On the Tape.
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They are also the people behind the alternative investment industry's largest and most exciting in-person events. To find out more about iConnections events and members-only platform, visit iConnections.io. All right, welcome to a very special edition of the Risk Reversal Podcast. Some might call this a market reversal.
In turmoil edition, that's what we're doing here. I'm Dan Nathan. I'm joined by Danny Moses to my right, Vincent Daniel to my left, and Porter Collins. Those are the Seawolf Capital guys. We're going to do a little bit of a rundown of what we're seeing. This is Thursday into the close. It's a little after 3 o'clock here. This is an emergency pod.
Let's just be very clear about that. All right. Let's kind of level set here. The S&P is down 4%. The NASDAQ is down 5%. The VIX is trading at 27.5%. The equal weight S&P down 4%. Interesting a little bit to me. The 10-year yield, 4.05%. Crude oil just below 67. The U.S. dollar index at about...
102. Where do you want to start? Jump ball here, gentlemen. What are we thinking about the news that we got? Much worse than expected, the way the market is taking it here. Let's do it, Porter. What do you got? Well, thanks for having us on. I've never been in a markets in turmoil podcast. I'm pretty excited about it, honestly. I think usually when we're all together, it's a bearish podcast and the market's on the lows. And so this feels pretty
Pretty good for me. I actually said to somebody yesterday, this feels a bit like 08, where you really had no idea what was going on. That's how big of an event it was last night, where it's like,
I don't know. We were joking around. So the Nike staff meeting this morning, 10 o'clock in Eugene, Oregon, 1 o'clock here. Hey, guys, the stock's down 25%. They said we're going to tariff everything from Vietnam at 45%. Well, what do you guys want to do? Right.
Get him on the phone. Get Vietnam on the phone. So Vinny, are you surprised that, again, some of these companies did not have more sway with the administration, right? Because we saw no shortage of lineup. This is coming from election day all through the transition because what's going on here on a single stock basis is pretty devastating to kind of Porter's point about a Nike in particular. I think that's the exact reason for the move, right? Because I think a lot of investors, whether it's institutional retail or
Just couldn't possibly believe that the path that we were going to take, which was the three standard deviation tariff announcement we got yesterday, was going to be probable. Well, we woke up at 4.30 and we realized it was. And it feels to me that...
While I think hedge funds moved their feet about two or three weeks ago, I don't think the long-run community moved their feet, and I don't think the retail community moved their feet. And mainly because they probably said, well, there's no way he's going to go through with like this, right? Or, yeah, he's going to announce the tariffs. He'll be reciprocal tariffs. But at the same time, we're going to have TikTok coming to the United States or BYD coming to the United States. So we're seeing the beginning of the end of the light of the tunnel. Now we don't have that.
Right? And so as a result, all you have is uncertainty. And we all know that markets hate uncertainty. So even though this was known,
I just think we took the worst path and hence the day. So Danny, Guy's been saying for about a week or two, it's the chaos is the issue. Like this is what they want to kind of create or Trump in particular. We saw that in Trump 1.0. You're not buying that. No, I mean, listen, they're breaking things, right? So the whole idea of finding waste and fraud in the government and getting rid of it, of course, makes sense. But you do it the right way. You don't just go in and, you know,
wreck everything in sight. Same way with this. So we want to bring jobs and companies back to US and sent them to bring jobs and reshore them back here. Great. That's been kind of an ongoing plan. You can't just undo multi-generational capital plans in a day and do that. But the worst part about it is, is that the math behind it makes no sense.
So all that being said, whether it's whatever the tariff number was, it would be there's people that are saying we'll get through this way. But understand that the math doesn't work. So for people out there that aren't paying attention, just looking at numbers up on a board, they took the trade deficit with a particular partner or country and use the amount that they buy from us and did a percentage basis on it on chat GPT. It appears because all four large language models came out with the same exact numbers of what you saw up on the screen. Ninety two percent.
So nothing went into this. And the fact that Scott Besson said, I really wasn't involved in the process. He's out touting the fact that look, 10 year yields are back to 4%. Well, yields dropping for the wrong reasons is the worst kind of drop because credit spreads are widening. Credit spreads are blowing out. This is a financialized economy. It's been a financialized economy since 08, since we saw the blow up. And now you can't just unwind that. So de-evaluate.
Deep breath. I think these things will be undone. However, to a degree, I think the damage, though, from a trustworthiness as a partner, the U.S., at least for the time period, is damaged. So I think we're looking at a permanent or temporarily permanent, it'll feel permanent, impairment in the valuation of what people are willing to pay for the U.S. stock market. And I think we're sitting here at 21 times 2025 earnings still here. We know it's probably 22 times because we know numbers are probably coming down another 5%.
So look at it holistically. Yes, you can buy things that maybe aren't impacted by any of this, some of these names, and just buy some good stuff. I'm not saying you should pile into the short here because I believe cooler heads at some point will prevail. So Porter, you just mentioned it reminds you a bit of 2008. I suspect you're not talking about actually the reasons for the decline in 2008. But when somebody hears that, especially when they hear it from you guys, they're going to pay attention a little bit. So give us like, you know,
some of the similarities here because like for instance, the S&P is one more day like this and we have an S&P that's down 15% on the year or something like that. And if you think about peak to trough in 2008 into '09, the stock market got cut in half. We go back to the dot-com, it got cut in half, this is the S&P 500. What are some of the similarities and how far do you think this can go if we do have a protracted trade war?
Well, you know, one of the things that reminds me is just that stress feeling of unease of, I don't know what's going on, right? And you'd have different policy announcements in 08, you'd have different, you know, programs from the Fed, and you'd try to, you know, analyze it all at once, and all the stocks would go up, or all the stocks would go down. It's just kind of like today. Like he said something, all the stocks went down, right? And usually...
The best days are in the next week, you can figure out what stocks to buy, figure out what stocks to short. And so that's that very macro market. They all gap up and gap down together based on headlines. And it's really hard for an investor to do that. One of the more bullish things that I think about here is that we've had this glorious easy run of...
markets for call it 15 years since '08, '09. The only place to be was the index.
Nothing beat the S&P. I actually feel like this, and many people have called false breakouts of this, it might be the return of the active investor, the hedge fund out there who, hey, remember guys out of short stocks? Remember what it's like? Based on fundamentals, not a short report or anything like that. Based on, hey, Nike's in trouble. Apple's in trouble. I think that this can trade on a lower number.
a lower PE and things are maybe more rational. That's not going to happen, we know that, but it's a beautiful mind thesis. Whether it works or not, I don't know, but it makes me feel good to say it. I was about to say, so your bull case argument is that life's going to get exceedingly more difficult for the average investor? Yes. Okay. All right. I actually agree with him. Anyway, but I think in the here and now, right, Carter Worth used that.
I think that the problem is that we were probably headed into an economic slowdown already, right? And now that he announced what he announced, it's going to be more severe and protracted, right? Unless there's a complete 180 on policy, but it's really difficult to foresee that.
And so you have to start thinking about like, okay, what stocks can I own? Certain stocks that are down a lot look cheap, but if I start putting it in a recessionary outcome where no one really cares how cheap something is, it just goes lower, you could probably wait longer on certain names. Other names where you could actually maybe benefit from whatever it is we're expect to see. For example-
10-year yields better come down, right? Like if they do not come down,
we have a problem and we've talked about but if they come down it's because of growth fears yes okay well what are you what are you talking about what what are you saying that these tariffs if they don't undo some of these this is not this is not you can skate through this these ceos well you made it sound like well it was like a bump in the road no if you just said let's assume that they stay in place these things if they stay in place we're going
way lower. It's not even, but these are nonsensical. They don't make, so you now as a CEO, are you going to
Make a plan, like a CapEx plan now, and reshore everything. Go through this entire thing, knowing that it could be undone by potentially the next administration. No, you're not going to do it. Okay, let's walk through this. Go ahead. Of Nike. So they walk in and their staff meeting today, what do they do? Do they say, okay, we're going to reshore everything in the U.S.? Probably not. Do they make some fake announcements, say they're going to, you know, make –
Open a plant in the U.S.? They're going to study it. They're going to open a plant in the U.S. and then put a lot of money behind the Dems in the next election so he's out and then life goes back to normal. It's going to be a real problem. And do I think they walk it back? Probably. Probably in some stage, but not completely. And so I think that corporate profit margins are going down. I think that employment is probably going up.
What do you mean employment's going up? Unemployment. Unemployment. Sorry. Unemployment's going up. Unemployment. Yeah. And so...
I think it's problematic. We just fixed the supply chain. We didn't fix anything. Well, the COVID post COVID supply chain issue shortage of this, things got rectified. Finally, things are, I'm not saying humming along, but they figured things out that in and of itself was a difficult task to reallocate. They moved some stuff around. Some was reshored as a result of it. Great. Near short. Now they got terrible. Right. You're short. But the point is that you just brought up a great point. So holistically looking at the market,
Debt to GDP of the US, 130% approaching or 125. GDP is going to get hit on this. There's not enough offset of the government to make that ratio any better. It's worse, right? You probably bring back quant. That's inflation though, that helps. What's that? Inflation helps though. Yeah, but my point is this, like this is a major shock to the system, exact wrong time. We haven't had a real cycle. Remember, we were about to go on a real cycle right before COVID. We were going into it. I talked about this all, COVID hit, all hell broke loose, stimulate, stimulate QE4.
We haven't dealt with any unwind since we traded the great financial crisis together. And what happened then? We transferred the risk of corporate America to the federal balance sheet. We're trying to now fix the federal balance sheet, right? At the same point, we're now going to damage these corporations. That's the difference. This is almost like a Brexit on-
on a global scale. That's a great way to, that's actually a great way to talk about it. Yeah, we just Brexited ourselves without a plan. Yep. That's actually, that is actually the best way to describe it. let me ask you guys this though. Let's say we don't get big concessions from the ones that matter and then we have to do bailouts again like we had to do for the farmers back in 2018. We'll probably have to do it for the autos. Like, at that,
at that point, then what does that mean? Like, this is like a self, it's like an own goal. It's like, you're not going to fix anything. They're going to lose the midterms, right? They probably lose the White House in 2028 and then nothing happens. You know what I mean? Like, so it's like, why are we doing this? You know, I've said this a couple of times in the last day or so. It's like if they had used a scalpel
If they had gone after China first, like they did in 2018, and then start getting some of these unfair practices with your allies, your biggest trading partners, that might have been a pretty smart way to do it. And the other thing is in 2018, Gary Cohn came in. What do you want to do? You want to get tax cuts. And that gave the economy and the stock market a bit of a tailwind. So right now, it almost seems like they're literally trying to fuck things up on purpose.
Yes. Partially, yes. You have to go with that philosophy or it doesn't make any sense at all. Well, let's also keep in mind, whether I agree with him or not, it's not the point. Their view is that we have been wronged for the last 40 years and middle America got the shaft and he wants to alter the course. Now, we could yell at each other left and right, whether that's BS or whatever. That's what they're telling us, you know.
We should actually listen to what they're telling us because they haven't been, I mean, he hasn't shied away from his policy. In 40 years he hasn't. But Vinny, my question to you is that we know who made those decisions 40 years ago or 50 years ago. It was CEOs of U.S. companies. And to your point about Nike, 6.5% of their manufacturing is here in the U.S. So who are these punitive measures against? Are they versus our trading partners? Are they versus U.S. companies here?
Well, I think some of it's probably against US companies here, right? It's a bit of everything, right? Because it's Nike who made the decision to manufacture everything in Vietnam. And listen, would I have chose to do things differently? Yes. But that's not... No one listens to us, right? And so...
you know, it's going to be a real issue because I just don't know the uncertainty is going to be around for a long time. 75% of the economy, at least, is services. 25% is the goods. We're doing math on just the goods part. What's the services part? Travel and leisure, right? Financial services is actually service. That's part of the service economy. So we're doing two things here. One is we're damaging or tearing the fabric of the U.S., in my opinion, as a trustworthy partner, period.
So what does that mean to the service end of the sector, people choosing not to do business, not to go actually do stuff with the United States of America? It has this has fallen on our vacation. So my concern isn't just the economic impact of what Nike needs to do. It's the overall attitude
towards the United States as a partner, you know, as a place of commerce. And that to me is the part I can't price it in. I'm not going to go sell stocks on that. But that's what you have to start to think about. And the point about should Nike have made stuff in the U.S., should Apple make phones in the U.S.? That would have been great. But you know what?
There wouldn't be 300 million iPhones in the hands of people in the United States and there wouldn't be Nike shoes everywhere that were affordable. And so you can't have your cake and eat it too on both sides of the equation. But you can't just unwind the globalization, the markets in a night on a poster board with a number. This is not a political statement. Scott Besson didn't even know the answer to the question of does the additional China tariffs include the 20 percent that was already there? He says, I don't know.
So who is not consulting with people that actually are supposed to make, this is crazy. Shamath comes out. He goes, it's working 4%. Hey, Shamath, if you listen to this, which you probably don't, you probably don't. Are you looking at credit spreads? They are blowing out. This economy is a financialized economy. Oh, good luck with your auto finance. Good luck with home finance. Good luck with securitizing anything because you just damaged it. Go ahead, Vinny. Is it Shamath or Kamath? Kamath.
Chamath. Chamath. Pali Habatia. Chamath has already. Did I say Chamath? I know you did. You did. Chamath has already sold his SPACs. Yeah. He doesn't care. He's the one advising. He's in the White House interviewing people. He's interviewing Howard. But I need to watch those two guys talk to each other. But listen to the way we're yelling at each other.
No, it's just frustrating. The uncertainty out there is high, extremely high. It's really hard for anyone, for us, for corporations, for Nike, for Microsoft, for anyone to make decisions in a big, major way. So as a result, what does that mean to markets? I don't know. Bias down? No one's hiring. No one's hiring. Well, the government's not. Well, that's the beauty of the thing is-
The plug hole for all the jobs that we shipped overseas was the US government. And now we're cutting those jobs as well. So in many respects, I don't know, this is a nasty brew. Do we have a lot of sympathy for the fact that manufacturing jobs have been lost and towns in Cleveland and whatever have been hollowed out for years? Yes. Should we have a more of a turn towards that? I think so. But the problem is, is that
In a perfect world, we'd have no tariffs anywhere, right? Or some people protecting maybe the dairy industry or something like that. But the US is uncompetitive. The wages are too high. Steve Jobs didn't decide to build his iPhone company
You know, in Cleveland, he went overseas because it was cheaper. Yeah, but there's two other things. One other thing is really important, I think, that we're missing from that. They also wanted access to that market. There's 250 million iPhones here in America or whatever the hell iOS devices. There's also 250 million iOS devices in China. So think about that. You know what I mean? And here's a company that has 90% of the gross margin for smartphones around the world, partially because they build smartphones.
the phones in China. They employ a million people through their OEMs and fabs, you know what I mean, building these sorts of things or whatever. So it's not so simple about the hollowing out of middle America because we couldn't have these companies. These are the biggest companies the world has ever seen, right, when you think about that. And so it doesn't happen if we're manufacturing them here in America.
No, it doesn't. But the other side would suggest maybe we shouldn't have had that. Yeah, but think about 90% of the innovation in technology over the last 50 years also comes from here. And they're only able to fund that R&D and CapEx because they have that profitability, not just here because of cheap labor overseas, but they have access to all those markets overseas. Well, the other thing going on right now is the wealth effect is going to go the other way. We've
We've had the wealth effect has been a huge boon for consumer spending, for the stock market, people investing. And I always underestimated that during when the market was rising the last few years and it feeds on itself. Right. We know that the call the top 10 percent control 90 percent basically. And then not everyone's involved in the stock market, obviously.
But the fallout of this to me is that less spending. So it's going to feed on itself. Again, not trying to make a market call, but you got to be realistic if you're going to play this whole thing out. If you actually believe that the changes are going to come and maybe some will be permanent. I guess I'm just disappointed.
that trusting the fact that trust the process here, I don't think this thing was thought through. And to Porter's point, the Brexit that I think is a great comparison, but Brexit was coming and then they voted and it actually happened. We were trading, three of us were trading during that. And yeah, we were caught a little bit off guard.
This is even bigger to me, given that the consumer dominates the U.S. economy. And so it doesn't take much. We are already having a drop in consumer confidence. It was already happening. Now you're hearing Besant say, don't listen to what the CBO says. The CBO is the one that scores.
you know, tax proposals. And he goes, don't listen to it because they're not going to include all the gains that we're going to get from tariffs. So the next thing they do is probably shut down that organization. But anyway, so they're getting this tax package through. So they're obsessed on the minutiae, to me, in the near term. Get this tax thing through. Really? Now you want to cut taxes into a slowing economy? So I don't know. Go ahead, Benny. We're also forgetting one other thing, which we will probably... Powell? Well, no, this...
Bessem feels like Colin Powell, by the way. I was going to say Powell, Jerome Powell. No, no. Well, no. That's where I'm going, right? Which is, I think we underestimate...
How much debt was rolling over this year and how much lower? Interest costs were needed in order to roll over that debt and we had all that you might at the federal level sovereign debt or something like this year and we were all trying to figure out how how the fuck are they gonna do this right and I know alienate all the buyers of our debt go ahead and they've chosen they've chosen a path that I wouldn't have chosen and
And because in many respects, it reminds me of two historic references that they're going for. The Reagan-Volcker of the early 80s and the recession slash depression of the 1920s. They did the same thing.
Jim Grant wrote a book on the 1920s recession, in case anyone wants to read it. Early 20s, yeah. And they basically sunk the economy quickly within six months. Now, I don't know if you could do it in this age of digitization and everything else. And globalization. And globalization. So I don't agree that they can do what they did in the 20s and also the error of information flow, but there is a stark precedent of what they're trying to do. I just don't think it's going to work. Yeah.
i mean luke roman said and he was right he goes he was hopeful that they'll fix the debt to gdp first before they start to enact any of these other policies so it puts us on fragile footing and so you're talking about god forbid on treasuries you know getting them down to because they have to issue so you're alienating the buyers of our treasuries now maybe they'll probably still buy them let's not be overly dramatic but you're doing the biggest buyers foreign buyers right so let's be clear
QE's coming back. Okay? So we are going to make up for whatever loss from demand. Then they're going to keep rates down. And whatever happens to Jerome Powell here, I don't know, but his hand's now going to be forced. And the next meeting, I don't know what the odds are right now, Dan, of CME Fed Fund futures, of what the odds are for a rate cut. It's not going to do anything because... But Danny, the problem is here for the market, right? That...
There is no Fed put right now because they're still doing QT, right? They haven't. So I think that the Fed put is a lot lower, right, in the market. Stock market-wise. Stock market-wise. I think that Trump will cave if markets call it 10% probably. He'll cave to everything because, listen, this is a report card. He'll cave. How do they do it gracefully?
It's an American to short a stock. -Trump does nothing gracefully. By the way-- -Fake win. Fake win. Yeah. He's changed the narrative of the tariffs, of why he's doing the tariffs like six times now. Someone put out something on that. But like every-- you know, before it was fentanyl. Now it's, you know, border. It's all different things, right? And so--
I just feel like the bottom's not here. It's just not. We were saying, okay, so maybe 250 in S&P earnings, right? Which would be flat-ish year over year. Yeah. And we solved for a technical level, but 19.25 times is the 28 something. What was the Carter's level, right? We were saying 4850 in S&P, which was the 2021 high in the S&P 500. Yep.
No one buys it when it gets to $48.50 because it'll feel so bad. But the point is – but I'm not – we're not here to be bears, I think, as much as – No, but I think – but if you think about it rationally, like people get upset if you're a bear. Like I'm just trying to think about it rationally. No. Where would I – because I don't buy S&P or whatever. Where would I actually feel comfortable buying the S&P? It's not there, but –
I'd put money to work there if things were okay-ish. - And this market is so difficult to trade in, I would suggest to anyone, please don't try and do it. Because we could wake up, I mean, I'm looking at each other, the four of us here, and if Guy was here, the five of us, it would be like the cover of an Economist magazine, right? And we'd almost say, go. - Not a hunting magazine with a bear on it? - No, go long. And you could wake up tomorrow in some,
obscure news from China saying studying it and in touch with DC in terms of what to do. Could. I'm not saying it's going to happen. Don't yell at me, Danny. Could happen. I want it to happen. By the way, that will happen. Yes. Just whether it's a week from now, a month from now, it's going to happen. And when that happens... They can't stomach this, by the way. No, of course. The Germans can't stomach this. No. No. But...
they're gonna, anyway, let's just say that happens, right? Market's up 3%, like that day. So it's really tough to press stuff like this. It's just tough to trade a bear market. And I would strongly suggest people, unless you're really good at it,
It's really, really hard. Does that headline, whenever it comes, does it turn the markets around meaningfully? Because you're going to hear this, it's not a BT, buy the dip anymore, it's going to be sell the rips, right? And a lot of that's going to have to do with, you can say whatever you want about the concessions that we're going to get, whether there's teeth to them or not,
Who knows, right? Turning this economy around once it's already weakened is going to be a really hard thing to do, especially if this has weakened our trading partners more than it has us in the meantime. So for instance, if you get what you think is some sort of intermediate term sort of deal that
both sides can kind of feel okay about. What does the economy do? I know that's a tough one, but Porter, I'm just curious, like, you know, based on what companies, the guidance that we get in a couple of weeks is going to be bad for a lot of these companies. So a lot of them are just going to pull it, Danny thinks there's going to be a lot of Friday night dirties. But like, isn't the economy kind of sunk for the first half of the year and possibly a technical recession? Yeah. I mean, just look at what Vinny said. The four of us can't agree on anything, like where the markets are going and like these companies will have,
To think that they have any vision in terms of what their sales are, you're kidding yourself. They have no idea how to forecast. How is Carnival Cruise going to forecast? Do people like, no, I'm staying home this year or whatever. I think it's just very, very difficult. I mean, look how quickly United Airlines or Delta or one of the airlines changed on a dime. Delta. Six weeks. Delta. Right. In the middle of all of it. Yeah. Right.
And listen, the banks, right, we're going to hear earnings from them first. And the one thing that's held up, and I press Vinny on this forever, and we're finally at the moment, we were in a moment already before tariffs is credit. Consumer credit is deteriorating. Not crazy. I know, Vinny, I'm not going to go nuts. It's not horrible. But when you look at the signs of the FHA, right, which really cater to the lower income subprime,
homeowners, right? The metrics are horrid and they have been. The auto delinquencies are growing. Subprime auto is really bad. I'm looking at three names today that I tend to track on my favorite screen, which is Affirm, Upstart, and Carvana. They are getting destroyed today.
They're not. There's no. Hold on. There's no tariff issue with Affirm as far as I can not take this thing through. Actually, one can make an argument. That they should be the beneficiary. That Carvana is a beneficiary in terms of used car pricing. But the reason is because I think credit and the. Correct. And they're wholesale financed. Right. That's the other part where the credit spreads. That's the part. That there's the hard part, as they say. And so.
I had always said, and you guys agreed, that Affirm and Upstart are financial companies hiding as tech companies. And when it really matters, Upstart is still trading at eight times book value for a financial company. They're only as good as the credit spreads. And that's it. And believe me, we saw what funding partners do to mortgage originators. We started watching it in 2005 and 2006. The plumbing started to change. They started to pull the credit lines and availability, shrink, shrink, shrink, what
what's left when the tide goes out on your balance sheet. Remember, these companies sell the best assets and keep the worst and mark their books based on the selling of the best. That's how it works. It's always worked that way. And I'm getting pissed and I'm getting angry because people, investors, not institutional investors, they're big boys and big girls. I don't care about them. They've been doing it long enough. Let them go stock picket. It's the retail investor that is now sitting there watching
I don't understand. There was 38 buy ratings with zero sell ratings on this. I don't understand. They just got it up before. I don't understand. I thought it was a tech platform. I'm just saying in general. That's why I'm upset. Because you try to educate me. Oh, you're bearish. You're this and the bearish. No, we're realists is what we are. And now we're dealing with, sorry. That's my line. Yeah. The Brexit one's the best line so far. But this is scary because it's real time. And the markets, you can't just shut the markets for a week and regroup.
You can't just shut Nike for the week and regroup. You have orders that are coming in. Your imports are coming in right now. They're like, get it in here. Where is it? It's in the ocean. Land it. We got to get in here by midnight tomorrow because if we don't get a midnight tomorrow, it's going to think how crazy it is. No time to plan. No time to do this stuff. Good thing Blackstone's marks won't change. Oh yeah, that's true. If you're a hundred percent in private equity, you're
- Larry Fink's letter. - What happened? - No more 60/40, let's go 50/30/20. I have a great idea. - You're probably up 25 bips. - Yeah, you're right, you might be up today. That's the other thing. That is the other part. - What kind of track record do you guys think you have in instances like this where you're like, ah shit, we're a little too hyperbolic?
You know what I'm saying? Like, you know, back in 2022, back in early 23 during the, you know, the regional bank and credit. And I'm not, I don't have the answer. I'm just saying like from a psychology standpoint. As we've gotten older, we've tried to get better and take less emotion in the topic and then pivot when you need to pivot. You don't get stubborn is what you're saying. So, the last five years, I've sort of been in the muddle along camp. And I have
I got lucky here and there. The deficit is spent and so they propped up the economy for longer. But I really think this, whether this goes through fully or half-baked or whatever thing, I think it's a game changer. I think it's a game changer for a lot of companies. I think the profit margins are going to get squeezed. I think it's going to, whatever this is, it's the expense of the S&P.
It's at the expense of a lot of the exporters like the Germans. The Germans are in trouble. The state-owned enterprises, the exporters in China, their profit margin is going to get squeezed. And so I think that there's a lot of people on this thing that are going to get squeezed. And so I'm not super bear, but I didn't buy a lot today.
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All right, guys, let's drill down on some sectors. Danny, you just mentioned financial services. What are some areas that you think are most squarely in the sights of a protracted bear market? Because one of the names you would have thought of that should be down 10%, 15% today would be GM. Half the cars they sell here in the US come from outside. It's showing some good relative strength. I just want to say one thing. If you think about big money pools, whether you're like a
big tiger complex or Fidelity or Capri or even Klaus, the Europeans, right? They need sort of
10 years, five years of runway to say, you know, I can invest in this as an investable theme. I can, I, you know, they need some sort of certainty. So until whatever Trump's doing with his tariffs and his, I might do this, I might do that, I might do this. Well, you can, we'll negotiate until you have some sort of clarity on any of this stuff.
I think we're all just talking about jet washing where the market goes up and down, down, down, down, up, up, up, down, down, down, down. There's just, they can't put money to work. They have no, they could be guessing and put money to work, but they can't put like, you know, I can buy, I can buy a lot of Apple. Like when Buffett goes, Buffett's a great example. Everyone's put the memes of him looking around with his cash. What's he going to buy? He's not going to make a decision until there's clarity.
Or he creates clarity. Yeah. Which he does. Which he does. But he can't invest. He doesn't know what's going on. Consumer discretionary gets hit the hardest. Period.
period, I think. And let's keep in mind on the services side again, just to go back post COVID, we've seen a boom. It's been amazing. And the US consumer never underestimate the resilience of the US consumer. And so when I think about that, I think the Vinny's of visas and the MasterCards of the world, which have incredible business models and they're fine. They're not going to go out of business, but they were trading at a very high multiple.
Walmart was sitting at over 40 times. I mean, 40 times already, as Carter said on a podcast the other day, Walmart's trading at one-time sales, they sell paper towels. - Wait, let's pimp that out for a second. So the three of you guys, you did a on-the-tape podcast hosted by Danny Moses, Carter, Vinny, and Porter. - And Bourbon.
lots of bourbon it was it was great um go watch it on youtube if you'd like on the on the tape feed or listen to it because i listened to it and then i went back and looked at some of the charts you guys killed it carter was amazing so everything everything lined up too i mean it doesn't matter now but he won three donkeys it was great yeah i know it was great but you you could see the writing on the wall so now you're looking at the title yeah that's a great title it was bourbon and charts i think but
But honestly, like the whole the setup now is so let's say that we find out in October that we were in a recession in the first two quarters because for everyone out there, when you know what a recession feels like, this is starting what it's going to feel like. This is kind of how it feels. I don't need the definition. I don't need to know what whose organization is calling because they'll also get fired and that will be shut down. And by the way, let me give a little another flavor.
Let's say that Moody's or S&P or Fitch decided to try for one second. The irony in this is they waited too long to downgrade the mortgage companies, all AAA. Imagine they even hint it coming after the U.S. credit rating. Imagine what will happen. Bye. Shut them down. Shut them down. That'll be what thing. I'm just this is not hyperbolic. These are things that are happening. So I am so disappointed and and upset about everything that's going on. Right. Because when you invest.
And just being a consumer, you want to believe that there's laws that protect you as a consumer. There's laws that protect you as an investor. And I think we've seen a market change in that, in my opinion, what's going on right now. And so there's no CFPB, guys. Call it what you want. I know they overstepped their bounds, Consumer Financial Protection Bureau. But guess what? Credit's going bad now. And who's looking out for the little guy that we talk about that they're supposed to be championing and helping out? It's not going to be pretty. So...
You know, I'm getting all wound up here as we talk about it. You make me say to myself, where would I put my money right now? You know what acts bad and great today at the same time is gold. Gold is down, yeah, it's down 40 bucks. It was down 100, it came snap right back. Gold has been the one constant throughout all of this continues to be gold. But now you can see why. It's not inflation. You didn't do the baseball, right? It's not baseball. You said one constant. One constant throughout time has been gold. But...
But honestly, so where am I putting my money right now? I didn't ask you where you're putting your money. You said, what are the names that are most in the sights of a protracted trade war? Well, who benefits from the, am I saying allocation? It's not realistic to say people are going to go buy gold. So it's not an allocation. So let me try to be slightly bullish on a sector. Like my bullishness earlier? No, no, no. Well, yes, yes. It's exactly like your bullishness and Daniel. Spreads. Rates have to come down.
Right, they have to. I'll say it again and again and again. If rates don't come down, if they start going up with all these issues, we're going a lot lower than 48.50, like a lot lower. But I'm under the assumption that rates will come down. I don't know where, call it 350 on the 10-year, 375, something of that ilk.
And three, four months from now, we'll start a cutting process that'll bring fed funds down to two or three, right? Because we are in a recession, right? That's what's supposed to happen.
I think you can own some of the mortgage names, right? So on the charting, there was a recent acquisition, I spoke about it before, of Rocket Mortgage bought Mr. Cooper. - Just like gold's a great name for a great ticker. - Bear Gold. - Rocket. - Rocket is a great name for a, you know. - But you think there's movement in the housing market if we're in a recession, if people are losing their jobs, if the economy's really-- - Two types of mortgage originations. There's purchase.
And there's refi, right? I'm banking a little bit more on the refi, right, than I am on the purchase. And if we get rates low enough, there will be a little bit of movement on the purchase. I'm not saying it's crazy. I'm with Ivy. Don't go out and buy the home builders. I'm just simply saying, and mortgage spreads tend to widen out and gain on sale spreads tend to widen out, which is good for these companies.
And it's not a bullish pitch. I know it's a bullish pitch, but it's not a bullish pitch. It's not a bullish pitch. That's why I think Danny's not yelling. Well, there's nuggets you can own. Those companies aren't big enough. So let's pretend you're the portfolio manager today at Fidelity.
- Rocket's a $30 billion-- - Okay, so when the deal closes it'll be, so it's big. - It's big. - Okay, so Rocket's big now. I didn't realize, that's the combined valuation of what it's gonna be? - No, that's the Rocket, that's just Rocket. - So it's gonna be even bigger probably when they, okay. - Correct. And I also think-- - Mr. Cooper's like a-- - All right, so it's one name. How much can you, but my point is this. It's a small part of, what, no. - I gave you a name. - So you're a portfolio manager at Fidelity, and right now you're getting your analyst in, you're reallocating in, right? You have to be invested.
What sectors, if your benchmark is the S&P 500, are you now overweighting and what sectors are you underweighting? They are plowing right now hand over fist into Coca-Cola, Procter & Gamble. McDonald's. McDonald's. The same shit as they always do. Like that's the blueprint. That's where they're going. It's not Yellum. They're buying Philip Morris right now. Yes, they're buying Philip Morris. They're buying Staples. Yeah.
But when you idiots like us, when we look at that multiple and we're like, fuck, I ain't buying Coke at 25. One of the biggest downwards earning revision. Dan just shared Butters facts that the third largest earnings revision lower in Q1 was Staples. Like they're already. I hear what you're saying. I'm not saying you can't run and hide in them for a period of time, but it's kind of interesting. Um,
I want to go to one thing that you just said, Vinny, and maybe Porter, you can hit this. So you said rates have to come down, maybe three and a half. Okay. So back in September, the 10-year yield was at 3.6%. You know where the S&P was? Right here at
at the same level, right? So if the economy is weakening that... Now, back then, we were worried about the jobs market, right? That was one of the reasons why they did that 50 basis point cut. So if we have earnings that are now going to be flat year over year... Let's just say, Porter, you started out by saying that, right? Yeah. Back then... By the way, I'm saying that...
Me saying the S&P earnings are going to be up a little bit this year, that doesn't sound like I'm bearish. But the analyst expectations are 13% earnings. They were. This is ridiculous. That was before this also. It's like the Tesla earnings. They're expecting 13% earnings. Every strategist at the end of 2024 had an up. The 19 largest strategists had an up target on the S&P. I get it. I know how it works. It's normal.
Right. So what we've seen since then is the coming down, coming down. Gold analysts going up, going up. It's just chasing the current. But Porter, give me that on that. Because, OK, let's just say to Vinny's point, let's say we have 50 basis points lower in the 10 year. Maybe that happens sooner than later, especially if this looks like it's not going to move like, you know, the tariff situation. You know, you have an S&P right now that it's basically 5,400. That's where it was in September. Let's say we start seeing cuts to those, you know, S&P earnings there.
The S&P could be easily at 5,200 and then on its way to that 4,850. Well, so like if you think about, I actually think that at some point you're going to want to buy the banks back again. I mean, the Bank of America has gotten killed in something like 10 times earnings. It's not as expensive as it used to be. But if rates come down, it's positive for their bond portfolios. You know, they sold all their mortgage stuff. But then some of that activity will pick up. But we're far away from those. We're far away. I agree. No, not regionals.
Yeah. More
More credit exposed. Yeah, its problem is lower. Like I said, lower, but they're not exposed to the trade war. Your brain doesn't have to wrap its head around Nike and stuff like that. Well, they are exposed to the trade war because they lend to the companies that in middle America that make goods overseas and manufacture. So I hear what you're saying. They do mostly domestic lending, though. And theoretically, if they're going to build plants here, maybe loan growth. Yeah, no, I'm not even saying everyone's impact. You can't get away from it. It's very difficult. Yeah.
I'm trying to be bullish here. Yeah, no, I love it. It's great. Besides the S&P gold sector, which is one stock. Danny asks, what is Fidelity buying? And everything we mentioned, no, they're not buying that. Ha, ha, ha.
No, they're not buying that. All right, Danny, what are they buying? They're going to go back to the MAG-7 at some point. Right. So we just went 45 minutes without talking about the MAG-7. Okay. So these are some of the hardest hit stocks in the entire market from Apple down 21% to Tesla down 50% in between. I mean, Meta, which was a darling just a few weeks ago, is down like 27%, 28% or so.
um we hear this all the time about leadership um and how they perform during you know a drawdown like this they're the worst performing names um so give me a sense of like will this leadership when they bottom out does the market bottom out well you know maybe these these stocks will start to bifurcate themselves because met is a lot different than uh tesla than than uh apple and then uh netflix right and so
We're talking about Spotify. Spotify is not down that much today, right? So that was sort of a non-tariff hit company. Maybe Meta's a little bit that way too, right? Maybe that they decide, ooh, I'm not going to spend $80 trillion on data centers and my cash flow is going to go through the roof now.
right? Because the earnings aren't going to get killed. And so I can wrap my head around something like that where it's not good for Nvidia, of course, but maybe Microsoft is
- All right, this is a great point about meta, okay? In 2022, the stock was down 70% from its all time highs. It didn't bottom until they started rationalizing costs, until they started firing people. You know what that is today in this environment? It's cutting your data center exposure or your-- - Back then it was the metaverse and I think the consensus was, and rightfully so, that that capex spending was stupid.
And we've all decided that CapEx spending in AI is not stupid. So therefore, they were getting- We? The market. Yeah, right. But with DeepSeek, and if there's an easier solution, it should be net beneficial to them, I guess, at some point. So you don't want to buy the data centers. You don't want to buy, you know, NVIDIA. But you can buy, you know, Meta, Microsoft, Amazon.
- All right, so Google again. - Well, you can and you can't. So you talk about the S&P 500. - We're trying to be bullish here, Danny. - No, no, no, I just wanted to say on a proportional basis, if money comes out of the SPY, those are gonna get proportioned. - Yeah, no, I agree. - So what I'm saying is, if you have the S&P, it's not time. It's not time. - While they may not be subject to the trade war, they're certainly subject to a weakening economy. - Oh, no, I think some of them are subject to the trade war. - The advertising, they make a ton of money. - Well, that's what I mean, the advertising.
But that's not like, that's that tariff. What I'm saying is the weakening economy. - Yeah, but who's spending? Same thing in regional banks. They lend to companies that do business. They get advertising spend from companies that do business. - And let's not forget, all those companies have a decent portion of their revenue streams are from overseas.
So that is going to be an issue. - What about the weak dollar? Is that something, you know what I mean? - I'm more worried about do they slap tariffs on software services? Because that is a trade or services surplus for us. Is that one of the ways they combat this? Does...
China say, good luck selling to Tesla, good luck selling a car manufactured in China to Europe without us slapping an additional tax on it. But Google's capex per quarter, it went from 14 to what, 20, something like that? It's a big number. I forget what exactly it is.
Maybe it goes back to 10. That's a lot of cash. It's funny. We've had so many guests on Fast Money over the last six months. No one are bearish on that. Guy and I have been pounding these folks. What is the sanctity with this CapEx number? You know what I mean? That's been skipping higher and higher. It's actually obviously been decelerating pretty meaningfully. Guys, we only have a few more minutes. I just want to kind of go back to 45 minutes ago when we started this. The S&P was down 4%. Now it's down 4.75%.
Okay, so it's going to close on the lows with five minutes left. Okay, we have a NASDAQ that's down nearly 6%. So by the time folks are listening to this, all right, it's going to be tomorrow morning at 8.30. We have the all-important March jobs number. Beaks! Beaks!
Where's Beaks? Is that important? And what are we expecting? Let's assume there's no data tomorrow or no messaging on the tariff thing. And let's say we have, what is the job number? If you're a bullish, what do you want? You mean if you want an excuse to buy stocks? You want a weak number. No, you don't. You want a weak number. I disagree. No, no.
No, no, no. You want a weak number. You need the Fed. You need someone, Superman. We had a weak number today on jobless claims. How'd that work out? It didn't matter. That was the relevant. I thought it was a good number on claims. I don't think so. 207,000 government workers. So the government stuff is now speeding itself into... So private payrolls versus the overall payrolls, right? I think the market wants a weak number. That's my opinion. Let me say something. And I don't have... I actually don't know the answer to this. Tariffs are inflationary. I don't know that to be the case. Oh, it is. I think it is. No, but the...
I'm with you, Dan. But I think it's deflationary if it scares people into not doing things, meaning consumers pull back. So you're assuming tariffs are inflationary. I'm not saying that they're not. I'm saying if the pass-through works and then the consumer still buys it, that's inflationary. But I don't think it's possible. So the tradeoff would be earnings are coming down a lot if the consumer is not going to eat all of it. So pick your...
So that part I don't know. And I honestly don't know the answer because we're in a kind of uncharted territory here. It's a real issue. You want to go furnish your home these days? You're going to get killed. Well, you're not going to do it. You're not going to do it. That's my point. So it's not inflationary. Clearly you're not doing it at Restoration Hardware. No. By the way, that call last night, he was on live when the tariffs came out. It's epic. Epic.
He was on life. He go, holy shit. It's down 40% on the day today. I think it was worse. Yeah, it was. It was trading 140. So much for honesty. That gets you, see what it does? Gets you crushed by CEOs. So we're short the way fair. That's been a good one. Let's say the jobs is, it just doesn't matter. Okay. One way or another. It just doesn't matter. We're in stripes now. Yeah. It just doesn't matter. I think the unemployment percentage is a bigger issue than the jobs number.
In my opinion. Well, it is and it isn't. But I don't think tomorrow's number really matters. That's what I was trying to get at. Not in a market like this. Let's assume that there's no... It's a lagging data base. So let's just say tomorrow everyone takes a breath. We have a market that's up 1% after the S&P closing down 5%. Do you go out long into the weekend? Oh, yeah.
I don't think so. Listen, so what are the things that Vinny talked about that you have to start to plan for? We've been programmed to buy the dip. The world has since 2008 because the government has your back. They can do something, new acronym, something will happen. So what's on the table that can make a market rally? I think they're all...
They're just small wins. I just don't see a sustained reason. So I think it's a sell. Fed might cut Ray Rally. What is it really going to do? Nothing. Tax cut bill advancing.
Okay. Not, not, is it going to do anything? Not today. It's not. So all these things that they can pull from the, all right. Surprise cut. Does that freak the market out? A surprise rate cut? Yes. I'd be surprised. It won't be under Jerome Powell. Let's just say for whatever reason it happened. Okay. Does that freak the market out? I think it initially goes up and then they freak out. Howard Lutnick and Kevin Hassett being fired. Rally the market. I remember why I was in 08 when they did the surprise cut.
- Yeah, no, listen. - Like again, those are the big uncertain times. - Nothing is off the table. You have to think the craziness that's going on. I joked before about, I think we were a day away from a short ban in Tesla. I really believe that. - Can I give some good news? - Please. - For now, right? Right now we haven't seen anything systemic start to come up. - What do you mean?
It's been 24 hours. No, but the markets have not. I agree. I'm watching credit spreads. I think that's systemic. I agree. But there's been no bank, like you're not hearing a bank going under. You're not hearing a, not yet. 24 hours. I'm just saying. So much Shabbos.
yeah I mean seriously yeah don't yeah please it's happy on the lib day all right we got to do Tesla really quickly so um on the second which was yesterday by the time you're listening it was two days ago um it was absolute bloodbath as far as deliveries we can all agree on that I think even the most bullish folks can agree on that it came in at 336 deliveries I think well I think three months ago the consensus was like 430 or something like that um
Margins are going to be horrible. They've been buying down rates. Demand is horrible here in the US. It's horrible everywhere they sell cars. Vinny, give it to me. Absolutely nobody does it better than him. No, I agree. Nobody does it better. Nobody does it better. No one does the spin better than him. I mean, here we are. Again, I call it, it's a fundamental analyst's worst nightmare. Here we are.
We had a certain delivery number. It was worse than we did. And I was trying to move it up a little bit saying he's going to cheat, he's going to cheat, he's going to cheat. He didn't cheat. But then he spun narrative that he's going to take his doge cape off because he's got to go home to Austin, right? To save the company, right? So the sad part is- Stock finished up like 10% that day. It's nuts. Amazing job. The sad part is-
is that I don't think we're going to get what we think we should get in this name until we start to see RoboTaxis and Optimus Prime, right, delayed. What's going to happen? You know they have an event, a RoboTaxi event in Austin in June. Do you remember last year they had an event in July? Yeah, the fake one in the Art of Holland Studios. But they pushed it out to October.
Right. And so in this last quarter, and I'd love to get, you know, Porter and Danny, they basically, Elon said this. He's like, don't look here at the auto business. To your point. These aren't the droids you're looking for. He said, look at FSD, RoboTaxi and Optimus. And, you know, if you don't believe in that, you should not be long the stock. Let's be very clear. Do you think you want 120 pound robot?
like you can't what do you mean he says he said every carry human on earth would have 120 pounds what does it do for you right what are you gonna i mean listen what's it gonna do cook for you i mean like i'm gonna tell you the only way to to you know it's been brain damage to try to short the stock time at this out in the other and i think a lot of people a lot of scar tissue there to go try to do it which is why the stock is actually holding up and i'm not joking about the short band that i think was about to happen when it was at 215 or 220.
You want to go try to short the stock, go buy puts out, okay? Six months. This is not financial advice. At $100 strike.
Forget it like because if it goes to one it doesn't trade anywhere near fundamental So if it begins to trade on fundamentals, that's I'm not saying that's going to get there I'm saying that is the okay risk reward trader try it. Let's play a game here Imagine guy comes in and gives us all four optimist robots. Okay, what? What does that even mean? What are you gonna do? What are you gonna do with the optimist robot in your house?
- Like Rocky in Rocky IV? Paulie's robot? - I'm gonna chop his arm off and call it Garrett Cole. - Yeah, exactly. Oh, you're gonna hurt his arm and call it Garrett Cole, exactly. I don't know, this whole thing is-- - It's like, what are we gonna do with the frickin'-- - So let's be clear, let me close the door on this, Tesla said. When he goes back to Austin, wherever he goes back, he's done a Karate Kid sweep the leg through Washington on every agency
that has been investigating him self-driving is going to have a clear my point is that there is so people like us that believed in securities laws believes that he would be forced to pay the piper for the stuff that he's done no he's not no it's gone so that part of the story is gone and so came through washington now he's in the sec god knows what he's what documents that he's drubbing up with his guys right now in the sec then he goes back so he's in that way you can't rely on an enforcement of anything that's always a dangerous but
But people out there, I wouldn't be long it. Forget about being short it. There's better names to own. Bank America is a great idea if it gets hit enough. Something like that I think is a nice liquid way to play it. You pitching Bank America is just tremendous. Well, I remember when we were buying it, the most liquid thing on planet Earth, and it was when we were at Seawolf. It was the next iteration of when things got hit. Yeah, during the –
The servicer issue, the putbacks. Remember the putback issue? Yeah, no. And listen, large liquid name was trading under book value. So anyway. Just to be clear. So if you're looking at Tesla close today at 267. Higher than the delivery day. Yeah. So it's down five and a half percent. If you looked at the at the money straddle in October. Okay. That's the put premium plus the call premium. It's about a hundred dollars.
So think about that. It's basically saying $100 in either way. So it could be... Maybe we can tariff that. Maybe we'll do the math and tariff that. $167 to the downside. Seems reasonable, but you'd never buy that. You'd get destroyed. All right, gents. A lot of good stuff here. We're all in studio. We all miss Guy Adami. I think that viewer is going to be some Yankee Mets talk here. You didn't get to it. If you want to... Guy...
Probably will listen to this one. Do you have any parting words about the Yankees here? I told him he's going to get us an Optimus robot, chop the arm off and call it Garrett Cole. What the hell we can do with these Optimus robots? What are people going to do? By the way, they're drinks. Usually on days like this, we get a call, the Fast Money guys, because we're done at six o'clock.
Kramer goes on at 6 to 7, and usually we get a call, can you guys stick around for a markets in turmoil sort of episode? We didn't get the call, so maybe that's a really bad thing because usually when they do those shows, it marks the bottom. Yeah, you guys know that. All right. Vinny, Porter, Danny. All good, man. Ray Pod. Happy Liberation Day, guys. I'm feeling liberated. Oh, my God. Day one after Liberation Day. We'll see you all later. Thanks so much. All right, bye. Bye.