Speaker 1: On this episode of newts World, I'm talking with Anthony Esposito,
Speaker 1: founder and CEO of Island Capital, co host of the
Speaker 1: Policy and Profits podcast about the recent stock market volatility,
Speaker 1: the Federal Reserve, and the tariffs, and as you can imagine,
Speaker 1: it's hard to be more relevant right now than those Anthony,
Speaker 1: welcome and thank you for joining me a newts World.
Speaker 2: Mister speaker, thank you so much for having me. It's
Speaker 2: a pleasure to be here.
Speaker 1: So, given your experienced background, how do you see the
Speaker 1: current situation in the stock market.
Speaker 2: The current situation in the stock market, and I was
Speaker 2: pretty vocal about this back in December and January. I
Speaker 2: write a morning note where I was very vocal about it.
Speaker 2: I was out on some TV hits and out on.
Speaker 3: The podcast as well.
Speaker 2: We were seeing an overextended, over leverage stock market coming
Speaker 2: into December January. My technical model and I run a
Speaker 2: technical top down model here, so I'm not looking at fundamentals,
Speaker 2: I'm not looking at earnings reports. I'm really watching price
Speaker 2: momentum and trend I was watching those indicators in my
Speaker 2: model break down, and for the first time in a while,
Speaker 2: it was breaking down on not only my daily count
Speaker 2: so that would be the quicker trade, but it was
Speaker 2: breaking down on the weekly and the monthly count, so
Speaker 2: the daily count quicker and more active, but also intermediate
Speaker 2: and longer terms. I was seeing what I was started
Speaker 2: to call in January as a topping pattern, which typically
Speaker 2: would occur as bull markets end and bear markets begin.
Speaker 2: That is exactly what we saw now. I know the
Speaker 2: headlines become interchangeable, and tariffs are a major headline, and
Speaker 2: this is a major discussion as it creates a lot
Speaker 2: of questions moving forward for the markets, for earnings, for investments,
Speaker 2: for the economy. But I would say that right now
Speaker 2: we are moving through the beginning phase of a bear market.
Speaker 2: I think we took that twenty one percent down move
Speaker 2: or so in the SMP cash and now we're kind
Speaker 2: of seeing some volatility which is extremely emotional and attached
Speaker 2: to again topics like the tariffs, and we are heading
Speaker 2: into earnings and so on and so forth. But I
Speaker 2: see the market as running its course through a bear
Speaker 2: market which started at a peak of about sixty one
Speaker 2: point fifty, just above sixty one hundred on the S
Speaker 2: and P five hundred, and I see us in a
Speaker 2: process of moving down towards forty two hundred or thirty
Speaker 2: seven hundred on the SMP, in which that process we'll
Speaker 2: see a ton of volatility, very aggressive bear market rallies,
Speaker 2: which is nothing new, and some really heavy selling on
Speaker 2: days where the headlines don't work or where you have
Speaker 2: managers or hedgers just unwinding positions.
Speaker 1: How much of this do you think was sort of
Speaker 1: baked in no matter who won they and how much
Speaker 1: has been made deeper by Trump's activity, particularly on terrifs.
Speaker 3: That's a great question.
Speaker 2: I think, broad stroke, the market was ready and poised
Speaker 2: to fall regardless of who won, and I think a
Speaker 2: lot of that had to do with the policies of
Speaker 2: the previous administration. And what I mean by that is
Speaker 2: we had a GDP growth, a nonfarm payrolls growth, and
Speaker 2: a market that was basically supported by government spending, and
Speaker 2: that in and of itself was a kfab. It was
Speaker 2: a complete smoke screen if you look at the percentage
Speaker 2: of jobs created that were directly or indirectly funded by
Speaker 2: the government, or were direct government jobs.
Speaker 3: If you look at GDP growth.
Speaker 2: As direct payments from the government, you were looking at
Speaker 2: about eighty percent of the jobs created were either funded
Speaker 2: by the government or low paying services jobs. That's not
Speaker 2: where we want to be. And the adjustments down upwards
Speaker 2: of a million jobs at the end of the year
Speaker 2: that were never created that were reported. If you look
Speaker 2: at GDP growth, we were looking at fifty to sixty
Speaker 2: percent of GDP growth directly or indirectly funded by the government.
Speaker 2: That was debt creation, that was tax dollars. So not
Speaker 2: only is that not real growth supporting the market right,
Speaker 2: supporting growth and earnings, but it's also extremely inflationary, which
Speaker 2: is exactly what we saw. You can also go into
Speaker 2: consumer spending, which is a driver of earnings for the
Speaker 2: S and P five hundred, consumer spending was also being
Speaker 2: driven by transfer payments from the government. So we had
Speaker 2: an administration that hid the fact that we were actually
Speaker 2: weakening as.
Speaker 3: Far as GDP growth, that we were.
Speaker 2: Weakening as far as manufacturing jobs, which have been technically
Speaker 2: intercession for two years, and they hid that by spending overspending,
Speaker 2: printing money, taking on more debt, and actually weakening our
Speaker 2: position as they said or tried to present us as
Speaker 2: we were in a stronger position. What that did is
Speaker 2: it created a floor or a put for the market
Speaker 2: and everybody played a long from the twenty twenty two
Speaker 2: lows through the twenty twenty five highs, we saw a
Speaker 2: narrative of AI, a narrative of continued growth. Really pump
Speaker 2: through the markets and keep those models running and keep
Speaker 2: that narrative moving when under the cover, we had really
Speaker 2: seven names that were carrying the entire SMP five hundred,
Speaker 2: and it was on a narrative that was really falling apart.
Speaker 2: So the market, regardless of who one was poised to fall,
Speaker 2: we were overvalued, we were overlevered, and the breadth was
Speaker 2: extremely narrow. Now, what I would say is as we
Speaker 2: come out of the election and we head into this
Speaker 2: tariff conversation, which is the Trump conversation. Remember we had
Speaker 2: that massive rally coming out of the election. Everyone ready
Speaker 2: for President Trump, for America first, for true growth, for
Speaker 2: a restructuring. But it's kind of like you don't realize
Speaker 2: the pain that you may need to go through to restructure.
Speaker 2: We have decades of problems to fix here in our
Speaker 2: trade deficits, which I think is the real tariff conversation.
Speaker 2: Our trade deficit conversation is a fifty sixty seventy year
Speaker 2: old conversation and that takes time to fix. So where
Speaker 2: the market would have fallen anyway with a Harris administration,
Speaker 2: I think it would be falling into a bottomless pit.
Speaker 2: The market falling with the Trump administration is kind of
Speaker 2: the grime through the cleanup of the problems left to him.
Speaker 2: And I've made this joke and I'll say it because
Speaker 2: I think it makes sense. You know, clean up on
Speaker 2: Aisle seven. We're trying to get from the Biden administration
Speaker 2: over to the Trump administration policies. So the process of
Speaker 2: fixing and changing policy to seeing the effect of the
Speaker 2: policy is messy, and the risk markets the stock market,
Speaker 2: that's the mop. So as you're cleaning up the mess,
Speaker 2: all the dirt, all the grime, all the chaos is
Speaker 2: going to be in the markets. You're going to see
Speaker 2: it every day on the headlines. You're going to see
Speaker 2: it in the newspapers, You're going to hear it on
Speaker 2: the news.
Speaker 3: But at the end of the.
Speaker 2: Day, we're heading to a better spot under the Trump administration,
Speaker 2: whereas the Harris administration, I think we would have been
Speaker 2: heading into a bigger mess, and we would you did
Speaker 2: quite a few moths, so the sell off was coming,
Speaker 2: But I think the pain that we're going through will
Speaker 2: be productive in the end.
Speaker 1: I'm curious to get your reactions. I tell all of
Speaker 1: my friends, don't look at your stocks until August of
Speaker 1: twenty twenty six. You're just gonna have turmoil and you're
Speaker 1: gonna get heartburn. But sometime around the summer of twenty six,
Speaker 1: my personal belief is that the investment boom and the
Speaker 1: various things will all begun to hit and all of
Speaker 1: a sudden, my guess is the end of the bear
Speaker 1: market will be in the spring an early summer of
Speaker 1: twenty six. What's your reaction just to that observation.
Speaker 3: I think that you're pretty much spot on.
Speaker 2: I love your thought on the investments actually starting to
Speaker 2: take off.
Speaker 3: So I've said previously that.
Speaker 2: The investments that were the onsharing of manufacturing, the onshuring
Speaker 2: of investments, and we've seen trillions of dollars coming in
Speaker 2: and be committed. Those, if you notice, those became the
Speaker 2: secondary tertiary headlines and everything became the tarre corf.
Speaker 3: President Trump is crazy.
Speaker 2: We're kind of reverting back to the same old tantrums
Speaker 2: that we had. But what I believe will happen to
Speaker 2: your point, mister speaker is as we come through the
Speaker 2: mess of the cleanup and the clouds kind of clear,
Speaker 2: we're going to realize that there is a massive amount
Speaker 2: of reinvestment on sharing and new investment in the country.
Speaker 2: And what that will do is that will create a
Speaker 2: v spike recovery and economic growth in this country, in
Speaker 2: jobs growth in this country. I think the market will
Speaker 2: be absolutely on fire now. I say that, I think
Speaker 2: super insightful. I love the point you're making. I say
Speaker 2: that as an individual who's running a portfolio here under
Speaker 2: Island Capital, we are actually up thirty eight percent year
Speaker 2: to date as of this minute. I've been ahead of
Speaker 2: this and I'm really happy being short or long.
Speaker 3: For me, I don't care which way the market goes.
Speaker 2: My model doesn't care, which is kind of why I'm
Speaker 2: a technician and a CMT, and I like to look
Speaker 2: at my models, my signals. I can basically work in
Speaker 2: a vacuum and the price and price action, along with
Speaker 2: trend and momentum, will tell me what's going on. I
Speaker 2: know if the news is good or bet or if
Speaker 2: the market looks at it as good or bad.
Speaker 1: Are you significantly into gold? I have.
Speaker 2: Gold is one of my five main areas or sectors
Speaker 2: of investment.
Speaker 1: Yes, it's good because that has really gone way up.
Speaker 3: It has it has.
Speaker 2: I actually had a call out in gold to just
Speaker 2: be perfectly upfront on December twenty seventh, as gold was
Speaker 2: breaking above twenty six hundred, I put out in my
Speaker 2: morning note, which is typically just the S and P
Speaker 2: five hundred. I keep it very simple. It's not my
Speaker 2: full model or my full universe. Everyone watches the stock market,
Speaker 2: so I write on the S and P five hundred.
Speaker 2: I put out a strong buying gold and called for
Speaker 2: three thousand. It's been an absolute charm of the contribution,
Speaker 2: the attribution in the portfolio.
Speaker 3: As far as gold goes, I can't complain about.
Speaker 2: It has gone way beyond three thousand and way faster
Speaker 2: than I expected. But it's kind of worked with negative
Speaker 2: correlation to the market right as we've seen this fear really.
Speaker 3: Flow into the market quickly.
Speaker 2: With this massive draw down, we've seen a real rush
Speaker 2: into gold and into not only individuals buying gold and
Speaker 2: funds buying gold and retail buying gold, but more importantly,
Speaker 2: the sovereigns have been all over the gold purchase and
Speaker 2: chasing it up. So phenomenal move, and I think for
Speaker 2: all intents and purposes, we could seek some consolidation lower
Speaker 2: to the three thousand level, but I think it actually
Speaker 2: has more room to go to the upside.
Speaker 1: One of the things I did notice is that the
Speaker 1: ten year treasury got to four point four to one percent,
Speaker 1: which I think partly tells you how much challenge they
Speaker 1: have in placing all the bonds. But how do you
Speaker 1: interpret where the trail renoes are at and what the
Speaker 1: federal reserves should be doing.
Speaker 2: So the move in the treasuries is interesting. I'm not
Speaker 2: sure whether it's a structural change in the debt market
Speaker 2: or whether it was part of a bigger unwind of
Speaker 2: what's called a basis trade in fixed income and in
Speaker 2: the treasury. So the basis trade, essentially is you have
Speaker 2: a trade which is trying to make money, and it's
Speaker 2: a massively levered trade on Wall Street, and some of
Speaker 2: the largest multistret funds are in the trade. Significantly, you
Speaker 2: are essentially trading the basis of the ten year or
Speaker 2: the bond versus the futures out on the curve, and
Speaker 2: you're trying to make very little spread on a massive
Speaker 2: amount of investment and that's where the leverage comes from,
Speaker 2: and that's where the trade unwind becomes that important. We've
Speaker 2: seen the tenuere now spike from four percent back up
Speaker 2: towards four point four.
Speaker 3: The investors that were in or the traders.
Speaker 2: In that trade were long the bond and they were
Speaker 2: shortening the curve out and trying to make that spread.
Speaker 2: So now to unwind that trade, they need to sell
Speaker 2: the bond. As they sell the bonds, that spikes yields
Speaker 2: higher because there's an inverse relationship between price and yield.
Speaker 2: So I think part of the spike we've seen back
Speaker 2: up from four to four point four to four point
Speaker 2: three today has been the unwind of that trade. I
Speaker 2: think that that will settle back in and the ideas
Speaker 2: it'll stay between four and four and a half percent,
Speaker 2: I think it'll actually come in lower. I think with
Speaker 2: a change in some regulations and a change in the
Speaker 2: offering of the duration by the Treasury, I think that
Speaker 2: we will probably get more demand into the ten year
Speaker 2: and will pull that ten year yield down, which is
Speaker 2: something that Secretary Besson has spoken about and I was
Speaker 2: actually very happy to hear him speak about a month
Speaker 2: or two ago closer to two months ago.
Speaker 3: Because the real cost.
Speaker 2: Of borrowing in this country is not correlated or directly
Speaker 2: related to the FED and the FED funds rate. That's
Speaker 2: the headline number. That's the thing that the stock market
Speaker 2: is constantly chasing, and the FED has been very happy
Speaker 2: to be somewhat artificially supportive of the market, and which
Speaker 2: is not their role. The tenure yield will determine more
Speaker 2: directly the cost of the thirty year fixed the cost
Speaker 2: of a car loan, what you pay on your credit
Speaker 2: card bills, what you can go and get a loan
Speaker 2: at the bank, a personal loan at So this is
Speaker 2: really should be the focus.
Speaker 3: In my opinion.
Speaker 2: Secretary Besson is the first Treasury secretary of the first
Speaker 2: member of any administration to speak about the tenure yield
Speaker 2: in realistic terms versus the FED funds rate. So I
Speaker 2: think that the tenure yield will come in. I think
Speaker 2: there will be more support for the bonds, and I think,
Speaker 2: in my view, we'll see the tenure yield closer to
Speaker 2: three and a half percent, which will be beneficial for
Speaker 2: everyone as far as economic growth, and also benefit the
Speaker 2: refinancing of debt for the government, which is a major
Speaker 2: issue the FED right now, if you'd like me to
Speaker 2: kind of shift gears and go to the FED, I'm
Speaker 2: not happy with and I've been vocal for whoever's listening
Speaker 2: with mister Powell. The idea of him being independent or
Speaker 2: not independent, or an independent FED or not an independent
Speaker 2: FED has nothing to do with President Trump. I think
Speaker 2: mister Powell has shown himself to be very politicized and
Speaker 2: very biased. He has not performed well in his role.
Speaker 2: And I can go back to twenty eighteen and speak
Speaker 2: about some of his rate decisions and asset purchasing decisions,
Speaker 2: balance sheet decisions which have been very questionable, but most pointedly,
Speaker 2: to cut rates by fifty basis points, which was almost
Speaker 2: an emergency measure in September heading into an election, and
Speaker 2: then two more cuts of twenty five basis points was
Speaker 2: clearly political. There was no reason to do that for
Speaker 2: a FED that's quote unquote data dependent. We saw a
Speaker 2: chair that was really making decisions that was a contrary
Speaker 2: to what a lot of members of the committee were saying,
Speaker 2: and b made no sense. And now that President Trump
Speaker 2: is in office, he came out on the sixteenth and
Speaker 2: said he is not supportive of rate cuts. They don't
Speaker 2: see any issues there on their hands. They have nothing
Speaker 2: to do like his view and his actions are so
Speaker 2: illogical and so badly timed that the idea that he's
Speaker 2: not political or should still be in that role is
Speaker 2: actually crazy to me, To be perfectly honest, in.
Speaker 1: The old days, the job of the Fed was to
Speaker 1: protect the dollar. We then passed the Humphrey Hawkins Bill,
Speaker 1: which said, oh, and they also was supposed to worry
Speaker 1: about unemployment, which I think made them schizophrenic. And I
Speaker 1: think we'd be much better off to go back and say,
Speaker 1: your number one job is to create a stable dollar
Speaker 1: and to take the steps necessary so that if I
Speaker 1: have a dollar this year, it'll be worth a dollar
Speaker 1: in ten years, and that would be a very dramatic
Speaker 1: change from where we've been.
Speaker 2: I agree with that, and I think that they are
Speaker 2: a major piece of that puzzle. I think that the Treasury,
Speaker 2: the amount of debt that was created under again Janet
Speaker 2: Yellen's watch, where Powell was completely silent. He had nothing
Speaker 2: to say about it, and in fact he said when asked,
Speaker 2: I don't comment on fiscal policy. Well, that stance has
Speaker 2: now changed since the administration has changed, but we'll leave
Speaker 2: that be for him to watch Janet Yellen create upwards
Speaker 2: of sixteen trillion dollars in debt under her watch and
Speaker 2: not have any idea where inflation came from, and then
Speaker 2: say as President Trump takes office, oh, I know where
Speaker 2: inflation comes from. Now it's President Trump and the tariffs.
Speaker 2: This is the problem. As Janet Yellen waved on the
Speaker 2: way out the door and said, hey, you guys might
Speaker 2: have a debt issue like these are the things that
Speaker 2: make me laugh. I think the FED would be better served, yes,
Speaker 2: focusing on price stability, and the idea would be that
Speaker 2: with price stability, employment will follow. The system does work,
Speaker 2: the ecosystem works. I think the FED is confused in
Speaker 2: their role overall and how to accomplish their goal. And
Speaker 2: I would add to that, mister speaker, that when I
Speaker 2: listened to mister Powell and miss Yellen speak about the
Speaker 2: environment the ozone equity in their deliveries, not that those
Speaker 2: things are are not important to me. I won't get
Speaker 2: into that, but it's not part of your mandate. This
Speaker 2: is not the ball that you need your eye on.
Speaker 2: I think they really have lost their way. So a
Speaker 2: Secretary Bessett now at the Treasury is a great change
Speaker 2: of pace. I think that the FED, to your point,
Speaker 2: would be well served to focus on price stability and
Speaker 2: the dollar.
Speaker 1: I think Bessett is far and away both the most
Speaker 1: technically competent and the most stable member of Trump's team,
Speaker 1: and I think that he probably will carry us through
Speaker 1: all the tariff negotiations and all the challenges with remarkable skill.
Speaker 1: He strikes me as a very, very competent person.
Speaker 3: There's no question.
Speaker 2: I've actually referred to him often, most recently with poise.
Speaker 2: I'm from his world, and I understand what he's trying
Speaker 2: to accomplish and how he's trying to accomplish. Its a
Speaker 2: massive amount of knowledge, and he has superb poise, which
Speaker 2: is something that we've been missing certainly in the last administration.
Speaker 3: I mean, called a free for all is probably kind.
Speaker 2: His poise and his expertise are just exactly what we
Speaker 2: need here, and I'm very very happy.
Speaker 1: The big bold challenge of all this is the effort
Speaker 1: on tariff's what's your reading on that?
Speaker 2: So the broad stroke for me on tariffs is it
Speaker 2: is a conversation well overdue. We have a massive trade
Speaker 2: deficit issue, and I think that's more the issue than
Speaker 2: the actual tariff conversation.
Speaker 3: I think it's a very difficult.
Speaker 2: Problem to fix, as is any problem that's developed on
Speaker 2: a global stage over decades. But I think that all
Speaker 2: of the efforts being put forth by the Trump administration
Speaker 2: are certainly well thought out and well planned, regardless of
Speaker 2: how they appear, and we'll put the United States in
Speaker 2: a better position as we move through the resolution. I
Speaker 2: don't know exactly what the tariff rates become, but I
Speaker 2: do know that with our trade deficit at negative three
Speaker 2: to four percent of GDP, what we're essentially doing and
Speaker 2: have continued to do, is we've transferred our economy from
Speaker 2: a manufacturing economy to a consumption economy, and by doing that,
Speaker 2: we're sending US dollars overseas. So that trade deficit is important.
Speaker 2: It's not that it's not important, and we're part of
Speaker 2: this beautiful global world trade organization where we're all happy
Speaker 2: and healthy.
Speaker 3: When you send.
Speaker 2: Dollars overseas, you're basically handing over our wealth to foreign nations.
Speaker 2: You're giving them investment funds in the United States for
Speaker 2: them to come back and buy us assets, whether those
Speaker 2: are art assets in real estate, whether those are treasuries,
Speaker 2: whether that's interest in our stock markets or our companies.
Speaker 2: We are essentially transferring wealth away at a rate that's
Speaker 2: not healthy. A three to four percent of GDP trade
Speaker 2: deficit is not where we want to be, and we
Speaker 2: don't want to be purely a consumption economy. If we
Speaker 2: look at China on the other hand, which is really
Speaker 2: a manufacturing economy and not a consumption they're not consuming
Speaker 2: nearly what they manufacture and send out. I think the
Speaker 2: point to the entire trade deficit tariff conversation brings us
Speaker 2: to a place where we're reducing our trade deficit. We're
Speaker 2: raining US dollars back into the country, and to your point,
Speaker 2: mister speaker, strengthens the dollar. We don't want a slush
Speaker 2: of dollars out across the globe or within the domestic
Speaker 2: United States. That's not healthy for the dollar. That doesn't
Speaker 2: create a stronger dollar, creates a weeker dollar. We want
Speaker 2: to rain dollars in, and we like a country like
Speaker 2: China to balance their economy with ours if they become
Speaker 2: a little bit more of a consumer and reduce manufacturing,
Speaker 2: because we've now on short manufacturing and we become a
Speaker 2: little bit more manufacturing, which is where we should be
Speaker 2: and what we are good at, we are the best.
Speaker 2: That starts to create more of a balance. And I
Speaker 2: would say that if not to pick on China, but
Speaker 2: if countries like China abided by the rules of the
Speaker 2: WTO and actually played a fair game as far as
Speaker 2: intellectual property, as far as barriers, we would be globally
Speaker 2: in a better place. I think that not only globally
Speaker 2: in a better place, but the United States would be
Speaker 2: in a stronger, better place, which is the goal of
Speaker 2: the administration and the goal of the conversation. It's not
Speaker 2: a random argument, it's not random numbers. The tariff conversation
Speaker 2: and the trade def as a conversation for President Trump
Speaker 2: is something he's been talking about for forty years, and
Speaker 2: it's part of a bigger puzzle, and it's part of
Speaker 2: a solution to a bigger problem which ties right back
Speaker 2: into fiscal policy, monetary policy. What our manufacturing levels are,
Speaker 2: our consumptions levels are, the strength of the dollar, inflationary pressures,
Speaker 2: They're all connected. I think the conversation is a hard one,
Speaker 2: but one that we need to have, and we need
Speaker 2: to work through this process to become truly strong and
Speaker 2: truly better and see real growth here once again.
Speaker 1: As it struck you that we're seeing a lot more
Speaker 1: coverage of tariffs and almost no coverage of the scale
Speaker 1: of the announced investments. There are two Swiss pharmaceutical companies
Speaker 1: between them have announced ninety billion dollars in investments in
Speaker 1: the US, just those two companies, And every time you
Speaker 1: turn around there's either an auto company or there's in
Speaker 1: videos now putting hundreds of billions in. It seems to
Speaker 1: me that that in the long run may actually be
Speaker 1: a bigger story than the tariffs.
Speaker 2: I absolutely agree with that, and definitely in the long run. Right,
Speaker 2: So this is what we were talking about before, where
Speaker 2: the pain of fixing our trade deals and fixing the
Speaker 2: policies that were in place prior will end. But then
Speaker 2: we're going to see this massive spike in real growth
Speaker 2: in this economy, in real growth in the market. It
Speaker 2: does not surprise me that the focus has been on
Speaker 2: the negatives of tariffs. It does not surprise me that
Speaker 2: there's a pylon the idea that there are so many
Speaker 2: in the world, but more specifically in this country, that
Speaker 2: would rather see the negative headline and a failure on
Speaker 2: the part of the Trump administration rather than see the
Speaker 2: Trump administration because of the fact that it's President Trump's
Speaker 2: administration succeed is a said commentary on where we stand
Speaker 2: as a nation. If this were flipped and it was
Speaker 2: the Harris administration creating all this turmoil, but working towards
Speaker 2: what they say is a better economy and more productive
Speaker 2: growth and fairer trade deals, we would see complaints, but
Speaker 2: we would not be seeing such lopsided reporting on what's
Speaker 2: going on. Again, there's a bigger picture here, and I
Speaker 2: give President Trump a lot of credit for ignoring a
Speaker 2: lot of the noise and grinding through, because at the
Speaker 2: end of the day, they are reporting negatively on everything
Speaker 2: that's going on, and we don't.
Speaker 3: See the positive reports that are there.
Speaker 2: What will end up nipping them in the butt, as
Speaker 2: it always does, is when the tide goes out and
Speaker 2: we see what's really there, we will be in a
Speaker 2: better position. GDP growth will be stronger, the dollar will
Speaker 2: be stronger, the markets will be healthier, and employment numbers
Speaker 2: will be better. And this is why the country voted
Speaker 2: for President Trump and brought him back into office. The
Speaker 2: negative reporting, I can go one further for you. The
Speaker 2: negative reporting just on Tesla's earnings alone was absolutely insane,
Speaker 2: even from Wall Street analysts calling for the company. Now,
Speaker 2: all of a sudden, Tesla is they're in a make
Speaker 2: or break spot. There are red flags everywhere. This is
Speaker 2: a reb old story, a rebuilt story. This is a
Speaker 2: company that made nineteen billion dollars in the first quarter.
Speaker 2: This is a company they're the only fully US made
Speaker 2: car company in the world. Premiere technology, premiere electric vehicle.
Speaker 2: Five years ago, Elon Musk was going to put civilization
Speaker 2: on Mars. He was the darling of the left and
Speaker 2: then came out and said, hey, I believe in free speech,
Speaker 2: I believe in the Constitution, I believe in a strong border,
Speaker 2: and I'm a patriot, And all of a sudden he
Speaker 2: became the red headed stepchild. So even there, the negative
Speaker 2: coverage of Tesla by analysts that have had buy and
Speaker 2: outperform ratings for five years on the stock was so
Speaker 2: biased and so transparent it's illogical.
Speaker 3: I just don't know what to say about it anymore.
Speaker 3: It's just noise.
Speaker 2: Doesn't surprise me that they want everything to look bad.
Speaker 2: But at the end of the day, President Trump, the
Speaker 2: administration of doing the right things.
Speaker 1: What struck me watching Tesla over the years, is Tesla's
Speaker 1: actually an information company with because the sheer volume of
Speaker 1: data they're generating is so enormous that as you get
Speaker 1: into artificial intelligence and you're looking for databases on which
Speaker 1: your new artificial intelligence can train itself, Testa is going
Speaker 1: to have an enormous advantage and just the sheer volume
Speaker 1: of real data about the real world because their data
Speaker 1: is not just theoretical. I don't know if that fits
Speaker 1: at all your vision. I think of them as a
Speaker 1: very interesting and very different long term play.
Speaker 2: I agree with you one hundred percent, and I think
Speaker 2: that's a great view and another angle to look at
Speaker 2: the company. I mean not only an information company, as
Speaker 2: you said, or a data company. But you're looking at
Speaker 2: the battery technology, You're looking at reusable renewable technology. Now,
Speaker 2: you're looking at AI robotics. Like the company is just
Speaker 2: beyond exceptional.
Speaker 3: Now.
Speaker 2: I don't invest here in individual names. I'm in the
Speaker 2: future space and I am macro top down, but I
Speaker 2: would say that Tesla as the street has turned negative
Speaker 2: and had been pressing the name for clearly political issues,
Speaker 2: which is insane to me. I think Tesla right now
Speaker 2: is probably at one of the most attractive levels. It's
Speaker 2: a very attractive entry level for the name, and ironically
Speaker 2: it's when the street has turned and is calling the name,
Speaker 2: you know, on the brink of extinction. It's just insane
Speaker 2: to me. But the company has a lot going for it.
Speaker 2: And look Elon Musk, he's so highly functioning that this
Speaker 2: whole play was to pull him from Doge.
Speaker 3: They wanted him out because they feel like he is
Speaker 3: the tip of the.
Speaker 2: Spear in uncovering the waste, fraud and abuse. So maybe
Speaker 2: they accomplish their goals. As he announced it in the
Speaker 2: earnings culture as of May, he would be stepping back.
Speaker 2: I think he leaves a capable team in place, and
Speaker 2: I think that that's irrelevant. The company, yes, to your point,
Speaker 2: is multifaceted. There's a ton there, led by one of
Speaker 2: the all time geniuses in history.
Speaker 3: You can't really argue that point.
Speaker 1: People don't notice. But SpaceX continues to grow and evolve,
Speaker 1: Starlink continues to grow and become more profitable. Neuralink may
Speaker 1: have breakthroughs that are extraordinary within the next year. I
Speaker 1: tell people he's sort of a cross between Henry Ford
Speaker 1: and Thomas Edison. I mean, the sheer scale of his
Speaker 1: ability to think things through is really pretty bizarre. You
Speaker 1: don't see these things more than once or twice in
Speaker 1: a century.
Speaker 3: Agreed.
Speaker 2: I love the fact to that point exactly, that the
Speaker 2: analysts are saying, well, he's taking too much time on Doge,
Speaker 2: he's not paying attention to Tesla.
Speaker 3: He's running five five massive companies. No one has a
Speaker 3: problem with it.
Speaker 2: But he steps into Doge and he's working with President Trump.
Speaker 2: All of a sudden, he can't do that. That one
Speaker 2: ship was one too many on the board. He's not
Speaker 2: going to be able to handle this.
Speaker 1: In general, what are you telling your clients about the
Speaker 1: markets right now?
Speaker 2: My clients understand that my view for the intermediate term
Speaker 2: and longer term here is that we have lower lows
Speaker 2: to make before we recover and start to move higher
Speaker 2: from our previous peak. With that said, my technical model
Speaker 2: is giving me a positive, a neutral, or a negative
Speaker 2: on all of my asset classes in the universe. The
Speaker 2: investors know that we may not be participating on these
Speaker 2: rallies as we're seeing today, but I am more inclined
Speaker 2: to be selling my negative calls because that's the greater.
Speaker 3: Move for me. These moves will reverse quickly.
Speaker 2: For as aggressive and attractive as they are, they will
Speaker 2: reverse quickly to the downside. So they understand that we
Speaker 2: are basically playing the market flat to short until our
Speaker 2: downside targets are achieved, and then we'll start to play
Speaker 2: the market on the recovery. And again with that v
Speaker 2: spiked recovery, where those investments are now acknowledged and starting
Speaker 2: to take hold, I'll start to turn and I'll see
Speaker 2: my intermediate and long term signals start to flatten out
Speaker 2: and become more bullish, and then I can start playing
Speaker 2: the daily trades higher. I've been playing the market flat
Speaker 2: to short since December, and I can tell you that
Speaker 2: for the year to date, we're up going on forty
Speaker 2: percent now, So the investors are happy. I'm happy, and
Speaker 2: I think that there's a way to make money in
Speaker 2: both directions as long as you can look at the
Speaker 2: market objectively and have a process that works, which thankfully
Speaker 2: I do. The problem that investors run into and funds
Speaker 2: run into is they're trying to manage on a fundamental
Speaker 2: model which is broken, so then they grasp at straws
Speaker 2: because there is no earnings growth. You don't know what
Speaker 2: the numbers are going to be. You don't know what
Speaker 2: the guidances and the model falls apart. So for me,
Speaker 2: investors understand right now, I am neutral to varish. I'm
Speaker 2: not chasing these rallies. I'm a seller of these rallies.
Speaker 2: But when my model tells me, Okay, the dust is
Speaker 2: cleared and we've bottomed, and I may be in a
Speaker 2: month to a quarter behind that, I may not jump
Speaker 2: in as soon as there's a turn. But they realize
Speaker 2: they'll start to see on the monthly quarterly statements to
Speaker 2: long exposure as this thing bottoms out and my model's
Speaker 2: telling me it's time to start to take some long exposure.
Speaker 1: You're certainly very smart and you certainly know a man
Speaker 1: some mount about the economy. How can people get your newsletter?
Speaker 2: So my newsletter is out at Islandcapitalinvestments dot com.
Speaker 3: It's a free newsletter.
Speaker 2: You can see all of my deck, my investment process,
Speaker 2: and you can sign up for free for the newsletter there.
Speaker 2: I'm also on exit at CMT Underscore Anthony, that's Charted
Speaker 2: Market Technician Underscore Anthony. I have all of my media
Speaker 2: out there. I have the podcast out there with Ejantoni
Speaker 2: Policy and profits. The newsletters posted every morning and then
Speaker 2: as I see something during the day, I may throw
Speaker 2: something out just to give a heads up, but I'm
Speaker 2: definitely out there. The information is free. I like to
Speaker 2: share that information and be open with it. I'm actually,
Speaker 2: mister Speaker going through a cap raise effort now and
Speaker 2: a restructuring of the fund, so hopefully in the next
Speaker 2: three to four months, I'll be launched in a different form,
Speaker 2: potentially with a different name, but it'll all flow back
Speaker 2: towards Island Capital Investments DO and at CMT Underscore.
Speaker 1: Anthony, I must say this has been very impressive. I mean,
Speaker 1: I really appreciate your knowledge of the market and your
Speaker 1: candor and the model that you use. I want to
Speaker 1: thank you for joining me. I do encourage our listeners
Speaker 1: to check out your website at Islandcapitlinvestments dot com, which
Speaker 1: I'll tell you flatly I am going to sign up
Speaker 1: for this afternoon because I very much agree with your
Speaker 1: general approach to the economy and thank you for joining us.
Speaker 3: Thank you for having me as an absolute pleasure.
Speaker 1: Thank you to my guest, Anthony Esposito. You can get
Speaker 1: a link to his company website, Islandcapital investments on our
Speaker 1: show page at newtsworld dot com. Newsworld is produced by
Speaker 1: Gaglish three sixty and iHeartMedia. Our executive producer is Guarnsey Sloan.
Speaker 1: Our researcher is Rachel Peterson. The artwork for the show
Speaker 1: was created by Steve Penley. Special thanks to the team
Speaker 1: at Ginglishtree sixty. If you've been enjoying new World, I
Speaker 1: hope you'll go to Apple Podcast and both rate us
Speaker 1: with five stars and give us a review so others
Speaker 1: can learn what it's all about. Right now, listeners of
Speaker 1: Newtsworld can sign up for my three free weekly columns
Speaker 1: at gingrichree sixty dot com slash newsletter. I'm newt Gingrich.
Speaker 1: This is Newtsworld.