Jay, what are you seeing up in the markets today? And just kind of fill us in on what's been going on with you lately.

Well, we are bullish on the market.

And in fact...

You know, this year we'll see what happens because we do have the war still raging or not raging, unfortunately.

But if you just take a reasonable multiple of next year's earnings, and we still do have great earnings growth, which is what drives those ridiculously good returns in the long run, you could easily get to 9,300 next year.

We're just below 7,700.

So that's a great... you know, mid-teens type return.

when we're looking at the biggest opportunities in today's market particularly for energy and real assets what are you seeing jay hatfield

Tell us more.

Thanks, Nicole.

It's great to be back.

Well, we do think that generating income is a great strategy in that, you know, it's been kind of a tough year.

Market's up, but the war overhang has really made it, you know, a very skittish market, more rotational than straight up, as you were just discussing.

So having income allows you to not think as much about the mark-to-market, but just focus on whether the income is covering a good portion of your expenses.

And so we have two fixed income ETFs, BNDS and PFFA.

So with these, when you do asset allocation, someone who wants to be a little more, with a little less risk appetite would go into these fixed income ones? Explain why.

Now, I want to talk about... your belief when you strongly believe in an investment and the market keeps moving against you, how do you know whether you're early or whether you're just plain wrong?

Well, we do respect the technicals.

So we're aware a lot of times that, you know, hedge funds are shorting stock or, you know, right now there's a war going on.

So good example, we actually like the alternative asset manager, KKR.

Nobody else does.

And it's not timely because of the war.

So we will write some calls, although it's so far out of the money that we're really not writing any calls.

So what do you do when the market moves hard against you and you want to stay with the position, but you're realising that this could actually be stubbornness rather than conviction?

Can you talk about that?

Yes, and it is like actually remarkable that not everybody follows this.

And comes up with a lot of really strange, arguably stupid theory or not stupid, but unsupported by data views.

So and this actually works pretty much globally.

So it's just called the term premium.

So whatever the Fed funds and it could be, you know, any could be could be ECB overnight rate.

The term premium is pretty consistently, definitely for U.S. Treasury, but across all countries, about 100 base points.

Can you talk more about why you think what the Fed is doing right now is wrong?

What did the Fed get wrong and which inflation or economic indicators most strongly support your argument that it should have held rates or maybe even cut rates?

Absolutely.

We opposed the appointment of Kevin Warsh.

He was the most hawkish Fed member ever.

And you didn't have to do a lot of research to figure that out.

You could just read Wikipedia.

So we have no idea why the president nominated him other than he does have a lot of political power based here in New York.

What is driving that forecasting? Could just basically lower mortgage rates meaningfully change that trajectory that you're forecasting?

But can we talk about what's going on in France and even the subjection of Frexit?

Yeah, so what happens when central banks raise rates when they shouldn't? So they're supposed to raise rates when a core CPI is accelerating.

It's not in the US.

It's not either in Europe.

So when they raise rates when just oil prices are higher, that already has made the economy weak.

France was weak before this even started.

So they probably need to leave the Eurozone.

Why?

What is making you so confident that, uh, fiscal spending and AI CapEx aren't bigger drivers here, Jay?

Well, this, the, the main reason, although we just did a little re- research a few minutes ago, [laughs] to, because everybody in the world thinks it's hyperscaler spending, but if you did a regression or, in other words, just looked at the change in the data since two weeks before the war, we're at 4%, so we're 125 basis points lower.

Everybody knew there was gonna be heavy cap- uh, um, hyperscalers CapEx, and everybody knew the budget deficit would be roughly where it's been for 25 years, which is about 5.8% of GDP.

So the only thing that changed was the war, oil, and a hawkish response.

So any logical person would come to the conclusion that that's what's driving it.

And in fact, the expectations for Fed funds rose 125, uh, 150 basis points rather, and the 10-year only ra- rose 125.

So actually, more than 100% of the increase was caused by the hawkish Fed.

Uh, so if you do have this, uh, 8,300 target on the S&P, which I believe is around a street high now that, yeah, Denny's pulled his lower, um, assuming that the 10 year ends at 475, 5% range, what are your top picks heading into year-end here? What, what sectors, what stocks do you like?

So, uh, do you feel there are fe- outside pressures that are causing that or do you think it's, uh, they're read- reading the, the market in the wrong way? Or maybe just get some insight into that.

I mean, the way I'd characterize it is they were calling for it and then everybody else just listened to what they were saying, which is rational of course, because they are in charge.

[laughs] It's kind of silly to not, to not listen to them.

They are, um, mostly Keynesians, so they, their models, even though they broke during the pandemic, have not been revised.

So they believe in the expectations theory of inflation, which if you really think about it, the opposite is true.

If inflation expectations rise, bond yields rise, that's very restrictive.

But they do believe that, and so they remarkably say, "Well, inflation's been high for five years, so we gotta raise rates so that inflationary expectations don't get out of control." I mean, all that's complete nonsense.

And as you pointed out, you're seeing that in the housing market, it's pretty flat?

But why is Marvell specifically one that you want to buy?

Thanks, Dom.

It's great to be back.

Well, as you know, we recommended Marvell on Market Navigator in March, and it's up over 150% since then.

Now, after the announcement of the Oracle deal, it's now the largest holding in QVAL, our NASDAQ option income fund.

And the reason it is, is that that agreement is a huge game changer.

I mean, we had downgraded the stock before that when it got to 300, but this deal is enormous.

Can you view the rest of the chip trade broadly in that same way?

How much weight do you think Kevin Warsh has with this current Fed, or is he almost bound to the perils of his ancestors here?

Well, mostly the latter, but what we believe is the case and we only suspect it because we don't text with him or anything, but that he's what we call herding the cats.

So in other words, he came in to this very hawkish fed and he needs credibility with them to influence them.

If he came in or if it wasn't worse, let's say it was one of his other nominees that were viewed as just an administrative administration's pawn.

then that Fed chair would almost certainly be overruled, like he would actually have to dissent from the increase.

And it would be like, you know, three dissents and an increase.

So we believe that Warsh is coming out super hawkish.

I think a lot of people would put the blame on individuals like Warsh or Powell, but then generally they're fans of the Fed, let's say.

Dig deep, but explain really more how it works so that we get a good sense for what you're gonna be gravitating towards or gravitating away from.

Well, the first call you have to make on the macro side is interest rates, and we do, uh, actually seventy-five percent of our assets are fixed income, PFFA and BMBS.

So you do have to get the interest rate call right, and that also drives the stock market.

Um, at the beginning of the year, we were optimistic about bonds.

We saw core inflation heading below two.

And by the way, it already, it is trending towards two, even with higher oil prices.

But we have a super hawkish Fed.

Next, for Pat in Swansea, New Hampshire, Oracle Corp, ORCL.

Why, why is that?

[clears throat] Well, we think that the Fed should use real consumption and real prices instead of...

The PCE's really not meant as a price index.

It's meant to adjust for the GDP.

So it's 30% imputed, which is a fancy way of saying made up, [clears throat] and the methodology is horrendous.

So the, in fact, even the BEA understands that, and they're gonna do a revision of their two worst components, which are software-[clears throat] uh, the, um, software component, which is, uh, 21%, and, uh, the other component, which is a total 0.8.

So if they had adjusted both of those-

Okay

Do you think also it alleviated some of Wall Street's concerns going into the print about what it would say about this Google partnership with Marvel?

Well, the key factor to focus on was the guidance for fiscal 28.

They raised guidance on EPS to $30 from 25.

And so that was POSIX's last call.

It was way more of a disaster because POC 10 gave no guidance.

And so that was, but there was one disappointing element and I agree with the prior comments.

There's a lot of hedge funds in these names and they were constrained on revenue by supply.

Just talk us through all of that.

What's your take?

Thanks, Anne.

It's great to be back.

Well, there's absolutely no doubt that this Fed is super hawkish.

They want to demonstrate their independence from the administration.

Two of them are being prosecuted by the administration.

And it is true that inflation has continued to be above target.

You think there's enough there there that we could see a continuation of a pause?

But just general big picture assessment, just to start here and set the stage, what, what's standing out to you?

Thanks, Alex.

Great to be back.

Well, what we think happened in June, you know, there's no earnings.

Hedge funds kind of dominate the traders, the trading rather.

Long-term investors like us are not doing, you know, nearly that level of trading.

And we could see the chip trade get massively overdone and in our Qvol, uh, ETF, which is a income ETF, but it's, it's highly active, we have our own weightings, we took off all of our, uh, excess DRAM exposure and a lot of our chip exposure.

Mm-hmm.

Mm-hmm

... because they're massively, um, flawed, and the Fed did nothing and claimed it was transitory.

Here we have the situation where rents are flat, housing prices are flat, um, the 30-year treasury's at 680.

There's no inflation coming from the interest sensitive sectors, and we just have solely, uh, inflation coming from energy, and we completely, 100% reject the expectations theory of inflation.

Really, expectations are deflationary 'cause they raise long-term rates and tighten financial conditions.

So we think the l- Fed is living in the past, at least those that are-

[laughs]

So I didn't realize the IRGC would fire missiles at, uh, the ships right after the peace agreement.

I just want to hear what Jay Hatfield's focused on.

Thanks, Alex.

It's great to be back.

Well, we have a unique take on inflation, which has historically been extraordinarily accurate in predicting inflation.

And that is that inflation is caused by excessive money supply growth and oil prices.

So we're in the and oil prices part of that right now, but we have the advantage.

I co-founded an energy company based in Tulsa.

Do you think that's a trend that continues, or do you think there's some normalization that may happen?

But why do you maybe want to stick with parts of that momentum trade just in different aspects of it?

Great.

Thanks, Dom.

Great to be back.

Well, you know, last time we were on, we recommended Marvell.

And the reason for that was that we thought that hedge funds had overreacted to the guidance they gave.

And ironically, the exact same thing has happened with Broadcom, which is the largest overweight in QVAL, our NASDAQ income fund.

Are there any other places within the market outside of tech that you see a similar situation developing?

Yep.

So I would argue, if you had told me beginning of the year, "Okay, we're gonna have a major war.

Oil's gonna go over 100, and we're in June.

Where is the S&P?" Um, that was 6500, 7000, something like that.

So give the mar- if you're a market whisperer, you'd say, "Wow, if we're at 7400 with all this brain damage, just imagine when we get into July.

We normally have a power rally, should get up to 8000."

It's been, it stayed right there

... it's trading at 50 over.

What's going on with oil?

Well, we had the view since the war started that after the war, and we had the view also that the street would reopen.

We weren't certain how it would reopen by force.

And apparently, an article in the Wall Street Journal confirmed that they did have a plan to open it by force, thwarted by the Saudis, or by negotiation, which is how it ended up.

So we were correct.

It took longer than we had expected, but I don't think anybody could predict things like the Saudis banning use of their facilities.

So we did reopen as we'd expected.

I feel like we should touch on that because it's definitely a unique spin on where a lot of people want exposure.

So would love to open the discussion up to those two talking points.

The thing I'm constantly amazed by is how easy it is to have non-consensus but accurate projections.

So I will be sad when the dot plot goes away, because we use that as a contra indicator.

so it's always exactly wrong so these people i don't know what they're looking at but it's so so the two leading indicators of inflation both core and headline are oil prices caused almost all the inflation in the 70s up 1200 percent in oil which is hard to believe not 120 but 112 hundred percent three to thirty nine dollars but So these people who claim to be, I guess they're PhDs, but maybe that's more of a criticism than anything.

They thought we should have a rate increase.

They're not looking at the price of oil is down 25% in a month.

You don't have to be, you can be a high school economics major and forecast CPI is gonna plunge, core is gonna go down because of airline fares and other factors.

You

I'm just wondering if the worst is behind us yet or we've still got some more downside.

Well, that's a great question.

You pointed it out earlier.

We had actually held off on recommending KKR.

And the reason is exactly what you cited, that we were confident that stock was not going to work while the street was closed.

because there's fears, we think irrational fears, of a rate increase.

And that's just not good for financials.

Okay, and where else would you be sort of weighing up where to allocate if we do see a resolution to the war beyond a name just like KKR?

Why are we not seeing that same dynamic today? Is there just a suspended disbelief and people think the Fed is not going to allow inflation to happen and therefore it's not happening? Or what's preventing that spillover right now in your view?

Well, there's two or three dynamics there.

The first is that was an unimaginable increase in oil prices.

So it's 1,200%.

And I always have to say not 12, not 120, but 1,200%.

So it's like oil went from 60 to like $800 a barrel.

So it was purely insane.

behind lowering the rates? Is it just lower rates are better? If we can bring the tenure down, lower our overall debt service, that's just better? Is there any flip side concern

And

you're not supposed to have a favorite child, but I'm the most excited about this ETF.

Specifically, I'm really excited for the reason we already discussed, which is I love income, but I also want total return.

And so it's kind of frustrating when you have like PFFAs, preferred stocks, and AMZA, but all anybody really wants to talk about is tech stocks.

I'm from Silicon Valley, so...

I always give them tech names and not our ETS.

So finally we can participate in this wonderful growth, probably the best, biggest tech boom ever.

When it comes to the options that you guys do set up, is there a certain amount of days to expiration or amount over the money or out of the money that you guys look for? Or is it case dependent?

With your wonderful foundational economics, the heart and soul of this is, for whatever reason, a buoyant nominal GDP, which starts with okay revenues at least, right?

Mm-hmm.

Absolutely.

Although it's important to, to note that you don't need super strong GDP to get earnings growth.

Earnings growth comes from retained earnings and strong return on invested capital.

So most analysts are too negative about earnings, 'cause they say, "Oh, well, GDP's only 1%," so it doesn't really require a really robust economy.

How do you view inflation, uh, here? Is it, you know, to use a word that people don't like anymore, transitory? Is there something more fundamental out there, do you think?

Well, there's two critical leading indicators of inflation.