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tv   Making Money With Charles Payne  FOX Business  December 13, 2022 2:00pm-3:00pm EST

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neil: all right, remember we were up 800 points this morning? well we're not. we're up 87 points. we had been down. it's a weird reaction to a retail inflation report ended up being better than expected but might not change the dynamics for another rate hike tomorrow. maybe that is sinking in. i have no idea. i have no idea but i know my buddy charles payne does to take it into the next hour. hey, charles. charles: it might be too good. which is odd to say. thank you so much, my friend. folks, breaking right now, we're awaiting a press conference from the southern district of new york to formally announce
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the indictment of ftx founder sam bankman-fried. welcome to "making money." i'm charles payne. the press conference coming after bankman-fried made his first court appearance after being arrested in the bahamas. his arrest came less than 24 hours before he was set to testify before congress. u.s. federal prosecutors are charging sbf with wire and securities fraud as well as violating campaign finance laws. he is also facing charges from the sec and the cftc for defrauding investors. with me now crypto law founder john deaton. john, last time we spoke, you asked, you were pretty upset about the notion that he wasn't arrested. it took a long time and ironically now people are saying now you do it? just right one day before the american public really would have had a chance to listen to him under oath because he has been flapping his jaws. he has been talking a lot but it would have been really great to see him under oath answer some
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of these questions. >> absolutely. thanks for having me back. you actually asked the question two weeks on your show, why is this guy not been given the perp walk? everything we talked about played out. it is curious on the eve, we wanted to hear him sink himself. what we talked about, wire fraud, monday any laundering all those things played out. charles: help us understand, we'll hear from the southern district at the moment what it really means there are four wire charges. obviously there is nuance to this? >> sure. understand basically i told you couple weeks ago this isn't about crypto. this is about a con man, same bank fran fraud did a tale as old as time, took people's money, gave himself a one billion dollar loan, gave five billion dollars in assets that he purchased, bought real estate in mom and dad's name and used money for risky trading on
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alameda. charles: right. >> he basically -- charles: this whole thing became his piggybank. >> absolutely. charles: we're talking billions of dollars. hold on a second, bring in former securities & exchange commission enforcement branch chief. lisa, your thoughts the sec filing charges against sbf as well? >> right. so the sec charges are much more limited. and they're sort of peculiar because i think the sec had to rush, get the complaint all together, ready to file to keep up with doj but it's on behalf of 90 or so venture capital firms that, i mean venture capital first routinely invest in insanely risky ventures like ftx and they expect that they're going to be run in a crazy way but they just need one hit, right? and then they make all their money back. so this is a peculiar one with
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the sec. charles: on that note, the bankruptcy has a million folks in the bankruptcy, 1.2 million people used the platform. here we are once again, they finally take action and on behalf of the richest folks out there who can afford to take a hit. i don't get it. what about the millions of regular people, many of them just getting started in their life who put every nickel they saved into this exchange and maybe they were ripped off for the rest of their lives? >> right. i mean that is going to get played out in the bankruptcy court and through the criminal case. maybe there will be restitution that the criminal folks are able to get to the customers but the sec case, completely about those 90 investors. charles: yeah. >> it is going to step in front of the bankruptcy. >> go ahead, lisa, i'm sorry, go. >> no, it is kind of crazy that you know the government steps in to get ahead of folks who are,
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you know, the most injured, the creditors in the ftx bankruptcy. charles: yeah. but, john, i mean, it's, people who were, who read the ftx literature were thought to be putting their money in a safe exchange. sam bankman-fried bragged how safe it was. that to me is fraud, that fraud needs to be prosecuted on behalf of individual investors. >> lisa called this peculiar. i got another reason. this is political. sam bank man fraud meat with gary gensler and sec more than any other crypto investor. why? part of charges 75 million-dollars donations came from hard-working people, that money he gave political donations. these federal prosecutors 2:00 p.m. giving a statement, they're telling that was intentionally meant to curry favor politically for ftx.
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they say, charles, legislation and regulation the devil is in the details, well gary gensler was meeting with the devil for these details. neil: charles: lease, sam bankman-fried he was working working his way toward authoring his own legislation. he was real close to making the rules on crypto with the united states congress. >> sure. charles: this is mind-boggling stuff. >> well but somebody has to. so far it hasn't happened. we need to get some kind of rules. i would disagree with john. i would say the fact that sbf was in talking with gary gensler doesn't raise red flags in the same way. i mean everyone wants to get in and talk to gary gensler. that's what you do and he had a big enough, you know, foot print out there to be able to do it. charles: euphemism for wallet? you discuss said you want to see gary gensler. i have a lot of viewers who
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would love to see him too. i've been asking him to come on the show. what is the difference between me and sbf. >> i hope some of your viewers would be able to get in front of gary gensler. some of them have, but it is a lot harder when you're retail investor, a lot harder, no question. charles: okay. so, john, the retail investors are being overlooked by the sec. the people who helped build this, you know, listen, there is a system in place, right? not everyone with curly hair, overweight, birk ken stocks and caulk around to get a 32 billion-dollar valuation. there are smart people that have to look at the books. have you looked at the books? the liability, illiquid liabilities, the super-duper ill liquid liabilities including something about donald trump. million set -- seven million set aside. there is so. more awful on the face of it. we'll learn more.
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the attorneys for the southern district of new york are coming out now. take a listen. actually, we got a podium. a head fake, another head fake. that is the story of ftx. lisa, before they begin speaking what do you want to hear? >> i want to hear an explanation of why now? could have happened a couple weeks ago. could have happened weeks from now. it would be really nice to hear from the criminal prosecutors why this precise moment? i would have wanted to let sam bankman-fried just go right before congress and give testimony under oath. not that he hasn't said everything already but you know, his statements have not been under oath until it would have been today. so it's a little strange. charles: yeah. >> i'd like to hear them play out a little bit more, give some detail on why they chose all of these charges, including the campaign finance violations. charles: yeah. >> some of the them make a lot of sense and i'm glad they're
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bringing charges on behalf of the customers. but that's -- charles: let me go to john real quick because, the second largest donor to the democratic party this last cycle outside of george soros. you know, talk about a big foot print, currying favor, having a fat wallet, it is kind of tough stuff. here we go. this is the real deal this time. let's take a listen. >> good afternoon, everyone. my name is damien williams and i'm the u.s. attorney here in the southern district of new york. one month ago ftx, one of the world's largest cryptocurrency exchanges collapsed destroying billions of dollars in customer value overnight. for every day of the past month the dedicated prosecutors of this office and our partners at the fbi, sec, and cftc have been working round-the-clock to figure out what happened and to begin the process of seeking
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justice. this morning we unsealed an eight-count indictment charging samuel bankman-fried, ftx's founder with a series of interrelated fraud schemes that contributed to ftx's collapse. i authorized these charges last week wednesday. a grand jury here in manhattan indicted mr. bankman-fried last week, friday. we obtained a warrant for his arrest and that arrest was executed yesterday in the bahamas. let me be clear, my remarks today are going to be limited. that is by design. this investigation is very much ongoing and it is moving very quickly. but i also want to be clear about something else, while this is our first public announcement it will not be our last. the indictment has eight counts but effectively it outlines four different areas of misconduct.
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first realize that bankman-fried defrauded customers of, the cryptocurrency exchange he founded. second, lender alameda research, is proprietary hedge fund. third we allege he defrauded eninvestors in ftx and lastly we allege that he violated campaign finance laws. now, let me say a little bit more about when we allege in the indictment. first we charged that from 2019 until earlier this year bankman-fried and his coconspirators stole billions of dollars from ftx customers. he used that money for his personal benefit including to make personal investments and to cover expenses and debts of his hedge fund, alameda research. secondly and relatedly, we charged that bankman-fried lied to alameda's lenders about the source of the money he was using to pay those debts. third we charged earlier this year in the midst of the crypto
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crisis bankman-fried lied to investors in ftx about the fact he sent billions of dollars of ftx customer money to alameda. fourth we charged that bankman-fried violated federal campaign finance laws by causing tens of millions of dollars in illegal campaign contributions made to candidates and committees associated with both democrats and republicans. these contributions were disguysed to look like they were coming from wealthy coconspirators when in fact the contributions were funded by alameda research with stolen customer money. in all of this dirty money was used in service of bankman-fried's desire to buy bipartisan influence and impact the direction of public policy in washington. to anyone who was watching this or hears about this prosecution, if you believe that you have been a victim of these schemes, or you have information about the conduct that we've alleged in our indictment that we unsealed today please let us
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know. to any person, entity, or political campaign that has received stolen customer money, we ask that you work with us to return that money to the innocent victims. and to anyone who participated in wrongdoing at ftx or alameda research and who has not yet come forward i would strongly encourage you to come see us before we come see you. now, let me say a word about our partners at the fbi, the sec and the cftc. the women and men of the fbi are some of the finest public servants in this country. they have been with us since day one in this investigation and there is no one, no one better to work with. i want to thank the brilliant lawyers at the sec and the cftc. this investigation is complex and it is sprawling. we embrace that kind of challenge here in the southern district of new york and we always want the cftc and the sec
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by our side when we're doing that. finally i want to thank the career prosecutors from my office handling this case. nicholas rose and daniel sassoon and their supervisors, scott hartman and matthew pinlski, chiefs of our securities commodities fraud task force. i want to acknowledge the contributions and hard work of the prosecutors from our money laundering and transnational criminal enterprises unit including samuel raymond their chiefs, jessica feinstein and tara lamort i want to acknowledge the contributions from our chief public corruption unit. donna. this should be clear a all hands on deck of the investigation at sdny i couldn't be prouder of the team i'm privileged to lead. i want to invite up to the podium assistant director in charge michael driscoll. >> thank thank you, dame men. thank you all for joining us
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this afternoon for this important announcement this case came together at great speed, such that it is only possible to be standing here today through tremendous coordination and cooperation from many people and agencies. as the indictment today alleges bankman-fried knowingly defrauded customers of ftx through the misappropriation of customer deposits to pay expenses and debts of a different company. in addition bankman-fried executed deliberate transactions designed to obscure and disguise the misuse of customer funds. he preyed on his customers, the victims of this case, abusing the trust placed not only in his company but in himself as the lead of that company. we are determined to help the victims of this case get a sense of justice and we will continue to make every attempt to recover as much of their funds as possible. if you're willing to deceive customers and attempt to hide your actions we will be
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persistent in pursuing you an insuring you are brought to justice. i want to thank damien williams and his team at the southern district for their cooperation and partnership on this case. i also want to thank our partners at the sec and the cftc for their outstanding work. a word of thanks to dea aviation division and foreign operations group for their logistics, resource assistance over the past few days. our field offices in boston, washington, miami and lead office in bridge town. fbi components that fed and worked on this case from criminal investigative division, our cert team, crisis incident response group and our international operations division. of course the special agents from, and forensic accountants from the securities fraud squad as well as the money laundering squad. the justice department office of international affairs has been an important partner in this. of course as damien noted
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before, his team in securities an commodities fraud, money landerring and transnational criminal enterprise unit has been a true partner in this case. i also want to thank our international law enforcement partners. these kind of cases do not happen without that kind of coordination. i specifically want to note the assistance provided by the royal bahamas police force. i want to be clear, this case is about fraud, fraud is fraud. it does not matter the complexity of the investment scheme, it does not matter the amount of money involved. if you mislead and deceive to take what does not belong to you we will hold you accountable. i would like to thank everyone who is working on this case helping us adhere to that principle today. thank you. >> good afternoon, everyone, i'm the director of the sec's division of enforcement. today in a parallel civil complaint the sec filed charges
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against sam bankman-fried alleging that he orchestrated a year's long scheme to defraud equity investors in ftx trading limited, a company he co-founded and led as ceo until its collapse last month. as alleged in our complaint starting in 2019 and continuing through november 2022 bankman-fried raised more than $1.8 billion from equity investors on the basis of lies. you see ftx operated behind a veneer of legitimacy that bankman-fried created by among other things, repeatedly touting to investors ftx's top-notch automated risk controls he claimed protected customer assets and by repeatedly claiming that those assets were at all times safe, segregated and secure. but as we allege in our complain that veneer wasn't just thin but
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also fraudulent because in reality from ftx's inception in 2019 bankman-fried began secretly and improperly diverting ftx customer funds to his crypto hedge fund alameda research and it is alleged in our complaint he misused those funds to make undisclosed venture investments, lavish real estate purchases and large political donations. bank man's freeds about ftx sophisticated risk controls and other customer protections were simply bogus. similarly his representations to ftx investors and trading customers concerning alameda were also part of that carefully crafted veneer and were similarly false and misleading. he frequently claimed that alameda was just another customer with no special privileges at ftx. but in truth bankman-fried directed that alameda be except from the very risk management measures that he touted to ftx
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investors and its customers. he also provided alameda a virtually unlimited line of credit funded by ftx customers. and he also diverted billions of dollars in customer funds from ftx to alameda. bankman-fried's entire house of cards started to crumble as crypto asset prices plummeted in may of 2022 and as alameda's lenders demanded repayment on billions of dollars in loans but to continue propping up his empire we allege that bankman-fried diverted billions more in ftx customer assets to alameda, even as it was increasingly clear that alameda and ftx could not make those customers whole. in fact through the summer of 2022, he diverted hundreds of millions of more in ftx customer funds to alameda which he used for additional venture investments for loans to himself
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and other ftx executives. all the while he continued to make misleading statements to investors about ftx's financial condition and about its risk management. and even in november 2022 faced with billions of dollars in customer withdrawal requests that ftx could not fulfill bankman-fried misled investors for whom he sought still more money to plug the multibillion-dollar holes that he had created. his brazen multiyear scheme finally came to an end when ftx, alameda, and their tangled web of affiliates filed for bankruptcy on november 11th, 2022. that collapse has had far-reaching consequences for ftx customers, for its investors, for its counterparties and our investigation into those consequences, into those individuals and entities involved remains ongoing but one immediate takeaway from today's announcement should that be non-compliant trading platforms
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pose dramatic risks to both their investors and to their customers. among other things they don't provide them with the same robust level of disclosures and protections against fraud and conflicts of interest. that's what traditional u.s. registered securities exchanges provide. so it is imperative that non-compliant platforms come into complyiance, but as chair gensler said the runway is getting short irto come register with us. those who do not the enforcement division stands ready to take action. i like to recognize the team from crypto asset and cyber unit and across our division responsible for this action. devlin sue, pasha, investigate i had had this matter under the supervision of amy hartman, michael brennan, jorge ten-ero, david birk and david burkhardt and david dadio will lead
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litigation against bankman-fried. finally i want to commend our partners under the southern district of new york under the leadership of u.s. district attorney damien williams and partners at fbi and cftc. this is yet another strong example of collaboration you see this afternoon. with that i will turn it back to u.s. attorney williams. thank you. >> like to welcome gretchen lowe from the cftc. >> good afternoon. i'm acting director gretchen lowe director of enforcement at the cftc thank you for the opportunity to speak today. today the cftc filed a complaint against sam bankman-fried and his companies ftx and alameda charging a fraudulent scheme that dates back to the launch exchange in may of 2019. the cftc's complaint specifically charges defendants with fraud by misappropriation
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of customer funds as well as false statements to the public, customers, investors and congress about the handling and security of those funds. as alleged there are overbillion in -- eight billion in customer losses we ascertained as of today. the rippling consequences of defendant's fraud are vast and have done significant damage to the integrity of the evolving digital asset market. the cftc charges that at bankman-fried's direction ftx customers, customer deposits intended to be used to trade digital asset commodity futures swaps and other products were not appropriately segregated by ftx. instead customer funds were held in alameda accounts where they were comingled and misappropriated for a variety of unthorrized purposes use in high-risk investments other digital asset enterprises, political contributions and to purchase luxury real estate.
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as charged the fraudulent use of customer funds by bankman-fried and his companies were inconsistent with the touted ftx terms of service and contrary to numerous statements made by public statements made by bankman-fried. this cftc also charges that defendants created features in the underlying code for ftx that allowed alameda essentially have an unlimited line of credit on the exchange. defendants also provided alameda with unfair trading advantages including quicker execution times and exemption from ftx's auto liquidation risk management process. this massive and costly fraud was in connection with interstate commerce and as alleged including bitcoin, ether, tether which are the most widely traded digital assets in the world. bitcoin and ether also under lie derivative contracts on cftc
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designated exchanges. lastly standing here today with the u.s. attorney's office at the southern district, fbi and the sec represents yet another stellar example of the importance of federal regulators around federal criminal authorities working collaboratively effectively with each other to achieve justice. the teams worked quickly, tirelessly to obtain compelling everyday to hold those responsible for the ftx collapse accountable all within a very short time frame. thank you to all at the sdny, the fbi and sec for your cooperation and thank you to the cftc team, nina, carl len metzger, brian sue, ben jackman, yousef japar, supervised by deputy director robert howell and chief trial elizabeth pendleton and many, many others at the commission to supported the work. i'm proud of our hard work, your
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dedication to the mission of the commission and for always acting in the public interest. thank you. >> happy to take some questions. [inaudible]. >> are you going to pursue charges against miss -- number one. charles: couple questions. >> what is the situation with extradition? finally he didn't fit the profile of someone who you would think behind this i don't know what the profile is typically but he wore shorts, t-shirt, incredibly bright. can you address the fact he didn't fit the profile, part of the way he fooled some people? >> you can commit fraud in shorts and t-shirts in the sun, that is possible. that addresses the last question. in terms of whether we're going to bring charges against anyone else, i can only say it this clearly but we are not done. >> extra -- tradition?
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>> extradition in the bahamas is ongoing. i don't have any information on that. >> reporter: [inaudible]. he was supposed to deaf before congress today, why not let him do? it this is really, really fast. can you explain how you were able to do it, why you were able too wanted to do it so quickly. >> so on the timing of the arrest, as i mentioned before i authorized charges last week wednesday. and he was indicted as a defendant in this district as of last week friday and we had a warrant for his arrest. so the timing was dictated by law enforcement as opposed to any other considerations including the timing of his testimony in congress. he was wanted for arrest and we acted on that. in terms of the speed of the investigation, you're right, this is very, very fast but i've always underscored we're not con but we have a track record here i think, you've seen us, this group in particular at this
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podium multiple times since i've been u.s. attorney announcing charges. charles: folks, we learned quite a bit including the fact you can commit fraud if you wear shorts, t-shirts and flip-flops. i want to bring back my panel, john deaton and former sec enforcement chief, lisa breganza. john, let me start with you. i have a bunch of notes. i wanted to be sure. one thing caught your attention from the sec division of enforcement when he sort of said hey, northern -- non-compliance, these trading platforms not in compliance he shot across the bow. initially i was thinking that was offshore only but you say no. that applies to big names like coinbase and others? >> absolutely. gary gensler keeps combing in and say talk to us but that is a direct message to kracken, coinbase, the largest u.s. publicly-traded exchange.
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i want to take note of something. brian armstrong, the ceo of coinbase last year complained that he couldn't get a meeting with gary gensler and he runs the largest publicly-traded exchange in the united states yet same bank man fraud could. we have regulation by enforcement. something lisa and i could probably agree on. meantime while he meeting with same bank man fraud he has the library case, northern fraud, ripple case non-fraud, dragon case, kim kardashian. pursuing non-fraud cases but not telling coinbase which cryptos might be securities. charles: otherwise known as low-hanging fruit. lisa, what was the biggest takeaway from you? >> i'm really puzzled by, sorry, that's my dog. i'm pus puzzled why they had to do this charge at this time?
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it's early. there are a lot of people who were involved in this case. there are lots of things that have to be tied up and the receiver trustee in the bankruptcy has not gotten through it all. charles: right. >> what was the big rush? were we afraid sam bankman-fried was going to russia or someplace we don't have an extradition treaty? he was just sitting there in the bahamas. i'm still puzzled by this. i don't understand -- usually the government waits. charles: yeah. >> i just want to remind everybody, these are charges. i'm a defense attorney and john and i think we would, i agree with you completely this is regulation by enforcement but that's not really fair to you know folks. these are charges. charles: certainly the american public wanted to hear him in front of congress today big time this could have happened yesterday or after that. thank you both very much. appreciate your legal expertise
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there. i want to bring in cleo capital managing director sarah kuntz. you had a chance to listen there. your thoughts, charges are rolling in for sam bankman-fried. you have to suspect others in the inner circle, to damian williams point, other people being investigated including the parents, we're not done yet, right? should everyone in the circle start to lawyer up? i want to know what the chatter is in the vc world, according to sec they are the victims. i believe they are part of a system that helped to create this beast. tell me your feeling on your side of the ledger? >> yeah. i mean i think the sec went after theddest, sort of lowest hanging fruit as you were saying. the reality is there is a very clear paper trail what he promised investors and what was really happening. certainly i don't think investors are the ones we should not be concerned about.
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it was real people who lost real life savings, right? i think we're going to see a lot more charges aimed at helping those people recoup their money. if you're anyone who has before an close to sam bankrupt fraud this is a great time to lawyer up. charles: right. >> to make the call to the southern district of new york and tell them what you know because it's clear that this is the beginning of charges, not the end. charles: i don't have a lot of time and i apologize i want to ask about the contagion or potential contagion. i feel like friday's close there were when i e whispers talking about coinbase, microstrategies, their bonds trading 50% deeper discount. speculation some institutions have exposure. we know the dominoes end up very small and end up very large. are you aware of any major contagion beyond this sort of niche in the financial world? >> the price of bitcoin continues to hold and even go
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up. the same with the price of ethereum. i think it is something where you need to look at where these companies are domiciled. i wouldn't put my money in international exchanges or exchanges use a lot of leverage. coinbase is trading extremely low p-e ratios. if you're a believer in crypto it could be a really good buy right now. i think it is too early to say u.s. publicly based companies will be hit with contagion. charles: sarah, thank you very much, appreciate it. coming up we go to the markets. we have brian wesbury, lance roberts, kenny polcari, it has been a crazy, crazy day in the stock market. we'll get you ready for it all and jay powell. a comprehensive wealth plan for your full financial picture. with the right balance of risk and reward. so you can enjoy more of...this. this is the planning effect.
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researchers believe the first person to live to 150 has already been born. it could be you! wow. really? of course, you'll have to eat your greens, watch your stress, wear sunscreen... but to live to 150, we're developing solutions that help doctors listen to your heartbeat while they're miles away, or ai that knows what your body will do before you do. cool. introducing elevance health. where health can go. charles: so the consumer price report came in below consensus. investors breathed a sigh of relief at the beginning of the
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session but of course powell and company they loom large. they're casting a shadow over the market right now. of course the street at this moment right now looking for three rate hikes. we have one more coming. that is tomorrow. 80% probability it will be 50 basis points, then we'll see another one of 25 in february and another one of 25 in march. from there this is the pause, this is really the new pivot until they actually do pivot. i want to bring in first trust advisors chief economist brian wesbury. the debate on peak inflation is over with, right? >> right. charles: how long will it get inflation to a reasonable level? the numbers the fed are talking about, that takes years. how do we reconcile that and the notion that the street sees the fed pausing soon and before the end of next year actually cut rates? >> you know, charles, the big idea i keep hearing is, we're going to destroy demand, right? and if you, i say if you take two days of econ class, then that sounds like it will lower
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inflation. the problem is, when you raise interest rates you destroy supply to. for example, housing starts are down 20% from a year ago. so we're destroying both supply and demand. that really doesn't change inflation. charles: right. >> only way to really do it, is to bring the m-2 money supply down. they have. if this is for real, if what the numbers on m2 we're seeing are for real. they have tightened monetary policy a lot. charles: right. >> that means inflation could come down pretty quickly. charles: so i've got a liquidity chart. the relationship between liquidity which is the fed, you got some other things in there, and it is a direct correlation. there's the market, there's liquidity they're both trending lower. >> right. charles: the m2 number you talk about has come down a lot. >> right. charles: by the same token everyone is on pins and needs as we do into the close. feels like jay powell the best
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tool he has got is jawbone the market. he has been able to crush this market. will he come into tomorrow with the same agenda, with the same chip on his shoulder that he had at the last fomc? >> at least at the last fomc we didn't have two months in a row of better inflation news. it is pretty clear the labor market is softening. it is still, obviously we're not in recession yet. initial claims are up. the number of jobs we're creating each month is down. i wouldn't be surprised if he a little less hawkish tomorrow. i'm not sure he is going to come in with thor's hammer like he has over the past year. i think he is still serious about getting inflation lower but i think he has got some signs right now that maybe it is beginning to happen. charles: real quick, 30 seconds, lag, he brought up the word lag, probably pushed into it by his colleagues. that helpeds to recession. how much does recession going to be in the air tomorrow? >> i think it will be in the
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air. you know, here's, the problem, charles, the biggest problem we have right now is that we locked down the economy, we gave it all the morphine we could. everybody feels like we didn't have any pain because we printed all of that money. we borrowed all of that money. feels to me like we'll have recession almost no matter what powell does. charles: yeah. >> so it's in the air because we artificially goosed the economy. now we're, now we're going to, we're going to live in the aftermath. charles: pay the price. >> it will be in the air. yeah, pay a price in my opinion. charles: brian, thank you so much, my friend, we have to cut it short because of breaking news earlier in the show. >> right. charles: coming up folks i do a little bit after deep dive of bank of america survey that's out. talk about risk aversion and other key things you must know about. the best person to get us through it, lance roberts. he is next.
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first psoriasis, then psoriatic arthritis. even walking was tough. i had to do something. i started cosentyx®. cosentyx can help you move, look, and feel better... by treating the multiple symptoms of psoriatic arthritis. don't use if you're allergic to cosentyx. before starting...get checked for tuberculosis. an increased risk of infections some serious... and the lowered ability to fight them may occur. tell your doctor about an infection or symptoms... or if you've had a vaccine or plan to. tell your doctor if your crohn's disease symptoms... develop or worsen. serious allergic reactions may occur. watch me. ♪. charles: so as i mentioned the cpi report better than expected but you know, listen, initially put a pep in the step of this market but you know you might have sensed yesterday, right, we had a strong run into the close
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we were going to get this kind of number. even before today the street was torn. here's the problem, we look at the next year, wall street is usually herd mentality. right now you have the widest spread between year-end targets for next year than we've had maybe on record. there is a lot of different opinions out there and it is not just there, right? one of the big confusing things here is earnings. how do we look at these earnings? for instance, growth, s&p growth is looking to be up for next year. here's the other problem though, mid-cap growth and small-cap growth are looking to be down. on the other hand you heard a lot of guests come in saying we like value, charles. small cap value up. mid-cap value up. s&p value up. right now looks like maybe value is the way to go if that is the way you want to look at it. there is finally bank of america came out with their monthly survey of all these big-time money managers. this is the key here. this is risk aversion. you can see, it was really, really low.
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this yellow line it goes on and on and on but now it is beginning to turn up. of course the path is strewn with landmines. okay, we got peak inflation but still there are some things out there so how do you adjust your portfolio? i want to bring in ria advisors cio lance roberts. lance, your thoughts before we get into this, the cpi report, does it change the calculus much? >> not really. i tell you the thing to be paying attention to tomorrow is jerome powell, just remember week before last, the market jumped 3.1% because he made the statement at the brookings institution, saying well, we'll slow the pace of rate hikes. we all knew that but the market took that, oh, my gosh, this is the pivot. we'll really start to slow down on rate hikes. that is not what he said, and not what he meant. i would expect to see jerome powell be a little more clear, not only will they hike rates 50 basis points tomorrow but we may see additional rate hikes next year if inflation doesn't come
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under control more quickly. 7.3%, that is still high inflation. that is still a concern for them. how unemployment means higher wages, that is a problem for them as well. charles: right. >> be careful for tomorrow. he might be a bit hawkish. charles: pick up on that, high every wages mean higher earnings, right? >> sure. charles: the street is at 205. this is one of your great lance roberts specials. i'm looking at the trend line which is 157. that is a huge gulf. where are you here with respect to where the street is and right now where the growth trend line is? this could be a market up significantly or up, or one that could be down a lot? >> that's right. from 1957 to present, earnings have grown from peak to peak. that is those tops at 6% annually. we're currently above the 6% growth rate in earnings. remember earnings come from economic growth. if you have a slow economy, assuming no recession, but a slowdown, earnings have to come
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down because that is where earnings come from. so the growth trend line where earnings revert in a recession. that is big risk to the downside if we slip into a recession if earnings really fall off the cliff next year, there is a pretty good gulf to the downside from a risk management standpoint, not saying that is going to happen. charles: right. >> from a risk management standpoint we have to consider the possibility because rate hikes are not factored into the economy yet. charles: another chart you posted fantastic, not the number, this is interesting, forward p-e ratio only 17 times. let's hope it doesn't get to that. lance, appreciate it. always appreciate your work. folks joining me now kenny polcari, slatestone wealth management, keystone wealth management ceo is with us as well, eddie ghabour. i got to start with you. you've been bearish. you've been right. watching carnage from the sidelines.
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any notion to jump in at this point? >> nothing changes charles. the only thing we buy on dips as we go into year-end, we saw a significant drop in health care or staples, even treasurys. treasurys were a great trade for us. we bought them when yield was 4%. we have nice pressure shun there. we play defense to year-end. i strongly believe we're heading into the last phase of the bear market on the growth side. that is usually the most painful part. in my opinion because we have the luxury of being patients not having to chase because of our positioning this year we'll be cautious going into year-end. i think we'll see a pretty sizable drop in the first quarter. charles: kenny, mean time you've been craftily, buying but very crafty way. did you change anything today? are you buying more? are you holding some powder for tomorrow to see what powell says? >> i'm waiting for tomorrow because i thought the reaction this morning was completely out of control. the 7, 800 point surge in the
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dow, 150 point surge in the s&p, sitting there scratching my head, did cpi come in negative 7.2 the way algos reacted? they gave it all back. a little bit cautious going into tomorrow. you know me. i've been invested all along. i have not played the timing game. i'm in. i'm very strategic what we've been buying. i will wait until tomorrow. i want to hear the tone of his commentary. i want to make sure he doesn't change the narrative that it will be what he says it will be. charles: kenny, algos something to do with it, look at the chart, from the same bank of america survey all the fund managers, the relationship of equities to bonds. this is people complete out of stocks into bonds, completely out of stocks into bonds, completely out of stock into bonds. if the narrative changes these people have to buy stocks. there will be some sort of bums rush for lack of a better term to get into this market, similar what we saw this morning but maybe sustainable. do you see anywhere near?
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>> i'm with eddie in the sense i think the first, at least the first quarter of '23 will be volatile and negative. i think there is time for that. i don't think today's report suddenly changed the whole story in the markets going up, up, from here. i think a rally into the year. some difficulty in the first quarter. that is when i think you will start to see narrative begin to change as we begin to get to the end of the first quarter people start to rush out. if you're in it, you don't have to rush, do you charles? charles: no you don't. the risk from next year, top three, a whole bunch of em. recession, every fund manager got to name three. numbers don't ad up evenly. 46% recession. 43% higher inflation. and 44% aggressive fed. what is the fear here, eddie? do you have a year-end target for next year or is it too early? >> my biggest fear the fed overtightening. i think they have already have overtightened.
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powell may made it clear that inflation accelerates back up that would be disasterous for them. when you overtighten into an economic slow down. that is clear what we go into next year, what you will see risk assets test new lows. there will be nothing left to sell except for larger cap names because of what is happening and the carnage in the other sectors. charles: right. kenny, the risk here, are these, do these sort of match yours or something that really stands out for you? >> i am like eddie fearful that they're going to overtighten. i don't think they have done it yet but i think they could. listen, it is going to be like a pendulum. you can't just stop it mid arc it has to keep going the other way and i think jay powell, maybe we'll hear more tomorrow, maybe we'll hear it in january where that arc is going how they manage it. i think recession is coming. the yield curve is inverted for eight months. so it is coming at some point. i think it is already here but i
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think it's a coming. >> all right. eddie, kenny, appreciate it you guys. >> thank you, charles. >> folks we'll be right back. ... the refrigerator is greg's happy place. my kids eat. but i finally figured it out. we can get all that we need and then a little bit more at walmart. ♪ it's nice to unwind after a long week of telling people how liberty mutual customizes your car insurance so you only pay for what you need! (limu squawks) he's a natural. only pay for what you need. ♪liberty. liberty. liberty. liberty.♪
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young lady who was, you know, mid 30s, couple of kids, recently went through a divorce. she had a lot of questions when she came in. i watched my mother go through being a single mom. at the end of the day, my mom raised three children, including myself. and so once the client knew that she was heard. we were able to help her move forward. your client won't care how much you know until they know how much you care. charles: so watching some of that ftx hearing today without sam bankman-fried, some of my worst nightmares come true, came true. you know, most of the focus was on sbf running this multi-billion dollar
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business using quickbooks, the absence of no independent board of directors but there's really nothing about the system that allowed, that fostered, that nurtured this fiasco in broad daylight. i mean, sbf was champion, he was cheered by the smartest investors in the world, even with the books that he put out there. i mean, they were crazy. in his own books, the liability of his 900 million, then he takeaway the less liquid stuff 5.5 billion and the ill-liquid stuff he had a line that said trump loss. i mean what does that even mean? it's ridiculous, and listen i don't care what venture capitolists say they lost. like oh, we lost money. they promoted this venture and made him a superstar. moreover i've read where many got extremely discounted ftt, i don't know this to be a fact yet so i'm looking into it but this ftx coin made out of thin air it was a buck in 2019, $30
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in 2020 and last september it hit $77. that is a lot of money. someone made a lot of money and imagine if you got those $1 coins at $0.20 or $0.10 so i heard representative today after representative to try to make their fellow, you know, person a villain. here is the thing. they talked about regulations. they tried to shutdown crypto trading. a lot of critiques of crypto in itself. some of gary gensler but the fact of the matter is these people seem so confused. they seem so lost. one after another. i don't understand blockchain. i don't understand crypto. let's just rename it. it's no good. we don't like it. just because you don't understand it, doesn't mean we should not have it. these are the people that are supposed to save us, liz. we'll see. liz: i was stunned by one congressman who must have said four times "i don't understand this whole crypto thing." charles: [laughter] why is he on the committee, right? bring someone who knows. liz: at least don'


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