By coinnews 
0:04 spk_0
Welcome to a new episode of the opening bid podcast. I’m Yahoo Finance executive editor Brian Sai. Like I always say, this is the podcast that will make you a smarter investor period and of course opening bid sponsored by our friends at Vanguard. Let’s go right to our featured interview of the session here uh at the uh NASDAQ in Times Square. Adam Parker, Trivariate Research founder. Adam, good to see you in the flesh.Time follower of your work. Thanks for having me. I loved your recent note and I think maybe you’re trying to poke some holes in this market rally you’ve seen after this US-China trade agreement. What is next here for the market?
0:40 spk_1
Well, you know, you take a step back and you say, well, we had a huge 23 and 24.Uh, for the US equity market, we came into this year thinking the market might be down and volatile in the first half of the year with things like tariffs and other policies not in the price that looked reasonably intelligent until early April and uh we’ve seen a huge rally that frankly has been a little bit bigger than I would have thought, um, you know, I, I take a step back and say we’re almost flattish now as we sit here a year to date on the S&P.And I think we did some damage to the 2025 earnings versus what everyone thought in January 1st. So for the price to be right today, uh, I think what you’re saying is that the earnings.In years 2028 through 2033 or some long term view of earnings is now better than it would have been otherwise and that we’re gonna go through some sort of, uh, you know, downward trajectory to earnings followed by a recovery that’s better than it would have been without this and I, I think there’s a little bit of TBD on that. I’m not sure I should pay all, all, you know, for all of it rightnow.
1:45 spk_0
What will, and I love that you look at earnings estimates. I mean you’ve been doing this for a while.
1:48 spk_1
Tell
1:48 spk_0
us about your career.
1:49 spk_1
My career, yeah, we don’t, we only have, we only have 24 minutes, but, uh, quickly, PhD in statistics, um, I worked at, uh, Sanford Bernstein as a fundamental semiconductor analyst and, uh, and then became a strategist, uh, mainly the US strategist at Morgan Stanley. I went to the B side to a, a great firm called M&S Capital run by a guy named Ricky Sandler, and then we started Trivariate 4 years ago, uh, you know.Sell research and services and and uh custom work to institutions who care about US equities and we also have a business called Trivector Research which is really specifically for advisors and individuals who care about US equities. We sell it for 100 bucks a month. You get inside publications. You get, uh, webcast. You can ask me questions. You get all kinds of ETF analysis and 100 bucks.
2:31 spk_0
Yougotta raise prices on it, but yeah, yeah,
2:33 spk_1
it’s true. We have a tariff free China free.pricing stag. So hopefully that’s attractive.
2:39 spk_0
You make agood point though, but now that the market has rallied, the fundamentals of from companies have to justify that rally. So to that end, what will second quarter earnings
2:48 spk_1
look
2:48 spk_0
like?
2:48 spk_1
You know, April earnings season was definitely better than people thought, including me. Um, I, I felt like even as early as March things were slowing a little bit on the consumer side. I mean earlier in the year you saw Walmart lower their revenue guidance.The conference news, the investors go to uh Raymond James in March and in the, in the small cap space, you know, Morgan Stanley’s Techcom. Things were slowing a little bit. So I thought heading into April, we might see a mediocre set of earnings, maybe a little bit of weak guidance, but when you got this terrorist stuff, I thought, well, boy.You know, we could see some prenex and you really only saw pulled guidance from, I don’t wanna say businesses nobody cares about, but businesses that aren’t seen as broad barometers, autos, airlines, right? So people say, yeah, Visa’s number was pretty solid. The bank earnings of visas
3:33 spk_0
pretty this quarter surprised the hell out of. I talked to that. I talked to a CEO, and he told me that trends through April mirrored what he saw in the first quarter. I’m like, You Ryan, you gotta be kidding me here,
3:42 spk_1
right? No, and then it’s a global business, but still.You know, very good. Yeah, I agree the banks, you know, when they come out early in the earnings season, mid-April, didn’t see a fall for the first half. So I, I think, you know, there’s a combination of factors, you know, we had, uh, pull forward in demand a little bit ahead of this, um, you know, I think there’s a lag between the tariff announcements and when they actually hit the earnings, so I suspect.It’s more like Q3 numbers that are gonna soften a little bit um and um you may get a ripple again here where people say OK well uh I’ll I’ll I’ll do a little bit more now at 30% versus a plus 100% and so you could get a little bit of a wave where not everyone misses at the same time but I currently think the Q2 numbers.Are probably OK, but the Q3, Q4 numbers are actually embedding in some sectors higher than normal second half, which
4:32 spk_0
makesno sense. I was, I was, I was talking to, uh, Mattel’s CEO and nors three months ago. He had earnings guidance out there. He was looking for 166 cents a share to 172. Talked to him, uh, a week ago. He has no more earning signs. He pulled it,
4:45 spk_1
right? You saw Hasbro, kind of a similar business, say last week we need to order now for Christmas, right, because of the lag and and the supply chain andAnd so I think there’s gonna be some dislocations between production and consumption. So the kind of things we’re searching there is called transcript for we do tons of.Natural language processing is anything around inventory overproducing consumption pricing, uh, capital spending, anything that shows that there’s dislocation so I think the bull cases just look like we we get on the other side of this tariff news we understand what we’re dealing with these are the rules of the game now we can operate our business and then we can move toward, you know, maybe it’s um tax extension or regulatory cuts maybe it’s proof cases for AI where businesses start seeing marginal expansion and then finally maybe it’s the.The, the frothy stuff that everyone was psyched about last November, like, you know, M&A and
5:36 spk_0
do you think investors will be shocked by how bad earnings could be?
5:41 spk_1
It feels like that’s more likely than their surprise to the upside. I, I think that’s true. Stocks go up when margins go up and so a lot of what we’re talking about seems like it’s bad for businesses margins, right? You raise pricing, you lose units or.Input costs go up, but you can’t pass it on like those things aren’t great for margins so I, I, I guess there’ll be some winners and losers so stock pickers maybe can, can, you know, navigate their way through it, but I think the whole system’s earnings are too high and they’re gonna come down. The stock market go up when earnings come down for sure, but they’re higher than normal and we had tariffs. It just feels like.That’s not all in
6:19 spk_0
the when was the last time that you saw companies.I guess racing to pull their earnings out. I couldn’t, I can’t think of a period. Was it COVID maybe?
6:28 spk_1
So there’s been a few times this has happened. I, I, I think it’s more, you know, I thought was it United Airlines that did the the two tour guides to that one. This could happen, this could happen, but we really don’t know. I haven’t seen that. I don’t recall seeing that. Like this season, I, I don’t believe in my career. I’ve seen like Pepsi and P&G miss in the same week. Like there’s been some.Really, you know, dislocated things happening. So most investors I talked to the institutional investors are trying to figure out, OK, I, I, I needed some offense because that April 9th day we were up almost 10% in one day and that’s kind of what you learn in school it’s like an annualized rate of returns we got that in one day.What can I own that I maybe I have to hold my nose, but I, and so you go back and do the work well, you know, tech works almost every time there’s a recovery, right? So do you own semis, do you own software you saw pretty good earnings from ServiceNow software looked pretty good. So I think people are trying to find offense that they can kind of tolerate and then figure out what’s the right defense and, and I mentioned Staples, a couple of bellwethers that hasn’t really worked, so people are trying to figure out what’s the tariff free.China still
7:32 spk_0
trying to figure out what takes down service now every quarter, no matter what that company does, uh, it just, it just grows significantly. Yeah,
7:38 spk_1
you know, people like, you know, certain aspects of software generally are good, right, recurring revenue, consistent pricing, all that. I, I, I think the steady part, the stable part of the barbell has been hard. I mean, we’ve been recommending stuff like aggregates like Vulcan and Martin Marietta and Knife River or Waste Management and Republic and Waste Connection, like things that.I think we still need
7:58 spk_0
our garbage
7:58 spk_1
tariff free garbage has to be picked up, right? They have, they don’t grow massively. They’re not cheap, but they’re just good
8:04 spk_0
solid, if I buy less toys because now they’re double in price, that’s less trash. I mean, we’re just connecting the dots here all the time, guys. But you know, as someone that watches these watches these estimates like a hawk, do you need guidance to help inform your decisions because in many cases I mean it no longer exists. And even if a company were to come out with guidance, how can you believe it?
8:25 spk_1
Yeah, I mean, I think there’s a bit of a notion of they got it too good, you would think they’re whistling by the graveyard so there is a bit of a Goldilocks element to it like you gotta believe it’s believable, uh, in the context of the business they’re in, um, you know.Look, I think one of the primary uses of the sell side at the analyst level is to have some central place to post your estimates so you can know what the consensus is and therefore if you’re an investor understand whether you believe in estimate achievability whether you’re above or below consensus. So, uh, you know, I, I think institutional investors try to get the so called whisper what do they think their by side buddies actually think the numbers are, what are the.So-called, you know, range of outcomes and, and expectations. So,
9:09 spk_0
well, as a former analyst, you know, uh, that crunched and put out earnings estimates, um, we’re just trying to win awards at them. I mean, that’s all, yeah, yeah, yeah, yeah, but just for earnings consistency. I mean,yeah, no, no,
9:19 spk_1
it’s a good point. I mean there used to be something called estimate dispersion which was you buy stocks or stocks that have more certain earnings estimates, you know, maybe the, I remember years ago the guy was bull on Coke would say I’m 1 cent above consensus, you know, and that.You know, and as a semiconductor analyst, I thought like I don’t know, AMD is like a random number generator. I don’t even know within 50 cents. So I think there is a certainty of achievability that should should merit a higher multiple. I think the real answer to your question is uncertainty probably means I should pay a lower multiple and so that’s the part about this rally off the lows that’s a little bit uncomfortable as we’ve, we’re paying for earnings and earning stability that we don’t have visibility on now, right? I mean, so.Sure it’s directionally better to have lower tariffs for sure, but if you kind of go where we started from to where we are now no we weren’t it’s worse than we thought. So to have a market that’s more or less absorbed all that at the market level, that’s a little surprising.
10:17 spk_0
All right, hang with us, Adam. 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. Opening bid sponsored by our friends at Vanguard, having a great chat here with Adam Parker of Trivariant Research, um, of course, the, the, the company’s founder. I liked what you wrote in your most recent note. You wrote this quote, There’s ample confusion amongst investors about what news is coming next,
10:46 spk_1
right? You know, there’s sort of an order that you get news, right? And I think the price actions first, like you can.Say that’s tautological, but like the stocks lead GDP not other way around, right? So you look at the stock prices and maybe you have to say, all right, the stocks are up a lot. What are they telling me? Maybe things are gonna be better than I thought and I shouldn’t be too negative. OK.Then what we all try to do is get the news from the companies, right, the bottom up, um, analysis. So what we do is we scour every earnings call transcript every webcast presentation. We look for all the things that we think thematically makes sense bysiders go to conferences, meet management teams, right? We have some companies that report April and earnings, and they would give you that extra little month of, of what’s happened in April, right? We’re all cons so that that’s the next thing you do.Then I think what happens is, you know, what you talk about the, the actual, um, you know, uh June end quarter earnings and guidance and, and, um, uh, analyst revisions, you know, economic news, I think the June jobs report is probably gonna be important. We have this tension between prices and unemployment and what the Fed’s gonna do.But the last thing you know, you, you, you in the sort of information flow is economic news. So like I don’t really care what the economists tell me their GDP estimate is because I know the stock relevant. Yeah,
12:06 spk_0
lot of times they’ve changed it numerous times in the past monthand a half.
12:08 spk_1
I don’t even know if economists know what already happened. Forget what’s gonna happen. Like I think that’s the challenge. And so you need an econ economist for like a framework, but I don’t think you need it for, you know, price action. So I think it’s gonna be let’s figure out really what’s happening at the company level. So obviously.You know, the quant part of what we do and, and a lot of investors do scour X and scour transcripts and scour, you know, K’s and Q’s and look for any inflections around inventory or those kindof things.
12:35 spk_0
So if, if we start to get and you know it’s kind of dovetails of what you were, we were saying earlier about the earnings first quarter being pretty good, what if we go on a stretch late May into June of bad economic data that first sign of data that.Hey, this trade war is having an effect and sure we maybe, uh, have ratcheted down the rhetoric with China, but still this stuff is starting to hurt. How do stocks react?
12:59 spk_1
Well, you know, I, I, I think most people know that we had some low, you know, kind of low port traffic already in LA like we saw a pull forward demand plus a quiet period afterwards. So I think it really depends on what economic data you’re talking about if it’s, you know,
13:13 spk_0
anotherGDP, another negative GDP, I mean that that’d be what the second.Yeah, is that a recession?
13:18 spk_1
I, I feel like investors can look through GDP a little bit. I think the jobs print matters because look, if I’ve learned anything doing doing this stuff for all these years, there’s two things that matter at all. It’s changes to the perception about growth and it’s changes to the perception about.And so if we get a weak jobs print, you know, we have to see if people’s view of the interest rate path changes. I think that’s probably important if we start seeing any uh signs that uh prices are rising on products and that gives us that weird stagflationary fear I can’t show you what data that’s good for the equity market, right? So we have to kind of look at the tension between employment.And, and pricing corporations, as far as I can tell, we haven’t seen a lot of firing, right? So you know, yeah, right. And so how does that, how much that lag
14:07 spk_0
Microsoft laying off 3% of its workforce, but it, I, it’s hard to, we’ve seen it not because oftariffs perhaps,
14:12 spk_1
but we’ve seen a few examples on Wall Street. We’ve seen a couple of businesses do it, but, um, you know, you go in and you, you mentioned, um, at the top.Here, um, alphabet, I mean, I’m sure they could fire a huge number of their employees, right? So I think that’s what we need to see is more, uh, economic data on jobs, on wage, uh, pressure, and, um, on prices.
14:34 spk_0
Uh, I’ve had a lot of strategists tell me, um, the market would like to see some rate cuts this year, but I don’t think you agree withthat.
14:42 spk_1
You know, one of the things I think was really interesting about the this last interest rate cycle, think about uh what’s what it’s called late 2022, right?If you were a, a genius, you, you had your massive shorts and Nvidia and Met on in 2022 sometime around December 30th, you covered them and went massively long for a huge rally in 203. Why, why did you do that? You did that because you said, you know what, the Fed’s closer to the end of hiking.Than they are at the beginning and so yeah, they might hike a couple more times, but that’s in the price when you saw the multiples get killed from late 21 through 2022. So part of me thinks we’re at like the other side of that right now where all right, if they start cutting now, is that because the economic news we just talked about just got much worse and then you’re psyched that it got much worse like.At some point you, you, we had two massive years of of multiple expansion because the Fed was accommodated. So I think at some point you can say, well, we’re kind of closer to the end of the accommodation cycle in the beginning. It’s just the exact logic and reverse from
15:39 spk_0
the rooting for a rate cut is almost like rooting forbad deteriorate,
15:43 spk_1
right? And I’m not.Sure we track um the relationship between Fed Fund Futures 12 and 24 months in the future and the multiples, the price of forward earnings of stocks and right now it’s the reverse of what it was in 20122, meaning I think bad news might be penalized uh by the market. We’ll see, but um I think there’s this knee jerk belief of, um, you know, cutting is gonna be great, but I think at some point at the end of the cycle.It’s not great if um.You know, unemployment’s tanking and uh you know, and, and the economy’s, you know, we don’t want to roof, right? So I think the the the bull case would be the Fed does nothing like they don’t, they don’t, they pause. I mean they don’t feel like things are dropping off enough that they have to do anything and they say, OK, well maybe we’re, maybe we are kind of like navigating our way through this and maybe even though I don’t think it makes that much sense maybe.In the distribution of possibilities we are gonna navigate through this without a big earnings hiccup and.And, and so that if you start believing that narrative more 3 months from now, how long,
16:45 spk_0
how long would a pause pause for the whole year bullish
16:46 spk_1
for stocks? I think so. I think if they pause the whole year, it means um that we kind of are in this sort of sideways economic thing as opposed to declining, and I, I would view that as bullish versus what I think could happen.
16:59 spk_0
You mentioned theJune, um, jobs report. Why that report and and does that go?Negative, is that what you’re lookingfor?
17:06 spk_1
I just think that people believe, you know, one of the things that’s, I think most wrong that I look at is I look at it all the time is this is a function on Bloomberg called WIRP. It’s how many cuts people think the probabilities at each month going forward and that moves like crazy, right? And so people’s expectations for how many cuts or or when the cutting will stop and they might hike.That really changes around the jobs report and so if you get a big kind of dub or I guess you know hawkish jobs report that could move out um the expectations for the path a lot and I think that’s the perception about change the perception about rates part that that is one of the two things that matters the most for
17:45 spk_0
investing in the lastpart of our our podcast, Adam, we always love to get hot takes from investors and let me set it up this way. I got a note from you and my bos.A couple months ago, uh, on the Mag 7 and it was at the time, I think a contrarian call. Mag 7 was still, of course, is Nvidia, Microsoft, Tesla, you name it, still trading pretty much at not peak valuations, maybe just a little off, and you were, hey, something’s off here. This is, this is not good. Well, now this space is back to lead the market. The stocks have rallied back. Do you, are you a believer in this rally?
18:16 spk_1
Yeah, I mean, you know, so yeah, February 8th we wrote a note sort of saying after, you know, liking the mag 7 the previous few years that we would kind of go underweight the mag 7, but just for context at that time the mag 7 was about 30% of the S&P 500, um, and we sort of said, OK, maybe you should own like 22, 23%. So I don’t want people to think I like,
18:36 spk_0
but then the stocks essentially they felt
18:38 spk_1
right, and they really underperformed for a while. The timing was perfect. I was lucky, you know, but you know, the rally back, I think.Look, the market really in my opinion, isn’t gonna rally without tech participating. I mean, if you go back and look at the last 20 times the SP was down 10% or more, and then what worked the three months after 19 of the 20 times tech was up in absolute terms and on average tech is the best performing. So ex Post, when you look back at the market rally, yeah, I’m not surprised tech worked, I think.The fundamentals of these businesses are probably gonna deviate some, so it’s a little bit weird to even call these things a Mach 7. I think we probably dropped that vernacular in the next year. Tesco’s not even the 7th biggest company anymore, so I think we’ll probably get rid of that. But I do think you’ll see diverging forts. I mean, look, if you see corporate action out of Alphabet or you see, you know, um, something in China with that like it just the businesses don’t seem like they have the same trajectory in.Aggregate they will grow faster than the S&P X the mag 7 so it doesn’t surprise me in an offensive risk on market like we’ve had since April 9th that they participate but um I think they’re still embedding some of the risks that I originally wrote I was concerned about primarily the higher capital spending, right? So the businesses had 8 to 10% cap to sales.For the previous 567 years and if you look at what they said their capital spending is this year, it makes them more like 14, 15% and so that means their margins are probably gonna be a problem and as one of my buddies in Boston said, I wish I’d thought of this, um, yeah, it’s hard for me to raise money for a decelerating revenue margin contraction fund.
20:14 spk_0
So right, it’s hard. Well, can, can these stocks work higher if that June jobs report isn’t good?You know, what I’m trying to think is like could this be that leadership space still that everybody went to if the economic data starts to go sour because they have a lot of cash and they’re just beasts and what, yeah,
20:30 spk_1
I, I, you know, we got them underperforming in a down tape earlier this year. I’m not sure they’ll underperform in a down tape going forward. I, I, I think they’ll probably, you know, um.Just because their overall ability to absorb higher prices is better than the market XA 7, you know, it’s just in terms of passing on pricing, etc. so.You know, I, I, I think they probably could act a little bit better and if we do get a correction.
20:58 spk_0
Uh, it was great to, uh, very much enjoy following your Adam Parker, uh, Trivarient research founder, good to see you. Do not be a stranger. Yeah, thanks. Thanks for those votes coming. Keep those big calls. Thanks for having me. All right, do, uh, stick around on, uh, the opening bid podcast. We have much more episodes coming up in the weeks and months.Ahead, but in the meantime, continue to hit us with uh those thumbs up on YouTube. Love your comments, love your feedback. It makes me better and of course keep us with those ratings, uh, coming, uh positive stars I should say on all the podcast platforms appreciate those too. And of course opening bids sponsored by our friends at opening, uh, actually at Vanguard. We’ll talk to you soon.