BlackRock, the world’s largest asset manager, is partnering with Coinbase to offer crypto to its clients. Daniel and I discuss why this is huge for the crypto space… and why every investor should have exposure to crypto—even during this brutal bear market.
We also highlight when we expect the U.S. government to clarify crypto regulations.
Samsung recently warned investors that semiconductor demand will drop in the second half of 2022. I break down this grim economic warning… and the similar signals we’re seeing from other corners of the economy.
Finally, Daniel shares a “boring” company that rewards shareholders through any economic conditions… and I share my favorite play on end-of-summer entertainment.
- You need crypto exposure—now [2:20]
- What BlackRock’s announcement means for the crypto space [4:30]
- Why asset managers are changing their tune on crypto [11:00]
- When can we expect U.S. crypto regulations? [21:50]
- What to make of Samsung’s semiconductor warning [28:00]
- Two stocks we like right now [35:10]
Wall Street Unplugged | 943
Think like the Big Money… and use this bear market to get crypto exposure
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 Thursday, September 8th. And I’m Frank Curzio This is the Wall Street Unplugged podcast, where I break down the headlines and tell you what’s really moving these markets. Thursday is usually guest day, at least usually, but I want to discuss a few topics with you today that I’m receiving lots of emails about, so I’m going to bring in Daniel of Curzio Research, again, Senior Analyst of Curzio Research, to discuss some of these. Since we’ve been talking about it, this conversation should be very, very good to have online. Daniel, what’s going on, buddy? How’s everything?
Daniel Creech: Good, Frank, back to back days. How about that? Not only are Wednesdays the best days, it’s close to being Thursdays now.
Frank Curzio: Well, at least you know that I like you, right?
Daniel Creech: Well…
Frank Curzio: I wouldn’t have you on two days in a row if I don’t.
Daniel Creech: We’re the only two in the office, so that’s good, too. I got the odds in my favor when we’re selecting and spinning the wheel on who’s going to fill in.
Frank Curzio: I know.
Daniel Creech: No, I’m kidding.
Frank Curzio: I was looking somebody. I was looking for somebody, but I couldn’t find a deal, so Dan is the only guy. Daniel, come on, let’s discuss it. But usually, I come in, Daniel is here a little bit earlier than me. I’m driving the kids to school. I’ll go work out and come in. And he has a good perspective of what’s going on in the market, and I’ll ask him and I’m like, “Really?” Then, I’ll research it, and then, we’ll have a back and forth and stuff like that. And some of those conversations get to be really cool. And I want to start trying to put them on podcast and like this one.
Frank Curzio: We’re going to talk about crypto a little bit here, because again, lots of questions are on crypto where crypto has come down a ton. And we sound the alarm in the entire market. And you have the Jackson hole that the Feds is serious about aggressively raising rates, which we’re hearing by everyone that’s coming out. Yesterday, today, all the Fed governors and presidents and board members and not board members and not voting members and stuff like that, but they all have the same tone. We need to get inflation under the control. It’s got to happen, and we’re going to significantly raise rates. But if that happens, we’re already in a global recession. If they’re looking to raise rates significantly, look out.
Frank Curzio: And so, again, questions where you seeing Bitcoin fall off, you’re seeing crypto fall off, and you’re seeing it fall off every other asset class. It is an asset class where it’s tough, especially even in risky market. But I want to talk about of where we think it’s going and why we’re so bullish on it because I think sometimes it gets lost in what’s really going on in the sector right now, where it could provide a tremendous buying opportunity. Right?
Daniel Creech: Yeah, and we are going to talk. I think, where you’re going is we got to talk about BlackRock and big money and big institutions yesterday a little bit. There is some big news, what a month ago give or take, is when this news came out.
Frank Curzio: Yeah, a few weeks, yeah.
Daniel Creech: Yeah. The bigger picture here for me is it’s very frustrating. I have crypto investments that are down in Galaxy Digital and things. At risk of just coming across as a permeable and having your head in the sand, and I don’t want to come across as ignoring the present, the bear market, the issues and the risk. However, during down times, during negative times, during of fear, uncertainty, and for lack of a better word, just market crashes, when there are major events or big ticket items that are taking place or plans that are building that are still taking place during all the chaos and all the meltdowns, I think it’s just as silly to ignore all of that during markets like this.
Daniel Creech: And this, the amount of money that could potentially flow into the space off of just one asset manager, opening up the dam, if you will, it’s just mind boggling. And I think that if you’re a crypto bear or you’re an anti-crypto guy, like the Peter Schiffs or anything like that, you ought to be dancing and celebrating right now because the present is your friend. You don’t want any of these things that are being built and worked on right now to take fold because the odds and the least resistance path is much, much higher from current levels. And I don’t think it’s a big surprise, or I’m not going out on a limb there saying that, but the amount of money that’s going to flow into this asset class and is flowing into it is just, it’s something that you can’t ignore as an individual investor. If you’re really trying to get massive, massive life-changing gains.
Frank Curzio: Yeah. And listen, we see a lot of crap happen in crypto. I’ve said numerous times, 90% of the crypto companies, especially utility tokens that I looked at, are worthless. They’re really worthless. With that said, if you’re looking at BlackRock and we talked about Fidelity announcing that they’re coming in $4 trillion assets in the management, probably trillion retirement. They’re going to open up, I think, they said 20% allocation, even if it’s like 2, 3%, that’s okay. You’re looking at Stay Street. You’re looking at all these companies, all big fund management in the world. And now, BlackRock just signed a deal with Coinbase.
Frank Curzio: And I wanted to talk about it because we all know BlackRock, and we’ve mentioned them numerous times. We talked about even last podcast, Daniel, that has $11 trillion assets on the management. Holy shit, $11 trillion assets on management. It’s a massive. But when you look under the hood about this announcement, which I did and some people did, it’s much bigger than that, because they signed a partnership with BlackRock with their Aladdin platform. You’re probably not familiar with it. I wasn’t even that familiar with it. I heard of it. I didn’t realize how big it was.
Frank Curzio: This is the software platform that services over 240 clients. You say, “Big deal, 240 clients.” Well, those clients are Fannie Mae, the large banks of the world, largest institutional fund management that have a combined $22 trillion in assets under management within this system, who are now going to get access to crypto. And okay, you have access to crypto, it’s another asset class. When you look at that amount of money, ARK published a report and they have a lot of math behind and everything, but again, I’m just going to tell you what they reported, who are pro-growth, pro-crypto. And they published reports showing that this news alone could push the price of Bitcoin to $200,000 to $500,000, where is it, a little under 2019, whatever they say.
Frank Curzio: Based on an asset allocation between 2.5 and 6.5% of that money into crypto. And we do the math, yeah, okay, but $200,00 and $500,000, let’s get back to 50 first, let’s get back to 75. But even if we’re conservative, 1% of this money goes into Bitcoin. That’s $220 billion. That market cap is now less than $400 billion, so at 2 or even 3%, the amount of money it’s going to go into crypto and into Bitcoin, it’s incredible. It can push us up significantly, double, triple pretty easily.
Frank Curzio: There’s a bigger point here I think you need to understand, and I think everybody, and I feel like this is lost when you see this, Daniel, is that you have to ask yourself why is BlackRock doing this? Why did JP Morgan reverse? Why did Jimmy Diamond say, “Bitcoin, all this shit, garbage, garbage, garbage,” and now, they’re into crypto? Why are all these asset managers reversing? It’s because their clients want this. And why do they want it? Because people are like, “Oh, they want to speculate because Bitcoin is getting, no.
Frank Curzio: You talked about it earlier, Daniel, what you’re seeing in crypto. This is where all the innovation is coming from. All right. Someone who’s covered innovations, who’s been to The Consumer Electronics show for, man, how many years over a decade, have great contacts in technology, getting in early. Just so many amazing trends. 5G, EVs, all this stuff, just reporting live from The Consumer Electronics show, and again, being invested in a lot of these things. With this data analytics, you go back even further Internet of Things. Being there when Chambers made that speech that almost everything’s going to be connected and trillions of devices or what was the number? I think he said something like trillions. It was something like 25 billion.
Frank Curzio: And I’m like, “Wait a minute. All of 7 billion people, how’s that possible?” I didn’t realize, nobody realized he meant that anything that could get connected would be connected, which is what we’re seeing today. Now, the point of this is where’s the innovation coming from, okay? You’re seeing extensions and you’re seeing 5G getting better and better and better. AI is certainly getting better and better. These are existing trends that are getting enhanced. When I’m talking about change the world innovation, I’m talking about DeFi, DOW, which is governance. You actually have a board of director, everybody voting. Go look at Andreessen Horowitz and they wrote a great piece on Dow.
Frank Curzio: Look at NFTs. Yes, we just saw Bill Murray with a charity and they wound up stealing some of the money and someone put up that money. NFTs are great. They have to be regulated. There’s a lot more to go. It’s kind of like crypto in 2015, ’16. Now, you’re seeing much more security on it. It’s more secure. People don’t go to Coinbase and think their money is going to get stolen anymore. NFTs is the future. NFTs is ownership. It’s a ledger digital ownership of your own content that shows that you own it. You own it forever and it’s on the Blockchain. Nobody could change that.
Frank Curzio: That is amazing, amazing. And that’s why you see money pour into this. Hundreds of billions pour into this, the metaverse. Again, ownership of your own digital account, which is what the entire younger generation, who is 40 years old millennials now and younger, that’s what they want. That’s what they want, the internet. That’s what they want. They want access to their own content, knowing that they own their own content, knowing they could sell and make royalties off of it, which you don’t have right now.
Frank Curzio: And a good example is I had a little rant on YouTube. YouTube, whatever. People think I’m a conservative. I’m not a conservative. I believe in capitalism. I believe in capitalism. I believe in lots of things. I do believe in climate change, not to stupid extremes. It’s whatever. But just by being a little bit maybe bent and whatever, our stuff doesn’t get sent on YouTube. We know YouTube. We have great channel, and it doesn’t really get sent, and we know it’s not even out in the algorithms or anything, and that’s on purpose. When a lot of people could be seeing our stuff, we could be helping a lot of people in terms of investments and stuff.
Frank Curzio: So, you want something, that’s not biased, something that you own and that’s why their clients and everyone wants is. This is where the growth is coming. Think about the incident and the things that you could invest in. Now, if you look at the money coming into crypto, I always say this with Bitcoin, I don’t know where Bitcoin’s going. I don’t even know if Bitcoin will be the crypto. Maybe, it’s something else. Maybe Ethereum, after this proof of work, just the whole translate where you don’t have to pay gas fees anymore.
Frank Curzio: And that’s supposed to happen within right now into the next week, and it’s supposed to happen for two and a half years, which is a very big deal, because it’s very costly in terms of gas fees to use transactions. And that’s why everyone builds a smart contracts on, but maybe it’s different kind of crypto. What I do know is that trillions are going to flow into this industry. Trillions are going to flow into this industry. This is where the innovation count. This is what’s exciting. This is where all the big money is going into right now.
Frank Curzio: And it could take a year, it could take six months, but we have a lot of shit going on globally. In a global recession right now, which is pretty crazy. But when you look at crypto from that point of view, saying that this is what people want. Here are the biggest asset manager saying, “Okay, if you want it, here you go.” And I have to tell you, crypto deserves an asset application like gold. I’m not crazy about gold, and I see gold go up a couple days in a row, which is nice. I think the dollar is coming down.
Frank Curzio: But it should have an allocation, just like uranium has it, just like your technology speculative investments or whatever, it should have it. I think people are going to have at least a 3 to 5% allocation, not just in Bitcoin, but in different crypto investments. And you could throw FinTech in there as well that are related to crypto. And that’s what they’re opening up to like this asset class. And we never had that. You never had that in crypto before.
Frank Curzio: This is all retail and retail got leverage out the ass and you had a couple of hedge funds and stuff like that, that stupid shake because everyone always sleep at the wheel in terms of governance. And we’re hoping the SSC finally comes out with rules on this crap. All you have to do, just come on. Give me a break. How long does this take? Just come out with rules. Everybody wants them. We want them.
Frank Curzio: We want the regulation. Okay, we want the regulation, this way you’re going to see money absolutely surge and pour. You’re seeing it right now. But that’s the big news out of crypto that you need to focus on if you’re into long-term. You’re not going to see a better growth market than this out of any single market out there right now. There’s no sector in it, and it’s going to grow faster than this over the next five to 10 years. You’re going to see a massive explosion.
Frank Curzio: It’s going to be difficult. We’re seeing it now at the markets. It’s a spec of asset. SPAC of assets is getting crushed because the Fed are raising rates like idiots, even though you’ve seen so many sectors get destroyed. But that’s where we are with crypto. And people will just, “Well, you own crypto, you’re saying the market could come down and just start, pick it away, pick it away, pick it away.” And this money is going to flow in. It’s going to flow into it and when it does, you’re going to see this market is not a big market right now. It’s a small market within crypto. There’s two companies that basically dominate the whole thing, maybe 10 would account for probably 75, 80% of the whole entire market cap.
Frank Curzio: This is an area where the big money is coming in, and it’s going to come in fast. And I think you’re going to see that over the next three to six months and you’re going to see Bitcoin rise tremendously. But you have to look at the news a little bit and not just say, “Well, Bitcoin’s a speculative garbage asset.” There’s a lot more under the hood here. This is where the innovations coming from and everybody and investors, especially big investors, institutions, they want to get into this. They need to get into it, and that’s why they’re fighting for it. And now, they’re getting their way with these institutional money managers to sign, to partner with these big guys.
Daniel Creech: I think the biggest takeaway, to your point, is why are the big companies, big institutions doing this? And it’s just because your clients want it. The old saying, “When the ducks are quacking, feed them.” You can say whatever you want as a leader of a business or a movement or anything, when you’re base or when you are clientele and they can vote with their wallets, which when you’re in business and you are trying to… You, you greedy capitalist, you’re trying to generate a profit and siphon all the income out of your customers, Frank, as a right winger over there. I didn’t know we were on YouTube, off YouTube for the most part in their algorithms.
Frank Curzio: No, we’re on. We’re on, but it’s just-
Daniel Creech: No, I know. I know what you mean about, yeah.
Frank Curzio: Yeah. We have a couple of thousands and then-
Daniel Creech: Well, that’s probably more of my fault on my opinion.
Frank Curzio: TikTok was 6000, 7000 immediately, and which took a month or two just to get up to that amount, and we only have a few thousand on. And I was always wondering. I’m like, “Wow, we show a lot of the free stuff that people don’t even…” Well, it’s not free, actually. Some of the stuff that we have access to and really good charts and stuff like that, I was just surprised. And maybe it’s just that we’re really ugly, too. It could be that.
Daniel Creech: Well, let’s not get carried away. But to see the demand and the clients want to, because if you’re Wall Street, if you’re BlackRock, if you’re JP Morgan, your clients can go elsewhere. You can go to a competitor. You lose your assets under management, you lose your fees, you lose your connections, your deals and all that sort of thing. That is a huge positive for this movement in my opinion. The unfortunate part is, how does that help us today? Prices, Bitcoin was dropping yesterday. It’s volatile as always. That’s going to continue.
Daniel Creech: And you hit on this last week, I think it was last week in your Monday Monologue or Tuesday monologue, excuse me. Yes, Bitcoin is a speculative asset. I think we’re going to start, and don’t me wrong. I’ve been late to this party. I would’ve already expected it to happen. But Bitcoin and crypto in general is very correlated with tech stocks, the NASDAQ, which makes sense in the early days because you have speculative money, growth, et cetera, flowing into that space. What will be interesting to watch going forward, and again, unfortunately, this isn’t today or right now, over the next year or so or longer that disconnect between how other assets trade and how Bitcoin and or cryptos trade.
Daniel Creech: I don’t think, you’re definitely closer to the end than the beginning with crypto taking off as its own asset class and there’s a couple reasons for that. One, it’s more mature. It’s still very new, but it’s over a decade old. It’s got a lot of the anti-arguments or anti-Bitcoin arguments that have been around since the beginning are still there, but it’s getting harder and harder to make that argument as to this asset class is going away. No doubt Russia is doing its thing. Everything is Russia’s fault.
Daniel Creech: Frank, did you see where, was it earlier this week that they were talking about making Bitcoin and crypto payments as part as their settlement for international trading thing?
Frank Curzio: Mm-hmm.
Daniel Creech: If that’s true, and don’t get me wrong, it should be on their level if you put on that side of the world hat. That is the easiest thing that our government wants to see because why, Frank? Then you can go the Elizabeth Warren route. There we go again, getting banned on YouTube. We can go that route and say, “Hey, this is only for criminals and bad people and war mongers, and that such.” Ignore all those headlines. The main thing is that there are billions, if not trillions of dollars, that will flow into this space for lack of a better sense.
Daniel Creech: Because people that are in the business of making money and will make money know that that’s the only thing that matters. Without an economy and without energy, you have nothing, including civilization, Frank, so this is taken off into a big one. I want to ask you something. You know what yesterday marked as an anniversary in Bitcoin world, Frank?
Frank Curzio: What?
Daniel Creech: Yesterday, the 7th was the year anniversary where El Salvador made Bitcoin legal tender.
Frank Curzio: Wow. It’s been that long already?
Daniel Creech: It has been that long already, a year. “You can do anything for a year,” a wise man once told me, Frank. Time flies. Would you guess, although all the critics are having fun with this, because Bitcoin is down around 60% since last year, I believe. Okay? I’m just point pulling this up from Coin Telegraph, the other day. It says it marks the first country world or excuse me, El Salvador became the first world to adopt Bitcoin. And legal tenure Bitcoin adoption would benefit 70% of the local population,” is what their president Bukele or however you say that, says.
Daniel Creech: Except for the fact that they first started buying it when it was… They bought 200 BC for $10.36 million, an average price of over $51,000 give or take. But the government came out and says, “Rest assured, we’re not wrong, we’re just early.” Because why, Frank? They haven’t lost a dime because you don’t realize it until you sell it, so it’s just a paper loss at this point.
Frank Curzio: You sure?
Daniel Creech: Kind of like me and my Galaxy holdings. That’s okay.
Frank Curzio: Yeah, I know.
Daniel Creech: Anyway, that’s big news. Is it moving the needle? I remember this. This was announced at the Miami conference last year, before this, when on stage, they streamed the president there. But listen, there’s a ton of stuff that is going to continue and evolve in this space. It’s exciting. It sucks that it’s a bear market. And I think we need the Fed to slow its pace or change its rhetoric before this asset class, along with specular takes off. But you’re silly not to be participating in this, even during down times, in my opinion.
Frank Curzio: And look, a lot of times say, “Well, give the customer what they want.” And I could tell you firsthand, sometimes, that’s not a good idea. If I ask my clients what they want, they’re going to say, “Well, we want an income newsletter that’s safe.” And then you’d launch an income newsletter like we did and you don’t see sales really take off because everybody says something and want to know. Everybody wants to be a billionaire tomorrow. They want to speculate. The more money you have, the more you want to speculate. It’s amazing, which is fine, which is cool because if someone asks you something, you give the proper answer.
Frank Curzio: You don’t say, “Shit. I want to put everything in and be a billionaire tomorrow.” Yet, that’s okay if that’s what you want. A lot of people just don’t say that out loud. But when it comes to crypto, I think the big shift was, it’s very difficult to understand. There’s a learning curve there. Now, they’re making it easier where now just buying it is a lot easier where you don’t have to… KYC, AML checks, you still have to go through, which is know your customer and anti-laundering and stuff. But they do it much quicker where it used to take a few days.
Frank Curzio: Transferring stuff to your wallet is still difficult. We need different wallets for different… Depending on what exchange or platform you’re trading on. So, it’s still difficult, but as the younger generation, and this is 40 and under, which is millennials and Gen Zs, this is what they’re growing up in. This is what they’re involved in, everything digital. And when you’re looking at where crypto is, I think if you look at who manages the most money? How old are these guys? They’re all in their ’60s.
Frank Curzio: You’ve got a few fund managers who are superstars in their 40s and 50s like IronHorse was and Ackerman and stuff like that. But still, even those guys are starting to age, which is cool. But these are people who are not familiar with this technology. They weren’t familiar with it. And it’s also the reason why you’ve seen so many people change. Damn it. I mean, look at the legendary billionaire hedge fund managers that changed all of a sudden.
Frank Curzio: You look at a Druckenmiller, Mark Mobius, Bill Miller. And Bill Miller not necessarily changed too much, but he understood this thing. He was in early than everybody else. Soros, Ray Dalio. Ray Dalio said, “This is basically garbage or whatever.” And now, he understands it because he took the time to understand and see the whole world is digital. And this is where we are going. This is the new age and new world.
Frank Curzio: And to see these guys being able to change their mind, I love it because as you get older, especially as a male, you never want to change your mind. You’re set in your ways and that’s it. “I promise myself, I would never, ever be like that even when I’m 99. I never want to change my ways.” The reason why I was bullish four weeks ago and then after Jackson Hole, became incredibly bearish. If the data changes, you got to change. You just have to change.
Frank Curzio: You can’t have this stubbornness about you. It’s your money. It’s your life. It’s your children. You got to be able to change if the facts change. It’s that simple. To see that these guys change, I applaud them, but also now, they’re getting a better understanding of why this is the future, why this is so big. And you can see by this crazy money printing where we have the Fed aggressively raising rates. Why our freaking government just launched the student loan forgiveness for $500 billion, which is more than what top cost to repair the banks and then we have the Inflation Reduction Act, the best name ever. Just whatever name it is, just say it’s the exact opposite of what it does. It’s so funny.
Frank Curzio: But you’re spending money right now. These just came out. This is massive spending right now and for what? When we need money to come out of the system. When you see things like that, crypto as a ledger, there’s no third parties. Yeah, this is outside the scope of all of this bullshit that you see in politicians and people that only care for themselves.
Frank Curzio: And again, this is the whole generation up to 40. Think about 10 years, 20 years, it’s going to be pretty close to 90% plus of a digital generation. Everything is digital and this is the agent they’re growing up in. It’s something to think about. To me, it’s an enormous, massive trend, especially within NFTs, especially within the metaverse, which we’re seeing a lot, which is really cool. Which will come out in a movie pretty soon, and I’ll show the trailer. If you guys haven’t seen the trailer, I’ll put it in the website. It should be on the website, but it’s a really, really cool trailer.
Frank Curzio: And we’re going to come out with that probably in a few weeks. Maybe like a month or so, putting all that together. The things that we’re seeing, which is not just some garbage crap. Just different sites with terrible graphics and a video game, which is what they’re showing out there. There’s so many different applications and stuff and we’re seeing it in the metaverse. The ownership part of it is just incredible. And we want to show it that to the world in a show. And I think when people see it, they’re going to say, “Holy shit, this is for real. It’s the reason why there’s so much money pouring into this.”
Frank Curzio: But getting back to the crypto, listen, long-term, I’m probably most bullish on this sector than any other sector, than any other of the sector at these prices right now. Because there is money flowing in, this is where the innovation is coming from. This is where the growth is coming from. And that’s what makes me excited.
Daniel Creech: When do you think more clarification or clarity, for lack of a better word, from governments will come down on the regulations and things? Do you think that’s the-
Frank Curzio: I think-
Daniel Creech: Sorry. Do you think that’s the end of the year, or do you think it’s longer than that? Because I do think two things, one, the Fed obviously is influencing all asset classes lower at this point for the most part. But two, regulation is a big deal for floodgates to continue to open and things like that.
Frank Curzio: I think it’s going to come by the end of the year. It has to come because one, you let it go and now, it’s its own animal, so you can’t regulate, you can’t stop it. If you do, the effects that you have across all these asset classes, especially now that funds are getting in, it will destroy so many different industries. Just like we saw with the credit crisis. Housing is coming down and GE is like, “Why GE going to zero for? What happened there?” Well, they’re highly leveraged, too and you didn’t know about it.
Frank Curzio: Everyone’s leveraged and just from one perspective or another. But they have to regulate. It’s just so big, intertwined with so many different things in industries right now. It really is and some of the biggest companies, most of the biggest companies. You look at Apple, you look at the Square, you look at MasterCard, Visa, all these guys launching FinTech around crypto and the amount of money pouring in. You’re going to see it soon and they need to regulate it.
Frank Curzio: They just need to regulate where people are safe and when you have that, that’s when you’re going to see not just US adoption, worldwide adoption, because you need this. Because some of these kids, they’re very smart when it comes to computers and code and able to steal money and not get caught. You need to set an example here and that’s the biggest thing. You really need to see an example. You’re going to see regulation, and it’s going to be good regulation.
Frank Curzio: Not to the point where it hampers growth, which sometimes we see a lot when the government gets involved. But you need some kind of regulatory structure where people get in and say, “Okay, I know that my money is safe here. And if it gets stolen at a Coinbase, I know I’m going to get paid.” Because we have Voyager and we use that platform for one of our stock picks, and we actually invested in Voyager and made an absolute killing in it. But these guys did the wrong thing and they leveraged themselves in the wrong company and now, they’re screwed. And some people have their money on that platform, and I’m getting questions on it.
Frank Curzio: And Voyager is doing the right thing. Voyager is emailing their clients, and I’m on that list as well, and emailing saying, most likely they’re going to get the money back. Here’s what we’re doing. It’s probably going to be in crypto or whatever, or USDT, stable coin. But that’s what you need. That shows up the system. You saw Binance get hacked, probably about two, three years ago and they lost a lot of money. And CZ who runs Binance said, just gave all money back and say, “Here you go. Nope, we got this. This is on us.”
Frank Curzio: That’s what you need. You need that. Otherwise, it’s going to be very hard for the masses to invest in because people can’t afford to lose $50,000, $100,000 or something if they want to be in this asset class or you have $5,000 or $10,000. You got to make sure those assets are safe and hopefully, I hate to say this, because very hopefully that the government does the right thing, but they’re going to have to. People are bitching. Hedge fund managers are bitching.
Frank Curzio: Everyone is bitching at the SSC right now saying, “If the FTC, that the FTC, whatever, are going to regulate.” Let’s get it done. Let’s regulate this freaking market. Get the garbage out. Determine what’s a security. What’s not a security and let’s go. Because you got to so many different markets that are ready to grow and explode and money coming in, but you just need that framework. And hopefully, it comes by the end of this year.
Daniel Creech: I hope you’re right. That’s not a good investing strategy or a strategy at all for hope. However, I do hope you’re right on the end of the year. I don’t think that’s the case. I would be surprised if they move that quickly only because I have zero faith in most government agencies doing anything of merit quickly or on time. The timeline there is interesting. Changing calendars, all that kind of thing, winter. I would like to think it’s closer for regulation, at least clarity between, “Is it going to be the SEC? Is it be the commodities future trading?” Whoever is going to kind of oversee this.
Daniel Creech: There’s a couple of things going in the pipelines right now. We have the Coinbase Insider trading. A lawsuit continuing on where there the SEC actually named a few cryptos as securities. Whether or not more were going to be deemed as securities is to play. I just don’t think, it’s hard to fathom though that BlackRock and everybody else getting involved in this. Did you see earlier this week that Access Capital, the reinsurance is going to, and I don’t know, I’m speaking a little ahead. I saw this across our briefing platform that they are going to offer some sort of insurances to companies in crypto related with over $2 billion in revenue?
Frank Curzio: Mm-hmm.
Daniel Creech: That is just another data point to say, “Hey, this is just maturing and growing into just another asset class to your point with all that. I don’t think that access does that. I don’t think BlackRock does it. I don’t think get Goldman Sachs does it without having regulation coming down the pike. I just can’t agree with this year, but I hope I’m wrong on that one, Frank.
Frank Curzio: Look at who the big guys are signing up with and who’s consulting them and what they’re doing with Coinbase, regulating all the stock.
Daniel Creech: When you all get your revolving door around, no doubt they have…
Frank Curzio: Yeah, and that as well.
Daniel Creech: Former SEC guys.
Frank Curzio: Right, so these are guys that know their stuff, that know that they have that protection. But they’re not like BlackRock saying like, “Hey, we’re creating our own firm.”
Daniel Creech: Right, right, right, right.
Frank Curzio: And division where it’s like it’s flowing through a regulated organization like Coinbase, which is regulated. And you’re going to see more of that. And Coinbase could be a buy off for that, even though I think almost everything on there, I’d say 85% of the things trading on it, the token trading off securities and should be deemed securities. And when they are, they’re going to get the hell out of there because they’re not going to report some of the shit because you see what’s going on under the hood, holy shit.
Frank Curzio: But that’s going to open the door to security tokens and tokens that do establish and have checks and tell you when the insiders are selling and a lockup periods and stuff that you should know as an investor. That’s what’s going to happen, but I wanted to get into-
Daniel Creech: And lastly, I think the government regulation will come down when the Federal Reserve has more of a grasp and handle on a digital currency from the Fed. So, I think that’s what they’re waiting on. That’s another reason we’re not as popular on YouTube.
Frank Curzio: Yeah. I mean, that’s going to take a long time because you’re looking at the Fed, a bunch of old idiots in the government, who don’t understand math at all.
Daniel Creech: All I got to do, Frank, is say Fed.
Frank Curzio: They only understand how to make laws around-
Daniel Creech: All I got to do is say Fed.
Frank Curzio: They’re all lawyers. They’re all lawyers. That’s all they are. They don’t understand growth. They don’t understand the economy. They don’t understand any of that crap. They’re just lawyers. And lawyers are great. I’m not putting down lawyers. But when it comes to technology and Bitcoin and stuff like that, you need people who know what they’re doing, understand these markets and hire the right people, especially if you’re going to have regulation around it.
Frank Curzio: But I want to touch up on one other topic, Dan, which is news that I saw, and this comes out of Samsung. Samsung warned, okay, they said the general perception earlier this year was that the second half of the year would be better than the first half. And we heard that from almost all the semiconductors and almost all companies, because supply chain concerns. We saw this massive demand because $11 trillion was injected to the market. Massive demand, and they were like, “Holy shit.”
Frank Curzio: It caused huge bottleneck to supply chains. They can produce things and then the chip makers and stuff like that. And then, what’d they do? We passed all these laws. Let’s build up more chip factories to meet this massive demand. But people forget the $11 trillion already spent. People got that money and they spent it. And so now, you’re looking at, you’re taking a ton of money out of the system and a lot of these orders and things like that were pre-orders, especially for EVs.
Frank Curzio: And it’s amazing because Samsung is not the only one that’s warning where you saw Micron, SK Hynix, Nvidia, they’re citing supply chain concerns for the first time, which is not supply chain concerns. It’s demand concerns. They’re not going to say that. Intel and now, Samsung, these are the biggest, these are the biggest. Samsung is the biggest. They make the most chips next to Taiwan Semi, actually. And you’re seeing them warn. But here’s what the head of Samsung’s Device Solutions Division, I’m quoting in here. And it’s important for you to understand this, and I wish the Fed would freaking read a little bit, then they’d understand what’s going on in markets.
Frank Curzio: They said that general perception of this year was that second half would be better than the first. But from April to May, one month, it changed drastically. I’m quoting. So, it said, “The world is changing so quickly.” Think about that line because the same thing happened to retails, Walmart and Target. They usually come out, and they’ll give you a warning and say, “Listen, sales aren’t that good. Earnings aren’t good. Income are going to become low.”
Frank Curzio: They didn’t even get a chance and that’s why their stocks fell by the largest amount. One day, it drops. Both of them saw it since the 1987 market crash. Because out of nowhere, what they did is you have all this money, massive demand and these companies are great and figured out this supply chain that said. “Shit.” Now, we got all this inventory here. It’s massive, and then demand falls off a cliff. Now what do you do? You have to sell off a bunch of lower prices.
Frank Curzio: Same thing happened with Home Builders. Listen to the Home Builders quarters, two quarters ago, last quarter, and this quarter. Just go through the transcript. You can find them anywhere. Demand, we’re not seeing any drop off any. At this time, we’re seeing a drop off. We’re slowing down. We’re cutting. That usually doesn’t happen that fast. Usually, you see a warning. They’re not seeing the warning it’s happening immediately because that’s what higher interest rates are doing right now. It’s not just higher interest rates because you’re raising interest rates by the highest amount in the history. Not history. I won’t go to history, but since 1994, that’s the last time we saw a 75 base point hike.
Frank Curzio: And we’ve seen two of them and people are now predicting a third one. When you have a hike of that magnitude, this is what you have in a monthly timeframe where businesses can’t see shit. So now, you have all these supply chain concerns and it was all, listen, we’re having trouble meeting demand, so let’s build like crazy, because we need the supply. Now, you’re building. Now, you’re getting the supply. Demand is falling off a cliff. It’s the worst scenario possible.
Frank Curzio: You want to see how terrible it is, you’ll see during Black Friday. Why? Because these are the chip companies, Daniel, the chip companies. What do chip companies do? Because we’re going to put in perspective. And these are for people who are looking the invest in technology and growth and stuff like that, especially the hardware company. Smartphones TVs, washing machines, refrigerators, laptops, LED light bulbs, thermostats, healthcare devices, smart watches, EVs.
Frank Curzio: Everything that uses sensors, rail cars, trucks, cars, planes. You have software programs, which are high-end computers for AID analytics, with semiconductors, hundreds of them go into some of these things, in planes and cars. All smart home devices, drones. Those are all the industries that fueled growth over the past 12 years. And right now, the semiconductors, the nuts and bolts, these are the companies that make the parts that go into all this are saying that we’re seeing a massive slowdown.
Frank Curzio: It does make sense people are buying fewer homes. You have appliances and all this stuff and smart homes, you’re going to see less of those. Price for EVs have skyrocketed to the point it barely saves you more money compared to gas vehicles. As of today, they’ve risen tremendously with batteries and all that prices going through the roof. So, people are starting to cancel these presales. You have household wealth that’s declining, 70% of it comes from housing where prices are falling and the markets and everyone is down around 20% or more on their portfolio, meaning that they’re not going to buy well, maybe not buy the really expensive next generation iPhone, which is going to be exactly the same. Maybe with one minor, the picture is going to be a little bit better in the camera as the one you have, as 13.
Frank Curzio: Those are the nuts and bolts that’s saying that demand is slowing. And what they’re saying in reality is that GDP is slowing since their products go into millions of products that fuel the growth. Throw in the fact that China and US tensions are increasing. China is closing tons of factories, still the factories are closed for COVID. It’s a clear sign. This is the sign that inflation is going to ease on months ahead. But it’s also a sign that we’re in a global recession, which is always determined three to six months later. We’re in it right now. And we see it. China, Europe, we’re in it. We’re going that way too at higher interest rates.
Frank Curzio: Just something to think about. I thought that was pretty big news concerning the Fed sees no signs of inflation slowing, and everything’s cool. Even though, everything we buy electronically, the people who make them are warning. They’re all starting to warn. Not every semiconductor. Broadcom was okay. We have one on portfolios, a few of them. But a lot of them are starting to warn about these orders, which I think is significant and it’s not getting enough coverage.
Daniel Creech: Absolutely. And listen, you never want to have the same strategy all the time. There’s a time to be on offense. There’s a time to be on defense. To your bigger point, the reality is not to say anything that’s not crystal clear right now. Hey, markets are in a tough bear market. Stocks, everything is waiting on the Feds speculative assets like crypto and things have gotten hurt. There’s nothing wrong with being defensive here and paying attention to this.
Daniel Creech: And you’re right, this isn’t getting that much news that you and I think it should. We read this as a line, as just news passing. And a lot of times you can get caught up in that. Whether you’re looking at news or whatever view you share or what side, it can become numb to you. And you think, “Oh, wow, look at this. Big Samsung just warned. Is that a big deal?” Yes. It’s a big deal. It’s a very big deal.
Frank Curzio: When you look under the hood-
Daniel Creech: And that’s what you want to do.
Frank Curzio: If you look under the hood, it’s a big deal.
Daniel Creech: Exactly.
Frank Curzio: Just like Samsung, your typical company, that’s warning. On top of that with Micron and Nvidia and all these other companies, you’re seeing that, wow. They all said that, every one of them, if you go Q1, said second half is going to be freaking blockbuster. We’re going to kill it. Our supply chains are easing now. We’re going to get things back online. All this demand. Well, demand fell off a cliff and they’re sitting on massive supply.
Frank Curzio: When you go black Friday, don’t buy anything. Don’t buy your TVs because it’s Black Friday. Cameras. Wait. You’re going to see the greatest deals you’ve seen proudly in 10 years. Seriously, you’re going to be able to buy a 72-inch TV for less than $500. It’s going to be insane. That’s how much inventory these companies have right now. And then, they’re trying to hide it, and they’re not going to be able to hide it, but you’re seeing it in earnings. It’s why earnings are getting lowered.
Frank Curzio: That’s why they’re lowering their earnings and the guidance themselves. Even though they say 70% of these companies, Dan, right now are beating analyst estimates. It’s because they’re being lowest significantly. And I covered that the other day, too, with earnings coming down, so yeah, just be careful.
Frank Curzio: And there are ideas out there. You have a couple of ideas. One idea that I have, hey, let’s go over your idea, so one of the ideas that you couldn’t believe how cheap it is right now.
Daniel Creech: Right. Well, just one of the favorite whipping boys for Wall Street is Altria Group MO. And if you pull up a stock there, the chart is it’s fallen down. It’s come back a little bit off its previous lows. You could argue maybe it got run up a little bit more, but it’s a great dividend stock. It’s a sin stock, tobaccos, but they did just settle a massive lawsuit. Well, they haven’t settled it completely yet. But the Wall Street journal reported, I believe yesterday, the JUUL, the e-cigarette vaping section that Altria bought. Frank, do you remember? I think they bought it for $35 or $38 billion.
Frank Curzio: Which is a massive stake in it, yeah.
Daniel Creech: And they wrote it down to…
Frank Curzio: They worked through the whole thing.
Daniel Creech: I think under $2 billion now.
Frank Curzio: Which is incredible.
Daniel Creech: But the Wall Street Journal reported this week that JUUL Labs agreed to pay at least, Frank, at least $438.5 million to settle. And basically, what they were accused of is marketing and making e-cigarettes and vaping cigarettes flavored and looking cool to younger teenagers and it caused a pandemic of just underage smoking and things like that. To Altria’s point, they’re arguing that the FDA, so then the FDA, now they’re all settling this.
Daniel Creech: Frank, these payments are payable over six to 10 years. The longer Altria takes to pay them, the higher the fine. So, if they pay it all, it’s going to be $438.5. If they take the longest time, it’s like $470 and change. Do you have any idea how much revenue JUUL made in last year, Frank?
Frank Curzio: How much?
Daniel Creech: They’re paying $400 million.
Frank Curzio: Mm-hmm. I’m curious.
Daniel Creech: It says JUUL, which had more than a billion dollars in sales last year, but that slipped to number two in the market, so their competitor has taken them over. Now, the FDA banned their products, then JUUL and Altria had to sue them. They got that lifted while they still discuss certain things. But get this. This also includes, they raised the age of buying tobacco to 21. A billion dollar in sales, so you can do, that’s 40%. Frank, if you get fined 40% of your total income, you’re going to keep doing that, especially when you can stretch it out over a 10-year period.
Frank Curzio: Pretty much.
Daniel Creech: Not to mention the tax offs and all that kind of thing. Now, we’re not advocating for young children to smoke here. We’re just simply pointing out the funny and irony here. But yeah, so if you think about, “Hey, how can you play defensive?” One of the most hated stocks, the stock chart is it’s off its previous lows. It pays a great dividend.
Frank Curzio: What’s a dividend these days? Man, it’s freaking high.
Daniel Creech: I don’t know, current price. It’s got to be 4 or 5%. Wouldn’t you think?
Frank Curzio: Higher than that.
Daniel Creech: Do you have Finvix up or Seeking Alpha?
Frank Curzio: I think it’s even higher than that. Let’s see. When it comes to Altria, so yeah, it’s probably higher than that. But yeah, you’re right. It’s a stock everybody hated.
Daniel Creech: Yeah, according to Seeking Alpha at current prices, it’s a little over 8%.
Frank Curzio: Yeah. It’s really high. New is pretty high up there, so yeah. Wow, 8%. And that’s payable through cash flow, too, so it’s not like holy cow, I need to worry about 8% dividend. I mean, they got the cash flow and stuff like that.
Frank Curzio: The stock that I like, guys, I think news came out too, on one of the radar is IMAX. I purchased IMAX now, so they had a $50 million buyback. They increased it to $225 million. They have $800 million all over that market cap, so they planned on buying back 30% of its stock, which is insane. And if you look at the movies coming out, too, for the rest of the year, it’s going to be pretty cool. They’ve got a good slate. The Avatar movie’s coming out, which is going to be a billion dollar movie, probably, worldwide. Just, I think there’s a DC league movie coming out.
Frank Curzio: There’s about four or five more blockbusters, but IMAX, all these blockbusters get shown in their IMAX theaters and we’re not talking about 3D theaters. Some of them are. But just the sound quality and everything when you go to IMAX and see a movie in IMAX theater, it’s a different experience. When I go to a theater and I see a movie it’s pretty cool, but you can get that in surround sound. If you have a good surround sound system with good speakers and stuff, you can get that. And you get, especially with the TVs today and how beautiful they are if you put them in a right spot. I love doing a show like this.
Frank Curzio: But actually, you cannot. You don’t have that experience. You don’t have the IMAX experience of how they’re shooting with their IMAX cameras or how it’s just, that sound in there, it’s just different. The movie is different. And that’s why these guys kill it every time there’s a blockbuster movie coming out, but we just saw Tom Cruise and a lot of these movies generated a shitload of money. They got three or four coming out on slate for the rest of the year.
Frank Curzio: And they’re buying back all of this stock. They know that. They’re doing great in earnings and that’s a stock that’s fallen. But you all are going to see people go to the movies. It’s not the most expensive thing in the world. Popcorn is like 50 bucks these days to get up to get. Maybe it’s a little less than that, but you guys get my point. But when you’re looking at so many other things or baseball game and $10, $12 of beer and stuff like that, and tickets and fees on the tickets, which cost more than a ticket itself these days, it’s probably, it’s not that bad to take your family to a movie compared to alternative things.
Frank Curzio: And that company is just riding high, good company, good balance sheet. And man, buying back a lot of their stock, which you want to see, which should put a floor under it, even in shitty mark conditions, because it has gotten hit along with everything else, so.
Daniel Creech: I like that. And that will be a good test to just pay attention to the consumer. Frank, I have never been to an IMAX theater.
Frank Curzio: It’s really cool.
Daniel Creech: I have not watched a movie, and I’m not a big movie guy.
Frank Curzio: It’s really, really cool. No, IMAX theaters are really cool, man, so they’re-
Daniel Creech: I did watch Top Gun though the other day.
Frank Curzio: Did you like it?
Daniel Creech: Yeah, I did. It was good. It was entertaining. Yeah.
Frank Curzio: Yeah, it was a good movie.
Daniel Creech: Yeah, it’s something to let your… They go well with alcoholic beverages.
Frank Curzio: Like everything, like everything. All right, guys, so a couple of ideas there. Crypto, getting a lot of questions on and also, just be careful. Every industry is seeing it one by one. It’s retailers, home builders, now, it’s semiconductors, all saying the same thing. They’re saying that, “Holy shit, this happened so fast, they need to slowdown.” Something they didn’t prepare for and they didn’t see coming. That’s what happens when you raise rates by this amount that quickly.
Frank Curzio: And I’m telling you the last interest rate hike is not even factored in yet and they want to go another 75 basis point hike. They can go 75 basis, point hike next. They have to ease their tone. They don’t have to say the lowering rates, but if the Fed comes out with the same rate that they’re going, that they’re talking about now and that same tone where, “We’re going to do whatever it takes and if inflation’s much higher, we got to.” There’s no reason to own stocks.
Frank Curzio: We’re in a global recession right now. There’s not seeing growth from any country. And the Fed has the power right now. It’s up to the Fed. The Fed can either cause a recession if they go, “We’re in a recession.” But it’s up to them. It’s going to be mild or this going to be a depression. It’s up to them.
Frank Curzio: And let’s see what they do coming. Hopefully, they’re looking at the right data and listening to the right people because right now every single one of them is on the wrong side of this trade. Just like they were on the wrong side saying inflation was going to be transitory. And that’s what scares the hell out of me, so yeah. Let’s see what happens.
Frank Curzio: We’re here for you. Questions, comments, firstname.lastname@example.org. Daniel?
Daniel Creech: email@example.com.
Frank Curzio: All right, guys. Have a great weekend, and I’ll see you next week. 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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