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tv   Making Money With Charles Payne  FOX Business  October 10, 2022 2:00pm-3:00pm EDT

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neumann, thank you for calling in on the phone actually. see you soon. we're looking at the markets. it has been interesting, a wild ride on the dow. pretty much flat as we're seeing it here. we'll toss it over to our good friend charles payne to take us through the next hour to see what we get. still watching the nasdaq, s&p 500 trading lower. charles? charles: it's a struggle. thank you, jackie. i'm charles payne this is "making money." a shaky start starting to turn ugly. the fear and doom band wagon is filling up big time as people are losing confidence in the folks who are in charge of putting out this fire. adjustments for inflation and recession have wall street estimates in fry fall but many wonder are they still too high? gary kaltbaum, shah ghailani coming up on that. the fed will probably have to change course sooner than advertised. what will that mean for the dollar and stocks, commodities? lynn alden has the blueprint.
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forget about repeating the 1970s. the fed is making a mistake repeating the 1930s. paypal chutzpah taking money from you where they deem misinformation. i can't wait to get don luskin's thoughts at 2:40. my take in the show, why all the free money was designed to put people into debt because you know what that means? greater loss of freedom. all that and so much more on "making money." ♪. charles: all right, race to the bottom, folks and, it is exacerbating, in a lot of areas, also in earnings. coming down really quickly. look at this, we're really going down very, very quickly. this is right before the earnings season, one of the biggest free falls in earnings. by the way, not just a quarter people are worried about now. wall street analysts coming out with earnings estimates for next year and their targets.
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take a look at this. ubs with a reasonable target. it feels like wall street believes this is the end of next year. wall street probably seeing a lot less. meanwhile bank of america sees earnings at $200 for the entire year. wall street is at 2:41. again you have the 2023 targets, all of them pretty mundane. maybe ubs just slightly higher. we'll go through all of this. joining me now kaltbaum capital management president, gary kaltbaum. money map press chief investment strategist shah gilani. shah, let me start with you, the idea, is there too much optimism out there right now? >> there has been a bit too much. i think that is being weighed down now by earnings revisions. probably it is coming more in line what the market is telling everyone what to expect, probably a fairly i would say, uneventful quarter in terms of earnings. i don't think, i think we probably still see a little bit of growth this quarter, all the numbers are tallied. but investors are starting to
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figure, if earnings will come down, we may head into a recession and this might be, we might have seen peak earnings. the optimism that was there, i think it is coming out fairly quickly. charles: gary, over the weekend i was doing work, earnings season rarely come in less than wall street anticipated, once in the last five or six years. at this rate is there a point where wall street becomes too pessimistic? >>well let me just say for the record, it started with target and now with the amd. earnings guidance has come down markedly. target with all the consumer, amd with a lot of tech and pc so maybe but i deal in reality in the market and you're seeing it in droves right now and when you see, i will names. you got target, nike, amd, fedex, these are note fly-by-nights. these are masterful companies that have been managed so well throughout the years and they're not just missing numbers,
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they're missing numbers by gargantuan amounts of numbers. charles: right. >> this gives me pause for companies moving forward. by the way i forgot to mention nvidia, walmart. i'm expecting rough going from the earnings report. not just the report. guidance really worries me w oil prices going up, that is another hook that was unexpected because of opec. charles: there is no doubt we'll probably get fewer, less guidance than normal and probably more warnings. >> yep. charles: so the medicine for all of this has been central banks. i want folks to look at this. developed nations, central banks around the country, around the world, rather, this is how many basis points they have hiked rates, 1525 basis points. let me go back to you, gary, at some point you have never seen anything like this! it feels panicky. yes i know they created this mess how much of this mark cut rout could be lack of confidence in the same folks who missed this and they're trying to catch
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up? >> when you lower 2500 basis points you have to bring them back 1500. look, you know where i stand. you and i have been talking about this now, two, three years. i always worried from day one, gotten it right they created massive overvaluations overleveraged, too many bubbles, and they all popped and you're getting the other side of the eiffel tower now. where it stops i don't know. my big worry, i'm pretty sure i'm right, they have no control anymore. they really don't know what they're doing. it has been proven out. charles, they just don't shut up. 31 speeches in two days last week. charles: yeah. >> contradicting each other. that is only going to screw markets even more. i will pay for their vacation to italy for about 3 months. i think the markets would be a little bit better. charles: i think they would be a lot better. shah, how much is lack of confidence now in powell and company to get this job done? >> i think it's, i don't think it's a lack of confidence.
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that ship has sealed a long time ago. i think it is reality being self-evident now that they're going to raise rates, continue to raise rates. i don't see any abatement in inflation. i don't think we'll see it in the cpi prints. i think every one has figured, they missed the boat. they shouldn't have kept rates so low for 15 years. charles: right. >> now they will have to raise them considerably higher. that is taking the air out of the market. as far as the fed goes their credibility has been out of the window for sometime as far as i'm concerned. >> charles? charles: yes? >> it shouldn't be their job to get it done, to get the job done. it should be the people of this country, business going to work every day trying to do better for themselves and their families h. all they have done is interfere with price discovery. boy, are we getting discovery of price now. again that is where i'm saying for so long. i wish they would get out of the way. there is too much of them, too little of us this juncture. you're seeing comeuppance of it. charles: real quick, shah,
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technology having the worst year going back after the technology bubble popped. what will be the new leadership when the dust settles? >> i think technology is going to be the new leadership. technologies, materials, commodities i think they will be sectors that start to rip but it will be a while. as long as rates continue to wise the valuation metrics in terms of technology will see them get hit further and further and now we're having bilateral disagreement if you will, i'm being polite with china on chip-makers and that's going to create more problems including supply chain problems. inflation will get worse. tech companies will get hirt harder by rising rates. at some point it flushes out i'm going all in with techs first and foremost, commodities second, industrials third. charles: real quick, hate to do this, gary we always see a real correlation between sports and the stock market. i don't know why but apparently there is only been a couple times when a team has come back in the playoffs from seven runs
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down, 1929, 2008, 2022. does that mean, by the way those are ominous years for the stock market. so does that seal our fate it happened yet again? >> well i wish the mets came back from six runs down from yesterday. i always look at these little correlations. i hear people talk about the moon and stars and markets also. for me just watch price. what happened in 1922 or 1822 i don't think will have much to do with what we are going here. i'm insane. i watch a little bit of everything and i get it but for me again, watch the market. the main trend is way way down. mention real quick on tech, tech always leads up and down. i can promise you the greatest winners of next 10 years will come from tech and health care, medicine, things like that. >> i was ribbing you, my man. >> you may. charles: gary, shah, thank you very, very much. the financial media talk about the fed, currencies energy,
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stock market as different things. they talk about them overlapping but never in terms of a correlation or causation. my next guest just weaved an amazing piece knitting it together in her october newsletter. lynn alden strategy investments founder lynn alden. i want to begin you began your piece with writings from july 29th, 2019, where there was a question about the bond market being a bubble, whether or not bonds are safe. it might have seemed ludicrous then but nowadays those are not unreasonable questions, right? >> yeah, i've been bearish on bonds for a few years now, even i'm surprised by some of the carnage we've seen in the bond marcket. basically we had a combination of long-term disinflationary trend, very low yield, negative yields in some countries. that was hit by this inflation tsunami which is putting tremendous pressure on the market. those sovereign bonds are incredibly large market worldwide. they're bigger than the whole
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s&p 500 for example. so that is doing a lot of damage to various types of investment funds around the world. charles: last week, i think it was friday, in fact, fed board member waller, he actually hassized folks musing about treasury illiquidity. they are just winers who couldn't get the price they wanted. should the fed take it more seriously? >> i think so. they don't want to see a repeat what happened in the uk bond market, right? they wouldn't want the same thing to happen in the treasury market. on one hand they are accurate a lot of market participants are whiners, not positioned well, took on too much leverage. that has validity to it. that is how they structured the system. when they flood the supply with too much bonds, very high debt-to-gdp ratios, you jack down rates super low, encourage debt accumulation. you tell the markets we won't raise rights for years. oops we're wrong and raise rates
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at super high pace to squeeze all bondholders to accumulate debt, the fed should take that seriously. because they caused a bit of it. charles: the dot plot a year ago looked completely different. you understand why the everyone took the actions they did. you believe the fed will pause or reverse course sooner than advertised and if i'm reading your work right, market top for dollar and spike a big leg for commodities? >> right now they're holding down, especially oil and energy prices, with you know, attempted demand destruction. we're not fixing most of the supply issues. we're mostly trying to curtail demand and the risk there is as the fed holds interest rates this tight, as they try to sell bonds they're creating a similar environment in the uk, in the u.s. treasury market we've seen in the uk bond market which ended up requiring intervention. if you do a survey of all the developed markets, if you look at japan, look at the eurozone,
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you look at the uk, they're all currently doing some form of yield curve management. japan they're doing outright yield curve control you have the bank of england doing an intervention on their bond market. the ecb have them supporting some of the southern european countries more indebted by trying to keep their yields from rising too quickly. so the risk we look forward perhaps the first half of next year you could see the fed in a similar position as these other central banks where they're forced to do some sort of liquidity invention despite the inflation is still elevated. that would be a big departure how central banks are historically meant to operate. you have to go back to the 1940's to find a similar type environment. charles: you also wrote about the withdrawal of the strategic petroleum reserve and how precarious the oil market should be next year. with that in mind, the place to be for longer term investors be commodities, oil, maybe even energy stocks? >> so i do think maintaining and
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energy exposure as part of a portfolio helps. when you think most aspects of stocks and bonds benefit from disinflation. they want commodity prices to be low. they want value accrual to be on top of that. most portfolios are pretty underweight that. oil is a very small allocation. the s&p 500, many avoid it for esg reasons. i'm taking alternative view, i want somewhat overweight position in those energy types of assets. that can protect to some extent the rest of the portfolio by having something that benefits from inflation where most of the rest of the portfolio is impaired by that inflation. charles: yeah. >> depending what kind of risk you want to take you go on to the pipelines, you can go on to the big producers, you can go on to the small producers so people can tailor that what they are looking to gain out of it. charles: lynn, great piece. fantastic. very much appreciate it. >> thanks for having me. charles: coming up, folks why elon musk is slamming paypal as
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the company tries to backtrack on the unthinkable. first the markets breaking down here. we'll talk about where the possible havens are, maybe some buying opportunities. of the chart school is next. get your pad and pencil ready. we'll be right back. ♪. i'm so glad we did this. i'm so glad we did this. i'm so glad we did this. i'm so glad we did this. i'm so... ...glad we did this. [kid plays drums] life is for living. let's partner for all of it. i'm so glad we did this. edward jones ♪ ♪
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♪. charles: trying to navigate these treacherous waters, welcome to chart school, folks. welcome in adaptive technician,. i heard you on the recording for the weaning, who was on the recordings with you? is that your brother. i know it's a colleague. >> that is my [inaudible] charles: great conversation. i think i heard 3667. did you guys try to get long here? because it looks like obviously last monday and tuesday looked amazing, right? we thought this was the beginning of something. what went wrong? >> so nibbled for the first time in a long time with a super, super, tight stock for risk
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management and that was stomped out. so you know, it was, you know, we got the bounce there similar to what we saw in early september. pretty good few days of breadth and once again bulls fumbled the ball, it fizzledded out. charles: we keep hearing about these big thrust days, 90% stocks up and those kind of things. we got it in june. felt like okay, some boxes were checked off and that began to fizzle to your point. are we now focused again on the downside, how much risk there is? >> yeah. i think that we continue to focus on what this trend has been for the last few months and that is to the downside. lots of things not confirming, right? end of fixed income arena. junk bonds never confirmed. high yield spreads continued to blow out to make new highs. it is just, it continues to be on a risk-off environment. charles: so in this environment everyone is looking for where
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you might want to be, where you cushion the blow. i saw you talked about the nasdaq 100, which are the big cap names that led the market for a long time, versus small caps. so with respect to that, of course last november, they were hot. you couldn't stop those big nasdaq names. now they're breaking down. you don't have to be a technician to see this is one ugly chart. do you want to at least get greater exposure to large caps, versus large megacap names? >> you know when we look at the relative chart of the nasdaq versus the russell 2000 we do see the nasdaq breaking lower. kind of been in a range since summer 2021, june 2021 area. now rolling over, breaking lower. what i think this means is that broad indices continue to go lower and that the russell is just going to outperform to the downside. charles: oil upcoming into the today, six days in a row, six
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sessions in a row. the energy, xle, looking pretty good. it was amazing that it broke down the way it did. big reversal, opec news sort of a spark here. can it keep going? looks like you only have one serious resistance point before you test the highs, and if that is the case do we want to be long some of these oil stocks? >> oil and energy names continue to be the only thing that has worked this year. obviously crude back up above 85. that led to a nice rally in a lot of these. xle, if xle is above, 80, charles, i will give you the green light but -- charles: okay. >> exxonmobil, chevron, looking like they might want to running out of some steam up here. so i'm a little cautious after the run they have had but if you got to own something clearly this is where you would want to be. charles: all right. again that was a great call, conversation you guys had. thanks a lot, ian. appreciate you, thank you. >> have a great one, charles.
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charles: all right. coming up, folks, the nation's top economists got together this morning and their forecast are going to shock you. dana peterson was wrong them. she will discuss. paypal claims it is policy to punish users for misinformation was misinformation? are you buying that? tweet me @cv page. i can't wait to hear what you have to say. the great don luskin has his take on it too at 2:40. ♪. ♪ ♪ we all need a rock we can rely on. to be strong. to overcome anything. ♪ ♪ to be... unstoppable. that's why the world's largest companies and over 30 million people
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you'll always remember buying your first car. and buying your starter home. or whatever this is. but the things that last a lifetime like happiness, love and confidence... you can't buy those. but you can invest in them. we believe that your investments should work harder for the future you imagine. and that's where our strategic investing approach can help. t. rowe price. invest with confidence. ♪. charles: so this morning fed governor charles evans spoke at the national association for business economics at their conference and actually seemed to offer an olive branch of sorts. he said i think we can bring inflation down relatively quickly while also avoiding a recession. as soon as those words tripped
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off his tongues the equity markets went higher. we were red and all green lasted for a nanosecond which is par pr for the course these days. joining me chief economist at the conference board dana peterson. i see you're part of the team that analyzes all the pieces, they research these surveys and i want to get your thoughts what evans is talking about this morning. a lot of people on the street complaining about mixed messages from the fed, they're talking too much. are we getting any clarity out of them? >> i think what is pretty clear the s.e.p., when you look at that, certainly they have downgraded their numbers relative to june. also they have very elevated inflation through the end of next year, very weak growth. indeed you could have negative numbers in there. they will raise the federal funds rate pretty high. all that suggests we'll probably have recession, may be short. maybe not too bad, still in all,
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when you look at the unemployment rate they're expecting, roughly one percentage point higher by end of next year than it is now. with all of that, seems to me the bulk of the fed s.e.p. participants that something is really bad around the corner and we could have a recession. charles: what i found fascinating with respect to recession with the surveys, 55% saw the greatest downside risk was too much monetary policy, too much monetary tightening. 43% thought the greatest upside risk was a soft landing. seems like more of your colleagues are dub bus about dubious about the fed's ability to stick the landing right now. >> seems like there is, 55% say worst thing to happen to the fed, too much tightening, too little, too late, end up in recession, higher unemployment, but still in all inflation not getting back to the 2% target anytime soon but there are some
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optimists. certainly on the upside the fed could stick the landing to have a nice soft landing. again i think most of the data we're getting from my colleagues are that they're expecting some kind of recession over the next year or so. charles: right. i was curious, and actually stunned to see only 13% of them responses saw a wage price spiral which really seems to counter everything, everything i read from corporations all of the different data i read from the different associations. you know, isn't, aren't we in the midst of a massive wage price spiral right now? >> well we are seeing raises, wages rising pretty quickly as well as prices but so far wages are actually not even keeping up with prices. so we kind of need them feeding each other. seems like we're not quite there but no one can doubt the fact wages have risen for people who quit their jobs to look for better jobs. charles: quitters are ahead of inflation no matter how you
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measure it. let me ask but the atlanta fed modeling for the third quarter, 2.9%, it has been on a rocket ship but here is the caveat, private domestic demand up 0.2%. this tells me maybe the consumer is running on empty? >> well i think consumers have been definitely responding to the fact that the fed is raising interest rates, right? potentially buying fewer cast, right? potentially buying fewer houses that need to be financed. if you look at consumer credit is above where we were before the pandemic. a lot of consumers are not using cash but credit cards. consumers are slowing down. even in our surveys consumers are skeptical about the future. charles: great stuff. great work. thanks so much, dana for walking us through so much. appreciate it. >> thank you. charles: by the way at the end of the show i will give you my take what is happening with this rocket ship of consumer credit. meantime lots of complaints out there about the role of free money in this runaway
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inflationary crisis. guess what a dozen states decide to do? they will want to help you out with inflation, they will issue more free money. entrepreneur, teacher of macroeconomics george gavin. california beginning its fight against inflation with more free money this week. how do you think that is going to go? >> not well. it will exacerbate the problem, charles. as you know, most of our viewers know the problem with inflation you have too little supply and too much demand. what they're doing is pouring gas on the fire by increasing demand and decreasing supply when you hear them talk about stimmies or inflation but also increasing taxes with corporations like this windfall profit tax for the people or entities that are producing goods and services we need to expand. charles: no, it seems really nuts to me. then on top of it president biden has gone back, oil, gasoline up 19 last 20 days. we were down 99 days in a row which was fantastic. we were up six days, all of
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sudden biden blaming ma and pa gas station owners for gasoline going up. what is intriguing me over this entire period, runaway inflation period, producer prices are significantly higher than consumer prices, the increases. that is not how you do profiteering, is it? >> no, because their margins are getting squeezed and this is in a business where their margins are already razor thin. it doesn't make any sense. i think the bigger point here is that at some point in time you have to look what the politicians are saying and you have to ask yourself, are they just stupid or are they actually evil? and i think, or both. when you look at these absurd comments out of the biden administration like you just mentioned that somehow high gas prices are a as a result of the mom-and-pop shop on the corner, he has got to know the difference. charles: yeah. >> so you say, why is he saying it? he absolutely lying through his teeth to try to gain favor with his constituents and quite
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frankly i think that it is despicable. charles: i do too. i really wish they would draw the line somewhere with this stuff, i really do. so you're a reknowned real estate expert, i have to ask but the housing boom which is now going bust. how much further to the downside? >> i think significant downside potential risk. if you look at historic trend line going back to 1900 just for inflation you see that the price, the healthy price, based on income, should be where we were in 2012. that is in real terms, not nominal terms. if you look what just happened in the uk, they had the long end of their yield curve spike higher, we could see the saks same thing happen here in the united states. if the 10-year spikes even higher, than it is already, again like we saw in the uk. charles: right. >> the fed isn't able to do anything about it, because again they're hawkish, they're trying to combat inflation, you could see mortgage rates go even higher than they are right now making housing even more unaffordable, creating a demand,
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really squashing demand which would put downward pressure on nominal prices. >> i got 30 seconds. are you doing anything on the equity side? are you buying any stocks here? >> no. i mean, i think the best thing people can do right now, if i had to give them some advice just understand we're going into an age, the golden age of political stupidity. so if you can take the other side of these political mistakes that we see out of the biden administration or trudeau up in canada, i think you will do well. i heard another one of your earlier guests talk about commodities. i truly believe we're in a long-term commodity supercycle over the next 10, 15 years. i'm not saying buy now but definitely put that on your watch list because i think that is the best way to go long political stupidity. charles: george gundlach is talking about that with me a year-and-a-half ago. i think the most important thing, people, watching, if you want to do it, don't miss it. george, thank you so much. appreciate it. thank you very much. >> thank you.
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charles: paypal backtracking on the policy to fine users $2500 for sharing what they deem to be misinformation. we'll tell you what the company is saying right now. plus forget about the 1970s. more "market watchers" are saying the fed should be concerned about repeating the mistakes of the 1930s. economist don luskin is here on that and more right after this. ♪. thinkorswim® by td ameritrade is more than a trading platform. it's an entire trading experience. with innovation that lets you customize interfaces, charts and orders to your style of trading. personalized education to expand your perspective. and a dedicated trade desk of expert-level support. that will push you to be even better. and just might change how you trade—forever. because once you experience thinkorswim® by td ameritrade
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- [narrator] if your business kept on employees through the pandemic, can qualify you for a payroll tax refund of up to $26,000 per employee, even if you got ppp. and all it takes is eight minutes to find out. then we'll work with you to fill out your forms and submit the application. that easy. has helped businesses like yours claim over $1 billion in payroll tax refunds. but it's only available for a limited time. go to powered by innovation refunds. ♪. charles: well paypal now backtracking on a new potential policy that was planned to fine consumers other their customers $2500 for spreading quote, misinformation. lauren simonetti in the newsroom with more. lauren. reporter: charles, that apparently was a big mistake. let me give you paypal's official response given to fox business. they say an acceptable use
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policy notice recently went out in error this included incorrect information. paypal is not fining people for misinformation and this language was never intended to be inserted in our policy but charles, it was, even briefly and it included damages like fining users as much as $2500, debited directly from their paypal account per violation. the backlash was swift. the former paypal president, david marcus, called the policy insane. this is what he tweeted, quote, a private company now gets to decide to take your money if you say something they disagree with? insanity. let me give you an example. paypal had canceled three accounts linked to toby young who runs a free speech non-profit. that organization defended the comedian russell brand who moved his show from youtube to rumble because of censorship. politicians taking note here. blake masters that is the republican running for senate in
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the state of arizona, he also worked for peter thiel who is paypal's cofounder says if he is elected he would put a stop to this. >> we need to ban companies at that level, at that size, especially if they're touching banking or social media, we'll ban these companies from discriminating against users because of the political content of their speech. reporter: he compared it to a phone company, right? verizon can't regulate what you say to someone on the telephone so why can paypal and others discriminate, and fine you for saying, acting how you believe with your own money, charles? jackie: hard to believe, lauren, really is. thanks so much, appreciate it. joining me now, maybe he will help me understand this trend macro chief investment officer don luskin. don, it is nuts. the company is supposed to be a conduit for people to send each other money, pay some bills. knowing they would think about something like this, judging,
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punishing users, listen i closed my account. i want your thoughts on all of this? >> well, this is taking the whole cancel culture thing to a whole new level. it is one thing for twitter to shut down my account if i say that maybe the covid vaccines are not as effective as dr. fauci says they are. it is another thing for paypal to decide they don't want to do business with me for that reason. for them to be judge, jury,cutioner, levy a fine, $2500, while they are holding my money, to take that money because they disagree with something i said, absolutely over the top, out of control evil. to think libertarians like elon musk and peter thiel founded this company 25 years ago to exactly stand to thwart this kind of madness, oh, how the mighty have fallen. charles: it does. it will be interesting to see where it goes. kind of reminds the mistakes
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robinhood mate out of there. beware the cold monetary shower. it is freezing through the pipes. essentially saying friedman had long and variable lags in monetariry policy and the fed really needs to start thinking about all of these actions they're taking because they will be cumulative and they're in the pipeline. what do you say? do you think there is some truth to that? >> well there is total truth to it and the irony is that jay powell quotes that friedmanism all the time, long and variable lags. i heard him say it like five times. so i don't know if he knows it. he wants you to think he knows it. he doesn't act like he knows it. he is looking at lagging, backward looking data like cpi and setting policy that's not going to have a effect for a year or more. it is just complete, out of control madness. charles: so speaking of the fed, ben bernanke, he got a nobel prize today.
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i didn't get all the details what it was, him and two other guys. we're talking about helicopter ben here. what did you think when you saw it? >> it was not helicopter ben. it was save the world fed. we could not have a better fed chair financial crisis, a fed chair who happened to be a scholar about financial crises why he won the nobel prize. i got to say i wish jay powell could be more like ben bernanke instead of paul volcker. bernanke said you have to be careful, slowly, scholarly. all powell wants to do is reconstruct some fantasy image of paul volcker 40 years ago, a larger than life superhero, who will cause all kinds of pain in the world for all your good. all it takes is courage. all it takes is courage. be like ben bernanke. it takes brains, sobrietity. good on you, my friend, ben
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bernanke. charles: wall street certainly loved his reign. wall street breaking down here somewhat, all the technical levels. looks like it will be tough near term. what are your thoughts how people make it through this near-term weakness? >> i think the first by word here is that it is just way too late to sell. by the time you say, right now we have 25% correction in the s&p. so what is your trigger? 26%? i'm sorry, that is not a time machine. fine you can go back to january if that is what you could do. you need to look at buying opportunities here. charles: all right. don, thank you so much, my friend. appreciate it. >> thank you, sir. charles: coming up, folks my takeaway, more proof all of that free money was designed to put people deeper into debt because the deeper you are into debt the more you lose your freedoms. first my next guest says volatility is the only thing that works when buying in in market. erin gibbs on that and some other ideas to help us through all of this, right after this.
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charles: so you know there is a lot of ways the federal reserve might measure success, right? at some point they will want to take a victory lap i think to decide mission accomplished. of course this is their quest to turn back inflation by any means necessary. you heard don luskin talking about the paul volcker way the way he turned back inflation and here is an interesting thing, look at this. if they measure by the negative wealth effect, reversing the wealth effect, the volcker fed didn't have much work to do. they only lowered the wealth effect by 14%. already the powell fed lowered our wealth as percent of gdp by 54%. housing and stocks were not as expensive back then. marion street asset management investor erin gibbs. erin, that is a fascinating piece. the leuthold group put that out.
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good stuff. i didn't even think about it. we're near a point only the global financial crisis and early stages of the pandemic we lost more wealth. how much wealth does the fed have to lose? we're at 54%. record is 61%. i think the great depression is1%? >> the fed is very focused on their mandates of inflation and unemployment. unfortunately i think they will not be looking at the wealth effect. they're looking to get unemployment higher, getting inflation lower. i think they're laser-focused on those two data points. charles:.plot is 4%, 4 1/2%. most economists that i talk to think at the rate we're going will be at least 5%. chris lowe who was on last week said over 6%. again those are the risks, if they push too hard. >> exactly and obviously we're already seeing declines in profit expectations on a corporate level as we were
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talking if fundamentals really mattered and we had to worry about growth. charles: you're saying fundamentals throw them out of window for now? >> i think we're in such a macrotrending environment where it is really about top level economic news and not about corporate profits but we are seeing those trickle-down effects in corporate profits and expectations. believe it it is there. companies are feeling the pain too. charles: your firm has a lot of business owners as clients. what are they telling you? >> they're concerned. obviously inflation is hitting everybody in different ways. certainly my clients that are worried about retirement looks like they may have to work longer. particularly as we talk about the impact on wealth. and so, it is tough but we are, very conservative with most of my clients in that we are on the sidelines and -- charles: you've been on the sidelines a while. you saved people a lot of money in this carnage. in the last month, the quarter, only thing that worked was cash. you did an amazing job with
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that. what do you make of the doom and gloom crowd? today jamie dimon out talking about another, maybe 20% on the downside? >> yeah, that seems unlikely to me only because if you look at valuations we're trading 16 times forward earnings of the s&p 500. we've seen consistently over history, even in the financial crisis that buyers tend to come in when we get around 14 times, 15 times, even at 15 times. i would say more-like another 10% decline before we really see people come in with the new risk/reward scenario and obviously higher interest rates. i think another thing that is interesting if you look at credit default swaps. so that's insurance against a company falling. charles: right. >> that is still very law. it has increased from about 20 b.o.p.s to 28. a 40% increase. say we're expecting one-half of 1% of companies potentially
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defaulting. that is still healthy. charles: that doesn't derail the entire system? >> not at all, if insurance is still relatively cheap from defaulting that i think we'll be able to make this out. obviously that can change if we really see really high unemployment. charles: all we see one or two of these reports to come in. one day the cpi will come in well below expectations or the jobs report and i think the conversation will change so quickly. there might be a rush to get in there. >> exactly. charles: erin, great job. thank you very much, appreciate it. all right, folks coming up we're talking trillions of free money. it kind of felt good, right? here is the thing, debt and credit soared at a breakneck pace. how do you explain it? how do you explain people getting trillions of dollars of free money and now sitting on record debt? if i tell you it was always planned would you believe me? my takeaway is next. ♪.
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record climb of $32 billion. resolving credit, which is credit card saw a third monthly gain ever. the amazing thing is the low point is back in march of 2021. that's where we were back then and then the american rescue plan was passed. the problem now is consumer confidence has began to plunge because of the combination of inflation and recession and of course that means credit card use began to rise. now, here's the thing, folks, the sad part of this is it's all deliberate. years ago nancy pelosi talked about the multiplier effect coming to food stamps and argued the more food stamps the more people spend above the amount they got and $1 extra spending $1.30 or $1.40 so give them as much as possible. that's what happened with all the stimulus. people went out and spent the stimy and in the store and saw something else they wanted and said what the heck. i'm buying and probably need more. saturday my grand kids had to
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guy them all gifts and it's been awhile and the pace is going pretty good. this will anger jay powell and should anger those who are getting in over their heads, folks. this was also always the plan and it always has been the plan. if you give you money, they want you to spend it and even more and that's exactly what's happened hence our predicament right now. hand it over to liz claman for another crazy last hour of trading. >> did you guys go to the program us mall without me? charles: i did but couldn't get the discounts without you. liz: these levels worse till about 1:35 p.m. eastern time and


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