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On this episode of On The Tape Guy, Dan and Danny are joined by Mike Wilson, Chief Investment Officer and Chief US Equity Strategist for Morgan Stanley, to discuss his thought process on the market (4:43), how the S&P 500 could get to 3,000 (8:00), what’s happening with central banks (14:40), bank earnings kicking off next week (23:35), and what would make Mike bullish (30:35). Later, Cannabis advocate and operator Brady Cobb drops by to breakdown President Biden pardoning thousands of people convicted of marijuana possession and ordering review of federal pot laws (36:30).
And as always we want to hear your feedback. Please hit us with any comments at [email protected], and follow us at @OnTheTapePod. You can always tweet us individually @RiskReversal, @GuyAdami & @DMoses34.
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Show Transcript:
Guy Adami: [00:00:00] CME Ad. [00:00:01][0.4]
Dan Nathan: [00:01:19] iConnections Ad. Okay. Welcome to On the Table. I’m Dan Nathan. I’m here with D-Mo. Danny Moses. You know, the man, the myth, the legend. He was just called a legend by our guest right here, Mike Wilson, who is the head equity strategist at Morgan Stanley, also the CIO. Welcome back to On the Tape, Mike Wilson. [00:01:35][15.7]
Mike Wilson: [00:01:36] Great to see you guys. [00:01:36][0.4]
Danny Moses: [00:01:37] Mike, it’s almost like we can just leave now because everything you say I completely agree with. So we can just you know, I agree with everything this guy has been saying. [00:01:44][7.3]
Mike Wilson: [00:01:44] But now we got to put it on the tape right. [00:01:45][1.1]
Danny Moses: [00:01:46] I make this promise. If and when you do turn bullish, I will turn bullish with you. . [00:01:49][3.4]
Dan Nathan: [00:01:49] Really? [00:01:49][0.0]
Danny Moses: [00:01:49] At my word, yes. When he does it. [00:01:51][1.1]
Dan Nathan: [00:01:51] All of our listeners are waiting for that. All right. Well, you know who else is waiting? Guy Adami is in the, what tunnel AD the Lincoln Tunnel or the Holland, one of the tunnels. [00:01:59][8.1]
Danny Moses: [00:01:59] He doesn’t even know. [00:02:00][0.6]
Dan Nathan: [00:02:00] He doesn’t even know. But I will tell you, he’s probably fit to be tied. So he’s going to show up, hopefully in a little bit here. We’re going to get to it. All right. Mike Wilson, as Danny just said, not only do we think you are the best strategist on the street, both of us go way back with you, you and I, when you were in tech sales, you were working with our friend Billy back in the late nineties, and I was at a hedge fund. You were covering me and you were a stand out salesman. You went on to run equity research. You went on to be a strategists CIO now you have a lot of titles at Morgan Stanley. Talk to us about that. What, 25 year career at the same bank? That is unheard of generally, isn’t it? [00:02:34][34.1]
Mike Wilson: [00:02:35] 30 years, but who is counting, working on 31. But key to my success is that I move on before they figure out I’m useless. I get the next job, you know, create that new job. And they say, Oh, I forgot about that guy. And next jobs [00:02:44][9.6]
Dan Nathan: [00:02:45] Really, I don’t think that’s the cae. [00:02:46][0.4]
Mike Wilson: [00:02:46] Look it keeps it interesting. I mean, I never would’ve been able to stay at one place of work doing the same thing. I would go crazy. So like one hand, I’ve been extremely fortunate because they’ve given me that opportunity. I mean, they usually give me too much to do and then we just figure it out. So I’ve been fortunate, been a great place, been a hell of a ride, by the way, at Morgan Stanley and all the investment banks for the last 30 years. And it feels nice because I do feel like Morgan Stanley is in a really good position Now. [00:03:09][22.0]
Danny Moses: [00:03:09] I would say that you and I both started in the business same year, 1991. I started MBIA and Muni Bonds and then went to Oppenheimer. But because you’ve been there so long and Morgan Stanley has been so involved in everything, everything to do with capital markets and recently really build out retail. And retail has been a main focus obviously the last several years. You get to see a lot. And when you came in here, I told you that I know a lot of private wealth guys at Morgan Stanley. Yeah, they pay attention to other research, but really how they get paid is to take your research. You send out kind of make notes and send it to their clients. So you’ve seen a lot of things and I think go into your current viewpoint here. That’s why you’re just logical. People always say you’re bearish to me or you’re bearish. You just kind of logic that we’re going to have a reversion here like burn back through the atmosphere. I kind of call it here. We talk about your current mindset here, how you’re seeing things because like I just mentioned, I won’t go in it again. But you’ve dealt with companies on roadshows. You’ve dealt you’ve you’ve lived every life at Morgan Stanley. And I think that’s important for people to understand. You’re not just coming from nowhere. [00:04:05][55.6]
Mike Wilson: [00:04:06] Yeah, we call that’s a nice way of saying I’m old now. I’ve experienced it’s true I mean experience there’s no better teacher than experience. And living through these different cycles and periods and doing different jobs, you see these things so that when they pop up again, you recognize them. You say, Oh, I’ve seen that before and this is the way it usually plays out. We don’t get everything right, but we are familiar with these things. And I think you said it right, Danny. It’s just logic. We’re not trying to make some big, bold call necessarily, but when the logic is out of the markets have been illogical a lot in the last 15 years because of QE, the markets haven’t always traded logical and the last couple of years we’re actually reverting back to logic. Okay. Because they’re withdrawing some of this extraordinary policy and that normalization process. Okay. We’re just going back to normal, which is something we saw early because we’ve seen the way the world was pre QE, pre GFC, even pre tech bubble. And that process is painful, extracting heroin, if you will, from the patient. It has been a painful year. Now I think we’ll get through it. The patient will survive. Okay, but this bear market is not over yet. [00:05:02][56.7]
Dan Nathan: [00:05:03] So talk to us a little bit about your thought process, at least in Mike Wilson’s head, because there was a point in 2021 where you were very bullish. And we know that you come on with Guy and myself. You’re on CNBC a lot and you have a monday piece that like to Danny’s point is a very widely followed piece in the investment community, and there is a petering off of that bullishness at some point in kind of early 2021. And what were you seeing in the build up? You weren’t buying the transitory argument here. Did you see this inflation and Danny just the summer of 2021, he really started introducing the idea that we are going to be in a very stagflation area environment if a lot of the things that continue and are largely having to do with what the Fed was probably not acknowledging at the time. So talk to us how you changed your tune in 2021 and how did it feel being really on an island for a major bulge bracket strategis and it started out 2022, particularly bearish? [00:05:54][51.7]
Mike Wilson: [00:05:55] It’s really funny. I mean, we do get pegged to be perma bear, whatever and you know. [00:05:59][4.2]
Danny Moses: [00:05:59] Join the club. You should wear that with a badge of honor. [00:06:01][1.9]
Mike Wilson: [00:06:02] I mean, and many I mean, like I’m a fiduciary, right? So you got to tell it like it is. But the reality is, is that we were extremely bullish in 2020 for the same reasons we were bearish right so we saw the inflation coming, which when inflation is picking up, it’s extremely bullish for stocks. And people were slow to catch on to that. And is there’s this huge earning cycle that actually went even further than we expected. So to be fair, we probably got the train a little bit early. Okay. We left a little bit on the table at the end, but I’m okay with that, leaving the party a little early to make sure you don’t get taken away by the cops. And that’s what we did. So what we really saw in the spring of 2021 was that M2 growth peaked. Okay, we’re a cycle analyst. That’s all we do. We’re really dedicated to it. We understand it. [00:06:38][36.6]
Danny Moses: [00:06:38] It’s money supply for those people out there. Sorry. Go ahead. [00:06:40][1.9]
Mike Wilson: [00:06:40] Yeah, money supply, M2. And it’s not just the Fed’s balance sheet, but also the velocity in the economy. I actually think that most of the inflation is due to fiscal stimulus more than monetary. Now, monetary had its hand in it, but that was really the gravy. Yeah, that was that was wasn’t really the train that you paid for it. But we had em think about this. We had M2 growth in March at 21 of 25%. So anybody didn’t think that inflation was coming at. You mean it’s crazy, right? I mean, inflation is a monetary phenomena. M2 growth today is 2%. Now, if you recall going back to March of 21, that’s exactly when I crypto peaked SPACs IPO is all the hype on profitless companies. So that was the beginning of the bear market and we got like way out of the way of that stuff early and then it lingered and the market rotated around, went to quality and everything else, and we went full on defensive in November, almost a year ago, under the idea that it was this fire nice narrative, right, that the Fed was finally going to put out the fire. That was the first part of this year multiples got crushed for everything. But now what we have to deal with is the slow down the ice. Our out of consensus call now is on earnings. We think earnings are going to disappoint significantly even without a recession. The key point that we’re making with clients now and I don’t think it’s fully appreciated yet this goes back to experience is that operating leverage cuts both ways. So we had positive operating leverage when inflation was going up. Guess what? As inflation peaks, you actually get negative operating leverage because the costs are actually still increasing at a faster rate. So we’re just starting that process now. Last quarter was the first one. We started to see that degradation. This quarter, it’ll get worse. And what we don’t know the answer to yet is when will the market price where we think earnings are ultimately going? We think it’s sometime between basically this month and February. It could take two more quarters and we just don’t know. But the price point we know is too high still. [00:08:22][101.2]
Danny Moses: [00:08:22] So let’s stick with that for a second then I want to come back to something else. So if S&P earnings, I think your $212 for 2023 is at or. [00:08:29][6.9]
Mike Wilson: [00:08:29] 212 as our base case, but our base case is sort of one 190 95 and we’re leaning towards that. But that’s what we’re leaning in that direction. [00:08:36][6.4]
Danny Moses: [00:08:36] So lets call it 200. [00:08:36][0.0]
Mike Wilson: [00:08:37] 200 is the right number. [00:08:37][0.6]
Danny Moses: [00:08:38] Do you believe that within the year of 2023 that we will trough at some point, meaning what I’m trying to get at is and what that number would be? So we just think of a I know I read your research and I think a like a 14 to 15 type multiple on that number. We’re going to dance around the 3000 level on the S&P, but we tend to overshoot on the way up and we tend to overshoot on the way down. I think that’s what you’re talking about. But I want to get to is this you just nailed it on that. So there’s a large group of investors that have only known that the Fed has had your back for that matter. Global central banks have had their back. So they’ve never been tested to really go underneath the coverage and look at some of these companies. And you can punch people in the face all you want, but it takes earnings misses, earnings degradation, to actually put pen to paper. The stat skill set is certainly out there and there’s a lot of prefer that get it but that’s why I feel like we’re only in the second or third inning of that realization that you just touched on. When is the punch in the face? Is it this quarter that’s going to be reported now or is it where are we in that? [00:09:28][49.9]
Mike Wilson: [00:09:28] Well, first of all, we’ve already been punched and kicked in the face with the Fed. So on that note, I think the market actually gets a joke like I think rates are probably peaking now. The fence probably already gone too far. They probably know it, but they want to make sure they finish the job so they’ll go too far and we’ll have a probably a mild recession at some point. We’re 50/50 on it as a house, but it doesn’t really matter. The earnings are going to get smashed. Now, as you know, stocks will discount the earnings trough six months in advance. Our model, what I would suggest to you strongly is that the trough rate of change, which is what matters year over year growth in earnings, will happen sometime probably late second quarter, early third, which once again argues that maybe we bottom sometime between November and February. The market is really smart, it’s really dumb, and then it’s really smart. It’s really dumb because it doesn’t think forward it has to be told. It needs what I call the engraved invitation from companies to say, okay, take your numbers down and the market adjusts and that process usually happens at the end of the year. Just companies kind of kitchen sink at or at the beginning of the year when they’re forced to guide for the full year and then you get the full reset. That’s why the timing is kind of now. As far as the multiple goes and then how we get to 3000 is a little bit different in that because it won’t trough when the earnings trough. As I just said, it’ll trough when earnings are 30% of the way done going to its ultimate destination. This is where the market’s really smart. As soon as you’re 35% done with, it just knows that we’re 35% the way that that’s when the multiple bottoms and we’ve been using sort of 225 that’s the third of the move to 200 from 240, which was the peak. And we think it’s 13, 13 and a half. That’s your trough multiple, 13, 13, half times 225. That’s around 3000. I mean, can we be that precise? No. Is it a really good framework? Absolutely. [00:11:06][97.8]
Dan Nathan: [00:11:08] So, Mike, what’s it feel like being on an island as a strategist for one of the largest investment banks in the world? And just everything was coming your way with your fire and ice call. It was all happening. It was a large part, though. Your competitors, a lot of your major clients, the push back there, they just thought it was going to be something that was also going to be transitory. We’re going to have this sort of thing where we’re going to get back to buying the dip. And that’s what is it felt like that we’re literally through nine months of the year, we’re through three quarters. And almost everything that you were predicting, even though you were a little early in 2021, it’s all happening. So now all of a sudden we’re starting to see some of those perma bulls throw in the towel here and they’re going to probably get it right for that move back to like the low three thousands in the S&P 500. But people like Danny and me and Guy, we have long memories. [00:11:53][45.6]
Dan Nathan: [00:11:55] I’m glad to hear that. Well, thanks. That’s a nice way to recognize it. Some people don’t. Clients have recognized it. They’ve been great. We’ve helped them hopefully navigate this. Being on the island, to be quite honest, is exhausting because you’re always defending your position. But it’s no different being an investor, an investor here, a lot of times you’re having to defend your position in the market and the market’s not wrong. You’re wrong. So it’s it’s the same thing, the investment process and investment business if you’re committed, I tell it to somebody say if you’re really committed to this business as an investor, as somebody who’s trying to help investors or being adviser, and I kind of do both, it’s exhausting. And that’s just the life we’ve chosen. [00:12:28][33.8]
Dan Nathan: [00:12:29] Speaking of exhausting and then a godfather quote, Look who’s here, Guy Adami Guy Adami. Put your mic on. Look, we got Mike Wilson. I got Danny Moses. [00:12:37][7.7]
Danny Moses: [00:12:38] So, Guy, perfect timing. Have a seat. I was just about to get into the Fed, so it really was no reason for you to speak until this exact moment [00:12:43][5.5]
Dan Nathan: [00:12:44] But Mike Wilson just said. This is the business that we have chosen. He just said it. [00:12:49][5.1]
Guy Adami: [00:12:50] So I’m coming in late here. It’s first of all, it’s great to see what do they call it in real life Dan. [00:12:54][4.1]
Dan Nathan: [00:12:54] IRL in real life. [00:12:56][1.8]
Guy Adami: [00:12:56] In real life. Right. So Mike Wilson, IRL here, you know, I have the utmost respect for Mike, but so I’ve gotten this thing where I do song lyrics, right? And it comes to me in the car, by the way. Got in the car at 1:37 p.m. east coast time. Now this is first world problems don’t f’in @ me on twitter. I’m not interested in it. Okay it is now 316 as we’re doing this. You can do that math that’s a long ass trip. Shouldn’t take that long. [00:13:20][24.0]
Danny Moses: [00:13:21] Path train. [00:13:21][0.3]
Guy Adami: [00:13:22] Excuse me. [00:13:22][0.3]
Danny Moses: [00:13:23] Path train. [00:13:23][0.3]
Guy Adami: [00:13:24] Oh what do you just create a path train. You just make one up out of the blue like take your barber. Your barber? [00:13:28][4.4]
Danny Moses: [00:13:29] Mike, where do you live? [00:13:29][0.5]
Mike Wilson: [00:13:30] White Plains [00:13:30][0.0]
Danny Moses: [00:13:30] Okay, easy enough. 28 minute train. Nothing. Yeah. [00:13:32][2.1]
Guy Adami: [00:13:33] Fourth studio album from the mighty Van Halen was, you might remember. Fair warning. Right? Fair warning. Just keep that in mind. Danny Moses. Fair warning. At night I walked this stinking street pass the crazies on my block. Everybody thinks we’re nuts. They’ve thought that for a while. And I see the same old faces and I hear the same old talk. Listen to this. And I’m searching for the latest thing, a break in this routine. I’m talking some new kicks, some like you ain’t never seen. Now, why do I bring that up? Because we’ve been giving people fair warning, literally, since we started this thing. And there are mean streets. But for a guy like Mike Wilson and you talk about this all the time, Danny Moses and his job is never been in jeopardy. I’m not suggesting this, but to make the call that he’s made and bid steadfast on for the last at least year, if not longer, I mean, that puts you at some risk in a world where you can just fade into the ether with everybody else here buy the dip buying opportunity, all the bullshit you typically here because there’s no ramifications for being bullish and for being wrong. That’s what I would like to sort of add to this great conversation. I’m certain you already had. [00:14:43][70.1]
Danny Moses: [00:14:43] I would say that we use the word logic being logical, and that’s where we were in this exact process, talking about earnings degradation, where we’re going to hopefully trough and where that’s going to be and how I would give anything to be bullish and how when Mike does turn bullish, I promise to follow him. Even though in that episode I’m going to say, do you believe Mike turned bullish? Is he crazy? So I’ll just preview that now. But Mike, so let’s get into the Fed for a second. And it’s reliant because something big has been happening over the last well, last six months, but specifically in the last couple of weeks. Right. The heroin that you just reference was trying to come back a little bit, left the clinic. I promise I’m cured. Put the heroin back in RBA Reserve Bank in Australia goes 25 OO BOE comes in to undo the is a mess so it’s really interesting today at what the gilts are doing they’re having a massive move higher again why? Because the BOE didn’t buy anything the last couple of days even if the Fed stops which I think I want to hear your opinion. I know they’re overshooting. I believe their first move is going to be to stop QT because I believe that will settle the mortgage market a little bit. It may not, but the perception will be and it will settle the treasury market. And I’ll end with this because they have a lot of financing needs over in England and all of a sudden they’re going have these huge auctions coming in. The BOE only put this in place for basically a month, this kind of stopgap. Anyway, I want your thoughts on that addiction and then your thoughts specifically for Guy, especially about what the Fed is doing wrong right now. [00:15:59][75.5]
Mike Wilson: [00:15:59] Yeah. I mean, I’m actually not a big critic of the Fed because they have a tough job. They’re reactionary by design. So they’re always going I mean, they’re looking at unemployment data and they’re looking at inflation data, which is backward looking. So they’re always going to be late to start in late to finish, but that’s by design. So I don’t really disparage the sort of central banks once again, I think fiscal policy was the real reason we got this blowout inflation because, look. That’s the difference between the GFC and today. The only difference between the two periods was that we didn’t actually put the money into the economy. That’s what got the inflation going. That’s the thing that people I think don’t appreciate. But the reality is, is that what’s going on right now is M2 growth is now negative on a global basis. Okay, so whenever that happens, stuff breaks. UK market, gilt market was the first thing kind of big one where we got the first major bank to reverse course. So as I wrote this weekend, is this the light at the end of the tunnel? Meaning has the reversal process began? Yes. The BOE is reversing RBA only did 25. Polish National Bank only did zero. So they’re starting. But it doesn’t matter because the only. [00:16:55][55.9]
Dan Nathan: [00:16:56] How many bankers did it take to do that. [00:16:57][0.6]
Mike Wilson: [00:16:57] Probably more than it should. But the reality is, is that the Fed is the only central bank in the world they can actually print the dollars. We’re short dollars. That’s what’s going on right now. It’s a global phenomena and the Fed will eventually have to pivot. So I totally agree with you, Danny. It’s going to be they stop QT. They’re not going to cut rates that much. They’re going to tap cut because that’s the problem. And they’ll probably have to do QE at some point, not tomorrow. Is it a hope trade for now? But it’s the right idea. I just think it’s too early. [00:17:25][27.2]
Danny Moses: [00:17:25] Right. And where the market is valued right now, it’s not right. It doesn’t make sense regardless. So there’s a lot more to come before, right? [00:17:30][5.1]
Mike Wilson: [00:17:30] Well, not just that, but like the Fed really shouldn’t be pivoting yet because we haven’t had a financial accident that really has big enough for them to care about this. Number one, it has to be closer to home. And secondly, the jobs market is still booming and CPI is still too high. So they have to keep going to regain their credibility. [00:17:46][15.9]
Guy Adami: [00:17:47] One of the things that I posit is for the first time in a while and I may be 100% wrong, but this Federal Reserve seemed laser focused on the stock market for years, to their detriment. By the way, this one doesn’t seem to be nearly as concerned. So for me, I don’t think they start thinking about reversing course. And so the S&P somewhere around 3000 ish, that to me is sort of if there’s a put that’s where it is in terms of unemployment. They want it to go higher. So they’re hoping the number goes up. The thing that’s going to spook them again, my opinion is the credit market or the credit markets, they’re showing cracks. You do much more thoughtful work than I. But can you speak to that? Because if the credit markets start to go, then all bets are off with this entire thing. [00:18:30][42.7]
Mike Wilson: [00:18:30] Totally. So let’s look at the last two times they pivoted in 2019, there was a funding markets. They had the reverse repo operations that was sort of a new facility that now is permanent. So they have that ability to do some of that stuff. Again, that’s why those markets are actually quite stable. Still still still for now. And the other one was in December of 18 when the credit markets, the funding markets in the longer term and also the year end constraint from the banks really forced their hand. So I totally agree. And that’s our house view as well. It’s usually the credit markets they care about. The S&P could trade 2500 if credit markets are still okay. I mean, that’s the reality. I mean, I think when we get to 3000, if we get there, other things will be happening that really flips their hand. And it could be labor or it could be credit markets. But you’re spot on. It’s something in the markets that inhibits the functioning nature of the economy. That’s what the Fed will care about. [00:19:18][47.6]
Guy Adami: [00:19:18] It’s interesting you mentioned the repo and I’m not looking to get in the weeds here. I’m not looking to make people’s eyes glaze over. But in September, I think it was the 17th, Danny probably knows the exact date, 2019. So before anybody even heard of COVID, if you remember, Danny, the overnight repo market blew up. [00:19:35][16.9]
Danny Moses: [00:19:35] I talked about it while you were in Italy a couple of weeks ago. That exact thing exactly right. [00:19:38][2.4]
Guy Adami: [00:19:38] So that to me now people will blame COVID. I get it. Causality of the whole thing. But we started talking about that and say, hey, folks, look under the hood because something happened here that I haven’t seen in a long time. So to your point about the overnight repo markets, that’s to me and I’m glad you brought it up because I think that’s a vital importance. [00:19:56][18.6]
Danny Moses: [00:19:57] So to Mike, let me just echo Mike’s point. So what’s happening is for people out there again to explain you pull money out of banks because you’re not earning anything on your deposit, you can park it. Banks can’t use the reverse repo. Right. So everybody else that kind of comes in, they’re intermediaries. When you drain deposits from the banks, they can’t lend as much because of ratios or all, of course. So I think a lot of mini breaks and we’ve had, I don’t know, 22,000 bond market flash crashes globally in the last six months. I mean, the flash crash we were all crazed on years ago was from 222 to 176 or something in a period of 5 minutes. We have that in minutes now. I mean, today, just in England anyway. Yeah. So your thoughts on that because we do have many little breaks, but I don’t have faith that Powell or The Fed even understands what they’re looking at, to be honest with you, Mike. [00:20:37][39.9]
Mike Wilson: [00:20:37] Yeah, I mean, like it once again, I’m not in the weeds on Fed policy. I’m not in the business of besmirching them because there’s a lot of other things going on that we can analyze, like earnings, like the economic cycle, like valuations that are still out of bounds. I mean, we’re heading in that direction, right? So like it or not, the Fed is doing their job now. I mean, it’s funny, like a year ago I was like going, Oh, why aren’t they raising, they are complaining that the Fed wasn’t doing their job. Now they’re doing their job and they’re complaining about that. So I find investors to be a little bit more. They complain too much about like, look, they’re just doing their job. So the flash crashes and things like that, yeah, we’re seeing these little pop ups, but none of them are big enough for the Fed to change course. And there will eventually we worry about this. There will eventually be something if they stay this course. So I told you before I give you some numbers. We look at global M2 in dollars that peaked at 87 trillion in March. It’s now 83 trillion. So it’s down for trend. It’s a lot of money and there’s a lot of reasons for that. It’s not just the fact that the Fed’s tightening or other central banks are tightening. It’s that there’s regulatory squeeze, there’s less velocity in the real economy, i.e. housing and things like that. So everything’s kind of coming in, in a way where M2 in dollars is negative on a year over year basis. If we go further negative, there is going to be an either economic or financial accident that will change their course. That should be in the next 3 to 6 months if all stays the same. What I don’t know the answer to and it’s probably some, you know, better than I do. The plumbing now has been changed. They’ve created so many facilities right where they can get dollars into the economy in other ways besides the traditional QE process. And that is an area where we could be kind of fooled, where they’re doing something that is not necessarily fully transparent. I don’t know.The answer to that is more of a conspiracy theory. [00:22:20][102.9]
Danny Moses: [00:22:21] That’ll be the SLR adjustment. [00:22:22][0.9]
Mike Wilson: [00:22:22] Okay. [00:22:22][0.0]
Danny Moses: [00:22:23] Where they allow the initial treasuries and not have all the capital requirements that they need, that will be what they will do. When you see that people are going to extrapolate that into Fed tier, the chance of doing that, that might indeed happen. But. Jamie Dimon, next week we can talk about Jp morgan, not Morgan Stanley here, but you’re going to hear, I think, one of the greatest earning calls in history that’s going to encompass everything. And one of the things I think. [00:22:42][19.2]
Dan Nathan: [00:22:42] Or you won’t. What do you mean, like greatest as far as like. [00:22:44][2.4]
Danny Moses: [00:22:46] No like greatest hits. It’s going to be his greatest theatre [00:22:46][0.7]
Guy Adami: [00:22:47] Theatre [00:22:47][0.0]
Danny Moses: [00:22:48] And what I was going to say then was that if you’re the CEO of a publicly traded company and you just mentioned make people give year ends and only time to recalibrate, what do you do? Especially if you have a balance sheet, especially you have to refinance debt, especially, you know, use commercial paper market, whatever it might be. That’s where the instability, it’s not just in the plumbing and that’s fine, that’s temporary. But that’s, I think, is very frustrating for I wouldn’t say that the Fed’s not transparent. I would say that they’re just overshooting it. So you got to play that game as a CEO. And I think a lot of we’re going to try to send a message during earnings season to the Fed. [00:23:18][29.5]
Mike Wilson: [00:23:19] Well, look, I mean, I think they’re getting what they want. I mean, they’re getting an economic slowdown, probably not as fast as they want, but you have to break this thing out. Right. So the labor market is still red hot. Housing market is a standstill. The car market now is basically coming to a standstill. These are two really important markets. I agree. And that’s a shipping market. Cost of inventory. Inventory has ballooned and this is all permutations of what happened during COVID, the lockdowns and then the supply chain issues and the logistical problems. This is a lot to absorb for an economy in a short period of time. So things are going to break. We think ultimately it turns into real earnings problems. We talked about that. We think earnings are way too high and there’s a lot of reasons. Okay. It’s not just a typical economic recession. There’s all this financialization which has to come out of the economy. [00:24:02][43.1]
Dan Nathan: [00:24:02] All right. So next Thursday and Friday, we get Q3 earnings season kicked off. We’re going to have Citi, Wells Fargo, Morgan Stanley, Jp morgan. So probably 50% of the XLF starts reporting. And we all know this. We’ve been doing this a long time. Sometimes the way the market trades into the beginning of the earnings cycle and some of the things that we’ve seen, Jp morgan gapped down three or 4% after its results and everyone feels like this is going to be one of those long earnings periods and then all of a sudden you get to that week and a half later when all the megacap techs are reporting and it just has a different feel to it. How do you think this is going to go? Because, again, we know that a lot of these companies that are going to be reporting that are dictating the course of that earnings that you’re expecting to be declining next year in 2023, they got a lot of dollar exposure. They got a lot of fixed costs that are really being impacted by input costs and the ability to continue to pass them on, whether it be the consumer, we’ve seen peak margins. How does this shake out in Q3 earnings season? Are we going to see a meaningful downgrade to Q4 estimates? And then will that be extrapolated out to 2023 earnings because you’re one of the only guys calling for it right now? [00:25:07][64.4]
Mike Wilson: [00:25:08] Yeah, I think people have power that no, I do feel like it’s getting a little more crowded in the room on the earnings story. I don’t think they’ve had the precision that we have necessarily the confidence. But here’s where I have confidence. Here’s where I don’t know. Well, first of all, the leading revision factors are telling us that the fourth quarter is going to come down pretty hard. What I don’t know is will people extrapolate that into 23? I think if you get enough companies polling guidance, that’ll freak people out or they may guide Q4 down enough on the top line where you’d have to extrapolate or you lose all credibility as an analyst. So I think it’s a 50/50 on that. But the market should be clear. The market won’t go down hard too. My targets on the downside until the forward numbers come down in a more meaningful way. And that’s the missing part. So there’s a higher chance it happens now than it did 2Q Because we’re close to the end of the year, it may need to bleed into the January reporting season. [00:25:56][48.4]
Danny Moses: [00:25:57] I’ve always said that the banks forget about owning long, short the banks in general. I want to talk about that. But the banks have been the key to all this because we have such a financialized global economy, as you just mentioned before, it’s so much debt and it’s so crucial that people pay attention not just to Jamie Dimon, but to all these quarters, because we know the write downs that are occurring in the debt markets, we know these deals that are hung. We know or people are now realizing that the M&A market lives off of debt because you have to finance these deals. And you’re seeing right before our eyes Citrix and some of these things get repriced and Twitter and stuff. So to me, that’s my takeaway next week. And whether or not you own these stocks or not, you have to pay attention to what they’re saying because to me, they’re going to tell you what is their industrial loan book. You know, are they growing their CNI loan, as we call it, personal loans? What do delinquencies look like to the consumer? To me, it tells you everything. And having been trained in financials, you can extrapolate that and take to all all the other sectors. [00:26:44][47.7]
Guy Adami: [00:26:45] You alluded to some this is a human being question. And I know the way I’m wired and I’m obviously not a normal person, which I. [00:26:51][6.4]
Danny Moses: [00:26:51] Thats a good thing. That’s why we’re friends [00:26:52][1.0]
Guy Adami: [00:26:52] Exactly. I happen to think it’s a good thing as well. But as I mentioned when I came in, you were on that island pretty much by yourself in terms of this call that’s coming to fruition. You just alluded to the fact that the room is getting a little more crowded. On a certain level I think you feel there’s a vindication. The market is created that vindication, and now people coming around to your way of thinking has done as well. But does it scare you now? Do you look at this and say, holy shit, now everybody’s thinking the way I am. Maybe I got to do another deep dive and say, maybe this is getting long in the tooth because I know that’s how my brain works. [00:27:27][34.2]
Mike Wilson: [00:27:27] Yeah. I mean, we always were paranoid schizophrenic. Like I said before, in this business, you have to be. And yeah, it’s getting more credit. We don’t like that. However, our fundamental work, we’re getting more confident that we’re so far out of bounds on the earnings estimates that we’re going to trust that work. Once again, I go back to the timing. I don’t know if it’s this quarter of next quarter, but at 3800 3900, the risk reward is pretty poor at the index level. One thing I want to just spend a second on, because, you know, we have some guys who do good work on this. So in September, obviously were down 10% in the S&P and some stocks are much worse. We’re September. We’ve seen, you know, a long time. And we basically saw some of the asset owner community retail and specifically and the CTAs sell out. So I’ll give you some rough numbers. So the CTAs, we think, sold $75 billion worth of equities. It’s a huge number. Okay. And they’re not quite as. [00:28:12][45.0]
Danny Moses: [00:28:12] Can you explain to our audience what those are CTAs. [00:28:14][1.5]
Mike Wilson: [00:28:14] CTAs are just trend following momentum players, you know, usually. [00:28:17][3.0]
Danny Moses: [00:28:18] And they’re levered and they normally lever. [00:28:19][1.0]
Mike Wilson: [00:28:19] That levered and they only buy basically S&P futures, NASDAQ futures, maybe Russell futures or they’ll buy other futures. And just to put it in context, they’re not as underweight equity exposure as they were in June, but they’re close. So there’s a lot of buying power that can come back if the market just hangs around for two or three weeks, which is possible because while I agree the financial sort of companies are important, but the market really will tank is the tech names. It’ll tank when those guys finally give it up because that’s the bulk of the earnings. That’s what people really care about. And we won’t know that for three weeks. The market could kind of drift higher as that buying power kind of comes in. That’s where I get nervous, but that’s where we have a great team of people who can tell me, Look, this is more tactical. Our fundamental view is still not played out yet. And that’s why we have this risk reward framework where we say, look, it’s just not attractive at 3800. [00:29:06][47.0]
Danny Moses: [00:29:07] Mike, I think it’s important to point out the CTAs, we’ve talked about the leverage in the system and all of a sudden you’re six, seven times levered, you’re borrowing at zero and then you’re six or seven times levered, borrowing it 4 to 5%. The tap on the shoulder that we all know, the famous Wall Street tap on the shoulder that Guy might get and trading energy or whatever it might be. But that to me, that’s not coming back. That leverage isn’t coming back anytime soon. You’re right in the sense of the exposure. But I’m curious your thought on that, because I don’t think they’re going to be ramping that back up with rates where they are now. [00:29:34][26.8]
Mike Wilson: [00:29:34] No, they’re not going back to where they were, say, at the end of last year. Right. They can’t. See your point is rates are much higher. Their cost of capital, they’re not going to be allowed to. But they could they could buy back to 75. That’s a decent number. And then it kind of builds on itself. So I’ll say this and we’ve talked about in our pod we did this morning. [00:29:49][15.2]
Dan Nathan: [00:29:50] Give it a shout out. What’s it called? [00:29:51][0.9]
Mike Wilson: [00:29:52] It’s called Equities Unplugged. [00:29:53][1.6]
Dan Nathan: [00:29:54] All right, you guys smash your subscribe buttons for Equities Unplugged Mike Wilson. [00:29:56][2.5]
Guy Adami: [00:29:58] You said smash. [00:29:58][-0.0]
Dan Nathan: [00:29:59] Crush that thing. [00:29:59][0.0]
Mike Wilson: [00:30:00] Once every two weeks. [00:30:01][0.4]
Danny Moses: [00:30:01] Once every two weeks. All right. [00:30:02][1.0]
Dan Nathan: [00:30:02] So should we do a home and away? Absolutely. What you want to do? The on the tape bears [00:30:05][2.8]
Guy Adami: [00:30:06] Morgan Stanley does not want us. [00:30:08][1.1]
Dan Nathan: [00:30:08] They would kick our ass so quickly. [00:30:10][2.4]
Mike Wilson: [00:30:10] There wouldn’t be anything out of it it’d be all censored. [00:30:10][0.1]
Dan Nathan: [00:30:12] So the bleep, bleep, bleep, fed, bleep, bleep. Listen, we only have a couple of minutes left. And one of the things that I just going to say, Guy and I, Guy you’ve been doing fast money for, what, 27 years? [00:30:20][8.8]
Guy Adami: [00:30:21] It’ll be 27 years next week. [00:30:23][2.2]
Dan Nathan: [00:30:24] Yeah. And I’ve been doing it for ten. Is there a better thing in our A Block when, you know, Mel comes to us, we’re like just talking this and that or whatever. And then a guest like Mike Wilson comes on and he’ll just roll in and be like, you know, Dan made a really good point. That Guy just kind of nailed that. Is there a better fast money gas than Mike Wilson, who will just give you a shout out? Right fair enough [00:30:42][18.3]
Guy Adami: [00:30:43] And it’s it’s funny is what you don’t see on camera is if Mike were to do that or anybody would do especially with me, I will flex. I will all be pointed point at myself, like look at the big brain on Guy. So listen Mike you know, the way we feel about you, that’s why you’re here before you run out of here. They’re all different metrics that you look at and there are a lot of inputs to this thing. Is there one thing that’s going to turn that you’re going to say, All right, guys and gals, we might start thinking about turning this boat around. [00:31:11][27.5]
Mike Wilson: [00:31:11] Yeah, it’s easy for us. I mean, we want to see those numbers down about 225 on a forward basis. We want to see equity risk premium at least close to 400. Quite frankly. I mean, I’d like to see the PMI is closer to 45. Those are the things we’ve really been highlighting for folks were pretty disciplined in that. It doesn’t mean that, you know, markets can overshoot on the upside. Tactical trade, perhaps the next couple of weeks. We’re trying to stay true to our work and we tend to be early as we were always right. Early is wrong sometimes, but it’s unlikely we’re going to be late. [00:31:38][26.3]
Dan Nathan: [00:31:38] Did you get nervous this summer that the nearly 20% rally in the S&P 500 from the June lows to the mid-August highs, does its price sometimes make you rethink a little bit your thesis? [00:31:48][10.1]
Mike Wilson: [00:31:49] Of course. Now, I will tell you this. I was much more nervous in March when we got back above the 200 day moving average, and we hadn’t really started the earnings revision cycle yet. And I thought, oh man, this is still some gas in the tank. The reason I wasn’t nervous this summer is because our revision date had already plummeted. So I was like, this sink can run. It maybe goes to 200 day and then literally stopped the 200 day to the penny. It was amazing tactical. Like if you were starting a tactical analysis class, just pull that chart. [00:32:12][23.3]
Dan Nathan: [00:32:13] Carter Braxton Worth, Worth Charting. [00:32:13][0.4]
Danny Moses: [00:32:14] And Mike I want to end with this because I think you hit on something. I don’t try to think about where the market is off of its highs. I look at it on a bottom up kind of basis. And I am still to this day, I’ll never understand Q4 2021 that run from 43 or 4400 to 4800. I like to take that and just mark it off and use kind of 43, 4400 as the rational beginning point. Do you concur with that? I still think we. [00:32:33][19.1]
Mike Wilson: [00:32:34] Totally, We overshot to the upside by 400 points. It was exactly our number, 4400 now. But markets overshoot and we got laced in the press. I mean, rightly so. Like, oh, this guy’s an idiot. And, you know, it was true. We missed 400 points. [00:32:43][9.6]
Dan Nathan: [00:32:44] Not our press. [00:32:44][0.6]
Guy Adami: [00:32:45] There was a seasonality thing going on. [00:32:46][0.4]
Mike Wilson: [00:32:46] But to Danny’s point it is important because what it means is that we always overshoot fair value both on the up and the down. Now, it’s interesting, the markets are rounding tops and they’re usually spike bottoms. So when we go, if we are the low 3000, we ain’t gonna spend much time down there. [00:33:01][15.1]
Danny Moses: [00:33:02] Yeah, I’m with you. [00:33:02][0.6]
Dan Nathan: [00:33:02] We’re all going to nail the bottom together. Yeah. Okay, we’re set right here on the tape. [00:33:05][3.0]
Danny Moses: [00:33:06] Remind me, when I say when Mike turns, I try and when I don’t punch me in the face. [00:33:08][2.7]
Dan Nathan: [00:33:09] And sincerely, I think the listener can tell how much respect we do have for Mike Wilson. We’ve all known him for a very long time, both professionally through the media and obviously we are so glad to have you join us on the tape. We hope you’ll come back really soon Mike [00:33:20][11.0]
Mike Wilson: [00:33:20] Really appreciate it. Thanks. [00:33:20][0.8]
Dan Nathan: [00:33:21] Stick around, everybody. We got a lot more. We got D-Mos picks. We got a whole. [00:33:24][3.8]
Danny Moses: [00:33:25] There’s some big cannabis news that came out. [00:33:26][1.2]
Guy Adami: [00:33:26] I was showing you that. [00:33:27][1.6]
Dan Nathan: [00:33:28] Stick around. [00:33:28][0.3]
Guy Adami: [00:33:32] CME Ad [00:33:33][1.0]
Dan Nathan: [00:34:56] iConnections Ad. Masterworks Ad. [00:34:56][0.0]
Guy Adami: [00:35:55] All right, we’re back. It is great to have Mike Wilson in real life. [00:35:58][2.9]
Dan Nathan: [00:35:58] IRL. [00:35:58][0.0]
Guy Adami: [00:35:59] Love that see I learn these things. When they say their other lines are those letters, they use that lol law that means laughing out loud. Whatever. I mean, it’s just dumb if just say it. It’s nice having him in real life. And obviously we admire not only him as a person, but his work has been extraordinary. And he said typically early is wrong in our business. Well, he happened to be early and spot on, so it was real pleasure having him. And by the way, I didn’t realize, Dan, this was a call in show, but in a few minutes, we’re going to get a call in from that great linebacker from Florida State University. Brady Cobb Because there is groundbreaking new. [00:36:38][39.0]
Danny Moses: [00:36:39] Groundbreaking it really it is. [00:36:41][1.6]
Guy Adami: [00:36:41] In the cannabis space. [00:36:42][0.7]
Danny Moses: [00:36:42] Truly is. He’s going to call in [00:36:43][1.2]
Guy Adami: [00:36:44] He’s going to call in. But Danny before he gets on, I mean, I don’t this seemingly came out of the blue I didn’t know about. Well, obviously. So what’s the news? [00:36:50][6.2]
Danny Moses: [00:36:50] Brady’s been tweeting this for several months, but even earlier this week, something was brewing in Washington. There was some weird news. There was like appointed a person to the FDA that understood marijuana reform from state of New York. There was a lot of chatter that Cory Booker, who wanted all these social reforms, Sherrod Brown, one of these shows reforms as it relates to cannabis offenses. And so he can only do stuff on the federal level. BIDEN So basically, and this is in real time, we’re going to get Brady on to explain it better. But he’s basically pardoning anyone on the federal level for possessing marijuana. That’s one and two. He’s imploring at the state level to do the same. And then they’re also directing the HHS Department of Health and Human Services to basically look at descheduling the drug. So for those out there, the reason that you can’t bank cannabis is because it’s a, quote, schedule one drug like cocaine. I mean, fentanyl is not schedule one. Let’s just be clear. If you go to schedule two, it’s not money laundering. Banks can start to do it. So anyway, this is the step we were waiting for safe banking. I’m going to imagine Brady’s about to say this is one step bigger. [00:37:50][59.7]
Guy Adami: [00:37:51] There are many sexy men out there. There are many sexy, smart men out there. There are many sexy, smart men with colored histories. There are many sexy, smart men with color histories who played linebacker at Florida State. And then there’s Brady Cobb. There you go. What is going on man? [00:38:07][16.4]
Brady Cobb: [00:38:08] Gentleman [00:38:08][0.0]
Danny Moses: [00:38:08] Brady, I just butchered. I think I was trying to explain because I literally read your text to me when it happened and we were recording something else. So take it from the top. What just happened? What does it mean and where do we go? [00:38:20][11.8]
Brady Cobb: [00:38:21] Yeah, so President Biden just did what he promised to do on the campaign trail, which I’ve given him a lot of shit for taking too long. But he just held a press conference where he said he’s signing executive orders. The first one will be to pardon anybody that has a federal possession charge for cannabis, which is around 6600 people, which I can’t tell you the impact of that for those people’s lives. Weldon Angelos, who I serve on his board at the Weldon Angelos project, has been advocating for that alongside so many others. It’s massive. The second thing that he did that I can’t overstate how important it is, is he has ordered the Department of Health and Human Services to conduct a review on the scheduling of cannabis, meaning it should not be scheduled where it is. And he actually referenced the fact that cannabis is scheduled next to LSD and heroin on schedule one and actually fentanyl is on schedule two, which is ludicrous. And he noted correctly that that is something that this country is dealing with from an overdose standpoint. Cannabis should not be there. So those two steps, I can’t explain to you how massive they are. The first one is long overdue peace of social justice reform should have happened quite some time ago, and it sets the precedent and makes the passage of safe banking that much more likely in the lame duck because it’s a social justice piece that we can check off, because that’s the one complaint from the more liberal side of the Democratic Party is safe banking doesn’t do enough for social justice. The second piece is an absolute showstopper for the cannabis industry, because if cannabis were to be rescheduled, say it’s a schedule three, it’s not going to go to schedule two. Based on the president’s own press release, where he says schedule two is where fentanyl is. It’ll go something lower than schedule three. And you guys are the market masters. You can tell me that there’s plenty of companies that sell schedule three and below drugs that are listed on U.S. exchanges. So put your chinstrap on. [00:40:09][108.3]
Danny Moses: [00:40:10] So, Brady, let’s talk about what that actually means. So safe banking, everyone was focused on this supersedes that. But let’s talk about the states for a second. So he’s imploring the states to follow his lead. And then I don’t think there’s going to be federal legalization, which we don’t need to have all these things occur. Can you explain the difference? I know he’s importing the states. And I want to say one other thing. You’re being humble and modest in this. You’ve been very involved for years in this. And it always happens not when you least expect it, because you were expecting it at some point, but happened. And it was the Republicans who finally came around and I think forced the hand of the Democrats because they were stealing the issue from them. To your point, you made it Biden when he was running for president, this was one of his things he was standing on and he never did anything until now. So I know those are like three questions and things I just mentioned in there, but can you just address those? [00:40:55][45.0]
Brady Cobb: [00:40:55] Yeah. So the federal government doesn’t have the power to effectuate changes with respect to state law and state convictions, but in signing an executive order that employers, the state governors to also issue pardons or sentence commutations for people with marijuana possession charges, which is, again, massive. And it’s one of the things I would note on that piece is I’ve been working with Representative Dave Joyce, one of the leading Republicans in the U.S. House, and Dave actually crafted a bill that I helped work on the framework of probably four years ago called the Hope Act, which would provide federal funds for the states to process expungements. And that’s the bill that’s been talked about the most that would be combined with safe banking in the lame duck. So again, it makes everything the pieces are. It’s been a long, miserable walk in the dark. The sector has gotten pounded, there’s been no hope and it’s abolished and said it’s going to be a catalyst. And when it happens, watch out and the pieces are starting to come together. This is the day that I’ve been waiting my entire life for with everything my father went through. [00:41:52][56.5]
Danny Moses: [00:41:52] It’s been 50 years. [00:41:53][0.6]
Brady Cobb: [00:41:53] And by the way, not to say anything special, but I put a tweet out on Monday saying, Keep an eye on DC this week. And I got a lot of hate back saying The Boy Who Cried Wolf. So it’s finally nice to get one right. [00:42:04][11.1]
Dan Nathan: [00:42:05] So suck at Twitter. [00:42:05][0.7]
Brady Cobb: [00:42:06] Yeah, exactly. [00:42:06][0.2]
Danny Moses: [00:42:07] But Brady, it’s good. So hopefully I mean, this is a this is a big moment. Forget about the stocks. Honestly, I’m not even thinking about the stocks right now either. This is 50 years in the making, undoing Nixon’s policies and all the things that have gone on. This is a major win for everybody, and I just would not take that lightly. [00:42:22][14.7]
Guy Adami: [00:42:22] So Brady hits me here. Guy Adami speaking. Big fan, as you know this to me now, all these companies have been waiting patiently on the sideline, all the big cap pharma names, all the beverage names. My sense is the M&A landscape is going to change considerably over the next few months. But am I looking at this correctly? [00:42:41][18.7]
Brady Cobb: [00:42:42] Yeah, you’re looking at this correctly. I want to focus on industries that I think will be the first movers to come in and pull the trigger. It’ll be alcohol. I mean, there already is there’s been a huge push in DC from a lobby standpoint. Alcohol’s gotten behind it because they see the threat. They can’t let seltzer happen again. Seltzer went and took a 50 60 share points off of Bud Light and they can’t let it happen again. Cannabis presents a real threat to alcohol from a quality assurance stomach standpoint. And by the way, alcohol has been lobbying. If you saw Nancy Mace, Bill, the States Reform Act, that bill is largely set up in the same way that alcohol is currently distributed, which is state by state on a three tiered distribution system. I firmly believe cannabis will ultimately be regulated the same way state by state after the rescheduling occurs. So I would be focused on alcohol and tobacco in the short term. I think far more will come later. [00:43:28][46.2]
Danny Moses: [00:43:29] Really amazing. Brady I know we’ll have a lot to catch up on later, but timing wise, honestly, we’re in the studio and to get you on the phone and get your thoughts is tremendous and congrats on all the work you’ve done. I know there’s still a lot of work to do in the sector. [00:43:40][10.8]
Dan Nathan: [00:43:41] Yeah, I just want to say one thing. You know, I’ve gotten to know Brady through Danny as Guy has over the last what, year, year and a half. You’ve been so generous coming on the pod and really giving not only just your take on what you just did here about just from a legislative standpoint, from an investment standpoint, you alluded to something that I think if any of you guys and I know Danny, you know this in and out, Brady, you just said this is something you’ve been waiting for 50 years is very personal to you. And so hopefully, I think your guidance for a lot of people, including us on this topic, is really important and we thank you for it. So everybody listening, go Google Brady Cobb and. [00:44:13][32.2]
Danny Moses: [00:44:13] Follow him on twitter. [00:44:13][0.0]
Dan Nathan: [00:44:14] Fascinating life story associated with this topic so check yeah. [00:44:19][5.4]
Danny Moses: [00:44:19] There’s something called sunburn that he started recently so right out there anyway. Brady, you the man? I’ll call you in a bit. [00:44:24][4.7]
Brady Cobb: [00:44:25] Thanks, guys. [00:44:25][0.3]
Guy Adami: [00:44:26] Love Brady Cobb. And listen, Constellation Brands obviously is way ahead of the curve. But something happened literally today. They say if it wasn’t for bad timing, I’d have no timing at all. [00:44:35][8.9]
Danny Moses: [00:44:35] Exactly. So they made a multibillion dollar investment in canopy. Years ago. Costs a lot of people have jobs I think it constellation their whole idea is that we cannot let seltzer happen again to the alcohol industry. What they did when they came in and made all these seltzers and stuff. And so thc beverages is what their mindset is. Well, just this morning they wrote down, I think, $1,000,000,000 of their investment in Canopy because obviously they have to start writing it down. Well, maybe tomorrow morning. [00:44:59][23.2]
Dan Nathan: [00:45:00] Can we talk about this seltzer thing. And when we were in high school in Colorado, we were like, oh, hold on a second. We were crushing the worst canned beer you know, walkies best all that’s the kids today. You see them, they have these slim cans. They look too slick. It’s all I see. Guy ahve you seen these, the nooners and all this stuff. That Trulys. It’s horrible. [00:45:19][19.4]
Danny Moses: [00:45:20] In my son’s apartment refrigerator. [00:45:21][1.7]
Dan Nathan: [00:45:22] Ha! It’s embarrassing. [00:45:22][0.4]
Danny Moses: [00:45:23] They had natural light. [00:45:24][0.7]
Dan Nathan: [00:45:24] Okay, so you felt this guy. Okay, anyway, natty light. Right now. What was your crap beer. [00:45:29][5.4]
Guy Adami: [00:45:30] Stroh’s on tap at the tomb hows that for you Georgetown people out there [00:45:32][2.3]
Danny Moses: [00:45:33] Yeah. Had it to. Exactly. [00:45:34][0.9]
Dan Nathan: [00:45:34] All right, what are we doing? [00:45:35][0.7]
Danny Moses: [00:45:35] They’ll have THC in it. [00:45:36][0.8]
Dan Nathan: [00:45:36] So, Danny, what are we doing? What are we doing? When are we going to get your guys? And what do we just shout it? Listen, guys, if you’re listening to this and you like what we do, but you also like what Danny does with Vinny and Porter and the whole idea of, what are we doing? Will you please tweeted that we’re going to get them on the mic? [00:45:51][14.3]
Danny Moses: [00:45:51] I was driving to Boston the other day and Brady had. Posted this and I didn’t really talk about it, but we got invited to speak at Harvard Business School. Harvard looks good now. We just had Brady speak in their entrepreneurial class two days ago, and I’m driving in the car going up to meet Brady in Boston, and I get on the phone with an importer, one of the phone for 22 minutes just shooting this shit. And I go, guys, how would you not just record this? It was just a back and forth of like, what are we doing there? Talk about energy. We were talking about rates, we were talking about Tesla, we were talking and everything. And so they’ll do it. We’ll get them on. It’s happening. You know, we’ve got they’re making too much money I can’t pull them off the street. [00:46:21][30.4]
Dan Nathan: [00:46:22] Alright. So we’ve got an action packed show here. Guy came in mid Mike Wilson we had Brady just dialing in. We got a call in show here. What else are we going to do? As you’re listening to this, we will already have known the September jobs report. Okay. How important. Okay, guys, that’s a great topic. Okay. Let’s talk about. [00:46:39][16.9]
Danny Moses: [00:46:39] So you could give me the number right now. [00:46:40][1.6]
Dan Nathan: [00:46:41] Wouldn’t know what to do. [00:46:41][0.5]
Danny Moses: [00:46:41] So the estimate is 270 275. You could hand me 350 I’ll make a bullish and bearish argument. You can hand me 175 I’ll make a bullish and bearish argument, right? I think people want to see that number right down the middle. Right? Because no one wants to have to evaluate because here’s what’s going to happen. If it’s a bad number, the Fed probably won’t recognize it. They’ll come out and they’re all out there. Kashkari Your favorite guy Guy they’re all out there saying, I hope you’re listening. We’re still very hawkish. So that would be like stagflationary. [00:47:05][23.7]
Dan Nathan: [00:47:06] Or I’ll just say this real quickly and I’d love to get your take. It is a really hot number. Markets going down. S&Ps filling in that gap and it’s going down. [00:47:14][7.8]
Danny Moses: [00:47:14] I think the unemployment number, the three point, whatever it’s going to be, whether it’s eight or 3.9 or whatever it’s going to be, is a more important number than the job number. [00:47:20][6.3]
Guy Adami: [00:47:20] Fair enough. But anything north of 350, the market craters and in terms of unemployment rate, we’ll see how it shakes out. [00:47:26][6.0]
Danny Moses: [00:47:26] But think about what you’re saying. So we saw a lag impact from rate hikes believe me I’m not bullish. No, no. Well, I’m trying to paint a picture of 350. See, I told you, we’re still functioning employment. We can handle these rates going up and all the other inflationary things are starting to tick down. This is the best of all worlds. I mean, I’ll paint you the bullish picutre. [00:47:44][17.5]
Guy Adami: [00:47:44] No I’ve lived through that, believe me. I’m just throwing it out there again this year. Right? I say it to Melissa all the time. I’d fast money if you told me these numbers a day ahead. I’d be wrong half the time at best. And that’s just the market we find ourselves in. By the way, speaking of somebody who’s been wrong half the time, that’s Danny Moses in this year’s NFL 500. Okay, so you understand what I’m saying wise guy okay. That’s not because I got to tell you, when you’re playing at 85%, six and five ain’t nothing to write home about. [00:48:12][27.6]
Danny Moses: [00:48:12] Well, listen, so I started out the season 1-2. [00:48:14][2.0]
Dan Nathan: [00:48:15] Yeah, it wasn’t great [00:48:15][0.1]
Danny Moses: [00:48:16] yeah well no yeah start out 1-2 first time I’ve had a losing record as a member of On the tape. So I’m now six and five but Dan. [00:48:22][6.1]
Dan Nathan: [00:48:22] Waait first things first [00:48:23][0.8]
Danny Moses: [00:48:25] You’re doing to me right now what I did you last year. Yeah. I’m now taking the other side. Right. Your picks and I am back down $1,000. [00:48:30][5.5]
Dan Nathan: [00:48:31] You are not doing that. first things first are so so Thursday night Guy we even told you this Danny that were with Joe Marchese [00:48:36][5.2]
Danny Moses: [00:48:37] Oh my God I forgot about that [00:48:37][0.0]
Dan Nathan: [00:48:38] and we were watching this Cincy game. Okay. In a bar and on a phone. On a phone. And you got to see him. He’s doing all these things like, you know, like he’s doing all this stuff in his hands are moving. And then we had a bartender, nice guy but this kid. [00:48:52][14.0]
Danny Moses: [00:48:53] Degenerate. [00:48:53][0.0]
Dan Nathan: [00:48:53] Oh, my God. I actually had a little sidebar with him. Stop. Yeah, he did. And he’s like, Listen, guy, you got to turn it down a little bit. It was like a little intervention. [00:49:03][9.3]
Danny Moses: [00:49:03] Yeah, the kid McPherson, the kicker kicked it, and I paid you 100 dollars. I go, Dan, I’ll give you 100 bucks if he makes. [00:49:08][4.7]
Dan Nathan: [00:49:08] And no, no, I, I took 100 bucks from Danny. He pulled it out of his wallet, and then I gave it to the kid behind the bar cause he was getting killed. He was. Wasn’t he losing that game. [00:49:17][8.9]
Danny Moses: [00:49:17] He was [00:49:18][0.2]
Dan Nathan: [00:49:18] He appreciate it [00:49:19][0.3]
Guy Adami: [00:49:19] All right. So week five in the league where they play for pay six and five. Danny Moses. By your standards, that’s just an atrocity. What do you got for us? [00:49:25][6.3]
Danny Moses: [00:49:26] All right. So Cincinnati, speaking of Cincinnati in that game, that was a Thursday night game, wasn’t it, Dan? Yep. That gives them an extra three days, doesn’t it, guys? They’re going into Baltimore, right? That was a tough loss for Baltimore. Bad coaching, by the way. Harbaugh has done a bad job. [00:49:40][14.0]
Guy Adami: [00:49:40] I agree with that. That’s a game they should have won. [00:49:42][1.7]
Danny Moses: [00:49:42] Very good coach right? Bills came in or whatever since he’s getting three points. [00:49:45][2.8]
Guy Adami: [00:49:46] Live dog live dog. [00:49:47][1.3]
Danny Moses: [00:49:48] Live dog to an outright. But I like Cincinnati plus three. Dan, you want any action on that one? All right. I love Jacksonville. I realize. [00:49:55][7.7]
Guy Adami: [00:49:56] Hold on a second stop. who talked about the Jacksonville Jaguars? It. Thank you. [00:50:00][4.0]
Danny Moses: [00:50:00] You also talked about the Eagles and you’re right on both by the way [00:50:02][1.9]
Guy Adami: [00:50:03] Thank you. You just put it out there. Jacksonville’s two and two, by the way, should be three and one, but doesn’t matter in the league . [00:50:07][4.5]
Danny Moses: [00:50:08] Could have been four. I mean, they were up 14. Nothing. But anyway, they’re coming home, right? They’re coming back home again and they’re playing a horrendous Houston team. Hall The line is seven. I can’t believe I’m saying I love Jacksonville minus seven because I think this is their true coming out. I think they are very talented team and they’re just not in a market where people are seeing them. And so I love Jacksonville minus seven over Houston. Dan, would you like Houston? Nope. All right. I’m going to get four picks this week. Wow. With the hope of going 3-1. [00:50:33][25.3]
Dan Nathan: [00:50:33] I have a couple that I’d like to see. [00:50:35][1.8]
Danny Moses: [00:50:35] Oh, you’re getting cocky. Okay. All right. Bears plus seven and a half in Minnesota. I think Minnesota stinks. And I love Justin Fields. He keeps them in games the Bears. I realize your G-men, oh Guys going to take action. [00:50:47][12.0]
Guy Adami: [00:50:48] No I’m not taking. [00:50:48][0.0]
Danny Moses: [00:50:48] I’ll take the Bears plus seven and a half in Minnesota and then my last. One is and the most nervous about both these two teams are Jekyll and Hyde. I will take Tennessee minus two in Washington. I feel like this is when Tennessee gets on track here. So. Tennessee minus two, Jacksonville minus seven. Bears plus 7.5. And have Cincinnati +34 picks. Dan. [00:51:08][19.3]
Dan Nathan: [00:51:08] None of those. What about this? I want to take Atlanta. [00:51:10][1.7]
Danny Moses: [00:51:11] I love Atlanta. [00:51:11][0.3]
Dan Nathan: [00:51:12] I want to take Atlanta. Plus 9.5 [00:51:13][1.0]
Danny Moses: [00:51:13] I’ve been short tampe all year [00:51:14][0.0]
Dan Nathan: [00:51:14] I know you have. And they do not look particularly good. So you don’t want Tampa. The other one would be Green Bay, minus eight over the New York Giants. I want to take that. [00:51:24][10.1]
Danny Moses: [00:51:24] You want Green Bay? Yeah. All right. Guy and I will split together. You got to take the Giants . [00:51:28][4.0]
Guy Adami: [00:51:29] No, I don’t. [00:51:29][0.2]
Danny Moses: [00:51:30] That’s not your team. [00:51:30][0.4]
Guy Adami: [00:51:30] I don’t do that. That’s that. [00:51:32][1.3]
Dan Nathan: [00:51:34] Not one of your official picks. [00:51:35][0.8]
Danny Moses: [00:51:36] You just because Chinos and Liz Young just want to be friends with them. You’ve taken the Packers. They already love you. Dan, you don’t have to do that just [00:51:41][5.1]
Guy Adami: [00:51:41] By the way, I got to tell you something, Packers defense is good. Yeah, that offense is not very good and that Giants defense gets better. No I don’t I don’t bet on sports. It’s not my thing [00:51:52][10.7]
Danny Moses: [00:51:53] Alright so Dan What number do you see? Eight? [00:51:53][0.7]
Dan Nathan: [00:51:53] I see Green Bay minus seven and a half. [00:51:55][1.7]
Danny Moses: [00:51:55] All right, I’ll take Giants plus seven and a half for 500. Thanks. Okay, very good. [00:51:59][3.3]
Guy Adami: [00:51:59] Ladies and gentlemen, this has been one of the more interesting on the tape [00:52:02][2.5]
Dan Nathan: [00:52:03] Oh, hold on a sec we’re not done [00:52:04][0.8]
Danny Moses: [00:52:06] But we have one more thing we have to talk in my interpretation of I know you guys have talked about it all week on this Tesla Twitter. Danny, what is your take on all? [00:52:14][8.4]
Dan Nathan: [00:52:14] Yeah. Danny, what’s your take on this whole Twitter Tesla Elon Musk thing? [00:52:17][2.2]
Danny Moses: [00:52:17] I don’t know. I mean, I must admit, here’s what’s interesting. These banks remember we talked about Citrix. That was a January deal. That was a 13 to 14 billion already. That’s going to cost the banks 600 million. And now they and they’re going to actually have to buy 6 billion. You know what? All the bank pandering to Musk, all that stuff, the guy’s a money machine for us. Well, if he goes through with this deal, you’re looking at half a billion dollar write down and probably the carrying of some of this debt. Remember how he financed this thing with the term loans, with the secured, with the unsecured? That’s the first part. The other piece of news to come out today that was interesting was on Tesla specifically, which is S&P upgrading the debt for the first time to investment grade. That would be from double B to triple B. Dan Right. [00:52:55][38.0]
Dan Nathan: [00:52:55] I saw that [00:52:56][0.7]
Danny Moses: [00:52:57] Do you remember September? There was a tweet from Musk about Moody’s is irrelevant. I find that Interesting that Moody’s isn’t the one that upgraded, it was S&P. And also, listen, everything happens for a reason. I mean, I truly believe that now. I don’t know. I don’t think it’s bullish necessarily. I don’t. Supposedly they’re free cash rolling, but people read into that like, oh, they must know something. Yeah, but they know is that deliveries were worse. The numbers are going to continue to get cut and that musk is going to have to sell a lot more stock. [00:53:21][24.0]
Dan Nathan: [00:53:21] And again, Tesla’s had a really bad week. There was a day it closed down 8% after those September deliveries. The one thing I’ll just say is that I think that there was probably him selling that day because that was the night that he came out and said that he’s going to close on the deal. And I think he also knows because that would. [00:53:37][15.4]
Danny Moses: [00:53:37] Have to be out already there with a filing, would have to be out that he sold stock. [00:53:39][2.5]
Dan Nathan: [00:53:40] Okay. [00:53:40][0.0]
Danny Moses: [00:53:40] Well, I would think. But go keep him here. [00:53:41][1.2]
Dan Nathan: [00:53:41] But it closed down 8% on the day when the market was up 2%. [00:53:44][2.4]
Danny Moses: [00:53:44] I mean, the desk could be doing it for him and then he puts it on slop. Yes fair [00:53:47][2.8]
Dan Nathan: [00:53:48] So my point is, is that he’s probably been selling stock Friday on the close. This came out. The stock closed at 49.42. It closed at 52 the day after he said it was going to close that deal. The deal’s for 54.20. So we’re now two three bucks below that. And there’s really a lot of talk about this debt contingency, whether the banks are going to wear this thing, because the truth is, they’re not in a position to take hundreds of millions of dollars of losses and sell this thing to their clients, correct those losses. So the question we saw Apollo pulled out from the equity standpoint. So if he’s going to close this thing, he’s got to sell more Tesla or and I heard this and it’s just a rumor I heard there was secondary space X for sale this week. Yeah. [00:54:28][40.5]
Danny Moses: [00:54:29] Wouldn’t shocked me. Yeah. [00:54:29][0.6]
Dan Nathan: [00:54:29] Right. So then the question is, does the richest man in the world who basically in a world where all of his wealth is tied up to a publicly traded stock and a private one at SpaceX, that was last valued, I think, at 120 or something like that. Billion. Is he going to overpay 20 or $25 billion? Yes. For a company that when he takes it back up public, what do you think? [00:54:51][22.3]
Guy Adami: [00:54:52] He overplayed his hand and because he doesn’t want to be deposed, because if you’re deposed, you have to answer questions about literally everything in your life. And it’s worth $25 billion extra not to go down that road. And we’ve talked about this for a while. Tesla, very quietly, is down now, some 43% from its all time high. And I got to tell you something, that the dogpile on the Cathie Wood Rabbit, but that Ark ETF is in a world of hurt in this environment. [00:55:17][25.1]
Dan Nathan: [00:55:17] One last point, I would just say this on that one situation. So it sounds like he’s got an out if he can’t get the debt. [00:55:25][7.3]
Danny Moses: [00:55:25] No nope, nope. I’m sure he tried to make that a new condition. [00:55:30][4.7]
Guy Adami: [00:55:30] Twitter said no. [00:55:31][0.4]
Danny Moses: [00:55:31] Twitter said no. So that just so you know, Dan, that did not. So he tried to say, all right, I’ll do it at 54.20. Let me back up a second. I should compare it to The Wizard of Oz. This goes back five years of the musk. You get to the curtain, the tin man, the lion, they’re all coming, looking for hearts and brains and courage and all these things. Right? And you pull the curtain back into this guy. [00:55:50][18.5]
Dan Nathan: [00:55:50] Hearts and thoughts. They fade. You take tell you later. [00:55:52][2.0]
Danny Moses: [00:55:53] All right, so listen. Shame on. Everybody deserves what’s coming to them. The banks deserve it. Investors deserve it who are long. Take a step back. He bit 5420 as a joke. They started to read his emails. He was going to be deposed. Supposed to happen actually today. Right. Which is why he’s. And the judge is not taking any shit from him. Right. It’s like we’re moving forward, like we’re doing. So he’s so nervous. You know, the other thing of this genius you started to read, I don’t know if you took the time to read the emails you probably didn’t of when he was reaching out to Larry Ellison. Was there anything behind this? It was even calculated. You came up with the number because it was the 420 to 54.20 joke. Do you think that he can run a space X, a Tesla, a Twitter because of this? You’re saying like again, I’ve always said this is the culmination of everything in these markets but [00:56:35][41.9]
Dan Nathan: [00:56:35] Listen, I don’t think this deals happening. I’m just telling you, because if you think about since late April when he made this bid, when you think about where credit is, you think about equity valuations, you think about I’m telling you to be legal. [00:56:48][12.9]
Danny Moses: [00:56:49] The judge is going to say you have to do it. I’m not saying that, but he’s not going to get out of it legally. You’re saying it’s not going to happen. He’s just going to say, I’m not doing it. The regulators never punish him like they should for his 420 secured. And this is where we are. [00:56:59][10.4]
Dan Nathan: [00:56:59] Listen we’ve had plenty of companies over the history of, you know the stock market massively overpay in M&A. We’ve never had an individual do they’re the same and the story keeps rising up anyway. [00:57:10][11.3]
Danny Moses: [00:57:11] Where’s Barry Diller and Activision? All right. [00:57:12][1.3]
Dan Nathan: [00:57:12] Should we get out of here, guy? You want to wrap this up? [00:57:14][1.7]
Guy Adami: [00:57:14] But again, homage to Frank Morgan, The Wizard of Oz. Yeah, yeah. An homage to Larry Ellison, who is we said that Friday. What do you call that Friday? Fun day or drop day or Friday. [00:57:25][10.9]
Danny Moses: [00:57:25] Friday night dirties. [00:57:25][0.2]
Guy Adami: [00:57:26] That remember that was that Friday night. [00:57:27][1.3]
Dan Nathan: [00:57:28] No one’s ever even asked him about it. It’s never been a story written about it. [00:57:31][3.7]
Guy Adami: [00:57:31] We talked about it. Yeah. This has been a fascinating, enjoyable on the tape podcast. I hope you’ve enjoyed it. And what do you say, Dan, leave us critiques or messages? [00:57:40][8.7]
Dan Nathan: [00:57:41] Now be careful because I got ratiod. You know what that means guy to get ratio and someone tweeted something about me and the amount of comments versus amount of likes in here it was like it was proportionate about the comments. [00:57:53][12.5]
Danny Moses: [00:57:55] Versus. [00:57:55][0.0]
Guy Adami: [00:57:55] I don’t know. Hey, we’ll learn out about that. Yeah. [00:57:57][1.6]
Dan Nathan: [00:57:57] Let’s get Guy ratio’s. [00:57:58][0.2]
Guy Adami: [00:57:58] All right. Okay. Thanks, everyone. We will see you all next week. Thanks. Once again, the 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. [00:58:24][26.2]
Dan Nathan: [00:58:27] 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. [00:58:27][0.0]
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