters, I’ll show you how to play it, and we’ll make money because we want to be in position when this market does come down to buy a lot, a lot of great assets. And there are going to be a lot of great things that actually benefit from inflation. And I’ll go over all that with you going forward over the next few weeks and into next year.

Frank Curzio: So, that’s it for me. Questions, comments, email me at frank@curzioresearch.com. Thank you so much for listening, and I’ll see you guys tomorrow. Take care.

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

Frank Curzio, 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 weekly Wall Street Unplugged podcast—ranked the No. 1 “most listened-to” financial podcast on iTunes—has been downloaded over 9 million times.

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