Transcripts For FBC Making 20240703 : comparemela.com

Breaking right now markets start the week on the back foot. The 10year yield dancing around that 5 . It is pulling back now. Earlier today everything went haywire. Here is the thing, history suggests not to panic but stock and Bond Investors have at least one foot out the door. Ackman, takes a victory lap and covers his bonds short. There is the fed in ad sing the try health of our economy. Is it as strong as a consumers says . They will help us unpack the central issue haunting this market. House speaker soap opera drags on. A new poll Shows Americans are simply over it. I will ask congressman Warren Davidson where things now. What he thinks of the antiestablishment probitcoin in argentina somehow forced into a runoff. My takeaway on americans jettison family norms. One key desire is remains in place. That is great for the soul and our wallet and the nation. All that and more on making money. Charles all right, so theres an old saying the struggle is real and it seems to apply across the Financial Spectrum these days. The bond market continues its historic rout. The tlt is getting absolutely hammered. Closed at a piste dal point here. This used to be resistance going back a few years. This was support. It cohold or completely start falling apart that brings us to this, right, u. S. Treasurys. This is interesting, the last time it was this overbought, 10year treasury yield was this high, this is relative strength. Every time it gets up there that is a signal youve gone too far too fast, indeed it came down pretty hard last time. We had the same signal a week ago. It is a juggernaut. Didnt stop at all. Like a runaway train. A different scenario certainly and one that has a lot of people concerned and worried. How dirt we get here . Lets talk about this year because it has been one hell of a roller coaster ride. Fomc meeting, yields go up. Banking crisis particularly after svb. Banks were in trouble but they went back down. Sort of same thing. Fomc higher for longer. We start rallying higher. September fomc, we start rallying higher. You get the point. Every time the fed opens their mouth the market moves. Even about they dont take action the yields go much, much higher. The question can anything be done to stop this, right . Because youve got other things, youve got other drivers that are happening besides what is happening at the fed. One is competition. Remember we talked about a few months ago, japan ditching being that 10year yield curve. This is what happened. They were at this level, artificial level for their 10 yearyearold for a long time. Look where they are now, 0. 9 from 0. 2. That is giving our yields a lot of competition. Why is this important . They are number one foreign holder of our treasurys, 1. 3 trillion. This is because china has sold off hundreds of billions. So heres the question, with that in mind, where should the real, you know, the real yield be . Where should we expect longterm expectations . This is from edward jones. I thought it was really great work. Essentially what theyre saying if you have real gdp, real gdp in the range of 1 1 2 to 2 , your core inflation is in the range of two, to 2 1 2 , this should be your range right here. For the 10year yield. Can we live with that . Can markets live with that . Ii want to bring in qi research, ceo, chief strategist, Danielle Dimartino booth. For folks listening on radio were talking about the long term, the i dont know the 10year yield in a range of 3 1 2 to four 1 2. I mean is that, what would that mean for markets . Well, charles, a, thank you for having me this afternoon, great to be back with you. I think even 3 1 2, 4 1 2 , that particular range, probably where were headed because the economy, the underlying economy is slowing. Were of course in the sixth week of the uaw strike. Well start seeing higher prints with unofficial unemployment claims every thursday morning and there will be a lot more nervousness that seeps in as we go tminus 12 months to election day. Even after 3 1 2, 4 level is problematic charles, because so many u. S. Companies with more bankruptcies being announced today, so many u. S. Companies have become reliant on the Federal Reserve keeping Interest Rates at the zero bound and keeping the 10year close to two to 3 yield range. Were not there. That means a lot of refinancing has to get done going into 2024 at appreciably higher yields. The question becomes who is going to survive this, separating the wheat from the of what to use very overused cliche. Charles interesting that you mention that. The top 50 stocks, Largest Companies in this country who probably need that money less, less reliance on refinance financing, those stocks are up 3, 23 . We know what small caps are doing, getting annihilated. We have the competition part, and im calling this chart, and the band played on. We stopped with the budgeting a long time ago, continuing resolution, continuing resolution, continuing resolution. What happens to the budget and spending . 2 goes crazy this part of it is really nuts, danielle. The federal government wont stop spending money this is like a wartime budget and it seems like it will get worse . It does seem like it will get worse, charles, i dont think it will necessarily get that much worse between now and march of 2025. There is no additional large stimulus spending we cant even get a speaker of the house in the gop, charles. To suggest there will be large types of stimulus spending passed between now and election day is a little bit of a stretch. Charles right. So what were going to be doing is raising spending up to a ridiculously high plateau but in terms of additional at the margin spending that hands money out, helicopter money out to households i dont foresee that again until march of 2025 at the soonest. Charles every time they kick the can down the road were talking you know, automatically like at least 8 more spending. Plus all the spending in the pipeline already. Lets talk about the feds role in all of this. Financial conditions have tightened considerably. This is from morgan stanley. Essentially what theyre saying a big spike here, it is equivalent of 80 basis points of fed fund. Imagine three 25 basis point rate hikes that is it what the bond market is doing. We heard jay powell kind of allude to this. Is it possible this chart with what the bond yields are doing keep the fed away from anymore rate hikes . I certainly think that is going to be the case and if you look back, charles, historically, once there is two pauses in a row, it would have to be quoteunquote different this time, charles, i hate those words, it would have to be different for the fed to jump back in resume hiking rates. That being said holding rates at a very high level, making it very uncomfortable but i think theyre finished where they are right now. Again tighten something tightening. A year ago we were talking about the fed raising Interest Rates at 3 4 of interest points at one time and stock market laughing it off and financial conditions easing there is a shift the way the markets act with this as you said wartime, fiscal spending. The bond vigilantes are definitely out in force but some would say, i dont know mr. Ackman, this trade is a little long in the tooth since the real economy is coming back to bite. Charles i think he did a great time taking profits and thank you, danielle. Thank you, charles. Charles with hadley heath manning, well were trying zero population growth. We tried it before it is a bad thing. We bring in constance hunter. Well talk about this for a minute. The state of consumer is central issue. As long as they look strong the fed has to stay where they are. Commercial banks really tightening here. Were at a level not seen since the great financial crisis, right . That is one thing that says maybe, maybe theyre getting where they want to be. Everyone has got an opinion how much excess savings are out there. According to the San Francisco fed, 2. 1 trillion, we spent 1. 9 trillion. By the way by far more than anybody else out there because were americans we like to be number one. This is something, you know, these are subprime the level of delinquencies starting to skyrocket here. In the retail sales report we saw strong auto sales. People getting these cars after the 72 months. 10 years ago, that was even unheard of. In your opinion where are we with respect to the real true strength of the american consumer. Depends which consumer youre talking about. 80 of the spending is done by the top 20 ever earners. That is really important feature in answer to the baseline keeping the economy growing. We have job growth 2 1 2 a year. That just supports general consumption of about 2 a year but what were talking about about is the bottom 20 , these subprime borrowers, theyre reducing their spending. At the margin this reduces demand which further reduces prices t actually helps the fed. If you remember last year, 2022, jackson hole speech powell said there is going to be pain for some households and businesses. Right. So it is not just the consumer, as you were saying earlier it is the small businesses. Theyre seeing huge pressure in the borrowing costs if the banks are even lending as you showed the senior loan officer survey suggests. Charles this is the whole way this thing is set up even particularly with aggregate data. One household with five Million Dollars is not hurting someone looks at that, things are hunkydory. Growth of checking account, bottom 20 negative. Gone negative below 2019 levels. 20 to 40 barely up from there of course obviously the top 1 . How much damage does the Federal Reserve by the way they do that little disclaimer, we are the hurting households yadi yada. Theyre killing these folks. Can they get them to slow down enough where they stop killing these folks . Well, no, but what we will see i think weve, we think we peaked in rates. We dont think there is another hike coming. We think there is very likely a cut in the Second Quarter of flex year. That will ease a whole bunch of those things. Get down to the level you were talking about in the four, 4 1 2 range rather than 5 . Charles that means what danielle was just talking about then, all all of sudden this thg happens sooner than later. Slow all of sudden. Are we looking at that scenario, all of sudden the data seems to change on a dime . It is very possible. One of the things were also seeing the lag effect of tighter monetary conditions. As danielle said, Smaller Companies have to reset their loans next year. Charles right. That will impact consumption. There is a lot of slowdown in process well see going into 2024. Charles constance, can the fed be okay with this range, 3 1 2 to 4 . What theyre looking to anchor the short end of the curve. Theyre pretty wellanchored out to the two year. The 10year theyre letting the market set the rate one of real wild cards what happens with productivity. We think productivity will continue the march higher. That is really good charles is that the a. I. Factor. Partly a. I. But reducing supply chain restrictions. Fewer people are out sick since 1980. Forget the pandemic. Medicine is working. Fewer people are out sick. People are staying in their jobs longer. So of good news about productivity that affects everybody across all income spectrums. Charles constance, you appreciate it. Glad you had some good news. Coming up the s p facing the largest drawdown since last october lows. Lance roberts is here. Is there opportunity here or should you stay in your folks hole . First mike green has a shocking message for all managers out there. Of course is this a new bear bond arc market . Try saying that three times quick. Well be right back. Meet the traveling trio. The thrill seeker. The soul searcher. And ahoy its the explorer each helping to protect their money with chase. Woah, a lost card isnt keeping this thrill seeker down. Lost her card, not the vibe. The soul searcher, is finding his identity, and helping to protect it. Hey oh yeah, the explorer shes looking to dive deeper. All while chase looks out for her. Because these friends have chase. Alerts that help check. Tools that help protect. One bank that puts you in control. Chase. Make more of whats yours. Hive digital technologies. A leading Bitcoin Miner and gpu cloud operator is building the infrastructure of tomorrow, featuring a robust Growth Strategy that aims to double its mining capacity while accelerating gpuon demand business. Hive digital technologies. You cant buy great conversations or moments that matter, but you can invest in them. At t. Rowe price our strategic investing approach can help you build the future you imagine. T. Rowe price, invest with confidence. So, youve got the power of xfinity at home. Now take it outside with xfinity mobile. Like speed . Its the Fastest Mobile Service around. With the best price for two lines of unlimited. Only 30 bucks a line per month. Thats hundreds in savings a year when you wave bye to the other guys. All on the most reliable 5g network nationwide. You really shouldnt walk out the front door without it. Switch today at xfinitymobile. Com. Nice footwork. Man, youre lucky, watching live sports never used to be this easy. Now you can stream all your games like its nothing. Yes [ cheers ] yeah woho running up and down that field looks tough. Its a pitch. Get way more into what youre into when you stream on the xfinity 10g network. You know the good news foreinvestors that history is often a guide, right . But history maybe never has seen anything like what were dealing with right now. Take a look at that, Government Debt level skyhigh, going even faster. Treasury issued 3 trillion in debt this year alone. Will be a lot more next year. The Biden Administration has a ambitious plan to remake u. S. Energy which means spending a to go ton of money. All the spending is ramping up. Government interagencies are buying or increasing their bond ownership. So how do we navigate what is becoming a serious maze of confusion . I want to bring in simplify chief Asset Management mike green. Mike, before we do this, i was looking at your note from the 22nd, it begins with market efficiency is not the question. What is the question, maybe if you can, what is the answer . [laughter] sure, so market efficiency is a measure how accurately markets react to underlying fundamental measures. It is never stand still sort of metric. We know markets react to information. We know there is a degree of efficiency. The real question is are they using the Information Available to us to provide for what were trying to do . Are markets trying to actually allocate capital to Good Companies . Are markets trying to create returns for our retirement objectives . Are they trying to beat inflation, et cetera. What is the painful thing were asking markets to do far too much. Were asking our governments to do too much and asking our markets to do far too much in this environment. Charles how do you uncomplicate that . I would add the Federal Reserve has too many hats, and they keep getting more responsibilities. How do you, how do we take the pressure off . Well, one of the things we have to start doing is we have to start understanding what we mr. Actually asking markets to do and so most people have investments in their 401 k for example, relying on markets to provide for their retirement. Nobody ask in defined benefit plan anymore. Nobody has the ability to rely on corporate employment and a pension, et cetera, except for Government Employees or for things like medicare, et cetera. Those are exactly the benefits that youre seeing explode. So ironically weve actually created conditions under which americans have increasingly outsourced their retirement to a market that has no real obligation to them and unfortunately every time that starts to go wrong we need the Federal Reserve to step in and bail it out for us. To make sure our retirements are intact. To me the mosting it part of this scenario were at right now is, im looking at the yield of 10year on your screen right now, were given an opportunity in many situations to take that uncertainty out. I think that is the message youre hearing from many of your guests right now. The Federal Reserve has been very explicit. They raised Interest Rates to the level that is restrictive to design to slow the economy that cant be sustained. If we know that the answer, then the answer has to be we should be increasing our allocations to bonds. All right. Before i let you go then, bill ackman covered his bonds short today. Took a victory lap. Does that sort of add to, i know you do your own work but that sort of signal maybe other folks are hooking out there thinking the better part of this trade is to go long rather than short . It certainly seems that way. Bill has not explicitly said he has gone long but i would point out he has gone at least pearlings long, right . Fantastic trade on his part. He caught the supply story, increase in bond issuance coming. Congratulations to him. Great to hear he is seeing the same opportunity that im seeing. Mike, wish we had more time. I was going to ask but the Upton Sinclair quote but we dont. Love reading your work. Well do that another time. Charles i learn so much reading your stuff but im always in the dictionary to understand your words. Appreciate it. Jay powells speech on the new york economic club, powells actions on treasury lately were not shopping but were hoping for more. Almost resigned to the fate he is trying to tighten while the treasury is pushing modern monetary theory. Tim sweeting about the encore presentation of unbreakable town hall. Great show. Love the message to never to take a loss rather and never give up. So inspiring after this week t was perfect timing. Thanks a lot, tim. Always love hearing from you. Tweet at us, cvpayne, woe want to share the comments when we can. Coming up nine republicans have thrown their hat into the ring for house speaker. Can any of them get 217 votes this week or ever . I will ask congressman not just the bond market you about the stock market. Lance roberts, ann mileti to here to help you navigate your way through this. This is Bond Investors<\/a> have at least one foot out the door. Ackman, takes a victory lap and covers his bonds short. There is the fed in ad sing the try health of our economy. Is it as strong as a consumers says . They will help us unpack the central issue haunting this market. House speaker soap opera drags on. A new poll Shows Americans<\/a> are simply over it. I will ask congressman Warren Davidson<\/a> where things now. What he thinks of the antiestablishment probitcoin in argentina somehow forced into a runoff. My takeaway on americans jettison family norms. One key desire is remains in place. That is great for the soul and our wallet and the nation. All that and more on making money. Charles all right, so theres an old saying the struggle is real and it seems to apply across the Financial Spectrum<\/a> these days. The bond market continues its historic rout. The tlt is getting absolutely hammered. Closed at a piste dal point here. This used to be resistance going back a few years. This was support. It cohold or completely start falling apart that brings us to this, right, u. S. Treasurys. This is interesting, the last time it was this overbought, 10year treasury yield was this high, this is relative strength. Every time it gets up there that is a signal youve gone too far too fast, indeed it came down pretty hard last time. We had the same signal a week ago. It is a juggernaut. Didnt stop at all. Like a runaway train. A different scenario certainly and one that has a lot of people concerned and worried. How dirt we get here . Lets talk about this year because it has been one hell of a roller coaster ride. Fomc meeting, yields go up. Banking crisis particularly after svb. Banks were in trouble but they went back down. Sort of same thing. Fomc higher for longer. We start rallying higher. September fomc, we start rallying higher. You get the point. Every time the fed opens their mouth the market moves. Even about they dont take action the yields go much, much higher. The question can anything be done to stop this, right . Because youve got other things, youve got other drivers that are happening besides what is happening at the fed. One is competition. Remember we talked about a few months ago, japan ditching being that 10year yield curve. This is what happened. They were at this level, artificial level for their 10 yearyearold for a long time. Look where they are now, 0. 9 from 0. 2. That is giving our yields a lot of competition. Why is this important . They are number one foreign holder of our treasurys, 1. 3 trillion. This is because china has sold off hundreds of billions. So heres the question, with that in mind, where should the real, you know, the real yield be . Where should we expect longterm expectations . This is from edward jones. I thought it was really great work. Essentially what theyre saying if you have real gdp, real gdp in the range of 1 1 2 to 2 , your core inflation is in the range of two, to 2 1 2 , this should be your range right here. For the 10year yield. Can we live with that . Can markets live with that . Ii want to bring in qi research, ceo, chief strategist, Danielle Dimartino<\/a> booth. For folks listening on radio were talking about the long term, the i dont know the 10year yield in a range of 3 1 2 to four 1 2. I mean is that, what would that mean for markets . Well, charles, a, thank you for having me this afternoon, great to be back with you. I think even 3 1 2, 4 1 2 , that particular range, probably where were headed because the economy, the underlying economy is slowing. Were of course in the sixth week of the uaw strike. Well start seeing higher prints with unofficial unemployment claims every thursday morning and there will be a lot more nervousness that seeps in as we go tminus 12 months to election day. Even after 3 1 2, 4 level is problematic charles, because so many u. S. Companies with more bankruptcies being announced today, so many u. S. Companies have become reliant on the Federal Reserve<\/a> keeping Interest Rates<\/a> at the zero bound and keeping the 10year close to two to 3 yield range. Were not there. That means a lot of refinancing has to get done going into 2024 at appreciably higher yields. The question becomes who is going to survive this, separating the wheat from the of what to use very overused cliche. Charles interesting that you mention that. The top 50 stocks, Largest Companies<\/a> in this country who probably need that money less, less reliance on refinance financing, those stocks are up 3, 23 . We know what small caps are doing, getting annihilated. We have the competition part, and im calling this chart, and the band played on. We stopped with the budgeting a long time ago, continuing resolution, continuing resolution, continuing resolution. What happens to the budget and spending . 2 goes crazy this part of it is really nuts, danielle. The federal government wont stop spending money this is like a wartime budget and it seems like it will get worse . It does seem like it will get worse, charles, i dont think it will necessarily get that much worse between now and march of 2025. There is no additional large stimulus spending we cant even get a speaker of the house in the gop, charles. To suggest there will be large types of stimulus spending passed between now and election day is a little bit of a stretch. Charles right. So what were going to be doing is raising spending up to a ridiculously high plateau but in terms of additional at the margin spending that hands money out, helicopter money out to households i dont foresee that again until march of 2025 at the soonest. Charles every time they kick the can down the road were talking you know, automatically like at least 8 more spending. Plus all the spending in the pipeline already. Lets talk about the feds role in all of this. Financial conditions have tightened considerably. This is from morgan stanley. Essentially what theyre saying a big spike here, it is equivalent of 80 basis points of fed fund. Imagine three 25 basis point rate hikes that is it what the bond market is doing. We heard jay powell kind of allude to this. Is it possible this chart with what the bond yields are doing keep the fed away from anymore rate hikes . I certainly think that is going to be the case and if you look back, charles, historically, once there is two pauses in a row, it would have to be quoteunquote different this time, charles, i hate those words, it would have to be different for the fed to jump back in resume hiking rates. That being said holding rates at a very high level, making it very uncomfortable but i think theyre finished where they are right now. Again tighten something tightening. A year ago we were talking about the fed raising Interest Rates<\/a> at 3 4 of interest points at one time and stock market laughing it off and financial conditions easing there is a shift the way the markets act with this as you said wartime, fiscal spending. The bond vigilantes are definitely out in force but some would say, i dont know mr. Ackman, this trade is a little long in the tooth since the real economy is coming back to bite. Charles i think he did a great time taking profits and thank you, danielle. Thank you, charles. Charles with hadley heath manning, well were trying zero population growth. We tried it before it is a bad thing. We bring in constance hunter. Well talk about this for a minute. The state of consumer is central issue. As long as they look strong the fed has to stay where they are. Commercial banks really tightening here. Were at a level not seen since the great financial crisis, right . That is one thing that says maybe, maybe theyre getting where they want to be. Everyone has got an opinion how much excess savings are out there. According to the San Francisco<\/a> fed, 2. 1 trillion, we spent 1. 9 trillion. By the way by far more than anybody else out there because were americans we like to be number one. This is something, you know, these are subprime the level of delinquencies starting to skyrocket here. In the retail sales report we saw strong auto sales. People getting these cars after the 72 months. 10 years ago, that was even unheard of. In your opinion where are we with respect to the real true strength of the american consumer. Depends which consumer youre talking about. 80 of the spending is done by the top 20 ever earners. That is really important feature in answer to the baseline keeping the economy growing. We have job growth 2 1 2 a year. That just supports general consumption of about 2 a year but what were talking about about is the bottom 20 , these subprime borrowers, theyre reducing their spending. At the margin this reduces demand which further reduces prices t actually helps the fed. If you remember last year, 2022, jackson hole speech powell said there is going to be pain for some households and businesses. Right. So it is not just the consumer, as you were saying earlier it is the small businesses. Theyre seeing huge pressure in the borrowing costs if the banks are even lending as you showed the senior loan officer survey suggests. Charles this is the whole way this thing is set up even particularly with aggregate data. One household with five Million Dollars<\/a> is not hurting someone looks at that, things are hunkydory. Growth of checking account, bottom 20 negative. Gone negative below 2019 levels. 20 to 40 barely up from there of course obviously the top 1 . How much damage does the Federal Reserve<\/a> by the way they do that little disclaimer, we are the hurting households yadi yada. Theyre killing these folks. Can they get them to slow down enough where they stop killing these folks . Well, no, but what we will see i think weve, we think we peaked in rates. We dont think there is another hike coming. We think there is very likely a cut in the Second Quarter<\/a> of flex year. That will ease a whole bunch of those things. Get down to the level you were talking about in the four, 4 1 2 range rather than 5 . Charles that means what danielle was just talking about then, all all of sudden this thg happens sooner than later. Slow all of sudden. Are we looking at that scenario, all of sudden the data seems to change on a dime . It is very possible. One of the things were also seeing the lag effect of tighter monetary conditions. As danielle said, Smaller Companies<\/a> have to reset their loans next year. Charles right. That will impact consumption. There is a lot of slowdown in process well see going into 2024. Charles constance, can the fed be okay with this range, 3 1 2 to 4 . What theyre looking to anchor the short end of the curve. Theyre pretty wellanchored out to the two year. The 10year theyre letting the market set the rate one of real wild cards what happens with productivity. We think productivity will continue the march higher. That is really good charles is that the a. I. Factor. Partly a. I. But reducing supply chain restrictions. Fewer people are out sick since 1980. Forget the pandemic. Medicine is working. Fewer people are out sick. People are staying in their jobs longer. So of good news about productivity that affects everybody across all income spectrums. Charles constance, you appreciate it. Glad you had some good news. Coming up the s p facing the largest drawdown since last october lows. Lance roberts is here. Is there opportunity here or should you stay in your folks hole . First mike green has a shocking message for all managers out there. Of course is this a new bear bond arc market . Try saying that three times quick. Well be right back. Meet the traveling trio. The thrill seeker. The soul searcher. And ahoy its the explorer each helping to protect their money with chase. Woah, a lost card isnt keeping this thrill seeker down. Lost her card, not the vibe. The soul searcher, is finding his identity, and helping to protect it. Hey oh yeah, the explorer shes looking to dive deeper. All while chase looks out for her. Because these friends have chase. Alerts that help check. Tools that help protect. One bank that puts you in control. Chase. Make more of whats yours. Hive digital technologies. A leading Bitcoin Miner<\/a> and gpu cloud operator is building the infrastructure of tomorrow, featuring a robust Growth Strategy<\/a> that aims to double its mining capacity while accelerating gpuon demand business. Hive digital technologies. You cant buy great conversations or moments that matter, but you can invest in them. At t. Rowe price our strategic investing approach can help you build the future you imagine. T. Rowe price, invest with confidence. So, youve got the power of xfinity at home. Now take it outside with xfinity mobile. Like speed . Its the Fastest Mobile Service<\/a> around. With the best price for two lines of unlimited. Only 30 bucks a line per month. Thats hundreds in savings a year when you wave bye to the other guys. All on the most reliable 5g network nationwide. You really shouldnt walk out the front door without it. Switch today at xfinitymobile. Com. Nice footwork. Man, youre lucky, watching live sports never used to be this easy. Now you can stream all your games like its nothing. Yes [ cheers ] yeah woho running up and down that field looks tough. Its a pitch. Get way more into what youre into when you stream on the xfinity 10g network. You know the good news foreinvestors that history is often a guide, right . But history maybe never has seen anything like what were dealing with right now. Take a look at that, Government Debt<\/a> level skyhigh, going even faster. Treasury issued 3 trillion in debt this year alone. Will be a lot more next year. The Biden Administration<\/a> has a ambitious plan to remake u. S. Energy which means spending a to go ton of money. All the spending is ramping up. Government interagencies are buying or increasing their bond ownership. So how do we navigate what is becoming a serious maze of confusion . I want to bring in simplify chief Asset Management<\/a> mike green. Mike, before we do this, i was looking at your note from the 22nd, it begins with market efficiency is not the question. What is the question, maybe if you can, what is the answer . [laughter] sure, so market efficiency is a measure how accurately markets react to underlying fundamental measures. It is never stand still sort of metric. We know markets react to information. We know there is a degree of efficiency. The real question is are they using the Information Available<\/a> to us to provide for what were trying to do . Are markets trying to actually allocate capital to Good Companies<\/a> . Are markets trying to create returns for our retirement objectives . Are they trying to beat inflation, et cetera. What is the painful thing were asking markets to do far too much. Were asking our governments to do too much and asking our markets to do far too much in this environment. Charles how do you uncomplicate that . I would add the Federal Reserve<\/a> has too many hats, and they keep getting more responsibilities. How do you, how do we take the pressure off . Well, one of the things we have to start doing is we have to start understanding what we mr. Actually asking markets to do and so most people have investments in their 401 k for example, relying on markets to provide for their retirement. Nobody ask in defined benefit plan anymore. Nobody has the ability to rely on corporate employment and a pension, et cetera, except for Government Employees<\/a> or for things like medicare, et cetera. Those are exactly the benefits that youre seeing explode. So ironically weve actually created conditions under which americans have increasingly outsourced their retirement to a market that has no real obligation to them and unfortunately every time that starts to go wrong we need the Federal Reserve<\/a> to step in and bail it out for us. To make sure our retirements are intact. To me the mosting it part of this scenario were at right now is, im looking at the yield of 10year on your screen right now, were given an opportunity in many situations to take that uncertainty out. I think that is the message youre hearing from many of your guests right now. The Federal Reserve<\/a> has been very explicit. They raised Interest Rates<\/a> to the level that is restrictive to design to slow the economy that cant be sustained. If we know that the answer, then the answer has to be we should be increasing our allocations to bonds. All right. Before i let you go then, bill ackman covered his bonds short today. Took a victory lap. Does that sort of add to, i know you do your own work but that sort of signal maybe other folks are hooking out there thinking the better part of this trade is to go long rather than short . It certainly seems that way. Bill has not explicitly said he has gone long but i would point out he has gone at least pearlings long, right . Fantastic trade on his part. He caught the supply story, increase in bond issuance coming. Congratulations to him. Great to hear he is seeing the same opportunity that im seeing. Mike, wish we had more time. I was going to ask but the Upton Sinclair<\/a> quote but we dont. Love reading your work. Well do that another time. Charles i learn so much reading your stuff but im always in the dictionary to understand your words. Appreciate it. Jay powells speech on the new york economic club, powells actions on treasury lately were not shopping but were hoping for more. Almost resigned to the fate he is trying to tighten while the treasury is pushing modern monetary theory. Tim sweeting about the encore presentation of unbreakable town hall. Great show. Love the message to never to take a loss rather and never give up. So inspiring after this week t was perfect timing. Thanks a lot, tim. Always love hearing from you. Tweet at us, cvpayne, woe want to share the comments when we can. Coming up nine republicans have thrown their hat into the ring for house speaker. Can any of them get 217 votes this week or ever . I will ask congressman not just the bond market you about the stock market. Lance roberts, ann mileti to here to help you navigate your way through this. This is Spring Semester<\/a> at over 13,000 us school districts, which have become top targets for Ransomware Attack<\/a>s. But theres never been a reported Ransomware Attack<\/a> on a chromebook. Which is why thousands of schools like the fairfieldsuisun Unified School District<\/a> switched to google tools for education. So they can focus on teaching and 22,000 students can focus on learning, knowing that their data is secure. this isnt just freight. These arent just shipments. Theyre promises. Promises of all shapes and sizes. Each, with a time and a place theyve been promised to be. A promise is everything to old dominion, because it means everything to you. Charles all right, folks, thinks a moment of truth but its also the moment where guys like Warren Buffett<\/a> say maybe you should be thinking about buying rather than selling but why . Lauren simonetti is here to set the stage for you. Or the report charles, thanks for having me. The theme for today, the struggle is real. It is certainly true for the stock market which is right here, orange, maybe dipping into the red. Fear territory, here is extreme fear. This is the moment of truth. As the s p 500 is at a key support level. Here it is, 4200. Can it hold it amid the biggest drawdown from the october 2022 low. So this is the support level right here. You want to hold the 4200. Meanwhile wall street is busy going over the history of curve steepeners, the process of bond yields uninserting. History does suggest curves steepening coupled with increased credit tightening, leads to here is the uninversion. This woe actually lead to the fed cutting rates. If that happens, the same time, the same way this time, then maybe the cme fed watch tool isnt farfetched in modeling right here, that a rate cut is coming next june, a 37 chance of a quarter point cut then. This friday, key date, that is when you get the pce report, it is out. It may add clarity to the inflation story and the recession debate. But dont forget, a lot of very influential earnings reports are in between now and then including the big tech names which are sensitive to rates. The last point i wanted to make here, this quarter is supposed to be be the Inflection Point<\/a> that will see earnings build over the next two years t has gotten off to a pretty sluggish start but if this is true then earnings will look good going out, charles. Charles they say earnings are the mothers milk of rallies. We need some kind of milk, lauren. Im chugging whiskey right now i can tell you. I appreciate it. Bring in ria advisors lance roberts. I know down in texas you drink whiskey with corn flakes, you say stop being a wussie. Lance, this market seems oversold. Im not saying it is going back up but i know traders have to be salivating here. There are a lot of issues. How do you rank issues most impacting this market . Right now the issues hitting the market over the last really month, has been higher Interest Rates<\/a>. That has been a big drag here. You know, but we are, again we kind of laying out the case here. The markets are getting pretty oversold. Sentiment is getting very negative. This is the kind of setup that youre looking for. There is a lot of fear built up everybody you talk to like oh, my gosh, rates, and the economy and too much debt and deficits, that fear is actually very good for the stock market and this provides us opportunities for these rallies that kind of come out of nowhere. You and i talked about this last october. Super negative sentiment is good for the markets. Were back at that level again similarly. Same type of oversold condition here we had last october going into november and buybacks start after the bell today. Good support when going into the end of the year. Charles what are your thoughts on this curve steepening thing . There is a bear steepener, and bull steepener . This is socalled bear steepenef everything works according to schedule weve got tight credit at some point soon, sooner rather than later the fed is back in the picture cutting rates. Yay, you got to be, you and i talked about this the last couple weeks, what were talking about a rally into the end of the year. There is a lot of reasons for the markets to go up into the end of the year. Once we get new 2024 it is a different ballgame. This monetary tightening, higher yields what is happening in the housing market, what is happening to consumers, that will all weigh on Economic Data<\/a> that will be slower economic growth. Earnings are going to slow down. That kind of chart we look at in a minute with this kind of trajectory of upward growth in earnings neck year. Will likely not manifest itself. As investors we need to be more cautious into next year. Value overgrowth will likely be the place to be. You read my mind. Last two questions i was asking about earnings and how ideally your portfolio should look. Are you overweight equities now or are you still hiding out in bonds . Yeah yeah still have our bond position and we added to it here just recently, because we think were close to the end of the rate hikes. Were fully out. We run a 6040 allocation. Were fully allocated to equities right now. Were using this decline over the last month 1 2 to buy positions we really like here. So we added to some of our growth tech names, nvidia, microsoft, apple, google. Were buying some other names like cvs, is deep discount value stock. We like the Health Care Sector<\/a> going forward. We. We are getting older, need more health care. So there are good opportunities on the value side as well. Charles lance, good stuff, appreciate it, man. Thank you. Charles well put up the famous roadmap we allowed to before. You have the socalled steepener. Then you have credit getting tighter what were seeing, typically in six to 12 month span the fed starts to cut rates. My next guest is saying maybe market is too optimistic the fed lowering rates and we cant use the same playbook we used in previous cycles. We have ann mileti this is a new paradigm, a new day . I do. Charles really . Certainly a new day from where weve been the last 15 years or so where i fed i think will not have the ability to come to the rescue. Charles so then what happens . That sounds so ominous. Were so used the fed breaking it and putting it back together . It does not sound as ominous it might team. I agree with your last guest and some of what was said before. I wouldnt get out of the market because there is a lot of reasons that equities still have the potential it foregood returns but i think you have to be much more cautious as an investor today because youre not going to have the bailouts weve had in the past. It is just, market is not set up that way. With rates likely to be higher for longer and inflation likely to be higher for longer it is not what weve seen in the last decade plus. Charles so on the equity side, i know you like quality and im going to put up on the screen a what you define it as, strong balance sheets, free cash flow, Proven Management<\/a> teams. A lot of folks say if youre in equities be defensive but some of these are names, when you look at these names i think some of the more high beta names that are strong with pretty strong balance sheets. They dont need to go, dont need to worry about refunding their debt. They have got competitive advantages. They have product the that people want and theyre high, high beta names . They can be but they also can be in the small cap space, in the midcap space, they can be in the defensive areas. I mean one of the, couple of areas that we actually like right now that have been sold off by incesttores, health care, staples, even utilities and reits. The areas that really underperformed. Charles why have they underperformed though . This is the script, the usually goes in this sort of a market, those are the traditional safe havens. Utilities you get a fat yield. Theyre not volatile. Utilities have been hammered. They have been crushed certainly, investor have gone for where there has been growth and Earnings Growth<\/a> and it actually has been a very, very narrow area of the market. Charles right. And you know people get so excited about earnings. Earnings really havent done anything. They have been flat. Charles right. But a few select names have shown some Earnings Growth<\/a>. People have paid extraordinary multiples for that earnings but when you look at where earnings are coming, potentially next year, i do think in some of these areas, especially if we head into a recession or the economy looks a little bit more dour those are the areas where you will see investors run to. Charles how long do you think this, is this new paradigm for lack of a better term, how long does it last . I think were here for quite a long time. Charles really . It is not just because rates are here, are going to be charles higher for longer, yeah. Inflation is really going to be hard to kick. You talk about it on your show a lot. Globalization is not coming back the way that it was in the past and some of the trends that were seeing how are inflationary. It is good to bring jobs back. It is good to bring some manufacturing back but the shifts that are happening now are inflationary today. Charles im running out of time, if that is the case, the fed has 4,000 ph. Ds you think maybe, i know jay powell is loathe to do this, he pushed back on it, maybe they should make an adjustment . Do we have to be at a 2 target . Well see what happens. There is yin and yank between fiscal and Monetary Policy<\/a> right now they want to stay in their hain with Monetary Policy<\/a> so well see what changes. I do love the fact, charles you continue to tell people too be optimistic. One of the reasons why, we cant forget that ion when things look dour, bull markets are really, really powerful. Theyre way more popular than bear markets. They have been around for much longer. Their prevalence is much higher. They last five times longer than bear markets and average return over the last 50 plus years, actually since 1950 the average return for a bull market is 365 , versus a 33 decline for a bear market. There is still reason to be optimistic. Charles it is nuts to get out right now. Im holding a lot of hands, ann, but ive done this for a long time, over 30 years and you know, the people that listen, come back around say thank you. Those that dont i just feel bad because you know history does repeat itself. Thank you very much. I appreciate you coming . H in . Thank you. Explore endless design possibilities. To find your personal style. Endless hardie\u00ae siding colors. Textures and styles. Its possible. With james hardie\u2122. Is it possible to fall in love with your home. Before you even step inside . Discover the Magnolia Home<\/a> james hardie collection. Available now in siding colors, styles and textures. Curated by joanna gaines. He hits his mark center stage and is crushed by a baby grand piano. Youre replacing me . Customize and save with liberty bibberty. He doesnt even have a mustache. Only pay for what you need. Liberty. Liberty. Liberty. Liberty. Charles so iey, coming in. The week we also reflect. Last week nothing was working, right . Maybe more worrisome, large cap growth, right here that was your worst performer last week. That was the dominant performer all year long. People say we want to rebalance yourself. Here is the problem, selling large cap growth doesnt mean they were buy anything else because that was certainly the case. Here is another problem, number of stocks trading below the 200day moving average. If they get low enough, it could be a buy signal. Single digits, 2008, twine, those were clear buy signals. Im not sure that is the way to go. I want to bring in kaltbaum capital management, fox news contribute contributor gary kaltbaum. There is internals are so bad it looks like a buy signal. Youre getting close to where the sellers are washed out we can only hope. Let me state for the record, the internals and technicals as i go through 2,000 stocks every day, are some of the worst ive seen on record in comparison to the money flowing into seven to 10 names that hold up the big indices, while the russell 2000 down 32 from two years ago. It is an amazing thing to watch. The big money is seeking the biggest names and the most liquidity out there, even to this date doing the same. Charles with that though, i mean were looking at small caps because if history, if history had repeated itself small caps would have been the names that brought us out of this this year. Except to your point theyre getting hammered. So many of those names, these companies have to go, to find ways of raising money the higher Interest Rate<\/a> environment. I think people are looking at them from a fundamental point of view having difficulty excoot the business models, cant afford new workers. Theyre in a bind from a turn fun point of view . Not much happens by accident at wall street. You have the big institutions looking at these things, if you are a Small Company<\/a> maybe accessing capital is little tougher and your stock can suffer. If youre like apple with, bazillions in cap call and buying back trillions of dollar worth of stock you end up acting okay even though apple is not even such a strong stock right now. Charles right. There is definite divergence going on. One plus one actual cause two. All i have owned is megacap techs which kept me in good stead. I wait for earnings and hope and pray at this point in time. Charles warren pie posted a interesting table. I share it with the audience. Market breadth declining and Interest Rate<\/a> increasing. Relationship is absolutely phenomenal. This is where were at now, the reason i bring this up, bond yields and Federal Reserve<\/a> and it just feels like theyre casting a darker shadow over stocks than i can ever remember. Every day i wake up i have to look at the 10year yield before i look at anything else you have to remember markets have been used to one man printing to nine trillion dollars, taking rates down to zero. That has ended. Markets also know he cant do that anymore and that is what is the overhang at this point in time. You know, the hope is 5 is the top. Were not going higher. Thats the hope. Hopefully bill ackman is right covering his short. I dont know if he is buying his bonds but covering the short is a start. My big worry, charles, i have a to give you these numbers in 2007, fed funds rates and 10year yield are about where they were as they are right now, just about very chose but back then we had nine trillion in federal debt. Were at 33 1 2 trillion right now. Weve gone up two trillion in the last five months, were headed to 50 trillion and the big worry is the bond market going to be looking at inflation which is coming down or debt which is skyrocketing . By the way economics 101 says when debt goes higher yield holders will want more. Charles right. That is whether rates keep going up. So fingers crossed were getting closer to the end because i have got news for you the market and economy will not be able to take 6 and 7 10year yields if that occurs. Charles i agree. Trillion here, trillion there,rs pretty soon we talk real money. Well be right back be ready for any market with a liquid etf. Get in and out with dia. This is american infrastructure. Megawatts of power, rails and open road, and essential services of every kind. All running on countless invisible networks, making it a prime target for cyberattacks. But the same aipowered security that protects all of google also defends the systems running americas infrastructure. For these services. For the 336 million of us living here. Nice footwork. Man, youre lucky, watching live sports never used to be this easy. Now you can stream all your games like its nothing. 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See me find relief that can last. Ask your dermatologist about cosentyx. Charles we have breaking news. Hamas released two more hostages, both israelis. Well get more details. In meantime house speakers race has expand the to nine republicans. Joining me Ohio Republican<\/a> Warren Davidson<\/a>. Congressman, i guess the big question can any of those unite the party, reach that magic 217 number and get away from some of the stuff that now seems really petty at this point . Well i think that is the challenge. Everyone is so focused on the person, challenge, the real issue, what is the plan that is going to bring us together. The idea the plan any one person can unite everyone. We crossed that bridge. It has to be a shared mission at this point. Kind of forums and Everything Else<\/a> is focused on the person. I dont think were focused on solving the problem right away. Charles i think were looking at people. I believe looking at this, this is a battle. It is a battle between the old establishment Republican Guard<\/a> many who retired or voted out of office, the new you could call it maga republicans i think grassroots voters overwhelmingly prefer those voters and yet feels like there is enough springs being pulled to deny someone in that space this opportunity . Yeah i mean that was kind of the paradigm last week. Jim jordan, very popular, probably the second most popular republican in the country after donald trump. Grassroots were dumping phone calls and emails and every other kind of message they could get into here, Pay Attention<\/a> to us, we want jim jordan but frankly if you hook where the opposition was concentrated it was kind of with the old bulls, people that are used to getting their way on appropriations, shortterm crs until we get omnibus, status quo kind of agenda, that is really the core of what blocked jordans path to the speakership. The core of that core is u. S. Spending right . It is huge. It is out of control. You know rubber stamping these deals. For instance i know, from what i read senator mcconnell is okay with 106 billion President Biden<\/a> is asking for. But i got a chart on the screen, shows how much foreign aid we put out there, who gets it the most. After afghanistan, rebuilding that nation. Billions and billions 6. Iraq, billions and billions of dollars. Ukraine, this is the war, how much american taxpayer will be on the hook for . Im asking you, you just posted an oped, ukraine is officially americas new forever war, President Biden<\/a>, how does this end . Obviously we all want putin to be vanquished but this will be expensive tab, not just the war, rebuilding effort american taxpayers are probably going to pay for . The idea were going to rebuild ukraine. We didnt destroy ukraine. The assets seizes all over the world russia to go to ukraine to rebuild. We have to get the peace. Gerhard schroeder, former chancellor of germany, he had smoking gun evidence the United States<\/a> was interjecting itself to prevent peace negotiations between russia and ukraine earlier this year. So that is disappointing. Look, it really should be up to ukraine to negotiate their peace terms, not the United States<\/a>. I think there is a feeling that a lot of folks in the United States<\/a> have really pushed for more wars in more places at every opportunity. We dont have to accept every opportunity to get involved in a war. Charles less than 30 seconds, real quick, the argentina president ial race is in a runoff which is interesting considering the lead that milay had in the polls. Nevertheless he is antiestablishment candidate. He is a probitcoin guy. He is talking about getting rid of unnecessary spending. Sounds like the kind of guy who could be speaker of house. Maybe if he didnt win this maybe you guys bring them to d. C. [laughter] his message fits more freedom, sound money. I dont know much else about him but those values are pretty good. Good. Thank you very much. David sown folks well be right bag. That you and your family need. I promise to put your longterm Financial Wellbeing<\/a> above any short term transaction. Everyone has a big picture. My job is to help you invest in yours. Charles schwab is proud to support the independent Financial Advisors<\/a> who are passionately dedicated to helping people achieve their financial goals. Visit findyourindependentadvisor. Com upbeat music constant contacts advanced automation lets you send the right message at the right time, every time. constant contact. Helping the small stand tall. When youre looking for answers, its good to have help. Because the right information, at the right time, may make all the difference. At humana, we know thats especially true when youre looking for a Medicare Supplement<\/a> insurance plan. 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Charles a topic that covers activations prospects to protect enter protect to defend ourselves, in some ways a major confidence in citizens confidence in that fertility, last week the post article fertility marriage and the power of social societal norms, i want to begin iws Vice President<\/a> for policy holly heath manning. I gotta tell you i was shocked when only 88 of americans say they did not want children enter content not having them, i thought the number was a lot higher, what are your thoughts there. This is where there is a disconnect between peoples desires and peoples outcomes and behavior, yes we still see the case across generations that there is a small group of people who say they never want to have children, overwhelmingly people expressed the desire to have children, unfortunately what we see the most recent generation or two many people who desire and set out in life thinking topic about mom or dad the end up with a different outcome the interbeing childless thats on the choice is involuntary and the result of not finding the right partner or not being able to have children later in life if they plan on completing a career or a degree first, it is a variety of factors, its very unfortunate because there is a lot of grief and heartbreak around this issue. What are the areas that we saw split apart as the Global Financial<\/a> crisis, took a toll on our birthrates but we have a chart here where the trend was going and after the Global Financial<\/a> crisis where it is in the red and now weve come out of another difficult economic environment. The economics of the saying it is too expensive, how much is that playing a role. I think the expectation appearance today of both finances enter time and Energy Commitment<\/a> are different from what they were a couple of generations ago, this places a burden on parents and projects to younger people that parenting is a drag or parenthood is a burden when in reality it is a great blessing. I would say the economic factors are certainly there that we have seen a decrease in fertility since the mid1970s. Of course the greater availability of Birth Control<\/a> is a factor, womens greater participation of the workforce as a factor but the single most important factor in our fertility crisis is actually a married crisis, married couples are more likely to have children more likely to have more children, too. Married household is the best environment for children. We are seen downstream of the marriage crisis is a reduced number of birth and children. Charles in the 70s we saw everyone was getting nervous paul had the population of 68 about harming the planet were hearing a lot of kids talking about that. You only have 15 seconds but to what degree people are saying i do want to have children i want to save the planet. I think some of that is there but the reality there will be implications from a population but not just for our government budget but our economy, we will experience a lot less joy in this world because of the reduced number of children we need a future generation for the workforce to become taxpayers and take care of us in our old days and im hopeful that we can turn things around and the desire is still there according to the poll. Charles it away started desire, Ashley Webster<\/a> and for liz claman. Thank you very much charles, i will take it fro","publisher":{"@type":"Organization","name":"archive.org","logo":{"@type":"ImageObject","width":"800","height":"600","url":"\/\/ia801501.us.archive.org\/16\/items\/FBC_20231023_180000_Making_Money_With_Charles_Payne\/FBC_20231023_180000_Making_Money_With_Charles_Payne.thumbs\/FBC_20231023_180000_Making_Money_With_Charles_Payne_000001.jpg"}},"autauthor":{"@type":"Organization"},"author":{"sameAs":"archive.org","name":"archive.org"}}],"coverageEndTime":"20240703T12:35:10+00:00"}