tv Barrons Roundtable FOX Business May 14, 2022 11:30am-12:00pm EDT
[laughter] to keep joe biden away from the press. gerry: well, we look forward to that and, of course, also hearing jen psaki continue to defend the white house in her new spot. thank you, thank you both very much, cath katie pavlich and charlie hurt. i'll be back next week week with more comment air and interviews right here on karine jean-pierre >> "barron's roundtable" sponsored by jpmorgan asset management. jack: welcome to "barron's roundtable" where we get behind the headlines and prepare you for the week ahead. i am jack hough, coming up, whipsawed on wall street, how rob arnot is investing now. forwarding with a bear, i don't
recommend that, with stocks close to bear market territory, what investors should buy and avoid. we begin with three things investors should be thinking about, stocks slumped for the week but gained some back on friday. what should investors look for in the week ahead? labor costs cutting into corporate profits, what stock investors should do. it is a rough road for electric vehicle stocks. ford and gm got dingdong downgrades. been levisohn, and joining us for the first time megan castillo. the market was down for the week but things turned brighter thursday afternoon. >> the fed is singularly focused on inflation. when there's an inflation number that is running hot the market tends to fall. the fed has given the
impression it doesn't have to worry about the economy, a soft landing, powell, the fed chair acknowledged there wouldn't be a soft landing, you would think that is bad news but it also means the fed might not go as fast as markets worried about these rate hikes. jack: you mentioned landings, will be get a soft landing or hard landing? i'm keeping my trade table up. is there a recession coming is what should investors be watching for? ben: there's always a recession coming, just a question of when. we've had signs the economy isn't as strong as it needs to be, the inverted yield curve, economic metrics we watch have been stalling so right now that starts to worry people.
even though it is slowing it hasn't fallen apart yet. that manufacturing surveys have been holding up, the big thing to watch next week will be retail sales and earnings from companies like walmart and target that will show how much the consumer is still shopping or if that is starting to slide as well. jack: your cover story looks at the rising costs of labor. with time getting the money and labor inflation when everyone else is getting account we heard wendy's talk about labor costs hitting margins. you say that is part of a trend investors should be watching, tell me more about that. megan:labor costs are eating into profits, us foods reported 20% increase in operational costs due to labor. there been a lot among employers and major companies about this, something that was going to fade and people go back to work.
this could last, the labor market likely through the end of the decade. that means employees have power to demand higher wages. companies have to pay higher costs or to pay them the fat rate. jack: should investors make adjustments in their stock portfolios for labor inflation and how? megan:the ones we've mentioned already, capital-intensive companies should be more shielded from the effects over the long-term. as the energy space think about transportation and shipping companies, ups or fedex are more capital-intensive instead of labor intensive.ompany call video should a going concern warning this we, the first i heard that there is a going concern called co-new.
a lot of mayhem in ev stocks lately. what is happening? ben: the week started with two of the smaller startups, basically saying they don't have enough cash to reach production and they need additional capital. stocks traded down and up 20%, then we hadrivian, ford sold shares, stock dropped 20 at the stock and the stock rose 17 after earnings more than feared and elon musk said that would a deal was on hold sending total shares up friday. meanwhile wells fargo took a bearish view of the ev supply chain. jack: they went bananas on those stocks, what was the reasoning for the downgrades
and do you think they are right? al: it's no shock i think they are bearish, they would represent the extreme bearishness, they say prices of lithium, nickel, copper, are going to be elevated for a decade because of the ev boom, that bleed into profit margins afford and gm. they have a line in the reports still that they are selling unprofitable compliance so they slashed their targets and upgraded raw material producers. jack: is elon too busy with twitter to pay attention to tesla? al: no, but it is eating into his time. he spoke at a conference 20 minutes of that was spent on what he's going to do with twitter. that is how much time he is spending on it.
like real time cgi. okay... yeah... oh. don't worry i got it! become an agent of innovation with invesco qqq jack: i want to ask our next guest if it is time to buy stocks. joining me is research affiliate founder rob arnot. how quickly do you think the fed can bring inflation under control? rob:the fed was off the mark when they said it would be transitory. if you define transitory is within five years, sure but pressures, inflationary pressures are powerful, sustained and last a while yet. two to four years from now,
inflation would have moderated by then but watch out for 2022-23 and perhaps 24. jack: you have taken a bearish class, have we seen enough markdown to get optimistic on stocks? rob:optimistic would be strong for us stocks. the market is pricey. price relative to that, that is 32 times, if you get back halfway to historic norms. when markets drop, but forward-looking return improves, they dropped, forward-looking returns have improved. have they improved enough to be interesting?
not really except outside the us, europe, japan, emerging markets priced cheaper. jack: tell me about value stocks, they rallied and are they still expensive? rob:the spreading valuation, the test same stocks and value stocks, august 2020 was the widest spread ever, even at the peak of the tech bubble in 2000. because value has snapped back they are not longer as cheap as they were in 2020 but bottomed up cheapness. they are still very very cheap. what we saw after the tech double burst is value for the next we 7 years, outperformed growth by over 100 percentage points. what we are looking at is value
is very cheap. 40 percentage points, just to get back to normal the loan where value is expensive. jack: the dollar hit a 20 year high, tell me about the comparison on valuations versus the us, and what are the risks? rob:this is an area where valuation comes into play, foreign currencies falling, stock markets alongside the us means those markets are cheap and in dollar terms cheaper, and under 20 and emerging markets just over 15 and there is lots of opportunity, not if you want to be centrally
focused on mainstream us stocks and bonds. bond yields have gone up sharply but they are still not interesting, if you have 8% inflation and bond yields in the two to three year range and a real rate. one thing i think about interest rates is the real rate acts as a speedbump to discourage reckless investing, to discourage dissipation resources, mall investment and that mall investment can be at the government level or the corporate level, what we have is actively encouraging dissipation of resources. jack: are we going to recession this year or next year? rob:i think it is reasonably likely that we will. i don't think that the odds are as high as a lot of people suggest. apart from the stock market
indication that the economy is in trouble, falling stocks, paul samuelson once said falling stocks predicted tween 9 of the last five recessions, this may be one of those cases but war is inflationary, war creates complications for the industrial sector, but that supply chain disruption can wreak havoc, on balance, i'm not an undue pessimist when it comes to the risk of recession. comes to the risk of recession. jack: what to expect when you you'll always remember buying your first car.
and buying your starter home. or whatever this is. but the things that last a lifetime like happiness, love and confidence... you can't buy those. but you can invest in them. we believe that your investments should work harder for the future you imagine. and that's where our strategic investing approach can help. t. rowe price. invest with confidence. this is koli. my foster fail (laughs). when i first started fostering koli i had been giving him kibble. it never looked or felt like real food. but with the farmer's dog you can see the pieces of turkey. it smells like actual food. i saw a difference almost overnight. healthy poops, healthy dog, right? as he's aged, he's still quite energetic and youthful. i really attribute that to diet. you know, he's my buddy. my job is to keep my buddy safe and happy. ♪♪ get started at longlivedogs.com meet jessica moore. jessica was born to care.
she always had your back... like the time she spotted the neighbor kid, an approaching car, a puddle, and knew there was going to be a situation. ♪ ♪ ms. hogan's class? yeah, it's atlantis. nice. i don't think they had camels in atlantis. really? today she's a teammate at truist, the bank that starts with care when you start with care, you get a different kind of bank. xfinity mobile runs on america's most reliable 5g network, when you start with care, but for up to half the price of verizon so you have more money for more stuff. this phone? fewer groceries. this phone? more groceries! this phone? fewer concert tickets. this phone? more concert tickets. and not just for my shows. switch to xfinity mobile for half the price of verizon. new and existing customers get amazing value with our everyday pricing. switch today.
jack: a bear market is when the stock market falls from a tie, the s&p comes close, the nasdaq is in bear territory. i want to say a couple words about that. bear markets are normal, ten us ones since 1950. 15 if you count close calls making them as common as american presidents, the average bear market is taken two years to get back to even. what is unusual is how investors have had until recently, a 35-year-old investor since graduating college is not seen a bear market that took longer than 6 months to come back, i have two pieces of bear market advice, first, do not double down on hot garbage, ease up on the meme stocks and crypto and anything else that doesn't generate steady cash flow and second if you are under invested in stock start buying.
you don't have to time the bottom perfectly, you can't, history suggests long-term holders do well in levels like these. they always make tempting intellectual arguments but long-term return stinks. the best investment mix is 60% optimism at 40% humility. than think about my campaign speech and what characteristics would you be looking for in stocks? >> i am a traitor at heart and always trying to assess the odds. of the next moving going up or down. and right now it has a weird feel to it to the point i don't know. there's a chance of going higher or lower and in that environment i agree i don't want to go searching in a flaming dumpster for stocks that are down 90% and could fall 90% more. i want companies with stable earnings nomad or what the economic environment is like
and i want them to be trading at reasonable prices, wells fargo listed a few of them, consumer stocks like dollar tree, industrials like general dynamics which i reckoned it a few weeks ago and healthcare like johnson & johnson and if you like energy schlumberger might make sense. jack: i want to talk about bonds. -bad mouthing bonds for so long, there's a trend year treasury yield close to 3%. i see high-grade corporate paying 4.5%, junk over 7% so if i have been sitting in cash bonds have looked terrible is it time to start buying? >> there is reason for optimism, if you are looking for a place to put cash the bond market is -- the timing may not be perfect but it is beginning to be a good time for bond investors as long as you are staying away.
it has been a bad year so far but the fed has told us where they expect the federal funds rate to be in the next year or two. it has plummeted, it should be over. the fed has made clear they don't want to do anything to surprise the markets, they could be slowing down there peak over the next few months, the value of treasury notes before long can start climbing, a pretty good place to go. jack: let's talk about start ups, i mentioned bumble in a column, the dating apps, i'm so old that when i was younger my main apps for dating were bars, church, and work where i met my wife but it is not only profitable, it is fast-growing and 20 times next year's free cash flow, it is way down so that is my stock pick to take a
look among these former high flyers, give me a couple you think are worth a look. >> i would vote for you after that speech, no surprise to people i would take a look a rivian, it is not profitable and is earning cash but it got to the point market net of cash was almost 0, slowing their cash burn, have a plan delivering cars, might be time to dumpster dive to use that term, these others -- jack: i want to tell you i drove are rivian pickup, it is a little low going in. i had to get in dukes of hazard style but go ahead. >> it is a good truck. the others have earnings, recent ipos with earnings,
stronger support on wall street, global boundaries, it hurts, you're going to look at earnings but they are strong earnings, the travel rebound hurts global, i practice this. they come up with this that they added to their shampoo. what is not to like? jack: what is it called again? i don't know. good ideas, thank you. good ideas, thank you. roundtable members give their you know liberty mutual customizes your car insurance, so you only pay for what you need? oh, like how i customized this scarf? wow, first time? check out this backpack i made for marco. oh yeah? well, check out this tux.
oh, nice. that'll go perfect with these. dude... those are so fire. [whines] only pay for what you need. ♪liberty. liberty. liberty. liberty.♪ your shipping manager left to “find themself.” leaving you lost. you need to hire. i need indeed. indeed you do. indeed instant match instantly delivers quality candidates matching your job description. visit indeed.com/hire to celebrate salonpas day and our mission matching your job description. to improve people's lives through topical pain relief we invite you to try our powerful, long-lasting patch for muscle and joint pain, get your free sample at trysalonpas.com hisamitsu
bonnie boon i'm calling you out. everybody be cool, alright? with ringcentral we can pull bonnie up on phone, message, or video, all in the same app. oh... hey bonnie, i didn't see you there. ♪ ringcentral ♪ lemons. lemons. lemons. the world is so full of lemons. when you become an expedia member, you can instantly start saving on your travels. so you can go and see all those lemons, for less. big game today!
everybody ready? alexa, ask buick to start my enclave. starting your buick enclave. i just love our new alexa. dad, it's a buick. i love that new alexa smell. it's a buick. we need snacks for the team. alexa, take us to the nearest grocery store. getting directions. alexa will get us there in no time. it's a buick. let's be real. don't make me turn this alexa around. oh my. it's painful. the buick enclave, with available alexa built in. ask “alexa, tell me more about buick suvs.” asset management. through any challenge you face, we say let's solve it.
jack: there was a stable coin meltdown. should i be wearing a hazmat suit? >> there's a stable coin that was supposed to keep value of one dollar. by friday it trended below $0.10. unlike other stable.it was not backed by dollars but crypto currency to keep it at one dollar, traders can receive a dollars worth of luna for burning one terra. theoretically that would reduce the supply of terror and get it back to a book. still with me? that didn't happen. by friday at least one crypto exchange halted trading. tara's collapse was felt through the crypto market and was even blamed for causing bitcoin and other cryptos to fall, a lot of stable coins out there for inner workings of the crypto currency market. for now things have stabilized but don't be surprised, backing one imagined currency with
another might not be the greatest idea. jack: should i like my money on fire in the backyard? i will share that for a future topic. you have survived your first "barron's roundtable" almost 1st, give us a stock to consider. >> time to consider citizens financial. they have had two main results, succeeded in expanding their geographic reach from new jersey metro, prominence and they are diversifying service offerings. equity and fixing underwriting, there's a lot to like. jack: give me a pic. i'm in the market for something that can provide around 26 kilowatts of immediate propane, fire, backup power. al: i like generac, earning
estimates were going up after first-quarter earnings. they missed the bill, a great company, well-run, trades below 20 times earnings, i like it. jack: everything i was looking for, amazing, great ideas and thank you. thank you. to read more check out (announcer) the following is a paid presentation brought to you by rare collectibles tv. (announcer) the morgan silver dollar is without a doubt the most iconic coin in united states numismatics history. designed by united states mint assistant engraver george t. morgan, this silver dollar series was minted from 1878 to 1904 and then again for one year in 1921. the morgan dollar is nearly an ounce in weight and has a 90% silver content thereby containing over three quarters of an ounce of pure silver.