CIO Scott Martin Interviewed on Fox Business News 02.18.21Pt. 1

Kingsview CIO Scott Martin discusses the accessibility of Bitcoin as well as the responsibility Congress and the regulators face going forward.

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Program: Cavuto Coast to Coast
Date: 2/18/2021
Time: 12:00PM
Station: Fox Business News

NEIL CAVUTO: I want to go to Ann Berry, a financial analyst, Scott Martin with Kingsview Asset Management CIO, Ann, where is this going? Where do you think right now this this is presently going?

ANN BERRY: I think this is going to start an increasingly visible presence in D.C., looking at some of these newer technologies, but I think Neil, the issue here is, is the question of really not being able to [illegible] when there are changes in regulation, ending short, selling is something I heard you just mentioned. There are huge unintended consequences to this. And I think what really points to is a need for the regulatory bodies to invest more in technology, to be more forward looking than reactive and to really start thinking about how they can get ahead of some of these trends rather than respond to them sort of after the case has bolted.

CAVUTO: Jackie DeAngelis, I didn’t see you here, I apologize, you’re joining us here. You’ve talked to a lot of traders a lot of the time, you know, the system isn’t broke. It’s working the way it should. And some people rush into something, are going to get burned and the door is only so wide on the way out happened in many other prior market disruptions. And I’m using a kind word there that we’re a lot worse sometimes, especially in the middle of the financial meltdown in two thousand eight and nine. And I’m just wondering what they’re telling you now.

JACKIE DEANGELIS: Well, that is what a sophisticated trader would say about what happened here. And they would say, buyer beware, if you’re a little guy and you’re putting your toe in this big pool of water and you don’t know what you’re doing, you can get burned. And as we know, the short sellers got burned. But a lot of people who didn’t necessarily have the timing right on the GameStop stock, for example, got burned as well, too. And it’s coming down to is sort of these traders aren’t really sticking their nose in the fray at this moment. But what I look at is why did this happen in the first place? Right. Why were people taking stimulus checks and going on Robin Hood and investing in these stocks that maybe or maybe not don’t have the fundamentals to move higher the way they did in such a fast clip? It’s really because of the market environment that’s being created. And we have to step back, and we have to look at that. Right. We’re in the middle of a pandemic. We’ve got these low interest rates. A lot of people are out of work. A lot of people are suffering in the stimulus money that’s supposed to put food on the table is now being invested in the stock market. And people are using this as a way of generating income. That’s not what the stock market is supposed to be. You’re supposed to invest it for the future on fundamentals. You’re not really supposed to get ahead of your skis here. And that’s one of the big issues, I think.

CAVUTO: You know, Scott, you and I discussed as I was talking to a trader not too long ago said, you know, Neil, the one thing that could stop this craziness is suitable competition for stocks. And right now, even with the slight back up in rates that we’ve seen, there’s none out there. So, this type of behavior will probably continue when you’re looking at near zero percent interest rates of CDs that return a fraction of a percent on your money, you’re going to see more of this. And, you know, real estate, real estate might be an alternative for some, not all. And that, you know, markets that have run up fast and rich, they look for alternative investment or hidden buys within those markets to keep the good times going. So, isn’t that the backdrop that actually advances more of this behavior no matter what Congress tries to do?

SCOTT MARTIN: Agreed. And to Jackie’s point, Neil, the way the setup is, it’s kind of forced these investors, let’s say, let’s call them that graciously, to take those checks and put the money in the stock market instead of putting it for maybe food on the table or maybe they didn’t need the money so they’re using it for other things as well. And so those alternatives just don’t exist right now. I would argue there is an alternative that’s out there that seems to be going that route, which is Bitcoin, as that has proliferated and proliferated into different segments of the population. More people have access to that risk profile. As far as Bitcoin goes. I’ll tell you one quick thing, though, to stay with kind of the animal theme, as you asked Ann earlier, where is this going? It’s going down a rabbit hole, if I may say, because this type of thing that just happened is not going to occur again. I mean, the horse has already left the barn, as have all the other cattle. And I’ll stop with the animal references there, because the reality is this was a once and kind of maybe a lifetime occurrence of how just the SEC and some of the regulators, Robin Hood and all these other things came to be and came to exist as how things could happen the way they did. So, going forward, as I think and pointed out correctly, and this is scary to think that Congress and the regulators have to kind of take on this responsibility. They’re going to have to get ahead of what this next crisis may be, because we’ve had things, like you said, in the financial crisis in the past, the flash crash, which was just a couple of years after the financial crisis occurred to where there’s been all kinds of market manipulation and liquidity drying up that has caused things like this to happen, just like happened with GameStop and some of these other things just a month ago.

CAVUTO: You know, and it’s very, very clear right now that the targets, at least for the politicians, are the Citadel and Melbourne Capital CEOs. They’re the rich guys. They’re the ones with the billions and the hedge fund investors that pay, you know, handsomely for their services. And they are the ones who will be the targets. You think this could get to the next stage where we really go after Hedge Funds, really limit what they can do, regulate the hell out of them beyond efforts that have been made in the past, particularly after the meltdown.

BERRY: I’m not sure the facts that are coming out of this is going to be able to precipitate that Neil, I think as the hearing continues and the Hedge Funds make their case that they there were new rules that were being broken, that some Hedge Funds lost a lot of money and all this some made some more. So, I don’t know that this does become the catalyst for going after the Hedge Funds more aggressively. But I do just want to come back to something that Scott said. I’m not sure that this doesn’t happen again. And Jackie said something really important, which is why are people going out and spending their stimulus checks and doing speculative trading instead of putting the food on the table? And what I’m hoping, Neil, is this prompt a different kind of policy response, which is better education that starts in schools. It starts in high schools that teaches young people before they can go on these apps. What is a fundamental stock analysis? How to manage personal budget? And this becomes a much broader discussion around how to make sure that, you know, the average retail investor is well equipped to distinguish fact from fiction when they’re making some of these decisions.

CAVUTO: Jackie, and I’m not blaming your generation or young people in general, but a lot of them have been intrigued to come back into the market. But wanting to get or land on the next Tesla land on the next Amazon land on, you know, even a Microsoft, that all of a sudden starts, you know, churning and making money hand over fist and the stock rises. But they’re always late on those big guys. So, they look and scour for, in this case, all the stocks that have been shorted. It builds a little drama, a little excitement over, you know, even if they come up a little bit on a percentage basis, it beats this. They dismiss eight, nine, 10 percent returns with a mutual fund because, well, we should be able to do better than that. I I’ve heard of these people talking again about these new investors. Jackie, I want the Tesla return. I want the apple, I want that. And the only way to do it is to get deeper into these risky areas without seeing it is risky. They can make pay dirt day trading on it, they’ll do that. Is there any way you can police that sort of thing in a market that offers few other alternatives? Because the CD return seems boring, a treasury note seems boring. You know, a lot of people have been turned on to some commodities lately, but that by percentage terms is boring and they don’t want boring.

DEANGELIS: I don’t think you can police it, Neil. I think what you have to do is step back. If you’re somebody who’s going to regulate the Hedge Funds or try to change the system in this way, we have to keep you know, I say that again. Why did this happen? That’s what we have to explore here. And you’ve got to make a more traditional investing. To Ann’s point, part of it is about the education in the stock market and investing. But also, part of it has to be that if I have a traditional high yield savings account and literally I’m telling you true story here, they sent me a notice when I signed up for it, my interest rate was one percent. Every month they kept sending me an email that said, it’s going down. It’s going down. It’s going down, till zero. And so, what you have here is a class of investors who, as you said, they want to get rich quickly and they’ve seen people do it in the stock market with Amazon, with Microsoft, with Apple. And they’re trying to play games here. And unfortunately, you know, that really wasn’t I know a lot of people make a lot of money that way, but that really wasn’t what the markets were intended for. And if there were other alternative investments that were more attractive, if rates were higher, if CDS yielded more, if the bond market was more attractive right now, people would have a little bit more of a diverse asset class to get into and they wouldn’t be risking so much. When you turn Wall Street into a casino and you see your friends around you investing in some of these companies and literally turning into millionaires over the course of weeks, months or even a couple of short years, you sit down and you’re coming to work every day and you’re saying to myself, what am I doing wrong here? My God.

CAVUTO: Yeah, I just found out, Jackie, the other anchors here are paid and they’re really ticked me. So you might be right. You might be right.

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