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On this episode of On The Tape, Guy, Dan and Danny discuss Thursday’s massive one-day turnaround in the markets (4:05), growing strength in the energy sector (8:00), the wild moves in interest rates and if the latest hot inflation data will force a recalibration by the Fed (12:00), why no one wants the Elon Musk-Twitter deal to happen except Twitter shareholders (21:50), and Danny’s best NFL bets for the weekend (24:15).
Then, Guy and Danny talk with Lori Calvasina, Head of U.S. Equity Strategy at RBC Capital Markets, about why she thinks the market will get back on track late next year (32:16), the challenge of building forecasts and models amid inflation and high interest rates (35:00), the value of embracing contrarian thoughts (44:34), if there are significant cracks yet in the credit markets (48:01), and why she thinks it’s become a stock picker’s market (50:18).
And later, CNBC’s Julia Boorstin joins Guy and Dan on what inspired her to write her new book “When Women Lead” (54:00), the value of investing in female founders and female-led startups (61:00), mentoring the next generation of female leaders (1:07:40), and what characteristics help female-led companies succeed (1:11:20).
Check out the article by Puck’s William Cohan discussed in the episode: “The Elon Financial Mindfuck”
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SHOW TRANSCRIPT:
Guy Adami: [00:00:00] CME Ad. [00:00:01][0.4]
Dan Nathan: [00:00:30] iConnections Ad. [00:00:31][0.3]
Guy Adami: [00:01:21] Welcome to on the tape. I’m telling you, we have so much to do on today’s show as we’re sitting here. It’s Thursday afternoon. The market’s in the midst of one of the wildest reversals we’ve seen in quite some time. We’re obviously going to talk about that. I got Dan Nathan here. I got Danny Moses there. Danny went on some thread rant or something that Dan knows that I don’t understand about Tesla. We’ll talk about that later. On this show today, we’re going to have Lori Calvasina, who’s head of U.S. equity strategy at RBC Capital Markets. Lori just lowered her price target. Danny and I had a great conversation with her. And then later in the show, we’re going to go off the tape with Julia Boorstin, our dear friend from CNBC, who just wrote a book When Women Lead. It dropped Dan, see what I did there on Amazon over the week for the first 50 half, 100 people that leave a review of the on the tape podcast on your favorite podcast store, I know what mine is. We will send you a copy of Julia Boorstin’s book. I would love to say we will get you a signed copy, but that would be going too far. But hey, you know, who knows? Julia’s pretty cool. So as I mentioned, we’re seeing this crazy move. And indulge me for a second as you both. That’s your want to do. Paul McCartney was asked who the fifth Beatle was and some people said it was Brian Epstein. A lot of people say it was a great Billy Preston. Dan and Danny, I know you’re both familiar with his work. He was a legend on the keyboards, but one of his famous songs, one of my favorite Billy Preston song, will it go round in circles? Will it fly high like a bird up in the sky? And I’m telling you right now, for me, at least, that’s the theme song of what we’ve been seeing over the last couple of weeks and specifically over what we’re seeing today. Will it go round in circles and will this market fly high like a bird up in the sky? And I’m telling you right now, that’s exactly what appears to be happening. Dan Nathan. [00:03:24][122.9]
Dan Nathan: [00:03:25] Yeah. I mean, listen, Guy, you just mentioned the volatility we’ve seen. We walk in this morning, we’re up 1%. I think whatever you’ve been up the S&P futures on what might or might not happen in the UK. And we know that we have this CPI, this widely, widely anticipated number. We already had the PPI. It ran hot. I think expectations were for it to be hot. The magnitude in which the futures went from being up 1% to down 2% like that is pretty shocking. I think you’ve been talking about bond market volatility, volatility in the currency markets, the commodity markets. Well, you’ve said this and we all agree the sell offs in the stock market for most of this year have been very orderly. When you start seeing that sort of price action makes people a little nervous. All that being said, investor sentiment could not have been more bearish heading into this. We were just below the 52 week lows made back in June. We are down at the lows earlier this morning, more than 20% from the August highs when you think about that. So all of a sudden, who’s left to sell, I guess is the point. And I covered a couple of shorts today. Once that starts happening, it turns into a bit of a snowball sort of effect here. And so to me, might this have some legs? Danny the most important thing I see in the market right now, in the stock market is that bank stocks with a half an hour to the close with what, four major money centers reporting tomorrow morning are up about five or 6% into the prints. [00:04:54][88.8]
Danny Moses: [00:04:55] So one thing that caught my eye was Yellen’s comments that she was worried about the loss of adequate liquidity because the broker dealers don’t hold as many treasuries as they used to because the capital requirements needed to do so. That was something called the SLR. I mentioned a couple of weeks ago the supplementary leverage ratio. Effectively, they have to hold X amount of capital even when they own treasuries. I believe the next move and they may talk about it tomorrow on some of these calls maybe doesn’t come out tomorrow, but it’s going to be talked about that the Treasury and the Federal Reserve are going to release these banks from having to hold capital against treasuries. That, I think, is our equivalent of what the Bank of England’s trying to do. And they did this once during COVID to stabilize Treasury markets, and that kind of expired in March 2021. I wouldn’t be surprised to see that happen Guy [00:05:36][41.8]
Guy Adami: [00:05:36] Well, if that’s their response and again, we’re getting a bit ahead of ourselves, but you have been talking about this that would be unprecedented, in a word. And it would also for me be really interesting to see how the market reacts. I think the initial knee jerk reaction in equity markets will be higher. I think it’ll take some of the volatility out of the market and will last for a period of time. But I think people will then come to their senses and say in order for them to do that, Danny, they clearly see something under the surface that’s not particularly savory. And again, it all definitely comes back down to earnings, earnings growth, revenue and revenue growth. And that’s just not here to support the market. Again, my opinion. [00:06:20][43.2]
Dan Nathan: [00:06:21] So we talk about this volatility here, upward volatility for the first time in a while here. There’s some things, though, guys under the hood, if I’m looking at in the transports. Delta had some good comments this morning. They talked about business travel fueling a strong fourth quarter and the holiday rush. You just mentioned the banks. What’s going on there? You saw that move in energy. It’s interesting. Crude was trading, I think, below 86 and shot up almost to like 90 bucks. And the XLE, the large integrated names are trading up 4%. The OIH, the services are up 5%. I mean, we know they’re going to have good earnings there. And so I wonder if we are in a very similar period to what we saw in late June into July, where everybody was really beared up. We were at the lows in mid-June or so and estimates had been coming down for Q2 earnings. And what happened was we had some early disappointments, which we had a couple of weeks ago. Remember some of those preannouncements, FedEx, we saw Micron, a couple other things. And now maybe you have expectations low enough, you have bearishness. That was at all time highs here and maybe a rally out of it a little bit. And that might be a great setup, I think, for some of us who really think that down 25% in the S&P was not it for this market? [00:07:35][74.2]
Danny Moses: [00:07:36] Yeah. Listen, I would say two things on that, Dan. One is that back in June, the expectations of where the terminal Fed funds rate would be was actually much lower. So there’s two things. How much is the Fed going to go? When are they going to stop? And what does that actual rate where they stop mean? So this whole six month delay that we keep waiting for it to filter into the system which is coming. One of the reasons that people saw the CPI print today and made a comment that, you know what, let me look at shelter costs in there, because we know that rents are coming down. People are starting to try to pull dovish things out of it. But I will say I don’t think this is a sustained rally. I don’t think it’s going to be as big as we had in the early part of the summer because of the fact of how much higher we are here on a relative basis. And I believe the next move lower if and when that does occur, will actually be caused by something breaking in the system here for sure. [00:08:20][44.0]
Guy Adami: [00:08:20] Let me talk about energy real quick. I’m glad Dan brought it up because I wasn’t bring it up as well. You look at those three names that we talk about, Conoco Phillips, Chevron and ExxonMobil, three companies that now have nearly $1 trillion worth of market cap when you add them up collectively. Conoco Phillips, last I looked is within $0.50 or so of their all time high. ExxonMobil within a whisper, Chevron a little bit off. But my point is very quietly, these three names have had stealth rallies to the upside that nobody’s really paying attention to. The energy stocks have actually performed relatively well. Danny talked about that last week. Number one, the underlying commodity effectively has gone nowhere. Yeah, we vacillated around here. We had obviously the OPEC news, it rallied, gave some of it back rallying here. But the commodities basically in no man’s land, which, by the way, in this environment is probably supportive of energy equities. We’ll see how it plays out. But just something to keep in mind. And I’m glad you brought up some of the things getting better on the inflation side. But inflation is effectively moving from the supply chain problems which seemingly are curing themselves organically, which we thought would happen a long time ago but are finally starting to happen and moving to the service sector. Services made up 74% of the one year increase in core consumer price index in September. That’s a staggering number. It’s going to take a lot of time to get that out. So the point in bringing up inflation is not to pick on the Fed. You notice I haven’t even mentioned it yet and I promise you I won’t mention it during this podcast because I think a lot of people think it’s become boring. I get it. But what I will say is the inflation problem is a lot stickier than people thought. And to combat that, you’re going to have to go a lot further than you’re going. So we’ll see how it plays out. But Danny, quickly, to your point, if they pivot in the form that you talked about earlier, I’m really fascinated to see how the market interprets that because quite frankly, although I can understand the knee jerk reaction being bullish, I would submit that longer term it’s not good at all. [00:10:29][128.4]
Danny Moses: [00:10:30] So if anything Guy, I think this number today, the Fed’s patting themselves on the back, kind of gives them cover. They kind of said, see, I told you, we’re going to keep going. And with the market reacting like this even more so, it gives them the ability they think, I think, to go. And now we’re at 75 basis points for sure. In early November, I think we’re up to a 95% probability. And last week it was 7030 of 75 or 50. I’ll just tell you down on your comment about Delta. Yeah, it was a good outlook for the stocks just back to where it was on October 3rd. Domino’s had a good quarter. That stock’s just to back where it was on October 5th. So just put this in perspective, I guess, on these kind of moves that we’re seeing. And certainly people want an excuse to be bullish, but I think we have to take a step back and take a bigger picture there. [00:11:11][41.0]
Dan Nathan: [00:11:11] Yeah, I mean, listen, I think we’re all particularly bearish. I mean, I think the market at some point, the stock market, the S&P will be down at least 35% this year. I mean, what’s clear to me about this number in the Fed’s insistence on going and continuing to go. And we see where Fed fund futures are priced in, what, 485 or something at some point mid-next year? The bond market’s going to anticipate that. We all agree on that. So one of my largest positions right now is this GOVT, this iShares U.S. Treasury ETF, that if I’m lying, that I’m making a bet that yields go lower. And we could see that at some point right after this November 2nd meeting. And so I thought the interesting move right out of the gate after that data was that the ten year U.S. Treasury yield blew out above 4%. It’s come back in a little bit here. So, Danny, as you just said, the Fed is likely, very likely now to go 75 basis points. It gives a little more muster to what they might do in December. But the fact of the matter is, it’s like this economy is going into a recession. It doesn’t really matter when it happens. It’s the fear of the recession. We’ve talked about that a lot. That’s when corporates start changing their behavior, consumers start changing their behavior and the stock market will discount it. It will bottom before we’re actually in a recession, but we’re not there yet where we’ve had the guidance and the job cuts and the cuts to R&D and all that sort of stuff. So to me, I think that’s what we learned in this Q3 period of just how serious the C level suite and the S&P 500 are taking, the fears of a recession, the fears of higher interest rates, the fears of uncertainty as it relates to supply chain, higher costs on reshoring, jobs, and then obviously what’s going on with Europe and China. [00:12:53][102.2]
Danny Moses: [00:12:54] So all one of my all time favorite movies, Risky Business, the whole scene with the egg, the egg gets cracked while the parents away. And he’s partying for a week. Joel, who’s partying for a week? I feel like this market has been basically we have a broken egg, a cracked egg. You can’t see it unless you hold it really up to the light. And that’s kind of thing how fragile this thing is right now. So, Dan, your point about yields, I mean, I actually think the U.S. Treasury market is reacting rationally today. We’re back to a 50 bps, at least at this moment, but that could be 20 bps spread on the 210. By the time we’re done recording this, ten year yields have started to come back in a little bit. I think we’re starting to price in the slowdown. So in the backdrop today of all the craziness that’s going on, I think the bond market is being a little bit more rational. In England I mean, I want to talk about this again because this has been important. I said how things are shifting from trading from monetary policy to fiscal policy, right. You actually have to manage your balance sheet, manage your finances. And so for UK today to backtrack now when they’re talking about tax cuts, we did we got a little rally. So they’re trying everything that they can. But at least it’s good to see a fiscal change versus some type of monetary policy is a little bit different. So I just think we’re seeing a little bit of rational behavior. That being said, to see the range of 404 to 446 in the ten year guilts in the UK. I mean, that’s insanity as far as bond prices so. [00:14:07][73.1]
Guy Adami: [00:14:08] It’s insanity. Again, people need to understand, I’m not trying to harp on this, but when you see a move of that magnitude, again, these are not developing nations. These are developed nations, bond markets that are moving at levels and magnitudes that we’ve never seen historically. And the fact that Janet Yellen can come out over the last week and say some of the things that she said in terms of she was somewhat encouraged by what she saw. And I find it just to be completely disingenuous not to pile on Janet Yellen. What I will say is this, though, to try to explain what is taking place on this Thursday, the move in the market. And we talked about it a couple of weeks ago when the volatility index, when the VIX has traded up to around 34 or so, that’s when we have seen these wild days is big down days followed by big moves to the upside, these negative gamma move days that I’ve talked about a number of times when people are just on the wrong side of volatility. And we saw it again today as the VIX approached 34. And it’s no coincidence that when the VIX touched that it started to sell off and that’s when you started to see the huge move to the upside. And I’ll say this, Dan, and I’ve said it a number of times, but it’s worth repeating that move lower today, although it felt like panic was somewhat orderly to me. The move to the upside, I mean, you just say what you want, but the move that we saw, some hundred and 50 S&P handles higher from the low. That to me reeked of panic. [00:15:36][88.6]
Dan Nathan: [00:15:37] I guess guy we call this crashing up, right? [00:15:39][2.3]
Guy Adami: [00:15:40] It’s true. Because when you hear crash panic, it’s always to the downside. Panics take place to the upside as well. And we’re living through it, at least in this move. [00:15:49][8.9]
Dan Nathan: [00:15:49] One thing and we’ll just segway to this, because I think we can spend some time on this because Danny did have a pretty epic thread on the Twitter. But one thing was really interesting this morning is that Tesla, which was trading, what, 320 or something just a month ago on 9/21, Tesla traded 314. Okay. That was the high in September this morning. It made a new 52 week low at about 206 and a half or something like that. And we’ve been talking about this cycle. Cannot end until this stock cracks. And so I know, Danny, you’ve been talking about it. You’ve been short this thing. I’ve been shorted. I started a couple of months ago here, and I was playing for a matched 52 week low from the May low. And I took my bearish position up when it got down there at about 209 or so. And the stock has rebounded a little bit here. They’re going to report very early on in the cycle, October 19th or so, but maybe in the near term it did what it needed to do by getting back to that low from the spring. [00:16:48][58.5]
Guy Adami: [00:16:48] Well, listen, we made a 52 week low of 206.22, which officially made Tesla down a tad more than 50% from the all time high of about 414 and a half that we made in November of last year. So in less than a year, Tesla, everybody’s all American, went down 50 5-0%. And we’ve been talking about on this on fast money on market call the potential for Tesla to trade down to around the $200 level which if you think about it Post-Split is the $600 level that we traded down to at its low back in the spring of this year in May. So it made sense. It all makes sense. And Danny, you had a bit of an epic tweet thread on the back of Tesla, which people seem to really enjoy. I don’t really understand how to read them, but people seem to enjoy when you do it. [00:17:43][54.5]
Danny Moses: [00:17:43] I like dance peter Brady Time to Cheer When It’s Time to change the voice Dad. Dan It’s a really bring me back to my seventies and eighties. [00:17:51][7.8]
Dan Nathan: [00:17:52] I’m struggling here, brother. It’s been a long week. [00:17:54][2.2]
Danny Moses: [00:17:54] You do a lot of stuff. You do a lot of stuff. Listen, I really to me, it’s always been about Elon Musk and his brand and the belief in him. And so if you pull that back, what is that worth? Because we know the companies is not trained on fundamentals. I don’t want to hear about their TAM that just market. I don’t want to hear about how you can validate a six, seven, 800 billion market cap on the company because you can’t because most of it continues to be on the comm. Right. What the deliveries are incrementally quarter to quarter, 20,000 better, 10,000 worse. Don’t care because I think from a bottom up perspective. But to me he smells of desperation. The stuff that he’s saying, the stuff that he’s doing. I mean, he’s seems like he’ll do anything now to stop the bleeding. And in front of him is this Twitter deal. And if he is forced to buy Twitter, which he very well might be, what is going to happen here? And I just think when a stock starts to trade down, people start to ask questions that they don’t care about when the stock’s on the way up. And that’s just normal human behavioral finance, psychology. Something must be wrong because the stock is down. And when you look at it and you start to look at it from a fundamental basis and it changes its complexion from a theoretical $800 billion company to what is it actually worth then I think the bloom comes off the rose. So to me, that’s what I think we’re in the midst of. Could a trade back up to 230, 240, 250? Sure. When companies like this don’t move higher on the same type of announcements that made them go higher previously three, six months ago. Better orders here. Oh, an S&P upgrade on this year, a new product launch there. That’s exactly what I saw in 2000 and certain names. And that’s what I wanted to point out and bring the behavior of finance into dance point that I’ve been saying this for too long now for a couple of years has been we’ll know the markets corrected when something like a Tesla finally cracks. And listen AMC has cracked. It’s got I mean, the total between AMC and APE is like six and a half or $7 at this point. That was $21 just a few weeks ago. So those things are happening now, which tells us we’re getting closer to the bottom, which is why you can have a rally like this today. You can have this because you’re starting to get people that no longer invest in the market. So long winded way of saying I still like my Tesla short and I’m still watching it as a barometer for the market and the signals that I’m seeing that indicate to me that it’s at a much lower. [00:19:52][118.3]
Guy Adami: [00:19:53] Yeah. And what I’ll say is if you’re looking for levels to sort of reload that short, which again traded down to that 206 ish level today, there’s potential for Tesla to have another $25 to the upside. So you call it another 10%. And then I think you’re looking to reload again visa V, however you want to play it. I’m not suggesting you buy puts because there’s no way to know what volatility would be at that point. But something that will portray a bearish position I think makes sense. And that’s going to happen in a number of different names because me personally, although it absolutely felt like capitulation today to the downside, I don’t think it was. And obviously, we’re going to talk to Lori about her price targets. And we’ve had a number of different people come on. I think Mike Wilson still thinks there’s downside in this market. We spoke to him last week. So although it feels good today and I think market participants are breathing a collective sigh of relief, remember the one thing HYG made a new 52 week low today? Yes, it subsequently rallied off those lows, but it’s effectively closing unchanged on the day. That’s something to consider. And we’re still looking at a VIX with basically a 32 handle, understanding that that can bleed away over time. It’s just something to watch. So, yes, the Dow had a great day. Yes. The S&P 500 had a great day. Yes. For at least 24 hours. Ross saying maybe we dodged a bullet. But again, to me, the panic was on the up. Side and that does not portend a market bottom. [00:21:22][89.0]
Dan Nathan: [00:21:23] Yeah, I’ll just say this though. The higher the market goes from today’s low is the more bearish I get about how the S&P closes on the year. Think about that. I mean, we got out of the way, guys, in July. I mean, Danny even tried to get bullish a couple of times. I bought a bunch of stocks in May and June. We kind of let the air come out of the bearish thesis a little bit, but it didn’t change our view that we thought we were going lower. And I will tell you, if we rally 10% or 15% off at today’s lows, it will not pierce the August highs. We will still be in a downtrend. The global economy is only getting worse. The earnings estimates for the S&P are only coming down. So to me, it just gives you an opportunity from a trading perspective to kind of get back in there. And I’ll say one other thing man. When you think about Tesla and it’s moved down to 206 today and you think about Twitter and what’s going on there. Bill Cohn, PUP News, he had a great piece out called The Elon Financial Mindfuck. And honestly, you have to read this thing because a lot of what he details in there, it’s a bit monotonous and he’s a great writer. But I found it hard to read a little bit. But the main point here is that all of his pals that agreed to provide the equity for his $44 billion takeover of Twitter, personally not the company they all want out and they all see rates higher costs of capital, higher valuations much lower. The prospects for this company much dimmer. He’s been just trashing this company for six months. And then you have the situation of 12 and a half billion dollars in debt that have been pledged by Morgan Stanley, Bank of America and a bunch of others. And they’re going to be owning this thing, Bill, saying that the debt, they’re going to unload it at $0.50 on the dollar. Now, I think some people think more 75 or 80, and they’re going to end up losing a lot of money on this. So no one wants this deal to get done other than Twitter shareholders. Elon doesn’t want it. So if you think about the unwind of this scenario, this would be perfect, sort of set up, in my opinion for like just a really, really messy market decline here because it’s going to be a lot of he said she said these guys suing these guys, all that sort of stuff. [00:23:27][124.0]
Guy Adami: [00:23:27] What Elon wants in his best case scenario, he doesn’t want the deal to be done and subsequently he does not want to be deposed. One of those things is going to happen. This one’s going to cost him a significant amount of money. The other is going to cost him a significant amount of embarrassment and subsequently potentially a lot of money. Neither are good outcomes for him. We’ll see how it plays out. And that’s not trying to pile on Elon Musk. That’s just trying to read the tea leaves. And before we get to Danny Moses, who coming off a three in one week in the NFL, again, let me say this, there is nothing healthy about what took place today, today being Thursday in terms of the market, the moves we’re seeing these outside two three standard deviation moves do not suggest that we’re putting in a bottom. It suggests that volatility is still with us and will be with us for the foreseeable future. We might get a respite in the form of bond yields may be stabilizing. To your point, and Danny’s point, we might get a respite in terms of the S&P maybe moving a few percent higher. But I do believe we’re still in an environment where rallies need to be sold. And until I’m proven incorrect, I think that’s the way to play this entire thing. [00:24:40][73.2]
Dan Nathan: [00:24:41] Dan All right, let’s do the NFL here. Danny, you watched three and one last week versus the line making you nine and six on the year. [00:24:47][6.7]
Danny Moses: [00:24:48] You’re off the schneid. [00:24:48][0.5]
Dan Nathan: [00:24:49] Maybe. There you go. All right. What do you got this week? [00:24:50][1.9]
Danny Moses: [00:24:51] Well, let me just tell you that that bartender story, we talked about at il mulino, the previous week they got me off the Schneid, Sean Massimo. He tweeted, He hasn’t been on Twitter in years. He heard about it, tweeted at me. It was really funny. You can see that on Twitter. But anyway, so this week, Dan, I don’t know if you going to want to give the side of this, but I do have a Thursday night pick again, which means I’m going to tweet this out after this show, obviously. But I like the bears at home getting one against Washington. I mean, I think Washington just stinks. The bears are playing better. Yes. They’re not winning a ton of games, but they’re back at home. They’re good at home. I see. Justin Fields, a breakout game tonight against the Commanders, Bears plus one at home tonight. You don’t want action on that, Dan, I take it. [00:25:27][35.7]
Dan Nathan: [00:25:27] I know this is really not going to be what you had in mind here. I’d love to go 500 your way with you. Okay. [00:25:33][6.0]
Danny Moses: [00:25:33] You know, we’ll talk about that later. Okay. Second game. Joe Burrow won the national championship in the Superdome in New Orleans. He also played for LSU, as you might remember. Well, he is headed back there to play New Orleans. I think Cincinnati’s getting better every week. Yes, they did lose a heartbreaker this past week, obviously, to Baltimore. But I like Cincinnati now with two and three, kind of it feels like a must win playing one and a half in New Orleans. I love them here. I think I’ll have the good feelings about himself in the Superdome. And the last pick I’m taking the chiefs at home against the bills. I mean, this is the side of the horrible overtime loss of the bills had last year in the AFC divisional round 42 to 36. Give me the chiefs. I’m going to buy the half point, though. So -120 for you sports fans out there. So Chiefs plus three at home against the Bills. Guy is looking to chime in. Want some action on the other side. What do you got? [00:26:21][48.1]
Guy Adami: [00:26:22] You know I don’t wager on the league where they play for pay because it’s not my thing to do. But what I will say, and I know you agree with this, the chiefs looked incredibly mortal, that first half against the Raiders, obviously that second half was epic, but they still should have lost that game. And everybody loves the Chiefs. I get it. But there’s just something that doesn’t seem right to me with them this year number one. I love Joe Burrow. I think you’re right. I think the Bengals are sort of going through the motions right now, but I think they absolutely will figure it out. The Washington bet is interesting, given all the news we heard about Dan Snyder over the last couple of days. You wonder with that, coupled with the comments that their head coach, Ron Rivera, made about Carson Wentz, about quarterbacks in the NFC East, well, that galvanize the team. And will they finally show up for a game? So I love your picks, as I usually do. I’m just curious to see how they play out in a very interesting week. And oh, by the way, did I mention that the New York football giants, the Daniel Jones led football giants, the same Daniel Jones, Danny Moses that you don’t like are now four and one staring a potential five and one start in the face in the form of the Baltimore Ravens at home this weekend. [00:27:40][78.2]
Danny Moses: [00:27:41] I asked you last week if you wanted to action with me against Dan on the Giants plus seven and a half against the Packers. Dan killed the Packers. Geno still loves you. So does Liz on that. I asked you. You said no because I’m not going to take him. I think that Daniel Jones performance was one of the gutsiest performance I’ve seen in years in sports, not just in football. I’ve always said he has the talent. I don’t expect him to continue that type of performance, though, but I do actually like them at home. Getting those points to me, fired up, getting six points at home. I would take them not one of my picks, but I do like them, Guy. [00:28:10][29.3]
Guy Adami: [00:28:11] And I know Vinny and Porter are listening to this now. I’m speaking to an audience of two. And as you know, both of you know, I am not a mets fan. I say it all the time, but I admire people that are and I understand the fandom. But that Padres series, in my opinion of all the epic collapses that the Mets have had, and there have been a lot that’s going to be at the top of the list, and that team is going to look a lot different come springtime. What also is going to be a lot different is on this episode of On the Tape, we have two guests, the aforementioned Lori Calvasina from RBC Capital and our friend Julia Boorstin. And as I mentioned at the top of the show, for the first 100 people that leave a review of the on the tape podcast at their favorite podcast store, you will be receiving a book if you screenshot the review and send it to Amanda at RiskReversal. Along with your address, you will get a book in the mail. When we come back, Lori Calvasina from RBC Capital. CME Ad. [00:29:13][62.5]
Dan Nathan: [00:29:53] iConnections Ad. [00:29:53][0.3]
Guy Adami: [00:30:45] Lori Calvasina is head of U.S. Equity Strategy at RBC Capital Markets. Having spent nearly two decades as an equity strategist at major investment banks. Lori is an expert on the U.S. stock market and regularly appears on CNBC and Bloomberg. Prior to joining RBC, Lori was a senior equity strategist at Credit Suisse from 2010 to 2017. She spent the first ten years of her career at Citi in a variety of roles, including lead small midcap strategist. Lori, welcome to On the Tape. So it’s great to have you here, Lori. Now, I like to preface everything I say by prefacing everything I say, and I’ll do this. You know, a lot of people have come on the network over the years, as Dan will say. I’ve been with CNBC for the last 36 years, which is a bit of an exaggeration. But obviously, there’s certain people that come on that you want to turn the sound up when they are on. And I will say without equivocation that you are one of those people. Lori. [00:31:44][59.3]
Lori Calvasina: [00:31:45] I appreciate it. I always love coming on and talking to you guys, but when people unmute us, that’s probably the biggest honor you can get. [00:31:51][6.0]
Guy Adami: [00:31:51] It’s the highest praise without question. When we started Fast Money, we actually told the producers we want to be a show that people actually listen to, but we’ll talk about that another time. Before we get into a very timely piece you just put out, give us sort of the back story, because I think it’s always fascinating for people to learn how different people get in the industry, what sort of drove them to go there, those types of things. [00:32:13][21.4]
Lori Calvasina: [00:32:14] Sure. I mean, look, so I’m from down south. I grew up in Alabama, went to college at the University of Virginia, and I never thought I would end up on Wall Street. My dad was a business professor, so he got very excited that I did not become a political scientist, literally. I was taking some econ classes my last year at the University of Virginia and took one from someone who had been in the business at Smith Barney, and he set me up with a job after college, and I sort of started an equity strategy then and never looked back. [00:32:41][26.8]
Danny Moses: [00:32:42] Lori, I got to stop you right there. So I’m from Georgia. My dad was a finance professor, and I never thought I’d find my way up to New York. So there you go. Very parallel paths and we share a similar view of the markets. I think so. I know Guy was just going in your background here, but maybe just start with your most recent note. Which Guy just kind of alluded to on your current thoughts here and we can kind of go from there. [00:33:01][19.4]
Lori Calvasina: [00:33:02] Yeah. So, you know, it’s October and it’s that time when we all have to start thinking about the year ahead, as well as try to guesstimate where the market’s going to end up on December 31st of the current year. And I really kind of wanted to take the emphasis off of where are we going to be over the next couple of months and talk about where are we going to kind of be through the next year and I really do feel like things are going to be choppy for a while, and I don’t feel overly bearish in here given the pain that we’ve already gone through. As of September 30th, we were down 25% in the market year to date. That puts us on track to be the sixth worst year since 1927, which is pretty remarkable. So I do think we’ll see some recovery next year, but I think it’s going to be back end weighted. So we have a 3800 number on the S&P for this year. We’re assuming we’re going to stabilize, we’re assuming we’re going to come up a little bit. That assumption is obviously not a super high conviction, one given everything we’re going through. But I do think that towards the end of next year, we can start to get this market back on track. But I think we’ve got a lot of hard work to do before that. [00:33:58][55.9]
Danny Moses: [00:33:58] Along with those targets. Can you talk about your earnings estimates for the S&P, how you kind of getting there, when the inflection might occur here? We get reacceleration. [00:34:05][6.5]
Lori Calvasina: [00:34:06] It’s a great question. And we do a simple income statement for the S&P 500. And we look at operating margins, revenues, tax buybacks and interest expense. And those are really the five components we try to project. And we just basically plop in macro assumptions. And we do have different models for revenues and margins, but we’ve got a pretty pessimistic macro backdrop baked in. We think the economy is going to take the brunt of the pain in 4Q of this year and the first quarter of next year. And so that’s really when our earnings numbers are getting hit the hardest. We do have margins contracting pretty significantly next year. And one of the things I like to tell people is if you think about inflation, be careful what you wish for because inflation moderating pulls down the revenue number pretty sharply in my model, and that’s a pressure point all through next year, we have inflation coming down to about 2.7% or so at the end of next year. And I found just in my modeling over the years, it’s not going to help the margin line all that much. So we do think there will be a little relief at the margin. But in general, I think that inflation coming down is going to hit the revenues in a much harder way than people anticipate, and that’s going to be a headwind all year. [00:35:08][62.6]
Danny Moses: [00:35:09] Here’s the problem that I have not with your research is in general, I don’t think we’re ever going to see a cycle like this when it’s said and done, ever. Meaning we came out of 13, 14 years of kind of easy money, both on the consumer side and on corporation side. And you’ve mentioned in your notes how hard it is for a CEO right now to try to budget not just Q4, but 2023. And you kind of have to throw your hands up in the air because every company is impacted differently. The one thing I just have a problem with right now is I don’t think we’ve ever had to deal with in the eighties. Obviously we raised rates at a fast clip and so forth, but all these geopolitical and all this stuff that’s going to hurt, I don’t envy being. Public company right now. And so I know you pull stuff from each kind of cycle over the years and you try to pull the best and the worst of each and try to gauge which is the best you can do. But how do you think about that? Because this is unprecedented. I think what we’re going through or what we will be going through. [00:35:56][47.1]
Lori Calvasina: [00:35:57] I think that’s true. And I will say and the valuation work, we built a model to try to predict where the PE is going to be and I’ll be the first to admit that it’s far from perfect. But we did try to go back and bring in data from the 1970s, so we only have average trailing PE data back into the seventies. I know everyone wants to predict forward is I frankly just don’t have that data going back then. But we wanted to bring in those lessons. And I’ll tell you, one of the things I found that was really fascinating by doing it was that PE multiples were much more sensitive to inflation rates than they were to interest rates. And if you look at interest rates, the tenure mattered a lot more than the Fed fund effective rate. So we did learn some things even though it was an imperfect exercise. But we sort of took that idea what we got in the seventies and those relationships built a model and it basically told us that if inflation does come down next year, even if interest rates stay high, we can still get a little bit of multiple expansion. And so that’s one of the ways we can get to a 4100 number on the S&P for next year, even though we’ve got below consensus earnings expectations, because just that idea of inflation moderating should let the multiple heal a little bit. [00:37:01][63.9]
Guy Adami: [00:37:01] The interesting, Laurie, I mean, I think this cycle that we’re living through has a little bit of everything we’ve seen. If you follow economics or follow markets over the last hundred years, like I know you do, it has some of the good of it, a lot of the bad as well. So there’s no you can’t just point at one period and say this is reminiscent of 08 09 because again, there’s parts of it that are, so embedded in that is how should people think about the multiple they’re paying for these earnings? Because, listen, we were trading north of 22 for S&P 500 earnings for a long period of time. And that obviously was, you know, a standard deviation or two away from the norm. Could we find ourselves in an environment where we shoot the other way and trade low to mid-teens for an extended period of time? Does that make sense? [00:37:49][47.9]
Lori Calvasina: [00:37:50] I think so. And the rule of thumb I like to give people is whatever you thought was justified before the pandemic, if you thought 30 times was justified because you were a tech investor, if you thought 20 times was justified, take it down a notch or two. You know, maybe take it down 20% or so. And I feel like that’s what I see in a lot of the testing. If you think about that model I mentioned a moment ago where we looked at the trailing piece, that model topped out at 37.6 times or so recently and it’s now fallen down into the mid-teens. And our model says it deserves to be around 16. So that’s 60 some odd percent type contraction. So that’s pretty significant. But that is the kind of contraction we saw in the tech bubble. That is the kind of contraction we saw in the seventies. I would just really challenge people to look at that rate of change and just really take things down a pretty significant notch going forward. [00:38:37][47.3]
Guy Adami: [00:38:38] 15 minutes into this, and I have not mentioned the Federal Reserve yet with you, and it’s about time that we do, because obviously not only our Fed but central banks around the world have played such an important role in what’s been going on in markets. How do you even begin to game that out? Because some of the things that we’ve seen over the last few weeks out of the Bank of England, Bank of Japan, Bank of China, all these different things are somewhat unprecedented. [00:39:03][25.2]
Lori Calvasina: [00:39:05] I think they’re unprecedented. I think that’s what my derivative peers would call tail risks. And I think as a strategist, we have to always look at the base case and be cognizant of the tail risks. But it’s very difficult to build a forecast that exclusively looks at those tail risks. I think that what’s probably the most challenging part of trying to predict markets right now in the context of what’s going on with central banks is this is really not something we’re able to model. I can build you a PE model that looks at the balance sheet and we’ll tell you basically we’ve already done the contraction we should do based on the cut that’s coming. But we all know that’s not the full answer. Right. There’s psychology here, and I think that’s probably the most difficult part of this right now is that we are in many ways subject to the whims of policymakers. And I’m not trying to disrespect them by any stretch, but at a certain point, we really are just sort of subject to the decisions that they make, whether they be good decisions or bad decisions. [00:39:57][52.7]
Danny Moses: [00:39:59] You have the luxury of having a phenomenal bank analyst Gerard Cassidy at your firm. And I know you guys speak from time to time. And I think the one thing about this cycle is it’s a very financialized economy. And so it’s very important as the banks are about to start reporting earnings, what you can garner the health of the consumer, the health of corporations, the balance sheets in general. What has he been saying to you or what kind of questions are you asking? Because he’s seen a lot and we used to talk to him all the time. [00:40:20][21.8]
Lori Calvasina: [00:40:21] Gerard is a treasure. When I came over to RBC the analyst I’d work with at my former shop said, Oh, you’re going to work with one of my favorite competitors of all time. And I saw exactly what she meant because he is probably one of the most brilliant analysts I’ve ever worked with. And as you said, he has seen a lot of cycles, and I think that’s extraordinarily valuable right now. And every time I talk to Gerard and also our regional bank analyst, John Armstrong, who has just about as many years as Gerard does. The thing that they both impress upon me, I would say are two things is one, the plumbing is just in fantastic shape relative to where we were ahead of the financial crisis. So we’re not looking for any kind of big systemic collapse. We think that the stress test worked. And so we have that wind at our back right now. And then the other thing we hear from them is the starting point heading into this recession, whether it is looking at the banks, whether it’s looking at corporate balance sheets or whether it’s looking at consumer balance sheets, yes, things will deteriorate. But we are in a much, much better place to take this challenge on that we’ve been in in the past. And that gives me a lot of comfort, especially when we’re thinking about how far markets might fall. [00:41:23][61.9]
Danny Moses: [00:41:24] I totally agree on those comments that the banks are healthier than they’ve been, certainly much healthier than they were in 2008 2009. But when you see the stuff happening in the plumbing, you see the Treasuries trade like they do globally, not just U.S. and you see how fragile the system might be because the banks aren’t as willing to take the risk or they’re not allowed to take as much risk to kind of have some of these assets on their balance sheet and play more middleman role than they have in the past. So I still don’t know. I think the system is more fragile in certain areas, not necessarily on the bank’s balance sheet, but I do think we’ll start to see that. And just you as a strategist having to deal with those inputs that are so volatile and key to what you do. How do you deal with that? You mentioned before like standard deviations here, kind of running wild. How do you deal with that to create some type of normalcy? I would say into those inputs. [00:42:09][45.4]
Lori Calvasina: [00:42:10] I kind of refer to this at the top when we were talking about our targets. I think we have to really try not to get too caught up in the short term and really stay focused on the longer term opportunities that are unfolding. And so this comes up a lot when we talk about sectors, for example, which is defensive sectors at this point in time are pretty much over ground and overbought. We’re at peak valuations on things like staples and utilities relative to the S&P. And even health care, which had been cheap, is starting to look expensive now. So I think we sort of understand, right, that those sectors may continue to work in the short term. But if we really want to take that long term approach, I think you start to think about paring out of those maybe very slowly. Maybe you don’t pull out of them all at once. But I think that’s really the only way I can make sense of it, because there are things we can control, there are things that we can model. And I think what I also try to do, frankly, is just be the calm voice of reason. I try not to get too caught up in the volatility of the day and just really think about, okay, if things do hit the fan, what do I want to be doing in that particular moment? And that may be one of the reasons why lately I’ve been pounding the small cap so hard as something I want people to be going into. And look, I know if we take another big downdraft in the market, they’re going to get hit. But from a fundamental perspective, they don’t deserve to get hit any more than they already have. So we want to be backing up the truck if we do get that an opportunity. [00:43:21][71.1]
Guy Adami: [00:43:22] Interesting. I’ve said for a few years now that typically and I look at the small cap to the lens of the IWM, but it doesn’t matter what you look, you know, they tend to lead and if you go back and look over the last couple of years on the way up, they were sort of a couple of months ahead of the broader market on the way down. The same is true. So I happen to agree with you there will see. I still think there’s a little more pain, but I don’t think you’re playing stock market here. I think you’re talking more tactically, which I totally understand. One of the sectors which I’m trying to get my arms around. I thought I had it cold for a lot of this year, obviously, when got knocked out of the sails over the last few months. But energy, how do you look at energy in this environment? So many crosscurrents. I mean, the commodity crude oil has gone from 130 down to 75 back to 90. I think a lot of people selling on the thought that demand destruction would be imminent. It’s not happening yet. Here we are. Energy sector. [00:44:14][52.2]
Lori Calvasina: [00:44:15] This has been a fun one or an interesting one, at least for this year. So I came into the year overweight energy. I’d been overweight since last January and I actually downgraded, I think, right at the beginning of April. And the way I’ve dealt with energy is I’ve really stuck to my process and what happened in April. I do a survey of my analysts every quarter and three of the five got more cautious or got less bullish. They didn’t really turn negative, but they have been pretty stalwart in defending the sector up until that point. And so when they pulled out, I said, you know what, I’m worried that they’re not pricing in recession at this point. And so I’m going to pull back and take some money off the table. And I will tell you, Guy, that I got mercilessly beat up for that call and we were early, but we felt like it was the right one. And then eventually in June, we did see a pretty severe bout of underperformance. We’re being controversial on that one again recently. We upgraded it again over the summer and it’s finally starting to work. I feel like we’ve been early on those calls, but we’re sticking to the process. We’re listening to our analysts. We are still seeing strong earnings revisions, cheap valuations. If something breaks down, I’ll pull it off again. But I think that’s all we can do. [00:45:19][63.5]
Guy Adami: [00:45:19] Listen, I happen to agree with you and I’m glad you brought up getting beat up. Not that I’m happy by any stretch that you are, but it’s an interesting comment that you made, because historically we’ve been able to do what we do, not in a vacuum, but there was no outside voices that were going to do exactly what you just alluded to. And now in the world of social media, you being on CNBC that comes in, that entered. Any of the equation, you know, whether we realize it, accept it or not. How do you deal with that? Because as a human being, forget about process, which I totally get. Human nature suggest it’s really hard to stand in the pocket when a lot of things are happening around you. [00:46:00][40.4]
Lori Calvasina: [00:46:00] I think that the way you do it is you make sure and look, I agree it’s a pressure and nobody likes to be beat up and it’s not fun. I do feel like I’ve learned over the years that my clients value contrarian thoughts. Now they want the contrarian thoughts to be right, and they’re not always right. But I do think most of the people I talk to my professional life do sort of value us being intellectually honest. So I think that helps. But I think the pressure, I mean, it just makes sure you really have to do your homework before you make a call. And you may be wrong, but if you’re sort of doing it by the right process, there’s a certain defense ability there because nobody in this business gets everything right. And I do find a lot of longer term investors value the discussion, value, understanding how you get from A to B. And I think, honestly, when you’re wrong, admit it. Don’t try to dance around it. You have to be flexible and pivot back if needed. Having that intellectual honesty and that rigor, I think is the only way you can deal with it. [00:46:51][50.8]
Danny Moses: [00:46:52] Guy you’re talking to, a tough southern girl from Alabama, she doesn’t need your help on this. But I was just going to say, I always used to measure, which I’m sure you can. You want to call it hate mail or emails that come back that actually confirms that you’re right, because that tells you that everybody is on that side. If everyone agreed with you, it was probably the wrong call. I just want to go into some of the stuff that has been working. You mentioned before, you know, Staples maybe look a little overbought health care. I just think people want certainty and comfort. Dividend paying companies, companies that do well in a recession. What we’ve seen in the last few years has been these tech names, these Microsofts, that Alphabet’s traded a historical premium to their valuations because people felt safe. So I feel like part of what we’re seeing is a rotation from there just to keep money in the market. I want to get your thoughts there. In my second question to you is that you believe that energy and financials are kind of where you’re going to want to be when the Fed finally stops. And I guess I will say I feel like people are getting trapped in those names because if oil hangs in here, it’s a cause of inflation. It’s almost like the Fed won’t stop until energy underperforms to your point, or energy comes in. So just get your thoughts on that kind of order there. [00:47:53][61.1]
Lori Calvasina: [00:47:53] I think in terms of thinking about sort of energy and financials specifically, I think financials is actually one a lot of people are conflicted about going back to Gerard and RF. I mean, I think they’re getting beaten up constantly on credit concerns and they’ve stayed fairly constructive. I don’t necessarily see them as being quite at risk from a Fed perspective, as, say, the energy trade. And I think what’s tricky about energy, they are the big contributors or a big contributor to inflation right now, but there’s not a lot the Fed can do about that. And I wonder when we’re going to get to a point in this Fed discussion where they admit that and they sort of take stock of the fact that there are things they can control and things that they cannot control. Because I do think energy sort of similar to housing, right. My homebuilding analyst likes to say, I know how beaten up, I know how enduring these things are. But the Fed is set out to crush housing. Well, if the Fed is out to crush inflation of the energy eventually becomes a victim of that as well. But I frankly don’t know what the Fed can do about Vladimir Putin. And I’d like to hear them be a little bit more honest about that. [00:48:47][53.1]
Guy Adami: [00:48:47] I’m totally with you. And I would submit correctly, incorrectly, that energy was going to go to where it went regardless of whether or not the Ukraine situation happened, it might have taken more time, but we were on that trajectory. Be that as it may, the Fed putting the S&P 500 to me is somewhere right around 3000, which is still some 600 so S&P points more we’re currently trading. So I can do that math, believe it or not. So I don’t think the market is necessarily in their line of sight. I happen to think the credit markets might be. Are you seeing any indication at all that there’s some cracks underneath the surface that we should be aware of? [00:49:20][33.4]
Lori Calvasina: [00:49:21] In terms of credit markets? It’s interesting. I watch mostly the high yield part of the market. Just because we spend so much time looking at smallcaps and things actually don’t look too alarming there to me, frankly. And when I talk to my peers in the high yield part of the business, they’ll tell me the same things I see right on. All the balance sheet work is that things have been cleaned up a lot. There is still risk there, but I don’t see anything that’s worrying me in that part of the market. In regards to my small cap call specifically. [00:49:46][25.3]
Danny Moses: [00:49:47] Do you run screens, very sectors that are dependent on the credit markets and they’re that you look at balance sheet, heavy debt, heavy companies, or do you screen for that at all? [00:49:55][7.8]
Lori Calvasina: [00:49:55] We haven’t been doing those screens in the Smallcap world. There are definitely issues there. I tell you, I get a little bit perplexed when I do that work looking sector by sector in the big cap space, because the areas of the market, sectors that tend to have the most debt, it’s more a long term fixed rate debt as opposed to short term debt. And so if you look at the tech sector, for example, or even consumer discretionary, that’s where you’re going to get more of the short term variable rate, but it’s also less of a debt burden overall. So I don’t get overly spooked by that because I think that we have generally seen public companies, they knew what was coming, maybe not quite how bad it was going to be, but they knew interest rates were going up. I knew the Fed was going to get more aggressive. They knew the party was going to come to an end. And so we saw a lot of commentary last year, in fact, about debt paydown. If you look at the stats, we saw debt coming down across the board. And I’ll tell you where I got a little bit of egg on my face in two Q reporting season is that interest expense relative to sales came in much, much better for S&P 500 companies than I’d been modeling. And so really the ability to manage the debt burden and keep it from being a problem has again, I already have egg on my face. I underestimated how much cleanup had been done already. [00:51:02][67.1]
Danny Moses: [00:51:03] I agree with a lot of what you say, but one thing you said, there are a lot of names out there that are already pricing in a recession. And the problem is that passive investing kind of groups, all of these stocks in together in a various ETF, whether it’s a small cap ETF, they just all get take it. What are your thoughts on the impact of passive investing and are you a pro stock picker person even though that’s not your job to pick stocks individually? [00:51:23][20.1]
Lori Calvasina: [00:51:24] I think that the volatility in the markets, while I know that it feels absolutely awful, I do think it opens up opportunities for stock pickers because I think one of the things we’ve noticed when we go through earnings transcripts, for example, not all companies within a specific industry are created equal. And I think I really noticed this in the retail space where you’ll hear certain retailers come in and say the sky is falling and the macro is falling apart and we lift numbers and margins are under pressure and then everyone gets freaked out about the consumer. And then two weeks later, you hear from another company that actually executed pretty well and had good pricing strategy and manage their inventories better. And so then we kind of swing back to the other way and people say, oh, well, the consumer is resilient, the macro is not that bad. And the answer the difference is that some companies are executing better than others, even within certain industries. And I think you really are only going to be able to capitalize on that trend if you’re a stock picker, you’re not going to capture that through passive an ETF right now. So I think this is a great time to be an active manager. [00:52:21][56.8]
Guy Adami: [00:52:22] Yeah, I happen to agree. And listen, just going through your notes and listening to you on television as is my want to, do you think we’re on the precipice of one of these face ripping rallies, which we’ve seen a number of times but you also think by early spring of next year, we’re probably, if not at these lows, maybe even lower. That’s a pretty tactical call. And I happen to think that’s one that plays itself out. But what is the best case scenario where that 20% rally effectively has put the bottom in its rearview mirror and it continues to accelerate? Obviously, there’s always a situation where it could happen, but what needs to happen for that to happen? [00:52:58][36.7]
Lori Calvasina: [00:52:59] Let’s put the long debated question of the Fed pivot aside, because I think we can all agree, like if the Fed changes course, that’s going to excite risk assets again. Look, I think that my earnings numbers for next year, they’re pretty far below consensus. And we’re baking in pretty difficult economic period over the next couple of quarters, which means demand is going to get hit. And companies have not been telling us demand has been getting hit. There’s a difference of opinion. If you’re calling for a recession, you’re saying demand is going to really fall pretty hard. So I think the bull case, frankly, is that companies look around and say, you know what, fed, I’m ignoring you. We’re not going to lay any people off. We’re just going to keep doing what we’re doing and we’re going to let the macro take care of itself. And consumers look around and say, you know what, I’ve been locked up for the last two years. I’m going to get out and live my life until I spend every last cent I’ve got and hope that this is going to be short term in nature. And so I think the bull case is that we skipped the recession and the Fed actually not only pulls off a soft landing, but pulls off barely a blip. [00:53:54][54.7]
Guy Adami: [00:53:55] Obviously, that would be in everybody’s best interest. I’m hard pressed to think that comes to fruition. I think you are as well, given the note you put out, but you always have to sort of game out. How can I be wrong? And I think that’s really important. You talked about being humble and being honest, intellectually honest. I think that’s why you resonate so well on television and why your work resonates so well with Wall Street. So, Laurie, thanks for joining us here on the tape. [00:54:17][22.6]
Lori Calvasina: [00:54:18] Thanks for having me. It was a pleasure. [00:54:19][1.1]
Guy Adami: [00:54:20] Upon our return, we’re going to have our colleague, our friend and author of When Women Lead What They Achieve, Why They Succeed and How We Can Learn From Them. Julia Boorstin, right after this. [00:54:35][14.5]
Dan Nathan: [00:54:38] Masterworks Ad [00:54:38][0.3]
Guy Adami: [00:55:35] Julia Boorstin, a CNBC senior media and tech correspondent and has been an on air reporter for the network since 2006. She also plays a central role on CNBC’s bi coastal tech focused program Techcheck delivering reporting, analysis and CEO interviews with a focus on social media and the intersection of media and technology. She’s the author of the new book When Women Lead available now where books are sold. Julia, welcome to On the Tape. So Dan, as you like to say, I started CNBC 37 years ago and they make fun of me. But in reality, they called me up in 2005 and early in 2006, me and the Fast Money Gang used to show up at Englewood Cliffs, the headquarters of CNBC, late at night. And one of the first people I met was Julia Boorstin. Now, obviously, she’s beautiful woman, but what you came to learn extraordinarily quickly was how bright she is. And so Julia won’t remember that. But we met you early on in ’06, and it’s great to have you here with us on the tape. [00:56:41][65.5]
Julia Boorstin: [00:56:41] I remember because I started appearing as a contributor in early 2006 and then I joined CNBC, I think it was end of May 2006. So I started right about the same time as you. [00:56:53][11.7]
Guy Adami: [00:56:53] Your career has been unbelievable and you’re a great voice on the network. We used to say on CNBC, we want to be a show where people turn the volume up to listen to instead of just watch. And you’re one of those people. So it’s great having you here. And we’re obviously going to talk about your book, but talk about your journey because Princeton grad, extraordinarily bright, as I said, did you always want to be a journalist? Was this sort of the goal from the start? [00:57:16][22.8]
Julia Boorstin: [00:57:17] No, not at all. I majored in history and I always did journalism. You know, I worked on the newspaper in high school and the newspaper in college. But I thought I would go to grad school and work in international relations. I actually had interns at the State Department and at the White House, and I was really interested in international relations. But I figured before I would go to grad school, I would defer for a year and go work in magazines in New York. Like many of my friends, moved to New York after college and take a break before more school, and I applied to a bunch of magazines and the best job I got was at Fortune magazine. And even though I had never taken Econ, believe it or not, I got this job as a reporter at Fortune magazine, and their whole theory was, you can’t teach a business person how to write, but you can teach a journalist about business. And I had this amazing like business school bootcamp. I learned from amazing editors. There is this legendary editor, Carol Loomis, who used to write the Berkshire Hathaway annual reports like she was a legend. And I remember her teaching me how to read SEC documents and how to try to compare them and pick up on key things. So I was really lucky in those years at Fortune magazine to get an amazing training of how to be a business journalist. And I’ve only had two jobs. I was at Fortune magazine for six years and have been at CNBC since 2006, and it’s just been awesome, as you guys know, what a place to be. There’s a reason why people stay at CNBC for so long, and I started off covering media. Then I added social media, which people really weren’t paying attention to in 2006. And then from media to technology. And now, of course, all of these things have converged as we watch NFL games on Amazon, MLB on Apple, media and tech companies. They’re all kind of the same now. [00:58:55][98.5]
Guy Adami: [00:58:56] Well, it’s totally your beat and you’ve taken it over. You’ve done an amazing job. But, you know, this obviously started when you were young lady and at 13 years old, probably eighth grader. So your mother told you that, Julia, when you’re at a certain age, women are going to be running things. And it’s really important. That resonates with me because as people know that watch CNBC First Money, you listen to the podcast. My mother was one of five women that graduated from law school in 1963, so I am extraordinarily sensitive to that. Can you speak to that? Because that to me is what drove you to where you are and really was probably one of the driving forces behind your book. [00:59:30][33.7]
Julia Boorstin: [00:59:30] Absolutely. I mean, look, my mom always told me my parents always told me when you grow up, you can do anything. You don’t have to worry about the fact that women are less likely to run businesses, etc., just don’t worry about it. You’ll be able to do whatever you want when you grew up. And I really saw men and women in equal roles, whether it was on the newspaper or student council all the way until I graduated from college. But then I got to Fortune magazine and we were reporting on the most powerful companies in the world, and women were in a tiny, tiny minority, not just at the CEO level, but in the C-suite in senior management roles. I was interviewing mutual fund managers, people in the investing community, and they were all men as well. So, I mean, you have to point out right now, women represent about eight and a half percent of Fortune 500 CEOs. That is an all time high. So being at Fortune, I saw that my mom was totally wrong. Things had not changed that much from when she was growing up. And it was still incredibly hard for women to break into that very highest level of management. And so in the past 20 years, since then, when I started Fortune magazine, I started to see more and more women in these senior leadership roles, and I also started to see in the entrepreneur space I do the Disruptor 50 at CNBC. Those are my favorite projects. As we look at the 50 fastest growing startups in that area, it’s even harder for women. Last year, women drew about 2% of all venture capital dollars in the US. $330 billion was deployed in VC money in the U.S. last year, women grew only 2%. So I was seeing there were women who were succeeding, but they were succeeding despite massive odds against them. [01:01:08][97.5]
Dan Nathan: [01:01:08] All right, guys, let’s do it. Julias book When Women Lead. We’re encouraging all of our listeners to go out and get this book here. But Juliet, you just talked about this 20 year arc in your own career. How did you get to a point where you wanted to take all of these relationships, all of these experiences, all these interviews that you’ve done as a journalist, synthesize them into a book talking about how women can lead? [01:01:31][22.2]
Julia Boorstin: [01:01:31] Well, I have to say, and I’m so glad you guys are reading it, this book is even more important for men to read than it is for women to read. And I have a bunch of reasons why. But first, let me explain to you why I wrote this book. As you guys know, I have interviewed the biggest names in media and tech legends like Bob Iger and Reed Hastings. I have seen the transformation of the media industry. But what kept on striking me is that if women had to defy those odds and get a tiny piece of that 2% of venture capital funding, it’s hard enough to grow and scale a massive business, but to do it when you have so much less access to capital, those women were, by definition, exceptional. And I wanted to figure out how they had defied those odds. And I knew that because they were so exceptional, they would have lessons that would be valuable for everyone. So that’s sort of what led me there. It was a combination of what I was seeing in the Disruptor 50, the numbers I was seeing and understanding that, yes, we knew about these leaders of the Fortune 100, but there are stories that you don’t know and leadership trades that you may not realize are incredibly valuable. And that’s why I wanted to tell the story, the data and the facts that are in this book. They are not out there anywhere else. But here’s why I wrote this book for men to read. Men don’t realize these stats. They don’t realize that female founders get 2% of venture capital funding and coed teams get a little bit more. Last year, male only founding teams of startups got 82% of venture capital dollars. That’s crazy when you look at the stats that show that women led companies are more profitable and they yield profits faster. You guys care about making money and if you want to make money, you will take a second look at female led companies. This book is chock full of data that shows how and why companies with more diverse leadership, both in terms of gender and in terms of race, are more financially viable. There are all sorts of reasons for this. For instance, if you look at the financial crisis and you look there was a great study of female led regional banks. The female led banks outperformed the male led banks. It turns out that these women were less risk taking before the financial crisis and because they took less risks they were, well, much better positioned to ride out that 2008, 2009 period. If you look at the pandemic, female governors outperformed male governors in terms of reducing debts in their state, even if they had the exact same strategies and approaches, simply because women communicated their approaches differently. And then if you look at companies, S&P 500 companies, once a woman is appointed CEO. Those companies that appointed women outperform male led companies over those first two years. So all the data points to the fact that investors are missing a huge arbitrage opportunity here. Women are in the minority, but there is a lot of upside potential in investing in them. [01:04:21][170.2]
Guy Adami: [01:04:22] There’s no question about it. And things are getting better. But to your point, there’s so much more to be done. Who’s doing a good job? You’ve interviewed so many really amazing people. I mean, Jennifer Hyman from Rent the Runway. Gwyneth Paltrow, who I totally dig. Obviously dated Brad Pitt, who, by the way, as you know, Julia, Brad Pitt and I share the same birthday. I’m sure he’s saying that right now in a different podcast. But what companies? Who’s doing a good job with this? Because we really do have a long way to go. [01:04:47][25.2]
Julia Boorstin: [01:04:48] There are two questions here. There are which big public companies are doing a good job with diversity and really understanding the value to unlock there. For that the two companies I like to point to are PayPal and Salesforce, and that is because both of their CEOs have made a big commitment to closing gender and pay gaps. They’re not doing so out of the goodness of their heart. They’re doing so because they understand it’s better for their business. They’re going to have better employee retention and they’re going to have better results if they are paying and promoting their employees equally. One thing that’s interesting is PayPal and Salesforce. Not only did they identify that maybe there were some pay gaps that needed to be closed, but they identified that in some situations, men and women were getting paid the same thing. Men were getting promoted faster. And that’s why ultimately they were making more money. But the key thing for public companies is they just need to be paying attention to data. It’s so easy for bias to overcome data when you’re signing pay promotion, etc. And if companies just pay more attention to data, they’ll be able to weed out the bias. And they’re great tech driven companies that help do this and take away the pressure from the resumé. And I write about some of these companies that are led by women in the book. In terms of the startups there’s so many different ways to measure their success. But some male led VCs have really understood the value of investing in female startups. And I have to point out, First Round Capital, it’s a big VC. They made a ton of money on Uber. They’re based in Philly. After the first ten years that they had operated as a VC, they said, hey, let’s figure out what’s actually working. They’re early stage investors. So they’re betting on entrepreneurs just as much as they are on any kind of track record. And they looked at their data and they found that the female led companies that they invested in performed 63% better than the male led companies. So after they saw that data, they’re like, What are we doing here? Why aren’t we investing in more women? So they hired more female investing partners, and since then they’ve been investing in more women. So I think there is the public companies, there’s the VCs, and then there are the startups. And I think, look, a lot of the companies that have gone public in the past couple of years, their stocks have really suffered. But I think if you look over the long run, keep an eye on a lot of the companies I write about in this book, and many of them have not gone public yet. There’s a startup called Labs of Tech that’s a biotech company that turns pollution into fuel. I mean, this stuff sounds like alchemy. And this is a woman who I interviewed for Disruptor 50 and also write about in the book. So I think there’s so many of these companies with long term potential, especially after we get through this trough of what’s going on with the tech stocks right now. [01:07:19][151.4]
Guy Adami: [01:07:20] Indulge me for a second. So there’s obviously a term that I’ve come to understand called mansplaining, which I don’t think I was ever guilty of it. But I want to give you sort of this little bit of a story. I’m curious to your thoughts. So Melissa Lee and I, who, by the way, are extraordinarily close. Melas Like my sister, I adore her. As you probably know. [01:07:38][18.6]
Julia Boorstin: [01:07:39] She is awesome. [01:07:40][0.8]
Guy Adami: [01:07:40] She’s awesome and I’d never do anything to undermine her. But Mel and I were asked to sort of host one of these CNBC things where we were sitting up in the wings of an auditorium and between panels we were commenting and different things. And at one point early on I said something to the effect of, Mel, I feel like you and I are the two old Muppets in the balcony. And then I said something. I said, You’re probably too young to remember that, which is a throwaway line. And it was not meant to be derogatory at all. But somebody emailed me and my initial reaction was like, Holy shit, are you kidding me? But then I thought about it. And what she said to me was, that comment doesn’t help. It’s really dismissive. And what you did there, whether you realized that or not, was undermine her. So can you speak to that? Because I think sometimes men try, but they still managed to screw it up. Does that make sense? [01:08:32][51.5]
Julia Boorstin: [01:08:32] Well, I could see how you were complimenting how Melissa looks like she’s about 25 years old, so obviously she couldn’t have been alive to remember the Muppets. There is a compliment there, but you and I both know that she’s been at CNBC, I think, for longer than I have. So I think that sometimes mansplaining is more of a tone than anything else. My husband has read my book and knows all these stats better than anyone, but he occasionally mansplain to me too. So I think to me mansplaining is more about like, well, you couldn’t possibly understand this as well as I do, and I think that’s what really mansplaining comes down to. So I can’t speak to this particular situation because I didn’t hear it. But women get condescended to all the time. I know you guys have never condescended to me on CNBC and I’m so grateful to you for that. But I think it just happens to be like, well, I know how this works better than you. That to me is what mansplaining is. [01:09:20][47.9]
Dan Nathan: [01:09:21] It’s interesting, actually, that you mentioned it’s more important for men to read here. And I also would say as a father of two teenage daughters who are kind of interested in what I do. One’s in college and one’s going to be in college in a couple of years. It’s really important for them to have strong female role models. Talk to us a little bit about mentorship and how you think about it and how you kind of seen it work over the 20 years of your career. Is it important for females who are interested in business to have female mentors, or is it just as important for them to have male mentors? [01:09:51][29.9]
Julia Boorstin: [01:09:52] Mentorship is incredibly valuable. Women should have female mentors. They should also have male mentors. The mentor I had who changed my life was a man, Andy Serwer, where he was an editor at Fortune magazine. He’s now editor of Yahoo! Finance, and he is such a good guy. And he always treated me, I think, the way he would want someone to treat his two daughters. And he really encouraged me to step out of my comfort zone. He pushed me to try going on TV when I was at Fortune and to just not be afraid and not have imposter syndrome, which is something that women are more likely than men to face. So it’s essential for women to have male mentors, especially in male dominated fields. If you’re a woman in a male dominated field that you’re only looking for female mentors, they are going to be harder to come by. But I also think that women mentors are essential, too. And I think that the more that companies or organizations can create structures where there is easy access to mentors, and people who are in more senior positions understand that it’s not optional. They have to mentor people of all genders to encourage this next generation. And I think now, especially with people working remotely or sometimes working remotely, mentorship is more important than ever. And so many of the women I interviewed for When Women Lead talked about mentors who were essential for their success, sometimes it was people that you mentioned, Jen Hyman. Sometimes it was Jen Hyman going to the CEO of Nordstrom or a company that was a rival company effectively, and asking for advice. So I think that people often give advice if you ask for it. And the more that young people, women included, feel empowered to not only ask for advice, but share something in return. You know, this is actually something that Sheryl Sandberg wrote about in Lean In, this idea that mentoring is often very valuable for the person who’s giving it because they learn stuff from their mentee. So I hope your daughters can have all sorts of mentors, but also figure out what kinds of perspectives they can share with their mentors so they understand that it’s like a two way street in terms of offering that value. [01:11:48][115.7]
Guy Adami: [01:11:49] Well, you can see what’s going to happen here in five years from now. You’re going to right when women lead two volume two because the world is going to look much different. But we know the people you interviewed did. And I obviously reading the book and I want to talk about that quickly. Who didn’t you get a chance to interview that you’d be like, you know what, she’s going to be great for my next book or I wish I had an opportunity to speak to her. [01:12:08][19.6]
Julia Boorstin: [01:12:09] You know, there’s so many women I interviewed about 120 women. I include about 60 of them in the book. And I intentionally didn’t include a lot of the women who you already know about. So, for instance, the CEO of Canva, who’s currently on the cover of Fortune magazine, Melanie, she’s an amazing leader, has one of the most highly valued private companies. And Canva’s going to be a massive IPO someday but she’s based in Australia was a little harder to get access to her and she was already very much in the spotlight. So I wanted to make sure to tell stories you had never heard before about people like Jen Hyman or Julie Wainwright from Rent the Runway or Sallie Krawcheck. So tell those stories you had not heard about people you know and tell stories you had never heard about, people you’ve never heard before. So my hope is sort of to surprise you with people you didn’t know about but could end up being the Jeff Bezos’s of tomorrow. [01:13:01][52.3]
Dan Nathan: [01:13:02] Julia in the book, there are so many good anecdotes about successful women in their path to leadership here. And obviously you spent some time talking about ones in the private markets, in the public markets also. But when you think about the path to really becoming a successful executive at like a Fortune 500 company versus, let’s say, a woman who sets out to build her own company and or partner with other individuals in a very entrepreneur manner. How do you think about that in the public versus the private path towards success, into leadership? [01:13:33][30.4]
Julia Boorstin: [01:13:34] Well, some VCs are looking at the data, but the problem is, is that early stage financing is made based on what investors see in terms of an entrepreneur and an idea. And the reason that women get 2% of venture capital funding and the numbers are particularly low at the seed and a stage or the early stage of companies. And that’s because investors are looking for patterns, just like you guys are looking to invest in a stock that could be the next Amazon private VC investors are looking to invest in a founder who could be the next Mark Zuckerberg. So they’re looking to find someone who meets that pattern because there isn’t a lot of data like you guys can look at the data, look at the P ratios and the revenue and the trends. But if you’re an investor investing in a pre-revenue company, all you’ve got to go on is the business model and the entrepreneur. And that’s why it’s so hard for women at the early stages of entrepreneurship. But what’s amazing is once you get to these later stages, like the C round where companies are more mature, they’re often profitable. If a woman can get to that phase of a private company, then men and women are invested in equally. So I think the smart investors, the smart VCs are going to be going through their data, finding that the female led companies outperform and then betting in more women. But across the board, the majority of VCs are still investing a very small percent in female led companies. [01:14:49][75.4]
Guy Adami: [01:14:50] I’m sure you have thoughts on this and I’d love to hear it, Julia So obviously the last couple of months have been trying times for the market, but my sense is, and I think I’m going to be proven to be correct, this is going to be an incredible opportunity for all the things in your book and for all these women led companies to really separate from the herd, to differentiate themselves and to prove that everything that you have in the book is actually true. Can you speak to that? Because the world seems to be lining up for exactly what you wrote about? [01:15:18][28.3]
Julia Boorstin: [01:15:19] I absolutely agree Guy and here’s why. I think the characteristics I write about and when women lead are so essential right now. The first one is that coming out of the pandemic, with its record inflation and risks of a recession and all of these different types of economic uncertainty, female led companies are doing a couple of things that are incredibly useful, not just for women. Anyone leading with empathy is more important than ever. If you’re going to connect with your employees, if you’re going to prevent the quitting and the quiet quitting and all of these other things, you want to understand where your employees are coming from so you can drive them, motivate them and reduce that churn. Empathy is also essential to connect with your customers. Figure out what your customers need when they’re grappling with this inflation and all these other challenges. So empathy is a characteristic that many people would have thought was a weakness means you’re overly sympathetic, but in fact can be a massive strength right now. There are other things like that showing vulnerability about what you don’t know, having a high adaptability quotient, which women are more likely to have. Obviously, that was really essential during the pandemic, and I would say we’re still in this period of crazy uncertainty. But then when it comes down to what happens with the companies in this book, female led companies are more likely to hit profitability faster, either sell or go public faster, and that means they’re delivering returns to their investors faster. They also are better at doing more with less. Women have less access to venture capital, so they grow their companies further with less capital. Maybe they’re not buying as many foosball tables or as many kegs of beer. So I think having that sort of fiscal responsibility and understanding that you have to be a little bit more cautious about how you spend your money because you won’t be able to go out and get another hundred million dollar check the way men can that is going to pay off in the long run. [01:17:03][104.4]
Dan Nathan: [01:17:04] Julia obviously can tell the guy and I are really excited for you with this new book here. We’re really enjoying reading it and we really hope that our listeners go out and buy it. But as a little bit of an incentive for the first 50 listeners who leave us a review of our podcast in the podcast store, you know the drill, take a screenshot of it, email it to Amanda at [email protected] with your address and we will send you a copy of this book. But if you’re not one of those 50, please go out there, buy it, read it, leave a review. [01:17:35][31.0]
Julia Boorstin: [01:17:35] Thank you so much, Dan and Guy. [01:17:37][1.8]
Guy Adami: [01:17:37] Really proud of Julia. I mean, sincerely and again, as one of the first people I met at the network, your career arc has been tremendous and what I would submit is the best is clearly yet to come. So congratulations on the book and we hope to see you soon. [01:17:50][13.1]
Julia Boorstin: [01:17:51] Thank you so much, Dan and Guy. Thank you both so much. You’re awesome. [01:17:54][2.9]
Guy Adami: [01:17:56] Thanks once again to CME Group and I connections for sponsoring this episode of On the Tape. If you like what you heard, make sure you hit, follow and leave us a review. It helps people find our show and we love hearing from you can also email us at on the tape at risk reversal. Dot com any time follow and connect with us on Twitter at on the tape pod and we’ll see you next time. [01:18:19][23.5]
Dan Nathan: [01:18:20] On the tape is a risk reversal media production. This podcast is for informational purposes only. All opinions expressed by me and Nathan Guy, Danny, Danny Moses and any other participants are solely our opinions and should not be relied upon for specific investment decisions. [01:18:20][0.0]
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