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tv   Making Money With Charles Payne  FOX Business  March 2, 2023 2:00pm-3:00pm EST

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prices. global story, not only small business owners in morning, but kroger, macy's, best buy, walmart, target, really just shows sort of this global inflationary problem, lydia. lydia: reminds me of the other stories we heard circling back to the pizza place. new york city known for dollar slices. dollar slices no longer. brian: trying to do that on top of the crime problem. good for them staying strong. they need political leaders to stay strong as they are. let's hope we get it in new york at some point? taylor: thank you for joining us for "the big money show." "making money" charles payne starts right now. charles, are you looking at the 10-year yield? charles: i was at my grand daughter's play, i wasn't watching market or anything. we're doing good with the yield breaking through 4%. lydia: approximately said. charles: good afternoon, i'm charles payne. this is "making money."
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breaking at the moment it is captivating the nation. self-inflicted wounds and the status quo have taken a toll in the court of public opinion. so i will ask lance roberts and kenny polcari what their verdicts are. it is the stock of the day, sales force delivering a knockout earnings report. we're going through the details with famed tech analyst dan ives at fundamental school. get ready to learn how you can make money in these things before they pop. bob elliot is suggesting we're even further away from recession than we were just three months ago. if that is the case what does it mean for your portfolio? he will explain at 2:40 and is it too late to save the credibility of powell and company? how a soft landing might actually make things worse. we've got two the of best to talk about it, michelle girard, lyn alden on their take. you don't want to miss my takeaway on today's session is believe it or not more impressive than it looks. all that and much more on
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"making money". ♪. charles: so there a trial going on in this country right now. it has been going on for a few years now, it is about our financial system. it is being judged and the jury really is still out whether or not it can save itself and as others are promoting hey, there are alternative ways to run a nation, to run an economy that sound nicer, sounds more inclusive and nobody would be poorer. capitalism and free markets are being questioned. now you got the power of the federal reserve which i think already is too much. people wonder about that. companies that live for buybacks and shareholders rather than stakeholders are being demonized. so will the foundation and pillars of capitalism pass this test? well let's begin with one thing we always talk about, the mother's milk of market. that is corporate earnings. these days the big question is quality, quality of earnings. it is about credibility. look what is happening here. you have gaap earnings,
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generally accepted accounting principles and non-gaap which are something different. if you went by the book, look at numbers, earnings are down, coming down even more. if we kick out stuff we don't kind of like. this is what wall street does, non-gaap earnings at 2, 2, 2. this is significant difference this is one of the big problems when it comes to american style cap tappism and the stock market. i want to bring ria advisors lance roberts. lance you published a great piece entitled capitalism is broken if record profits don't revert. you put in a lot of great charts. i want to share one with the audience because if i'm reading you right, maybe i'm not, you say these bubbles are actually signs that the market works, that capitalism works? >> yeah. that is absolutely right. you know, look, what you're talking about, look, you and i have discussed corporate share buybacks, the problems with that we've talked about a lot of the
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other things going on in the market, wealth inequality, et cetera, those are all issues. that is function of corporatism. capitalism, you and i are big proponents of capitalism. capitalism is alive and well. nothing stops you or me writing a book, going out starting a business, that is the dream of american business. capitalism is alive and well. corporate profits, we were talking about a massive surge of earnings and corporate profits in 2020, 2021 because of an experiment in modern monetary theory which is socialistic process of injecting money directly to households. that is not capitalist. that is what created this diversion in earnings and profits and if those don't revert back to normality, which would align with economic growth, you and i have a difficult story to talk about. charles: by the way about 15 minutes ago, 20 minutes ago, bostick, atlanta fed president bostick talked about maybe
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pausing this summer. the market was struggling a little bit. it is catching something of a bid. the role of the federal reserve in the capitalistic society, does it add, does it take away? my opinion they got far too much power to begin with, more power in successive years. we don't have a natural business cycle. every day we come in wonder what jay powell had for lunch rather than profit margins? >> no, you're absolutely right. ever since the fed became active in the late, late '70s, early '80s unpaul volcker all the fed has really accomplished creating repeated booms and busts within the economy that has not contributed to the economic prosperity of the country as a whole, manipulating interest rates, focus on again alan greenspan promoting adjustable rate mortgages which led up to the financial crisis. the fed has been behind every systemic problem within the financial markets which has deterred individuals and the economy as a whole from growing
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at a much more economically sustainable growth rate that would benefit the masses. this is why 80% of people don't have $500 in the bank when we talk about wealth inequality. charles: right. i was listening to your podcast yesterday. apparently it is time to get exposure to the bond market through tlt. i'm looking at the chart, i'm wondering what you're looking at here? where does a buy signal become official, lance? >> got a little bit more to go here but we're getting very close. if you look at the previous peak that we had at 4.25% on the 10-year treasury, that is where the market was really starting to struggle. there is a limit how high interest rates go when you have an economy so burdened in debt as we have today, mortgages student loans, corporate loans, everything we have in terms of consumption tied to debt. interest rates can't move much. when the fed breaks something, that is not a question of anymore if, a function of when, when the fed breaks something, they have to reverse interest rates, that first reversal will be your key signal to extend
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duration in the bond portfolio, buy tlt, long duration bonds, lock in higher yields. yields will go back towards 1% very quickly. charles: wow, 1%. lance, thanks a lot, my man, appreciate it. >> thank you. charles: let's bring in slatestone wealth, chief market strategist kenny polcari. kenny, i want to pick up on the notion capitalism being on trial. when you encounter someone skeptical about markets, just the overall economic system in this country, what do you tell them? >> so, you know it's interesting because i agree with lance in the sense, with you in the sense there is nothing better than the capitalism we have. we are, we have the greatest market in the world open for anybody that wants to take part in it but what people need to understand there is a lot of noise out there. there is a lot of noise whether it the fed, technology, the algorithms make people suspect of civil. you have to eliminate on a lot of that noise. you have to focus on the long-term picture. i talk to people all the time, talk to them about history,
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history of capitalism, history of exchanges, why we have what we have regulation, rule sets kind of changed the way markets interact but in terms of being, you know, having a capitalist i can system, there is nothing better than the one we have. i hate when it is on trial because i love the system so much like you do. i believe in it. i think it is the greatest generator of wealth as long as you understand how to use it. charles: let's talk about history. you just brought up history and it is so interesting, everyone is talking right about volcker, volcker, we're studying volcker in part because jay powell more or less said he wants to be like the second coming of volcker. that takes us to 1980, what you have been saying i think this is fascinating, walk us through this. i have a chart up of the cpi, you said we should start 1970, starting from there, instead of 1980. walk us through the main reason why? >> it is really that whole decade of the '70s, right, when arthur burns was fed chairman at the time, we saw early part of the '70s,
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inflation reared its ugly head. the fed tried to respond. then as it started to retreat again, the fed, retreated with it along with trying -- charles: stop for one second, kenny. i have got the chart up here. fed attacks, inflation growing crazy, arab oil embargo. >> early '70s. charles: early '70s, right here. 73, '74, we're up there. the fed takes aggressive action starts to come down, they kind of relax. this is the point where arthur burns is always criticized. >> right. they start to relax. look what happens on the chart? it zooms up again. charles: right. >> even going higher than where it was in the early '70s. that is when paul volcker got there, we're '79, 80ish when that is happening. inflation runs out of control. 13 1/2%. unemployment 10%. paul volcker said enough is enough. he jammed rates higher in 1981, '82 they were up to 22%.
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money in the banks. it wasn't in the market. in that sense anyone who had any money put it in the bank. it guaranteed, earning 22%. why would you put it in the market? until only after paul volcker crushed inflation, sent the economy in a two-year recession, which was ugly, started to cut rates on that day in august of 1982. charles: kenny, 30 seconds, that scenario, say powell sticks to it, he doesn't want to be arthur burns, he wants to be volcker, he has to crush inflation where do you go cash? do you load up on cash at this point? >> no listen, here again, depends who you are, right? if you're younger i wouldn't load up on cash at all. i would be cautious i wouldn't load up on cash. for me new money putting in, leaving in cash, putting in treasurys at the moment. i do think there will be some continued short-term disruptions next two, three, four months. therefore i own what i own. i'm not selling what i own. dividends on any of those stocks get reinvested in the same
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companies. i'm building further positions but i'm being optimistically cautious, keeping it in treasurys until i get a sense. i think he is right. i think bostick is right. the fed will pause. they will pause in june. three more 25 hikes, they will pause. that is the summertime. i don't know why the market thinks that is new news. that is not new news. charles: right, if that is the case this market will take off. some people will sniff that out before then. >> i agree. you and i have been talking about that. charles: we'll be there, my man. we'll america some money. always like taking these strolls through history with you. >> always a pleasure. charles: the stock of the day, posted results at the top line, bottom line, beat consensus. timing of course was really good. say it adds to the legend of mark benioff. all the activists were circling this thing like sharks. let's go to fundamental school, bring in wedbush managing director dan ives.
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dan, we'll start with the, you know what's happening here. you had the amazing revenue number. looking at some things that helped to propel the stock today, for instance, a cynic would talk about, operating margins, non-gaap operating margins at 29 but gaap operating margins at 43 the problem with this, it can't go any higher plus it is flawed. what do you say first and foremost about the amazing operating margins? >> i say look at sales force that is gold standard in terms of what they're doing. back was against the wall. they beat the street by 700 bps. that is a grand slam in termses of the quarter. cash is starting to ramp. growth on a margin story now. charles: i have the cooker flow chart up here. so the folks understand this is really absolutely phenomenal. the yellow part is the free cash flow you talked about. this is what they spent on cap-ex.
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hard not to argue with that right? $2.7 billion. is this going to be enough in your mind to help get those activists push them away a little bit? >> i think this keeps them at bay. ultimate they were starting to swirl. benioff, it was a fork in the road conference call and quarter. what starts to happen it gets rerated because of free cash flow and margins. it is golden install in terms of software this is one, new york city cab driver was negative on sales force going into this year. charles: okay. let's talk about guidance because guidance is everything these days. all of these numbers, revenue, which will be up 10% year-over-year, operating, operating margins, earnings per share, cash flow, all of them are above wall street's consensus right now. i didn't see how many folks upgraded today. i'm sure a lot have. when you see guidance like this, how long, what kind of a runway does it give you? does it make you feel okay
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owning the stock, for instance for next year? >> especially benioff. benioff has that credibility. talking about historically one of the most successful tech ceos really out there and i think, if they were going to be conservative they could have ripped the bandaid off and that's why now you look at this, get sort of the trifecta in terms of margins, growth, then you have the activists situation. this is a stock that goes much higher in our opinion. charles: it is interesting though because benioff has the reputation. the idea many thought he was losing it, have five separate activists says something. i admit, this is the cover of the presentation. i don't know if you can see it there. i almost went short when i saw the cover, be that as it may, i want to shift to one other company that reported last night. snowflake. i've giving them the mouse that roared award, it is not a good award. they will buy back $200 million
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of their own stock. when the company throws out that kind of thing, it is so nonsensical it loses credibility. is that one of the reasons snowflake is getting hammered today? >> that and this is cloud arms race. this is softer number. relative to, acta, this is something where they really feel like they're at the kids table and the others are ated adult table when it comes to cloud. charles: by the way i will buy $2 billion of our own stock. you don't have two nickles to rub together. how will you pull that off? feels like distinctive winners and losers emerging in these sectors, is that what we're seeing a narrative. >> bifurcation. the strong are getting stronger. never underestimate how bad a management team and overestimate how good they are. look at nadella, look at benioff, look at cook. i think it speaks for itself. charles: you're right. i tell folks invest in the management team and those that
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follow ethos of success. dan, thank you very. appreciate it. >> thank you. charles: coming up wall streed fed funds rate consensus is moving to 6% f that happens what happens to the stock market? how much credibility does the fed have left? i will ask michelle gerard what she is looking at 2:30. the 10-year breaking through 4%, not a concerns of panic, not yet. we have thomas thornton he says what how he thinks we should all be trading off of this next. ♪.
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charles: folks, let's face it, bond yields are the key to everything these days. the specially the 10-year yield smashing through 4% and seems very likely this breakout mean as retest of the high. joining me hedge fund telemetry founder thomas thornton. thomas, welcome to the show. >> thank you, charles. charles: this is the magic
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moment we've been waiting for because the two-year took off. what is going on with the 10-year? we're finally smashing through the 4%. what does it mean for you when you see it happening? >> this is setting off alarm bells for people. the market is not freaking out yet. i think we'll go to 4.2, 4.3% on this move but every yield from the one year to the 30 year, the yields are still going higher and they're going to wake up some people. charles: so we're talking about a retest, right, a double top kind of thing if you're a chartist. maybe we get there sooner rather than later okay it is a double top, we tested it we'll pull back down, could that be a reason for calm? or we have something like this big gap down here, 3.45% people ultimately they we will come back to fill that gap. what is it that people are so comfortable now rather than freaking out? >> equity market is ignoring this type of action in the bond market and i think the bond market is definitely nervous when you have a two-year goes up 100 basis points in a month. i think that is really, really
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dangerous. charles: let's talk about these other yield curves because already coming into the session 76% of the yield curves were inverted. 70% is the threshold where typically you're almost guaranteed a recession. so you say this number is only going to get higher. that means recession no matter what in your mind? >> i think it, i think the curve can get more inverted and then probably three months out i think it is going to start to steepen and that's when the recession fears start to take hold. because it is always when it steepens that a recession is on deck right now. charles: so in this environment i saw where you tweeted out you were going short. you've been aggressive on the, for instance, i think you were short snowflake? >> i was. i shorted it yesterday in our trade ideas on our sheet and yeah, it was a nice, nice win for me. charles: paying for dinner tonight, huh? golly. what else are you looking at? what else have you gone short?
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>> i'm short some technology. i'm short nvidia. i actually shorted crm today. i think sales force is a great company but you had five activists in there. with this lift they're doing a big buyback. i think those guys say great, we got what we wanted, let's sell. charles: in other words you think the activists will start selling into strength. you want to be there with them? >> i think so. look at disney. we saw activist in disney. stock went up. he gave up. sold the stock and it went down 15%. charles: not to change the subject but maybe to change the subject, when you talk about this sounds like old greenmail stuff, is that what we're seeing? are these activists really sincere get in there do real retooling of company, or are they talking it up and taking profits? >> i think there is a mix of them and the ones that were involved in crm i think they're definitely smart people. they wanted a board seat but you
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can't get five board seats to five different funds. i think basically they will have to give up. maybe elliot will probably get a board seat. charles: elliot always gets a board seat. i have 30 seconds to go. right now you're very worried about the market. getting the message from the bond market. investors should look to do short trading or wait this out for a moment? >> i definitely think that there is caution in the market right now. charles: right. >> i'm not saying go short the market here. i think though having a fairly sizable cash position is not such a bad thing, especially pays you a yield these days. >> cash is no longer trash. i always loved your work. glad you made it on. folks, guess what, we're aweek away from the "future of work" town hall. i will be joined by michio kaku, joni bailey, march 9th, 2:00 p.m. here on the fox business network. also the fed's credibility,
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folks, even with a soft landing there is no way powell can repair the damage that has already been done. i can't wait to ask michelle gerard and lyn alden. they're next. ♪.
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♪. charles: don't look now, folks, but wall street consensus on fed funds is actually moving closer to 6% as economists have now seen the light and they have sharpened their pencils. including my next guest, natwest markets head michelle gerard. we have a "fox business alert," michelle gerard sees 50 basis points at the next fed rate hike, next fed meeting. you have also changed your
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modeling. >> after the change in numbers over the last couple weeks, high inflation reading with the pce index last week we nudged our forecast up in march. we think there is a better than even chance they do go 50 basis points. a lot of data between now and then but we think in the end the data will favor taking more aggressive action sooner. the sooner, more they do quicker hopefully the quicker they can pause and then, not only did we up our odds of 50 basis point for march but we've actually added another rate hike in june. charles: right. >> that would take us to 5.75. so a 50 basis points more than we had before. honestly we couldn't even rule outgoing to 6%. it will really depend on the data. there is so much resilience i think that it will be hard for the fed to pause without getting up 5 1/2%. charles: michelle, 60, 70 minutes ago i saw across the tape bostick saying maybe they
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will pause. the market starting to react to that in a real positive manner. i mean the fact of the matter even with consensus moving to a 6% the market wasn't freaking out. what do you make of that? you know when you have someone like bostick seems to take it as a personal challenge to talk this market down every day talking it up today? >> bostick historically has been relatively dovish. he tends to be the one favoring doing less rather than more. first of all he said at the moment he favors march but depending on the data that could change. so, you know, even for him to even acknowledge that, he could be convinced going 50 basis point i thought was significant but you know his work is similar to ours. i think the fed is hoping by mid-year, whether it is june or july, the fed has reached a point with the funds rate approaching 6% or again north ever 5 1/2%, that enough will have been done and that they will feel comfortable enough to
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pause. actually his view is aligned with what we're thinking, hoping at the moment. charles: let me ask you then about an article i read, op-ed, allison schraeger at bloomberg yesterday. sort of suggesting that the fed is in a very tenuous position with respect to credibility this conversation about bostick, might add to that. now she, she suggests that the most likely outcome of the economy is a soft landing that skirts recession but the problem is, we'll have lower inflation, but it will still be in the 3 or 4% area and the fed, fighting against that, might be foolish if it is moving in the right direction. she is also saying the issues that they're dealing with are structural. so this 2% target, it might be so farfetched at this point. what do you make of it? everyone talks about the fed's credibility. the ability to jawbone this market down or up as being an essential tool? >> i think in the end the fed has to get the funds rate,
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excuse me, the inflation rate down toward the 2% target or 2 1/2%. i don't think that if inflation cools but only to 3 to 4% they will be able to pause. unfortunately i don't think if we skirt recession you will be able to get inflation all the way back to 2%. i really think the fed is going to have to keep, you know, the forecast we have does, you know, we think, put the economy into a recession in the second half of this year. so we actually unfortunately think that you will have to see a decline in economic activity to get inflation back to target. if the fed stops sooner, tolerates inflation at you know, the kind of steadying out but still at 3% or more, i do think that the credibility will be called into question. i just don't think the fed, having built up all these years credibility around, 2% target is going, is going to be able to stop without getting a heck of a
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lot closer to that point. charles: no, definitely wedded to that for sure. michelle, thank you so much. always appreciate it. thank you. >> thanks. take care. charles: so the question is, again everyone keeps debating how does the fed fix inflation? my next guest laid out the issues in a fantastic february newsletter, titled, fixing inflation. joining me lyn alden investments strategy letter. learn -- lyn alden. i didn't finish it. i'm still going through it. all the parts i went you there you covered so much. cut to the chase, the bottom line, you say we face waves of ongoing inflation. why does it mat every, what does it mean if we're in sort of a constant state of crisis? >> so i think basically the problem is that you know, look back at the 1970s. that was bank lending driven inflation. main tools were there were to slow down lending.
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the situation we have now inflation is very much physically driven. we have background, structural deficits, demographics, entitlement driven. for the foreseeable future. combine that with labor shortage, relatively tight commodity inflation. when they get a period of growth, it is accompanied by inflation. ironically increasing interest rates, quell the private sector lending side, beat disinflation at that end it contributes to the larger fiscal deficits by increasing federal interest expense. basically some of the fed's tools are just not, they're limited what they can do against some of the structural forces. charles: so when there is an occasional, when inflation is occasionally under control, will that be because central banks have engineered some sort of a soft landing? could other factors contribute to that? >> i think when inflation is under control, likely be recessionary or near recessionary conditions. if you suppress demand enough you can temporarily get down to inflation targets.
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but i think until you have basically an abundant growth of new energy, rein in the fiscal deficits which seem unlikely throughout the developed world i think that inflation will be ready to go back. kind of like, if it's monster you can go hide in the closet but doesn't make the monster go away. as long as the monster is still there it will come back as you try to emerge from the closet. that is the situation they will find themselves in over and over. charles: with that in mind i want to pick up the conversation i had with michelle in terms of fed's credibility. i know the book is written, story is being written with respect to the credibility of the fed, central banks in general, specifically jay powell and company? >> well, i think, i think his intent is in the right place. he is adamant he has to get inflation down to the target. i think potential mismatch, historians might not look well on, continually citing 1970s, viewing rates are the main tool in order to do that.
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whereas, unfortunately some of the background issues are outside of his control. so i think basically it will be more on other factors that i think historians look at in terms of inflation during this period. charles: before i let you go, i have only 30 seconds, you mentioned energy. i know you think that is one of the long-term areas investors should be invested in. where else should we be looking? >> one area compromise is energy transportation pipelines. less exposure to underlying price and distribution yields. many have long duration fixed debt at low rates. if you expect a period of higher average inflation, the fact they locked in a lot of their debt years ago at very low rates is pretty favorable for them going forward. charles: lynn, great, great stuff. again i tell everyone, follow you on twitter, go read this letter. might take them all weekend to read it but it would be worth it. thanks a lot, lny. >> thanks for having me. charles: coming up thomas hayes is here. he will bust some of the biggest
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myths you hear in the financial media every day. that is at 2:50. first we'll talk about the recession with my next guest who says forget about it, we're not even close. bob elliot is in studio after this. ♪.
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♪. charles: coming into the year conventional wisdom held that the u.s. economy was tumbling fast toward recession, if not already in recession. well my next guest called it bunk then, he has picture now suggests that the economy is even farther away from recession than it was at the beginning of the year. joining me unlimited ceo, cio, bob elliot. bonn, first we have the recession barometer. explain to the audience what we're looking at, what it is telling us. >> this gives you a sense what the key factors are they look at
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whether there is recession. charles: national bureau of economic research, they time stamp resession. >> basically data comes in. it says recession or not. if you look at the data they often take a whole long time to finally figure it out and determine it, but look at the data chose to real time. that is what we're looking here. we're looking at data. these are the key factors they're considering. the colors give you sense what data looked like during previous recessions versus on the outside what the data looks like today. more outside it is, the more positive the data. charles: sort of a cone centric circle. once it starts to get little tighter? >> we should be worried. charles: when the alarm bells goes off. this is amazing. really looking at this feels like we have some time even if we get to recession? >> for sure. when you look at data, there has been a little weakness in the industrial production side of the economy. that gets a lot of attention because there is a lot of stats about it but when you look at
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some of the other key elements of the economy whether talking about consumption or employment, those various measures what we see is very strong data relative to the type of die ma'am die dynamics we see during typical recessions. >> everyone should use that. say we're looking for signs of potential recession. what wall street is looking at. two of the biggest things move the needle, non-farm payroll and unemployment rate. these are how they changed. unemployment rate 190,000. that is really low. nowhere near recession. >> right. charles: if it starts to go, initial jobless claims. if this starts to go up, this is increases the probability, right here? >> exactly, exactly. that is what you want to look at when you think about whether or not the economy is in a recession it really comes down to the labor, deterioration of labor markets. the great thing we get timely data every week, put out a tweet
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every week that says this is the weekly reminder that the u.s. labor market remains secularly tight. that is what we're seeing right now. 190,000 jobless claims is very low at cycle lows. no sign in the labor market that we're starting to see sort of deterioration needed to hit a recession. charles: right. last time you were on, you said this, more or less said the 60/40 portfolio was dead. rest of the year will be tough for stocks and bonds. the 60/40 ran into a lot of trouble last year. why bother when yielding less than six month t-bills? >> that is right. investor take money out of cash to put money into the market, you're taking risk, price risk in the market. what this shows what kind of yield are you getting if you invest in 60/40 versus holding cash? reality, six month treasurys is not a bad bet. last time we talked, bonds keep going up which is pretty tough for most investors. charles: overall then, recession
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being so far away, maybe the fed having to make this happen, what does it mean for the stock market? stay away for now? >> it will be a tough time for the equity market and particularly a tough time for the bond market, right? most investors look to the bond market to get their diversification, to get that balance, and when the fed is tightening cycle, bonds are not going to provide you that sort of balance you need. go to cash. charles: 30 years, people told six at this 40, every financial advisor in hometown, telling everyone they grew up, bob go with the 60/40, they might be making a mistake. thanks a lot, bob. my take on why i like the action today even before bostick spoke. first my next guest says you should do the exact opposite what all the wall street experts are saying. not bob elliot. he is talking about the truisms you always hear, cliches.
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bob hayes is here next. ♪. new projects means new project managers. you need to hire. i need indeed. indeed you do. when you sponsor a job, you immediately get your shortlist of quality candidates, whose resumes on indeed match your job criteria. visit and get started today. lomita feed is 101 years old this year and counting. i'm bill lockwood, current caretaker and owner. when covid hit, we had some challenges like a lot of businesses did. i heard about the payroll tax refund,
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♪. charles: so you don't have to be an investor in the market long before you learn itries riddled with axioms, truths myths. some say buy low, sell high. other that you would sell too early and i don't want to chase this because it is going up. my next guest is here to debunk the myths you hear almost every day in the financial media. capital hole chairman, thomas hayes. number one right now. don't fight the fed. >> don't fight the fed. the last four tightening cycles since 19894 stocks are up 7.8% during the tightening cycle. the second myth we're going to bust, charles is earnings. every one says you can't buy stocks right now earnings are going down, right? charles: right. >> since 1930, in years that earnings were up year on year the s&p was up 10.2%. in years that earnings were down
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year on year, s&p was up 9.8% and most people missed that. charles: is that because the market senses this and starts to go down anyway? i mean you look in the last six months, for instance, right? every one last year was saying earnings estimates are too high. guest after guest as market was coming down. as these numbers have come out actually worse than expected we had a pretty good pop. >> everyone is waiting for a storm that already passed. we corrected 25% peak to tough last year, charles, anticipating the slowdown we're seeing right now. if you believe 2024 earnings at 250 on the s&p then actually what we should start to do in coming months is rally in anticipation of the recovery. charles: with that in mind, the contrarian idea, i saw you like, you have have an idea almost totally counter the overall wall street narrative right now. >> yeah. so we like 3m. no one likes it. it has been left for dead. we're deep value guys and basically it has got some litigation overhang. so they have litigation with ear
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plugs. the department of defense came out yesterday said 90% of the people who used these ear plugs had no problem. that will lift some weight. trading 11 times forward earnings his tore clerk multiple of 17 forward times earnings and great financial crisis 14 times earnings. they will do tax-free spends to unlock value. in next 12 to 24 months we have a double plus. charles: sometimes stocks with low valuations have low valuations for a reason. >> this is different. low quality overhang. this is compounding capital for years, once this overhang is lifted pay the fine it will take off. it might take a while to get going but when it does. charles: you like seasonality. third year of presidential cycle usually does welcoming out of the last two weeks of february we usually turn back up. >> yep. charles: why does that work? >> we don't know but it does. charles: i love at that answer. >> no question about it.
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february, everyone got negative. we had to pay back some for january. next two month are the strongest months in the four years of the presidential cycle. so that is a positive thing. you've seen it in the last few weeks, people are selling equities like crazy. last time they sold equities this much was the spring of 2020 after the rebound off the lows. every one said we would go back to the new lows like they're saying now. what did we do? up 50%. charles: did wall street get it wrong. political class. it's wrong, it's wrong. i can't let you go asking you about alibaba and chinese market. >> yeah. charles: a lot of false starts there. is the dust cleared? can an investor go in there make some money. >> we've been buying alibaba for months this will be the last time you will have to buy this thing under $100. composite pmis yesterday completely off the charts. i think what are underestimating in terms of the global recovery china will crush the 5% gdp. rising tide lifts all boats. buy alibaba at fought fourth prices. only difference is, charles? they have grown revenue by 800%.
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grown earnings and cash flow by 500%. this thing will take off. people will chase. we need a little weakness in the dollar. charles: president xi, no more won't attack the big tech names, chinese tech names anymore? >> when he saw people rioting in the streets, wait, people want economic prosperity. we have to let this thing -- charles: learn a lesson. take them off a bicycle, put them in a car, they will fight you tooth and nail never go back to a bryce kel except in new york city. >> this is first time they do the recovery. stimulus will be consumption based instead of infrastructure based. charles: ghost cities. >> all going into consumption. alibaba is the toll taker. if you're buying something in china going through alibaba or one of the others. alibaba has the biggest share. that thing will work. the cloud business is getting started with the digitization. i know it is down and out. no one loves it. i will be back, baby in 12 months. >> well get you back sooner than that, tom. appreciate it. we'll be right back.
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permex petroleum is leading the charge in the prolific permian basin with an attractive portfolio of oil, natural gas, and royalty assets. with expanding drilling operations and plans to uplist to the nyse, permex petroleum is poised for growth. charles: so the 10-year bond has blasted through 4%. guess what? the stock market's holding up pretty well. technology down the most, but mostly unchanged, you know, and the decline in the consumer discretionary area which is down the most,s that's coming from tesla. they simply didn't blow people away. but coming into this show 8 of 11 sectors were higher led by utilities, can defense and staples. but the most curious action in
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financials and, remember, they're supposed to go higher when you have higher yields. although the damage is in insurance and regional banks, not the big banks. it feels like one of those summer banks -- day, you know, when everyone's gone fishing, and that's the story. the market's waiting for the fed to become the fed that it knows and loves. to a cree, it happened about -- to a degree, it happened about an hour ago when the atlanta fed, bostick, hinted at a pause in a few months. nevertheless, this admission was special. so be cool when these markets are sort of like this moving sideways, they feel listless, those are often the best times to start chipping away. liz knows what i'm talking about. liz: did you say gone fishing or gone shopping? [laughter] i don't fish, i shop. charles: i heard about that kind of therapy. it's supposed to be pretty good. liz: it's very therapeutic. charles, thank you. the bulls just scoring a late-day touchdown. all right, market here with 59 minutes left to play, the


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