CIO Scott Martin Interviewed on Fox Business News 6.2.21

Kingsview CIO Scott Martin discusses the great reopening, global supply chains, and what pricing pressures mean for small businesses.

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Program:  Cavuto Coast to CoastDate:  6/2/2021
Station:  Fox Business News
Time:  12:00PM

NEIL CAVUTO: Want to bring Jared Levy into this Delancey Strategies, President Scott Martin, Kingsview Asset Management. Gentlemen, of course, for this restaurant owner, you can pull all the academic prescriptions you want. It’s making his business a tougher business. And he he he really doesn’t need that coming out of the pandemic where he’s hurt enough just finding labor and finding workers. Now, this. So I’m wondering, Scott, I know a Federal Reserve district president, Philadelphia saying this run up will be short lived, but it’s not short lived. This guy.

SCOTT MARTIN: No, in any short lived period doesn’t feel good to the business owner. I mean, Jeff talked about it with a fella there about he’s losing money on the wings today, hoping they go down in price in the future. I mean, that’s a scary hope to hang your profits on. And that’s something that concerns me, Neil, about this great reopening that’s out there. Yes. Global supply chains hopefully will get back on track and therefore some of that pricing pressure will alleviate. But the mom and pop the small business down the road that competes with the big business in your neighborhood. Those guys and gals don’t have the pricing power with their suppliers that some of the bigger companies have. And so when you look at this re-opening happening and saying, hey, this is going to be great and it’s going to help everybody, as the administration likes to say, it’s probably going to help the big guys more than anything, because the small guys still have a lot of that pressure, as the fellow said, to talk to Jeff about passing on those price increases that they’re seeing from their suppliers.

CAVUTO: Yeah, you know, when you look at this chart and you want to step back and say, let’s hope things calm down, these ransomware spikes or whatever you want to call them, they can’t go on forever. Of course, we’ve seen enough incidents where we’re beginning to wonder how true that is. But but that even the run up we’ve been seeing in a lot of these prices, all of these developments, they were real. The surge in things like car and truck rentals and the haircut, first of all, services, meals, et cetera, that was in place long before any of these attacks. And I’m just wondering if the Federal Reserve, which seems to think it won’t last very long, is wrong on that it’s going to compel them to respond to it or risk falling behind the curve. Right. I mean, so how does it play this?

JARED LEVY: Yeah, this is there’s two pieces here, right? I mean, one, you know, my heart goes out to every small business owner in this country because the key here is, is not the just the price increases. It’s the fact we’re traders. Right? We talk about investing, buying, selling. Remember, these guys have run businesses. You don’t go to your local burger joint and see the burgers swimming up 10 cents, down a dollar, up two dollars. They don’t operate that way. You know, when things get missed, when things get priced or major crisis happen, they reprice and they stay that way. We don’t see a lot of undulation. So the bottom line is these guys are going to have to ratchet up and it’s going to stay that way at the consumer level and at their level if they’re going to stay open. So that’s one problem. You know, and this isn’t a JBS issue. And I’m referencing the Meat-packing company in the meat distribution company. This is a bigger, broader effect that’s taking place around the world. I’m talking about inflation. It’s going to continue. Unfortunately, you’ve got a lot of money stashed away. You’ve got a lot of folks I mean, I can’t get work done on my house. There’s nobody available. People are paying two, three, four times for services to get them done. Now, do you do you correct that with with interest rates immediately? I mean, it’ll shock the marketplace, but I don’t know how a rise in interest rates or policy or even Putin saying don’t hack. You know, hey, guys, don’t don’t nobody do any ransomware attacks. How that’s really going to change things. This is a much longer, bigger arm that’s swinging right now. And frankly, I don’t think that even an extreme jump is going to correct it. So so, again, I don’t think this inflation is short lived. And I think it’s something that’s here to stay. We’re going to have to really adjust and it’s going to take some time.

CAVUTO: Yeah, you know, whether you’re worried about this returning to the 70s type of place, which I think is a bit overwrought, it’s still a trend that’s firmly in place. And on that point, Scott, I’m wondering how the market deals with that. I mean, it seems to recognize that the backdrop for this is strong demand. We’re coming out of our homes. Obviously, bookings are very strong on airlines, one of the best travel weekends we’ve seen since before the pandemic. So the trend is the economy’s front. I get that. But when does the market get or will it respond to this stubborn uptick in prices that might continue for a while?

MARTIN: It’s when the sugar high runs out, Neil, from that euphoric run up of this great reopening that we’ve been anticipating. I mean, I’m in Ohio today and they’ve removed, as you’ve been talking about on the show today, all the mask mandates statewide, which is great. So that provides that sugar high, the excitement for that run up, that demand that you talk about to show up. But when we get there and I think to Jared’s point, when these price increases don’t alleviate, then you kind of stand around and be like, well, now what? Now we need wage increases. Now we need increases in wealth and things like that to start paying for all the increased costs that we’ve seen. And that’s when I think the markets need to really take heart to this. Now, what you will see, though, is in some of the bigger companies like the Starbucks of the world and Netflix, some of the companies we own, Neil, in our portfolios, you’re going to see pricing power there. I mean, companies like those can raise their prices a dollar or two and likely get the buy in from consumers. But those are a select few. And so it basically shakes out not to be sexist, the men from the boys to use that term as to how some companies are going to be able to weather those price increases and the stock prices are not going to suffer versus others that cannot.

CAVUTO: All right, guys, I want to thank. We’re going to have you back a little bit later here.

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