Munson and Maria talk retail earnings

Let me tell you - you don't need to trade every situation just because it exists. More often than not you want to observe the crowds reaction. Case in point. This week we will see everything from Gap, Macy's, Dicks Sporting - and all of them will tell us what we already know. The consumer is holding back, they ordered too much inventory, gas prices are high, supply chains are an issue. Yeah, I already know last week from the Target/WalMart 25%+ drop fiasco, worst since 1987. Some of these retail stocks have already sold off expecting this news.

So, let's see how the crowd reacts before and after the earnings. Simply stated, do investors buy the bad news or continue to throw in the towel? That's all you need to know. No need to buy anything, trade anything, or get worked up.

In a nutshell, if investors take the bad news we know and bid up the stocks, it suggest people are looking past the current peak inflation. This means there is a shot of a rally between now and the end of the year. If not, we may not be done with this bearish correction, regardless if we see new lows on the broad indexes or not.

This knowledge helps me make allocation decisions, clues on how and when I want to rebalance, and more importantly how to set expectations with clients when they want to know the impossible: when will the volatility end or do we want to buy the bearish correction or do we just sell low and buy high later. Let's avoid that last thought.

Three Stock Lunch with Lee Munson on CNBCs Power Lunch

Having a blast on Three Stock Lunch, a cool segment on CNBC's Power Lunch where Tyler Mathisen and Kelly Evans let me loose on a few stocks.

This time I commented on the some of the cheapest stocks in the SP500. Disney, Darden, and DR Horton. Let's just say I have some strong opinions.

More than just my comments on these particular stocks, I'm talking about how to think about certain sectors and how to position size based on volatility.

Munson Returns to CNBCs Power Lunch

What a way to come back to CNBC than with a three stock lunch - a fun segment where I more casually lay down what is really driving the big stock movements of the day.

Today the focus was on WBD - a streaming stock that has one too many legacy cable channels that steal the thunder of HBO Max. Oh, how I wish I could just own that single streamer, and not the other stuff.

Then there is Tesla. It hasn't made new highs since last November. Perhaps a few Tesla Bulls are wondering if the commodity shortages in lithium will catch up? Didn't stop the stock from popping - because people love to hear how easy it is to pass along higher prices. It's an example of what investors want, which is an inflation hedge. Just unsure the valuation isn't pricing in car sales from the next next century.

Then Carvana - what a dog! It's overpriced, not a new idea, and inflation for their average customer is going up faster than wages. Total opposite of Tesla. Then add to that higher auto loan defaults and you can see why this stock hit the bricks.

Recession in 2023? Maria asks Lee

I enjoyed this hit where I'm asked to unpack the question of a recession in 2023, the direction of rates in the face of more rate hikes, and how I'm invested through the end of the year - fun stuff!

Munson on First Fed Hike, Gold, Oil - I spill the beans

You get my reaction to the Fed hike, why China has bottomed out but not out of the woods. I explain where I'm overweight, and where I want to be at the end of the year.

Let's put it this way, the Nasdaq is like the Fed - it's got a lot of work to do.

I also got to muse a little on my gold positions, and my thoughts on oil. Just remember the OPEC can't meet their targets, so don't think that part of the inflation story will go away.

Overall I had a great time, love the new hosts, and got the space to really light it up. Enjoy!

Munson on Fed Meeting And Trading This Year

I lay out my thesis on the major Fed meeting in March. For months I've been vocal that the Fed will raise, but not the 9 hikes some on Wall Street believe. The situation in Ukraine just brings that point home.

The bottom line: the Fed Chairman said we should expect 25 bps. Stop trying to second guess their action, and think about the different ways the market and frazzled so-called investors may react.

My last point from this interview is that many traders see this as a trading year. That is a red flag for me. While I've been busy in portfolios moving small bits around - the broad strokes of continued inflation, continued supply constraints, and continued demand for everything on top of a Fed that will raise - I'm working on a portfolio that should be pretty similar to what I see holding at the end of the year. Everything else is just managing volatility.

In other words - just walk things forward and tell yourself what you see.

Munson on Jobs Report: Two effects on portfolios

The first adventure was driving to work at 4am after a major snow storm, then we got to the real fireworks on TV: breaking down the two effects of the disappointing jobs report.

ADP printed -300k jobs while the estimates were closer to +200K - that's half a million less jobs. Okay, blame Omicron, but shouldn't the estimates taken that into account? I don't know, and like to see the revised numbers next month. And yes, December numbers were revised down a bit.

First off, I would speculate this will settle down those voices talking up a 50bps rate hike in March - you really think the Fed is going to move that fast? What about after these jobs numbers??? We will see. Second, some would suggest the weak numbers mean a return to long duration assets that do well when rates are going down and growth is hard to find. I say that's wishful thinking on top of Facebook losing 20% of it's value last night.

My point today was to remind investors that just because cyclicals have done well recently as rates have risen - it can keep doing well if inflation persists and the Fed hikes for a while. And just because a pricy tech firm corrects 20%, it can get a lot worse - just check out a chart of CSCO from 2000-2002 and you will get my drift.

Post-Correction, pre-Fed hike: Munson talks bitcoin, gold, rates

Now that we are past the initial correction and high volatility, we get this reflex rally and people want to know what's next between now and the Fed's March meeting. I don't know any more than you do.

What we do know is that the Fed is pretty clear they are raising rates, but I suggest 50 bps is wishful thinking, and the day the jobs report confirmed that.

One of the questions that gets asked is what does well when rates rise? Over the last 50 years gold has put up some decent numbers starting at the first hike then going out 24 months. Time will tell if this pattern continues.

Also, I put the kibosh on the notion BItcoin as an inflation hedge - seems to me it's just another risk asset that sometimes front runs the market by 4-6 weeks. I wouldn't put much thought into patterns on an asset class this new.

Maria asks Lee Munson about bank stocks

A big chunk of of the value/cyclical arena are bank stocks. As on of the few sectors still seen as "cheap," what would cause them to continue to rise - their performance has been on fire, reminding investors that there is upside to things like valuations, earnings growth, and reality. I know math is hard, but do you really want to pay 10-15x sales for software companies when rates are rising?

If you don't know what I'm talking about you are too young to remember 21 years ago which was the last time tech valuations were this high going into rate hikes. It's even worse today - something I didn't think I would see in my lifetime.

Banks stocks have a few things going for them in the face of inflation and higher rates. They make money off the net interest margins - which go up when the yield curve steepens - a fancy way of saying long term rates are higher than short term rates. Remember 2019 when that wasn't the case? Then you have the potential of more borrowing as retail consumers all the way up to small and mid size firms start to borrow. Right now, people have tons of cash on hand and many didn't have to pay rent for months. Many firms got PPP loans and are flush with cash. That is going to start to melt away as prices rise higher than wages or profits - causing lots of people to get reacquainted with their bankers.

Don't over think it. Review history. Do the math. Have the courage of your conviction. Never be afraid to admit things have changed. But also realize the market will take it's sweet time to unfold and weird things will always happen that will shake your confidence. That's why markets are risky. You can never have the arrogance of certainty.

Lee Munson Discusses GE's Legacy of Shareholder Destruction

I could unpack this for hours. While initially I was set to discuss the all time highs on Bitcoin and the implications to markets, at the last minute the topic was shifted to the breaking news of GE's breakup into three easy pieces. Of course I jumped at the opportunity to let it bleed.

GE has destroyed shareholder capital - including the thousands of loyal GE employees of whom many own significant amount of GE shares in their retirement plans - over the last 21 years. Don't tell me Jeff Immelt was alone in wrecking the firm. Jack Welsh made GE at one point the most valuable company in the world - yet it was build on financial engineering and not the industrial roots of GE. And it wasn't sustainable. While Immelt clearly didn't get the job done, the reliance on financial earnings for over half the earnings didn't translate to a cash printing machine that anyone could run.

So in that sense, no legacy was created, no legacy was undone. The larger concept here is that corporations are made of people. Like people they have a life span - around 25 years. Just ask Jeff Bezos. One day Amazon will look like Sears, even if that day is many years into the future. While you get rich by concentrating wealth, you preserve it by diversification.

When a magic CEO has a solid 20 year track record of hitting it out of the park, maybe leave with them. You can always go back to the well, as the resurgence in Microsoft post dot.com crash to Cloud dominator has taught me over the last 20 years. But it was a painful drawdown between Gates and Nadella.