Program: Cavuto Coast to Coast
Station: Fox Business News
NEIL CAVUTO: We got Martin on this. The Kingsview Asset Management CIO. You know, Scott, it’s sort of like all dressed up, but no place to go. So is, you know, hot and very, very excited consumers who want to get their hands on a car, but they can’t find them, or at least the ones they want, and they wait and wait and wait. What do you make of this?
SCOTT MARTIN: They do, and they probably lose interest, Neil, and also don’t even mention the fact that there’s repairs out there that need to be done on some of these cars that folks have that they can’t get done either. So if you talk to a lot of these automakers, if you talked to a lot of the auto dealers? Not only are they having trouble getting materials, they’re actually even having trouble getting workers. So if you even get the materials into the dealership, having somebody to fix it, they’re if they’re actually coming into work is another story.
CAVUTO: You know, this problem doesn’t seem transitory, right? I mean, you and I have gotten into this before this notion that inflation and all these other issues are going to be short lived. Well, we’re past the short lived transitory stage just taking let his reported face value cars right now. This extends well into next year, maybe beyond. What do you think?
MARTIN: Yeah, I think it does, and I’ll tell you what else, Neil, if you just look at the effects that some of the issues have with the global supply chains on on all industries. In fact, if you look at how demand starts to wane because folks lose interest, folks find other things that they want to do or buy. You’re talking about a major effect on just the overall economy, but also in other areas of the economy than just autos. So if you look at the spread, that’s likely you had if this continues, that has a detrimental effect on future growth.
CAVUTO: How do you like the markets now? It’s been a bumpy September typically is, but we can’t get past our own way. Today’s game notwithstanding, what do you think generally has got a lot of bumps ahead?
MARTIN: Yeah, yeah. Yeah, look, I think there’s going to be a lot of bumps ahead. And if you’re a long term investor, you have to take those bumps in stride. Use some of those pullbacks and some of the Microsofts, the Amazons, the Adobe’s the Nike’s to buy in more on your positioning. Because if you see any kind of pullbacks five 10 percent in the market, you’re a long term investor. You have to take those opportunities to load up on some of the positions that may be weak in your portfolio because overall, a lot of those companies, a lot of those stocks I mentioned, I think, are going up into the right in the future.
CAVUTO: You know, you mentioned technology, it’s been taking it on the chin, say Microsoft today. You know, it’s buying back 60 billion dollars worth of its stock. It just raised its dividend 10 percent. It was flirting with the $300 a share before. I don’t know where it is now. If we can pop it up, guys, but what do you think of that?
MARTIN: Yeah, I think the buybacks are key. I mean, if you have a lot of these companies now that are preparing for higher taxes on the corporate tax rate coming forth, you have a lot of cash flow companies that are doing very well in the cash flow analysis. And so therefore they’re looking for something to do with all this. Cash buybacks is one thing. Dividends are another thing, and that actually intrigues investors to go out and buy shares of the companies that are doing that.
CAVUTO: All right. Scott, I want to thank you very much, my friend. Always good catching up with you.
Program: Your World with Cavuto
Station: Fox News Channel
NEIL CAVUTO: You like telecommuting or just not being in the office? Well, apparently a lot of your bosses, a lot more companies are saying they’re fine with this continuing in some cases for another month or so past the September promised return to work to as well to twenty twenty two January, February, you name it. Welcome back, everybody. I’m Neil Cavuto and focusing on companies that are now allowing their workers to keep doing the virtual thing virtually, right? Well, for months, maybe quite a few months to come, the implications of this was Scott Martin, family expert, readers of the financial and other markets. Kimberly, the message from the companies is it seems to be working for us right now. We’d prefer in person, but now we’ve got these spikes in cases, the uncertainty about mass, what to do. So keep doing what you’re doing. What do you think?
KIMBERLY FOSS: Yeah, it’s just difficult, Neal, I understand that they want to be safe and they want to do the right thing, but at the same time, eventually we have to go back to work, because the bottom line is just the quality of work, the time it takes to get things down. I can tell you in my own practice, when we try to get software service, you’ve got the lady on the other end trying to help us. But she’s got the screaming Mimi in the background. And the bottom line is it takes us four phone calls for phone calls to get what I could have done with one person in the office focused on what our situation is, which then takes me more time, takes my employees more time, it takes more cost. I can’t be as profitable. That’s the end of the story. We need to make a profit.
CAVUTO: OK, you sound like a workaholic, and we’ve got to talk about that, because that’s a separate issue for you. But let me let me get to you, Scott. All kidding aside, these same companies are saying on the flip side of this that, yeah, we’ll let you continue working for them depending on where you work. We’re going to cut your pay. Google has already hinted that maybe pay cuts of up to 10 to 15 percent because you’re not commuting, you’re not as
expensive a local. And so why should they pay you that much? What do you think of that?
SCOTT MARTIN: It’s interesting because that’s kind of been the dark side of this option of how much we care about you as an employer. It’s like, yeah, you can do all this cool stuff, work from home, work by the pool, you know, take the dog out and do the conference calls, you know, on the street. But, oh, by the way, you’re going to get 30 percent less. I’m going to cut your other benefits, too. And that’s the goofy part of this whole thing. And Kim touched on it, getting back to the regular economy and the regular style of work. I mean, we’ve got an office here of about 15 people and we got about half of those folks back in. And it, myself included, think about when you’re going to work on a daily basis. You’re going to the bar, to the restaurant, to the dry cleaners. Yeah, because, like, this suit doesn’t clean itself, by the way. And that’s usually in that order of which I’m doing things. And you’re not going out spending money, you know what I mean? You’re not stopping at places along the way where you’re creating economic activity, you’re staying home, you’re staying inside, and you’re not going out. And you’re not generating kind of that economic growth, that economic activity that we’re so used to that the markets need, I believe, to stay at these levels.
CAVUTO: You know, I look at the markets, though, Kimberly, and, you know, the Dow and S&P were up again today. That makes, you know, four days in a row of records for them. So they’re panicking about it. They’re not showing it. And I’m just wondering whether it’s their belief we’ll get through this. Everything’s going to be fine. The earnings certainly have been fine through the pandemic. They’ll get even better the more even if it slowly pull out of the pandemic and they just see everything half glass full to you.
FOSS: Yeah, I think that they’re shrugging this Delta variant off and by the way, Neal, this is not the only variant that’s coming out, right. They’ve got variants out to two thousand twenty three. So interesting how they know that. But that’s another subject. But at the same time for. You just just a little area. You’ve got four point five truly trillion dollars on the sidelines to throw in money market and money goes towards best reward and is not getting rewarded in money market account. So you are going to see more money committed to the market. I think this is going to be a slight pullback. But what we pivot, that’s what America does so great and entrepreneurs do so great, they pivot,
they’ll figure out a way at the front door is locked. We’re going in the side door, the little door in the basement. We’re going to get in somehow some way. And that’s. What about capitalism and the investor?
CAVUTO: Well, I’m going through the refrigerator door myself, but I understand what you’re what you’re getting out there with this migration that’s going on. Guys, I want to thank you both very, very much.
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 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.
Kingsview CIO Scott Martin discusses the great reopening, global supply chains, and what pricing pressures mean for small businesses.
Program: Cavuto Coast to CoastDate: 6/2/2021
Station: Fox Business News
NEIL CAVUTO: Want to bring Jared Levy into this Delancey Strategies, President Scott Martin, Kingsview Asset Management. Gentlemen, of course, for this restaurant owner, you can pull all the academic prescriptions you want. It’s making his business a tougher business. And he he he really doesn’t need that coming out of the pandemic where he’s hurt enough just finding labor and finding workers. Now, this. So I’m wondering, Scott, I know a Federal Reserve district president, Philadelphia saying this run up will be short lived, but it’s not short lived. This guy.
SCOTT MARTIN: No, in any short lived period doesn’t feel good to the business owner. I mean, Jeff talked about it with a fella there about he’s losing money on the wings today, hoping they go down in price in the future. I mean, that’s a scary hope to hang your profits on. And that’s something that concerns me, Neil, about this great reopening that’s out there. Yes. Global supply chains hopefully will get back on track and therefore some of that pricing pressure will alleviate. But the mom and pop the small business down the road that competes with the big business in your neighborhood. Those guys and gals don’t have the pricing power with their suppliers that some of the bigger companies have. And so when you look at this re-opening happening and saying, hey, this is going to be great and it’s going to help everybody, as the administration likes to say, it’s probably going to help the big guys more than anything, because the small guys still have a lot of that pressure, as the fellow said, to talk to Jeff about passing on those price increases that they’re seeing from their suppliers.
CAVUTO: Yeah, you know, when you look at this chart and you want to step back and say, let’s hope things calm down, these ransomware spikes or whatever you want to call them, they can’t go on forever. Of course, we’ve seen enough incidents where we’re beginning to wonder how true that is. But but that even the run up we’ve been seeing in a lot of these prices, all of these developments, they were real. The surge in things like car and truck rentals and the haircut, first of all, services, meals, et cetera, that was in place long before any of these attacks. And I’m just wondering if the Federal Reserve, which seems to think it won’t last very long, is wrong on that it’s going to compel them to respond to it or risk falling behind the curve. Right. I mean, so how does it play this?
JARED LEVY: Yeah, this is there’s two pieces here, right? I mean, one, you know, my heart goes out to every small business owner in this country because the key here is, is not the just the price increases. It’s the fact we’re traders. Right? We talk about investing, buying, selling. Remember, these guys have run businesses. You don’t go to your local burger joint and see the burgers swimming up 10 cents, down a dollar, up two dollars. They don’t operate that way. You know, when things get missed, when things get priced or major crisis happen, they reprice and they stay that way. We don’t see a lot of undulation. So the bottom line is these guys are going to have to ratchet up and it’s going to stay that way at the consumer level and at their level if they’re going to stay open. So that’s one problem. You know, and this isn’t a JBS issue. And I’m referencing the Meat-packing company in the meat distribution company. This is a bigger, broader effect that’s taking place around the world. I’m talking about inflation. It’s going to continue. Unfortunately, you’ve got a lot of money stashed away. You’ve got a lot of folks I mean, I can’t get work done on my house. There’s nobody available. People are paying two, three, four times for services to get them done. Now, do you do you correct that with with interest rates immediately? I mean, it’ll shock the marketplace, but I don’t know how a rise in interest rates or policy or even Putin saying don’t hack. You know, hey, guys, don’t don’t nobody do any ransomware attacks. How that’s really going to change things. This is a much longer, bigger arm that’s swinging right now. And frankly, I don’t think that even an extreme jump is going to correct it. So so, again, I don’t think this inflation is short lived. And I think it’s something that’s here to stay. We’re going to have to really adjust and it’s going to take some time.
CAVUTO: Yeah, you know, whether you’re worried about this returning to the 70s type of place, which I think is a bit overwrought, it’s still a trend that’s firmly in place. And on that point, Scott, I’m wondering how the market deals with that. I mean, it seems to recognize that the backdrop for this is strong demand. We’re coming out of our homes. Obviously, bookings are very strong on airlines, one of the best travel weekends we’ve seen since before the pandemic. So the trend is the economy’s front. I get that. But when does the market get or will it respond to this stubborn uptick in prices that might continue for a while?
MARTIN: It’s when the sugar high runs out, Neil, from that euphoric run up of this great reopening that we’ve been anticipating. I mean, I’m in Ohio today and they’ve removed, as you’ve been talking about on the show today, all the mask mandates statewide, which is great. So that provides that sugar high, the excitement for that run up, that demand that you talk about to show up. But when we get there and I think to Jared’s point, when these price increases don’t alleviate, then you kind of stand around and be like, well, now what? Now we need wage increases. Now we need increases in wealth and things like that to start paying for all the increased costs that we’ve seen. And that’s when I think the markets need to really take heart to this. Now, what you will see, though, is in some of the bigger companies like the Starbucks of the world and Netflix, some of the companies we own, Neil, in our portfolios, you’re going to see pricing power there. I mean, companies like those can raise their prices a dollar or two and likely get the buy in from consumers. But those are a select few. And so it basically shakes out not to be sexist, the men from the boys to use that term as to how some companies are going to be able to weather those price increases and the stock prices are not going to suffer versus others that cannot.
CAVUTO: All right, guys, I want to thank. We’re going to have you back a little bit later here.
Kingsview CIO Scott Martin discusses nationwide real estate sectors; corporate, industrial and residential.
Program: Cavuto Coast to Coast
Station: Fox Business News
NEIL CAVUTO: Want to get reaction to all of this with Jared Levy and Scott Martin, you know, Jared and Scottie, think about it, commercial rents are going to continue going down. I mean, I guess they’re anticipating a comeback as businesses and people return to those businesses. But this might be more the norm, what we just heard. So, Jared, what do you think?
JARED LEVY: Yes. So Manhattan’s a kind of an unfortunate but now fortunate microcosm, right? Median rents in that city dropped to twenty seven hundred dollars in the first quarter of the year. That’s the lowest of all time. And you got to think about Manhattan. Right. It’s kind of really need a lot of very small, very expensive places. A lot of things are vertical. So for retailers, not really sort of a great place to be. Now, that’s not to say that there can’t be a rebirth like the one we just saw. The issue is how do we fill up all those big high rises that are now being vacated by big companies moving elsewhere where there’s lower taxes, lower cost of workforce, et cetera. So, you know, another interesting point, Seattle just dethroned Manhattan as the number one spot for foreign investment. So I’m not ready to buy in on Manhattan Persay. But I will say that real estate across the U.S. is seeing the commercial real estate is seeing a huge change in evolution. Sam Zell just dump three point four billion in a mammoth mammoth real estate investment group. I believe they’re a huge industrial operator. So they service like Amazon’s people like that. So I think that’s where the big money to be made in commercial real estate’s going to be Manhattan. Who knows? But but interesting to say.
CAVUTO: Yeah. And you think about it, too, Scott, to Jared’s point, I mean, when when people do return to their offices and a good many will, they’ll be spread out a little bit. They’re not going to be packed like sardines like they had been before. We don’t know all the details, but we do know enough that the demand for still more office space is going to be cold for a while. I’m just wondering how this plays out in cities like New York.
SCOTT MARTIN: Well, I would add Chicago to that list, my hometown, Neil, which is suffering, too, I mean, we’re looking at Chicago occupancy rates near our office in downtown Chicago, less than 20 percent, and with no end in sight, frankly, of people coming back or deciding to. And so I think that’s that’s really interesting takeaway. You know, there’s other cities, though, Dallas, Denver, that have weathered some of the corporate real estate difficulties much better. And so those will probably bounce back faster. But, yeah, Manhattan, San Francisco, certainly Chicago. You have the impact, as Jared said, from the vertical dearth of people coming back with respect to some of the corporate office buildings being empty and then also the mom and pops or even just the retail that was built around, say that corporate infrastructure, that that’s at risk now, too. So really, I think it depends on where you go and kind of what sectors you’re in. Industrial real estate has been an area we’ve done a lot of investing in because of the expansion from Amazon and companies like that. But corporate in some of those long famed leading cities of the United States really looks to struggle here going forward.
CAVUTO: Would either of you look at real estate investment trust in this environment, some of them have been beaten down quickly, if I can. Gentlemen, Gerard, to you,
LEVY: the answer is yeah. You’ve got to be really careful here. Remember, here’s the key to investing in real estate. If you can’t jack up your rents enough to meet inflation, there is no protective measures there. The good thing is there’s a lot of preferential tax treatment. But again, I would look at I like multifamily in some cities, but certainly I would stay away from high density areas. Like Scott just mentioned. The big metro areas would be a place that I would avoid in general in terms of reinvestment.
CAVUTO: Scott how about you, REITS, any interest in them?
MARTIN: Yeah, yeah. Multifamily Neil and Florida, even some residential housing expansion that’s going on outside of cities like Nashville and Denver, as I mentioned, that are doing very well through the pandemic and have a lot of growth ahead of them.
CAVUTO: All right, gentlemen, I want to thank you both very much, Jared and Scott, on all of this.
Program: Cavuto Coast to Coast
Station: Fox News Channel
DAVID ASMAN: Kingsview Asset Management CIO Scott Martin and former Dallas Fed adviser Danielle DiMartino Booth, Danielle first to you. We are heading into a full blown energy crisis. Can President Biden avoid the blame here?
DANIELLE DIMARTINO BOOTH: I do think the administration can probably get around this particular issue, there is gas in the pipeline, there will be relief. It will take a matter of days. There is a lot of panic buying going on. I’ve heard from from colleagues in Washington, D.C. that people have shown up at gas stations with empty plastic bags to fill up. So they’re hoarding gasoline. But it does appear that the Biden administration could have been a little bit quicker on the draw in terms of responding to this and and broadcasting the message that relief is on the way, regardless of what happens with the pipeline itself. So there was a delay and these types of delays can be very damning, especially in light of the current circumstances we have where where the policies of the Democrats right now, when adjusted for inflation, you actually have massive pressure on wages as well. Again, I know this story has been covered over and over because people are being paid more to stay home than they would be.
ASMAN: But we’re going to talk about that. We’re also going to talk about the inflation numbers, which shocked everybody today. But I want to keep on gas for a second and energy specifically, Scott, because just a year ago before the election, we were we were proud and happy that we were energy independent. Right now, the way they’re solving this problem is by importing fuels. We have to import fuels just to get enough for the gas stations. I mean, what a change in a year, by the way– Scott, what we’re looking at now, that’s that’s something a picture that I took on November 7th just after the election. Twenty twenty. The price of a gallon of gas in New Jersey was two dollars and one cent. Go ahead.
SCOTT MARTIN: Yeah, same here. Chicago is low twos as well, David, and now rocketing up towards four bucks, you’re right. I mean, nothing like giving up some of our national sovereignty as far as energy policy that Trump had instituted, which Biden has obviously rolled back and giving up that sovereignty so that we’re reliant on foreign oil. Again, I’ll tell you, Danielles, right. I mean, the messaging from this administration has really been the problem. I don’t foresee a major energy crisis coming, thank goodness. But look, let’s look what’s happened with the Keystone XL pipeline, other kind of, let’s say, iterations out of the administration against the energy sector. Those have not been good. Now, what’s been interesting, though, David, if you can believe it, is since the election and since the inauguration, one of the best sectors to own in the S&P. Five hundred has been, you guessed it, Energy. We own energy at Kingsview in some of our portfolios. I think that’s the way to combat, along with materials as well, some of this inflation scare that’s circulating throughout the market. And you’re seeing that in the stocks today.
ASMAN: All right. Let’s talk specifically now about inflation, Danielle. Consumer prices jumping four point two percent year over year. That is the biggest annual gain since two thousand eight stocks, of course, went down on the news. I’m just wondering where this ends. Is this just the beginning? Because as we were talking before, that doesn’t even count wage inflation, which clearly is coming as a result of trying to lure people back into those jobs that are waiting for them.
BOOTH: So, you know, I think the real problem here is not necessarily that four point two percent headline, but we had zero point nine percent increase in the core CPI, which the Federal Reserve pays very close attention to. That’s the biggest increase since nineteen eighty two. So again, it’s going to be about messaging. Vice Chair Richard Clarida, what’s on the wires today, saying that he was, quote unquote, surprised by the increase in inflation. We can’t not have the people, the Federal Reserve saying out loud that they’re surprised. We knew that base effects were coming, but the month over month changes in and of themselves are extraordinary and in large part do reflect kind of a confluence, if you will, of all of the supply chain disruption, the shortages that we’ve seen everywhere. In addition to spring break, we saw airlines and hotels, those types of prices go through the roof. That’s because a lot of Americans splurged, went out, got out of the house, hit the road in March, during spring break, because they could. So, you know, again, there needs to be more clarification and certainly not any surprise out of Federal Reserve officials.
ASMAN: Well, and, Scott, the fact is, is that we’re forgetting the main factor here in my mind, which is government spending. I mean, we’re spending trillions and trillions and trillions of dollars. When you do that, you get inflation, right.
MARTIN: To some degree you do, David, I do believe, though, and I agree with Federal Reserve Chairman Jay Powell in saying that is a transitory type effect fact. I mean, I, I kind of challenge or channel my inner Milton Friedman here by saying inflation over the long term, David, is more of a monetary phenomenon. As Danielle hit on. That’s got to be something that’s more wage related, which, yes, I think is starting to come back. But technology is providing some sort of deflationary environment. Counterintuitive to that. The last thing I’ll say, though, to David, you know, pushing, gosh, what is it now, 30 trillion in national debt. We’ve printed, you know, almost 10 trillion or looking to print 10 trillion. Now in the latest covid relief stuff, if you add it all up correctly, if we are to pay that debt back, David, we’re going to need inflationary dollars to do that. We have to pay back that debt with cheaper dollars. So we actually better hope for some inflation down the road. Just not crazy.
ASMAN: You quoted Mr. Friedman, Danielle. I’m going to quote him, too. He said, Inflation is very simple. It’s too much money chasing too few goods. And right now we have a lot of extra money in the markets because of the Fed buying up those bonds. And we have a lot less goods because we can’t get people back to work.
BOOTH: You know, it’s a terrible combination, and I think that if the administration and if the Democrats don’t understand at this point that too much stimulus money can be a bad thing for the economy, it can produce unintended consequences.
ASMAN: But the president and forgive me, the president doesn’t get it. The president is saying it’s not related, that the the money that we’re spending on keeping people at home is not related to the fact that we have eight point one million unfilled jobs. He said there’s no connection.
BOOTH: Then he’s not connecting the dots. It’s pretty simple map, the average American right now is getting paid seventeen dollars and fifty cents an hour. That’s just what the unemployment benefits don’t trust. I’m not even talking about rental moratorium evictions. Right. Just just look at that. It’s simple math, president by simple math.
ASMAN: All right. Well, we’ll wait and see if he wakes up or the administration wakes up to that simple math. Good to see you both, Danielle. Scott, thanks very much. Back to what?