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On this episode of On The Tape Dan Nathan and Liz Young are kicking off the week by discussing the crazy price action that’s defined 2023 thus far (4:00). It’s a big week for earnings and the Fed meets, what can we expect (10:00)? Liz breaks down the consumer credit picture (21:00). After the break, Danny Moses is joined by Porter Collins and Vincent Daniel are back for another edition of “What Are We Doing?” (28:00). January’s rally has the guys scratching their heads, what are they expecting ahead of the FOMC meeting? Tesla stock presented a good bounceback buying opportunity but more pain could be on the horizon for the techno-car company (40:00). The Seawolf Capital guys have advice for finding high-yield private bonds (44:00). Gold is in for a bumpy ride over the next few weeks (47:00).
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Show Transcript:
Dan Nathan: [00:01:45] Welcome to a Monday edition of On the Tape. I am joined by EY from SoFi. That would be Liz Young. She’s the head strategist at SoFi. I am Dan Nathan. Liz, welcome this morning. [00:01:56][11.3]
Liz Young: [00:01:56] Hey. Hey. Happy Monday, I love how Mondays, have I mentioned that I love Mondays? They’re my favorite day of the week. [00:02:01][5.1]
Dan Nathan: [00:02:02] Which is why we chose this day for you to be the co-host of On The Tape. Now, I am going to get I love this Monday. I am down in South Beach. I am at the FountainBleau, One of our fine sponsors iConnections is holding their global alts conference that global alternatives. They meet fund managers with fund allocators. They are a platform for that. But we’re also doing services fast money down here. Guy is going to be with me for the next couple of days going to be a lot of fun. So shout out to I connections. And for any of you guys who are down here listening to this, we are also going to be doing a live broadcast of on the tape tomorrow, Tuesday, that we’re going to put in the feed here, people. You can also watch it on the market call feed. That’s Guy Adami, Dan Nathan, Danny Moses and Jim Chanos will be our special guests also. Stick around. We got a lot of stuff going on here today. Liz and I are going to run through 20% of the S&P 500 reporting this week, Obviously the Fed meeting on Wednesday. And then we have the all important jobs report on Friday morning. I’m sure you’re going to be in a tin box on the squawk box, Liz. [00:03:03][61.1]
Liz Young: [00:03:04] Not this time. Not this time. [00:03:06][1.1]
Dan Nathan: [00:03:06] But stick around because after liz and i are done with all that, Danny Moses is joined by Vinny Daniel Porter Collins for “What Are We Doing?” For that great episode those guys going to rip through a whole host of things. Alright Liz Let’s get into it because January, as we speak, has two trading days left. We’re recording this right in the opening on Monday. The S&P is up 6% on the year ish, five and a half or so. The Nasdaq up about 10% here, we got meme stocks are going wild again. We got Bitcoin up 40%, We got Tesla up 40 some percent. It feels like we are back in January of 2021. Talk to me what’s going on? [00:03:44][37.6]
Liz Young: [00:03:44] Well, first of all, I appreciate the listeners can’t see this, but you wore your glasses for us today. You’re looking extra smart. It’s like sharpening, sharpening your pencil to make sure you get this all in. [00:03:53][9.2]
Dan Nathan: [00:03:54] You know who’s not looking extra sharp? Yesterday, you’re sitting on your couch. You probably head out to a sports bar and you send out a tweet and you say to your friends, your tweets, as they call them, Hey, listen, I got nothing because everybody knows EY from SoFi is a massive Green Bay Packers fan. She’s like, I got no dog in this hunt today, but I got an AFC championship and NFC championship. Give me some reasons to root for some of these teams and then you end up picking the Niners and the Bengals [00:04:18][23.9]
Liz Young: [00:04:21] Oh, guys. Okay. So I guess lesson learned. Whoever I choose in sports, just do the opposite because that didn’t go well for me. I got, I don’t even know 200 some comments. What do we call what do you call that you get. I got ratio’d [00:04:33][11.9]
Dan Nathan: [00:04:35] You got ratio’d Liz [00:04:35][0.3]
Liz Young: [00:04:36] I got ratio’d. There was a lot of opinions but yeah I had I know dog in the hat and then both the dogs I chose fell out So here we are anyway. Happy Monday. It’s over. [00:04:44][7.9]
Dan Nathan: [00:04:44] All right so let’s, let’s do it. This is like. Like, are we back in January 2021? When it was just kind of crazy town in the markets. [00:04:50][6.0]
Liz Young: [00:04:51] I mean, so you outlined really what’s happening, though, from a risk appetite perspective. And look, I don’t want to hate on a rally. I mean, I have money in the market just like all of us do. Right. And and for what it’s worth, there’s people out there accusing me of being short because I’m cautious. I’m not short anything. I am long all the things that I’m in, I’m also long cash. So that’s about as bearish as it gets. But the risk appetite that’s out there, first of all, the stuff that got killed in 2022 is the stuff that bounced. There’s a lot of what I would call almost euphoric risk taking, which is not usually the characteristic of a durable rally. Right? That’s usually characteristic of a bear market sort of environment. It’s a bear market behavior. And now I think what’s happening is we rallied into earnings season. Everybody thought it’s not going to be as bad as we expected. And now we’re rallying, although today we’re not, but rallying into the Fed meeting because people are expecting at least a pause that doesn’t fix anything. And the other thing is, I would say this to investors, a 6% rally in the market does not solve the problems we have. So don’t lose sight of everything that’s happening in the economy. All of the data that’s turning over. Go back and read my blog post from last week called Walks Like a Duck, Quacks Like a Duck, and see all of the undeniable truths that I laid out in data. And by the way, data is not dogma in data of the direction that we’re heading. And just be careful not to get caught up in the FOMO of a really ferocious risk rally. [00:06:24][93.3]
Dan Nathan: [00:06:25] We’ve seen like participation in the market again in January. There’s a lot of talk about all the retail traders dead. When I see this sort of stuff trading the way it is, the zero days to expiration options, right? These meme stocks that Best Buy or Bed Bath and Beyond that is basically said that they cannot meet their financial obligations and they will be filing for bankruptcy and people driving that stock up. You know what I mean? Like 100%. You know, there’s just a lot of crazy behavior here that you and I know just doesn’t end well, because it was the sort of stuff back in 2021, while the major indices in the stock market were still intact and still in rally mode, there was a lot of stuff under the surface that was coming apart after euphoric periods. Right. And so to me, you know, I’ve been doing this for 25 years. When people go back and say, oh, well, we had 30% rallies on seven or eight occasions in the in the bear market from 2000 highs to the lows in 2002 or whatever. I remember those. I remember that feeling o, you know, that that sort of FOMO sort of thing or whatever. And they’re great trading opportunities. And I want to make one other point here. You said you were invested. You were the farthest thing from a trader. You’re a strategist. When people tune in here and they listen to the guy and Danny and myself, sometimes, we are very much traders. I mean, like, yes, we are also invested, We own funds, we own things for the long term, but we are the ephemeral markets, guys. We’re the hot take, guys. We’re the guys, you know, and hopefully we’re backing it up with data. We just have a different time horizon. [00:07:53][88.0]
Liz Young: [00:07:54] Right right. And that’s absolutely true. But I will say, even though I’m a longer term investor and I’m a strategist, I make changes to my portfolio. And when I talk about stuff, if I talk about a final trade or if I talk about something in particular here, an industry group or a sector, I probably made changes to it in line with those thoughts over the past month, or I plan to make changes to it within the next month. Right? I just don’t swing trade, so I’m not in something on a Monday and out the following Monday. But I do make trades and I certainly am active in that. The other thing I would say is you’ve said you’ve been doing this for 25 years. I would say so. I’ve been working full time for, I don’t know, 18 or 19 years, I would say entered this industry really more around 2008, 2009. And I would say this to any of our listeners who are newer investors, even it doesn’t matter your age, maybe you’re just new to doing it yourself. The first crisis you go through shapes you and the first one that I really saw, I experienced. I had clients experiencing it. I lost money in. It was 2008, 2009. So I get much more obsessed with things like credit spreads, right, And things like what is the bond market saying to us? If your first crisis was COVID, then you probably expect a V-shaped recoveries. And I don’t think that’s what we’re going to see this time. So again, don’t get tricked into thinking that they’re all the same and that the timing happens the same every single crisis. And this week, I think is going to be very telling for what we’ve seen as a rally year to date so far. I don’t know that we’re going to make it through this week without some bumps and some bruises along the way and maybe some of that euphoria that starts to relax. [00:09:29][95.4]
Dan Nathan: [00:09:30] Yeah. And before we get to the Fed, let’s talk a little bit about, you know, earnings. So, you know, David Rosenberg, Rosenberg Research friend of the Pod. I really like his work. He’s saying the profits recession has already started. The S&P 500 EPS for the fourth quarter is now on track to be down 50%. The make up and this is important because we had that GDP reading the makeup of the Q4 GDP data was none too good. Involuntary inventory accumulation accounted for over half the 2.9% headline. Now, those two comments put together are really important to me because, again, if we’re starting to see inputs to margins weigh on earnings and we’re seeing deceleration because maybe there are some easy comps a year ago, but we’re seeing lots of businesses, right see deceleration. So we’re seeing declining earnings growth with pesky and persistent as Guy Adami, we like to call it inflationary readings, even though we’re seeing year over year readings wages. And I know we’re going to get into that and others are still much higher than they were year over year. Right. So that’s going to weigh on S&P profits. And then when you think about that GDP comment and you think about half of that nearly 3% gain is voluntary inventory build. Okay. So like to me, that’s a really nasty set up for the middle part of this year and especially when we start to talk about recession again, because again, this is really important. I mean, the consensus became that we are going to have a soft landing and possibly avoid recession, which is one of the reasons why we’re staring at an S&P up more than 5% of the year after less than a month, and the Nasdaq up 11%. And just one last comment before we get into it. You know, Mike Wilson from Morgan Stanley, also friend of the pod, he had a comment. He was bearish all of 2022. He had a tactical rally call from the October lows. He turned it back around in December. But he’s saying better price action and stocks has started to convince many investors they’re missing something. So this goes to the FOMO thing. But I think it’s really interesting that he mentions this one point. He’s like a lot of investors have forgotten the cardinal rule of investing. Don’t fight the Fed. And that’s what I think you want to get to hear a little bit about what the Fed is going to do on Wednesday and what Fed Chair Powell is going to say at his 2:30 presser. [00:11:40][130.5]
Liz Young: [00:11:41] I do, but but I want to cover some earnings stuff real quickly. So you talked about the inventory build. Tie that to anybody who’s really excited still about the GDP print that was positive for Q4. Do you know why it was positive? It was positive because of inventory. Private investment down 26%. Right. What made up for that was inventory. And think about. This is all just very logical. Think about this intuitively. If you’re a company, you’ve voluntarily built inventory because you’re guessing that the customer is still going to buy that inventory, that you can unload that inventory. What if they’re wrong? Right. And consumers can change their habits on a dime. Once we start hearing about people being laid off next door, are whoever somebody in your family gets laid off, and I’ll say this, this is an anecdote, but I gave a presentation last week in the good state of Wisconsin. Let’s say there were 150-175 people in the room. I said, raise your hand if you’ve seen headlines about layoffs. Everybody raises their hand. And I said, keep your hand up. If you know somebody who’s been laid off, I would say 25 to 30% of the room still had their hand up. I was surprised that there were that many people, especially in a state like Wisconsin, which is right in the Rust Belt. So that means that it’s starting to hit other industries. So don’t get fooled by the inventory build up as a positive. As far as earnings go listen to these numbers. And I know you know this, Dan, I’m talking to the listener. Percentage of companies beating on earnings right now this quarter is only about 69%. That is below the one year average, the five year average and the ten year average. Okay. So fewer companies than average beating on earnings. And those are earnings that are already revised downward. That’s not great. These are not great numbers. And you can’t ignore some of those trends. So keep your eyes on it. And one of the big things that I want to watch this week, although I know that the headlines are going to be dominated by the big tech earnings that come out, but there’s going to be some industrial companies that start to report. Those are the things that once industrial start to report if they’re poor or if they miss or if they start to announce big layoffs, which some of them have. That’s when nobody can hide. Right. And that’s when you start to see a recession scenario become much more realistic. [00:13:51][130.4]
Dan Nathan: [00:13:52] Yeah. So that earnings data that you just quoted, you know, per FactSet here, we’ve been quoting John Butters on that for months now and tracking that. And so, again, you know, that data is coming in below the averages over those time periods that you just mentioned. But what’s really important is John Butters has also been showing us data how much quicker earnings estimates have been coming down over the last couple of quarters over the course of the quarter. So analysts are basically trying to get in front of this. So when companies are reporting, let’s say, beats, they’re beating much lowered expectations and then they’re guiding lower again. You know what I mean? So the fact that they’re not as bad as expected, I think is a big part of it. And that’s a trend that we saw for most of 2022. We talk about that rally March into April, June into August and then October and December. Those periods also coincided with earnings periods to where I think investors when the market was at its lows, investors were really dour. They got the earnings, they got the guidance, and they kind of rallied out of it. What’s different about this earnings season right now is that we’ve had a nice little rally. We didn’t make a new low. We weren’t coming off of a relative low. So, you know, again, all of that’s important. Hey, the last point on GDP, you know, it’s interesting because we know that Q1 and Q2 of last year were negative prints, but for some reason they were explained away. Right. So two consecutive negative prints meant to be a recession. But for whatever reason, no one’s calling a recession and who cares? I mean, it doesn’t really matter. But when you think about the comparisons year over year, they’re pretty easy, right? And then when you think about what you just made the point about what made up a good chunk right, of that GDP at 2.9% was voluntary inventory. Not good. So that’s Rosie’s point. The last thing I’ll say about this is prior to the pandemic, the average GDP for the ten years was about 2.2%. Okay. So no matter what you think about how we come out of this kind of economic malaise, I mean, we’re headed right back towards the average sort of 2% GDP environment. And then the real question is do jobs, do wages, Does the jobs picture stay really tight? You know what I mean? Does it really complicate this whole kind of scenario for the Fed, right, where they’ve seen a lot of inflationary inputs that they track come in, but wages stay difficult, wages stay high and the jobs market stays tight. And there we have this situation where the Fed maybe has to stay tighter for longer. [00:16:13][141.3]
Liz Young: [00:16:14] They’ve been telling us that they’re going to stay tighter for longer. And I still I’ve said this I don’t know how many times over the last six months. I don’t know why people refuse to listen. They have to, right. And if they’re going to continue to telegraph that, I mean, maybe we can only take what they say they’re going to do for the next 30 to 60 days, but still they’re going to stay high. So when we look at the labor market now, first of all, is it going to stay tight? Yes, because there’s a lot of bubble wrap around it. So it’s going to take a while for it to actually be viewed as not as tight. There’s still a gap of 3 million people between number of jobs available and people available to fill those jobs. That’s a huge gap and that gap needs to close. There’s also still a ton of job openings out there when you look at the JOLTS data, Right. So some of that’s going to have to come down. That’s the bubble wrap that I’m talking about. That’s going to take time. But one of the indicators that you can look at is something like temporary help. I’ve probably talked about that either on market call or here. Temporary help has been contracting since August. That usually leads the broader labor market by about six months, which would suggest that we start to see some loosening or some weakness in the bigger labor numbers in some of the February, maybe the January data, but some of the February data. So although this week is going to be just January data, I think we probably get worse numbers for February. But there is a jobs number coming in on Friday and it’s expected to come in pretty far below where we were last month. So there’s some weakening that’s going to start. What I think is actually going to happen here is, you know, we hang on Jerome Powell’s every word. Now, it’s really not a surprise that we think the terminal rate is somewhere around five. They’re going to hold it higher for longer. Right. And also, people don’t make the mistake that pause means it’s over. Right. Pause just means now we hold. Right. So you get we get the hold high for however many months the Fed is predicting. They hold high through the end of the year. But what I think is going to happen now is we’re going to start to hear in his commentary that, okay, we’re watching inflation. Of course, it’s on the right path. Now we’re watching the jobs market because the part of inflation that we’re worried about is wage inflation and is services inflation. And just think about that too, intuitively. If you’ve got services companies, they’re not the ones that are benefiting from this huge drop off in goods inflation. Right. They’re the ones that are spending most of their money on things like wages. If you get wage growth that stays in that 5% range and inflation is right around equal with that, that might be good for the people making those wages. It’s bad for the company because revenue has fallen. So that’s where you get to this point where it’s like, all right, everybody wants to declare victory. Inflation has peaked, everything’s great, the market is up, it’s over. And then what could actually happen is inflation will come down to, I don’t know, four and get stuck there and wages stay high and we’re stuck there. And then the Fed has no choice but to hold it steady high. And that’s where you start to see operating margins compress. And then we’re in a whole world of hurt. [00:19:13][179.7]
Dan Nathan: [00:19:14] The hard thing here for the Fed is that they’ve done a lot of things right over the last year. Their messaging has been fairly consistent. I think the things that they’ve been most focused on as far as inflation readings, you know, have come down considerably. Right. And so, again, we you know, I think you and I were in the camp that we were going to see mean reversion, whatever you thought your definition of transitory was. But the one thing to your point is wages stay bit. And I saw that President Biden had a tweet out and they’re not great on this stuff from the messaging in my opinion on some of this stuff. But they’re talking about wage growth because politically it helps them, but it makes the Fed’s job that much harder. Right. Let let’s just be really clear on that. I wanted to mention this is really interesting, your point about being in Wisconsin and doing a little hand raising exercise with the people out there in the heartland, as you called it. You know, there’s some consumer credit commentary that I thought was really interesting over the last two weeks. So we saw Discover financial, we saw COF so those are lower down the credit range in the comments that they had to say about their clients and just kind of default rates and that sort of stuff. And then we had American Express on Friday morning. And so when you think about, you know, where we’ve seen the layoffs of late, you know, they really have been on these kind of like tech workers, kind of higher end workers. Even if you think about like an Amazon, they’re not cutting their factory workers. They’re cutting like white collar jobs. Right. They’re cutting tech workers. And so I think it’s interesting, you know, I got sucked into a bad trade. I mean, I just made some bad analysis on of that. I think we got sucked into it. [00:20:43][88.7]
Liz Young: [00:20:43] Garbage in, garbage out. [00:20:44][1.0]
Dan Nathan: [00:20:44] Yeah, a little bit. And I thought that, you know, the American Express, I thought that we would like to see, like the high end, maybe consumers slow down a little bit because where we’ve seen the job cuts and then maybe also corporate travel and some of those things and maybe you would see that in American Express, we did not see that. Okay. And so the point I want to make is that we actually haven’t seen jobs, manufacturing jobs. Yes. Triple. I made an announcement. They were cutting 2500 jobs, manufacturing. They were specific to say it. But I think that’s an interesting dynamic here. You know what I mean? So I’m just curious, thoughts on consumer credit in general. We know that it’s ticking up. We know that companies that are offering credit on the lower end of the kind of credit spectrum are getting a little bit worried, but doesn’t seem like there’s too much difficulty on the higher end right now. [00:21:30][45.5]
Liz Young: [00:21:30] Well, the higher end always happens last, but the consumer credit picture like we talked for so long about, oh, there’s all the savings out there, there’s a huge savings glut. Everybody’s got this built up savings. The savings rate is low now and it dropped off a. Cliff. If there was so much savings out there, people wouldn’t be borrowing so much on credit cards. Why would you choose to do that and pay an interest rate in a rising rate environment? So I think it’s actually the lower income consumer who is loading up on leverage, loading up on credit card debt. And this is something that we have to be careful of. And I think you have to set your expectations a certain way. It hasn’t broken yet. But I mentioned at the beginning of this that, you know, I look at credit spreads quite a bit. I think a lot of corporate debt right now way too tight as far as spreads go. High yield debt. Way too tight as far as spreads go and default rates are rising. Now, they’re very low compared to where they would be on average and where they would be in a recession. But default rates in high yield are rising. They were about 0.25% at the beginning of 2022. Now they’re about 1.25%. That’s a that’s a pretty big clip year over year. So they’re on their way up. I think consumer credit, especially low quality consumer credit, which is things like credit cards. Right. I think there’s going to be a credit event this year. I don’t know exactly where or what’s going to be the impetus of it. Bed, Bath and Beyond could be one of those canaries in the coal mine. But I don’t think that consumer credit is as healthy as everybody is expecting. But to your point, the higher end consumer, it takes them a while. And the layoffs, yes, they’ve happened in white collar. But if there’s you know, there’s big severance packages, if it takes a while or especially in tech, if there’s still plenty of jobs available, they can get employed again. So and I don’t know that those layoffs necessarily are happening at really high levels. They might be white collar, but it’s not happening necessarily in the C-suite. Right. So some of those higher end consumers may not have been directly affected yet. [00:23:23][112.5]
Dan Nathan: [00:23:23] That’s just kind of weird. So Guy Adami is flying down to Miami four to meet me here at this conference, and he just literally put in our chat a Wall Street Journal article. Banks Brace for more Consumers to Fall Behind on their loans. No shit. He literally just texted that in our chat, which is kind of weird. And the other thing he said he’s all excited that he landed, that he got here on his own. I just I just texted back, Do you know how to use Uber do you need me to order you one? Let’s let’s see what he says here. Because, you know, he and I for business, obviously travel together most of the time. [00:23:55][32.6]
Liz Young: [00:23:56] so he’s unsupervised. [00:23:57][1.2]
Dan Nathan: [00:23:58] Yeah. Let me tell you something. It drives me crazy that he does not have TSA pre I literally rail against, it’s just the worst and I have pre I have clear. Before we get out of here, Liz, let’s make a couple of predictions here. The market right now. Okay. Like we said, it’s down about 50 basis points. Okay. So we’re you know, we were euphoric on Friday’s close. We’ve kind of I don’t know, it seems to be a bit of a like let’s say it’s a Monday morning hangover, not something that you typically get here. How do you think the market trades into Wednesday’s Fed meeting? Let’s say the base case of the CME Fed watch tool is suggesting it’s going to be 25 basis points. Everybody knows that. But really comes down to the presser. Right. And there’s going to be one line, one line that moves this market either higher or lower. Right. There’s going to be a knee jerk reaction to whatever the press release says, but there’s going to be one answer and there’s always one answer that moves the market the other way. Okay. So I’m curious, what do you think the first reaction by the algos is going to be right? And then what do you think possibly the reversal is? Or sometimes they just rage into the clothes or they get killed into the clothes and then the next day, you know, when people have a little time to kind of like dissect what was said, it goes the opposite way. I’m just curious because it’s not a great set up here, in my opinion. You know what I mean? Like, the higher we go into it, the worse we kind of come out of it. [00:25:19][81.2]
Liz Young: [00:25:20] I’ve mentioned this before. I think the most dangerous time to trade the Fed is between two and 2:30 Eastern time. You get the data at two, he starts talking at 230 and everything changes because we’ve had such a strong rally into the meeting and because it’s baked in the cake that we get 25 basis points. If that’s what they do. I actually don’t think there’s much of a reaction at all in the market between two and 230. When he starts talking, though, I do think that he is going to lean heavy on labor data and then people are going to start to look at that. We all know the inflation story and I think that probably takes it back down a bit. What I think will actually happen now, Thursday, anybody’s best guess what happens on Thursday. But then we get if he leans heavy on labor data in Wednesday’s comment and then we get labor data on Friday, that’s strong. The market’s going to go down on that. That’s the impetus that then makes everybody question the rally and says they’re going to go too far, they’re going to hold too long, and this is what breaks it. And the other thing is I think we’re sort of we have this muscle memory to watch tech and watch growth and watch communications and consumer discretionary. That stuff will still move. But if the concern becomes now classic recession rather than just inflation and rates, that’s where you start to see cyclicals get hit. Industrials, right? Consumer discretionary would fall in that category. So I just think some of the pain is going to get felt in different sectors. And some of the leadership in these little rallies is going to be different as well. And I don’t I just don’t trust the risk on in growth that we’ve seen so far this month. [00:26:46][86.5]
Dan Nathan: [00:26:46] And again, I think that was a really good synopsis of like kind of like how things might play out here. And I think it makes sense. And I just think if you if you go back and you look January 2022 of the high in the S&P 4800, and you draw that line that we’ve been drawing it and it’s been like literally to a T from the March 2022 high to the August 2022 high to the December 2022 high. We just got above it briefly and we know where the 200 day moving average is. And, you know, so again, I mean, this is not a convincing breakout, but when you think about the price action that we’ve had in stocks of late, 3800 of 4050 or so, and then that low back in October and the S&P was kind of, let’s call it just above 3500. I say to myself, the ten year has come in from four and a quarter right to 3.55. Okay. The dollar, the US dollar index, the DXY has come in from nearly 115 to just below 102. Your point about high yield credit is basically improved pretty dramatically in that time period, I just don’t think the rally that we’ve seen in the month of January is that impressive, believe it or not. And then underpinned by the stuff that has me moving. Right. We talked about some of the crap, right, that has been moving like crazy. To me, this sets up really dangerous and if the Fed just comes in and they just say, Hey, listen, you know, to your point about the terminal rate of 5% and we’re staying higher for longer because the jobs market is going to continue to be pesky here. They do not want to see a risk asset bubble reinflate it. They just cannot afford to do that. So I think that’s the thing that probably takes us back to 3800 and the not so distant future. And then it is the moment of truth. And I think that’s going to happen in February, March. [00:28:23][96.9]
Liz Young: [00:28:24] Yeah, absolutely. And I want to close with one thing. Somebody is wrong. That’s my theme. For the next few weeks. Somebody is wrong, right? Either the equity markets wrong or the bond market is wrong. My guess is that the equity markets are wrong. [00:28:36][12.3]
Dan Nathan: [00:28:36] All right. Fair enough. And I’m probably wrong somewhere in that I was called this, you know, on the Twitter over the weekend. I think it was on Friday, Elon Musk responded to a tweet that someone put up a video of me talking about Tesla, and he called me a doofus. So, yeah, So I’m wrong a lot. I admit it. You know who doesn’t admit when he’s wrong? Elon Musk. All right, stick around. Stick around. What are we doing? Demo. Very important. Thanks [00:28:58][21.9]
Danny Moses: [00:31:01] Welcome back to On The atpe for another edition of What Are We Doing? Although in this case, it’s what in the hell are we doing? Really don’t know what’s going on. I want to welcome my former partners, Vinnie Daniel Porter Collins back. A lot has been going on, boys. We’ve seen the majority of the banks report take away on that. And your take away in general what it means for the consumer credit, which I’m most interested in. [00:31:19][18.3]
Vinnie Daniel: [00:31:19] The one thing I’ll say is the earnings have been better than what people expected. Credit has been deteriorating, but not as bad as people expected. But the one takeaway I left with all these names in, generally speaking, we’re not involved in these names at all. Is that every single management team of every credit card company is still gunning it on the marketing side. So, for example, Capital One, I believe if I’m a little off, forgive me, they’re expecting a marketing budget of $4 billion in 2023. And every single credit card companies have this similar vein. They like what they see because the yields are really fat and the profits are wide. My only point is that I was expecting that we would actually see some form of credit tightening as we walk into 2023 and the credit card business and actually seems like we’re going to get the opposite, which is amazing to me. So I’m expecting them to continue to grow probably well north of nominal GDP, at least for the next three, four or five months, which might serve probably pretty poorly for them in the second half of 2023. But right now, we’re not involved. But if they continue to, quote unquote, fatten up their receivables from their cards, we might get involved on the short side later on. [00:32:31][71.8]
Danny Moses: [00:32:31] You’re not involved in financials, which says it all. Either you feel like there’s not a lot of alpha, there’s not a lot of fat pitches there. I mean, you guys collectively have covered the sector for 45 years. [00:32:40][8.5]
Porter Collins: [00:32:40] We are short on a couple of names, but we’re not [00:32:42][1.4]
Danny Moses: [00:32:43] “cross chat” [00:32:43][0.1]
Porter Collins: [00:32:50] We were doing this sort of geeky analysis for The Help with a friend of ours recently. We were looking back on credit card receivable growth compared to GDP, and the last time that receivable growth was growing this far in excess of GDP, it started in third quarter 2006 and extended to third quarter 2008. And every other time credit card receivable growth has been below nominal GDP and now it’s exceeded it by a fairly high margin, a high actually higher margin than it did in 2006. And so now we’re approaching this is going to be the fourth quarter and it will be five quarters in a row where credit card receivable growth in excess of nominal GDP. So it’s not a good thing. Obviously, people are tapping the highest yield of credit. [00:33:34][44.8]
Danny Moses: [00:33:35] In 2005 and six, we all started to see the cracks. We were sitting together 2006 and seven and the market really didn’t react quarter to your point six quarters later. It feels very similar right now just in the market in general. Forget about financials. In general, it feels very similar that the bombs kind of gone off here. Let’s talk about the markets in general. As we sit here on Friday morning, we’re going to get more economic data. Give me your guys thoughts on the market in general, what’s happened here since the start of the year. [00:33:59][24.3]
Porter Collins: [00:33:59] Unlike most guests that come on your show are probably polished up a slide deck. I have nothing. All right. We’re trying to flesh out our thesis. I think last year, for the most of last year, we were ahead of the sticks. We felt very confident in that. The Fed had no clue what was going on. Inflation was running a lot hotter than the Fed thought, and the Fed was basically out to lunch. So we nailed it. We actually for the past three years, we’ve had some of our best returns because you’re ahead of the sticks. I would say now a bit more confused. And let’s try to flesh out why we’re confused. So inflation’s coming down and I think that one of the things that people miss is the Friends of the BLS. They’re a little late to this. We thought they’d start earlier, but they’re treating it like crazy now. They changed the way they calculate health care inflation. Now they’re going to change the look back period. And so just the headline number of the CPI we think is going to be weaker. The Fed needs inflation to come down because they can’t keep tightening like this. They just can’t. They’re going to crush the economy. And the Fed’s done in basically two more hikes called 25 and 25 or whatever your but they’re done in two more hikes. If you’re a bear, you’re looking at this and saying, okay, the Fed’s done as a bull. You look at the economy and say, wow, it’s just not that good, right? Very inconsistent. I think the jobs picture is pretty good, but everything else is pretty poor. And then you have other wild card here. You have China reopening and I sort of have these awful 2016 flashbacks of the bears out there. And then China reopened and they stimulate and it rips. Talk about the credit card. There’s some warning signs out there, like the credit cards receivable growth exceeding GDP. And then, you know, you have the technicians who are now universally bullish. The S&P is through the trend line. But then there’s the fundamentalists. They call them dinosaurs, like Vinnie and I, who still don’t love the valuations, who still look at the earnings trajectories and say, o that’s why we’re confused. Over the past couple of years, you’re sitting there earning nothing. And so there was Tina and there was no alternative. But now there’s a lot of alternative because in the front end of the curve there in 4%, there are some higher yielding stuff out there. I think that’s actually a bit more interesting. So that’s our confusion of what’s going on. [00:36:03][124.0]
Vinnie Daniel: [00:36:03] Last year, you can fly Top Gun analogy, you can fly at 30,000 feet, fire missiles all over the place and nail almost every target you want to hit. Now I feel more important than ever. It’s important for us to go below the hard deck, shift the guns and go name by name, theme by theme. It’s hard for us. I get it. We also tend to run a little bit more bearish than the average cats, if we could just admit it. But I’m trying really hard not to look at the overall market and where it is. I’d rather look at our themes. What I am most convinced of and on both sides, on the long side and the short side, and solely play that because playing too much for what the market’s going to do is probably going to get me into trouble this year. [00:36:47][43.1]
Danny Moses: [00:36:47] Let’s go back to the Fed for a minutr, since that’s what people are obsessed with and they’re going to focus on. So all the things that have been happening in the last month, let’s say. Risk on financial conditions, easing gasoline prices going back up, oil holding firm above 80. Talk about the lag impact of the Fed raising rates. There’s also a lag impact of that and that’s contributing again to inflation. And if housing has indeed just stabilized, also just from what that factors into CPI in terms of rent and stuff. So my opinion is Powell just got what he wanted if he wants to be very hawkish. And the amazing thing about this, guys, is, you know, I’m a big behavioral finance guy. You guys are as well. We try to think ahead. It hasn’t really paid off to kind of get creative. It’s always been kind of simple, stupid and what’s right in front of us. So is it as simple as next Wednesday we come out? People don’t get what they want and then they look back on what’s been happening these last three weeks. The layoffs that are going on across many industries, obviously concentrated in tech, 10,000, 12,000, 18,000. And these are not blue collar work. And the irony in that is that the tradesmen, the blue collar workers, are the ones that are still going to get paid and stay employed because there’s a shortage of them. It’s the white collar workers that are the higher paid that’s going to have an impact. We have to trade this market. You just said you try not to pay attention, but you’re going to have to pay attention to next week. So give me the set up specifically, you guys think into next week and then when the earnings season is finally over, what’s in front of us here? [00:38:10][83.1]
Porter Collins: [00:38:10] Sorry, what is next week? Oh, Two more hikes and they’re done. I don’t want to [00:38:19][9.0]
Danny Moses: [00:38:20] I know. But Porter, he’s going to be think about what I’m saying, the set up now. It’s not like we’re down 7% for the year we’re up [00:38:26][6.3]
Porter Collins: [00:38:26] Like you said, Danny. Let’s keep it simple and let’s go. What’s most probable? Any idea right now, as we speak of the Fed, cutting in 2023 is wrong, just given what we just had in January and all the leading economic indicators right now, not the lagging, which is still strong, not the coincident, which is weak, but the leading economic indicators are signaling a loosening of financial conditions. [00:38:50][24.2]
Danny Moses: [00:38:51] If that’s your case, the market has completely been trading upon. Fed fund futures coming in went from 85 to 99% of only 25 basis points and there are rate cuts coming in. So what you’re saying is you’re answering my question if it starts to seep back in. So go ahead. I just want for people out there to understand that that the curve has been showing that there’s going to be cuts coming in the summer. And you’re saying you guys are not seeing evidence that there should be any cuts coming at this moment? [00:39:15][24.0]
Vinnie Daniel: [00:39:15] I mean, I’ll give you a great case in point, which is fairly live Last night, Visa reported, which is a monster. It’s one of the top ten monsters in the world and it means a lot during their earnings call in the commentary, they said that January saw an acceleration of spending and acceleration. So when I see stuff like that and then you see the loosening of financial conditions, my first thing is, wow, I don’t think we’re going to get those cuts. People are thinking and I think the rate of my mind is starting to sniff that out. So what does that mean for us? I don’t know what the Fed’s intent is going to be because they kind of needed loose financial conditions to refile a lot of paper. That said, if the two year remains anchored north of four, which I think it will, that’s going to be very tough for the auto market. If the ten year stops declining, the rate of change for housing is going to get worse. On the short side of the ledger for us, we remain bearish on large ticket consumer discretionary now, which have squeezed a lot. And so we actually got opportunities to come in and short some of those names because they’re up a lot. They’re starting to hit interesting technical levels. They went from way oversold to no longer oversold and potentially overbought. So that’s something that we feel very comfortable with, that consumers are just not going to go out and buy. And not that we’re short this name, but I’m using it as an example. They’re not going to go buy really expensive furniture at Restoration Hardware above and beyond what they did over the last three years. That’s going to be a difficult get for them. So so again, keep the highly probable things that you believe based upon what the Fed, I think is going to give you. Are they going to get super hawkish, Danny, I don’t know. But I know they’re not going to get super dovish. That I know. [00:40:50][95.1]
Porter Collins: [00:40:51] Let’s go back to what we talked about last year. You know, the Fed was using this blunt instrument of higher interest rates to kill inflation. Right. But we have fixed nothing in terms of the root causes of a lot of this inflation. In terms of labor. There’s still not enough labor out there. Oil, actually, we’re pumping less than we were last year at this point, and we just haven’t fixed any structural changes to inflation. And so as China reopens, inflation is going back up again. The CRB Raw Industrials Index is inflecting again higher. So we have all these underlying inflation things starting to reaccelerate. Right? And as I know, the Fed’s cheating and their CPI is going to come down but I think that what the Fed’s going to do is they’re going to have to stay at a higher level to finish what they started, you know, if they cut too soon and these commodities start to reaccelerate hard. You know, if you see oil at $120, then they’re really screwed. I’m agreeing with Vinnie here that I think the Fed’s going to stay higher for longer to make sure that they actually crushed inflation, because if they don’t crush inflation, they’re dead. [00:41:50][58.9]
Danny Moses: [00:41:51] Fair. There’s a couple of names that have reported names that we’ve talked about often. What’s drift here into Tesla, If you would show me that press release without any other commentary, even though I know that Musk would get on and blah, blah, blah, I would thought the stock would trade down. Not that means anything. I don’t think from a fundamental basis. I don’t think it was I mean, I think it was better than expected. I think the only takeaway in my mind was just the saying orders are are accelerating in January because of price cut. But we all know we’re fundamental people. So give me your guys quick take on the name and how you’re kind of position here. [00:42:20][28.9]
Vinnie Daniel: [00:42:20] We covered a bunch of our short when it got down around 100 and lower. We actually started adding to it after they reported. [00:42:27][6.7]
Porter Collins: [00:42:27] It was simply too oversold. Steep, sharp declines like that, you know, people are just dumping. Get me out, get me out, get me out. The same way that it feels so bad when stocks are going down and the stock that you like is going down. That’s the time to buy, buy low, sell high. So when Tesla was getting killed like that, you have to take chips off the table. So that’s what we’re doing. [00:42:46][19.0]
Vinnie Daniel: [00:42:47] The other thing you have to keep in mind that there’s probably not a name in the market that benefits more from loosening financial conditions and liquidity than Tesla. The sad part of what we all like to do for a living, which is fundamental analysis valuations and the like, doesn’t really pertain to this name. It sucks. It just does. Like I remember, I look at it and like, why even play around with this name? Because there’s a variable and a factor that I just prefer not to think about when I’m analyzing. But I have to, particularly with this name. That said, I think probably the rate of change on liquidity and financial conditions over the next two months is probably negative relative to what we’ve seen in January. So as a result, I think the stock is going to run into headwinds. I don’t know if it’s at 160 or 200. That’s my issue. But aside from that, they’re going to run into problems because their fundamentals weren’t that great. And it’s not looking great, at least on the auto side. It’s not looking great Over the next 6 to 9 months. Their margins are coming down, competition is coming. All the stuff that we care about seems to be weighing on the company and it weighed on the stock, to be fair, went from 400 to 100. But I think as the liquidity dries up, this stock is going to face some material headwinds. [00:44:00][73.5]
Porter Collins: [00:44:01] And this stock looks more and more like a normal auto company. [00:44:03][2.7]
Danny Moses: [00:44:04] Not yet. But yeah. [00:44:04][0.6]
Porter Collins: [00:44:05] The earnings do. They’re actually talking auto not not the other crap that they were talking about. But the thing that’s not lost on me is that Tesla is still level two autonomy. Right. And Mercedes just came out with their electric vehicle sedan. That’s level three autonomy. So they’ve been lap by the majors, Right. They’re not cutting edge anymore. They have the cybertruck coming out, but everything else is kind of weak. You know, the S and X are in decline mode. The orders are down, down a lot. There’s nothing really exciting coming out like, you know, in the auto industry. You have to refresh your product and there’s no refresh coming in the Cybertruck. I don’t know. I just think it’s going to be a big flop. [00:44:40][35.3]
Danny Moses: [00:44:41] And he pushed it out another year. But. Porter The thing is to me is that recognizing full self-driving revenue, a chunk of that right, which we know at some point could have to be restated because that doesn’t exist. The regulatory credits, which they continue to use, those aren’t fundamental things. To your point, the fundamentals look like an auto company. The stock doesn’t was it was my point. But all those things, there’s only one direction. All these price cuts are coming in now. And the other thing is that you guys agree. Is it just the economy in general. And yes They’ve cut prices down to a level maybe they don’t considered luxury anymore. But between all of that, I just think it feels like doesn’t matter if it’s X, Y, Z or TSLA, stocks will rebound to your guys point from an oversold condition, Fibonacci style and go to a level and suck the rest of the people in and then eventually catch back up again to its fundamentals, like bouncing off of a champion and coming back down again. And so to your guys point, you traded it well, you’re adding back here and it just seems to me that and Vinnie, I think you make a great point. It is probably the poster child of easing financial conditions and the flip side tightening financial conditions so. [00:45:44][63.5]
Vinnie Daniel: [00:45:45] So Danny lets speculate here. [00:45:45][0.8]
Danny Moses: [00:45:46] Okay. [00:45:46][0.0]
Vinnie Daniel: [00:45:46] What did Tesla buy with $4.3 billion? [00:45:49][2.6]
Porter Collins: [00:45:50] It was the question we were asking on Twitter. [00:45:51][1.4]
Danny Moses: [00:45:51] Well, on Twitter for Twitter, about Twitter, I don’t know what it is. Could be an investment in Elon Musk Inc is a bailout. It could be an about who knows. We’ll never get a true read of that company all the other companies that he runs and if there’s any co-mingling going on, whatever, we won’t know. And we’re not going to get this 10-K here for probably a month. Maybe we get it sooner, but it has to be by the end of February. That’ll be interesting because that 10-K, I believe, correct me if I’m wrong, will have stock margin has a lot of other things that go into it that we don’t get in the normal queues. So I guess we’re going to have to wait and see. But yeah, listen, there was a lot of stuff in there that didn’t jive on the balance sheet in my opinion. Porter you mentioned something and I know you guys have been doing this, I’ve talked about it on the podcast and people have tweeted at me, How do I do it? You guys have been looking at single name corporate bonds here and there. Almost call them odd lot bonds or companies that you like that you’re like this is kind of mis priced. And I think it’s important for people out there to understand you get yield at 4% on the front end or even, you know, short end of the curve, so to speak. But there’s six, 7% things that are out there. And even 9 to 10, if you count just total return on these bonds. You guys talk about how you get there, what you see and how people can find these things and buy them, because I think it’s really interesting. [00:46:58][67.0]
Porter Collins: [00:46:59] It’s hard. We gravitate toward the anti ESG sector, right? Because you think about that’s the sector that the banking sector shuns. And, you know, just you’re going to gravitate towards higher yield. And so, you know, a lot of these corporates are finding themselves seven, eight, nine, 10% or greater. And so I would say if you’re in the high yield sector, I would look towards a lot of these commodity based oil and gas companies shipping and there’s a lot of these yields and really attractive. And the difference this time is that the balance sheets are really, really good. And we made a nice purchase in Transocean bonds, which was a great trade for us, but. [00:47:35][36.7]
Danny Moses: [00:47:37] That would be RIG equity symbol for that, correct? [00:47:38][1.0]
Porter Collins: [00:47:39] Yep. This is one of the classic examples. If you’re sort of like the equity, you have to like the debt yielding high teens rates. And so they’re down to 13% now, the Rick Bonds. But like, that’s a great example. I love the balance sheet. I love what’s going on. I don’t love the balance sheet, but it is good and it is trending in the right direction. But still, you know, 12, 13% yield, that’s pretty attractive to me. [00:48:00][21.5]
Vinnie Daniel: [00:48:00] The other thing we do and this is tends to be opportunistic, Danny, right now the opportunity doesn’t exist, but as old vig hacks, financial services hacks, the bank preferreds were always a way of getting yield when the banks were trading distressed below tangible book value, so you would be able to scoop up their bank preferred, usually in the high single digits. And the way I think about those pieces of paper is they’re particularly, let’s call it a JPMorgan preference or PNC or any of the regional banks. They’re almost as good as government paper because if one of those go down, the government’s going down. So as a result of that, you’re getting to earn, call it eight, 9%. We’re not there now, but eight 9% on government paper. That’s a pretty decent yield to enjoy, which is effectively default risk free. [00:48:47][46.1]
Porter Collins: [00:48:47] Some of these financial but they’re not there yet. They’re too you’re not. So the anti ESG is the best way to go and some of the high yield funds gravitate more towards those sectors. So I would say look through fund managers who have higher materials, energy concentrations. That’s at least what I’m doing. [00:49:04][16.7]
Danny Moses: [00:49:04] So let’s move to an asset which has no yield, but has been performing very well for the last few months here and probably going to get tested here in the next week, just around the Fed meeting in general and on the margin. But that being said, I think it’s kind of found a new home and that’s gold. And people say, oh, gold and, there are fundamental reasons and Porter, we’ve talked about it a bit and we’ve talked about it physical versus if you want to call it paper market for gold and so forth. Give us an update on kind of where you guys are and how you’re kind of expressing that trade right now. [00:49:31][27.3]
Vinnie Daniel: [00:49:32] Well, first off, we do want a lot of gold. However, you know, we were doing our typical analysis and charts yesterday, and like you said, there had overbought conditions and there’s a variable next week, which is the Fed, which they probably have to do some form of relative hawkishness to what we’ve seen in January. So I do expect the bumpy ride over the next few weeks. We’ll see. But the long term to me is inevitable. The state of our balances and fiscal deficits and we wrote about this in our annual review, There is no easy way out and eventually they’re going to have to get dovish eventually, and eventually we’re probably going to see some form of QE because someone has to buy our debt because we can’t get our fiscal deficits in order. So as a result of that, we remain long term constructive on gold and silver. The next two weeks, I can’t make a call. I agree that it could get choppy. [00:50:20][48.4]
Porter Collins: [00:50:20] Carter Worth and every other technician says gold extended here. Okay, fine. I get it. But I would say that, you know, I had dinner last night with one of the major strategist from a buldge bracket firm. I was going through my you know, what Vinnie just went through and talked about gold and he just goes, oh, and so real money isn’t there. When I think about foreign central banks and custody of assets, if the Russians or the Chinese, you know, if you’re the Chinese, do you want all this exposure to U.S. government bonds. And so the US doesn’t like what China is doing. Did they seize assets? You know, And so I think that’s a real question mark. What’s going on with Turkey? Do they get nervous about owning U.S. government bonds? I think it’s a real issue. And so you go back to bearer instruments, right, of what foreign central banks can own. And I think gold’s up their gold as a percentage of foreign central banks balance sheets is at a 5060 year low all across the pension system, everywhere, people don’t own it. And so I think people are gravitating towards more physical aspects anyway, at the same time, hitting harder and harder to extract a lot of these physical oils or metals or whatever from the earth. That’s why I think I’m more in the long term inflation camp. And I think you want to own a lot of these hard assets. You know, if you look at the typical RIA, they don’t own any of this stuff. They still don’t. They own mostly tech and consumer and staples and youth. Since they like that, I just don’t think they own hard assets. [00:51:40][80.0]
Vinnie Daniel: [00:51:41] You don’t hear a lot of bullish things coming out of our mouths. But the one place where I think is a treasure trove of grift and we can’t ignore it and you shouldn’t, is the Inflation Reduction Act what it does in law? It is hoping to change the energy grid of the country in the world. I think a lot of it is stupid. I would have done it differently. But we don’t make the rules and it is what it is. So as a result, that is where we are looking towards for a lot of our longs. As Porter said, we’re going to have to dig up a lot of stuff out of the ground to create a green climate. And that’s where we’re spending a lot of our time to look at what needs to be dug out of the ground more so than people think and what’s in short supply. [00:52:20][39.7]
Danny Moses: [00:52:21] Think this Bank of Japan experiment playing with the yield curve and their currency is a huge catalyst, potentially not just to mess up the entire financial system. They carry trade, but gold, I think comes to the forefront as a result of that and people trying to figure out what asset can they go into. That’s what I was going to mention in your quote letter, your Rocky four letter Vinnie leaked out on Twitter and everybody got to read it. How fantastic the returns have been. And you guys kind of made a hint or alluded to your thinking about it, maybe taking outside money, maybe start with friends and family. What are you guys plans here in 23? You’re going to bring the SeaWolf back to the forefront here with some outside money? Don’t answer so quickly here boys, I put you on the spot people want to know [00:52:58][36.9]
Porter Collins: [00:52:59] First of all, you know, you always get nervous. Guys like us get nervous. You know, we’ve had a couple of good years. You always worry about reversion to the mean. So that’s in the back of our heads. Last year was one of the easiest shorting environments in history. First month here has not been so easy. Thankfully, we have learned from a lot of our past sins. We don’t go net short anymore. We are carrying a healthy long portfolio so which is saved us from getting destroyed this year. People need help out there and people will show me their portfolios all the time here. This is what I own. This is my RIA has me in this. What do you think? And I look at their portfolios and it’s it’s just a smattering of stuff I look at. I don’t know, like I don’t even know what you can do with this thing. And there are much ETFs here and there. I don’t even know who’s managing things. And and so, you know, our goal was sort of to help people and help people with yield, help people with retirement and that kind of stuff. And so, you know, we were we were stupid Vinnie and I were were thinking sort of more widows and orphans type thing and help people with yield and just fundamental names with little downside. And so I don’t know, we haven’t quite baked out what we’re going to do. [00:54:05][65.9]
Vinnie Daniel: [00:54:05] If you turn on financial media, it’s amazing. There’s only like seven names they talk about all day long. Right? And I actually think that there’s so much more that can be done below the radar screen. I remember and I agree with them I remember there was a podcast with David Einhorn and he was talking about the death of value, but he really didn’t mean the death of value. What he really meant was that value has evolved or morphed into a much different thing where you can’t rely on someone else taking you out of your position because those funds don’t exist. So we kind of went again below the hard deck, really looking at stuff that no one wants to look at, and there’s a lot of interesting things to do. The other thing that we’re trying to do, for lack of a better term, is time, and who knows when it’s going to happen. But time, the inevitable probably flush of the market. It could be three months from now, it could be three years from now. But we want to be sitting there with an opportunity to have a generational buying opportunity to buy stuff on the super cheap and really just accrete the yields based upon the value of where we bought it. So that’s the primary goal. It’s still in process mode. [00:55:12][67.1]
Porter Collins: [00:55:13] Guy and Dan they wouldn’t recognize a single name on the long side. Yes, the shorts. Shorts are shorts. And they would see Tesla and they would know it is. But on the long side, they’ve never heard of BTU except for us talking about it, but they’ve never heard of AMR or d stuff completely off the radar and we think have big margin of safety, nice dividends, cash flow. Last time we were on with then he was making fun of us for our oil call. You know, oil so extended. How can you buy this? I’m shorting it. I think we had a bet in there. I think we won. But I think people are looking at the ExxonMobil’s and the Chevron’s and they just see the cash flow. Right. And the cash flows enormous. And and they look at all these tech names at the end and there’s there’s not a lot, you know, except for the big boys, there’s not a lot of cash flow coming out. And so I think when you stick to fundamentals and you stick to free cash flow yields and dividends, that’s just kind of stuff that we like. And yeah, they might be a bit boring and off the radar, but the stuff that we like. [00:56:10][57.4]
Danny Moses: [00:56:11] We’ll Be back again at this in a couple of weeks hopefully. And I think I think we’ll have a lot to talk about. It was so obvious that the market was going to trade down, but now try to time this thing perfectly. But anyway, boys, thanks for coming on again. [00:56:21][10.3]
Porter Collins: [00:56:22] But Danny, when you see the CPI, when you see the CPI come out, just know they switched the samples. [00:56:27][5.4]
Danny Moses: [00:56:28] So they could have just prevacid. Dr. Richard Kimble. All right, next, next letter KimballAll right, boys. Love you guys. Thanks for coming on. Well, we will be back soon. [00:56:37][9.0]
Porter Collins: [00:56:38] Later. [00:56:38][0.0]
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