CIO Scott Martin Interviewed on Fox News 5.20.22

CIO Scott Martin discusses the recession, energy re-emergence, earnings and consumer staples.

Program: Making Money with Charles Payne
Date: 5/20/2022
Station: Fox Business News
Time: 2:00PM

CHARLES PAYNE: Now, without a doubt, these are tough investing times, but the market is always about the future. So we’re going to try and see if we can go to some sort of a time machine taking a may 20 of 2023. What are we going to be looking back at bringing in right now to to help figure it all out? We’ve got Luke Lloyd, Scott Martin and Rob Luna. Thanks a lot, guys. First, let’s get your read on recession and how your current portfolio is mixed. You know, stocks, cash, bonds, whatever it is. Let me start with you, Scott. Recession, yes or no?

SCOTT MARTIN: Recession now? That’s right. That’s that’s that’s a factor. I mean, that’s really what people are missing. I don’t care if it’s Scott Ryan or all these other goofballs talking about recession in a year, two years, which is ridiculous recessions. Now. Now, the cool part about that is we’ll get through it faster. It’s going to be shallow, but it’s going to hurt and it’s starting to show up in the market. I mean, that’s why the market is going nuts. That’s right. Rates are going down, boys and girls, right now with all these Fed hikes supposedly coming. And yeah, I’m a little fired up today because I saw this great interview with Edward Lawrence and Jim Bullard. I mean, the guy’s foolish, not Edward. Jim Bullard is. I mean, he’s talking about above trend GDP growth. No worries about stagflation. He’s talking about all these great Fed mandates that are ahead, like they’ve blown it between the Fed screwing this up and the administration. And I’m not talking about Whoopi Goldberg supporting Joe Biden. All these people out there, the actual administration has no clue about helping the economy and helping oil prices, helping the consumer. So we have really bad policy out there on all fronts. And that’s where the market is going down. That’s why we’re being driven in recession. The recession is here.

PAYNE: Luke

LUKE LLOYD: Yeah, I think Scotty hit the nail on the head there. You know, we’ll find out in a couple of months. We’re actually already in recession right now. But here’s the thing that everybody needs to know. By the time we feel the

most amount of pain economically, the stock market will already be on its way back up. You know, we’ve been pretty cautious for a while, but we’re finally nibbling at some stocks again. Finally, the scariest part to me is that two thirds of Americans are living paycheck to paycheck right now. And what happens when the job market starts to take a turn, which.

PAYNE: It will, which, by the way, we have to point out that’s the goal of the Federal Reserve to make it take a negative turn. The Fed is trying to crack the economy without destroying it. No one has confidence, Rob, that they can pull that off our, you know, recession camp already.

ROBERT LUNA: Yeah, absolutely. I think Elon Musk and if Scott Martin says that we’ve got to be in a recession, Charles, I mean, I think, look, we had a negative print the first quarter of this year. More than likely, we’re going to have a negative print the second quarter. So that would mean we are technically in a recession. We won’t be calling that for a little bit of time. But look, the playbook that you use when you’re preparing for a recession, consumer staples, some of those types of stocks, they’re trading more expensive than the growth stocks now. So don’t think that’s going to be a safe haven, guys.

PAYNE: All right. I want to stay with that, because the action in the market itself has been pretty intriguing. I mean, I don’t think a lot of folks would understand that coming into this session. If you go back to May 11th, the Ark Innovation Fund up 17% and that safe haven staples down 7%, including 10% this week. So, Rob, 20, the top 25 positions in ARK now have a price to sales ratio of six. That’s down from 36. I mean, how do we define value in these moments when you have these big value names they told you to sell at a big loss. You went to the safe havens and now they’re getting clobbered.

LUNA: Yeah, look, I mean, like I said, the safe havens, they’re trading more expensive. Look at Kellogg. It’s trading at 22 times earnings versus 17 times earnings on on metaverse right now. So that’s not where you want to be going. And as you mentioned, Charles, and we’ve really seen this as the market is trying to put a bottom ark yesterday was up four, four and one half percent when the market’s down. That’s exactly the type of rotation we need to see. And guys, look, if you’re looking at 2000 is the playbook, the S&P on the S&P right where it was now, the the PE on the Nasdaq back then was 28. Right now it’s 20. So if you’re looking to look at valuation metrics, we’re not that far off here either.

PAYNE: Luke, you mentioned you started nibbling. What are you looking at?

LLOYD: Yeah. So one of the stocks we started nibbling at is Axon Enterprises. So you got to look at current strong cash flow companies and not look for growth in earnings 5 to 10 years down the road. And the fact of the matter is, we do think that we’re entering a recession and a stock like Axon. They supply tasers and body cams to police officers and military. Right. So crime actually goes up in a recessionary environment. So that’s in an area where we’re looking at. And then also in the energy sector right now, you know, oil is not is had a big run up, but nuclear energy is actually where we’re taking a look right now. CCJ is a stock we just picked up as well because nuclear energy is one of the cleanest energies out there and nobody talks about that. And I actually was just talking with an advisor over the past couple of months that specializes in nuclear energy. It’s getting a lot more political drive. And again, it’s going to adopt a lot quicker than people realize.

PAYNE: Yeah, let me stick with the energy theme. Crude oil now up for the fourth week in a row. We know energy has been like the only shining light with respect to equities. Yet if you look at it long term, over the past 30, 40 years, it’s only a spec of what it used to be. In the seventies it was like 25% in the market. Scott, with that. Is it too late to chase these names?

MARTIN: Yeah. Don’t call it a comeback, because it’ll be here for years. Because I’ll tell you what. Energy is starting to re-emerge. Like you said, Charles, we’ve been adding pipelines. I think we have XL already, but we’ve been adding pipelines like MLP because that’s just going to be the toll booth for the flow of the crew that goes through. But I love Luke’s call. To me, we’re talking about more crime in a recession if we can actually handle it, and nuclear stuff. So that’s interesting plays as well because you’ve got to get creative here. Rob talked about it. I mean, Staples, the one issue, guys, that I have a problem with, I mean, Staples absolutely destroyed this week, absolutely hammered one of the worst week Staples have had in years. Here’s the thing, though. The numbers are so goofy on earnings going forward. If you look at Yardeni, Bloomberg, S&P, J.P. Morgan, everybody’s like 250, $250 on the S&P for 2023. You put a 20 X estimate on that. That’s 5000 on the S&P. Okay, fine. But guess what? If that number is wrong, let’s see. It’s 200. Let’s say it’s even less and you put a less estimate or less multiple on that estimate. You’re looking at S&P 3500 or less, maybe 3000 at fair value. They’ve got to get those earnings

estimate numbers right because PE means nothing if those estimates are wrong and.

PAYNE: They’re supposed to be used for P, which is one of my favorite metrics. Let’s talk about the biggest loser today. Ross stores another major blow to retailers. Obviously, they’re dealing with inflation and these massive inventories just as people are spending less money. On the flip side, though, restaurant sales are going up. We could also see air travel above 2019 levels. Rob, you’ve talked about that sort of reopening of FOMO, a yellow kind of thing. I’m getting my acronyms all confused here. Is that a place we want to be right now?

LUNA: Yeah, I mean, I think so. Look, this millennial generation values activities, they value experiences. They’ll actually sit asleep on their mother’s couch to be able to do that and spend the money. I’ve seen that in my own practice, so I think that’s an area you’re going to want to stay with. And so traditionally those have pulled back during recession, I think, because we’ve already had some weakness in those. That is probably a theme that you could stick with, Charles.

PAYNE: All right, guys, we’ve covered a lot. I really appreciate it. Really good stuff. Luke, Scott, Rob, thank you all very much.

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CIO Scott Martin Interviewed on Fox News 12.21.21 Pt. 2

Program:  Cavuto Coast to Coast
Date:  12/21/2021
Station:  Fox Business News
Time:  12:00PM

NEIL CAVUTO: Scott Martin on all this, Scott, keeping the politics out of it, does anyone ask the typical consumer or resident how he or she feels about this? Because invariably it’s going to mean higher energy costs? Say what you will on natural gas. It’s a cheap, efficient and still clean use of energy. And now they’ve got to seek out alternatives that are all going to be pricier.

SCOTT MARTIN: Correct. It’s all fun and games, Neal, until your wallet gets hurt, and I think that’s really one of the issues and in fact, one of the issues that we’re seeing really around the country now. What’s funny about this is if you go to Texas, to Arizona and most likely Florida as well as I put that cut into that category, you get to choose and they’re blocking the effort by governments locally to make consumers choose the electricity over natural gas because to your point, in the lead in with Lydia. Natural gas is something that, depending on how you how you use it, it’s it’s cleaner. It’s everywhere, it’s abundant, the United States, and it’s cheaper. So let’s naturally get rid of it and not use it and go to a power grid that doesn’t have the capacity, let’s say, for everybody to latch onto it or in some cases, the the electricity generation is not as clean. So when you look at it overall as a consumer, I think you think about it both how it’s going to impact your bottom line. And frankly, is it going to be that much more efficient and when it comes down to it being forced as a consumer to choose something over another because the government tells you to do that doesn’t leave the best taste in your mouth.

CAVUTO: What do you think of energy stocks in general? Energy contracts themselves because they’re getting whipsawed, certainly by Macron, and maybe some of these efforts to target more traditional forms of energy for 2022, How does a Scott Martin play it?

MARTIN: Scott Martin plays it with a lot of love, a lot of energy, love materials, and what’s funny is, Neil is that since Joe Biden has been in DC. Would you be surprised to know that the energy sector, the Chevron, the Exxon’s of the world are some of your best performing of the sectors out there? He hasn’t been 500 since this war on oil has been going on. It’s only now actually crude the stocks. So I believe that there’s going to be a lot of conjecture. There’s going to be a lot of back and forth with respect to how the administration is going to tackle the energy crisis or lack thereof that may be going on in the country. And so there’s going to be volatility and money managers, as advocates for clients were using that volatility, Neil to add to positions to put in new positions when they fall like they did yesterday, for example. And if you look at today just down in the lower quarter, their energy is one of your best performing sectors today as we’re getting the market rebound.

CAVUTO: Yeah, they are disproportionately weighted to when some of these populations, including the Dow, thank you very much, Scott. Good seeing you again, my friend Scott Martin on those developments here.

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