Program:  Making Money with Charles Payne
Date:  2/18/2022
Station:  Fox Business News
Time:  2:00PM

CHARLES PAYNE: Luckily for us, we have three of the best. Scott Martin, Erin Gibbs and Jim Awad with us. So let’s take these issues one by one. I want to begin with you, Jim, my longtime friend. You have seen quite a few geopolitical events in your career. Is the market overreacting right now to a potential Russian invasion of Ukraine?

JIM AWAD: No, as you said, the market dislikes uncertainty once once the market understands what’s going to happen and what the parameters are, it’ll make the economic adjustments and normalise through. And that should happen in the next couple of weeks. But right now there’s there are too many wide variety of scenarios. What I would say is if this is confined, confined to Ukraine and doesn’t spread beyond that, it will fade into ancient history over the next few months.

PAYNE: Erin, I think it’s going to be confined to just a portion of Ukraine, just so maybe annexing it’s going to be tense. Obviously, 190000 troops built up. But how much of this market then rebounds? I mean, how much of a rebound could we see in a couple of weeks to Jim’s point?

ERIN GIBBS: Very quickly. Very fast. If you look historically, I would actually say that the market is overreacting because it really doesn’t have a fundamental impact on, you know, over 95 percent of the economy and certainly all public trading companies, it has very little exposure. So where we really need to think about, it’s more of an emotional toil. This happens almost every time there’s an escalation, whether it was Iraq, whether it was North Korea. The market likes to overreact, and these things tend to resolve themselves very, very quickly. Even if the US is directly involved. So because we’re not even involved, we’re not even talking about using military force. I think that means that this is going to snap back even faster.

PAYNE: All right. So let’s talk about the supply chain and inflation. The market was trying to get a little traction this morning. I mean, that’s all we’ve seen every morning. But today it was GE. They warned about supply chain issues. And of course, they’re not the only company that’s mentioned that or inflation, Scott. You know, I want to get it. Get back again to the way these stocks have been reacting, particularly how severe it’s been. And I got to be honest, there’s a part of me that thinks this also might be overdone. Inflation will be resolved. Supply issues will be resolved. Why are they destroying the value of these companies?

SCOTT MARTIN: Because the market’s emotional right now, Charles, and they’re doing the shoot first. Ask questions later. I mean, to your point, these are all the supply chains that are out there. The problems we already knew about them. I mean, this is like old news. This is a story from like August and September of last year and now the market’s paying attention. I mean, I would tell you, Charles, that we talked about a couple of weeks back, like in chip land, for example, in Virginia and Taiwan semi like whatever’s going on in Ukraine. Do you think that affects chip production for those companies in different countries? No. So the reality is when you get pullbacks in some of these areas, Boon Brands, Darden Restaurants and two more of my picks that we’ve made together, Charles like that does not affect their business. So when you see pullbacks like this to Erin’s point, when this does get resolved, they’re going to be a big snap back and you better be in those names.

PAYNE: You read down a little further. In my script, I was going to give you your shout out for Bloom and we’ll get back to that. I took it OK. It does bring us, though, to the Federal Reserve. And the big question, of course, is are they up to the task this morning? Charles Evans said policy was quote wrong footed and needs substantial adjustments. Meanwhile, you have Loretta Mester yesterday saying that financial stability that if it becomes a concern, the Fed will slow down the pace of balance sheet reduction, by the way, they have been started on that. So, so Jim, let me go to you on this because just moments before I came on there, we heard from Evans, who said distinctly, he’s only got twenty five basis points. I’m really in the camp now that they’re going to go 50, but since we’re so confused, is that helping or hurting?

AWAD: Yeah, well, there are so many Fed speakers, and they’re contradicting each other because they have different opinions and they’ll get together in four weeks and they’ll decide. But what I would say is since nobody’s raised the terminal rate and since long run inflationary expectations remained under control. The faster they do it and get it over with, the better. So I personally would prefer 50 because it gets you closer to the terminal rate and with the market needs is to be able to see over the horizon and where this is going to end.

PAYNE: You know, Aaron, of course, yesterday when I’m listening to Mr. She spoke at NYU. It was pretty clear to me she’s saying the Fed put is alive and well if they start to see it disrupt the economy, which is to me, a euphemism. The stock market goes down much more. We’ll put the brakes on.

GIBBS: Yeah. You know, I think we’re we’re we’re we’re calling for the Fed to make a big action on this next on this March meeting. I think honestly, the bigger scare or the bigger fear should be when they’re trying to unwind this how quickly, whether they overdo it. So I think the market’s going to react positively to any action. Initially, it’s more when they change direction. That’s the tough part. And they frequently mess up coming out of a new direction, not going into it.

PAYNE: Let’s talk about the the Nasdaq because it continues to take it on the chin technology in the absolute freefall, Erin. I want to go back to you because last time you were here, you actually talked about how extreme the dip had become. Certainly, it’s only gotten worse since then. What do you make of this and when do you become a buyer?

GIBBS: So actually, at the end of January, I was a buyer of mid-caps. I think so. I’m not so focused on technology, just the smaller valuations. Because right now, smallcaps and midcaps are trading at a discount to mega caps, the large caps. So they haven’t hit those lows, they haven’t become, but they’re starting to look much cheaper, the Dow and a lot less than the large caps today. So I actually feel that that’s one of your defensive positions is just buying the avoiding the mega caps and buying smaller down in your in your market cap spectrum.

PAYNE: Well, what about you, Scott?

MARTIN:  Yeah, I agree. In fact, if you look in the last few days, Charles admitted small been outperforming pretty well. And that’s really a good sign because to Erin’s point, they were lagging quite a bit. I mean, the relative valuations got way out of whack. The only thing that I have an issue with, though, is that small caps and mid-caps have shown to be very volatile and other times. So knowing what you know about that going into it, just be ready for some volatility here as the market works itself out, it’s got.

PAYNE: Now let me give you this your props because you deserve them. You did mention restaurants. You said specifically to focus on Bloom and having a real nice day to day. Is this all about the reopening?

MARTIN: Sort of. You know, it’s funny. Bloom and Outback Steakhouse, how could we forget Darden Restaurants is in that mix, too? Charles, they’ve reinvented their business. So now those two companies are ready for either reopening or almost a re closed. I mean, they’ve done the delivery pick up ghost kitchens. So they’ve really revamped their business to really operate well in any environment. But to reopen certainly helps those guys. Yes, and we own them.

PAYNE: Jim, it’s been tough sledding overall and it’s been interesting because it’s been tough sledding for bonds and for stocks and we’re both being hit. Many people wonder, where do you put your money in this kind of environment?

AWAD: Well, it never pays to bet against the US economy and equities over the long run. So I would use this at these periods of weakness to accumulate shares in the higher quality growth companies that have that have earnings and good balance sheets and editorially stocks like Taiwan Semi and Microsoft and Apple. And then I barbell it with some high alternative, high yielding instruments. I happened to be using Aries Capital, but there there are some good non-volatile lenders out there that are yielding seven or eight percent. If you marry that well with growth stocks, I think you’ll weather this period just fine.

PAYNE: Still frisky after all these years on, Jim, I got less than a minute to go. Aaron, the last word to you.

GIBBS: You know, it’s it’s it depends on your business, and I have some clients that are so scared of these types of downturns that will put them in a very short term floating rate where you’re just is essentially cash plus. So that’s an option, but I prefer to roll out the storm. I think it’s very hard to get back in and time when you’re going to get back in on on the shorter term dips. So I’d say that most maybe switch a little more to value to get you through the next two weeks. But overall, again, I agree. Don’t bet against the U.S. economy or the U.S. public equity markets, they’re going to turn around.

PAYNE: Absolutely. They’ve done it for a couple of hundred years. Aaron Jim Scott, I couldn’t ask for a better panel. Thank you both very much, but thank you, all three of you very much. Appreciate it. Sure. All right, folks.