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On this episode of On The Tape Guy, Dan and Danny discuss panic buying on the back of the CPI report (1:00), Tesla touching the $175 mark (12:40), the FTX crypto crash (16:55), homebuilder stocks soaring (26:20), and Danny’s NFL picks of the week (28:00). The co-hosts interview Cameron Dawson, Chief Investment Officer at NewEdge Wealth, and talk about her path from performing arts to finance (33:26), the importance of the dollar (40:26), S&P earnings (41:45), trading around the 200-day moving average (46:30), and growth vs. value (55:45).
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Show Transcript:
Guy Adami: [00:00:00] CME ad. [00:00:01][0.5]
Speaker 2: [00:00:30] iConnections ad. [00:00:31][0.8]
Guy Adami: [00:01:21] So I have to start these shows by just starting the show. There’s no introduction, although I will make an introduction in a minute. But Danny Moses, we’ve done this before, but it’s important to do it again, okay? For whatever reason, you have a familiarity or fondness the state of Georgia. Right. And we’ve mentioned the great city of Athens, Georgia, a number of times. So give me the first band that comes to mind when we speak of Athens, Georgia. I know what I think. [00:01:45][23.7]
Danny Moses: [00:01:45] I know you’re R.E.M., but I’m not going to give it to you because I’m a Widespread Panic over R.E.M.. [00:01:48][3.1]
Guy Adami: [00:01:48] I appreciate that. Widespread Panic is the right answer. And today, that’s exactly what we’re seeing that people say, wait a second, Swizz. The market doesn’t panic to the upside, but I would submit everything we’re about to talk about speaks and reeks of panic. By the way, this is the on the tape podcast. I’m Guy Adami, that was Danny Moses, the 14, 11 and one pedestrian. Danny Moses, of course. Dan Nathan is here as well. And in just a few minutes, Danny, we will speak to Cameron Dawson of NewEdge Wealth. She has some great insight into the market, what she thinks is going to happen and subsequently what she thinks is happening as we sit here today. So, Danny, how are you? [00:02:30][41.2]
Danny Moses: [00:02:30] I’m good. And let me just say, Cameron was the recipient of the 2012 Ed Moses Scholarship out of Cromer School at Rollins College. So I’m very excited to talk to her. What’s happening is 0.3% better CPI numbers, rallying the market 5%. So that makes a lot of sense to me, Guy. [00:02:45][14.5]
Guy Adami: [00:02:45] Well, that’s why I call it Widespread Panic. And I’ve said this for years and I’ve said it to our producers on CNBC, Fast Money, Danny, a show that you come on once in a while that we associate panic always with the sell side the market panicked markets sold off 3%. There was widespread panic. But what we’re seeing today is panic buying, which, by the way, can last for a period of time. On this very show, we’ve talked about the potential for the S&P 500 to get to 4000, maybe overshoot to 4100. And as we sit here now, it’s happening right before our very eyes. But it’s also happening with the VIX trading down to the low twenties with bond moves that you talk about, ridiculous bond moves. Well, take a look at what happened today, folks. When you’re talking about 25, 30 basis point moves in two years, in ten years, that is not particularly, I don’t think healthy, but it can last Dan Nathan. [00:03:36][50.9]
Dan Nathan: [00:03:36] Yeah, this is a coordinated orgy of just enthusiasm. If you think about as you just mentioned, the ten year is at 3.82. It was trading at 4.21 like a few trading days ago. Look at crude oil. It’s at 86 bucks. It was at 90 a few trading days ago. The U.S. dollar index, the DXY is down 6% now from its highs made just a few weeks ago, but down a few percent just in the last few trading days. You put all this together and it’s a really explosive cocktail, if you think about it. So, Guy, you’ve been saying this for a couple of weeks now. You think we made a new low. This was in the S&P and the NASDAQ, and you thought we’d have one of these counter trend rallies. I was a bit concerned about the Nasdaq and how little progress that it had made off of those recent lows. But you look at a day like today with the Nasdaq in one day up 7% as we go into Thursday, I mean, 7% in one day. This is not the sort of thing you want to fade on day one, two or three. You probably want to give it a week or so. [00:04:37][60.2]
Guy Adami: [00:04:37] Yeah, I agree with that. And it’s going to be interesting. You hear a lot of people come out and say the Fed is getting this right. The platform or the eye or the window for a soft landing has gotten significantly larger. Some maybe that’s true, Danny. I don’t see it because you know, with a mid seven handle and CPI, we’re a long way from their goal of 2%. And what’s interesting and I think they’re doing it, I happen to think they’re doing a good job and I get yelled at by Porter, I think last week or two weeks ago yelled at me and said he gave them an F, I gave them an A in terms of their messaging, because you heard a lot of voices come out today and say, hey, listen, our job is not over yet. And I think they’re using this strength and they’re using that whatever CPI you want to say, soft or whatever word you want to use as more leverage to be more hawkish, and that’s exactly what they should be doing. [00:05:24][47.2]
Danny Moses: [00:05:24] Let’s just back up a second. [00:05:25][1.1]
Guy Adami: [00:05:26] Okay. [00:05:26][0.0]
Danny Moses: [00:05:27] Lets not get all caught up in noise. [00:05:28][1.0]
Guy Adami: [00:05:29] Where do you hear me getting caught up. [00:05:30][1.3]
Danny Moses: [00:05:30] You giving the Fed and A of any kind. [00:05:32][1.5]
Dan Nathan: [00:05:32] That was last week. [00:05:33][0.6]
Danny Moses: [00:05:33] So I know. It’s fine. Let me just say this. So let’s just look at the CPI number, if that’s what you want to say that caused all that. [00:05:39][5.7]
Guy Adami: [00:05:39] Yes. Well, hold on. I mean, I’ll give you two things. And Dan mentioned this before, and one of the calls we had, I think it’s a combination of CPI. I think it’s a combination of midterm elections that are right down the middle. It seems like to me this is a good outcome. And I think it’s also a culmination of this whole crypto thing, which we will talk about sort of crescendoing. So go ahead. [00:06:01][21.9]
Danny Moses: [00:06:01] I was just going to say we had a FTX go down, right. And the contagion was contained into crypto. It obviously affected the S&P. Yesterday we woke up today, the world didn’t end and so that was okay. We had a stable market going into the print and it was a little bit better. But we’re one print away from something else. And by the way, let’s just. We all believe inflation has peaked. The world has believes inflation has peaked. Question is how quickly can it move its way down? When you look at the components of what was there, right, what’s in there? I’m going to tell you this guy, because as much as you hate the Fed, I hate another industry more than any industry in history. The airlines. Okay. Airline tickets was the was the high. Okay. I hate this because I’ve been flying a lot lately again. Airlines get bailed out every time something happens in the world, right? They even buy the frickin stocks themselves. Yes, I was buying the stocks. Yet when things are great, they will gut you with prices though. Customer service sucks, but when things are bad bailed out every single time. So I wanted to say that the airlines. We know that used cars were coming down. We know that furniture and appliances component were coming down. That’s a direct impact, obviously, of housing. So we saw these things that were happening. Right. So we know that rents obviously are going to come down because those follow home prices eventually. Those were still I think it. [00:07:08][66.1]
Guy Adami: [00:07:08] Stick, sticky. [00:07:08][0.0]
Danny Moses: [00:07:09] So I like to look in and say, what is it also telling us? And take a step back. Here’s why I don’t like it. It’s not because I’m bearish. I can withstand a bear, a bear market rally. I’ll say it gets people in FOMO, they start buying again. And then what happens? We get a PCE or something that’s going to be higher than expected. And then what? So I looked at CME Fed from futures. Dan, obviously we’ve now shifted to 50 bips from 75 more on the next meeting and we’ve shifted a little bit in terms of where will the peak number be. If it was five and a quarter, now it’s between, you know, it’s five or something like that. So we’re kind of back to where we were a month ago. So now we’re economic dependent print, but we know what’s going to happen. There’s going to be some elevated print or something. But I just I just don’t see this as a sustainable. [00:07:48][38.8]
Dan Nathan: [00:07:48] But it may go the other way. Right. And this is kind of what we were talking with Vinny and Porter last week. And I remember I got a little amped up here a little bit because I don’t remember. I think when we look back, we’re going to be looking meeting the meeting we’re going to be talking about, oh, you remember in Q4 of 2022 when we were done debating about transitory and this, it became pretty clear that the Fed Guy just, you know, their old target was 2% on the upside inflation, okay, that was pre-pandemic. And so yeah, maybe they’re targeting 2%. But really what they were talking about mid this year was getting it down to maybe four or 5% or so. So today’s CPI print might be the first of many that might give us greater confidence that we will be getting to mid-single digit CPI prints at some point early next year or so. And so if you’re looking at what the Fed funds are pricing now for December, your point is that it was a high chance of a 75 basis point hike after the October jobs report. This might say something differently. And so my point is, is if we think about it, we are shifting we are going towards a different phase of this whole cycle here where high levels of inflation, 40 year highs are in the rearview mirror. That’s done. I think we can all agree on that. And so when you think about this guy, you were giving Fed Chair Powell an A in 2018 when he was on autopilot, raising Fed funds, 25 basis points, every meeting on autopilot. I think he used that expression. Yes, he did. Okay. But then it was an outside growth scare globally that basically caused the stock market to start going lower and they pivoted really quickly. So here’s the thing about this cycle. The S&P at its lows was down only 25%. And all of our calls for 3300, whatever you wanted to put S&P earnings on at a trough multiple, we may not get there and maybe cycle. [00:09:31][102.2]
Danny Moses: [00:09:31] What are you talking about I so disagree with you. [00:09:32][0.9]
Dan Nathan: [00:09:33] Okay, but what I’m saying is, like, there’s a chance, okay, that rates are going to come in. Inflation’s coming in, the dollars coming in, stock market multiples have come in dramatically. And so maybe there’s a chance that there’s a soft to commodity prices. Don’t you’ve been saying, Guy, if the dollar comes in and if rates come in, you’re going to see commodities explode. Yes, you will. Well, you might or you might not. I mean, it might be that the growth that comes out of this bear market and whatever recession we’re likely to be in next year, it might not stimulate that. So. Oh, Danny, just making faces. [00:10:04][30.9]
Danny Moses: [00:10:06] I don’t think multiples have actually come in that much. And here’s why. Earnings revisions are coming down. And so we’re now sitting back towards the 4000 level, right? Earnings are probably going be down 15 to 20%, some are saying. Yeah, I’m saying the revisions are starting now. What I’m saying is I’m not saying we can’t have bear market rallies. What I’m saying is people obviously get a certain set up and maybe was overly bearish a little bit and now people feel like they’re missing in the jump in back to it. But one commodity, which is gold, which I know you’re not a fan of, as a matter of fact, last week I think you said it’s dead. I’m saying that if we’re moving, this tells me buy gold being up today. I’d love to get your thoughts on it. Dan Yeah, this is not just about inflation peaking. This is about the Fed’s very close to done and people believe that the one thing that might happen is quantitative easing again in the future. Because for gold to have a move like this, it’s up $130. Right. [00:10:55][48.7]
Dan Nathan: [00:10:55] We do agree, though, that stocks do well in periods of quantitative easing, right? [00:10:59][3.8]
Danny Moses: [00:11:00] Absolutely. Just what what I’m trying to want to try to clarify it is it just is one of these. Okay, why are we buying? Because is the Fed done? Is whatever I’m saying. That’s interesting. The gold is rallying as much as they are, because that tells me that people were just waiting for the moment that they could buy, Guy. [00:11:15][15.0]
Guy Adami: [00:11:15] I think and I’m not suggesting you’re saying this, but I want to be clear, we’re light years away in terms. The way we look at things from quantitative easing, I mean, I think it’s pretty clear that they’re still on some sort of mission to get inflation, maybe not down to 2%, but something resembling that. But I understand what you’re saying. I think there are certain parts of the market they’re looking way past what they’re doing now and saying this time next year, the environment’s going to look a lot different. I’m with you, by the way. This is to me what we saw again in June of this year when the market went up 18.9% into August, and then everything gave it back. So all we’ve really done here is made a series of lower highs and lower lows in the S&P. And I think we’re on track to make one of those lower highs in the form of Dan 4000, maybe 4100. [00:12:02][46.8]
Dan Nathan: [00:12:02] Been steadfast on that. And I don’t mean to push back. I’m not following this rally. I was buying stocks the last couple of weeks when it looked really ugly. Basically, I was riding your coat-tails. And you know what I was also doing? I was short UUP, which is a bet on the dollar going lower and it was long GOVT a bet that yields are going lower. So like I think what’s interesting about 2022, it’s emerging as a actually very predictable market. And my point about the CPI reading and today’s reaction to it is that we might be transitioning to a different phase right now. So we’ve been selling rips all year long. That’s been a great trade. It might end up turning into a situation where there are some generational opportunities to buy stocks that were disconnected on the upside from any reasonable valuation scenario. And they’ve discounted a whole heck of a lot of that on the other side of this, with rates on the way up this year and just people refocusing where valuation should be and that sort of thing. [00:13:00][57.9]
Guy Adami: [00:13:00] Yeah, we’ll talk to Cameron Dawson in a few minutes and will allow her to break the tie. In terms of the broader market, S&P valuations, multiples and those types of things. Now I would be remiss if I didn’t point out that we have been saying collectively, along with Vinny, along with Porter, that Tesla, the stock had a destiny, a date with $175. And lo and behold, this morning, before the market opened, Tesla was trading Danny Moses, $175. Now rallied today with everything else. It makes a lot of sense, but it did get to levels we were waiting for, number one. But number two, something that you’ve unearthed over the last few minutes is Twitter debt is trading at a really horrible level. Now I want you to start connecting dots again. We’re not Elon haters. I don’t hate them. I’ve never met the guy. I’m sure he’s lovely, but like Dan doesn’t like them. I’m sure. My point is this. We have to bring it up because it’s something we talk about and something that has become an ongoing situation. [00:13:58][57.4]
Danny Moses: [00:13:59] You know, one other component in the CPI, which rose a lot, the largest was alcohol price of alcohol, which I’m going to have as soon as I get out of here because I’m all riled up. And I don’t want to spend any more time on this asshole, Elon Musk than we have to. But I will say this. You know what? Someone actually wrote that I actually didn’t even think about. That probably will happen. He’s going to buy Twitter. Tesla is going to buy Twitter. You think I’m crazy? I remember living through this Tesla solar. [00:14:24][25.1]
Guy Adami: [00:14:24] Slow down for a secon [00:14:25][0.4]
Danny Moses: [00:14:28] You see the news today they’re laying off people at Solar city [00:14:30][1.5]
Guy Adami: [00:14:31] So Tesla the company [00:14:32][1.0]
Danny Moses: [00:14:32] This is not what I think is going to happen. But when you think about what does he do when he’s desperate, when he got margin called for people that don’t remember, SolarCity was a separate company in 2016. [00:14:41][8.6]
Guy Adami: [00:14:42] Was going bankrupt [00:14:42][0.1]
Danny Moses: [00:14:42] Yes, it was going bankrupt. Cousins ran the company for people that think Elon Musk is this genius, whatever. I don’t care. I keep him going down this road again. What did he do? He did it for self-preservation. So he was margin. [00:14:52][9.9]
Guy Adami: [00:14:52] So what you’re saying is he’s going to use Tesla as an ATM like he has many times before and he’s going to convert his ownership of Twitter into Tesla. [00:15:01][8.3]
Danny Moses: [00:15:01] It’s insane. [00:15:01][0.4]
Guy Adami: [00:15:02] Now, let me just. I’m with you. Yeah. Doesn’t the board have a say in this or don’t shareholders. [00:15:06][3.8]
Danny Moses: [00:15:07] Oh the board the board of Twitter? [00:15:07][0.8]
Guy Adami: [00:15:08] You mean the board of Tesla? [00:15:09][1.4]
Danny Moses: [00:15:10] Oh, the board. The board of Tesla. You mean his brother Kimbal and some other people and Larry Ellison who left the board? [00:15:14][4.9]
Guy Adami: [00:15:15] Theoretically, that should be the case. [00:15:16][1.4]
Danny Moses: [00:15:16] They have no say in anything. I don’t think they’ve had a quarterly meeting. I don’t know. My point is that he’s going to have to do something to Twitter. Morgan Stanley, Bank of America and Barclays are sitting on the bulk of this $13 billion in debt. It’s now trading, I think, sub $0.60. [00:15:31][14.1]
Guy Adami: [00:15:31] That’s that is unbelievable. [00:15:32][0.8]
Danny Moses: [00:15:33] Everything that they’re getting. As Dan mentioned last week, which we talked about, they couldn’t get out of the deal, whatever. So he is literally writing on Twitter. I’m going to try some things. They may work, they may not. And the other I don’t think of myself, I’m the bankers in that room like, holy shit, we just took a risk on this guy because he was going to give us future banking business. So what I’m saying, guy is nothing is off the table with this guy. First of all, there’s no synergies between Tesla and Twitter other than he’ll come up with. It’ll be really cool. You can when you’re in your car, it’ll read you your tweets and we’ll be able to find you where you are exact location and you can tweet to our service department and then they’ll be able to get your car. I mean, I’m so sick and tired. I’m so excited when it goes anyway. Dan, you’re not in your head. Guy brought it up, not me. [00:16:13][40.3]
Dan Nathan: [00:16:13] It’s really interesting listening to you detail what’s going on with the debt. I mean, think about this. Think about what this guy has done to shareholders who’ve been following him on the Twitter, which is kind of meta, if you get what I’m saying. Last year he was like Buy Dogecoin. Last year he was buying Bitcoin and putting it on their balance sheet. Last year he was touting the stock and anybody who’s bought the stock over the last year is down money. Think about that and then think about how he’s going to torch all these banks, like you just said. As far as owning this debt, that’s trading at $0.50 on the dollar or something like that. And the last part about this is just fascinating to me is that Jack Dorsey, who founded Twitter, was a CEO twice, essentially kicked out twice. He rolled his entire position of two and a half percent of his equity into the price at $44 billion. You would have thought that that was like a bid from God getting him out of that thing. So, again, the guy is an arsonist of investor capital here. I don’t know what happens. Your point is a good one, Danny. He’s going to have to get creative. [00:17:15][61.3]
Guy Adami: [00:17:15] Obviously. The other huge story this week is this crypto situation. But Danny, I know you have thoughts on I mean, Tom Brady’s been having a bad year, but he had a really bad week. I mean, that winning touchdown drive last weekend notwithstanding. And I still don’t know how they blew that game the Ravens, I mean, there’s no way that should have happened. But with that said, this FTX situation, I mean, a lot of people got very scared for a lot of different reasons this week. [00:17:39][24.1]
Danny Moses: [00:17:40] People will come, Sam, they’ll come to the Bahamas to look for the coins. The long for once was good and right. They’re coming for him in the Bahamas. But anyway. Yeah, you know what I’m waiting for? Alex Rodriguez, his name, to be on that list. [00:17:51][10.8]
Guy Adami: [00:17:51] It’s got to be. [00:17:51][0.4]
Danny Moses: [00:17:52] Has to be. [00:17:52][0.4]
Dan Nathan: [00:17:52] That would just make the world [00:17:53][0.7]
Danny Moses: [00:17:53] Would just be a better a perfect place to be. But, you know, as you guys know, I was never bullish on crypto. I’m not going to dance on any graves. I’ve always said the irony to me was that they crave regulation, but they don’t really want it. This is a perfect example of if you want crypto to make it to the next level, you need to protect customers and investors and people. Right. But what he did with the co-mingling of funds, potentially moving assets from the exchange into Alameda, he’s going to jail. You don’t need the SEC to regulate that. You go to jail for doing something like that. Jon Corzine, who should have gone to jail for MF Global, did the same thing years ago. Right. He used client money, MF Global to make investments to basically he was running a hedge fun. [00:18:32][39.0]
Dan Nathan: [00:18:32] Just to take a step back here. So what happened is FCA, XCOM is a retail crypto exchange. You open an account there, you fund the account. So what Sam Bankman-Fried was doing, he has this Almeida, this hedge fund over there. They were taking that FTX deposits and they were moving him into the hedge fund then probably getting leverage on that and making risky bets. [00:18:52][20.2]
Danny Moses: [00:18:53] You farming? Yes. The token that you saw that FTT, that token basically was propping. That’s part of the it’s a Ponzi scheme and is the redemptions coming to just keeps buying. [00:19:01][7.7]
Dan Nathan: [00:19:01] Do you guys remember we talked about this on the last podcast when Joe Wiesenthal had him on a few weeks ago or a few months ago, and people were dumbfounded because Joe asked him, Joe is, I think, a really smart crypto skeptic and it has been for a long time. And he asked him to explain a bunch of this stuff. How do you get that yield? And he couldn’t explain it. Remember that? Like he got all tripped up and people have been defending this guy the whole way over the last year or so. [00:19:26][24.8]
Danny Moses: [00:19:26] But if you’re Sequoia or you’re Tiger or you didn’t like what diligence where you all. [00:19:30][4.3]
Guy Adami: [00:19:30] All of a sudden, I mean, that happens historically. Look what I mean. Theranos is a great example of that. [00:19:35][4.5]
Dan Nathan: [00:19:36] Theranos was one company and when you think about it, I mean this sincerely. Think about what this guy was doing. They bought into his shit guy. He had this kimchi trade. He basically supposedly made a ton of money taking out the premium between spot in Asia and here. And that’s how he made his billions. And everyone thought he was a genius. And every hedge fund or every mutual fund, every VC fund that wanted exposure to the space, they were looking for people like this to do it and they were just pushing their money up. [00:20:02][25.8]
Danny Moses: [00:20:02] Well, they thought Elizabeth Holmes was a genius. They thought this guy was a genius. They didn’t see the risk. They thought it was just going to be an exchange, like a transaction machine. They never thought, obviously, that the assets would be used levered into a token that Alameda would combine. And the thing about it is, is that no one was on that board, no venture capital got onto the board. If there was someone independent on that board. That never would have happened because they never would have proved the co-mingling wouldn’t have happened because you would have to, you know, show it. And it did. So they follow these people into the abyss. [00:20:27][24.9]
Guy Adami: [00:20:27] So here’s my take on not that I know anything about crypto, but I would submit that what we just saw over the last week in crypto is probably the healthiest thing that can happen because this is the market weeding out bad actors. And I think again, it’s just going to help in the long run. The crypto community, I’m sure a lot of people will believe that as well. I’m not saying Bitcoin is going to go back to 35,000, but this to me, this is one of those moments in time we’ll look back at and say that was a capitulation. That was one of those points in time where the industry itself healed itself. [00:20:59][31.7]
Danny Moses: [00:21:00] Listen, I hope they serve vegan food in prison because I know he touts himself. [00:21:03][3.0]
Dan Nathan: [00:21:04] And I’m not sure that’s the case guy. And I’ll just say this is like if you think about this, one of their biggest competitors put out this bullshit press release and said they were going to buy him out and it was nonbinding and then they pulled out. And so now FTX is trying to raise billions and billions. They’re not going to raise it. You know why? Because it’s a zero, right? And so why don’t they come for Binance? And so I guess the question I have for you, Danny, and you’ve been you’ve been sounding the alarm. Every crypto guest that we’ve had on since we started this thing in January of 2021, you’ve asked the question about Stablecoins. You’ve had a lot of issues about the collateral, the supposed collateral, and the way that they’ve been audited and that you’ve asked the question repeatedly, and no one’s really given you a great answer about it. So my question for you is, if everybody’s been worried about the thing that moves outside of crypto into more traditional, they call it trade fire, tread fire, something like that. So I guess the question is, is like, is the systemic risk isolated within the crypto universe or are there issues with traditional banks? And again, we know that there’s tons of VC exposure and stuff like that. I’m just curious, is there the potential for some sort of calamity to befell traditional markets? [00:22:13][69.0]
Danny Moses: [00:22:13] Well, there’s certain companies, obviously, that are overly exposed to crypto. MicroStrategy comes to mind. But let me just clear up he owes $10 billion. You actually said I o34 $10 billion. So you’re right, it’s going to zero. It’s not happening on Binance. Who knows? They had $500 million. [00:22:25][12.3]
Dan Nathan: [00:22:26] But why would you believe this guy? You know, I’m not talking. [00:22:30][4.2]
Danny Moses: [00:22:30] About Sam Blank. [00:22:31][0.5]
Dan Nathan: [00:22:32] No, no, no. But the guy who runs Binance, what I’m saying is it could be just like SPF. [00:22:35][4.0]
Danny Moses: [00:22:36] So one thing I always said was, why don’t crypto bulls or real crypto people call out the bad actors more? Why don’t they question what Letitia James questioned years ago on Tether? Where are you? Show me the adage she’s got. [00:22:49][13.0]
Dan Nathan: [00:22:49] She has a mandate. Now she can go. [00:22:51][1.7]
Danny Moses: [00:22:51] Yeah, well, she can go out. But my but my point is that she’s out there protecting people. Look at what she did to tether why they can’t market themselves anymore, why they can’t. And so does Tether have the amount of money they say, in liquid collateral? Absolutely not. Zero chance that they have that. So do they get pushed? I know it broke the buck again today. I know it’s trading sub 98, 97. People might think, oh, that’s not bad. Once it breaks par, right, something’s wrong and there’s could be a run there. So how systemic is it? Could certain banks and brokers have a little piece here and there? Maybe the market today absorbed it pretty well, I would say. So it’s telling you maybe it’s not systemic. [00:23:25][33.5]
Dan Nathan: [00:23:25] Got to give Jamie Dimon a little bit of a shout out because all those [00:23:28][2.2]
Guy Adami: [00:23:29] He backtracked on that, too, though. [00:23:30][0.7]
Dan Nathan: [00:23:30] But all those calls about it being a total Fugazi and getting them credit a little bit. [00:23:34][4.1]
Guy Adami: [00:23:35] Well, Buffett as well. Charlie Munger, this I mean, there have been a lot of people on that side of the ledger, and to a certain extent they’re being vindicated, I guess. But there’s still many chapters left in this thing. You brought up a firm Danny months ago, I want to say. Might have been a year ago. You started talking about this and how it didn’t make any sense to you. And then right before our very eyes, the same way carvana the same way with tether crypto, Affirm is happening. Something, quite frankly, that you talked about and you were sort of a soothsayer about and for. [00:24:01][26.7]
Danny Moses: [00:24:03] Well, I think we talked about it on the Monday show that Friday there was a Friday night dirty about what was happening in the securitization market, that a firm’s cost of funding, so to speak, started to exceed their margins. And so basically that means you can’t originate these loans anymore unless you want to do it at a loss. And if you want to keep the loans yourself, you’re going to have to pay a pretty price to keep them on. So it becomes a balance sheet heavy company, right, in terms of giving. So this whole thing with upstart and affirm, upstart’s a little different animal, it’s not buy now, pay later but obviously it was a platform for different loans starts to matter when funding costs go up. So traditionally a pitch themselves as the technology companies did. And now you’re seeing what can happen. And that’s when I go back to what Powell said last week, that short term rates don’t impact consumers. They do because companies like this depend upon funding. I don’t care if it’s auto loans, whatever might be. So you’re just seeing, again, companies that never should have existed or gone public, they got created because the amount of QE, the amount of liquidity that was in the system for too long. And when Upstart tried to change their profile and when a firm tried to change a profile, which means accessing all different lending products and also balance sheet those loans as opposed to selling them. Throw the flags up. Get out. That’s right. And that’s it. [00:25:09][66.7]
Guy Adami: [00:25:09] And what you just described is the difference between being an academic and things that work in textbooks as opposed to being in real life. So I’m sure the playbook of the Federal Reserve, they never see things like this coming. But as we’ve said hundreds of times, the unintended consequences of zero rates and easy money for years and years and decades potentially is things like this are created. People fall into the trap and they become the victims on the back end. And that’s what we’ve been talking about. So when I say the Fed is a villain, I don’t mean it as if they’re out there shooting people like Wyatt Earp. I mean that they create unintended consequences that, quite frankly, they should understand are going to happen. [00:25:50][40.7]
Dan Nathan: [00:25:51] Yeah, I guess my pushback has always been on that Guy and you and I have been sitting on the set of fast money together for 11 years. And again, I think you give credit where credit is due. We just talked about 2018, but when I think about what the Fed had to do during the financial crisis, what I think they had to do during the pandemic, really the mistake they make is just overdoing the thing that they’re meant to do. So that’s why I don’t think of them in that same light. I feel like they’re just like you and me. They make mistakes in the markets every day. You know what I mean? [00:26:21][29.9]
Guy Adami: [00:26:21] Yes. But, you know, going back to Shakespeare. Uneasy as a head that wears the crown. I’m not a Fed chair. I’m not one of the officials. So I’m not tasked with that. You take that job and you have to see what potentially be coming down the road. I mean, that’s what happens when you step up to the plate. [00:26:36][15.5]
Dan Nathan: [00:26:37] Okay. So we started this conversation a little widespread panic. Okay. So Danny you been saying this for a year. You said what’s going on in the homebuilding space? Given what’s happened with interest rates? [00:26:48][11.4]
Danny Moses: [00:26:48] Did I miss it? [00:26:49][0.4]
Dan Nathan: [00:26:49] No. Well, you might say that they were up a lot today, so that’s what I want. I want to get your sense for this, because we were talking to Carter earlier today on MRKT Call and we were looking at some of the sectors, some of the names that were benefiting, at least, I think, showing relative outperformance to the broad market because of what’s happened in rates. And I looked at like a Lennar and a Toll Brothers and they were up immediately like 12%. And those charts, interestingly enough, they did not confirm the new lows in the S&P 500, even as rates were going higher. Right. So to me, put all that together and you say to yourself, I saw the CEO on Squawk and Friends this morning. Think of Lennar. He was talking about. Yes, things have gotten difficult in this rate environment. But we know one thing, that there’s a housing shortage in America and we’re going to keep making houses. So I looked at those charts and then I looked at the CPI and I looked the market cap up and then I’m like, All right, these things might be ready for Demo to jump on the FOMO. [00:27:43][54.2]
Danny Moses: [00:27:44] And I probably missed that. I was busy all day, and you’re right, when you get a market rally with rates flat or higher and you get a market rally with rates lower, the builders, that’s a parlay, right? That’s a that’s a nice exacta ticket. So I’m sure they’re up a lot. And again, there is still a secular demand for housing in certain areas. But I would tell people don’t buy the XHB necessarily, but find the single name that you can find. I’m sure you and Carter and and Guy. [00:28:05][21.6]
Dan Nathan: [00:28:06] I’m looking at my FactSet right here. And so after today’s 12% rally in Lennar, the stock is down 24%. It never made a new low. We don’t even need to talk about valuation, single digit multiples, all that sort of thing. Technically, though, it’s above its 200 day moving average and it looks like it’s ready to what Guy? [00:28:22][16.1]
Guy Adami: [00:28:23] Party. Before we get to Cameron Dawson, by the way, I’m looking forward to that conversation. As I mentioned earlier, I believe if I didn’t forgive me again, I’ll use the word pedestrian for probably the eighth time this year. Danny Moses, a pedestrian 14 wins, 11 losses and one tie. Now, you would submit 14, 11 one makes you money every day and you would sign up for that. But the problem is last year you were off the charts. So in comparison, your year over year comps, as they say, not particularly good. But we’ve reached week ten in the NFL and it goes by like that, folks. So here we are. What do you got? [00:29:02][38.7]
Danny Moses: [00:29:03] Let me just clarify. Last week I said short Tom Brady. [00:29:05][2.3]
Guy Adami: [00:29:06] Which was right, that that end of that game was. [00:29:08][1.9]
Danny Moses: [00:29:08] It was right. The X is right point. Yeah, excellent point. One of that I will say that technically speaking, if you want to give me a loss on that one, you can. The line went to three after. But I’m not. I’m not. No, no, but that’s fine. Baltimore destroyed New Orleans, Tennessee hung in there with the Chiefs. And yes, the Rams had the worst coaching decision ever. At the end of that game, they deserved to lose to let Brady have that ball again so they lost by three. So you can give me whatever you could give. You make me 14, 12. I don’t care. But this week is interesting. There is a team out there that has covered the spread six weeks in a row. They are the Rodney Dangerfield of this league. I don’t understand. And this line to me, this is my pick of the year. I’m making one pick this week. It’s Tennessee Titans at home, minus two against Denver. Why is it only two? Denver had the bye week. They were in London. They pulled off that win. Whatever that that’s fine. They traded away their best defender Chubb to Miami in the off week titans are rolling I think Tannehill plays it’s minus two best running back that I’ve seen honestly in the last ten years in Derrick Henry the way they control the ball they should have won that Kansas City game No. One to give him credit. They’ve covered six times in a row. I’m going with my pick of the year. Tennessee Titans minus two against Dan you want to instead of betting against me since not you want to come with me. [00:30:11][63.3]
Dan Nathan: [00:30:12] Yeah, I’m in. I’m in a five year deal, so we settle up our bet. We did Team Rubicon. They were super psyched. Ten grand from us, two teams. And we had Jake Wood on okay computer. He’s the founder of Team Rubicon. Joe Marchese, our main man, was also on with the check that in the podcast story. We also had a killer week on the tape though obviously you’re enjoying this, but we started the week off guy. Danny and I talked with Nouriel Roubini about his new book, MegaThreats. [00:30:38][26.8]
Danny Moses: [00:30:40] It’s Disaster. [00:30:40][0.2]
Dan Nathan: [00:30:41] That was a great conversation. It right and the book’s awesome. Okay. So we had a lot of people we had a giveaway. We said, leave a review in your Apple podcast store and we’ll send you a book. And we got to 100 people already. Keep going. People will send you more books here. Leave us a review in the podcast stores. It’s a really important read. And then also Guy and I had a bonus episode. This is for Veterans Day. So shout out to all of that’s out there. My dad, Steve Nathan, retired Army Lieutenant Colonel and in the reserves. But Anthony served from Westpoint to Wall Street. Now he’s the CEO of SoFi Guy and I had a great. Convo with him that dropped on Thursday in the podcast. So check that out too. You got a lot to catch up on. [00:31:23][42.6]
Guy Adami: [00:31:24] We know. And we actually got him a little teary eyed a few times. [00:31:27][2.9]
Dan Nathan: [00:31:27] Yeah, he told us some great stories. [00:31:29][1.1]
Guy Adami: [00:31:29] He told us some great stories and happy 247th birthday Danny Moses to the United States Marine Corps or ooyala or booyah or Semper Fi, whatever. [00:31:39][10.6]
Danny Moses: [00:31:40] I can I say one of the things. [00:31:41][1.0]
Guy Adami: [00:31:41] You can do this. [00:31:42][0.6]
Danny Moses: [00:31:42] Week we will be broadcasting from the CME Group Tour Championship. [00:31:46][3.8]
Dan Nathan: [00:31:46] Oh, yeah. [00:31:47][0.8]
Danny Moses: [00:31:47] In Naples. [00:31:48][0.5]
Guy Adami: [00:31:48] You will be defending. [00:31:48][0.3]
Danny Moses: [00:31:49] I will be defending my amateur title. There’s a chance that the woman I played with last year can make it. And she’s 83 right now in this tournament this week, she needs to get into the top 60 and we can then defend that. [00:31:58][9.0]
Guy Adami: [00:31:58] When you said 83, I thought she’s no matter age. [00:32:00][1.9]
Danny Moses: [00:32:01] She’s ranked 83. No, I tend to ruin people when I play with them in tournaments. So she’s fallen off a cliff ever since she met me. But I hope I get out of this shot. [00:32:07][6.3]
Guy Adami: [00:32:07] Well, she got the yips. I mean, she got the. [00:32:09][1.6]
Danny Moses: [00:32:09] Exactly. I have that effect on people. [00:32:10][1.3]
Guy Adami: [00:32:10] So incredible. When we come back, Cameron Dawson of NewEdge Wealth. CME Ad. [00:32:15][5.0]
Dan Nathan: [00:32:55] iConnections Ad. [00:32:56][0.8]
Guy Adami: [00:33:44] FactSet Ad. [00:33:46][2.1]
Dan Nathan: [00:34:24] Cameron Dawson is the chief investment officer at NewEdge Wealth. Prior to joining New Edge, Cameron was the chief market strategist at Field Point Private Securities and a senior equity analyst at Bank of America. Cameron, welcome to On The Tape. [00:34:37][12.8]
Guy Adami: [00:34:38] Back in my youth, there was this great movie, Ferris Bueller’s Day Off. You remember the movie, of course. [00:34:43][5.0]
Dan Nathan: [00:34:43] Hardly your youth. [00:34:43][0.6]
Guy Adami: [00:34:45] That’s not you know what, lose the age jokes. It was my youth. I was probably in college age at the time. And there was this great scene, if you recall, Danny Moses when Cameron was in Egypt’s land. Yes. Let Mike Cameron go. Well, she ain’t in Egypt’s land. She’s in Danny Moses is land right now. IRL here on the tape Danny. [00:35:03][18.8]
Danny Moses: [00:35:04] Cameron we met years ago and how we met was you were the recipient of the 2012 Dr. Edward Moses Distinguished Finance Award, Rollins College. Cromer Business School. And for anyone who doesn’t know that my father who passed away in 2010, he was a finance professor his whole life and was Dean Ed Rollins at the Cromer school. You never took his class. You took Dr. Singleton’s class. But obviously that was a close associate of my father’s, and it was truly an honor to meet you at the time. That was the second year we gave it out. He passed away in 2010. You have gone on to prove how valuable, not just the education, is it, Rollins, but the fact that they acknowledge your talents while you were there. Because let’s start with the fact that when you entered into Rollins, you were in dance and theater. You had no business experience, no business school experience, yet you managed to get your way in there and get where you are now. Let’s talk about that journey and welcome, by the way. [00:35:55][51.4]
Cameron Dawson: [00:35:56] Yeah, I’m probably one of the few people in finance to have left high school traditionally homeschooled myself online so I could dance full time and then somehow ended up back in a very academic career and back in finance. And it really was the Edward Moses Scholarship that opened the doors for me to be in the industry, because I knew I had studied economics and I loved it, but I didn’t know how to stay within that realm. And then I found my way into Dr. Singleton’s class in studying security analysis, and he tapped me on the shoulder and you said, You kind of got to do this. But at the time I didn’t have any work experience in finance. And the whole idea of the scholarship, which I think is absolutely brilliant, is that it was a postgraduate scholarship. You gave me a couple thousand dollars after I graduated so that I could buy time to find the right job. And it meant that I actually said no to quite a few opportunities before I said yes to what was the right one, but I wouldn’t have been able to do that or pay for my initial dues to the CFA or fund trips up to New York to be able to meet with you and meet with other people in the industry to figure out where I fit within the finance industry. So I don’t mean to be histrionic, but I say very, very resolutely that if it hadn’t been for that scholarship, I don’t think I would be doing what I am today. [00:37:13][77.1]
Danny Moses: [00:37:13] Well, I can tell you that my dad would be very, very proud. And there’s a lot of people that went into helping fund that scholarship. One particular person, John Raise who I can’t believe let you get away from the prince reasons, all because he would kill to have you [00:37:23][10.2]
Cameron Dawson: [00:37:24] He only hires tall people. [00:37:25][0.4]
Danny Moses: [00:37:24] That’s right.The basketball team. From the basketball team. No, no, you know. Exactly. And so now you’re doing great thing. So tell us where you are right now, what you’re doing. Let’s get into that. [00:37:33][9.2]
Cameron Dawson: [00:37:34] Great. So I am the chief investment officer at NewEdge Wealth for an ultra high net worth, high net worth private wealth manager. We also serve family offices and institutions. And so I cover the full spectrum of asset classes equities, fixed income, alternative asset classes and set the overall investment direction for the firm. [00:37:51][17.5]
Guy Adami: [00:37:52] So our worlds now are colliding, obviously. Danny Moses We met on the set of CNBC’s Fast Money a few years ago and I was very nice to him. Dan Nathan If you recall. I mentioned at Cameron, because when Dan first came on to fast money, apparently I didn’t speak to him, I didn’t look up those types of things. [00:38:09][16.6]
Dan Nathan: [00:38:09] He was a bit of a Johnson as he would say. [00:38:10][1.1]
Guy Adami: [00:38:11] A huge Johnson. Yeah, from the movie. [00:38:13][1.9]
Danny Moses: [00:38:14] Eddie Murphy [00:38:16][1.8]
Guy Adami: [00:38:16] You’re I mean you’re so you’re so scattered right now. I mean, the movie is Top Gun. Top Gun. Right. Thank you, Dan. [00:38:23][6.3]
Danny Moses: [00:38:23] No problem. [00:38:23][0.2]
Guy Adami: [00:38:24] And then we see you on on CNBC all the time. How did that happen? How did they find you? By the way? Kudos to whoever did. [00:38:30][6.4]
Cameron Dawson: [00:38:31] So this was another really lucky one. At the time. I was with another firm and and one of our board members had it was, I think, a daughter who’s boyfriend’s friend. It was one of these multiple steps removed who knew somebody at a different network, but also who knew somebody at CNBC. And I get this random call on a Friday afternoon in the middle of summer saying this is so-and-so from CNBC. Are you able to come in? I said, Can you say that again? And so can you come on the show next Friday? And and she said, Have you have you ever done this before? And I said, no, but I was in a Coke commercial as a kid. So how hard could it be? So so that was my first opportunity last summer, about last July. And everything is just sort of snowballed from there. And I mean, it’s the coolest thing in the world because it’s actually full circle on the performing side of things from my dance background and now bringing the analytics into it, which is really exciting. [00:39:22][51.2]
Dan Nathan: [00:39:24] Before we get to your market outlook, you just mentioned that you’re firm and just you know, we know Rob Kitchen already who runs that fine organization and you guys serve you said ultra high net worth people. Give us a sense of like in this year that has had so many different crosscurrents as it relates to the economy and markets. What is like the biggest fear that the ultra wealthy have right now? Because inflation actually works well if you have assets and you have capital put to work. I’m just curious as just a common thread through, let’s say, your client base, what were some of the biggest concerns when we had all of this uncertainty about geopolitical about politics here, about what the Fed was doing, about inflation? Just give us a sense for that. [00:40:03][39.6]
Cameron Dawson: [00:40:04] So I think the first thing is that we’ve seen a lot of clients get anchored to their closing account values of December 31st, 2021. And one of the encouragements has been don’t anchor to that, because you had this combination of ultra accommodative fiscal, which was still happening through the end of that month, and ultra accommodative monetary, which in theory those should never in econ 101, those should never happen at the same time. And that resulted in peak earnings and peak valuations. Very hard to make money in that environment. So the end result was that it really is getting clients to accept that the world has changed and that we’re in a different environment. And I think that there’s also still, through the volatility, been an urge to try to step in and be buyers. And that seems to be the longer we stay in this bear market, kind of getting beaten out of people. So now some of those calls of, hey, should I be buying have morphed into, hey, should I be selling? And now really what we’re working on, trying to get people to accept is the possibility of a world of lower returns, kind of post an initial bounce. But what is the forward returns look like? And if they’re lower than those are some pretty tough conversation. [00:41:14][70.5]
Guy Adami: [00:41:16] Yeah those are the difficult conversations. And it’s interesting you must listen to the on the tape podcast starring Danny Moses, Dan Nathan and yours truly. Because one of the things we talk about a lot over the last six, nine months has been the U.S. dollar and the strength of the U.S. dollar. But one of your thesis on the road to 4100, the S&P is the dollar is going to crack. And as we’re sitting here today on a Thursday afternoon, it’s happening right before our very eyes. But you clearly think there’s further room to the downside in the dollar. Speak to me about that. It’s one of the most overt love things over the last few months. And it’s showing some cracks in the armor right now. [00:41:50][34.6]
Cameron Dawson: [00:41:51] Yeah, the dollar really is the fulcrum of a lot of trades, whether you’re looking at commodities or domestic versus international or even just the S&P 500 overall, there’s been this inverse correlation. Stronger the dollar, the weaker the S&P 500 trades. And it’s somewhat a chicken or an egg. You don’t know if it’s an input output or is it an input of equity weakness because it’s causing weaker earnings or is an output of equity weakness because it’s a flight to safety? But I think that the fact that the dollar broke its hundred day moving average at about 109 likely puts the 200 day in play. But also raises a question if the big, bold trend we have seen in the dollar all year is starting to fade and that could have some big implications of what leads over the next few months. [00:42:37][45.8]
Danny Moses: [00:42:38] You’ve said before also that S&P earnings, you think are obviously going to keep coming down and it’s hard to have a market rallying into that. When do you think the inflection point will happen when S&P earnings revisions stop moving lower? [00:42:49][10.8]
Cameron Dawson: [00:42:49] So we’ve started this process, but it’s only just begun. And I think we have to appreciate that. We’ve only just now started cutting estimates for 2023. They’re now from $243 a share back over the summer to 37 today. Okay. So we’ve moved them a little bit lower, but certainly we’re not pricing in some kind of recessionary scenario, nor are we pricing in what typically happens following after tightening cycles that don’t end in a recession. So like 2015 is tightening cycle or 2018 tightening cycle. The next year we saw earnings about flat. So then the question is, and I think this is the Holy Grail question is at what point do you get to that where you’ve cut plenty enough and stocks start going up on bad news? That’s your trigger, which is that you started to see that some with the semiconductor names. So even though you had a lot of semis come out this quarter and they were ugly reports and they talked about how terrible the environment was, the stocks are ripping, and that’s because they were trading at ten times earnings and or 12 times earnings for some of them. So you’re essentially putting trough on trough, which means low bars on both the earnings and the multiple. And that sets you up for relief rallies. [00:43:54][64.4]
Dan Nathan: [00:43:54] That’s a really great point. I’ve heard a lot of analogs to 2002 into early 2003 for what maybe where we are right now. And I remember trading those markets and the Nasdaq and many of the names at the lows in 02 in October were down like 85%. I think the Nasdaq at that point and there was a quarter out of Yahoo! Remember, YHOO, the ticker, you were probably in grade school. [00:44:16][21.6]
Cameron Dawson: [00:44:17] Okay, now. [00:44:17][0.2]
Dan Nathan: [00:44:18] But the quarter was disgusting, but it was a low single digit stock. And there was no one left to sell it and it just kept on going higher. Now the broad market rallied in the year end and then made an attempt at the prior lows and it really felt kind of ugly. But then at a certain point there were enough companies where the estimates were low enough and the expectations were just nowhere, and there’s nothing left to sell. And that’s kind of how things have to end. But we’re sitting here taping this on Thursday afternoon with a half an hour left, and I’m looking at an S&P that is up 5% and NASDAQ that’s up nearly 7%. That’s today. Okay. Which is amazing. Now, you probably have your phones are ringing off the hook because you’re kind of resetting their expectations as far as lower returns going forward. And they’re like, no, we’re all in worthy bottoming here. Give us a sense of today’s price action. [00:45:08][50.5]
Cameron Dawson: [00:45:09] It’s interesting because I saw and I don’t remember, unfortunately, on Twitter today, one of the technical analysts saying that, yes, we’ve had big up days during bear markets that marked the end of bear markets. But we also saw big updates in the midst of bear markets. And so they’re just as common. I think where we have to be disciplined is that and I think this is just overall where we have to maintain discipline, which is that when you’re in a bear, you can’t get too negative or too short or too late in your positioning when you are oversold versus trend. And the easiest way to do that is just to say where are we trading versus the 200 day moving average? And if you are trading near an extreme in that percentage down, and I think for the Nasdaq, it’s usually in like the 17 to 18% range of where the extreme is. Then you don’t be short and you don’t be overly bearish. That’s when you say stuff can rip and you just need a little spark in order to cause a conflagration. But then what you say is that if I’m underneath the 200 day moving average, when I start to hit resistance, that’s when I have to be careful. And Chris Warren, who’s a fantastic technical analyst, that should take us, he put out a note earlier this week in relation to some of the crypto carnage and saying mistakes happen when you’re under the 200 day. That’s when you get your face ripped off by a big down day. And so we shouldn’t actually be that surprised by the price action in some of those areas in response to the news. So I think that we have to remain in that discipline knowing that the trend is still down. So you can rally right up to that trend on great momentum. But the fundamentals are dictated by the path of earnings which will be caused by growth. And the path of valuations which is caused by liquidity are driven by liquidity, fed liquidity. Do we think liquidity is getting more abundant in the near term? Probably not. Which means that any relief rally, meaningful relief rally we have in valuations likely is short lived. [00:47:08][118.7]
Danny Moses: [00:47:09] That was one of the greatest summaries. I’m serious that that was very clear. [00:47:12][3.3]
Guy Adami: [00:47:13] You know, stop it. [00:47:13][0.9]
Danny Moses: [00:47:14] No, I’m serious. [00:47:14][0.3]
Guy Adami: [00:47:14] I want to just stop it. [00:47:15][0.9]
Danny Moses: [00:47:15] So so you started that Rollins literally during the financial crisis that you were a little freshman sober and you came out kind of in QE two and a half. We were like after QE two. So you have this knowledge, but you never lived through any other time other than QE? [00:47:30][14.6]
Cameron Dawson: [00:47:30] Well, in my defense I covered industrials. Okay. And so we had, I think, three full cycles in the time that I covered those stocks and we had the big industrial recession, then we had the trade war and then we had COVID. And so I remember early 2016 and my companies were saying the world was ending, the world was ending and they were coming. And all the analysts on the sell side came in and gave this doomsday and they scared all my PMs [00:47:58][28.0]
Danny Moses: [00:48:00] Was I in there? [00:48:00][0.5]
Cameron Dawson: [00:48:01] You were not. [00:48:01][0.3]
Danny Moses: [00:48:01] Okay. [00:48:01][0.0]
Cameron Dawson: [00:48:03] Yeah, no, because I remember I remember talking to you about about shorting Deere because of the. [00:48:07][3.8]
Danny Moses: [00:48:07] Financial. [00:48:07][0.0]
Cameron Dawson: [00:48:08] Right. The financial portion of it. Yeah. But what was crazy is that even though the fundamentals were still very bad and companies were still saying things were terrible, you had two things happen. You had the essentially was like the Shanghai Accord, where you had intervention into the currency markets, which caused the dollar to bottom. At the same time that you had Yellen back away from rate hikes, it was a true Fed pivot. And so multiples rallied, multiples had this relief rally and then you were able to see eventually the earnings start to catch up. It took 2 to 3 quarters, but it was such a good lesson to learn because, you know, the fundamentals really only tell half of the story. You have to get the liquidity right, the positioning right for monetary policy to get the multiples right. [00:48:53][45.2]
Danny Moses: [00:48:53] And if I remember correctly, you came on to the desk at Seawolf with Vinnie Porter myself, literally the day that the whale trade was occurring at Jp morgan. So you’ve seen not just with me, you’ve seen a lot of things, but it’s really interesting that you can see the industrials going through their own cycles and be able. But I would tell you that I think that investors still, for the most part, don’t understand what it’s like or what it’s going to be like in a not just a tightening cycle, but just a non QE cycle of things. And I think that’s the reset to me of the S&P multiple is that. And so I don’t know how you convey that. I mean today is a 6040 dream shot. Today is the you get back a lot of that so how people are be curious do they think oh they’re coming out of going to come out of bonds and and go into stocks. Are they seeing this bond rally? Give them a little bit more comfort to go back into fixed income? It’ll be real interesting to see what happens. But I guess it depends earlier question put yourself on tomorrow morning’s note. What do you writing if this market, you know say the market closes up here 5%, NASDAQ up seven yields have dropped 35 basis points. Because before you answer, I would say that days like this because they’re up don’t seem as unhealthy as days when the markets are down in this volatile. This is an unhealthy move when you think about it. So how do you just with that set up, what would you rate? [00:50:02][68.5]
Cameron Dawson: [00:50:02] The magnitude of the moves is a function of illiquidity and mostly in the treasury market, I would say. And that’s kind of the notes that I was reading all afternoon, which is that Treasury trading has been so light and this is supposed to be the most liquid market in the world. [00:50:17][14.9]
Guy Adami: [00:50:17] Well, slow down a second. Why did say that again? I didn’t. I am a little deaf in that ear what did you just say about the treasury market? [00:50:24][6.3]
Cameron Dawson: [00:50:25] It’s illiquid right now. [00:50:26][0.9]
Guy Adami: [00:50:26] and it’s supposed to be. [00:50:28][2.2]
Cameron Dawson: [00:50:28] It’s supposed to be used to be the most liquid market in the world. [00:50:30][1.8]
Guy Adami: [00:50:30] My God. [00:50:30][0.2]
Danny Moses: [00:50:31] Bingo card Guy got another one. [00:50:32][0.8]
Guy Adami: [00:50:33] That’s sweet. I mean, that’s unbelievable. Something wrong? No, you didn’t say anything wrong. He’s. That’s what I’ve been saying for the last two years. Like you’re preaching to the Guy Adami choir [00:50:40][7.7]
Dan Nathan: [00:50:41] Here so Guy because. [00:50:42][0.9]
Cameron Dawson: [00:50:42] I listen to everything that you say. [00:50:43][0.6]
Guy Adami: [00:50:43] Horse shit but that’s okay. [00:50:44][1.0]
Dan Nathan: [00:50:45] Are you are you a little tuned up today because the ten year U.S. Treasury yields down 28 basis. There’s nothing. And the two, two years down. [00:50:52][7.5]
Guy Adami: [00:50:53] I’ll tell you why I’m tuned up I’m tuned up for a number of reasons. My hockey team is off to a mediocre start. They lost they lost to the frickin islanders the other night in a game that they were up two zip a game you were at and put the horns on them, Dan, because you and Carter Worth left in the third period to go either smoke a marriage, want a cigaret or have a couple or have a couple of drinks. [00:51:12][19.5]
Cameron Dawson: [00:51:12] They were just doing charts [00:51:13][0.7]
Guy Adami: [00:51:14] Drinks, just doing Charts. So but when Cameron talks about the illiquidity of something that should be the most liquid asset in the history of mankind. Your spot on, sister. So I dig you now more than I dug you 5 minutes ago. Please continue. [00:51:28][14.1]
Danny Moses: [00:51:28] What’s in the note? What’s in the note? What’s in the box? What’s the note? Yeah. [00:51:32][3.9]
Cameron Dawson: [00:51:33] So the note is going to say expect this to continue. The momentum is strong enough that I think we can make a run for that 4100. And then I think we have to again recall that discipline to not chase the rally. Could we overshoot the 200 day? Yeah, that happened for brief periods in both the 0809 bear markets as well as the 2000 to 2003. So it’s possible to overshoot, but then the reality of valuations and earnings has to be appreciated. So if we trade to 4100, let’s say earnings are flat next year, let’s say in kind of an optimistic scenario that there’s no recession, earnings are flat. That means that the market would be trading at 18.6 times earnings at $220 a share. If the market if earnings are down 10% in a very mild recession, remember, median is 20% down. Mean is 30% down, but 10% down $200 a share. That means you’re trading at 20 and a half times. In my view, there are only three reasons to pay more than 1920 times a share for earnings. The first one is if the Fed is stimulating markets very aggressively like they were in 2020, 2021 and arguably 2019 as well, we could get back to it. Why the bubble started then? The second reason is if earnings are so depressed that you’ll pay a high multiple because you know that they’re going to recover. Or the third reason is if you’re in a bubble like you were in the late 1990s, and so if you don’t have any three of those conditions at play, it means that this market is capped out by valuation and it means that we have to then to get back to 4800, it means we have to grow into that valuation. So I was looking at how long it takes for you to get your money back. After each of the major recessionary barriers and the higher valuation you go into the bear market, the longer it takes, of course, to get your money back because you don’t get back to those heady peak valuations very quickly. [00:53:39][126.7]
Guy Adami: [00:53:40] So one of the things that I’ve noticed and clearly you did as well, companies that are missing or being punished and they’re not small companies. Amazon went down 18%. Microsoft got eviscerated to a certain extent. You saw it delayed reaction in Apple. Tesla is another good example of a company has just been taken out to the woodshed. So I think your point is when companies are being punished for missing earnings, estimates are still too high and I happen to agree with that. So if you want to game this out, what should earnings for the S&P 500 be and what’s the right multiple in the environment that we find ourselves in? [00:54:15][35.2]
Cameron Dawson: [00:54:16] Well, I think the thing we have to be careful about when we’re thinking about putting multiples on earnings estimates is that it’s very easy to take a very dire estimate and put a very dire multiple on it and then scare yourself from ever getting invested because trough on trough usually only happens for an instant. And so that’s where when we start talking about different scenarios for where earnings could go and what multiple you’d put on it, you start saying, look, I’d be willing to pay 18 times of earnings or down 20% because I know that they’re depressed. And that’s when I think that knowing that it’s unlikely that you’re going to go down to 14 times earnings and have earnings 20% down and stay there for a long time, that’s where you still want to be selectively buying. So our range for earnings, we think $200 is a conservative estimate in a recessionary scenario to 20 would be the best we could do with earnings being flat. And then we don’t think that we want to put a multiple any higher than 16 to 17 times on those earnings simply because of the interest rate environment, because of the degree of Fed tightening, which does not support high multiples. The best driver of multiples that you can see is in to money supply growth. [00:55:25][69.2]
Guy Adami: [00:55:26] So you’re talking about worst case scenario in S&P that bottoms out around 3200 ish, but 3400 is probably fair value with the S&P today trading 3900. So we could see, again, a bear market rally to that 4100 that you flagged. Something that we have been saying, Dan, since when? [00:55:44][18.0]
Dan Nathan: [00:55:45] October 13th [00:55:45][0.4]
Guy Adami: [00:55:46] 14th and then the subsequent Monday, the seventeenth. [00:55:48][1.9]
Cameron Dawson: [00:55:48] I talked about it October 6th. [00:55:49][0.7]
Danny Moses: [00:55:50] Bang. Cameron, high five. Come on go. Right. [00:55:53][3.9]
Dan Nathan: [00:55:54] That’s what they do on the IC. [00:55:55][1.0]
Guy Adami: [00:55:56] Well that’s the investment committee correct. Yeah. Well they do it very well apparently. Correct. So we are simpatico with these things. So I appreciate that. Danny, please continue. [00:56:05][8.8]
Danny Moses: [00:56:05] Yeah. No. So, you know, I’m a big believer in active money management versus passive. When I say that, I mean, I don’t like ETFs. I realize that new hedges businesses do recommend. I’m curious to how many of the clients own individual securities, because this has been a stock pickers dream because you can pick off certain companies. I always talk about if you look at the XLF, there’s five banks that you want to own in five you want to avoid. Yet if you own the if you’re underperforming those, I bet massive. Do you give out those type of recommendations or how do you steer your clients in that way? Yeah. [00:56:32][27.4]
Cameron Dawson: [00:56:33] So we have two internal equity strategies. One, that is a quality growth and one that is a dividend focused strategy with a quality overlay as well. The whole idea behind a quality bias, which means that you’re looking at balance sheets, you’re looking at free cash flow generation, you’re looking at return on invested capital, and you want best in class names and all those areas with valuation discipline, meaning that you’re not going to pay up for those items just because you can’t pay any price for quality. So we’ve had those portfolios all year and they’ve done really, really well versus their benchmarks. And it’s been a function of the fact that there has been bifurcation finally in this market. Now, for those people that can’t do that kind of individual stock selection and need kind of quick fixes for things, one idea to think about and I think to your point, guy, about these big tech names that are getting taken out to the woodshed is we should be asking ourselves, is what worked the last cycle going to work the next cycle and the last cycle? It was so growth dominant. And if you look and decompose the returns of growth over value in the last cycle, about half of it can be explained by earnings, but the other half of it is explained by relative multiple expansion, meaning growth multiples from the end of 2018 went from about 1718 times all the way up to 32 times in 2021, because real rates went from positive 1% to -1%. So if you don’t have as you were saying, Dan, if you don’t have that kind of boost from the Fed, from QE, it means that your growth outperformance, half of it disappears because you don’t get the relative multiple expansion. You’re relying just on earnings growth. But oh, but wait, a lot of these growth companies pulled forward earnings into 2020 and 2021 because of all the pandemic drivers. So I think that’s when saying, well, what if we look at Equal-Weight, maybe that’s actually the better solution in the near-term to say if we’re being selective buyers, let’s avoid the top heaviness of the S&P that still exists, that’s top heavy with expensive names that pulled forward earnings. If I need an ETF, maybe I should look equal weight as a better solution to get access to the market. [00:58:50][137.6]
Dan Nathan: [00:58:51] That is clearly one way to think about it. I think at these sorts of shifts, I think a lot of investors, strategists, they like to think about what will lead the next cycle here. I’ll just say this what’s different to me versus 08 09 10 when people are trying to contemplate how a market’s going to bottom after a 50% peak to trough decline in the S&P, and we had the same sort of decline from the highs in 2000 to the lows in 02 and the S&P. The NASDAQ was down a lot more is like when you think about leadership right now, those five or six names that make up. 25% of the S&P, they make up 35% of the NASDAQ 100. Here’s the thing. They’re all cutting costs dramatically. So they’ve had that valuation multiple come in. We have interest rates which are still bid for now, but they’re also cutting costs pretty aggressively right now. So if estimates come down low enough for 2023 and they’ve cut costs aggressively enough, there is no reason to believe that the largest growth names will not lead in the next cycle because they will start to grow earnings again faster than anything in the value land or anything like that. And they have defensible earnings. And let’s be clear, interest rates are going to come in. So my trade has been pretty simple. When you think this thing’s bottomed, when the Fed is done, you buy Qs and you buy twos. That’s what I’ve been saying using twos. Okay, you could use that if you want. [01:00:07][76.4]
Cameron Dawson: [01:00:08] Well, you probably want to buy twos before that. [01:00:09][1.6]
Dan Nathan: [01:00:10] Well, it’s happening right now. I mean, think about it. So the twos, you know, are down 25 basis points right now. I’ve been playing it through the GOVT. Guy is looking more at the 1020 year you could do it. The TLT. I think you want to be exposed heavily exposed to those prior leaders and then you’re going to get dozens of names in the QQQ that they’re down 70, 80% or so. [01:00:29][19.6]
Cameron Dawson: [01:00:30] Look, I think that that’s fair. My argument is less that these names can’t rebound and rally coming out of the low. They certainly will mostly if we see interest rates start to fall because interest rates drive their multiples. My point is that the degree of their dominance where you saw such powerful outperformance by the S&P 500, by the Nasdaq, by growth names over anything else in the market, I think the degree of dominance is going to be dampened because we don’t have the Fed’s support like we had over the last cycle. So are they good buys with great businesses? Of course they’re great businesses. They have huge return on invested capital. They generate tons of cash. They have great balance sheets. But do you get the same kind of relative performance outperformance like you did in the last cycle? And that probably tells you more about how you should weight them in your portfolio versus whether you own them or not. [01:01:22][51.9]
Danny Moses: [01:01:22] And Dan I would just echo and I would say that some companies trade on multiple of earnings and some of these tech companies were trading on multiple of revenues or adjusted EBITDA with massive stock based comp. So again, goes back to stock picking. We were talking last week about Meta started to trade as a value stock and when you get to that level, it takes very little like this to have a stock move up 20% off of its lows or whatever, 15, 20% off of its lows. That being said, you don’t go cut 11, 13,000 people and maintain your growth. You can’t do it by math because you are obviously cutting off certain areas of growth. So question Everything has its price. [01:01:55][32.5]
Dan Nathan: [01:01:55] You actually can in a company like a meta. I mean, like, here’s the one thing that I’m going to give Elon Musk some credit for. There’s no doubt in my mind when you looked at all the metrics that Twitter know that Twitter was trading on versus employee count like head count, they were like massively bloated. [01:02:10][14.8]
Danny Moses: [01:02:10] Oh, would have been 54.10 instead of [01:02:12][1.5]
Dan Nathan: [01:02:12] No, no. But I’m not I’m just you know, I’m not defending I’m just saying. But I think all of these companies, to your point, they pulled forward a lot of demand. They also over hired and they knew it at the time. [01:02:21][8.4]
Cameron Dawson: [01:02:21] Yeah, but if I describe to you a company whose core, highly profitable business was a slow melting ice cube and in decline and losing market share, and they were using the majority of their available cash to invest in an unproven new business that has no runway to generate any cash or profitability any time soon. Would you say that you want to buy that business? You say yes at a price. [01:02:49][27.6]
Dan Nathan: [01:02:50] down 78% from its highs a year ago when they decided to make the decision to do all that. That’s a cash say. [01:02:56][5.7]
Cameron Dawson: [01:02:57] Cash is down 60%. Yeah so I think that obviously a little bit of a breather on the earnings side of things. I just think that I’ve seen so many of these companies go through big transitions and usually it takes a couple of years. That doesn’t mean you can’t have short term trades within the stock, but it’s not nearly as clean of a story as it was. [01:03:15][18.0]
Dan Nathan: [01:03:15] That’s funny. All right. So let me push back again because like the way cycle. [01:03:19][4.5]
Cameron Dawson: [01:03:20] No, no, this is right. [01:03:21][0.6]
Danny Moses: [01:03:21] There’s always. [01:03:22][0.2]
Dan Nathan: [01:03:22] But the things are just accelerating. The pandemic crash that we had, it took five months to make a new high. Now, obviously, trillions of dollars of monetary and fiscal help. That in your point, you made a great point before about the multiples of the Nasdaq. It took 15 years to the Nasdaq to make a new high from 2000 to 2015 or something like that. The S&P was a little different, right. Topped out in 2000, made a brief new high in November of 2000, seven got cut in half again and then six years later made a new high that was off to the races. I guess what I would say is, is like the cycles have been accelerating dramatically. And I think when we come out of this bear, it’s probably going to end up being the average length of the postwar bear market here. And I just don’t think nothing’s emerged right now that leads me to believe that value should be the leader is going to outperform growth, especially if rates do start to come in. And when you think about what are the companies head count is the thing where they can cut costs. They’re not an industrial company or they’re not a retail company. It has all this retail. And I just think that they’re going to get the leverage. They’ve got the cost right now and they’re going to explode us out of this bear market. [01:04:26][64.1]
Cameron Dawson: [01:04:27] I think that the one thing we have to consider is the impact of the dollar and the dollar being very beneficial for a lot of these value companies because you only see major value rallies that are sustained when you have periods of protracted and sustained dollar weakness. And what happens after parabolic bull markets is not that markets go sideways, it’s usually that they correct very sharply down. And so we saw that in post the dollar bull market that happened in the early eighties when we had the Volcker raising of interest rates, the dollar shot higher, we had the Plaza Accord, big dollar bear market that followed and huge rally in value as well as in international and non-U.S. stocks. Same thing happened post the big dollar bull in the late nineties. That was followed by the tech bust. And you saw the big value in rally relative to growth and then the big rally in international. So this one that we’re seeing really does set us up that if we see a sustained period of dollar weakness, I’m the first one to say I have been anti international as dead money value traps for a really long time. And if you’re asking me about the fundamentals, I go there still really hairy. But I have to respect the fact that a lot of these areas have been left for dead for 15 years. They are cheap and cheap valuations, not a catalyst. But if we see a period of sustained dollar weakness and we could talk about under what scenarios that would be, then I think we have to think about how that could impact value versus growth, international versus U.S.. [01:06:01][93.9]
Danny Moses: [01:06:01] Cameron you were already one of my favorite people and challenging Dan like that. You just went up even higher on like a dead heat. But I know I was I just want to say this one more time because I speak for my mother and my sister where how proud my dad would be. And I’m getting teary eyed even talking about it, but very impressed. And you’re going to have an incredible career and I hope you’ll come back and still talk to us when you’re elevated to a level that we can’t even get you anymore. So I want to thank you really from the bottom my heart for coming on the tape. [01:06:26][24.3]
Cameron Dawson: [01:06:26] Well, thank you so much for having me. This has been truly a thrill. And to bring everything full circle, I can’t imagine how cool it is for me. So thank you. [01:06:33][6.7]
Guy Adami: [01:06:34] Thanks once again to CME Group and AI 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. [01:06:58][23.5]
Dan Nathan: [01:06:59] 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. [01:06:59][0.0]
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