On The Tape is brought to you by


On this episode of On The Tape Danny is joined by his “Big Short” colleagues Vincent Daniel and Porter Collins to discuss crypto (2:00), Tesla (7:45), energy stocks (20:30), and how they are positioning heading into 2023 (27:30).

Please rate and review and share it with your friends as this will help people find it.

And as always we want to hear your feedback. Please hit us with any comments at OnTheTape@riskreversal.com, and follow us at @OnTheTapePod. You can always tweet us individually @RiskReversal@GuyAdami & @DMoses34.

You can give it a listen on the website or at your preferred podcast store (Apple PodcastsSpotifyGoogle PodcastsAmazon Music, and Deezer), and please subscribe to have it delivered to your devices each Friday.

Risk Reversal - Listen on Apple PodcastsApple Risk Reversal - Listen on SpotifySpotify Risk Reversal - Listen on Google PodcastsGoogle Risk Reversal - Listen on Amazon MusicAmazon

Show Transcript:

Guy Adami: [00:00:00] CME Ad. iConnections Ad. [00:00:31][30.5]

Danny Moses: [00:01:21] Welcome to a bonus episode of On the Tape with my boys Porter Collins and Vincent Daniel. This is the What Are We Doing kind of segment. We’ve done this now three or four times, I believe we’re trying to do this every two weeks or so. A lot going on out there, guys. How was the weekend, Vinny? First of all, how was that Jet Pats game? Is it over? I’m not sure yet. [00:01:39][17.8]

Vincent Daniel: [00:01:40] I actually this is where I want to go because as you can imagine, let’s take us back. We’re at Seawolf, right? It’s a typical Monday in the winter and I’m coming in on the Long Island Railroad and there’s probably an 80% chance that the jets lost. And this is kind of like sex panther. There’s a probably a 20% chance on the 80% that it’s an epic loss. Right. And I just know I’m going to hear it for the first 2 hours of being on the desk. And yesterday it was bad. It was bad. Right. The only silver lining, Porter, you could attest to this or not, is that we now know that Zach Wilson does not deserve a third year. The films coming out of how many things he missed during the game, everything else on the team is pretty much set for the Jets, except for obviously the most important part of the team. So he’s not going to see a third year. That’s my guess. [00:02:35][55.4]

Porter Collins: [00:02:36] I’m just numb to it at this point. You know, like markets suck, cryptos blowing up. If it’s all fitting, it feels feels like happy place to me. [00:02:43][7.2]

Vincent Daniel: [00:02:43] It really led me to what I wanted to really talk about today. And in a nice way, in a funny way, but also in a constructive way, which is talk about losers. Right. And because, you know, I just experienced a major loser yesterday. [00:02:58][14.4]

Porter Collins: [00:02:58] It’s a nice Debbie Downer episode. [00:02:59][0.9]

Vincent Daniel: [00:03:00] No, no, no. And as it pertains to markets as well. Right. Like and what do you do when you have a loser on your hands and how do you manage through it and how do you deal with it? And I think it’s pretty topical today. [00:03:12][12.8]

Porter Collins: [00:03:13] A lot of the losers in the market these days. [00:03:14][1.2]

Vincent Daniel: [00:03:15] Yes. I don’t know where you want to go, Danny, on the first loser where you want to go. [00:03:18][3.8]

Danny Moses: [00:03:19] Yeah let’s get to sing more upbeat. I will say this. So Monday before Thanksgiving feels like if it wasn’t a Monday before Thanksgiving, the markets would be a lot more news flow. When I say news flow, there’s a lot of news flow out there, but it would be working its way more into the market. But things are actually happening. I mean, there’s some big moves here in some stocks. You’re seeing some of these meme stocks or buy now, pay later, which might as well be meme stocks and start to really crater again in the Carvana’s of the world like they’re down 8 to 10% today. Like these are our big moves. I don’t know if that’s just apathy in the market where the buyers have gone. Maybe they’re on a plane somewhere to see their family, I don’t know. But it just feels like there’s a lot of orphan status stock starting to emerge even more so in days like today kind of highlight it to me. [00:03:59][39.8]

Porter Collins: [00:03:59] Like I said, I’m in a happy place right now is it’s just fantastic. I think it’s you know, we like to do this all the time. Vinnie why are these stocks done? Reality. I think the reality setting in and we were talking about Carvana today and he goes, it wasn’t that they should go. They should go to bankruptcy. It’s a better place for them. The debt is too big. They can’t survive. And so I just think that, you know, we’ve been talking a lot, a lot about through the years that you’re going to see a big cycle, right? You’re going to be a big cycle in bankruptcies. And of course, you know, hard to predict these unwinding of crypto, but, you know, it would markets go down and the tide goes out, the frauds get exposed. Right. This this this fraud would not have been exposed had the markets not, you know, collapsed. You know, this cycle, you’re going to see a lot more of them because of all that easy money. And we now know that I’m going to give credit to my man Vin here the our first episode of taping on the tape, he called it called actually called Bitcoin, not a Ponzi scheme, but the perfect Ponzi scheme. People debate us whether it was actually, you know, Bitcoin was a perfect Ponzi scheme, but crypto was right. Crypto was an all of it was a Ponzi scheme and FTX obviously is one of the best and most perfect Ponzi schemes we’ve ever seen. And a lot of people missed it. As you see, one part fall apart, you know, three or four other companies down the line. And we are not close to the bottom of this thing. [00:05:25][86.0]

Danny Moses: [00:05:25] So let’s let’s stay on that topic for a second. Since you just went there, kind of we’ve seen a lot of frauds in our time, mostly public frauds that unwind. And it’s normally the stock price going down that forces people to take a deeper look. But we’ve seen frauds, obviously private markets as well. This one is interesting only because the amount of intellect, if you want to call it that, was at the table here, that didn’t seem to do the necessary diligence. And it’s always after the fact when you look at something like this. Right. But it’s just amazing. And we know a lot of these players. Right. And they’re not dumb people that got railroaded or bamboozled or whatever that was going on. And this guy was nothing more right than just just a charlatan. How deep does this go or whatever? I mean, the whole idea of crypto to me and I know Vinnie agrees and Porter, you agree, is that it’s it craves regulation, yet it stands to exist because of non-regulation. So where do these things mix and what’s going to happen here? [00:06:16][50.3]

Vincent Daniel: [00:06:16] Well, it’s funny, you know, we have a love affair for pop culture analogy and. And I think we’re about to enter the phase of Top Gun. I want some butts. Right. So remember when Maverick did the fly by on the carrier pissed off the admiral or whoever, and then they spilled coffee all over him, and he was just yelling out, I want some butts. And now that’s. Exactly. Yeah. And right now, I think DC has a lot of egg on their face. History would strongly suggest that at this point in time they need to basically get some butts. And I’m really worried about the penalties associated with the downfall of crypto. [00:06:59][42.9]

Porter Collins: [00:06:59] Well, let’s talk a little bit about DC in this in this role. Right. And as people know, Vinnie and I are very apolitical people. We hate both parties equally. The money that flowed to the Democratic Party from SBF is unbelievable. And the fact that money allowed him to be completely untouched. Right. And people, you know, fell for all this stuff and that financial media didn’t look at it. It wasn’t. Do I think any of this would have happened if it was a public company? I actually don’t because there’s a lot more scrutiny on the public markets, and it’s one of the best parts, I think, about the public markets. But, you know, these tech guys or the VC guys, they got FOMO, right? All this stupid stuff that, you know, we’re old school people and we hate all these stupid acronyms, YOLO, FOMO or whatever, but they all got it and they chased it and they were chasing returns and chasing the next hot, shiny thing. You know, reversion to the mean is a bitch, and it’s going. It’s coming. [00:07:56][56.2]

Danny Moses: [00:07:56] Well, Porter, just to be fair, I mean, in terms of politics of this, both parties get money from every different industry separately. And we’ve always talked about this happens to be in this particular case is front and center, obviously, and it’s going to be scrutinized. But this has been going on for years. This Wall Street K Street connection, you know, as we used to call on on the Acela. Right. That line was just full of this. And we see Ben Bernanke go to Citadel. Right. You know, seat heads from the SEC, go to sit on other firms. You know, former S.E.C. officials go into private equity like this is a revolving door. [00:08:26][29.8]

Porter Collins: [00:08:27] The richest zip codes in America all outside DC. I mean, that’s why we hate both parties equally. It’s it’s a problem. Money corrupts and you see it here. [00:08:35][7.8]

Danny Moses: [00:08:35] No, no, for sure. In this particular case, it’s really front center and exposed just how grand this thing is in terms of, you know, in terms of how much this thing smells here. And so I don’t know what the file will be. There’ll be a lot of hearings, obviously, over the next several months. We still don’t even know how much money is even left in the kitty, so to speak. It seems like every if I were to guess, every customer deposit is gone. You know, obviously any equity valuation is gone at this point. They are, you know, north of, I don’t know, $10 billion, probably total. So there’s a particular company we all follow that’s kind of out there. There are some public companies which exist right now which if it does turn out to be a fraud or things do unwind, people will look back and make very similar accusations in the sense of, oh, they they bought politicians, oh, no one cares that there was no board or board that didn’t do anything. Oh, no one cared about the products that we’re hurting people. All these things, right? It always comes in after the fact. It is amazing to me what it takes to get people to point. So let’s talk about Tesla for a second in this regard. All everything’s right in front of us with Tesla, right? in terms of everything. And you could literally I’m not going to compare it to FTX. That’s a little extreme. I talked about it on the podcast last week. But that being said, when you follow a quote person right into the fire or you believe in a person so much that you’re blinded and you’re FOMOd and you’re buying a stock that has 600 billion market cap, you don’t even care about valuation because just want to partner with this person and then that person turns not turns out not to be the person that you thought they were. And we’re getting a pretty good look right now in real time and what Elon Musk does, it’s something like a Twitter, how we treat his employees, how he governs. The New York Times article a couple of weeks ago, a week ago, about his kind of first 48 hours at Twitter when he was firing everybody and they said, hey, there’s labor laws, you need to work. There was a quote that said something like, I don’t care, we’ll just deal with it and pay the fines. And I’m sure that was very accurate. Guys like him, that’s their attitude because they’ve never been checked before. SBF is 30 years old. Musk isn’t. It’s different. This guy’s been around the block. [00:10:33][117.9]

Vincent Daniel: [00:10:34] As you were talking. I was thinking about some of the things that you guys talk about all the time with regard to Tesla. And if you think about his moat right or his moats, one of the most important moats that he has is that he has been protected by political constituents. I mean, the infamous Trump CNBC interview where he says we must protect our geniuses and the like. And so if I think about it from a political strategy perspective, I think Musk made a critical mistake. And what I mean by that is over the last, say, two, three, four months, he has sided more with the Republicans than he has with the Democrats, probably astutely believing that there was going to be a red wave in November. Well, what happened? We did not have a red wave in. November, and now he has so it seems many Democratic policymakers, senators and Congress people who are turning on him. And so as a result, now the question becomes, what do they do about it? And it could go one of two ways, as we know, guys. It’s either A, they use it and start really coming down on him on the things that we all would love to see them come down on him for, you know, whether it’s then TSA, the SEC or they put their wallet in front of them and open up the wallet so that they can get a piece of the pie. And so, therefore, he will be protected once again. I don’t know which way it goes. Probably 50/50. But he is now more exposed now, in my opinion, than he has been in quite some time from a political perspective. [00:12:05][91.8]

Porter Collins: [00:12:06] Another angle that there’s lots of angles on Tesla, but the ESG angle, all these funds, FOMOd themselves into ESG. Right. And the number one constituent in the ESG index was Tesla. You know, a lot of things wrong with ESG, but the fact that people thought that environment or energy was number one and who cares about S&G, you know, is just a total farce. And now I think some of this stuff is starting to get exposed and unraveled. And I think that the flows while they were working beautifully on the way up right, S&P ad Musk not selling ESG flows and now everything’s flipped the other way. Musk is selling Larry Ellison selling Cathie Wood’s got outflows, ESG funds have outflows. S&P is going down and so it worked beautifully on the way up, the record being short this 2019 and 2019 and 2020 were painful, but now things have flipped and you know we effectively risk manage that position took tax losses effectively in both those years in December and now we’re looking pretty good about the crossover and actually make money in this position over its lifetime, short we’re talking about managing losers and, you know, being able to stay in the trade even when you’re wrong. I mean, yes, we are stubborn in this one. That was obvious. But we were we we we saw it through and stayed short through that through the most painful squeezes. And I’m pretty happy we did. [00:13:31][84.5]

Danny Moses: [00:13:31] Let’s just say this, okay? I can hear people that don’t want to be shorted totally get it. Okay. But to want to be long this you can’t find me a compelling reason. I’m not going with the Cathie Wood playbook, this asinine playbook dream the dream with robotaxis and all the shit. We’re talking three DOJ investigations separate. We’re talking multiple agencies that are looking into it. Right. We’re talking continued SEC violations, right. Whether they get fined occasionally or not, I don’t know. Lack of corporate governance to your point Porter on the ESG of things, the S and G as a joke and on the E side of things, sure, he made electric cars, but let’s not kid ourselves. He sells tax credits to stay alive so the fossil fuel companies can keep making cars. He’s digging in lithium mines. He’s over in China. There’s nothing you could tell me about this guy that, you know, is not just self-serving or whatever, but the other day, what I can’t get my arms around and we’re starting to see it now finally unravel is why would you ever be long it? Again I’ll separate one to be short of stock for me there is not a compelling reason you cannot give me one to be long this and when this does play out over time and you know again the way the SEC works, we know how government agencies work. They don’t want to be the ones that are seen to be the blame for taking a company down. Right. In this case, you won’t see a lot until the stock’s at 50 or 40 or $30, in my opinion, in terms of, oh, here comes the government. Oh, thank you so much. Because any investor, by the way, shame on them. I don’t need the SEC to tell me what this company is all about. So we see this from time to time. And let me just shift back to Carvana for a second. And when you and I were working together with Steve again in the mid-nineties, when Ernie Garcia, the second, brought ugly duckling public and drilled it into the ground, this was not new for him. What he did with the subsidiary in the finance subsidiary that he had a Carvana is just amazing, whether it’s a generational difference of, you know, 20 years later, whatever might be that people just don’t realize that people’s personalities don’t change. And it is what drives the culture of a company. And in this case, to me, it’s just obvious. It’s just a question of when, not if. [00:15:24][112.9]

Vincent Daniel: [00:15:25] The great thing about Carvana from the short side and I’ve spoken to a lot of friends and friends who of people who have material investments in the name and they’re like, What did you say? And aside from our history of knowledge of the space, particularly the subprime space, it was like it was the balance sheet, simple as that. And if you look at the balance sheet right now, they simply have too much debt and too much interest expense to cover any potential profits of which they don’t have right now, any potential profits that are going to come over the next two or three years. So to me, just using my logical head, the best thing for this company is to go bankrupt as soon as possible. And I’m not trying to be a jerk or an A-hole saying that. I’m just looking at the tale of the tape and saying, if I was an employee of Carvana, you need to get rid of this interest expense as soon as humanly possible so that you could be a viable entity. And I do believe that once you A get rid of all of the debt so you you restructured the cap structure and B, of course, get rid of the Garcias. You might be able to effectively compete with who I think is the best in class in the space, which is which is CarMax. And I know that’s hard to believe, but just they have built a mousetrap that could work. You just need to get rid of a bunch of the poison in order for it to happen. [00:16:52][87.2]

Porter Collins: [00:16:52] You know, this is similar to Vinny. Twitter. Yes, right. The interest costs that Musk is now paying is two X, the best ever adjusted EBITDA year. [00:17:05][12.5]

Vincent Daniel: [00:17:05] But to be fair, Twitter has other issues. Right. Which is the cult of personality that now runs it. There’s I hate to say it, it’s it’s it’s very political. Half the people absolutely love him and a lot of people hate him. And this gets back to his whole political gambit that he played. And if this starts to continue to piss off the advertisers, then he’s got a revenue stream hole there. [00:17:28][22.5]

Danny Moses: [00:17:29] So up to Porter’s point, it doesn’t even matter on Twitter. I mean, there’s they don’t have a viable business model. They’ll be able to put in place in time. Right. To make these payments. And, you know, again, I have no sympathy for obviously the banks that that put up the money for this for you know, for the debt here and holding, you know, 12 and a half, $13 Billion of what it may be, whether they could have gotten out of or not, whether they wanted to see the deal go through or not, I don’t know. But it’s hard for me to see Twitter being worth anything more than the debt, and it’s probably worth less than the debt. And you’re literally the company is being undone in front of our eyes. And again, you’re seeing the real Elon Musk. And this is not a company that he built the culture of. He helped form the culture at Tesla. He didn’t he didn’t start Tesla for people out there nope kicked out the founders took it over himself. But whether it’s a space X or a Tesla, he’s been able to kind of control the culture of a company. This one, he came in and it’s a wrecking ball. And you can see how he operates. I mean, he just, you know, whims and. [00:18:22][53.5]

Porter Collins: [00:18:23] It’ll be it’ll be really interesting. Denny, if to see like in the post mortem on this and whether the risk committees waived all these. Oh yeah. [00:18:33][10.1]

Danny Moses: [00:18:33] Oh the banks. [00:18:34][0.5]

Porter Collins: [00:18:34] The banks on the covenants. Right. Because this is a massive LBO,. [00:18:38][4.3]

Vincent Daniel: [00:18:39] The total cumulative profitability of Elon Musk as an investment banking client after this hickey. Right. Which we assumed is going to be is it still worthwhile? I mean, perhaps probably for Morgan Stanley, which is the lead banker for Musk, but for everybody else, if you if you’re losing more money than you’re making on a prospective client, it changes your your point of view as to whether they should be a client going forward. [00:19:03][23.8]

Porter Collins: [00:19:03] You’re not going to write bullshit research reports on them saying that. [00:19:06][2.8]

Danny Moses: [00:19:06] Right. Well, listen, I’m not going to speculate on how they push this deal across the finish line with not requiring more cash. Right. Come up. I’m I have to believe and I haven’t seen this unless you guys have that Musk has pledged to shares. He already had pledges shares remember for loans outstanding separate away from the Twitter deal. But I’m guessing that this is this is what we’re seeing here, how the stock is acting now. I think it will continue to act. Its Musk will be continuously forced to sell stock to come up if there are any covenants. Right. That are required to make whole or capital that’s going to be required, we don’t know that yet. Have you guys seen anything to do with kind of what these covenants look like? Because it seems to me that he is probably fully pledged here with all of his stock. [00:19:46][40.1]

Porter Collins: [00:19:48] So I think that the common denominator of what Vinnie you harp on all the time is just too much debt. Right. And you know, he had spinning plates, a lot of leverage. And same with SBF, right? They had had way too much debt, you know, a lot of spinning plates and a lot of distractions, a lot of everything. You know, I like to keep my life pretty simple, right? And the more complex it gets, the harder it is to manage all this shit. [00:20:10][22.2]

Danny Moses: [00:20:10] All right, guys. Well, that wraps up kind of the single name Carvana crap Tesla stuff, Musk SBF, although I’m sure we may hit it when we come back. Let’s talk about kind of the energy sector, the volatility in the commodities themselves, and then maybe talk about what you kind of looking out for 2023. [00:20:25][14.8]

Guy Adami: [00:20:27] CME Ad. iConnections Ad. FactSet Ad. [00:21:04][36.9]

Danny Moses: [00:22:36] The energy sector is been in focus for the several years now, but particularly today with news that OPEC may increase production ahead of the Russia embargo. China had COVID deaths and now they’re, you know, potentially retrenching again for from a demand perspective. But certainly oil itself continues to be volatile. I know you have to pay attention to it. Obviously, it’s the underlying security or commodity, obviously, that helps price all energy assets across the board. So give us your current thoughts here. And it’s just the type of drawdown that you would buy on weakness for some of these energy stocks. Is there a level that oil goes to where you’re like, you know what, it’s going to be hard really to model these companies going forward? [00:23:12][35.9]

Porter Collins: [00:23:12] Well, I will say that, you know, I’ll correct your statement. This is not the commodity that prices all energy equities. And, you know, for the people that have cared about, you know, our investment in coal and coal stocks is a bit different. Right. And call coal. Yes, debt has had a pull back from those all time highs, but it’s actually hanging up in there pretty nicely. It’s actually up today along with oil with that gas. So, you know, we have bifurcated the energy industry and, you know, we just keep going back to look at the cash flows and look at the cash flows of some of these coal companies. Look pretty darn good. Yes. On the on the oil pullback, that is quite something. The most recent week or so, it’s down about ten bucks or something like that. I think if you take the news in totality, right, that OPEC was already 3 million barrels under their quota before they made that 2 million barrel cut a couple of weeks ago. And then now that they’re increasing 500,000 to their their production, it’s sort of like, who cares? You know, I know it matters for narratives, stuff like that. But, you know, like I think if you’re bullish on oil equities, you kind of look at in totality and say, you know, demand is an all time high right now. Yes. People are questioning what’s 23 look like. [00:24:22][70.3]

Danny Moses: [00:24:23] What I’m saying, Porter, is I totally agree with you and nat gas and coal related versus oil and coal. I totally understand that. What I’m saying is there’s people out there that I think have been waiting to buy the sector. And what I’m saying is, you know, just kind of dumb it down here, right, in terms of they’re going to watch oil and make a decision. What I’m saying is you guys are well beyond that. You looking at the cash flows of companies that are going to be doing well regardless. You know, oil would have to get to 55 or $60 for you to really start to rethink your position. What I’m saying is you think this is a head fake in terms of oil coming down or you’re not going to try to predict it. You know what’s going on out there. I agree with you. It’s just volatile and it’s just crazy to me how all these commodities, whether it’s rates, oil, trade like this, right. In $10 band, $7 bands, 50 basis point bands, things like this. I just think that’s obviously here to stay in terms of volatility in the markets. I’m just trying to make sense of how you use it constructively in terms of, you know, approaching your position. It’s like something you would add to today is what I’m saying. The energy stocks are obviously down today, I don’t know, 3 to 5%. I haven’t looked in real time here. I know I’m watching the OIH and the XLE and all this stuff and I know your bottom up, guys. I’m just saying, in general, you think this is presenting an opportunity to add or for people to start buying some of these energy stocks? [00:25:33][70.4]

Vincent Daniel: [00:25:34] Well, I said at the beginning of this podcast, first off, the name of what we’re doing is What are we doing? So I think it’s pretty important to talk about what are we doing because we are known and that we do have energy exposure. Right? The other thing I spoke about earlier in this podcast was to talk about losers. So at this point in time, it’s probably pretty important to talk about the position we have, which is energy and what are we doing? Because like Zach Wilson yesterday, it feels like it’s losing and losing badly. In the terms of Zach Wilson. You’re going to get rid of him, right? But what do you do with your energy positions? And so the first thing we do is to take a look at our portfolio, where our exposures lie and where we sit. Name by name. The other thing we do is we assess the information that came out there, whether it’s live or whether it’s Memorex. And then the third thing we do, which we do now more than we’ve ever done before, which is to consolidate, take tax losses when you could, because that’s an important part as well, for us we really don’t have outside investors, but what we do have are tax liabilities or tax gain. So places where we could reduce our tax liability, we’re going to do so and then consolidate them into our favorite names. So essentially reduce the number of names we have and probably increase our concentration in our favorite names. And that’s pretty much what we’re doing right now in terms of the news flow. And it’s still early because it just came out a few hours ago. The reasons for OPEC apparently saying what they might do is a function of either A you have potentially a Russian oil embargo coming in December and oil is coming off the market. B, our country just granted immunity to NBS for the assassination of Khashoggi. Or C, China is about to come on board at some point and increase demand they have. So in some respects, in a vacuum, the news flow looks horrible. But when you take it in the context of what the reasons why they’re doing what they’re doing if they do it. I apologize because they haven’t done it yet. It’s not as bad as it seems. [00:27:43][129.3]

Porter Collins: [00:27:44] What what you were asking today? Yes. On a day like today, we’re increasing our oil exposure. We like to be like Rocky Balboa. It keep taking the punches and just stand there and the facts change and some material changes. Yes, we’ll cut bait. But here, you know, we’re not going to cut bait. We have cut back on the names. We were in a European natural gas and oil producer. And, you know, the windfall taxes when they came kind of scared us. And if you look at what the UK did is they talking about the windfall taxes, not just retoractively activated 22, but they were talking about windfall taxes out to 28. I think if you’re looking at any energy company or any company that has exposure to that in Europe, I’d be like, Hmm, I got to think about this because as the three of us know, governments can change the rules any time they want. And, you know, they happened in during the financial crisis with with, you know, short selling bans, you know, windfall bank taxes, all this type of stuff. And so when noise starts happening, you know, we we say, you know, we got to watch. And so that particular position, Vermilion Energy, we we cut back on the cart. [00:28:54][70.1]

Danny Moses: [00:28:54] Let me just say that this has been a incredible secular trade, right? This is not just cyclical. This has been, you know, a kind of a revamp of the ESG stuff that’s been out there, the underinvestment, the incredible cash flows and balance sheets that everyone should be looking for in any company right now that happens to exist in the sector. So this is not a Oh, I told you so. Everything like that. I’m totally on board with you guys. I’m just say for people out there, I feel like every time that oil trades like this, they’ll dance on the bulls. I told you so. Meanwhile, the sector’s up a lot, and I don’t think there’s any sign to say that this is not going to continue barring some massive demand destruction which we’ve been dealing with China, COVID lockdowns, it unlocks for now three years. Right. It’s not that’s not new. And you throw in OPEC in on a week where the market is not that liquid. You’ll get moves like this. And it’s my inclination, if I could offer mine is this is when you add or start buying if you have underexposed to energy. Because I think as we move forward, which is where I want to shift this conversation now in the last few minutes to kind of 2023, hopefully we’ll get on air one more time with you guys as we go into it. But just to be kind of look to 2023, the setup is is not pretty from a macro environment. Geopolitically interest rates, even if the Fed stops, you know, the damage is still going to be felt. The economy has one direction to go in the US right from an employment perspective. So give me your guys thoughts and how you’re thinking about going into 2023. And then if you use the month of December to kind of Vinnie do the Barney clean up in the portfolio, forget about tax loss, selling, how you want to position going in. Because I think to me over the next 5 to 5 weeks, that’s what I’m going to be looking to do. [00:30:24][90.1]

Vincent Daniel: [00:30:25] Let’s talk about it, because first we have to acknowledge that there’s been a pretty big market rally over the past month and a half absent the last few days. Right. And to me, it’s it’s a battle between sentiment versus economic reality, at least for me, I like to weigh one versus the other. One is very short term oriented and can continue. And that’s the sentiment. Even though sentiment is not as oversold as it was in late September, early October, most of those oversold conditions are gone. Right. But from an economic perspective, Danny, I agree with you. It’s really tough from an economic perspective to own this market. And that’s because to me, we have yet to go through the downdraft in economic numbers we think we’re going to see let me let me put some numbers into context. We were in our past life. We were financial guys. We rely on financial data from the financial services industry to make some of our decisions and in particular, some of the credit card data. And you guys were talking about it last week. Here are some numbers. And these numbers come out every month by the credit card companies, which is the receivable balances there, delinquencies and their defaults discover credit card debt. Their receivables are growing 20.3% year over year. Capital one, 22% year over year. American Express, the consumer cards are at 25% and their small businesses at 36%. So when we see numbers like that and Danny, you know where I would be on the Seawolf desk screaming, it’s really difficult to see economic growth in 2023 when consumer credit, particularly credit card debt, has grown that fast. It’s just impossible, I think. So as a result, we are going to have a slower economy over the next six months in 2023. My view. [00:32:10][105.2]

Porter Collins: [00:32:10] I totally agree with you what you said earlier about oil. I think that’s something where you look to buy by the dip in those names and I don’t think this trade in any way finished yet. So that’s how we’re thinking. [00:32:21][11.1]

Danny Moses: [00:32:22] I would say on the credit card, Vinnie, I think. Right. It’s human nature. Right. And I don’t think this is why there’s a lag effect both on the business side and personal side for people. In terms of what the Fed does, people are just starting to realize if they carry a credit card balance. That’s right. Over time that it’s not, you know, 3.99%. It’s not even 5.99%. It’s jacking up into the mid-teens probably at this point. And so the inability to pay that back basically feeds on itself. And to your point, it’s feels like and someone asked this question a couple of months ago, you know, how do you explain or reconcile all the consumer spending? And I said it was really a COVID relief rally to a degree. I think people were pent up out spending money on services. Right. They stopped buying, obviously, goods as much as they started experiencing things. When you’re out experiencing things, you’re in restaurants, right? You’re in concerts doing you’re using your credit card all the time. And I think that we had this kind of pent up demand, unfortunately, at the same time. Right. That money’s being pulled out of the system. And when you pull it back, it’s really as simple as, you know, Mike Wilson talks about this all the time. Again, I wish I’d listen to him a month ago when he went bullish. But it’s different is when, you know, it’s just M2, it’s money supply. And as that starts to dwindle or go negative. Right, that’s it. It’s pretty much that simple in terms of the amount of money chasing, you know, that’s kind of out there and sloshing around. It’s getting smaller. And so to me, that’s going to be a major theme, obviously. And even if the Fed does pivot, they’re not cutting anytime soon. And if they were to cut soon, say, in the first three months, somehow in the first quarter of 2023, what happened? Like, why are they cutting? And I don’t think they will. To me, this whole dependency, an obsession on the Fed about CPI being 0.2 or 0.3 different, and then one number comes out and just knocks that completely out, right? What that looks like. So I’m watching stuff like that, watching the sentiment, but I do feel like we’re on borrowed time in that degree. Porter I think you would agree on that. [00:34:08][106.0]

Porter Collins: [00:34:09] Yeah hey, Danny, as we wrap up here of the tell a story, you know, we’re thinking about SPF and is fragile states statements being worthless? I have a story about Steve. [00:34:19][10.3]

Danny Moses: [00:34:20] And is this the toilet paper? [00:34:21][1.5]

Porter Collins: [00:34:22] Yes. And so and so Steve is a bit like Larry David. He’ll say anything, does anything. So this Japanese banker, insurance company, insurance company, insurance, he comes into the office. And first of all, Steve was obsessed with the way that he presented his business card to them, you know, because they take two hands and they bow. And so there’s like 17 of these executives. So, Steve, does every single executive and bouse looks him in the eye like like hahaha. And so then like almost the last guy comes in and the CFO hands and none of these guys speak English and the CFO hands him Steve has his business card with one hand and Steve goes, No, you can’t do that. You two hands. It’s it’s unbelievable. And so and so the guy sits down and the CEO sits down and he’s talking through the interpreter. And Steve is not even listening to any part of it. He’s taken you look at their their pitch book and he’s just swipe and swipe, swipe, swipe, swipe, reading this stuff. And he goes, he interrupts something because, wait, wait, wait, wait, wait. He goes and he turns. The interpreter goes, translate this. Exactly. Do you know what this is? This is toilet paper. And the interpreter looks at Steve like, I can’t say that. And he tells him and the interpreter comes back and the, the bank CEO’s like. [00:35:45][83.6]

Danny Moses: [00:35:46] But you remember why he sid it was toilet paper.. [00:35:49][3.2]

Porter Collins: [00:35:52] Yes I do. They didn’t own any stock. They, they own zero stock. And he was so pissed off that these guys were doing X, Y, Z without having any ownership. It drove him insane. [00:36:03][11.0]

Danny Moses: [00:36:03] Yeah, but in, in Japan, it’s not customary to own stock in the companies that you obviously work for. I think that was the answer that came through. And Steve said, this is toilet paper. And they all looked at each other. They thought the translation was wrong. I got up and kind of slowly walked out and normally do in the end. By the way, just for the record on that, you know, in The Big Short where Steve did put up the zero sign, I was literally the one next to him sitting there, scratched, you know, just going lower in my seat by the second. And then he did take a phone call and walk out of there and left me in that room. I was not going to be left in that room with those guys. But yeah, that was quite an experience. [00:36:38][34.2]

Porter Collins: [00:36:38] I tell you, the 20 minute theatrics of doing the business card, it was like that was just priceless. [00:36:43][4.7]

Danny Moses: [00:36:43] So it’s amazing. Ordered bacon cheeseburgers. When he had our investors in there that kept kosher all the time eating the bacon cheeseburger. There were so many great, great stories. But listen, that’s probably a great setup for what’s going to happen in 2023 because you better bring a sense of humor to everything that’s about to happen, because I think it’s going to be, you know, a bit rough. But [00:37:04][20.8]

Porter Collins: [00:37:04] This, this is toilet paper. [00:37:06][1.1]

Danny Moses: [00:37:07] This is toilet paper. Exactly. So anyway, guys, listen, it’s always great to catch up with you guys. And I know we’ll be back in a couple of weeks to do this again, but your calls have been phenomenal. I’m waiting for you to take outside capital. Just say the word and I’ll be your first investor. But anyway, guys, thanks for coming on to what are we doing? [00:37:22][14.4]

Porter Collins: [00:37:22] Great stuff, Danny. [00:37:23][0.5]

Vincent Daniel: [00:37:23] Thanks, Danny. [00:37:23][0.3]

Guy Adami: [00:37:27] Thanks once again to CME Group and I connections for sponsoring this episode of On the Tape. If you like what you heard, make sure you hit, follow and leave us a review. It helps people find our show and we love hearing from you can also email us at on the tape at risk reversal. Dot com any time. Follow and connect with us on Twitter at on the tape pod and we’ll see you next time. [00:37:51][23.5]

Dan Nathan: [00:37:52] On the tape is a risk reversal media production. This podcast is for informational purposes only. All opinions expressed by me and Nathan Guy, Danny, Danny Moses and any other participants are solely our opinions and should not be relied upon for specific investment decisions. [00:37:52][0.0]




See what adding futures can do for you at cmegroup.com/onthetape