Fox Biz Asks Munson How To Handle Market Sell-off

Markets hate uncertainty, and with the White House changing their direction every few hours, it’s difficutlt for investors to want to buy. No buyers? Stocks drift lower.

So, let’s look at the facts. There is a plan, we just don’t like it. it’s called unilateral tariffs and policy changes the US is not used to. A different style is an understatement. We also have the chaos of DOGE, which is a real issue - but I want to focus on what moves stocks longer term - earnings and profits.

Depending on what analyst you ask, consensus is someplace around 1% decline in earnings growth for every 5% hike in tariffs. Do the math, take it off the low double digit earnings growth Wall Street is currently expecting. We still get high single digit, low double digit growth. At a 6-15% discount (this selloff depending on what asset class you are looking at in the US), the prices reflect tariffs. Interst rates also reflect possible summer inflation due to tariffs and higher prices. It’s baked in.

This is why I’m a buying. It’s not that I’m bullish, it’s that when investors are paralized by uncertainty and the weak players sell out and cash out - it’s a buying opportunity. If things are slightly less horrible than people expect, markets may have a positive reaction. And I’m buying at valuations that make sense given the tariffs and policies the White House is threatening the world with. Time will tell, but over the last 400 years of markes every past decline looks like an opportunity, and every future decline looks like a big unknown risk.

A little chat at the NYSE

I was in NYC in mid February and Jared Bilkre and his partner in crime Sydnee Fried asked me to come down to the NYSE and do a live podcast. It was a tiny little studio on the second floor, but I don’t care, I got a full access traders pass to the NYSE!!! You bet I just went wandering around taking pictures and chatting people up. Eventually security gave me the “okay, it’s time to go now, whoever you are” but there is still nothing like being down on the floor. And yes, there are still real people doing trades and some tense moments, it’s just not as packed or busy as the old days.

As for what we covered, I was in a “let me tell you how the world works” mood and remember that this is for Yahoo! which has a younger Gen Z, millennial crowd. So I get a little more animated and definitely just say whatever is on my mind. Enjoy!

Fox Business Asks Munson: WMT Slowdown and Fed Cuts

It was a Friday morning and Walmart had a less that enthusiastic earnings forecast the night before. First off, WMT tends to take a conservative view at the start of the year and gets progressively more optimistic as the year goes on - so I'm not convinced consumer spending is dead. But yes, every CEO in America has uncertainty about tariffs and immigration.

Second topic was all about rate cuts. I'm not really concerned about what Fed governor said what about how may cuts we will see this year. Nobody knows because it's 100% dependent on the data and we could see a summer inflation spike due to tariffs - or just the overall hot economy. While I'm not exactly in the camp that we could see a rate hike (could you imaging the markets reaction to that???), it's best to assume no cuts until employment really falls off a cliff or we see inflation under 3% for three to six months.

Maria Bartiromo and Munson talk Deepseek NVDA crash

It was the day after Nvidia had the biggest single day loss in stock market history. Of course! 20% decline on the largest firm in the world, we shouldn't be surprised. I break down why AI is important to most stocks - it's all about increasing productivity and making AI models for less get the tech into corporate America's hands faster that expected. And while I agree with Maria that nobody is making an AI model for 6 million bucks - the point is, the price structure came down faster than expected. There will be winners and losers.

CNBC The Exchange asks Munson about Euro Stocks

I'm usually rather down on European stocks. Today I threw them a bone - of course there are a few winners in Europe. SAP is killing it with their one stop enterprise software offering and AI will just keep the good times rolling. LVMH just doesn't have the issues of Gucci - they are classy and timeless. I would just write off the value of the wine business in your analysis as we are seeing a clear secular decline due to young people not drinking as much.

And yes - the hair was a little out of control that day. Rumor has it the longer my hair, the more bullish I am. Decent theory!

CNBC POWER LUNCH: Munson's Last of 2024

I'm closing out the year with my friends Kelly Evans and Tyler Mathisen. We covered Chinese retailers, auto parts, and Fintech. Let's break it down.

First we have Alibaba. Oh the days of hot Chinese e-commerce stocks, I remember the 2010s fondly. Today the Chinese economy is limping along even with unprecedented stimulus this fall. BABA's problem is legion. They are selling off their department store assets at a huge loss to focus on core offerings like cloud. Wait, you want to compete in the AI space with AWS, Azure, and Google Cloud? I would not.

Next is Upstart. For a little Wall Street insider folklore, a well know trader (known for selling get rich quick books and hocking option tip sheets to degenerate gamblers) famously was doing a CNBC hit discussing Upstart and the host asked "what does Upstart do?" - and this dumb ass didn't know of course because he's a charlatan, but then proceeded to pretend the mic or audio was having issues. You can google it! The firm is one of these firms that gets in between the consumer and the lender (i.e. a leach), and claims they use AI or "technology" to quickly approve like 89% of everyone who asks for money. then, Upstart sells the garbage loans to about three lenders that make up 80% of the loan buyers (not concentrated at all!). Upstart keeps about 16% of the loans - read between the lines, those are the toxic waste they can't sell to anyone. I would say, how about we make a website that claims the same thing - approve everyone, and probably we would end up keeping 15-20% of the loans, but we would not have the expense of all the tech to underwrite... needless to say I'm not into it. I'd rather buy a big bank with the tailwind of less regulation, and stable rates next year.

Lastly, O'Reilly! ORLY. This sleeply little auto parts store is actually a 70 billion market cap category killer. You may see a lot of Auto Zone stores around, but ORLY gets half it's revenue from professional services - think pro mechanics, body shops, muni vehicle pools. That is where the 15% growth is coming from. Along with aggressive stock buyback programs over the years, it's a high multiple boring firm that warrants some investigation if you are into the Peter Lynch "boring is profitable" thing. It takes courage to be boring. Well, that's a wrap. It's been a great year!

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.