On The Tape Podcast – Hope is a Dangerous Thing with Liz Young of SoFi

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On this episode of On The Tape Guy, Dan and Danny are joined by Liz Young, head of investment strategy at SoFi, to discuss summer rally for stocks (4:00), the Fed meeting at Jackson Hole (10:47), young investors (15:40), how the markets could shake out after Jerome Powell’s speech (22:00), student loan forgiveness (26:30), Salesforce and Snowflake earnings (37:43), Liz’s note on what’s happening in China (44:33), Danny’s investor quiz (51:51), and EY from SoFi unplugged (56:27).

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Show Transcript:

Guy Adami: [00:00:00] CME ad [00:00:01][0.4]

Dan Nathan: [00:00:30] iConnections ad [00:00:31][0.3]

Guy Adami: [00:01:21] I’m sure a lot of you people out there think you guys plan these guests ahead of time. And sometimes that’s true. Sometimes it’s kismet. Sometimes the stars align, but sometimes we plan a guest for a reason. Dan Nathan and Danny Moses and I find myself reading a lot lately. I’ve reread the book The Fountainhead. I’ve also recently started Atlas Shrugged. You Ayn Rand fans out there might be familiar. I mention that because one of her lesser known works, The Iron Rind Library, the voice of reason essays in Objectivist thought by Ayn Rand. Now I mention that because you always say You, Danny and Dan, your hair’s on fire. You hate the Fed. So we thought we would bring in a voice of reason today in the form of e y from Sofi, you know, from MKT Call, you know, from so far, you know, from the halftime report, you know, from just about every news organization out there that needs an intelligent voice of reason. Well, she’s joining us today on the tape. How are you? Why. [00:02:33][72.2]

Liz Young: [00:02:34] I’m fantastic. I feel like the title of this episode should be Three Bears and A Bull on the Mike. [00:02:40][5.6]

Dan Nathan: [00:02:40] Well, hold on at first. First things first, Liz Young. So that’s Elway. But you have a little thing that you call her e y. And then for the rest of us who read The Fountainhead in high school or college or whatever, we just call her Ayn Rand. I don’t know. [00:02:52][12.1]

Liz Young: [00:02:53] I was wondering if that’s how I call her. [00:02:55][1.9]

Guy Adami: [00:02:55] It’s not. And that’s insulting. It’s Ayn. It rhymes with nine. [00:02:58][3.6]

Danny Moses: [00:02:59] Hold on a second. Yeah, we just declared. Liz said three bulls in a bear. How do you know? [00:03:03][4.3]

Liz Young: [00:03:04] Three bears in a bull? [00:03:04][0.7]

Danny Moses: [00:03:05] I mean, three bears and a bull. How do you know it? [00:03:07][2.1]

Liz Young: [00:03:07] Because I listen. [00:03:08][0.4]

Danny Moses: [00:03:08] So you’re what? I’m boys. Are you bearish? [00:03:10][1.5]

Liz Young: [00:03:11] No. [00:03:11][0.0]

Danny Moses: [00:03:11] All right, just checking. I’m a. [00:03:12][1.5]

Liz Young: [00:03:13] Short guy. Is bullish. [00:03:14][0.8]

Dan Nathan: [00:03:14] Yeah. You just turn that whole thing around here. And just to be really clear, Danny just closed a really cool deal, a cannabis deal. He just got done with the closing party last night. So he’s here. So what? So he might not be as sharp as normal Thursday, but they’re just saying, you know what I mean? How is Brady doing? Is he. He’s good. Yeah. Go get them later. All right. Sorry about. [00:03:31][17.3]

Danny Moses: [00:03:32] That. Yeah. [00:03:32][0.2]

Guy Adami: [00:03:33] It’s great to have Liz Young from so far with us. And let’s in all seriousness, your work is extraordinarily thoughtful. And before we met, I was a fan of your work. I’m more of a fan now for obvious reasons. And listen, the voice of reason, I think is a great title for this, because as we have this Jackson Hall tomorrow, the day this drops Friday, we’re going to hear from all these different characters. And, you know, where Danny and I said, Dan is a little more measured. But as we get into what’s going to be an interesting series of conversations, I’m sure, on the back of this, you’ve been extraordinarily thoughtful in your work. In the fall of last year, you were the one saying we’ve gone from a by the dip market to a sell the rally market. So you’ve been way ahead of all this stuff as the world looks to you now at the end of August, what are your thoughts here? Just sort of on a macro level. [00:04:23][50.3]

Liz Young: [00:04:23] No pressure, right? So first of all, I love that you are trying to avoid using the buy the dip, sell the rip rhyme. I’m going to use no. [00:04:31][7.8]

Guy Adami: [00:04:31] I to stop for. I’m just going to tell you one thing. You noticed that I was very cautious in not saying that. I mean, you know, the type of people that say that I will spare the audience from the word that I text you from time to time, but please continue. [00:04:44][12.8]

Liz Young: [00:04:45] Yeah, yeah. So, okay, I think that we are in a time where the market can’t decide if we’re mid-cycle or late cycle. And you watch the sector behavior, which is what I watch most closely. You watch what does well and what doesn’t do well in rallies. And this last one that we had that moved from June 16th until about August 16th, you saw a bunch of stuff that would signal early to mid-cycle and then utilities, which signals late cycle. And we’ve still got high energy prices. We’re still worried about oil spiking again, which sends all these late cycle signals, still worried about inflation, as we should be. But where we’re at at this moment is, I think, very anticipatory of what Jay Powell, I’m going to call him, Jay Powell is going to say tomorrow. Honestly, I would have thought that we would sell off this week and then have a relief rally after he talked tomorrow. But we haven’t really sold off. So now I’m afraid that we’re going to sell off tomorrow when he comes out and says, I’m still hawkish. We’re still hawkish, we still have to hike. We still have to fight this. [00:05:45][60.7]

Danny Moses: [00:05:46] Take a step back for a second, because I still don’t think we know that our economy can function in a higher rate environment. We have really seen it. We’ve seen fits and starts, especially as it relates to the ten year yield moving higher. Here we are again, mortgage rates hitting new highs again. You know, we’re piercing that. That tends to have a lag impact to what we see coming later. So we had this respite on credit spreads coming in. Yields came in a little bit. I think that was the reason, one of the reasons for the surge in the market. Curious to get your thoughts on that, because it’s still unproven to me. You know, the proof is in the pudding. If we can really get through this and going into Q4. [00:06:13][26.9]

Liz Young: [00:06:14] First of all, labeling anybody as a bull or a bear, I only do that jokingly because I don’t think it’s fair. And I don’t think that this is a time. Where we can be that clear cut about it. And I think what’s happening right now, especially with rates, you see things like the MOVE index, which is bond volatility, you see that spike higher. So it doesn’t really make sense that equities would do well in that environment. Now, you’re right, we don’t know if the economy can do well in a higher rate environment. As the Fed is hiking, history would tell you that it can’t. History would tell you that it never really works that way. But I think the one piece that always makes me question is when people start talking about a big recession being inevitable, unavoidable. That’s the moment when it becomes available, actually, and that we are all so braced for this terrible Armageddon situation and that we’ve prepped ourselves for it. And here we are. And it’s coming. What if it never comes? And, you know, I think, too, if you compare to go back to the yield curve situation, look at what happened in the first half of the year. And I know we talked about it on market call. We’ve talked about it many times. We had these couple of little fake inversions on the curve. Right? They were like inverted for about 7 minutes. And then it stopped or it inverted very, very shallowly. This one is real. This one, if it does signal a recession, if it does signal something bad coming, it signals that it’s coming in 2023. And that’s where I fall on the, I guess, more bullish camp for the rest of this year market. [00:07:43][89.9]

Dan Nathan: [00:07:44] You’re right. So the question would be, is that in the lows in June, when the S&P was down more than 20%, NASDAQ was down 30%. Was that that anticipatory decline for this 2023 recession? I just don’t think so. Right. And so market participants got really, really bearish into that. We had a Fed that for some reason people interpreted some of the tea leaves, I guess, that they were likely to pivot sooner. And I guess the markets at the time were thinking, and that’s why we had that equity rally. But it is interesting. I mean, since then, yields have not let up. Ten year U.S. Treasury yield is is back here just about 3%, which we hadn’t seen in a while. So I guess my point is, is that if that was like a fake inversion that we had. I don’t know about that because in 2019 we had a very brief inversion of the 210 spread. And in 2020 you can say it was a black swan event, but we had a recession. [00:08:34][49.9]

Liz Young: [00:08:35] But not caused by the same thing that the inversion was signaling. And so back to the drawdown that we saw up until that bottom in June, no, I don’t think that was what was foreshadowing a terrible recession to come. I think that was what we would call a non recessionary bear market, which is typically somewhere between 25 and 30%. We didn’t quite get to 25%, but we got close enough. [00:08:56][21.4]

Dan Nathan: [00:08:56] Is it the average bear market, though, also in recessions, 30 some percent or something? [00:09:01][5.0]

Liz Young: [00:09:02] 35 to 45? Yeah, I. [00:09:03][1.6]

Danny Moses: [00:09:03] Just don’t think there’s any historical precedent for this. And I would say I’ve been saying for a long time, if you want me to get bullish on the equity market, I actually want ten year yields to move higher because that signals to me and that’s this last move we’ve seen kind of overall with ten year yields moving higher, the market kind of yet had a big sell off last couple of days. It’s come back a little bit. That’s a healthy clean up. And the stock action that I’m seeing, some of the crappy names being left behind now are not rallying. If that sustains itself, that is a healthier state of the markets as far as I’m concerned, because. [00:09:29][25.5]

Guy Adami: [00:09:29] You’re smoking less. I mean, seriously, what do you mean? What was what do they call that, the gunge or something? Just trying to. [00:09:35][5.5]

Danny Moses: [00:09:35] Be more balanced? I’m trying to be more balanced and listen, lose it. [00:09:37][2.7]

Dan Nathan: [00:09:38] So you’re saying she you’re saying one part THC, one part CBD? [00:09:40][2.7]

Danny Moses: [00:09:41] What? I don’t think. [00:09:41][0.5]

Dan Nathan: [00:09:41] That’s what you’re exactly right. Rachel, what do you tell our moms listening to that? I don’t know. I mean, I’m just saying I’m not. [00:09:46][4.2]

Danny Moses: [00:09:46] Under the influence of anything at the moment. I’m trying to be objective and say, let’s call it like I see it. And if I see healthier activity going on the market, it doesn’t mean the market’s not going to go down. [00:09:54][7.7]

Guy Adami: [00:09:54] All right. So I’ll play your reindeer game dandy. [00:09:56][2.1]

Danny Moses: [00:09:56] Go ahead. [00:09:56][0.2]

Guy Adami: [00:09:57] So ten year yields have gone from two and a half percent in a extraordinarily quick fashion. They’re now north of I mean, it’s crazy these moves. I got to tell you something, DMO, ten year yields are not rallying because the economy is magically getting better. I think they’re rallying because that inflation genie is out of the bag. My opinion, and although the yield curve is flat and somewhat, I would submit this is an environment where yields going lower is probably a really bad thing and ten year yields going higher is a really bad thing. And you know where I learned that from the Danny Moses I knew prior to 20 minutes ago? [00:10:30][33.8]

Danny Moses: [00:10:31] Listen, I’m trying to take just a microcosm of what’s happening and just trying to kind of week to week, we got to kind of comment on what we’re kind of see him. But Guy, if you think our rates are volatile, take a quick look at the German ten year now and you know, the British ten year. So we’re recording this on Thursday afternoon. The Fed comes out tomorrow speaking at Jackson Hole Palace. We all know the Fed from futures are telling us either 50 or 75. It’s 5050 at this point. What it’s going to be three weeks for four weeks from now. So what are you going to say that’s different? I think this market has allowed him to be a little bit more hawkish than he probably potentially could have been to maintain credibility. There was other Fed governors out there saying 375 to 4 is kind of the target of where we are. So I still believe they’re not going to get there. But tomorrow is going to be a hawkish tilt. So does the market sell off on that? They’re anticipating hawkish. I don’t know. There’s economic data also that’s going to be. Coming out again. So, listen, I don’t think we’re out of the woods, obviously, but. [00:11:23][52.5]

Dan Nathan: [00:11:23] Well, it did. It gets worse before it gets better. Liz, do you agree with that, that the 15% rep in the S&P 500 over the last month and a half or so gives the Fed some cover to kind of maintain. You said September is 5050. The CME Fed watch tool is pricing about a 60% chance of a 75. [00:11:39][15.4]

Danny Moses: [00:11:39] Basis point change on every action. I oh, I know. [00:11:41][1.7]

Dan Nathan: [00:11:41] But if it moves towards 70, what I’m saying is, is that again, it really isn’t about the data, it really is about the inflation readings. Right. And so at the end of the day, I mean, guy been all over this idea that the shortages as far as natural gas and the situation over there gets worse again before it gets better. And is that the thing that kind of keeps the Fed hawkish through the fall? And sorry, buddy, you’re going to lose that bet. As far as luck, I’m just telling you, you never won less, do you do you buy into that? That is the equity market giving the Fed a little cover here. [00:12:11][29.3]

Liz Young: [00:12:11] First of all, I’m not making any $5,000 bets. I think that’s why. [00:12:14][3.2]

Danny Moses: [00:12:14] You should with him you’ll win. [00:12:15][1.0]

Liz Young: [00:12:16] So I don’t think. [00:12:18][1.8]

Danny Moses: [00:12:18] The Packers over under total wins just do something I’ll. [00:12:20][2.2]

Liz Young: [00:12:20] Bet on the Packers irrationally all day long. Okay. So first of all, the market is pretty split between 50 and 75 at this point. I think we have to number one, keep in mind that when they have that meeting, it’s September 21st. September is the month where we double the pace of quantitative tightening. Okay. So we do this balance sheet run off twice as big as we did before, and they are going to look at that. Whether or not we communicated or not, they’re going to look at that as another element of tightening. So I don’t know that they have to do 75. I think the only way that we get another 75 is if inflation does not decelerate further. So the market having rallied, although sure, it might give them a little more clearance because it’s one of the inputs into financial conditions. Right. So if the market rallies, then it would look like financial conditions have loosened so that they have some more leeway to tighten. But I think what gives them more flexibility to continue tightening is the labor market. And the fact that we’ve got it came out today, we’ve got gross domestic income. That’s still pretty positive. Not necessarily gross domestic product, but income that’s pretty positive. So they have room. Last thing I’ll say about this is moving from 75 to 50 is not dovish, 50 is still tightening, 50 is still hawkish. And if we look back on that ten years from now, we’ll say that was a hawkish Fed. [00:13:40][79.8]

Danny Moses: [00:13:41] There’s something else going on is pretty interesting is that the amount of auctions, treasury auctions that are going on are down a lot like they’ve taken down quantitatively that amount. And if you look at the quote cute that is supposed to be going on for the last three months has been anything, just a slight run up. There’s been really been nothing. And what’s funny about that is people say, well, look, it’s good. See, it’s not going to hurt us because the government’s going to issue less bonds. Well, let’s look ahead three, six months from now, what earnings going to look like? What are tax receipts going to look like? What is that? So you know that the budget deficit is going to grow. You know that this is a temporary little move down, improving a budget deficit. So those are kind of the other things going on that have a direct impact, I think, on the speed at which the Fed can go and so forth. [00:14:19][38.2]

Guy Adami: [00:14:20] Then we do a show called Fast Money, 5 p.m. Eastern Time, Monday through Friday. You might be familiar with it. I know Danny as he gets tired of this, by the way, that’s a running joke, right? And I’m sure rolling over. And don’t do that, Danny. It’s nothing I didn’t do. But I’ll say this. We had Paul McCulley, who, by the way, got fantastic care. He was on fast money about a week or so ago, and I asked him that exact question. I’m like, I get what you’re saying. It’s all well and good. I said, Paul, what nobody seems to be talking about is the fact that the Fed’s balance sheet is going to start to roll off $9 trillion balance sheet. I said, Are you not concerned about that? He goes, Oh, no, not at all, because the overnight repo market suggests and maybe he’s right, I don’t know. But there’s north of $2 trillion looking for a home and that balance sheet run off will be gobbled up by all these banks with excess liquidity. Danny, I ask you, is that just flat out wrong? Because, listen, I’ll take him at his word, but I think he’s underestimating the impact of this for sure. [00:15:18][58.0]

Danny Moses: [00:15:18] And we’ve yet to see your favorite thing, guy. The reverse repo rears its head yet, and I’m sure at some point it’s going to when you start to take out that type of liquidity in the market, there’s always an impact. I mean, look what’s happening. Global treasuries, how those things trade, just imagine and now I’ve talked about this before. I’ll put everyone to sleep, but we’re moving off of LIBOR onto the Sofr, which I’m sure Liz has talked about or written about in one of her blogs. And that’s an untested quote thing that’s supposed to track basically the Federal Reserve overnight rate. [00:15:46][28.0]

Dan Nathan: [00:15:46] You know, it’s really interesting about that guy I was on that night and I was like shocked that he said that. But then you have to remember what PIMCO is. Everyone talks their own book to some degree or whatever. I was just really surprised by that answer. And one of the things I will say this, that Liz, since you started coming on on the tape, I think it was early 20, 21 and obviously Guy and you and me, we do market called Danny. You’re involved in a lot of conversations we have when I think about who you’re speaking to. I first saw you on halftime report on CNBC on all different shows but when you think about the Sofi customer in a. We just talked. Everyone’s kind of talk in their book a little bit. You guys lead heavily into financial literacy. That’s a big part of your mission there, but you’re also trying to demystify some of these big things. So and Danny, you just said you’ve probably written about so for it, maybe you have, but you’ve probably done it in a way where you’re saying, how does this affect me? How does it affect my savings? How does it affect my investment philosophy, that sort of. Talk to us a little bit about how your job you used to talk to, like really fancy institutional investors in your prior life as a strategist. Now you’re really trying to speak to a customer base that is coming into the, I guess, the investment world. Is that fair to say? A little bit or. No. [00:16:57][70.6]

Liz Young: [00:16:58] It’s totally fair. So so far as investor base, 60% of it, more than 60% of it is between the ages of 20 and 40. So you have to think about that just from an asset allocation perspective. If I’m talking to an investor who on average is 30 years old, they’ve got a really long time horizon. So I’m not telling them that they should move their money around in 3 to 6 months time. It’s about making sure that you can stomach it in the meantime, because I know they’re looking at their portfolios every day, which is not something that investors of that age did 20 years ago. I know they’re looking at it every day, so I have to try to do is explain to them what’s happening, why it’s happening and why over the long term it probably isn’t that big of a deal. And the biggest thing in this market that we’ve had to do, which has it really is more fulfilling, I think, to talk to this type of investor, at least for me, because you get to educate and you get to really connect to the actual investor. The biggest thing has been that many of them, this is the first bear market they’ve ever seen. It’s the first one they’ve ever lived through and invested through. And I’ve said many times, your first bear market will shape you. And the first one I ever went through was 22, 29. I was running three departments, one of which was a small business association loan department, and we were the custodian. So we had to price these loans. Imagine how that went. We had to price these loans on a weekly basis. I will never forget that. Right. And you start to pay attention to indicators, the clients on the phone screaming at me about the price of the loans, I can’t do anything about it. It shapes you in the sense that I am now obsessed. No matter what happens in the environment. I’m obsessed with credit spreads, I’m obsessed with debt. [00:18:33][95.3]

Dan Nathan: [00:18:34] I’m obsessed with bringing it back to the things that some of these customers are invested in and really how to interpret it. One thing that we were doing market call earlier in the week and I was reading a story off of FactSet and it was about some sort of survey that some brokerage firm did about young investors who had been burned in meme stocks and crypto. And they were really pessimistic about the current environment. And you actually said, well, we just did a survey of your customer base and you’re actually getting some different data. And Danny, I know that you’re really interested in this sort of the psychology of this investor to your point, because this is the next investor, the next real big money investor, your existing investor. So talk to us a little bit about what your survey says about this age group. [00:19:12][38.6]

Liz Young: [00:19:12] Yeah. So we surveyed all of our invest members and 74% of them said that they were planning to invest just as much, if not more, in the next six months, regardless of the volatility that had occurred. And this was before really the big rally that happened. So it was comforting because it was like, okay, they’re not scared off by it and they’re intending to keep going in this, which is a great thing to hear and see. And I think as a young investor and somebody who has that kind of time horizon, maybe they’re coming around to the idea that, okay, this is just a natural part of the business cycle. [00:19:45][32.9]

Danny Moses: [00:19:46] But Liz, what’s not natural and you just said yourself, you went through in 28, 29 the stuff that you saw. I go back to 2000. I go back really Dave I was in college in 1987, so I’ve seen a lot of stuff. These are not normal credit spreads and you just talked about how you’re nervous about it. We know we’re in uncharted territory. We know the Fed’s had our back since 2009. So we have yet to see. And I know deep in that’s in the back of your mind, the average age of the Robinhood trader happens to be the average age of the people you’re talking to. It’s so far, right, 32, 33, whatever. These people don’t have any basis to understand that. So it’s all been one way. So how do you convey that message to these people? Like, listen, I just want you to understand, maybe you get to do, even though I won’t understand something, how a true functioning capitalist society works because this is not how it works. [00:20:29][43.0]

Liz Young: [00:20:29] So a few different ways. So when you look at one of the things that’s bothered me about this market, even when we were at the lows, was that credit spreads didn’t blow out the way that they normally would in that time, which it sounds perverse to sit there and think, I wish things were worse, but you wanna see some of those indicators get worse. So the way that you have to communicate it then is, okay, what is a credit spread? Why does it matter? It matters because it means that risk is more expensive, right? You want you want to make sure that you’re managing the risk. You want to know what the level of risk is out there. And they understand the word default. So if you make it into a default conversation and how that kind of ripples through an economy, then it’s more understandable. What you have to wrap it then up into is this package of how do we know that it’s actually done? How do we know that we had enough of a wash? And you can look back at a lot of. Those indicators, whether it’s even stock market valuations, did the E get low enough? Did credit spreads get high enough? I would say at this point, if we’re going into a real recession, no, that’s not didn’t happen yet. We didn’t get low enough in piece. We didn’t get high enough in credit spreads. So the market right now is still hoping. I know hope is not a strategy. [00:21:40][70.9]

Danny Moses: [00:21:41] Hoping hope is a dangerous. [00:21:42][1.1]

Liz Young: [00:21:42] Thing that we can somehow manufacture something. [00:21:46][3.6]

Guy Adami: [00:21:46] And you rush. [00:21:47][0.3]

Liz Young: [00:21:47] This back. [00:21:47][0.2]

Guy Adami: [00:21:48] And get it now. I mean, see, Danny, that’s the problem. Sometimes you rush things, all right? I get so excited. I mean, it’s so bad. [00:21:54][6.5]

Danny Moses: [00:21:55] Shawshank. This Shawshank is not one. Okay. [00:21:57][2.8]

Liz Young: [00:21:58] Anyway, sorry. Anyway, yeah, the market. So right now, because we haven’t hit those indicators, I think the market is still operating under some kind of assumption that we can manufacture something less bad than a hard landing. [00:22:08][10.4]

Danny Moses: [00:22:08] By the way, I tried to come in. I’m getting sobered up right now. I came in, I swear, I walked in. I even misstated three bulls in a bear. I’m so bullish right now. I’m so bearish right now. Oh, anyway, you did it again. All right, so listen, now we are finally starting to see price discovery on corporate debt. We are seeing things actually start to happen. Right. Stuff trading down $0.40, $0.30, $0.20. And finally, some of the equity people are waking up to say, you know what, that debt to trading at the EUR $0.40, maybe that equity is actually worthless. So I think this cycle we’re going to see the funding that’s going to we’ve already we talked about a couple weeks. Who are these fallen angels? S&P, Moody’s downgrade these things into junk territory, corporate bond. It is feast or famine. Now it’s going to happen. And I think people need to understand that. And by the way, that’s a huge opportunity. [00:22:50][41.2]

Liz Young: [00:22:51] Huge opportunity. [00:22:51][0.3]

Danny Moses: [00:22:51] You can recognize it on the long and the short. [00:22:53][1.3]

Liz Young: [00:22:53] Because what happens on the other side, rising stars, right? Exactly. If you catch a falling angel, it crosses over into John. [00:22:59][5.8]

Dan Nathan: [00:22:59] Oh, my goodness. I got you. [00:23:01][2.3]

Guy Adami: [00:23:02] By the way, every time you guys say that, I think of the commercial visiting angels, the number one name in home care, some damn thing which makes my head frickin explode. So I swear to God, if you say fallen angels or something, I’m going to lose my mind. [00:23:18][15.5]

Danny Moses: [00:23:18] I’m sure talks to angels. [00:23:19][0.6]

Guy Adami: [00:23:19] And don’t catch the fallen. [00:23:20][1.0]

Liz Young: [00:23:21] Angels at. [00:23:21][0.4]

Guy Adami: [00:23:21] First. That’s just. I’m going to leave, all right. [00:23:23][2.1]

Dan Nathan: [00:23:23] To guide tomorrow. But by the time our listeners are just keyed in on this, so the Fed, Jay Powell, his little speech is going to be done. How do you think the markets react? We have an S&P that sold off sharply last week. It was 4% off of its highs. It’s kind of trying to hold in here a little bit. We have, again, crude found a bit of a bottom right near those November highs. We have the ten year yield back above 3%. We have the US dollar index, the Dixie trading near what, multiple year highs here? There’s a lot of things that actually speak to me about a very vulnerable equity market. We’ll talk about some of the earnings that we’ve seen in the last week or so, because I do think some of the high valuation kind of stats names, some of the things that we saw this week might be really telling. Talk to me a little bit about how you think this shakes out on the way out, assuming that it’s just kind of status quo. You mentioned this earlier to me that Neel Kashkari, the biggest dove who’s ever sat on a Federal Reserve board, sounds pretty hawkish right now. [00:24:24][60.2]

Guy Adami: [00:24:24] He basically was read the riot act and he’s gotten himself in line, by the way, the arrogance that he portrayed during that whole transitory period. I mean, he was the flag waver of transitory made me crazy, the certainty with which he spoke. And now he’s finally had his come to Jesus moment and he’s figured this entire thing out better late than never. As they say. In terms of answering your question, I think the setup for a move lower is basically right in front of us. And obviously we’re going to know a lot more 24 hours from when we’re taping this. But I’ll say this, the move from the mid-June lows to the recent highs north of 4300 I think was expected. Why do I say that? Because we talked about it when back in mid-June, number one. And it got to levels, we thought. But I think people, again, of misunderstanding some of the commentary coming out of this Federal Reserve and the people around it, they have pretty much marched out every single person that ever had a Fed label around them and are basically telling you how inflation is a problem. We’re here to combat it. We’re going to do what it takes. So I don’t know what more they need to say. My sense is, given the fact that the market has rallied since really the last time you heard from Jerome Powell in earnest, it gives him ammunition to an earlier comment you made to why from so far. So I think the fact that the market has rallied gives them the opportunity to be even more aggressive in their tone than they would have been maybe 500 or so S&P points only. [00:25:51][86.8]

Dan Nathan: [00:25:51] What’s the downside of them being more aggressive? He didn’t answer your question. You just said it sets up. You’re not paying attention. Yeah. [00:25:58][6.4]

Danny Moses: [00:25:58] He said it sets it up because we had a rally into it, but we’re back down below 4200. So what have you asked and what is. [00:26:04][5.5]

Guy Adami: [00:26:04] Important to Bob Marley in like one of your headphones or something? Are you looking. [00:26:08][3.4]

Dan Nathan: [00:26:08] Guy six next stop is 4000 and there’s an unfilled gap. And so you’re saying four times. [00:26:13][4.6]

Danny Moses: [00:26:13] I was talking about for tomorrow. I didn’t answer the question for tomorrow which is what you and my grill. You know what, by the way? [00:26:18][4.9]

Liz Young: [00:26:18] Yeah, I feel like I. Her down for tomorrow. [00:26:20][1.4]

Guy Adami: [00:26:20] I heard. [00:26:20][0.2]

Dan Nathan: [00:26:20] Thank you. I think I heard down the road. But listen, you can. [00:26:23][2.6]

Guy Adami: [00:26:23] Hear what they want to hear. Then, you. [00:26:24][1.4]

Dan Nathan: [00:26:25] Know, they disregard the rest. [00:26:26][1.0]

Guy Adami: [00:26:27] Thank you, Paul Simon. That wasn’t that the title? Got a funny story. Can I tell a story? [00:26:31][4.1]

Dan Nathan: [00:26:31] This is your podcast guy. [00:26:32][1.1]

Guy Adami: [00:26:33] How that. So my daughter Lily’s home. She works in the city, but she’s living home, right? And last night, Wednesday night, I do this because it’s important to give context. There was no baseball in town. The Yankees of New York weren’t playing. The Mets from Shea Stadium weren’t playing that that I would watch them. There was no preseason football. So she sat down and said, Gigi, let’s watch Maverick Top Gun. I’m like, apps are frickin lutely. I saw it and I mean that. I’m all in for that. So she went to like Amazon Prime Video or one of those stupid like there are hundred of those friggin things that run across. [00:27:04][31.4]

Dan Nathan: [00:27:05] Yeah, we know we all use the. [00:27:06][1.2]

Guy Adami: [00:27:06] Hula hoop and Hulu and Roku and all that shit, right? So she came across prime Amazon Prime video and she clicked on it and Maverick Top Gun and she hit it. Then you had to go to your phone or something. I’m like, This is what people your age actually do. I’m like, Absolutely not. She goes, Okay, you know what we should do? Then I’ll make Danny happy. Let’s watch the Big Short. I’m like, Absolutely not. [00:27:28][22.0]

Danny Moses: [00:27:28] You’re such a dick. I know he’s watching, by the way. I know he has. [00:27:32][4.0]

Liz Young: [00:27:33] Like I said. [00:27:34][0.8]

Dan Nathan: [00:27:34] I actually don’t think. What do you think? The guy who plays them as much better looking than him or not? [00:27:38][3.8]

Liz Young: [00:27:38] Oh, you put me in that spot. No, of course. No. I think the real Danny Moses is just absolutely handsome. Off the charts. [00:27:45][7.0]

Dan Nathan: [00:27:47] CME ad [00:27:47][0.3]

Dan Nathan: [00:29:53] iConnections ad [00:29:53][0.0]

Danny Moses: [00:29:57] Can we talk about? Because I know it’s near and dear to your client base, the student loan thing that’s gone on here, right. I’d imagine most people you’re talking to are in Vegas now. I mean, that was like that was like a that was like a massive win. Yeah, but I don’t we don’t have to share your thoughts. This is not a political question at all. It’s just back to the moral hazard issue that we all went through for the last 13, 15 years and stuff. The Fed has your back. That is like really all of a sudden those are pretty wide ranges for forgiveness. Right. And these student servicing companies, some of them had already given up the ghost and transferred it back and so forth. But to me, it’s really nuts how this thing went down. Like quickly it felt like I know his plan, but. [00:30:34][36.4]

Liz Young: [00:30:34] Again, it didn’t feel quick to us. It felt like it lasted a long time to anybody working out so far. But something that’s true, this is anecdotal, but this was a few years ago. I have a friend who’s in the business and he has two little kids. And we were talking about investing and saving for college and we were talking about tuition costs. And he was like, You know what? I don’t even have college savings accounts for them. And I was guffawed. I couldn’t believe that somebody like him didn’t have college savings accounts for his kids. And he said the debt is so ballooning, the student loan debt is so ballooning that the government’s going to have to do something about it and look at what happened. It’s not as if he called this particular scenario, but look at what happened. So, look, I think it’s good for people that it’s going to benefit in the sense that it was completely imbalanced, the struggle that they were going to have due to their student debt. It doesn’t really solve the problem because if you start college next year, you’re still paying these huge tuition costs, you’re still going to have to take loans out. So it doesn’t solve the problem. It’s a temporary Band-Aid that we’re putting on during a time when people are already under stress. I think it’s a conundrum. I’m not really sure what we were going to do about it. I think the argument is that these were non-performing loans in the first place, but still it doesn’t reduce the amount of non-performing loans that we’re going to continue to have. [00:31:47][73.6]

Danny Moses: [00:31:47] Don’t you actually think it encourages, as sick as it sounds, people, to go take out more loans now that maybe would not have done it? Think about it because you were overthinking it. Just keep it simple. If I’m thinking about getting you know what, I’m going to get that student loan because maybe I never have to pay it back. I think you’re going to see huge growth in student loan demand as a result of this forgiveness. [00:32:05][17.9]

Dan Nathan: [00:32:06] Well, don’t you think people did the same thing when you think about that? I mean, corporations, they take out a lot of debt. They do a lot of stupid fucking things. Yeah, but you. [00:32:14][8.2]

Danny Moses: [00:32:14] Couldn’t prevent COVID as it relates to a four year. [00:32:16][2.3]

Dan Nathan: [00:32:17] Old. I’m saying is, is that it? Same thing happened to auto companies and AIG. I mean, the list goes on and on. So moral hazards, moral hazard. For the first time in a long time, people under $125,000 an income got a little something. That’s all I’m saying. And I think that, you. [00:32:29][12.7]

Danny Moses: [00:32:29] Know, listen, I think the colleges should have to pay for some of this stuff back. But seriously, this all really started on the for profit stuff years ago. So when I was at from point with Steve Eisman, I mean, he went in front of Congress. Right. He testified in 2010. He wrote a check to a woman who couldn’t pay back her for profit loan. What happened was those for profit universities, Corinthian, Apollo, this group of them, they figured out a game where they bring in a prospective student. They said, Oh, take out this government loan and you can pay for your college with this. And people started to figure out this game was just a game because they couldn’t get real jobs out of all these schools. Some they could, but some they couldn’t. And so we started to build up losses on these loans over time. And that’s where this all kind of started about, Hey, we got to get forgiveness. That forgiveness to me is different. And those companies were never set up to really educate people, get them jobs. They had these income tests that were going on at the time. Can you really go earn you can’t prove that you’re going to get a job after. You shouldn’t be able to get one anyway. That’s where this whole thing kind of started. And that was like 2010 11 when this thing really came to the forefront. And now those things are basically all gone. But that was a huge amount of the debt and the students was from these colleges, which would go on forever about. [00:33:33][63.6]

Guy Adami: [00:33:33] But I have a question for E.y and then I have a question for Danny Moses in order, if you may. Danny mentioned Corinthian. If I said to you, why Corinthian leather? What do you say quickly? [00:33:43][10.0]

Liz Young: [00:33:45] I have no idea. [00:33:45][0.5]

Guy Adami: [00:33:46] But of course you don’t. That’s the problem. See, that in and of itself is a problem, because you missed the whole Ricardo Montalban back in the day humping cars with rich Corinthian leather, number one. I’ll let you Google that. As I asked Danny Moses this next question, which is 1.6 trillion with a T college student loan debt, which is an astronomical number, credit card debt. Danny Moses is now north for the first time ever of $1,000,000,000,000 in this country. Now, we were talking about credit before, and I still think that’s going to be the domino that’s going to fall. And these numbers are getting out of control with rates going higher. I know these are things you look at, Danny, can you just speak to that? [00:34:25][39.6]

Danny Moses: [00:34:26] Yeah. People are using credit now more than cash. Dollar Tree came out with their quarter. It’s called Dollar Tree. Now that’s a buck 25, but that’s a whole nother story. And they’re saying they’re seeing high end consumers middle and come to their stores, same as Mart told us. And they’re seeing a lot more credit being used than cash. Right. So that is not great when rates are rising. And if you start to look at your papers on your credit cards, start to look and see what’s going on, it’s going up and God forbid you miss a payment. Now, it’s a good thing that the CFPB still exists. Consumer Financial Protection Bureau, because at least they’re looking out and keeping people honest. Because, Liz, you I mean, you are. He track this stuff very well. [00:34:58][31.6]

Liz Young: [00:34:58] So I have a question and this is just collectively to the group. I think there have been so many people saying the consumer is so strong, the consumer is what’s going to keep us out of a recession. There’s all this cash on the balance sheet. If there’s all this cash on the consumer balance sheet, why are people spending on credit cards? Is it just that we’re having this k-shaped recovery like we’ve talked about? You’ve got low income consumers who are spending on credit cards and high income consumers who are just saving money and not using it because they don’t have to. And then I have a second question that I think everybody should answer. Did you make any adjustments in your personal spending habits because of inflation? [00:35:34][36.1]

Danny Moses: [00:35:35] Let’s go back to the credit cards. So everyone had all these rewards built up for a long time. There’s so many rewards being drained right now. So ask me, the one thing that I’ve done is I’ve look to use points and whatever. I have to see what’s out there. That’s what’s going that’s one thing that’s happening right now for sure, edibles. [00:35:49][14.2]

Guy Adami: [00:35:50] Because that’s clearly what’s going on during this show anyway. [00:35:52][2.3]

Liz Young: [00:35:53] When you buy those points. [00:35:53][0.9]

Danny Moses: [00:35:54] Yeah, you can buy. Sure. When? I don’t know. Hands down. But anyway, it’s a buy now, pay later type mindset. Right. And that’s kind of where we are right now, is it? Oh, I can pay it in a month. I’ll worry about it then I’ll just go buy something. So I think it’s affordability combination with people actually looking at rewards and seeing what they have too. [00:36:09][14.9]

Dan Nathan: [00:36:09] So I think the thing about food and energy inflation right now, there’s a part of the U.S. consumer where it’s just not affecting. We see savings rates start to drain a little bit. We see some of the wage gains kind of moderate a little bit. And so, again, it really does feel like a slow moving train wreck, if you think about it. The one thing you mentioned earlier is, though, I think there’s got to pop is this employment situation. I mean, we are still at 3.6%. We were at that pre-pandemic low, which was a 40 year low. And, you know, I was in an elevator this morning. I was going up to a V.C. backed fintech company. And all these 20 somethings were roaring into the elevator as 9:00. And one of the guys looks at one of his coworkers and says, There’s a lot of people back on the streets, and that’s really good. But I can’t tell. Half of them look like they’re going to yoga class. They’re in their athleisure and stuff like that. People are not working. The productivity that we are seeing by the amount of people that are employed and what the managements have learned in the last two years about this hybrid work model, it is going to be nasty for these people who think that they can just sit on these really great jobs with these really great wages that’s coming to a theater near you. And I’ve been talking to a bunch of my friends who run companies who’ve been doing nothing other than expanding over the last, let’s call it, three or four years. And if they haven’t made cuts yet, this is the first chop that they take is two jobs. It’s just that simple. So we’ve had some of the bigger companies do it in tech over the last few months. That’s the one thing to me, man. I just think when that unemployment rate starts to tick up a little bit, that’s what I think a lot of these things start to snowball. And so if we’re already talking about savings not being used or at least savings rates being drained and then consumer credit ticking up at a time where we’ve seen rates go up so dramatically, it just seems like a really what would you call that, a wet brew? Oh, that. [00:37:57][107.6]

Guy Adami: [00:37:57] Would be a witch’s brew, in my opinion. Halloween coming up. By the way, if you’re looking for a costume, always a great one to go to a stand by, a staple, as they say. I’m going to effort and attempt to answer this question about the U.S. consumer and balance sheet. And everybody, I will tell you this. If you watch CNBC specimen or watch market call or listen to the Undertale podcast, what I have said religiously now for years is I never underestimate the consumer’s want to spend. It’s their ability that I’ve always questioned. And the reason why people say that on TV so often, because it’s a lazy bullshit answer that nobody ever pushes back on because they don’t have the data behind. And when you see now $1 trillion with a T once again of credit card debt in the United States, a record number with some absurd amount of new credit cards being open since April, you have to say to yourself, things aren’t that good. Oh, by the way, somebody just won bingo. If you want more proof positive. Danny Moses I just saw a headline about some Sun NAMI and I hate the word because I can’t spell it. I know. I think it starts with t, but I don’t understand really why people not paying their energy bills, 20 million homes in the United States. And if you don’t think that’s out there around the corner, that’s something we should be watching as well. And we won’t even talk about what’s going to happen in Europe over the next couple of months. [00:39:21][84.6]

Danny Moses: [00:39:22] Danny, listen, we are stuck right now, I think just obsession with the Fed and everybody is so keyed in, they’re not taking a step back. There are layoffs happening every day. Is it horrendous? No, but it’s there. That’s a lag impact, obviously, on the economy. All the things we’re kind of talking about. I think all of us in this room know there’s going to be a reset of some kind, whether it’s stock picking, certain stocks. I mean, I’m just going to go back. I know Dan hates talking about the meme stocks. I’m just not going to call it meme stocks. But when you see Peloton act the way it does today, it gives me hope. They come out, they announced their deal with Amazon. They’re going to sell their bikes on Amazon next day, puke a quarter. They have $1.2 billion in cash left. That’s what they lost in this quarter. Right. So. That’s not sustainable, right? When you start to see those type things occurring. Bed, Bath and Beyond. They’re pricing this incredibly expensive debt that literally is coming. It makes you a you know, that the equity is worthless like those. So anyway, I’m getting hopeful now because I’m starting to see these stocks act much more rational way and the money should leave those and go to some is quality that being. [00:40:16][54.4]

Liz Young: [00:40:16] Seeing the meme stocks act more rational. [00:40:18][1.4]

Danny Moses: [00:40:18] Yeah because they’re coming I’m saying they’re actually starting to fade. They’re definitely deflating here. They’re losing their sponsorship right all week scared the short to a great now there’s no one left to buy the stock but that’s great. My my point is that when we pull this back, we go into a fundamental tape in Q4. In the next 3 to 4 months, the market will come in because if once you start trading on fundamentals and get past the obsession with the Fed, that’s when I think we’re going to finally have a and it will be a healthy sell off. I know that sounds horrendous, but it’ll be healthy. [00:40:41][23.1]

Liz Young: [00:40:42] So stab back down to previous lows are a higher low. [00:40:44][2.9]

Danny Moses: [00:40:45] I mean, I think we’re going to pierce back through 36,500. I mean, I personally think that but there. [00:40:50][4.5]

Dan Nathan: [00:40:50] Was something that happened this week and Guy and I talked about it earlier today on Market Call, but I think it’s a really good topic here. And Michael Burry tweeted this out earlier. So he is Michael J. Burry on Twitter. Subscription software and hardware revenue models revolutionize the way business is done and made for higher multiples in the market. But this means many businesses will show weakness later in a downturn. As we enter the fourth quarter and the lap first quarter, this should become more apparent. So I think it’s really interesting. On the week we had Salesforce.com, this is $160 billion market cap company with $30 billion in sales. Their co-CEO Brett Taylor, said something about more measured buying to think about who their customers are. These are large corporations of all sorts who buy licenses for this software as a service here. But if they’re starting to lay workers off, we’re going to see companies like this start to tell us that first into Bury’s point is that we’re also starting to see valuations that don’t make a whole heck of a lot of sense on the flip side of that. So Salesforce is down on a disappointing guide. It was down, I think at its lows. About 6% was about $10 billion in market cap. And then here’s a stock snowflake that has $10 billion in gains today. It’s up 20% as we speak because they beat and guided higher. There’s a company that now trades at 30 times sales this year, 20 times next, and it’s still down 50% from its all time highs last year. So again, Guy, lay it out a little bit. What are you and off here when you see these two companies and you see these two directions of the stocks, you see the differing valuations here. What do you want to extrapolate here, especially as we get through the stretch here for Q3 and we’re going to start to probably get some preannouncements, especially with the where the dollar is right here. [00:42:37][107.0]

Guy Adami: [00:42:37] Snowflake is a stock story and it happens to be a good one over the last 24 hours. Salesforce comes out, CRM is an economy story and that’s the one you should be focused on. Now, if you’re trading stocks, doesn’t matter. You don’t really care necessarily. One stock is up big. If you owned it, that’s really great. But if you’re trying to do second derivative work and look at what Salesforce said, what’s the word you used? Customers are now more measured. That’s code for basically saying there’s a slowdown in sales. I mean, let’s just put it out there and that’s what they’re seeing. But it didn’t start there. I mean, we heard from Bill McDermott a month or so ago and he started this train rolling. So, again, these are great companies. Slowdowns are natural. I just don’t think the market is taking it into full consideration. What it means and I’ve said this now a dozen times the Microsoft quarter a few weeks ago was not a great quarter. I’ll say it again. If you didn’t hear me the first time, the Microsoft Quarter was not a great quarter. As a matter of fact, that day the stock closed at 255 within 15 minutes after reporting it was trading to 42. The only thing that saved that stock that day was they came out, said during the call that they did not see a slowdown in demand, which may be true. Good for them. That’s coming to that same theater that Dan mentioned a while ago. So the stock reaction was great. The Apple reaction to their quarter was great. But I’ll say this and I’m not an Apple hater, so please don’t ask me on Twitter. I’m really not interested anymore. I will indulge you. I will eviscerate you if you come at me, because that’s my want to do. But again, the Apple quarter was not great. We are now talking about a company. Forget the name for a second. The trading at 26 times next year’s numbers. That has just rallied 34% in two months with low single digits revenue growth and mid-single digits earnings growth. You tell me. Oh, and by the way, for you, bingo players, again, that had a twice 2% year over year revenue growth for Apple is a unmitigated disaster. There you go. Dan. [00:44:36][118.9]

Liz Young: [00:44:36] I have a couple of things let’s broaden out. I’m not going to talk about individual names, but here’s what I think we’re going to start to hear, because this happens in phases. So a company that if they know they’re trading at an inflated multiple and they don’t want their stock to get hit, but they have to engage in layoffs because they’re trying to cut costs. You’re going to hear about what’s called restructurings. Or divisions that got moved around or product lines that got changed, which is just layoffs disguised as a restructuring. So it’s going to be all about the messaging. And then what I think we start seeing is a pickup in M&A activity, particularly in certain sectors that have gotten killed. But there’s a difference between M&A activity for strategic reasons and M&A activity for financial reasons. So you start to see M&A for financial reasons, which is more of an M&A rescue plan, right? So I think there’s a few phases of this before. If we do hit a big recession and really hit the skids, a few things will happen before that. [00:45:32][56.0]

Danny Moses: [00:45:33] This is the problem with rates moving higher into a slowing economy. M&A explodes when rates are low because we know the financing costs and the leverage that goes into it. So that’s going to be much harder to overcome as it relates to Salesforce and how react. Yes, they announced a $10 billion buyback and it was expected. That’s not what you want to see when you want a growth company. It’s great. It’s nice. It’s not what you want to see when you go in growth company and guys point on Apple, that was always the obsession for a long period of time, right? It was never a crazy, expensive name. People wanted to extract value. What are you going to do with your cash? I think Apple for a while said we’re going to grow our business and go ahead. [00:46:05][31.8]

Dan Nathan: [00:46:05] I said, you know what, Danny, when I saw that headline, when they in their press release, Salesforce was like, we’re excited to announce this. When you look back, one of the first things that Tim Cook did in 2012 when he took over Apple rates were really low. They had a shit ton of cash. Okay, here was a company that was still innovating and growing in a strong secular sort of shift that was smartphones. And they started their buyback when Ruth Porat went over to Google, I think what was it, guide 2014 or something like that, similar sort of situation started to buy back their stock. Microsoft started doing it I think in the early aughts, and it was just different times when you see a company where the stock is down the way it is and they’re supposed to, there’s no organic growth there. And listen, they bought Slack last year. They bought I mean, they bought company after company. Benioff, the CEO of that company, he started at Oracle. He was one of their biggest salesmen. He’s just a big, old fashioned roll up. There hasn’t been organic growth at Oracle in a long time, so that just signified what that company is. It’s no longer a growth company. They’re going to have to financial engineering. And the point I was just making about Apple and Microsoft and Google, very different situations, I think, and a very different rate environment. [00:47:12][67.6]

Guy Adami: [00:47:13] A Why have you ever seen people play on those Slack line things? They connect them between trees. I mean, they’re like frickin acrobats, like the kids in the neighborhood that do this shit. It’s unbelievable. [00:47:23][9.8]

Liz Young: [00:47:23] Like when you glide through a jungle. [00:47:25][1.2]

Guy Adami: [00:47:25] It’s like a big rubber band. They hug between. [00:47:27][1.8]

Danny Moses: [00:47:28] Twinkle that a trapeze artist, what do we call that going like? [00:47:30][2.7]

Liz Young: [00:47:31] When you hold it, you hold on to the thing and you glide through trees? [00:47:33][2.3]

Guy Adami: [00:47:33] No, it’s that’s a zip line. I mean, it’s this is some people listening know exactly what I’m talking about. [00:47:38][4.7]

Dan Nathan: [00:47:38] Very few. [00:47:39][0.4]

Guy Adami: [00:47:40] You know, one of the things, by the way, that I look forward to I look forward to a lot of things. I look forward to waking up in the morning at my age. That is a when I put that in the wind column check one day. I won’t, by the way, and I won’t even know it. But that’s probably for another podcast. But you put out your piece every Thursday. It’s wonderful. But I will tell you and I know this to be true there nights when you sit around with your pajamas on thinking, How am I going to piss guy off tomorrow? You don’t have to admit it. I know it to be true. I will tell you that journey is one of the worst bands in the history of mankind. I have one song on my 765 song Spotify playlist. That’s Lights, and that song is marginal at best. But I thought I had to put it in because it pays homage to San Francisco. With that said, the note you put out about China, I mean, what’s going on in China separate ways? Well, I mean, it made me, again, talk about my head exploding. And I know you did it on purpose. You can say I’m completely self-absorbed. That’s true. Doesn’t mean that I’m not right. So talk to us about your note on China and all things China, because it actually was extraordinarily good. [00:48:47][67.1]

Liz Young: [00:48:47] So, first of all, I did think of you, but only because I wasn’t on market call today. So I figured you might not even see this one and it wouldn’t irk you is that it. [00:48:57][9.8]

Guy Adami: [00:48:57] Irked. [00:48:57][0.0]

Liz Young: [00:48:58] Me and I really wanted to use it. So what I did in this week’s note was, first of all, we’re so obsessed with the Fed, right? I’m kind of tired of being obsessed with the Fed. So I just wanted to talk about something else that was part of it. But the other part of it is we’re obsessed with monetary policy just as a globe, and here we are as the biggest economy in the world, worried about tightening. And we’ve got the second biggest economy in the world loosening and stimulating. And as I was writing it, I started to debate with myself about which one had it right and which one had it wrong. And if you think about what China did coming into this or even through the pandemic, they didn’t throw as much liquidity at it as we did. And if you look at what I did in the note, I talked about M2, the money supply, our money supply ballooned, which we all know China’s didn’t move very much. And their argument was we didn’t do that because we didn’t want to drive inflation. We don’t want to have this inflationary problem. Okay. But now they’re in this pretty big growth slowdown and they’ve got a completely. Plateauing, if not crumbling property market. So they’re dealing with a different set of problems. You look at the U.S. and it’s like, well, but we have really low unemployment. Factory production is still okay. We’re not in this terrible recession, so maybe we did it right. Can we tighten and get out of it? My argument is we can’t both have done it right. One of us screwed it up and I don’t know which one yet. We’re going to find out probably in the next six months or so. But one of us screwed it up. But I wanted to just kind of draw the parallels. Show people what’s so different about each of these central banks and then how do you invest in that environment? At this point, I am not a China bull. I am not an M bull. I think that they’ve got a lot of things to work out there. I’m also not a Europe bull, but you have to know what’s going on around the world to really understand it as an investor. [00:50:41][102.9]

Danny Moses: [00:50:41] Geopolitical risk we talk about it has been underpriced for a long time. That’s more economic, but geopolitical risk associated with Taiwan and everything like that. But that’s the one thing that’s underappreciated. You just said the obsession of the Fed. When you dig your head out of your head and people dig their head out like obsession with the Fed and look around, it’s not pretty. And there are a lot of moving parts. I mean, higher commodity prices, right? At the same time that things are slowing. You have crazy things that are happening right now and that just is not a great recipe, I think, for what’s ahead. So we’ll get past this stuff tomorrow and then we’ll get past the next Fed meeting. But the dance point, if I start to see Fed fund futures start to price in less than 50 or even down to 25 at some point in the future, to me it’s like, why did they do that? And they’re doing it because they’re starting to see things come in really hard. [00:51:23][42.5]

Dan Nathan: [00:51:24] Seems like an unmitigated disaster over there. She’s got this, you know, he’s up for reelection. He already named himself Premier for Life or whatever. Here’s a headline, though. This is as they are easing that China shuts down EV charging stations. When you think about that and you think about this move that they’ve had towards changing their electrical grid, but because they have a heat wave, we all have a heat wave. We all have some constraints on electricity and energy in general right now. Isn’t that kind of like crazy to think about? They’ve been pushing their citizens to do EVs and now you can’t charge them. So that one seems like a crazy mess to me. And I’ll just say this. You saw the headlines, guys all geeked up. He’s getting in line at his local Apple store right now. You know, Apple is going to introduce their next 14 or with the iPhone 14 or whatever. You saw a headline that some of the production after the initial production is going to be in India. I mean, so we’re seeing the reliance on China unwind right now. And I think the more we see that, the greater the likelihood we have some sort of dust up. And so, guys, just curious thoughts here, because last night Tim on our show said he declared globalization is dead. Is globalization dead? And what does it mean for our economy? Is this a good thing? Is saw Intel cut this deal with Brookfield? We know that the Chips Act is incentivizing our chip makers $52 billion worth to kind of onshore. Some of these states create some fabs here. [00:52:45][81.0]

Guy Adami: [00:52:45] Thoughts if globalization is dead. And I’m not suggesting that it is, but Tim’s entitled to his opinion. You’re going to be wishing we had eight and a half percent inflation. That’s what you’re going to be wishing for. That’s going to be like, oh, my God. Remember when inflation was eight and a half percent saying it in a hopeful way that we could somehow get back there? So I don’t think it’s dead. I think it’s changing. Clearly, things have been going on to necessitate exactly that, but it’s no way dead. And listen, you know, I feel in the fall I talked about geopolitical risk being the number one thing that nobody was talking about. We talked about Russia, Ukraine that happened. We thought it would be post-Olympics. It happened midway through. I’m surprised the China-Taiwan situation hasn’t basically accelerated more than I’m not wishing for it. I just thought it would happen quicker than it has. But I still think something’s going to happen there. None of this, by the way, is particularly bullish for the equity markets. In fact, that we don’t talk about Russia, Ukraine anymore doesn’t mean it’s still not going on. And, you know, that situation doesn’t resolve itself overnight as well. And the food inflation that you’re dealing with now, that’s basically a lot of it is predicated on what happened in Ukraine. That one, I can absolutely say Putin’s inflation, because in terms of food, that’s what’s going on. Ukraine being the fourth largest commodity country in the world. So globalization dead? No. If it is dead, buyer beware. A lot of you have come to not only expect, but yearn for what we call a rot, a rip off the tape, a Danny Moses time where he basically rants prior to Danny’s rot. I’m going to do a twist right here. I will say that The Sopranos to this day is one of my favorite shows of all time. I can sit and watch Sopranos episode and be enthralled by knowing every line of every show. No doubt why from so far has never seen it. That’s for another show. But I will tell you, this is where they jumped the shark and fortunately they jumped it. And the finale of the last show when they played that shitty song, Don’t Stop Believing in the diner once again, Journey sucks with that. Danny Moses. [00:54:54][129.0]

Danny Moses: [00:54:55] That’s you’re right. I love that. [00:54:56][1.1]

Guy Adami: [00:54:56] My brot is. [00:54:57][0.8]

Danny Moses: [00:54:57] Yours. So I always search FCC websites. I try to find something because I figured they’d come and tell. Say something. [00:55:02][5.6]

Guy Adami: [00:55:03] Yeah. You must be a frickin ball at parties. Listen to me. This is my bio. My name’s Danny Moses. I got great here. I always search FCC websites on Friday nights. If you’re out there and interested, I mean. Oh, my. [00:55:17][14.0]

Danny Moses: [00:55:17] God. Perhaps you see me in such things as SCC dot gov and dot org. So I started searching because I’m obsessed with Barry Diller and Alex von Furstenberg and David Geffen and nothing has happened on the Microsoft activity. And so I look all the time. I mean, it was April, the last we heard of anything was April, right? So I’m like, oh, let me look around. So I’m going on there. I’m going on the site. I’m like, I find this quiz on this investor dot org on the SCC website and like, what’s this? Take an investor quiz thinking maybe they’re trying to educate the retail investor and let you know what’s going on. So I go on this quiz and there’s all there are ten questions about, oh, an index fund is better than a mutual fund because passively managed funds are better than active because and I’m like, hold on a second. Ten questions that BlackRock obviously authored. Like, I mean, when I read it, I’m like, okay, so then I start to like conspiracy, whatever. So I said, I’m going to come up with my quiz on what I would ask retail investors. So my right is the ten questions that I would ask. Now I know we’re going to put in our notes. We’ll put this dot org and you can read the ten questions to put yourself to sleep on their end there. But my ten questions are the following You guys ready? One Should you rely on Wall Street sell side research for your investment decision? These are pretty much, you know, rhetorical questions, but the answer is obviously no. Does a stock split actually increase the fundamental value of a company? The answer is no. Is it wise to ignore fundamentals when choosing an investment? The answer should be no. But again, none of these things are on their right when the bonds of a company trade below $0.60 on the dollar. Should you be concerned that the equity of that company might be worthless? Footnote. Bond Price. Bed. Bath and Beyond. $0.30. Question Should you be concerned? I would think so. Five Is it better to make investment decisions based upon tweets from CEOs, large shareholders, or should you do your own work? We know the answer to that question. Do you have any idea what a 10-Q or 10-K or an 8-K is? The answer is, obviously, if a majority of people know. Do you know how to track insider buying and selling? And do you have any idea what A ten b51 plan is? These are the type questions I’m going to keep go unless I get three more. [00:57:10][113.0]

Guy Adami: [00:57:11] All right. Thank God. [00:57:12][0.8]

Dan Nathan: [00:57:12] Stick around. [00:57:12][0.3]

Danny Moses: [00:57:13] Oh, come on. In order to get away with insider trading. Is it necessary to be rich enough to line the pockets of politicians and hire the best lawyers? Yes, obviously it is. Is PFOA famed for the floor of a stock symbol or is it pursuant to a bookie that already knows the score of a game before he sets the line? See Ken Griffin’s real estate holdings at number ten. Do you think the markets are structured in a way that over a long period of time, institutional money managers will outperform the retail investor? And the answer to me is yes, because we know how this game is set up. So those are the ten questions that will never show up on an S.E.C. website that I wish we get on the show. We try to educate the retail investor because we want them to get smarter and make better decisions. And I think you probably don’t like how long it was, but maybe you agree with some of those questions that I would ask. Liz, when you ask these. [00:58:01][47.8]

Liz Young: [00:58:01] Exactly, I think I think I past at least. Yeah, at least I think. [00:58:05][3.8]

Danny Moses: [00:58:05] You got ten out of ten. Exactly. [00:58:06][0.9]

Liz Young: [00:58:07] So I mean I would ask some of those questions. I think some of them were a little leading. If I’m being honest, you know, the horse to the pond or something. But yeah, I mean, those are important questions to ask, right? How do you analyze something? What stuff should you think about? What should you pay attention to? Something that I just talked about in my last podcast was you have to purposely seek out information that is different than what you believe. Right? You have to purposely seek out a contradicting idea or argument and make sure that it doesn’t make a ton of sense. Because sometimes I’ll tell you what it does. Right. And then you have to rethink. You have to go back to the drawing board and do your weight. [00:58:41][34.0]

Dan Nathan: [00:58:41] You have a competing podcast to us. [00:58:42][1.5]

Liz Young: [00:58:43] I didn’t say competing. [00:58:44][0.6]

Dan Nathan: [00:58:44] Oh, so what is it called? It’s called the important part. [00:58:46][2.0]

Liz Young: [00:58:46] It’s called the. [00:58:47][0.4]

Dan Nathan: [00:58:47] Importance of follow it guide. You head down to your local podcast store, your favorite podcast. It’s funny you say that because. [00:58:54][6.5]

Guy Adami: [00:58:54] You know, is Thursday that we’re doing this. I was actually planning on going to the local Apple podcast store. It’s one in Randolph, I think, right next to a Chipotle Mexican grill. Looking forward to it. [00:59:04][9.7]

Liz Young: [00:59:04] Well, this one’s free, if that helps. [00:59:06][1.9]

Guy Adami: [00:59:07] So, Danny, great job with that, right? [00:59:08][1.3]

Dan Nathan: [00:59:09] I really would love to do sort of the top ten. Oh, is that what he was going with? Is it top ten list? [00:59:15][5.8]

Danny Moses: [00:59:15] Whatever. Dan, you know, are you high? I’m sick and tired. I saw you drink your como’s tequila in here in a bottle. I know what’s in that, but. [00:59:21][6.2]

Dan Nathan: [00:59:21] Liz is only doing this for that comes to kill. [00:59:23][1.8]

Danny Moses: [00:59:23] Okay fair enough. Right. [00:59:24][0.9]

Liz Young: [00:59:24] Listens to smartless let’s just wrap it up with by. [00:59:26][1.8]

Guy Adami: [00:59:27] Letterman staff is on line five oddly enough Gary Gensler is on line six for you. So well done by you with that. Right. But before we get out of here, I think people always want to get to know our guests just a little bit. So I’m from so far, we know you grew up in the breadbasket of United States, Wisconsin. I love Wisconsin. As I’ve mentioned a number of times, I got my ass kicked in Wisconsin once. Nobody seems to know what that is, nor do you, by the way, which is fine. But just talk to us. Give us sort of the. 32nd e y from so far behind the curtain unplugged. Those types of things. [01:00:01][34.3]

Liz Young: [01:00:02] Behind the curtain and unplugged. I mean, yeah, I grew up in Wisconsin. I am always through and through a midwest girl. If you talk to me two beers and you’ll hear my accent a lot stronger. I don’t know. I mean, I love this business. I love being in this business in New York City because it gives me a perspective of crazy people. And I get to maintain the groundedness of the Midwest and look at it through that lens. And it’s honestly it’s really fun. It’s really fun to do. [01:00:35][33.1]

Guy Adami: [01:00:36] Well, I appreciate that little synopsis. And by the way, when you said crazy people, you look directly at me when you said it, which is fine. I take that as a compliment. We’re going to play a little speed round because that’s what we do. So I’m going to say a word. You’re going to basically blurt out, Don’t think, by the way, if you hesitate for even a second, I’m moving on. So you ready, Danny? [01:00:57][21.1]

Liz Young: [01:00:58] I’m going to need that. [01:00:58][0.4]

Danny Moses: [01:00:58] All right, let’s do it. Yeah. [01:01:00][1.2]

Liz Young: [01:01:00] All right. [01:01:00][0.1]

Dan Nathan: [01:01:01] Dan’s got a couple of beers. [01:01:02][0.9]

Liz Young: [01:01:02] Yeah, yeah. [01:01:02][0.3]

Guy Adami: [01:01:03] Paul Molitor, number four. Well done. Aaron Rodgers, number 12. Come on. I mean, it’s just. It’s a number thing now. Okay, I’ll play your reindeer game. George Bamberger. [01:01:15][11.4]

Liz Young: [01:01:16] No idea. [01:01:16][0.4]

Guy Adami: [01:01:17] Of course you don’t. Here’s one for you. This is going sort of deep. Ray Nitschke. [01:01:22][4.8]

Liz Young: [01:01:23] Oh, I feel like I should I, I was going to say Packers and then I got confused if maybe it was a hockey player. [01:01:30][6.4]

Danny Moses: [01:01:30] But yeah, you know, I like it. It sounds like hockey player, but you got to, right? [01:01:33][3.1]

Guy Adami: [01:01:33] Packer Yeah, right. The first time. Yeah. Here’s one for you. Another one, Brad Cooper. [01:01:40][6.4]

Liz Young: [01:01:41] Bradley Cooper. You mean the Bradley Cooper? [01:01:44][2.8]

Guy Adami: [01:01:45] I know. I’m, like, shallow. [01:01:46][1.0]

Danny Moses: [01:01:47] There you go. [01:01:48][0.3]

Guy Adami: [01:01:49] Lady Gaga. [01:01:50][0.4]

Liz Young: [01:01:51] Weird. [01:01:51][0.0]

Guy Adami: [01:01:54] Your friend group. [01:01:55][0.7]

Dan Nathan: [01:01:56] A whole bunch. You just went saw Lady Gaga last week. [01:01:58][2.6]

Liz Young: [01:01:59] Know what I love about her is that she’s unapologetically weird. Yeah. [01:02:02][3.5]

Dan Nathan: [01:02:02] Oh, God, God doesn’t love that weird. Weird, though. Guy, what do you think of when you think of weird? [01:02:06][3.4]

Guy Adami: [01:02:06] The weird thing about weird is actually the word itself is weird. It’s that whole I before E except after C unless sounding like way is a neighbor and sleigh if you recall weird does not fit under any of those things. It’s weird. [01:02:19][12.8]

Dan Nathan: [01:02:20] Well, listen, it’s been our sincere pleasure to get to know Liz over the last couple of years. She’s been a great contributor with everything that we do in virtual media. I think you first came on in the first half of 2021 on on the tape and we got to know just kind of what you think about markets, the way you think about investing and the way you think about monitoring the economy. You know, we take a lot of time and effort to kind of separate all of those rather than think of them as a monolith. And it’s been really guy. And I’ve had a whole heck of a lot of fun doing Market Call with you on Thursday. So it’s always fun, Liz, to have you on the tape. We did this I RL and we hope you will come back, so thanks a lot. [01:02:57][37.2]

Liz Young: [01:02:57] Of course. Of course. I’ve loved working with you guys too. And you know, you’ve made me a better investor. I love. I love the bear takes. [01:03:03][6.2]

Danny Moses: [01:03:04] Here you go. I’m trying to transition. This is not going to happen. Probably because I was like, I can’t. I’ve tried to become bullish. I really do. I try to come in and do it. And by the way, we do have in common ours. My son’s in Madison, so I’m starting to experience the Wisconsin thing. It’s unbelievable. What a great state. [01:03:18][14.2]

Liz Young: [01:03:19] Yeah, it’s amazing that spirit there. [01:03:20][1.4]

Dan Nathan: [01:03:21] All right. Liz Young, thanks for joining us. [01:03:22][1.5]

Liz Young: [01:03:23] Thank you. [01:03:23][0.4]

Guy Adami: [01:03:26] Thanks once again to CME Group and I connections for sponsoring this episode of On the Tape. If you like what you heard, make sure you hit, follow and leave us a review. It helps people find our show and we love hearing from you can also email us at on the tape at risk reversal. Dot com any time. Follow and connect with us on Twitter at on the tape pod and we’ll see you next time. [01:03:49][23.5]

Dan Nathan: [01:03:50] On the tape is a risk reversal media production. This podcast is for informational purposes only. All opinions expressed by me and Nathan Guy, Danny, Danny Moses and any other participants are solely our opinions and should not be relied upon for specific investment decisions. [01:03:50][0.0]

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