Kingsview CIO Scott Martin discusses Twitter, inverted yield curves and commodity prices.
Program: Cavuto Coast to Coast
Station: Fox Business News
NEIL CAVUTO: The read from very young and savvy folks on the significance of all of this. Scott Martin, Jonathan Hoenig, Jonathan Susan’s point that maybe this might grant him a little bit more freedom, that is Elon Musk to do the kind of things he maybe he prefers to do and maybe he read in the footnotes. Becoming a board member. Kind of obligates you to do things you don’t really feel like doing what happened.
JONATHAN HOENIG: And there’s no question, Neil, unfortunately, I mean, being a board member of a of a company, it’s a liability. And Elon Musk has a great history of that. And the SEC has gone after him in the past over things that he has tweeted. So, you know, then you could have a situation where Twitter shareholders would come after him and say, well, you know, you tweeted this, it impacted the stock. So to your point, he’ll have a be even bigger impact on the company, not as a board member, and perhaps he will increase the stake. The whole fiasco indicates, ironically, Neil, that the system works. I mean, every day this story has been in the news. Everyone who owns Twitter uses Twitter, owns the stock, uses the service, has done so voluntarily. And it’s owners who decide the company’s future. No government is necessary in Elon’s deciding it’s not for him. It’s going to benefit shareholders nonetheless.
CAVUTO: Scott, what do you think? I mean, the stock continues running up today and it’s had an appreciable run, up about 30 plus percent since all of this started. So you could make the argument that it is it is still heavily influenced by the presence of Elon Musk. What do you think?
SCOTT MARTIN: A nice shot in the arm, Neil, but down pretty significantly from that boost last week. And we owned Twitter into that boost and gosh, needed it really after the last year of the performance of the stock. And we actually liquidated most of our shares. So I think to the point, though, that you and Susan were making Twitter does have some things. I think the problem, though, is it’s a lot of potential energy still with respect to kind of the news aggregation, the interactivity between the users and so forth. But it’s quick, it’s kind of direct. You know, the search features and such have improved. The edit button is definitely, I think, coming, whether Elon is there or not. I mean, it could have been something simple, Neil, as Elon Musk finding out that there’s like a no pot smoking, say, policy on the board, you know, that could have been a derailment in itself as based on some of his past history. So there’s a lot of things that I think went into the fact that when he started looking at the real rules and regs and maybe even talked to a couple of board members, he was like, you know, this may not be such a friendly neighborhood for me and I should just move on. But it does portend maybe a hostile takeover down the road because he can buy more shares by not being on the board.
CAVUTO: You know, I mean, we can switch gears to the markets in general. Now, Twitter, I think, would be an exception to what’s happening generally among the Nasdaq technology issues that have been taken on the chin Jonathan. Certainly in the face of fears of higher interest rates, we’re seeing that play out again today. Do you think it’s a fair rule of thumb that technology stocks take it on the chin every time rates back up? Why is that?
HOENIG: Well, well, I mean, Neil, technology stocks are those longest looking, most ambitious, oftentimes trading at the highest multiples. And, you know, it’s hard for, I think, kind of everyday investors maybe understand how important that interest rate is. I mean, every number, every calculation in the economy is based on interest rates. And, Neil, you can’t underestimate I mean, in my investing lifetime, I’ve never seen rates go up so fast in such a short period of time in the last year. The yield on the two year note has gone from 1/10 of 1% to two and a half percent. This is a major move. And one reason why I think you’ve got to be cautious in today’s environment. We’ve really never whether it’s the inverted yield curve or some of the rising and cost of commodities, these are very perilous and very lots of warning signs that a recession very much might be ahead.
CAVUTO: All right, Scott, of course, when he talks about inverted yield curve, that’s when shorter term rates eclipsed that of longer term rates, usually previews a slowdown or at worst, a recession. Are you worried about that? A growing number of economists now are and that it could happen sooner rather than later. Of course, these same economists have been wrong. Well, on everything. But my point is, should their worry be justified in your eyes?
MARTIN: Yeah. I don’t know who’s been more wrong, those economists or the CDC. And I love when Jonathan talks to me about inverted yield curves. I mean, I’ll tell you, he’s ten feet away, Jonathan. Don’t make me come over there and give you a hug. Here’s the thing, though, Neil, to your point and Jonathan’s right, the rise has been meteoric. I mean, if you go back to August of 2021, we’ve doubled the rate in the ten year. The problem is, in my mind, as far as looking at stocks going forward and why they’re getting maybe unduly punished, rates really aren’t that high kids. So the fact that they are up, yes. Is a problem. Commodity prices, to Jonathan’s point, very high and rising. It’s still not that crazy. So if we get some leveling off here, maybe three and a quarter, maybe three and one half on the ten year when the Fed slows down their role, I think that’s when tech stocks get rebirthed again.
CAVUTO: You know, Jonathan, there are a lot of investors there. We talked about technology at the outset who are holding on to still huge gains in those technology issues, depending on exactly when they got into names like Apple and Amazon and Tesla. How do you advise them? A lot of them see doubling and triple. Pulling in their money. Do they cash out? Do they? What do you what do you tell them to do?
HOENIG: You know, Neal, it always comes back to you as an individual investor. I mean, what is your individual situation? And, you know, it takes a lot of introspection. You have to think, how will I feel if this position, given its size in my portfolio, goes down ten, 15%? Will my lifestyle have to change? You know, I just even remember back to the late 1990s, you had a lot of, frankly, a little older investors who had big positions on an apple. And it was an apple back then. It was Microsoft and Oracle. Right. You know, basically they were a little overweighted. So, you know, no one predicts the future, the market with any complete certainty. So I think it comes back to your own situation. If you really had that long term time horizon, ten, 15 years, what is a correction mean? But if you’re a little close to retirement, I think now is a good time to take a little bit closer look at your risk.
CAVUTO: Scott, what of your long term horizon is forgot about ten or 15 years, maybe ten or 15 minutes. What do you do?
MARTIN: That’s my horizon. And what you have to do is basically hang on for dear life, but know that there’s nothing wrong. Guys with corrections, there’s nothing wrong with bear markets. In fact, just as humans, we freak out and don’t buy. We actually sell. I think you’ve got to flip the switch. I think you have to take these opportunities at lower prices to load back in.
CAVUTO: All right, gentlemen, we’ll be seeing you a little bit later in the show, talking about what we can expect out of the big bank earnings. They’re front and center this week, beginning on Wednesday and Thursday, we’ll get more of them. So get your gauge on how they are going to respond to how they see things going forward, not just the earnings, which are expected to be strong, of course, but the future guidance. That’s really the whole name of the game.
Kingsview CIO Scott Martin discusses the interest rate curve, tech earnings, the airlines, Telsa and restaurants.
Program: Making Money with Charles Payne
Station: Fox Business News
CHERYL CASONE: I want to bring in now advisor groups Phil Blancato and Kingsview Wealth and Fox business contributor Scott Martin. It’s great to see both of you as always. And Phil, I’m going to start with you. I just mentioned this with Bob picking up on earnings. Earnings are coming in hot next week. Do you think we’re going to see anything to get the market out of this Fed rut, especially the banks who normally benefit from higher rates?
PHIL BLANCATO I do. You’re looking at more than half of the S&P 500 has a buy rating right now, 57%. That’s the highest number in ten years. Add to that, I don’t disagree with Bob. We’re just getting back to normal. A normal means normal earnings growth. The normal earnings growth means a positive. S&P 500 is not negative. So we’re going to get through some of this volatility in the next few weeks. Here, we hope to see a resolution, Ukraine and Russia. But more importantly, I think the markets prepare for a Fed hike and the earnings season could give us that little boost we need when things are going to be more positive than negative.
CASONE: Now, Scott, what are you looking at?
SCOTT MARTIN: I agree with Phil. I mean, I think financials are a really interesting aspect of the market right here, Cheryl, because to your point, I mean, the interest rate curve, depending on whether you look at threes versus sixes as far as six months or you look at the three versus the tens, I mean, it’s it’s kind of crazy how you can kind of parse that out and find your own reason to predict the next recession. But the reality is the banks are in good shape. So we’re actually looking at financials here, Cheryl, kind of looking at what I would also say is maybe the tail end of this great reopening trade. I mean, the great reopening trade in our opinion, was March. I mean, that was like the second half of March. So now it’s this April angst, if you will, Cheryl, as we come in to tech earnings, what their outlook and guidance is going to look like going in here to say Q3 and Q4, because those are the areas of the market where we’re likely to see the biggest bounce back once they finally hit some firm lows.
CASONE: Oh, gosh. Okay. Phil, I thought that the great reopening trade was last year story. Maybe not. What do you say?
BLANCATO: I completely agree. I actually think there’s more room to run. I when a consumer got over $2 trillion of spend, look at the regional banks and how they’re set up. Well, they’ll make money and cash balances and be able to loan some money to consumer. Actually, they were in the middle stage of this reopening trade. I think there’s still plenty more to come. I think you can still make money in the hotels and the airlines and the restaurants, and you do better than the growth sector, which gets hurt by rising rates. What’s pivot to a cyclical recovery based on consumer spending and you’ll do just fine in your portfolios. Case in point, value stocks this year are mostly up, not down. Growth stocks are down. So let’s parcel it out for what it is. If you were a tactical mover in your portfolio and you favored the consumer here, you’re doing just fine. I think we’ve forgotten that.
CASONE: Yeah. Now, I’m glad you brought up the airlines. Scott, I want to take this to you. You’ve got Spirit Airlines saying that talks are underway for a $3.6 billion takeover by JetBlue. Do you play either of these stocks or spy another buyout in the works? And we got to bring in the whole frontier side of this drama, which is turning into kind of a movie, to be honest with you.
MARTIN: Yeah, it’s going to be a total catfight. Don’t play those airlines because I don’t fly them. I got to tell you, though, guys, I disagree. I mean, if you look at the airlines and look at some of the restaurants, I mean, the reopening trade looks like dog food, frankly, in the last couple of weeks with respect to those stocks. So it looks like they’re already turning over. So my point is the following. I think the reopening will continue to happen. But you guys know this as well as I do. The market has front run just about every moment of, say, this COVID effect in the last two years. So with respect to how the market does bounce back, I think finding reasonable, appropriate valuation, which is not in the airlines right now, frankly, Cheryl, is how you’re going to make money in this market if you do get back into growth. Phil’s right. Value has been, in a word, valuable this year. But I do think that growth, trade does reignite, especially if we get further and further away from this COVID veil that we’re trying to lift.
CASONE: All right. Let’s pick up on that growth story, Phil, with you and this issue with Elon Musk. I mean, again, another piece of drama playing out. This makes businesses fun, right? You’ve got Elon Musk. He’s going to be meeting with Twitter employees after being appointed to the board. They’re now saying that he’s going to meet with them. We don’t know when, but are you going to buy Twitter or Tesla or anything that comes of this? And what do you think that this really means for Twitter? And also, I got to mention, Phil, those social media stocks were all getting a bounce when all of this news broke earlier in the week.
BLANCATO: So I’m not a fan. For example, a little comparison, Delta Airlines trading down 8% of the year below its historical average. To me, at the cheap stock, that’s got a chance to grow much higher. So I’ll take the other side of that versus the Twitter that’s trading above its P average. Does it have the kind of revenue we’re looking for? Valuations that don’t make sense to me. A classic growth story, looking for a recovery trade when interest rates are going higher. Just because Elon’s in it doesn’t mean it makes it a great stock with great earnings growth, especially as interest rates are higher. So I say, no, it’s not a buy. I’m not there yet. Maybe in the fall. Look back the growth. I just think they’re still too expensive.
CASONE: Well, maybe it’s too soon to see what he’s going to do. Scott But there is a lot of conversation around the fact that he might make it more, more free on Twitter, that they will kind of back off of their woke agenda of silencing let’s be honest here, conservative voices.
MARTIN: Yeah. Because Elon Musk says they should. I mean, look, I love Elon Musk. We own Tesla. It’s been great. And other than sharing a birthday with him, which is June 28th, thank you very much. I don’t think there’s much he can do with Twitter, honest to God. I mean, Phil’s right. Like that’s a tough mountain to climb. We actually sold our Twitter that we had for a lot of our clients this week. Just because we got that final bounce, because the stock has been a disaster.
CASONE: Yeah, we’ll have to see. I mean, I went on the air in the early days, you know, questioning Elon Musk’s outfits and words and, you know, sometimes his relationship choices. And I’ve been wrong on all of that. So, you know, who knows? Phil Scott, guys, thank you very much. Appreciate it. It’s good to.
Reuters interviews Paul Nolte, SVP & Sr. Portfolio Manager
Kingsview SVP Paul Nolte discusses labor market data, and the underlying indication that the economy remains very strong. He also talks about the likelihood of an interest rate hike and the possibility of a recession.
Kingsview CIO Scott Martin discusses reallocating to more growth and aggressiveness when the economic climate is murky. He also talks about oil, energy stocks, and the Russia/Ukraine dynamic.
Program: Cavuto Coast to Coast
Station: Fox Business News
CHARLES PAYNE: So this has been a crazy, crazy week. Here to help us hash it all out. We’ve got Kingsview Wealth Management CIO Scott Martin Scott. You know, first I got to just ask you, the last two weeks in general, this market. You know, everyone that came on was cautious. They were out in the market. They were in defensive plays. I mean, have you been caught somewhat by surprise at the resolve of this market the last couple of weeks?
SCOTT MARTIN: Yes, I have. Charles, it’s one of those things, though, where you get surprised, you get caught off guard. But you also have to think back in recent history as to this is what happens when data gets really bad, when the economic climate gets a little bit murky, and when there’s geopolitical issues all around and everything looks really terrible and everybody’s telling you to get out of the market, the market’s going down, rebalance, reallocate. That’s actually the time you should be reallocating. But to more growth, more aggressiveness. And so while I am a little surprised at the resolve, I’m not surprised in the sense that we’ve seen this movie before it and we’re seeing it play out right now.
PAYNE: Let’s talk about some of the niches that have come on chips. Yesterday, NVIDIA was up 10%. You know, are you are you buying chip stocks at this point?
MARTIN: Well, I wouldn’t chase them on a week like this week. Now we own Nvidia and a lot of our ETFs that we run through Monarch funds as well as through a lot of the accounts that we run for our clients. We already have Nivida, which has been good. I would look at some other chips though. Charles maybe is seeing it spread over to maybe the Andes of the world or the Texas Instruments. But I wouldn’t chase someone on a week like this week because there’s a lot of froth in those names now, at least in the reaction to in video so far. So watch them come in a little bit, maybe 5% down from these levels and I’d be a buyer.
PAYNE: What about oil stocks, fossil fertilizer stocks? A lot of these names getting an extra bump from what’s happening over with the war on Ukraine.
MARTIN: Yeah. They’ve been good and they’ve been good. Diversifier. I think that’s the biggest news about oil this year is that it’s been great. Even though it’s equity, you know, if you look at Chevron, Exxon and some of the others, it’s like that’s been a good diversifier away from traditional equity because those have been up. Well, a lot of stuff’s been down. So we have some energy stocks in our portfolios here at Kingsview would tell you this, Charles, right now, I like the pipelines. So if you look at stuff like MLP, higher dividend, close to 78% and that’s the mover and shaker of the oil in the crude that we need to start going in this country as we try to develop, I think, some sort of energy policy maybe.
PAYNE: What about cannabis names? You know, we all know cannabis was hot then they fell off. They’re on fire this week, no pun intended. A lot of rumble rumbling about legalization or not decriminalization, if you will. You know, they’ve come down a lot. Would you be a buyer here?
MARTIN: They’ve been crushed and it’s tough with cannabis because they kind of were that forgotten asset class, like you mentioned, Charles, in the last six months. I mean, dare I say a lot of those stocks went up in smoke and that is a pun intended. So with respect to where cannabis valuations are, I think they’re attractive. But to your point, it’s largely politically driven right now. And if you get bad news in political land from the cannabis area, that’s not good. If you get good news, it’s obviously good. But no, no telling how that’s going to pan out short or long term, really.
PAYNE: You know, Scott, I was reading a headline today and Ukraine, you know, there’s a counteroffensive. They’re going on the offensive. They’ve held the ground. The war is a month old. Russia is not winning. In fact, many think they’re losing. And it feels like there could be a correlation to, you know, we’re rooting for Ukraine. And every time we see something positive there, maybe the market going up, I’m not sure. But if the tide turns and it looks like Russia is on the verge of some sort of decisive victory or their atrocities start to increase, would that start to hurt this market, in your opinion?
MARTIN: You might. Charles as you know, the market usually preempts that good news or bad news in some cases. So it may be too late when we finally get that news weather. Like you said, it’s good or bad. But look at any kind of resolution, any kind of positivity out of that area of the world is good. Longer term now, short term, there may be a little bit of gamesmanship here to play on that. But longer term, look out, six, 12 months, that’s going to be a largely positive development for the S&P 500 and frankly, probably for fixed income as well.
PAYNE: And, of course, for the world and humanity. Scott, thank you so much. We covered a lot. Folks, we’ll be right back.
Kingsview SVP Paul Nolte takes a deeper dive into retail sales, oil, automobiles, inflation, and the raising of interest rates that will invert the yield curve.
Kingsview SVP Paul Nolte takes a deeper dive into oil, automobiles, retail sales slowing, inflation, and the raising of interest rates that will invert the yield curve.
Kingsview CIO Scott Martin discusses managing assets, asset allocation and portfolio strategy. He also talks about traditional asset class behavior and a slowdown in economic growth.
Program: Cavuto Coast to Coast
Station: Fox Business News
NEIL CAVUTO: Meanwhile on that situation where interest rates are going to likely back up some more and maybe a lot more, at least the Federal Reserve has anything to do about it. It’s already created over this course of roughly, you know, a month and a half or so, a global bond market route to the tune of about two and a half trillion dollars. We have not seen that sort of sinking and swooning since the global financial crisis. In fact, this is bigger than that was back in 2008, remember, carried into 2009. So it’s not necessarily a fair comparison, but it does show you how the effect of higher rates, lower bond prices reverberates throughout the economy. So so what does Scott Martin do when he advises clients with this phenomenon? They’ve been pouring their money into stocks of late, which is their hedge, I guess, which is weird. But what do you make of it?
SCOTT MARTIN: They have been doing that, Neal. The first thing we do is kind of stop freaking out a little bit because it’s scary. To your point. My goodness, let’s go back in recent history. My friend, you go back to August of last year, August of 2021, the ten year interest rate, which is kind of the benchmark for a lot of things like Gerri talked about with mortgage rates and so forth, lending rates. Neil that’s doubled since August. Now, that’s a funny way to say statistics because it wasn’t that high back then, you know, 1.2% and now we’re approaching 2.4. However, you made the key point about wealth management, what we do at Kingsview, I mean, managing assets, asset allocation for clients is challenging right now because stocks and bonds, at least for this first quarter of this year, have been correlating, my friend, meaning they’re both going down. So instead of one thing, doing one thing and the other doing the other, they’re both doing the same thing, which is negative. So you have to start doing some interesting things with portfolio strategy, which includes structured notes, secured loans, gold, things like that, and maybe a little crypto if you’ve got the appetite or the stomach for it and the Pepto-Bismol handy. But there’s things that are going on in the bond marketthat are scaring people to your point, because traditional asset class behavior is not holding true to what it’s been doing over the last several years.
CAVUTO: Yeah, I guess it depends on the the Treasury instrument or, you know, the bond, but the yield curve has been flattening and not, you know, reversing. When it comes to shorter term rates that are eclipsing rates on longer term assets now that that depends on on the rate. I get it. But but at the very least, it seems to be, you know, telegraphing a slowdown in the economy, some say a recession. Where are you on this?
MARTIN: It’s telegraphing some some bumpy times ahead for sure. And definitely a slowdown in economic growth, which could be as simple as growth. That’s maybe 0.5% or 2% versus the six plus that we’ve had recently. And you’re right about the inverted yield curve. It basically means that there’s a risk off mode on Wall Street, which means that folks don’t want to really own much of anything right now. And we’ve seen that in the performance in Q1 so far. Now, the only thing I would caution folks out there on is that the inverted yield curve or the flattening yield curve, as you put it, has predicted about ten of the last five recessions, if you know what I mean. So it tends to scare folks a lot, and that’s just fun with kind of numbers. But it does show there is a slow down coming forward, which is why, again, something Gerri mentioned that you and I have talked about before, Neil, I don’t think the Fed’s going to raise interest rates as much as much as people think. I think we’re only going to get a handful of rate hikes this year and they’re going to see what that does to the economy. They’re going to see how inflation kind of materializes here and then decide how they want to proceed forward but not do the six interest rate hikes it seems like everybody’s betting on.
CAVUTO: I’m just curious what you also make of the comeback and a lot of popular issues, particularly technology stocks. They’re not all the way back by any means, and we’re still selling off today. But it is noteworthy that technology stocks as a sector and a group are up 14% from their lows. Now, they’re still not where they were, but they’ve clawed their way back up measurably. I’m just wondering whether that is an opportunity for investors now to cash out or to to assume that this, you know, rally or whatever you want to call them, that what is clearly had been a bear market for technology stocks is over. What do you think
SCOTT MARTIN: Depends on your goals, obviously depends on the time horizon. But I particularly think and for a lot of our clients, we’re seeing this as a major opportunity. I think tech stocks just got thrown out with the bathwater, the baby and frankly, the bathtub, because of the fact that nobody wanted to own them. Everybody was afraid of interest rates going up. Yes, TECHLAND has guided down, meaning future earnings reports that we’re expecting receive in the next several quarters are likely to not be as robust as they have been the last couple of years. But let’s face it, the last couple of years, Neil, 21 and 20. My goodness. For tech, we’re pretty much in a word, awesome. So there has to be a little bit of a pullback in Techland and we’ve got that. And so therefore, I think tech stocks got to a level where they are very attractive now if you have that 1 to 2 year to three year time horizon.
CAVUTO: Got it, Scott. Great catching up. Thank you my friend Scott Martin on all of these developments.
MARTIN: See ya.
Kingsview CIO Scott Martin discusses economic growth numbers, the Fed’s balance sheet and consumer confidence levels.
Program: Making Money with Charles Payne
Station: Fox Business News
CHARLES PAYNE: You know, I want to just stay with Powell for a moment. Right. Because the markets when Powell initially started speaking, we were on a roller coaster ride. We started that session higher. We went all the way down and then we started to climb back up. And it was interesting, too, about this thing is that that Fed announcement, it wasn’t unanimous. We had James Bullard, who dissented. And then today he went even further, saying that the committee will have to move quickly to address the situation or risk losing credibility over this whole inflation thing. I want to bring in Scott Martin now because Scott James, Paul at one a 50 basis points, he wants to be ultra aggressive. He’s saying if they miss this opportunity, the Fed will lose credibility. And I’m not sure what that would mean for the market. But do you think he’s on the right path?
SCOTT MARTIN: I think he was on the right path at one point. Charles But lately, because of the Russian Ukraine conflict, as well as some latest economic growth numbers, I think 25 was the right move a couple of months ago. 50 looked good. But Bullard’s been interesting in his commentary of late because you’re right, he’s talking about the Fed reducing its balance sheet, another kind of very hawkish measures coming into a period. Charles, we’re getting into some economic uncertainty. We’re seeing consumer confidence pull back. We’ve got a disappointing retail sales number, I think, coming up for March. So I think the Fed made the right move and also left the door open for some more flexibility going forward just in case things do weaken.
PAYNE: And we should also point out, like the two year, it rose so much ahead of the meeting that the jawboning worked like there were certain things that Powell want it to happen that actually happened and he didn’t have to pull the levers saving his ammo. Inflation is with us, we know that. But the dynamics of it are changing. Service driven is going up, the man is going down. And that to me seems to impact your portfolio. Are you making changes based on the fact that services we’re going to be using them now?
MARTIN: Yeah. I mean, we’ve looked and looked at picking up some consumer discretionary names a lot here on the lows this week, Charles, just because I believe that’s that service area you talked about. And just as you’ve been talking about this whole show, I mean, my goodness, you know, as we talked about really all these last couple of months together, my man, I mean, it’s darkest before dawn in the markets and also outside your front door. So what that means is when things look really bad and everybody’s telling you to sell, it’s usually too late. And that’s actually the time you should be buying. So not only have we been picking up, say, names in the consumer discretionary sector, but also some of those tech growth names that have been thrown out with the baby and the bathwater.
PAYNE: Let me ask you about the housing market. We have some big news today. Existing home sales declined 7.2% in February. That was well below Wall Street’s consensus. Meanwhile, mortgage rates are soaring. In fact, this is the fastest pace on record. Is this housing boom still in place?
MARTIN: Sort of depending on the location. Real estate’s always location, location, location. It’s cooling off. The one problem, though, that housing has that we’ve seen in other areas of the economy, Charles, it’s supply. Housing supply out there is not exactly robust. So therefore, as rates have ticked up, as you mentioned, very, very steep pace that we’re seeing out there now that will soften demand. But we’ve got to get supply going as far as new homes and homes for sale. If you really want to see housing cool off or at least that price rise that we all have seen cool off.
PAYNE: All right, Scott, thank you so much. You know what? You’ve been guiding them, right, for a long time. Appreciate it. Have a great weekend.
Kingsview CIO Scott Martin discusses debt issuances, risk management and the idea of “contagion”.
Program: Cavuto Coast to Coast
Station: Fox Business News
NEIL CAVUTO: All right. It’s currency has shot. Its markets have yet to open and they had already crashed. It’s tough to get money there. It’s tough to take money out of the country there. And now word that Russia could be on the brink of default by missing or allegedly missing $117 million interest payment on some government notes that was due today. Now, we’re learning from some Russian financial officials that that didn’t happen. They made good on that. The reason why I stress this is if you don’t make good on interest payments and your government, you’re in default. It’s as simple as that. And the Russians don’t want that added to all their problems. It would be the first time something like that has happened since the Bolshevik Revolution. So we really don’t know. But I want to go to my friend Scott Martin of Kingsview Asset Management. I’m hearing about this development, Scott, and then I’m looking at Tesla halting a $1 billion bond offering. And I’m wondering if it just feels the conditions are not right for any type of bond offering and it’s tainted by association, even though there’s zero association. What do you think?
SCOTT MARTIN: Yes. Strange things are afoot at the Circle K or in this case, the bond market. And I’ll tell you, Neal, a couple of things to just pass apart here. The Russia deal, which is the odd hey, the checks in the mail type of excuse probably isn’t going to work here because we know what’s going on with Russia. We know the kind of actor they are, and certainly they just don’t probably care either. So with respect to Russia, though, going forward, it’s probably good to get aligned with some of their creditors because of the fact that they’re going to need credit going forward to rebuild their country if they so desire. With regards to Tesla, I don’t think it’s as bad for Tesla in the sense that it was $1,000,000,000 issuance. Neil They’ve got a couple, probably about 15 billion or so on their balance sheet of cash. They’ve got another 18 or so billion they’re going to bring in this year. So not that big of a deal. And don’t forget, we’re in a rising interest rate environment. So when you’re issuing bonds in an environment where rates are going up as much as they are, you want to interest and issue bonds, rather interest rates that are higher than what they are in the open market, or at least not say going up against you. So therefore, they probably are going to wait until interest rates come down to reissue those bonds and therefore get the credit flows back that they need.
CAVUTO: You know, Scott, I worry, though, about the compounding effect of this. I mean, if companies then feel nervous about, you know, making a bond offering, we already know a good number of companies have put off initial public offerings, those that wanted to debut in this environment. They’re saying, you know, we won’t debut now. And it does tend to feed on itself, doesn’t it?
MARTIN: It does. And it also tells you kind of the environment we’re in where everything’s very skittish still. I mean, even after the Fed did what I think was a pretty good job yesterday, the markets are still a little bit in the figure it out kind of phase. But with respect to the debt issuances, Neil, that have happened really over the last six to say seven years, we’ve had other bond issuances delayed like this, like Tesla. So it’s really not that arcane to say this situation. But you’re right. I mean, some companies need debt more than others. I think Tesla doesn’t need it. Me and say as much as some of these other companies like Snowflake and some of the other ones that maybe aren’t making as much money, Teladoc and some of these other guys. So therefore it’s about need maybe more than want. And therefore Tesla, I believe, can be patient here.
CAVUTO: Do you ever worry, though? Sure. You have to worry about everything. You have clients and all that, and you have to look everywhere. The idea, the contagion, I mentioned it now with the House considering still more sanctions on Russia by removing its favorite trading status, which would invariably bring on tariffs and the like. And we already know that some Russian financial institutions that are on their last leg, a lot of people asking just how much exposure do our banks have to that region? Even in Citigroup’s case, you know, it’s a significant amount of money, $10 Billion. But, you know, they have 2 trillion plus in assets. So I wonder if it feeds on itself the perception that the good and the bad alike are caught up in a selling wave if it materializes to be a problem.
MARTIN: Yes, the bad feeds on itself. It feels like more than the good these days. And you’re right, Neil, I do worry as a money manager, as an investment wealth manager, we worry a lot just because we have to risk manage at the end of the day. I mean, I scream myself to sleep at night most nights. But with regards to the contagion, we’ve had a couple of dry runs here, though, haven’t we? We had the Brexit scare some years ago. We had the Greek debt crisis before that, and my goodness, there was never really a huge spread of contagion. Yes, there are some banks that closed, some banks that got taken over, some banks that had to liquidate their assets. But we’ve kind of been here before. And so this incident, while it is scary and it does have the potential to spread, I don’t believe it’s going to be any bigger than those other two, which really weren’t that big of a deal overall.
CAVUTO: Yeah, you’re right about that. You know, if you just it’s a spring like reaction of spring to selling. But but bottom line. And you just stayed calm. You got through it. So we’ll watch it very, very closely. None of this has really materialized yet, to Scott’s point, but we are watching it. Thank you, Scott, very, very much.