tv Barrons Roundtable FOX Business May 28, 2022 10:00am-10:30am EDT
little bit more optimism temp therred by fear, temp therred by caution but a little bit of optimism. gerry: that's it for us this week from switzerland. i'll be back next week with more commentary right here on "the wall street journal at large." thank you very much for joining us and enjoy a very happy memorial day weekend. >> "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. is it finally time to start buying stocks? we will ask adam cecil if companies can thrive whatever happens with the economy. investors lost billions of dollars in the massive crypto crash. we will take a closer look at
the digital currency market and where it goes from here but we begin with the three most important things investors ought to be thinking about. stocks hit a 7-week losing streak. what do investors see that is cheering them up. is the worst over? ben: snap had its worst day ever after the online ad business pushing investors for other social media platforms. on "barron's roundtable," carleton english and jack hough, after 7 weeks the green came back. what is it the cheers investors up? jack: it has to be the fed. from the last fomc meeting minutes came out and suggested we are going to get half point rate hikes but the fed is going to wait after that to see how the economy is reacting. it will not be super aggressive
one right after another but this is good for the market, the market is worried the fed will keep increasing rates until there's a recession that ends in inflation and hope that's not the case. people going and by these stocks. jack: you will tell me it's not time to back up the truck and start loading up on speculative tech. jack: that is right. if you like those stocks you are betting the economy is going to be fine and inflation will come down on its own without the fed doing more than what is going on. that's a fairly big risk right now. we don't know how this is going to play out. will the fed get aggressive again, will inflation stay high, will the economy fall into recession, not the kind of market i want speculative stocks. i'm looking at things that were higher-quality and stable
earnings, good cash flows, profits. jack: recession and inflation are the big questions. any indicators now or coming up that you will be looking to? core pc was happy. ben: a decent number that showed consumers still shopping, maybe not as strong as it could have been. we are looking ahead next week to the payroll number and see the jobs market staying strong but not as strong as it has been. if wages start getting out of control, that's very sticky. jack: tech stocks, the most speculative issues seem scary. what are you looking for to decide i think the market has bottomed?
carleton: everyone wants to telegraph the bear market, lots of fortunes made, what you are looking for is the market looking a little oversold, that may have been the case, the s&p snapped a losing streak but investors need to be careful because even bear markets have bounceds and we are seeing the bounds this week, the strength and come to students he, with daily volume. that is the nature when you are in volatile markets but one thing that is encouraging, dismal retail earnings, we are seeing diversions in the sector, signs the consumer is healthy. where they put their money. jack: the side of capitulation i'm looking for investors to --
she still has inflows. what is up with that? carleton: she certainly has. to put that money to work, short interests in the fund have fallen by more than half, 9.2%. i don't think you will find a fund rate right now. jack: even kathy would was ahead of the game when it came to snap. she sold off 40% drop. thinking about snap and were generally social media is this an indication the ad market might be blowing up? jack: yes. snap got hammered, fell 43% tuesday alone. people don't know the messaging surface where jen theers exchange videos the disappear after a short while. if you are sensitive to inappropriate images do not look at a stock chart of snap.
it is trading below its 2017 ipo price. the company has doubled users and tripled revenue per user and gone from burning cash to generating cash, guidance was given a month ago that advertising deteriorated. the economy, inflation, supply chain with russia, facebook had a warning in february, the question is how far it could spread. one analyst set of companies pull back on their ad budget they will take money from smaller venues and put them in the ones they know work from now. bad news for snap, twitter and peinterest but okay for facebook and google. if the economy really turned south who knows? some of these stocks are pretty cheap, that analyst said snap is set for a draconian downturn, facebook or meta, incredibly cheap, 17 times earnings.
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people get upset when things go down. you are happy when the price goes down, you should feel this way about stocks. a lot of froth with easy money policies, you have to be discriminating, the question of separating the babies and the bathwater. jack: how do you pluck those babies out of the bathwater. al: the question every investor should ask themselves, very simple, is this business in vulnerable to competition? have deep-pocketed competitors taken run of this business and failed? this is the concept of what warren buffett has given us. as i say in the book in the digital age what constitutes a mode or superior business is quite different than in the late 20th century.
jack: you write about throwing alligators and sharks in the moat so nobody can cross. give us some examples of 21st-century modes, coca-cola and amex. al: at these levels the first is alphabets, google has a 95% share, online search. being microsoft spend, couldn't do it. amazon made a run at google, couldn't build search. bezos told people to climb it but you can't move it. that is the business you want. the other one is amazon, they have almost 50% share of e-commerce, long tanked margins have 10% margin share. those are two proven battleships for the 20 first century.
jack: i want to ask about amazon. a big question, as wonderful as these companies are, the valuations are pretty steep by historical standards. bond rates have come down for 40 years. rates are rising for the next 40 years, could valuations go back to the levels they were in the 80s so even if you buy great companies the valuations should shrink? al: it is a great point. interest rates are a head went at least in the short term but i would turn it around and ask you a question. wire interest rates and inflation rising now? we had easy money since 2,008-9, we had it for 10 or 15 years. the answer is clear, we had to maddest demand stimulus, you also had the fed and a supply slow down because of all of the
supply constraints. more demand and less supply, you have inflation. it is not structural in my opinion. it is cyclical. the structural pieces for inflation in my opinion are quite benign. ask yourself why have we had 40 years of low rates and low inflation in a time of easy money? it is because globalization is teetering a little bit with russia and china but became a fact. and as i write in the book, tech is hugely dis-inflationary. before google, we had to buy maps, we had to buy encyclopedias. you run examples like that throughout the economy. that's not going away. google is free for everybody. jack: a few seconds left, about amazon, amazon's closing warehouse space, closing stores, that should be concerning to investors.
al: not at all. the job of long-term investors to arbitrage between short-term headlines and long-term substance of what is going on. amazon spent 25 years building their infrastructure which no one will ever match. in the last 24 months during covid they doubled their infrastructure again. sales grew only 65% so they overbilled a little bit. we can forgive amazon for missing the mark in the worst health crisis in 100 years. they are going to soak up that demand, that excess space, pretty quickly and pairing back a little bit but that is the headline. the substance is no one is going to catch amazon. amazon is going to keep growing and be protected by a deep and durable moat. jack: no wonder bill ackman liked your book so much, thanks for coming in. after the massive crypto crash is there hope for a comeback or
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jack: stocks moved higher this week but crypto currencies fly, care has imploded. doesn't make sense to buy bitcoin now? the cover story of this week's baron, darren, thanks for coming on the show. ugly times for bitcoin. are we going to look back and say this crypto currency thing was just fat or is it just a tough time? all assets go through bear markets. >> crypto, hit bind tighter monetary policies, rising interest rates.
the fed tries to fight high inflation and demand for risky assets, crypto is one of the. you don't get cash flows, it is hard to value cryptos by stocks or bonds. there's a lot of fear going on in crypto markets, down 50%. that's facing a lot of questions what it is good for other than trading. jack: those who would like to make big profits we used to see in bitcoin are wondering when the fed stops hiking and think rates not going to go up anymore is that bullish for bitcoin? when should they get back in? >> it is extremely difficult, i am told it is volatile and no intrinsic value. somewhat argue it is like digital gold and hedge against inflation. we may now be in a crypto winter.
crypto has become highly correlated tech. if that continues to be the case, don't add diversification benefits for portfolio. >> i want to take a look at another spot in the crypto space which was the blowup of the stable coin tariff. does that mean stable coins are not really stable? >> it was an unusual animal, and algorithmic stable coin trying to hold a pega by linking another stable coin called luna. the whole thing wiped out around $40 billion and raised a lot of questions whether algorithmic stable coins can be trusted to hold their value. not necessarily the case with traditional stable coin which are usb see. they held their pegs but there's a lot of questions house stable stable coins will really be and whether they make
a leap from crypto markets where they are used for trading and liquidity to standard financial payments for remittance. there is evidence that is happening but a transaction fee could be quite high. jack: i could buy one of these stable coins and everything goes right i get my money back, it doesn't just go proof. what's the point? >> i don't know if that is the case. it is true that things went proof in terror. i don't think that is going to happen with usdc. tether is a bit opaque about its holdings but there definitely is risk in stable coin. that said they are taking off emerging markets, so the cases are increasing but there are a lot of questions about it. jack: i'm a crypto skeptic so
i'm doubling down on my out location of 0 ever. if someone is asking me, they want to buy something but not take too much risk, forget the bitcoin, by something trashy, he at least you don't put up too much money. what would you tell that person? >> i would say be careful. don't trade on the major exchanges. you can still lose your shirt in them. you don't want to put a lot of money into any of these things. bitcoin is the largest and most liquid crypto. a lot of advisors would say you can't go wrong putting 2% into your portfolio with bitcoin but don't want to put much more than that in there. there's another way to gain exposure to crypto which is through stocks. a lot of stock out there have block chain exposure, companies like coin base, robin hood that
are exchanges, payment apps like paypal and companies like nvidia which makes chips and a bank that is trying to become on a crypto services bank, more traditional banking. to play the growth in block chain technology and the tokens in bitcoin as well. jack: thanks for coming on. roundtable members give their investment ideas for the coming week and jack sees a rare opportunity in the market. stay right there. s—you're a cio in 2022. so what's on the agenda? morning security briefing—make that two. share that link. send that contract. see what's trending.
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i read barron, then came here. jack: that was a clip from the mid season finale of break and bad prequel, nice plug for barron and that guy was reading your column. you write about an unusual occurrence, some stocks are cheaper than value stocks. jack: that is a latte mustache and that guy. it is small crap growth, it is actually cheaper than small-cap value. 12 times free cash flow versus 15 times. that is an unnatural state of affairs like when daffy duck gets its the gush gets hit so hard that his bills bills around. i spoke with brad newman, director of market strategy, value outperforms before and after rates, the beginning of rate hiking cycles. he things growth will take the lead again this summer. if you believe that, you can
buy an atf growth etf. he gave me some stock picks. software business with sticky customer relationships. actually a good thing. jack: and jack told us we are going to go along daffy duck. not sure about that. let's get some ideas starting with you, carleton. carleton: looking at lululemon, a 52 week high. part of the trend in retail, the higher end places outperform earnings. jack: what do you have for us? force? ben: i'm going against everything i've been preaching, i'm looking at shoe we. i have been beaten up by every stock out there, late
reporters, one of the first to cut back on guidance and if they get through this earnings report without cutting items this stock could look interesting. jack: that when gives me pause. great ideas, thank you so much. check out this edition of barron.com. that is all for us, see you next week on "barron's roundtable". that does it for us. thanks for watching. ♪ >> from the fox studios in new york city, this is maria bartiromo's "wall street." maria: and happy weekend to all. welcome to the program that analyzes the week that was and helps position you for the week ahead. i'm maria bartiromo. thanks for joining us. many americans changing their travel plans amid record high gasoline prices. president biden declaring it all a part of an incredible transition away from fossil fuels. does it feel incredible to you? senator lindsey graham is here