Oil and Banks on Friday the 13th

I love doing a TV hit on any Friday the 13th. I see it as good luck not bad. While the focus started out on oil prices, the effect on markets will be more about a hot CPI print due to energy and food prices. This further complicates Fed policy. For me, it just means don't get surprised, keep you eye on the longer term trend.

Then Maria wanted to talk banks. So in perfect Lee Munson fashion, I break down the major banks and what really matters. Each has something they want to sell Wall Street on. But in the end, nothing really matters but the expansion (or lack thereof) their loan books.

Munson on CNBC The Exchange with Kelly Evans August 2023

It's a Friday and that means fun, easy segments with lots of energy. Well, CNBC delivered today when they asked me to talk about 13Fs from the big dogs in the business, Buffet, Tepper, Burry. A 13F is just a regulatory filing to show the SEC what you owned on the last day of the quarter, so it becomes public about 6 weeks later. So, nobody knows when they bought or sold something or even if they still have it - so you take it with a grain of salt.

We talked about NVDA and chips in general having the issue not simply with valuation - but the risks of getting chips to markets from the foundries. Then we breezed through Expedia (competing against the credit card points economy), CVS (Marc Cubans is competing for the high profit, somewhat evil pharmacy benefits management business), and I had good things to say about housing going forward and DHI is the leader there.

My point is to dig deep when looking at individual stocks. Don't just buy something because a big hedge fund or Warren buffet bought it. Holdings on a single day, revealed six weeks later is just a list of stocks that could have some potential.

CNBC Power Lunch with Lee Munson not Bullish

Yeah, not bulled up right now - just call me a contrarian, because I don't feel like a bear at all. Simply put, we will see slower growth going forward as the Fed said today they don't see inflation hitting 2% until 2025. When looking at individual stocks, you have to have a thesis of the cost of capital - because it's a headwind.

Now - we first discussed RGEN. It's a one hit wonder selling a great drug that Rouche may usurp while the FDA holds up the ability for RGEN allow for less cost and less needles in your eye during treatment. I'll pass.

Second was PINS. I only see this as a summer catch up trade - speculation that traders will get board and bid up lesser names. All the new CEO has done is cut costs, made a deal to sell products with AMZN (who knows how that will work out), and some fluff about a more positive social media platform. Like I said, gamblers only.

Last was Generac, which is the main established brand in residential generator back up systems. It's recently surged on news that, big surprise, Texas is pushing up sales as people worry about more blackouts. But the real story is the 2019 Pika acquisition that provides the batter backup systems. Something went wrong with the inverters and now we have a black eye for this firm, lawsuits, and I just want to see that simmer down since battery storage is the real secular growth story.

Munson on Rates, Earnings, and Japan

Jared kept me for another segment since I was in the New York studio and have a lot to talk about! We discussed how long the Fed is suggesting short rates to remain higher, how to view earnings projections versus reality, and my short thesis on why Japan may be going through a counter trend of their 100 year recession - because let’s not ever fool ourselves that Japan will ever be out of the deflationary hole.

Munson Talking Oil and Tech on Yahoo!

Always fun to hand out with Jared on set in New York at the studio. We covered two basic topics: what big tech stocks have decent valuations and what large down and out stocks I’m looking at. What comes out of that is the tug of war between the promise of A.I. and the surge in earnings it could create versus firms that are more economically sensitive to overall growth. But not to worry - the overpriced A.I. stocks are so huge now, anyone with exposure to the SP500 index has plenty of it.

Munson in Studio with Maria Talking Fed, FedEx, and Bond Markets

I love to be in the studio with Maria - always electric!

Today we hit the major news items of the day - first off we discuss the mostly likely outcome of the Fed's talk with Congress and tomorrow the Senate. While ostensibly it's about banking regulation and the potential for a central bank digital currency - all Wall Street wants to know is if Powell was joking about not raising rates for a "few years." Let's just say I'm still puzzled why bond traders think this guy is pulling our leg. Pull Powells finger at your own risk! Because that is the world in which we live. High rates for longer.

While many would love to see classic recession activity like a surge in unemployment, inflation back to 2%, and housing prices crater - we may instead see a recession in financial assets. In plain English, a retreat in profit margins. That would have the same effect of a more obvious economic recession. Markets will price all of this the same way - down! Yet, did we not see some downward action from early February into the March mini-banking crisis? Did small value not dip down 13-15% and now ripping??? Could that have been the markets pricing in a smaller more contained recession? Time will tell. I played it as such.

We also discussed the anecdotal evidence of FedEx blowing earnings. Sales down 10%. Perhaps it's idiosyncratic to that firm. That is how the bulls see it - but they see nothing but AI these days. At least I got to mention that those very same stocks we said in February were going up because of eminent Fed cuts are now deemed AI stocks and can only go up. In the end, I see higher prices and growth going forward, but not in a straight line. So, have a plan for any eventuality and a little caution here

CNBC Power Lunch Invites Lee Munson to talk Telephones, Credit Cards, and Plywood

Today was a fun hit - puns were everywhere.

We disconnected from ATT as a mild slowdown to recession isn't going to help new subscriber growth - but more importantly new phone sales could slow as people hold off on big purchases. Plus, the whole reason many hold this stock is for the juicy dividend. Today it's not much more than a short term treasury - and the dividend isn't protected.

Don't leave home without it. American Express had a so-so quarter, telling us what we know, defaults are coming, and more bullish talk of 15% revenue growth. I simply said it's the only stock I like in that group. Why? Wealthier consumers don't slow down as much when times are tough. And their focus on getting young people wrapped up into expensive status credit cards is smart. Really, does a business owner want to give up their Platinum card? Time will tell.

As for homebuilders - I reminded everyone I said they were a speculative buy last year - but that was more about expectations the Fed would pause by now. What really made this stock perform well recently is simply the lack of housing supply. 30% of homes for sale are new construction. However, when stocks jump like this, with continued high mortgage rates, one might consider taking some profits off the table and right sizing the position.

Munson Talks Tech Rally, AI hype, and Earnings Risk with Dave Briggs and Seana Smith at Yahoo!

It was great to see the old crew at Yahoo! Finance. While boomers are worried about the price of oil, interest rates and inflation - it was clear the kids just want to know what's up with the tech rally, AI hyped stocks, and the banking crisis.

For those that were too young to remember, we saw a huge rally the summer of 2000 in names like QCOM ("it's down 70%, it can only go up, right?"). Those speculative stocks which were down over 50% rallied hard and some even doubled. Then reality set in and by the end of the year new lows where everywhere. It took some time. Is that happening now? Time will tell - but I'm not buying tech at a valuation higher versus the overall SP500 than we saw in the boom boom days of late 2021.

As for the whole AI thing - I'm out. Some of these companies are little known or just hype the "AI" moniker not unlike 23 years ago when firms would add ".com" to their names to get a quick pop in the stock price. I said that AI will be dominated by the big tech firms with the scale and money to develop it - we will see.

Regarding banking - we talked about what Jamie Diamond, CEO of JPM had to say. Turns out the banking titan thinks the only way to really make money doing mortgages or some consumer loans is to sell data on their clients to the highest bidder - wow, how the world has changed.

Munson Talks Oil Cuts and White Collar Recession with Maria

My first trip back to NYC since the Covid lockdowns - where did the time go? While the news that day was all about the Trump arraignment (I know, how did I pick that day to have meetings right by Trump Plaza and then downtown in the afternoon!), the markets were focused on the OPEC cuts. By cutting production right before summer, we could see higher gas prices and potentially an uptick in inflation - thus making the Fed's job harder. All of this right at the time of a banking mini-crisis. I explained this isn't the time to be taking a ton of risk, how I'm sticking with what was working last year and still avoiding the more speculative areas of the market that have shot up this year. Sometimes a little patience, prudence, and proper planning are in order.

CNBC's Three Stock Lunch: Hot Sauce to Yoga Pants

The twitterverse thought Ryan Seacrest was on with Kelly Evans today but it was just me. Kelly even mentioned it at the end of the interview. I like that better than the usual "you look like Timothy Olyphant."

All kidding aside, remember that while I’m speaking about a specific name, my whole point is about how to approach any company or market and these are just examples of the type of stuff you see. My clients and I prefer index funds and keeping it simple. But the idea of cost cutting, the bottoming of earnings estimates, and where growth will come from never goes out of style.

First on the list was McCormicks - you like Franks's RedHot sauce or Cholula? They make that along with spices you find at the grocery store. The key to any staple like this going into a recession is if they can pass along costs to consumers and continue to cut humans for automation. They are attempting both.

Next up was Walgreens. In short, it's not for me. The firm needs to decide what to do with the dog we call Boots (drug store in the UK), and growing its primary care segment - which could be huge, but it's not big enough to really move the needle. Plus, the Covid gravy train has ended - so no more easy revenue from testing.

Last is Lulu Lemon. Expensive yoga pants going into a recession? Sure. It's a premium retailer with strong numbers similar to Nike. While a premium retailer like LULU always trades at a rich valuation - I would rather see how earnings shake out, and if you can get management to guide down margins enough to bring the price down. Of course, everybody already knows this and expects that news. How the market will react is simply unknown. I would take a pass and see how the year goes.Show less