President Biden delivered his first State of the Union address last night. Daniel shares what he thought Biden did well… while I focus on what upset me about the speech—and what politicians could learn from Mike Tyson. [0:45]
Of course, much of the address centered on Russia’s invasion of Ukraine. Daniel and I discuss the economic sanctions against Russia… whether they’re working as planned… and how the war will impact energy prices. [9:53]
Fed Chair Jerome Powell announced plans to raise interest rates by 0.25% later this month… saying he “hopes” inflation goes down. While I’m riled up about the flip-flopping Fed, Daniel says I shouldn’t be surprised. [14:25]
Warren Buffett released his annual letter to Berkshire Hathaway (BRK.A) shareholders over the weekend. Daniel explains why every investor should read these letters… and a couple of items that stood out to him from this year’s. And we discuss why Berkshire will benefit from inflation. [20:10]
Next, we focus on Buffett’s comments regarding share buybacks. I break down why you should pay attention to Buffett’s share repurchases… And Daniel highlights one company aggressively buying back its stock. [26:16]
During its recent earnings report, semiconductor company Ambarella (AMBA) said the supply chain crisis is far from over. This will have a huge impact across sectors—and automakers in particular. [31:48]
Speaking of autos, Ford (F) continues to spew bulls*** about its electric vehicles (EVs). I go on a small rant about the company’s tactics to distract from its problems… and why I’d consider shorting Ford right now. [33:13]
- What Mike Tyson could teach politicians [0:45]
- Are the sanctions against Russia working? [9:53]
- Powell’s “hope” and the flip-flopping Fed [14:25]
- How Berkshire will benefit from inflation [20:10]
- Warren Buffett’s share repurchase plans [26:16]
- The supply chain crisis’s huge impact across sectors [31:48]
- Why I’d consider shorting F right now [33:13]
Wall Street Unplugged | 862
What Biden could learn from Mike Tyson
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: What’s going on out there? It’s March 2nd. I’m Frank Curzio, host of the Wall Street Unplugged Podcast, where I break down the headlines and tell you what’s really moving these markets. It’s Wednesday, bringing in the ever-handsome, smart, beautiful, Dan. I’m not talking about you. Dan’s like, thanks.
Daniel Creech: We do have people in town this week.
Frank Curzio: I do have other people in town.
Daniel Creech: There’s a few travelers here with us.
Frank Curzio: I do, but we bring in Daniel Creech to talk about what’s going on with the markets. And of course, there’s a lot these days, where we get a lot of questions, right, man. So listen, let’s just dig right in. We had the State of the Union last night, and I wanted to get your thoughts on it. My quick thoughts were, there was hit and misses. Russia and Ukraine and United, I think that was a strong part. Lot of misses, which I’ll talk about. But it’s a big topic today, and we’ll see. Usually, you can find lots of ideas. However, the war took center stage, usually they talk about different investment areas, where they’re going to go with investing.
Frank Curzio: And you could really… Even leading up to this, and even after this, even when it was alternative energy for the last five, six years or how much money is going to certain sectors and defense and stuff, you could really see these stocks move based on the State of Union. Because you’re talking about the government, unlimited spending. But we didn’t see too much of that in terms of finding ideas for it. But there was significant things they mentioned, oil and things like that. So, I don’t know what your opinion was.
Daniel Creech: Overall, it was decent. I thought he seemed pretty straightforward. I think he got his point across from a… If you put on the two different hats here from the Republican side, really the only thing you’re going to like, if you’re a Republican or more conservative, is the whole made in America theme. I thought he did a good job of selling that idea on whether it’s Build Back Better or whatever he wants to pass. He did make a point to say, hey, from basically from every step of the way from beginning to end, they’re going to do American products and things like that. That’s good for GDP. That’s good for the economy. I think somebody, I don’t know if it was CNN or MSNBC, one of the headlines, one of the new sites I was checking, made a point to basically highlight… That was the only time that everybody, or one of the very few times that both sides… You know how they go back and forth.
Frank Curzio: Back and forth, yeah.
Daniel Creech: Some people sit there and protest say, “Hey, I don’t cheer for that. And then, the other side does.” That goes back and forth. Overall, I thought it was decent. I didn’t watch the whole thing. Typically, I don’t watch these under any president. I like to read them. I like to read the transcript better, but I did watch it up until when he gave the congratulations to the retiring Supreme Court justice. I’m getting old, Frank. I just had a birthday. I needed to go to bed and get ready for today.
Daniel Creech: I was thinking that maybe Bloom Energy. I had that on my list. Bloom Energy, we’ve talked about, is a greener play. They have a product that works. They have some of the biggest Microsoft’s, Apples and things like that, as customers that use their power source for cleaner energy. It’s down a little bit today after a massive run up over the last week or two. So overall, it was more about the worldwide… I didn’t like the sense of the whole one world concept. I’m an individualist and a capitalist, and you rising tide lifts all boats worldwide, but that whole unity of one world and all that makes me a little nervous. So, that was my big takeaway. Much you do about nothing in the sense.
Frank Curzio: Yeah, I have to be honest, I think he was more energetic than I’ve ever seen him, which is cool. Because usually I’m used to him just being up there and making mistakes. He did make one mistake. It was if highlighting, when he supposed to say Ukrainians and he said Iranians or whatever, which is funny. But again, it’s a long speech and I get it. For me, I like the part with Russia, I think, unity and stuff. And everyone’s on the same side, I do think that our media’s betraying that the Ukraine is doing fine. I don’t think they’re doing fine at all. I think they’re in a lot of trouble. I think that capital’s going to be taken over very soon if you’re looking at pictures. I mean, listen, it’s patriotic, they’re fighting.
Frank Curzio: I think the war is basically going to end when it’s either that city’s going to be defended or keeps going to be defended or taken over. And I think it will be taken over very shortly in a couple days. I just think there’s nothing that Ukraine could do about it. But outside of that, you know what? There’s a couple things that really piss me off. First of all, we all make mistakes. And I think humble is such a great quality, not to the point where it presents weakness, but we’re under this impression that you can never admit that you’re wrong with things. So, he’s talking about how we’re going to lower the deficit by a trillion dollars. I’m like, “Okay, well you spent 18 trillion fiscal through COVID. Yeah, you did this is under your right leadership.”
Frank Curzio: So, this is in fiscal and monetary through the fed. And then, we’re sitting there, and he’s saying how great the economy is right now with this stock market crashing. So, we have inflation near all-time highs. All-time highs. If you take the methods that they use in ease, we’re at all-time highs. And it’s not slowing up, we haven’t seen any slope. And energy price it through the roof. Record crime rates across major cities, the biggest wealth gap in history. I mean, these are all facts. Record amount of legal immigrants entering the country. I think China and Russia are kind of laughing at us, and I think we’ve shown weakness through a lot of this stuff, but you have your positives and negatives with each president. But just highlight, hey, this is what we need to do better because right now we’re sitting in a market and just more inflation that we’ve ever seen.
Frank Curzio: And he’s trying to tell us, the economy is great and I’m watching that party get up and clap every time he says that. And I’m like, you’re really losing touch. If you look at Tyson, when Tyson bit off Evander Holyfield ear, I mean, even the Tyson’s fans were like, “Oh my God, this is disgrace. I can’t believe this.” If you look at Tyson now, it’s hard not to love that guy talking about all the mistakes he made, how to better yourself. What’s important to him. There’s a lot to be said of that, from learning from your mistakes. But if you’re going to sit up there and Trump did this a lot too, where you just go up there and tell everyone how great I am and how everything’s great… It’s not great. And it’s really, really not good right now. It’s not. It’s not good for most Americans. So for that speech, another thing I hate is the rebuttal. I mean, State of the Union, bring everybody together. Not only that, AOC with the rebuttal. I mean, you see that? It’s, you talk about energy and-
Daniel Creech: I did not, but one thing that caught my attention was there was two… You always have the rebuttal from the other side. So, in this case you have a Republican since it Democrat in office. And did I read, there was two rebuttals, so three total, one from the Republican and then two from Democrats.
Frank Curzio: I saw AOC come out. And I really have a thing about talking, how we need to focus more renewables. I mean, again, she’s 30-somethingm and I’m not saying that you can’t be brilliant.
Daniel Creech: Hey, watch it.
Frank Curzio: I’m not saying you can’t say brilliant at that age, but the experience and the policy and what’s going on right now, where yes, we all want to clean the planet, but we’re talking about national security. We have the opportunity to be stronger than any… We could have turn on the faucet. I mean, not even just be energy independent, which we were. And now, we off of that for renewables that are not there yet. We could still work on renewables. We could turn on that faucet and start exporting energy to Europe. I mean, and then you’re looking at Russia. I mean, Russia’s just crazy right now, the whole situation, to be honest with you. Even with the State of the Union and Russia going on, I mean, this would never happen. And I know it’s a nuclear power and superpower, but there’s no one in Russia right now, all the troops are in another country.
Frank Curzio: I mean, you could probably take over Moscow in like 30 minutes. And imagine the country that really wanted to do that, or China, which they won’t, but you’re controlling 30, 40% of the world’s energy by doing that. They’re really going all in on Ukraine. Anyway, I mean, that’s another story and that’s crazy thinking but for me, when I’m looking at the State of the Union, it’s a time to unite, even though it doesn’t. But I just hate the rebuttal, no matter who’s president. It’s like, you have this whole thing, you’re getting everyone excited, and this is what we’re going to do. And then you have someone saying that everything that guy say he’s totally full of shit, right after that.
Daniel Creech: So, who did the rebuttal on the right? Are you talking about AOCs or the other person?
Frank Curzio: I think it was a center from Iowa. I forgot the name. But it was a center from… I’m pretty sure it was, oh man. It’s Kim Reynolds, Iowa governor. So, for me, look, just be real with the people. I mean, now all of a sudden, you’re saying that you want to fund the police. I love the fact that there’s no masks now, convenient. Because everyone’s really sick of them. Make sure you do it the day before. No signs behind. But the day before, the day before State of the Union, no mask. You don’t need them anymore, which is great. So, good perception there. You took-
Daniel Creech: Sorry to interrupt, but it is powerful to make that line about the… Remember, you’re going into the midterms. So, you want to start saying things and implementing things now so that you see some results by the time you have-
Frank Curzio: Exactly.
Daniel Creech: So, I thought it was very smart of him politically to say that about funding, the police and things like that.
Frank Curzio: Yeah. Now you have to take that-
Daniel Creech: That’s good for overall economies as well. So, you couple that with, hopefully, the safety-ness that you get back to, plus the reopening and no masks. That’s a very positive, and that will play out over the next couple months. Sorry.
Frank Curzio: I mean, overall, it a non-event for me, but I do think that leads us to oil, which is they released oil from the strategic reserve. Oil price is over a hundred. I thought it was a good time to, hey, maybe take profits, but wait to hear my interview tomorrow guys with Harris Kupperman. He was betting oil for a while and say was going to go over a hundred when he was in the 30s and 40s. And even when he was on our podcast in the ’60s, he said it was an amazing opportunity. And he’s humble. He says when he gets things wrong, this one he got really right. But he’s saying that oil’s going to go a lot higher, and you’ll see that forecast tomorrow, which is insane. But what we’re doing with Russia right now, we’re making them 10 times stronger.
Frank Curzio: The sanctions are driving up oil prices and they’re one of the largest producers in the world. They have the entire playbook. Same thing happened when you took over Georgia, same thing happened when you took over Crimea, the same exact things. You place sanctions on them. They knew NATO was going to come after them. You can’t do anything. So, they had the playbook at the last five, six years. They win themself off for treasuries, got out the dollar, lower their Euro stake. Now, you’re seeing gold go higher and Bitcoin go higher. I mean, Putin was very, very smart in, hey, this is eventually going to happen. This is what we need to do over the next few years. And the timing was great, but I just feel like they’re so ahead of us, because everything that we are doing and we’re hurting them and their economy is closed.
Frank Curzio: Listen, the same thing happened with their currency. It went down 35%. The last two times, when they took over, Georgia took over Crimea. So, they know that’s going to happen. So, they close our stock market. It’s going to be a great opportunity. It’s going to be a chance for all that money that you have in oil to really invest in those companies. These guys are really smart. The way they’re doing this, we have to find a way to really hurt them by taking away that power in oil, which we haven’t done. Otherwise these sanctions, I won’t say that they’re meaningless, but what are they doing? They’re causing massive price increases for every single person in the world. And the one person you’re not hurting is the person you’re supposed to be hurting, is Russia because they’re one of the biggest producers and oil’s going through the roof and they’re so well. For me, I don’t get that part in terms of strategy.
Frank Curzio: And I just feel like Putin, there’s a narrative now saying he’s crazy. He is outraged. He has no choice. He has to take over Ukraine right now. If it doesn’t, it’s going to seem the most week, that Russia has ever been in history, even if they’re not able to do that. So, he’s all in. He’s definitely going to do that right now. I mean, he has to do that. He’s not crazy. He’s very smart up to this point. We have to do something. I mean, we’re doing everything we can to try to prevent this thing, except for basically putting troops on the ground. But we have to do something. I don’t know what that is. It’s not swift payment systems. It’s not that. It just, the sanctions right now are, are not working. They’re actually making Russia very strong.
Daniel Creech: Well, nothing’s going to happen overnight in a situation like this, the sanctions and the swift payments and the lack of communication or cutting them off from communication, I should say, we’ll definitely have a profound effect. What good is it, Frank, if and we’re paraphrasing a little bit here, but to your point, they are very rich in commodities that are very big producer in oil. One of the largest, one of the most influential yet if oil goes to $150 a barrel, but yet nobody is a buyer of your oil. What good does that do to you and your economy? We’re going to wait to see, obviously our administration’s bet and the world powers are saying, “Hey, that’s going to squeeze you out.” It’s going to cost strife. And for lack of better word just nervousness and non-commitment on the inside. You’ve already seen reports about logistic issues, food and logistic issues on the invasion and all that stuff.
Daniel Creech: Are they doing enough right now? I think the low hanging fruit theorists are saying no. And it’s funny because you always say, “Hey, let’s look at the other side.” So right now, the contrarian vet would be to bet against oil and or take profits. I’m still over the camp of this is the fun thing about investing from a bigger picture. When you’re right on an investment or a thesis, the hardest thing, and this isn’t Daniel Creech saying, this is much smarter people in books and all kinds of things. But the hardest thing Frank to do is to do nothing. Because you always want to do something you want to capture. So, hey, if you were in oil for the last six months and you’ve been in any energy company that’s gone up, I’m not going to, and I don’t think you’re going to do the same.
Daniel Creech: Nobody’s going to begrudge you or get on you for taking some profits or taking some off the table. However, just because times are good and you can sell into strength, doesn’t mean it’s time to get out of this and move into something else entirely. Forget Russia and the invasion for a moment is negative and as easy as that sounds to say, there’s still a lot of issues with supply and demand and bottlenecking and headwinds against oil and other sources of energy like that, that are going to continue to drive the price higher. You just have a huge short term, I.E if you will boost with the Russian invasion.
Daniel Creech: We say all this to say, make sure you have exposure energy companies. ExxonMobil was out today. Continental Resources was out today, making announcements, Frank. This is a good segue, because you love when companies make announcements like Ford. But ExxonMobil and Continental Resources are investing in carbon capture. They’re getting out in front in this. They’re going to be the leader and the cleaner energy. And that is the type of banner you want to have, and that’s why we have ExxonMobil and Dollar Stock Club.
Frank Curzio: Now, definitely makes sense. And as I’m watching, because power is testifying right now in the market’s starting to take off midday here.
Daniel Creech: Higher or lower?
Frank Curzio: No, higher, because he’s saying all the right things. So, he’s saying all the right things like they just have some headlines on there. It’s saying that inflation is a function of the monetary action and we can handle it. And the economy’s very, very strong. So, power will propose and support a 25 basis point rate hike in March. That’s what he actually said. That’s a headline. Wow, announcing it before the meeting. That’s going to be 25 basis points, rate hike in March. We’ll propose and support. And the markets are liking that right now. So, the market’s going up. They think it work up three, 400 points now in the Dow. And as that turns, and even Bitcoin starting to surge again, which up to $45,000.
Frank Curzio: Dan, the Fed to me is the biggest wildcard here. I mean, you want to talk about a wild card. We’re talk about five weeks ago, there was a hundred percent chance based on the Fed fund’s futures or what they’re going to do. That they were going to raise by 50 basis points. Before today, before this headline, all of a sudden, out of nowhere, there’s a 10% chance the Fed was going to do nothing. Nothing. I’m not talking about 25 basis points, nothing. So, if you think about that in five weeks, four to five weeks, the massive amount of uncertainty for the Fed to make that or for the perception to change that much. I mean, we’re talking about three rate hikes three months ago, then two months ago, then we’re talking about nine rate hikes from JP Morgan. Now it’s three weeks ago, that’s uncertainty. Nobody knows what the Fed’s going to do.
Frank Curzio: And the Fed doesn’t even know what they could do. They didn’t do anything yet. Keep that in mind. We’re inflation’s all-time high. They didn’t do anything. They said November, this is what we’re going to do. They didn’t do anything yet in March. Now, you’re going to start with a tiny little 25 business point rate hike with energy prices surging, which energy is the worst thing in terms of inflation, because that impacts all companies, every single company. And what are they going to do? They’re going to raise prices further. And you’re seeing that across materials. You’ll get a pool built right now and it’s three times the cost it was from 12 months ago. Three times the cost to build just a regular pool. So, it’s insane with the material costs and they’re going higher high and a lot of that function of oil prices. But the fed is so behind the curve, they just don’t… I understand we have the rush situation, everything, a lot of stocks are down, but it is pretty crazy. But-
Daniel Creech: I’m going to have some fun with you because you were thinking they were going to go 50 basis points. So, he literally just said that they’re going to do the 25.
Frank Curzio: It says the headline right now is, we’ll propose and support a 25 basis point rate hike in March.
Daniel Creech: Got you. Okay.
Frank Curzio: That’s the headline, what it says. So propose, you vote whatever, but for me, I think-
Daniel Creech: Frank, I got to have some fun with you. You got to quit being surprised that these people are going to change their mind. You give them too much credit my friend.
Frank Curzio: You know what the problem is, is they’ve been doing this all long and I understand their playbook is everything they ever read in the past and everything they ever read in the past, especially since the credit crisis, don’t freaking money at it. If we throw money at it, we’re fine. Look, we made a ton of money by bailing out the banks and taking Warren. So, all this stuff came back. This time you went even crazier, and then when the market came back and we have record highs in almost every asset class, which was a year ago, you still said pedal to the metal. It’s why we have supply chain concerns. It’s why people don’t want to go back to work because they’re getting hand money still. And even Joe Biden promoted that, more child tax credits. Again, just canning people money to have them stay home, which is why, when you go to your favorite restaurant, it takes an hour now or they’re closed at certain days during the week, because they can’t get anyone to work there.
Frank Curzio: So, we have to stop looking at this from a short-term perspective, because that’s what we’re doing. I mean, look, I understand the uncertainty, but inflation is something that the Fed you can’t really do anything about. You have to take money out of the system. It’s the only way to cure it. And they refuse to do that. And as long as you refuse to do that, we’re going to see these inflation numbers, not even moderate, they’re going to continue to go higher.
Frank Curzio: And you’re going to see that in the quarters ahead and company’s going to be raising prices and, again, this prolongs it. Instead of just taking the punch in a face and four or five, six months and maybe even a year stretching out to tough market conditions and getting everything under control and prices coming back down and straight at a normal level, now you’re prolonging this for years and years and years because again, nobody knows what the hell you got to do. And with the uncertainty 50 basis point rate high a hundred percent, five weeks ago… And then, up to yesterday it was 10% no rate. You know how big of a that is?
Daniel Creech: Yep.
Frank Curzio: So anyway-
Daniel Creech: Hey, there’s things going on. You got invasions going around. Hey, it’s difficult. Cut them some slack. It’s a tough job, Frank.
Frank Curzio: I’m trying to cut them some slack, but then again, what a market. And we’re seeing it because-
Daniel Creech: Hey, lower your expectations on them doing the right thing.
Frank Curzio: You know what? It’s not even expectations of them doing the right thing. It’s funny that this is what they need to do.
Daniel Creech: I know I sound cynical for everybody out there, but you’ve got to understand. Frank has a very genuine big heart and I love it.
Frank Curzio: I believe people at the end of the day would do the right thing. And we haven’t seen that in politicians. The mask wearing, all the bullshit and the lies that were told, even though the science was there. Kids don’t need this. Now we’re seeing that the vaccine… Did you see that highlight from Pfizer where kids between, I think it was, five and 11 or five to 13 or something like that?
Daniel Creech: Oh, how quickly it wears off?
Frank Curzio: Yeah. So basically, you have the same chance of catching COVID or getting COVID or not getting COVID whether you take the vaccine or not, but yet, you’re taking the risk of that vaccine. It’s whatever they could do to make money, they make money and I get it. So, I won’t go on a rant there because there’s other things I want to talk about, which includes earnings. But before we get to earnings, Buffett’s letter, which you were excited about. You’re like, “Yeah, this is cool.” I want to talk about, I read some of it, but this is on you. What do you want to talk about? Because you were pretty happy about a few things.
Daniel Creech: Yeah. I mean, I love this. In my opinion, everybody should read these annual letters that Buffett puts out there. Obviously, hands down, he’s one of the, if not the greatest, investor of his generation and he is one of the best ever, period, on just creating a conglomerate. And I encourage everybody that listens to this, go through, read his annual letters. The most recent one just came out this Saturday and a couple things that stood out to me from his perspective. First of all, Frank, you got to give him credit, since on the first page they put the compounded annual gains against the S&P 500 since they took over management. Overall gain from 1964 to 2021 for them is a little over three and a half million percent, which, hell, the S&P did 30,000% over that time.
Daniel Creech: So nothing to talk about, nothing quite like them. The main thing that I want to take away quickly as on the cliff notes version of Daniel’s opinion of this is that, he does such a great job. And he has for years on trying to convince people to think about buying stocks as buying businesses, the entire business. So, you can own a portion of businesses. One of their biggest holdings as Apple. They don’t own Apple entirely, they own a portion of it. But he looks at it and views as if they were buying their own company. He wants a solid business with great economics and a great CEO. If you look at Buffett’s stature in the building blocks, and he goes through this in his letter, he talks about it a lot through his insurance CEO, Geico and other businesses with the pilot.
Daniel Creech: But you focus on CEOs. You and I have talked about this a lot. We go through transcripts all the time during earning season. You want to see what management is saying. Typically, their cheerleaders, that’s part of their job is to be upbeat and be successful or sound successful, sound exciting, be a little salesy. But when Warren Buffett is telling you, hey, they invest in people. They buy companies. They let the people continue to run them as if their own. That’s something special. I say all this to get to two great companies here in a minute, but a couple of thanks, Frank, real quick. Did you know that Berkshire pays roughly $9 million a day in taxes? So, Buffett always walks this fine line about taxes.
Daniel Creech: This is one of the many reasons I respect this guy because he comes across in the media, projects him as the nicest guy in the world. And he’s one of the best cut throats and businessmen in the world. So, I respect the thing on how he pulls the strings and puppet master on that. He talks about the insurance and how the float generates their massive earnings because all the money are huge majority, billions and billions that they earn or not earn, but collect and then invest for shareholders is basically for free because of the insurance quotes. You ought to read through that. He does a great job talking about that.
Daniel Creech: Share repurchases, Frank, this is what I want to talk to you about. This is what I wanted to highlight because for the last several podcasts I’ve been talking about the low hanging fruit for the environment we’re currently in and going into, I.E. higher inflation. I don’t know how you have more of a risk-reward standpoint, Frank. Argue if you will, how is Berkshire Hathaway not one of the best companies set up to just start putting money to allocating during what we’re expected with inflation stuff? Across insurance, across railways, all that stuff. Where do you stand on that as a low hanging fruit that nobody cares about? Because it’s like recommending Amazon and Apple. People are going to say. “Ah, I don’t want to listen to this.” Everybody can think of that.
Frank Curzio: I think it’s a good idea. I mean, if you’re looking at the holding. So, one thing that does worry me, they got a very, very big position in Apple now. I don’t know if Apple’s so much of an inflation hedge that it should be cyclical. Is one of the few technology companies that comes out with new products enable to significantly raise their prices and maintain those margins forever. Yes, they’re getting into services and things like that, which is becoming more percentage of portfolio, but it’s still relatively hardware company. You have banks, which are good, even though they’re trading 52-week loads when we have mass of inflation, which is surprise, but everything’s getting nailed right now. Coca-Cola is another good name. I mean you have dividends and not only that you’re seeing with, Buffett here and I got some numbers here. They bought back $6.9 billion of it stock in a fourth quarter alone, bringing that year to date, total to $27 billion.
Frank Curzio: And they’re going to continue to do that. Some of the things that I saw and that answer your question. But some of the things I saw there is he highlighted how, of course, rising industry going to dramatically impact markets, which I think some of us know, not all of us know. And we’re seeing that to the effect just in November, from the Fed saying that we’re going to raise rates more aggressively and tighten, and what’s happened to the market. We look at Starbucks and Nike and Home Depot down 25% plus from their highs. And it’s impacting all stocks, not just the bad ones. And he said something else that was very surprising. So, he has in terms of buybacks also within Apple.
Frank Curzio: I thought this was really cool, because he said his ownership is a mere 5.5, 5%, up from a 5.3, 9% a year earlier, which seems like nothing. It sounds like small potatoes that increase, but consider that each 0.1% of Apple’s 2021 earnings amounted to a hundred million dollars. We spent no Berkshire funds to gain our commission. Apples repurchased it to the job. But he also highlighted how he’s not really… Even now, he’s not really finding a lot of ideas.
Daniel Creech: Exactly, which leads to the 140 something billion dollars in cash.
Frank Curzio: Yeah. So, you’re going to see more buybacks. Yes, it is a good place. And your expectations were, hey, know what? Remember, we had 8% annually, those are usually return. So, S&P 500 date back to 1950s. The last three years though, we’ve seen massive gains of 30%, 19%. And I think it was 26%, three years in a row. Again, you got to revert back. You can’t continue with those gains. And this is a company that’s well-positioned. And again, everybody just laughs at this guy for so many years and years and years. And you see all these new investors say this guy’s know Cathie Woods and stuff like that. Not like she doesn’t respect Buffett, but it’s just funny to see how he finally got out of the technology. I don’t know if Apple was his idea or portfolio manager’s idea, but that made the whole portfolio that made the gains and these guys doing great. Now, really quick, because of the buybacks and we’re going to get the stocks.
Frank Curzio: We might run a little bit low in this podcast, but the buybacks data I want to talk to you about, they’re saying it’s a massive call, but let’s go over the last two quarters alone. Last quarter, we had a record. I think it was $260 billion, $500 billion was spent to buy back stock in the last two quarters. Think about that. That’s how strong the company’s balance sheets are even today. So, 30% of that was from the Google’s, Apple’s, and Microsoft’s, which led the way. But you’re looking at Meta, purchased $20 billion worth of stock, which shares were above 300. And where is around 200, a little bit above that, maybe Starbucks, Cisco, Charter, they had buyback best amounts of stock last quarter stocks that have gotten hit. You’re going to see another record year.
Frank Curzio: If you’re looking at the full year, $870 billion was spent in 2021 to buy back stock and $500 billion, the last two quarters. And if I had to guess over those last two quarters where we are now, those stocks are down. Most of them are down significantly since then. So, you’re going to see more buybacks come in and which they should come in at the right time because these stocks are down tremendously, and you’re seeing companies raise dividends. That’s something to look at, because that’s a catalyst that people aren’t talking about where I think it’s more than 80% of the companies are now outside that window where they can now talk about it and announce buybacks. And that’s why you’ve seen a lot of companies announce these buybacks now.
Frank Curzio: So, you going to see that. I think that’s a big calls in this market where some of these names are good names are down tremendously, and we’ll take that to earnings. Because I know you want to talk about Ross and also Nordstrom. Nordstrom’s up to 30 plus percent. Ross had really good numbers. And I know you want to talk about some of the earnings, but now’s a good time, maybe these companies buying back stock now, but Nordstrom up 30% and day, but it’s still down 30% plus from it highs.
Daniel Creech: And Nordstrom had a huge short interest. I believe it was over 20% going into that plan.
Frank Curzio: I think I covered that a while. I haven’t looked at it in a few months, and then they made sure that it wasn’t going to happen or whatever it was. But-
Daniel Creech: I like your stats on the buyback. I didn’t realize they were that high. And one last point here, Buffett has done a great job over the years about pounding the table for lack of a better term. Buybacks can be used to help earnings per share because you’re just shrinking the number of shares. Therefore, all else being equal, your earnings are going to go higher per share because you have less numbers. And Buffett is always talking about and reiterating the fact that you want to buy them back at attractive prices. For your example, if you’re buying your stock back at 300, and now it’s 200. Obviously, in the short-term, you can say, “Oh well, we overpaid.” You have to give that time to play out. But over time, you want managers that are good allocators of capital.
Daniel Creech: And so, my point here is Buffett, they’ve repurchased 9% of the shares outstanding since 2019, Buffett has. And they bought it back year-to-date $1.2 billion as of February 23rd. And he says our appetite remains large, but we’ll always remain price dependent. My point is that for us average investors, if you have the greatest investor buying back his stock right now, that’s an easy path to follow on your share re purchasing thing. A lot of them coming out of blackout periods. I think it’s brilliant. And to your point, raw stores, you want to see them buy them back at the right price. So, if you have Rost, R-O-S-T pulled up, you see a chart there. It is sold off significantly from its recent 52-week highs.
Daniel Creech: I point all out because they just came out with good earnings, solid earnings guidance was a little rough, but what did they do? They announced a $1.9 billion buyback. They announced a 9% increase to their dividend, management said that they’re getting back to normal on store reopenings going forward. And after 2023, they expect to return to double digit earnings per share growth. Now, all things else being equal fact, set as of the 25th of February on their wonderful earnings insight that you always call out. Basically, for cyclical year 2022 earnings per share are expected to grow around eight and a half percent. Ross is telling you that they’re buying back shares that they’ve sold off since recent highs. They’re getting back to normal in store reopenings, they’re raising their dividend and they expect double digit higher than market average, double earnings per share growth going forward. When you have people spelling it out like that, put that on your radar and make sure you pay attention to that because that’s exactly what you want to hear going forward as an investor in a wonderfully run business.
Frank Curzio: Yeah. If you’re looking at, and we have the chart up here now, we’re looking at a stock that went from 134 to 86. And now it’s at 96. So people are like, wow, the company just reported great earning is up seven and-
Daniel Creech: It is up seven or 8% today.
Frank Curzio: Yes. Big deal. I mean the stock has gotten murdered and you’re seeing those numbers are good. They have a dividend, they’re buying back. Did they buy them back stock? If not, I mean, they raise a dividend at stock. They announce massive growth plans, opening up more stores. This is something that does very, very well. If you’ve been in these stores during times. If you’re thinking that time’s going to get tougher, this is a place that people shop. This checks off all the marks of a business. When I say I’m seeing ideas that I’ve never seen before, just incredible ideas in a very, very long time. This is what I mean. The market’s terrible right now, but a company like this, that’s getting it done. Just reporting great numbers, and only what? Less than about 10% off its highs.
Frank Curzio: With that quarter, you’re seeing that. So, when things do get better and we have some certainty, this thing’s going to shoot up to its highs again. So, these are the stocks that you want to invest in. As long as you have a 12-month timeframe, you’re scaling in, this is a good name. I wanted to bring up something else because Ambarella reported. And Ambarella got nailed. They got destroyed. It was down like 35%. And it’s not so much, they bombed the quarter, but they said something that was interesting because they had supply constraint concerns, which by the way, I get this data, guys, every single week, especially with cars. And it took a huge leg backwards where we were hearing from Ford and GM. And I told you that they were lying nine months ago, 12 months ago, that supply chain issues are easing and second half 2021, we’re going to be, no.
Frank Curzio: Now we’re hearing Intel saying, nope. These are the guys that build the chips Intel. They’re like, nope. This is through 2023 guys, sorry. Now Ambarella, a little part of Ambarella, you hear the supply chain concerns and constraints. Specifically, I found this in that conference call. That it’s 14 nanometers supply from Samsung will be constrained. That’s what’s constrained right now from Samsung. The 14 anatomy just for Ambarella, which is a much bigger company. Remember, they used to be like a GoPro play and that was it. And then, they grew in this company’s massive now. So that 14 anatomy supply goes into advanced driver assistance systems, ADAS. Driver and in-cabin monitoring, autonomous driving, robotics applications. Think about that for minute because Ambarella’s not going to be the only company that has impacted right now. So basically, those chips that need to go into a car are constrained right now from Samsung.
Frank Curzio: And you’re probably going to see the same thing from Taiwan, Semi, where capacity’s taken. What does that mean? When I’m looking at a company like Ford and Ford came out and said, “Hey, you know what? We’re going to separate these divisions. It’s going to be electric vehicles, international combustion business, Ford Blue, that’s going to be the iconic guest company and Ford Model. Ford Model E’s going to be the breakthrough EV vehicles at scale. And I love Ford because Ford’s management team has done a great job over the past, probably 18 months of saying the right thing and bullshitting. And it’s different from the way they used to be, which is why they were just left behind. But now, I mean, this company’s going to say anything to get it stock price up. Eventually, you got to put the numbers behind it. We saw last quarter that the numbers aren’t behind it.
Frank Curzio: And a lot of this, I just want to throw this hatchet because this is cool. They said they were going to do this, this going to create value. But I’m just going to show how a lot of this, you’re saying to get your stock up because it’s not good right now for Ford, GM. These guys, they’re not making cars, they can’t make cars. They don’t have the chips. And the supply chains are getting worse and worse and worse. Now, they say they’re going to accelerate their Ford plans to unlock growth, create Ford for Ford shareholders. Total company, just an EV margin of 10% that they’re expecting the annual production of more 2 million EVs by 2026. So, the margin of 10%, 2 million EVs by 2026 and EVs represent half of global volume. That’s what we’re expecting by 2030. Let’s put those numbers perspective, just outline.
Frank Curzio: You’re not even producing a total of 2 million cars right now. You didn’t do it in 2021, you didn’t do it in 2020 saying this is going to be a half of your global volume by 2030. That means you’re expecting to produce 4 million cars in total. 4 million cars. The highest amount they’ve ever produced was 2.6 million, barely 2.6 million in 2016. That’s the most they’ve ever produced in their life. By the way, Ford is shutting down at least one plant, probably two plants because the supply came still. They’re not telling you that. They’re announcing this shit to basically mask. And it’s like what Disney did with streaming all these subscribers. No one’s paying for it, but it’s okay. We have to many subscribers that aren’t paying for it. The numbers matter, and you’re seeing that with Disney. You want to get into the right industries and pretend you’re a growth company.
Frank Curzio: How is Ford a growth company? Because if you’re looking at their earnings over the next four years, this year expected to hit about $2 and seven cents. And if you’re looking through 2026, that number is only expected to go as high as $2 and 87 cents. So, when I see that you’re looking at 7% annual growth in earnings over the next four to five years, that doesn’t sound like a growth company to me. That’s annual growth in earnings. That’s what analysts are expecting right now. Their debt’s going to grow from less than 20 billion to 33 billion by 2024 because they don’t even really have the technology for this. How they going to produce this? So, massive spend below average growth. And now, you’re about to you say we’re going to be one of the largest EV makers. Every car maker is going to be releasing new EVs easily over 150 in the next three years, 50 will plan this year.
Frank Curzio: Probably, you’re not going to see any on the street. Maybe you see five, six people that get them, but it’s just classic how you’re listening to a company doing everything they can because the numbers aren’t there. They have supply constraints. They’re going to see it. You’re seeing it from the suppliers. They’re not announcing it. GM’s not announcing it. Wait till you see the numbers, the next couple of quarters, these guys aren’t selling anything. And the reason why Amazon aren’t as bad is because yes, there’s demand there and people need to buy cars. The existing car is able to sell a lot more for a big premium. But if you’re looking at sales, being down, you look at a company, even at its best levels, through 2026, which you’re going to see a lot of whatever, the new Model E whatever. Their new Ford F-50 lightning, you’re going to see come out.
Frank Curzio: Even with all those numbers coming out, there’s no way they can make these estimates on production. And to me, it’s just funny. Look, if you say the right thing, you say the right things, that’s what Ford is doing. There’s no way they’re actually going to meet these estimates, not even come closer and you’re going to see the next couple quarters when numbers really, really come down, because expectations are high right now. I know the stock was 25 and it’s 17. It’s up a little bit more on today’s news. I think it’s going to be short lived and eventually going to have to put the numbers.
Frank Curzio: I just can’t see Ford putting up the numbers. I hope they do. They’re not going to be able to put up the numbers they haven’t yet. And you’re not seeing these cars being developed. What is that? I might be even saying it wrong with the car EV of the year for 2022, but you can’t even buy it in 2022. So, what the hell’s the use of being the car of the year when you make two of them? So-
Daniel Creech: Are you saying the shot it or just avoid it?
Frank Curzio: I would shot for here.
Daniel Creech: Shot it?
Frank Curzio: I mean, by puts on shot, you never know what could happen in this market. Something could be like, you look at Nordstrom. You’re right. It’s down 60% and boom. It pops 35% in a day. Depending on the expectations, how much it’s down for. It’s not really down that much. It’s still a little bit of expensive stock, but man, I don’t know how they’re going to get those numbers around. And sorry, it took so long on that though. But anyway-
Daniel Creech: That’s all right. It’s good stuff.
Frank Curzio: It’s good stuff. So, we covered earning, we cover State of Union. Again, we just try to keep this 30 minutes. We’re closing on 40 minutes, but there is a lot going on. We want to be here for you, the oil markets, the Buffett letter, different ideas that we’re bringing you saying, “Hey, you know what?” Ross, Nordstrom became Ambarella and also Ford be careful. So, we just want to shoot ideas out there, what we’re seeing for the week. And this segment is getting lots of downloads. So, questions or comments, keep them coming in. But Daniel, thanks for coming on.
Daniel Creech: Absolutely.
Frank Curzio: Awesome stuff and-
Daniel Creech: Cheers everybody.
Frank Curzio: And I’ll see you next week, buddy. All right, guys. So, that’s it for us. Questions, comments, gift for free, email me firstname.lastname@example.org. Daniel as well. Daniel, real quick, before you go, what’s your email?
Daniel Creech: Daniel@curzioresearch.com.
Frank Curzio: He loves it. Ask him to say it all the time.
Daniel Creech: Love it.
Frank Curzio: I got to do that forever. Now, it’s a New York thing. When we find out something that bothers you, we do, we do it for the rest of your life. That’s just a New York. That means we really like you though, by the way, just to let you know. Everyone from New York’s like, yep. It’s called busting. Anyway, but really appreciate all the support. And guys, great, great, great interview for you tomorrow. Listen up. Some ideas are going to share lots of things that are working. Company has a massive following now and it’s a really, really good interview. Yeah. It’s going to be really cool stuff to definitely tune in tomorrow and I’ll see you there. 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 guest. You should not base your investment decisions solely on this broadcast. Remember, it’s your money and your responsibility.
This week in Unlimited Income, Genia Turanova laid out her 4-point plan to stay safe amid the market’s new “Russia risks”…
Including an asset that’s better than cash when inflation is rising.
Join now and get immediate access to the report… along with a portfolio of high-yield assets for any market.