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All right, welcome to a very special edition of the Risk Reversal Podcast. I'm Dan Nathan. I'm joined by old friend Dan Greenhouse. He is the chief strategist at Solus Alternative Asset Management. Dan, welcome back to the pod. Are you focused here on what we're doing because you're staring into your iPad? Yeah, I thank you for having me back. I'm not focused as of yet. I'm getting everything in order so that we're just going to start it just like this, my man. The viewers and the listeners deserve the
full greenhouse. We got it. I'm preparing myself. This is, last time you were on with us, it was in late September. It was Danny Moses, Guy, myself, and you. We called the episode Only Dan's. This really is Only Dan's because it's just the two of us. It is Wednesday afternoon. We had a little bit of a difficult
opening. We're well off the lows right here. The S&P is down about 1%. The NASDAQ's down a little less than 2%. I think at the lows, the NASDAQ was down about 3%. There was a bunch of economic data. I'd love to get your take on PCE, on GDP. But there was also some single stock
that took down what I think is a really important complex, you know what I mean, as part of this rally over the last couple of years. That was Supermicro. They are a server maker that goes into the data centers that train the models, blah, blah, blah, you know, all that stuff. All right, let's start here with just today, what you took away from this data. And then I want to take a step back and talk about how you came into this year, because I know that you have been a bit contrarian. Yeah, so with respect to the morning data,
The GDP number is negative. That is not accurate. We knew coming into this for a couple of months, and this is not a secret to most people,
I don't fully understand it and I haven't even bothered to try to understand it, but there's been some arbitrage. - Well, explain it to us then. - I'll pretend like most people on TV, I'll pretend like I know. There's been an arbitrage between gold prices in the US and Europe. And so we've seen a tremendous amount of gold inflows into the United States, which distorted the trade data in January and February.
So we knew coming into this that GDP at a headline level would probably be weighed down. And then that issue was compounded in March by front loading in front of the tariffs, which is a more legitimate input, so to speak. But in any case, trade was an enormous drag on GDP to the tune of over five percentage points.
There was also, on the other side of things, inventories were built in front of tariffs, and so inventories added to GDP. Really quickly for a second. So you talked about the gold situation early in the year. Liberation Day, and I say that with air quotes if you're listening, was April 2nd. And so do you think there was that inventory build in March? Like that was like that substantial? Yes. Based on the data that you just saw? Based on the data that just came out the other day. And so when you put it all together, it ended up,
dragging on GDP to the tune of, again, about five percentage points, which is the largest in decades and decades and decades. So the point of the story is when you look beneath the headline at a more appropriate, for lack of a better word, version of GDP, that number was about 3%, what we call real final sales to domestic. And will it be revised? Of
Of course. This number gets-- we don't even have the-- in any first, what we call the advance these days, the advance estimate of GDP, the third month is always estimated because you don't have the data yet. So it gets revised at least two, three, or four more times. This number will get revised. But the important point of the conversation is, if you're listening to this recently,
That core number is about 3%, which is not the best thing ever for that number, but still pretty good. So going into Liberation Day and the second quarter, I think the economy was doing just fine. Consumer spending wasn't awesome, but it wasn't terrible. And that is borne out by a lot of the earnings reports that we've seen, which you mentioned. All right, we're going to talk about that because you put a tweet out. I thought that was interesting. Yesterday morning, and you were basically saying, you know, people are like, you know,
There's not a lot of visibility. You're not seeing, you're seeing companies pull guidance and light. And you gave, I think six or seven names that have all, you know, they beat and, and many of them, you know, had a level of clarity to give guidance for the current period. And, you know, again, we're halfway through S and P 500 earnings. So it'll be interesting to see how that goes. And, you know, some of these companies are probably, you know, looking at how the market's reacting to companies that, that pull their guidance and they may change their minds. You know what I mean? One way or another. So it'll be interesting to see that. Um,
But the interesting thing about the guidance story is you, and everyone knew this, you had carte blanche to suspend guidance, to widen your bans. And my point in the tweet and just in the conversations I've been having with investors in the fund and other people I know,
to have the confidence to provide the guidance, to reiterate guidance, to increase guidance, as a number of companies have done, really, I think, speaks to the confidence. Now, again, that might be misplaced confidence, but at least it's contrary, and you mentioned before how I've been sort of contrarian, it's contrary to the vast majority of commentators who are making borderline apoplectic proclamations about what's going on. Yeah, and I think that accelerated, though, after, like, just the lack of, uh,
I would say, to the rollout of the tariffs, you know, and I really generous way. No, I mean, you know, I'm not one to try to be generous whatsoever as it relates to, you know, policy with this administration. But, you know, when I think about I think there was a turn. Right. But I think some of the consumer data was starting to weaken anyway in March. If you think about as far as markets are concerned, all the Trump trades. Right. That took off in November. They really started to abate.
You know, at some point as we got into January, that was saying a little something to me that it was going to be a different sort of administration or at least that first year, because the first time around they went for tax cuts first. That gave a tailwind to the economy. It gave a tailwind to the markets. And then they did the bad stuff. And then you remember, you know, trade wars were easy to win or, you know, that sort of thing.
So what's become really clear is they kind of did it ass backwards. That's been this dummy's commentary on TV and the like here. Sure. Speak to then the PCE, the Fed's most favored inflation target. And then let's put together the growth and the inflation kind of stuff. So with respect to the ass backward part of it, that was,
they had no choice. The extension of the tax bill was always gonna take months and months and months and months. It just got pushed back another month into July. It presumably might not even be done then. It could be a fall story. So first of all, you had to do tariffs first 'cause you can do that, so to speak, with the stroke of a pen. And there's a debate about why one person, the president, should be able to do this. Congress has abdicated its responsibility on this front. But the tax story was always gonna take months and months and months.
But the important part of this conversation is not that the policy implementations were reversed, although that is accurate and appropriate. It's that this time around, what was a pretty substantial tax reduction is not going to be the case this time around. You're talking mostly about just an extension of existing policy, which is not stimulus. Well, he's talking about actually adding taxes, you know, like raising taxes. Well, we're talking about a lot of things. No, but that's, those are words that I never thought would come out of this president's mouth.
The raising of taxes. Yeah. Hold on now. Folks making a million dollars. Well, he did say that's not going to happen. Yeah. He did say it's not terrible. He said it could happen. It's not going to happen. Like this is one of the reasons why you have a VIX stuck at 25. Right. Listen, on the policy side of things, my gut says they're not going to do a millionaire tax bracket. Democrats would love it. Obviously, you've opened up the conversation, the Pandora's box, so to speak. So when a Democrat gets in power.
a millionaire tax bracket will be on the table. Listen, I think there's too many traditional Republican institutions and wings of the party that are against raising taxes really at all. So you're much more likely to see the things like the no tax on tips and no tax on benefits, et cetera. And then on the inflation side of things with respect to the PCE, listen, tariffs are a tax. They're measured through these CPI, PCI type inflation measures.
And you're probably talking sometime over the summer and into the fall, you'll probably be seeing 0.3%, 0.4% increases on a monthly basis on some of these measures. It's really hard to know for sure, which is probably going to push headline inflation measures up into the threes, maybe even into the fours, which obviously is going to be a problem for the Federal Reserve. The degree to which it's a problem for markets remains to be seen. There's a lot of uncertainty here. Everybody knows this.
We have a rough framework for how tariffs work. But the issue, and again, getting back to my contrarianism, you can't just say, all right, well, we import $3.3 trillion worth of goods. We're going to put a 10% tax on it. That's $320 billion. That is X, Y, and Z. And therefore, CPI does Y. It's not that simple because...
The exporting company might bear some of the increase. The importing company might bear some of the increase. The consumer is certainly going to bear some of the increase. Currencies might adjust. You've got a lot of moving parts here to try to determine what's going to happen with prices. And so from an economic standpoint, it's nearly impossible. You can roughly estimate it. From a market standpoint, it's even more deleterious. It's even more confusing because all of that then has to be amplified by how the companies deal with that. And I just, it's...
- Even though I have been more optimistic than virtually everybody on TV in the context of this argument, I don't think we're up, up and away because this uncertainty is likely to persist at least during this 90 day duration, I guess now 60 day duration or whatever, but even beyond that, presumably. - All right, so explain less bearish or a little bit more bullish than most of the folks. Where does that fall out for you? - So when Liberation Day was the second,
And immediately those of us who do TV with regularity, the vast majority were on TV just saying, in defense of people who were apoplectic, 150% tariffs on China and 50% on Vietnam. So you weren't believing it is what you're saying. I think the position I took was this doesn't seem very likely to me.
And when you're an investor, you have to deal in expected value. There are a lot of range of outcomes, a lot of uncertainties, what are the likely, at least like a bull bear base, so to speak, if you're a sell side analyst.
And it just seemed really unlikely to me that a lot of this would happen without some amelioration. And indeed, you got, well, we're not going to do X. We're not going to do Y. We're going to exempt Z. And it became clear to me that the president was much more willing to be amenable to those around him and markets than perhaps a lot of people gave him credit for. And I've been accused of being Trumpy in some respects as a result of this, but it's not really a...
political or an ideological position. It was just... Well, it doesn't have to be political to be Trumpy. I mean, here's a guy who said in 2018, you know, that trade wars are good and easy to win. And, you know, I think it's important to remember the first tariffs that he put on China were March of 2018. They did not have a phase one deal for...
for the trade war until January of 2020. But the other thing is everyone keeps talking about how long it takes to strike trade deals. NAFTA took this long and USMCA took that long and we have an agreement with South Korea and it took even longer.
You're not getting, and Labenthal was on Halftime Report today, talking, you're not getting- Farmer Jim. Farmer Jim. You're not getting trade NAFTA-style agreements. You're going to get some MOUs, memorandums of understandings, some signed one-page- And they're useless. This is exactly what happened in the first administration. But in the meantime, those tariffs are going to be in place. And we're hearing it, whether you give us six names, and whatever these names were, are you ready for this? RCL, Teradyne, Honeywell, Koch, Sherman-Williams, Farmer Jim.
Philip Morris, whatever. Yeah, they're real companies. But I could tell you the likelihood of them hitting that guidance that they just gave is not great. Like at this point, I have no idea. Like you just said it, why these guys, and they're all guys, I'm sure every one of those CEOs are guys, why they agreed to give guidance. And it's not like you could drive a truck through. It's not like, all right, well, here's our base case. They gave guidance, which seemed kind of goofy.
Well, it's goofy. Well, listen, I understand why one would think it was goofy. You have the ability to be wide. You have the ability to defer. Why not? You know what? Let me move away from the guidance for a second and just talk to the tone of the calls. And whenever I talk to young people and they always, well, how do you know X? How do you learn Y? Reading the conference calls, listening to the conference calls is just imperative. And I do as many as I possibly can. The tone of the calls...
I can run down the list, including Visa today, Visa, which I Visa MasterCard, which I consider the premier calls to read because they catch spending in all the categories. A lot of these categories, a lot of these companies are saying,
you know, into April, everything was cool. Visa reported last night or this morning, I don't remember, and said through April 21st, which is just a couple of days ago, basically no change in consumer spending. Sure, there's some things going on, but basically no change in consumer spending. That's total bullshit. When you have the stock market drop 15% in like a week, you know what I mean? Of 9% year over year. Yeah, but...
Fine, dude. But like the retail, these people you're talking about, they're buying Nvidia all the way up until February 19th. You know what I mean? And then they're choking on all this crap on the way down. Let's be frank. So let me ask you, is Visa lying? No.
No, but Visa is in a very unique situation where if consumers are basically, and Guy uses this expression all the time, if you look at consumer debt and the like, they're combating inflation with credit. So like Visa and MasterCard are just going to be just fine. You know what I mean? And they don't have the problems of delinquencies, you know what I mean, that American Express is going to have, that sort of thing. But American Express reported already and said the same thing. And the
And when I say that to people, they go, well, but American Express is rich people. Well, that's what I was going to go there. That's going to be the last. You're going to see the problems with Discover and CLM. But Capital One reported, and obviously we talk about it in the prism of the merger with Discover. But Capital One also said. Let's come back towards the end of the quarter and see what these companies are saying. And I mean that. I'd love to do that. I tend to be a lot more skeptical. I've been in the business a long time. I've been in it for 30 years. And I've seen so many companies in and around these sorts of periodicals
periods just give absolute bullshit you know what i mean hopium guys you gotta take this again and again and again and again so but these are pr statements i mean conference but you have to take them like they they sign off on this stuff i mean they feel pretty comfortable about this right now and listen you go back to 07 which is the obviously the most acute period it's not as if everybody was jumping out of a window there was optimistic takes in some quarters but but
even if we step away from the card companies, you can look at booking just reported. The airlines, as you know, and I'm sure many of the listeners know, the airlines are going to commit suicide. I think it was the CEO of American that said this is a worst drop-off in demand we've seen since COVID. Well, then why is booking telling me that basically the only thing they're really seeing is less Canadians are coming to the United States or going to Mexico? Well, don't you want to believe
I mean, you got to believe the airlines over bookings. I mean, like what, what, something weird is going on there. I have no idea. Listen, I don't, we talk about it all the time with the air, like why are the airlines? So the hotels are not telling you this. The OTAs are not telling you this. What is going on with the airlines? It's a perfectly fair conversation, but,
But the point I'm trying to make is it's not just the card companies. It's not just the travel companies. It's Caesars who reported today and said forward booking trends for both group and leisure were doing okay. Now, again, a lot of what we worry about is not April or March and certainly not back in the first quarter. It's what's going to happen in 30, 60, 90 days, et cetera. My point is just getting back to the contrarian and what was going on in TV.
The worry about the consumer, the stock market's down 20% top to bottom, everything's falling apart, cats and dogs living together. And yet I keep hearing from these companies, not everybody, Chipotle obviously had some problems, a couple of other companies had some problems, but on balance, the companies are saying things are doing okay right now. That doesn't mean no good 60 days, 90 days from now, but at least right now it gives me some comfort. And part of the reason why I was saying,
we're selling off 20%. This doesn't seem right to me was rooted in the idea that this was what was going to happen. And indeed it is. So how do you think strategists have kind of changed their tone a little bit? Obviously the S and P now is, is made up half of those losses. It's down six and a quarter percent on the year, which to be frank, it's, it seems okay. I don't know what that's discounting, I guess, is the question. It's a normal, it's nothing. It's nothing. Well, that's,
That's kind of what I mean. So if your base case, and you know, my base case coming in here and thinking about Trump 1.0 was that he was not going to go for the jugular with China. I didn't think that, you know, he was going to pick fights with our allies. You know what I mean? Like on the- Nobody did. No, no. He started with Canada, Mexico, and the EU before we heard a whole heck of a lot about China. Obviously, Japan was something else. So I think that
now you have to go from base case somewhere in between worst case, like, you know, because the longer it goes, the longer you have this sort of lack of like clarity for consumers, but also for businesses. And we're already starting to see, you know, if the generative AI trade was a big part of, let's just say, a lot of demand over the last couple of years, we know that those stocks are
were huge contributors to S&P 500 performance. They were also huge contributors to S&P 500 earnings growth, right, for the last two years.
If you see some sort of digestion phase, which I think these stocks are kind of telling you, we're going to know more because tonight we have Microsoft and we have Amazon and we have Meta over the next couple of days. But the reaction to Google, what they had to say about maintaining their CapEx, it wasn't great. I mean, it was a, you know what I mean? So talk a little bit about that. Expectations, you know, as you think about what are the drivers of demand in this economy and how will the markets think about it? Because really we're talking about the stock market here.
Yeah, listen, Google, I don't, we don't own Google. We're not a, I say this a thousand times, we're not a large cap tech investor. We've never owned these names, probably never will. Although we probably in some respects should, but that's a whole other conversation. But you may have a really good shot to buy them at like half price. Yeah. Well, I mean, listen, Meta was,
was 700 bucks a share or whatever. The issue with Google and Meta is we spend a decent amount of time on advertising. And so we always come back to, jokingly, why do I want to own this random newspaper advertiser in Indiana when I can just own the largest search company printing money left and right with a tremendous moat, et cetera. But that's a whole other conversation. But yeah, the response to Google wasn't great. That was a pretty good report by all accounts, advertising demand,
they've seen no impact from chat yeah they're seeing slow down and pay clicks and i mean there's some stuff under the surface that you would definitely you should be nervous about especially if we see an economic slowdown yes but i think going into it there was a
we can debate it but going into it expectations were not high expectations got above them and the stock was up a few percent and that's right well below that not but but i wouldn't it i wouldn't expect the response and you have seen some companies like it and plat yesterday was up 30 or whatever but but there have been some companies that have surged uh in response to their earnings report but i think on balance i think getting back to my point earlier
Why should the stock market break out to new highs? - Can you conceive of one reason why we should be back at 6,000? - Not in the short term. I think we shouldn't have been down 20%, but breaking out to new highs, you would need meaningful, and this is, I was at a dinner last night with a bunch of macro people, and this is the fight that we were having,
My optimistic take is that you get an India deal, you get a UK deal, eventually you get a Japan deal, and the worst case outcomes don't come to pass and everybody calms down. But the rebuttal to that from the macro community based on my dinner last night was, well, great, but then you're left with a 10% increase in tariffs across the board, which is still the greatest increase in tariffs basically since Smoot-Hawley, just not as bad as it was.
And my rebuttal to that is I don't believe that a 10% increase, and again, China's not going to be 10%, but let's just say a 10% across the board tariff. Again, we import $3.25 trillion worth of goods. That's $325 billion. Personal income is somewhere around $25 trillion. So you're talking...
One and a half percent of income, something like that. Not great at all. But is that going to be enough to drive us into a recession? I don't know. And so on that point, when you look around the street, the recession that everyone is forecasting, to oversimplify, because everyone is not forecasting a recession, but if you were to forecast a recession, you're talking about the most minimal of GDP declines ever.
unemployment doesn't go up very much, the economy doesn't contract in any meaningful way. You're talking about GDP numbers of minus 0.5 a la today. Nothing too deleterious from what's happening. And it gets to the number of companies that have said...
Listen, we get it. This is not going to be great, but I forget who it was that used the word manageable. I'm blanking on the company that said the tariff increases were going to be manageable. I just, I don't take as negative a take on things and look at trained technologies, Honeywell,
Illinois Tool Works, it's not just consumer companies. I just, I think we're able to deal with this to a greater degree than the market wants to give credit for. - All right, I'm gonna put you on the spot here. So let's just say some of these
deals, the bilateral deals with some of our allies they come through. It's India, it's Japan. Some of those folks have a strong interest, let's say, in being on our side, especially as they start thinking about a longer protracted trade war with China. If you're India, you want to see a lot of business be shored towards you, right? And I mean, the list goes on and on for a while. Apple. Right. Yeah, and Apple just said they're going to produce all iPhones that are coming into the US and India. Now, I'm
taking the over on when they're able to do that, right? Probably a fair. Yeah. And it's more expensive there and, you know, not much. Yeah. But reorienting to there is going to cost some money. Like that's like probably a 15% tariff anyway. You know, Apple also has a movie studio that loses money left and right. Yeah. But they're not likely to sustain too much degradation to their margins for this. You know, here's a company that has 90% of the gross margin of the global smartphone industry. You know what I mean? So think about that. But,
but to your point, I get it. Um, so give me the three bullets of why you think, even if we had this shallow recession, right? Cause that's really what you described as shallow recession. That's what I'm describing. Yeah. I'm not saying, yeah, right. Okay. So in a manageable sort of recession, what are the three, um,
main points you would say why at some point, whether it's back towards those lows at 4850 and the S&P 500, we don't get too much worse than that. And that's where you want to start to buy, like just for our listeners, so they can create some sort of framework if we go back and retest those lows. Stepping away from the trade conversation, I think I've tweeted about this a bunch, and I've spoken to a bunch of people, and I know that you're familiar with this as well. I
The 2000 episode is just increasingly relevant, not that it hasn't been relevant for some time. So when we talk about, well, what is a recession or whatever look like in the next 12 months? The bear case is 2000. The recession in 01 was basically non-existent.
However, obviously the stock market got cut in half. But that wasn't because there was a recession. We know it was the overinvestment that we knew was happening. The Ciscos, the EMCs, et cetera, the world. You just had- Steve Milanovich. Steve Milanovich, which I was listening to on the way here. I was doing my research and I wanted to- What did you think? Did you like that podcast? It was fine.
No, I'm joking. Of course. Bill liked it. He just gave me a thumbs up. Listen, Bill knows what he's talking about. You know what I loved about that podcast? I've known Steve since before 2000, you know, and he's been covering hardware. What I really liked to hear from him were these frameworks that he thinks about. Because oftentimes, folks like us, we're just going back and forth. It's a bit more ephemeral. You know what I mean? And I just... I reject that. But okay, I understand what you mean. I reject that, but I understand what you mean. Why? Why do you reject it? I think...
Well, I understand many of these conversations are surface and ephemeral. I think it gets to why I thought that podcast was so interesting, because I love history and I love context. And I think what has in my career, what has made me to any degree that I've been resonant with some clients when I was on the sell side and now is the ability to frame things in context. And I think
knowing about 2000 and what was happening and being able to relate that in a visceral physical sense to today is tremendously important because in many respects, it's a direct corollary. It's very echoing. - From a psychological standpoint, but when you drill down-- - But also practically, I mean, listen,
I forget the exact number, but any of us that were there, we could wrap all the telecom cable around the earth 400 times or whatever it was. We knew we were overbuilding, but everybody kept doing it. You ever hear that stat about actually how many people were on the internet in 2000 relative to, let's say we had 7 billion people or whatever it was, six and a half. It was like,
- Minus school. - Minus school. There was nothing. And so there was gonna be some fallout. Everybody knew it. And then what happened was the investments ceased and then you started working your way down and Juniper and IBM and Dell and everybody got whacked over the course of that bear market. So getting back to your question, which is about the next 12 months or whatever,
Like as small an issue as I think this will end up being, and I could certainly be wrong. I'm not sitting here saying everyone's an idiot and I've got it figured out.
That AI investment story, I follow very closely, not from a H100 or the black, like you guys are all well more versed in that, but just in terms of the commitment to this CapEx cycle, which is driving not just the Broadcom and NVIDIA, but train technologies and Eaton and Vistra and Vertiv and all the way down all the ancillary plays that have benefited from this build out. When that starts to slow to me,
That is the most important piece of data that you would want to hang your hat on because of how important they've been driving these markets higher. And then you start to say, okay, well, these stocks have revenue growth, Amazon, Microsoft, et cetera, call it mid-teens revenue growth over the next couple of years, EBITDA growth of a similar amount, maybe a bit more in the case of Amazon, but whatever.
Those numbers start to become challenged, therefore multiples start to become challenged, etc., etc. And there's just not enough heft in the rest of the market to compensate if those names start to sell off because this thesis shifts. And while eventually you will find a bottom and someone else will take your leadership, the switch from one to the other is probably going to be pretty painful. So as important as this tariff story is, as dominant as it is in the narrative, I
I just maintain that that conversation about the AI infrastructure data center build is just dwarfs everything else. When that goes south, it's going to be a big problem. Well, it's going south right now. There's some smoke. Yeah, and I'll just tell you, this was maybe, I can't remember at one point last year where I was convinced that 2025 was going to be a bit of a disaster for this. And for all the reasons that you just mentioned, the corollary, going back to the dot-com, is that someone...
I heard someone say this, I don't know if it was on TV or maybe it's the internet or something like that. They were talking about Sherman Williams is a great play in and around this gender. - 'Cause we need to paint the data centers?
- Yeah. - Fine. - Okay, I'm just telling you, like that was the dumbest fucking thing I've ever heard in my life, okay? - That was me being polite, for sure. - Yeah, but okay, so, you know, there's a lot of that stuff going on. So that's what I was saying from a psychological standpoint, from a sentiment standpoint. - Very, very similar, but the companies that are making this, are doing the spend are very different. Their moats are massive. - Massive. - You know what I mean? Like, so, you know, that's kind of where I'm coming in. - And the difference between now and then, of course, is whereas then, how successful could Books A Million be
with only a few people on the internet. - Clove.com. All right, so let's go back to-- - Real quick, pets.com is chilly. - I know, but that's, dude, I've given, like you, there's 50 examples that were just 10 years, 15 years too early. - Just early. - Like, no doubt about it. But there are some similarities. Like, I think CoreWeave is gonna be the global crossing of this sort of era, you know what I mean, one way or another. All right, so let's just talk,
All right, we'll finish this part up. So manageable, shallow recession. Let's just say it's caused by a trade war that you just mentioned. Let's say worst case scenario, we have 10%, you know, unilateral sort of tariffs, right? That's your...
We're never going below 10% during the Trump administration. Okay, so let's just say the markets start looking ahead, but they think the multiple is too high, you know what I mean, given what's going to be a slow growth in period, given what is not likely to be a huge decrease in inflation, right? We're not going to get to the Fed's target probably in 2025, you know, that sort of thing. So then where in your mind do you start thinking one, two years out about buying the S&P 500 or the NASDAQ, whatever you're thinking of, you know what I mean? Is there a level, I guess?
No, I don't have a level in mind, but there's two points I want to make. I'm going to forget the second one by the time I get to it. But about the Fed's target, I think there's a...
Insistence on the part of a lot of people who do, who write for the banks and who do TV to think about this in the sense that there's not a difference. There is, but they act as if there's not a difference between the economic argument and the investment argument. And I would posit this to you as a non-economist.
- Do you-- - Wait, I'm not an economist. - I would posit this to you as a non-economist, and I am not an economist either. We are market, we own stocks. - You are far more of an economist than I will ever be. - Yeah, I play one on TV, but fair. But do you care, does Dan Nathan care, does Guy Dami care if CPI is 30% instead of 2%? - No. - Couldn't care less.
But what I do care about is the cumulative nature over the last four and a half years. Sure. I get it. You care about it in the sense that my toothpaste will cumulatively, I get it. But in the one year timeframe, Dan Nathan, Guy Dommy, Danny Moses couldn't care less whether it's three, the economics community cares a lot.
And there is a big difference for how I invest if I think along those two lines. So you've got people on TV screaming bloody murder. The Fed's going to miss its target. They're at three and a half. And I get it. There are second order effects here in terms of what the Fed does, et cetera, et cetera. But just thinking through the investment prism.
I mean, I work at a multi-billion dollar hedge fund. We have meetings every day about what to invest in, what to sell, et cetera. At virtually no point, unless I initiated because it's what I do, does anyone go, yeah, but the CPI, it's just not accomplished. Well, you might say what the reaction might be to the CPI, how that plus the Friday jobs report and then the May 7th Fed meeting, like what sort of, you know, situation or near term environment might that cause in the market, right? But,
But even in the context of, well, in a high inflation environment, you want to own these companies and not these companies. The difference between two and three is irrelevant. Now, to be clear, we're not talking about that. And I mentioned earlier, we might get as high as 4%. So that's a little bit of a different conversation. But the point is...
is the same that when you think about investing, this point in the part of the conversation should be largely irrelevant to you. And I think too many people make a thing out of it. And it's like the forest for the trees is what you like the forest for the trees. Let's just stay focused on what really matters here. And this gets back to something we were talking about earlier. And I get my spine up a little bit about this, about you mentioned that a lot of these conversations could be ephemeral or and I use the word surface. Yeah.
And I said I took offense to that. And the reason why I take offense is probably too strong of a word, but I took note of it. What I mean by that, and it plays into the point I'm trying to make here is there are a lot of people who,
like they know the ins and outs of this conversation and write newsletters or just have opinions. Podcast. Or just have a podcast with two of their buddies and think all of a sudden. There's a lot of people out there who say a lot of things who I don't think there's a lot underneath it.
their conversations are ephemeral. Well, I mean it from the standpoint of like, all right, so Guy and I were on a show called Fast Money. We do this. Like one of the reasons we started this podcast, you know, back in 2020 was basically because we wanted to have longer form, deeper conversations. Now, we're the guys calling balls and strikes, you know, Fast Money, you know, the...
But to have these sorts of conversations and see how they kind of meet in the middle, I think is very useful. I didn't mean to say that anything- - No, I don't think you did. - No, I know. And I know you didn't really take offense, but like I look at it from our standpoint, you know, we're making lots of donuts here. You know what I mean? A lot of that stuff ends up being a bit ephemeral. - You'd have to really say something for me to take offense.
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Okay, so I get this question a lot, and I'm not a financial advisor. I don't give financial advice, but when I have people close to me saying, hey, what should I be doing here? Because I'm not in the markets. I'm a doctor. I'm a teacher. I'm a garbage, whatever the heck it is. And I have a 401k. I have an IRA. And what I always say, and I said it
all throughout 2022. I could be Barris Dan on Fast Money or kind of lay out the Steelman case over here for this, that, or whatever. But what I say is if you are investing in tax advantage accounts and you're thinking long term, well, then you just dollar cost average. You know what I mean? You don't like that. You don't like that. No, that's 100% correct. I was going to say the problem I have with that is the viewership for clients
closing bell or halftime or fast money, which are the three, I guess, most individual stock oriented shows. I hope I'm not saying anything incorrect here. I think you're are people who are actively in markets. And I hope and maybe we all don't do a good enough job of it.
I hope people understand that there's a difference between the fun you can have in markets, so to speak, and the appropriate investing course. And it's why I'm sure you have the same conversations with people I do. I meet any number of people in RIA world
who go, what the hell are you guys talking about? I mean, nobody actually does this. From a time horizon standpoint. From a time horizon. And listen, in grad school, it was the first time I had heard about what's called core satellite, which is really what you're supposed to do is the core of your investment portfolio is supposed to be
passive, the spiders, the cues, whatever index level. - Low cost index. - Low cost index fund, dollar cost average, set it and forget it. And the satellites around that are you wanna go to the, you wanna go to your buddy's house and talk about how you bought CoreWeave or you got in on the Facebook IPO or whatever. And those are the satellite, that's,
which is supposed to do. Trading in and out of Eaton and Chipotle is not going to work for most people. 100%. But like, I've been saying this for 20 years. I mean, everyone has their, you know, kink or their, like, you know, you,
You might like to kite surf, and that's going to cost you $25,000 a year. It's travel or it's whatever the heck you do. And a lot of folks think of that – what do you call it? The satellite? Satellites. That's kind of their entertainment intellectually. It's kind of stimulating. They're trying to figure out individual stories. There's like a psychology about it. There's a certain kind of –
you get a little rush from all this sort of stuff. You find people that you like on TV, you enjoy the commentary. So that's really important. Guy and I... It's investable sports. Yeah, 100%. And so Guy's been doing Fast Money since the day it started 18 years ago. I started about 13 years ago, that sort of thing. We've met in person hundreds of
I was at the Knicks game last night. I met two of them. They come up. It's their sport. You know what I mean? They enjoy it. It's a hobby. And hopefully this is not the only thing that they're doing because you and I will be at, you know, hundreds of people institutionally who are trying to do this. It's really hard to do it as your only sort of thing. I don't get recognized at the Knicks game, but for me, it's sometimes. All right. Bill, was that a little cheesy? Was that a bit of a flex? Yeah. Yeah.
For me, sometimes they go to concerts, the fish shows, me and Leisman. Yeah. Me and Leisman are holding court. We had this live event where people bought tickets. They came from 30 states in this country, a couple of countries, to watch Fast Money Live and do a panel. We did a panel. We had cocktails. These people were so into it. I think it's great. And it went so well, we're doing another one.
And so, you know, there's a lot of folks like that. They love this sort of stuff. But I think it's important. You have to have a barbell approach is really what you're saying. It's like, I got to listen to Dan Greenhouse on one side of it, because that's the thing that's going to help me think about frameworks and think about like an intermediate to longer term thing. But if my satellite thing is Dan and Guy, well, then that's kind of fun, too. The other thing I'm not positive you talk to more retailer viewers than I do. I'm on once a week. You're on every day, obviously.
Although my first time was 2009, so I wasn't too far behind everybody. Mine too, by the way. Yeah, we've been doing this. There's not many of us that have been doing this a long time. You don't age, by the way. I moisturize religiously, and it really covers it up. Just the hands, though. What I don't think most people really appreciate, they've heard it, maybe they know it, but they don't really get it, is the advantages that I, an institutional investor, have.
Doesn't mean I'm smarter than anybody. I'm not.
doesn't mean I'm any better. No, the example that you just gave, you were at a closed door dinner last night with a bunch of macro people. They could have been strategists. They could have been portfolio managers, investors. So like I came from that world. I get it. Now you can get sucked into a lot of stuff. I love the fact that it sounds like you were in there. You were the sole guy. But that's amazing for you to get that sort of like, you know, like feedback and pushback. I'm in a room with 10 macro investors and a
bank and all their macro people. I get it's drinking from a fire hose. The amount of research I get, I have access to. I mean, just look at the other day, the story where Scott Besant moved markets by saying something that was a closed door JP Morgan meeting. So cheesy, by the way.
- Separate conversation. - So cheesy, oh my God. - But like the average investor doesn't get that type of information where it's sort of the old school-- - That's why it was cheesy, by the way. - Fine, but it was that old school movie where you run out of the court and you run to the pay phone and say, you know, he's guilty.
It was that scene in the big short where Eisman, you know, like at the Paris-Germans conference or something like that, you know, and that happens, man. Like, you know, during that Archegos thing, you remember like that, you know, this was just what, three or four years ago and all the streets were on the hook. They were short all these like meme stocks, Viacom, all that sort of stuff. And, you know, supposedly the Goldman and Morgan guys were in there like, you know, texting their traders, you know, and the guys who didn't text their traders out of the meeting, they got stuck and they actually, you know, were in these massive short squeezes. We're big in the media space. Yeah.
And not that everybody wasn't watching it, but we were trying to figure out what was going on in a couple of those names.
And just a side note, I don't think in my career I've seen anything quite like that. - I have some friends who were working out of those positions and those were career enders. - Ended up taking down a bank eventually, you know what I mean? - So the point I'm just making is I hope people at home recognize that a lot of the stuff that in particular you guys talk about on Fast Money and Halftime and to a lesser degree what we do in Closing Bell,
I hope they just recognize that this should be part of a larger portfolio and the type of stuff that institutions do, it's not what the- - I say the same thing, by the way. I said like 10% or less.
or less of your investable capital should be used for this sort of stuff. Unless you think that, you know, you have some sort of edge, you have some sort of like, you know, model that you've created both quantitative and maybe you have some qualitative frameworks and that sort of thing, but it takes a lot of work. I mean, I think it's getting, you know, easier and easier to kind of create those frameworks with, with technology. And that's been going that way for a long time. All right, well, let's, let's finish up with this. I mean, like,
I love contrarian views. When I started doing CNBC in 2009, no one knew that was going to be the bottom. It was a really difficult period for a year and a half, maybe two years. And a lot of folks still have a lot of scar tissue from that sort of period. But when I started going on CNBC, I was like you. I used to see it up for 10, 15 years in the first part of my career. And you're like, who's that? Chamoli or that guy is always wrong.
Chamoli? Yeah, you know, that sort of thing. But then when I got there, I was like, oh, my goodness, everybody's universally bullish, you know? And I was like, well, I thought. Well, stock go up. Yeah, and my only view was like, all right, well, I think this would be useful for the viewers. Like, let me try to pick apart that bear case or the bull case because when I started in the business, like, if you were going to be drilled by, you know, whoever, the portfolio manager or whatever, you had to know both sides of it. Got to know both sides. Yeah, so talk to me like, all right.
Shallow recession is your view. People are freaking out a little bit. You think things are going to calm down. You think we get some bilateral deals. Then we focus on China. You think that neither one of us, China or the U.S., want something that's going to damage too badly our own economies, but then also just cause a global recession. So you think cooler heads are going to prevail?
Long time ago when the conversation of China selling treasuries would be brought up Larry Summers, whatever one thinks about him really good with the language coined it mutually assured financial destruction and Said the idea that the Chinese would dump our treasuries was far-fetched because we would just stop buying their stuff And that would be the end of both countries I'm over simplifying a larger conversation But and I think to some degree I think you have to think about it that way that as as as
dramatic as President Trump might sound, as out of the box some of these proclamations might be. I'm not ruling out military force in Greenland or Governor Trudeau in the 51st state. A lot of that drives people crazy. And it is, I understand, it is provocative language and it's designed to be provocative, the third term stuff.
He tweeted the other day, this is not my market. It's Biden's market. Right, dude. But if you haven't been paying attention then, like, you know, all of this stuff is possible. Yeah. I get it. All I'm saying is what I try to focus on is getting back to the concept of expected value. What's the most likely outcome? Sure. There's one possibility where we invade and take over Greenland. I guess that's a possibility. Is that the most likely outcome? Probably not.
Sure, there's a possibility that we go forward with 150% tariffs. And to be clear for the listener, whether it's 100 or 150 or 200 is irrelevant. At some point, you've just made Chinese goods uncompetitive. It doesn't matter what you do. You can't raise them anymore. You can't buy less of zero.
So what's the most likely outcome? And again, to me, I think taking my own personal feelings about politics and everything else out of it, what's the most likely outcome? Probably not these worst case outcomes. And at that moment when markets were imploding, all I was saying
Not that tariffs are great and they're a terrific negotiating strategy. I'm not an administration spokesman. You're not opining on the rollout. I couldn't care less if AOC is president or Trump is. I mean, I can care, but you know what I mean. My job is just to say, okay, these are the cards in front of me. What's...
am I going to flop the ACE I need, or do I need to pull an inside straight? What's the most likely outcomes. And again, I just don't think those worst case scenarios are most likely outcomes. Okay. If that is the case, and we'll end with this, do you think an S and P that's down 6% on the year and a NASDAQ that's down 10 and a half percent on the year, um,
Do you think they closed, let's say, unchanged or higher, given kind of the base case that you're expecting? Or do you think that it was just time to have a little bit of those multiple turns taken out, kind of digest some of this generative AI stuff, maybe some of the financials and what they had to say, it's not going to turn particularly much worse than, you know what I mean? Maybe it's just not, I'm with you, there's a chance of that. And we had two 20% up years in the S&P, 23%, 24%, 25%.
that's unusual do you think that like right you think the lows are in for this year in the in the uh listen a lot of we are investing by tweet we are so there's a there's a uh i have no insight i don't think anybody really is inside even the people who have insight don't have insight but i i if things go the way that i think they're going to go that's what then the lows are probably in again i don't think we're going to seven i originally thought we might get to seven thousand we're clearly not going to get to seven thousand any time soon
But do I think the lows are in? I think the lows might be in. Although I reserve the right to change my view tomorrow. But why I love this conversation with a strategist who's on the buy side is that you are not beholden to, you know what I mean, targets and all that sort of stuff. And you're also not beholden to what your –
clients want to hear. Do you know what I'm saying? Yes, you talk to investors, you know what I mean? But they've already trusted you. They're already given you their money. They also know what your track record is. They hear from you guys frequently. I'm sure you write a monthly or quarterly or something like that. So they know your process. You know what I mean? They know your risk management, you know, capabilities, that sort of thing. So that's why I love hearing from you. I mean, you and I,
I've been talking for a long time. I've seen you on TV forever. And I think you are one of those folks that are never hair on fire, you know what I mean? One way or the other. - Hair on, 'cause Josh on TV one time said most of the time the meteor doesn't hit the earth.
earth. Yeah. And I've never, I mean, that's some version of that saying, that's right. Some version of that saying has existed in perpetuity, but it is a recent observation that, that bears repeating most of the time, the meteor doesn't hit the earth and it gets, you know, it gets back to, I think it was Tepper in a bottom in 08.
when he was buying was on with Kernan on CNBC and said something to the effect of, "Listen, either the Fed's gonna save the day and I'm gonna make a ton of money, or it doesn't matter what I own." Something like that. - I think he did that during COVID too, by the way. - It might, listen, COVID was, we had conversations in COVID that were verbatim.
Listen guys either a year from now. We're cool or we're dead. So like this is a pretty asymmetric trade here now that's not to say that I knew when the bottom was but you could at that point and to be clear a lot of stuff couldn't be bought spreads were too wide Stuff wasn't in credit stuff wasn't trading equity obviously is a considerably more liquid but you I just felt like you knew at that moment that
First of all, I've been we don't want to get into this, but you knew at that moment either I'm going to die or I'm going to make money. And it seems like I should go with I'm going to make money. What's different this time to me about the meteor and like headed for Earth, you know what I mean? Like it might be able to kind of divert off a little bit, you know, is that the traditional playbook, you know what I mean, for some sort of economic calamity is kind of out the window right now.
You know what I mean? So I think if the Fed came out on Wednesday. This is a legitimate argument people make. I agree. If the Fed came out on Wednesday and they did a surprise cut of 100 basis points, I think the stock market would be down 3% like that. You know what I mean? I think the NASDAQ would be down 5%. I think the dollar or the Dixie would be on its way to 95.
You know, like those sorts of things. You say, OK, well, let's say we have a three point eight percent tenure at that point or so. Well, we had a three point eight percent tenure. So like I just 10 years basically unchanged with Liberation Day. Yeah, it's unchanged from a year ago. You know what I mean? Like so. So I guess my point is, is like I think the traditional, you know what I mean? Playbook is kind of out the window right now. And, you know, who knows? You know, I listen, you know, I play this.
I play this guy, you know, on TV a little bit again, like I just mentioned, but I'm not like the sky is falling right now. I mean, I think that hopefully cooler heads prevail. What I'm more concerned about is that every day I open the Wall Street Journal, the New York Times, the Washington Post, the FT and the top 10 stories about how different parts of our
our government are being dismantled by the people who have been put in place to run those, you know, verticals. And to me, I think there is a single point of failure in our government. Like we have never seen before. You just talked about on the tariff, you know what I mean? The power of the person. So, so Congress is just, they've just, they're gone. They're out. That's been, so, so we don't need to turn this into the New York times podcast or a political podcast.
- I'd love to be Ezra Klein, he's brilliant. - Ezra Klein is a phenomenal listen. But about the single point, listen,
I get why investors, as much as we try to be politically agnostic and deal with it, everyone has their own political inclinations. And I understand why one would look at what's going on. And if you're on that side of the aisle, the left side of the aisle, you might, oh my God, he's doing X, Y, and Z. He's ignoring judges. Listen, pretty soon, it's going to be both sides of the aisle. And that's one of the wild cards for me. Well, the rebuttal, let's have some fun for a quick moment here at the end. The rebuttal is that that was the last term.
In the last term, there was plenty that happened that was extrajudicial or ignoring of norms, et cetera, et cetera. Listen, I don't want to—it's not my job to be the politician on a public forum. I mean, the history is going to think very differently. Think about the last term ended in a violent insurrection on our nation's capital. And to me, the intellectual dishonesty by so many of these folks that—
had condemned that had written this guy off as one of the biggest villains in american history and now they're all there with their handout trying to get tax cuts and deregulation and better trade deals and this and that whatever um i don't buy it well um i hate to leave it there i'm not asking you we're now what's supposed to happen now is listeners are supposed to write in and demand
the risk reversal Dan and Dan political podcast. - I would love that. - Where we don't talk-- - You know, I already have a name for it. - What? - Political Capital. - That's actually not, well, there was a Bloomberg show for years. - Oh really, I don't watch Bloomberg. - That was Political Capital. - Are you sure? - Or was it, I'm just saying that, but the key to being a strategist is saying it like you know it and you mean it, 'cause you just assume other people don't. So I'm gonna go with, yeah, there was a Bloomberg show called Political Capital. - You nailed that. - All right.
Dan Greenhouse, this was fun. I hope you'll come back. Let's do it at the end of Q2, and it'll be interesting to kind of revisit some of these thoughts. As long as we cool it down in here a little bit, I'm happy to come back. Bill, will you fix that? All right, peeps. Thanks so much. I appreciate it, Dan. My pleasure, sir.