Kingsview CIO Scott Martin discusses the psychology of the market. He talks about taking advantage of buybacks and future market rallies, as well as names in the discretionary space.
Program: Making Money with Charles Payne
Station: Fox Business News
CHARLES PAYNE: So once again, this market reeling into a weekend and that’s ahead of that big Fed rate hike we expect next week. Remember last Friday’s close? I keep bringing this up because it was so awful. I actually last weekend was thinking about a Black Monday situation. It was not an easy weekend. This may not be much better, even though I know it’s a good thing, folks, right, to wring out the excess and to shake out the weekends. Obviously, I’ve been around for a while. I know that’s a good thing. But, you know, what’s the message to this market right now? Like what exactly is it trying to tell us and what should we be hearing? I want to bring in KingSview wealth management CIO Scott Martin. And Scott, you know, before we even talk about next week, let me just talk a little bit about this week. I think you were long Netflix. I think you had sold Amazon. Just your thoughts on those and some of these other big tech names that reported this week.
SCOTT MARTIN: Oh, man, how much time do we have? You know, I think I need a therapist after all of this. And it’s just, you know, then of the days. I mean, come back to your point, Charles. We did try to bottom fish on Netflix. I’m still going to keep bottom fishing because I just think it’s overdone. We sold Amazon way higher for some of our portfolios and we’re talking like 3300, which is awesome, you know, I mean, Facebook was a surprise, which was great. So we have some of that and not as much as we used to. So here’s the takeaway. And you’ve been talking about this all show, and I like how a lot of your guests put it. I think Bob Dahl put it this way. His way is like it depends on your risk horizon or your risk tolerance and horizon. I mean, there’s a lot of reasons, Charles, to be scared if you’re in tech right now, if you’ve got a short horizon, meaning like something under a year, that’s frightening. Now, that could still work out. But if you’re like a lot of our investors and even like myself, I’ve got some spare cash. Our investors have spare cash. Our clients, and we’re using these pullbacks even today feels scary to pick up things like Tesla, maybe some pipelines, maybe some Chevron. I’ll even probably fish towards the end of the day here at 3:00 Central and just find some more stuff that’s getting just really pounded for no reason other than the fact that it’s just amidst the sell off.
PAYNE: I like that part though. The no reason part, right? I mean, you look at these companies that beat on the top line, beat on the bottom line, they’re expanding margins, they’re taking market share and they give strong guidance when they’re down in the market like this. I think those most times eight out of ten, they’re a gift.
MARTN: I agree. And I’ll tell you what’s funny about saying for no reason. It’s like the reason is that everything else is down, you know, like, you’re right. There’s no reason. And here’s the other thing I’ll say about where the market is just in general. There’s no reason, like, are you kidding me? There’s no reason. We know every reason the market’s going down and the market should have to. That’s what’s kind of the weirdest thing. I talked to you about this last Friday, man. Like, what’s weird about the trade, though, is we’re bellyaching about interest rates. We’re all scared about this. I almost said something else about inflation, and we’re worried about a slowdown. What? Like we’ve been talking about this for six months. The Fed is engineering all this stuff and the market’s deciding to sell off by, what, 15%, you know, over the last few months? That’s a little scary to me because it might mean something else is coming, right? But if it isn’t, this is a great opportunity. An opportunity over the last few years, frankly, similar to 2020 March.
PAYNE: Yeah, you always worry about what you don’t know because there is a point when the market can react to what the knowns are, even if the unknowns are harsh. To your point, one thing I think that could help is right now, because of earnings season, companies are what they call a blackout period, but the buybacks are going to come back. I mean, just this month alone, we heard 200 billion buybacks announce, Apple 90 billion, Amazon, $52 Billion. ExxonMobil tripled theirs to $30 Billion. Does that help you? I mean, do you want to own these kind of stocks or, you know, you’ve got that kind of firepower behind them?
MARTIN: Yeah. I mean, it’s nice to see them convicted in their own name. I think that’s good when executives are buying stock and not selling it to. The weird thing is, though, Charles, in this market and this and this psychology that gets announced in earnings and the market doesn’t even care, like you’ll even
see, like you’ll talk about it because you’re just so kind of devout into stocks. But you look at the other networks because I watch our enemies sometimes and it’s like they don’t even talk about it because the stock is not even even taking into consideration they don’t talk about it. And so even in articles, I’ll mention it one line, you know, and then that’ll be it. So my point is on that is it’s the psychology of the market that to your point, you should take advantage of those buybacks because then when the market starts rallying and those names start performing, somebody’s going to come out in like three months of, oh, wait, on their last earnings report, they’re buying back 200 billion of stock. That must be it. And it’s like, no, you knew that three months ago. You ignored it because you got lost in the psychology and you missed out. So a good point. And I think that’s something to keep in mind when you’re looking at names here.
PAYNE: So next week, let’s let’s handicap the Fed here right now. And it’s no, I haven’t crunched numbers. I haven’t done much other than just Wall Street experience. I feel like we could be in one of those situations where we know what’s going to happen. And to your point, we know it, but we’re still getting hammered because of it. But when it does happen, the the the counterintuitive move happens. In other words, the Fed hikes by 50 basis points. And I see a big rally on the same day. What do you see?
MARTIN: I say, I say the same thing, except I think there’s 250 basis point hikes in May and June. I think June is the one because I think to your point that you made with one of the other guests today, June becomes the next meeting. I think it’s May, but the next meeting becomes when they turn tail and they’re like, all right, inflation is starting to slow down. Demand is starting to fall back. We’re starting to get into an economic slowdown, etc., etc. Consumers being affected, rates are going up, housing, blah, blah, blah. They’re going to be like, we’re going to take a maybe a pause and we’re going to start being very careful about how we proceed from here. The ten year is pulling back, so like and, you know, just in the open market. So they already see that this is starting to work. So that I would just I agree with you on a percent. I just say the move is June, not May, because it feels like it’s too quick for that.
PAYNE: Yeah, right, right. Right. And so you mentioned earlier you were you’re buying a you probably buy something at the close. What are you going to buy? What are you looking to buy here at the close?
MARTIN: Well, I. Man, I wish I could tell you. You can’t keep secrets very close.
PAYNE: Can you? What? What sector are you looking at?
MARTIN: Well, I’ll tell you, man, I mean, I’m probably going to pick up something in the probably something more in the discretionary space. I mean, Booking.com looks pretty good. We own that already, but we got to probably pick up some more of that for our investors. TMS is one we own. Charles has been great the last few days. Costco, you know, there’s just stuff, man. If you look at the charts, you know, there’s kind of a a company handle type thing and it’s doing this sort of round out and it breaks a low and then closes above the open and then it starts to turn. Then you turn the stochastic up and you’re kind of off to the races, of course, until it turns down again, which could be Monday. The point is there is stuff that’s churning in. Those three names are ones I’m looking at.
PAYNE: Yeah, no, I love all three of those names as well. Thank you so much, my friend.
MARTIN: See ya.
Kingsview CIO Scott Martin discusses the technology names, what we’re seeing in individual performance and earnings reports, and the investor response.
Program: Cavuto Coast to Coast
Station: Fox Business News
NEIL CAVUTO: By the way, Tesla stock itself is up a little bit more than 3%. So the 120 some odd billion in market value that the company lost yesterday and that Elon Musk lost it directly yesterday as a result. That’s clawing back a little bit right now. But there does seem to be an issue here that whatever Twitter gains, Tesla loses. I don’t know if that necessarily applies here. Back to Scott Martin, Jonathan Hoenig. Jonathan, what do you think of that, that that, you know, this is the currency, this is the collateral that Musk is using to to purchase Twitter. So whatever Twitter gains from that, do you think it’s automatic that that Tesla down the road loses or how do you see it?
JOHNATHAN HOENIG: Not necessarily automatic, Neil. I mean, there is some historical examples of CEOs, in fact, running to companies, even pledging some stocks back and forth. Even Warren Buffett back in 1991, he ran Salomon Brothers and Berkshire Hathaway and of course, Steve Jobs picture in Apple and Musk with Tesla and SpaceX. The trouble comes when, as you alluded to, when a CEO pledges their stock. So Elon is pledging some of his Tesla stock to buy a Twitter. Now, if Tesla stock continues to decline, he’s going to get that margin call. And that, in fact, can cause the whole House to collapse. So as long as Elon doesn’t pledge too much, he should be financially okay. But if one starts to weaken, if Twitter starts to weaken, you could see tech writ large follow suit.
CAVUTO: You know, Scott, what’s interesting to me with most of the technology names that reported yesterday, important, improved numbers, even in the case of Google, which disappointed just a smidgen on revenues and earnings and certainly really missed on on YouTube revenues. The fact of the matter was Alphabet did commit to buying back $70 billion of its stock. The other technology names put and posted great year over year numbers, but they were not rewarded. And after hours trading somewhat moderately, you know, rewarded today. But it sounds like the stuff that used to propel technology stocks or keep them going isn’t there anymore, at least for an extended period of time, that could change. But what do you think of that?
SCOTT MARTIN: Yeah, I think it’s a market phase we’re in right now. It’s a tough environment. It’s definitely sell first, ask questions later. And to your point about some of the individual performance, Neil, leading into the earnings reports. A lot of these companies get back what they lost during the day, in the after hours market and then get sold the next day. So investors are definitely taking, I think, the stock off the table and just going to cash, going to the sidelines and waiting for better days ahead, which to me is an opportunity down the road here to start adding to some of these names which you already own, like Microsoft, just because you’re going to get them at lower levels, at better valuations.
CAVUTO: You know, I wonder and Jonathan, you can help me with this when when people are nervous with the market, they’re using it almost. And I hear this increasingly flipping around and watching different shows. It’s my job. I got to do it. They’re getting nervous about buying into rallies, as I said at the outset here. And I’m wondering if they’re overdoing it, if they’re overanxious. And I don’t know and you always mentioned, Jonathan, about your long term perspective, and I get that. But is it something different going on here? What do you think they need to be convinced about to do it? Because earnings are still, by and large, coming in better than expected. What do you think it is?
HOENIG: Well, more than anything else, it’s cliched, but diversification works. I mean, look, even if this is a, you know, a quiet period or a bear market period for technology stocks, as it was in the first ten years of the 2000, you know, tech stocks back then basically took a nap for ten years. But other sectors, sectors did well, real estate, emerging markets, commodities. So, I mean, I don’t think the market is down and out, but I think the leadership is changing. And people who’ve bet all their apples on Apple, Microsoft and Netflix this time around will probably be a little bit disappointed, just as they were with Cisco, Sun Microsystems and Oracle 20 years ago. So the market tends to move in cycles if there’s a bear market for tech, I don’t think it’s a bear market for stocks writ large. It just means you have to look at other opportunities.
CAVUTO: Got it. Gentlemen, I want to thank you both. Appreciate all of that.
Kingsview CIO Scott Martin discusses Facebook, Amazon and Apple. He also talks about a reduction in Robin Hood’s workforce and his expectation for the stock.
Program: Cavuto Coast to Coast
Station: Fox Business News
NEIL CAVUTO: That’s something we’re we’re keeping an eye on. How much ground could be made up for that? We get a read from Scott Martin, Kingsview Asset Management CIO Jonathan Hoenig as well. Scott, when you look at a day like today, I do notice it’s very, very hard for the market to put two back to back winning days together. They’ll get a, you know, a spurt of activity and all of a sudden it will dissipate and then more. The common rule is to sell than to buy. That might change, but it has been a pretty reliable rule of thumb. What do you make of that?
SCOTT MARTIN: Yeah, a factor of the market phase right now, Neil, you mentioned it. I mean, alpha earnings, you get good earnings, you get good revenues and the stock goes up and then gets sold throughout the day. So that’s the phase we’re in and that’s going to continue, I think, through this earnings season. But you mentioned a couple of names in your intro there. My goodness. I mean, Facebook coming out very soon. Amazon and Apple have to come out as well. The good news is, I think if there’s any silver lining with what happened with Netflix some days ago, the expectations are starting to come down. Google yesterday, too. So as these companies come out with new reports, if Facebook does fall flat on its face, pun intended, you might not have as big of a sell up as you one might think, because I think some of the things are happening in Facebook today, selling off right now that are getting into expectations of maybe lackluster earnings here, at least for this period of time.
CAVUTO: Well, if that happened to Facebook, that would be a major disappointment. See what I did there? It’s a meta. All right. Listen, guys, if you hate my wit, then, well, no one appreciates my wit. Jonathan Hoenig, let me ask you a little bit about and we’ve touched on this before, Jonathan, what you tell investors these days, some of them, especially with the big technology names and even with the fall off of some of them that have gone well into bear market territory, they still made a lot of money on them. And one investor was telling me, I just don’t want to run it back down to no gains at all. So what do you tell them to do?
JOHNATHAN HOENIG: Well, it’s all about one’s own individual context, Neal, and also expectations and also stocks themselves. I mean, as you mentioned, some of the names like Facebook, like Microsoft, Netflix down 70% year to date. So even made up, for example, it’s down 50% year to date. Well, now it has to gain 100% just to get back to even. So, I think some expectations setting is in order here. Look, we’ve had a dramatic comeback since the pandemic lows, everything from the meme stocks to the FAANG stocks, the technology across the board. So these are the names that have led the market on the way up and the fact that they’re sputtering, as Scott mentioned, sputtering so heavily now. I mean, even today, Neil, 555 new lows, only about eight new highs. So the market’s having trouble getting going without tech leading the charge.
CAVUTO: You know, guys, what I thought was kind of interesting and maybe a story of our times is what happened. Robinhood, you know, now announcing it’s going to lay off 9% of its workforce. This was sort of the means by which a lot of young people in particular, as you know, Scott, got into the market. And I’m wondering if that is saying something about the frenetic activity behind that and whether this is an indictment of that. What do you think?
MARTIN: There was just a flash in the pan for Robin Hood. It was also the Darling Neil to steal that word from you, the darling of the IPO smash that was going on about a year, a year and a half ago. So they got public, they got liquid. A lot of folks got rich off of that. They were privately holding those shares and they kind of succeeded in that route. But once they came out, once you kind of saw what the company was all about, had some trading issues and some other things going on there at the company that were not well run. Obviously, it got the right valuation and continues to do so. And of course, competition. I mean, with respect to what they’re doing, they’re not doing anything amazing with respect to how their business is. So therefore, as they continue in their say line of fight here, I expect the stock to go lower.
CAVUTO: For technology as a group. How are you playing at these days, Jonathan?
HOENIG: Well, I mean, I’m actually avoiding it, Neal. I mean, you know, technology is such a major part of the S&P 500 of the Dow. I mean, these companies aren’t tech companies anymore. You know, Apple, Microsoft, Netflix, these are the stalwarts of the old overall economy. So even if some of our viewers don’t think that they’re overweight in technology, just that S&P 500 index fund is likely has a big portion of it in technology stocks anyway, as Scott alluded to. I mean, look, the times are different now. We’re not in the midst of the pandemic, the peloton’s, the the zooms, those stocks are underperforming now. And inflation is the big story now. I mean, the ten year yields gone from about 1.6% to two and one half percent in just one year. So these are different times. I think they requires a different different portfolio than just technology stocks.
CAVUTO: All right, guys, if you can just stay right there. Want to get the latest right now on.
Kingsview SVP Paul Nolte discusses the underperformance of the Twitter stock as the company is purchased by Elon Musk. He also addresses the Fed’s increase in rates and numbers being released next week including, unemployment, manufacturing indexes and service indexes.
Kingsview SVP Paul Nolte discusses bond-buying program, commodity prices, and the earning season. Paul also talks about the alternating markets that have been a boom for traders, but not so much for long-term investors.
Kingsview CIO Scott Martin discusses inflation, the labor market, and mortgages.
Program: Cavuto Coast to Coast
Station: Fox Business News
NEIL CAVUTO: Let’s go to Scott Martin and Jonathan Hoenig back with us right now. Scott, you know, we know that we’re anticipating strong inflation numbers, very high inflation numbers. And the fact is that even though Americans wages have been moving up pretty smartly throughout all of this, they’re still behind the eight ball here because they’re paying out more for everything from food to gas. How long do you think that remains, that that gap remains.
SCOTT MARTIN: Probably for the full cycle, Neal, until inflation starts heading back downward. Just because, to your point, they are so far behind. I mean, it’s going to be almost impossible to catch up given the structure of the labor market and the fact that, frankly, a lot of folks still amazingly don’t want to go back to work. So when I look at the financials and like Jackie talked about, that’s a great lead off, I think, for for the earnings reports that we’re going to see starting in Q2 here. But the financials are not performing well at all. I mean, you look at various stocks in that arena, Neal, whether it’s JPMorgan, Morgan, Citigroup, Wells Fargo looks a little bit better. Most of the banks look like, in a word, dog food on the charts. So something is going on there. And for us, we’ve been liquidating financials against the recommendations of a lot of other analysts out there this year, especially towards the end of last year. And getting more into real estate like XLRE instead. I think that’s a better way to play the lending environment than directly through the banks.
CAVUTO: You know, I think this is one of those quarters, Jonathan, where it isn’t so much the earnings that are going to get people’s attention, but the guidance and particularly with banks, what do you think they’re going to say?
JONATHAN HOENIG: Yeah, absolutely, Neal. I mean, as you know, the markets are forward looking, you know, and if Scott is exactly right, this inflationary cycle is just at the beginning. I mean, if history is any guide, this could be a five, six, even eight or nine year, ten year cycle of which the banks probably won’t benefit too much. Scott is exactly right. I mean, banks should be
doing very well right now because interest rates are going up. So what’s called their net interest margin is growing. As Jackie said, they’re basically making more money on that loan, those loans, but they’re underperforming. And I just think back, Neil, my biggest fear is credit quality. These banks have owned and issued a lot of junk bonds. 20 years ago, junk bond yields were about 18%. Even now, today, they’re only about 4%. So that’s my fear, is that the junk could get a lot junk here if the economy declines and even banks will get hit in that environment.
CAVUTO: You know, we’ve been waiting, Scott, if you think about it, for the stag part of stagflation to kick in. It hasn’t happened yet. And all of us have talked about this in the past. But I’m fascinated by that because I think a lot of people who try to draw the seventies parallel have yet to realize that that part of it, the economy just, you know, rolling over and dying. And that has not happened. Now, of course, it stays like this. And rates and overall inflationary statistics stay like this. It could be just a matter of time. But but do you think that avoids Scott, a repeat of the seventies for the time being potentially.
MARTIN: I mean, goodness, you know, the stagflation era of the seventies, Neal, like you said, is far away. I mean, we ain’t seen nothing yet with regards to what we saw a few decades ago and hopefully won’t the stag part of things, I mean, that’s kind of the story of my life as a personal note. So I get that part. But with regards to the banks going forward, what’s interesting though, Neil, about how Jonathan mentioned credit quality, I mean, I got a mortgage just recently, did some refinancing on some properties. My goodness. That was worse than an exam from the doctor that you don’t want to see if you know who I’m talking about with respect to how much they were looking into me and seeing what was going on, which gives me a little bit of patience and respect to what they’re doing because I think unlike 0′ seven and 0″ eight, there’s some more care that banks are taking and maybe they’re lending and expanding of their balance sheet so that maybe when we do pull out of this, when banks finally do get it together, the economy does grow again because there’s money out there for them to lend. They’re just being very stringent about who they want to give it to. That could refire the economy if things get lined up correctly.
CAVUTO: First, a reminder, Scott, it’s a family show. And secondly,
MARTIN: I thought this was.
CAVUTO: I assume you were talking about the dentist. Let me ask you. Of course. Of course, Jonathan. You know, young investors in particular were drawn into this market and the second wave of it, the bull wave. And and I hasten to add that a lot of them took their time coming, maybe burnt by what their parents went through in the financial meltdown, what have you. And I’m wondering, you know, if you’re twice burnt, are you are you really shy on that third go round? What do you think?
HOENIG: Well, you know, Neal, there’s an old saying, you know, you always want to avoid the herd. So find out what the herd is doing and then try to do something else and even go back to the late 1990s. You know, most people didn’t invest in stocks until January of 2000. That’s when most money came into the financial markets. Right and right when prices were at the top. So, you know, we’ve seen more money coming to the market in just the last few years in a lot of it. And not to denigrate them from from the Robinhood investor, younger investors who haven’t seen the type of interest rate increases. Commodity price inflation or bear markets. Those of us who’ve traded and been around a little bit more have seen. So markets can decline. They can decline quite precipitously. Even good names and good stocks, whether it be Apple, Tesla or all the rest. Sometimes good companies and good stocks aren’t the same thing. I think now it’s why now is a good time for caution.
CAVUTO: Okay, guys, I feel really old when you, of course, now support yourself as a like a Yoda of finance, Jonathan. But I guess that’s, you know, you’re doing enough. You know, you just feel that way. Guys, thank you both very, very much.