Fox Business Asks Munson Why Cut Rates Now?

I'm asked my opinion on todays opinion piece from the Editorial Board from the Wall Street Journal questioning the logic of cutting rates ahead of an expanding economy next year. I have the same question - because if we see inflation tick up next summer, is the Fed going to raise rates? Okay, that would be a total disaster and markets would hate it. On top of that, I'm not convinced the Fed was that restrictive on monetary policy in the first place. Overall, I'm bullish for 2025 in terms of earnings growth and economic expansion. What we don't know is how long volatility will stay this low.

CNBC Asks Lee: Scary Valuations on Friday the 13th

Three buys and a bail - but this version you have a gun to your head and have to choose from the MAG7 basket. Child's play!

I still like Amazon and Google. Yes, they have a lower valuation, but it's about retail and corporate adoption of AI. Who knows what chip maker will be the leader a few years from now. That is a cyclical business, but the place a business owner keeps their data and provides an AI platform is a little more sticky. Plus, I love the cash cow of those two names.

Apple was a buy from my perspective not from the valuation (it's too high), but the refresh cycle on AI - which is happening faster than people think, and you can see it in the price of the stock. While the valuation could get hurt next year if inflation starts to pick up, at least we know nobody will wonder what will make people upgrade next.

The bail was Tesla. I know the fundamentals. I know the growth rates. But it's a car maker. The robo taxi is a regulatory nightmare. I think it take longer than people think. While I say valuations don't matter until inflation/recession hits, being up 50% since the election is about Mush being a bro to Trump not Tesla. I think the real win for Musk is SpaceX, which is a privately held firm.

CNBC Power Lunch asks Lee Munson about Pharma, Defense, Chips

What were there three sectors most banged up this week? Yep, pharma, defense, and chip stocks. I was asked what I liked. I like big and with a competitive advantage. That was easy.

For big pharma, how can you not look at LLY? It's the big gorilla and dominates GLP drugs outside of Novo. The other big players don't even have a plan. This is only the beginning of a very long cycle.

Defense? Simple, I like Transdigm, TDG. They are like a mini-Berkshire buying up parts makers for aerospace. Love the secular growth in aerospace, and selling unique parts with little competition is music to my ears.

Lastly, chips. I was pretty clear on this. Nvidia is the only game in town. What, are you going to make a play on the commoditized DRAM market with Micron? Are you going to tell me bedtime stories of relative valuation plays buying QCOM. Maybe ARM looks interesting (it does), but let's get serious. I'm only buying an individual stock, with all the extra stock-specific risk, if my intent to to make a lot of money with a lot of risk. If not, I'll stick to a low cost tax efficient index fund.

Fox Business Asks Munson Opinion on Fed Cuts

We talk about three topics.

First, what to make of the Fed’s comments that they could rase rates next year if the data suggests it. It’s like, all of a sudden, there is zero forward guidance and everything is up in the air. From my perspective, this is just frustration the Fed Chairman is having this week looking down the barrell of massive deficit spending ruining his work reducing inflation.

Second, all of this is further inflamed by the question to the Fed Chair if he can be fired by Trump. He had the best one line answer: NO. Because the President doesn’t have that power - that is why we are a wealthy country and not Turkey, a place that has no central bank independence.

Third, the host and I both agree this isn’t a practical reality. Powell’s term ends in two years. That will come faster than we think. Then we can start complaining about the new person - because investors over the last 20 years have been programed by the media and politicians to hate the Fed or at least second guess each move. Just don’t tell anyone that the Fed actually has very little effect most of the time, outside of major market dislocations.

Munson Asked About Buffet's Big Pile of Cash

I was asked to comment on Berkshire Hathaway’s quarterly earnings release. It was an uneventful quarter - but the headlines said it all this week - Buffet’s $325 BILLION cash pile. I get it. Since I was in my 20s I’ve been hearing about how the cash pile just gets bigger. Bigger than last year. Biggest in history. Never been bigger ever, even in past big years. The law of large numbers and specific investment mandates (called having some discipline on valuations and types of things you buy and don’t buy) prevent the speedy reinvestment of all that cash that gets created - and this quarter billions more of profits off his Apple position were cashed out.

From the value persepctive, all of this makes sense. His value stocks have not performed like the momentum tech shares of the MAG7. But that is not what he is doing, right? Look at OXY. For several years it’s been doing nothing. Why not keep cash earning a risk free treasury rate instead? I say good move. Nobody knows what exactly the plan is - but you should listen to what the people that own and run the company are saying. They are saying they had some big winners.

Some profits are being taken. Nothing out there looks great at a good valuation. That’s it.

Halloween Horror: Talking Tech stocks on CNBC

I always wanted to do a guest spot on Halloween.

As a value minded guy, it was a pleasure to share the stage with Tom Hancock from GMO. Sometimes you look for a pickaxe, and sometimes there is just a single, focused thing that is going on. You try to pick the fastest horse and try to remember its a long distance.

Clearly, when i look at e-Commerce, I'm not really trying to pick winners below Amazon. I'd rather look at a pick axe business that is a necessary component in the production cycle (warehouse logistics), that can grow revenues with the overall growth of the industry and in addition offer cost savings and productivity increases. But for getting big firms to move IT to the cloud, I would simply rather own the places that are getting those large annual checks.

In the end, a ton of this spending is happing inside companies in the Nasdaq 100 and SP500. In fact, they are a huge component to what is driving those indexes.

Munson on CNBCs The Exchange - stream swipe and staples

We get right into the first question: does the height of my hair correlate to how bullish I am? Probably...

I discuss what is at state with earnings from Netflix, American Express and Proctor and Gamble. My take on what matters is rather simple.

Netflix is more about controlling costs - who else can they sign up these days?

Amex is about the high end consumer, and trades for twice the multiple than card firms that cater to the less affluent.

PG is a different thing. It's trading at a 24x on earnings with only 2% organic growth? This makes me uncomfortable. I've seen this before....in 2000 it traded at a 30x and people didn't care because it was a blue chip stock. But I have always believed that no company is worth an infinite amount of money.

Munson on What Bond, Bank and Oil Markets Are Telling Us

We go though the major issues of bank earnings, what bond markets are telling us, and the speculation in oil.

Banks are doing great and investors continue to push up the prices. I suspect a lot of this is about the presumption of a Trump victory and less regulation. It could also be general bullishness on a no landing scenario for 2025.

As for bond markets, the long term rates keep going higher post-September Fed meeting. Which is what usually happens on a cutting cycle - just look at the history. I explain I'm out of long term treasuries. It's simple. I see very little upside and a ton of downside if inflation picks up just a tad next year on a hot economy.

Lastly, what people need to understand about commodities is that the price only moves once the event happens. So while there is massive bullish option buying in oil markets - until an event happens, ostensibly Israel attacking Iran - the price won't spike until disruptions begin. This is totally different to stock markets which are always in a state of predictions going out 6-18 months.

Munson and Maria Talk First Fed Cut in Four Years

It's not about 25 or 50bps cut - it's about the markets reaction to the cuts. Over the next few days and weeks, markets will experience a lot of noise. The question is if we can get enough movement up or down to find good buy or good sell points. Sure, the election still matters, but going forward the Fed will be able to cut rates - creating another regime of the "Fed Put" that let's market participants know - any rough waters ahead the Fed will have your back.