Fair Warning with Mike Wilson of Morgan Stanley, and Breaking News from Brady Cobb

Bullish Studio

Guy, Dan and Danny are joined by Mike Wilson, Chief Investment Officer and Chief US Equity Strategist for Morgan Stanley, to discuss his thought process on the market (4:43), how the S&P 500 could get to 3,000 (8:00), what’s happening with central banks (14:40), bank earnings kicking off next week (23:35), and what would make Mike bullish (30:35). Later, Cannabis advocate and operator Brady Cobb drops by to breakdown President Biden pardoning thousands of people convicted of marijuana possession and ordering review of federal pot laws (36:30).  Link:  https://riskreversal.com/podcasts/on-the-tape-podcast-fair-warning-with-mike-wilson-of-morgan-stanley-and-breaking-news-from-brady-cobb/

Transcript

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01:20 Okay, welcome to On the Tape.

01:22 I'm Dan Nathan.

01:23 I'm here with DMO, Danny Moses,

01:25 you know the man, the myth, the legend.

01:26 He was just called a legend by our guest right here,

01:29 Mike Wilson, who is the head equity strategist

01:31 at Morgan Stanley, also the CIO.

01:33 Welcome back to On the Tape, Mike Wilson.

01:36 - Great to see you guys.

01:37 - Mike, it's almost like we can just leave now

01:39 because everything you say I completely agree with.

01:41 So we can just--

01:41 - Really?

01:42 - I agree with everything this guy has been saying.

01:45 - But now we gotta put it on the tape, right?

01:46 - I make this promise.

01:47 If and when you do turn bullish,

01:48 I will turn bullish with you.

01:49 - Really?

01:50 - Yes, when he does it--

01:51 - All of our listeners are waiting for that moment.

01:53 - I will do that.

01:54 - All right, well, you know who else is waiting?

01:55 Guy Adami is in the, what tunnel?

01:57 The Lincoln Tunnel AD or the Holland, one of the tunnels.

01:59 - He doesn't even know.

02:00 - He doesn't even know, but I will tell you,

02:02 he's probably fit to be tied.

02:03 So he's gonna show up, hopefully, in a little bit here.

02:05 We're gonna get into it.

02:06 All right, Mike Wilson, as Danny just said,

02:09 not only do we think you are the best strategist

02:11 on the street, both of us go way back with you.

02:13 You and I, when you were in tech sales,

02:16 you were working with our friend Billy

02:17 back in the late '90s, and I was at a hedge fund.

02:19 You were covering me, and you were a standout salesman.

02:22 You went on to run equity research.

02:24 You went on to be a strategist, CIO now.

02:27 You have a lot of titles at Morgan Stanley.

02:29 Talk to us about that, what, 25-year career

02:32 at the same bank?

02:33 That is unheard of, generally, isn't it?

02:35 - 30 years, but who's counting?

02:36 Working on 31, but the key to my success

02:38 is that I move on before they figure out I'm useless.

02:41 I get into the next job, you know,

02:42 create that new job, and they say,

02:43 "Oh, I forgot about that guy," and next job's not--

02:45 - Really?

02:46 I don't think that's the case.

02:47 - Look, it keeps it interesting.

02:48 I mean, I never would have been able to stay

02:49 at one place of work doing the same thing.

02:51 I would go crazy.

02:52 So, look, on one hand, I've been extremely fortunate

02:55 'cause they've given me that opportunity.

02:56 I mean, they usually give me too much to do,

02:58 and then we just figure it out.

02:59 So I've been fortunate, been a great place,

03:01 spent a hell of a ride, by the way, at Morgan Stanley

03:03 and all the investment banks for the last 30 years,

03:05 and it feels nice because I do feel like Morgan Stanley

03:08 is in a really good position now.

03:10 - I would say that you and I both started

03:11 in the business same year, 1991.

03:14 Started MBIA and Muni Bonds, and then went to Oppenheimer,

03:17 but because you've been there so long,

03:18 and Morgan Stanley has been so involved in everything,

03:20 everything to do with capital markets,

03:22 and recently really built out retail,

03:24 and retail's been a main focus, obviously,

03:25 in the last several years, you get to see a lot.

03:27 And when you came in here, I told you that I know

03:29 a lot of private wealth guys at Morgan Stanley.

03:31 Yeah, they pay attention to the other research,

03:33 but really, how they get paid is to take your research

03:36 that you send out, kind of make notes,

03:37 and send it to their clients.

03:38 So you've seen a lot of things,

03:40 and I think going to your current viewpoint here,

03:43 that's why you're just logical.

03:44 And people always say, "You're bearish to me,"

03:46 or, "You're bearish to me."

03:47 It's just kind of logic that we're gonna have

03:48 a reversion here, like burn back through the atmosphere,

03:51 I kind of called here.

03:52 We talk about your current mindset here,

03:54 how you're seeing things, because like I just mentioned,

03:56 I won't go in it again, but you've dealt with companies

03:59 on roadshows, you've lived every life at Morgan Stanley,

04:02 and I think that's important for people to understand,

04:04 you're not just coming from nowhere.

04:06 - Yeah, we call it, that's a nice way of saying I'm old.

04:08 Got a lot of experience, so it's true.

04:09 I mean, experience, there's no better teacher

04:10 than experience in living through these different cycles

04:13 and periods and doing different jobs.

04:14 You see these things, so that when they pop up again,

04:16 you recognize them.

04:17 You say, "Oh, I've seen that before,"

04:19 and this is the way it usually plays out.

04:21 We don't get everything right,

04:21 but we are familiar with these things,

04:23 and I think you said it right, Danny, it's just logic.

04:25 We're not trying to make some big, bold call necessarily,

04:29 but when the logic is out of,

04:30 the markets have been illogical a lot in the last 15 years

04:33 because of QE, the markets haven't always traded logical,

04:37 and the last couple of years,

04:38 we're actually reverting back to logic,

04:41 because they're withdrawing some

04:42 of this extraordinary policy,

04:43 and that normalization process,

04:45 okay, it was just gonna make the normal,

04:47 was something we saw early,

04:49 because we've seen the way the world was pre-QE, pre-GFC,

04:52 even pre-tech bubble, and that process is painful.

04:54 Extracting heroin, if you will, from the patient,

04:58 it has been a painful year.

04:59 Now, I think we'll get through it.

05:00 The patient will survive, okay,

05:01 but this bear mark is not over yet.

05:03 - All right, so talk to us a little bit

05:04 about the thought process, at least,

05:05 in Mike Wilson's head, because there was a point in 2021

05:09 where you were very bullish,

05:10 and we know that you come on with Guy and myself.

05:12 You're on CNBC a lot, and you have a Monday piece

05:15 that, to Danny's point, is a very widely followed piece

05:18 in the investment community,

05:20 and there was a petering off of that bullishness

05:22 at some point in kind of early 2021,

05:24 and what were you seeing in the buildup?

05:27 You weren't buying the transitory argument here.

05:30 Did you see this inflation?

05:31 And Danny, just in the summer of 2021,

05:33 he really started introducing the idea

05:35 that we are gonna be in a very stagflationary environment

05:38 if a lot of the things that continue,

05:39 and largely having to do with what the Fed

05:41 was probably not acknowledging at the time.

05:44 So talk to us how you changed your tune in 2021,

05:47 and how did it feel being really on an island

05:50 for major bulge bracket strategists

05:52 and starting out 2022 particularly bearish?

05:55 - It's really funny.

05:56 I mean, we do get pegged to be perma bear, whatever,

05:58 and, you know-- - Join the club.

06:00 You should wear that with a badge of honor.

06:02 - I mean, I'm a fiduciary, right?

06:04 So you gotta tell it like it is.

06:05 But the reality is is that we were extremely bullish

06:07 in 2020 for the same reasons we were bearish, right?

06:09 So we saw the inflation coming,

06:11 which when inflation is picking up,

06:13 it's extremely bullish for stocks,

06:14 and people were slow to catch on to that,

06:16 and so there was this huge earning cycle

06:18 that actually went even further than we expected.

06:21 So to be fair, we probably got the train

06:23 a little bit early.

06:24 Okay, we left a little bit on the table at the end,

06:25 but I'm okay with that,

06:26 leaving the party a little early

06:27 to make sure you don't get taken away by the cops.

06:30 And that's what we did.

06:31 So what we really saw in the spring of 2021

06:33 was that M2 growth peaked.

06:34 Okay, we're cycle analysts.

06:36 That's all we do.

06:36 We're really dedicated to it.

06:38 We understand it.

06:39 - That's money supply for those people out there.

06:40 Sorry, go ahead.

06:41 - Yeah, money supply M2,

06:42 and it's not just the Fed's balance sheet,

06:43 but also the velocity in the economy.

06:45 I actually think that most of the inflation

06:46 is due to fiscal stimulus more than monetary.

06:49 Now, monetary had its hand in it,

06:50 but that was really the--

06:51 - The gravy.

06:52 - Yeah, that was really the train.

06:53 That's who paid for it.

06:55 But we had M, think about this.

06:56 We had M2 growth in March of '21 of 25%.

07:00 So anybody who didn't think that inflation was coming,

07:02 I mean, it's crazy, right?

07:03 Inflation is a monetary phenomenon.

07:05 M2 growth today is 2%.

07:07 Now, if you recall going back to March of '21,

07:09 that's exactly when crypto peaked, SPACs, IPOs,

07:12 all the high unprofitable companies.

07:14 So that was the beginning of the bear market.

07:16 And we got way out of the way of that stuff early.

07:19 And then it lingered on, the market rotated around,

07:21 went to quality and everything else.

07:22 And we went full on defensive in November,

07:24 almost a year ago,

07:26 under the idea that it was this fire and ice narrative,

07:28 that the Fed was finally going to put out the fire.

07:32 That was the first part of this year.

07:33 Multiples got crushed for everything.

07:35 But now what we have to deal with is the slowdown, the ice.

07:38 Our out of consensus call now is on earnings.

07:40 We think earnings are going to disappoint significantly,

07:44 even without a recession.

07:45 The key point that we're making with clients now,

07:48 and I don't think it's fully appreciated yet,

07:50 this goes back to experience,

07:52 is that operating leverage cuts both ways.

07:54 So we had positive operating leverage

07:56 when inflation was going up.

07:58 Guess what?

07:59 As inflation peaks,

08:00 you actually get negative operating leverage

08:01 'cause the costs are actually still increasing

08:03 at a faster rate.

08:04 So we're just starting that process now.

08:05 Last quarter was the first one

08:06 we started to see that degradation.

08:08 This quarter it'll get worse.

08:09 And what we don't know the answer to yet

08:11 is when will the market price

08:13 where we think earnings are ultimately going.

08:14 We think it's sometime between basically

08:16 this month and February.

08:18 It could take two more quarters and we just don't know,

08:20 but the price point we know is too high still.

08:22 - So let's stick with that for a second.

08:23 I wanna come back to something else.

08:24 So if S&P earnings, I think you're $212 for 2023,

08:29 is that or 200?

08:30 - 212 is our base case,

08:31 but our bear case is sort of 190, 95

08:33 and we're leaning towards the best case.

08:35 But that's what we're leaning in that direction.

08:36 - So let's call it 200.

08:37 - 200 is the right number.

08:38 - Do you believe that within the year of 2023

08:41 that we will trough at some point,

08:43 meaning what I'm trying to get at is

08:45 and what that number would be.

08:45 So if we just think of,

08:46 I know I've read your research,

08:47 you and I think alike,

08:48 14 to 15 type multiple on that number,

08:50 we're probably gonna dance around the 3000 level in the S&P,

08:53 but we tend to overshoot on the way up

08:54 and we tend to overshoot on the way down.

08:55 I think that's what you're talking about.

08:57 What I wanna get to is this,

08:58 you just nailed it on the head.

08:59 So there's a large group of investors

09:01 that have only known that the Fed has had your back.

09:03 For that matter, global central banks have had their back.

09:05 So they'd never been tested to really

09:07 go underneath the covers

09:08 and look at some of these companies.

09:10 And you can punch people in the face all you want,

09:11 but it takes earnings misses,

09:13 earnings degradation to actually put pen to paper.

09:16 That skill set, it's certainly out there

09:18 and there's a lot of professionals that get it,

09:19 but that's why I feel like we're only in

09:21 the second or third inning of that realization

09:23 that you just touched on.

09:24 When is the punch in the face?

09:25 Is it this quarter that's gonna be reported now?

09:27 Or where are we in that?

09:29 - Well, first of all,

09:29 we've already been punched and kicked in the face

09:31 with the Fed.

09:32 So on that note, I think the market actually gets a joke.

09:34 Like I think rates are probably peaking now.

09:37 The Fed's probably already gone too far.

09:39 They probably know it,

09:40 but they wanna make sure they finish the job.

09:41 So they'll go too far.

09:43 And we'll have a probably a mild recession at some point.

09:45 We're 50/50 on that as a house,

09:47 but it doesn't really matter.

09:48 The earnings are gonna get smashed.

09:49 Now, as you know,

09:51 stocks will discount the earnings trough

09:53 six months in advance.

09:55 Our model, what I would suggest to you strongly

09:57 is that the trough rate of change,

09:58 which is what matters year over year growth in earnings

10:00 will happen sometime probably late second quarter,

10:02 early third, which once again argues

10:05 that maybe we bought them sometime

10:05 between November and February.

10:07 The market is really smart.

10:09 It's really dumb and then it's really smart.

10:11 It's really dumb because it doesn't think forward.

10:14 It has to be told.

10:15 It needs what I call the engraved invitation

10:17 from companies to say, okay, take your numbers down

10:19 and the market adjusts.

10:20 And that process usually happens at the end of the year

10:23 because companies kind of kitchen sink it

10:24 or at the beginning of the year

10:26 when they're forced to guide for the full year

10:28 and then you get the full reset.

10:30 That's why the timing is kind of now.

10:32 As far as the multiple goes

10:33 and then like how we get to 3000,

10:34 it's a little bit different than that

10:36 because it won't trough when the earnings trough,

10:38 as I just said, it'll trough when earnings

10:40 are 30% of the way done going to its ultimate destination.

10:44 This is where the market's really smart.

10:46 As soon as you're 35% done with it,

10:47 it just knows that we're 35% of the way done.

10:49 That's when the multiple bottoms

10:51 and we've been using sort of 225.

10:53 That's the third of the move to 200 from 240,

10:56 which was the peak.

10:57 And we think it's 13, 13 and a half.

10:59 That's your trough multiple, 13, 13 and a half times 225.

11:02 That's around 3000.

11:03 I mean, can we be that precise?

11:05 No.

11:05 Is it a really good framework?

11:06 Absolutely.

11:08 - So Mike, what's it feel like being on an island

11:11 as a strategist for one of the largest

11:13 investment banks in the world

11:14 and just everything was coming your way

11:16 with your fire and ice call.

11:18 It was all happening.

11:19 It was a large part though, your competitors,

11:21 a lot of your major clients, the pushback there,

11:25 they just thought it was gonna be something

11:26 that was also gonna be transitory.

11:27 We're gonna have this sort of thing

11:29 where we're gonna get back to buying the dip

11:30 and that sort of, what does it felt like?

11:32 We're literally through nine months of the year.

11:34 We're through three quarters

11:35 and almost everything that you're predicting,

11:37 even though you were a little early in 2021,

11:40 it's all happening.

11:41 So now all of a sudden we're starting to see

11:43 some of those promo bulls throw in the towel here

11:46 and they're gonna probably get it right

11:48 for that move back to like the low 3000s and the S&P 500.

11:52 But people like Danny and me and Guy, we have long memories.

11:55 - I'm glad to hear it.

11:56 Well, thanks.

11:56 It's nice for you to recognize it.

11:57 Some people don't.

11:58 Clients have recognized it.

11:59 They've been great.

12:00 We've helped them hopefully navigate this.

12:02 - Being on the island, to be quite honest, is exhausting

12:05 because you're always defending your position.

12:08 But it's no different than being an investor.

12:10 An investor, a lot of times,

12:11 you're having to defend your position in the market

12:13 and the market's not wrong, you're wrong.

12:15 So it's the same thing.

12:16 The investment process and the investment business,

12:18 if you're committed, I told it to somebody yesterday,

12:20 if you're really committed to this business as an investor,

12:22 as somebody who's trying to help investors

12:25 or be an advisor, and I kind of do both, it's exhausting.

12:28 And that's just the life we've chosen.

12:29 - Speaking of exhausting, and then a godfather quote,

12:32 look who's here, Guy Adami.

12:33 - Story's loud.

12:34 - Guy Adami, put your mic on.

12:35 Look who's, we got Mike Wilson, we got Danny Moses.

12:38 - So Guy, perfect timing, have a seat.

12:40 I was just about to get into the Fed,

12:42 so there really was no reason for you to speak

12:44 until this exact moment.

12:44 - But Mike Wilson just said,

12:46 "This is the business that we have chosen."

12:48 He just said it.

12:50 - So I'm coming in late here.

12:52 First of all, it's great to see,

12:53 what do they call it in real life, Dan?

12:55 - IRL.

12:56 - In real life.

12:57 - In real life, right.

12:58 So Mike Wilson, IRL here.

13:00 You know I have the utmost respect for Mike,

13:01 but so I've gotten this thing where I do song lyrics, right?

13:04 And it comes to me in the car.

13:06 By the way, got in the car at 1:37 p.m. East Coast time.

13:10 Now this is First World Problems,

13:11 don't effing at me on Twitter, I am not interested in it.

13:15 It is now 3.16 as we're doing this.

13:17 You can do that math, that's a long ass trip.

13:20 Shouldn't take that long.

13:21 - Path train.

13:22 - Excuse me?

13:23 - Path train, aren't there things--

13:24 - Oh, what, you just create a path train?

13:26 You just make one up.

13:26 - I'm just saying, you could take the train.

13:28 - You're Barbara Eden.

13:29 - Mike, where do you live?

13:30 - White Plains.

13:31 - Okay, easy enough.

13:32 28 minute train, nothing, yeah.

13:33 - Fourth studio album from the mighty Van Halen

13:36 was, you might remember, Fair Warning, right?

13:38 Fair Warning.

13:39 Just keep that in mind, Danny Moses, Fair Warning.

13:42 At night I walk this stinking street

13:45 past the crazies on my block.

13:47 Everybody thinks we're nuts, they've thought that for a while

13:49 and I see the same old faces and I hear the same old talk.

13:53 Listen to this.

13:54 And I'm searching for the latest thing,

13:56 a break in this routine.

13:58 I'm talking some new kicks, some like you ain't never seen.

14:02 Now, why do I bring that up?

14:03 Because we've been giving people Fair Warning

14:06 literally since we started this thing.

14:08 And there are mean streets, but for a guy like Mike Wilson,

14:11 and you talk about this all the time, Danny Moses,

14:13 and his job has never been in jeopardy,

14:15 I'm not suggesting this, but to make the call

14:17 that he's made and been steadfast on

14:20 for the last at least year, if not longer,

14:24 I mean, that puts you at some risk in a world

14:26 where you can just fade into the ether with everybody else.

14:29 You buy the dip, buying opportunity,

14:31 all the bullshit you typically hear

14:33 because there's no ramifications

14:36 for being bullish and for being wrong.

14:39 That's what I would like to sort of add

14:40 to this great conversation I'm certain you already had.

14:43 - I would say that we use the word logic,

14:45 being logical, and that's where we were

14:47 in this exact process, talking about earnings degradation,

14:49 where we're gonna hopefully trough

14:51 and where that's gonna be and how I would give anything

14:52 to be bullish and how, when Mike does turn bullish,

14:55 I promise to follow him, even though on that episode,

14:57 I'm gonna say, do you believe Mike turned bullish?

14:59 Is he crazy?

15:00 I'll just be with that now.

15:01 But Mike, so let's get into the Fed for a second

15:03 and this reliance, 'cause something big

15:04 has been happening over the last, well, last six months,

15:07 but specifically in the last couple of weeks, right?

15:09 The heroin that you just referenced

15:11 was trying to come back a little bit, left the clinic,

15:13 I promise I'm cured, put the heroin back in.

15:15 RBA, Reserve Bank in Australia goes 25,

15:18 ooh, BOE comes in to undo this trustless mess.

15:21 So it's really interesting today

15:22 at what the GILTs are doing.

15:24 They're having a massive move higher again, why?

15:25 'Cause the BOE didn't buy anything the last couple of days.

15:28 Even if the Fed stops, which I think,

15:30 I wanna hear your opinion, I know they're overshooting,

15:33 I believe their first move is gonna be to stop QT,

15:36 because I believe that will settle

15:37 the mortgage market a little bit.

15:38 It may not, but the perception will be,

15:40 and it will settle the treasury market.

15:42 And I'll end with this, because they have a lot

15:44 of financing needs over in England.

15:46 And all of a sudden, they're gonna have

15:47 these huge auctions coming and the BOE only put this

15:49 in place for basically a month, this kind of stopgap.

15:52 Anyway, I want your thoughts on that addiction,

15:54 and then your thoughts specifically for Guy especially,

15:57 about what the Fed is doing wrong right now.

15:59 - Yeah, I mean, I'm actually not a big critic of the Fed,

16:01 because they have a tough job.

16:03 They're reactionary by design.

16:04 So they're always gonna, I mean,

16:05 they're looking at employment data

16:07 and they're looking at inflation data,

16:08 which is backward looking.

16:09 So they're always gonna be late to start and late to finish,

16:11 but that's by design.

16:12 So I don't really bespare this sort of central banks.

16:15 Once again, I think fiscal policy was the real reason

16:18 we got this blowout inflation, because look,

16:20 that's the difference between the GFC and today, right?

16:22 The only difference between the two periods

16:24 was that we didn't actually put the money into the economy.

16:26 That's what got the inflation going.

16:27 That's the thing that people, I think, don't appreciate.

16:29 But the reality is, is that what's going on right now

16:31 is M2 growth is now negative on a global basis, okay?

16:34 So whenever that happens, stuff breaks.

16:36 UK market, gilt market was the first thing,

16:38 kind of big one, where we got the first major bank

16:41 to reverse course.

16:42 So as I wrote this weekend,

16:44 is this a light at the end of the tunnel?

16:45 Meaning has the reversal process began?

16:48 Yes, the BOE is reversing, RBA only did 25,

16:51 Polish National Bank only did zero.

16:53 So they're starting, but it doesn't matter

16:55 because the only--

16:56 - How many bankers did it take to do that?

16:57 (Danny laughs)

16:58 - Sorry. - Probably more than it should.

16:59 But the reality is, is that the Fed

17:01 is the only central bank in the world

17:03 that can actually print the dollars.

17:05 We're short dollars.

17:07 That's what's going on right now.

17:08 It's a global phenomena,

17:09 and the Fed will eventually have to pivot.

17:11 So I totally agree with you, Danny.

17:12 It's going to be, they stop QT.

17:15 They're not gonna cut rates that much.

17:16 They're gonna stop QT because that's the problem.

17:18 And they'll probably have to do QE at some point.

17:20 Not tomorrow.

17:21 It is a hope trade for now, but it's the right idea.

17:24 I just think it's too early.

17:25 - Right, and where the market's valued right now,

17:27 it's not, right, it doesn't make sense regardless.

17:29 So there's a lot more pain to come before, right?

17:31 - Well, not just that, but the Fed

17:32 really shouldn't be pivoting yet

17:33 because we haven't had a financial accident

17:35 that really is big enough for them to care about.

17:37 That's number one.

17:38 It has to be closer to home.

17:39 And secondly, the jobs market is still booming

17:42 and CPI is still too high.

17:44 So they have to keep going to regain their credibility.

17:47 - One of the things that I posited is,

17:49 for the first time in a while,

17:50 and I may be 100% wrong,

17:52 but this Federal Reserve seemed laser focused

17:54 on the stock market for years,

17:56 to their detriment, by the way.

17:57 This one doesn't seem to be nearly as concerned.

18:00 So for me, I don't think they start thinking

18:03 about reversing course until the S&P

18:06 is somewhere around 3,000-ish.

18:07 That to me is sort of, if there's a put, that's where it is.

18:10 In terms of unemployment, they want it to go higher,

18:13 so they're hoping the number goes up.

18:15 The thing that's gonna spook them, again, my opinion,

18:18 is the credit market or the credit markets.

18:21 They're showing cracks.

18:23 You do much more thoughtful work than I,

18:25 but can you speak to that?

18:26 'Cause if the credit markets start to go,

18:28 then all bets are off with this entire thing.

18:31 - Totally, so let's look at the last two times

18:32 they pivoted in 2019.

18:34 There was the funding markets.

18:35 They had the reverse repo operations.

18:37 That was sort of a new facility that now is permanent.

18:40 So they have that ability to do some of that stuff again.

18:42 That's why those markets are actually quite stable still.

18:45 - Still. - Still, for now.

18:46 And the other one was in December of '18

18:49 when the credit markets, the funding markets in longer term,

18:52 and also the year-end constraint from the banks

18:54 really forced their hand.

18:56 So I totally agree, and that's our house view as well.

18:58 It's usually the credit markets they care about.

19:00 The S&P could trade 2,500 if credit markets are still okay.

19:03 I mean, that's the reality of it.

19:04 I think when we get to 3,000, if we get there,

19:07 other things will be happening that really flips their hand.

19:09 And it could be labor or it could be credit markets,

19:11 but you're spot on.

19:12 It's something in the markets

19:14 that inhibits the functioning nature of the economy.

19:17 That's what the Fed will care about.

19:18 - It's interesting you mentioned the repo,

19:20 and I'm not looking to get in the weeds here.

19:22 I'm not looking to make people's eyes glaze over,

19:24 but in September, I think it was the 17th,

19:27 Danny probably knows the exact date, 2019.

19:30 So before anybody even heard of COVID,

19:33 if you remember, Danny, the overnight repo market blew up.

19:35 - I talked about it while you were in Italy

19:37 a couple weeks ago, that exact thing, exactly right.

19:39 - So that to me, now people will blame COVID.

19:42 I get it, causality, the whole thing,

19:44 but we started talking about that and say,

19:46 hey folks, look under the hood,

19:47 'cause something happened here

19:49 that I haven't seen in a long time.

19:51 So to your point about the overnight repo markets,

19:53 that's to me, and I'm glad you brought it up,

19:55 'cause I think that's of vital importance.

19:57 - So to Mike's, let me just echo Mike's point.

19:59 So what's happening is, for people out there,

20:01 again, to explain, you pull money out of banks

20:02 'cause you're not earning anything on your deposits.

20:04 You can park it.

20:05 Banks can't use the reverse repo, right?

20:07 So it's everybody else that kinda comes in there.

20:09 Intermediaries, when you drain deposits from the banks,

20:11 they can't lend as much 'cause the ratios are all off course.

20:13 So I think we're a lot of mini breaks.

20:15 And we've had, I don't know,

20:17 22,000 bond market flash crashes globally

20:19 in the last six months.

20:21 I mean, the flash crash we were all crazed on years ago

20:23 was from 222 to 176 or something

20:26 in a period of five minutes.

20:27 We have that in minutes now.

20:29 I mean, today, just in England.

20:30 Anyway, yeah, so your thoughts on that,

20:32 because we do have many little breaks,

20:33 but I don't have faith that Powell or the Fed

20:35 even understands what they're looking at,

20:37 to be honest with you, Mike.

20:38 - Yeah, I mean, like once again,

20:39 I'm not in the weeds on Fed policy.

20:41 I'm not in the business of besmirching them

20:42 because there's a lot of other things going

20:44 that we can analyze, like earnings,

20:46 like the economic cycle, like valuations

20:49 that are still out of bounds.

20:50 I mean, we're heading in that direction, right?

20:51 So like it or not, the Fed is doing their job now.

20:54 I mean, it's funny, like a year ago,

20:55 everybody's like going, "Well, why didn't you raise?"

20:57 Now they're complaining that the Fed wasn't doing their job.

20:59 Now they're doing their job

20:59 and they're complaining about that.

21:00 So I find investors to be a little bit more,

21:03 they complain too much about like,

21:05 "Look, they're just doing their job."

21:06 So the flash crashes and things like that,

21:08 yeah, we're seeing these little pop-ups,

21:10 but none of them have been big enough

21:12 for the Fed to change course.

21:14 And there will eventually, we wrote about this,

21:17 there will eventually be something if they stay this course.

21:20 So I told you before, I'll just give you some numbers.

21:22 We look at global M2 in dollars.

21:26 That peaked at 87 trillion in March.

21:29 It's now 83 trillion.

21:31 So it's down 4 trillion, that's a lot of money.

21:32 And there's a lot of reasons for that.

21:33 It's not just the fact that the Fed's tightening

21:34 or other central banks are tightening,

21:36 it's that there's regulatory squeeze,

21:38 there's less velocity in the real economy,

21:40 i.e. housing and things like that.

21:41 So everything's kind of coming in in a way

21:43 where M2 in dollars is negative on a year-over-year basis.

21:46 If we go further negative,

21:47 there is going to be an either economic

21:50 or financial accident that will change their course.

21:53 That should be in the next three to six months,

21:55 if all stays the same.

21:57 What I don't know the answer to,

21:58 and this is probably something you know better than I do,

22:00 the plumbing now has been changed.

22:03 They've created so many facilities

22:06 where they can get dollars into the economy in other ways,

22:09 besides the traditional QE process.

22:12 And that is an area where we could be kind of fooled,

22:15 where they're doing something

22:17 that is not necessarily fully transparent.

22:18 I don't know the answer to that.

22:20 It's more of a conspiracy theory.

22:21 - Well, that'll be the SLR adjustment for the banks, right?

22:23 They'll allow banks to hold treasuries

22:25 and not have all the capital ratio requirements

22:26 that they would need.

22:27 That will be what they will do.

22:28 When you see that, people are gonna extrapolate that

22:30 into Fed's here, they're changing, they're doing that.

22:32 That might indeed happen.

22:33 But Jamie Dimon, next week we can talk about JP Morgan,

22:35 not Morgan Stanley here, but you're gonna hear, I think,

22:38 one of the greatest earning calls in history

22:40 that's gonna encompass everything.

22:41 And one of the things I think-

22:42 - Or you won't.

22:43 - What do you mean, like greatest as far as-

22:44 - No, like greatest hits.

22:46 It's gonna be as great as-

22:46 - Theater. - Theater.

22:47 - Theater, I'm sorry.

22:49 And what I was gonna say at the end was that

22:50 if you're the CEO of a publicly traded company,

22:53 and you just mentioned, Mike,

22:53 people give year ends normally time to recalibrate,

22:56 what do you do?

22:57 Especially if you have a balance sheet,

22:58 especially you have to refinance debt,

23:00 especially, you know, use commercial paper market,

23:01 whatever it might be.

23:03 That's where the instability, it's not just in the plumbing,

23:05 and that's fine, that's temporary.

23:07 But that's, I think, is very frustrating for,

23:10 I wouldn't say that the Fed's not transparent.

23:12 I would say that they're just overshooting.

23:14 And so you gotta play that game as a CEO,

23:15 and I think a lot of them are gonna try to send a message

23:17 during earnings season to the Fed.

23:19 - Well, look, I mean, I think they're getting what they want.

23:20 I mean, they're getting an economic slowdown,

23:22 probably not as fast as they want,

23:23 but you have to break this thing out, right?

23:25 So the labor market is still red hot.

23:27 Housing market is a standstill.

23:29 The car market now is basically coming to a standstill.

23:32 These are two really important markets.

23:33 - I agree.

23:34 - And that's- - Shipping market.

23:35 It's destroyed. - Shipping market, I mean,

23:37 cost of inventory, inventory is ballooned.

23:39 And this is all permutations of what happened

23:40 during COVID, the lockdowns,

23:42 and then the supply chain issues, and logistical problems.

23:44 This is a lot to absorb for an economy

23:47 in a short period of time.

23:48 So things are gonna break.

23:49 We think, ultimately, it turns into real earnings problems.

23:53 We already talked about that.

23:54 Like, we think earnings are way too high,

23:56 and there's a lot of reasons, okay?

23:57 It's not just your typical economic recession.

24:00 There's all this financialization

24:01 which has to come out of the economy.

24:03 - All right, so next Thursday and Friday,

24:04 we get Q3 earnings season kicked off.

24:07 We're gonna have Citi, Wells Fargo, Morgan Stanley,

24:09 JP Morgan, so probably 50% of the XLF starts reporting.

24:13 And we all know this.

24:14 We've been doing this a long time.

24:16 Sometimes the way the market trades

24:17 into the beginning of the earnings cycle,

24:19 and some of the things that we've seen,

24:21 JP Morgan gapped down 3%, 4% after its results,

24:24 and everyone feels like, ah, this is gonna be

24:26 one of those long earnings periods,

24:28 and then all of a sudden, you get to that week

24:30 and a half later when all the mega cap techs are reporting,

24:32 and it just has a different feel to it.

24:34 How do you think this is gonna go?

24:35 Because again, we know that a lot of these companies

24:38 that are gonna be reporting,

24:39 that are dictating the course of that earnings

24:41 that you're expecting to be declining next year in 2023,

24:46 they got a lot of dollar exposure,

24:47 they got a lot of fixed costs

24:48 that are really being impacted by input costs,

24:50 and their ability to continue to pass them on,

24:53 whether it be to the consumer.

24:54 We've seen peak margins.

24:55 How does this shake out in Q3 earnings season?

24:58 Are we gonna see a meaningful downgrade to Q4 estimates?

25:02 And then will that be extrapolated out to 2023 earnings?

25:05 Because you're one of the only guys

25:06 calling for it right now.

25:08 - Yeah, I think people have piled on, though.

25:09 I do feel like it's getting a little more crowded

25:11 in the room on the earnings story.

25:13 I don't think they've had the precision

25:14 that we have necessarily, the confidence.

25:15 But here's where I have confidence,

25:17 here's where I don't know.

25:18 Well, first of all, the leading revision factors

25:19 are telling us that the fourth quarter's

25:21 gonna come down pretty hard.

25:22 What I don't know is, will people extrapolate that into '23?

25:27 I think if you get enough companies pulling guidance,

25:30 that'll freak people out,

25:31 or they may guide Q4 down enough on the top line

25:34 where you have to extrapolate

25:35 or you lose all credibility as an analyst.

25:37 So I think there's a 50/50 on that.

25:39 But the market, just to be clear,

25:41 the market won't go down hard to my targets

25:44 on the downside until the forward numbers

25:47 come down in a more meaningful way.

25:49 And that's the missing part.

25:50 So there's a higher chance it happens now

25:52 than it did in 2Q,

25:53 'cause they're closer to the end of the year.

25:54 It may need to bleed into the January reporting season.

25:57 - I've always said that the banks,

25:58 forget about owning long, short, the banks in general.

26:01 I don't wanna talk about that.

26:02 But the banks have been the key to all this

26:03 because we have such a financialized global economy

26:06 as you just mentioned before, so much debt.

26:08 And it is so crucial that people pay attention,

26:10 not just to Jamie Dimon, but to all these quarters,

26:12 because we know the write downs

26:13 that are occurring in the debt market.

26:15 We know these deals that are hung.

26:16 We know, or people are now realizing

26:18 that the M&A market lives off of debt

26:20 because you have to finance these deals.

26:22 And you're seeing right before our eyes,

26:23 Citrix and some of these things get repriced

26:25 and Twitter and stuff.

26:26 So to me, that's my takeaway next week.

26:28 And whether or not you own these stocks or don't,

26:30 you have to pay attention to what they're saying,

26:31 because to me, they're gonna tell you,

26:33 what is their industrial loan book?

26:35 Are they growing their C&I loan,

26:36 as we call it, personal loans?

26:38 What do delinquencies look like to the consumer?

26:40 To me, it tells you everything.

26:41 And having been trained in financials,

26:42 you can extrapolate that and take to all the other sectors.

26:45 - You alluded to some, this is a human being question.

26:47 And I know the way I'm wired,

26:49 and I'm obviously not a normal person,

26:51 which I think is what-- - That's a good thing.

26:52 That's why we're friends. - Exactly.

26:53 I happen to think it's a good thing as well.

26:55 But as I mentioned when I came in,

26:57 you are on that island pretty much by yourself

26:59 in terms of this call that's come into fruition.

27:02 You just alluded to the fact that

27:04 the room is getting a little more crowded.

27:06 On a certain level, I think you feel there's a vindication.

27:10 The market has created that vindication.

27:12 Now, people coming around to your way of thinking

27:15 has done as well.

27:16 But does it scare you now?

27:18 Do you look at this and say, holy shit,

27:19 now everybody's thinking the way I am.

27:21 Maybe I gotta do another deep dive and say,

27:23 maybe this isn't getting along in the tooth.

27:25 'Cause I know that's how my brain works.

27:27 - Yeah, I mean, we always were paranoid schizophrenics.

27:30 Like I said, we're friends in business, so you have to be.

27:32 And yeah, it's getting more crowded.

27:33 We don't like that.

27:34 However, our fundamental work,

27:36 we're getting more confident that we're so far out of bounds

27:39 on the earnings estimates

27:40 that we're gonna trust that work.

27:41 Once again, I go back to the timing.

27:42 I don't know if it's this quarter or next quarter,

27:44 but at 3,800, 3,900, the risk reward is pretty poor

27:47 at the index level.

27:48 One thing I wanna just spend a second on,

27:50 'cause we have some guys who do good work on this.

27:52 So in September, obviously we're down 10% in the S&P

27:55 and some stocks are much worse.

27:56 Worse September we've seen in a long time.

27:59 And we basically saw some of the asset owner community,

28:01 retail specifically, and the CTAs sell out.

28:05 So I'll give you some rough numbers.

28:06 So the CTAs we think sold $75 billion worth of equities.

28:10 It's a huge number, okay?

28:11 And they're not quite as--

28:13 - Can you explain to our audience what those are, CTAs?

28:15 - CTAs are just trend following momentum players.

28:18 Usually--

28:18 - And they're levered, and they're normally levered.

28:19 - They're now levered, and they only buy

28:21 basically S&P futures, NASDAQ futures,

28:23 maybe Russell futures, or they'll buy other futures.

28:26 And just to put it in context,

28:28 they're not as underweight equity exposure

28:31 as they were in June, but they're close.

28:33 So there's a lot of buying power that can come back

28:35 if the market just hangs around for two or three weeks,

28:37 which is possible, because while I agree

28:40 the financial sort of companies are important,

28:42 what the market really will tank on is the tech names.

28:45 It'll tank when those guys finally give it up,

28:48 because that's the bulk of the earnings.

28:49 That's what people really care about.

28:51 And we won't know that for three weeks.

28:52 So the market could kind of drift higher

28:54 as that buying power kind of comes in.

28:56 That's where I get nervous,

28:57 but that's where we have a great team of people

28:58 who can tell me, look, this is more technical.

29:01 Our fundamental view is still not played out yet.

29:03 And that's why we have this risk reward framework

29:05 where we say, look, it's just not attractive at 3,800.

29:07 - Mike, I think it's important to point out the CTAs.

29:09 We've talked about the leverage in the system,

29:11 and all of a sudden you're six, seven times levered.

29:13 You're borrowing at zero,

29:15 and then you're six or seven times levered

29:16 borrowing at four to 5%.

29:19 The tap on the shoulder that we all know,

29:20 the famous Wall Street tap on the shoulder

29:22 that a guy might get in trading energy

29:23 or whatever it might be.

29:24 But that to me, that's not coming back.

29:26 That leverage isn't coming back anytime soon.

29:28 You're right in the sense of the exposure,

29:29 but I'm curious your thought on that

29:31 because I don't think they're gonna be ramping that back up

29:33 with rates where they are now.

29:34 - No, and they're not going back to where they were,

29:36 say, at the end of last year, right?

29:37 They can't.

29:38 So your point is the rates are much higher

29:39 and their cost of capital.

29:40 So they're not gonna be allowed to,

29:41 but they could, they could buy back to 75,

29:43 and that's a decent number.

29:45 And then it kind of builds on itself.

29:46 So I'll say this, and we talked about it

29:48 in our pod that we did this morning.

29:50 Give it a shout out, what's it called?

29:52 - It's called Equities Unplugged.

29:54 - All right, you guys smash your subscribe buttons

29:56 for Equities Unplugged.

29:57 Mike Wilson, smash it.

29:59 Let's crush that thing.

30:01 - Once every two weeks.

30:01 - Once every two weeks, all right.

30:03 Should we do a home and away?

30:04 - Absolutely.

30:05 - Do you want to be on the tape, Bear?

30:06 - Morgan Stanley does not want us.

30:08 - They would kick our asses out.

30:09 - They'd kick my ass quickly.

30:10 - There wouldn't be anything on, it'd be all censored.

30:13 - Bleep, bleep, bleep, Fed, bleep, bleep.

30:15 Listen, we only have a couple minutes left.

30:17 And one of the things that I just gotta say,

30:18 Guy, you've been doing Fast Money for what, 27 years?

30:21 - It'll be, yeah, 27 years next week.

30:23 - January, yeah, and I've been doing it for 10.

30:25 Is there a better thing in our A Block

30:27 when Mel comes to us and we're just talking

30:30 this and that or whatever,

30:31 and then a guest like Mike Wilson comes on

30:33 and he'll just roll in and be like,

30:34 you know, Dan made a really good point.

30:36 The guy just kind of nailed that.

30:38 Is there a better Fast Money guest than Mike Wilson

30:41 who will just give you a shout out?

30:42 - I love that.

30:43 - Right, fair enough?

30:44 - And it's funny is what you don't see on camera

30:46 is if Mike were to do that or if anybody would do,

30:49 especially with me, I will flex.

30:51 - Oh, no, we'll all be pointing.

30:53 - I will point at myself, like,

30:55 look at the big brain on Guy.

30:56 So listen, Mike, you know the way we feel about you.

30:58 That's why you're here.

30:59 Before you run out of here,

31:01 there are all different metrics that you look at

31:03 and there are a lot of inputs to this thing.

31:05 Is there one thing that's gonna turn

31:07 that you're gonna say, all right, guys and gals,

31:09 we might start thinking about turning this boat around?

31:12 - Yeah, it's easy for us.

31:13 I mean, we wanna see those numbers down

31:14 to about 225 on a forward basis.

31:16 We wanna see equity risk premium at least close to 400.

31:19 And quite frankly, I mean,

31:20 I'd like to see the PMIs closer to 45.

31:22 Those are the things we've really been highlighting

31:24 for folks.

31:25 We're pretty disciplined in that.

31:26 It doesn't mean that markets can't overshoot

31:28 on the upside on a tactical trade,

31:30 perhaps the next couple of weeks.

31:31 We're trying to stay true to our work

31:33 and we tend to be early.

31:34 Doesn't mean we're always right.

31:35 Early is wrong sometimes,

31:37 but it's unlike that we're gonna be late.

31:39 - Did you get nervous this summer

31:41 that the nearly 20% rally in the S&P 500

31:44 from the June lows to the mid-August highs?

31:46 Does price sometimes make you rethink

31:48 a little bit your thesis?

31:49 - Of course, now I will tell you this.

31:51 I was much more nervous in March

31:53 when we got back above the 200-day moving average

31:54 and we hadn't really started

31:55 the earnings revision cycle yet.

31:56 And I thought, oh man,

31:57 this thing still has some gas in the tank.

31:59 The reason I wasn't nervous this summer

32:00 is because our revision breath date had already plummeted.

32:03 So I was like, this thing can run.

32:05 It maybe goes to 200-day

32:06 and then literally stopped the 200-day to the penny.

32:09 It was amazing tactical.

32:10 Like if you were starting a technical analysis class,

32:12 just pull that chart.

32:13 - Yeah, Carter Braxton Worth, Worth Charting.

32:14 - And Mike, I wanna end with this

32:15 because I think you just hit on something.

32:17 I don't try to think about

32:17 where the market is off of its highs.

32:19 I look at it on a bottom-up kind of basis.

32:21 And I am still to this day,

32:22 I'll never understand Q4 2021.

32:24 That run from 43 or 4,400 to 4,800.

32:27 I like to take that and just mark it off

32:29 and use kind of 43, 400 as the rational beginning point.

32:32 Do you concur with that?

32:33 I still-- - Totally.

32:33 - Okay. - We overshot to the upside

32:34 by 400 points.

32:35 That was exactly our number, 4,400.

32:37 Now if a market's overshoot

32:38 and we got laced in the press,

32:40 I mean, rightly so.

32:41 Like, oh, this guy's an idiot, man.

32:43 You know, it was true.

32:44 We missed 400 points.

32:44 We were pressed.

32:45 - There was a seasonality thing going on there as well.

32:47 - But to Danny's point, it's important

32:48 because what it means is that we always overshoot fair value

32:51 both on the up and the down.

32:53 Now, it's interesting.

32:54 The markets are rounding tops

32:56 and they're usually spike bottoms.

32:58 So when we go, if we go to the low 3,000s,

33:00 we ain't gonna spend much time down there.

33:02 - Yeah, I'm with you.

33:03 - We're all gonna nail the bottom together.

33:04 - Yeah. - Okay.

33:05 We're set right here on the tape.

33:06 - Remind me when I say when Mike turns, I turn,

33:08 and when I don't, hunch me in the face.

33:09 - And sincerely, I think the listener can tell

33:11 how much respect we do have for Mike Wilson.

33:13 We've all known him for a very long time,

33:14 both professionally through the media.

33:16 And obviously, we are so glad to have you join us

33:18 on the tape.

33:19 We hope you'll come back really soon, Mike.

33:20 - Really appreciate it, guys. - Thanks.

33:21 Stick around, everybody.

33:22 We got a lot more.

33:23 We got Demos picks.

33:23 - Stop it. - What else we got?

33:24 - We got a lot.

33:25 There's a big cannabis news that came out.

33:26 - Yes, I was showing you that.

33:28 - Stick around.

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35:51 (upbeat music)

35:55 All right, we're back.

35:56 It is great to have Mike Wilson in real life.

35:58 That's great. IRL.

35:59 I love this.

36:00 Yeah, I learn these things.

36:01 When they say, there are other lines,

36:03 those letters they use.

36:05 LOL?

36:06 Law, that means laughing out loud.

36:07 LOFL?

36:08 What is it?

36:09 Well, laugh out, laugh out for you.

36:11 Whatever, I mean, it's just dumb.

36:12 Just say it.

36:13 It's nice having him in real life.

36:15 And obviously we admire not only him as a person,

36:18 but his work has been extraordinary.

36:20 And he said, typically early is wrong in our business.

36:23 Well, he happened to be early and spot on.

36:25 So it was a real pleasure having him.

36:27 And by the way, I didn't realize Dan,

36:28 this was a call-in show,

36:30 but in a few minutes we're gonna get a call-in

36:31 from that great linebacker from Florida State University.

36:35 Brady Cobb?

36:36 Exactly, Brady Cobb,

36:37 because there is groundbreaking news.

36:40 Groundbreaking, it really is.

36:41 It is, in the cannabis space.

36:43 It truly is, he's gonna call in.

36:44 He's gonna call in, but Danny, before he gets on,

36:46 I mean, this seemingly came out of the blue.

36:48 I didn't know about it.

36:49 You obviously have a lot closer to this.

36:51 Brady's been tweeting this for several months,

36:53 but even earlier this week,

36:55 something was brewing in Washington.

36:56 There was some weird news.

36:57 There was like, appointed a person to the FDA

37:00 that understood marijuana reform

37:01 from the state of New York.

37:02 There was a lot of chatter that Cory Booker,

37:04 who wanted all these social reforms,

37:05 Jared Brown wanted these social reforms

37:07 as it relates to cannabis offenses.

37:09 And so he can only do stuff on the federal level, Biden.

37:12 So basically, and this is in real time,

37:13 we're gonna get Brady on to explain it better,

37:15 but he's basically pardoning anyone on the federal level

37:18 for possessing marijuana, that's one.

37:21 And two, he's imploring at the state level to do the same.

37:24 And then they're also directing the HHS,

37:27 Department of Health and Human Services,

37:29 to basically look at descheduling the drug.

37:31 So for those out there,

37:32 the reason that you can't bank cannabis

37:35 is because it's a quote, "schedule one drug," like cocaine.

37:38 I mean, fentanyl is not schedule one, let's just be clear.

37:41 If you go to schedule two,

37:42 it's not money laundering, banks can start to do it.

37:44 So anyway, this is the step.

37:46 We were waiting for safe banking.

37:48 I'm gonna imagine Brady's about to say,

37:50 "This is one step bigger."

37:51 - There are many sexy men out there.

37:53 There are many sexy, smart men out there.

37:56 There are many sexy, smart men with colored histories.

38:00 There are many sexy, smart men with colored histories

38:03 that played linebacker at Florida State.

38:05 And then there's Brady Cobb.

38:07 - There you go. - What is going on?

38:08 - Oh, man. - Gentlemen.

38:09 - Brady, I just butchered, I think,

38:11 I was trying to explain,

38:12 'cause I literally read your text to me when it happened,

38:15 and we were recording something else.

38:16 So take it from the top, what just happened?

38:19 What does it mean, and where do we go?

38:21 - Yeah, so President Biden just did what he promised to do

38:25 on the campaign trail,

38:26 which I've given him a lot of shit for taking too long,

38:29 but he just held a press conference

38:32 where he said he's signing executive orders.

38:34 The first one will be to pardon anybody

38:37 that has a federal possession charge for cannabis,

38:40 which is around 6,600 people,

38:42 which I can't tell you the impact of that

38:44 for those people's lives.

38:46 Weldon Angelos, who I serve on his board

38:48 at the Weldon Angelos Project,

38:49 has been advocating for that alongside so many others.

38:51 It's massive.

38:53 The second thing that he did

38:54 that I can't overstate how important it is

38:56 is he has ordered Department of Health and Human Services

38:59 to conduct a review on the scheduling of cannabis,

39:03 meaning it should not be scheduled where it is,

39:05 and he actually referenced the fact

39:07 that cannabis is scheduled next to LSD and heroin

39:10 on schedule one, and actually fentanyl is on schedule two,

39:14 which is ludicrous, and he noted correctly

39:17 that that is something that this country's dealing with

39:19 from an overdose standpoint.

39:20 Canada should not be there.

39:22 So those two steps, I can't explain to you

39:24 how massive they are.

39:25 The first one is long overdue piece of social justice reform.

39:29 Should have happened quite some time ago,

39:30 and it sets the precedent and makes the passage

39:32 of safe banking that much more likely in the lame duck

39:36 because it's a social justice piece that we can check off

39:39 'cause that's the one complaint

39:40 from the more liberal side of the Democratic Party

39:42 is safe banking doesn't do enough for social justice.

39:45 The second piece is an absolute showstopper

39:47 for the cannabis industry

39:48 because if cannabis were to be rescheduled,

39:50 say, to schedule three, it's not gonna go to schedule two

39:53 based on the president's own press release

39:56 where he said schedule two is where fentanyl is.

39:58 It'll go something lower than schedule three,

40:00 and you guys are the market masters.

40:03 You can tell me that there's plenty of companies

40:05 that sell schedule three and below drugs

40:06 that are listed on US exchanges.

40:08 So put your chin strap on.

40:10 - So Brady, let's talk about what that actually means.

40:13 So safe banking everyone was focused on.

40:15 This supersedes that,

40:16 but let's talk about the states for a second.

40:18 So he's imploring the states to follow his lead.

40:21 And then I don't think there's gonna be

40:22 federal legalization,

40:23 which we don't need to have all these things occur.

40:26 Can you just explain the difference?

40:27 And I know he's imploring the states.

40:28 And I wanna say one other thing.

40:29 You're being humble and modest in this.

40:31 You've been very involved for years in this.

40:34 And it always happens, not when you least expect it

40:36 'cause you were expecting it at some point, but it happened.

40:38 And it was the Republicans who finally came around

40:40 and I think forced the hand of the Democrats

40:43 because they were stealing the issue from them.

40:45 To your point you made that Biden,

40:47 when he was running for president,

40:48 this was one of his things he was standing on

40:50 and he never did anything until now.

40:51 So I know those are like three questions

40:53 and things I just mentioned in there,

40:54 but can you just address those?

40:56 - Yeah, so the federal government doesn't have the power

40:58 to effectuate changes with respect to state law

41:00 and state convictions,

41:01 but in the signing of executive order

41:03 that implores the state governors

41:05 to also issue pardons or sentence commutations

41:08 for people with marijuana possession charges,

41:10 which is again, massive.

41:12 And one of the things I would note on that piece

41:14 is I've been working with representative Dave Joyce,

41:16 one of the leading Republicans in the US House.

41:19 And Dave actually crafted a bill

41:22 that I helped work on the framework of

41:23 probably four years ago called the HOPE Act,

41:25 which would provide federal funds for the states

41:28 to process expungements.

41:30 And that's the bill that's been talked about the most

41:32 that would be combined with safe banking and a lame duck.

41:34 So again, it makes everything, the pieces are,

41:36 it's been a long, miserable walk in the dark.

41:39 The sector's gotten pounded, there's been no hope.

41:42 And as I've always just said, it's gonna be a catalyst.

41:44 And when it happens, watch out.

41:46 And the pieces are starting to come together.

41:49 This is the day that I've been waiting my entire life for,

41:51 with everything my father went through.

41:52 - It's been 50 years.

41:54 - And by the way, not to say I'm anything special,

41:57 but I put a tweet out on Monday saying,

41:58 "Keep an eye on DC this week."

42:00 And I got a lot of hate back saying,

42:01 "The boy who cried wolf."

42:02 So it's finally nice to get one right.

42:05 - So suck it, Twitter.

42:07 - Yeah, exactly. - Yeah, fight me.

42:08 - But Brady, it's good.

42:09 So hopefully, I mean, this is a big moment.

42:11 Forget about the stocks.

42:12 Honestly, I'm not even thinking about the stocks right now.

42:14 - Me either.

42:15 - This is 50 years in the making.

42:17 Undoing Nixon's policies and all the things that have gone on.

42:20 This is a major win for everybody.

42:21 And I just would not take that lightly.

42:23 - So Brady, it's me here, Guy Adami speaking.

42:25 Big fan, as you know.

42:27 This to me now, all these companies

42:29 have been waiting patiently on the sideline.

42:31 All the big cap pharma names, all the beverage names.

42:34 My sense is the M&A landscape is gonna change considerably

42:39 over the next few months.

42:40 But am I looking at this correctly?

42:42 - Yeah, you're looking at this correctly.

42:44 And I'm gonna focus on industries

42:45 that I think will be the first movers

42:47 to come in and pull the trigger.

42:48 It'll be alcohol.

42:49 I mean, they're already in.

42:50 There's been a huge push in DC from a lobby standpoint.

42:53 Alcohol's gotten behind it because they see the threat.

42:56 They can't let seltzer happen again.

42:57 Seltzer went and took 50, 60 share points off of Bud Light

43:01 and they can't let it happen again.

43:03 Cannabis presents a real threat to alcohol

43:05 from a wallet and a share stomach standpoint.

43:07 And by the way, alcohol has been lobbying.

43:09 If you saw Nancy Mace's bill, the State's Reform Act,

43:12 that bill is largely set up in the same way

43:14 that alcohol is currently distributed,

43:15 which is state by state

43:16 on a three-tier distribution system.

43:18 I firmly believe cannabis will ultimately be regulated

43:21 the same way, state by state,

43:23 after the rescheduling occurs.

43:24 So I would be focused on alcohol and tobacco in the short term.

43:28 I think pharma will come later.

43:29 - Really amazing, Brady.

43:30 I know we'll have a lot to catch up on later,

43:32 but timing-wise, honestly, we're in the studio

43:34 and to get you on the phone

43:35 and get your thoughts is tremendous.

43:36 And congrats on all the work you've done.

43:38 I know there's still a lot of work to do in the sector.

43:41 - Yeah, I just wanna say one thing.

43:42 I've gotten to know Brady through Danny,

43:44 as Guy has over the last, what, year, year and a half?

43:46 You've been so generous coming on the pod

43:48 and really giving not only just your take

43:49 on what you just did here about,

43:51 just from a legislative standpoint,

43:53 from an investment standpoint,

43:54 you alluded to something that I think if any of you guys,

43:56 and I know, Danny, you know this in and out,

43:59 Brady, you just said this is something

44:00 you've been waiting for 50 years.

44:01 It's very personal to you.

44:03 And so hopefully, I think your guidance

44:06 for a lot of people, including us, on this topic

44:08 is really important and we thank you for it.

44:10 So everybody listening, go Google Brady Cobb.

44:13 - Follow him on Twitter, FBCobb Law.

44:16 - Fascinating life story associated with this topic.

44:19 So check it out.

44:20 - Yeah, there's something called Sunburn

44:20 that he started recently, so out there.

44:22 Anyway, Brady, you're the man.

44:24 I'll call you in a bit.

44:25 - Thanks, Guy. - Thanks, buddy.

44:26 - Love Brady Cobb.

44:27 And listen, Constellation Brands, obviously,

44:29 is way ahead of the curve,

44:30 but something happened literally today.

44:33 They say if it wasn't for bad timing,

44:35 I'd have no timing at all.

44:35 - Right, exactly.

44:36 So they made a multi-billion dollar investment

44:38 in Canopy years ago.

44:40 Cost a lot of people their jobs, I think, at Constellation.

44:42 Their whole idea is that we cannot let seltzer happen again

44:45 to the alcohol industry, what they did.

44:46 They came in and made all these seltzers and stuff.

44:48 And so THC beverages is what their mindset is.

44:51 Well, just this morning, they wrote down, I think,

44:53 a billion dollars of their investment in Canopy

44:56 because obviously, they have to start writing it down.

44:58 Well, maybe tomorrow morning,

44:59 the list should be-- - We talk about

45:00 this seltzer thing. - 8K and right here.

45:01 - When we were in high school and college--

45:02 - Bartle and James was the-- - No, no, hold on a second.

45:04 We were crushing the worst canned beer,

45:07 Waukee's Best, what we call it.

45:09 All that stuff.

45:10 The kids today, you see 'em, they have these slim cans.

45:13 They look too slick.

45:15 It's all clear.

45:16 Guy, have you seen these?

45:17 The Neuners and all this stuff, the Trulies and stuff.

45:19 It's horrible. - I was just in my son's

45:21 apartment refrigerator.

45:22 - It's horrible, it's embarrassing.

45:23 - No, they had natural light.

45:24 - Okay, so you felt a level of respect.

45:27 - Yeah, yeah. - Okay, fair.

45:28 - Natty Light, right?

45:29 Guy, what was your crap beer?

45:30 - Stroh's on tap at the Tombs for you, Georgetown.

45:33 - Yeah, the Tombs, exactly.

45:35 All right, what are we gonna do?

45:35 - Well, soon, they'll have THC in 'em, so.

45:37 - Danny, what are we doing?

45:38 - What are we doing?

45:39 - When are we gonna get your guys and what are we doing?

45:40 Just shout, listen, guys, if you're listening to this

45:43 and you like what we do, but you also like what Danny does

45:46 with Vinny and Porter and the whole idea of what are we doing

45:49 will you please tweet at them?

45:50 We gotta get them on the mic.

45:51 - I was driving to Boston the other day

45:53 and Brady had posted this and I didn't really talk about it,

45:55 but we got invited to speak at Harvard Business School.

45:57 Harvard looks good now.

45:58 We just had Brady speak in their entrepreneurial class

46:01 two days ago and I'm driving in the car

46:03 going up to meet Brady in Boston

46:05 and I get on the phone with Vinny and Porter.

46:06 We're on the phone for 22 minutes just shooting this shit

46:08 and I go, guys, how would you not just record this?

46:11 It was just a back and forth of like, what are we doing?

46:14 We were talking about energy, we were talking about rates,

46:16 we were talking about Tesla, we were talking about everything

46:18 and so they'll do it, we'll get 'em on, it's happening.

46:21 They're making too much money,

46:22 I can't pull 'em off the screen.

46:23 - All right, so we've got an action-packed show here.

46:25 Guy came in mid-Mike Wilson, we had Brady just dialing in.

46:28 We got a little call-in show here.

46:31 What else do we gotta get?

46:32 As you're listening to this, we will already have known

46:34 the September jobs report, okay?

46:36 How important do you guys think this is gonna be?

46:37 - Okay, that's a great topic.

46:38 - Okay, let's talk about it.

46:39 - So you could give me the number right now.

46:41 - Wouldn't know what to do.

46:42 - So the estimate is 270, 275.

46:44 You could hand me 350, I'll make a bullish,

46:46 and bearish argument.

46:47 You can hand me 175, I'll make a bullish,

46:49 and bearish argument, right?

46:50 I think people wanna see that number right down the middle

46:52 'cause no one wants to have to evaluate

46:54 because here's what's gonna happen.

46:55 If it's a bad number, the Fed probably won't recognize it.

46:58 They'll come out and they're all out there,

47:00 Kishkari, your favorite guy, guy,

47:01 they're all out there saying, hope you're listening.

47:03 We're still very hawkish.

47:04 So that would be like stagflationary.

47:06 - I'll just say this real quickly, guy,

47:07 and I'd love to get your take.

47:08 If it is a really hot number, market's going down.

47:11 - Yeah, I agree with that.

47:12 - And SESAP is filling in that gap and it's going down.

47:14 - I think the unemployment number,

47:15 the three point whatever it's gonna be,

47:17 whether it's eight or 3.9 or whatever it's gonna be,

47:19 is a more important number than the job number.

47:20 - Fair enough, but anything north of 350,

47:23 the market craters.

47:24 And in terms of unemployment rate,

47:26 we'll see how it shakes out.

47:26 - But think about what you're saying.

47:27 So we saw the lag impact from rate hikes, believe me,

47:30 I'm not bullish on that.

47:31 (laughing)

47:32 I'm trying to paint the picture of 350.

47:35 See, I told you we're still functioning, employment,

47:37 we can handle these rates going up

47:39 and all the other inflationary things

47:41 are starting to tick down.

47:42 This is the best of all worlds.

47:43 I mean, I'll paint you the bullish picture on it.

47:45 - I've lived through that, believe me.

47:46 I'm just throwing it out there.

47:47 Again, you're right.

47:49 I say it to Melissa all the time on Fast Money.

47:51 If you had told me these numbers a day ahead,

47:53 I'd be wrong half the time at best.

47:54 And that's just the market we find ourselves in.

47:56 By the way, speaking of somebody

47:58 who's been wrong half the time,

47:59 that's Danny Moses in this year's NFL, by the way.

48:02 - I'm above 500, I'm 65.

48:03 - Okay, you understand what I'm saying, wise guy.

48:05 Okay, that's not nitpick, 'cause I gotta tell you,

48:08 when you're playing at 85%,

48:10 six and five ain't nothing to write home about.

48:12 - Well, listen, so I started out this season one and two.

48:15 - Yeah, it wasn't great.

48:16 - Yeah, no, yeah, I started out one and two,

48:18 first time I've had a losing record

48:19 as a member of On The Tape.

48:21 So I'm now six and five, but Dan--

48:22 - Wait, wait, first things first.

48:23 - Dan is doing to me, no, I wanna say what you're doing.

48:25 You're doing to me right now what I did to you last year.

48:27 I'm now taking the other side of your picks,

48:29 and I am back down $1,000 too.

48:31 - You are not doing that.

48:32 Just first things first, so Thursday night, guy,

48:35 we haven't told you this,

48:36 Danny and I were with Joe Marchese.

48:37 - Oh my God, I forgot about that.

48:38 - Friend of the pod, and we were watching

48:40 this Cincy game, okay, in a bar, and Danny--

48:42 - On a phone.

48:43 - On a phone, and you gotta see him.

48:45 He's doing all those things, like, you know,

48:48 he's doing all this stuff, and his hands are moving,

48:50 and then we had a bartender, nice guy,

48:52 but this kid--

48:53 - Degenerate.

48:54 - Oh my God.

48:55 - I love him.

48:55 - And Danny actually had a little sidebar with him.

48:57 - Stop.

48:57 - Yeah, he did, and he's like, listen, guy,

48:59 you gotta turn it down a little bit,

49:01 you know what I mean?

49:02 It was like a little intervention.

49:03 - Yeah, the kid McPherson, the kicker, kicked it,

49:06 and I paid you $100.

49:07 I go, Dan, I'll give you 100 bucks if he makes it.

49:09 - No, no, I took 100 bucks from Danny.

49:12 He pulled it out of his wallet,

49:13 and then I gave it to the kid behind the bar,

49:15 'cause he was getting killed.

49:16 Wasn't he losing that game?

49:18 - He was, and then, yeah.

49:19 - He appreciated it.

49:20 - All right, so week five in the league

49:21 where they play for pay, six and five, Danny Moses.

49:23 By your standards, that's just an atrocity.

49:25 What do you got for us?

49:26 - All right, so Cincinnati,

49:28 speaking of Cincinnati in that game,

49:29 that was a Thursday night game, wasn't it, Dan?

49:31 - Yep.

49:32 - That gives them an extra three days, doesn't it, guys?

49:34 They're going into Baltimore, right?

49:36 That was a tough loss for Baltimore.

49:38 Bad coaching, by the way.

49:39 Harbaugh's done a bad job this year.

49:40 - I agree with that.

49:41 That's a game they should've won.

49:42 - Very good coach, right?

49:43 Bills came in and whatever.

49:44 Since he's getting three points in Baltimore.

49:46 - Live dog.

49:47 - Live dog.

49:48 - A live dog to win outright, but I like Cincinnati.

49:50 Plus three, Dan, you want any action on that one?

49:52 - Nope.

49:53 - All right.

49:54 I love Jacksonville.

49:55 I realize--

49:56 - Hold on a second, stop.

49:57 Who talked about the Jacksonville Jaguars?

50:00 - You did.

50:00 - Thank you.

50:01 - You also talked about the Eagles

50:02 and you're right on the hose, by the way.

50:03 - Thank you.

50:04 - You've been very good.

50:05 - I'm just putting it out there.

50:05 Jacksonville's two and two, by the way,

50:06 should be three and one, but doesn't matter in the league.

50:08 - Could've been four.

50:09 I mean, they were up 14-nothing.

50:10 But anyway, they're coming home, right?

50:12 They're coming back home again

50:13 and they're playing a horrendous Houston team.

50:16 The line is seven.

50:17 I can't believe I'm saying it.

50:18 I love Jacksonville minus seven

50:20 'cause I think this is their true coming out.

50:21 I think they are a very talented team

50:23 and they're just not in a market where people are seeing them

50:25 and so I love Jacksonville minus seven over Houston.

50:27 Dan, would you like Houston?

50:29 - Nope.

50:29 - All right.

50:31 I'm gonna give four picks this week.

50:32 - Wow.

50:33 - With the hope of going three and one.

50:34 - I have a couple that I'd like to see.

50:35 - Oh, you're getting cocky?

50:37 Okay.

50:37 All right, Bears plus seven and a half in Minnesota.

50:40 I think Minnesota stinks and I love Justin Fields.

50:43 He keeps them in games.

50:44 I realize you're G-men.

50:46 Hold on, oh God, Guy's gonna take action.

50:48 - No, I'm not taking any.

50:49 - I'll take the Bears plus seven and a half in Minnesota

50:52 and then my last one is, and I'm most nervous about,

50:55 both these two teams are Jekyll and Hyde.

50:57 I will take Tennessee minus two in Washington.

51:00 I feel like this is when Tennessee gets on track here.

51:02 So, Tennessee minus two, Jacksonville minus seven,

51:04 Bears plus seven and a half, Cincinnati plus three.

51:07 Four picks.

51:08 Dan?

51:09 - None of those.

51:10 What about this?

51:11 I wanna take Atlanta.

51:11 - I love Atlanta.

51:12 - I wanna take Atlanta plus nine and a half.

51:13 - I've been short Tampa all year.

51:15 - Okay, fine, I know you have

51:16 and they do not look particularly good

51:18 so you don't want Tampa.

51:19 The other one would be Green Bay minus eight

51:22 over the New York Giants.

51:24 I wanna take that.

51:25 - You want Green Bay?

51:25 - Yeah.

51:26 - All right, Guy and I will split together.

51:28 - You gotta take the Giants, Guy.

51:29 - No, I don't.

51:30 - That's not your team.

51:31 - I don't do that.

51:32 That's the, you put the ultimate, you put the horns.

51:33 - I'll take the Giants, not one of my picks.

51:34 - I don't do that.

51:35 - Not one of your official picks.

51:36 - You just 'cause Chano's and Liz Young,

51:37 just wanna be friends with them, you've taken the Packers.

51:39 They already love you, Dan.

51:40 You don't have to do that.

51:41 Just--

51:42 - By the way, I gotta tell you something.

51:43 Packers defense is good.

51:45 That offense is not very good.

51:47 And that Giants defense gets better each week.

51:49 No, I don't bet on sports.

51:51 - All right, so Dan--

51:52 - It's not my thing.

51:53 - I'm taking the Giants.

51:53 What number do you see?

51:54 Eight?

51:55 - I see Green Bay minus seven and a half.

51:56 - All right, I'll take Giants plus seven and a half

51:57 for 500.

51:58 - Thanks.

51:59 - Okay, very good.

52:00 - Ladies and gentlemen, this has been one of the more

52:02 interesting--

52:03 - Wait, we're not done.

52:03 We have one more.

52:04 - Oh, hold on a second.

52:05 - We have a rot, we have a rot.

52:06 - We don't have a rot, but we have one more thing.

52:07 We have to talk in my interpretation of,

52:10 I know you guys have talked about it all week

52:12 on this Tesla Twitter.

52:13 Danny, what is your take on all this?

52:15 - Danny, what's your take on this whole Twitter,

52:17 Tesla, Elon Musk thing?

52:18 - Here's what's interesting.

52:19 These banks, remember we talked about Citrix?

52:22 That was a January deal that was a 13 to 14 billion dollar

52:26 that's gonna cost the banks 600 million,

52:28 and now they're gonna actually have to buy six billion?

52:30 You know what, all the bank pandering to Musk,

52:33 all that stuff, oh, the guy's a money machine for us.

52:35 Well, if he goes through with this deal,

52:37 you're looking at half a billion dollar write down

52:39 and probably the carrying of some of this debt.

52:40 Remember how he financed this thing,

52:42 with the term loans, with the security,

52:43 with the unsecured, that's the first part.

52:45 The other piece of news to come out today

52:46 that was interesting was on Tesla specifically,

52:48 which is S&P upgrading the debt

52:50 for the first time to investment grade.

52:52 That would be from BBB to BBB, Dan, right?

52:55 - Yeah, I saw that.

52:56 - Do you remember September there was a tweet from Musk

52:59 about Moody's is irrelevant?

53:01 I find that interesting that Moody's isn't the one

53:02 that upgraded, it was S&P.

53:04 And also, listen, everything happens for a reason.

53:06 I mean, I truly believe that.

53:07 Now, I don't know, I don't think it's bullish necessarily.

53:10 Supposedly, they're free cash flowing,

53:12 but people read into that like,

53:13 oh, they must know something.

53:15 What they know is that deliveries were worse,

53:17 the numbers are gonna continue to get cut,

53:19 and that Musk is gonna have to sell

53:20 a lot more stock at this deal.

53:21 - And again, Tesla's had a really bad week.

53:23 There was a day it closed down 8%

53:25 after those September deliveries.

53:26 The one thing I'll just say is that

53:28 I think that there was probably him selling that day

53:31 because that was the night that he came out

53:33 and said that he's gonna close on the deal.

53:35 And I think he also knows because--

53:37 - That would have to be out already.

53:38 The way the filing would have to be out

53:39 that he sold stock, I would think, but keep going.

53:42 - But it closed down 8% on the day

53:43 when the market was up 2% that day.

53:44 - I mean, the desk could be doing it for him

53:46 and then he puts it on slot, but yeah, it's fair.

53:48 - So my point is is that he's probably

53:50 been selling stock Friday night on the close.

53:52 This came out, the stock closed at 49.42,

53:54 it closed at 52 the day after he said

53:57 it was gonna close that deal.

53:59 The deal is for 54.20, so we're now two, three bucks

54:02 below that, and there's really a lot of talk

54:05 about this debt contingency,

54:06 whether the banks are gonna wear this thing,

54:08 because the truth is they're not in a position

54:10 to take hundreds of millions of dollars of losses

54:13 and sell this thing to their clients at those losses.

54:15 So the question, we saw Apollo pulled out

54:18 from the equity standpoint, so if he's gonna close

54:20 this thing, he's gotta sell more Tesla,

54:23 or, and I heard this, and it's just a rumor,

54:25 I heard there was secondary SpaceX for sale this week.

54:28 - Yeah, it wouldn't shock me.

54:29 - Yeah, so then the question is,

54:31 does the richest man in the world,

54:33 who basically-- - In a world.

54:34 - In a world where all of his wealth

54:36 is tied up to a publicly traded stock

54:39 and a private one at SpaceX that was last valued,

54:41 I think at 120 or something like that, billion,

54:44 is he gonna overpay 20 or 25 billion dollars

54:48 for a company that, when he takes it back out public,

54:51 what do you think is gonna--

54:52 - 'Cause he overplayed his hand,

54:53 and because he doesn't wanna be deposed,

54:55 because if you're deposed, you have to answer questions

54:57 about literally everything in your life,

54:59 and it's worth $25 billion extra not to go down that road,

55:03 and we have talked about this for a while.

55:06 Tesla, very quietly, is down now some 43%

55:09 from its all-time high, and I gotta tell you something,

55:12 not to dogpile on the Cathie Wood rabbit,

55:14 but that ARK ETF is in a world of hurt in this environment.

55:17 - One last point, I would just say this

55:20 on that Tesla situation. - I have one more point, too.

55:21 - So it sounds like he's gotten out.

55:23 If he can't get the debt financing--

55:26 - Nope, nope, nope. - Are you sure?

55:28 - He tried to make that a new condition--

55:31 - Twitter said no. - If he agrees,

55:32 and Twitter said no.

55:33 So, just so you know, Dan, that did not,

55:35 so he tried to say, all right, I'll do it at 5420.

55:38 Let me back up a second.

55:40 I used to compare it to the Wizard of Oz.

55:41 This goes back five years of the must.

55:43 You get to the curtain, the Tin Man, the Lion,

55:45 they're all coming looking for hearts and brains

55:47 and courage and all these things, right?

55:48 And you pull the curtain back and you see this guy.

55:50 - Hearts and thoughts, they fade.

55:51 - Yeah, fade away. - Just fade away.

55:54 All right, so listen, shame on everybody

55:55 who deserves what's coming to them.

55:56 The banks deserve it, investors deserve it if they're long.

55:59 Take a step back.

56:00 He bid 5420 as a joke.

56:02 They started to read his emails.

56:04 He was gonna be deposed.

56:05 It was supposed to happen actually today, right?

56:07 Which is why he's paying,

56:07 and the judge is not taking any shit from him.

56:09 It's like, we're moving forward, like we're doing.

56:11 So he's so nervous.

56:12 You know the other thing of this genius?

56:13 He started to read, I don't know if he took the time

56:15 to read the emails, he probably didn't,

56:17 when he was reaching out to Larry Ellison.

56:19 Was there anything behind this that was even calculated?

56:22 You came up with a number 'cause it was the 420,

56:25 put the 5420, it's a joke.

56:26 Do you think that he can run a SpaceX, a Tesla, a Twitter?

56:31 I'll close with this, just saying, again,

56:33 I've always said this is the culmination

56:35 of everything in these markets, but--

56:36 - Listen, I don't think this deal's happening.

56:39 I'm just telling you because if you think about

56:41 since late April when he made this bid,

56:43 when you think about where credit is,

56:45 you think about equity valuations, you think about--

56:48 - It's gonna be legal.

56:49 The judge is gonna say you have to do it.

56:50 I'm not saying that,

56:51 but he's not gonna get out of it legally.

56:53 You're saying it's not gonna happen.

56:54 He's just gonna say, "I'm not doing it."

56:55 Regulators never punish 'em like they should

56:57 for his 420 secured, and this is where we are.

56:59 - Listen, we've had plenty of companies

57:01 over the history of the stock market

57:04 massively overpay in M&A.

57:06 We've never had an individual do this to this.

57:09 - It's unique, and the story keeps riding itself.

57:10 Anyway, where's Barry Diller in Activision?

57:12 - All right, should we get out of here, guy?

57:13 You wanna wrap this up?

57:14 But again, homage to Frank Morgan,

57:18 the Wizard of Oz, by the way.

57:20 And homage to Larry Ellison, who, as we said,

57:22 that Friday, what do you call that Friday fun day

57:24 or drop day or Friday? - Friday night dirties?

57:26 - Remember, that was a Friday night dirty.

57:28 - No one's ever even asked him about it.

57:30 It's never been a story written about it.

57:31 - We talked about it.

57:33 This has been a fascinating, enjoyable,

57:35 on-the-tape podcast.

57:36 I hope you've enjoyed it.

57:38 And what do you say, Dan, leave us critiques or messages?

57:42 - Be careful, 'cause I got ratioed.

57:43 You know what that means, you gotta get ratioed?

57:45 Someone tweeted something about me

57:47 and the amount of comments versus the amount of likes.

57:51 It was disproportionate about the comments.

57:54 - Noted.

57:55 - Okay, we'll learn that about that next on--

57:57 - Let's get guy ratioed, all right.

57:59 Thanks everyone, we will see you all next week.

58:02 Thanks once again to CME Group and iConnections

58:05 for sponsoring this episode of On the Tape.

58:08 If you like what you heard, make sure you hit follow

58:11 and leave us a review.

58:12 It helps people find our show and we love hearing from you.

58:16 You can also email us at onthetape@riskreversal.com anytime.

58:21 Follow and connect with us on Twitter @OnTheTapePod,

58:25 and we'll see you next time.

58:27 On the Tape is a Risk Reversal Media Production.

58:30 This podcast is for informational purposes only.

58:33 All opinions expressed by me, Dan Nathan, Guy Adami,

58:36 Danny Moses, and any other participants

58:38 are solely our opinions and should not be relied upon

58:40 for specific investment decisions.

58:42 (upbeat music)

58:45 [BLANK_AUDIO]

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