Announcer: Wall Street Unplugged looks beyond the regular headlines heard on mainstream financial media to bring you unscripted interviews and breaking commentary direct from Wall Street right to you on Main Street.

Frank Curzio: How is it going on out there? It’s March 24th. I’m Frank Curzio, host of the Wall Street Unplugged podcast, where I break down headlines and tell you what’s really moving these markets. How about the NCAA tournament? I’m doing great this year, not the last day. Every game is a blur in the last day, but man, it’s insane. Oral Roberts, Loyola Chicago, who is definitely not an 8-seed. But still, I mean, it wasn’t even like, “Hey, they might win, or there’s a possibility. Or one of them is going to choke.” I mean, they beat the crap out of them. They were a much better team, which I was surprised, considering how it goes one of my final four picks, final two picks: Syracuse, Oregon State. Insane how many low seed, double digit seeds… You try to pick double digit seeds, usually there’s one, sometimes two. We have four this year.

Frank Curzio: Oregon, Syracuse, Oral Roberts, and UCLA. And how about UCLA and USC making it into the sweet 16? Yes, they destroyed Kansas, which was expected. I can’t believe watching Kansas, the only big school I’ve seen maybe in the last 25 years that has a person… They don’t have anyone that could dribble the ball. They don’t have a point guard, but they have no passers on the team. No one can pass. It was just a matter of time before they get crushed. But I think Bill Self did a good job with that team because they really, really weren’t that good this year. But great for UCLA and USC, considering they had to beg Newsom, Governor Newsom, to allow them to open gyms and practice this year, and they actually had to beg them. Beg not… Being dead serious here.

Frank Curzio: So, USC actually went public with an appeal to the California Governor, saying, “Hey, can we please play sports?” And thank God, they did because look at them both in the sweet 16, and who knows… This is a crazy year, and both those guys are playing very, very good. USC, they look good. But Kansas is a bad team. But when I look at the final four, mine was Ohio State, gone. Illinois is gone. And yet, Gonzaga and Florida State were both in. And I still like Florida State. I think that that’s a sleeper, a number 4-seed. I mean not so much of a sleeper, but not too many go for Florida State. But if I’m looking at my sleeper picks from last week, which was North Carolina. They got blown out. I think Wisconsin would beat any pro team. They hit every shot, 50% from three, or 50% overall.

Frank Curzio: Georgetown got blown out, which I was surprised at. East Washington did cover against Kansas, so I had that one right. Syracuse, I told you, final 16. But my biggest one was Abilene. And I said that game was going to be big coming off Division Two, they’ve only been in Division One for a few years playing Texas. Abilene is in Texas, so they’re playing the heart, the big team, Texas Longhorns, and they got up for that game. And I knew they’re going to get blown out in the next round because that’s a championship. And then Colgate, I think they had them, and they got robbed and bad calls in that game, and then they just let it get away from them. But I didn’t really like Virginia; they lost early. But great tournament thus far, lots of upsets. And at the end of the day, you have two best teams, which are Baylor and Gonzaga, who are both alive. We’ll see a lot of brackets, including mine, are busted. But I definitely wanted to cover that and looking forward to the next set of games, so the sweet 16.

Frank Curzio: But let’s move on here. Lots of questions from subscribers asking me about the markets. What do I think? They’re trading all-time highs. I’m not really worried, but it’s not surprisingly, when we see the market trade at all-time high, everyone is bullish, and now it’s even more bullish than it’s ever been. I mean, you put on TV, everybody is bullish. Hard pressed to find bears on TV right now, telling you to take some off the table. They don’t exist. Last month, when tech stocks, growth stocks, had slaughtered, like always, the pullback lasts for a few weeks, and it turned out to be a buying opportunity. They’re still up 10% off their highs, a lot of those growth names, large caps, especially tech, Nasdaq 100.

Frank Curzio: But let’s talk about the markets right now, today, because that’s what matters. You can talk about the past, and a lot of buying opportunities. Let’s talk about where they are right now. Because if you’re looking to find new ideas, companies with favorable risk and rewards, it’s fricking difficult. I mean, I would know, I’ve been doing this 25 years, cover all sectors, all stocks, and it’s not easy right now. You’re going to have to take on more risk, and you’re probably going to get less reward because a lot of these things have moved higher tremendously. And you’re looking at growth names early on in the cycle, and the rebound of March did well. And again, they were off the highs a little bit because value names are on fire.

Frank Curzio: Cyclicals are up huge over the past few months as our economy reopens. It’s a great trade that we got into early. And we’re not just talking about the economy reopening; we’re talking about consensus estimates have this at GDP to grow 7% in 2021, and 4% in 2022. Now, what does that mean? GDP, the economy growing… I mean, you got to put in perspective. And you have to also throw in that we’re coming off COVID, so we saw a big decline followed by… A couple quarters of major declines, and then a big uptick. But now, we’re looking at 7% this year and 4% next year. And if we put this into perspective, the last time the economy, our economy, US economy GDP grew 3% was 2005. And the last time our economy, GDP grew more than 4% was in 2000. So, we’re expecting 7% in 2021, 4% in 2022. That’s incredible. And it should be easily attainable, given that we injected how much? $8 trillion into the system already. Eight trillion, now how crazy is that? Eight trillion dollars, holy cow, with a T.

Frank Curzio: It doesn’t matter. It’s trillion here, a trillion there, everyone has their hands out, politicians, everybody making money here, handing out free checks. But the funny thing is, that’s the past. Let’s talk about now and into the future, because Goldman Sachs came out and said, “Hey, okay, here’s the 1.9 trillion, that’s good to go.” We go, “Okay. People are getting their checks now.” But now, they say in September there’s going to be another four trillion of stimulus. And that’s the number they put, another four trillion. What is it be? A 30, 35% of GDP now. So, two and a half trillion is going to be dedicated to infrastructure. Again, this is a great report by Goldman Sachs, they put out. But you’re looking at all this money, and it’s not going to be like the past stimulus package where this is going to be more of a 5, 10-year distribution, and money allocated to different things, so it’s not going to see an immediate impact.

Frank Curzio: But man, I mean positives all around when you look at the macro backdrop, you see why everybody’s so positive. We’ve been bullish for a very long time. I think you’re throwing the Fed who was on, what? Not long ago saying, “Okay, pedal to the metal, keeping short term rates low forever.” No problem there. And what do we have. What’s the biggest risk in the marketplace, at least being mentioned in financial media? It’s rising long term rates. We started a 10 years surged 1.7, it’s around 1.6 today. And it was what? 1% January. Which is a major, major move, guys, if you don’t follow this gig, major, major move. You don’t really see it that much. Something like that big of a movement in less than three months.

Frank Curzio: Now, bond experts are calling for the 10-year to rise above 2% in the coming months, and 3% by next year. And it’s a concern, it’s not a major risk. And I’m saying that because we look at our deposition of Frank. The reason why it’s not a major risk, guys, is because the Fed knows this risk, they see it coming. Our biggest risks in the marketplace are the ones we don’t see, like the pandemic. I mean dot-com bubble inflated incredibly high before it finally burst. I mean people were calling that from ’98 through ’99, into 2000, and finally it burst. And then we had 2008, which was unexpected, because no one knows how leveraged we actually really were. It wasn’t just subprime loans, it was a leveraging of those subprime loans by 20X, 30X, which meant housing prices just had to decline a little bit, and the whole entire financial system would break apart. And nobody knew what all his risk was. We eventually found out that AIG was up there. And Fannie and Freddie and everybody got bailed out.

Frank Curzio: But those are unforeseen things. We see it. We know this is a risk. We know how much debt we have. We see the numbers. So, that does that mean? It means the Fed could institute yield curve control to keep long-term rates capped. They did this in World War II to help fund the war. Japan is doing it now. But if you’re looking at this particular risk, and being mentioned on TV every day, a risk that the Fed sees. And it pushed stocks down, initially. Created some huge volatility, especially year to date, just pull up a chart that’s S&P, or… Nasdaq fell 6% in late January, rose to new highs, and then corrected close to 12% in February, and that rebounded again. This is two half months. Crazy. I mean these massive, massive moves because we’re at extreme valuations, we understand the economic backdrop is very, very favorable, but now you throw in that risk in people, it’s spooked people a little bit. But again, it’s something we could see.

Frank Curzio: And I’ve gotten questions saying, “Frank, I don’t understand. The large cap tech stocks, massive great balance sheets, why are they going to be hit the hardest, or they being hit the hardest right now in a high interest rate environment?” And I get that question. And you’ve seen, if you have a ton of money on your balance sheet, which a lot of these companies do, but they took out a lot of debt at dirt cheap prices, even Apple, Microsoft, the companies that tens of billions and hundreds of billions dollars on a balance sheet. I mean they could borrow for cheap, and they know they can make a much, much better return than that payment of basically zero point whatever on your 40-, 50-year bond, whatever it is. But if you have a lot of cash on your balance sheet, higher interest rates, you got to earn a high return right.

Frank Curzio: So, I understand those questions of, why is it hurting those sectors, and most of those stocks? But higher rates lead to what? It leads to less leverage, people aren’t going to be able to borrow as much. And less leverage leads to, customers of these tech giants that’s how they make their money, their customers cutting their capex budgets, everybody cuts back. Which, in turn, results in a slowdown of sales growth, and also a slowdown in earnings growth. It’s a big deal because many of these tech names as you know apply for perfection. And the cheapest of the FANGs were trading at 30 times forward earnings. They used to be trading at 18 times forward earnings. And they’re going to premium now, especially the Apple was not really growing as fast. I’ve seen a lot of these names. Google is starting to take off, outperform. Facebook is still probably the cheapest out of the bunch, but these things are trading at very, very high valuations.

Frank Curzio: And a lot of their customers will cut their budgets. They’re not going to be as leveraged, they’re not going to take on more risk, and that’s why you see some of those names get hurt, even when they do have great balance sheets, because they’re trading at inflated valuations because of their growth potential. And that growth potential is going to be cut. And then, what else do we have? We have the reopened trade, many of these names rebounded sharply. Big beneficiary of this trade is the cyclical names. We positioned our portfolio as perfect. Got to a lot of these things early before the Russell 2000 took off. I mean companies under a billion dollars in the Russell 2000, they’re up 30% year to date. That’s how crazy and how much they’re outperforming and it’s mostly value. Who thought value cyclicals? We nailed that, like three, four months ago.

Frank Curzio: I’ve been wrong on things. I’ve been wrong on Disney. But that was one of the things that we were right on. And we positioned our portfolios accordingly, and a lot of people are doing well. We’re up 80 to 120% on a lot of these positions over the past five, six months, and it’s nice to see firms and everybody talking about them today as, “Hey, these are rebound plays, and are going to go higher.” And we went a lot earlier that’s what people pay me for. And I’m glad I want to see people make money. And I don’t get paid by companies. If I show you performance, you’re going to continue to subscribe, if not, you cancel. So, right now, everyone’s doing pretty well from my portfolios. And again, that makes me happy too. It’s why I do this. Anyway, you’re looking at some of these names that have rebounded, they’re still trading, they might be trading at 52-week highs now. But remember the market bottom, or their high was in February.

Frank Curzio: So, they’re going back to when the market crashed. So, they trading at two week highs, but they’re still 15, 20, 25% off of their pre-COVID highs. And now they cut costs tremendously, they’ve gotten money for free from the government, and now you see to reopen trade and all the stimulus, and people have tons of money to spend you could see why. Financials, energy, casinos, airlines, consumer discretionary, retail, restaurants, a lot of these things are going to take off, and they have taken off. People have a ton of money to the tune of $2 trillion. It’s 18% savings rate compared to normally it’s an 11% savings rate. And they’re dying to get out. They’re dying to go on vacation. They’re dying to spend money. They’ve been locked up in their homes. I told you last week how a lot of that is all bullshit, the COVID, and political garbage.

Frank Curzio: But hey, this is about stocks, about making money, and you’re going to see these names continue to move higher. So, how should you look at this market right now, today? Because so many people are bullish, and you guys know I hate that. I hate that everyone is bullish now. Because you came a find… That’s when you get to extremes. You’re not really seeing any bears on TV right now saying, “Take your profits.” Nobody is like that. I’ve seen that over the past two, three years all the way up. I don’t see it at all right now, which makes me nervous.

Frank Curzio: As you know I said early, I’ve been bullish for a while, positioned the portfolios accordingly. But right now, it’s just finding those new ideas has become difficult. And there’s two risks on the table of why that’s happening, and I want to discuss with you right now because they’re not being mentioned in the financial media. And it’s important you understand this. So, if you’re watching, I’m going to share a couple charts and figures with you guys on the Curzio… If you’re watching this through Curzio Research YouTube page. If not, no worries. I’m going to explain it thoroughly. If you listen to iTunes, running, whatever. Trying to get away from your wife or your husband for a little while, whatever you do, that’s cool.

Frank Curzio: But these two risks. Let’s go for the first one, is valuation. I know it sounds… Valuation. Valuations has never been a concern. The stocks that are moving higher are really the ones with the worst balance sheets. And the growth stocks aren’t moving as high. So, you’re looking at valuation. Now, why do I say valuation? Because close to 70% of stocks are trading more than 20% higher than their 200-day moving average. And that’s incredible. And I’m going to bring that up really quick this way I could show you. So, right now, we’re coming up the 10- best 12-month periods of small caps. This is the best ever out of the last 10. And small caps tend to take a pause, and let’s go to the Jefferies’ research.

Frank Curzio: But pulling up that chart, record levels of stock trading at 20% above their 200 day moving average, it’s 70%. So, if you look at the chart that I have up right now… If you look back at 2008, we went to about 50% which is the highest since 1984, and you notice it was after 2008. So, after the stocks get nailed, they rebound, and you see this. This is common. Same thing happened is there’s a level of 2002, and you can see. And then dating back to 1996. But the average of these peaks is 40%. We’re close to 70%. 70% of stocks trading 20% above their 200-day moving average. And when look at that, that is insane. It means that you’re going to take on an exceptional amount of risk, because these stocks are higher, and your reward is probably not going to be as great. Why? Because these stocks have moved up tremendously already. And that’s a scary environment you guys need to pay attention to.

Frank Curzio: So, valuation is a risk right now, where these companies are trading. They’re trading all-time highs, and I get it, I get the backdrop. I’ve been pounding it your head with the Fed, the interest rate is low, and trillions in stimulus. I know, we’ve been talking about this for a very, very long time, and we positioned our portfolios perfectly. But when you look at this, and this is a great report going into small caps and just saying, “Hey, you know what, be a little careful.” But they still see pauses. But I’m going to share another report with you, which I found was interesting.

Frank Curzio: So, the second risk is higher taxes. Goldman Sachs came out with a report, this is on March 19th, a few days ago. I’m showing right now my screen. Equity investors will soon pivot their focus from rising interest rates to rising tax rates. Remember, Biden, they ran on higher taxes; these things are coming. But what’s not really factored in is Goldman is saying that full implementation of Biden’s tax plan will reduce S&P 500 earnings by 9%. So, close to 10%. That’s not being factored in right now. Not at all. And they’re coming, those high taxes have to come, and they’re probably going to be a lot, lot bigger, and hurt tons of middle class people because there’s no revenue coming into the states right now. Especially… Look at New York and California, who closed their borders, who said, “We’re taxing the shit at everyone who makes more than a million dollars.” Where do you think those people are going to go? They’re flocking to Florida. They’re going to Texas. They’re going to more favorable tax places.

Frank Curzio: And what does that mean? That’s less revenue coming in, they have to raise taxes on the… They don’t have a choice. They don’t have a choice. It will continue to happen. These tax policies, they’re going to be a lot crazier than even what they ran on. They have to be. But you go through this with Goldman Sachs, and they take surveys and everything. They showed, 10% of the CLI, showing a lot of these. They say equities do not appear to be pricing and much concerned regarding tax hikes. They’re not. And they go over S&P 500 stocks, potentially that are vulnerable. I’m showing this list now. It’s Seagate, Microchip, NVIDIA, Xilinx, Garmin, Cooper Companies, Maxim Integrated, Western Union, even Apple. These are all low tax rates right now, but they’re going to be raised considerably which is going to hurt earnings.

Frank Curzio: They show just different charts and different levels. And one of the things I liked about this report is they have market performance year-to-date, absolute versus risk adjusted returns, and on top of that is Bitcoin. This is a Goldman Sachs report. Goldman is talking about Bitcoin, getting into bitcoin now. They would have never listed Bitcoin as an asset class. This is Goldman, they’re the biggest, they have Bitcoin right up the front. But when you look down this list, which is surprising for total returns year to date, the biggest underperformer is gold. Probably not a surprise there. But Russell 1000 growth, Nasdaq 100 utilities. So, these are the areas that I want to look at right now to find new ideas. And I show how the cyclicals are outperforming tremendously, defensive names are down tremendously. They used to do a really good job highlighting lots of things, but consumer staples have underperformed, healthcare has underperformed, utilities, real estate has underperformed while energy has rebounded, industrial have rebounded, financials are on fire. Materials have rebounded sharply.

Frank Curzio: But it’s not easy to find cheap stocks, and that’s what I’m getting at here. So, when we bring all this together, what does it mean? And they’re just throwing out numbers and thrown out stats. But you have two risks, which one is very hard to find good ideas, because everything is trading exceptionally high. 70% of stocks, again I’m repeating that because the bear is repeating, which is insane. Are trading, and this is the highest level ever going back to 1984, probably back ever. But 70% of these names are trading more than 20% above the 200-day moving average, which is insane. That’s insane. And they’re buying all these companies up here, pretty insane. And you have high taxes coming, which nobody is talking about.

Frank Curzio: Those are bigger risks than high interest rates only because we know higher interest rates are probably coming. We know there’s going to be inflation coming. And the Fed could adjust accordingly. It’s a risk that they see in the table. But no one is really talking about taxes, and no one’s really talking about how hard it is to really find new ideas because that risk to reward is not as favorable. So, the 64,000 question: What should you do as an investor? What’s the perfect strategy in this environment? Lucky for you, you have me and I’m a genius, and I’m always right 100% of the time. As you know that’s 100% not true. But here’s based on my experience of what you should be doing right now. Because that’s all it matters now. Not in the past, not how much you’re up, which a lot of you should be up a lot and doing well, it’s bull market. But again, how do you position yourself going forward.

Frank Curzio: And I suggest holding current positions, let those winners ride. And we have a lot of those in our portfolio, this rally could continue for many months, the backdrop is very favorable. But I’m looking at the pressed sectors, I’m looking to buy stuff like utilities, real estate, consumer staples, defense companies have gotten crushed. Insurance names have come down. But a lot of these sectors significantly underperformed. Just recommended a new gold stock in Curzio Venture Opportunities which you’re going to be getting today, if you haven’t gotten already, you’ll get it pretty soon if you’re listening to this. And that’s on the buy side. We could see this thing continue to go higher, and we want to be positioned, we want to be smart. I’ve seen so many people sell stocks too early, and you really don’t know how high they can go, especially in certain market conditions like this.

Frank Curzio: So, definitely hold on that, I’m not giving you a die scenario, where you should sell everything. But how do you protect yourself? You can hedge yourself. I mean buy a put in the Russell 2000 dated maybe six to nine months out from now, put two to 3% of your portfolio into it. So, that means that the money you’re putting into that is the money that you will lose. And if you lose that, and the Russell 2000 goes up, then you know what, the rest of your portfolio, again this is how much money you have in small caps, the rest of your portfolio will take off and easily make up that difference. But if the Russell 2000 falls, that 3% position is probably going to be 10 to 15% because you’re going to make a fortune on that trade. So, you’re risking 3% big deal, if you lose it. If you lose it, chances are you’re easily going to make up that 3% because everything else in your portfolio is highly leveraged, the market and economic growth regardless if you think it’s not, it is. So, much correlation these days.

Frank Curzio: And also, the biggest thing here, guys, be mindful of your stops. Make sure you have an exit plan in case things get worse. Don’t be stupid. Why? I mean, look what’s happened in past crashes, when we go back to 2000, when the Nasdaq crashed by over 70%. And pretty close to three years, which included during the September 11 attack in 2001… Markets were really terrible then. In 2008, we saw the credit crisis, where S&P crashed with 30%, and even over 40%, from peak to bottom. And last year, we had COVID-19 in March 2020, which pushed the markets down tremendously 30, 33% around. So, when we look at these crashes, it’s easy to draw one conclusion. They were all massive, massive buying opportunities. Huge. I mean, you guys heard the saying, “Buy when there’s blood in the streets.” Warren Buffett.

Frank Curzio: But our brains are not really programmed like that. They’re not programmed to buy stuff like that when it’s down. We want to buy shit when it’s exciting. That’s when everybody wants to buy. So everybody is talking about, water coolers. That’s how we’re programed. And our brain is also programmed to sell things when we’re fearful or scared. “We got to get out of this position, holy cow it’s going low.” And notice how many times you’ve done that and you sold, and that stock is rebounding tremendously. I’m not talking about if it hits a stop, you hit your stop, you’re out fine. But people tend to sell even before it hits their stop, “And I’m out of here. It’s crazy.” You watch TV for a day and everyone is completely bearish like it was two weeks ago, and now everyone is completely bullish. Two to three weeks ago, the market was going to crash 20, 30%. Here it comes, and all these bears… It’s crazy. It’s funny.

Frank Curzio: Buying low and selling high is not easy when a programed like that. If you read every investment book, that’s what they say to do, but it’s very, very difficult. It’s just the way we’re… If you want proof of that, a good example is circle a company right now that you would buy on 20% low. And I can almost guarantee once that stock hits that and goes 20% low, you’re not going to buy it. You know why? Because it’s 20% lower on bad news. Everyone in the media is going to be talking negative about it, how much they hate it, how much they’re in trouble, and it’s horrible. They had a bad quarter, and you’re not going to buy it because your emotions are going to be involved. It happens all the time. You’re not going to say, “Hey, it’s down 20%, I’m going to…” No, you’re going to factor in everything that just happen and everything is being said, and then your emotions get involved.

Frank Curzio: Again it’s natural, it’s how our brains a programmed. But my point here is imagine in 2002, you bought Microsoft, Oracle, Amazon, eBay, Qualcomm, Cisco, Intel, names that got destroyed during the dot-com crash. Most of these names are at all-time highs today. You get 20X, 30X return since then. I know it’s a long time but, yes, massive, massive returns. Think about 2008 when the market crashed. Imagine buying a home back then. In 2009, 2010, 2011, I remember I moved to Florida. I was fortunate in 2010, I got a great home for a very, very cheap price. But we’re pretty close to the water and there’s hundreds of houses, I have to tell you 90% of those houses were for sale. Easily. People just bought them, they leveraged them, they put no money down and when the market crashed they just walked away. And everyone was giving those things away for three, four or $500,000, they’re worth multimillion dollar houses now, on the ocean.

Frank Curzio: But imagine you had the money to do that back then. No, everyone was getting crushed in the markets and fearful. Or imagine buying in March or even April 2020 after the market crashed. So stock is down 50, 60%, names that are over 100 fell to under $10. You had Goldman, Caterpillar, J.P Morgan, Boeing, American Express, Exxon… These are Dow components guys down more than 30% from their highs. And these drops came in just a few weeks. While Norwegian, Apache, Occidental Petroleum, Royal Caribbean, Live Nation, Western Digital. These are things that fell 50 to 70%. Imagine being able to buy them. When you fast forward today look where these names are now, you’d be up huge. So, where am I going with all of this? Wide inflated valuations. The market is super expensive. Definitely still money to be made with the economic backdrop, but it’s a very dangerous market. We saw solar stocks, marijuana stocks, some ESG names crash more than 50%. Yes, they’ve run up a lot before that. But they got murdered.

Frank Curzio: But right now, if you’re looking at the market, it’s not a favorable risk reward, where the risk you’re taking justifies the reward. Again, nearly 70% of stocks are trading more than 20% above of their 200 day moving average, which scares the crap out of me. It’s insane. So, that means you must pay it for stocks which increases risks and your reward is going to be cut since a lot of these names are already up huge. And again, doesn’t mean a correction is coming tomorrow and the weeks ahead. I’m not telling you to sell everything, because market is about to crash 50% on April 18th. I love that our competitors have people that put out the exact date that the markets going to crash, that exact date. They have hundreds of them in the last 10 years, which none of that has come to fruition. But they sold a lot of newsletters and products and shit like that. But no, I’m not going to put a date on it.

Frank Curzio: But the point of this, is it’s better to be prepared because when it does happen and the market does come down, you’re going to be ready for it, it’s going to be great news for you. Because crashes and pull backs are always great news for those who are prepared. It’s how the greatest investors make the most amount of money. Because 2003, 2009, April, May of last year, 2020, if you had cash on the sidelines and bought just about any asset when the market went to shit and everything went to shit, you would be sitting on a massive pile of cash right now. Your wealth definitely increased substantially.

Frank Curzio: So, Michael, I’m hearing out there at the bulls’ camp. I’ve been a bull for a long time. Don’t be going all in here. Let your winners ride, take advantage of market inefficiencies, which my subscribers have me for, and they pay for me to look at. Names that got crushed, maybe they had bad earnings, on temporary problems, not secular problems, names trading at discounts to that peer which is unwarranted, but those market efficiencies and names and ideas, that’s my job to find some of those.

Frank Curzio: Pay close attention to your stops and be, and I won’t curse you, but be fricking smart. It’s what learned from my decades of experience, and yes, that includes me being wrong lots of times during a timeframe. But I’ve learned not to follow the crowd, to limit my losses. It’s why I’ve been doing this for over 25 years, where so many others get burned. They’ve ruined their reputations along with the money that from everyone that follows them right, those people get crushed too. But they all get nailed, but once the bull market ends. Been doing this for 25 years because I worry about the risk to the marketplace, and right now you should be worried about, just be cautious about.

Frank Curzio: That’s all I’m saying. Be careful, be smart. If you do that, I promise you’ll be just fine. Speaking of fine and have his picture up right here, Disciplined Investor podcast and everything. Well, today’s guest is none other than Andrew Horowitz, who is a very, very good friend, who has The Disciplined Investor podcast. He manages money through Horowitz, a company. But I love having him on, especially every two months, three months or so because has lots of ideas to share, lots of trading ideas, and his performance track record has been very, very good, which track Dollar Stock Club. So, really excited to have him back on, because we’re really going to dig in a little bit to the economy, not to the point where it’s boring. And then, he’s going to share some of his favorite ideas, which I know you love. So, without further ado, let’s get to my interview, the one and only Andrew Horowitz. Andrew, thanks so much for coming on Wall Street Unplugged.

Andrew Horowitz: Hey, thanks for having me, Frank. How you doing?

Frank Curzio: I’m hanging in there. How you doing? And I see you on your boat all the time. I see you cooking all the time. I mean your Twitter feed… Will give you your Twitter feed because actually, I mean, the stuff that you post is really, really cool, makes me want to come over your house every day.

Andrew Horowitz: And Andrew Horowitz, just one word, that’s my handle on Twitter. Don’t fall for the fakes. That’s a big thing these days, these fakes on Twitter.

Frank Curzio: I know these fakes.

Andrew Horowitz: That they come on, and then, they start DM’ing my followers who think they’re following me, and ask them for Bitcoin to throw them a bone there. But speaking of a bone, this week it was my birthday, and-

Frank Curzio: Happy birthday.

Andrew Horowitz: Thanks. I had a 50-day dry aged bone in ribeye from some Sterling-something farms. And I cracked it open this weekend, and I did a reverse sear on it. The smoker, and then pushed it into a cast iron skillet with some bacon fat and some butter. And man, it was a heart attack for a meal. It’s delicious.

Frank Curzio: Definitely worth it, man. That is awesome. And happy 65th birthday, buddy.

Andrew Horowitz: Yeah. Thank you. Thanks, Frank. Appreciate it.

Frank Curzio: Definitely a lot younger than that, but yeah. So I mean, you know what, let’s get to the markets because it’s been crazy. I mean we all know the economic backdrop. We love talking about the economy, we try to make it as interesting as possible on our podcast, your Disciplined Investor podcast, and mine. Again, it’s not just about bell curves, about what everybody does every day so we make it interesting. And when you look at the backdrop where the Fed went on television and said, “Listen…” And it is a week ago, “Pedal to the metal low rates forever.” Yes, we see rates rising and that’s a risk. But it’s a risk the Fed sees also, we’ll see it. Usually, you have to worry about the risks you don’t see.

Frank Curzio: And if they want to implement yield curve control or something else to control that we’ll see, but everybody is super bullish now. I mean you can’t really find a bear out there. I don’t see anything on TV or in the news of people saying… Just any bear saying, “Now is the time to take money off the table.” When three weeks ago we saw it when the Nasdaq crashed. We’re not really seeing that now. Does that make you a little nervous?

Andrew Horowitz: First part is the rate issue. And of course, the Fed their job is to cheerlead. That is their job. I’m not saying that in a weird way, that is their job to make sure there is confidence in the markets, that they’re going to make sure that there’s a safety net, that interest rates are at a level that will promote the velocity of money. And that’s what they do. If you ever watch Jay Powell in the last couple of weeks, everything he said is an exact word for word, letter for letter duplication of what he said the week before, and the week before that. They are committed to this, they are going to hold, make sure that their two mandates. They’re going to let inflation run a bit because they’re going to do averaging.

Andrew Horowitz: Very, very careful with his words. The problem is that they are going to, and they’re about to enter into an inflationary period right now. There’s no question about this, by the way. It’s called the base effect. And you’re going to start hearing more about this, because they’re really concerned about making sure everybody is prepared for what is about to happen. And what that means is that while we’re seeing that inflation running from anywhere from one headline numbers of .1 to .3, depending on what month it is, on a month over month basis. And then, year-over-year-basis, we’re seeing maybe 2%, 1.92%, and may go up a little bit, down a little bit. Here’s the problem. We’re about to do a comparison on the base from back in February, March, April of last year, when there was a massive deflationary plunge in overall prices.

Andrew Horowitz: Now, what we’re going to start doing is looking at that as the base when we start doing our calculations to say, “Okay. What’s the differential between where we are now, and where we were then?” And you’re going to see some very, very high levels of overall inflationary looking numbers the next 2, 3, 4 months, and then it’s going to stabilize. The Fed has been trying to tell us it’s transitory, it’s going to be this pop, don’t worry about it, it’s going to go back to some normal levels once we get past that. But the question is whether or not markets are prepared for it, whether or not we’re going to able to deal with if we do see a 5% year over year inflationary number for one period, two periods. 4%, whatever the exact number is. And I think that there has been a lot of, I would say, education in the area of this, but it’s going to be something to contend with. That’s the first thing.

Andrew Horowitz: The second thing really about rates. What’s happened is that yes, we have a better economy, things are moving along well, Fed is still buying a total of $120 billion per month of overall bonds. However, there was some selling that went on from principals and the dealers recently because of the question about the expiration of what was called the SLR. Not a lot of people heard about this, the supplemental leverage ratios that was put into place back some time ago as a backstop that in the event that the banks essentially needed to backstop some of their monies were allowed to remove treasuries, without getting into all the nitty gritty, remove treasuries from the ratios there, the financial leverage ratios, and therefore would not have to worry about it, thereby allowing them to hold those treasuries.

Andrew Horowitz: Not a lot of banks took them up on this, however there was enough on the books. There was about $80 billion worth of sales over the last three, four weeks, and that drove bond rates up a bit. Now you’ll see them at a point where there was a question of where they going to extend it, were they going to cancel it. The Fed came out and said last week on Friday, “You know what, we’re going to let this expire on March 31st 2021.” Just as we had anticipated, basically put it in there for a year. And it’s pretty much now a point of, “Okay. We got it out of the way. There’s no surprises, we have clarity on this.” And markets are now taking rates down from where they were 1.77% to about 1.65%, which still a little bit hot from where it was. A lot there.

Frank Curzio: You said a lot of interesting things there. Especially-

Andrew Horowitz: A lot there.

Frank Curzio: Yeah. No, no. But one of the most things that stood out to me really is the 4%, 5% inflation, is it possible for us to see that kind of inflation? Because the way they structure it in the CPI, we all know. I mean, you can look at electricity costs, you can look at a tuition costs, you look at food prices, you look at gasoline prices, lumber, copper. I mean lumber and copper are through the roof, especially lumber. Home prices, in general, we’ll see a massive amount of inflation. But again, none of that matters when it comes to what we’re talking about here. Because in terms of your investments, it matters what the Fed is going to do based on this inflation. But if we’re not seeing over 3% inflation now, are we ever going to see four or 5%, just the way it’s structured, where a lot of real estate and rentals go into that and stuff. And we all know it’s a BS indicator, but that actually is what the Fed is looking at.

Andrew Horowitz: Well, the Fed is actually looking at the PCE indicator, which comes out this Friday, I believe. The personal consumption expenditures level, that’s their preferred metric. Don’t forget, there was a great and a very famous-

Frank Curzio: So, this is out again.

Andrew Horowitz: Jerry Lewis movie. There was Jerry Lewis movie that was entitled, Don’t Raise the Bridge, Lower the Water. It’s like, if you can’t do one thing, well figure out another way to do it. And what that is all about is there was a significant change a few years ago that looked at what inflation is now, and they changed a lot of the components to show that there really isn’t a lot of inflation. So they lowered the water. If you go to shadowstats.com, there’s a good amount of data utilizing the old statistical calculation of what inflation is, and it’s much higher. It seems much more realistic than what we have today.

Andrew Horowitz: Same thing with unemployment, all the calculations now much different than they were a number of years ago. If you look at ShadowStats they have great information on there about the core inflation, as well as comparison of where inflation is now, and also the unemployment. The U6, all the numbers that go into the unemployment what the official numbers are now, what it would look like if they didn’t tinker with the numbers. To answer your question, I think we’re going to see a momentary inflation spike, probably in March and April, because we’re comparing it to the year ago period. And that’s what everybody looks at year over year numbers, month over month is important, but it’s a very noisy statistical measure. So, you’re going to see it, it’s going to spook some people, but I think a lot of people that know what’s going to be happening, and why it’s happening, are going to be prepared. I don’t think it’s going to be 4% inflation over the next five years on that kind of clip.

Frank Curzio: Yeah. It’s pretty crazy.

Andrew Horowitz: And there’s a lot of reasons why, by the way. There’s a lot of ways, you have technology, you have the fact that they’re doing all sorts of things to try to tame this down. There will be inflation, it’s probably going to be running closer to 2%, maybe two and a half percent, then there is at 1% or one and a half percent, but it’s not going to be 4%.

Frank Curzio: Yeah. Which means the pedal to the metal still with that economic backdrop and trillions more stimulus. Goldman Sachs just came out with a report saying that another four trillion by September, two trillion plus for infrastructure. Again, a lot of things that we know, but now we look at valuations. I mean, I saw this stat, and this is right up your alley here. But it’s 70% of stocks are now trading more than 20% above the 200 day moving average, I mean to put that in perspective it has never been that high thing back to the ’80s, early ’80s. So, it’s getting… So, what does that mean? The risk-reward profile is tough. You’re going to take more risks, that’s more expensive, and the reward isn’t going to be as great because a lot of these stocks have run up.

Frank Curzio: First it was growth, now that pulled back a little bit. Still a little off its high, maybe 5, 10%. And now you have the value cyclical names, but maybe utilities or consumer staples. But how are you playing this? Because I think we all understand the economic backdrop and how powerful is in terms of assets. But eventually it doesn’t mean that everything could continue to go up at stupid valuations where you’re paying $25 for a candy bar.

Andrew Horowitz: Right. Well, you have small cap value right now, that sector is up about 25% this year. It’s about 21% above the small-cap growth sector. This is a total reversal of where we were last year. Everybody all sudden got on the inflation higher train started buying the bank, small-cap banks, the energy stocks. Those are really packed into that small cap index universe. Large cap value is also about 8% or so higher than the large cap growth department there in terms of the sectors. And then you have the Dow Jones beating the S&P and beating the Nasdaq this year. So, it’s a strange situation where everybody gets to one side of the boat very quickly right now. They follow the trend, everybody gets there and all sudden they get off of that.

Andrew Horowitz: As soon as they start to realize that interest rates were going up, they started beating the crap out of all your growthy growth names. All the tech names, a lot of the healthcare names, well off their highs. I mean well off the Apples, the Googles, Teslas, you name it. And for good reason. The reason was that even though a lot of the pundits… Frank, what do you think of this? All these pundits on TV talk about how, “Hey, low interest rates could really be very supportive of higher multiples.” We’ve heard that for two years, three years, five years, whatever it is, right?

Frank Curzio: Yeah.

Andrew Horowitz: Then they come on, they’re like, “Hey, higher interest rates are really good also, because that means we have a really good economy, and in a good economy we can see that there’s going to be better earnings.” So, if there’s low interest rates, that’s good for stocks, and if there’s high interest rates, it’s good for stocks. Is that equation even possible? In other words, everything’s good for stocks no matter what happens. I mean, it’s ridiculous.

Frank Curzio: I mean, that’s what it seems like. It just seems like everything is good, no matter what. Everything is good for stocks. But when does that change, Andrew? When is that going to happen, where you’re looking at some of the stocks or sectors are going through the roof? It’s got to change sooner or later. I mean you want to ride the wave up, of course, but-

Andrew Horowitz: If we start seeing… Yeah.

Frank Curzio: Go ahead.

Andrew Horowitz: If you see interest rates pop and pass 2%, and they are there for a period of time, that’s not going to change, that’s going to be a real issue. Now, the main issue here really about how interest rates impact stocks, it has to do with the risk free rate of return in what’s called the capital asset pricing model. When you utilize the, let’s say, 10-year or two-year depending on what you’re using as a risk free rate of return, you put that into calculation, and you look at earnings and discount models, and you try to then project, “Okay. How much growth can I get? And what am I willing to pay for it?” The lower the interest rate, the more I’m willing to pay for something because I get a better opportunity.

Andrew Horowitz: And as interest rates move higher, obviously, you pay less for it. So the thing is, though, that if interest rates move up slowly, but surely not a problem, because that does indicate you have a stronger economy, that is a benefit to earnings. And what happens, is that your earnings will grow into the multiple. However, when you get a skew event, like we saw recently, where we went from the beginning of the year to somewhere about 1%, on the Treasury on the 10-year, up to about 1.75%, that’s a very significant move very quickly. It’s like the frog boiling concept where you could put a frog in a warm bucket of water, and they’ll sit there all day, put a flame under it, they’ll hang out, you’ll end up having soup. Whereas if you throw a frog in a boiling pot, what’s going to happen is they’re going to immediately just say, “No good, I’m out of this.” And they’re going to freak out and jump out.

Andrew Horowitz: So, it is the same thing when it comes to interest rates, if you can slow boil it and slow cook it, what’s going to happen is people will get used to it and become accustomed to it. If it goes up too fast, then you get these events what really are off putting to your capital asset pricing model, it really does take its toll on some of the more growthier your names in the universe out there. And that is exactly what happened this year.

Frank Curzio: Your food analogies are killing me, buddy.

Andrew Horowitz: We could talk about my hamburger theory if you want. No, I’m kidding.

Frank Curzio: Yeah, I know. Right. Okay. Let’s bring this all together then. So, we’re seeing a lot of froth in this market. We’re seeing just a certain buzzwords. If we, you and I, create a space program, it will probably have a $10 billion valuation if we have all the right buzz words.

Andrew Horowitz: Correct.

Frank Curzio: Doesn’t matter if 10 years from now if we actually have something that’s going to shoot to the moon, and that we can ride. But even when we look at the ESG trend, which we’ll get into in a second because I’ve just so pissed-

Andrew Horowitz: Oh, do we have to?

Frank Curzio: That I’ve seen this, but what are your… You know what, we can go to ESG, because ESG is another sector. Where I’m going with this is, one of the sectors you’re looking at, we’ve seen sectors come down a lot, but we also see a lot of froth out there, and maybe we could start that before the ESG conversation. Because what are some of the sectors that you’re seeing where utilities are still weak, the Russell 2000 growth are weak Nasdaq 100 a little weak. These are ones that are underperforming this year, while value cyclicals are up. Where are you looking for new ideas here?

Andrew Horowitz: So, we use a quantitative screening process to find the stocks, and wherever the particular stock comes from doesn’t really matter to me. It could be theoretically a utility or a bank, it could be technology or healthcare. What I’m looking for is consistency of earnings. I’m looking at the growth of earnings. I’m looking consistency of revenue, and growth of revenue. I’m looking for certain volume metrics to make sure we don’t have a liquidity problem inside there as well. I’m looking at high return on equity. There’s probably about a dozen different metrics that I’m looking for. What’s interesting to note is that we got a lot more names into that screen that came through the screen in the last go around about a month ago. That was good.

Andrew Horowitz: We’re seeing some of our technology names particularly in the mobile advertising space, like a Digital Turbine, symbol APPS just go through the roof. Another one that I would have never picked, never. If you were to give me, “Okay. All right, go out there Andrew and find something.” I would have never picked Williams-Sonoma. But our screener picked it. And that stock is on fire. Have you seen that stock chart, WSM?

Frank Curzio: No, I haven’t seen it. No. But I’m very familiar with the name. Yeah.

Andrew Horowitz: Unbelievable. But this is a company-

Frank Curzio: But it is a lot of stocks. And it’s crazy. Go ahead.

Andrew Horowitz: A lot of stocks. But this is a company that overcharges… All-time high, by the way. Overcharges by about 40% from the same product you can get on an Amazon or Bed Bath & Beyond. And people are doing a lot more with that. And again, it’s amazing how well that’s been doing. A Taiwan semiconductor, for example, has been in our portfolios for a while. Done really well. It’s been in the car space, it’s a one of a kind type of… Even with this shortage of chips right now, doing very well through all this. So, I would rather lean maybe on… Banks are not a big part of what we do, some of the financials. But I’d rather lean on some EV right now, possibly the recovery plays to a degree.

Andrew Horowitz: Shorting some of the recovery plays. Well, I was short Planet Fitness. Don’t understand how that company is almost at an all-time high recently, after last two earnings reports and pulling guidance, I just don’t understand that at all. We had short about 87 now it is trading about 76. There’s a variety of areas that looked like there’s going to be some great opportunity, some of the SPACs in the EV space that looks like there’s going to be a lot of attraction in that area. Some of the pot stocks, a couple of names that come to mind in that area as we’re seeing that many of the states are going to require to have more taxation brought in, and they got to figure out how are they going to do this. Well, they could do it with some of their alternative areas. Whether it’s going to be online gambling, tax that possibly. Whether it can be sin taxes. And whether it’s going to be for example pot, that they’re going to bring in, allow, legalize, and then tax. That’s the game.

Frank Curzio: And lots of ideas there, I really appreciate. Now, let’s get to this ESG thing, because you know as well as I do, a lot of this is BS. I mean this is people’s agendas. Yes, they’re all concerns and everything. But just the fact that I’m listening to every single conference call and everybody cares about it now. It’s such a big deal, and everyone has to be politically correct. I’m sick of being politically correct on this because at the end of the day, you’re looking at Wall Street charging more price, getting more money. You’re looking at SPACs, these guys really don’t care. SPACs are a quick profit mechanism, and they’re out of it. They’re going to talk about, “This a great ESG company.” And be out of it.

Frank Curzio: But yet, some of these names have gone up tremendously, and they’ve pulled back. Is this still an area invest in? Because even though a lot of it is BS that’s being fed by politicians, and a lot of it… I mean even when you look at Al Gore and what he did. He was worth two million before the presidency, he’s worth hundreds of millions of dollars now. But the amount of money he positioned himself to benefit from all that, An Inconvenient Truth, which I think we’re all supposed to be in the water by now. I think that was three, four years ago, but we’re all okay for some reason, which is crazy.

Frank Curzio: But remember, when all this crap and garbage comes up, it’s always about how do we make the most money off of it? And we want to be there to, regardless if that’s the policy, that’s the administration, everyone is focusing on, there’s more money is going to go into it. How do you make money off of this? Because again, I don’t want to go on too much of a tirade and a big rant here.

Andrew Horowitz: Let’s just for a moment, let’s describe to the audience what this is. ESG stands for environmental, social and governance. What they’re trying to do is find companies that have a good environmental footprint, number one. Number two, they also have a good social agenda. Number three, they have good governance. Which means things like making sure they have the ability to have a range of succession plans and overall board membership that is, as you said, politically correct of the day. So, what they found was, somebody did some digging, and they did some scoring, and they came up with this process to figure out, “Okay. Let’s see how companies that have a good, according to this metric, environmental footprint, and that are socially conscious, and that have a good governance program. How do they do compared to those that don’t?”

Andrew Horowitz: Again, this is an arbitrary and somebody coming up with this whole model. And what happened was that whether it was because they forced it, and they came up with this, or whether it was true, it seems that these ESG companies, companies that really had a good idea of putting these three things together outperformed those that didn’t have a good score. Now, everybody caught on, and now all of a sudden, there’s an official ESG score, wherever you look. You probably can pull up some of your stocks, and there’s somewhere on there, there’s a screen that says, “Here’s their ESG score.” And a lot of people are investing according to that.

Andrew Horowitz: And what is also going to happen, potentially, is they’re going to try to persuade the S&P indices to come up with a high ESG score index. And so, what’s happening is that a lot of people are gravitating this to feel better about what they’re investing in, and to look at those companies that have all these things, because historically it’s been good. Now we have a good amount of history with this that they can provide. I think it’s more of a theme and it’s gimmicky. It’s like, “Oh, we’re only going to invest in companies that have, for example, years back that don’t have any sin in there.” Tobacco, and firearms, and liquor, and gambling. We’re not going to have that at all in our portfolios. I don’t know, that doesn’t make any sense. What are we doing? Are we investing to feel good? Maybe the millennials and the Zoomers and others want that. What makes me feel good about when I invest is the same thing that makes you feel good, Frank. What is it? It’s profits.

Frank Curzio: Making money. Yeah, making money. Absolutely.

Andrew Horowitz: That’s it. So, I want make sure that I’m not burning down the rain forest, that’s probably something that I’d find important, or that I’m not killing indigenous people of some land somewhere to do what I’m doing, I get all that, okay. However, the fact is that, this is all about investing, we don’t want anything going on that’s reckless and odd, and hurtful. But at the same time, I find that this ESG thing is an interesting component to add to your analysis, but not the analysis on its own, what they’re trying to make it out to be. They’re taking a shortcut and saying, “Hey, we’re only going to buy the high ESG scoring companies.”

Andrew Horowitz: I’m not exactly sure what a company that has a good environmental footprint, by the way, which may be greenwashing. You have to remember the word greenwashing. They’re trying to figure out a way to come up with a high ESG score any way they can, whether they got a cheat to do it, or come up with buying carbon credits, or whatever it is. And the fact is that that’s not really what the whole thing was created for. So, companies are now trying to do a bit of a shoo in to show themselves as high ESG scores, and therefore make it into the screens, and that’s not exactly what the plan was all about.

Frank Curzio: Yeah. It would just be nice if companies can think on their own. And if you don’t have this policy, and people hate that, then maybe people don’t invest in it. But the fact that they get mandated and pushed into this stuff, and a lot of it is going to be BS anyway, like you said, all about a score. It’s just sad. That’s politics. That’s the way our environment is right now. That’s the way the climate is right now. It’s crazy-

Andrew Horowitz: They’ll figure out how to… And if it’s all about money, they’ll figure out how to boost their score, artificially.

Frank Curzio: Exactly.

Andrew Horowitz: That what they’re going to do.

Frank Curzio: All right. So, look, we will leave it there. Thank you so much for coming on. But I did want to give you a shout out before… Let me know, or let my audience know, where to find you. They know we’re good friends, and I do have your nice Disciplined Investor podcast up here, as you can see, which is cool.

Andrew Horowitz: Oh, there you go.

Frank Curzio: And how long have you been doing a podcast for? A little bit longer than me, I believe, right?

Andrew Horowitz: Yep, 2007.

Frank Curzio: 15 years at least.

Andrew Horowitz: This is our 14-year, consecutive year, 700 plus episodes. Next week, coming up is actually the first guest that I ever had on my show. I got him back.

Frank Curzio: Who?

Andrew Horowitz: Brian Freeman is going to be my… Brian Freeman. He was just a guy that was involved in radio, involved podcasting back then. He was the first guest I had on, we made some predictions. So, we’re going to bring him back for a 14-year reunion.

Frank Curzio: That’s awesome. And so once again, touch where you give your street or address-

Andrew Horowitz: And my kids gave this. Can you see this?

Frank Curzio: Oh, that is really, really cool, actually. That is awesome.

Andrew Horowitz: So-

Frank Curzio: Wow, that is awesome right there. That is really, really cool. Look at that.

Andrew Horowitz: There you go. Go over to thedisciplinedinvestor.com check out all the things that are available there, from our strategies, from what we do. The TDI Managed Growth Strategy, global allocations our robo-esque advisor style eNVESTOLOGY. As well, follow me on Twitter, Andrew Horowitz. And if you want to follow me on the food world on Instagram dad bod food blog.

Frank Curzio: What was that about?

Andrew Horowitz: Dad bod. Do you know where I get that?

Frank Curzio: Is that real?

Andrew Horowitz: Dad bod… That’s true. That’s real. Yeah. Dad bod food blog.

Frank Curzio: Wow, that’s cool stuff. That is awesome. By the way what because we do some video and sometimes people, but what you were holding up from your kids was a… Just explain what that was, it looked like a little-

Andrew Horowitz: This is a little… Just a congratulations. “So, The Disciplined Investor podcast, 14 anniversary, 700 episodes. Congratulations, dad.”

Frank Curzio: That’s cool, man. It’s great stuff. All of it is worth when we get stuff like that. Pretty cool.

Andrew Horowitz: Yep. Absolutely.

Frank Curzio: All right, man. I will talk to you soon. Thank you so much.

Andrew Horowitz: Hey, Frank, you’re the best. You are the best.

Frank Curzio: Thanks, man. Love you, buddy. I’ll talk to you soon.

Andrew Horowitz: All right, see you.

Frank Curzio: All right, take care. Okay. Great stuff from Andrew, love having him on again, sharing all those wonderful ideas with you and his track record has been very, very solid at least over the past 18 months where we’ve been tracking a lot of this stuff through our Dollar Stock Club portfolio. And again, this podcast is about you not about me. Let me know what you thought at frank@curzioresearch.com, that’s frank@curzioresearch.com, and I really mean that. I want to have people on that you guys enjoy. I like having Andrew on, guys like John Petrides coming on in a couple of weeks because they have lots of picks, and lots of ideas which… And I know you guys love by all the emails that you do send me. Now, let’s bring in my buddy, Danny Creech. What’s going on, man? How’s everything?

Daniel Creech: Hey, what’s going on? Frank? How are you?

Frank Curzio: So, fresh off your golf trip, North Carolina. Not too bad. The weather wasn’t that good, though. Is probably the worst weekend, I think that we’re going to have… We’re going to see for the rest of the… Not the rest of the year. Maybe the rest of the year until December. But yeah, it was really crappy, wasn’t it?

Daniel Creech: Yeah, it was. I mean I picked a good time. It wasn’t really that good here. But it was chilly. We had a lot of 40-degree weather. A lot of overcast, a lot of wind. So, I was very grateful that I bought some rain gear. But yeah, the weather sucked. But it’s beautiful. We’re in the mountains of North Carolina. It was a great time, great people. Just a great getaway for a few days.

Frank Curzio: No, that’s awesome. And how did you shoot man? Did you do okay? Or does that matter at all, or just nice to be out there?

Daniel Creech: Well, of course you want to win. I mean, hell, you don’t want to lose anything. That sucks. But I didn’t win any money, no. I played a lot like the weather. So, it was streaky. So, it was a blast. I mean we played for three days. We got rained out here and there, so we didn’t get three full days in. But I went streaks, at times you hit it well, at times you look like you never played before. But it’s overall a great time.

Frank Curzio: No, that’s awesome. That’s awesome stuff. So, listen I want to dig right in here, dive right in. You heard Andrew talk about ESG. A lot going on. We’re really seeing so much crap out there. It’s pretty crazy. I’ve been so politically correct about this, and I’m sick of being in it. But just one of the things that we talked about too, is when we’re looking at the education that’s being provided for… And I really think parents don’t know this, that their kids that their minds are being polluted with bullshit. And I mean to almost hate America. I mean seriously-

Daniel Creech: How do you really feel, Frank?

Frank Curzio: No, but they’re really. It’s the White privilege shit. I mean my dad had to work three jobs, and go to school at the same time. And that was unfortunate because he didn’t really spend time with my brother and sister who are older. And then, when he started his own company, and then started going upstate for four months out of the year, I used to go with him, we all used to go with him. My brothers just got older. They weren’t there, I was there for a few more years, because I couldn’t stay in New York City by myself, we’re in Queens. But he busted his ass. And I was fortunate that, I was able to spend much more time with my dad than my brother and sister at a young age.

Frank Curzio: But come on. I mean how many people work their asses off coming from another country. When I hear this shit, like the White privilege, and we owe people something, like we don’t work hard. It’s just man, the corruption that’s taking place. And I don’t understand why, Daniel, that we are educating kids to tell them that America sucks, and it’s a shitty place. That’s what I’m having trouble. And I wish some of these kids which a lot of them didn’t, in the younger generation have gone to other countries, because they’d see how amazing that they have it here. And they wouldn’t be pissed off all the time. But you only got to listen to the people that teach you, right?

Daniel Creech: Yeah. I mean, especially when you’re young, you’re very influential. You can be easily influenced. And I can say this very easily, because I’ve been looking into this a long time, it’s a passion of mine, I’ve liked politics, I love history. And this is just, you literally have a lot of people, it’s so hard for a lot of people that don’t pay attention to what’s going on because they don’t have a direct interest in it. I’m not saying your average person doesn’t care about somebody else, but most people just want to live life, do what they do. Everybody has a similar routine, once you get in your own passions and in your own groove. And most people just want to do that and not block everything else out, not build walls everywhere, but just maintain that.

Daniel Creech: And for those types of people, and a lot of people, it’s very hard to think that you have a lot of people that hate the basic principles and foundation of the company, or the country. And they want to change that. And all you have to do is listen to what people running for office and in office say right now. And whether they like freedoms, freedom of speech, guns, the ability to travel anywhere. So, it’s easy for me to say, because hell I’ve been scared about this stuff since I started paying attention, and now it’s really right in front of us. And yeah, it is scary. But unfortunately, people are going to disagree, and people are going to use their power any way they can, and it’s huge. And that’s why anytime you want to change something from a political standpoint, or have the pendulum shift, you always start in education, every time. Because when you have a generation come up, and you can influence them, and you get them to buy into mindsets like socialism, or anything else, you start when they’re young. And it’s the same old playbook. It just works and it sucks.

Frank Curzio: And you mentioned the stat with the younger generation that you read, which I was surprised. And I think you read a story in CNBC about tipping. I mean talk about that. That’s insane.

Daniel Creech: Yeah. Well, I was joking yesterday, and now I’m trying to find it again. But I was joking with you, because I was in the office, and I was watching this. It’s 12-minute video on CNBC, and it’s basically saying how tipping is racist and sexist. Because a lot of the serving industry is Black and women. And they did some interviews and women were saying how since COVID hit, they’re getting a lot more negative comments. I assume they mean men hitting on women or trying to pick up waitresses and stuff like that. And I’m not saying that you should ever say anything out of line. I’m simply saying that this shows you where we are in the world right now when tipping…

Daniel Creech: Somebody brings me a drink. I frequent bars. I’m a huge bar fan, dive bar fan. I’m going to start going in there and not tipping, or start… I’m going to do some surveys, Frank. I’m going to I’m going to hit some bars and ask, “Hey, do you just want everybody to quit typing because you think I’m being sexist or rude to do that.”

Frank Curzio: And what was that percentage, Daniel? That was…

Daniel Creech: It was 72% of millennials-

Frank Curzio: Holy cow.

Daniel Creech: Don’t leave a tip.

Frank Curzio: That’s what they’ve been taught. So, our generation… But these are people who were the first to lose their jobs, and a lot of them are still just coming back now, where bars or being open, but in a lot of states that’s the last thing to come back with bars. Some of the restaurants are opening. Again, takeout is definitely there. But still, these are people that that got impacted the most. Yeah, how are you being taught that? I just don’t get it? I mean, it’s insane. It’s just insane.

Daniel Creech: Yeah. Well, the way they’re doing it, they’re spinning it is to say, hey, right now there’s rules in place to where restaurants can pay people a couple dollars an hour, because they know the tipping is going to make up for that. And so it’s being used to push for the whole $15 minimum wage thing and say, “Hey, you want to do away with tipping, and have the actual wage increase.” Which is hilarious, because it shows you how silly, I don’t want to say stupid. That’s such a bad word, but that’s the best word for it right now. But I’ll say silly. You have the people in charge that are about to change. How many politicians do you think, Frank, think… And I’m not putting anybody under the bus here because you should do whatever you feel good at night. How many cash tips get claimed in taxes, do you think? What percentage?

Frank Curzio: I have no idea.

Daniel Creech: Do you think it’s 100%?

Frank Curzio: No.

Daniel Creech: I don’t know, either. But I would bet your bottom dollar it’s not 100%.

Frank Curzio: No, it’s not 100%.

Daniel Creech: So, tax free income money is better, because you’re not paying taxes. So, you keep all of your money. If you do away with all your tips, and just take a salary base $15 minimum wage, what’s going to happen? Your taxes are going to go up. Because of how are you taxed? You’re taxed on income.

Frank Curzio: Yes.

Daniel Creech: So, it’s just hilarious. Again, all the people out there telling you they’re for poor people, and helping them have no idea how to help poor people. And their point is to keep them poor, and keep them voting a certain way.

Frank Curzio: And that’s the thing that pisses me off the most, Dan. Because I can’t be politically correct about the shit anymore.

Daniel Creech: You’re fired up about this. It’s been hell working with this guy.

Frank Curzio: I mean, the whole ESG movement and just the bullshit behind it, it’s… I love the fact that more environmental friendly, and more corporate governance, and women need to be in a board, which is putting women down if you’re mandating that one woman should be on a board. To me, that’s discrimination. I mean you have women who earned that right. Who busted their ass to make that, right now you’re saying, “Okay…” I mean, if you really want everything to be fair, then stop labeling everything. That’s the first thing.

Frank Curzio: The second thing is none of these corporations or politicians give a shit about this. None of them do. So, they get these people who support this agenda, and they’re really into it, and yet the person that’s running these things doesn’t give a shit. They want your vote. That’s it. They want to get filthy rich, that’s what they want. So what do you see? You see every company, listen to any quality call and just bring up the presentation as they’re talking 2, 3, 4 pages are all ESG now. Every single company, from oil to everybody else, they’re all ESG, all this bullshit. And then what happens next? What do you think? You have SPACs taking over these companies. “Oh, wow, this SPAC took over this ESG company, and now, their valuation increased by 5X to 7X.”

Frank Curzio: These guys don’t give a shit about the company. They’re going to be out four months later. They got in at $1.50, and they’re selling this to other investors, private investors through pipes. It may be eight, nine. They come out at 12, 13. People buying these things 20, 25. They don’t give a shit about these companies solving problems. They’re out of it, they’re liquid now. That’s why SPACs, you’re seeing celebrities, every hedge fund. It’s easy money. It’s a definition of a hedge fund. You want to be liquid all the time and make profits as quick as you can, and leverage the shit out of your positions. And this checks off every single box. It’s going to end when retail investors smarten up, and they stopped buying companies and space companies at a 12 to 15 $20 billion valuations when they don’t even have a product in operation yet.

Frank Curzio: But what happens now, you have Wall Street, and they came in and they’re charging 40% more. They created all these ESG ETFs, so that people could… It’s for the people. They charge 40% more fees for those than they do for traditional ETFs. So, there’s Wall Street making their money. So, all these people and all the fakeness, and all the bullshit, and actors and actresses who are just completely phony. You got politicians who are a bunch of assholes who are just going to tell you anything they want, and never back anything up. Ever back anything up. I mean it’s crazy. I mean even if you look at COVID, which I had my rant on last week, a lot of this is bullshit. We know the stats, why isn’t every state opened up? We still have California and New York. I mean how are California and New York not 100% open when our fucking borders are open, and we have millions of immigrants coming in here that haven’t even been checked for COVID. But the states have to close, you have to…

Frank Curzio: I mean think about that. Think about that for a minute. Just think about that scenario. And for me, it’s everybody is so politically correct. They can’t say the wrong thing. This is an independent podcast when we get thrown off iTunes. I’m sick and tired of it. I got to call it out because it’s all bullshit. And for me, stirring this shit up daily is because I care about investors. I want to teach them the mistakes I learned, help them become better investors. I sleep better at night. Yes, the business is doing well, and some of subscriptions are expensive. But for me, that’s the goal here. And just seeing all this underlying bullshit. The kids getting corrupt the way colleges are allowing people that come in and have speeches in front of hundreds, if not 1000 students telling them that capitalism is racism. Are you kidding me?

Frank Curzio: Like back in the day, you know what used to happen? There was no social media, you used to get punched in the face when you said something stupid like that. You drag them outside beat the crap out of them. And they’re like, “Sorry, I’ll never…” Good, that’s how you do it. Now, you have social media, people taking cameras, you could say whatever you want. I mean, this these assholes who are saying this are writing books capitalizing off of capitalism, telling you that this is the worst thing ever. So, they’re hypocrites. But I’m just sick and tired of all the bullshit on both sides. I don’t care about the emails. I don’t care about people not listening to this… For me, I got to be true. And to be true about this shit. It’s frustrating as hell, but now it’s hitting Wall Street investments, and ESG companies, and these valuations. Remember, it’s all about money. It’s all about votes. Nobody gives a shit about you. The quicker you know that the more money. And that’s my rant.

Daniel Creech: And make sure you send this to frank@curzioresearch.com.

Frank Curzio: Yeah, I don’t-

Daniel Creech: That’s frank@curzioresearch.com-

Frank Curzio: It’s just so true.

Daniel Creech: Not daniel@curzioresearch.com. Send the good ones there.

Frank Curzio: And you know what, you’re not going to hear anyone on… There not to mention this on TV. If someone says a bad word, they got to apologize. They’re going to lose their sponsors. And if you’re an actor, you’re not going to get a job if you support certain people. The fakeness, and the fact that you cannot speak your mind which is what this country was founded on, it’s getting to be a complete fucking joke right now. For me, it’s just frustrating like hell. But-

Daniel Creech: We need to either do a swear jar or a drinking game.

Frank Curzio: That was a lot of swears there.

Daniel Creech: I know. But the F-bombs is the best. That’s great.

Frank Curzio: Yeah.

Daniel Creech: Apple is going to get you on that one.

Frank Curzio: Yeah, I know.

Daniel Creech: Hey, real quick. I’ll transition this to our favorite ESG stock. But first, I found in my notes 72% of millennials do leave tips, it’s only 18 don’t, so I had that backwards. That’s a big deal.

Frank Curzio: Okay. So, 18 don’t-

Daniel Creech: 18 don’t, 72 do. Out of all restaurant goers, 82 leave a tip, and then 72 don’t.

Frank Curzio: Yeah. But how are they taught not to leave tips. I just don’t understand-

Daniel Creech: Well, it’s sexist and racist, anything. ESG, Tesla, price target. The best ESG environmental, social and governance or government. What should the G stand for? I think it’s governance.

Frank Curzio: Governance. Yes.

Daniel Creech: Tesla came out… ARK Invest came out with a price target of, drumroll Frank, $3,000 in 2025.

Frank Curzio: Yep.

Daniel Creech: Now, I’ve been dead wrong, because if I had a gun to my head, I would have sold Tesla. I’ve been on sidelines but I would have bet against that rather than bet with it, which would have been completely wrong, and I would’ve gotten-

Frank Curzio: And I’m putting up the research report now so people can see.

Daniel Creech: I would have gotten whooped. So total disclosure, it’s one of those I can sit on the sidelines. But the only… This Cathie Wood from ARK Invest has been spot on, she’s taken a lot of heat. Tesla Q, which when you add a Q on it, that shows you that you’re in bankruptcy, so that’s the big joke on Twitter. A lot of people like to bash Tesla. And a lot of great people out there have really smart arguments. Elon’s BS… And I don’t I don’t care. I don’t think you have to act a certain way as a CEO of a company. It doesn’t bother me that he tweets a lot, didn’t bother me the Trump tweeted a lot as president. The securities thing pissed me off when he said he was going to take Tesla private at 420 or 450 or whatever it was, that was a big deal to me because that is influential. But everything else I could care less about.

Daniel Creech: However, this Cathie Wood been spot on, can’t blame her, give her total credit. The reasoning she comes up, if you’re going to buy Tesla because you think it’s going up just keep the cult mentality mindset. I can understand that kind of crazy. You think you’re saving the world by using batteries that are dug up in the Congo and ruin the environment and the ground. That’s fine. You want to plug your car in, charged mostly by coal, and you’re doing better than me, that’s fine. I don’t care. However, when you start saying that they are going to get into robo-taxis and make billions, and billions, and billions of dollars within the next few years. When you say that they’re getting into the insurance business and they’re going to have better margins than huge companies like Progressive, that’s where I got to call BS and just say, “Hey, you know put a huge price target on it. Say, they’re innovative, say it’s the new world, and just leave it at.” Because the insurance thing in the robo-taxis is killing me.

Daniel Creech: Interrupt me, Frank, and then I have a great point to make.

Frank Curzio: Listen, I love it. I love the facts. I had the report up. That’s your little mini rant.

Daniel Creech: I know.

Frank Curzio: I mean listen, for me when it comes to analysts I give them the benefit of the doubt because so many people doubted Cathie Wood, so many people doubted Tesla. There wasn’t a premium put in and how much people love Elon Musk. And again, there’s people that hate the guy and I get it, I understand. But when I look at this and just looking at the model here. It is funny. I mean I’m not going to doubt her because she’s been dead right this long, and I’d love to have her on the podcast because I think she’s brilliant. But she says to arrive at this forecast… And by the way, the bull case is 4,000 so bull case is 4,000 as you can see here. But the expected value is 3,000. That’s 2025, not too far off. And to arrive to that forecast they used a special model with 34 inputs, the high and low forecast incorporating 40,000 possible simulations.

Frank Curzio: How could there be 40,000 possible simulations? I want to see that list of the simulations first of all. Give me a break. 40,000 simulations, which simulations carry more weight than the others. I’d love to see that full algorithm, that full entire model. But to say 40,000 different simulations. And you’re looking at it and taking the average, whatever you’re doing. I’m a model guy, and I see this stuff, and it’s just funny. You’re right the insurance business, they talking about autonomous driving, Level 5, and it’s pretty crazy. Doesn’t mean the stock can’t go up. Because at the end of the day, it’s where the stock goes, because-

Daniel Creech: Absolutely, you can be wrong.

Frank Curzio: And Morgan Stanley said the same thing. This is three years ago, I tore them apart, and their price target turned out to be super conservative, even though it was about whatever, over three years, and it was going to quadruple, and it turned out to be conservative. But they said they’re going to take over the whole rental car industry, all Teslas are going to be self-driving by now. All this stuff and it didn’t come true. But it doesn’t matter, because it’s all about the stock price. So, I’m not saying her thesis may work out, or may not work out. But I just don’t see where she factoring in the competition, where is she factoring all the credits that they’re going to lose for these electric vehicles? This massive, massive, massive competition of really, really nice cars coming out with Ford, GM. Their technology, they’ve been so far behind, but they’re finally starting to get their cars out. You’re looking at all this where Tesla, one of the negatives is… It’s amazing what Elon Musk has done, right, Dan?

Daniel Creech: Absolutely.

Frank Curzio: I mean he couldn’t sell it out of any… Just like Ford, and they sell at car dealerships, they didn’t allow that. So, that’s the biggest thing with Tesla when you want to get your car fixed, it’s difficult. It’s difficult to get it fixed, where these other places-

Daniel Creech: There’s a lot of issues.

Frank Curzio: Are going to have thousands of places within a couple miles of your house to be fixed. So, you have to factor in a lot by 2025. Every single… 100% of all the auto companies, which now have very, very strong balance sheets and have shored up their cash positions, and pushed out their debt, and are doing well now, They’re all getting into electric vehicles. All this is going to launch in the next two, three years. So, listen, I’m not saying that’s not going to come out to that, but I do give it the benefit of doubt. But it is worth mentioning, a $3,000 price target.

Daniel Creech: One last thing here. So, anybody that’s listening in the industry of autonomous driving, self-driving and the technology, I know it’s hard to write in, so maybe I ought to talk Frank into trying to give away a free subscription to something if you send us something good. But everything that we’re out there reading, there’s a lot of back and forth, and I’m not going to go on this. But I don’t hate anybody. I don’t hate Elon Musk. But it’s not hard to find out that the way they sell their self-driving as Level 5, which is the big top dog, no hands, no fear, just get in and go. Now this is cool, because NBC News has a headline that, “A driverless Tesla will travel from L.A. to New York City.” Says Elon Musk.

Daniel Creech: Okay. There are Level 2 right now out of five. What do we need for Level 5? We need everything to be connected. We need 5G up and running because you cannot afford to have delays in sensors, when you have people walking across sidewalks, and you could kill them. The issue with this, it’s from October of 2016. Elon Musk said a driverless Tesla will travel from L.A. to New York City by 2017. I don’t know what year it is Frank. But we’re a few years past that, and you still don’t have one. So, maybe that can happen in the next four years, but counting this company is not one that produces results as much as it does paint pictures. And as long as they keep doing that, and as long as we’re in the environment we are, they probably will get to that, but I doubt it’s because of their insurance is bringing in $20 billion a year, and I doubt it’s because their robo-taxis are everywhere.

Frank Curzio: And for those that think that we will live in a total autonomous Level 5, that’s what it is called. Level 5, total where you just get back seat, it’s going to drive you, go wherever you want, and every single car on the road. Remember, in order for that to happen, there’s technologies, I’ve studied this numerous times. This has been the biggest topic in the last six, seven years at the Consumer Electronics Show. And when it comes to LiDAR, these cars need to communicate with each other. That’s the only way this works. They need to communicate with each other, where you have to have infrastructure built all over the cities and everything.

Frank Curzio: So, not only that, in order for this to happen every single car, basically 98% of the cars, they’re not electric vehicles, 98% of those cars need to be off the road. Hundreds of millions of cars need to be replaced, and they have all this new technology on, this way they can communicate with each other. Do you think that’s going to happen anytime soon? Do you think people really don’t like driving? I like driving. I don’t think I need to get to a car and go to the store that’s a few blocks away or whatever, a half a mile away, and I have to be driven. So, in order for that to happen, people have to change their habits. Even with electric vehicles. I mean people aren’t used to charging. That’s a big deal. It’s easy to transition from something or scale something where…

Frank Curzio: Uber was much, much better than a regular cab, it checked off all the boxes. Charging your vehicle is not so much easy. You’re providing something that everybody finds very, very easy because there’s millions of gas stations within a mile of your house, half mile of family house. You’re telling all these people give all that crap up, and now go fully into electric vehicles and you’re going to be charging it, and old people have to charge. There’s a lot of headwinds-

Daniel Creech: Hey, be old people, Frank.

Frank Curzio: No, but it’s hard. It’s not easy.

Daniel Creech: Okay. No, I know.

Frank Curzio: Just to charge these things and go outside. A lot of those people have certain gas stations where they’ll fuel it and fill the car for them. And I don’t know, for Level 5, I think it’s insane to think that this is going to happen anytime within 10 years, probably longer than that. And electric vehicles as well, everyone is getting into it. But still it’s a trend that I’ll be surprised if we do hit that target price on Tesla. You need a bull market, a super bull market for that to happen. That matters tremendously when you have an outlook that far out. But let’s see, you got to give them the benefit of the doubt, and really good stuff to talk about. So, I don’t know if we had anything else in agenda. Have we?

Daniel Creech: No, we’re probably out of time for today. But we will, let’s tease this next week, we’ll go over more detail about the Goldman Sachs and the infrastructure plan coming, because a lot of these green… Now, it sounds like I’m bashing green energy and battery and all that, we’re not. We’re going to make money off of this trend, because we know what’s coming down the pike. We’ll break down a little bit more of the infrastructure bill and it’s no coincidence, Frank, that we’re expecting an infrastructure bill between three and $4 trillion dollars come around September, I think is when a couple of big banks. I think Goldman was thinking about September-ish. All that. I’m not sure what J.P Morgan said yet, if they have said anything.

Daniel Creech: But it’s not a coincidence that Goldman Sachs upgraded Sunrun today. They’re in the residential solar battery storage or energy storage space. RUN, R-U-N in is the symbol. They downgraded SunPower, which is interesting after it fell tremendously. So, keep looking for upgrades and downgrades in that section. Bloom Energy is another one that’s really good. It’s been on my radar for a long time. It’s pulled back. So, this infrastructure bill is coming, there’s going to be a lot of beneficiaries, and we want to position that in both CRA and CBO going forward.

Frank Curzio: I like that, throwing out some names at the end, Dan. Pretty cool.

Daniel Creech: Well, you got to try to give them value.

Frank Curzio: Yeah. I don’t know how much time we gave them today-

Daniel Creech: They don’t to just listen to you and I bash, rant. Yeah, I was going say.

Frank Curzio: With the rants. But we’ll see, we’ll get those emails coming in. It should be pretty-

Daniel Creech:

Watch all those stocks tank, then I look really good.

Frank Curzio: Don’t worry if they tank, I’ll make sure to give your email address, and that was Daniel not me. So… But all right, Dan, thanks so much for coming on. Guys, thanks so much for tuning in. One of the products that we have, that it’s a starter product for new people is Dollar Stock Club. We take a pick and do one-page thorough report on it. Reasons why to buy it, and you just highlight the buy up to price, and we’ve put a stop on it. And this has resulted in some amazing winners because, yes, people buy my newsletters, and I’m happy to say they’re doing very well.

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Announcer: Wall Street Unplugged is produced by Curzio Research, one of the most respected financial media companies in the industry. The information presented on Wall Street Unplugged is the opinion of its hosts and guests. You should not base your investment decisions solely on this broadcast. Remember, it’s your money and your responsibility.