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: What’s going on out there. It’s May 8th. I’m Frank Curzio, host of the Wall Street Unplugged podcast where I break down the headlines and … tell you what’s really moving these markets. What a week. This Mueller report. No idea how this continues to make headlines and you just think about it, right? If Democrats fought this hard during election, I think Hillary would have won in a landslide. It’s insane.

Just keep going to it and going to it. Surprised it’s such a big deal considering everyone outside of the Democratic Party has moved on from this and including people on the fence who are not Republicans or Democrats and that’s where the Democrats need to target to have any chance of beating Trump in 2020 and the Mueller report, keep going on and going on and going on. I can’t believe it’s still going on. It’s always in the news. It’s just surprising. This week, we also had Donald Trump awarding the medal of freedom award to Tiger Woods and this should have been a great event.

A nice happy event, right? This is cool, listen, Tiger Woods, I love people who come back and not just come back and win. I’m talking about the tabloids and cheating on his wife and taking the drugs and DWI and lying. Listen, tabloids destroyed him. He lost sponsors, he paid for it and then he came back and it makes you a better person. Look, we all go through ups and downs in life. All of us. We’re all going to make mistakes and stuff like that but just like the American way, it’s like coming back saying, hey, you know, just like Hilary. If Hilary just admitted and say, listen, I didn’t fight as hard. I didn’t fight as hard against Trump and she didn’t. The facts show she wasn’t in enough states, right? She wasn’t campaigning even in the right areas. She was drawing the much attention, especially in the last 90 of days of that election and she winded up losing and she got killed and that’s okay.

If she came back and said, listen, I didn’t fight hard enough, but you know what, this time is going to be different. People love that. They love that instead of complaining Mueller, Russia. That’s why I lost. Yeah, it’s just crazy. With tiger woods, should have been like a pretty cool event and I just love how the left just can’t say anything nice. They got to involve Trump in this, right? No matter what. Some of the headlines are hysterical. One from The Undefeated. They say tearful Tiger gets honor of a lifetime from a controversial president. Or the one from MSNBC. Guy who drives a cart all over the green gives Tiger Woods and award. Can’t just be nice a little bit. CNN, somebody at CNN, let’s not make it more than it was. It was all about golf and Trump attaching himself to Tiger Woods. Even in a good time, a good event, that should have been just a positive all around, you still found ways to just, put Trump under the bus. I guess that’s more important.

Just don’t get it. You’re allowed to say positive things sometimes, even about people you hate, but trying to spin a great story into a negative is a reason why so many Americans, especially today, right? I think most politicians are assholes and the media producing this garbage is useless … but hey, we know the deal. It’s getting clicks from your supporters, your base, and that means more money in your pocket and we all know that’s the only thing you care about even though technically as a news provider on both sides, your job is to report the news in objective and fair ways, you’re supposed to, it never ever happens that way. This goes into my point, because speaking of the media, they’re all over this tariff news, all over it. After Trump, this is on Sunday, threatened impose tariffs on almost all goods imported from China, he says, we’re going to do this on Friday, which is kind of a surprise, right?

We were told by Trump [inaudible 00:04:01] numerous people in his cabinet that talks are going well, we have Chinese top delegates flying in this week to discuss trade with Trump, a deal’s supposed to get signed, get pretty close to getting signed. Then on Monday, the markets fell sharply after Trump tweeted and say, hey, you know what? We’re going to raise tariffs on China. We don’t like what they say. We said there’s a Reuters report out there saying that, basically China switched a whole bunch of things in the agreement, it’s going back, whatever it is, whatever it is. You’re looking at this uncertainty and what happened where, on Monday the markets fell sharply, then recovered almost all those losses, but then you look on Tuesday the markets fell again nearly 500 points or close to 2%. This time they didn’t recover like they did on Monday.

Today they’re holding their own. Now look, I love what Trump’s doing here. Now remember it’s in his best interest to keep the economy strong, the stock market higher. That’s why he’s always criticizing the Fed on Twitter at least once a week to try to influence them to lower rates next year, right? People invest in [inaudible 00:05:02] market’s good. It’s almost a guarantee he’s going to win the next election, the [inaudible 00:05:06] going to be in trouble. So why would Trump shake things up like this knowing that this news would definitely create uncertainty and push the markets lower? Because there is zero chance, zero that China does not sign a deal with us unless they want their economy to fall into a depression, which it basically did in 2018 while most of this nonsense between the US and China and raising tariffs was going on.

If you look at China, it’s the growth engine of the world. When you really dig down to the numbers and we’re the largest consumer of their goods, accounting for 20% of China’s total exports. Hong Kong is second with 12% but if you look past Hong Kong, the next five trading partners with China, if you combine those amounts account for roughly same amount of exports China sends to the US, again this is based on sales. That’s how big of a component we are to them. Now when it comes to US, look, we have the greatest economy on earth … which I kind of wish most of our population understood a little bit more since some countries don’t have access to [inaudible 00:06:16] and we take stuff like that for granted. That’s another rant. We’re our consumers? Businesses?

We’ve been conditioned at birth to spend money. Forget about your politics here and say, well, that’s why [inaudible 00:06:30], forget about it. We’ve been conditioned to spend money. That’s what we do as Americans. That’s what we do. So spending and spending and spending, think about that. We have the richest consumers in the world. It’s great for any country, any business that’s outside of the US and even in the US of course. They’re just looking to sell us products. You need exposure to the US, it makes sense, especially if you’re another country outside the US and when you look at this deal, it’s so much more important for China than it is to us.

It’s not an opinion guys, it’s fact. You want proof? Look at the headlines once this was released in Sunday. Our markets since then, are down less than 2%, in two trading days. China’s market crashed by 6%. They are down to 6% alone on Monday, a tiny bit, but it’s still down 6%. That Monday, decline alone, it was the largest decline in three years. The Downey decline but Trump is in a position to play hardball, to make sure that China gets a message that we want this deal done ASAP, so don’t mess around. Here’s a good example, China playing hardball with us is like companies like Skyworks, ST Microelectronics, analog Devices, right? These are big suppliers to Apple. It’s like threatening Apple, their largest customer. We know Skyworks, ST Micro, Analog Devices, respectable companies, market caps between 15 billion to 40 billion but Apple is a behemoth. $1 trillion market cap. It has five to 10 times more cash on its balance sheet than what these copies are actually worth based on market cap.

Apple could essentially by these three companies at the same time tomorrow and barely see a dent in its balance sheet. So China playing hardball with the US is like one of these suppliers threatening Apple if the tech giant doesn’t comply with their terms. That’s where we are right now and look China has to do this, I get it. They have to save face. They don’t want to get bullied here. They want to stand up to it. I get it. It’s fine. That’s the game they have to play, but as an investor you, mom and pop and I said this in 2018 and received a lot of negative emails, which is cool. I’m going to say it again right now. This tariff thing is a non-story. It’s a deal that will happen. Too much is at stake for China and China has plenty of things to offer us behind closed door to make this deal happen as they use a shitload of natural gas, which we have basically an unlimited supply of. So much that we burn it just to get rid of it and now we’re going to see a ton of LNG export facilities opened up over the next five, 10 years.

We have two operational who just seen demand through the roof. Sabine Pass for Cheniere Energy, Cove Point for Dominion Energy. Those are the two. Originally import facilities and then Shell revolution, Shell matter export facilities and now you see dozens more are going to open up over the next five years. Aircrafts, soybeans, cars, our biggest exports into China. Something could be worked out behind closed doors. There’s a lot or have China provide incentives for our companies to build factories in China. I know, everything wants to be built in the US, but at the end of the day, China used to be that the end all in manufacturing, right? Low labor costs. Lately, they’ve been losing market share to other countries that are providing even cheaper labor and that’s not a bad reflection on China. It just means that their economy is starting to grow a lot more.

Seriously, guys, tariffs are not the crazy long-term risk that’s going to put Bosch Law economies into recession and spark this massive trade war. I know that sounds crazy with the media telling you that the world’s going to end, just like they did through 2018 citing trade wars and recession. If you look at the details, the S&P 500 yeah, it fell around 6% on the year but most of that decline, which was a 20% decline, which is amazing from September through December, it had to do with the Fed, right? With the Fed saying, hey, we’re going to raise rates, we’re going to raise rates, pedal to the metal, we’re going to raise rates. Then finally they switch and now you’re looking, this year we’re doing very well, but apples, apples comparison, let’s use a 6% decline that we had right from last year in the S&P 500. China’s market, Shanghai fell 24% last year.

The worst performance in a decade. This year, if you look from January to mid-April, pretty much this time period where the US and China trade fears was off at ease. It was like, okay, deal’s going to get done. The Shanghai index surged 30%, right? There’s incredible rebound because this risk, the uncertainty was off the table. We think a deal’s going to get done. That’s almost twice the gain in the S&P 500 over the same timeframe. My point, the people who are telling you that a US-China trade war is worse for the US than China are either complete idiots since they don’t know how to analyze data or they have an agenda. If you still think I’m crazy, let’s dig in a little bit, since I am an analyst. Let’s go to the math. Unless she used the auto industry as an example, who use a ton of steel to produce cars.

If you look at one car and really quick guys, going to be numbers here, you don’t have to memorize every number. You’re going to see the point, I’m going to go through this quick. So you have one car uses an average of 2000 pounds of steel. 50 cents per pound, let’s say that equals $1,000 per car. So a 25% bump in steel prices for US producers would amount to $250 an extra cost to produce a car. Now the average profit margin for cars is about $4,000 so the 25% increase in tariffs on steel, works out to a little bit more than the 6% hit on margins, which is no small potatoes for the auto industry or any industry. A 6%, that’s pretty big a margin. That’s why usually when people talk about margin they say basis points, because it’s usually a little high, little low. 6% is a big deal.

Last year, we slashed the corporate tax rate from 35% to 21%. It’s a pretty big deal when you look at the numbers. Remember gross margin per car, $4,000, so instead of paying 35% tax on these profits, which amounts to $1,400 per car, car companies will have to pay 21% which amounts to $840. You could write down the numbers if you want. If not, I’m getting to my point. I hate throwing a lot of numbers because I don’t want to lose you. This is important, because if you subtract what they used to pay when it was at 35% tax rate compared to its today, at a 21% tax rate, you’re looking at the automaker’s making an extra $560 in added profit per car. Just due to tax reforms. So that’s 560 that you’re making because of tax reforms and take the 250 off of the 25% increase in tariffs.

That means car companies are still making an extra $300 plus in profit per car when they factor in everything, right? Higher tariffs and tax reforms, bringing it into all together. Sorry I threw so many numbers at you, but it’s important to understand this because nobody’s talking about this. At the end of the day, car companies are still making an extra $300 plus in every car they produce, which increases the profit margins by an incredible 7%, even if we have 25% taxes on some of this stuff. That’s why earnings last year through all this tariff nonsense, double digits, fastest pace in years, despite all the tariff nonsense through 2018. Even though the trade war was supposed to crush our economy.

It was supposed to end the world. Save Yourself, build a bunker, buy guns and shoot the riding people that are going to crash into your home or raid your home and steal everything. You’ve got to worry, holy cow. Let me tell you something else. The companies that said they were impacted by high towers last year like Harley Davidson and Whirlpool, were lying out their ass. They missed earnings because the [inaudible 00:14:22] was crap for motorcycles and new appliances. Their management teams were just not getting it done. They didn’t see that lower demand curve. They didn’t adjust [inaudible 00:14:30] things to adapt. It wasn’t because of tariffs. Money through those tax reforms was just huge. So look, you can believe whatever you want to believe, it’s totally fine. Some of this stuff is so religion to people, meaning no matter how many facts I throw at you, it’s not going to matter.

You’re never going to change your mind and that’s okay. For me, the reason why you listen to this podcast, I think, I’m someone here to help you avoid all the BS stories in the media or the crap being published by investment firms. Most of these people have an agenda. I’m telling you, trade wars, tariffs, China, it’s a non-factor. It’s not a long-term risk. You should look at it as the Zika virus, where the media scared the shit out of everyone, right? So much so that our greatest athletes chose not to represent their countries in fear they would contract the virus by going to Brazil. Remember that? Remember that story? A lot of famous golfers too. I remember, I think Rory Mcilroy didn’t go to a couple of, this whole scare putting that fear into you, right? Who’s talking about Zika today?

I don’t know. The mosquitoes like just suddenly stopped biting people? Talking about a virus that if you contract it, the symptoms are so mild you don’t even know you have it. There were rumors suggesting that if you contract this virus, especially when you’re pregnant, for women, your baby could develop a birth defect even though there’s no hard evidence at all to support this. Zero, independent, non-biased studies to support this but because of that fear in the media, think about that like 10 years, 20 years from now, 30 years from now, when guys like Rory Mcilroy have grandchildren and you had the opportunity to, maybe you’re going to have an opportunity to do it later on, maybe fine but some people don’t, especially in different sports where age matters.

You could play golf for 20 years. Tiger Woods is about 43 just won, he won his first, whatever under 20 whatever. How old he was, but if you’re looking at different sports, I mean sometimes it’s an eight-year window before, you tell awful lot. It’s hard to compete with younger athletes. Think about telling your grandchild, I had a chance to represent my country and I didn’t because I was afraid of the Zika virus. They are going to be, what is the Zika virus, well, it’s nothing. That’s what the media is all about. Anyway, don’t get caught up with the media bullshit, especially when it comes to tariffs. Like I said in 2018 the same goes for today, you should be buying stocks on any weakness due to tariffs, especially this nonsense going on right now.

It’s a short-term political story, not a long-term risk that’s going to impact your portfolio. So adjust accordingly. Moving on, rant ended. Great interview today, one of your favorite guests, who is John Petrides, Managing Director, Portfolio Manager at Point View [inaudible 00:17:17] Management. Over 20 years’ experience. Great stock analyst, a regular on my podcast. Someone I love having on, since we can go anywhere with this interview including tariffs. We’re going to talk about earnings, the economy. More important, which I know you guys love is John always gives a lot of stock picks. It’s going to give probably at least five to seven ideas, new ideas, which is great. So, I know I get so many positive responses, so many positive feedbacks me at frank@curzioresearch.com. Keep it coming in, I love that. This podcast is about you, not about me, but when John’s on guys like Andrew Paul Horowitz are on, guys that could talk about the market in general and so many different topics, we usually get the best responses for and this interview’s not going to let you down. It’s going to be fantastic. It’s coming up in a minute.

Then to my educational segment. I want you to do me a favor. This is important since I rarely ask you for anything. Get away from the spouse, get away from the kids. Go to a quiet place you love for about 20 minutes. That could be the bathroom for most males … whatever. Find a nice quiet area and please pay close attention to this segment. I promise it’s going to be one of the greatest lessons you’ll ever learn about investing. As I will break down what are the mistakes I made, yes, I’m going to talk about mistakes, right? Never said don’t ever talk about your mistakes, always talking about putting no, you’ll learn the most from your mistakes. This mistake was one way to answer the question my Frankie speaking podcast, it was a great question. I gave a great answer. One that I would give again, based on my experience. That may be wrong.

I’m going to show you how this mistake, will lead you to becoming an incredible long-term investor to the point that you’re going to know more than most experts who follow the markets on a daily basis and I’m not kidding. You’re not going to find this lesson in any books, not going to hear anybody talk about it on TV, in the media or anywhere else, but it’s something that’s going to help you become a fantastic investor. When you hear about it, the funny thing is, you’ll be like wow, that really makes a lot of sense and it does. Trust me. Just need 20 minutes of your time. I’m not building this up. I’m not teasing it. I’m being dead serious. It’s really cool. I’m going to highlight one mistake that I made and you’re going to see why learning from this mistake, and it’s just this mistake, but I’m going to put it in a bigger concept, is going to lead you to becoming a much better investor. Now, before I get to that segment, here’s my interview with John Petrides. John Petrides, what’s going on?

John Petrides: Hey Frank, how is it going?

Frank Curzio: I see you’re kind of busy these days. All of the media, a lot of demand for you, and I say this to a lot of my guests, where don’t forget about us little guys when you get really big and you start doing fast money and everything. Remember guys like us, hopefully you still come on the podcast, but how are things going?

John Petrides: It’s going well, it’s busy. Obviously it’s been a nice market to ride the wave I guess here today because volatility up until a couple of days ago has been relatively calm, it’s been quiet. Reminds me almost of 2017, where the S&P 500 finished positive at the end of every month for the entire year and there was essentially no volatility. So from that standpoint, it’s been a really nice market.

Frank Curzio: Now today, go over this week, tariffs are the big story now and I’ve argued in my opening pretty much that it’s kind of a nonissue in terms of being a long-term risk or an outright trade war between the China and the US and told everyone in my opening segment to buy the dips because a deal has to get done unless China wants to push its economy into a depression, so it’s eventually going to get done but I want to get your thoughts on tariffs real quick because, also you’ve been telling clients to buy dips as well. However, there was two other reasons why you said that people or investors should be buying. So I want to talk about tariffs a little. Then also, those other the two reasons why you’ve been saying, hey, you know what, you should be buying this because of these two reasons.

John Petrides: Yeah, so clearly what investors should never do is trade on your portfolio, buy or sell based on rumors. Frank, Top Gun was one of the great movies of all time in the 1980s and one thing that Maverick said was he’s not leaving his wing man because when he left his wing man, he got shot down. He helped her at the end and obviously the good guys won. Here when the market gets volatile, you can’t leave your wing man. You have to stay disciplined and consistent to your investment process. So on days like we’ve had over the past couple when the president tweeted out that he’s threatening to increase tariff on China, the market in general sold off. Now admittedly, the market has had a strong run year to date. So taking a deep breath is not necessarily a bad thing, but because of what the potential outcome of tariffs may or may not be, should not influence you if you like the company and you think the cashflow and the business model is strong enough to weather this type of storm.

So we are not buying or selling the rumors based on a trade deal. At the end of the day it is in the Chinese economy’s best interest to get something done. Now you’re dealing with a lot of unorthodox personalities on the US side and on the Chinese side, which makes this a bit more difficult to wrap a probability about expectations but I think as we can all see from the impact that tariffs have had in the Chinese economy, it’s in their best interest to get this resolved.

Frank Curzio: Now talk about the other two reasons why you’ve been saying and you’ve been saying this for a while now. You talk about lower yields, you look at the Fed policy where the Fed actually changes tune completely not too long ago where that really pushed the markets down from September through December where the Fed was like, hey, we’re going to raise rates, we’re going to raise rates, going to raise rates and then they said, all of a sudden like, hey, we’re not going to raise rates and actually we may lower them depending on, we’re going to look at the data now. So when you look at that and this favorable conditions, these macro conditions, you’re still suggesting, hey, you know what, buy these dips?

John Petrides: Definitely. We were buying in the fourth quarter, 2018. We continue to buy here today and we fought that, I think much like yourself, that the fears of the US heading into recession and the global economy heading to recession was really misplaced. We think the market just priced a way too negative of a scenario. So you see two legs of this rally take place. The first one was, actually three legs of the rally take place. The first one was that the macro data and the earnings data came in better than what expectations were, which was for recession. We’re not seeing any signs flash anywhere, particularly within the US of the economy heading into recession and earnings have been quite strong off of what was a very difficult year, comp wise year, given last year, we had the tax cuts, right?

So that set off the first wave of, okay, we’re not heading it to Armageddon. The second wave was the Fed, particularly in March, Chairman Powell said, Fed chair Powell said, the US economy looks good and the Fed will do everything in its power to keep it that way. Frank, that was it. Game, set, match on that quote right there because it basically puts the safety net back into the market, which has helped really drive stock higher post the financial crisis, that if we do head into a bumpy patch, if trade tariffs do increase and Trump does levy a higher tax rate on the Chinese and the Chinese economy does fall into recession and the global economy does slow, what are the central banking and global central banks going to do? They’re going to print more money and when you print more money it forces bond yields down, it makes cash less attractive.

It forces investors out the risk curve to invest in stocks and that will push stocks higher. So the first leg of the stool was that we are not heading into recession. It was a big deep sigh of relief. The second leg of the stool has been that the Fed has stepped to the side and is printing more money and is staying out of the way of growth and the third leg of the stool and you really saw that in the month of April was that growth stocks once again took the baton. Growth was outperforming value stocks by about 5% a year to date and if you look at the Nasdaq in particular, at one point it was up over 20%. If you look at the S&P 500, right? 20% of the S&P is in tech and about 10% is in communication services, which is a new sector that owns the likes of Facebook, Google and so on and so forth.

So if you combine those two sectors, about a third of the market is really, really strong and that’s what’s pushing S&P 500 higher and those two sectors are predominantly growth stocks. So those have really been the three legs of the stool that have gotten us to the point where we are today. To move this market higher I do believe that you need some resolution on trade tariffs, that would be sort of the biggest cognitive wheel at this point to see further growth going forward.

Frank Curzio: Now let’s get to one of the things you just mentioned, which is earnings, right? So we’re coming to the close of earning season. A lot of companies are already reported. I know you cover earnings like I do, where you’re analyzing so many different stocks and also looking at the macro backdrop in terms of total earnings growth, the S&P 500, even sectors. In this earning season, has anything stood out to you in terms of surprises, positive and negatives? Because yeah, I guess two things and I’ll start here, that stood out to me was, one was Google. I couldn’t believe how, it was like a slow down across the board, right? Where Google better put up amazing numbers the next quarter because they have to justify that 25 times forward earnings multiple. This one was really weak and another thing was Apple where I was really surprised that stock rode higher and yes I know they beat consensus estimates but those estimates was significantly lowered by analysts in the quarter.

When you’re looking at the real numbers, Apple’s earnings [inaudible 00:27:22] declining year over year. Product margins declined. Just seem like the numbers would have justified maybe a small pullback instead of a company trading like right through 200 and everything’s great. Apple’s back, I was just like, whoa guys, take it easy and that they’re not growing sales in revenue and every other company S&P 500, they’re growing earnings are around 1, 2% right now. It was supposed to be negative, but they’re actually growing and growing sales is more than 5% and they had the same multiple as Apple. So those are two things that surprise me. What about you, because I know you talked about those two subjects, but I know you also talk about tons of other things when it comes to earnings.

John Petrides: I want to add Amazon to that mix and I’ll explain it in a second that I thought was actually a little surprising. On the first off, let’s talk about, regardless if you own a stock or not, you have to read or listen to their earnings calls from multiple thoughts across multiple sectors, right? To put the piece of the puzzle to see where we are today and where are we headed. What are different companies saying in different sectors to put all the pieces together to figure out where the future growth rate is. So like Fogg, what you saw it at Caterpillar, thought what you saw at 3M which had its worst trading day by the way since 1987 when the stock market crashed on their data report earnings, and FedEx. Those three companies are global in nature, they are very reliant on global growth and what you saw out of all three was just a confirmation that the global economy is slower and although not in recession, it’s just slower than what it once was.

So not that I was surprised by it, it’s just confirmation of what I think the market was overly concerned about and shouldn’t be as concerned. They weren’t screaming recession, they were just confirming that global growth was slowed. Okay, fine. The next thing were the banks and I felt the US bank earnings calls were very good. Again, confirming the fact that we’re not in a recession. The loan profile of banks were really strong, or were solid. Banks are continuing to navigate in a flat yield curve environment where the shorter maturities are yielding around the same as longer dated maturities are and the wider that’s spread, the more the banks make. So the fact that the banks are still able to earn out in that period is very healthy and a good sign.

Now let’s talk about, some of the bigger cap, text box that you mentioned. I think the reason why we saw Apple stock rally as much as it did was twofold. One was the capital allocation, decisions to shareholders, right? Buying back a ton of stock. We’re in a low yield environment, so they decided to increase their dividend that are healthy, were 5, 6% type of clip. So investors like the fact that they’re returning cash to shareholders. The second thing is, Apple is extremely sensitive to what happens to the Chinese economy. China is 20% of Apple sales and they did see a rebound in China. If you remember the first week of January, Tim Cook came out and revised guidance lower because of weaker China. I think the fact that China was growing again was the big sigh of relief for Apple investors and those that may have been on the sideline, may have been a bear were able to say, okay, maybe we are all systems go here.

So that’s what helped move Apple higher. I agree with you. I’m totally surprised or was totally surprised by Google’s results. Google has 35 consecutive quarters of growing as top line, 20% or greater. That’s amazing. 35 consecutive quarters, that’s just unbelievable, a 20% plus top line growth. So you finally saw that number come below that and the comments coming from management were kind of confusing. They really could not pinpoint the reason of why their top one was a bit slower. So I agree with you that next journey’s call, Google is going to have some explaining to do, to figure out what’s going on, if there is an issue within their business model because it’d be, frankly incremental marketing dollar. So the next marketing dollar spent is going to either Google and or Facebook or both. So, is this something where Facebook has now become a true competitive threat to Google’s model, time will really tell.

I saw it in terms of Amazon, Frank. I thought one thing that Amazon’s call did not get enough attention. Amazon announced on their calls that they’re working on next day delivery and that got all the buzz in my opinion. They going to spend money, do next day delivery and that they’re focusing on convenience, the convenience factor for the consumer is the big driver. What I didn’t think get enough attention was that AWS, Amazon Web Service, I’m going to say this sort of tongue and cheek, only grew 41%. Now that’s that business line, which is their highest margin business line is a pure cash cow had been growing between 45 and 50%, for the past couple of years, year over year, every quarter. Now why is that important? To me, AWS is the secret sauce, the cash cow, that allows Jeff Bezos to do things like go out and buy whole foods.

It allows Jeff Bezos to afford the ability to do next day delivery. E-commerce for Amazon is a very low margin business. Wholefoods is a very low margin business. So much like GEICO for Berkshire Hathaway, where Buffet uses the float from GEICO to buy all these other businesses and get the higher return on investment, AWS is exactly the same for Amazon and Jeff Bezos and if that starts to slow, if that dips below 40% you’re going to see the multiple on Amazon get sucked out pretty quickly in my opinion, because that’s the growth driver of the stock going forward. So I thought that, that didn’t get enough attention in my opinion and fears is if that does start to slow, investors need to be careful.

Frank Curzio: Yeah, now that’s a good opinion on Amazon and even on Google, Google was just a surprise to me. It’s kind of funny because we’re not saying guys that Google is a bad company. It’s an amazing company but like you said, 30 plus quarters of 20% growth, that was a number of people were looking at with revenues and that decline, but it was just an overall slowdown across the whole business and it was nothing to point to other than, it’s important that this company continues to grow not only at 20%. 20% of their size is insane, right? As you get bigger, it’s much harder on a percentage basis to grow. The fact that manager was kind of arrogant on that call and not really addressing that, it was just like whoa, take it easy.

The company has a very, very high multiple and you’re not growing as fast as you and it looks like that’s going to stay the same going forward where 15% growth for large a cap company is amazing. The average companies sales grow by 5% but remember the stock prices of Google is reflecting that at 20% plus growth. So now that multiple has to come down. So it’s not like we hate Google or it’s bad, it’s just the price right now is pretty expensive based on the numbers they’re putting up. Again, Amazon was interesting to add to your slow international growth theme. I don’t know if you saw the numbers from floor, which were horrible. I mean that stock crashed 25% global infrastructure company anti-thesis and John, you know me by now and we’re getting good at this because my next question was about banks, which you addressed and we’ll get more into it because it’s also a sector that I love.

You mentioned that interest margins, a little bit under pressure as the Fed imposed mode right now and guys, just to break it down for banks, margins usually increase when the Fed raise their interest rates or at least a spread between where they borrow and lend widen. Of course I was going to ask you this, one question is do you get negative feedback because I still get negative feedback if I tell everyone not to buy the banks. If you look at the fundamentals, their balance sheets have never been stronger than the history of this because of the current rules in place. So the only thing that they’re allowed to do if they pass the stress test, which is every bank’s [inaudible 00:35:43] about 35 of them, the only thing that they could do is really buy back enormous amounts of their stock and raise their dividends every year, which is going to continue for many years to come and I saw one bank in particular, I like Citigroup, but I saw that you like Wells Fargo. Could you tell me why you like Wells Fargo out of all the major banks?

John Petrides: Yeah, so I guess the way that I think about it is the major banks, JT Morgan, Bank of America, Citigroup, Goldman Sachs and Wells Fargo. I think of those as the five largest financial institutions in the US and I guess in the hierarchy I guess it’s a four way race between Goldman, Citi, Bank of America and Wells Fargo. Okay, we like pretty much any and all of those three. JPMorgan is the one where although it’s the highest quality and probably the strongest financing institution in the world, we think you’re paying up for that fact, and we think you’re paying up at current valuation to be a shareholder with Jamie Dimon. Much like for the longest time, Wells Fargo got the biggest premium of the banks because Warren Buffet was a large shareholder and for the longest time Wells Fargo was considered the cream of the crop.

They were the best institution, right? They were the gold standard of banks, by and large, up until recently, Wells Fargo had avoided any major catastrophes. They didn’t have the London Whale like JPMorgan did in 2011, 2012. They were forced to acquire Wachovia and some of the other acquisitions in the financial crisis. They’ve been fairly conservative from a lending institution historically, but given the headline risk that Wells Fargo has had with some of the nefarious practices they’ve done with some of their client accounts, making up fictitious accounts to try and boost some of their goals and some of their achievements, a little bit of the luster has been taken off of the stock and because of that, the valuation has come in.

So, the idea with buying Wells Fargo now is on a relative basis compared to JPMorgan and compared to where Wells Fargo has traded historically, it’s significantly more attractive than it has been in a very, very long time. So that’s sort of the thesis, it’s a relative game. I still think that Bank of America is really cheap. I think Citigroup is really cheap, despite the 25% pop we’ve seen in Goldman Sachs following the hedge fund scandal in Malaysia, Goldman is only trading at or around book value. We think the stock definitely deserves more than a premium to book value it is Goldman Sachs, they’re well diversified across the entire financial spectrum between banking and trading wealth management.

To be honest with you, Goldman has bought about $200 billion of deposits. To put that in perspective, Citigroup has about a trillion dollars in deposits. So Goldman is slowly building its way up into being a full service bank. So that sort of fall on the banking sector I do think is attractive and I’d feel comfortable owning all four of those. JPMorgan is probably the one where I would wait for a better entry point.

Frank Curzio: Outside of the banks and I love you, we’ve already shared so many ideas and we talked about some of the individual stocks, which is why, people love when you come on. They just love new ideas and everything’s going on to the markets but is there something that hit your radar after listening to the latest earnings calls or maybe something that maybe you changed your mind on in terms of individual stocks or a thing. We talked about Google, a couple of technology and just banks right now, but if there’s anything else that really stuck out that hey, let’s do a conference call or maybe change your mind on something that you are recommending or you said, wow, this is worth taking a look right now.

John Petrides: The stocks that I was keeping a tier on that I still like; energy is one of the sectors that we still like here despite the price of oil going up about 50% from its lows in the fourth quarter of 2018. We still think there’s room to run in the energy sector and the one stock that I really like is Kinder Morgan. Now, KMI is a ticker. Now, Frank, you and I remember from 2010 to 2014, the influx or the height that the MLP is the master limited partnerships got, right? Everyone wanted to own the master limited partnerships. These were the oil and gas pipelines that moved basically the mid-stream part of the energy sector.

The story from 2010 to 2014 was, the MLPs were like a toll road, they’re highly capital intensive, but once the pipe is in the ground and you move oil from point A to point B, you clip a toll along the way and they should be fairly insular to the price movement of natural gas and oil and by the way, they kick off a huge dividend, typically between 6 to 8%. In a low yield environment, who wouldn’t want that type of income stream? Well, that was the narrative for about four years and then in July of 2014, the oil market collapsed and oil went from about $115 in July of 2014 to $25 by January of 2016 and the MLP space was basically over. It was essentially retail and high net worth investors that owned MLPs. Institution could not get into the game because of the MLP structure. They couldn’t deal with K-1s and tax issues and all that stuff and investors in the MLP space really were burned and they have not come back into the space.

Kinder Morgan was the poster child for the MLP space, punted debt on its balance sheet, owned the most amount of pipeline, paid out a big dividend, grew their dividend in the face of rising capital costs and essentially in 2015 they got caught with their pants down. They had too much leverage. The rating agencies turned their back on them and basically that was it. They had to cut their dividend and basically hit the reset button. Well today Kinder Morgan is no longer an MLP, tickers KMI. They still own 40,000 miles worth of pipe across the country. They claim to transport 40% of the country’s natural gas. They’re now investing grade rated on terms of their balance sheet. They have, I think a four and a half percent dividend yield, which they plan on growing, I think 25% over the next couple of years.

They have a $6 billion backlog, of which about 60% of it is contracted out which essentially is guaranteed. So the stock is up, it’s around a little under 20 bucks and here is a company I think you get good yield. I think all the negative stuff of the oil and gas pipelines is now behind us. We know the growth coming out of the Shale throughout the country. That’s not going away and I do think now the leadership team of Kinder Morgan has had its big moment and they’re not going back there again. So they’re being significantly more conservative in terms of their cash outlay. So, KMI to me is a nice way to play the easy energy space and get a big fat dividend off it and again, it’s no longer a master limited partnership. So you don’t have to deal with K-1s for your taxes.

Frank Curzio: All right John, now we’re going to get to the most important question here because I know that, and we’ve covered a lot of stocks which is great, but I know that you’re a sports fan since we always talk about fantasy football and stuff like that and everything going on. I’m not too sure to if you’re a basketball fan or not. Are you a basketball fan or a hockey fan?

John Petrides: I am unfortunately a Knick fan.

Frank Curzio: Yes, and that is unfortunate. Hailing from New York, yes, I know, that’s unfortunate but enjoying the playoffs right now. I think that if a lot of people, if you’re watching NBA, it’s never been so open at this stage of the playoffs where, Golden State, I guess a couple of weeks ago was like the favorite, but now they just lost two to Houston. You have Milwaukee losing to Boston the first game and then all of a sudden the Bucks, just amazing. They’re just blowing out Boston right now unbelievable, Toronto different team, right? Because of Kawhi and then Denver, man, everybody thought they were going to lose to San Antonio the first round. I mean, great, great team that moves the ball. I mean, who do you see winning this thing? Because you know, basketball fans out there, it seems like there’s four teams that could win this, that are very good compared to, oh, it’s Golden State and back in, it’s Lebron but yeah, it’s pretty open this year. Pretty cool.

John Petrides: If Golden State can survive Houston then it’s Golden State’s to lose but to me Golden State doesn’t look like the previous three years. Steph Curry’s body language just does not look into it. There’s a lot of bickering going on within Golden State, but it does look like maybe that dynasty is starting to come to an end, if they can’t get past Houston. They just look really look really lethargic. They play probably 400 basketball games in the past 5 years and it was pretty much domination. So if Golden State gets through it, I do think they survive and I do think they wind up winning the championship. If Golden State does not win, if Houston beats them, I think it’s Toronto’s to win. I mean, they look so complete. I mean, Giannis is a beast but he is a one trick pony in terms of driving to the, sorry Buck fans but Cleveland couldn’t do it over the past couple of years were just Lebron and Giannis isn’t there.

He needs more players around him to make that a true to championship team. Much like Jordan needed Pippen and Lebron needed Kyrie and Dwayne Wade needed Lebron and Shaq but that sort of thing. He needs that second player. So to me, I think Toronto just looks so deep and so complete that if Golden State loses, I think the Raptors finally win.

Frank Curzio: Yeah, it is interesting too because Toronto fans are like, oh no, we always see this but when you have a superstar like Kawhi, it’s a game changer. I mean if you see him not playing well, he influences the game so much whereas Steph Curry, his shot is off, he’s done. He’s one of the worst defensive plays in the league. I mean if Harden blows by, everybody blows by him every two seconds, you know, with Kawhi, it’s just a total different outlook in defense and offense. It’s been pretty incredible but if you’re not watching NBA playoff guys, I know there’s a lot of people hate but I mean Portland series with Denver, you want to see two teams just like killing each other, playing hard and you don’t see those games because they’re usually on late at night but man, it’s been pretty exciting also in hockey as well but I always love getting your take on sports because I know you watch as much as me-

John Petrides: Yeah, I love hockey and basketball playoffs. My thought is and it’ll never happen, is that both leagues should just move down to the 20 largest cities in the country, play a 50 game series. Every team would have all the superstars on it and basically every game, there’s no reason to play hockey in June. So you go to a 50 game season, 20 teams. Every team is stacked with great players and then you let it roll in the playoffs. I wished the NBA would do the same thing. You don’t need to play 85 games, whatever it is in the NBA. You go to 20 teams, play 50 games and every team has been a super team and you basically have a dream team throughout the league and that to me will be a lot of fun because then every single game, every night is going to be competitive. It’s going to be great basketball, great hockey, but that’s not going to happen.

Frank Curzio: Based on that thesis, I’m sure you love baseball.

John Petrides: Yeah, exactly, exactly.

Frank Curzio: A million games. All right John, we covered a lot today. I know people have said this a few times podcast alone, people love when you come on because we can always talk about things that are relevant in the market. It’s timely, you’re always giving ideas and stuff like that and with this particular podcast guys, John decided to come on, we just had a late cancellation and which happens sometimes, really, really great person, but who’s going to be on I think next week or the week after and you actually filled in very, very quickly for me and I know how busy your schedule is. So I just want to say thank you. I know my listeners really appreciate [inaudible 00:48:31] so I really appreciate it.

John Petrides: No worries Frank. I always love doing this show and I always love catching up and chatting, so it’s my pleasure.

Frank Curzio: Great stuff and we’ll definitely talk soon.

John Petrides: Bye bye.

Frank Curzio: You guys, great stuff from John. I love having him on, [inaudible 00:48:45] I wasn’t kidding when I said at the beginning in that interview that he’s all over the media networks, getting a lot of attention. He’s got charisma and plus he’s brilliant. So, on TV and media, he comes across great, even on the podcast. I love having them on and hopefully he will not forget about us and he won’t, he’s a good friend and a great guy, great analysts. Again, that’s how I feel and I always say the same and I mean it. So, let me know what you thought of frank@curzioresearch.com. This podcast is about you. It’s not about me and again, I could get on numerous guests now, thanks to you. The podcast continues to grow. So keep sending me ideas. I probably received more than a dozen emails from people saying, hey Frank, I love to hear from this guy or that guy.

No self-help gurus or anything like that. That doesn’t work on our audience. I think people know that they shouldn’t have a lot of debt and I don’t know how many millions and millions of books can be written about this, but mostly stock analysts, economists, world leaders. I mean we’ve been interviewing billionaires. If you think there’s someone that would be fantastic guest, let me know. I definitely have them on and the exposure is that big where you know, thanks to you guys and I’m always humbled and saying that where, they’ll come on, they’ll get a lot of exposure because we have a lot of listeners. So, just let me know frank@curzioresearch.com.

Now let’s get to my educational segment. So a few weeks ago, nice guy, nice investor and listener, Brandon asked me a question and he goes, hey Frank, I own Anadarko, which Chevron just made a bid for it $65. My target was 61.50, so I’m up 50% plus in 18 months. I also heard that OXY made a $7 that was rejected. Now guys, keep in mind, this was April 14th, right? We kind of know a lot of you know what happened now. I’m going to get to that in a second. So he continuously goes, yeah, I also heard that OXY made a bid for $7 rejected. Is there a general rule you have or that you’ve learned through all your experience on timing and how these bids generally work out? Is it best to sell right away when a bid is made or hang in there till the end or close to the end in case there’s a bidding war, just because it makes sense financially. Thanks for all you do, special thanks to you and your family that allows you to be shared with us and Bran’s a good guy and it was a great question.

So the offer for Anadarko was from Chevron, right? One of the large oil companies in the world, industry leader. $33 billion and then OXY came in, Occidental Petroleum, raises bids around 38 billion. OXY has a $44 billion market cap, right? 3 billion in cash on its balance sheet. Free cash flow at 1.5 billion and if OXY wins this bid, it’s going to have to sell 10 to 50 billion in assets right away to cover it, right? So think $44 billion mark cap. Chevron has a $225 billion market cap, 9 billion cash compared to 3 billion with OXY, free cash worth 13 billion compared to one a half billion for OXY. So, when I got this question might advise like, look, you have two bids on the table, you’re looking maybe 5, 7% upside from here if they accept the OXY offer.

If the bid falls through and both of these companies, which you know you have two reputable companies bidding for this, so the chance of that are going to happen I told him, were little, but if they do pull their bids, then the stock is going to fall, whatever, 25% plus whatever the premium was. That usually happens if a company rejects that offer. The bigger thing was the opportunity costs I told him, because sometimes these deals could take six months, they could take a year and a half to get done and you have your money tied up looking for maybe a little bit of a premium from the OXY bid and that’s money you could put into the markets and buy some of your favorite situation. So for me, I was like, you made a good return. It might probably be better if you sell, take the profits and go in.

I give that advice over and over again because I’ve been through this process dozens and dozens of times, through my 25 years plus of research experience, right? I’ve owned and even recommended a lot of companies in my portfolios that were acquired for big premiums. So for me, this is the right advice. This is good, right? Yeah. You’re looking for a little bit more return, don’t get too greedy. You have 50% plus and move on. You know what happened, if you don’t know what happened, I’ll tell you because I was a little bit wrong, right? So I was wrong because OXY and Anadarko, they actually accepted OXY’s bid over Chevron, which means, that stock is trading higher and it also helped that Warren Buffet came in with 10 billions of financing for Occidental that it said will only provide if this deal actually goes through its official and Berkshire’s terms are incredible and you got to love Buffet for this.

So basically Berkshire is going to get, he’s going to purchase 100,000 preferred shares of stock, which pay an 8% yield, which is awesome. If this deal falls through, Berkshire is got to get paid anyway, I think it’s something around $50 million or some 50 million, don’t quote me on that if the deal doesn’t go through. Occidental actually it stock fell on this news because of these crazy terms, because they are going to have to do so much to actually compete, to really get this thing done. Now the lesson here, which again, you’re not going to read or hear about anywhere else … people say history repeats itself, or at least it rhymes. Not all the time. This deal for Anadarko, the way it’s going down, almost never ever, ever happens where a mid-tier company outbids an industry leader, especially when it comes to a deal this size, which is really over 50 billion in total when including debt.

If you read investment books and you’re a new investor, you’re going to read all these books and you hear the same things over and over again. Don’t put all the eggs in one basket, state diversified. Most billionaires put all their eggs in one basket. They’re not diversify, they’re all into their own company. Would I give you broad advice like that? Of course, but if you’re young and you have a good idea and you have plenty of working power, if you’re wrong to do lots of different things, but that’s when you make the biggest impact. You’re not allowed to say that, right? As the person giving advice, well diversify, get into international stocks, have a little bit of exposure year. I’m glad guys like Zuckerberg, Jeff Bezos didn’t listen to that advice. Elon Musk, whatever you think of him, I’m glad. You should buy stocks with low PE ratios, right? They tend to outperform the market. That was from database from the 50s and the 90s even to the 2000s. It showed plenty of studies. A lot of fame value investors wrote about it.

It was great. Let me tell you something, Apple was trading at 65 times earnings in 2004. Netflix was trading at 75 times earnings at the same timeframe. To put it just to basis, Apple was trading around $6 back then at a 65 times PE. If you’re a value investor, you’re like, I’m not touching this thing. Well that’s too bad because that’s 30 X gains, you could generated, right? If you avoid the advice of what value investors are telling you. Netflix was trading at $3 in 2004 on a split adjusted basis. That’s 120 X gains. Think about that. That’s enough money to change your life and that’s over 15 years. It’s not that long. Imagine owning that stock and keeping it till today. You talk about probably having a helicopter, four houses, a nice beach front. Pretty good living on a stock that how many people told you back then? Man, this is crazy. This is too expensive. Don’t buy it. Same can be said with Amazon, Microsoft. These companies were really not expensive in 2004 when you factor in both sides of the story. The other side of the story is growth potential.

It’s like our massive debt problem in America, right? I mean you can go anywhere. Everybody knows about, it’s cited everywhere. Politicians fight about 21 billion plus in debt. It’s a scary number. It is a scary number. I can keep going. It was at one point 3 trillion, now it stood a loan debt over a trillion in auto loan debt. Yeah, sub primal, all this stuff. You’re going to hear all these stories. It’s just one side of the balance sheet, right? Nobody really talks about the other side where net household wealth is near record levels. Look at homeowners have more equity within their homes than any other time in history, and what, close to 70% of Americans own a home. I bet over 85%, 90% own other assets like stocks and there 401ks. Look where stocks are. Collectibles, you’re looking at art, anything. Rare stuff. I mean, all of this, these assets have been inflated tremendously because of the Fed, which we know, right?

Lowering interest rates, forcing more money to come into these markets. Nearly every asset that is searched has a credit crisis, but nobody wants to talk about that. Nobody, they just want to talk about debt because debt is a much more exciting story. Holy cow. You’re going to lose you money. You’re going to get killed. ATM is going to stop giving you money and printing money and you got to take it all out and put it in a box and bury it in your backyard. Open up international accounts. All this garbage, right? For 10 fricking years we’ve been hearing about it. Again, nobody says both sides of the story, nobody tells you that because most people have an agenda. Another thing I love to hear, taking out debt is terrible, especially corporate debt, right? Because corporate debt is surging. Guys, debt is a great thing if managed correctly, and think about it, how would anyone, 95% of people living in the US.

How would they be able to buy a house without being able to take out a mortgage and going back to corporations, you can now borrow at record low interest rates or close to them today, a little bit higher. Who’s going to help them grow their companies even faster? Again, doing the right thing. Rates are so low. August 2016 [inaudible 00:58:16] 14 billion of bonds to the market, in 2017 he sold another 17 billion which was increased from 14 billion due to its insane demand. He was ready to AAA from Moody’s. You looking at Microsoft, their balance sheet is amazing. It was over a hundred billion dollars in cash before this deal. You can say some of it is overseas and this is a little bit better and, whatever it is. Look at the biggest companies in the world raising money to debt markets, even though they have strong balance sheets because capital is very, very cheap right now. It’s a smart thing to do if you do it properly.

It’s a great thing, if the cost is favor, which it is right now, and you manage his money in the right way. You’re not leveraging it three to one like so many companies did, which it will basically cause a credit crisis. My point here is you have to be open to learning new strategies, new ideas, because in this crazy industry, which I love so much, things are never the same. You have to be willing to adapt. That’s why I love my job so much. It’s like golf. No matter how good you get at it, you can never perfect it. There’s always room to get better. Always room to learn, always room to improve your game. So when it comes to the markets, check your ego at the door. I see this with so many great hedge fund managers, so many great money managers out there. Usually they’re over 55 but they’re set in their ways. Don’t be stubborn in your ways. Don’t be like a David Einhorn who refuses to invest in growth companies and that’s why his funds have gotten crushed over the past five years. When you’re seeing a lot of usually pure value guys getting into the Amazons of the world and getting a net.

You’re looking at Buffet buying Amazon right now, saying it’s a value play, right? Recently he’s managed to buying Amazon now. I love that about Buffett. I wouldn’t agree it’s a value play right now. I mean we’ve invested in this thing and I recommended him in myCurzio Research Advisory newsletter under a thousand, people will put pretty much over 100% on this position and people didn’t like that. I recommended it because that’s not what they pay me for but when I researched every single cloud company and really dug in, Amazon was the greatest ever and I saw a chance for my subscribers to get gains and they did. Be willing to change guys, be willing to learn, be willing to adapt. That was fortunate. Another good example of this. When my dad was a pure value investor and then when I went to Kramer I didn’t know anything about growth and it was like a huge, that learning curve of five years coming to so many growth companies. I was fortunate to get thrown into two different styles. Invest from two great teachers.

That helped me tremendously and even now, you look at technicals, I interview so many great people and I’m always interested in their methodology investing, which I tried to get across to you and I learn and see if I could use any of it and use it with what I’m doing. That leads to tons of ideas to me because it’s funny because I was talking to a really great analyst. He’s like Frank, well you know what? You’re a growth guy. I’m like, I’m not a growth guy. I would say actually I’m more a value guy but I’m investing in growth over the past seven years because that’s what the market is telling me to do. Don’t fight it, don’t get emotional about, oh the debt and banks are assholes and all this stuff and look at all that.

You have to realize the Fed has a great policy in place. Money is easy right now … which is very, very important. You see balance sheets flush with cash, dividends are rising, they’re buying back stock, earnings are very strong. There’s a lot of positives in the market. So pull your emotions away and always be able to adapt to different market conditions. It’s not easy. Provide you learning something. Golf is a great example. I mean they continue in trying to develop a better swing to just, Jordan Spieth that went on to be a disaster. Did win in all the majors and stuff like that now the guy can’t even make a cut, but you want to be willing to adapt to all kinds of market conditions. The only way to do it is check your ego at the door. Again, this is something you’re not going to read in investment books. It’s not gonna be mentioned anywhere because you can’t really write a book about it, right? So I’m basically saying everything you learned about stocks today, maybe totally different tomorrow, right?

It’s hard to write something like that and look at IPOs, look at that industry guys. Remember IPOs just come out with the good companies. Now it’s so much more favorable if you’re not generating earnings. I mean these guys are saying, well we’re not going to be profitable forever. Like Lyft. That’s the trend. You could go on social media and complain and whatever, you could rant, that’s fine but smart investors adapt, they go with the flow. You know what? That’s how you establish a 20 year plus career in this business because you get it right more times than wrong because you’re willing to learn from your mistakes because history does not always repeat itself guys. It doesn’t. This deal with Anadarko, stuff like this never happens. I mean it’s about Chevron and a mid-tier and the mid-tier is outbidding and getting Buffet and going to have to sell their assets, whatever and Anadarko really doesn’t want to go at OXY, but for the shareholders it makes sense and that’s supposed to be their best interest but in reality Chevron is a perfect fit.

It’s like IBM and Red Hat because when you merge when a company is not a perfect fit, it’s not fun. It’s tough. That integration is going to be really, really difficult. So as a business, long term, I think I would be selling Occidental. I think this is a terrible decision. I think they are paying way too much. They’re giving Buffet free money to get into this just to put his name on it. So, there’ll be able to get this asset, which Buffet doesn’t care about. He’s gonna get 8% on the deal anyway and probably make a fortune on his freaking shares. That’s fine. I don’t know if he’ll making a fortune out of the shares. I think we’ll lose money on those shares eventually, but just always be aware that it’s not always the same. Even from the guy that’s been doing this for over two decades, it’s not always the same. Things change and when they do, be willing to adapt. Wow. Crazy podcast there, right? Little bit long.

A lot of good information, a lot of good ideas, great interview and that’s it for me. I don’t think I can give any more today, but one thing before you go. When it comes to towers, I created a 20 page plus report, I sent out last year and I updated it. It’s on our website now, www.curzioresearch.com absolutely for free. So you may have read it already, but it is updated now. If you’re subscribing to the services, you probably definitely got it but I really break down this tariffs thing in a way you’re not going to see anywhere else. What it truly means, why the US is getting screwed, why China has to sign a deal with us or risk at least depression and more important, I’m going to break down the numbers showing you why 25% hike in tariffs is not really that big of a deal for us.

At least, right now considering how much money companies are generating from tax reforms. So when you actually see the data, you’re going to realize how pretty much 99% of the stories you’re reading about tariffs is complete nonsense. It’s really good. It’s aggressive, it’s challenging, but it’s real and it’s something you’re not going to read any place else and I wanted to put that on our website, curzioresearch.com, it’s absolutely for free. If you want it, just go there. If not, no worries. Perfectly fine. So guys, thanks so much for listening. Hope you’re enjoying the playoffs. Man, Petrides knew lot about basketball. I was pretty impressed. I’ll see you guys in seven days. Take care.

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