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tv   Barrons Roundtable  FOX Business  August 20, 2022 10:00am-10:30am EDT

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>> most of her kids cannot read and do grade level. can we focus on that before we turn them into social justice warriors. >> that sounds like a plan, democrats, republicans, independents we can all come together. my thanks to jason riley and christopher bedford. we will be back next week on the "wall street journal at large". thank you for joining us. ♪ >> "barron's roundtable" spotted by global x ets. ♪ jack: welcome to "barron's roundtable" where we get behind the headlines and prepare for the week ahead. where the market is heading with rbc capital markets head of strategy and china bull ray dahlio sold his chinese
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holdings. we begin as always with three things investors ought to be thinking about, skittish traders push stocks over rates and recession as the market is watching and wearing. economists and banking heavyweights meet at the jackson hole conference next week. walmart earning a new cheapskate economy. which retailers could benefit. $80 billion in new funding after beefing up the irs which should mean more audits and how to avoid red flags that could lead to an audit. on "barron's roundtable," ben levinsohn, carleton and glitch and jack hough. we had a nice bounce off of the markets but recently investors turned skittish, the rally fizzled. what is going on? ben: it has been a solid market, four weeks of gains for the s&p 500 and this friday hit. it didn't seem there was any
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one thing that caused it to fallen fed governors contradicting the governor and had recent economic data. it all comes down to tech bubbles. people talking about weird things like the 200 day moving average and that got a lot of attention. the market came up to it. and stopped and stayed for a few days. then people started thinking time to pull back on this especially after watching many stocks like bed, bath and beyond. jack: some people compare technical analysis to eating sheep entrails but coming from you i will buy that. let's get to a fundamental issue my jackson hole next week. we will hear from fed chairman powell. delay expect anything meaningful? ben: they expect the bernancke moment from 2,009. i don't think the fed knows
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what it needs to do, where inflation will settle. commodity prices are falling but we don't know how far inflation will come down and that will keep the fed playing it by ear for a while. jack: these predictions of what the fed will do our ahead of the actual fed. the unfortunate reality we do know, a great way to kill inflation is recession, falling stock prices, stuff we don't like. do we have to see those to cut the legs out of inflation? ibly17 ben: we do. when the fed does get around to raising rates in september, we will see the inversion part of the curve that matters and 3-month rates rise above the 10 year yield and at that point we count down the hard part about this, markets often rally in terms of the recession start so we get a bounce in the markets.
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jack: one way to get inside the economy, what retailers are doing and consumers are doing, you have been loading up on ranch dressing. jack: and impact of 40 ounce jugs of light dressing, immediate buyers remorse. not because i overranch. i had a $3 coupon and thinking about amortizing those savings for months to come. i don't know when i turned this cheaper my circumstances haven't changed. don't quite trust the stock market because a lot of it going on across retail trading down. customers were trading down to chicken hotdogs and canned tuna. it also said it isn't getting a boost from higher income shoppers that are stopping in the stores.
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that has too much, ceo doug mcmillan, and the earnings call, it does not speak well when the boss is pushing that in august. a little cold cut gamesmanship here based on what walmart said about the deli, his customers see an average of $2.50, if you are a frequent temperature over the course of the year you save close to 5 times based never should cost. it was upgraded to be of a and tjx reported a decent result. jeffrey said they could benefit from stores canceling orders going forward and this coming week we hear from dollar general and dollar tree. ubs, game share from for customers and higher income customers in the dollar stores looking for bargains.
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jack: buyers are having trouble figuring out how to manage inventories because they are so reliable right now. that is helpful for tjx. let's talk about audits. the irs beefing up the story about it. carleton: one thing about the irs, it is a function that the irs, the last tax season certainly felt that if they were trying to get ahead of tax season. the irs is getting a budget of $80 billion and hiring 87,000 people over the next ten years. half of that is enforcement. and improving operations, technology, to make tax filing easier for us. jack: 17 million paper tax returns not processed by the irs. they need help quick. how can viewers reduce the
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chance of being audited? carleton: they look for taxpayers who take big deductions against therein, people who own business infrastructure as escort, if you own crypto and if you derive a lot of income from foreign sources. jack: those who just get paychecks it is tough to cheat. is the bear market over? if so, what should you invest in? lori kalbacena is next. [ "back to life" by soul ii soul ]
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♪ ♪ we all need a rock we can rely on. to be strong. to overcome anything. ♪ ♪ to be... unstoppable. that's why the world's largest companies and over 30 million people rely on prudential's retirement and workplace benefits. who's your rock? jack: the markets are off their summer lows but some investors wonder if another pullback is
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coming. joining me is the head of us equity strategy lori calvasina. thanks for coming on the show. one of the big questions is was june the low in the market or are we waiting for that in the second half, what indicators do you look at? >> june wasn't the low but that's a 60%, they have additional volatility. i've been telling investors, the earnings outlook is cloudy. and they are relieving investors, comfort about the outlook, with additional things to worry about. jack: when you hear portfolio managers outperforming the market one thing you never hear, you like to buy lousy
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companies with no earnings, you are following the low-quality trade and that is where the winners have been. >> the russell 1000 is a good gauge of stocks, we see negative earners and smaller market start to outperform over the past 4 or 5 weeks. we see that in the russell 2000 since june, the junk is running off the bottom, this is typically what we see coming off of the bottom in the middle of recession and investors hate it and they don't have enough exposure to the market. i'm not telling people to have a massive low-quality portfolio. it is normal if we did see the low in june. jack: how should they invest in that? >> if you want to play it over the short term you can look at the sectors and industries where earnings band-aid has been ripped off so to speak. if you look at small-cap or large-cap, specialty retailers,
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the rate of upward revisions, basically at historical lows. you can look for potential reversions in that sense. jack: small-cap has not been a great trade. what about opportunities there? >> small-cap holding steady relative to large caps. small caps outperform coming off of the mid-recession bottom. they got down to trough valuations, trading like ism plunged and fall into typical troughs. if you are worried about recession it is baked into the small caps and you can do that when it is. jack: from an economic perspective, are we in recession and could there be when in our future? this is the outer recession trade. >> a lot of investors say if we have a recession it will be short, shallow, technical and largely play out this year.
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the market fell 24% and that is very close to median recession of drawdown and the technical recession basis is right you pay the price for it already in june. jack: another factor you are tracking is the gas prices elevated and you see that in consumer behavior. >> the consumer company and small-cap space, things were kind of slowing down in june but when gas prices were high and started to come down in july things got better. there's attornment is concerned about the consumer, what they are hearing from a few companies. jack: it's not a good idea to invest based on politics. if you get out of the market, you hated obama, you hated trump, not a good call in either direction. midterms coming up, looks like a total red wave, now more questions coming in.
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how are you thinking about that as an investor? >> at the end of the day there's a good chance the republicans will take back the house, the senators more questionable. that should be good for markets longer-term. if you look at different look all backdrops of how stocks perform, republicans controlling everything, strong backdrop but if you have a democratic president and split a republican-led congress, that gives you similar return. even if republicans take one chamber it is good enough but that has been a consensus part of the market. i heard people talking about the red wave back in june as a reason to buy stocks. what you are seeing in the betting markets and doubts about the senate, biden's approval number starting to stabilize as gas prices have come down, this is something markets could worry about and selloff a little bit on in the coming months. jack: great to see you as always. tensions over taiwan adding to
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the risks of investing in china. why investors might need something new next. 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.
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jack: investing in china has always been risky. the country struggling after covid 19 lockdowns, even long-term china -- a big story in barron. why should investors have access to china. even he has thrown in the towel. carleton: hats off to that. the country has been attractive to investors for some time.
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there is an to slow down of it, that has been expected but exacerbated by the 0 cup covid policies, growth coming in at less than half of 1%. we have weekending employment, property values, property sales is 30% of gdp, and the situation being tenuous, it is tightening monetary policy. it was a bit of a surprise. jack: on top of all this, rising tensions with the rest of the world especially the us. carleton: you have the risk of a situation with china, they flew ballistic missiles over the region, if you expect. every invasion but don't want to say we don't expect it is a risk.
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the us and china have a relationship that was competitive or even a friendly relationship. it is looking more like a cold war type relationship and also are twentieth party congress this fall where we expect xi will hold on to leadership. jack: that is a pretty beak -- bleak picture. you want to outperform, you don't do so by buying things everybody loves, you do so by buying what everybody hates when there's more opportunity but this risk, reward does not look good to me. jack: it is a scary bet. china has something, it is pretty cheap, ten times earnings. it does well when the us is not. china was powering emerging markets and you couldn't see that again. part of that is about sizing
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into china. some of it makes some sense. ben: i don't like to be a pooh-pooher, but the great need for me to invest in china, it is a growing economy. there are american companies that sell more to the middle class. into what? a state run economy with arbitrary rules. i don't feel that i am too overweight democracy and capitalism right now. i stick -- there's a deal in capital markets. company's come to investors with hats in hand raising money. and exchange they give up a say, a little bit of a say. some figure out how to raise money from american investors but americans never get a say in the businesses. i don't see it.
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the ideal allocation to china for me is 0 ever. i my pooh-poohing at this point? jack: a pooh-pooh platter. we would all agree that the way to not get exposure to china is through an index fund, to get broad exposure. if we are going to do it we might think okay, the investor, probably toward the government. the story looks at industries and companies that benefit from that. carleton: maybe you want to stay away but tough to ignore the second largest economy in the world, one would be to look at them with income fund. it is focusing on a lot of areas china is growing, healthcare, information technology. you might not want to invest in a china-based company or having a global our location.
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or meaningful portion of their revenues from china. your money is in the us but you look at things like nike or apple or companies like that. jack: one thing that struck me as an interesting idea, it might not be in china's economic interest. carleton: china is reliant on semiconductors and trying to build the domestic domestically that doesn't happen overnight. jack: you can take their oilfields but tough to take over taiwan semi conductor. fascinating story. i recommend it. round tail members, investment ideas in the coming week. jack says walmart is going hollywood. stay right there.
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>> "barron's roundtable" brought to you by global x, beyond ordinary etfs. visit"barron's roundtable". jack: my wife asked what i want to do this weekend and i said walmart and chill. jack: i wonder if i have to tell people what walmart plus is. there is a thing, amazon prime, a thing called walmart plus, cheaper than amazon prime, not as good. doesn't have a streaming service but that will change soon because in a month or so walmart will throw in the base subscription level to paramount plus, no extra cost with its walmart plus subscription, walmart get another reason for shoppers to pay its memory should become a paramount gets a bigger audience, doesn't have to worry so much because it does a big business in advertising.
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i get nothing because i'm not a walmart member. we were talking bj's peacock synergy i could get excited about that. this one does that. jack: you will get derivatives when they make that deal. time for actionable ideas. carleton: going with a long-term barron pick, broad ridge. and a lot of people know about this committee, they have a monopoly on communications, proxies, that sort of thing, activist investing a it is dear to my heart, an area that is very sticky, they are improving your margins by going digital. decent dividends raised by 13% and it is 1.6. jack: about time. what do you have? ben: honeywell, one of those extensive high-quality stocks fell quite a bit but it is a lot less expensive. it is a little over 20 times
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earnings, stock was down, bounced off the bottom, created a double bottom, the looking like it could breakout. jack: and increase airline travel. thanks. to read more check out this week's addition of and visit us on barron online, see you next week with carleton in this chair on "barron's roundtable". from the fox studio in new york city, this is "maria bartiromo wall street". maria: welcome to the program that analyzes the week that was in position you for the week ahead. i'm jackie deangelis and for maria bartiromo. the latest analysis of bidens inflation reduction act shows families likely to get tax hikes and tax breaks. at the media blames republicans for fear mongering about the new bloated irs budget. house ways and means committee ranking member kevin brady


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