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On this episode of On The Tape Guy, Dan and Danny discuss the BOE intervention (7:30), the S&P 500 below the June lows (12:00), Stanley Druckenmiller predicting a recession (17:50), yield volatility (22:12), why gold can’t get going (29:23), opportunities in the market (31:02), Danny ROTTs on what’s really broken (41:35), and NFL picks of the week (47:02). The co-hosts interview Stephanie Link, Chief Investment Strategist and Portfolio Manager at Hightower Advisors, and talk about how much has changed in the market over the last ten months (53:21), whether things are different this time (56:17), the outlook for earnings (1:02:36), when to pivot on an investment (1:05:21), opportunities in the stock market (1:07:26), and if the market can rally without big tech (1:15:26).

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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.

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Show Transcript:

Guy Adami: [00:00:00] CME Ad. [00:00:01][0.4]

Dan Nathan: [00:00:30] iConnections Ad. [00:00:31][0.3]

Guy Adami: [00:01:21] Yeah. People. Yes, I’m back. Not from Italy, Danny Moses. Not from Italy, Dan Nathan, but from Sicily. And I will tell you, if you haven’t been, folks, you need to go to the island of Sicily. What’s I find fascinating about Sicily? We find Palermo in Old City, actually, oddly enough, not that anybody particularly cares. But when I got home from Sicily and I was scrolling, what do they call it when you click through channels on the TV Dan. [00:01:48][26.8]

Dan Nathan: [00:01:48] That’s clicking through the channels. [00:01:49][0.6]

Guy Adami: [00:01:49] Yeah, clicking through the channels. I stopped on Patton at the same scene that George C Scott was going through Palermo. What do they call it? Like kismet or something? It’s all meant to be. My words were colliding from Sicily. It was a wonderful trip. By the way, you’re listening to the Oddity podcast, guys, I’m back from vacation. Danny Moses, Dan Nathan. Later on, by the way, we’re going to have the chief investment strategist from Hightower, somebody you know and love, a member of the ICI. That’s the investment committee Dan Nathan, Stephanie Link will be joining us. Perfect time to have Stephanie because she looks at things from 30,000 feet as opposed to what I look at it sort of sea level. But, you know, I was trying to think we like to integrate music into our titles, into our podcast. Is that correct? Back me up. Give me somebody say something. [00:02:37][48.3]

Danny Moses: [00:02:38] Yes we do that. [00:02:38][0.1]

Guy Adami: [00:02:38] Yes we do. So. Yes, yes. So it was February of 1976. I was 12 years old. I just turned 12 in December and a song came out, Turn the Beat Around by the great Vicki Sue Robinson turned you remember Love to hear percussion. Yeah. So why do I bring that up, Danny? Because I know you have songs in your head because guess what happened this week Danny Moses? [00:02:59][20.7]

Danny Moses: [00:02:59] First of all, let me just say this. You look younger, you most handsome have. So it is your home plate. You need to go back there, so on. You know. [00:03:06][7.3]

Guy Adami: [00:03:06] It’s funny you say that. Actually, my wife said the same thing. She goes, I felt like you felt at home there. And I did. I felt a kinship with the land. [00:03:14][7.3]

Danny Moses: [00:03:14] Love it. [00:03:14][0.2]

Guy Adami: [00:03:15] Yeah. What to Mount Etna I got my hand in the lava. [00:03:17][1.8]

Danny Moses: [00:03:17] So we started the month, right? It was on September 1st. And I sang a little Neil Diamond because I needed something to present to it. [00:03:23][5.8]

Guy Adami: [00:03:23] Can you. Can you? [00:03:24][0.5]

Danny Moses: [00:03:24] September Morn came in today. I’m like, this is the last our last show in September, right? So what should it be? So I was thinking song, song, Blue Diamond. But what’s really happening right now, right? It’s a little Bob Marley. [00:03:34][10.1]

Guy Adami: [00:03:35] Do it. [00:03:36][0.9]

Danny Moses: [00:03:36] Redemption songs. Emancipate yourselves from your fund manager. None of yourselves in your portfolio. So hold on. So now quarter and so hedge funds that got redeemed, they now have to come up with the cash. Right, and all this stuff. And we know what happens in fiscal year mutual funds happening here next month. Right, Dan, it’s I think it’s an October and for that. So that’s why things always get dicey this time of year. So this is the worst day I’ve seen. Forget about the the stock how much the market is down, the worst action, the worst disappointment, the worst everything I’ve seen and since we started this show, today is a defining day. And we are officially I don’t care what the definition Dan of a bear market it we’re here and now it’s time to really look at your portfolios. [00:04:18][42.2]

Dan Nathan: [00:04:19] It feels a little bit more like burning and looting. [00:04:21][1.5]

Danny Moses: [00:04:21] Burning and looting tonight. [00:04:23][1.4]

Dan Nathan: [00:04:23] Okay. So we are Thursday into the close of trading day know that is also. [00:04:27][3.8]

Danny Moses: [00:04:27] It’s also the great Bob Marley. [00:04:29][1.4]

Dan Nathan: [00:04:29] Anyway, the S&P is down nearly 3%. The Nasdaq is down three and a half percent. Apple Computer, this is a really interesting down nearly 6%. You think of that in market cap terms. [00:04:38][9.0]

Guy Adami: [00:04:39] Hold on a second Dan one second. I thought Apple never went lower. I watch on the television they say Apple never goes down. [00:04:44][4.6]

Dan Nathan: [00:04:44] It can it’s down today. So yesterday on Wednesday, there was a Bloomberg report that some of the production that they had for the 14 pro was going to be less than expected by 6 million units on a 90 million number or something like that. The stock was down four and a quarter on Wednesday morning. It rallied. The market was screaming, good sign. I guess if you’re a bull, you’d say, okay, the S&P closed up 2%. Apple was down 4%, closed down one and a half percent. But here it is today, down nearly 6% on a downgrade from Bank of America. You call them BofA? [00:05:11][27.1]

Guy Adami: [00:05:12] Yeah. [00:05:12][0.0]

Dan Nathan: [00:05:13] But it’s interesting. So the analyst that I know him is a guy named Ramsay Mohan. It really I think a good analyst used to cover BlackBerry back in the day. I’m just say forever. But just real quickly, this stock is down nearly 6%. It’s a $2.35 trillion market cap. How many stocks, Danny, in the S&P 500 have more than 100 billion market cap, probably less than 50. Right. And this stock is down more than that today. Yep. [00:05:36][22.8]

Danny Moses: [00:05:37] No, it’s definitely not good action. [00:05:38][1.1]

Dan Nathan: [00:05:38] What does it say to you, though, back to your redemptions? Because a lot of people we’ve been talking about this hide out and Apple and it’s. [00:05:44][5.7]

Guy Adami: [00:05:45] Wait before you opine. Yeah. They don’t even know they’re hiding out in Apple. They don’t even know they’re hiding out. I’ll say it the third time. They don’t even know they’re hiding out in Apple. Why? Because of the advent of passive investing. Danny Moses I’m putting the ball up on the tee for you, and I’m going to let you pull your driver out and whack it. And my concern all along has been when passive becomes active, it ain’t going to be on the way up, sister. And I think that’s what you’re seeing right now, Danny. [00:06:12][27.2]

Danny Moses: [00:06:13] In the ETF world, right. You know how many stock ETFs there were at the beginning of this year. Just take take a guess. Just a number of you. Forget about now talk about the asset. I’ll get to. [00:06:21][8.0]

Dan Nathan: [00:06:21] 500. [00:06:21][0.0]

Guy Adami: [00:06:22] No more, Danny. More? I would say 1850. [00:06:24][2.5]

Danny Moses: [00:06:30] 8552 ETFs. [00:06:30][0.1]

Dan Nathan: [00:06:30] That’s how many listed stocks there are. [00:06:32][1.3]

Danny Moses: [00:06:32] I’m just telling you how many that. Isn’t that correct? Over 10 trillion or it was over ten at one point. You know how many bond ETF store? [00:06:37][5.6]

Guy Adami: [00:06:38] Well, no, I don’t know. [00:06:38][0.5]

Danny Moses: [00:06:39] 554. Bond ETFs over 1.2 trillion. That’s obviously grown. Obviously, we’ll talk about that later. But anyway, to your point, Apple is probably in a third of those. Yes. So people are hiding, you know, so the answer is it’s everywhere. All these large and we’ve said it, people have been hiding out in these names for a long time and funds use it as a safe what quote safe, long valuation be damned. They’re in it because they know it’s a good company. Well, everything has its price and now the price is being paid. And so it’s good company. It’s not going to zero. It’s going to be a buy like these are the things you’ve got to start buying. [00:07:10][31.7]

Guy Adami: [00:07:11] You say it all the time. It’s not about being a good company. It’s got nothing to do with it. And we’re going to talk about this later, some opportunities that might be coming around. There are a lot of great companies, but it doesn’t mean they’re great stocks at the time. And again, Apple’s a company. Just to put it in some perspective, that’s going to have mid-single-digit EPS growth Dan Nathan [00:07:29][18.1]

Dan Nathan: [00:07:29] Maybe at best [00:07:30][0.5]

Guy Adami: [00:07:31] Mid-Single-Digit revenue growth, maybe at best declining margins. I understand they have cash on the balance sheet, which by the way, has never been really a plus for them. Maybe in this environment it is trading at 23 times next year’s numbers. That’s expensive in this environment. And I think what’s happening now is the market’s come to that realization. [00:07:48][17.1]

Danny Moses: [00:07:49] Well, the market’s realizing a lot of things. I think we need to obviously address what’s going on with the Bank of England. [00:07:54][5.0]

Guy Adami: [00:07:54] Okay. So hold on a sec with the Bank of England, because I set you up and you were so excited to sing your frickin Neil Diamond. Sing it again, please. By the way, which one do you want? You September morning. It’s the other one. What was the other song sung below? Say, can you just do it for me? Because I’d love. [00:08:09][14.4]

Danny Moses: [00:08:09] To come into America. They’ll drive the dollar higher then that coming to America today. [00:08:15][6.4]

Guy Adami: [00:08:16] So that was a nice shot, by the way. I wouldn’t even rehearse that. So my turn, the beat around. Vicki Sue Robinson February of 1976, the Bank of England turned the beat around in a major way, seemingly out of the blue. And that’s the reason on Wednesday, in my opinion, you saw sort of that knee jerk rally in the equity market because people connected the dots, say, wait a second, the Bank of England just flinched. The U.S. is going to flinch. The Federal Reserve is going to put much different situation in England, specifically England, but overall Europe than it is here in the United States. But the fact that they had a turn on a dime speaks to the fact that we’ve been talking about now almost two years, the bond markets broken, the currency markets are broken. And now people have come to the realization that’s not great for equities. [00:09:01][45.0]

Danny Moses: [00:09:02] This will be looked back as a seminal moment, not just for the UK but globally, I think for the markets. And here’s why. Liz Truss, new prime minister, looking out for the people, decides to cut taxes and spend money, government money to accelerate programs right in the face of inflation and the sterling getting hit versus dollar and all these things. So it’s counterintuitive to what you should be doing. So everyone yells at are whatever same time we have all these pension fund managers, UK that have to manage their bond portfolio and guess what, they use leverage in the bond portfolio and it’s managed by none other than BlackRock and Schroders and people like the outsource this manager. So effectively we always said in the show when we started the killer of all is leverage to basically leverage it. So when bond sold off and the rate started to go higher, there was a, quote, margin call. The Bank of England probably got a phone call from BlackRock and some of these other fund managers said, you got a problem, you got to guys got to post billions above this LDI market is one and a half trillion dollars. Just put that in perspective that size the market so it’s not so much it’s just a posting of collateral leverage kills off anyway backing then comes in they said all right we’ll start out with buying $1,000,000,000 worth, which you get a pound in a dollar the same at this point. So what’s called $1,000,000,000 of long dated bonds will settle the market. Well, guess what happened? The market saw right through that. Here’s why. It’s a seminal event for the first time in a developed country, forget about if a third world country tries to do this. Rates go to 35, 40%. It’s over for them. We can’t get financing. There’s actually credit underwriting occurring. People are starting to look at the budget like, hold on a second, you’re not giving you low rates. No one’s following you into this because the deficit, because of all this deficit spending, for the first time guys since we have started this experiment, this global central bank experiment, this is why it’s a seminal event. They didn’t get away with it. It was a short term fixed. Yes, rates came down and they’re going to be there buy. They probably thought that rates would go to seven and a half, 8% on the gilts. We talked about gilts here months ago that something to keep an eye on and watch. So they feel like they kind of stopped it from happening and maybe they have. But here we are again. All investors want is that Hail Mary. Come on, central banks. Right? Well, guess what? They got it. And it’s not mattering now. And to me, that’s a seminal. [00:10:57][114.7]

Danny Moses: [00:10:57] Yeah, it’s funny, though, that the S&P rallied 2%, had its biggest up day there, just waiting for the crack. They’re waiting for the pivot. And it’s interesting, Danny, when do our people when we atone for our sins, what does that was the name of the holiday, Yom Kippur. Yom Kippur. What is the date of that? [00:11:11][13.6]

Danny Moses: [00:11:11] It’s the fourth and fifth of next week. Yeah. [00:11:13][2.2]

Danny Moses: [00:11:13] One of the first market idioms I learned on Wall Street probably in the late nineties was that you sell Rosh Hashanah and you buy Yom Kippur. So we’ve been selling off this week, Russia, China was on Monday. And we’re going to probably have a pretty nasty day by the time you’re listen to this. In the stock market, there’s no saving this market. No way. Okay. And then we know that Tuesday and Wednesday are Yom Kippur and we will be atoning for our sins. And maybe that’s the thing the pivot. [00:11:38][24.4]

Guy Adami: [00:11:38] I learned sell in May and go, which is asinine. Listen, I’m telling you now, if you’re listening to this podcast and if you ever utter that phrase, don’t listen ever again, I’m just saying I don’t want to lose an audience member, but you shouldn’t be doing it. And if you wearing one of those stupid, what do they call those things, half vests or something silly. [00:11:56][17.9]

Danny Moses: [00:11:57] We’ve already been through that before. [00:11:57][0.5]

Guy Adami: [00:11:57] Don’t do that either. There are a lot of things I don’t want you to do as forwards, but let me just say this. In terms of the Bank of England, they flinched. I guess they had a flinch. They had no choice, but they flinch. And now, over the course of the last two weeks while I was away, Bank of Japan, for the first time in a long time, came in intervention. Bank of England. What happened with the Yuan? Intervention in the yuan. You starting to see it in developed currencies. That’s not a particularly good sign. [00:12:21][23.8]

Danny Moses: [00:12:21] Yeah, I’ll just say this. You’re going to be listening to this on September 30th. That will be the last trading day of this month. The S&P 500, as we record right now, is down eight and a half percent on the month. It’s down 10%. The Nasdaq on the month. Think about that in the month of September and people get freaked out. We come up with all these things, September morn, wake me up when September ends, you know, all that sort of stuff. It’s not a great month right here. And so my question to both of you is, like, when you see this sort of price action, it all happened all at once, if you think about it [00:12:50][28.5]

Guy Adami: [00:12:51] As it typically does. [00:12:51][0.6]

Danny Moses: [00:12:51] Okay. So what does this portend? The S&P is below those June lows. The NASDAQ are below those June lows here. I mean, how do you save this thing? [00:12:59][7.8]

Guy Adami: [00:13:00] Price discovery is the answer. What we’re going through right now is we’re trying to find truth. Price is truth. I say it all the time. The reason why that hasn’t worked for the last 13 years is because liquidity creates opaqueness in the market. You have zero clarity. Now you’re starting to get clarity on the way to price. Discovery is very painful. That’s what we’re going through. But we’ve been pretty steadfast and oh, Danny, for about 30 seconds, one podcast sort of lost his mind because Liz Young was here and got a little bullish, said, I just try to get my guy on that pledge. [00:13:34][34.3]

Danny Moses: [00:13:34] It doesn’t work. [00:13:35][0.4]

Guy Adami: [00:13:36] We’ve been pretty steadfast in our belief that this S&P do the math lower valuations this environment you’re not paying as much for dollar earnings in this environment than you were six, seven, eight months ago. That is what it is. And then earnings are coming down. And we’ve been saying that for a while, that it’s just a matter of time before you start to see earnings revisions. So back of the envelope, math, 3400 and the S&P, which is now 200 or so S&P handles away, is not as ridiculous as it seems six or seven months ago. [00:14:05][28.9]

Danny Moses: [00:14:06] I always like to look one thing of where you are off the highs, where you’re off the lows and what is the absolute valuation. So I don’t think the S&P average should have been at 48. I agree. Okay. But it was. But if you try to be rational, mark, we actually talked about that was the fourth quarter last year when we had this kind of melt up. I’m like, what I always said take off that quarter. Now I think the S&P at that point was early October of 2021. Dan’s got his factset machine up. I think it was I want to say 43, 4400. I think we rallied roughly 400 points. [00:14:31][25.1]

Guy Adami: [00:14:31] And we talked about the seasonality. I remember the conversation. [00:14:34][2.6]

Danny Moses: [00:14:35] Yeah so I like to use that as the level of the top. So let’s just pretend that 4440 hundred never existed. Right? So a 20% correction off for there is 880 points that get you roughly to guess what, 35, 20, somewhere in that range where we’re quickly approaching. And that’s the other thing in this market going to talk about is that the volatility is insane, right? So I think we just are now entering the correction. Now that being said, again, take your head out of the sand. We say we focus on the macro and we focus on the Fed and we focus on micro and bottom up. What the hell is going on right now is the worst political climate we’ve ever been in internationally. Putin literally just declared, just took over four territories in Ukraine today and said, if you try to come back into these territories, it’s now by vote. It’s now Russia. If you come in, we’re going to use nuclear weapons. They sabotage Nord Stream one. There’s four leaks going on. Okay. And I think we’re so obsessed. Is the Fed going to come to the rescue? What are they going to do? What is number. [00:15:28][53.3]

Danny Moses: [00:15:29] Listen, if this war steps up, the Fed is going to have to take their foot off the pedal. [00:15:33][3.8]

Danny Moses: [00:15:33] Let me let me finish my thought. So it did step up. Okay. It is stepping up. But if that’s your hope, that doesn’t happen to 3600 Dan is my point. It’s lower. What happened today in Germany. They went further and put in price caps on energy to help the consumer out. But in the middle of all this, let me give you I you get to a bullish point to say you have Porsche IPO, successful IPO today spinning out of oats wagon going public good company. We can talk about its valuation versus Tesla which is insane when you think about the two companies where they showed a value. What else happens? Biogen This is what I’m talking about. Biogen’s In over 300 ETFs, if you’re in a biotech ETF for health care ETF and think that you’re diversified, the whole idea here is to become a stock picker. Biogen trades at a 20 PE. They have 6 billion in debt, but it’s a $35 billion company, so there’s no issue with their balance sheet. My point is that if you’re doing your bottom up work and you had picked Biogen as your pick, guess what you made yesterday? 15. 20. Those did hear me out. My point is that we’re in this wash of liquidity, right? We’re in a washing machine right now, and people feel safety in numbers of owning ETFs. They think they’re diversified. Let me give you an example. Let’s say that two days ago, Medicare came out and said we’re slashing reimbursement budgets for drug companies across the board, 20%. Every one of those ETFs would have been down to same degree and Biogen would have been taken down on its market weight accordingly. My point is this if you understand the fund, I’ll leave you. My point is, you understand? I get it. [00:16:48][75.4]

Danny Moses: [00:16:48] It’s a needle in a haystack. You know, market like this doesn’t matter, because at some point in the not so distant future, if the stock market is much lower, Biogen will fill in most of that gap. [00:16:57][8.3]

Danny Moses: [00:16:57] You have massive. [00:16:57][0.3]

Danny Moses: [00:16:58] Well, no, my my point is, is I don’t believe that a lot of people that watch us, listen to us are trading the way we’re trading and thinking about things the way we’re thinking about them. I mean, they’re thinking about them from an investment standpoint. They’re thinking about. So if you were to go in and buy Biogen after the news, that’s not a great. [00:17:13][15.0]

Danny Moses: [00:17:13] Dan, let me ask a question. Do you think Cathie Wood probably has one good stock in her entire I’m guessing I’m honestly, I’m not being a jerk here. There’s probably one or two good stocks. Okay, hold on. [00:17:21][7.9]

Danny Moses: [00:17:21] Tesla. [00:17:21][0.0]

Danny Moses: [00:17:22] When you please. [00:17:22][0.5]

Danny Moses: [00:17:22] It’s showing good relative strength Danny [00:17:24][1.5]

Danny Moses: [00:17:25] When I don’t even he’s trying to get me worked up people anyway. [00:17:27][2.2]

Guy Adami: [00:17:27] Successfully. [00:17:27][0.0]

Danny Moses: [00:17:28] Teladoc or whatever stock you may want to pick. My point is this they’re all going to go down the same rate, right? But if you understand that ahead of it, my point is that if you look at the you say, what would I want to own away from Cathie Wood within that portfolio that I know she owns, 22% of there’s going to get clobbered. I’m not in a rush to buy it Dan, but you get my point. Yeah. My point is that the origination of the stock market was never this club ETF was never an active ETF. I mean, it was never that that it wasn’t. And that’s why. [00:17:53][24.6]

Guy Adami: [00:17:54] And that’s created, by the way, this, I think this false sense of security. And when things are going higher, nobody focuses on the things that you talk about all the time. Now that things are going lower, these things are coming into focus and it’s somewhat problematic, but it doesn’t mean it’s a matter of fact, I would submit some of the best opportunities over the next couple of months are probably going to present themselves for long side trades. We’ll probably talk about a few of them. What I found really interesting, amongst the many things that have been interesting while I’ve been gone, including this Bank of England thing, which is just as Danny said, a seminal moment, I happen to agree. So Stan Druckenmiller, who’s a legend in our world, was speaking at Seeking Alpha,. [00:18:32][38.1]

Dan Nathan: [00:18:32] Delivering Alpha. [00:18:33][0.6]

Guy Adami: [00:18:34] It’s not seeking alpha? [00:18:34][0.4]

Dan Nathan: [00:18:34] CNBC delivering alpha. [00:18:36][1.3]

Guy Adami: [00:18:36] You know, it should be called seeking alpha. [00:18:37][0.8]

Danny Moses: [00:18:38] Maybe should trademark that. [00:18:38][0.5]

Dan Nathan: [00:18:39] That’s a website called Seeking [00:18:40][1.1]

Guy Adami: [00:18:41] Desperately seeking Susan that was Madonaa right and Dan is totally tuned me out and whatever delivering, seeking. You understand what I’m saying? He was speaking at a conference and I will tell you, not somebody to speak in hyperbole, but he said and I don’t necessarily agree with them, but he thinks the next decade for the equity market is sort of no man’s land is going nowhere. I mean, I don’t know if you agree with that or not, Danny, but when a guy like that says something, he’s not saying it just to make headlines. He doesn’t really care. [00:19:05][23.8]

Danny Moses: [00:19:06] Tudor Jones. Klarman Yes. Gundlach These guys have seen seven cycles. Most people that are trading I’ve seen one, maybe one and a half listen to them. They’re not trying to be, Oh, I told you so. They’re speaking from experience. They see what’s happening. They’ve been through eight different Fed governors, they’ve been through currency crisis, they’ve seen long term capital. They’ve seen bits and pieces of everything. Listen to them. Don’t go in the market’s up 500 points in next saying to old man, go back in your right, go back home, like whatever. No, they’re not trying to be they’ve made their billions. They’re not talking their book. They literally feel the need to try to help you. I really believe that’s what it is. Do some people go out there and talk their book? Sure. Cathie Wood goes out and talks your book on TV all the time and the alongside somehow that’s okay. But when someone comes out and tries to be rational. [00:19:48][42.5]

Guy Adami: [00:19:49] So I hear the pushback on that and I totally get what you’re saying. But just to play devil’s advocate, just to sort of level the playing field so we don’t seem to sided or to jilted or jaded, whatever the word is, you would expect her to talk her book because she obviously has conviction. So but I understand what you’re saying. I will tell you something else. And you mentioned people discounting Stan Truck. I get it. So do that at your own peril. But everybody seems to be discounting Warren Buffett right now. And I mention Warren Buffett because this week his stake in Occidental Petroleum, Danny, went up north of 20% and now it’s almost 22% of the company. Now, I don’t want to play stock markets specifically in that name, although it is a specific play. It has more to do with the energy market. Just let me say this, Dan Nathan, tremendous call on energy over the last six months. You know, when it was trading in the 120s 130s, you said this thing is destined to mean revert. It’s probably go back to 75, 80. Here we are. That was a great call. Now, I’ll tell you, I think some of the reasons that I didn’t see coming, obviously the stronger dollar didn’t help. Obviously, zero COVID in China didn’t help. Obviously, this global slowdown we’re the midst of didn’t help. But I think what happened was traders investors whatever front ran the commodity thinking that at some point you’re going to see demand destruction which I totally get. By the way, it’s been a great trade to be short crude oil. The problem is again, my opinion, we haven’t seen the commensurate demand destruction. It’s just not there. So you’re waiting for something to happen and it might happen, but it hasn’t happened yet. So the reason I bring up Buffet in oxy. I think there’s a next leg to the synergy trade and Bank of England flinched, which is strike one potentially. If this fed our Federal Reserve into the midterm elections, Dan says something like, okay, the data suggests maybe we’re on hold for a while. The commodity market is going to scream to the upside. And I think you want to be positioned for yourself in energy under that situation. [00:21:43][113.4]

Danny Moses: [00:21:44] I don’t disagree. But what if what happened to the banking when starts to happen here? What if the joke is up? The Fed comes in. Guess what? There’s a $34 billion auction coming in on the one year, the two year. We all of a sudden we look at our finances north of 30 trillion, the debt look at our and when you start to look at those rates, it becomes self-fulfilling how hard it is to basically pay our bills. That’s what’s happening right now over in the UK and that’s the scary part. I’m not saying I think we’ve got a little taste for what can happen to risk assets if just a central bank blinks. We saw what can happen. It’s massive. So the answer is the Fed does blink. Make no mistake, all asset prices will go up. The market will go up a lot. I’m not going to say that it won’t, and I’m not saying that it won’t happen, but it won’t happen in these levels. And as it relates to energy Guy, I just try to extract the oil prices to these companies, which are still grossly cheap, which you talked about six weeks ago, eight weeks ago. Every day that goes by and oil’s not below 70 or 75 is another day of cash flow for these companies. [00:22:36][52.5]

Dan Nathan: [00:22:37] Interestingly, we’re talking about blinking the next Fed meeting November 2nd, a week before the midterms. The stock market feels like things are heating up to the downside. Yesterday, after the BOE, we saw the ten year U.S. Treasury yield trade up massively to about 4%, the first tick above 4% in a very long time. Huge intraday reversal closed at 371 today on Thursday as the stock market’s getting rocked. Rates are barely up. This is a really important day, not just for the stock market, for yields, because are the ten year, is it starting to price in the potential for a recession? Right now, we’ve been talking about the difference between the two and the ten. And so if yields start going down, Carter has been looking at the charts with us on MKT call each day. The ten year can easily be back at three and a half tomorrow. And then we probably have a break of trend and then you see 3%. And then if you did see the Fed, if they float a trial balloon, you know that Fed whisperer, the guy tomori’s at Wall Street Journal in late October prior to that November 2nd meeting. Maybe it’s political. I don’t know. Then you’re going to have a good old fashioned rip in your hands, because we’ve also been talking about that FactSet has been telling us on our MKT Call, our main man, Butters, estimates are coming down for the S&P 500 faster than they have the five, ten, 15 year, 20 year average. So could we have a scenario where we get a few preannouncements out of the way? Danny Maybe tomorrow night, a Friday night, dirty on the last night. The last night of the quarter. Okay, think about that. And then you have a bunch of companies beat lowered expectations and then a Fed that’s maybe getting a little more dovish. [00:24:08][90.9]

Guy Adami: [00:24:08] Here’s the Guy is going to be an asshole portion of the podcast you ready for wait. [00:24:12][4.1]

Dan Nathan: [00:24:13] That didn’t start 20 minutes ago? [00:24:13][0.1]

Guy Adami: [00:24:13] So this is more more so this is me because you’re going to get mad at me when I do this, but I’m going to do it anyway. Dan Nathan, what’s the largest economy in the world? [00:24:22][9.0]

Dan Nathan: [00:24:23] Well, it’s the EU combined. [00:24:24][1.0]

Guy Adami: [00:24:24] Okay. Thank you. The country specific country? Yes, you’re right. The EU combined negative. [00:24:28][4.2]

Dan Nathan: [00:24:30] United States [00:24:30][0.2]

Guy Adami: [00:24:30] . It’s interesting. The United States, the largest economy in world. It is. And you just what did you just say before that ten year yield set? A 30 basis point is that would you say that 30 or 30 basis point look, [00:24:40][10.0]

Dan Nathan: [00:24:41] Something’s broken. [00:24:41][0.2]

Guy Adami: [00:24:41] Daily, 30 basis point move in United States, ten year yields. What word would you use to describe that? I’d just thrown it out there, Danny. I don’t know. Maybe you could throw me a word. Volatility, volatility, volatility. And now everybody is talking about the volatility in the bond market, the volatility, the currency market. Then when we were mentioning it this time last year, everybody said, oh, you’re a bunch of nervous Nellies. It’s not a big deal, blah, blah, blah. So put that in your pipe and smoke at number one. Number two, to answer your question, I could paint a scenario here and I actually think I might wind up being right on this one where ten year yields actually trade down to 3%, while two year yields stay anchored at 4%, if not higher. And what environment would you call that? It’s a word for it. I think it sounds like a male dire or something. [00:25:33][51.8]

Danny Moses: [00:25:33] Destruction. [00:25:33][0.0]

Dan Nathan: [00:25:35] Stagflation. Stagflation. Yeah, but the. [00:25:38][3.4]

Danny Moses: [00:25:38] Security and stagflation. [00:25:39][0.6]

Guy Adami: [00:25:40] We are we’re there. And this is something you talked about last summer. So here we are. I will tell you again, the US ten year yield should not move five basis points in a day, let alone 30. But here we are and everybody seems to normalize it. [00:25:53][12.8]

Danny Moses: [00:25:53] Dan, your comment you made about ten year yield rallying, by the way, I’m down with TLT. You know that. I think it’s a buy. [00:25:59][6.0]

Guy Adami: [00:26:00] Yeah, that’s a song right. [00:26:00][0.7]

Dan Nathan: [00:26:00] Yeah I’m long just you know I’m long the G of which I shares U.S. Treasury ETF and I’m actually short of the U.P. so I actually think there’s a very strong likelihood the dollar comes in. Rates come in. [00:26:12][11.1]

Danny Moses: [00:26:12] Yeah, well, okay. Well, those probably go together. I guess my point is this. If you said, hey, Danny, the ten year is going to 3%, guess what? I think the S&P hit 3000. At some point before that while that’s occurring. So my point is that you’re trying to time and then what is it? Because here’s the thing, Dan, it means something different to different industries and different companies and people. Rates coming in or positive for credit spreads is positive. For borrowing costs, it’s positive. There’s a lot of positives. So if you’re a functioning company and you get the benefit of it, your stock will go up and your tech company, your value to just go. I get it. But the point is that for that to happen and I think it will happen, there’s a lot more pain to listen. [00:26:44][32.4]

Dan Nathan: [00:26:44] The case for S&P 3000 is becoming increasingly clear. So Mike Wilson over at Morgan Stanley, who’s been on the pod and we all have a lot of respect for he I think is one of the first strategists to lower his 2023 S&P earnings estimate below his 2022 earnings estimate. Now, that’s really important here because we’ve been talking about how strategists have been side. So he’s lowered his 2022, he’s lowered his 2023 to $212. So if the S&P troughs at a 14 or 15 multiple, so multiply to 12 by 14 and you get below 3029, 80, do it by 15 and you get 3180. Okay. So I mean, the point is it’s actually becoming a number that makes perfect sense. And to your point, guy, you’ve been saying when we were saying, well, we should get back to this is just a technical level. We had a higher multiple on a higher earnings number. We’re saying, okay, that gets you back to 3400, which are the pre-pandemic highs. So we’re going to overshoot. It’s not like we’re going to stop on a dime. And that was the one thing earlier this week when we had that match low in the S&P 500 from June 16th, the thought that we would magically stop on a dime and just rally from there made no sense. And Carter Braxton were on CNBC’s Fast Money with us the other night. He actually made a really good point. He said, here we are in June 16th. We were right at this level and here we are on September 28th. At this very same level, he goes, Stocks are not oversold. They’re at the exact same spot they were three months ago. And think about how much higher the dollar is and how much higher rates are. [00:28:17][92.4]

Guy Adami: [00:28:17] A couple of things since you brought up Mike Wilson, wouldn’t it be great to get him on the podcast like next week Dan Nathan? [00:28:23][5.3]

Dan Nathan: [00:28:23] Stop it. Yeah. [00:28:25][2.5]

Guy Adami: [00:28:25] So Mike Wilson will be on the podcast next week, number one. And you just mentioned match. Would you say match something? [00:28:31][5.6]

Dan Nathan: [00:28:32] Match Slow. [00:28:32][0.2]

Guy Adami: [00:28:32] Matt slow. This is how my mind works. Now this game match game. No, I love match. Gene Rayburn with the stick Mike is tremendous and Paul Lynde and. [00:28:40][7.4]

Danny Moses: [00:28:40] Yep. [00:28:40][0.0]

Guy Adami: [00:28:40] CNR and yeah yeah. Richard Dorsey the dinosaur, maybe. Oh, it was the greatest show ever. I mean, it was really a great show. No, I think of matched tires and that was Robert Duvall and Tom Cruise in Days of Thunder. And I got to tell you something, Robert is racing. Robert is race at called Trickle, one of the great artists. I love the movie, but these are Days of Thunder and I might put the title out there. I’m just saying and let me just say this while I did like that. [00:29:03][22.9]

Dan Nathan: [00:29:04] We thought we would were. [00:29:05][0.9]

Danny Moses: [00:29:05] Hurricane London. Yeah. [00:29:07][1.4]

Guy Adami: [00:29:07] Now just let me say so you don’t think it’s just us three hacks, the good looking guy from the Big Short, Dan Nathan, who we used to be on the Options Action Show, the old Sicilian guy Guy Adami. Credit Suisse. That’s a pretty reputable firm, right? [00:29:21][14.0]

Dan Nathan: [00:29:23] Full disclosure. I’ve been an advisor to the technology part of the bank for the last six years. [00:29:26][3.3]

Guy Adami: [00:29:27] Lucky to have you. They issued a dire economic outlook titled The Worst is Yet to Come and think about what we’ve been through over the last eight months. And Credit Suisse puts out this note. They just didn’t haphazardly put it out. And they’re pointing out all the things that we have now been talking about literally for the last year or so. Thank you, Credit Suisse. Better late than never, as they say. So, Danny Moses, again, I think you and I both have the tin foil. When I saw that Bank of England headline that we alluded to a little while ago, I said, Holy shit, if there’s ever an environment, a setup for gold to work, this is it. This is what we have been waiting for, in my opinion, given the sell off that gold has had, given the level that it’s trading at, given the fact that nobody’s been in it, given the commitment of trader reports, there’s nobody in to name. Gold should beat up $100 minimum and it barely moved. Now, maybe it’s going to happen, but what am I missing? Because this is gold’s environment, high inflation flinching, central banks, currency disruptions, bond market disruptions. What am I missing? [00:30:33][65.9]

Danny Moses: [00:30:33] It’s funny. I looked at it the other way yesterday. It was up, I think, three or 4%. Obviously, the market was ripping. It didn’t do the two or three acts. And it actually last week when we had a little bit of a rally, it also rallied with the markets. Also, it was a higher beta play, but actually today is more interesting to me, right? The market’s selling off. Massive gold’s holding its own. It’s down small. It’s down, I don’t know, half a percent, not even. And I’m not going to call the low, low like I did a couple of months ago when it was at 1715. And I’m like being gone below 1700. It did. But with the geopolitical part to me right now is the part where gold’s going to start to fill in that gap, because now it’s apparent to me. So yes, it trades on a strong dollar period. That’s kind of been the correlation trade. But to your point, nobody owns it. I love it more than ever. This is where one of the assets I would certainly be in here again is not a gold bug, anything like that. I just think from a risk reward basis from here, it’s hard to really see that it’s not good because the only thing that rallies this market sustainably is a blink now, a blink by the Fed, and gold’s going to go twice. I mean, so my point is, I’d rather own goal here. Yes. It doesn’t have interest. Yes, I know it doesn’t earn anything, but it does check a lot of boxes. [00:31:35][61.9]

Guy Adami: [00:31:35] Okay. So you always say again, doom and gloom, blah, blah, blah, you guys. So it’s first of all, it’s not true. But now is when if you stand in the pocket, if you’re Joe Flacco and stand up like a statue and the world sort of slows down, now is when you should be looking for opportunities. And I will tell you, although I think we’re all across the board bearish and think there’s still lower lows to be made here, I think we’ve talked about that rather eloquently. There are going to be some opportunities. So my question to you, Dan Nathan, is how does it manifest itself? So for example, Nvidia that we talked about was almost $1,000,000,000,000 company in November of last year ish. Now it’s probably trading with like a 300 or so billion dollar market cap, a company that’s going to earn $30 billion. I can do that math. It’s trading at ten times revenue at its zenith. That was stupid. At these levels, it’s reasonable. But if you see that trade at X Times revenues, what gets you interested in a name like that? [00:32:30][55.3]

Dan Nathan: [00:32:31] Yeah, I mean, listen, the stock nearly ticked 350 less than a year ago. It’s trading at 122 expected EPS growth next year of 20% in revenues, topping $30 billion, up 14%. So you have a stock trading at 27 times. If people are paying 25 times for consumer staples, wouldn’t you rather pay a similar multiple for a company that is literally on the cutting edge? My point is there’s a price. I said a friend of mine who wants to buy it. I said, I’ll start buying it at $110. It’s 122 down from $347 a year ago. It would take a protracted global recession for it to be hard to average into this thing and make money over a five year period if you start buying at $110. I mean, let’s be frank. [00:33:13][42.1]

Danny Moses: [00:33:13] I think Stuart Scott brought up we had him on last week and he brought up the point of the unknown with them might be what were they selling chip wise into the crypto mining space? And now with the split of Ethereum or whatever you guys call that thing. [00:33:25][11.9]

Dan Nathan: [00:33:26] The merge, the merge. [00:33:26][0.7]

Danny Moses: [00:33:27] All the miners were selling all their Etherium and all this. So maybe the demand for the chip. Yes, it’s video games. Yes. You’re going to go into holiday season. Yes. But I don’t know. It’s not a stock. Right. [00:33:36][8.6]

Dan Nathan: [00:33:36] So let’s just talk about this. [00:33:37][0.8]

Danny Moses: [00:33:37] By the way, if it hit 110, you wouldn’t buy it. [00:33:39][1.5]

Dan Nathan: [00:33:39] Yeah, so do you. Okay, I’m going to buy something. It just, you know, I mean, but, you know, in late spring, remember my whole spurs in two sort of. Yes. And so I actually did choose in two. So I love the idea of the Q skew, the Nasdaq 100. Again, the concentration risk is a problem right now, here and now. I think that’s going to get corrected. Apple’s going to make a new low pretty soon. They’re probably going to guy down. Microsoft’s going to have a difficult quarter. Amazon was up 50% from its June lows at its highs last month. That’s going to make a new low. Tesla. I know Tesla. Danny, I’m going to say it again. Tesla, that trade that that’s the that stock is going to make a matched low at some point in the next few months. You’re going to have a. Q. Q. Q. That’s driven by six stocks. It’s going to make new lows, but then there’s going to be dozens of stocks within that index of 100 stocks. They’re a start to show some good relative strength that are down 70, 80%. [00:34:29][50.2]

Danny Moses: [00:34:29] Okay. Interesting. Dan, what a great philosophy to look through a ETF machine and see maybe it got taken out better and maybe it’s a buying opportunity. I just heard that. Guy did you hear that from somebody? You just pitched back my pitch. [00:34:41][11.4]

Dan Nathan: [00:34:43] I’ve been pitching that since the spring. [00:34:45][1.8]

Danny Moses: [00:34:45] So you Blue’s Clues and Q’s [00:34:46][1.2]

Dan Nathan: [00:34:48] My Qs and 2s. Yeah. No. So I actually think that very soon you start legging in to dollar cost averaging the Qs. And I think whether it’s your TLT guy and Danny or my GOVT, I think that that is a portfolio of just a couple ETFs that works for a whole host of different reasons. And you get a little dollar weakness in there that actually would ask lighter fluid on that if you were to have the dollar come in meaningful, especially when you consider the U.S. multinationals that make up a disproportionate amount of those. [00:35:14][26.0]

Guy Adami: [00:35:14] Who did you say you had on the podcast. [00:35:15][1.0]

Dan Nathan: [00:35:16] Stuart sopp. [00:35:16][0.0]

Guy Adami: [00:35:18] Love Stuart. Did you hear the story that they tell you the story or. No, he didn’t tell you the story. [00:35:21][2.6]

Dan Nathan: [00:35:21] When you guys met at some charity event. [00:35:22][1.0]

Guy Adami: [00:35:23] So we went to this. What’s that place out there where they do all the fireman stuff? It’s not Rikers Island. That’s the jail. It’s one of the islands Randle. And we had a beautiful night for event for the FDNY. Right? It’s later in the night and my age before I get in the car to drive. [00:35:38][15.5]

Dan Nathan: [00:35:39] so it’s like seven. [00:35:40][0.8]

Danny Moses: [00:35:39] Go to the bathroom. [00:35:39][0.3]

Guy Adami: [00:35:40] Got to take a leak. Right. And have beautiful bathrooms outside. [00:35:42][2.1]

Dan Nathan: [00:35:44] like a trough. [00:35:44][0.1]

Guy Adami: [00:35:45] No, no, no, no. They actually had these things set up. So I’m walking to the vessel, dark out, walking to the bathroom, I’m walking slow, and I walk into the bathroom up the stairs. And this dude with a beard that looks like he’s off the set of, like, a Viking movie. Yeah, And he looks at me and I look at him, and it was Stuart. I’m like, What are you doing here? It’s like, What are you doing? And we embraced. We hugged him. He just came out of the bathroom. So I didn’t really this. But anyway, we had this long embrace. We had a wonderful time. We connected dots. We know a lot of the same people. So. Stuart If you’re listening, which you are, it was great to see you, by the way. Your wife is a complete badass as well. I think she’s cooler than you are number one. Number two. And you? Asian stocks. Again, these are great companies. But I want to mention Microsoft real quick, because we took a lot of shit for this one. When Microsoft reported last quarter, Dan and Danny, the stock closed that night at around $255 ish. They reported, by Microsoft’s standards, a lousy quarter. And in the aftermarket, the stock traded down to 242. I remember watching the frickin print and then they came out and said, we are not seeing demand destruction. And the stock subsequently went to 298 or thereabouts on a broader market rally. [00:36:54][69.3]

Dan Nathan: [00:36:54] 20%. [00:36:54][0.0]

Guy Adami: [00:36:55] Thank you. It all lined up, but we said be careful. Be careful here. Just go back and look at the quarter. And the fact that they didn’t see demand destruction was probably not a good thing. Where is Microsoft trading right now? Dan, can you pull it up on your Factset machine? [00:37:07][12.4]

Dan Nathan: [00:37:08] 237. [00:37:08][0.0]

Guy Adami: [00:37:09] Excuse me,. [00:37:09][0.3]

Dan Nathan: [00:37:09] 237 [00:37:09][0.0]

Guy Adami: [00:37:10] Which is lower than 242. [00:37:11][0.8]

Dan Nathan: [00:37:12] And it’s a new 52 week low. [00:37:13][0.9]

Guy Adami: [00:37:13] And it’s a new 52 week low. The point is, you really have to pay attention these things. Price doesn’t necessarily mean that things are good. A lot of times price action dictates your views on things, and it shouldn’t. The reality was it wasn’t a good quarter. The stock was still expensive and now you’re starting to see real price discovery in a name like. [00:37:33][20.8]

Dan Nathan: [00:37:34] That was a very long winded way of what Danny says all the time. Read your Ks and Qs [00:37:37][3.6]

Guy Adami: [00:37:39] To read your Ks and Qs. [00:37:40][1.0]

Dan Nathan: [00:37:41] Do your work kids. [00:37:41][0.0]

Guy Adami: [00:37:41] No But I am. But I illustrated it so well. I put it out there for you. [00:37:44][3.2]

Danny Moses: [00:37:44] Lost art. Lost art. More wisdom from a man who’s seen a lot. [00:37:48][3.4]

Guy Adami: [00:37:48] I’ve said I have seen. See, that’s an age joke, by the way. I’m feeling my age, by the way. I just want the folks at home to know we’re going to be at what? What’s the next month, October right now. So it’s the fourth quarter. And the fourth quarter of this year I will turn 59 years old. I’m just letting you guys know. I mean, listen, it’s hard to say. [00:38:03][14.8]

Danny Moses: [00:38:04] I actually think in the fourth quarter I will turn bullish at some point in the fourth quarter. [00:38:06][2.7]

Guy Adami: [00:38:06] I you know what? I happen to agree with that. Well, I think I like that. I think it’s. [00:38:09][2.8]

Dan Nathan: [00:38:09] What are you going to what do you buy first? What sectors. [00:38:11][1.5]

Danny Moses: [00:38:11] Housing. [00:38:11][0.0]

Dan Nathan: [00:38:12] Really and you have been saying that you said. [00:38:14][1.7]

Danny Moses: [00:38:14] I said not yet. [00:38:15][0.3]

Dan Nathan: [00:38:15] Acting rational, though all year long. [00:38:17][1.6]

Danny Moses: [00:38:17] They’ll be the ones. [00:38:18][0.3]

Dan Nathan: [00:38:18] So so what will it take as far as mortgage rates, for instance? We just the 30 year just top 7%. My point is there’s got to be a constructive this view here. [00:38:26][7.6]

Danny Moses: [00:38:26] My my view is that the Fed stops this QT that that’s going be my view that’s been your view by they will they will it’s not even happening even though what’s happening is now I think that will be the first so that will be the one thing they do when they do that. Basically, it’s the all clear, not all clear, but mortgage rates. So go back to the BOE for a second. What do you think was happening in the gilt market? You don’t think that there were professional investors that knew the pension funds were in trouble. They’re the ones that exacerbated that. The ones exacerbated by the move and actually move made the Bank of England move desperate. Same thing happened in the mortgage market six months ago. [00:38:54][28.3]

Dan Nathan: [00:38:55] They’re going to push. [00:38:55][0.3]

Danny Moses: [00:38:55] Mortgage traders were widening the spreads because they knew that the Fed was going to be gone. Right. And the Fed is so moronic in that category of of the lack of sophistication, understand how their signaling impacts markets on an actual and on a predictability basis. And so whether that comes or not. But then that would be a very consumer sensitive, cyclical kind of great play to me. And I don’t know where the builders are on the charts here, but they’re going to look real. [00:39:16][20.6]

Dan Nathan: [00:39:16] Quickly before we go to opportunities when the Fed does something or there’s one other thing and people keep asking me this who again, who are not in the markets day to day, they keep seeing these headlines about something’s going to break or the guys point about the Treasury market. It’s just broken in the volatility. And we saw that with the UK. I was in the UK this summer, I was in London and I was still calculating the difference between a pound. yeah. It’s a lot easier when we’re at one. I was in Europe, same thing. So there’s things that are getting out of whack here. So my question, Danny, is that is the S&P 500 about to break? We’re making new 52 week lows. We basically taken out all of the access to your point that Q4 2021 stuff was just the Fugazi and the S&P closed up 28% year over year. It doesn’t feel that bad. So is there a down six, seven, 8% day in the S&P 500 coming? [00:40:06][50.3]

Danny Moses: [00:40:07] Yes. [00:40:07][0.0]

Dan Nathan: [00:40:07] And what would be the catalyst at this point? [00:40:09][1.7]

Danny Moses: [00:40:09] Well, you don’t really need . [00:40:11][1.3]

Dan Nathan: [00:40:11] It just starts to snowball. [00:40:12][0.3]

Danny Moses: [00:40:12] Is it can do you pick one go. So if it had done that yesterday what’s you mean over a 2 to 3 day period it is going to do that sovereign debt in a one day. You could blame it on it. You could pick something that you wanted to. But again, that’s at least we’ve talked about meme stocks. What did I always tell you? I mean, use them as a barometer. So getting destroyed, okay, they’re dying. So we’re halfway there on that, right? [00:40:29][17.4]

Guy Adami: [00:40:29] I thought if you owned them, as long as you own them they don’t go down. [00:40:31][1.6]

Danny Moses: [00:40:32] Hodl. Yeah, you hold. Hold all Tesla is starting to crack. It is. [00:40:36][3.8]

Dan Nathan: [00:40:36] So they’re shooting the generals, is what you’re saying. [00:40:37][1.3]

Danny Moses: [00:40:37] There’s not even a general. I mean, that’s. [00:40:39][1.3]

Dan Nathan: [00:40:39] Like a captain. [00:40:39][0.2]

Danny Moses: [00:40:40] That’s not even a capital corp. That’s a just. [00:40:42][1.9]

Guy Adami: [00:40:42] Did you see Maverick Top Gun, by the way? [00:40:44][2.0]

Danny Moses: [00:40:44] I did. I saw it on the plane. [00:40:45][0.8]

Guy Adami: [00:40:45] Ed Harris brings Tom Cruise. [00:40:47][1.4]

Danny Moses: [00:40:47] Ed Harris was in it for New York. I was disappointed. [00:40:48][1.4]

Guy Adami: [00:40:49] How is it you’re still a captain? One of the great I mean, horrible. [00:40:52][2.6]

Dan Nathan: [00:40:52] Actually horrible line stop. I know one of life’s great mysteries [00:40:56][3.4]

Guy Adami: [00:40:58] Should be a two star admiral. No, you should be a senator. You are what. [00:41:01][3.7]

Dan Nathan: [00:41:02] Some of the dialog seriously lack that those. [00:41:04][1.9]

Danny Moses: [00:41:04] Top guns you can’t do around. [00:41:05][1.1]

Guy Adami: [00:41:05] I love Tom. I already mentioned Tom Cruise and day splendor. [00:41:07][2.0]

Danny Moses: [00:41:08] Let me get back. So sorry that in all seriousness, when Tesla is going to go until it goes, I know we’re not there. So it’ll go because it’s the thing that people still hold. Everybody owns it. They’ve held it because it’s it’s working. It worked. It’s not going to work anymore. So how quickly does that thing go? And it doesn’t trade on fundamentals, and so an incremental delivery doesn’t mean anything. Oh, you going to go from a $780 billion valuation to a $810 valuation because you beat deliveries by a thousand? It’s the dumbest thing I’ve ever seen. So it will go when that goes down. I know we’re close and I think we are close to that thing going in. Whether it’s Twitter trial, I don’t really care. It’ll go I don’t care. It’ll go at some point. [00:41:41][33.1]

Dan Nathan: [00:41:41] Are we’re going to see some Friday night dirties. We got the quarter end tomorrow as we just said. Could Tesla pre-announce could Apple pre-announce. [00:41:47][5.7]

Danny Moses: [00:41:48] Pre-announce a fake number maybe they’ll pay pre-announce a beat their air day I mean it’s going to be magnificent robots running. [00:41:53][5.0]

Guy Adami: [00:41:53] The Friday night dirty thing, by the way I’ve embraced that. [00:41:55][2.6]

Dan Nathan: [00:41:56] It’s catching some steam. #Fridaynightdirty [00:41:57][1.1]

Danny Moses: [00:42:00] Think this could be a big one, though? This could be the ultimate Friday night dirty. So [00:42:03][3.0]

Guy Adami: [00:42:04] Alright so So I think this is the portion of the show that just a lot of people I think what do you call it when you fast forward, something to get to something you call it fast forwarding, right? Fast forward. Well, they just want to hear Danny. They want to hear him become somewhat unhinged, which I think you spend most of your life on the precipice of being unhinged. But it’s something we called way back in the day when we started this thing. We’re almost two years into this, by the way, which is really remarkable. It’s incredible. And obviously, folks, thanks for listening. But something we decided to call ROTT, which is short for us, you know, rip off the tape, like pulling off the Band-Aid where Danny just sort of goes off on some tangent, but well thought out tangent. So Danny, as we like to say on behalf of Dan Nathan, the the microphone is yours. [00:42:48][43.9]

Danny Moses: [00:42:49] Well, listen, we’ve addressed actually a lot of it in there, but I just wanted to talk about because some of the smartest people, I call them plumbers in the financial system, James Aiken of the world, we had plumbers macro alf on here to talk about it. They’ll tell you that the plumbing is, quote, working so the market, quote, isn’t broken by standards of what you think is broken. So I thought about that and I thought about, okay, well, you can buy and sell something. Everything has its price. Maybe that works is a lot of volatility, but I guess that works. So I sort of think about what is broken. What’s broken is capitalism. When did it break? It broke in 2007 & 2008 That’s when it broke. What happened? We all know what happened. The Lehmans, the Bear Stearns, the AIG, everything just kind of shut down. What did we do? [00:43:24][35.4]

Guy Adami: [00:43:25] I hold on. I have an answer. Go ahead. We capitalized gains and we socialize losses. So for all you folks out there that say they don’t want to be socialist, guess what? We are already there. The system. You did not allow the system to work back to you. [00:43:40][15.4]

Danny Moses: [00:43:40] So we kind of mass we put it on a sinking ship, bubblegum, and we did it and it worked, right? It’s worked for a long period of time, but it obviously sent people out on the risk curve, leverage out the wazoo, all these things that were happening, never believing there would be a time that we would have to pay the piper. So to go back and look, of all the things that have gone into that, and it’s not just about what the Fed did, Treasury what they did, global central banks, a lot into it. Let me go backwards here. So we had an equity flash crash May six, 2010, so we knew that there’s been problems building within the algo markets for a while. Right. We had a bond flash crash which you on in October 2014, which, by the way, I might add, you know what that flash crash was. Just to put in perspective what we call the flash crash back then. We went from 2.2% to one eight 6% in a minute. Whoo! How does that pale in comparison now these intraday moves we’re seeing, that was a bond flash. And you know what the result of the investigation by seven federal authorities was that could not find a reason for it. That’s October 14th, March 2015. The U.S. dollar dropped 3% in 4 minutes, right? Whatever. August 2015, stock market lost 5% in 5 minutes. Yen, Aussie dollar, the day that Apple preannounced in 2018, that dropped 7%. So we’ve had all this stuff go on, but I’m gonna bring this all back full circle here, Dan I promise. In 2015, the SEC started to investigate what was called 12 V1 fees. What are 12 V1 fees? Those are mutual fund fees that are paid to brokers for putting Guy Adami in the Lord Abbot Growth and Income Fund. So if I’m a broker, the Lord Abbot guy comes and takes me out. I’m using them as an example. I have nothing against Lord Abbot full. Those claim come out and take you out of golf and you’re going to go sell their funds to me. I’m your client. Hey, Danny, have you looked at the in the in the day? I’m like, sure, put me in it because. Doesn’t matter. But you were getting fees for pushing me into the product. So the brokers got that basically that revenue stream broken off, they weren’t able to get anymore. So what did they do? They changed their business model. At the same time, the passive investing was growing. At the same time they became managers. It would get a fee of 1% for all your assets that you have and trade you out. All these ETFs, the advent of passive growth was occurring. There’s a cause for all the stuff that is happening now. I mentioned before about stock ETFs, how they balloon bond market ETFs. So we talk about bond market volatility, 554 of them, over $1.2 trillion, which have gone in because as a broker now there are some good brokers out there. The people that call their clients ask how they’re doing through all hiding right now, no one’s suing and they own ETFs, so they feel like they’re diversified. They don’t own individual securities, so it’s like less risky. But all these things have gone in to, quote, filling an elephant through a faucet, literally trying to put these things through. And that’s where we happened. So my definition of broken is capitalism 2000, throw in ESG investing, which helped break this system also in terms of how it was implemented, the logic behind it are not behind the win. And so it’s not just about the. But we’ve been living in this fantasy world for a long time. There’s been crafted. [00:46:23][162.5]

Dan Nathan: [00:46:24] But Danny is it capitalism that’s broken or market structure thats broken [00:46:27][2.8]

Danny Moses: [00:46:28] I brought in market structure, but it’s capitalism because to me, capitalism is price discovery, risk reward. If you take a risk and lose, you lose. We’ve been bailed out. The moral hazard created in 2009 has fueled this leverage in the market. So there’s leverage everywhere. I mean, what just took down the pension funds in England was leverage. [00:46:44][16.3]

Guy Adami: [00:46:47] When I was in grade school, I had a friend, Charlie Charlie Munger, who’s a couple of years older than I was. But he went on. People started calling him Charles in the later years, and he came up with something called Darwinism. And I’m a big fan of corporate Darwinism, survival of the fittest, and we’ve taken that out. We somehow prop up things that we shouldn’t be propping up. So to Danny’s point in that prism, capitalism is dead. [00:47:13][26.2]

Danny Moses: [00:47:14] Broken, never be dead, but it’s broke. We’re going to be fixed and it’s going to be so you know what fixes it. S&P at 2820 starts to fix itself because you get rid of the it starts to fix itself over time. We never fully realized the pain that we should have in 2008 & 9. That’s it. [00:47:28][14.3]

Guy Adami: [00:47:29] We are good. Believe it or not, we’re week four in the league where they play for pay. I was away for. [00:47:36][6.9]

Danny Moses: [00:47:36] All of it. [00:47:36][0.3]

Guy Adami: [00:47:36] From some of it, yeah. My New York football giants got off to a zero start. They lost to the Cowboys a game that was in their grasp. But okay, whatever. It doesn’t matter. But if you do recall, very early on, we talked about the Eagles being mean and that team, everybody seems to love the Eagles now in Jacksonville, surprisingly two and one. But as we get into week four, Danny, because I know you love to do this, I think you’re four and four as we enter week four. Not great. Which for you is shitty. Yeah. [00:48:03][26.8]

Danny Moses: [00:48:04] I least I won some money back from Dan last week on shorting Tom Brady. [00:48:07][3.1]

Dan Nathan: [00:48:07] So can I ask guys a question? Speaking of Tom Brady, how are the Buccaneers at home favored by one over the Chiefs? [00:48:13][5.2]

Danny Moses: [00:48:13] Is that the line right now? Because I have it actually it even says one of my game. So let me go to my picks here. But that’s a great question. [00:48:18][4.4]

Dan Nathan: [00:48:18] I mean, look how they look. They looked horrible. Literally. I took the [00:48:22][3.7]

Dan Nathan: [00:48:22] Who looked horrible. [00:48:23][0.3]

Dan Nathan: [00:48:23] Bucs. [00:48:23][0.0]

Danny Moses: [00:48:24] Yeah, Chiefs didn’t look much better, but I know. [00:48:26][2.1]

Dan Nathan: [00:48:26] And by the way the bills didn’t look very good. [00:48:29][2.7]

Danny Moses: [00:48:29] So other injured can be talk about I was on that show breaking even with the coach I took coach again. [00:48:33][4.0]

Dan Nathan: [00:48:34] Yelling at. [00:48:34][0.4]

Danny Moses: [00:48:34] Me. I had the Colts and I had Packers. Yeah, he owes me another 200 and so does punish. Yeah, so does Ned. [00:48:40][5.9]

Guy Adami: [00:48:40] By the way, the coach said to me, if daddy calls me one time for his money, I’ve got to beat him over that. [00:48:45][4.3]

Danny Moses: [00:48:45] I’m going to Venmo request him right after the show. You should actually go on their show. I said, Why do you come on our show and pick stocks? You kind of looked at me cross-eyed anyway. So Kansas City, I’m going to keep shorting Tom Brady as long as he’s favored or even even in something he does not want to be out there. And the chiefs are angry after what happened last week. Kansas City in a pickem is what I see. Dan in Tampa, you want Tampa? Oh, boy. I don’t like my KC pick as much, so take the chiefs there. All right. The New York Jets, by the way, while you were in Italy, a miracle happened in that. [00:49:12][27.6]

Guy Adami: [00:49:12] Was I read that about this has to be a yeah. [00:49:15][2.7]

Danny Moses: [00:49:15] Yeah. Now, Zach Wilson, the savior, is coming back. Guess what, do you think the Steelers are going to be one in three? No, I don’t either. So Pittsburgh’s playing three against the Jets. I will take Pittsburgh in that game. So that’s my second pick. And my third pick is a Thursday night game, which I will tweet out like I did. I will the only first game or one of the season was on a Thursday night. Cincinnati is going to roll on Miami tonight, right? Everyone gets healthy. When they play the Jets, they tend to look better like, you know, the next week. So Cincy at home giving three and a half, maybe by the half point, actually by the half point -120 against Miami. Miami just came out of that Bills game, right? I mean, that was a hell of a game. Very physical traveling up. There was hurricane week. God, I hope everybody’s okay down in Florida, by the way. Hurricane week, I don’t know. It’s got to be a little bit discombobulating to them. So I like Cincinnati playing three and those are my. Dan, do you want any of those? [00:50:02][46.9]

Dan Nathan: [00:50:03] No. But what about this? Bears at giants? Bears getting three. [00:50:06][3.4]

Danny Moses: [00:50:07] I like the bears. I think I’m going to have a horrible week. NFL. It’s going to be a horrible week. Dan, here’s the other thing. I like the Pats getting ten and a half Jacksonville plus six and a half. [00:50:16][9.2]

Dan Nathan: [00:50:16] Pats getting ten and a half versus pack at Green Bay. [00:50:18][2.3]

Danny Moses: [00:50:19] Yeah, no, but okay. Anyway, we’ll come up with something else over the weekend for this is going on too. [00:50:23][4.5]

Guy Adami: [00:50:23] You know it’s interesting and. [00:50:24][0.9]

Dan Nathan: [00:50:25] My guess is going to be if you’re bored. [00:50:27][2.0]

Guy Adami: [00:50:28] You should it just that’s one of those things where you won the championship you basically ended the year undefeated you should have never made another NFL bet in your life [00:50:35][7.3]

Danny Moses: [00:50:36] Bad I know but you know four and four it’s yeah something I celebrate. [00:50:39][2.5]

Dan Nathan: [00:50:39] What about this Jacksonville at Philly. [00:50:41][1.7]

Danny Moses: [00:50:41] By the way, as good as the S&P has done in September. What’s that? [00:50:43][2.3]

Dan Nathan: [00:50:43] Jacksonville at Philly. Philly, minus six and a half. [00:50:46][2.2]

Danny Moses: [00:50:46] I like Jacksonville, but I don’t I’m not putting it anyway. [00:50:48][1.7]

Dan Nathan: [00:50:48] I’ll take the Eagles. You take Jacksonville. You’re getting six and a half. [00:50:51][2.5]

Danny Moses: [00:50:51] Fine. Doesn’t count as one of my. [00:50:52][1.0]

Dan Nathan: [00:50:52] Doesn’t count. [00:50:53][0.3]

Danny Moses: [00:50:53] As 500. 500. Okay, you done. [00:50:54][1.4]

Dan Nathan: [00:50:55] There’s something wrong with that line, by the way. [00:50:57][2.0]

Guy Adami: [00:50:58] Something about that line should scacre you. What else should scare you is the fact that we’ve really gotten long. But when we come back, Stephanie Link, chief investment strategist, member of the I See You Lover on CNBC from Hightower. Stephanie Link will join us here on the tape introducing. CME ad [00:51:19][21.5]

Dan Nathan: [00:52:43] iConnections Ad. Masterworks ad. [00:52:43][0.0]

Guy Adami: [00:53:42] Stephanie Link is the chief investment strategist and portfolio manager at Hightower, a national wealth management firm that provides investment, financial and retirement planning services to individuals, foundations and family offices, as well as 401K consulting and cash management services to corporations. She’s also a CNBC contributor. You know her from the halftime report, Squawk Box, The OT and more. Stephanie, welcome back to On the Tape. Dan, what do they say when you ask somebody to come back because there was a lot of popular demand? What’s that saying? [00:54:18][36.7]

Dan Nathan: [00:54:19] Back by popular demand. [00:54:20][1.0]

Guy Adami: [00:54:21] Is that what they say back by popular demand. So in November of last year Stephanie Link joined us on the tape and obviously backed by popular demand. Stephanie Link But before you utter a sound, Steph, I will say this, so I’ve been doing this for quite some time, as Dan will tell you and a lot of people ask about a lot of guests and panelists on CNBC. But one of the most frequent questions I get is about Stephanie Link. They’re enamored by your intelligence, your poise, and, quite frankly, your honesty. And I am as well. So it’s great having you back here on the tape. [00:54:56][35.4]

Stephanie Link: [00:54:57] Thank you both very much. It’s great to be back. I can’t believe it’s been so long. [00:55:00][3.3]

Guy Adami: [00:55:01] It’s coming up to was a ten months or so. And think about what’s changed over those last ten months. We’ll get into it, obviously. But your job is difficult. It becomes even more difficult when we’re seeing some of the things we’ve seen not only over the last couple of months, but over the last couple of days. So maybe just speak to that and we’ll get into it. [00:55:21][20.5]

Stephanie Link: [00:55:22] Sure. Well, I mean, I think this year has been all of us can attest to this has been so challenging because there are so many unknowns. I think when you look at the last three years, the compound annual growth rate of the S&P 500 was 28%. That’s not normal. But people began to believe that it was normal and anybody could have made money in the last three years. And a lot of that was driven by the enormous amount of fiscal and monetary policy stimulus. We all know that. So you fast forward to this year and now all of a sudden you have more restrictive policy, both fiscal and monetary. I know we got a couple of things passed on the fiscal side, but it’s a lot less than it had been. And the monetary policy, my goodness, this is a complete about face with the Fed. And so in addition to that, you have huge, huge inflation and we can get into sticky parts and non sticky parts. The point of the matter is, is you just can’t have inflation where it is and it’s going to take a while to get that back down. So you have this Fed that is kind of putting the pedal to the metal. And in my career, I don’t know if I’ve ever seen the speed of the changes of the increases in the Fed monetary policies, meaning higher interest rates. And we won’t feel that until another 6 to 9 months because there is a lag impact. And so that’s why you’ve got these unknowns. The Fed’s doing their thing. And then fast forward what we were already seeing, a slow economy. What does this do for 2023 in terms of a recession? All that being said, I certainly don’t want to start on a really negative note because you guys know me by now. I pretty much try to look at the glass is half full and I would simply say the S&P is down 23% year to date. Nasdaq down 31. And if you think about the long term average compound annual growth rate in the S&P 500, the total return, it’s 10%. So you’re going to have ups and downs and mean reversions all over the place. And I think that’s really what you’re seeing this year, unfortunately, is not only a mean reversion in equities, but fixed income people forgot they could lose money in fixed income. Now everyone is losing money in spades and everyone is so down and out. These are the kinds of times when maybe you want to start looking past some of this stuff and we can talk about opportunities for sure. [00:57:37][135.7]

Dan Nathan: [00:57:38] Yeah. So stuff you bring up a really good point about the average return of the S&P 500. You also bring up the point of the average decline of the S&P 500 in a recession. And right now, like you said, we’re down 23%. The average decline is down about 30 or so during a recession. Well, we haven’t had the recession yet. And we have fears of a recession because to your point, the lag in which some of this tighter monetary policy is going to take to kind of seep its way through the economy, I just say, what are the biggest things right now? If you take out the 2020 recession that we had in February, March, April, the spring of 2020, during the pandemic, and you go back to the financial crisis and then you go back to the post .com period. In both instances, the Federal Reserve went from being slightly hawkish to very, very dovish. And so to your point before, now they’re as hawkish as they’ve ever been in our lifetimes. And so that’s why this might be different to me before we even had the official bell ring of the recession. I’m just curious, is it different this time? Because again. We’ve all been just lulled into this by the dip. And whenever we have any storm clouds on the horizon, the Fed gets easy. [00:58:47][69.0]

Stephanie Link: [00:58:48] Well, yeah, no. I mean, it’s been a by the dip for the last ten years. Right. And so it certainly is not that this year. I just don’t buy into the fact that what some of the market pundits like at delivering Alpha today, for example, said you won’t make money in the Dow or the S&P for the next ten years. So many things can change and the Fed has got to get inflation under control, but they will. And in that process, certainly we are going to slow. We might see a recession. I have a pretty high odds that we will next year, but markets are forward looking mechanisms. And while we could go down more, certainly, as you mentioned, Dan, the average in a recession, the market goes down 30%, you’re down 23%. So your risk reward is certainly starting to get more interesting. That all being said, I think we need the Fed to pivot for us to really take off or at least get hints of them trying to pivot. Now the BOE today, the Bank of England did change their monetary policy. Today they went from Q2 to Q3 and who the heck knows what’s going on over there? But here’s the reason why. I don’t think the Fed is going to pivot following this news. It’s because the BOE is one of their mandates, is financial stability. And their bond market, their fixed income market was in disarray. They had to fix the bond market. And I don’t know if these actions actually do fix it, but they had to calm it all down. The Fed’s mandate, as you both know, it’s a dual mandate. It’s jobs and it’s inflation. Well, jobs are okay. They’re actually quite strong and inflation is quite high, as I’ve mentioned now a couple of times. So the Fed is going to have to continue to at least jawbone talk about being more hawkish for a bit more time. I do think eventually they are going to be successful. We are already starting to see parts of inflation come down on the commodity side of things. And so we just have to wait. We have to wait it out and see. And it’s going to take some time. We’ve made a lot of money over the last many years. Just take a deep breath. And this is the time when I look to upgrade my portfolio by number one. And number two is in the industry. And I know both of you are doing the very same thing. [01:00:55][127.5]

Guy Adami: [01:00:56] When you watch the shows that you’re on. I mean, you’re one of the people that can stand in the pocket when the world gets faster. You slow things down. I mean, that’s a skill set and I’m not blowing smoke. It happens to be true. You bring up all the time, stephanie, it’s important people forget a lot of this is conversation. But what it comes down to the foundations of the market are earnings, earnings growth, revenue and revenue growth and what you’re willing to pay for those things. And you break that down with individual stocks and you break it down with the markets. So here we are. A lot of people are doing back of the envelope math coming to different price targets for the S&P and the environment that we’re in. And we’ll probably continue to be in for the foreseeable future. What’s the right multiple and what’s your earnings sort of outlook? Because that really is how you get to the S&P number. [01:01:41][45.3]

Stephanie Link: [01:01:42] You guys are asking all the right questions and these are really hard to answer because, you know, the long term average multiple on the S&P 500 is anywhere from 14 to 16 times depending on where interest rates are. I would kind of lean more towards the 14 times given where interest rates are. Right. There are a lot higher. And so here’s the thing. All the things we just talked about, the economy slowing, the Fed doing their thing, the global economy is also slowing, certainly is going to put pressure on earnings. I’m kind of surprised earnings haven’t come down for next year. Strategists are still and economists are still expecting about 8% for next year. That’s way too high. We know that. We absolutely know that. Here’s the thing, though. I mean, I feel like not only are the broader averages down so much, stocks are down, some of them are down 40 and 50%. And so, sure, earnings might come down. And so maybe they’re not as cheap as we thought, but they’re discounting a lot of bad news. And so I feel like the broader averages, I feel are going to be choppy and remain choppy. But I think you can take advantage of some of these high quality companies that I mentioned before, number one. And number two in the industry, buying back a whole bunch of stock balance sheets are great, free cash flow is strong. Those kind of companies that are down 30, 40, 50%, I think is worth a nibble, at least if you have a longer term time horizon. But yeah, for the foreseeable future, Guy, you’re spot on. It’s going to be choppy for sure. [01:03:02][80.5]

Guy Adami: [01:03:03] That’s going to be the tail, right? One of these companies is going to say something and I’m not suggesting I know who it’s going to be. They’re going to say something. It’s pretty bad and the stock action is going to be pretty good. And then you have to start looking at things and say, you know what, the market’s finally discounted it. Now, the other side of that is a name like Federal Express. So, listen, I think most of Federal Express is Federal Express specific, but you can’t underestimate some of the things that have happened. So there’s so many cross-currents here, but we’re starting to see it. And I would submit as much as it’s a good thing that we haven’t seen demand come down yet might be a bad thing as well, because there’s an inevitability to all this and. We’re getting hints of it from Apple and we’ll see what happens with some of these other names. But I think we’re closer to that than we’ve obviously been in quite some time. And I would submit stuff that’s probably a healthy thing. [01:03:51][48.1]

Stephanie Link: [01:03:52] Oh, absolutely. I mean, I think there are so many people that are so nervous, that are negative, that are throwing in the towel. I talked to a lot of advisors at HighTower and they are kind of pulling their hair out. There are many PMs you guys know and I know that haven’t ever seen inflation like this or have never seen a Fed this aggressive. And I barely have seen it. And I’ve been in the business for 30 years. So we know there are some PMs that are running money that are just scared out of their minds. And that’s a terrible way to invest. You’ve got to take emotion out of it. Everybody says they buy low, sell high. They don’t. They buy high and they sell low. And we know that to be a fact. It’s really, really hard to buy low. And when I know it’s kind of sort of getting in the right frame of mind to be buying. It’s like when I’m under my desk and I’m hitting the buy button and it’s really challenging and that’s really what’s going on right now. It’s really challenging. So, look, we have a lot to get through. We have earnings in a couple of weeks. We’ll get a lot of information. It’s not the worst thing in the world to have a recession. Recessions happen. We’ll come out on the other side of this just fine. [01:04:57][65.8]

Dan Nathan: [01:04:59] Let’s talk about earnings, because to the point that you just made with estimates starting to come down a little bit, that was kind of the story of the Q2 earnings period into July where we saw estimates come down. When we saw the actual results, they weren’t as bad as some had feared because they’re now coming in line or beating lowered estimates. And so we had that late July into August ramp here. I read a stat from FactSet earlier today that Q3 earnings have come down far greater over five, ten, 15, 20 year average. So analysts and strategists are starting to get the memo here for the price action to the downside. Do you think there’s a potential, though, despite the poor visibility when Guy just mentioned FedEx, you have to think the strong dollar is impacting that. Just all the disruption to global supply chains, the wars, continued lockdowns in China. This is not going to be a great quarter for multinationals. So do you think there’s a chance that investors with lowered expectations start looking by that? And to Guys point, we woke up this morning, there was a Bloomberg report that Apple is cutting back some production of iphones. They just released it. The stock was down four and a quarter percent. Pre-opening the stock market screaming here it’s only down one and a half percent or so. Is it a possibility that we see a kind of look past this current quarter? [01:06:14][75.5]

Stephanie Link: [01:06:15] There’s a very good chance that we look past this quarter. I think that companies are going to use this quarter perhaps to kitchen sink some things, too, right? I mean, we know all the things that you just mentioned. We all we know all the negatives. Do we know any positives? How about companies that have pricing power? How about companies that over the last three years, they were forced to streamline their businesses, to think differently, to buy more technology and get more productive? U.S. companies are so resilient, and I’m not saying it’s different this time because the numbers are going to come down. We know it’s just a matter of how can they manage it and which companies can get out to the other side in a healthy fashion. And when you have some companies, the bluest of blue chip companies, Starbucks comes to mind. Chevron comes to mind. Meta comes to mind when you have these companies that are down so much while Chevron is not down at all. But you have these other companies that are down, but they’ve done such a great job at generating free cash flow and they’re putting it into shareholder value creation and they’re also putting it into their businesses so that they can grow. These are times when you do want to be buying. Do you want to buy in front of earnings? I don’t know. Maybe buy a little. Now you buy a little bit on the earnings. But I do think that the U.S. companies have been amazingly resilient, especially on the margin front. And with commodity costs coming down, supply chains getting better, I just think they’ll be able to weather the storm a little bit better. Again, they’re already reflecting a ton of bad news. [01:07:42][87.2]

Guy Adami: [01:07:43] Steph. You wear a much different hat than we do. So as traders, regardless of thesis, regardless of whether or not the story change, if something moves, whatever percentage against you, it’s in our nature to cut your losses and take a fresh look because that’s what traders do. But in your seat it’s a lot different. So in our world, price dictates action, but in your world, price doesn’t really have anything to do with it. But sometimes the story does change and you have to change with it. Can you sort of speak to that? Because I think it’s a really important distinction for people. [01:08:19][36.0]

Stephanie Link: [01:08:20] Absolutely. So I do focus on fundamentals. I do think about total addressable market. What is a company’s market share? As I mentioned before, really good free cash flow and balance sheets and all of that. If something changes, completely changes, then it is certainly worth taking a look. So for example, I. Owned for a while Wynn Resorts and I owned it because I thought well a casinos gaming white hot in North America and in China in Macau. We know it’s horrible and we know that China is eventually going to reopen. Well, actually recently trimmed that position because guess what? It seems like China is going to be closed for an extended period of time and that’s a thesis changer. Even though it’s only 25% of EBIT for the company, it used to be 75%. It’s a thesis changer for me because it’s just going to take a lot longer for the story to work its way through. Not that it’s a bad company, but it’s opportunity cost. I could use that money elsewhere and so actually use that money. And I bought Dollar General most recently. I just think no matter what environment we’re going to see in the next year or so, they are able to deliver because they have an assortment mix story, they have margin story, 80% of their business is consumable. So I am long term. But if it’s going to take more than I saw to make the story work and something happens in my process and my thesis changes, I have to take the loss and I just have to move on and kind of forget about it and just look for the next best idea. [01:09:49][88.6]

Dan Nathan: [01:09:50] Steph are there areas in the market right now, let’s just say you think we’re closer to the end than we are to the beginning of, let’s say, this bear market. A lot of the recent price action in equities has been dictated by the rise in interest rates. And we spend a lot of time talking about that right now. August 2nd, the ten year U.S. Treasury yield was at 2.51 this morning, it traded 4.01 and it reversed. And Guy, I’m just going to let you in here. It’s trading at 3.7. Do you think that’s at all natural there, buddy? But that was the fuel for equities today. Here we are. We’re talking it’s Wednesday into the close and we’re up 2%. And I just do not think if the ten year was marching above four, it looks like it was just on a runaway breakout and the U.S. dollar index was continuing and it obviously reversed a little bit today, too. I just don’t think we’d have this upward price action in stocks right now. Talk to us about that dynamic and then where in this environment, okay, none of us think that yields are going to come crashing down, but they’re going to be elevated, especially year over year, other parts of the equity market where you really want to be exposed in that environment. [01:10:52][61.6]

Stephanie Link: [01:10:52] So one of the areas where I think people have just written off are consumer discretionary. I think people think that the consumer is just going to roll right over. I think the three of us know that the US, we are a nation of spenders no matter what we take on debt if we have to, but we spend now we can argue as a goods or services. It all pins on jobs. And I know that jobs eventually will come down because that’s what the Fed wants. They want to see housing down and they want to see jobs down. They want to see jobs down because wages are too high and wages and rents are stickier parts of inflation. But I would say that this sector is just hated. It’s totally ignored. And I think as long as we do have an unemployment, let’s just say below four and a half percent, maybe even at 5%, I think consumers will continue to spend because I don’t think wages are going down. And at the same time, I think commodity prices, i.e. especially gasoline coming down, is actually going to make them feel better. It may not happen right away, but I do think that 70% of our economy is the consumer, and I’m not writing them off at this point in time. And the sector is down so much and so many stocks are just so hated. So that’s an area where I like, I think interest rates. You mentioned the kind of all over the place. I personally think that we’re still trying to figure out price discovery because we’ve got a Fed that’s manipulating the market. So we have no idea what the real true price is and what the valuation is. But I do think that the financials can actually catch a bid here. I know they’re hated too. They’re very, very cheap and they do benefit and many of them benefit from the short end going higher because they’ve got very sticky deposits. And you’re talking about one times book with very good capital. The regulators have forced them to have excess capital. And so this is not 2008 all over again. And knock on wood, of course, I still think industrials are an attractive place to be, and I think that’s onshoring, to be honest with you. I think that is what these stocks are kind of pricing in. And if the dollar just hangs back just a little bit, then that sector will do fine. Everybody wants to buy tech. Everybody wants to buy growth. Not 100% sure that works. Lastly, I would say I still think energy is attractive because I think structurally that industry has totally changed in terms of supply dynamics as well. Shareholder value creation dynamics. [01:13:15][142.6]

Guy Adami: [01:13:16] Yeah let’s talk about energy real quick because I will tell you, I was one of those people that in the fall of last year, I thought energy was the place to be. That proved to be correct. I think when it spiked the commodity in March, I believe up to one third we all thought was a bit of a blow off top. The sell off was probably a little more precipitous than I thought, but I did think we’d bounce. That bounce I thought would take us to new highs. It didn’t happen. Dan was all over it. He thought we’d actually mean revert to the levels that we find ourselves in now. I’m with you. I understand why people are selling the commodity. They feel that a global slowdown will see demand destruction. So they’re trying to get ahead of that. It makes sense, coupled with the fact that the dollar has been on fire and that creates some headwinds. With that said, you haven’t seen the demand destruction that everybody is waiting for. So this is a bit of a rhetorical question, I guess, but what am I missing here in energy? Because these companies are run better than they’ve ever been run vis a vis ESG and vis a vis a time when the front month accrued with the -$39 a barrel, all those things forced them to run themselves better. They’re just better companies. They’re cheaper now. They should thrive in this environment. But the stocks aren’t doing it. [01:14:29][73.8]

Stephanie Link: [01:14:30] I think they’ve had a really nice run and I think people are afraid and people are taking at any cost, they’re are taking their gains where they can. I think it’s very healthy to have a pullback. And I think that to your point, Guy, these companies are being run way better than they ever have. They’re not cowboys anymore. They used to be they are not overproducing when the crude prices go higher. So you don’t have this boom bust kind of scenario. But what I think is really the reason why these stocks have come back is I don’t think people believe in the supply story and I think they are giving over emphasis to the demand destruction. But these companies have changed massively because of ESG and ESG investors, and they are getting more clean and more green and they have all kinds of plans on doing so. And instead of overproducing, they’re returning the free cash flow back to shareholders in buybacks, dividends and special dividends. I’ve lost count how many times, for example Diamondback, I think it’s been four times. They had a special dividend this year alone. It’s incredible. The free cash flow stories are amazing. The break evens are 40 to $50. So even oil here at these prices, they’re still minting money and perhaps maybe they don’t return their free cash flow to shareholders as aggressively going forward. They’re still going to do so. And I think that when you have companies being more efficient, you have the SPR, which we’ve got it now at 40 year lows. We have to go and replenish that. You have opec+ cutting production. I feel like the supply side of the story still is very, very lean. And I also think this one last thing, we haven’t had to pay attention to energy for ten years. It got to 3% of the S&P 500. It is now after the rally this year, a whopping 5% of the S&P 500. So back in the eighties, as you both know, it was 19%. You had to pay attention to it. So I think people are nonbelievers. I don’t think you have all the generalists understanding the energy market, not to the extent they should. And let’s get worried when the growth managers start asking us about which energy stock to buy. [01:16:40][129.9]

Guy Adami: [01:16:41] Yeah, I’m with you. And this is more statement that you can respond to if you choose, but you don’t have to take my word for it. I mean, people should listen to you long before they listen to me, but they should listen to Warren Buffett as well. I mean, you think about it, it’s amazing when he’s buying things that they love, like Apple or something, everybody champions them. He’s a genius. He buys 19% of oxy and it’s like the guys lost something off his fastball. Maybe he has. But, you know, he clearly sees something as well in a sector now that everybody seemingly is sort of brushed to the side. [01:17:13][32.1]

Stephanie Link: [01:17:13] Yeah. And I would just add, I think Warren Buffett is a value investor and these are values, believe it or not, these stocks, the PEs, the multiples have actually come down while the estimates continue to go higher and the stocks go higher. So I think there’s real value there. I think you just have to have confidence in the supply demand story. And yeah, if we got a deep recession, would these stocks pull back further? Of course they will. But find some quality ones. Find some ones that have good dividend yields. I was buying Chevron when it yielded 9% back in 2020. I mean, as long as you feel confident in the balance sheets. Right. And that’s why I mentioned free cash flow. [01:17:47][34.1]

Dan Nathan: [01:17:48] Steph, let’s go back to Tech for a second, because when you’re talking about the areas that you want to be exposed to in a recessionary environment or ones that might lead us out of this environment, you mentioned tech here. It’s not a place that you kind of want to be as it relates to growth. And we know that some of the areas of the market that have been getting killed long before the S&P 500 topped out on January 2nd was high growth, high valuation tech. Now, we also know that the top five names in both the S&P and the Nasdaq are all tech names. So consumer discretionary, as you mentioned here. So we have Apple. Microsoft traded about 25 times. Amazon obviously the same Google alphabet much cheaper. I’m sure as a value gal, you’re probably starting to kick the tires in a matter. These are trading at unusual values relative to the last ten years. But is there a chance that the market can rally without those names? Because to me, obviously, they make up a huge part of the weight of those indices. But they also make up a lot of the expected earnings growth. And really just from a sentiment standpoint, expect them to be leaders. And I don’t really see anybody who’s ready to knock them off their incumbency right now. So I’m just curious, as you think about maybe the concentration of those names and their ability to once again get back on the horse and lead. And then also, what about all these names that have been absolutely murdered, down 60, 70, 80%? [01:19:03][74.6]

Stephanie Link: [01:19:04] Well, those are the ones that probably don’t have earnings. So that’s the one place I don’t want to be buying, especially as interest rates inch higher. And I think interest rates are going to enter. And if they don’t in China from here in I’m wrong, I still believe they’ll stay high and so the non earners no touch for me unless you want to take a flier one or two. That’s perfectly fine. Take the one you like and have at it. But that is not where I want to be focused as a long term investor, not one. I can get some of these fang names that are down 20, 30, 40, 50, 60%. So I don’t know if they’re going to be leaders, but I do think that the market will struggle if the tech and comm services as a whole, if you add them together, if they underperform because it’s 35% of the S&P 500. So therefore you need every other sector to outperform for the market to do better. And so I think that’s a tall ask. That being said, I do think that there is a way to play tech, and I think that’s like kind of a barbell. Like I have some value names and with some dividends and I have some growth names with great total addressable markets which are expensive. But I feel very strongly that their earnings over the long period of time will remain above average again because they are in the total addressable market space of cybersecurity, AI cloud data center. We know all the themes and so I definitely wanna have exposure there, but I don’t necessarily think you have to have this broad stroke of just growth and just tech, especially as rates remain elevated. But it remains to be seen. I will say this, I just talked to a colleague of mine and I thought, well, I own Merrill. Unfortunately, I’ve suffered with it. But actually Alphabet is starting to become much more interesting to me, down 30%, trading at 17 times forward. Not there just yet, but we get another down leg in the market. I think that’s quality on sale and that’s sort of kind of how I invest. [01:20:50][106.5]

Guy Adami: [01:20:52] John Malkovich, Matt Damon, Ed Norton, great movie, Rounders. Love it. If it’s on, I’m watching it. What you say, Guy what the why you. Because everybody has a tell and you just showed your tell when you said have at it. That proved to me that you actually watch fast money because that’s Dan Nathan have at it people you channeled your inner Dan Nathan fast money. [01:21:18][26.8]

Stephanie Link: [01:21:19] I did [01:21:19][0.3]

Guy Adami: [01:21:19] Don’t pretend you don’t watch number one anyway listen, before we get out of here, the independent advisory world, that’s where everybody’s going. I mean, it’s clear the wire hazards, they seem to be dinosaurs, the peoples of the world. But Hightower, you got a lot of really cool things going on under the stewardship of Bob Oros, who happens to be a friend. Full disclosure, just speak to that real quick. [01:21:40][21.2]

Stephanie Link: [01:21:41] I will, I’m a big fan of both of you and I actually DVR all the time fast money [01:21:46][4.8]

Guy Adami: [01:21:49] Stop it now okay. Dont bullshit me Steph. Now I know you just you were doing so well. My 30 minute mark you spit the bit [01:21:54][5.4]

Stephanie Link: [01:21:55] My daughter wants to watch it with me. That’s even the better of it. All right, so she’s learning stuff. No, seriously. It’s a great, great show. I always enjoy it. I always feel like I’m in the know, the immediate know. I feel like I know my stuff. But you guys, you know, the minute to minute stuff and why things are actually acting the way they are, which is really pretty darn cool and very, very hard. So thanks for the plug for Hightower as well as Bob Oros, we’re doing a really great job in terms of growing both organically and inorganically, meaning M&A. And what I really enjoy about the firm is that it does have the size and scale in the industry and the market share, but it also has that intimate feel of just good people wanting to grow. And you guys have been in this business just as long as I, if not longer and, you know, the financial services industry is under enormous stress in terms of buy side and sell side. And well, the independent wealth management channel is actually growing and that’s sort of been a fun part to be a part of. So thanks for the shout out there. [01:22:53][58.2]

Dan Nathan: [01:22:54] Well, Steph, they’re lucky to have you as a voice and a face of the organization and just right back at you, too. I mean, we really enjoy listening and watching you on the investment committee. I saw you on the floor of the New York Stock Exchange with Scott last week and the OT there. And it’s always fun to listen to your commentary. So Guy and I, we can’t be happier about having you join us on the tape and we hope that you will come back soon. Steph. [01:23:15][21.6]

Stephanie Link: [01:23:16] Always. Thank you so much, guys. [01:23:16][0.0]

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