Wall Street Unplugged
Episode: 895May 18, 2022

Why safe havens are no longer safe

stock market drop

Today is my 50th birthday!

With the major indices down across the board, I want to answer a few more questions from listeners about this volatile market. I cover why safe havens aren’t so safe anymore… whether it’s worth investing overseas right now… if Walmart and other big names are buys after massive pullbacks… why the metaverse is far from just a fad… and who I see as the winner in the electric vehicle (EV) market (hint: it’s not Tesla).

Inside this episode:
  • Why the market’s safe havens are getting hit [1:00]
  • “Is there any interest in investing in emerging markets?” [4:40]
  • “Should you buy Walmart on this pullback?” [13:32]
  • “Is the metaverse a fad?” [27:41]
  • “Is Tesla the clear EV winner?” [39:50]

Wall Street Unplugged | 895

Why safe havens are no longer safe

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

Frank Curzio: How’s it going out there? It’s Wednesday, May 18th.

Frank Curzio: My 50th birthday. Yes. I’d like to advertise that everywhere, so feel free to send me gifts if you like. I’m Frank Curzio, host of the Wall Street Unplugged podcast, where I break down headlines and tell you what’s really moving these markets. Just kidding about the gifts, going to be hard. You’re going be like, “Frank, give me a stock pick. Everything’s down, we’re not sending you anything.” It’s pretty crazy. We enjoyed a nice rally yesterday though, before today. Like I said, yesterday, Daniel’s on vacation this week, so you’re stuck with me. And this podcast is about you. I say that a lot. I’m here to answer your questions, which is this week. I’m going to continue that next week as well. Watching Target get hit today, Walmart yesterday. These are supposed to be the safe havens of the market… But I want to start taking more of your questions during these times.

Frank Curzio: So, seven weeks in a row that we’re down, we might go through eight weeks. I thought we’re going to start off and have a really nice week, which we did on Monday. And then Tuesday, we see this Target warning and then Walmart the day before. But the market’s not really shaking this off. And safe haven is getting hit. With times like this, I want to be there for you so I took questions yesterday, taking some today. I’ll continue this format next week, as well, even with Daniel. So, send in your questions, curzioresearch.com. Like I said, “I’m here for you.” It’s tough times. But during these times, when you see in the market, as bad as it is even a company… I’m looking at Target, which is a good name we’ve had in our portfolio, we’re up a lot on…

Frank Curzio: We did not see this coming. Nobody saw this coming because they didn’t warn… I’ll explain that in a second, why that is significant. But even the places that usually work during times like this, that haven’t got hit hard, they’re starting to get hit hard. Look, we want to be there for you, want to let you know what to do because times like this are the times that we pick out some of these stocks and pick the right names. They’re down 20, 30, 40%. It’s one of those times you’re going to look back like, 2009, March bottom, the bottom during a COVID crisis in March into April where, holy shit, I wish I bought there… We’re getting to that point. If you have a 12- to 24-month outlook, inflation’s here, went over all the risks and everything. But man, looking at where the market is, it’s pricing in death.

Frank Curzio: And there are positives in this market. We’re seeing the negatives, we know the negatives, we talk about them every day. I’m not going to mention them again with the inflation, all that garbage with the Fed punchbowl, being removed, maybe I will mention today… And war and stuff like that and everything going on. But when I see this market and how many stocks have been absolutely murdered… Look, we are going to see inflation, moderate. There is going to be a short to buy. It’s not going to be pretty over the next few months on the next three to six months. But some of these levels where stocks are trading at could offer you unbelievable returns, unbelievable returns. I know it’s hard to say because you’re down on your portfolio, I’m down on my portfolio, but these are the times and markets that you want to invest in, especially if you have a long term outlook, because you’re investing in everything of something… What?

Frank Curzio: We’re looking at inflation, it’s a major concern, we highlight that for two years of why it was going to be major concern and why it was going to be like this. Just like it was in ’80s and how crazy it is. I didn’t think the market would fall as much, but when you’re looking at inflation and where it is, that’s going to moderate. We’re going to see it moderating. I’m going to break that down now, why you’re definitely going to see it moderate a lot faster than expected. And that is going to be the catalyst where the Fed, hopefully, is going to raise rates enough where they start cutting by next year. But investing in some of your favorite names right now, it’s going to be a little painful and just pick away. But where these things are trading, they’re trading at levels like it’s the biggest bear market in the world, ultimate chaos and everything. And what you’re seeing is the leveraging.

Frank Curzio: And when you see the leveraging, you see a lot of great names. Right? You’re like, “Why is my name that just reported great earnings, why is it down so much? It reported two great quarters. It’s down 25% like everybody else.” It’s the leveraging. People are on margin. And when they’re forced to sell or pay their taxes from last year, which they probably did good in the stock market, outside of November/December, you’re going to sell a lot of the good names. It’s forced selling. You’re forcing to sell even the good names. And that’s why you’re seeing a lot of great names. Great, great, great names. And even after today, it’s more like 22, 23% of the S&P 500 is now trading below of 10 times forward earnings. And a lot of those companies are paying dividends. A lot of insiders are buying. They’re going to see massive buybacks. Now, they just reported earnings are going to stop buying back their stock at these levels.

Frank Curzio: And they are growing earnings some of those companies, not all of them, but they’re all expect to grow earnings. You’ll find some that expect to grow earnings 10% plus, the Microsoft and Apples. Maybe they get hit a little bit further here but there’s a lot of names out there. They’re doing the right thing, they’re doing okay, weathering the storm, they shouldn’t be down 30, 40% like so many names we’re seen across technology and in the markets. But anyway, let’s get some of your questions, and I’m going to address a lot of these things I just said now.

Frank Curzio: Starting with Josh and this is Joshua. He goes, “Hey Frank, thanks for all the great coverage on the market individual names. What are your thoughts on emerging markets? Valuations still lower than the US and they’ve fallen further. Any interest in investing overseas? Thanks for all information and teachings you provide. Still wishing… I listened to your recommendation to sell some positions of February, 2020 and to buy in December, 2008 much. Thanks, Josh.”

Frank Curzio: I mean you can go over the good calls and I’ve had lots of good calls, but this market sell off, what I’m most pissed about is sounding the warning and sounding that alarm in November, when the Fed did an about-face and say, “Guys, this is a fundamental change in the market.” A lot of people don’t understand what it means when you have inflationary environment. It’s something that Fed can’t control. The only way they control it is by taking money out of the system, which is almost forcing a recession. That is the biggest risk in the market. I didn’t think that we’d see the NASDAQ fall. And this is just since March, it’s down 25%, the NASDAQ. I didn’t think we’d see at this level, even though we’d have trillions down that have to be unwound and I wish I did. We did sell some positions. I wish I sold a few more.

Frank Curzio: Even Target. Target was a big winner for us and NASDAQ… A great company that we bought right at the bottom of COVID said, “These guys are going to get it done. They’re one of the companies that the government selected…” Target could be open. Walmart could be open. Home Depot… We had all those and we sold off a couple of them. Even Costco did very well in all those. Costco and Home Depot, we sold a little early. But Target was one of the few that we still had in our portfolio. We still have Walmart for gains as well. And, of course, 25% hurts. We’re up a lot. But it just shows you how difficult this market is.

Frank Curzio: As for international, I would stay away. I’ve had some brilliant people come to this podcast, brilliant people I know have been telling me to invest internationally and have gotten destroyed. It just seems, even with times like this, that market gets hit worse. And when you have a growth environment, US stocks do much better than international stocks. You could find a chart from a timeframe that you could bring up and say, “Frank, what about from August 1st, 2017 to this part?” And you’ll say how stocks, in whatever market you’re showing me that outperform, but just a lot of these companies in the S&P 500 have a lot of exposure to international.

Frank Curzio: So, you can get China exposure through YUM! Brands. There’s so many different companies where… You could get exposure to Russia through a company. You could see how many companies are cutting their Russia exposure, right? And how many companies have exposure to international markets where you could invest here and be safer and understand these markets much better, they’re more liquid, instead of investing in a fund…

Frank Curzio: I’m not telling you that it’s a bad idea but listening to so many people tell me Russia was a buy, China was a buy all these years and they may have been right for a very short period, getting absolutely, freaking wrecked. And when I say wreck… Right now, when you look at the markets guys, everybody’s getting wrecked. Unless you’re short the market, unless you buy inputs in Genia’s newsletter, she’s absolutely fricking killing it. It’s a hundred percent winner every month that I see her logging in. Again, from Moneyflow Trader. Which is buying long dated puts on these things, you see 20% decline, you’re going to make a fortune and she’s seen 30, 40% declines on these things and these positions are going up in a month, they’re going up a hundred percent.

Frank Curzio: And it’s unbelievable, right? This is what happens. When you protect yourself and you provide insurance that’s something again that, hopefully… A lot of you have taken advantage of that newsletter. And you’re happier than ever. But I know a lot of people just… Insurance and hedging and stuff, I get it. It’s so easy to go and buy a stock any place, it’s not even that easy to buy crypto sometimes but you’re not going to have that mass market when it comes to… Some options, yes. And these people love trade options, but man, it’s nice to see that newsletter killing it.

Frank Curzio: Getting back to the emerging markets, it’s… They underperform, and I’ve seen these people get absolutely crushed and trying to listen to them and figuring out I’m like… I just don’t get it. Why invest over there when you have so many opportunities here. And again, I’m talking about very smart investors. And you have to be smart because you’re covering international stocks and people aren’t going to cover that unless they’re familiar with our markets and why that’s… Because you always have to compare and say, “That’s a better market than over here.” But the point I was trying to make before is when it comes to these markets everybody’s getting killed right now. Everybody’s getting crushed. Everybody understands a risk. Everybody know what’s going on. The problem with international stocks is they got killed when the market absolutely surged. And that was frustrating. When you see China coming down, our stocks killing it. When you see Russia getting crushed before the war, even before the war and US based stocks are, are killing it.

Frank Curzio: It’s tough to be a manager of something like that and say, “Hey, you need exposure to this.” And then the opportunity costs, you’re getting freaking wrecked, you’re getting run over by a truck. Where right now, you could be like, “Well, I thought Target was going to work. And it didn’t. I thought Walmart was going to work. I thought retailers, I thought energy stocks, I thought energy stocks are working right now…” It’s still working, still working. Energy, one of the few. But when you look at retailers across the board, if you’re looking at healthcare companies that usually do good… You’re seeing healthcare and that inflation. It’s so funny when you look at an inflation chart guys. You’re seeing massive inflation in almost everything right now, but when you look at healthcare, it’s steady inflation over the past 50 years, just a constant line going up, up, up, up.

Frank Curzio: And the only thing that’s worse than that much, much worse by far is tuition, which that’s a rant for another day because these asshole schools never get blamed for the amount of money they charge and how much control they have over students. Not to mention what they’re teaching our students these days, which we’re finally realizing is crazy. You talk to any kid that’s young and they hate the world, right? They hate America. They think it’s the worst country in the world. They hate us. That’s what they’re teaching us. Not only that, I mean, the rate of inflation for those guys, holy shit. Everyone wants to blame everybody else about student debt, “It’s the students, it’s the parents fault for not talking about them, it’s to government…” Whatever. The schools have to have some kind of responsibility here.

Frank Curzio: The prices that they’re charging these fucking kids are a joke to the point where it’s not worth it to go to college. It’s not worth it to spend 200 grand. That’s how much it is, 200 grand to go to a division one school, if you’re not in state. But all costs are said and done. That’s what it’s going to cost. So, you’re going to pay 50 grand, at least 50 grand. You can away with 30 grand here, 20 grand here, but it’s insane. They just keep going higher. But getting back to the international markets here, and sorry that is a rant for another day, for me in doing this for such a long time, the opportunities have always been in the US.

Frank Curzio: Will there be a time to buy Russia stocks? Yes. And they’re a trading at a PE of three. Well, you told me to buy them when they were PE at 15 and our market was training at 24. You told me to buy them when they were at 10, you told me to buy them at a PE of five. Now, they’re at two. You’re getting wreck, you’re buying cheap stocks with limited growth and you want to make sure you have that growth potential. You do have some of that growth potential on China. But when China decides to have a zero policy for COVID and all of a sudden everyone’s going to die from COVID. Even though we all know the facts and figures now, and most people are going to be okay if they get COVID, very few deaths. We know who it impacts. We know all the statistics, but I still see people driving with masks in fucking cars by themselves. I don’t get it, but that’s okay. Someone’s scared the shit out of those people. And whatever, you can thank whoever you want for that.

Frank Curzio: But in China, it’s even worse. For them to go to the zero COVID policy and they still have businesses closed there… Japanese survey yesterday, you’ve seen a lot of these companies they’re saying, “Oh, well, we’re open.” And China did not. They’re open yet. And that’s causing more supply chain concerns, which you’re seeing even in these warnings. So, for me, the international markets, look, I could be wrong. For me, every time I’ve tried to invest in these things, I’ve lost money. And not to the point where I lost money, where I put money in, and they might have gone up a little bit over time, but if I had them in US-based stocks, I would’ve significantly outperformed.

Frank Curzio: And that’s what you have to look at. Because when I have US-based stocks, they go up a lot higher than these international markets. And when the market’s like this, a lot of people rush to the US and those markets get hit a lot harder than they do in the US. So, I would stick… Even to the S&P 500, the Dow components and things like that, you probably better off since… Even Boeing, all these companies, especially Dow components, they have a ton of international exposure. Yet you have all the regulation, all the numbers that… You could rely on the US that these people could to go to jail if they’re not reporting the right numbers or lying about it. Why go international with so much risk? And just from a risk-reward standpoint, to me, it’s never really been worth it other than if you’re a trader in some times.

Frank Curzio: It’s never been worth it to actually hold it long-term. You put a chart up at the S&P over 10 years, 20 years, 30 years, 40 years, 50 years compared to almost every single market there. And we’ve outperformed, significantly. So, again, you could find one little time period that maybe it didn’t happen. Just like people do with gold sometimes. Even gold, it’s been horrible compared to buying the S&P 500 over whatever timeframe. And again, you could pick the 10-year timeframe that’d work for gold, 2002, 2000, whatever, a 10-year period… But overall, for me, I stay away from the international markets because I can get that international exposure here through some of the greatest companies in the world that have much better balance sheets and that I could actually rely on their financials. So, hopefully that helps.

Frank Curzio: Next question. And this from Jack. It goes, “Right. What did you think of the Walmart quarter? And should we be buying the stock on this pullback?” That was Jack. I’m going to throw a Target in here because earnings were terrible for Walmart. And I saw Cramer get on there. I think he interviewed the CEO and he was off. He’s like, “This is bullshit.” Because I think he interviewed the CEO and he has Walmart in his investment club or whatever. And I get it. Because he was so surprised. He’s like, “You’re telling me one thing and this happens.” And he used to have a wall of shame when I was there, and he’s had that for a while, and I don’t think he does that anymore, but I get it. But let’s look under the hood a little bit because look what happened with Target. And you see margins get hit for both of these companies because they can no longer pass on the higher costs to consumers anymore.

Frank Curzio: And a lot has to do with energy where energy prices of spiking again, and now people just throw in the towel. I’m seeing it. I’m doing it myself. I’m telling my kids, “Hey, you’re not going to Starbucks a lot. I know it’s easy. We drive all over the place and sometimes it’s easy to just get something on the run but we have to cut back.” I’m cutting back on food because I don’t want to pay… I stopped by Wendy’s, it was one meal and just a double burger, I got right with no fries or soda and trying to behave, just burger without cheese, and it was like $18. I’m like, “Holy shit.” The cost to go out to eat now is insane. It really is.

Frank Curzio: You’re seeing it. We’re paying over a hundred dollars. Do you know how much we drive? I tell you guys, you guys know everything about my life. And I’m driving all over the place. So, I’m moving to Jacksonville and building a house there. One thing that’s held up is houses. And we’re going to see that come down, probably not in the major… Not in Florida, Texas, and low tax areas people are trying to move to in Nevada and stuff. But you’re going to start seeing that. And you’re seeing with the home builders and you’re seeing that crack a little bit where people ordering houses, they’re like there’s seeing cancellation rates at 7/8% now. Which people were dying for these houses. They were lined up. They couldn’t get anything for months. And trying now, you’re seeing lots of cancellations.

Frank Curzio: So, you’re looking at Target and Walmart are going to throw them both in here. They saw pullbacks in discretionary spend. So, discretionary items. And again, mostly due to surging gasoline prices, the cost of fuel and freight are the same. Walmart talked about it but Target, the CEO, came on and said, it’s going to result in an extra $1 billion in costs for energy, for fuel and freight. And they said that they did not anticipate. That’s why you’re seeing the stocks sell off tremendously. And someone asked the Target CEO, “Why didn’t you warn between quarters?” Usually companies, when they’re having a bad quarter, they may say, “Hey look, this…” They warn. Right. And it’s like a pre-warning and saying, “Hey, just prepare.” Usually, their pre-warning is worse than what comes out. And when they report, they’re like, “Oh, they did better than the pre-warning. The stock will go up a little bit.”

Frank Curzio: But usually when companies warn, they fall sharply. So, when they ask the CEO and said, “Hey, why didn’t you warn between quarters? Because you’ve done that many years ago.” it was remarkable. He said, “This happened so fast.” They didn’t get a chance to. This is how quick customers… Like that, consumer sentiment can change. And when it does look out. Retailers know that more than anything. Everybody wants something. They want it, they want it, they want it, they want it, they want it and then they build up this mass amount of inventory and all of a sudden people are like, “Ah, you know what? That was pretty cool, but I don’t want it anymore.” You don’t know what changed the sentiment. But it’s just like something going viral. You can’t say, “Wow, I’m going to produce a video. It’s going to go viral.” That never happens. The things that go viral… It just weird. You don’t know.

Frank Curzio: It’s so hard to understand that. We try. That’s why analytics right now is such a big deal. That’s why Facebook, it turned into a trillion dollar company. And now that got cut in half in the social media companies, because you’re learning more about the consumers. You’re trying to understand them but the change in sentiment is almost impossible to predict. It happens very quickly, and it’s happening now. And it happened with Walmart as well. And that’s why when Cramer was like, “I was so off, I talked to the CEO and this is a great investment…” He probably adds to his position or he has his portfolio and then they come out with the warning and they blow the quarter, he’s like, “What the F?” What the fuck’s going on here?

Frank Curzio: Well, what’s going on is he wasn’t lying to you a month ago. Neither was Target. They’re not lying. Say, “Holy shit. What’s going on?” A month and a half, two months ago, they were just like, “Whoa,” out of nowhere. And you could see two months of that quarter strong and all of a sudden, nothing in the last month of that quarter. The first two months of that quarter, the last month could be holy shit. And that seems to be happening. What have we seen? Inflation rise tremendously, the Fed raising rates last couple months. And now, you’ve seen a huge rise in energy prices. And that’s enough for people to be like, “Okay, enough is enough. I can’t afford this. Holy cow. I mean, the amount of money that’s coming out of my pocket right now, see my savings dwindle. It’s getting a little crazy.” And that’s the reality. That’s the reality.

Frank Curzio: The consumers at the same time, significantly cutting back on spending, what happens? It leaves these companies with inventory concerns. And let’s talk about that real quick, because this is major guys. You need to understand this. And we could probably make a lot of money off of this because we have companies like Ford, GM, Target, Walmart, Best Buy, every semiconductor company that produces components that go into… You have billions of electronics. Your furniture companies, kitchen appliances, sporting goods, material companies, almost every retailer. What was going on over the past 12, 18 months? These companies were seeing unbelievable demand, because so much money was injected to the system. So much demand, massive, massive demand, but they couldn’t get enough supply to stock their shelves. Everything you ordered. If it’s golf clubs, it’s a mattress for me, those two things took six months, more than six months.

Frank Curzio: How long has Ford said…? For 18 months now, “Hey, we got the EV the Ford Lightning.” Have you seen one on the road? I haven’t. How many people have gotten them? A handful? All these EV things. This story for Ford and GM has been here for 18 months and longer than that. But 18 months they’re like, “We’re producing all this shit. All these EVs, we’re going to take down Tesla…” Where are they? Where are the EVs outside of Tesla? Have you seen any? I haven’t. I haven’t seen one outside of Tesla yet. They’ve been promising us for 18 months that, “Hey wait here. This is it now.” They’ve been promising for fricking three years. But now, it’s supposed to hit everything’s great supply chain concerns, everything. So, what have these companies been doing? They’ve been doing everything they can right over the past 12 months, at least, or everything in their power spending, billions to build more factories, use better software, Intel’s opening up more fab plants…

Frank Curzio: You’ve seen, Jim saying, “We’re spending $30 billion here.” All this craziness. On EV, they said first it was going to be 20 billion… I think it was 10 billion that it was like 22 billion, now it was 30 billion as of last quarter. They’re spending on new technology and everything, all this stuff, software, to fix their supply chains. This way they can get their goods in their store to meet that massive demand. Now, demand’s starting to tail off. They’re tailing off when we’re starting to get that inventory in now. And inventory levels have risen for many of these companies. So now, we’re seeing big warnings, massive warnings. It’s the worst scenario. I saw this with Taiwan semiconductor in 2017, they decided to go all in on chip production because crypto was booming and they said, “Wow, we got to produce a lot of these freaking chips. It’s absolutely booming. We’re seeing massive demand.”

Frank Curzio: It was still accounting for less than 5% of total profits, I believe and it was like… Whatever it was. It was 200 billion in sales they were generating right away and they said, “Okay, we’ve got to allocate.” And remember, we’re looking at the semiconductors, which their capacity at a 100%… “We have 5% capacity right now in 2017, 7%. Let’s use it for this and build it.” And then, they built it in crypto absolutely crashed and no one was buying these chips. And they said, “We can’t do that anymore. Because now we’re sitting on inventory. What are we going to do with these freaking chips?” We’ve got to sell them for like 60/70% discounts and get them out of here.

Frank Curzio: Because you know, outside of Nvidia and gaming, you have massive amount of chips with these super crazy computers that you really didn’t need now. And you come out with next generation in a couple months and years and stuff. So, that’s what happens. But you’re looking at a time where inventory levels arising for these companies now demands tailing off. So, we’re probably going to see some big warnings going forward because this happened so quick, especially with the latest surging energy prices. And that’s going to result in a lot of names that claim they solved their supply chain problems to see similar declines when they report a war that we saw at Target.

Frank Curzio: That’s if demand slows, right? Because they’re sitting on massive inventory, meaning they’re going to have to discount that stuff tremendously to sell it. It was in high demand two months ago, a month ago. You don’t see Target, right? Target and Walmart come out. These guys have a better indication of the consumer than almost anyone access to hundreds of millions of consumers in the US alone who shop there, and for them to say, “Holy shit, this caught us off guard. And we didn’t see this coming where in the last 45 days of the quarter.” Basically, people just said, “We’re not buying anything anymore.” Holy shit. And he said a couple of categories, outdoor and stuff like that… But most of the categories across the board, they’re saying discretionary, they’re just surprised that everyone’s cutting back so much. Now, the silver lining here, which is important, the silver lining, we’re about to see inflation fall rapidly.

Frank Curzio: Not with food and energy. I covered that. I told you why it’s not going to happen rapidly. It’s still months perhaps quarters away. But we’re going to see inflation fall across the board. Since companies no longer have pricing power. They can’t raise the prices right now because no one’s buying. They try to raise those prices. Now they’re like, “Holy shit, we…” How often have you heard that we have to discount things to sell them? Target and Walmart just said that. We haven’t heard that since COVID because there’s so much money in the system. We haven’t heard that. I mean, airlines raised their prices by 17% month-over-month, not year-over-year, month-over-month. Think about that. And they’re getting that. That’s because people are traveling, “I want to go on vacation. I haven’t been on vacation in a while, and I want to go because the last two summers were fucked by COVID. I need to go.”

Frank Curzio: They’re paying for that but they’re not going to pay for those discretionary items, items they really don’t need right now. And again, Target and Walmart. These are companies, right? And we’re hearing this from the two biggest, big bucks retailers in the world who have the best supply chains, the best management teams. And these guys got it wrong. The next shoe to drop is restaurants. Any restaurant that’s held up this year probably great shorts right now because a consumer is cutting back. But outside that we’re going to see inflation fall rapidly. That’s the silver lining here. That’s what you need to see. The only way you see that is if investors are like, “I am not paying these high costs anymore,” because then you have to lower prices. And that’s what Walmart said. That’s what Target said. That’s a great thing. That’s a sign the bottom is close.

Frank Curzio: And a lot of this other shit, I know people are seeing it going, “Oh, my God. How is this going to get better?” We’re down, accounting for a lot of these risks that we talk about every single day. But we’re going to see inflation come down sharply over the next couple months. Not in energy. We see it in the core. We’re not going to see massive increase maybe a little bit through summer. Another increase we passed through, through airlines and traveling and hotels. But people are going to start… Once summer’s up, after that, you’re going to see a big decline in inflation, inflation numbers, both CPI and PPI. When that happens, that’s going to be the opportunity because the Fed, hopefully, over the next few months and few quarters are going to be raising rates aggressively. Again, it’s going to be choppy and painful. It’s going to be ways to make money off this market.

Frank Curzio: Considering a lot of stocks are down 40% plus from their highs, but start picking away at some of those names over a hundred names S&P 500, like I said earlier, trading below 10 times total earnings. That’s a great thing. That’s a really great thing. But you’re looking at the mark, that’s the silver lining. We’ll see inflation come down because we they’re not… We’ll see for the biggest retailers in the world saying, “Hey, holy shit, they’re not buying our stuff all of a sudden.” That’s going to happen across the board. That’s not going to be limited to the two biggest retailers. Maybe you have like the Lulu Lemons and stuff that are able to keep a little bit of pricing power. But are they going to maintain that huge multiple? I don’t know. I don’t know about that, especially, when everyone else is. And they said apparel is actually pretty strong, outdoor stuff pretty strong, but still… Under Armour warned as well. Nike… Look out.

Frank Curzio: The Walmart, Target, they’re the bellwethers. They have access to data, hundreds of millions of people. Nobody knows the customer better than these guys. They’re saying loud and clear, “Consumers are cutting back on spending.” We knew it would happen. We were surprised it took so long, with inflation running wild and the Fed moving the punchbowl. But be careful buying those survivors right here, companies that weathered the inflation storm, especially this year, you had a date. Because that’s the next shoe to drop again. The silver lining, we’re going to see inflation fall sharply in the months ahead, it’s going to be the catalyst to buy cheap stocks that are still able to grow earnings. Which, again, there’s a lot of names like that or names that are already full and 30% plus, which is almost every name in the NASDAQ right now and most stocks across markets.

Frank Curzio: But I’d be careful. Even some restaurant stocks have held up well, that’s going to be the next shoe to drop. Chipotle’s and things like that, are people going to pay that much for food? No. If they’re cutting back for just regular items are going to cut back on food as well. Meaning that these companies are going to lose their pricing power. And once they do, look what happened to streaming? Those guys lost their pricing power. Look at all streaming across the board. When you lose your pricing power, these stocks fall like a rock. So, the ones that have held up well, be careful. I think restaurants will be the next shoe to fall. However, there’s lots of names that are pricing this in trading cheap are going to grow earnings. It’s going to be difficult over the next quarter or so you see inflation a little bit all over the place.

Frank Curzio: But now, the trends are in place where they’re losing that pricing power. We need to see inflation come down and now the writing’s on the wall. That’s it, the two large retails both back to back. Two days in a row, both got nailed, said the same exact thing, “Holy. We can’t believe how much the consumer’s pull back.” Why? Because they’re not paying those higher prices anymore. They’re done. That’s a good thing. Short term. It’s going to be a negative for the markets. You see stocks come down, but it’s going to provide even better valuations for you to buy. And it’s going to be, I would say, two years from now, three years from now, you’re going to be like, “Holy shit.” Buying at those levels was absolutely amazing. It’s going to be choppy. You can go down a little bit, but if you have a long-term outlook right now is the time.

Frank Curzio: Let’s take one more question, “Frank. I know you’ve been bullshitting the metaverse. And investment firms have cited this would be an 8 trillion plus industry. However, what are the chances of the metaverse being a fad or it doesn’t get widely adopted? Not to pour cold water in your thesis…” And I do believe in the metaverse by the way. “You told me when it comes to researching, you need to look at both positives and negatives of every stock and industry. Thank you.” So, that was James. That is an awesome question. And I love the fact that you said that, because for me, I’m always looking at the other side when things are terrible right now I’m highlighting the positive. When things are positive, I’m saying, “Hey, this could go wrong. This could go wrong.” You’re going to find a few people outside of the perma bears that told you there was inflation for the last 40 years. They’re 70, 80 years old, they woke up, since seven years old, they’ve been preaching inflation and the dollar’s going to crash. You could go back and look, it’s insane.

Frank Curzio: I’m not talking about those, but while the market was going up, I created Moneyflow Trader to take advantage of markets like this. And it took two years of painfulness, where the market still surged, and it was hard now people thanking me. So, for me, I always want to give the other side and I am always looking at the other side. I don’t want to be this whole fluff thing, “Oh, this is great. You’ve got to get in it.”

Frank Curzio: But let’s talk about the metaverse a little bit. Major league baseball announced it’s investing in NFTs for the metaverse. Real Madrid says that they’re building a virtual stadium. WPP the largest advertising agency in the world’s going all in the metaverse trying several deals with certain metaverses. Accenture just said that 150,000 of new hires are going to be spending their first day of working in the metaverse. Kraft Heinz is using the metaverse to solve its supply chain problems. They’re working with Microsoft with their software to provide that technology, where the manufacturing facilities, they have virtual versions of them in Kraft and gives the company’s leadership a better view into how they work and what needs improvement through virtual.

Frank Curzio: Dentistry. Big article talking about the metaverse, how they’re going into the metaverse. Again, you have to go to the dentist but still just different things within the metaverse where you could see different things before you even come in. And what kind of things that you want instead of going to office three, four times before you get stuff done. And this past earning season, more than 30% of the companies asked S&P 500 mentioned the word metaverse in recent conference calls 30%. Everything I just said there, every single thing. All of that, just these things that I just highlighted, everything I mentioned happened over the past seven days for the metaverse the past seven days.

Frank Curzio: These aren’t stories I’m pulling from months ago and years ago and, “Holy shit, this is going to…” This is just the past week. This is how big and how quick… As quick as consumer sentiment changes, and you’re seeing the spending habits change, is as quick as people are getting into the metaverse. The metaverse is going to be the new internet. It makes sense. It makes sense from every perspective. It’s what the people want. It wasn’t meant for four or five companies to own your pictures, to own your data, to kick you off sites because you have an opinion. I’m not talking about opinion where you’re it’s dangerous, where you’re looking to hurt people. I’m talking about just for a political party that you vote for, that you believe in, that you state. For reporting facts on China, from people who had data on China saying, “We know this virus started in a Wuhan lab,” and reported it got thrown off. The Biden laptop. New York Post got thrown off a social media. Now, it’s fact.

Frank Curzio: And that goes to both sides. It doesn’t matter what side you want, but not being able to express your opinion when you’re doing research because you’re not on the right political side. Was that the way the internet was supposed to be? Where these guys are so rich, they make a massive donations to different parties.

Frank Curzio: It’s amazing. It really is amazing. The idea is to get you off and angry and what does that mean? It means you’re going to post more shit and go on social media and these guys are going to make more money. That’s why they donate. They don’t donate for a cause that they truly believe in. They donate for something that’s going to make them filthy freaking rich through their company. That’s why they’re donating dollars. That’s why they do this whatever agenda that is because at the end of the day, you’re going to retire, you’re going to be sitting home with a massive freaking nest egg and you don’t give a about what’s going on. You’ll be someplace in Wyoming, in Jackson Hole, just hanging out at your freaking mansion while we have chaos. They don’t care. Is that the internet? Is that what it was supposed to be?

Frank Curzio: No, it wasn’t supposed to be that. It’s supposed to be this amazing utility, this amazing service, where people control their content through NFTs in the blockchain. It’s what concerts are going to take place going forward. Yes. I love concerts. I love being there but when you’re seeing 150 million people tuning to Travis Scott on Fortnite for a virtual conference, a virtual concert, what do you think…? Every single person in a music industry is thinking, “Holy shit, look at these concerts. I go to a million different venues…” And what is it? 50,000, 30,000, maybe 60,000, 70,000 for the big ones. Get even bigger ones overseas. But you talk about 150 million. Holy shit. Hey, that’s the future.

Frank Curzio: You’ll be able to meet people online. Real people, not bots. Every person’s going to be real online dating or whatever. That’s the way it would take place. It’s not just this small idea where Facebook’s like, “Hey, we really need to do this and change our name.” It’s 5th, 6th large company in the world. Who does that? Total, like, “This is our core business. We’re changing our core business because here’s where we’re going.” That’s where they see social media. They’re smart. They know everything about people. They’re in your living room every second of the day, tracking you, even though you don’t know it. But they know this is what the people want. They know this is where the next generation’s going. The younger generation is going, this is what they want.

Frank Curzio: To have the lockdown on social media… Yes, you’re getting threatened by TikTok down, things like that, Instagram and everything else, and Facebook and really change and go into this. It just shows you with the data they have of how important this is and how much they believe in this. But it’s a lot more than just Facebook who’s… Again, knows more about those 3 billion customers and post everything about their lives every minute of the day online. But Apple, Nvidia, Microsoft, Google, Amazon, all investing in the metaverse because they have to. It’s threatening their existence. Yes. They’re still going to be here. Yes, they’re big companies. But these are the companies with hundreds of billions of cash on their balance sheets. And this is where they’re investing. Major retailers, this is where they’re going into. See a massive amount of capital being raised by metaverse projects in the billions which is incredible. Given the current market conditions. Usually, you see everybody pull back, “Holy shit. We’re pulling back.”

Frank Curzio: You don’t really see people investing in certain things. That’s how relevant this is. That’s how big this idea is. And even if it’s a half assed idea, it doesn’t work. And I explained… In 500 billion… And for us, if we’re able to take a quarter percent market share because we are doing deals in the metaverse right now, which some subscribers are aware of through our company, you’re looking at over a billion in sales at a quarter percent market share of 500 billion market. And that’s discounting incredibly considering… We’re not looking at, “We pulled one crazy research report and said, this market’s going to be 8 billion.” Goldman Sachs is 8 trillion, but Goldman Sachs is going to be 12 and a half trillion. Citi Group is eight and eight to 13 trillion. Jeffrey’s in the trillions. Morgan Stanley, in the trillions.

Frank Curzio: This is across the board of how big this could be. But even if they’re that wrong, and it turns out to be much small market, the opportunity is that great. And it’s not going to happen overnight, but if this market does happen to be that big, now I can see why so much capital’s flowing in now, even though we’re seeing a market that’s shitty as it gets. But they’re investing in the right project, the right metaverse.

Frank Curzio: And if you’re looking just from an individual investor standpoint, you’re seeing big money come in. But even for individual investors, you could invest in a lot of these companies at very low prices because if these guys are right and it is the next trillion dollar industry or wherever, it’s going to be five, 10 years from now, it’s going to give you an opportunity to invest in the Googles, Apples, Amazons or those next generations of them. And imagine investing in those 20 years ago and where you are today, even with today’s sell off you… Instead of having five islands, you have four. Instead of having 10 yachts, you have three on the sell off. You might have to sell a couple, but you get my point. On the internet, you rarely find markets that impact everyone. Everyone. Usually, you have these target markets where if it’s apparel, it’s a target market.

Frank Curzio: Here’s my total addressable market. Here’s… They’re so small. This is the internet where everybody could go to imagine owning your own content, having your own ideas. Imagine if you’re an entrepreneur. So many of these people have made a living off of TikTok. Even TikTok, or you’re looking at Facebook, if you’re looking at Instagram, YouTube channels, they’ve made money in advertising and built up massive files in a second, in one second, any one of those companies, Google, Apple, iTunes, any one of them could shut you off and be like, “F- you. Goodbye.” And you’re done. They own everything. Every picture, your pictures you’re putting on there, they’re making money off of you. Advertisers are paying for your information, which they’re giving them for free. Shouldn’t the advertisers be paying you. Doesn’t that make sense to target you? Doesn’t that make sense? We need a middleman to do that.

Frank Curzio: That’s what Facebook’s doing. “Hey, we got a great idea. We’re going to freaking just take all the information that you’re giving us and we’re going to give it to these advertisers. We know exactly where you are, what you’re doing. They could sell you all. We’re going to make a fortune off it. Not you, even though it’s your content.” Think about it. Think bigger because when you think about this concept, this is something that is massive. And I thought it would take a little bit longer to develop, the amount of money it’s pouring in. And even the investors that we’re doing in this industry are incredible because we found what I believe is to be the best metaverse by far where Facebook’s not really the metaverse, Roblox’s not really the metaverse. You could say that. That’ll say that the metaverse is Fortnite as well, even Decentraland and Sandbox. Those are one way streets for those guys to make profits.

Frank Curzio: The metaverse is a decentralized, permissionless system where everybody benefits. You own the real estate. You own everything you could build on it. You could have a job in that economy, build a business. You could venture, hang out, play games, do whatever you want. But it’s a whole new world where everybody benefits. So, even though you’re seeing them metaverse with these guys, this is more like, “How do I pull money?” It’s the reason why Facebook said they’re going to collect 48% from developers. You’re pissed off at Apple and what they’re doing with their app, but you say you’re taking 48%, 47%. The metaverse that we’re investing is taking 5%, which incentivized these guys to continue to build and build and build and build. And that’s the metaverse, it’s an economy.

Frank Curzio: It’s something that’s going to be on its own. We’re going to decide everything. We’re going to build it. You’re going to be incentivized to build it. It’s not going to just be one metaverse there’s going to be few. And the one’s going to be like cable company ones who have the best contents where people are going to flow to.

Frank Curzio: But that’s a new world on the internet, where you control it. You make money off of your own content, where everything you post online, you’re not making money off of. You have to share it with somebody. You have to be on a platform or whatever, which is bullshit when you think about it. That wasn’t the way the internet was designed for. So, me the chances of this not happening are very low. I researched this to death. My biggest risk was, “Wow. We’re probably early the party,” which I am to a lot of trends. That’s one of the mistakes I make where I’m early to it. And then a lot of times they eventually work out, and we do very well. But this one, the amount of money pouring in, it’s not just a bunch of people out there and investment firms saying how big a trillions this industry is going to be, which is just bullshit at the end of the day.

Frank Curzio: Follow the money. Billions are flowing into the metaverse right now, and it’s getting bigger and bigger, and it makes sense. All the retails are getting it, all the major technology companies getting it. And you’re going to see it happen a lot sooner than later. So, it pays to start throwing money into this now. That’s how I feel about it.

Frank Curzio: So guys, any other questions, comments, I’m here for you. I mean, I got some more questions here and you know what? I usually give this in 30 minutes. I’ll go another five minutes. Because I have another good question. Okay. Because I want to be here for you guys. So, this one was from Matt. And he goes, “Hey Frank, I have no doubt. EVs would be the future of the car industry. Is Tesla going to be the clear winner? Is it worth buying here? Who else will be the winners?”

Frank Curzio: There will be winners. I really like Rivian here. Inside of buying, they have the best technology, Ford, GM, but there’s just a massive shortage of lithium guys. And I think nobody’s really talking about that. I talked about how these guys are say they all have the technology for 18 months, yet the supply chain concerns are okay. They don’t have the technology yet. They can produce a car to and show it to you. I drove an amazing… It was the iX at the BMW, Consumer Electronics Show. All electric, it was amazing. They can’t produce it at scale. You’re not seeing anything else out there. So, the shortage of lithium is very serious and that’s going to make the price of these EVs, which most are expensive now compared to gas cars, they’re going to go up sharply. I’m not talking, “Oh, 3, 5%.”

Frank Curzio: I’m talking about 20 to 30% more. There’s a massive battery shortage. And most companies don’t have the technology yet to make EVs on scale, other than Tesla. Tesla’s going to be a clear winner. However, Tesla’s down 35% from its highs now, yet it’s still trading at 70 times forward earnings in a market where consumers are pulling back on spending. Are they going to spend that much on a Tesla now? I don’t know. I know it’s religious. I know they love it. I know they’re great cars. I’m aware of it. I know the stock better than most people. I know their products better than most people, been covering it for a long time. But we’re in a market where we have high inflation, which is going to moderate, but remain high for some time. And we’re in a market with the Fed’s raising its rates and shrinking its balance sheet.

Frank Curzio: So, it’s going to be a continued tough market for growth stocks with a massive premium they had and deserve where rates were zero, and the Fed’s pumping money into the markets. They deserve to trade 30, 40, 50, 60 times forward earnings based on that expected growth. And Tesla has filled in a lot of that. I would say three years ago, you’re looking at cash concerns and stuff. Now, they’re blown out of water, demand is there. They’re making money. They’re doing great seeing supply chain concerns, as well. But they’re still trading at a crazy multiple, considering it’s not going to be a growth market at least for another 12 months, at least, probably longer. Where you should be buying stocks at 70 times PE where you could buy mostly S&P, well about almost 25% of the S&P below 10 times forward earnings, but Tesla will be the winner. I don’t know if I’m buying the stock here though.

Frank Curzio: At this multiple, you’re going to see what competition come in. But the shortage of lithium is very serious considering how all these EVs plan to scale, they want to produce how many…? Just go back to… I’m not going to waste your time, I don’t want to waste time here… of how much the expectations are for. If you go back five years, everything was supposed to be… They were supposed to produce millions of cars now. So, now they’re pushing it out. But just go to 2030 and look at how many EVs and just go over the projections that these guys are predicting. If they’re right, where are they getting the technology from? That’s why I was always wondering why Ford… They should have just bought Rivian. You made the investment. It was a great investment when they did the IPO.

Frank Curzio: Unfortunately, your shares were locked up and the stock crashed 75% before you could sell. That’s Ford. Ford going back to its own roots. Everything always goes wrong for them, but their EV portfolio looks great. GM’s looks great. BMW’s looks great. Honda’s looks great. How they going to produce this on mass? Just on scale. They don’t have the technology. Rivian has the technology. That’s different. I wouldn’t be surprised if Tesla comes and buys Rivian. That’d be a great investment right now. The stocks down 80% you have insider is buying. How many EV companies you see inside is buying right now? That’s a good question. I only saw Rivian. Why are the insiders at Ford not aggressively buying here? Maybe they are, I don’t know. Or GM? Because you told me everything is great, at $4.25.

Frank Curzio: And where is it now? I don’t even know. I haven’t looked. 10, 11? Should be buying hand over fist. And at 30 billion you’re going to spend, why don’t you take 10 billion out of that and buy your own stock back? “No, because we don’t have the technology to produce these things on a scale yet. And where are we going to get the lithium from? We don’t know yet. We don’t know yet.” But Tesla knows. Two giga factories built Texas and Shanghai. Now, they’re producing those cars in California as well, which they’ve always been doing, but they’re well ahead of the curve. Well ahead of the curve. And they’re seeing those numbers, they’re seeing the growth they’re coming out with the new products. There’s going to be competition now, but Tesla’s still the king. I just don’t know if I want to invest in Tesla here at… They’re trading at this valuation.

Frank Curzio: And I don’t know what’s going on with Twitter and how much shares they had to sell, Elon Musk got to sell of Tesla. Whatever and speculation, all the bullshit… I’m just saying that 70 times forward earnings in a market, that’s no longer a growth market. You’re taking on a lot of risk here, and you’re hoping that they’re going to make their numbers, even though they just admitted that they have huge supply chain concerns. So, that’s my thoughts right now.

Frank Curzio: So guys, that’s it for me. Questions, comments, tomorrow’s podcast, email me frank@curzioresearch.com. I mean tomorrow’s podcast is going to be a great interview. So next week, I’ll come back to those questions but send all your questions guys. I’m here. I know the market’s tough. Every single time we see a market where we see a 2%, 3% rise in the NASDAQ almost immediately the next day gives it up just like we’re seeing today from yesterday. So, I know it’s tough markets out there, but there’s lots of great ideas I’ll help you find. And I’m here for you. So, any questions, comments for next week, frank@curzioresearch.com, and I’ll see you guys tomorrow with a great interview. 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 decision solely on this broadcast. Remember, it’s your money and your responsibility.

Frank Curzio
Frank Curzio, founder and CEO of Curzio Research, is one of America’s most respected stock experts. His research is regularly featured on media outlets like CNBC’s Kudlow Report, The Call, CNN Radio, ABC News, and Fox Business News. His Wall Street Unplugged podcast—ranked the No. 1 “most listened-to” financial podcast on iTunes—has been downloaded over 11 million times.

Editor’s note:

Earlier this month in Crypto Intelligence, Frank revealed a metaverse project he calls “the most exciting, high-upside project I’ve ever found in the early stages.”

In fact, he believes in this project so much, he made it his largest personal investment—ever.

With the pullback in crypto, now’s the perfect time to pick up amazing digital assets like this at bargain prices.

And with Biden’s recent executive order… it’s only a matter of time before billions start flowing into the entire space—generating huge gains for early investors.

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