Program: Cavuto Coast to Coast
Station: Fox News Channel
DAVID ASMAN: But first, inflation and inflation, is it permanent or transitory? That is the question the Fed is debating as we speak right now. We’ll hear about their decisions coming up. But markets are on edge, waiting to hear whether the central bank will pull back on its money printing sprint. Our all star panel is here, Kingsview Asset Management CIO Scott Martin, Fox Business correspondent Susan Li, and Through the Cycle, president and founder John Lonski. A great panel. Thank you all for being here. So, Susan, what are the markets expecting? They seem not to not to be too certain about what’s going to come up.
SUSAN LI: Yeah, well, what does transitory mean? Because before you’ve heard the Federal Reserve say maybe two to three months and now is it for the rest of this year? We know that inflation has run hot now for the past three months. You have a five percent increase in prices, consumer prices, the fastest, two thousand eight. So I guess the discussion is when do they take away the punch? Bowl is a twenty, twenty two. And then do you get the first interest rate increase in twenty, twenty three? I think the markets are passing and looking for some sort of wording from Jay Powell later on today.
ASMAN: Scott, which way. You bet.
SCOTT MARTIN: Expecting not much, David, actually, I think the real news is going to come out in the Jackson Hole meeting in a few weeks here, but I’ll tell you what else is going on here, David, is you talk about this transitory notion of inflation. Susan’s right. The setup is exactly correct. It was a couple of months and now it’s several months. And as long as they keep using that word along the line, I guess it’s still transitory. And I’ll tell you, interest rate projections are hard to handicap right now because we’ve got softening economic growth coming down the pike here in Q4 and Q1 of next year, which probably puts off the rate hike at least another six months into two thousand twenty two.
ASMAN: Well, John, earnings, of course, are looking in the rearview mirror, but we have these spectacular earnings yesterday, almost 60 billion dollars between three companies, Microsoft, Apple and Google or Alphabet, as it’s now called. So you had these spectacular earnings from the high tech companies. You still have a lot of demand out there. There’s this pent up demand. People with a lot of cash, they want to spend it. But you have a labor shortage. You have you have inflation. You have certain pushbacks on supply, supply chain, mess ups and and strangulations going on. So. So what’s your bet on what the economy is going to be doing in the months to come?
JOHN LONSKI: I think the economy’s going to slow down. We have had a number of downward revisions for predictions of economic growth during the second half of this year. You know, we had, for instance, GDP now by the Atlanta Fed earlier. They thought that the second quarter and we’re going to get a report tomorrow on second quarter GDP, the second quarter GDP growing by something faster than 10 percent. Since then, that forecast has been lowered to seven point four percent. Basically, David, what is happening is that price inflation, higher prices are beginning to take their toll of household expenditures. The best example, housing. New home sales in June were a disaster, down nearly seven percent monthly, down 19 percent from a year ago, despite still very low interest rates. I think the Fed is quickly finding that it’s going to be between a rock and a hard place. If it hikes rates to try to cool inflation, it will hurt the economy. If it does nothing faster, price inflation will lead to pullbacks by consumer spending.
ASMAN: But, Susan, they’re going to have to rewrite their mandates, if that’s true, because they have two major mandates. One is for price stability. As we talked about, there isn’t much price stability right now. Inflation is going up. There are even signs that it could be double digit next year if if that’s conceivable that we could go back to the late 70s. And the second mandate is on unemployment. Well, we have nine point three million unfilled jobs. Yes. They might not be paying as much as the government is for unemployment benefits. But the point is we don’t have an unemployment problem right now. So is the government just getting in the way
LI: And finding the workers to fill those jobs? And they also say that there’s a Fed put out there being that there’s a third mandate, which is to protect the stock markets, because a lot of people on Wall Street says that if we see the stock market fall 10 percent, you bet the Fed will step in at some point, as we saw in the depths of March last year, which they should have done. But, yeah, there are concerns that right now maybe the economy is running too hot. There are a lot of jobs out there, not the right people to fill it. And maybe it is time to take away the punchbowl. Now, if you take away stimulus, it doesn’t mean you can’t be reinstated once you see some sort of slowdown or some sort of hiccups in the economy.
ASMAN: But but but right now and again, Scott, it has to be the last word. I’m sorry, John. We’ll get back to you. We’ll start with you the next round. But but the fact is, is that we have the government just getting in the way of this amazing emergence from from all of the lockdown’s, which was creating all this spectacular growth. I’m wondering if the government is causing more problems than they’re solving right now
MARTIN: For sure, David. And creating new problems every day. It’s the classic case of government knows best. Government knows how to do best with your money, not you, yourself, the business owner or the spender. And that’s really where I think we’re at this crossroads here, because the Fed has done what they needed to do. The government has gotten in the way and created more inflationary pressure. And they seem to keep doing that with some of these crazy spending packages that have yet to be passed through Congress.
ASMAN: A panel this good should not be missed in their second round, which is coming up later in the hour. Good to see you guys.
Program: Cavuto Coast to Coast
Station: Fox News Channel
DAVID ASMAN: Well, meanwhile, Beijing’s crackdown on US listed stocks is fueling a record drop in those stocks. Let’s bring back Scott Martin. Susan Lee and John Lonski. Good to see you all. Susan, what is going on in China right now? I mean, President Xi is a communist, even though he’s allowed you know, he sits where he does because of the sort of free market pushes of his predecessors. Is he going back to the old a stricter communist model of dealing with the economy?
SUSAN LI: Well, if you ever go to China, you’ll see it’s actually a very capitalist society. People there just want to make money and make their lives better. But there’s a lot of debate in terms of what exactly is a long term goal of Beijing and Xi Jinping and the Communist Party. Because really, when you’re clamping down on big technology like they have been in the last few months, you’re really cutting off your nose to spite your own face. Right. So what is a long term goal? Is it just domination, control over data, over the economy, over the markets? Or do you want your home grown talent to make lives better for the billion people that live in the country? I think there’s a lot of debate about that. But I will say that Bitcoin has actually benefited from this clampdown. A lot of money has been taken out of these Chinese stocks and worse two day wipeout since, two thousand eight. That money has gone into other assets, speculative assets like Bitcoin, John.
ASMAN: So far, the Bush administration hasn’t really changed that much. The policy of the Trump administration, one of those rare things where it hasn’t undone the good stuff that his predecessor did. But do you think that will last or do you think we may have sort of relations with China that perhaps a lot of people would would would voice their opinions against?
JOHN LONSKI: Well, I think the Biden administration will continue to take a critical view of what is taking place in China with the intentions might be they will be very wary of attempts by Chinese companies to purchase U.S. companies. And Susan, I think put it quite well. The Chinese government appears to be shooting itself in the foot. I mean, they have a very creative, innovative, highly educated population that could do wonders at creating wealth for China. And yet they seem to be putting limits on the ability of the Chinese economy to grow. And this brings up an important point. You know, years ago, the 1950s, high ranking U.S. academics, Paul Samuelson made the argument that the Soviet Union would surpass the US economic never came close to happening now. And the more you try to stifle initiative in an economy, the less likely is the economy to reach its full potential.
ASMAN: Well, Scott, on the other hand, you see all those people there at one point, four billion of them, and companies like Coca-Cola and the others at Nike that have their their fingers all over the place are willing to forgive all of the problems that China has. They’re willing to kowtow to the Chinese Communist Party to to maintain their market share in China. But and this is a very important but that I want you to deal with. You have the issue of the pandemic. We will not forget where the pandemic came from. We will not forget the way they unleashed it by allowing the people from move to travel to Europe and to travel to us and infect the rest of the world and perhaps perhaps having invented it inside a lab. Won’t there be repercussions from that that will affect economically our relations with China?
SCOTT MARTIN: Well, there should be, David. I mean, I’m waiting for the administration every day to do something about what happened in the Wuhan lab a little over a year ago. And certainly if you look going forward and based on history, you can’t trust China, whether it’s economically, whether it’s medically. We don’t have a friend there, obviously. And if you look at back, you know, earlier this month, they had the hundred year celebration, I guess it was, of the CCP, which was highly their militaristic. It was highly affronted to the rest of the world as some of the comments that President Xi made versus the other rest of the world leaders and rest of the world countries about what the Chinese government was going to do to people. And so, look, going forward, if we think we’ve got a friend in China, we’re sorely mistaken and it’s already costing them internally. Yes, a lot of money as far as how they’re clamping down on their own, their own companies, but also what it’s doing to some of our companies that are trying to get in there and do business
ASMAN: Susan,John Scott, what a great panel. Thank you all for being here. Appreciate it. Well, it’s one of the.
Program: Your World with Cavuto
Station: Fox News Channel
SANDRA SMITH: Choppers still taking a bite out of Apple, the tech giant blowing through earnings and sales expectations, including big iPhone sales. The stock is little change in the after hours, but what is this telling us about the state of the US economy, the global economy, I should say? Let’s talk to our money guy, Scott Martin. I mean, record profits, dollar 30 a share, a record quarter record, June, record quarter, I mean, sales. One hundred and ninety four billion in cash. And by the way, Tim Cook is also confirming that return to office has been delayed to October and possibly later. So they’re doing all this while so many people are still working from home. I mean, Apple just keeps winning.
SCOTT MARTIN: They keep winning like Charlie Sheen once was, Sandra. And I’ll tell you what I mean. The numbers are outstanding, like you mentioned. I’ll throw in another one to record numbers for iPhone sales. Five billion, by the way, Sandra, ahead of what the street expected, five billion sports fans ahead in revenue. So, I mean, the estimates can’t even be high enough for Apple yet. You made a really good point, Sindarin. You this from your experience in the market, the market’s flat, the apple prices is flat. The stock price, rather, after hours is flat. And some of the other companies that came out like Google, Microsoft, others are kind of flattish. Same thing as well, because they’re already expected. Yeah, these are expectations that are built in this market. So be careful if you’re out there buying these stocks as an investor.
SANDRA SMITH: So while we’re all complaining about higher prices of our groceries or fuel, certainly we’re not letting the six hundred dollar iPhone bother us. There are still buying that. What does that say about the state of the economy?
SCOTT MARTIN: Well, I would love to find a six hundred dollar iPhone because, I mean, the last one I bought, this one right here was like a thousand and five. I mean, look at you know, there’s refurbished. That’s exactly right. The lower models, which, by the way, every time they do an upgrade on the iOS or a new iPhone comes out, that other model gets stupider, it seems like. But here’s the point. You’re right. It just do an experiment. If you go out today or go out tonight, walk around and see how many people are glued to their phones, where they’re walking around or in their cars driving. It’s unbelievable how these things are basically an extension of our arms and legs here. So the fact is these are integrated more than ever into our lives via the service revenue, too, by the way, which is another great number in today’s earnings report for Apple service. Revenue was about a billion ahead of street expectations as well. So that’s like the the Apple music, the Apple Arcade, things like that cloud. So, Sandra, the fact is, Apple is the biggest part of our lives, really, that we probably have as far as tech companies go. And they’re just going to keep on crushing
SANDRA SMITH: it and they crushed it. And I have to tell you, there’s an Apple and Grand Central here. And while Grand Central still half empty because there’s still not as many trains, there is still a line to get in the Apple store there. They stop you. If you don’t have a mass, they hand you a max, they line you up the stairs like this. And I mean, people just keep buying them. So that turned up in the earnings. Great to see you, Scott. Fellow Chicagoans. Thank you. So you all right after.
Kingsview SVP Paul Nolte discusses weekly jobless claims, how long it will take to return to 2019 employment numbers, and the market reaction to jobless claims, earnings reports and Chairman Powell’s Congressional testimony.
Reuters interviews Paul Nolte, SVP & Sr. Portfolio Manager
Kingsview SVP Paul Nolte discusses the rotation back in to large growth.
Kingsview CIO Scott Martin discusses the pace of the interest rate plummet, the housing market, and earnings in the S&P 500.
Program: Cavuto Coast to Coast
Station: Fox Business News
NEIL CAVUTO: Let’s get the read from Scott Martin, Kingsview Asset Management. We’ve got Luke Lloyd back with us as well as Strategic Wealth Partners. Luke, to you first on whether the bond market is telling us something that the stock market doesn’t want to hear. What do you think?
LUKE LLOYD: Yeah, Neil, investors can’t have it both ways. There are two narratives going on right now. Investors get scared when yields rise because of inflation concerns and then investors get scared when yields go lower because of economic concerns and the delta strain of the virus. You can’t have it both ways. The question you have to ask yourself is, what is the best case scenario? And then what is the most likely scenario? The best case scenario? Yields continue to rise because there are no more shutdowns in the economy remains high. What is the most likely scenario? I think that same scenario is the most likely the US can afford or handle another lockdown and half of the population is fully vaccinated. I think these concerns are just temporary and the stock market continues to slowly grind higher.
CAVUTO: Interesting because, Scott, you know, you could make the very argument that this is happening, it’s going to be beneficial to stocks, right? Because the lower those yields go, obviously dividend yields of the S&P 500 are a lot higher. You could make the argument that you’re getting squat in bonds. It might be safe, but you’re not getting much bang for the buck. So it might as investors try to regroup through this, be a good thing for stocks. What do you think?
SCOTT MARTIN: Right, that’s the funny thing, Neil, it’s just I think if you look at the pace of this interest rate plummet, as you kind of highlighted at the beginning of the show there, that’s concerning. I mean, we were up near one point seven three percent in the 10 year just a few months ago. Everybody calling for two, two and a half even heard some threes out there by the year and now everybody’s calling for maybe one. And so I think it’s the pace of that
fall in the yield that’s really concerning. And then also, if you juxtapose that, though, versus stocks, like you said, yield on stocks, dividend yields, their earnings yield on the S&P, the fact that a lot of techland is highly leveraged, therefore, their borrowing costs are falling by the day as the 10 year rate is falling in itself. Those are reasons to be somewhat constructive, but it just goes to show you how the market gets in these weird moods, whereas Luke kind of pointed out where maybe it’s investors wanting both things both ways or just the fact the market gets in this kind of sell first, ask questions later kind of mood and any news is a bad news and a reason to go for the sidelines.
CAVUTO: You know, you could use it. I think you guys are very good at spelling out the big picture here. Look, you could use the argument here that this could be a worrisome development for technology stocks. But however you look at their downdraft today, they’re still up, up and away over the last year. Amazon going into today, it gained about one hundred and thirty dollars billion in market cap. So I’m beginning to wonder whether this is just a a slight adjustment to that and nothing more ominous. How do you play technology stocks?
LLOYD: Yeah, I think it is a slight adjustment all around, but all all around. I think that’s actually bullish for US domestic stocks. And the reason why is, you know, first off, the US economy is essentially so hot right now and that’s causing issues. Companies can’t hire enough workers to grow like they want to, and that’s scaring investors. And then you have the Delta variant freaking people out again, about Covid. You know, as Americans, sometimes we get tunnel vision and forget about the world. In America, things are looking pretty good. We are open and partyin over here where you take a look globally, things aren’t that pretty. Many countries are still shut down. Listen, you know, here’s the thing. I think this is an opportunity for US domestic stocks to outperform international stocks over the coming years. Not only are we open, but international investors want to own US stocks because we are open. This is bullish for US stocks and technology stocks over the next coming years.
CAVUTO: You know Scott, you could also use the argument that lower rates, whatever the rationale behind them, certainly will help those looking for a home or those who want to refinance the one they’re already in. That typically happens with these type of spurts and activity. And we’ve seen housing ebb a
little bit, maybe because of the price of homes themselves have gotten so high. But what do you expect on the housing front?
MARTIN: Housing feels a little bubbly to me and Neil, not so much, say, 05, 06 or even in the mid teens, but it just feels a little bit hot right now to kind of hot to handle. You’re right, though. I mean, Reifies have definitely been a big boom in the last couple of years for consumers, and that could happen again. My goodness, rates are falling here with the Fed still in play, buying a ton of mortgages, all they can handle. So, look, I mean, housing, staying strong here, I think does help us pull through some of the difficulties here with maybe a resurgence with the Delta variance, maybe just a slowdown in general with the economy. But the one concern I do have to Luke’s point, though, is this overseas issue. Yes, I agree. Domestically, things are pretty strong. But if you look at the S&P, five hundred boys and girls, half of the earnings in the S&P 500 come from overseas. So if the global situation isn’t as good as, say, the US situation, eventually that does concern me for the overall performance of equities going forward.
LLOYD: That’s why you don’t own the S&P Five Hundred.
CAVUTO: Yeah, you could say that. Or the Nasdaq a proxy that. But I do want to pursue that a bit with you later in the show, because I want to get into the fact whether China created this technology round and might be doing that right now. But that’s a little later in the show. In the meantime, I want to go to my buddy.
Kingsview CIO Scott Martin discusses comments from China’s President Xi, and the influence recent events have had on Chinese stocks.
Program: Cavuto Coast to Coast
Station: Fox Business News
NEIL CAVUTO: So it’s really a it brought in this selloff that ensues right now, not as bad as it was when we’re off with more than 500 points, the Dow up about 250 points. The Nasdaq has taken on the chin. Technology stocks in particular have been saying take it on the chin. This actually began in China overnight, in Asia by extension, after people saw what was happening. The technology sector there. And China might lay a lot of the blame for this on the reversal of fortunes and its once thriving technology arena because it’s clamping down on technology. And that is not only hurting Chinese investments there, but now technology in general everywhere. Scott Martin back with us. Luke Lloyd, back with us. You know, Luke, I mean, the Chinese might have started this, the interest rate thing notwithstanding, by cracking down on their own offerings to say nothing of what they used to do to Alibaba and all the rest showing more their military concerns than their economic ones. What do you think’s going on here and how long does it last?
LUKE LLOYD: Yes, so I talked to earlier about how you should stay away from international companies. I think China is where you should stay away from the most. You know, China probing US companies should absolutely. One hundred percent concern investors. You shouldn’t be buying Chinese stocks at this point. The regulatory headwinds that could come from both sides aren’t worth the risk DiDi listing over here in the US then being taken off the App Store in China was a big middle finger from China. They could have done that before the IPO, but they chose to wait. And then the US is already talking about reacting by withdrawing the ADR from the US exchanges. I like to invest in free market countries and China is not that at the snap of a finger they can choose to destroy a company. And unless a company was trading an extremely low valuation at a price that I was willing to pay, I wouldn’t be a buyer.
CAVUTO: It’s very, very interesting, you know, Scott, what’s also interesting is the fact that either China doesn’t much care or it wants its cake and wants to
eat it, too, which is a dumb expression because you have the cake, please just eat it. But I digress. I’m wondering whether China, you know, played this out in their heads and now is shocked at the market fallout to say nothing of growing US pressure to crack down on this sort of stuff, as Luke said, maybe just not to buy their stuff all together. What do you think?
SCOTT MARTIN: Well, it’s a hard thing to avoid, typically, because a lot of companies do business in China. China is on pace to be the largest economy in the world in a matter of years. Billions of people, obviously, the companies want access to. I’m not sure China even lets their people eat cake, Neil, which means there’s more for us in the United States. But if you look at President Xi comments just about a week ago at the 100th anniversary celebration, I guess you’d call it a party on Chinese terms. You know, the things that he said at that at that presentation were actually pretty shocking, pretty aggressive, pretty militaristic and pretty scary for the rest of the world. So when you look at what China is doing, whether they mean to cause an uproar or whether they mean to cause selloffs or not, I don’t think they really care. Neil, I think China is ready to take on anyone and everyone, and it’s something we should all be aware of with respect to how the markets, at least initially, at least as we started to figure out who the real state President Xi is, as the markets have started to figure that out, they haven’t liked what they’ve seen so far.
CAVUTO: All right, good point, gentlemen, I’m sorry to truncate this, but with this breaking news, unfortunate, we have to. We’re going to.