By coinnews 
0:05 spk_0
Welcome to the opening bid podcast. I’m Yahoo Fine’s executive editor Brian Sai. Like I always say, this is a podcast that will make you a smarter investor, period. And I have to mention this podcast is sponsored by Vanguard, big fan of Vanguard. Let’s get to our featured interview for this episode. Callie Cox, Rithholtz’s wealth management chief market strategist. Good to see you in person for a change every day. I’m reading your notes, Callie, every day reading this stuff. Yeah,
0:28 spk_1
we, we’re thinking about a lot of.Ridholtz and it’s great to be here excited to
0:31 spk_0
chat. It’s good to see you here and now markets are back in rally mode just like that. Should investors be, I guess, enthused? I think if you talk to investors in early April after Liberation Day, they thought the world was going to end. Sit here today, it’s a little bit of a different story, at least in the eyes of the market. Yes,
0:47 spk_1
and I think that’s a reflection of expectations, Brian. I always tell people the recipe for the market is expectations and reality, right? AndSo long in 23 and 24, low expectations, pretty good reality. That’s enough to get a pleasant surprise in these relief rallies like we’re seeing today. When I say relief rally, I just mean people breathing a sigh of relief and you know buying stocks because things aren’t so bad right now. Our expectations are lower and I say R like the royal we of the world that
1:14 spk_0
we is, they’re just out there somewhere,
1:16 spk_1
right, right, expectations are lower. Every everybody’s.Braced for the punch and every little bit of good news feels like relief in the desert and you get that relief rally. I,
1:25 spk_0
I think you and I are going to sing from the same hymn sheet today. I hope I have that that that right. Um, the elephant in the room you wrote this is earnings expectations. The market investors are still looking for double digit earnings growth. Uh, why? I talked to a lot of CEOs. I talked to most recently Coca-Cola CEO and chairman James Quincy. He told me.Bryan, consumer demand is weakening. We’re going to hold firm on prices for now. I don’t want to hear Coca-Cola CEO telling me that demand for soda is starting to weaken. Not a good sign. Yeah we have earnings expectations for this year up double digits. Help me understand the disconnecthere.
1:59 spk_1
Well, I’m sorting through the same thing. I’m looking at the data and asking myself why, because I’m hearing the same thing as you are. Companies and CEOs coming out and saying,You know this this is a material change to our costs. We’re going to try and pass it on to the consumer. I’m surprised at how many companies are saying that. You know, I thought that there would be less less of a push to do that because I’m not sure the consumer will respond and actually pay those prices, but we are seeing companies coming out saying that they can pass costs.you know, maybe that’s the reason why we’re seeing expectations high, but you know, Wall Street is planning for the best year since 2021 and before that, I believe 2018. Expectations are quite high here and they’re especially high on the tech side. Tech is exposed to tariffs both on the cost of goods side and the international revenue side, so I am also asking what gives, I think analysts are frozen
2:48 spk_0
in their tracks. You want to pay $8 for a 2 L bottle of soda.Maybe that’swhere we’re going here.
2:54 spk_1
Yeah, that might be the world that we’re living in, and these are questions that are going to have to cross our minds. I mean, if you ask it that way, you can understand why you think consumers may balk at that and maybe look at other products that other companies aren’t necessarily jacking up the costs on sneakers.
3:12 spk_0
Sneakers could be going up double digits. I remember before the trade war, Callie, I think it was the CEO of Brooks told me he’s like, um, we could see if tariffs go through, we could see product prices go up 50%. So what does a sneaker go from $100 to $250 or $200? That’s crazy. Well, it has to hitdemand.
3:29 spk_1
I hadn’t heard that, but I wear Brooks to run. So now
3:31 spk_0
I’m telling you, see this
3:32 spk_1
I’m giving you.
3:33 spk_0
you can use like this is what’s coming at us
3:36 spk_1
here, yeah, and I don’t think, I don’t think you and I and many Americans have really processed what this could mean because we haven’t seen it happen yet. We still have shipping volumes dropping, but that means that the ships from China and overseas are coming into the ports and port volume is dropping. Those goods are not on our shelves yet.
3:54 spk_0
So should investors ignore these earnings estimates?
3:56 spk_1
I don’t think ignore is the right word. I think you need to take in some context with them, and what I mean by that is, you know, watch the numbers, watch the EPS earnings beats, the revenue beats that we get, and beats beats are coming across the tape like they usually are. Well, this is the first quarter, right? You know you got to remember Liberation Day happened on April 2, 2nd quarter technically. So I think you have to take all the data in, but you have to listen to the management commentary.Carefully this time around, and I would say that every quarter, by the way, I think management commentary is the most important and most valuable part of earnings season, but you have to listen to what they think about tariffs, what they expect for the future, you know how they’re projecting costs, and the point that you brought up from the Brooks CEO is a golden line that you should listen for in every earnings call. How are we planning on absorbing these costs? Can we pass it on to the consumer because that matters for your wallet.And it matters for your portfolio.
4:54 spk_0
No, and of course a shameless plug here. Uh, shout out to the finance team. You can now listen to live earnings calls on the Al Finance platform. That’s where I listened to Starbucks’ earnings call right on our platform. It’s so easy. I you just go to the Ticker page and you just pull it up and you can listen to the call. So I, I had to do that. Like it’s just, I mean, I love this function. So is it realistic that the first quarter, the results we’re getting now, this is just the best for the year and that maybe the 2nd quarter, 3rd quarter, and 4th quarter we see.The S&P 500 companies overall reporting down earnings year overyear.
5:25 spk_1
I worry about that. So again, if you go back to estimates and when we say estimates, we’re talking about all of the sell side analysts on Wall Street getting together, talking to the man talking to management of the companies they cover and putting together these estimates for their companies and you know adding those together in a very
5:41 spk_0
that’s different discussion. I hate the wholeprocess,
5:43 spk_1
don’t get me started on that, but yeah, there’s a lot we could say there, but.You know, it’s it’s a bird’s eye view of a bunch of different estimates, and right now all those estimates put together show that earnings could could level off in the 2nd and 3rd quarters but come back in the 4th quarter. I hope that’s the case. I want markets to stay afloat. I want the economy to stay afloat. I want this to be less of an event that a lot of people think it will be.I’m just not, I’m not as optimistic about that, and I think what worries a lot of people on Wall Street is that it feels like the worst is to come, and we’re kind of whistling past the graveyard here.
6:20 spk_0
You know what I find also fascinating is so in analysts, they see earnings up double digits this year.And the S&P 500 is now at trading, I think, 20 times 4 earnings on a PE basis. If you go back to look at past recessions, in some cases, the PE ratio is under 10 times, and I’m saying we’re going back to traded like 9 times as we did during the great financial crisis, but 20 times in this environment seems high. Why is that multiple still so high?
6:47 spk_1
I try to put a lot of caveats around the multiple because I think.Often investors look at the PE, especially the forward PE, which is what I would do, that’s future earnings or earnings estimates instead of past earnings, but I think too often investors look at the PE and they say, OK, the PE is X 20. That seems too high because it should be 16 or so. That’s really hard to judge because there’s an element of hope and expectations in there. We keep coming back to expectations, expectations versus reality.I think you know valuation definitely matters in this environment because we’re we’re at a point where expectations and reality are changing. The PE should be somewhere, but probably not 20%. I think it’s hard to say where it should be, especially if you’re looking back at past crises, because the world looked different, you know, tech wasn’t 40% of the S&P 500, you know, we.You know, back in the great financial crisis, iPhones were still like an early on product. Um, COVID happened under different circumstances, and I’m not trying to say this time is different, but I think it’s so hard to judge a market solely on PE. So I’m a little hesitant about, you know, adding, adding too much value there.
7:55 spk_0
So if, if one is a believer in this bounce back we’ve seen post liberation Day, where do they go?
8:02 spk_1
Well, I think this depends on your time frame. That’s a really lame answer, but if you’re a trader, if you’re looking at days and weeks, um, if you’re opening a position and planning to close it out, I don’t know, next Wednesday, then I think you look at what’s been sold off hard, and that’s tech, that’s small caps, that’s more growth names. That’s typically what we see in sell-offs, by the way. What does really well on the way up gets hit hard really gets hit hard on the way down and typically if you do see these, you know, really.rallies we go back to that phrase. You see them happen concentrated in the names that were hit really hard. If you’re a long term investor like the clients we serve at Rithholtz, I think you need to protect your sanity here. You need to stick to your plan and what that means is you need to, you know, remember why you’re investing when you need that money and what return you need over the years and decades you’re investing, and that will dictate where you put your money now.
8:57 spk_0
I imagine you, of course, like you just mentioned, work with a lot of long term.Investors, why are long term investors just so they continue to be in love with the Mach 7. They did love these seven stocks, and if you ask them why do you love these stocks? Oh, it’s the AI. They, they, I don’t know anything that these companies are actually doing. I’m not just trashing the retail investor in some cases, but I just feel as though they don’t really know the individual stories of thesecompanies.
9:20 spk_1
Well, look, I get it. AI is a really compelling story, and it’s cool that it’s at our fingertips now. I find it so funny that you know AI has been in the talk for decades. I, I feel like.I was looking at this for a note a while ago, but there were mentions of AI going back to the 1950s, but now it’s in our hands. We have Chat GPT, we have Claude, we have Gemini. We can the technology is tangible. Tesla bots. We’ve got Tesla bots are cool, yeah, but we have these applications to our daily lives, and I think for a lot of investors they see it happening andKnow the companies that have been talking about it a lot that are trying to get to the forefront of this story and obviously it’s the Magnificent Seven. I mean Nvidia, for example, has been a hot stock for us for a while, but you know, America hadn’t been talking about it for very long.
10:06 spk_0
Nobody knew what Nvidia did. Look, I tell the story too. I work with um.Uh, mentor of my friend Jim Kramer, uh, at the street, and I never heard of Nvidia until maybe 2017 or 2018. Jim would come to the office and talk about Nvidia. I mean, Jim was so far ahead of this, this call.And now the whole world loves Nvidia. Yeah,
10:25 spk_1
yeah, so it’s funny to see the world come along, and I understand why, you know, AI, AI is drawing drawing people to the mag 7. But you’re right, you know, no company has really other than Nvidia and probably a few semiconductors, nobody, no company has really grasped AI like Apple executives, Google executives.
10:45 spk_0
Where’s Apple’s AI?
10:46 spk_1
Well.
10:46 spk_0
Are we are we using Apple Intelligence? I’m not even using this at all.
10:50 spk_1
I mean, no, they’re behind, and I think they publicly said they’re behind, but you have to remember Apple at its heart, how it makes money, it’s a hardware company and you have to ground yourself in that, especially in times like these when there isn’t a lot of expectations, hopes and dreams being priced into the markets.
11:05 spk_0
So true. All right, Kelly, hang with us. We’re gonna go off for a quick break. We’ll be right back on opening bid.Welcome back to Opening bid here at the NASDAQ in Times Square and of course opening bid sponsored by our friends at Vanguard, having a great conversation with Callie Cox, Ritholtz, wealth management chief market strategist over the past um.Month of this, I don’t know, borderline chaos in markets. I’ve had more conversations about the bond market than I ever ever had in my career, not that I ignore, but you know the bond markets out there. You look at it and maybe write a story on housing or something, um, but I’m asking everyone if we are headed towards a crisis, and I put this question to a episode I did with Double Lines, um, deputy CIO Jeffrey Sherman.I see more debt coming in the back half of the year, uh, potentially, um, from a Trump tax plan. Um, I see the economy weakening. Like what are these things? What could they mean to the bond market? Well,
12:04 spk_1
it’s funny, I totally agree with what you say. We don’t talk about the, so we watch the bond market over at Red Holtz, of course we have a vast majority, if not all, all of our clients invested in some sort of fixed income, but the bond market doesn’t matter until it matters, and then it really matters.Feel it, right?
12:20 spk_0
You’re following the 10 year 4%, 4.3%, 50 shit,like, whoa, not good.
12:27 spk_1
Yeah, and you know, more tangibly how it works in your portfolio because people invest in it to further the portfolio cushion, right? They want to, you know, be braced against losses. That’s something that a lot of investors strive for even if they don’t admit it. And when the bond market isn’t working there, you feel it, you see it in your portfolio value and it hits you right in your gut. So are we heading for a crisis?I don’t think it’s that simple. Is anything ever that simple? No, but I do worry about the US exceptionalism trade and how that’s slowly unwinding because I’m not sure people realize how ingrained foreign investors are in our markets and how pissed off they are right now and how much power they hold.
13:08 spk_0
How, what would that mean, and you’re not the first person I’ve, I’ve heard this in the past two weeks. If foreign investors start selling, even if it’s in small in small increments, like what are the ramifications to the bond market?
13:19 spk_1
Well, so let’s put some numbers behind this. So foreign investors own about 30% of outstanding treasuries, and foreign investors, there’s a wide swath of investors. We hear a lot about, you know, central banks, the Chinese central banks, the Japanese central bank. They’ve been slowly offloading treasuries for years. So a lot of people see those headlines. They say foreign investors have been selling for a while, and that type of foreign investor has been selling for a while, but the majority of investors who hold treasuries, when I say treasuries, US debt.They’re private investors. They’re you. They’re me. They’re hedge funds. They’re smaller funds, you know, they’re not, they’re a little more price sensitive. They’re a little more nimble. They’re not just holding treasuries because they have to for currency offsets, essentially. They are, it’s more of a strategic play for lack of a better phrase, and that means they can let them go quickly. And one other thing that I’ll add to is that these private foreign investors have been big buyers over.Past several years, so they have been part of the reason why rates have stayed so low, because remember when you buy bonds that brings interest rates down, you know, prices and yields move in opposite directions. So you know I think we’ve taken that for granted. Where are we again? I think the world has taken that for granted and now we’re seeing those private foreign investors start selling off assets, start considering a world outside of treasury being the only game in town andThe big question is where the bottom is. I don’t think this happens quickly, but the worry is that there’s a slow drip with no obvious bottom in sight.
14:52 spk_0
What would a crisis in the bond market even look like?
14:55 spk_1
It’s hard to say because we’ve been in this US exceptionalism, you know, everybody buy Treasury’s the only game in town. The only thing we kind of know trade for a while, yeah, so that’s a question that I’m kind of wrestling with myself. I’ve thought through it and I think you can make a few basic assumptions here. First of all, money doesn’t evaporate when people sell something, they usually buy something else. I thought so.Uh, I would love to hear your theory behind that, but I think that’s an encouraging place to start for investors, you know, especially if you’re looking for where that money is going, it’s going somewhere. You just have to figure it out.Earlier on this month when 10 year yields were whipping around when the US exception when the Treasury’s trade, when the Treasury’s trade was breaking down before our eyes, you saw that money head into European debt. You saw German boons. You saw Italian yields come down. You saw Swiss yields come down. There was a clear flight into.European debt, will that happen in the future? I’m not sure. Nobody knows, but that at least tells you that, you know, maybe that’s that’s where people are fleeing for safety, and I say fleeing very lightly because I think it’s going to be a slow drip. It’s not this quick rush for the exits.
16:13 spk_0
As someone managing money and and walking people through long term plans, I imagine in the past 5 years you would always have confidence.In the bond market, it’s, it’s just, it’s the US, man, like it’s just rock solid.But that has now come into question. How does that change how you build and think about portfolios for the next decade?
16:36 spk_1
I think it’s come into question, but I don’t think it’s breaking down as much as people say it is, and I go back to that slow drip phrase. I mean, there are a lot of things still working for the US here. We have the biggest, brightest, best, most innovative companies. I mean we still have the deepest and most liquid market out there in treasuries. We have pretty attractive.Yields at the 10 year just above 4%. I think there are still a lot of reasons why global investors are looking at treasuries, and at Rith Holtz we’re very thoughtful about how we build our portfolios. Fixed income is our all weather sleeve, and what I mean by that is when stock markets are selling off, we expect our clients to look at their fixed income and say.OK, this is my portfolio cushion. This is where I’m getting my income, you know, I feel like I can breathe through this crisis and they still feel that way, in a way that, in a way bonds are still working. It’s just that the 10 year is being especially volatile at the moment. So.If you’re invested in fixed income, I imagine plenty of people we’re talking to are. I wouldn’t, I wouldn’t panic just yet around that. We’re still seeing certain parts of the fixed income market work really well. You just have to be really strategic and smart about where you put your money.
17:43 spk_0
Uh, the last, uh, two minutes of the podcast, we always love to get hot takes from guests. Um, nothing planned. So my, my question to you is this What is the next generation, maybe our generation of investors need to do to plan or just, I guess to ensure their financial safety and what mistakes do you still see them making today?
18:05 spk_1
That is a really good question, and to some extent I can’t, I can’t really tell you what’s happening in the future. Nobody has a crystal ball. I think the smartest thing you can do right now, and this is an investor of any age, is to set a process. Go back to your why, why are you investing? Many of us are investing for retirement. We want to be able to live off of our portfolios one day.And if that’s your why, then bam, you have a starting point. You know when you’re going to essentially you’re you know when you’re going to need that money. If you don’t know, you could probably back into it. And once you have that, you can make a plan for how much in stocks you hold, which by the way, stocks are still your best bet at beating inflation. We have piles of historical data showing us that you still have, you know, fixed incomes, so many ways to put your money into.Portfolio cushions like bonds that you should expect to help you generate income and to cushion you in market sell offs. Al and private investments are still very accessible. I think they have a place in portfolios. Obviously gold has done really well right now. I wouldn’t get too crazy. A lot of investors don’t need don’t need a super complex portfolio, but just know that you still have a lot of agency here, and that’s what we’re trying to transmit to clients as well.Yes, times feel a little anxious. Yes, markets are selling off, but at the same time you have the ability to set yourself up for the future and to lean back on a lot of really strong history on how this works.
19:35 spk_0
Is the better play to.Just buy the market what the SPY, uh, or is it to go look at a company like Nvidia with a powerful driver in AI and hold that for the next 15years?
19:52 spk_1
I think right now the phrase that people should take away is to not be a hero.Um, I had a good question. Yeah,
20:01 spk_0
it applies,
20:01 spk_1
yeah, but also like breathe a little bit. It’s OK. You don’t, you don’t have to, you know, hit a home run in this moment. You just need consistent returns for long enough. I think single stock picking is really, really tough in this environment, especially if you’re investing for days, weeks, months, because you’re, you’re exposed to a lot of headlines, and we’ve seen some crazy headlines over the past few months, so.You know, if you’re an individual investor, you have decades ahead of you, and I want to add too, if you’re retired, you also have decades ahead of you because God forbid you die the day after you.
20:30 spk_0
Well, we’re all living 200 years old. I mean, I don’t know about you, but I am. I’m gonna need a big ass portfolio. That’s the reality
20:37 spk_1
of it, right? But even if you’re living off your portfolio, know that you’re gonna, you probably still need to take some risks for future you.But to get back to your question, you don’t have to be a hero here. You don’t have to, you know, pick the stock that you think will win. If you want to pick stocks, if you, if you have a thrill from that, if you like to learn, then by all means it’s your money. But just know that, you know, at market bottoms when a lot of stocks have been hit, maybe some unfairly, it is smarter to, you know, think broadly when you’re investing your money.
21:08 spk_0
Uh, real quickly, the morning after Liberation Day, stocks are getting blown up. What was your day like?
21:14 spk_1
Oh my gosh, I tried to blanket from my memory. Uh, well, I was supposed to go into the office. I stayed home because I did not have time to brush my teeth.Um, you know, at Red Holtz, we’re always, you know, jamming on what’s happening in markets, so there were, there were a lot of conversations going on about that. Of course we had to make sure that our advisers were in a great spot to talk about what’s going on, especially, you know, how it affects our portfolios and ultimately how our clients have invested their money. So I was doing a lot of that. I was doing a lot of processing, a lot of writing, a lot of, you know, talking to advisors and eventually to clients about what was going on.But we have a good story and you know, we tell our clients that bear markets are normal. They knew this would be a possibility, and we guard them against those unexpected scenarios. So we’re proud of our clients. We’re proud that you know we didn’t get as many.As you probably would have thought, of course we got questions. Of course all of us feel anxious about what’s going on, but you know I feel like that was the time for us to shine for us to really show why it makes sense to have a partner with your money, and I think we did it
22:21 spk_0
well. So you are a hero.
22:24 spk_1
No, our advisors are here.
22:27 spk_0
All right, good, good answer. All right, we’re gonna leave it there. Callie Cox, Rit Holtz wealth management chief market strategist. Good to see you in person. Uh, love your work. Yeah,
22:34 spk_1
great to be here.
22:35 spk_0
All right, that is it for the latest episode of Opening bids sponsored by Vanguard. Continue to hit us with all those 5 stars on all the podcast platforms. Thumbs up on YouTube. Love your comments. You make me better at doing this every single time. I’ll talk to you soon.