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On this episode of On The Tape Guy Adami, Dan Nathan and Danny Moses are back with another What’s the big takeaway from today’s CPI report (3:40)? The guys offer insight on how Taiwan Semiconductor might be an early test for how earnings season and the second half of 2023 will look (10:00). The debt ceiling is looming, what is the Fed going to do (16:00)? Danny is taking momentum into the playoffs with his picks for Wild Card Weekend (26:05). Anastasia Amoroso joins the show again to discuss her outlook for 2023 (30:00). How is Anastasia thinking about a possible upcoming Fed rate pause (36:30)? Anastasia discusses the re-balancing we’re seeing in the labor market and how she views earnings for 2023 (39:30). What does a “soft landing” actually look like (41:45)? Anastasia details how she thinks the China re-opening process will play out in the markets (47:45).
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Show Transcript:
Guy Adami: [00:01:21] It seemed funny to me that the sunset she saw from her patio and the one I saw from the back steps was the same one. Maybe the two different worlds we lived in weren’t so different. We saw the same sunset. Of course, that’s a quote from S.E. Hinton, who was a teenager when she wrote The Outsiders. She used the initials S.E. So people wouldn’t know whether or not she was a man or a woman. That’s what the world was like back then. Now, that quote is fitting because in a few minutes, we’re going to have a wonderful conversation with Anastasia Amoroso. So it’s interesting to see her perspective on the sunset that the rest of us see and the movie The Outsiders, Danny Moses by the way, you are listening to the One The Tape podcast was such a fantastic movie. And I tell you, the cast, Patrick Swayze, Tom Cruise, C Thomas Howell. [00:02:16][55.3]
Danny Moses: [00:02:17] Ralph Macchio. [00:02:17][0.7]
Guy Adami: [00:02:18] At my own in Diane Lane, a very young Diane Lane, who to this day I have a bit of a crush on all in that movie. But obviously one of the themes in that was Stay Gold Ponyboy. And why do I mention that? Danny Moses Because all the things that are happening and now Dan is probably wincing right now. We’re going to talk about a lot of things. The gold market, which you talked about many months ago, is peaking up its head. So I would say stay gold, not ponyboy stay gold Danny Moses. [00:02:48][29.7]
Danny Moses: [00:02:48] Yeah, I did. Yeah, I like it. I like it. Yeah, we can certainly touch on that. And listen, the one thing that’s clear to me that whatever would cause the market to rally would also make gold rally. What is that? That’s the Fed stopping. That’s a dollar starting to weaken. That’s the Fed fund futures pulling back, which they are. And gold again to me from a risk war perspective is was and I do believe still is it’s had a nice little move here replaced so we’ll see what happens but we’ll talk about that [00:03:14][25.7]
Dan Nathan: [00:03:15] Yeah you heard this on the MRKT Call Guy and I the other day I put a bearish position on the JLD. Well today it’s 1% against me. Okay I know and I heard Vinnie and Porter on with you on what are we doing on Monday’s edition here and you guys were all geeked up about gold and Vinnie actually corrected you because you said he didn’t do a whole heck of a lot. He said on a relative basis, relative to everything else out there, It did very well in 2022. [00:03:37][22.6]
Danny Moses: [00:03:38] I said it did very well. I don’t know where he pulled that crap from. I said it was fine, but he was like, yeah, but it doesn’t yield anything. And I’m like, Yeah, but it was always [00:03:43][5.6]
Guy Adami: [00:03:45] Was that an impersonation of Vinnie or. [00:03:46][0.4]
Danny Moses: [00:03:46] No, it’s just my impersonation. [00:03:47][0.8]
Dan Nathan: [00:03:48] Hey listeners, keep keep tweeting at Vinnie and Porter. We want them on all the time so check that out if you didn’t listen to that one. [00:03:57][8.2]
Guy Adami: [00:03:57] 100% and listen, the conversation with Anastasia is going to be great. She’s as I’m going to say, you know, she’s one of the people you want to listen to when you see her on either CNBC or Bloomberg. We’re fortunate to have her. But in terms of the CPI report that we saw on Thursday, there’s something for everyone. I think collectively we said back in June, I think when the print came out, 9.1%, that that would be the peak. We will not see another nine handled. Things should start to trend lower and things have trended lower. For some people they’ve trended lower faster. For other people, it’s still somewhat resilient and sticky. I’m one of the resilient and sticky people, but again, for both bulls and bears is a lot to take away from this. Danny Moses, your thoughts on CPI and what it means? [00:04:38][40.9]
Danny Moses: [00:04:38] Yeah, listen, it’s trending down that we know. How is the Fed going to react to it? This was it, quote in line number you can piece apart probably some parts of the are still inflationary in some parts that you know, are coming down. But I take all this stuff that we see in the beginning of the year, all the data points, the job number. People are trying to craft I always say this and I’m going to ask you in a stage of the same question, if we were sitting here in the market was down 200 points for the year and the S&P instead of up, I don’t even know if that’s accurate, then I don’t know what the FactSet thing says, where we’re up for the year in terms of points. But I would say, oh, that’s because things are still going well. The job market, therefore the Fed’s going to keep going or the CPI number. Yeah, it’s coming down, but it’s still 6.5% year over year. So we’re going to transition here, I think quickly to next week when earnings start coming out. And I’ll tell you right now, the most important thing to happen in the first 12 days of this year, to me, it was already rumored and it was is Goldman Sachs starting to lay off thousands of people? They don’t do that at the beginning of a year at this point. If they think that things are going to either turn around or you’re going to see a pick up in IPO market pick up in M&A, things like that. So a lot of this stuff is going on right now. I think it’s temporary. Unfortunately I think we’re sucking people in again and it’s going to be staircase up like this and an elevator down and then it’s going to feel really bad to me. And so that’s my take right now. Yes, I’m still bearish. Yes. I’ve missed 4 to 5%. Ten days of trading does not a year make. [00:05:51][72.6]
Guy Adami: [00:05:52] I hear you, Danny, 100%. I think there’s this misguided belief that once the Fed were to indicate they’re going to stop, their job is done, like everything’s going to be okay for the market. But the lag effect off of what they’ve done and by the way, what they will continue to do with reducing their balance sheet has not been felt. And again, it comes down to earnings, earnings growth, revenue and revenue growth. And I will tell you, you take the Fed out of the equation, you do not have the revenue earnings growth, revenue and earnings to sort of be supportive of the valuations we’re seeing right now. And it’s not bearish for the sake of being bearish. It’s just trying to read the tea leaves. [00:06:32][40.7]
Danny Moses: [00:06:33] Right. Boockvar put out a piece about the bull Bear index. Things have really shifted neutral to slightly bullish at the same time. What’s amazing to me is Fed fund futures now really pricing in a 95% chance of only 25 basis point hike in their next meeting in February. So we’re pricing in already this happening. What I can’t understand, I don’t think people understand is that what would make them start to cut rates? It would be a massive slowdown in the economy. It would be something that we can’t even predict that’s going to happen. [00:06:58][25.6]
Dan Nathan: [00:06:59] But just think about this I mean the ten year yield ended the year at 385 or so. It’s trading at 343 right now. The U.S. dollar is down more than 10% from its highs, just made a little more than two months ago or so. So the Dixie the US Dollar index and again, half of that is the euro and we’re having a little bit of a reversion sort of trade there. You have crude oil back near 80 bucks. I mean, when you think about the S&P up 4%, the NASDAQ up 5% is we’re taping this Thursday into the close here. This seems like a bit of monkey trading here because I think you say this all the time. I mean, that volatility in the Treasury yield market, that’s something you really want to focus on and it’s going in a way right now. I get why people think it’s supportive of equity valuations and I get why the dollar coming in is supportive of equity valuations. To your point about markets being valued on earnings growth and those are two things that should be a tailwind to S&P earnings. But the point is if we do see a demand slowdown. To me, this is a really nasty trading period, in my opinion, the first couple of weeks of the year. A lot of people want to believe they want to kind of get in. And if you’re buying this thing up nearly 4% into Q4, earnings are what we’re like to see on guidance. I just think that’s kind of a bad way to start the year off, to be honest. [00:08:09][70.6]
Danny Moses: [00:08:10] And you know, I hate to keep harping on this, but I talk about because I look at these things as a barometer, right? The meme stocks, I realized market cap, who cares? Bed Bath Beyond just told you that they’re going bankrupt going concern language 500 million cash left burning $300 million a quarter. It’s over right? They need some rescue. Stock is up. Again doesn’t matter. But it tells me the indication crypto is running like mad right now. All the kind of shit that’s kind of running. And now people may like crypto, Danny, but my point is you can see the risk chase coming here early and to me that just sets it up for a worse fall. [00:08:41][30.9]
Guy Adami: [00:08:41] No question about it. And it’s interesting. Why do we keep bringing up central banks and the role they play in the market? Because it’s really important. Why did I start this with S.E. Hinton and stay gold, Danny Boy? Because something’s going on here. Bank of Japan. I want to read this to you. Bank of Japan will consider adjusting bond purchases or other policy changes to counter turbulence caused by tweaks to its yield curve control. What does that mean? They’re pushing buttons frantically. They do one thing to fix their currency and it does something else and they can’t stop it. And that’s why, in my opinion, gold is the play here. And these central bankers which have run amuck, they’re all now trying to figure out, okay, I hit this button and fix my currency, what is it doing to my bond market? And that’s the things that I look at to suggest that, yeah, maybe equity markets are not going to crater, but there’s clearly something going on below the surface with central banks, with the bond market, with currencies that at some point are going to find its way into the equity market. [00:09:43][61.9]
Dan Nathan: [00:09:43] Well, think about this. I mean, the VIX is trading below 20. It’s about 19 right here. And last time we saw the VIX get creamed like this was after that November CPI print. We did see the S&P gap up and it reversed. I mean, we’re giving back some of these earlier gains here. And I think to Danny’s point about the meme stocks, I mean, when you saw money flowing into different parts of the market this week, originally when rates started to come in, you saw a lot of these higher valuation, unprofitable sort of tech companies. They saw huge gains earlier this week. Those have petered out a little bit here. There are some things, though, that I think is really important to keep an eye on. By the time your list is you’re going to have four of the largest money center banks reporting Wells Fargo, Citibank, Jp morgan, Bank of America. Those are all Friday before the opening. And then you got to listen to what the companies are saying. Danny, You see that all the time. Read the terms, read the cues. But there was some stuff out of Taiwan semi. And I want to read this really quickly because I think this is important, especially when you’re thinking about what are some parts of the market where investors are going to go to first when they think that we’re going to see a reflation in global growth? One of those is going to be semiconductors. It’s Taiwan Semi. We obviously know that they make chips for a lots of different global chip companies and they’re domiciled in obviously Taiwan and China here. But this was a rundown of their earnings. And I think this is important because I think this might be a little glimmer of what we’re expected to see. This is from Credit Suisse, a trading desk after the report Thursday morning. TSM reports late Q4 sales and guides Q1 down 14% quarter over quarter, but that’s roughly in line with expectations. The first half guidance now implies down mid to high single digits and Q2 down 3% quarter over quarter and second half guided up. This is the important part to me, implying year over year up 29%. Okay. That’s sequentially. And so to me, I think this is becoming consensus right here is that Q1 and Q2 are going to be really bad and then you’re going to have second half loaded. Guys, remember, we used to hear second half loaded. That’s a dangerous trap to get into buying stocks, into this, chasing them after you think they’re just giving you trough sort of estimates. So to me, I think that this is a theme we might see in earnings season over the next couple of weeks. And I see Taiwan semi it’s up six 7% on the day because people are starting to believe this narrative. [00:11:57][134.0]
Danny Moses: [00:11:57] Well, yeah, listen, if you’re the CEO of the company and you want to keep your job, you’re willing it to happen. You want to keep your employees all geared in for the year. You say stuff to be optimists and maybe it’ll be right. I don’t know. But Dan, peeling that back from the global perspective to bring you back to a sector that people want an excuse to buy and I don’t think they can is homebuilders. KBH reported I mean, the stock’s had a decent run, right But KBH reported it a massive cancellation rate across the board. Right. And the real impact is now being felt from all these. Now, it was already happening, but look what they said. Read that quarterly report. [00:12:27][29.3]
Guy Adami: [00:12:27] That’s a dangerous script, though Dan, to your point, I mean, effectively with Taiwan semi saying and you said this, we’re going to have a shitty first half and things are going to pick up meaningfully in the second half. So effectively they’ve bought themselves, I don’t know, three or four months ish in terms of the market. And the market is saying, you know what, we’re going to buy first, ask questions later. I encouraged folks to go back and look at a Taiwan semi chart, go back to August and look where we really broke down from. About $91 or so, which is what we’re approaching right now. So although a lot of people want to jump in and say, you know what, I believe I’m second half can be gangbusters, I want to get in now, valuation is somewhat compelling, blah, blah, blah. You really have to ask yourself how much visibility, how is it possible in this environment for them to know what’s going to happen in the back half of this year? [00:13:17][50.0]
Danny Moses: [00:13:17] You know, a lot of these names like this and just the market in general, we’re going to go into, I think a state of show me story was a show me story. It is up to the companies to show the street that they’re actually making the numbers, not they’re going to talk about it. We’re not even close to that point yet. And when that does happen, obviously it will happen at some point. That will be part of the inflection period. But, Dan, to your point, I don’t think we’re anywhere near that yet so. [00:13:38][20.3]
Dan Nathan: [00:13:38] We were talking about this a little earlier, looking at some charts. The Nasdaq 100 is so much closer to its October lows than the S&P 500, and it just really acts very heavy. And so when you think about 40% of that or the top five or six names, we know that Tesla, which is I think five or six, got off to a pretty nasty start here. Some of the other ones were kind of bid up a little bit. And so we saw that huge rotation in the fall into industrials, into energy. I mean, at some point that has to correct itself. Energy’s been this huge contributor. We’ve been quoting this FactSet data for a while that without Energy’s contribution, the S&P, this is a sector that makes up less than 10% of the weight. We would have S&P earnings, I think down close to 10% in Q4. So at some point in late first half of this year, energy kicks to a negative contributor to the S&P earnings. So I just think that’s really important to remember is that we’re going to need some of these other areas that have really been lagging to kind of pick up some steam. That’s why you’ll see money flow into some of these early cycle tech things like semis. But you better get this timing right here a little bit. I mean, there’s going to come a time where you have to hold your nose and just buy. But to guys point, Taiwan Semi bottomed out at 60 bucks. It’s $87 right now. It topped out before it broke down in October at 90. And so to me, you better believe this guidance they just gave, because if there are any global growth headwinds, this stock’s going back down towards those lows. [00:15:03][84.7]
Danny Moses: [00:15:03] I would say thank goodness for energy stocks right now in terms of money staying in the markets and wants to find a home. So it goes towards the energy stocks. I don’t necessarily agree or counter that what you said about the second half going to be negative, it will be if the economy does start to slow down and I think the economy will really start to slow down, that impact will be felt. But there’s still kind of a renaissance going on in the sector. And your point, Dan, there is a limit to how overweight this group really can be at some point. But I think people are now probably chasing it. They’re they’re chasing because they know they’re going to get good earnings. They know they have good balance sheets and you’ll pay a premium for that. And that premium could stay for a while. In a hard landing scenario, all bets are off. [00:15:38][34.8]
Dan Nathan: [00:15:38] You know, it’s funny, though, that soft landing cabal, which is becoming a sort of consensus right now, I mean, they keep pointing to the fact that that December jobs data was three and a half percent unemployment. That was the pre-pandemic low as a 40 year low. And so that’s why this narrative still exists, that the economy is actually in good shape here. And again, if you’re looking at it through that lens, it might be. But like there are other parts. I mean, we were talking earlier today, Guy, about the services data that we saw within the CPI. I mean, it’s weakening. We’re seeing the housing market weakening right now. And I know we’re going to talk a little bit with Anastasia about jobs in tech. And it seems like every day you wake up and there’s a new headline about some tech company laying off 10,000 or 20,000 workers, I mean, tech workers in. U.S. there are about 5 million or about 2% of all of our employed here. And these are also areas of the market that massively were hiring in 2019 20 and 2021. So you’re seeing a bit of a rationalization there. So the debate on whether we’re in a strong economy or not, I think really goes back to the consumer here. And Guy, you’ve been quoting a lot of data about the consumer, about consumer credit and the like here. If you do see that unemployment rate tick up and that is the final piece of the Fed’s puzzle, it just doesn’t seem like it’s going to be above 4% anytime soon. [00:16:51][72.8]
Guy Adami: [00:16:51] Yeah, but that is, in fact, higher unemployment is not an outcome. It’s a desired outcome for this Federal Reserve. They will keep the pedal to the metal until they start to see unemployment rate move up in a meaningful way. And just like they thought they could control inflation, which clearly they could not control, is the same way that somehow, magically they’re going to be able to control the unemployment rate, which I will tell you categorically they’re not going to control. We talk about this all the time. We tape this on Thursdays. I only bring that up because by the time you’re listening to this, you can hear a lot of commentary out of Jamie Dimon and some of these other bank CEOs, which I think is incredibly important because, listen, we can say what we want, to hear what they have to say is entirely different. And I think it’s equally important. But I’ll say this again, the things that we’re talking about have been echoed by a lot of people, not least of which Paul Tudor Jones earlier this week on CNBC. So you can hear us say it and have one takeaway. But when you hear other people far more accomplished I say it, I think you’ve got to start to at least take notice. I’ll say this I don’t enjoy politics at all. I think they’re boring as shit. It’s just not my thing. And we typically don’t foray into that. But I’m going to for a second because the theater that we saw with the selection of the Speaker of the House was exactly that theater. But one has to wonder what’s really going on behind the scenes. I mention it, Danny, in the context of the debt ceiling, which is something that comes up from time to time, and everybody says, we’ll get through it and I get it. But there’s clearly something going on here in terms of the debt ceiling that I think the market isn’t taking into consideration nearly enough. What are your thoughts there? [00:18:32][100.8]
Danny Moses: [00:18:32] Yeah, we’re obsessed with the Fed and nothing else. But rest assured, this debt ceiling issue is coming. So the last time we had a debt ceiling issue was 2011. What’s interesting about that standpoint is that was after 2010 when Dems controlled the Senate race. You know, you had a fight on your hand. But let me put this in perspective. Back then, the limit of the debt was called was $14 trillion, but debt to GDP was 95%. This time, the debt ceiling limits 31.4 trillion were bouncing around. [00:18:57][24.4]
Guy Adami: [00:18:57] More than doubled [00:18:57][0.0]
Danny Moses: [00:18:58] And the debt to GDP is almost approaching 150. [00:19:00][2.0]
Guy Adami: [00:19:02] 150%. [00:19:02][0.0]
Danny Moses: [00:19:02] Crazy right. Back then, I would say there was more liquidity potentially in the bond market. But guess what? Rates were zero in 2011. There was QE going on. Now we have QT with rates going towards 5% here, right on Fed funds. So very, very different setup. And so what’s going to happen, obviously when we get in it will come up and so people want to think about it now I get it, by the way, it’s another positive for gold there Guy. People want to talk about. Oh, it’s not it’s going to be at us in April or May. You’re going to start to hear about it and you need to start to think about it because what is the Fed going to do then? We saw this in 2011, the crisis that kind of came here. So one of the thing I want to say is when you take a look at that $32 trillion in debt, the average rate that we’re going to be paying on it as a percentage of revenue is massive. It’s never, ever been this high. Back then. It was sustainable. You could, now you can’t. So it’s going to be bigger, Dan, in 2027 than defense spending. [00:19:50][48.1]
Dan Nathan: [00:19:50] Well, you just ask, what are they going to do? They’re going to lower rates. That is the thing [00:19:54][3.3]
Danny Moses: [00:19:55] They have no choice. That’s exactly right. This is something going to break. And what may happen, this is something that will be self-fulfilling. S&P downgraded in summer 2011, the U.S. rating from triple-A to Double-A puts. You guys remember that it was a massive futures bet that went off in the bond market. It was actually CDSs on U.S. Treasuries. $850 million trade in 2011. Guy, how is liquidity in the bond market now? If someone tried to pull off what I don’t know what 850 is today, let’s call it a billion 3 trade like that, it would be cataclysmic. So stuff will start to trade around this and it’s going to be an issue. So, yes, let’s focus on the Fed right now. Yes, let’s focus on earnings, which, by the way, I don’t think will be that great. But behind the scenes, what structurally there’s a massive issue here. And believe me, the way this is going in DC set up and I want to say one other thing. You know what the one thing and we talked about China reopening and how important it might be. You want to hear this, the house, this house, this dysfunctional house on a vote of 365 to 65 just voted to form a special committee to investigate the Chinese government’s economic, technological security, progress, competitive market in the U.S. Think about that for a second. So you want to talk about a Chinese Cold War that literally is beginning here economically. So again, getting all brick and buried up in our beautiful, by the way, beautiful new studios by the way, at Current Dan, I mean, this is pretty amazing. Pretty dope. This place is outrageous, right? They’re doing payment technology wizardry out there. We’re in here or whatever. But again, I start to think about these things because they are going to be you can’t avoid it, Right? You know, it’s coming. So that’s a rip off the tape, by the way, on the debt ceiling. That’s my first ROTT of 2023 [00:21:21][86.0]
Guy Adami: [00:21:25] You came in in such a good mood and I tuned you up a little bit. [00:21:27][1.9]
Danny Moses: [00:21:27] Yeah. But the debt is an issue [00:21:28][1.1]
Guy Adami: [00:21:29] It’s a huge issue. And I’ll say this and again, not that I’m some historian, but I fancy myself a bit of a renaissance man, Danny, as you know. And I’ll say no developed economy in the history of the world has been able to recover from a debt to GDP north of 120%, let alone 150%, which is where we find ourselves. And the debt service that you so correctly brought up is, I don’t want to say cataclysmic, but it’s extraordinarily difficult to navigate in this environment. And just one other thing. A lot of you will say, well, G whiz, everything you just said, if the Fed’s going to cut rates in the back or sometime this year, that’s really bullish. I don’t know about that. I’m not convinced that if the Fed were to pull that trigger again, it’s going to be all that might be in the short term, but long term it suggests something really shitty is going on. [00:22:19][49.6]
Danny Moses: [00:22:19] I got to tell you guys another story. So as I flew up here yesterday to see you guys, all right, I was like, So I was on a flight, JetBlue out of Fort Lauderdale coming to New York yesterday. [00:22:29][9.8]
Dan Nathan: [00:22:29] Is that what you call your plane. [00:22:30][0.4]
Danny Moses: [00:22:30] My, my, my flight time. It’s not funny. My scheduled departure was like 7:03 a.m.. Okay, so we taxi out. They leave early, 6:50 [00:22:40][9.9]
Guy Adami: [00:22:40] Oh, my. [00:22:41][0.8]
Danny Moses: [00:22:41] My son is sitting on my left and he knows I’m not a great flier to begin with. He takes his iPhone, he puts it in my face and it says FAA to ground flights. I go, Well, we’re not going, obviously. And as I look at him, our flight’s rolling down the runway and frickin takes off. Okay, now, now on JetBlue, you got the televisions, right? So I turn on Tom Costello’s on the Today Show talking about this stuff, whatever. I think he’s the best analyst in that area. And he goes, let’s take a look at FlightAware right now. Not many flights are in the air. And I see like on an asteroid, I swear what I think is my plane, there might be 11 planes flying up the East Coast. So I’m texting people, I’m like am I safe? What’s happening? And I’ll tell you this, the Postal service in the UK, what’s it called? The Post. [00:23:19][37.4]
Guy Adami: [00:23:20] The Bad Teeth Postman . [00:23:23][2.3]
Danny Moses: [00:23:23] Hold on. I think it was a cybersecurity issue, right? Because today the postal service in the UK, they got hacked, right? It shut down all the parcel stuff going in and out. So I think that’s coordinated. I think that has to do obviously with the Russia sanctions, which we’re talking about doing price caps again. So again, people I don’t think was a software glitch. I think that’s a hack. So I started saying the scene of Die Hard two guy when like dulles Yeah, this is the tower. You’re free to land anyway. [00:23:48][24.9]
Dan Nathan: [00:23:48] So is this a set up though? Because I wanted to hit these airlines. I mean, United’s up 34% on the year, Americans up 32% on the year. Delta is up 20% of the year. Delta is you by the time you’re listening to this, will have just reported United had really good results here. Listen, as our friend Jim Cramer says, there’s a bull market everywhere. [00:24:04][16.3]
Danny Moses: [00:24:04] Yeah, I’m not going to use cybersecurity as a reason to short the airlines. [00:24:07][2.3]
Dan Nathan: [00:24:07] Are there any areas that have just kind of gotten out of the gate already, Danny, that you’re thinking about? You know what? We’re going to have to see these things come back. [00:24:13][6.0]
Danny Moses: [00:24:14] Here’s a beauty of the airlines, they can just do whatever they want to the consumer, you know, I’ve talked about this before. And then when things get really tough, God forbid something happens, they go. [00:24:21][7.1]
Guy Adami: [00:24:21] Hat in hand [00:24:21][0.3]
Danny Moses: [00:24:22] They get bailed out now bailed out every time they come back. So, you know, I feel about the airlines. But listen, if I told you the market was 3500 right now on the S&P instead of where did it close? [00:24:30][7.9]
Dan Nathan: [00:24:30] 3980. [00:24:30][0.0]
Danny Moses: [00:24:31] 3980? It’s up to 3980? [00:24:33][1.6]
Dan Nathan: [00:24:34] You better call your broker. [00:24:34][0.6]
Danny Moses: [00:24:35] Wow, that’s not good. What I’m saying is I could have come up with the same narrative. [00:24:37][2.6]
Guy Adami: [00:24:38] Are you putting on hedging strategies. [00:24:38][0.4]
Danny Moses: [00:24:39] It’s not a great rally. This rally has not been a great rlaly. [00:24:41][2.6]
Dan Nathan: [00:24:42] Yeah but listen, this goes back to how we started the show here, okay? We’ve all been doing this for a long time. And for some reason, the way that people on Wall Street get compensated, Right. It’s really important to kind of mark your books up or reset the stage for the new year. And so people are willing to take unusual risk early on in the year and do things that don’t make a whole heck of a lot of sense. And so I’m particularly nervous about the fact that things that we’ve been talking about, why we’re not particularly bullish on equities for all of last year, people have come around to that thought process. My concern right now is that we haven’t really seen consensus. S&P earnings come down to a point that’s discounting even a soft landing, in my opinion. So when I go back to we have a VIX at 19 over the last 13 months, every time the VIX was a teenager, it was a great time to sell stocks. It was just that simple. And so to me, yes, it’s great that rates are coming down. Yes, it’s great that dollars coming down for corporate earnings. But to your point, we actually haven’t seen the economy slow meaningfully. I think GDP estimates for Q4 are somewhere, what, 4% or something like that. So I think if you’re chasing here, I think you probably it on your hands a little bit. Listen to what some of these big companies have to say. [00:25:50][68.8]
Danny Moses: [00:25:51] By the way, as Jacob just pointed out to me, it’s Royal Mail. The Royal Mail was hacked. Yeah, sorry. Well, yeah, but then people enter the year, professional money managers, they don’t want to feel like they have to chase. It’s getting close to a point or feels like where they’re going to start to. [00:26:04][13.1]
Dan Nathan: [00:26:04] Yeah, but wouldn’t you love to see the S&P up seven or 8% in the next couple of weeks. It would be literally the easiest short trade [00:26:10][5.6]
Danny Moses: [00:26:11] But I’m saying what you it it’s going to finish. [00:26:13][1.7]
Guy Adami: [00:26:16] It’d be a big softball coming right at you, like some of the questions people ask. We don’t ask softball questions. Danny, I’m going to ask you a bit of a softball question here. Before we get into our conversation with Anastasia, who’s wonderful, by the way. We have reached the playoff portion of the National Football League. [00:26:31][14.8]
Danny Moses: [00:26:31] Thank God. Get me out of the ring. [00:26:32][0.3]
Guy Adami: [00:26:32] So let’s just call you five hundred. [00:26:34][1.7]
Danny Moses: [00:26:34] But I ended strong, 2-0 last week. Momentum into the playoffs. [00:26:38][3.4]
Guy Adami: [00:26:38] Momentum into the playoffs, that’s always a good thing. Speaking of momentum into the playoffs, my New York football giants find themselves in the playoffs, traveling to Minnesota on Sunday to play extraordinarily overrated Viking team. I think a lot of money is going to find their way to the New York Giants. By the way when we started this football season, you may recall, Dan, because I know you do. I said how the Eagles had the best roster in football. Nobody’s talking about them. They basically wire to wire the entire thing. Okay. Number one, I also said my sleeper team was the Jacksonville Jaguars with a now mature quarterback behind Center in the form of Trevor Lawrence that came to fruition. So maybe I’m a bit of a savant here, but it’s not about me and my football commentary. It’s all about you. So, Danny, please educate us as to what you like as the playoffs begin in earnest this weekend. [00:27:26][48.4]
Danny Moses: [00:27:26] You’re a wise man Guy. And I will say you did call the Eagles. You did say, look out for Jacksonville. The picks you didn’t like with that I had normally you were right. The ones that you liked, I normally would. I wish you would start to gamble with me. It would help me out a lot here. So all these games, all two things I picked the Bills, to begin the season, win the Super Bowl. I’m going to stick with that. So right now, it’s not a great bet, the three and a half to one. But I would take them and think they’re playing with so much emotion and I think they’re going start to play their best football right now. And the AFC is extremely strong. I mean, Cincinnati, Kansas City, Buffalo. So the pick I have one pick this week because the lines are too big. I mean, Buffalo giving 13 to Miami. It’s too much. I’m not going to bet against Tom Brady as an underdog, even though I think Dallas when I came I’m going to take the chargers of Los Angeles Guy and now it’s up to two and a half to give me two and a half. It opened, I think at one and a half they’re laying to an up in Jacksonville. I think Jacksonville over earned a little bit their defense won it and maybe that’ll be what wins it for him this week and I we’re going get some home dog in the playoffs is dangerous I’m going to take the Chargers they’ve been playing great football obviously that’s a little bit of a slip oh Dan. [00:28:25][58.7]
Dan Nathan: [00:28:26] I have one pick. [00:28:26][0.2]
Danny Moses: [00:28:28] Oh tell me one pick, tell me It’s Jacksonville. [00:28:28][0.2]
Dan Nathan: [00:28:29] No, I think the Vikings probably win by two touchdowns over Guys New York Football Giants. [00:28:34][4.8]
Danny Moses: [00:28:34] Guys not going to like that I actually like the Giants this week, but I won’t take them. [00:28:37][2.8]
Dan Nathan: [00:28:38] You wanna do it? [00:28:38][0.2]
Danny Moses: [00:28:38] Yeah I’ll do it, is that okay Guy? [00:28:38][0.0]
Guy Adami: [00:28:40] I mean you two I don’t like when you guys bet because it creates a lot of [00:28:43][3.3]
Danny Moses: [00:28:44] We’ll settle here next week on the $500. I’ll take the Giants plus three because they’re playing with house money. Minnesota sucks. [00:28:49][5.3]
Guy Adami: [00:28:50] When we come back, Anastasia Amoroso joins us on the tape. Anastasia Amoroso is a managing director and the chief investment strategist at iCapital Network. In this role, she is responsible for providing insight on private market investing opportunities for advisors and their high net worth clients. Previously, Anastasia was an executive director and the head of Cross Asset Thematic Strategy for J.P. Morgan Private Bank, where she identified and invested in emerging technologies and disruptive trends such as artificial intelligence, decarbonization and gene therapy. Anastasia regularly appears on CNBC and Bloomberg TV and is often quoted in the financial press. Anastasia, welcome to on the tape. You know, Dan and Danny, there are times on CNBC when somebody comes on and you need to turn the volume up because you want to hear what she or he has to say. I will tell you that Anastasia is one of those people that I know myself turns the volume up for. Welcome here to on the tape. How are you? [00:32:09][199.6]
Anastasia Amoroso: [00:32:10] Thanks, Guy. Good to be here. [00:32:11][1.3]
Guy Adami: [00:32:11] Well, it’s true. I mean, don’t be humble. You don’t be humble. It happens to be true. So if it’s true, you ain’t bragging. [00:32:17][5.2]
Danny Moses: [00:32:18] It’s actually welcome back to on the tape. [00:32:19][1.1]
Dan Nathan: [00:32:19] Welcome back. [00:32:19][0.0]
Guy Adami: [00:32:19] Anastasia, welcome back to on the team. [00:32:22][2.8]
Dan Nathan: [00:32:22] All right. So Anastasia, one of the big themes I remember you and I talked offline on many occasions and I did see you she was on the IC on many occasions with or our friend EY from SoFi they would find themselves on the investment committee with Scott Wapner here. But a big theme I remember hearing from the get go for you early in 2022 was just kind of an environment with lower expected returns. Okay. Talk to us a little bit about how you came about that thesis in early 2022. Obviously, everyone’s focused on what the Fed was going to do to kind of tamp down inflation. How did it play out in and around the edges of your outlook for the year? And then we obviously want to spend a lot of time on what you’re thinking about this year in 2023. [00:32:59][36.9]
Anastasia Amoroso: [00:33:00] Well, it’s great to be back with you guys. And I mean, 2022 seems like ancient history now. But yes, when we first thought about what 2022 might be like, the title of the outlook I had was the year of higher hurdle rates and lower expected returns. And if I were to grade how we fared on that, I give myself some good partial credit here because I think we got the directionality of it right in that we expected the hurdle rate to be high in terms of inflation, but didn’t quite predict that it was going to go to eight and a half or higher percent. And we expected the returns from the equity and fixed income markets to be lower. But again, didn’t predict for the 60 40 portfolio to be down 16 or 17%. So I would say those themes played out, but the magnitude of which they played out certainly surprised a lot of us. [00:33:48][47.3]
Danny Moses: [00:33:48] So as we turn the calendar, we went to 2023. I know you’re kind of positioned to be defensive in the first half and opportunistic in the second half, but a lot of fund managers don’t have a choice. They have to stay invested. So in terms of I know you’re talking about private credit, macro hedge funds, structured investments, can you narrow that down a little bit to the retail investor maybe and say where can they be in the first half even in a tumultuous market, it looks like we’re going to be in. [00:34:13][24.4]
Anastasia Amoroso: [00:34:14] Yeah, and you know what? I don’t think those are mutually exclusive things. Defensive and opportunistic. I don’t think you only stick to the defensive playbook for the first half of the year and then chase the opportunities in the second half. I think you can do both, but you start to kind of fine tune the percentages in which you are being defensive versus what you’re being opportunistic. What I mean by defensive and I see the investors right now have the luxury of being both defensive and opportunistic. And what I mean by that is we have the luxury of getting paid 4%, close to 4% or more in cash and cash equivalents in short term treasuries. So that’s a luxury we haven’t had in a long time. So use that to your advantage as we wait for things to fall into the right place in the equity markets, it actually pays to wait. And that’s the great thing about being defensive now. Now, you don’t just stick to cash and cash equivalents. You look across the fixed income universe and there’s been a huge repricing in fixed income, whether it’s rates, whether it’s credit. So I would look to high quality fixed income. Investment grade is now yielding five or 6%, maybe parts of high yield, which I also like, where credit quality is there. And guess what? They’re not leverage low so they don’t have that higher cost burden. So I like those opportunities to be defensive and get paid while you wait. But at the same time, you guys would agree with me. I mean, look at this market. It is starting this year on a very strong note. So if you’re waiting for the full reversal in the second half and that’s why you want to get invested, that’s probably not the right approach either. So given the recent evaluations that we had across the spectrum, the other luxury investors have right now is to start inching it and to have a plan for the next 3 to 6 months and say, I’m going to be deliberate, I’m going to be methodical, I’m going to be committed to deploying capital across opportunities. Some of that may be in public markets. So we can talk about some of the sectors, whether it’s semis or discretionary, and some of them will be in private markets and things like buyout, private equity. I mean, it’s usually after the downturn years where you have some of the best vintages. [00:36:17][123.3]
Danny Moses: [00:36:18] So how do you tell people that are waiting for the Fed to, quote, stop or signal? I mean, that’s a given, right? It’s going to happen probably in the first quarter. But what about after that? Because the impact of these Fed hikes are still being felt because it’s a lag called nine months, 12 months, whatever it is, it’s just now really seeping in. So once people get past kind of the Fed is done, then what? Because to me it’s kind of a sell the news event. I’m curious to get your thoughts and that’s really near-term, maybe middle of first quarter type thing, but how would you position for that? [00:36:47][29.7]
Anastasia Amoroso: [00:36:48] It seems to me that most people have started to price in some sort of a growth slowdown in a recession. And if you think about the growth expectations for this year, nobody is expecting much. Three or four months ago, if you looked at 2023 GDP estimates, there were one and a half, in some cases 2% or several quarters out. You look at consensus estimates today for GDP and there are zero or maybe slightly negative for most of the quarters. So I think most people have penciled in that we’re not going to see much in terms of growth for this year. And then I would look at earnings, look at the S&P 500 EPS was 250 again six months ago. It is now been marked down to 231. And if we do have a severe protracted recession, which I don’t think that’s the base case, then I think we might have done a big chunk of the earnings cuts that needed to happen. And another way to look at it, you look at the bottoms up part of it, and if you look at the number of downgrades across different companies that have happened, those downgrades far outpace upgrades, of course, but we’re now on par to some of the economic slowdown levels that we have seen before. So I guess the point is we might have priced in the bulk of a slowdown, maybe even a shallow recession. I think for the markets to take a meaningfully lower leg down, we’d have to have a severe recession, we’d have to have massive dislocation, we’d have to have leverage that amplifies certain things. And I don’t think that’s the case for the broad economy. Will there be dislocation in leverage loans? Sure. Will there be dislocation, maybe parts of private credit? Absolutely. But I think this distressed investing will actually end up being an opportunity for investors. [00:38:23][94.8]
Dan Nathan: [00:38:24] So you just mentioned S&P earnings consensus six months ago was about $250. And there’s some strategists on the street who have their base case is basically $195. Mike Wilson from Morgan Stanley was on last week. He sees a worst case scenario that’s probably that deep, longer recession where you see S&P earnings at 180. And listen, we’ve been doing this a long time. I mean, there’s no way that you can have the pace of hikes that we’ve seen over the last year and not have the sort of hit to corporate earnings that would probably place year over year 2022 into 2023 as somewhere in the at best case single digits gains and more likely to be flat ish or so. So my question to you is that there’s a growing consensus right now, especially with the way we’re seeing some of this inflation data, that we’re going to have a soft landing, but we really haven’t seen anything other than multiple compression with rates going higher, at least in the mega-cap space in the S&P 500 in particular here. So I’m just curious, like, how do you square that off? Because we’ve just seen the most aggressive tightening, I think, in what, 30 or 40 years, Danny, or something like that. And we actually haven’t seen material downgrades to forward guidance by some of our biggest companies that are the biggest contributors to S&P earnings. So I’m just curious, I don’t think we really discount a whole heck of a lot because we haven’t even had the numbers cut yet. [00:39:44][80.7]
Anastasia Amoroso: [00:39:45] Yeah, I mean, we had some. But to your point, maybe we haven’t fully completed this process. The way they would address that is twofold. First of all, what distinguishes a soft landing versus a hard landing? I would say it’s the labor market where it is possible that I mean, it’s very probable that growth is going to continue to be soft. But the question is, is this going to result in a huge spike in the unemployment rate, as we had, let’s say, during the financial crisis? And if it does, then I agree with you. We need to account for that second order effect and we need to take down those earnings estimates lower still. But if you look at the labor market today, I mean, look, there’s layoffs that are happening in the tech space. Tech now accounts for 50% or more of the layoffs, and there’s probably going to be more to come. But at the same time, there is a rebalancing that’s happening in the labor market and labor force participation rate is still low. So a job openings are still near record highs. So people are finding jobs and that’s why unemployment rate likely rises, but it doesn’t skyrocket. And I think that prevents some of the hardest landing scenarios and the need to take earnings estimates significantly lower. That’s the first thing. The second thing is, do you think companies not know what the growth landscape looks like? They don’t know that the economy is either in a recession today or will be tomorrow. I think they’re positioning for it. And so, Dan, I think, you know, the way to be more optimistic about earnings is to actually start looking at companies that are rightsizing their cost structures. Why is it that tech is laying off people? Why is it the financial services are laying off people, communication services? Well, if you look at the margins of the S&P, of course, they’ve peaked for every sector, but they’ve really started to come down across tech, communication services and financials. And that’s why those are the first sectors to start to reduce their labor base and to reduce CapEx and reduce their buybacks. And I think as this progresses, it will affect more and more sectors. But there are levers they can pull to preserve those margins. And I think that’s where the market is going to focus on. [00:41:45][119.7]
Dan Nathan: [00:41:45] Yeah, you know, it’s interesting, though, This is so much focus on tech layoffs. And when you think about it, I mean, tech supposedly makes up less than 3% or so of U.S. employment. And we also know that was a huge part of this COVID expansion within tech. So to me, I think if you’re focused on how many jobs Amazon’s cutting in Amazon doubled its workforce from 2019 at about 800,000 workers to about 1.6 million last year, and they’re laying off 18,000 workers. It’s kind of a rounding error. And so I guess what I’m most focused on, though, is broadening out beyond tech, because if you’re all of these SaaS companies and you’ve been forecasting year over year growth, which is 20 plus percent sales, you had this valuation that was fatter than that on a multiple of sales. At some point, if there is a broader slowdown, if it hits the blue collar economy here, these multiples for some of these that are still high priced. What do we have Microsoft above 20 times or something like that? They’re coming down. And so I guess what I’m saying is I don’t even think that we have seen the cuts for what looks like maybe the potential for a shallow and short recession in 2023 right now. [00:42:54][69.0]
Anastasia Amoroso: [00:42:55] I think we started the beginning of those cuts. And one thing that I would point to, you mentioned all of these digital transformation projects, and we used to think that software is immune from a cyclical slowdown and clearly it’s not. But over the summer there was a survey that I saw how software companies are positioning for the demand environment, and many of them have said they’re starting to see their customers delay signing up for new projects and delayed bookings. And I think the wave of some of the downgrades for software companies actually started beginning on the third and fourth quarter of last year. Is it fully finished? No, probably not, but I think it has started. Now the other thing I would say on an aggregate index basis, if you look at software sales companies, they were trading at 20 times enterprise value to forward revenue this time last year. They’re trading at 5.5 times today. So we’ve seen a huge valuation reset. And look, if you were to pick a wholeness, you would say, well, these are not cheap multiples because we’ve just corrected averages. But my point is, I think we need to see a hard landing, a more than a shallow recession that we have to price in in order to see those truly, truly dirt cheap multiples. But have we corrected for the 5% interest rate environment? I think we have. [00:44:09][73.6]
Guy Adami: [00:44:09] Indulged me for a second. Anastasia. I asked Dan questions Danny sometimes as well to help me because I’m not that young and I don’t understand these things. On January 6 Dan, what do they call it when you surfed channels on cable channel surfing? [00:44:22][12.8]
Dan Nathan: [00:44:23] Channel surfing? [00:44:23][0.4]
Guy Adami: [00:44:24] Yeah, it’s funny. That’s what they call it. Yeah, well, I was channel surfing on January six, and I stumbled upon Bloomberg and who was on it? Anastasia was on Bloomberg. And you were talking about that day how the data that came out gave some merit to this notion of soft landing. So here’s my question to you. What does it look like? Forget about the S&P for a second. What does it look like in terms of ten year yields? Where do we sort of find a home? And more importantly, in order for that to happen, there has to be no significant hiccup in the credit markets. Are you seeing anything in the credit markets that suggest maybe we’re going to get through this thing unscathed? [00:45:00][36.3]
Anastasia Amoroso: [00:45:01] Yeah, well, first of all, soft landing, what does that look like? And I think I called the jobs report as kind of a soft landing report. What that looks like is below potential GDP growth, which is zero flatline GDP, and at the same time, the labor market that’s now weakening materially. And what we saw in the last payrolls report is the fact that jobs are still being created and yet the wage pressure is starting to abate. And I think that’s exactly what the soft landing looks like for the Fed. Are we going to be fully unscathed in credit markets are going to be just fine. It depends on what part of the credit markets you look at. So, for example, one of the interesting dynamics we saw late last year is that you had this convergence in yields where leverage low yields to take out and yield to worse on high yield and then private credit. They’ve all converged around this ten or 11% range. And look at this and say, well, which one do you pick and which one is the least vulnerable? And after looking at the credit fundamentals, what you see is high yield credit fundamentals have actually improved. They’ve been upgraded. There’s less lower quality issuance coming to the high yield market and the leverage ratios have come down. That is not the case for the leveraged loan market that tripled in size, has caught up with the size of that high yield market. And if the interest coverage ratio for leveraged loans was three and a half times at the start of 2022, by the time the Fed is done for a third of the leveraged loan market, the coverage ratio is going to dip to one times or below. So Guy that’s where I think we will start to see pockets of dislocation and pockets of distress. The reason I’m not concerned that this is going to take the whole economy down is it’s not the size of the mortgage rate market. It’s not the CDO squared that we saw in 2008. This is much smaller. But for investors who are looking for opportunities in credit markets. I think they’re going to be looking for this dislocation. [00:46:49][108.2]
Danny Moses: [00:46:50] How do you factor in what’s called the reopening of China right now and what that means to global equities, global everything? Because it’s really an unknown right now. It’s just kind of beginning. I know. Energy people are trying to quantify it as it relates to energy demand. But I mean, but how do you factor that in? What are your expectations for China kind of reemerging this year? [00:47:10][19.8]
Anastasia Amoroso: [00:47:11] I think it would be a huge upside surprise for the markets and clearly it has been priced in somewhat. We’re looking at the China ETFs, they’ve rallied 80% since the end of October, but off a very, very low base. I think there is a true reopening process that’s going to be underway there and yet come from a lower point in terms of economic data in China. So between reopening, between relaxing some of the property restrictions, between maybe letting the big tech in China breathe a little bit again. Those are three really powerful tailwinds for Chinese equities. Now, I think many of us have been burned many a time on investing in Chinese markets and then having to pivot very quickly. So I’m not sure that investing in Chinese equities is the best way, but I think investing in energy is one of the proxy ideas that I would have to position for China reopening. I mean, U.S. economy, if it slows down, but it doesn’t grind to a halt and if we don’t have a recession, I don’t see the ability demand in the United States slowing down all that much. I don’t see the ability in Europe slowing down. But if China demand if we go from 15.4 million barrels of demand in China back to 16 or higher, that’s a positive for the energy markets. And I don’t know if I want to be buying oil necessarily, but I want to be buying energy equities. And you see the relationship where even though oil prices have come down, energy as a sector has held in very well. So what matters for energy, equities, what is that forward looking fall funds trip look like? What does OPEC want that strip to look like? And I think between China demand rebounding and OPEC’s really wanting to maintain a certain level of prices so they can invest in expanding capacity that’s likely to support 70 to $80 on crude. That’s the case. That’s pretty great for oil and gas stocks. [00:49:02][110.5]
Guy Adami: [00:49:02] Unbelievable. It sounds like I mean, Danny, is that the craziest thing? Yeah. I mean, it sounds as though Anastasia listens to the on the tape podcast [00:49:09][7.0]
Danny Moses: [00:49:10] I think so. I think I think while you’re channel surfing finding her, I think she’s Spotify searching, looking for you Guy [00:49:16][5.6]
Guy Adami: [00:49:16] No, I doubt that highly. But what I will say is, everything she said far more eloquently than I ever did is exactly what we were talking about in the energy market. The fact that the commodity, the underlying commodity can stay here and go sideways. And these energy equities are still pretty interesting Danny Moses [00:49:33][16.6]
Danny Moses: [00:49:34] Yeah it’s really because money’s looking to find a home in the U.S. equity market. So the one thing that’s been happening is still the sexiest game in town, if you want to call it that, right? So it’s all a point of where you put your money in. If you’re a fund manager, what you overweight, what do you underweight and where do you want to be? And I think as we see Q4 and maybe even Q1, I think there’s no better growth area in earnings potential than energy. Yes, it’ll have it’s limited at some point. But if China just reawakens a little bit, I mean, that’s a massive impact on it. So I totally agree. [00:50:01][26.7]
Guy Adami: [00:50:01] Commodity markets were dead for a very long time. I mean, I traded commodities in the late eighties into the nineties. Commodities went away. We really never talked about them on our show Fast Money. We started talking about them in earnest. Then commodities collectively fell off a cliff. But in terms of what you do, obviously that’s become such a huge input. When you’re looking at commodities, understanding that energy is such a huge component, what are you watching? Is there any tells because recently base metals are starting to get off the mat? Danny Maybe that’s coincides with what’s going on in China but these input costs which again fell off a cliff are starting to show signs of recovery again. How closely do you watch? [00:50:40][38.6]
Anastasia Amoroso: [00:50:41] I think it’s been clearly an important asset class in 2022 and really kind of spotlighted the fact that that might continue to be the case. Because, look, the world is short of everything, which is what we realize. [00:50:53][11.5]
Guy Adami: [00:50:54] Right, Dan Nathan. Hold on a second. Yes. Thank you. The world is short of everything. [00:50:59][5.2]
Danny Moses: [00:51:00] By the way, this table almost came apart. [00:51:00][0.5]
Guy Adami: [00:51:01] Because when she says that, I mean, it’s like I put on a news channel and they said all the things that I believe. [00:51:06][4.7]
Dan Nathan: [00:51:06] So wait, we’re short of crude were short of dollars. They keep going down. The big buyers of treasuries don’t exist anymore, China. So yields are going down. So I hear stuff like that. I get it. I mean, that’s kind of fancy talking head speak guy. [00:51:19][12.3]
Guy Adami: [00:51:20] I didn’t say it, she’s a lot smarter than I am and she said she’s right. [00:51:20][0.2]
Dan Nathan: [00:51:23] No I Know, but it’s just like I have the crude chart up on my FactSet machine right here. Okay. It looks like unholy death. I’m just telling you so we can sit here and we could bring in the smartest macro minds on the planet and we could talk about what China’s contribution is going to be to a reopening in 2023 to global growth. And this thing can’t get out of its own way. [00:51:42][19.0]
Danny Moses: [00:51:43] Can I ask a question? [00:51:43][0.4]
Guy Adami: [00:51:44] Yeah, sure it’s your podcast [00:51:44][0.7]
Dan Nathan: [00:51:45] It is your podcast. [00:51:45][0.6]
Danny Moses: [00:51:46] Here’s a question for you, Anastasia. Let’s say we were sitting here. [00:51:49][3.1]
Anastasia Amoroso: [00:51:50] I’m here for it. [00:51:50][0.2]
Danny Moses: [00:51:50] We are sitting here. We’re all sitting here. I gave you all the same economic data points, the job report that came out last week. Everything’s the same. But I have an S&P that at 35, 3550 instead of 3950. And you have to create a case for why it’s there, because it sounds like what we’re doing is we’re making excuses almost for, oh, it must be that it’s a soft landing. And I’m not saying that’s what you’re saying. I’m saying that’s what the market is want it to be. But what if it wasn’t? What if it was the same data? I ask you the same question. Why is the market down to 3550 or 3600? What were you Answer be, based upon the same data that we’ve seen. [00:52:26][36.2]
Anastasia Amoroso: [00:52:27] Great trick question. Look, the answer is that we’re probably pricing in a hard landing in the Fed that’s not stopping. And the Fed maybe going not to 5%, they might be going to 6%. And here’s another chart that I really saw just before coming on to this podcast is the data that we have today with the CPI rising 0.3 percent month over month, that actually puts us on track to see 2% year over year inflation by the middle of this year. However, guess what happens after that? The comparisons become a little bit tougher because inflation has peaked over the summer. So it is possible that inflation for now subsides but starts to rising back up again in the summer. So I think if that is the case, then the Fed may not stop at 5%. They may go somewhat higher. So I think that’s one of the scenarios that would get us to 3500. That’s one. The second one is maybe it’s the lagged effects. And we talked about we’re close to 5% today. Where are the dislocations going to come from? What’s hiding in the shadows that’s going to come out to the front with mostly dealt with crypto, but have we seen the dislocation in the credit markets? Maybe the answer to that is is no. So as the default rates start to pick up in the credit markets, that could be one thing that spooks the equity market as well. But these are hypotheticals. [00:53:41][73.9]
Guy Adami: [00:53:42] There are people are listening this and are saying, not necessarily you three, you two and a half. So mostly me, mostly Danny, half. Dan Nathan Because you’re always looking for constructive things. You’re all negative all the time, but in a stage you’re not and you have some pretty high conviction ideas for 2023. Software and semis, public REITs. Can you speak to that? Because people don’t want to hear all the negativity from us all the time. They want to hear about opportunity. And I think you see some things out there for this year. [00:54:10][28.5]
Anastasia Amoroso: [00:54:11] Well, I see some things and, you know, it’s sort of the fresh look that you have when you first come into the year. Like it’s easy to get caught up in all the doom and gloom. And I’m not dismissing how challenging the environment still is. But if you take a step back and I have this valuation chart that looks at the cross asset valuations and they were the 90th percentile, expensive for just about anything that you looked at, whether it’s rates, whether it’s credit spreads, whether it’s equities. But if I look at it today, rates are as cheap as they have been in 15 years. And equity markets, they’re not cheap, but they’re also not expensive. They’re sort of down the middle. Credit markets have gotten a lot cheaper. And guess what? This year is when we’re going to see more of a complete correction in the private market valuations. So with that as a backdrop, that’s why I came into this year a little bit more optimistic because we have seen a huge reset in some of these valuations already. So things that we would be looking to do within the portfolio. I’ll start with the private market side. I mentioned buy out private equity. So we’ve seen public market valuations pull back and typically private markets follow with a lag of 6 to 9 months. So we haven’t fully seen that yet. The other thing I would say, a lot of companies that raise venture capital dollars in the tail end of 2021, that funding usually lasts 12 months or more. Well, guess what? That funding has run out and sometime in 2023, venture backed companies, private equity backed companies, will likely be looking to raise rounds. And as they do, they’re not going to be able to raise them at the 2021 valuations. So we’ll finally start to see that step down. And for investors, when you think about when is the best time to add to buy out private equity? It’s the downturn years. It’s the vintages that followed the financial crisis. It’s the vintages that followed the 2015 2016 valuation reset. So I think the 2023 year vintage is going to be much better for investors than a 2021 would have been. [00:56:08][116.4]
Guy Adami: [00:56:08] Danny that would be like an 85 Petrus or a 1982 Margaux or an 82 Cheval Blanc lets say. [00:56:16][7.5]
Danny Moses: [00:56:17] Guy’s such a reinassance, he always surprises me [00:56:17][0.1]
Anastasia Amoroso: [00:56:18] I was wondering where you’re going with that [00:56:18][0.2]
Guy Adami: [00:56:20] Those are vintage years. [00:56:21][1.0]
Danny Moses: [00:56:21] So as we enter 2023, we’re dealing kind of with a hangover of all the underwritten credit from the last few years when zombie companies got access and the Fed and the Treasury actually buying high yield paper. So for me, to your point, obviously anything that’s underwritten in 2023 will be much better than anything we saw 2021 at 22. On top of that, Goldman Sachs obviously doesn’t take laying people off lightly. They obviously see the M&A is going to slow down. The IPO market’s going to continue to slow down. And that tells me they’re not preparing for a soft landing and certainly as it relates potentially to credit. So when I look at all of that kind of put together, looking forward, it’s easy to say we’ll be able to find decent credit opportunities, but it feels like we’ll be dealing with the hangover of the last few years as we enter this year. [00:57:04][42.1]
Anastasia Amoroso: [00:57:04] Yeah, Danny, I mean, you’re spot on to say that the correction in private markets across the board, whether it’s real estate, whether private credit, whether it’s private equity, it is not yet complete. But just to put some stats and numbers around it, I mean, through the first half of last year, the 6040 portfolio was down 16% through that same first half of last year. The private markets portfolio of real estate, of private credit of private equity was up 4%. So yes, there’s a correction to still be had, but it’s coming from kind of a much better and a much higher place. Now, when it comes to real estate, I think we’ve seen a huge repricing in the public side, but that repricing needs to happen in the private side. If you look at cap rates, for example, and the cap rate spread versus the Treasury is at near record lows. So I would love to see that cap rates move higher, valuations reset lower, and that’s going to create an opportunity for some of the real estate investors. But if you think about private real estate, it was up 25% year over year at one point. So if we give some of that back, I think that that’s okay. And by the way, income and all these things is still being paid and is growing at the rate of inflation or in some cases more. When it comes to private equity valuations, we’re seeing a reset in private credit, too. But one dynamic that you don’t have with private markets as you do with public, you don’t have the technicals, you don’t have the market dislocation. It’s not like you’re selling into an illiquid market. And because of that, I mean, historically, the drawdowns we saw in private credit were never on par with leveraged loans or high yield. And I suspect that’s not going to be the case this time around as well. So some markdowns perhaps still to follow, but I don’t expect them to match the public markets. [00:58:46][101.6]
Guy Adami: [00:58:46] Anastasia, thank you so much for joining us once again here on the tape. People can find you on the Twitter at AAmoroso_1 because there’s some Johnson out there that was probably trying to steal your identity because that’s the world we live in. [00:59:03][16.7]
Anastasia Amoroso: [00:59:04] There’s been a few, there’s been a few. [00:59:05][1.1]
Guy Adami: [00:59:05] There have been a few. But the folks should definitely follow on Twitter. You do very extraordinarily thoughtful work and we’re really honored to have you join us yet again. Thank you. [00:59:14][8.1]
Anastasia Amoroso: [00:59:14] Thanks, guys. It’s a pleasure. [00:59:14][0.0]
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