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tv   Making Money With Charles Payne  FOX Business  October 21, 2022 2:00pm-3:00pm EDT

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emerson innovation helps make the world healthier, safer, smarter and more sustainable. go boldly. emerson. this... is the planning effect. this is how it feels to have a dedicated fidelity advisor looking at your full financial picture. this is what it's like to have a comprehensive wealth plan with tax-smart investing strategies designed to help you keep more of what you earn. and set aside more for things like healthcare, or whatever comes down the road. this is "the planning effect" from fidelity. neil: all right, the dow closed at session highs knowing full well that charles payne is ready and at bat. charles? charles: they call it the cp effect, neil. i'll tell you about it one-day. thank you so much have a great weekend. neil: you too. charles: good afternoon, i'm charles payne and this is " making money" and we're trying
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to end the week on a high note as many are hoping maybe the fed will slowdown, maybe just maybe at least a little rhetoric there's scuttle put out there helping the stock market move, of course we mistaked it before so we'll find out, meanwhile, dan niles here on why he is sending out the call to not fight the fundamentals. meanwhile, central banks run amuck, is it too late to real in the most powerful force in the world talking about wreaking havoc on not only markets folks but americans, so many americans i've got judy shelton and hadley heath manning to break it down what it means for markets, main street and our freedom really and smart money finally really catching up to snap, right? i'm not trying to diss the smart money crowd but i have another example for you on why you should throw comfortable doing your own research and never ever have to be expected to be called dumb money again. all that and so much more on " making money."
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>> all right, so, let's face it. these days the stock market is really about the bond market and the bond market is really about the federal reserve, which of course, has empowered every single member of the fomc with the ability to talk the market up or down, especially these days. it's the latter, down. of course, that was the case yesterday when the markets actually came out the gate with a little bit of vigor, right? reacting to better-than-expected results and a number of data points and then philly fed president harker made some remarks and well his comments were picked up by the media and it sparked a major reversal to the downside. the main point that was picked up is this quote. given our frankly disappointing lack of progress and curtailing inflation, i expect we will be well-above 4% by the end of the year. joining me now satori fund founder portfolio manager dan niles and dan, i want to start with the fed because markets up
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right now at this very moment and scuttlebut, maybe they slow it down a little bit. i'm not sure if that means on a rhetoric which by the way be a welcome relief, but what are your thoughts about taking the bait yet again, because obviously, the markets want so desperately for the fed to take a back seat. >> you're exactly right, charles. we put out a tweet this morning under daniel t. niles which is my handle saying look, here is an article in the wall street journal from a person they call the fed whisperer, nick timaros, and he basically put out that the fed is going to raise by 75 basis points but there's debate about raising it only 50 in december, and that be very bull ish, because that be the first sign that they are starting to slowdown their rate hikes, and this market, as you put it, people desperately want to believe that we've seen the lows. now, i think this is a low. i think the market can get backup being the s&p 500 back to 3,900 or 4,000, and if
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you look at our tweets in the past, we've tried to call bear market rallies so again, you get a nice five-to-10-plus percent move, and then people figure out the fundamentals are terrible, and then the market goes down again, but for right now, we think we've seen the lows for right now. we think the market rallies but then i think you want to remember that the fed actions being taken today, they are going to effect the fundamentals as we get into next year. so i don't think this is the low but it is a low and you can have a very nice rally like you had for 17% from mid-june to mid- august so i think that's the way to think about the short-term versus the long term. charles: and of course, the own us is on the investor, or in this case, you have to really be a trader, i think and have to be nimble and have the where with all to take advantage of it and many people can and do, but when harker said their work has been disappointing, what do you think about this , the sort of lack of progress and curtailing
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inflation? there is a lag effect. could he be overthinking this? >> well, you have to remember. he's just one person. the person i follow is james bullard because he was the only person on the fed that well over a year ago was saying look, inflation is going to be a problem. we need to be hiking right now. we should have an emergency hike , inter-meeting to stave this off and pretty much evidence at the fed was like oh, no it's trans transitory don't worry about it so he even is starting to say look, you know, we need to raise it pretty quickly and then stop and so he's the one if you're going to pay attention to any one member other than outside of jerome powell, obviously, he's the one you need to be paying attention to, because he's the only one who got it right during the last couple of years. so now to your point, the reason inflation is so high is because you've got 75% more job openings and you have people unemployed and so we've got some charts on that on danniles.com that
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investors can look at but that's the biggest gap you've ever seen the prior record was 25% and the u.s. economy is 75% services -based so wages are the main driver of inflation and that's just going to remain higher than what people want. that's why we think this is a bottom, and not the bottom, because you're going to have to see a lot more job losses before you can get inflation under control. charles: yeah, for a while there , i was saying myself that bullard had become something of the de facto head of the fed, or at least, you know, he was the head of everyone else to your point. dan when you say don't fight the fundamentals, what does that mean for our audience? >> well, you know, you bring up a great point, which is that if you look at today, for example, the markets up 2%, but snapchats down 30% and that's what i mean by don't fight the fundamentals in that you're going to see individual companies and i'm really concerned about next week , when you have some of the mega cap tech names reporting, because a lot of them
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have been what's been able to keep the market from going down even more, because names like microsoft or apple have incredibly high pe ratios but they benefited a lot from the pandemic in the sense that people ran out and bought smartphones, et cetera, or they ordered ton of stuff off amazon because you couldn't go to a store, and so if you start to see that stuff reverse, you can see more reactions that are highly negative like you saw with tesla versus what you saw obviously with netflix earlier where that stock was already down 60% and that's why it rallied so the fed hikes today will affect the fundamentals a year from now just like it took sometime to effect things on the way up and that's what i mean by don't fight the fundamentals, so play this for a bounce. it'll be a really good one, i think, but then remember, you've already had six rallies in the s&p 500 this year that average 9% each. you're not up 54% for the year,
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obviously, so you know? you just need to know you're just playing a bounce. charles: all right, hey by the way, i have to give you prop s because you're giving bullard props because i've got to tell you, i don't remember anyone else on wall street being more definitively bearish in asking people to be cautious about this market as early as you were last year, your timing was exquisite. so congratulations i'm glad you helped us started to's show off thanks a lot, dan. >> thank you so much for having me on charles appreciate it. charles: thanks, want to bring in mayflower advisors managing partner larry glazer. you've been cautious about this market for a while but is there too much pessimism out there now? >> yeah, charles there's an awful lot of pessimism. you can't listen to an earnings call without hearing about inflation, without hearing about ceo telling how bad things are, people like jamie dimon, target, walmart, jeff bezos, you name it they are all pretty cautious and worried about the consumer and you know its been said the successful investing secret is to focus on where the puk is
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going and not where its been but also don't fight the fed. the fed has been watching the puck go by. they were so late to the game and they are making a bad situation worse because they are chasing inflation down the street and they are slowing the economy and that's what ceo 's are seeing and they are in the trenches, but charles, here is the good news, right? i was very cautious, we were very concerned about some of these and we're still concerned but it's no secret that the fed is leaking out that there could be a pivot on the horizon going into mid-term elections. there's a setup here that's actually pretty optimistic, charles, and that is that whole mid-term concept. charles: let's talk about that then, because there's already a seasonality thing that goes with this. there's already a traditional seasonality associated with mid-terms, but i've noticed even in the last few sessions as the polls point to republican s taking the house and the senate, it seems to have added a little bit more vigor to this market, a little bit more u mph to this market, right?
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>> charles we're coming out of the worst bond market start to a year in history. bonds have a negative five-year return. you never see that in a generation. retirees vote, never forget that so as you go into mid-term elections, what's really exciting here is that if you look at history and history is our guide, you know that volatility mid-term election years tends to be as much as 50% higher than a non-mid-term election year. check. if you look at the incumbents congressional seats they tend to lose seats, check. that is what's in the polls right now, but also if you look at post-mid-term elections, for those 12-month period you get on average double the return of non-mid-term election years, so you get a lot of data on your side. clearly the focus has been on the fed but this is a pretty exciting backdrop given the high level of pessimism that we have here. charles: so you work with a lot of different folks because you wear a lot of different hats, larry. i want to ask you about retirees here. we've had a record shellacking in the bond market, what does
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someone do because i've had people come to me and say listen i've lost 25% of my retirement nest egg i'm 50 years old and i'm not sure what to do because it took me a long time to get it where it was. >> yeah, well, charles we were here in 2008, i was here in 200t periods. we saw two 50% declines in the s&p 500 arguably this is worse because of the carnage in the bond market so its been tough and there's no surprise that you see retirees quiet quitting the market, moving to cash, buying treasuries, or the 4% yield. that won't last forever. we don't want to give up on the innovation economy because at the end of the year you get into this tax law selling. some of the stocks are so washed out, semiconductors, software, biotech, for retirees, the advice is the same. don't panic. have a plan, and be opportunistic. we want to respect history as our guide. there are opportunities coming up. with that seasonality change in mid-term elections, you'd be surprised there's going to be a lot of potential for growth in portfolios, but it's rough sledd
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ing. charles: i've got 30 seconds. you wet my appetite and you got me wanting more. where is some of the opportunities, where are some of them that you're talking about? sure. well, there will be sectors that benefit from this mid-term election psychology and mid-term trend so you're going to get infrastructure names, you'll get energy names, you will see healthcare names struggling depending on the outcome of the election. you'll also see aerospace, defense, those are all beneficiaries but again don't forget about semiconductors innovation all the things that america does really well that's wounded, they are out of favor you'll pick them up for pennies on the dollar. if you're younger investor you have a long time horizon but i see tremendous opportunities to shift as a bullish potential trend and we'll get seasonality on our side and for once hopefully have a great end of the year. charles: i think we will too. larry thank you so much my friend appreciate it. all right, folks, the bond between political affiliations at the federal reserve is stunning and i'm talking about the number of democrats versus republicans and if human nature
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kicks in that means it could actually sway policy. i want to talk to judy shelton about this because everything is on the line with the federal reserve that's already far too powerful. she's going to be with us at 2: 25 but first retail investors are getting bearish, on whether or not now wall street is happy because they said for a long time, main street was too optimistic. we'll talk about sentiment and also interactive brokers having a great year. we'll be right back. ♪ ♪ mutual. they customize your car insurance, so you only pay for what you need. and by switching, you could even save $652. thank you, liberty mutual. now, contestants ready? go!
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from across the country. they provide the potential for regular income... are federally tax-free... and have historically low risk. call today to request your free bond guide. 1-800-217-3217. that's 1-800-217-3217. charles: you know, one of the biggest gripes from wall street, you know, the experts, the smart money, has been that retail investors have been too optimistic and well that they need to sell their positions in order for the market to stop going down. now, for me it certainly is a excuse for their own owe full performance, moreover, recent transactions suggest that retail investors are not irrationally exuberant. in fact bearish sentiment has been greater than bullish sentiment for almost all year. by the way, by far, look at the chart. a record. margin balance, that has slipped from close to a trillion dollars
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to 664 billion in fact the rate its come down is the fastest in history. that is usually a signal the markets oversold. by the way, small trader put buying? that's at an all-time high. with me now, interactive brokerage group chairman thomas peterffy. tom, i just have to ask you because no one has a better pulse of the retail investor than you. are they still too optimistic? >> well, so you're talking about retail investors, but actually our core customers are financial professionals. they work on trading desks of the large investment banks and have their portfolios early on and they remain active during the quarter. now retail customers having suffered due to these declining prices and they have been thrown to the sidelines.
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charles: uh-huh, so, with the market overall, okay i mean this has been a tough year. one of the worst on record. any signs it could be oversold right now? >> no. it's definitely not. i believe that the market still has a long way to go. i mean, the fed is still going to raise rates and they are going to hit the pocket books of the consumer and as consumer spending will slowdown, the discretionary items will be accumulating as inventory and i don't think that we have seen the damage that the fed is going to do to the earnings of the large tech companies. charles: so with that in mind, you know, you just posted your numbers. your business is, i mean, you're ripping the cover off the ball. your results were phenomenonal, and wall street consensus for
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next year. your earnings estimates are 534, they were 495, we're not seeing like that. most companies are seeing earnings estimates get hammered so why is your business on fire right now? >> so because as i said, our core customers are the professional traders and more and more of them come to us and -- charles: yeah, but with all due respect, professional traders lose money in the market too. i mean, so it's just that they are more active and you benefit either way? >> well, some lose money, some make money. i mean, you know, they are not necessarily long the market, like our core customer base is hedge funds, right? they are not necessarily long. charles: yeah, but the hedge funds are having, they are having a less worse year than the market, but most of the time , hedge funds over the last 20 years have under performed the market. in the last quarter the only thing that worked was cash, so
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again, i'm just listen, i'm tipping my hat to you because i think it's phenomenonal. wall street obviously thinks you're doing something right, and so for the audience we're like, what is it, because everybody wants to know. >> well, it's just, you know, we have been working for decades , building technology and that technology that is now very available to all kinds of customers starting with hedge funds all the way to the individual customer, anybody can use our technology. any account holder and obviously , the more sophisticated people, the more they can benefit from the technology and they use our research and tools and best execution is very important to them. the fact that we rebate 2.5% interest right now on ideal cash
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, i think the fed raises rates, we are going to go with the fed rates, so when they raise by three quarters they are going to go to 3.38%. charles: no, i got to tell you i just want to say congratulations and you're right. i've been on your side. it's just a treasure trove of help for everybody professional and new to the market, so congratulations, thomas, i appreciate you coming on thank you very much. >> thank you. charles: you know, folks over half of americans are considering a second job. half of people with children. i'm talking about parents. this is not the message we just got from thomas. this is not the message we're getting from any expert out there. they say this economy is killing it. someone is wrong. i want your opinion. tweet me at cvpayne. does the fed have it right or wall street or is america really hurting? meanwhile hayley heath manning is going to give us her talk and
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take at 2:30 and also judy shelton on deck. we'll talk about the political innings at the federal reserve right now, can it be real then, should it be reeled in? we'll be right back. ♪ she works hard for her money, so hard for it honey ♪ ♪ ♪
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charles: you know, there's a growing source of power that really has gone unchecked for decades but now, it is wreaking havoc on main streets around the world from the united kingdom to japan and of course in america and i'm talking about central banks and not new but the thing is, the power. particularly in this country, to be able to dismantle an economy, or build it up, well it's becoming universally recognized and people are getting worried. think about the showdown in the uk between the bank of
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england and the prime minister. well now liz truss will forever be linked to a head of lettuce, but nowhere is it more pronounced where think about this folks the framers of the constitution understood the need for a delicate balance of power to curb natural instincts, natural impulses that all human beings have. seems nobody is making sure those principles apply to our federal reserve. i want to bring in senior fellow judy shelton and first, i want to talk about what happened in the united kingdom and how it's relevant to the united states. >> well, i think what we saw happen is right after a duly- elected new government in britain presented a supply side pro gash growth economic agenda, which featured tax cuts to incentivize individuals and corporations to work more, produce more, it was going to have lower regulations. all of this was meant to have a
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more productive economy and greater output, and within days, the former head of the bank of england, their central bank, bad mouthed the program. he didn't think it was good. he went on bbc and gave an interview and then we saw people quickly blamed this new agenda for problems with the pound, and in fact, i think that had more to do with central bank differentials and interest rates. the bank of england had gone up 50 basis points and the fed went up 75 and global capital chases the interest rate but it was immediately attributed to this program, so there's a message that you better have a vision you're putting out of lienor government, more support for entrepreneurs and the private sector, and you better have perseverence and believe in your program and show that commitment or you will get eaten alive. charles: yeah, i mean, it's so intriguing that liz truss gave something of a, you know, on the way out, she promoted yeah,
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you know, i laid it out but she didn't fight for it and to your point, immediately as she laid it out there the media pounced. many folks out there didn't even know what they were talking about and they didn't say tax cuts, they said tax cuts for the rich, and how do we pay for it and on and on and on. it was an immediate attack on margaret thatcher, on reagan, supply side economics, and by the way let's face it. there's still a lot of bruised egos in the media over brexit and this was also an attack on brexit but you can see it happening if the people in charge don't really believe in these programs think about reagan. think about volcker. everyone is talking about how great paul volcker was, but that was a couple of years of serious pain. you have to have a stiff backbone to say stay with us in the end this is going to work, right? >> well that's true, but there's also more to a productive economy than monetary policy. basically, the central bank should just deliver stable money , and then we rely on tax
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and regulatory issues or policies and trade and energy policies. that's what contributes to the productive potential of an economy, so that people have more opportunity to have a more prosperous future and you have an economy that actually produces goods and services and that's how you resolve a lack of supply. what we have is everyone relying on central banks to raise interest rates to crush demand, and i don't think that the central banks have made such a great case for saying that by raising unemployment and curtailing growth, you're going to have a better outcome, when it really is a matter of maybe you're hurting supply more than demand and the central banks have given us this extremely fragile international architecture that is so sensitive as the pound was to these interest rate differential
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s and now, the existence of all of the derivatives in the world which are playing off central bank monetary policies and i think put the whole financial market on a hair trigger. charles: yeah, and to your point , the fragility means that they always have to play a role. for instance in japan, maybe one of the reasons our markets up is because the bank of japan intervened there. let me, i can't let you go though without asking about a study i just saw that shows that economists in leadership positions on the board of governors at the federal reserve have a 45:1 ratio, democrat over republicans. >> yeah. charles: this is crazy. listen, the reason i did my intro the way i did is because there are natural impulses. you know that political leanings are at some point going to, you know, make their way into federal reserve policy, so we're talking about an omnipotent un checked powerful force that can destroy our economy and will should we be pushing back on
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this? >> well, of course, for exactly the reason you just stated. when you give that much power to manipulate the cost of capital, to create money with no questions asked, and to have the power to counter market movements and then you don't question the group think and then you find out that 90% of the economists who work at the federal reserve are registered democrats, i would like to see a descent once in a while and because it's not that the fed has not made mistakes. they admit it now and it would have been nice if someone felt like they could speak up. we need more intellectual diversity at the federal reserve charles: i agree and by the way if it was 90% republicans i'd be saying the same thing. >> good for you. charles: i know you would too. thank you so much, judy. appreciate you. >> my pleasure thanks. charles: folks, listen. everyday a bunch of people from the federal reserve, they just y ap yap, throwing out warnings about things becoming
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unmore. that's their favorite word but you have to really wonder, you know, have they themselves become unmored from reality? i mean, as the fed focuses on destroying our economy real lives are being turned upside down. i want to bring in iwf policy director hadley heats manning, and you know there's a new survey showing 57% of all workers right now are seeking some kind of overtime or extra shifts to pay for their bills, 47% of parents are actively looking for a second job. now, right now, every time the fed talks they say unemployment is too low. wages are too high. things are too great. there's a major disconnect between what the fed is seeing and what people out there are saying. help me understand it. >> well, americans certainly don't need experts to tell them how the economy is going. they are feeling it. they are feeling it at their kitchen tables and pocket book and with those statistics you mentioned it is a sad day and a shame that in america someone could work a full time job and yet not have enough money to
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provide the basics, the groceries, gas their family needs so that's why inflation is the number one issue right now and why its captured the attention of so many americans. charles: i just had this conversation with judy shelton about this. i think more and more people are understanding now have heard of the federal reserve and some of their problems is that the administration is still pumping out a lot of money and trying to stop people from spending money, so to a degree they are between a rock and a hard place but the notion that you have this entity out there that none of us have a right to vote on, there's no checks and balances, and they are saying they deliberately harm our economy. >> well, on the one hand, you've got the fed and monetary policy and some of the efforts to try to stop americans from consuming. on the other hand you have efforts from the biden administration through revised department of labor rule proposed an old rule they are trying to revive that would stop americans from earning more money and limit the way that people can seek those additional side jobs or participate in the
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gig economy, so this is another area where americans feel like they don't have a voice. of course we can comment on role s proposed rules and we should do that but we hope those in charge will hear us listen to us and give us the freedom and flexibility to work to earn the money families need and of course when it comes to how we spend our money that should be our prerogative as well but we don't want to spend everything we earn and even more than what we earn on inflated prices of goods. charles: sure, so you don't want to go in a store with more money and walk out with fewer bags which is what's happening in real life. i want to pick-up on the administration for a moment because that what you're talking about is they are trying to make you join a union. this poll out, inflation. the number one issue in the mid-terms by far. at the bottom of the list climate, inflation is 100% higher in terms of people concerned. yet, it's the climb agenda that the administration is focused on that's why they call this war of fossil fuels. in a sense, they have kind of put that ahead of the american public. is there any chance that they can backtrack on this because i
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mean, just call a time out? >> you know, one might hope so. you always hope for reversal of bad policy or bad policy direction, and at this point, we're at a place as the country where we're facing the opportunity for new leadership because we have a national election, so i hope that our leaders are listening to the american people when it comes to the climate agenda, look, there are people on both sides of the aisle who want to ensure that we have a beautiful environment, that our kids have a healthy, clean planet in the future but we also have to recognize that there are trade-offs associated with total abandonment of fossil fuels which provide 80% of the energy that we're consuming today. we can't make that switch immediately. we have to do that in a sustainable way and a way that's economically sustainable, because what you do when increase the price of energy yes you discourage people from consuming energy but also put a tax on the back of the poorest americans, people paying very high energy bills and look, winter is coming. people are going to pay so much more to heat their homes.
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that's a dangerous situation where people have to choose between heating their home and paying for prescription that they need or buying groceries their families need . this is a serious economic issue and that's what our leaders into ed to pay attention to. charles: there's a big difference between nudging and coercion. some folks are out there really don't know how they pay their heating bills and that's no joke , and again, it's a shame it didn't have to be this way. hadley, thank you so much talk to you again real soon. all right, folks coming up we'll breakdown just how much more the fed may go before they even start talking about easing, because today, look at your screens. the easing word is coming back into the conversation and also, the volatility in this market is shaking a whole lot of people. rob luna is here in studio for a school of stocks, so get ready to learn and to feel much better we'll be right back. ♪
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charles: all right, folks. as you month of course that the stock market is going through an upheaval that some are saying well, kind of compar ing it to a metamorphasis, so when it's over, the attractive stocks will be those that have been mostly shunned. the ugly stocks for the past couple of decades. they are going to be wonderful, beautiful high fliers and i guess the high fliers learn how to crawl. such changes that they do happen will mean major ramifications for your portfolio, in fact for your economic future. so welcome to school of stock. joining me now, rob luna. rob, are you buying this notion this is a massive sea change and all the sexy stocks that led this market for a long time are going to be shunned and you need to be buying the thins that have been laying around? >> yeah, i'm not buying that at all charles.
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i think we've seen this game before and it's amazing how quick psychology can turn and when it turns it turns really quick and everyone has given up on the names that led us in the past, going into staples and utilities and that's probably especially if you got three-to- five years right now, the absolute wrong thing to do right now. charles: really? why is that? >> if you look at valuations, valuations right now, the traditional value stocks, financials, utilities, consumer staples, everybody is rushed into those names so those are actually the more expensive stocks. one of the -- charles: relative to the way they traded. what is the point to bring up because a lot of folks come on and say they are cheap, maybe compared to the s&p and other sectors but they are too expensive themselves. >> that's a great point. you have to look at their five year average, 10 year average sometime because not every sector, utilities aren't going to trade as quick as technology, so they shouldn't have that same valuation, but when you look at communication services for example,, a lot of people are communication services that's google, netflix, disney, that's
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trading a the 13 times earnings compared to 15 on the s&p, that normally trades at 17, so those are your new value stocks right now. charles: now, it's interesting because most people just lump them in with tech but they do have their own niche and they have been hammered. >> hammered. charles: is what's happening there, from meta is now considered a value stock. google is now in the area, if you look at the 4 pe, some say it's a value stock but i'm also from the school a lot of times when the stock gets hammered there's a good reason for it. are you suggesting maybe these are just overdone at this point? >> google is absolutely overdone. one of the things also about google if you take a look, google is an advertising company a lot of their advertising has come from travel. travel did not do too well during covid but that's starting to come back now. that's not going anywhere. now meta has some issues. they are going through some transition right now but a lot of that is priced into the stock charles. it's a stock trading at 12 times earnings. i don't think zuckerberg, or meta is going anywhere. charles: maybe zuckerberg, i think he panicked right? >> yeah.
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charles: they shouldn't have changed the name because everyone is focused on the metaverse which is not ramp ing up fast instead of the fact they still make a lot of money. let me ask you about the education side because you're known, you have a huge following. you help people, you educate people. is the same kind of vigor out there, the same kind of desire among the public to learn how to do this? >> i think so and especially for stocks right now, charles. i teach everything, real estate investing, no one wants to think about crypto or any of those things any more but when you look at stocks right now, i work with a lot of millennials . this is the first time they have seen a bear market and the first time they had the opportunity to buy companies they use, netflix, google, amazon, especially after the split at affordable prices, so they aren't as dumb as a lot of people say. the dumb money. they are interested and looking now at a discount saying this might be my once in a 10 year, once in a 20 year opportunity to get in stocks but here is the problem charles and i heard you say this one-time before. when you look at traditional financial media it's like a bunch of guys talking to
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themselves in the room not relating to the people. they need to be educated in a way that's jargon-free, teaching them buy what you earn, understand the basic fundamental s, and give them that education because this is the generation biggest generation in u.s. history that we need to change this financial literacy problem. charles: i'm glad you're out there doing it because honestly it's one of the things where i think the stock market is the greatest money making machine in history and these are the opportunities that in the midst of it, it doesn't feel great but five years from now people are looking back like golly, i could have got one of those watches like rob. >> [laughter] charles: all right, my man. >> thank you. charles: great seeing you. folks coming up, my take on wall street's ego-tripping and how they got another one wrong. all right, first though, we want to breakdown the economic impact on what's happening here. it's all about what you're looking at right now. the yield and it's the yield curve and where we're going and recession. one of the smartest guys on wall street is going to join us in
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the best, smartest brilliant young guys on the treat epb macro research founder eric basmajian. and eric, the market acting pretty good. not that the fed will bring per se but that there's some relief because every single day, two or three people from the fed get out there and they pound the hell out this market. my theory, is that they know they can't live up to the hype. like they will not be able to hike rates the way they say they will, but the one weapon they have is to be able to jaw bone the markets into maybe doing the work for them. now there is scuttlebut they might pullback on that. >> yeah, so the feds in a little bit of a tough situation here, because they are trying to keep financial conditions as tight as they possibly can to get inflation under control. every time they communicate that they may slowdown, the market rallies, mortgage rates come down, and they undo a lot of the progress that they made, so this mornings wall street journal article was i think the third attempt to try and say, we're going to get rates to
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something like 4.75 or 5 and then cool it down and of course the market rallied again, so they may have to come out and walk that back again. charles: and it did feel like comments from kashkari this week, evans this week, started to lean in that direction too like maybe there's light at the end of the tunnel, but on that note, so financial conditions have gotten tighter and yet the expectations for fed fund rates have gone higher also. that's kind of been baffling too been achieving what they want and yet we keep hearing they are getting tougher what's that all about? >> it's tough because when the fed hikes interest rates, there's usually something like an eight-to-12 month lag before it impacts the broader economy and then there's another six-to- eight months until it impacts inflation, but they hike rates today and then the cpi report comes in tomorrow and it comes in hotter-than-expected and they build in more rate hikes when today's rate hikes can't possibly impact the cpi. charles: there's also a time when the cpi numbers come in a
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lot less than expected. >> they will exactly. charles: but then it's too late because all the stuff they put into the system is in the system >> its still got to come through even if they pause and cut rates all that tightening comes like a tsunami through the rest of the economy predominantly through the housing market and then the rest of the economy. charles: you wrote something i thought was really intriguing and i want you to kind of if you can share it with us. every economy has four segments that work together in cyclical fashion. explain that to us. >> okay, so every economy has four major segments. it has income, consumption, production, and employment, and they work together and they feed on each other, so if you have more income, you consume more, if you consume more, you produce more, if you produce more, you need more employment. it could also work in the other direction right? so less income, less consumption , less production. there's a little bit of an unusual divergence going on in the economy right now where the consumers really hurting. real income, so after inflation, incomes are down and consumers are pulling back, so income and
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consumption are trending at less than 1%, but we have a lot of this residual backlog from the supply chains, right? so a lot of manufactures were waiting to get parts in, waiting to get parts and now they just arrived, but there's no more demand. charles: right. >> they still have produce it though. they aren't letting the parts sit there so production is still elevated running at 3% or 4% keeping employment a little artificially elevated while the consumer is starting to spiral downwards and that's allowing the fed to hike rates more than what the consumer probably can handle. charles: wow, it doesn't sound good. >> yeah, it's a tough situation , and my main concern is that the fed is looking at employment, which is of course lagging, and housing market is leading. the housing market is really in a tough spot right now, but we still have another 150 or 175 basis points to go. charles: all right thanks a lot. before the day, you thought
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maybe 175 and after the article -- >> after the article it looks like 150 but that could change on the next cpi. charles: it might change monday morning eric thank you so much. all right folks we'll be rightda back. ves fast... get decision tech. for insights on when to buy and sell. and proactive alerts on market events. that's decision tech. only from fidelity. in a recent clinical study, patients using salonpas patch reported reductions in pain severity, using less or a lot less oral pain medicines. and improved quality of life. that's why we recommend salonpas. it's good medicine. vo: it's a new day. because covid vaccines just got a big update. just in time for everyone who works. with other people. just in time for... ...more togetherness. just in time to say “oh, you bet we'll be there!” because the updated vaccines can now protect against
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the stock under the notion that it was cheap simply because of the share price. it's a classic mistake. but remember, price alone has nothing to do with whether a stock is cheap or not. point number two, last year wall street pell in love with this sock after a single good quarter. last february morgan stanley said it could go to $105 a share. since then it's been straight down, and here's the thing, morgan stanley placed an underweight rating on it today. there's no monopoly on smart ideas, on smart portfolio management, and sometimes your ego can get in the way because that's what happens on wall street all the time. whatever you do, don't be wall street. let the work justify itself. right, cheryl? cheryl: yeah. my work is about to justify itself with a market rally over the next hour. [laughter] charles: sounds good. cheryl: market alert right now, take a look at this. the fe

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