MARIA: WELCOME BACK FUTURES
INDICATING A GAIN AFTER
YESTERDAY’S SELLOFF.
NASDAQ IS UP 75, YESTERDAY A
DIFFERENT STORY.
THE DOW, THE S&P AND THE NASDAQ
ALL SEEING THE WORST DAY SINCE
JUNE 2020 AFTER HIGHER THAN
EXPECTED CPI REPORT THAT WE TOLD
YOU YESTERDAY.
TECH SECTOR YESTERDAY LED THE
SELLOFF.
TAKE A LOOK AT THE STOCKS THAT
LED THE AVERAGES LOWER AND IT
WAS A CRUSHING.
JOINING US RIGHT NOW THE BONSON
CIO AND CEO.
AUTHOR OF NO FREE LUNCH, 250
ECONOMIC TRUTH.
DAVID BONSON, THIS IS WHAT WE
WANT FROM YOU THE TRUTH.
HOW WOULD YOU ASSESS YESTERDAY’S
MARKET PLUNGE?
>> WELL, THE HALF FULL PART OF
THE GLASS THAT IT WAS TAKING
GAINS BEFORE BUT WE WERE AT
EARLY POINT IN SEPTEMBER.
THE SELLOFF IN AUGUST WAS QUITE
SEVERE AND SPEAKS TO REALITY OF
UNSTABLE MONETARY POLICY COMING
OUT OF THIS MOMENT IS LEADING TO
ONGOING VOLATILITY.
IT’S GOING TO BE ABOUT
MID-SINGLE DIGITS.
IT’S JUST THAT THE MULTIPLES
HAVE COME WAY DOWN WHICH IS
WHAT’S KILLED TECH AND OTHER
HIGH MULTIPLES.
ANY INVESTOR FOR A WHILE
DEPENDING ON MULTIPLE EXPANSION
IS NOT GOING TO BE HAPPY.
YOU HAVE TO HAVE ORGANIC CASH
FLOW GROWTH TO MAKE MONEY RIGHT
NOW.
MARIA: ADAM, WHAT DO YOU THINK?
>> I’M ON THE FLIP SIDE OF WHAT
DAVID MENTIONED.
A LOT OF MY NAME DON’T HAVE THE
CASH FLOW AND I HAD TO ACTIVELY
PIVOT FROM HIGH-RISK NAMES TO
HIGHER QUALITY UNFORTUNATELY
EVEN THE HIGHER QUALITY ONES
HAVE COME DOWN.
IT’S BEEN HARD.
MARIA: ANYWHERE TO HIDE?
>> I DON’T THINK IT’S HIDING,
YOU PROACTIVELY WANT TO BE IN
PLACE THAT IS HAVE GOOD BALANCE
SHEET, FREE CASH FLOW GROWTH.
THE PROBLEM IS THEY ARE NEVER
GOING TO BE SUPER EXCITING BUT
WE LIKE SOME OF THE HEALTHCARE
PHARMA NAMES AND I’VE BEEN A MID
STREAM GUY FOR A LONG TIME.
IT’S HELD UP VERY WELL.
OIL HAS COME DOWN 20%, MID
STREAM IS UP AND UP IN THE
30’s IN THE YEAR BUT YOU ARE
TALKING 6, 7% DIVIDEND YIELDS
AND NATURAL GAS IS NOT GOING
ANYWHERE NOR AS NEED AS COUNTRY
TO TRANSPORT.
MARIA: THAT’S THE PLACE TO BE.
JAMES: I’M WONDERING WHEN YOU
SAY YOU’RE NOT INTO THE OIL
PRODUCERS, IS THAT BECAUSE YOU
THINK THE ECONOMY IS GOING DOWN
AND DEMAND IS GOING TO BE LESS
OR YOU THINK REGULATORY
ENVIRONMENT IS HOSTILE AND WHY
ARE YOU NOT IN OIL PRODUCERS
RIGHT NOW?
>> I WOULD LOVE TO BE HEAVIER IN
RISKIER NAMES, FREE MONEY TO BE
MADE AFTER COVID AND THE MONEY
IS GONE.
THE EASY RETURNS ARE GONE.
ON RISK-ADJUSTED BASIS, MID
STREAM MORE THAN UP STREAM.
I’M NOT AFRAID OF UP STREAM.
I THINK THE PRODUCTION STILL HAS
TO GO.
THEY ARE MAKING PLENTY OF MONEY
IN 82-DOLLAR OIL BUT DIFFERENT
THAN 50-DOLLAR OIL.
WE HAD A BIG EASY RUN-UP AND I
THINK IT’S VOLATILE IN UP
STREAM.
MARIA: THEY ARE NOT INVESTING IN
THE PROJECTS THAT THEY WOULD
HAVE INVESTED IN BECAUSE OF THIS
PUSH.
>> IT’S NOT JUST ESG AND
GOVERNMENTAL, THOSE ARE THE TWO
BIGGEST FACTORS.
THE BIDEN ADMINISTRATION AND
ESG, EVEN THE SHAREHOLDERS DON’T
WANT THEM TO BE AS LEVERED AS
THEY USED TO BE AND TIRED OF
CYCLES.
>> WITH REGARD TO THE ENERGY
SECTOR, WHAT IS THE IMPACT OF
THIS IMPENDING ENERGY CRISIS IN
EUROPE GOING TO HAVE ON AMERICAN
STOCK MARKET AND AMERICAN ENERGY
STOCK.
>> I DON’T WANT TO BE CYNICAL
BUT THE LESSON IS COMPLETELY
OBVIOUS.
WE CANNOT BE DEPENDENT ON MIDDLE
ATTORNEY AUTOCRATS OR PUTIN AND
THE FACT THAT AMERICA WILL HAVE
TO GET OIL AND WILL START GOING
TO COAL OR DOING OTHER THINGS IN
THE SHORT TERM.
GERMANY IS NOT READY TO IMPORT
AS MUCH AS WE ARE EXPORT.
>> IS THERE A CASCADING MARKET
OVER THE WINTER?
>> I DON’T WANT TO SAY NO
BECAUSE THAT’S PORTFOLIO
MANAGERS.
I CANNOT IMAGINE IT ISN’T PRICED
IN.
WHO DOESN’T KNOW THAT IT’S
COMING.
I JUST HAVE TO BELIEVE --
MARIA: EUROPE GOES INTO
RECESSION FIRST.
THAT WORSENS THE PERFORMANCE OF
THE U.S. ECONOMY BUT LET’S TALK ABOUT INFLATION.
ABOUT INFLATION.
WHAT’S YOUR TAKE ON PRICE INDEX?
CPI UP.
>> 75-BASIS POINTS IS AUTOMATIC.
SOME PEOPLE ARE SAYING 100.
I DON’T THINK WE NEED TO GO THAT
FAR.
IN TERMS OF PPI, YOU KNOW ME, I
SEND TO BE AN OPTIMISTIC BUT PPI
IS A LEADING INDICATOR COMPARED
TO CPI.
FIRST YOU NEED TO GET THE RAW
MATERIALS, YOU MAKE THE STUFF
AND SEND IT TO MARKET.
PPI PRICES, IT’S POSSIBLE THAT
WE WILL ACTUALLY SEE THEM GO
DOWN AND THAT BECOMES A LEADING
INDICATOR AND THAT MIGHT BE
HELPFUL AND WE GET BACK SOME OF
WHAT WE LOST YESTERDAY.
>> I GEE.
A BIG PART OF THE ISSUE WITH THE
INFLATION NUMBERS.
LOOK, LONG-TERM, I’VE BEEN IN
THE CAMP FOR A LONG TIME.
I WISHED WE WERE TALKING ABOUT
DOWNWARD PRESSURE AND GROWTH
THAT JAPAN LIKE DEFLATION IS
MORE CONCERNING TO ME OVER THE
NEXT TEN TO 20 YEARS, IN THE
NEXT 10, 20 MONTHS, FOOD PRICES
WERE THE BIG SURPRISE YESTERDAY,
ENERGY PRICES HAVE COME DOWN,
BUT I THINK WHEN YOU LOOK AT
WHOLESALE INPUTS THAT WILL
PROBABLY START PUTTING DOWNWARD
PRESSURE.
THE LAGGING EFFECT OF THE WAY
THEY CALCULATE RENTS AND HOUSING
IS THE BIG ISSUE.
I THINK THE INFLATION NUMBERS
ARE GOING TO START GETTING
BETTER AND THEY ARE NOT GOING TO
FEEL LIKE IT OR NOT SEE IT IN
THE DATA BECAUSE THEY ARE STILL
CAPTURING RENT INCREASES FROM 4
MONTHS AGO, 5 MONTHS AGO.
IT’S AWKWARD METHODOLOGY AND --
>> THE FED IS IN A WEIRD
POSITION TO HAVING TO ACT LIKE
THEY ARE STILL INFLATION
HAWKISH.
THEY KNOW THEY CAN RAISE 100
BASIS POINT.
IT’S NOT GOING TO MAKE A
DIFFERENCE.
NO MARGINAL TAX DECREASES, NO
DEREGULATION.
THEY ARE NOT GOING TO DO IT.
MARIA: DON’T FORGET WHAT TOM
TOLD US YESTERDAY, HE’S
PREDICTING SIZABLE REGRESSION
BECAUSE THE FED IS GOING TO KEEP
FIGHT WITH SIGNIFICANT RATE