Editor’s note: This week, we launched a new format for Wall Street Unplugged. Instead of one long weekly show, you’ll have the option of listening to shorter segments three days a week: Frank’s personal (and often controversial) monologue on Tuesday… his guest interview with market experts on Wednesday… and his behind-the-headlines segment with Daniel on Thursday.
Football season is here… and I’m looking forward to fantasy football. Daniel and I discuss the massive amounts of gambling that will take place this football season. [1:15]
Crypto exchange Coinbase is fighting back against threats from the SEC. Prepare for a rant on why the SEC’s lawsuit is beyond frustrating… But it could ultimately be bullish for the crypto industry. [4:50]
The semiconductor industry continues to suffer from supply strains. I take a small victory lap as automakers finally admit the chip shortage will last much longer than they initially thought. [25:15]
And finally, anytime we talk about COVID, we’re going to ruffle some feathers. But investors are getting comfortable with the fact that COVID is here forever. And one sector is shaping up to be a no-brainer for making money in the new normal… [33:43]
Wall Street Unplugged | 792
Why the faceoff between Coinbase and the SEC is bullish for cryptos
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 September 9th. Welcome to the Wall Street Unplugged podcast. So, this is the part, a new format for Wall Street Unplugged where I, Frank Curzio, and Senior Research Analyst Daniel Creech, write down the top stories in the market, tell you what you really need to know. In other words, we weed out all the bullshit that’s out there, which there is a lot of these days, and tell you, not just give you an opinion on these stories, but find ideas on the best ways to make money from these stories that are on market. And a lot of times, there’s going to be original ideas, really cool stuff. And with that said, let’s bring in Daniel Creech. What’s up, buddy?
Daniel Creech: Frank, what’s going on, sir?
Frank Curzio: So, do you know, this segment is the one that by far we get the most emails on? Because I think we cover the most controversial subjects.
Daniel Creech: I’m shocked.
Frank Curzio: Which is COVID, if it’s Bitcoin, everything out there, right? So, the stories that you’re going to hear in the media are always controversial, and that’s what they want, and people going back-and-forth. But this is where we get the most emails. Positive, negative, everything. People pissed off, people happy, but emotional.
Daniel Creech: Well, we must be doing something right then. Keep them coming in. So, that’s good stuff. That’s good to hear.
Frank Curzio: They say pissed off people, that’s a good thing, right? I don’t know if that’s such a good thing if you read some of the emails that I read. But anyway…
Daniel Creech: A good mentor of mine told me a life story. He’s like, “Oh, you’re nobody until you get fired.” And that sounds good until you actually get fired. And you’re like, “Oh, I guess I’m somebody. I don’t feel like somebody. I don’t have a job.”
Frank Curzio: So, lots of stories in the marketplace. I don’t know where you want to start here.
Daniel Creech: Well, I want to start, since we’re doing a little new era here, and we’re doing a new season, and things like that, I saw one of your tweets over the last couple of days. I know you’re big into fantasy football. College football has started. Has NFL started or does it start tonight?
Frank Curzio: It starts Thursday. So, Thursday it starts. Should be pretty cool. I got my fantasy football team. I’ve been doing it for over 30 years. I got to tell you, Dan, you-
Daniel Creech: Has fantasy been around that long?
Frank Curzio: Yeah, it’s been around since you were looking… I used to look at newspapers to look at box scores within the newspapers. This was early days of Emmett Smith, Barry Sanders, and stuff. That’s how long I’ve been doing it. I got to say, Dan, you’re one of the few people under 40, male, right? Total stereotyping here, which I’m always in trouble with, that are not engaged at all with fantasy, and couldn’t care less about it, right?
Daniel Creech: Yeah, I joined a group. It has been a few years ago now. I love the concept. I like looking at numbers, and just stats and things. So, I don’t follow the NFL or much football in general. I’m an Ohio State fan. That’ll get some emails. I love the Buckeyes, and they are hated like, oh, gosh, they hate it down here in Florida. Anyway, I love the concept. I love looking at lines. I look at lines all the time. Anyway, we be BS about that. But yeah, I just don’t… I’m not interested enough in the sport to follow it and put it… It takes time. You have to… And of course, when you like to win at everything, it’s aggravating to join a league, and then get beat, especially by your friends. That’s the worst.
Frank Curzio: That’s when you have to hang in… You see people hanging their… So, anyone who is in fantasy football loves it, because you see these people after the season. The bet is you have to wear a sign, or you got to do something stupid.
Daniel Creech: Or, you have a fun trophy. Just seeing that kind of stuff cracks me up.
Frank Curzio: And you got to out in public and stuff. And everyone who plays fantasy is like, “Yep, good job.” And it’s pretty cool.
Daniel Creech: So, I love following the numbers. I just, like I said, I mean, I love following football lines, even if I don’t care in watching any of the games. But yeah, it’s exciting. It’s good to have the… I heard a stat, Frank. This was just yesterday. 45 million people at least are expected to bet on football this season. Now, this was, I was just running from here to the store, so that was a quick. I caught a commercial as I was scanning through some channels. But when I first heard that I thought, well, that’s not as many as I thought. And then I stopped. 45 million different people, that’s a hell of a lot of people betting on sports.
Frank Curzio: I think that’s-
Daniel Creech: I mean, that’s wild.
Frank Curzio: A conservative estimate.
Daniel Creech: It seems a little lower, right?
Frank Curzio: I would bet more. We can’t bet in Florida. New York, you can bet, but I can’t bet in Florida. You can go on DraftKings and pick fantasy, and bet that way, but you still can’t-
Daniel Creech: I was going to say, you can do… And I’m assuming all that’s lumped in, because I know people that pick golfers and different pools. And like you said, DraftKings never have… I don’t know all the apps out there. But yeah, that’s just, man, the amount of money sloshing around on those games is awesome.
Frank Curzio: I mean, if you take the illegal part of it and made it legal, that number, I wouldn’t be surprised if it doubled. But it’s crazy. But yeah, I mean, people like to bet. It’s just like people like to drink alcohol, and have a beer after work or whatever. It’s kind of like… But again, it’s always been that it’s not up to you. You’re not good enough to be responsible, so we’re not going to allow this anywhere. But yeah, it is interesting. But speaking of, yeah, I mean, so many plays in that area of DraftKings, so many plays I’ve done. I couldn’t believe how much money, actually. Now, we’re going to be on the this.
Frank Curzio: I couldn’t believe how much money these companies raised, I think it was like two years ago. I mean, the valuations were incredible. The amount of money, tens of millions, millions pouring into these companies. And I’m like, man, this was before most states approved gambling. And I was like, wow, you’re relying… Whenever you have to rely on the government, holy shit, it’s pretty crazy, because relying on the government, we saw, and this is one of the biggest stories, good segue, is Coinbase, right? So, Coinbase came out and said that, hey, the SEC sent them a Wells letter, so investigating their lend division. Which, by the way, their lend division for Coinbase, it’s marketed as a high-yield alternative investment for traditional savings.
Frank Curzio: So, accounts where you could have annual yields of 4%, where we know it’s zero in most accounts. And who is that going to impact the most? Banks, right? So, no surprise here, what the fuck is going on. No surprise. But they’ve been dealing with SEC talking to them, and Coinbase signed up for pre-enrollment for this program, lend. But the product hasn’t been launched yet, and already the SEC has sent them a Wells notice, even though they’ve been working with the SEC. And I mean, that’s pretty crazy to me. I mean, I have my opinion.
Daniel Creech: I can tell. Boy, this is going to be fun, because Frank is chomping at the bit. We were talking about this as soon as I walked in the door this morning. Where do you want to start here? I like the fact that he took to Twitter. He did a feed of 20, 21 different quick posts to try to educate a story. The first one is some really sketchy behavior coming out of the SEC recently.
Daniel Creech: Story time. Now, before we get into these details, Frank, you’re Brian Armstrong. Put on your Brian Armstrong hat. How many people are around him when he’s tweeting this? You got to have some lawyers around, right? You got to have your upper management. You got to get these reviewed. I mean, this isn’t off the whim. Because this is put together well. He’s being a good… He comes across well in this, and he takes some shots, which I like. And I’ll point out my opinion on that. But this is thought through, right? This just didn’t happen last night. I mean, maybe the Wells, and they have to disclose that kind of stuff. But what do you think? Give me that picture. How do you see that setting before he was tweeting all this out?
Frank Curzio: Here’s a setting, okay? Because even I get this too. Whenever we want to say something or do something, you have to go through legal. Now, we’re a publicly-traded company. And I will go through legal. And here’s what happened. He talked to this guy, Paul Grewal, and Paul Grewal, if I’m pronouncing it correctly, is the Chief Legal Officer. He’s the Chief Legal Officer, okay? This guy is huge. This guy is a Vice President General Counsel at Facebook, former U.S. Magistrate Judge for the U.S. District Court for Northern District of California. The guy’s a big shot. So, what happens is the CEO goes to him and says, “What do you think?” And here’s what he thinks, if you’re watching this on YouTube, because here is the SEC has told us it wants to sue us over lend, that division. We don’t know why. You know how that’s written by? Paul Grewal, their Chief Legal Officer.
Frank Curzio: So, I guess he gave him the okay to say, “Hey, you know what? This is total bullshit.” Here’s why I’m emotional about this. Because one is, I know in this field… Not for us, because we’re just like a regular company, the security token. We’re a security, which is fine. 99% of the things that you’re buying out there are not securities. They are not deemed securities, but they really are securities. And when the SEC changes that law, that’s when I know security token is really, really, really going to take off, because a lot of those things are not going to be able to trade. And that was my thesis behind this whole thing. I can’t believe that Coinbase is still able to trade hundreds of these, but they are right now, because SEC is sitting on their hands. And I don’t want to say anything bad, because again, it is our field, they’re sitting on their hands, and they won’t provide regulation for this.
Frank Curzio: So, I know personally with the partners that we talk to who have exchanges in security for security tokens, and also these security token-trading platforms, these ATS, as they’re called, they are talking to the SEC also, because they want to do the right thing. So, here’s Coinbase talking to the SEC and saying, “Hey, what do we need to do? Because obviously you guys are not letting us know. It’s going to allow us to bring in more investors, do more things.” And the SEC is like, just asking them for information. And all of a sudden a NOA comes out and decides to… I wouldn’t say sue them or anything. They didn’t launch the product. But they came out against them. And it’s hurting the stock a little bit today, and crypto in general. But the SEC needs to get off its ass.
Frank Curzio: I mean, I’m on the side that you need some kind of protection. Investors need that protection, whether it’s FDIC insurance for your accounts. You need to know if Bitcoin gets sent to a different address or whatever, you lose it, yet you know that you’re insured, or if it gets stolen, right? You need these things in place. You need to have a tax system where you get taxed capital gains tax, like everybody else. It doesn’t mean I want this whole entire industry to be regulated, because some diehards are like totally against it, right? Totally, totally against it. For me, in order to scale this thing to the masses, people have to feel safe. And I think, going on Coinbase some people do feel safe. Some people I heard, “Hey, I lost money. I haven’t heard back from them.” Whatever. I heard some stories. But you have to have that safety.
Frank Curzio: And then you have all these ETFs, you have all this stuff, and why doesn’t the SEC know? You know what happened, Daniel? You have an industry that went from a couple hundred million dollars, probably, in 2010, ’11, to fucking 2 trillion-plus, where Goldman Sachs is in it now. Morgan Stanley is investing in it.
Daniel Creech: JP Morgan.
Frank Curzio: JP Morgan, Jamie Dimon.
Frank Curzio: “This is a fraud. If anybody trades this, I’m going to fire them.” He’s in it. He’s in it now. You have huge hedge funds. You have tons of venture capitalists all over this industry, right? So, you need to fricking regulate it. I mean, to put this in perspective, did a little homework on this, if you look at the Russell 2000… So, this is a $2 trillion market. The Russell 2000 is about three and a half trillion, right? Which is huge. But to put it more in perspective, $2 trillion is higher than the GDP of all but eight countries. All but eight countries. That’s how big this market is right now.
Frank Curzio: And the SEC is just like, “Well…” Because it’s a security, and the Supreme Court has a definition of a security, pretty much the most vaguest thing. Couldn’t be more vague. Couldn’t be more vague. It’s like, there’s a whole entire… You’re looking at a wall with 50 different colors, and you’re like, “Yeah, if you use some of those colors you’re going to be okay.” “Which ones?” “I don’t know yet, but some of them.”
Daniel Creech: Just pick from this wall.
Frank Curzio: So, nobody knows what the hell they do, and they want to know what to do, because that’s going to bring more investments in. So, what pisses me off is here you have Coinbase trying to do the right thing, talking to them, and the SC turning around and saying, “Hey, you know what? Now, we’re coming after you.” And the takeaway from this is, holy shit, is crypto going to be 10 times stronger, 10 times stronger, because they’re doing this. Because me, who is in the middle saying, “Okay, we need a little regulate. That’s fine.” And I know it because I understand the capital market side, and know how much money could really pour into this industry, if there’s just a couple of rules in place that people know. Right now, there’s not. But now you’re looking at all the diehards who hate wall street, who hate the government, right? Who hate central governments. They just print money no matter what.
Frank Curzio: I mean, pretty soon all the debt is going to be wiped out for the financial… Student loan debt, right? And it’s because they need votes. It’s not because anybody wants to help these kids out or anything, right? So, let’s give free money to these guys. Here’s a couple trillion dollars. And now, we have retirees, and if someone representing the retiree said, “Hey, you know what? Because inflation is going higher, they should all get checks for $1,200. It’s on the government.” And again, retirees are a business, and I want people to make money and earn more money. The money comes from someplace. You continue to print it, you’re going to continue to have inflation. And holy shit, that’s the biggest problem in the world, because the Fed can’t control that. They can’t throw money at it. They have to take money out of the system. And if inflation goes a lot higher, which everyone in the world is predicting, the Fed, and even hedge funds, that it’s going to come down. Whatever. We’ll see.
Frank Curzio: But here’s my thoughts on this one. One, you’re making this 10 times bigger. It’s going to require… Not require, but people are going to hold this Bitcoin forever. It’s going to be adopted in so many different countries, because now it’s like, here, this is what we hate about you guys.
Frank Curzio: And here’s a great example. We have a company that’s one of the largest in the industry, that went public, did everything by the book, has made big investors and said, “Hey, SEC, we want to make sure we do this right.” And now they’re like, “All right, well, we’re going to come after you for this.” So now, who the hell is going to go to the SEC to try to get the regulations in place? For me, it’s just a total mess, but I think this strengthens the argument for Bitcoin and crypto.
Daniel Creech: Do you think it strengthens because it’s going to rally and get people’s emotions even more fired up, and the momentum, and people saying, “Hey, this is an anti, this is an individual freedom thing, so it’s that little guy versus Goliath-type deal?”
Frank Curzio: It’s not the little guy anymore. There’s a massive class war going on right now. And you could see with Robinhood.
Daniel Creech: I couldn’t agree more on that.
Frank Curzio: You can see what AMC. You see what the WallStreetBets crowd. I mean, these are guys that put a $12 million fund out of business, almost out of business. They had to get funded. You’re looking at GameStop. I mean, Citron is one of the leading short-selling firms. I know them over there. They’re great guys. I’ve met them before. And they’re like, “We’re not shorting stocks anymore.” They’re putting firms out… So, it’s not this little guy. These guys are getting stronger and stronger and stronger. And this for me, it is icing on the cake of why we don’t want regulation, why everything should be DeFi, why totally hands-off, controlled by the blockchain. Because we don’t want assholes forcing our hand to do something, when we don’t want to do it, or even if they do want to do it, right? They want it to be their choice.
Frank Curzio: But for Coinbase to actually do the right thing, talk to the SEC… And the fact that you’re looking at their site and their lawyer is speaking publicly, CEO is speaking publicly saying, “Listen, what the fuck, man? What do we need to do?”
Daniel Creech: Well, let me tee one up here for you. Let me ask a real simple question. So, it sounds like… and you got to take all this with a salt, with some salt… Pinch or a punch of salt? Pinch or punch? Where was that from?
Frank Curzio: I’ve heard both, actually. A grain of salt. Punch, pinch. I’ve heard punch-
Daniel Creech: There’s a great scene and Donnie Brasco where Al Pacino and Johnny Depp, they’re talking about that. He says, “You say a pinch or a punch?”
Frank Curzio: Pinch or a punch.
Daniel Creech: I love that. Anyway. So, take a little bit of salt here, but it does seem like Brian Armstrong and Coinbase is going along saying, “Hey, even though you haven’t clarified that this is a security…” Which, by the way, what they’re talking about is lending. And that’s one of the Twitter feeds that Brian Armstrong tweeted out on his Twitter page, is they responded… “They,” the SEC, “Responded by telling us this Lend feature is a security.” Okay, seems strange. How can lending be a security? “So, we asked the SEC to help us understand and share their view. We always make an effort to protect, proactively work with regulators, and keep an open mind.”
Daniel Creech: So, let’s give him the benefit of the doubt. They are going along as, hey, even though you’re not clarifying it, we’re trying to do everything right by the book as if we were doing lending on any other platform. So, the easy question to tee up here is, so why is the SEC dragging their feet on this, Frank? What is the difficulty or reasoning behind not saying, “Hey, this stable coin or this crypto or whatever is a security, therefore you have to fall under this umbrella of rules?” Why is that there? Why is there a gray area?
Frank Curzio: Because it’s politics. Politics and lobbying, right? I mean, finally you’re seeing the investment banks get into this industry. But this is an industry that disrupts the world. This is an industry that disrupts investment banking, where you don’t need these guys. You don’t need them. It disrupts the middlemen. Investment banking is about middlemen. They make a fortune on fees, right? So hey, we know a lot of people. You want to raise money? Here, we’ll get you guys together. Give us, whatever, 2%, 6%, whatever the deal is.
Frank Curzio: So, when you’re disrupting that you’re going to have those naysayers who have very, very high positions, who paid a lot of money to get these politicians in office. I know. I’ve just been asked to go to fundraiser myself. And what do you do at those fundraisers? Well, here. Here’s some money, and I might call upon you later on or ask you about something. I mean, that’s the way it is.
Daniel Creech: Frank, are we making political donations as Curzio Research company? Are we getting that bang? We’re on the map.
Frank Curzio: It’s funny. If you look, everyone says how Facebook and Google, and they donate to Democrats. They donate to both parties. They just donate more to one party, right? So, they’re making sure that they’re donating. This way whatever happens, they have their ass covered. But one of the things… I’m trying to find this quote here, because Brian Armstrong just went on a whole thing here saying that, the security thing… I want to see. This is very, very important, guys. And if I don’t find it, I know what they’re talking about. Armstrong had a post with eight different posts on Twitter, in eight different segments, Daniel.
Daniel Creech: It’s a ton, yeah.
Frank Curzio: So, one of the things that shocked me that I think went under the radar, he’s like, “We should be regulated, by the way, like everybody else in the industry.”
Daniel Creech: His quote is, “It’s nice if you actually enforce it evenly across the industry equally, by the way.”
Frank Curzio: Now, why is that important? I don’t know what they’re coming in for the lend product, right? Because they’re going to provide a higher interest rate, right? But I do know when it comes to lending, this is a massive, massive, massive industry, okay? It’s 50 billion-plus easily, because in April somebody came out, and I forgot their name, and I had a quote for them. God, I forgot the name of it now. It was a PointPay. So, PointPay market for crypto loans, or Bitcoin, stable coins pledged as collateral is estimated at approximately, 30, 35 billion in 2021. This was in April, right? So, I wouldn’t be surprised if it is a lot bigger than that. We interviewed people in BlockFi and stuff like that. But now BlockFi, I mean, you’re looking at a company that’s a $5 billion valuation on its latest raise. Galaxy Digital, Susquehanna. You have Fidelity, Coinbase Ventures, SoFi, Morgan Creek Digital. I mean, these guys are investors in BlockFi.
Frank Curzio: Nexo is another big platform on 3 billion worth of transactions for over 800,000 clients in 200 countries, providing five to 10% interest in cryptos, $1.7 billion valuation. Binance, Crypto.com, Celsius. I mean, so many of these guys are doing this right now. And it’s not so much where… I don’t know if it’s different where it’s more providing alternative for a savings rate, or pledging crypto and being able to lend out money through crypto, or earn interest on crypto. But if this is covering the whole entire industry, these guys are shaking their fucking boots right now, especially the ones that have U.S.-based offices, right? There’s a reason why you have IO… Even guys that I know that do all their in the U.S., they’re creating IO addresses. Because they don’t know what the hell SEC is going to do.
Frank Curzio: We’re light years behind most countries in crypto, light years behind. Nobody knows what the hell to do. Take these companies. They’re trying to find out the right way to do it, because they’re doing the right thing. Coinbase provides a nice, easy platform for people to buy, anyone to buy Bitcoin. It was seen in the security token industry as well. But the SEC has to get off their ass and let us know what the rules are. Because if they’re going after Coinbase because of this lending practice, and I pretty much put this all in the same boat here, holy shit, these companies are in a lot of trouble. Because if they say you cannot open this, you can’t do this in the U.S., holy shit. I mean, these guys are still going to exist. But now, they’re going to be out of the U.S. where you can invest in it. And I know a lot of these guys have tons of U.S. customers. As these platforms build, “Hey, you can earn 4%, 5%, 7%,” just on this crypto, and sending emails. And all you have to do is sign up through one of these platforms.
Frank Curzio: And constantly this is massive. We’re talking about tens of millions of people. I can guarantee it. Tens of millions of people. They might say, “Well, two, 3 million.” No. I mean, there’s 10 million on some of these platforms that I know of that are doing this just on one platform. So, that’s the scary part of this. At the end of the day I think it’s going to strengthen the case for crypto. The diehards are going to be in it. Probably going to be in it even longer. But it’s just, hey, now you got us to work with the government, the largest company in crypto, based on large-caps, to work with the government. We’re trying to work with the SEC, and the SEC turns around and does this. I mean, you don’t see legal officers, Daniel, get on their blogs and everything, and explain how, “Listen, to this is so much bullshit. It’s a joke.”
Daniel Creech: In one of the tweets, he calls out the SEC. He was in D.C., Brian Armstrong was, meeting with different regulators and things, and the SEC was the only regulator that refused to meet with him. So, I think you’re correct in the saying of, hey, this is disrupting one of the biggest industries in investment banking. It’s not going to be welcomed. So, what do you think about the guy going out on Twitter? You’ve said this in the past, and you’ve shared this story when you guys had your tussle with the SEC, you don’t want to fight these guys. But we’re in a realm now where you can get backing. You can go public with it. You can put everything out there. I respect what he’s doing, and I’m thinking of… So, Coinbase is down 3% today. Galaxy Digital is up 2% right now. Of course, this could all change.
Daniel Creech: That’s interesting to me on the price action when you see headlines like this. That does tell me that there’s a lot of momentum out there for investors and me. I’ve said this several times over the past several podcasts. Galaxy Digital is one that I’m averaging into. I like that idea. We’ve dubbed that the Goldman Sachs of crypto, hopefully. We can only hope they’re as corrupt and successful as they are, Frank. That’d be amazing for us and our subscribers. But I just think how that’s hilarious on it’s going up today. Mike Novogratz, that runs that, was saying, I think, just yesterday in an interview, “Hey, there’s too many institutions now that look at this as a store of value.” And I think he referred to Bitcoin and crypto as the Web 3.0. And nobody wants to miss the next internet boom.
Daniel Creech: So, I think this is a lot bigger than just the lending and what’s in the spotlight right now, to your point. I’ll admit though, it’s nerve wracking to see somebody go after the SEC. It reminds me of when Schumer said, “Hey, you go after the national intelligence community, and they screw you six ways from Sunday.”
Frank Curzio: And the reason why I have history with this is my late dad, and I told the story before, where the SEC came after him. He was a very small business. His definition of success was having a nice farm upstate. And we didn’t have like a huge, huge company or anything like that. But his performance, his track record showed up in an institutional magazine, Pendulum Investments. And the next day the SEC came in and said, “All right, we’re going to look at all your marketing and everything.” Basically shut us down. We couldn’t send out anything. We couldn’t do anything. That was 90% of our day, providing information for them. We provide information for them. You hear back two months later, three months later, whenever they feel like it, right? So, they could do whatever they want. It’s the government.
Frank Curzio: At the end of the day, they’re like, “Oh, well, we really didn’t find anything.” Only tiny things like this, and the font size, and stuff like this. And you know, our lawyer at the time, we decided to sign it, because he didn’t know any better. He said, “Yeah, it’s a $500 fine. Just sign it. Get it over with, so you can get back to business. And they put his name in the Wall Street Journal that said, “FXC Investors fined by the SEC.” That was my experience with it. Honest guy who turned down money, where he saw people’s portfolios and said, “I can’t do anything for you.” And for me, that scarred me for life.
Frank Curzio: And I’ve been at places where they walk that line. They’re like, “Well, if the SEC, they don’t have a case…” I’m like, it doesn’t matter. I’m like, it doesn’t matter if they have a case. If they come after you, especially a small company, you’re going to be done. I mean, it’s going to require all your resources. It’s going to require tons of legal fees. And they’ll tie it up for two, three, four, five years. Whoever’s donating the most to them, whoever has the best ties to them. I mean, that’s the way it is. And it’s crazy. So, I don’t care how big your firm is. There’s a reason why every investment bank has a slush fund set up for those fees. And it’s automatic. We’re going to admit to no wrongdoing, but here’s $20 million. Here’s $30 million.
Frank Curzio: And even Jamie Dimon, after a while they got fined, I think, 80 fricking times for the credit crisis. And he’s like, “All right, guys, you’re done. All right, we get it. You’re done.” You can’t keep fighting for the same thing. And sure enough, the SEC was like, “Okay, Jamie Dimon said we’re done. So, we’re not going to fine anybody for the credit crisis anymore.” If you notice, they don’t anymore. And they admit no wrongdoing. But it’s almost like, hey, this is what we have to do. Here’s what we’re going to come… And these guys get the heads-up when they’re getting come after, and when they’re going to get… Again, they have so many ties. You look at the SEC, and the biggest thing is the SEC. And once you get that high, you’re making decent money, but you’re going to make 10X to 25X more by going someplace else. And that’s where the Goldmans and everybody else, and they’re going to hire all these people.
Frank Curzio: That’s the system we’re in. So, you don’t ever want to fight the SEC. So, I don’t agree with what these guys are doing, but I feel like these guys did the right thing and said, “Hey, we want to work with you. Let us know.” Even the ETFs said, the Bitcoin ETFs, “The SEC is not making it clear.” People are like, “What the fuck? How come we can’t launch these things?” And you can buy Bitcoin. You can buy 15 different things right now in America on how many different platforms? On Coinbase or whatever. Gemini, whatever you want to do. But yet, we can’t have an ETF on all these. Why? Just tell us why. SEC is like, “Nope, we’re not going to tell you why.” Are you deeming these things securities?
Frank Curzio: If you do, which I think almost every crypto should be a security outside maybe the top five or seven, Ether, Bitcoin or utility futures, or whatever, but most of these utility tokens are going to be securities. And then, they’re going to have to show everything. And none of them want to show everything, because a lot of these guys spent their money. They got like three Lamborghinis. You don’t have to disclose anything, your financials, what’s going on, to insiders. All that shit changes if you’re a security. I know, because we have to show our financials. We have to show everything. That’s the way I want it to be, right? This way, there’s transparency in this industry, launching a security token, Curzio Equity Owners.
Frank Curzio: But anyway, enough of that, we want to give this 30 minutes. I think we went about 22, 23 minutes with that subject. But two other things I wanted to talk to you about is semiconductors. Big stories coming out saying that it’s going to be years, not quarters, not second quarter, like the CEO for Ford was telling you, like the CEO Barra was telling you from General Motors, that this is a short-term problem. They did last quarter, next quarter. And based on my sources, based on how much I was telling everybody… Again, I’m not patting myself on the back or anything. Just great information for people out there.
Daniel Creech: I’ll take a victory lap.
Frank Curzio: I’d rather take a victory lap on Azarga Uranium, which got taken over. They say it’s emerging. It got taken over. This is something I’ve invested in since 2017, ’18, and I told numerous times about the uranium story, and incredibly bullish last podcast, and told you the two of my biggest positions, Uranium Royalty and also Azarga. Azarga I owned forever, and just had, and kind of forgot about it. And it got taken over at two, 3X premium. But when all is said and done… So, that one I will. Hopefully, people will listen, because there’s a lot of in that industry, and a lot of dilution, and people who are never going to produce. But that was one I was proud of. And hopefully, a few people actually bought that.
Frank Curzio: But the auto industry you’re seeing 40, 50% declines in production, 60%. Nobody was really talking about them. These CEOs are fricking lying to everybody. Now, you had several CEOs come out, Volkswagen, Mercedes, that this could be years before the supply chain gets in order, where these fabs, they take a very long time to build. And there’s no capacity at the Taiwan Semis, and everything else. They’re locked up making iPhones and whatever. And those guys were smart locking in that capacity, where the autos were on the sidelines saying, “Well, let’s wait and see.” And they waited too long, and there’s no capacity for these chips. And man, it’s hard to run a business when you can’t sell your main product, isn’t it?
Daniel Creech: Well, you would think so. The bigger picture there is, hey, these things unfolded. We didn’t get to this problem overnight. I mean, granted the shutdowns and everything like that in those supply chains, those were short-term, short-term events, excuse me. But the auto industry over the last years was going to this as needed supply chain, and I get it, because you want to be as lean as possible. You’re not ever planning on a pandemic and a shutting down of the economy, and such. But hey, that’s the reality we’re at now. So, that’s not just going to change overnight. And Intel, we’ve talked about this, they’re planning massive investments. I mean, multi, multi billions of dollars in these fab facilities, chip fab facilities, where they’re going to create and start building these. But again, Frank, that ain’t going to happen overnight.
Daniel Creech: So, the big picture there is that it’s like a giant ship. It’s going to take some time to turn or reverse course. It is interesting. The stocks are holding up good though. It’s just amazing the benefit of the doubt the market’s giving everybody right now. Because to your point, I don’t think Ford or GM has gotten hurt over the last couple months, even when they announced these big production cuts and things like that. And The Street is basically just saying, “All right, well, you told us it was going to be a lot easier, a lot better by now. And now you’re saying it’s going to drag on.” But there’s no real punishment.
Frank Curzio: I mean, Ford touched 16 in June. And we kind of knew there was problems then, and we started highlighting a lot of those problems, and now it’s 13. So, that’s a pretty big decline.
Daniel Creech: But even at the beginning of the year it was eight or nine, right?
Frank Curzio: Yeah. Well, at the beginning of the… I’m just talking about the, when they were like, these chips, and you got to watch out, and stuff like that… And here. I’ll just post this chart right here that… Again, I just use CNBC to use free sites for you guys.
Daniel Creech: So, would you be a buyer of Ford or GM yet? Or do you think you’re going to avoid it?
Frank Curzio: You know what? I really liked Ford.
Daniel Creech: Buy, short or ignore?
Frank Curzio: I would ignore now. I tell people to get out of it at a lot higher price than this. So, over 15. Not a lot higher, but enough to say, “Hey, you know what? This asshole is going on TV and telling everybody that, ‘Hey, our EV portfolio is great,’ and, ‘Oh my God, this is great.'” I’m like, you need to say that production is going to decline by 60%. That’s a pretty big freaking deal for investors to know. Be transparent. It’s not your fault. It’s an industry-wide problem, right? It’s not particularly your fault. It’s every auto across the industry, right? So, just be freaking honest. How do I have access to that information and they don’t? It’s impossible. They have access to that fucking information. They just don’t want to tell you. And that’s sad, and that’s the market we’re in, right?
Frank Curzio: So, “Our EV portfolio is great. Technology, 2025, 2030, 25% of the cars are going to be electric, everything.” Even though there’s zero fricking infrastructure, and just assuming that everyone’s going to give up their gas-guzzling car, which takes one second to fill the freaking thing up, because there’s three gas stations within a half a mile of your house. Now, you want people to learn a whole new system of something that’s incredibly easy, and you’re just assuming… Again, if it’s mandated by the government, and they force your hand, that’s different. But I just don’t see a lot of people going, “All right. Let’s do this whole thing, and I got to look on a map to see where the infrastructure is.” Hey, I’d like to drive 350 miles, four, 500 miles to see my family. Okay, where do I have to stop? Where could I get the charge from? I mean, compared to just going right here, and find the gas stations everywhere.
Frank Curzio: When you disrupt markets it’s supposed to be easier, not learn more about something and make it an extra two or three steps for people. Don’t get me wrong. Electric cars are great. I believe in them. Tesla has done amazing job, and they have great models coming out. It’s just the adoption numbers that I’m seeing, where everyone’s just going to be like, “Oh my God, I got to get electric car,” I think you’re out of your mind. But again, I’m going off a little bit here, and a little pissed off. But overall with the chip sector, you’re asking me about Ford and whether you should buy it. I would avoid it because now they’re saying years, okay? I would buy this stock right here at 13 and think it’s incredibly… It’s worth a lot more. If you have a five-year time horizon, buy it now. If you have a two-year time horizon, and this thing lasts to 2023, when they still have plants that are idled, which kind of seems like that could be the case now, right? That was off the table. It was the end of this year, we’re definitely going to be good. Now, we’re looking into mid next year we’re still having these problems?
Frank Curzio: Yes, it’s a demand issue, and that’s a good thing, but I think it goes lower and you could buy it cheaper here. But until I see more transparency of when this thing is going to bottom… If you’ve got six months left, I would buy it here. But if it’s years, you’re going to see these guys get hit a lot more. Hopefully, the CEOs will do something that they haven’t done in this industry for a very long time and be honest with people. So maybe, that’s too high of expectations for a publicly-traded auto company. I don’t know.
Daniel Creech: Possibly. I would avoid them. I’ll ignore them. I’ll read some headlines, stay on the pulse. I continue to think the most boring, easy low-hanging fruit is Intel. I think the market’s going to be forward-looking. I like the activist in that. I like the fact that they have a new CEO, and he’s got big aspirations and big plans. And I think he’s saying what needs to be said. And hopefully, they can execute. So, I would park money there and hide out, be boring. That’s Intel.
Frank Curzio: Well, boring is good. But Intel is, you always have a good dividend. And we all know about all the mess ups that they had.
Daniel Creech: Exactly. They’ve dropped the ball a bunch.
Frank Curzio: And stuff. I mean, the high was 68. It’s 53 right now. But this is a stock that you’re seeing good numbers of stocks down a… It hasn’t done nothing. Hasn’t done nothing since May. And it’s really flat since may. I mean, just I’ll show you guys really quick, flat since May. But you look at a stock that did ramp higher, and then again, they just… I don’t get it. How did they not swallow up AMD? How did they let Nvidia do what they did? How did they not learn from these people, learn from these technologies, seeing what they’re getting into? I mean, that’s a management problem, when… that’s an AOL problem, that’s a Blackberry problem. When you see your competitors kicking ass you need to make a statement. You need to either poach people to survive, which again, is not, people don’t like that. But again, it is Wall Street, and we just saw Ford poach someone from Apple, which is in the news, CNBC and everything one of their lead car guys, whatever.
Frank Curzio: But you have to stop it. You have to find a way to compete. And when you see these guys and how much they excelled, and there’s so much… AMD. Did you ever think AMD? I mean, holy cow. AMD, man. What is it? So, market cap is 215 billion for Intel. Let me show you this. And let me see what AMD is now. Which just past a hundred, finally. Try to test that. It’s still half the size, $130 billion market cap. And Nvidia is just the king, right?
Daniel Creech: And those things just go up every day, it feels like.
Frank Curzio: It’s just, holy cow. I mean, you just sat by. And how are you not getting into graphics? So, it’s more than twice the size of them, almost $600 billion market cap now. But just crazy stuff that I see. Now, we want to keep this segment 30 minutes, but it is a good conversation with 33.
Frank Curzio: We’re going to go over something very quickly, and that’s COVID, because we get the most emails on this. So, “I love hearing email@example.com…” firstname.lastname@example.org. There you go. Hey, you want to be on this segment? You got to take the heat along with me. But a couple of things, people are putting words in my mouth about COVID, which I kind of hate. And I’m not anti-vax. You can’t be in the middle of everything, right? You can’t be in the middle of anything. And I think that’s what the value that we have, because there’s no bias, where I’m telling people to get the vaccine. If you want to know, right here, guys, I got my first dose, right here, and my arm hurts a little bit. I got it yesterday. And I got to get the next dose in a couple of weeks. But I got it because it’s required and need to travel. And the only reason why they I didn’t get it is… I’m not telling nobody not to get it. It’s your choice if you want to get it.
Frank Curzio: But for me, again, Dr. Gottlieb said, everybody said, we don’t know. We think hose antibodies lasts for six months, eight months, nine months. I don’t know. But I will tell you that something that’s pissing me off, and we are going to get… this is important from investment perspective, okay? Talked about this on Tuesday in the monologue. I want to know… This is what pisses me off about this shit, because there’s no transparency, right? There’s no data. Why don’t we have data? This is a very important data point. The people who already had COVID like me, why don’t we have stats? Stats like, how many people have COVID, had COVID, don’t have the vaccine and got Delta, compared to people who are vaccinated and getting Delta. Because there’s a ton of people that have vaccinated. Almost everyone I know that has gotten vaccinated… A lot of people vaccinated in Florida, believe it or not. At least a lot of people that I know. And everyone that’s getting it says, “Hey, I was vaccinated, and I got it.”
Frank Curzio: So, I’m not saying that the vaccines don’t work because it is reducing the death, but it doesn’t do what the government told us it would do, right? “You’re never going to have to wear masks again. You’re fine. You’re going to be immune,” and stuff like that, which is not true. I mean, first round, right? New strand comes around, Delta, and people are getting infected. Again, not as bad, so it’s good that they have the vaccine. But you have natural antibodies in your system when you get COVID, and they’ll last. They don’t know how long they last. Yet, you’re mandating those people get the vaccine anyway, without having that data. That’s a really big fucking deal.
Frank Curzio: So, the emails that you get and the craziness, I could tell you this, okay? COVID is here forever. It’s going to be here forever. You’re going to see more strains, booster shots. If you want to buy the best thing ever. I mean, you’re talking about tens of billions of dollars right now for Moderna, BioNTech, Pfizer. And I show you that these were not modeled. They’re not being modeled, those numbers. Those numbers that they have at 100 billion in sales from Moderna, and crazy numbers like that, which I thought was crazy, they’re not crazy anymore, those are for everyone, the billions of people getting the vaccine, getting both doses.
Frank Curzio: However, they did not include booster shots, one or two of them every single year, which is clearly what we’re going to need, clearly. At least for this year, probably next year. They’re talking about two boosters, three boosters. That’s great for Pfizer. They’re going to be pushing that. Moderna and stuff like that. Again, let’s see how long the natural immunities last. But who cares? Nobody cares. You just got to get the vaccine. But why don’t we have that data? I’m curious to know, if people had COVID, did they get it again without having the vaccine? Because then you know those antibodies are lasting longer than if you’re getting the vaccine, which is pretty interesting. But damn, those numbers are so easy to figure out. I mean, you know who took the vaccine and who didn’t take the vaccine, right? You know it. So, if people had COVID, they didn’t have the vaccine, do they have COVID again? Right? Those are statistics that are measured, right? We have that. Why can’t we come out with that stat?
Frank Curzio: I mean, you explain it to me. Why the fuck can’t we come out with a stat that I think is incredibly relevant? But yet, we don’t have that transparency.
Daniel Creech: I don’t have an answer to that. I mean, the takeaway here is that they’re just, I don’t know how anybody has any faith in the officials that are “the smartest people in the room.” I’m a little skeptical in general from this from the get-go. The big depressing thing for me is, and we’ve joked about this in different tobacco stocks and things like that, but COVID is here to stay. You’re always going to have the new… It’s like naming hurricanes. There is always going to be a letter in the alphabet for some new variant. And so the depressing thing is for me is that we’ve accepted this as a society in less than two years’ time. I don’t want to be a Debbie downer. I’m an optimistic guy. But that’s depressing as can be, is the fact that, okay, now everybody’s already lining up for these booster shots. Everybody’s just like, okay, this is the new normal.
Daniel Creech: That’s not a good situation from a society, in Daniel Creech’s opinion. The investing side of that is, if that’s the case, if that’s the new reality, Frank, why in the hell aren’t we going to recommend pharmaceutical stocks then? I mean, that’s got to be the closest thing to a guarantee is we can ask for now.
Frank Curzio: Pharmaceutical stocks, I think you have to own them.
Daniel Creech: And don’t get me wrong. Moderna. I was hoping… And this is why you can’t invest and make your decisions on emotions or hopeful. You got to invest and make your decisions on what the world is, not the way you want it to be. Honestly, I was hoping Moderna and none of them got a boost from all this. I was just hoping, hey, these vaccines come out… Even though I didn’t buy it all. But yeah, we missed that.
Daniel Creech: And so we haven’t missed it going forward. So, we have to do that for subscribers, and we have to pay attention, and at least give them those options, and saying, “Hey, here’s the way the world is. If this is the new normal, this is going to be a cash machine for these guys.” And it’s done on purpose. And you don’t have to… It’s just like a tobacco company. You don’t have to choose it or invest in it. But it’s one of the… that’s one of the easiest ways to make money, I think, is going to be in pharmaceuticals, and that’s depressing.
Frank Curzio: Even at those prices. And I don’t know if I’m the guy to listen to, because when Moderna was 100, I told people they were crazy to own it. And it’s over 400 now. Because one is they weren’t seeing the results of Pfizer. They were saying a new Pfizer was going to come out before them. There a lot of skeptics, even within their management team. And I was like, hey, these guys are modeling for crazy, crazy fricking sales. And sure enough, hey, listen, that happened. They were right, and I didn’t see that coming. But now it’s not like, hey, don’t ever buy Moderna. But obviously, the booster shots are coming. Moderna is going to be a little bit later, but everyone who got the Moderna is probably going to want that booster shot. I don’t know if you have to get that again. Just give us the information we want to know.
Frank Curzio: The bottom line here is the emotions that come out are incredible when we talk about COVID, okay? And everyone is going to have a different opinion. Someone emailed me today and said, “Hey, I just had a friend that died.” He’s like, “I don’t hate you.” But you’re going to have a different opinion if you have a family member that died. You’re going to have different opinion if you’re young, and this doesn’t impact you. You’re going to have a different opinion if you’re over 70 and you have underlying conditions. Everyone is going to have different opinions. What I want to try to do is provide as much statistics, this way you could come up with your own decision, to see if, hey, this makes sense, this doesn’t make sense, in a non-biased way.
Frank Curzio: What I will tell you from a stock perspective is people are getting used to it, Daniel. Like you said, in two years people, they’re getting used to it. Even some people that are starting to wear masks again. We’re seeing that even in Florida, right? And everyone is complaining, “Florida, look at the death rates.” The death rates in Florida from COVID per 100,000, they’re not even in the top 15 in states right now. And this is data as of two days ago. They’re not even in the top 15. So again, facts and figures that you would never know from listening to the media, because Florida, everyone lives here is a bunch of irresponsible assholes, and we want everyone to die who doesn’t want the vaccine yet. Yet, that’s a fact. So, out of the 100,000, based on per 100,000, you’re looking at COVID case deaths, Florida is not even in the top 15 states.
Frank Curzio: And one death is too much. And I get. I understand. But when I look at this as a whole, people are getting used to it. They’re not fearing it as much as they did. This is something I talked about on Tuesday. And what that means is, so I’m looking for those reopen trades. Because you saw casinos pull back. Wynn Resorts, which is based basically Macau, things are kind of better in China. I mean, we had data come out that wasn’t as good, macro data, but again, it’s hard to believe anything out of China. But Wynn is down 35% off its highs. We recommended a company in CRA, Curzio Research Advisory. That was down 40% from its highs, which is pre-COVID levels. Yet I mean, the numbers that they’re going to see are going to be explosive. And they’re starting to see that right now. These report are great numbers.
Frank Curzio: So, the Expedias, the airlines, if you’re seeing these things pull back, and you’re going to see them pull back with Delta, and then Mu is the next strain, and whatever, people are getting used to it. They’re learning how to live with it. They know if they get the vaccine you’re seeing results that aren’t as bad, where prevents the death rate tremendously, right? It brings it down tremendously. You’re seeing more people get vaccinated, right? This latest push in Delta is definitely getting more people vaccinated. People are going to feel more comfortable. Businesses are going to feel more comfortable. It may be three months, six months, nine months, Daniel. I don’t know how long that would take, but I could tell you that, I don’t know when, but it’s a guarantee that the profits these companies going to generate are going to be enormous, and some of these names are still down from their pre-COVID highs, and recently got hit in the past few months.
Frank Curzio: And I think some are exceptional, exceptional buys, because they’re going to come back. Business is going to be as normal as ever. And again, the only factor is how long is it going to take? I don’t think it’s going to take longer than 18 months. Maybe it does. But even if it does, if you’re a long-term holder, the Wynns, Expedias, casinos, hotels, airlines, I think they’re fantastic buys. A lot of these have pulled off 20, 25% off their highs, and still well below COVID highs. And I think those are really good buys.
Daniel Creech: Absolutely. I mean it’s a when, not if. I’ll give you that. I think that’s a good way to sum it up there. It’s a when, not if, proposal on that side. This was a lot of fun. I’m shocked we get so much feedback and emails on this.
Frank Curzio: I know. email@example.com. There it is. Send all your emails to that guy.
Daniel Creech: All of them.
Frank Curzio: He forces my hand. That’s what it is. No, he doesn’t.
Daniel Creech: I do. No.
Frank Curzio: But Dan I and will have different opinions on lots of things, and believe it or not, we don’t hate each other at the end of the day. So, I don’t mind getting emails, especially when people send me data, and I’m going back and forth. We always want to get the story right. You can have emotional topics and debate them, and be friends at the end of the day. You don’t have to have extremes where, “No vax at all.” “Everyone in the world mandated. You need to get the facts or everyone is going to die.” Those are fucking extremes. I can tell you from investing, when you follow extremists, you get murdered, you get fricking murdered. I’ve seen it time and time again.
Frank Curzio: Those guys get rich because the stories they tell us, so enticing, and people buy their books, and shit like that. But when you have extremes, if you’re investing in extremes, that’s when you get killed. You need to figure out the facts. And when you do figure out the facts and the numbers it allows you to take advantage of those inefficiencies, especially in investing, which is what I’ve done pretty much my whole entire career. So guys, Daniel, thank you so much for coming by. I really appreciate it, bud.
Daniel Creech: Always a good time. See everybody next week.
Frank Curzio: All right. And again, we’re going to keep these at 30 minutes, but big topics. So, this went a little bit longer than expected. But what we will cut these segments to 30 minutes going forward. Questions, comments, feel free to email me at firstname.lastname@example.org. And as always I’ll report back to you guys soon, and appreciate all listeners, all support. I really do. I’ll see you guys in a few days. 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 hosts and guests. You should not base your investment decisions solely on this broadcast. Remember, it’s your money and your responsibility.
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