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Frank Curzio: How's it going out there? It's Wednesday, November 14th, and I'm Frank Curzio, host of the S&A Investor Podcast, where I break down the headlines and tell you what's really moving these markets. Took a nice trip to Orlando this weekend with my wife, only a couple of hours away from where I live in Florida. Mom came to visit; she watched the kids for two days. Went to go see Cirque du Soleil, absolutely fantastic, amazing; first time I've ever seen it. I've heard millions of great things about it and I'm sure a lot of you have seen it already too. I just I thought I was the only person on the planet that didn't see it. We loved it.
We didn't go to any parks since we got up at like 11:00 AM both days – kinda older now and we didn't realize how much we never sleep with a two-year-old and a four-year-old, so just went out late, and next thing you know it's like 11:00 AM, which is pretty late for us to wake up. We're used to waking up 8:00 AM. But on Sunday – interesting. We went to the Premium Outlets, very nice place, I'd say probably about 200-300 stores, a ton of stores there. And I've been shopping at outlets for over 15 years. You know they're always crowded – a little crowded, at least the ones in New York, Baltimore, upstate New York as well, almost anywhere we go.
On Sunday there were thousands and thousands of people shopping. I've never seen anything like at it before. They had to open up parking lots across the street. So it's Sunday, so some of the stores were closed across the street. They opened up the parking lots and let people park there and cross the major highways to get to the outlets because there was absolutely no parking. And we're talking about parking with thousands of spaces around the whole entire complex. Every one of them was taken. It was jammed. It was this packed – I've never seen anything like this at the outlets before.
There were foreigners, as expected, at the outlets. Every time I've gone to outlets there's a lot of foreigners there. In Orlando you could imagine. It's great. I think it's pretty cool. I mean foreigners got it great in Orlando, I think. They can go there; nobody bothers them. Same in New York, I guess – New York City. But it's just cool because they really speak no English. Like they'll just stand in front of a walkway. You're like, "Excuse me," and they have no – they don't know what "excuse me" means, so they just stand there. It's almost like you gotta tap 'em on the shoulder and say, "Hey, I gotta –" like you gotta use sign language.
And there was like a little three-year-old running around, and the wife's like yelling at him in another language. I didn't even know what language it was. And my wife's like trying on clothes, and he goes underneath to look underneath, and I was like, "Wow, that's pretty good for a three-year-old." You know you do that at 40, you get arrested; at 3 you can get away with it. But it's just everywhere; it's just pretty cool. But absolutely crowded.
And everyone, everyone – I'm talking about every single person had a ton of bags. I mean it's important, especially if you go to malls and you're doing boots-on-the-ground research. A lot of kids go there just to hang out and you see kids everywhere and it's crowded. These people were buying stuff like crazy. And it wasn't like they were buying for Christmas. There was no Christmas trees up. There was no lights. It wasn't Christmas. I guess people will wait till after Thanksgiving. But they were buying stuff for themselves, and they had literally like 10 to 15 bags. They were carrying 'em when they went to the bathroom, and they had like bags surrounding them. I've never seen anything like it before.
If you're looking at certain prices, the prices were really, really good at these places. Not only are they giving coupons, but they were just really low at a place like Nike, Under Armour – that's where I shop. My wife will go to Coach, even Michael Kors. I mean, guys, if you want to earn some points with your wife, remember that name, Michael Kors. It's like the big, in name now for whatever – pocketbooks and whatever. I don't really know too much about it, but it's like, "Oh, Michael Kors." But it – the mall was absolutely packed.
I've never seen outlets that packed in my entire life, and that tells me a few things: that the consumer is not dead. I mean you can listen to the election and how many people are out of work. Listen, the consumer is not dead. People are spending money. I see it every place. I hear it from you when you e-mail me, [email protected]
I know the fiscal cliff is coming, stocks are crashing, but I have tens of thousands of people literally e-mailing me over the past year, and most are working harder than ever. They're able to buy what they want for themselves and their kids.
It's not like they're spending like crazy and going nuts and taking out credit cards. They're doing much better now than they were. It sounds crazy. I know it does. If you listen to ads, you'll___ TV, it sounds like nobody has a job, everything's terrible. But people who do have a job are doing okay right now. They're working harder than ever. I ask people, you know, "Is there a threat of your company going out of business?" "No way. Things are great. We have a lot of cash on the balance sheet. I'm busier than ever; we're just not hiring." So the people that are working seem to me – at least that's what I'm hearing – are doing fine right now.
Now, the second thing is retailers are gonna report terrible quarters due to Hurricane Sandy. At least they'll report terrible same store sales, which are monthly. But if you do see some weakness, I'd be a big buyer of a lot of these names. I mean start doing your research now. At least that's what I'm doing. You'll probably find a lot of great value. The stock market's really gotten hit here. Stocks are down big on a pullback, and I think December to January numbers are gonna be enormous for retailers. I think they're gonna have a monster, monster Christmas season.
Now it's easy to say that. The more difficult thing is what names should you own, and I'm gonna break that later on in my educational segment. But for all of you listening to this right now, send me e-mails: [email protected]
I do this a lot when I do recommend retailers. I have a very, very good track record for picking retail stocks in my newsletters because I've done a lot of homework and because of this podcast helps me out a lot. I don't – you know, sometimes I don't have a good track record in all sectors. I'm not patting myself on the back here.
But you're looking right now, and I'm looking at certain brands, and I'm gonna go into my educational segment exactly how we're gonna find the best retailers to buy. Because right now I'm living in Florida, which is home to ground zero of the housing collapse. You saw housing prices drop 40 to 50 percent here. And coming from New York, they were like 25 percent. And they're actually going back up sharply right now in New York. You know you could argue Southern California is just as bad as Florida, but people in Florida right now are spending money like crazy, at least the malls that I see.
So I can only give you a boots-on-the-ground perspective from Florida, but I think a lot of retail names are gonna be a buy here going into the January quarter. Again, I'll talk more about this in my educational segment. For you guys, e-mail me – [email protected]
Let me know what you guys have seen, and it's not just – you know, I get e-mails from different states and different cities. I get it globally as well. A lot of these brands are global – getting China, Australia, every place else, how they're expanding, especially the luxury brands. But I'll report back to you with everything I hear. But right now I really do think some of the retailers are a big buy on this pullback.
Now, I do have a great podcast for you – not one guest, but two this week. The first I know you heard of. It's Fast Money's Dr. Jon Najarian, founder of optionMONSTER, also former linebacker for the Chicago Bears. I love that. I wish I could put something like that in my bio. That means, since he's a former linebacker, that I'd better agree mostly what Jon says. It's gonna be a fantastic interview. For those of you who don't know Jon is, he's a real great guy. He's easy to talk to; it's a fantastic interview. We're gonna talk about the fiscal cliff, his market outlook for 2013, a bunch of stocks that he likes, also his favorite shorts. But more important is, it's not a Fast Money style where they ask a question and ask for a response of two seconds. He's gonna go in detail of his option strategies behind each position, so it's gonna be a fantastic interview.
Next, Aaron Brabham will be joining us. Aaron is co-host of Stansberry Radio with Porter Stansberry. He nominated me as "Scumbag of the Week" on Stansberry Radio, not once but twice, two separate weeks. We'll talk more about that – don't worry about it; I'll give it to him a little bit – along with some great topics like why Obama may get elected for a third term. Gonna be a great interview, a lot of fun, also serious as well. Aaron's a good friend.
We've been getting a lot of e-mails, almost as people worry about him. Me and Aaron are good friends and we joke around back and forth, and he's a great guy. This is gonna be a really good interview, especially the second part. The first part I'm gonna rip him apart about "Scumbag of the Month" and then we're gonna talk about Obama getting elected for a third term. I know it sounds crazy, but wait till you listen to what he has to say; it's gonna be fantastic.
Later on I'm gonna take some of your questions, if I get to them hopefully – it's a long podcast here – and also break down the markets which are getting killed over the past few weeks, right? Since the election especially. Luckily, if you listen to this podcast, you should have cash on the sidelines. I'm gonna give you some names and sectors that I'm picking away at. It's a very, very long list of names. I'm seeing fantastic buys in the market right now that I think have huge upside over the next 6 to 12 months following this selloff. But first let's get to my interview with Dr. Jon Najarian, and here it is.
We are talking to Dr. Jon Najarian, founder of optionMONSTER, CNBC contributor, regular on Fast Money, but I have to say my favorite part of your bio is that you're a former Chicago Bears linebacker.
Jon Najarian: Yeah. Well, it was fun but it was a brief career. I can't say it any more clear or accurately than that. I played four games; that was it. So I wish I could say, "Boy, yeah, I remember tackling Marcus Allen and all these guys." No, not so much. I was mainly special teams. I got to play because Mike Singletary held out on his contract; that was one of the main reasons. But it was fun and it is ultimately what brought me to Chicago.
Frank Curzio: So you're in the same sentence as Mike Singletary. What's better than that, right?
Jon Najarian: Exactly. And as my mom says, he kept me out of the Hall of Fame.
Frank Curzio: That's great. Well, I want to start out by saying we do have a lot of friends in common – Stephanie Link, Dan Fitzpatrick, Colin Gillis – who've all been on this podcast. I've actually worked with Stephanie Link, former guest and really great people. So I was looking forward to talking to you. Now –
Jon Najarian: Yeah, they are. All those Net people you mentioned.
Frank Curzio: Yeah, a very, very great analyst. Now you are an options guy. You play both sides of the market often, and I want to start with this because right now you have a falling market. It seems like, okay, well, the easiest strategy may be to go short, but it could be a death wish, especially if we get one positive outcome regarding the fiscal cliff. Like say if they don't raise taxes on dividends, you know we could see a big rally in just one day. So I'm asking you, what's your strategy right now, today? It seems like a real difficult market.
Jon Najarian: Well, my strategy, Frank, is really just that I'm pretty heavy in cash right now. And I am in cash because of the risks that both parties – the President who won and should get what a winner gets as far as he gets to dictate more terms; and Boehner, who still has people that are very concerned about the level of debt in this country. It's not gonna just be about revenue, and even if it was, we quite frankly can't raise enough revenue fast enough, so it's gonna have to be a combination.
That's what the negotiations were last year that brought us to this fiscal cliff, was they could not get to a point where they'd agree on how much cutting versus how much raising of revenue. And neither one of those two, in and of itself, will save us. So what I have feared is that they will keep dragging this on and keep kind of dancing to the edge of the cliff, much like a duel between two swordsmen in Count of Monte Cristo or something like that, where they're up on the mast of a burning ship or something.
You don't want do that, especially with the stock market, because sentiment is almost everything in the market. Additionally, people will hunker down and hold on to cash. Corporations have already done it. We don't want to see individual investors do it. And yet, because we have not been able to get to some reasonable negotiation, we've seen volumes – for instance, just a recent volume Monday of this week, of Monday the 12th, we saw New York Stock Exchange volume 60 percent under average of the last three months.
That implies to me a lot of people are doing what I'm doing, that they rotated out of stocks that were related to the election, and they have not gone back into stocks. It's not a rotation out of, for instance, the coal stocks and financial stocks that they thought would see less regulation under Romney. They've certainly sold those stocks, but they haven't rotated back into alternative energy and some of the stocks – health care, hospitals – that would be perceived as Obama stocks. That's dangerous.
The more we see people going to cash and the more the rhetoric gets ramped up, the more likely we are to dance right to the edge of a recession. So I would hope that both leaders, of the Republicans – which I'm gonna say is Boehner right now because he – that's where the revenue bills start in the House – and the President need to have some compromise. Hopefully we get there. If we do, I would be willing to commit a lot of capital very quickly. If we don't, like I say, I will stay on the sidelines.
Frank Curzio: Yeah, all real good points there. Now let me ask you a question. Did this sentiment, the way it is right now, catch you by surprise? I mean I think everybody kind of predicted a pullback – we were up a lot this year – but just like the sentiment after the election. If you look at the last week, it seemed like Obama was favored to win. I mean it was a dead giveaway when Romney was campaigning in Pennsylvania, I think. You know the fiscal cliff, the January 1st date, was always on the table, no matter who won.
Did it surprise you a little bit? 'Cause it kinda surprised me that, right now I thought it would be a great buying opportunity, but I'm seeing the action in stocks like I've never seen. Stocks come down another 20 percent lower than I thought that they were buys, and it kinda signals that, hey, there's a real concern here. Did it catch you by surprise a little bit?
Jon Najarian: Well, right now what I'm looking at, Frank, is that the VIX, the volatility metric for the S&P 500, has narrowed. It initially shot up, of course – as it should, because we had a 300 point decline in there, so the VIX should shoot up. But now it's pulled back and basically gotten back down under 17. I think that the volumes being as low as I've already cited, and the fact that people are not pricing in either a slam to the downside or a run to the upside, is because they think that there will be a lot of jawboning which will result in sort of that ratcheting down of the market; not steep 300 point drops like we've already seen immediately after the election, but rather some of these 50 point down days followed by a 30 point up day, followed by a 70 point down day, followed by a 30 point up day – those kind of things. That's what the market and the VIX, my read of it, is telling me that we're looking for now.
So was I surprised that we had that kneejerk reaction? No. I am surprised that the markets continue to be somewhat comfortable, at least for the time being. I don't think that'll last much past Black Friday, however, if we don't get greater rhetoric in a positive way about the fiscal cliff, because that's what this is all about now. It's not about Greece. It's not about Japan and GDP. It's about us avoiding a recession that could start again in 2013 if they don't do this right.
Frank Curzio: Yeah, absolutely, absolutely. Well, we're talking to Fast Money's Dr. Jon Najarian. Jon's also the founder of optionMONSTER. I want to give you a chance to talk about your company a little bit – something you don't really get a chance to do, I know, on CNBC – and how investors can find more about your site.
Jon Najarian: Sure. Well, happy to. OptionMONSTER is a subscription service where we publish what we're trading and opportunities that we see in the markets on any given day. We use some algorithms that – over time, we believe – have shown us where buying opportunities exist. We call it Heat Seeker, Frank, because it's looking for where the big institutions are buying. If they're lining up in energy stocks, if they're in banking stocks, if they're in durable goods or whatever, I want to follow that fast money. So our algorithms are really pretty emotionless about that. They just look for that big institutional buying, and then we follow it.
On the other side of our business we've got tradeMONSTER, which is an online brokerage firm for everything but forex: stocks, ETFs, options, futures, bonds, and mutual funds all on one platform. It's a deep discount broker and we've – knock on wood – been three years in a row number one for online trading by Barron's magazine.
Frank Curzio: Ah, great stuff, great stuff. Yeah, I know; you never get a chance to talk about that, so I definitely want to give you a chance before we get to the fun stuff.
Jon Najarian: Thank you, sir.
Frank Curzio: No, no problem at all. Thank you for being of the podcast. Now, fun stuff there – I was gonna go Fast Money style, talk about stocks and give you 20 seconds on each. But, you know what? I love you, I think you're a smart guy, and we got no commercials here, so we could take it a little bit more slower and get into a little bit more details for listeners.
Jon Najarian: Okay.
Frank Curzio: The first stock I'm gonna ask you about is Facebook, and before you give me your opinion, I'm gonna tell you a little bit of a story, that I went to Orlando with my wife to Pizzeria Unos, one of her favorite places she likes, and she actually is like a coupon freak for some reason. She's always into coupons. So she actually pulled up a coupon on Facebook which was 20 percent off, and a manager came over and said, "Wow, we've been getting a ton of these." He's like, "We're actually gonna –" and it was a manager. It wasn't like those 18-year-old managers. This guy's been around for a while.
But he actually talked about how Facebook is really helping their business, which is the first time I ever saw in my life on anything in Facebook. You know how it is with their mobile platforms. So just to throw that out there, a boots-on-the-ground thing. But what is your opinion right now trading Facebook? I mean is it finally a buy at the $20.00 level?
Jon Najarian: Ah, I mean overall it's a buy I think, Frank, only because it's going to take a herculean effort for somebody else to get into their space. As Bill Gurley has said to us on Fast Money, their moat is very deep. In other words, that to build up – whether we believe 900 million people are active on there or not; whether it's 500 million or 900 million – with multiple accounts and so forth, it's always hard to tell. But I think there is a value there.
The problem is, as we all know, that if I'm walking around with my cell phone, and even if Facebook does get into search – which we know they're getting into – and they use that to help monetize all those eyeballs, what you don't want when you're wandering around, like you said, Disney or Epcot or anywhere else, is to have a bunch of ads pop up. On the other hand, if the ad – if you were searching for a restaurant in Epcot and something came up that was a 20 percent off coupon at a restaurant in Epcot, that might be something that you would click on because, rather than annoying you, it's something that's potentially saving you money. Even if you had planned on meeting your friends at a different restaurant, if that presented itself, you might take advantage of it.
So I'll call that "location services." I think that's the future. Now, I don't think Facebook is a screaming buy here, because I don't think it goes straight up from here, because, number one, they have all these lockups, some of which have already occurred, and the insiders have elected not to sell. That doesn't mean they won't sell going forward. Even though Zuckerberg has said he won't sell for at least a year, it doesn't mean the others. You know, when 270 million shares unlock, that's a big number that could hit the street. If they see a rally, for instance, into the mid-$20.00s, I think a lot of the sellers would be from the inside at Facebook.
So I like Facebook but, as you already know, I love Apple, and I think Apple with 200 million people that actually buy things on their platform, that have bought things on iTunes or the Mac Store or any of the other retail outlets that Apple has available to it, I think those are much easier and much more viable candidates to be monetized. So whatever value I would put on Facebook, I would immediately impute that to Apple and then some. So, of the two, I do think Apple, after 130 point or 140 point drop that it's had from the highs, I think Apple is a much more attractive candidate because they already have people that have their credit cards registered, that have already bought things and so forth, that people on Facebook have not. So my answer is Apple in that space is a much better pick than Facebook to monetize search and local.
Frank Curzio: Yeah, you bring up a great point about the ceiling on Facebook. That's a great point, where if you do see $24.00, $25.00, $26.00, there's a lot of shares are gonna hit the market, and a lot of those guys may want to sell. It's a great point. Also, what you said on Apple – I notice that Kass nailed it. Doug Kass, who comes on Fast Money sometimes, nailed it on the way down. But he also started buying, right? Didn't he buy a little bit high, or he's buying Apple right now?
Jon Najarian: Yep, he did and I did too. We both got in on Friday. I don't know that we're at the bottom for Apple, but I think we were close enough. And what we did – here's the exact trade we did, in fact – we used an in-the-money call, Frank, as a surrogate for owning the stock. So what I did was I got in and bought the January 520 calls, and I paid $48.00 for 'em last Friday. My reasoning here was that we can use that instead of tying up $545.00 a share. I can tie up less than one-tenth of that by buying that call as a surrogate for the stock, the 510 call at $48.00. And then I, in December, bought the 535 calls and sold the 545 calls, one-by-two, so on that spread I collected a credit of $16.00, which is – you know it's still not too far from that. Obviously at this level, though, it's rallied $10.00 since I did it.
But at 545 where the stock is on Tuesday, I would say watch that, and instead of doing the spread that I did, look at the 545s. They're trading at $22.00 now, $22.50. And do the 545, 555. You're collecting $17.00 twice against the 545s, which, as I said, are trading $22.50 or so. So $17.00 twice is $34.00, against $22.00 means you're taking in $12.00 credit for that. So, obviously, volatility has come out as the stock has rallied a little bit, but since you have that January call in your pocket and you're short that one-by-two spread in December, you have insulated yourself against a 12 point decline in the stock, and you've got that LEAP or that January option instead of the stock, which means you've got less volatility at risk in the trade. And that's the way I'm playing it right now.
Frank Curzio: Yeah, I love that strategy, actually. I'm so glad you explained it too in detail, which is great because sometimes people just run right through it. But I want to get to a couple more stock picks here.
Jon Najarian: Sure.
Frank Curzio: I know you're really busy. Let's go into the metals and mining – the gold, gold ETFs, silver. What do you think here? I mean obviously Obama wins; it probably means more spending; people rushing into gold. But you even have some of the smartest people around – Bill Gross is really going into gold now. You have Akman into gold, David Einhorn. But let's talk about right now. Is right now a good time to buy it? Do you think that because of this election we're gonna see more spending? Is that the reason? Why are you buying gold? Did you even like gold and silver here?
Jon Najarian: I do still like both. I do think both go higher. AGQ is the ProShares Ultra Silver. I like that ETF because it obviously gives me more bang for the buck than just the GLD does. If somebody's more of a staid investor, then certainly the GLD makes sense, but I like – this is a double performer against silver, the AGQ, and I'm short puts in there. I'm short puts at the – in other words, I'm getting paid – I know certainly Frank knows this, folks – but I'm getting paid – if I have to buy the stock, I get paid to own it.
So I've sold those puts at the 49 and 50 strike in the AGQ. They're eroding by the day – knock on wood – and that, I think, it gives me a lot of comfort that the stock, or this case the ETF, could correct by several dollars and I'm still at breakeven or better on those short puts, because the put obligates me to buy it at $49.00 and the thing's trading, let's say, $51.00, $50.00. So I still like that trade. If I was somebody who's trading the GLD instead, which I have a few short puts left in there – I got in and sold the GLD December – what was it? – 158s and 161s.
We were doing a webinar a little bit ago, Frank, and I decided that was a good trade, to get in there and sell those. And they have just dropped by better than 50 percent. We sold 'em up around 240 and they dropped beneath $1.00 recently. So I'm still staying short those because I don't think the GLD goes back to that level, and I think that with Bernanke in charge of the Fed, he's gonna have to keep interest rates low, which is – he does, of course, by printing money. And that, of course, works against the currency but works for gold and silver, and that's why I own those too.
Frank Curzio: Now, I want to get to one more stock and maybe a sector here real quick, 'cause one stock – there was a list of 'em here – and one of 'em that I saw you talking about was Abercrombie & Fitch, which is a stock, a retail player that's gotten nailed. At the beginning of my segment of this podcast that I talked about going to Orlando. We went to the outlets. I've never seen – I've been going to outlets for 15 years – I've never seen them this crowded before in my life, and I know it's – retail's been getting killed. You had Hurricane Sandy. But now here's a company that really got nailed here. Do you think it's gonna get nailed more, or do you actually like it here?
Jon Najarian: If I put that proverbial gun to my head, I gotta like Abercrombie & Fitch at $31.00 or thereabouts, because I think any kind of a recovery means that this one's too cheap versus its peers. On the other hand, because this is Abercrombie folks – and of course Hollister as well, that come through Abercrombie & Fitch – both more or less high end, younger adults that they're targeting, and they get a premium in both cases. You know, most of us would be somewhat aghast to see how much they charge for jeans – or T-shirts – but they get it in most cases.
I don't disagree with Frank, though, that there's an – I see an awful lot of this material at the outlets, and that's not a good sign. What I see at T.J. Maxx or at Marshall's or at outlet stores like prime outlets and things like that, I worry about those retailers. So Abercrombie, like I say, I'm neutral on it right here. I know I hear rumors, just like you do, that this is a takeout candidate, but we've got to see a better market for this to be a takeout candidate. We don't see that in the near term, so I'm neutral on it.
Frank Curzio: And last thing here – this is, well, kind of a coal – probably takes it out of context from Barack Obama's saying if someone wants to build a coal power plant they can; it's just that probably they'll go bankrupt. Something to that effect was mentioned. But you could definitely take from that quote that Obama's not a big coal guy. Now that he's in his second term here, should you run away from the coal industry? Or are you looking to basically say, "Hey, you know what? These stocks are down 70, 80 percent. You might be able to find something that'll give you really good gains."
Jon Najarian: I think you can still – and he's – unfortunately, the President wouldn't be able to stop some of the coal usage that's gonna go on. We both know a lot of folks are switching over as best they can to natural gas because of the extensive amount of it that we've procured through the Bakken and the Marcellus Shale extractions and so forth. Alpha Natural would be my pick in this space, ANR, for one of these coal stocks. And I would say that if you're buying that stock – it's a $7.50 stock – you could collect about $0.60 in December for selling the 8 calls against it. I mean, to me, those trades make a ton of sense, Frank, because when you're talking $0.60 against $7.50, that's 8 percent in a month for those calls.
You know, all of us know that if I have – so let's say you had a 1,000-share position. You're making $600.00 a month against a $7,000 investment. That's pretty damn good in a zero interest rate environment. So even though I don't think the President's gonna come out and cheerlead coal like Romney did, I don't think he can stop the consumption of it, and I know that China's always there with its hand under the market to buy it if it gets even cheaper. So I would own coal and I would sell those calls till the cows come home, because I don't think it goes straight up at all, but I do think that it develops some nice gains for you just as a sit-and-hold play. But, again, it's gonna be held back by the fabulous gains that we make in oil and gas out of the Marcellus.
Frank Curzio: And final question here. This is the most important you're gonna get today. Do you think, right now, you could play linebacker for the Jacksonville Jaguars?
Jon Najarian: No. I wish I could. I have too much respect for those athletes to imply that I could, Frank. I know Jacksonville has struggled, but my brother, Pete – that might be a different story, 'cause he's still in that kind of shape. But I think that was 50 pounds ago when I was 255. Now at 205, I don't know if I could play strong safety for the Jags.
Frank Curzio: Well, Jon, I want to say – and I know I'm speaking for a lot of listeners here – we love watching you on Fast Money. One reason I love watching you is 'cause you're always humble and you seem to talk about your losers more than your winners, and you always learn from them. You don't really get that from a lot of people, and I just think it adds so much credibility to you. I love watching you, and I really appreciate you coming on the podcast.
Jon Najarian: Thank you. It's my please. It's a delight to be with you.
Frank Curzio: All right. Take care. Okay, guys, awesome, awesome interview with Dr. Jon Najarian. Send me an e-mail; let me know what you think – [email protected]
I like Jon. I think he's a great guy. I love him on Fast Money. Again, I like that he's humble. I like analysts that talk about their losers. He has more winners than losers; that's why he has a job. But I like people who analyze their losers on TV, because you're just connected to people a little bit more, and it's not like, "Yeah, I told you so. I told you to do this." He's not like that at all. And I like the way that interview went, but again, the podcast is about you, and let me know what you thought.
Now let's get to the markets. I have to tell you I'm getting a little nervous right now, and I did predict a pullback, about seven to ten percent in small caps, and we're about there right now. I'm not patting myself on the back at all; I've been wrong before, especially with Apple, Joy Global in my educational segments – which people remind me about all the time. But usually when you make a prediction like that and it happens, it means you should be buying. But there's a lot of activity that's going on. It just feels a little different to me right now, especially being in the market for 15 years – actually, more like 17, 18 years now.
It just feels a little different right now when I see companies that I think are buys fall another 20 percent on news that is kind of expected, like a weak quarter. I mean weak quarters were expected. I mean you've seen businesses – especially technology – business across the board, they're holding back. They're worried the fiscal cliff, what's gonna happen. They're worried about the election. And, you know, they're holding back, and you saw that – in almost every single conference call that I listen to, I saw that.
So the fact that a company will report weak earnings and then give their guidance, inline guidance, for all of 2013 means, hey, we're a little nervous in the short term, but we think business is pretty good, we're gonna be okay. Stocks shouldn't fall 20 percent on a report like that, and they are, which makes me nervous because I think these stocks – "Hey, wow, this is looking attractive" – as I'm researching it, they're getting killed even more. I mean you look at Metalico I mentioned last week, and this is a company I recommended high and we stopped at, we got nailed.
And it was like at $2.15 I think a week ago, and I was like, "Hey, I'm just gonna start digging into my research," and the first thing I looked at on Sunday when I got home from a small vacation with my wife, Metalico is trading at $1.70. I mean that's a major move – $2.20 to $1.70. You see Webifer – I know, accounting and stuff like that – it got nailed. It's under $10.00. Cypress Semi at $9.00. It was at $22.00 not long ago. Apple down 200 points. I mean that's almost like $200 billion in market cap.
Guys, to put that in perspective – I mean that's bigger than probably 98 percent of any individual S&P 500 company. How many S&P 500 companies could you actually have over a $200 billion market cap? It's a handful, guys. It's a handful. And they lost that – what, in a month and a half, two months maybe? You're seeing things in the market you're not used to seeing, and it's not like Apple's this high-flyer, Deckers Outdoor type of stock. You know, Buffalo Wild Wings – I mean their stock is trading at, what, ten times – less than ten times earnings if you back out the cash, $100 billion in cash.
So you're seeing a stock like this really get nailed – on concerns, but still trading at a multiple that Microsoft, Intel. Really? Are you of your mind? I mean Apple should be trading at the similar level, similar multiples – again, when you back out the cash? I mean is that crazy or is it me? And so you're seeing things that really don't make sense. It's almost like fore-selling, people running to the exits. And you have to be careful 'cause I'd love to tell you, "Hey, you know what? Now's the time to buy; it's great." It's not great. I mean, if anything, you should be picking away.
But when I do see these types of sellers, I look ___ fix, and one is historical valuations. I mean I could find a lot of this stuff on my engines that I look at, Capital IQ that I pay for. That's why you pay me for my newsletter. But to do it individually it's a little hard to find historical valuations because most stocks are blowing through their 200-day moving average, so you can't really use that too much. But you want to look at a three- to five-year chart and where does the stock usually hold, at what price, where does it historically trade at on average.
If the stock's historical valuation is 12 and it's trading at 9 times earnings, I don't mind it buying it as 1- to 2-year play. And, again, when I say "buy," I mean scale into the stock. You don't want to take a full position. I mean imagine doing that in January 2009. You were right in January 2009. You thought stocks were cheap. They were incredibly cheap. But if you went all in in January 2009, and even if you were on margin or whatever – which I'd never suggest – you would have got killed. You would have killed. From January to March the market sank 20 percent, small caps down 30 percent. You would have got killed.
And when it hit the March bottom, we really took off and went well above January 2009 lows. But you have to be careful 'cause it's almost impossible to predict when the bottom is. Nobody knows when it is. But I am seeing some great buys right now. I'm just nervous about a huge run to the exits from hedge fund managers. We could see that. Seems like we're seeing that right now. You're looking at hedge funds; they need to catch up on performance. I don't know if they could do it on the long side, right? They got killed. I don't know if they could do it on the long side.
I mean think about it – if you're a hedge fund manager, what would you do? A stock that's not expected to make money years from now, right? There's a ton of them in the market. You take a stock that recently blew through its 200-day moving average, right – again, you still have a lot of those stocks – and maybe just reported a weak quarter. So there's no good news; the stock's not reporting earnings. You take like a Westport Innovations – you could short the crap out of that.
I mean if you wonder why that thing is $24.00, $25.00 – everyone's asking me, "Frank, should we buy it?" We made 120 percent and I want to say 60, 70 percent in a few months on Westport. It's been great trades for us in Small Stock Specialist, my newsletter. But people are asking me, "Frank, should be we buying it right now?" And right now I don't know. I mean I saw the interview with Jim Kramer yesterday and the CEO didn't really – I don't know. When the stock was at $50.00, that guy was "Hey –" he almost came out with a cigar in his mouth – "What's going on, Jim?" Crossing his legs. "What's up, bud?" Now he's like, "No, no, no. Things are pretty good. No, we don't need any government help. We're okay. We're –" Like he just didn't sound like you should be buying the stock right now.
It's almost like Ackman at JC Penney, giving away the pins. Did you see that on Squawk Box on Tuesday? He was giving away pins for JC Penney. That's another stock we made 40 percent on in 2 months. People ask me, "Frank, shall we buy it at $19.00?" I thought it would be a steal at $19.00. When I see Ackman handing out pins, JC Penney pins on a set of Squawk Box, does not make me want to buy JC Penney. Man, things must really be bad there.
Yeah, you're looking at these hedge funds. I mean make great shorts, right? You sell any stocks that don't make money, blew through their 200-day moving average; they just reported a weak quarter, terrible results, weak guidance. There's no floor for them. There's no floor. A lot of these they could short the hell out of these stocks, trying to make up a performance. A lot of these guys aren't gonna get paid bonuses unless they meet their mark. They're still well below it, at least from the guys that I talk to.
On the plus side, if we do have compromise, the fiscal cliff, like raising the tax requirements on people making more than $1 million instead of $250,000.00 – which is middle class; people aren't rich if they make $250,000.00 as a family if you have two, three kids. They're not. And if somebody listening to this right now, a man who makes $80,000.00, say, "Oh, Frank, how could you say that?" I'm telling you – it's not like they're rich. I mean some people spend like they're rich. It's a lot of money to send kids to college. You're not rich at $250,000.00. You're not rich. Are you living well? Yeah, you're living good, but should you be taxed more at $250,000.00?
And if they raise that to $1 million, I think that would be a big positive, or maybe just a small increase in a dividend tax instead of, what, a 25 percent increase? We could see a huge rally in stocks, which would be amplified by all the short covering that's taking place right now in hedge funds – from hedge funds and a lot of other people, institutions. So we could see that. You know, we gotta worry about the fiscal cliff. That's the news; that's the market we're in over the next couple of months.
So it's very dangerous for me and my subscribers. I'm starting to scale in. I just know when I'm nervous like this – again, I predicted eight to ten percent pullback, and right now we have it. I'm like, oh, I'm nervous. I don't know – whenever I'm nervous like this, it's usually a great sign for stocks, just to let you know. It's almost like when I recommend a stock and I get 50 e-mails "Frank, great pick," I immediately want to sell it; I know I'm dead, dead in the water.
But when I have a pick and people e-mail "Frank, you're nuts. You're crazy. This stock – competition can surge. It's horrible." I just got e-mails on that for one of my stocks, one of my biotech picks. I must have got 40 e-mails. The stock came down off of its low of 30 percent – boom, caught a great quarter, and it's up like 25, 30 percent since then. It's like when I get those negative e-mails, I'm telling you – it's just that sentiment thing – time to buy. I knew it was a great pick. But right now I'm this nervous, usually it's good for stocks. Maybe it's not. I'm just telling you it's the way it's been in my career.
And before I get to my educational segment, I have another fantastic interview with Aaron Brabham. Aaron is co-host of Stansberry Radio with Porter Stansberry. And before I go any further, I want to give a little insight to why he nominated me to the "Scumbag of the Week." Basically, at Alliance Conference we had a little bet, which he happened to change, and now he wants to get paid immediately, which I am going pay him eventually, but just know he'll give you the details. It was a fair interview.
But I want to say this with Aaron: people need to know that me and Aaron are really good friends. We both would get a lot of e-mails going back and forth, and that's why I wanted to have him on my podcast. And he mentioned "Scumbag of the Week." Just, basically, it was kind of funny. I listened to the podcast; it was hilarious. Him and Porter were tearing me apart 'cause I didn't pay my bet yet even though he lives in Baltimore and I live in Florida and I'm gonna see him for the Christmas parties. So we're gonna have a little fun with that, and here's that interview with Aaron right now.
We're talking to Aaron Brabham. Aaron is a great golfer, also co-host of Stansberry Radio with Porter Stansberry, who nominated me on last week's S&A Radio as "Scumbag of the Week." Aaron, what was that about?
Aaron Brabham: Well, okay, so you say "great golfer," but I guess I'm not that great because you got nominated for a discrepancy between a bet that you and I had when we were at Sea Island a couple weeks ago for the Alliance Conference. And, of course, Sea Island was home to the McGladrey Classic, so they had just played the PGA Tour event and the greens were – to say lightning, that might be an understatement. What'd you think of those greens, Frank?
Frank Curzio: Yeah. I played – my tee time was before you, and that's when you sent me like your little girl text, which we'll get to in a second, when you changed the bet. But, yeah, the greens I went to before you. But I want you to explain something. I want you explain the original bet, the bet when we were drinking and you were yelling and how great you are.
Aaron Brabham: Sure.
Frank Curzio: What was the original bet? I forgot.
Aaron Brabham: Well, so the original bet was – it stemmed from me talking about I would take "Doc" Eifrig's money all day long 'cause he said I couldn't break 90 at that course. And I said I could break 90, no problem. And then I said, "I think I could even break 80." So I'm playing well, although playing well meant I played one time in the last three-and-a-half months. But that's okay. And you immediately piled on and said, "I'll take $100.00 that you can't break 80." And I, of course – liquid courage – said, "I'll take that bet." And then we had another copywriter that said he'll take $100.00 too. And I'm like, "No, no. Let's go 50/50."
And of course the next day I woke up and I'm like, "Argh, why do I do this when I'm drinking? This is just ridiculous." So I sent a text that said, "Look, how about 25 and 25" 'cause I remembered the next day that I was rental club guy. And I said, "However, I understand. I'll stick to my original bet. I'll do 50/50 at 8 – at breaking 80, no problem." And Steven wrote back and he's like, "Quit being a wuss. Be a man." So I was like, "All right, yeah, it's fair."
So I hadn't teed off yet, but I was getting ready, hitting balls, and I get a text from Steven that says "we" – as in you and him, the only two playing in the group – "We decided that if you can break 83, we'll honor the bet because this course is tough." And I said, "No problem." So I didn't tell anyone in my group. We all kept score; everybody kept each other's score too. Came down to the last two holes; I needed to par both of 'em. Parred both of 'em. Shoot 82.
Steven has no problem paying his bet because that's what you guys changed it to. And then old welcher Curzio comes back with a "No, the best was break 80. You owe me $50.00." Well, actually first you said, "I'll give you $25.00." And I said, "No, the bet was $50.00." You said, "Well, then it was – we said 80." So what is the deal? Steven swears that you both crafted the text message to me. What's the real deal?
Frank Curzio: The real deal is I did say 83 because I played that course, and my tee time was 2 hours before you, and I've never played a harder course because the greens not only were lightning fast, but all around the greens was all shaved, so if you went just 1 yard off, you rolled 30 yards away. I said, "There's no way this guy's gonna break 83," so I did change the bet. But there's a couple things here. First of all, I never said I was not gonna pay you, and I live in New York – I live in actually Florida now and you live in Baltimore, which I am gonna pay you in December when I see you at the Christmas party, 'cause I'm not gonna send you a check for $25.00 'cause you'd probably add two zeroes to it.
Aaron Brabham: I would.
Frank Curzio: The second thing is, I knew it was this thing and people are e-mailing me saying, "Frank, they're talking bad about New Yorkers." I'm gonna say – I don't know if it's a Baltimore thing – but usually like in New York we honor our original bets. Not saying I'm not gonna pay you, but in New York we don't change our bets in the middle, especially after we have a couple drinks and everything. That must be like a Baltimore thing, not really a New York thing. Is that like a Baltimore thing? You guys always do that? You change your bets like in the middle or –?
Aaron Brabham: Well, I don't claim Baltimore's my home, so – but, yes, I'll blame it on Baltimore. It's changed – it's warped my mentality. Now I am a waffler, apparently, and I'll blame that on Baltimore. I won't blame that on my Southern roots.
Frank Curzio: Well, I'm gonna say this: I'm definitely gonna pay you. I never said I am not going to pay you. And it was remarkable –
Aaron Brabham: Oh, I don't know – I got a text message that said – or an e-mail that said, "Nope, I'm not paying you. The original bet was 80; you owe me $50.00." And I was like, "Whoa, now this guy –" Oh, I remember what it was –
Frank Curzio: Who sent you that text?
Aaron Brabham: It was one of our listeners. One of our listeners said, "Come on, tell Frank to man up and honor the bet," so –
Frank Curzio: I know. I got like ten e-mails off of this.
Aaron Brabham: – I'm glad we have all on air now. It's all on air. It's out for the world. You are officially removed from the National Scumbag Registry of Stansberry Radio. You're back as an honorary member of the elite status team of great radio personalities.
Frank Curzio: You see, that's a thing – I'm nominated as "Scumbag of the –" It's good that Porter keeps mentioning me, 'cause my file's like five times the size of his, so when he keeps mentioning me, even as the scumbag list, that's good for me, right?
Aaron Brabham: Yeah. Sure, why not? Right?
Frank Curzio: Well, listen – I'm definitely gonna honor the bet, first of all. Second of all, on a serious note, I cannot believe you shot 82 on that course. You must be a great golfer. I shot I think a 94, and I ___ ____.
Aaron Brabham: I mean – look, man, it was an extremely difficult course. And the thing is too, you guys played in the morning. Well, in the afternoon we were two – we were three hours after you, maybe four hours.
Frank Curzio: ___ ____.
Aaron Brabham: The wind was ripping. It was 30-mile-per-hour gusts. And when you have greens that fast that roll like a table top, they were rolling at 13 on the stimp. And like you said, if you're above the hole, you're minimum 20-30 feet past the hole. There was one hole that I took my sand wedge out and I chipped it. I didn't take a divot or anything on the green, but I had to chip it up on the hill just to try to get a little of the spin before it started rolling back. They were insane.
Frank Curzio: Yeah, they definitely were insane. And just for the people who are sending out e-mails, me and Aaron are friends and we had a great – we actually hung out. We played ping pong by the way, which –
Aaron Brabham: Yeah, and we worked the other team. We smashed 'em, which was great. I wouldn't bet you in ping pong 'cause you are a better player than me. There's no doubt about that.
Frank Curzio: Yeah, I lied to you guys too. It's a little secret with me about ping pong too. My father was a ping pong champion, so he taught – basically, for like nine years straight I played. And, yeah, I haven't played in like five years before I played, but it came back to me a little bit at the end of the day.
Aaron Brabham: Yeah, you know what you're doing.
Frank Curzio: So that was pretty cool. But anyone sending your e-mails, we are cool. I still want to be on the "Scumbag of the Week." If Porter could keep mentioning me on the podcast, on his podcast, that'll be perfectly fine with me. But, anyway –
Aaron Brabham: Yeah, why not, right? You're up now to another 40,000 listeners a week. Who cares, right?
Frank Curzio: Yeah, I know you guys do –
Aaron Brabham: Just keep saying "Frank Curzio."
Frank Curzio: You guys are doing great over there. And I wanted to go into a couple of things that are a little bit more serious here. There's a big thing that Porter's writing about, talking about: Obama getting a third term, which sounds absolutely crazy. Why don't you talk about that, a lot of things that Porter and you have been talking about on your podcast?
Aaron Brabham: Sure. It does sound crazy and, look, understand that we recognize and understand the 22nd Amendment. That's term limits. Basically what the tie-in is something that you've written a lot about, Frank, and you've had a lot of recommendations that have done extremely well in this, basically, boom. So we looked back through history and there've been three times that there's been huge discoveries of oil in the United States. You had 1900, 1901 with Spindletop. Then you had 1930; you had the big East Texas find that H.L. Hunt stole from "Dad" Joiner. And now you have the shale boom, of course. You've written about it. I'm sure you've talked about it a lot on the show.
As matter of fact, I was reading Yahoo yesterday and saw that the IEA came out and said, yes, America will be producing more oil than Saudi Arabia and Russia by 2017, I believe, which is way faster than they originally said. They were thinking maybe like 2030s. You know, Goldman Sachs said by 2017. This is not becoming a reality; it is the reality of the new America. So we kind of looked back through history, and under Teddy Roosevelt, and of course FDR, those are the only two other presidents that had run for three terms.
Of course, FDR won a third and a fourth term, and Teddy Roosevelt could have won a third, but he decided to take an election off, appoint one of his buddies, and then he ran under the Bull Moose Party after that and got some momentum, but he didn't get back into the White House. But what they all have in common, these things, is 1900, 1901, Teddy Roosevelt; 1930 was FDR; and now we're coming back to this energy independence, net exporter, number one producer in the world, which comes prosperity.
And through prosperity, it allows government to, of course, collect a lot more revenues and people become happier because everything's operating better again. It puts people back to work. Income grows, so the government uses that to push a lot of new federal programs and expand its socialist agenda essentially. That's the tie-in that we have. And what we're saying is, look, it may not be Obama himself for a repeal of the 22nd Amendment, although we wouldn't say that it couldn't happen, because there've over 21 times that somebody has put legislation forward to try to repeal the 22nd Amendment. It just hasn't garnered any attention.
But if Obama can be the savior and he's a very – as we know after the election, man, his approval rating was horrible and then this guy killed it in the election. There's really no stopping this guy if he can really put America back up on its feet. Which, by the way, this has nothing to do with his policies. This has everything to do with the independent drillers that discovered horizontal drilling and fracking, for George Mitchell when he perfected the fracking. That's why we have that big glut of natural gas and that's why oil production has gone from about 4.5 million barrels a day to close to 7 million barrels per day in the United States, and it's only gonna climb.
We're probably maybe five percent penetration at this time. We're short on fracking crews and supplies. You're gonna see a huge shift, and it's gonna create a richer America, and Obama's gonna get all the credit, and I think the people will demand either he stays in or he has somebody from his proxy – maybe it's his wife, maybe it's a hand-selected person from his cabinet. I don't know, but I don't feel like Obama ___ ____, he's gonna relinquish his power so easily when he gets it.
Frank Curzio: Yeah, and it's a good point too, because after the election we actually saw how powerful this guy was. When you have like the younger generation, people who got out of college that don't have jobs for, what, the first time in a generation, right? You get out of college; these guys can't find jobs under this presidency. And they're still like almost 90 percent plus voting for this guy, which I have no idea. And I don't want to hate Obama at all. I don't want to be – but I'm gonna agree with you there, where somehow he gets votes from people that aren't even doing that good, which is great. Maybe it's the handouts. But also I've been to the Eagle Ford Shale, as you guys know. The recovery ___ –
Aaron Brabham: Yeah, you actually got to ride around with Cactus and, man, I'm jealous of that. You covered like – what, 400 miles in a couple of days? And Cactus is the real-deal wildcatter. The guy's had interests in over 1,000 wells, man. He is the definition of an exploratory wildcatter.
Frank Curzio: Yeah. And he schooled me and everything. The recovery rates on fracking for oil is just ten percent. They only recover ten percent of the oil. The technology is getting so great right now, it's gonna be 20 percent, it's gonna be 30 percent. They're gonna drill in places that they couldn't find oil before, so – and they're drilling now in places that they never drilled before, which is amazing. So as far as the oil trend, it's for real. We are gonna be a massive producer of oil.
And, like you said, you know what comes with that: prosperity, things get a lot better. And as crazy as it sounds, I could see something like this happening. So it is pretty crazy and a lot of people are talking about this. It's been published in different areas in the media now that Porter's been mentioning it. So it's pretty cool and I'd like to hear your opinion on it. [email protected]
Unfortunately, Aaron, I would love to talk to you more because this is the first time I had you on the podcast, you know?
Aaron Brabham: Yeah, man. I really appreciate you bringing me on. It took a risk for us to – for me to join the show, although, seriously, I love Frank; Frank loves me; we're very good friends. We just sizzle on each other. That's what we do. And one thing that goes on inside the Stansberry office, that none of our listeners really know, is we bring the heat to each other regularly. We analysts –
Frank Curzio: Yeah, absolutely. It's competitive.
Aaron Brabham: – sizzle each other. I mean, you name it – we are always pulling a prank or sizzling each other. We have a great time. We work really, really hard, but we also have a great time at other people's expense.
Frank Curzio: Work hard, play hard. But I tell you – we played ping pong, and this is with Mike Palmer too, and we played ping pong until 2:00 AM, I want to say, 1:30 AM? And I had a speech to make to 300 people at 9:00 in the morning. So that's how competitive we are.
Aaron Brabham: Yeah, man. Yeah, you killed it too, man, as always. You're a great analyst and you do a great job on your show as well.
Frank Curzio: Thanks. I appreciate it, guys. Go to S&A Stansberry Radio, great show. I'm so glad you guys are on the podcast bandwagon. It is awesome that you guys are on there, and it's great that you guys are one of the top-rated podcasts out there too. So, guys, listen in – S&A Investor Radio. And, Aaron, hopefully you'll join me again soon. We won't be talking about bets; we'll be talking about this whole movement that's taking place, pretty cool, and thanks for joining me, bud.
Aaron Brabham: Sounds great. Thanks for having me on. Talk to you soon.
Frank Curzio: All right, bye.
Aaron Brabham: Bye-bye.
Frank Curzio: All right, guys, great stuff from Aaron – again, poking fun at our little bet. But more serious, let me know what you thought about Obama maybe getting elected to a third term. Do you think it's absolutely insane, it's crazy? Brings up some really good points. But e-mail me – [email protected]
Again, I say this after every interview: the podcast is about you. Let me know what you want. I can get the guys on here.
What's great is we're ranked pretty much in the top five every week, and it used to go to us calling people to see if they wanted to be in the podcast; so people are calling us, saying, "Hey, I'd like to be on your podcast if possible." So we're getting a lot of really good guests, which is pretty cool, but it's nice to be in that position where I'm the man now. I don't have to chase anybody. I'm just kidding. It's really cool and we are ranked up there because of you, because of the listeners, and I really appreciate it. So, again, let me know how you like that interview with Aaron. Aaron's really a great guy, awesome guy and, seriously, a very, very good golfer. [email protected]
Now let's get to my educational segment. I started the podcast off by talking about retailers. Saw a massive collapse that we've seen with, what, big box retailers like Best Buy, JC Penney. Say, my small stock specialist subscribers made 40 percent in 2 1/2 months on JC Penney, buying at these levels. Like I said earlier, I'd hold off here. I don't know. I can't believe anyone thought that – for one thing on a positive side, I don't believe that anyone thought that they would report good numbers, but the numbers are much worse than people expected, even what I expected at this point.
I think they're gonna have a great turnaround. I really do. Ackman's great at his job when it comes to real estate rates and stuff like that, and I think this play's gonna work out. But, man, I didn't like the fact that he was handing out pins at JC Penney and just trying to get – I've never really seen Ackman flustered before, and he seemed a little flustered in that interview. Guys, check it out on Squawk Box. It was a really good interview and Sorkin was tearing him apart. I mean it's almost like he bought the stock at $28.00, so it was a really cool interview. You could definitely check it out.
But they're restructuring their entire operation. I think they will be successful and they have the cash to do it. But it's getting near a buy range, but I think you have to wait 'cause right now it's in freefall. I think you have to wait some kind of bottom, some kind of technical level before buying here. But I'm holding off, for people who did ask me about it. You have Buffalo Wild Wings down 25 percent, Under Armour down 17 percent, Deckers Outdoors down 70 percent.
Seems like a lot of good buys in this space if we don't have a recession next year, which I don't see. We're gonna take care of the fiscal cliff. There's no way we won't take care of the fiscal cliff. We have zero percent interest rates, a QE Infinity policy, and super strong balance sheets across most corporations. I don't think we're gonna see a recession in 2013. I really don't. Could we? Yeah, we could; I just don't see it. I think once we get this fiscal cliff resolved – and we will and I think they're absolutely nuts not to. I think we'll get it resolved and we'll have some positives coming out there too. It's gonna be painful and we're gonna see tax hikes, but I don't think they're gonna be as great as everybody suggested. I think it's gonna be a lot better.
But it does seem like there's a lot of good buys in this space on this pullback. The question is, how do you choose? And that's what the educational segment's about today. For me, I mentioned before to look at historical valuations – where does the company usually trade during strong and weak economic times. You don't want to just say, "Hey, over the course of whatever, this is where it traded." I mean if a company came out in 1995, you're gonna see – you know the historical valuation might be 25, 30 times PE until 2000. Who knows? Especially if it's a technology company. But you want to look to strong – the good economic times and poor economic times, because right now we're at average; we're at two percent. So where does this company usually trade when we have a two percent economy?
Also look for insider buying, which I think is really important. I mean the first thing with Decker is I saw the stock's down 70 percent. I'm saying, "Hey, is this stock a buy?" Well, when your stock's down 70 percent and your insiders are not buying, that kind of scares me. I mean that reminds me of Crocs, when early on in Crocs – remember $50.00, $60.00? People were buying it and insiders were dumping the crap out of it. It just crashed. It crashed to low single digits and insiders weren't buying it at all.
And I think they started buying it at maybe $2.00, $3.00, $4.00. I mean don't quote me on that, but I remember 'cause I followed the stock for a while. And, thank God, we rode it up and then we got out of it, which was great. But on the way down, one of the things I was looking at is when are the insiders are gonna buy. $20.00, $10.00, no insider buys. Finally they started buying the low single digits, and it's doing a little bit better now.
You look at Kohl's, insider selling right now, Cabela's doing great. I mean there's even insider buying here. Direct market of hunting, fishing equipment. Remember guns? Through the roof in sales. One of the best markets right now. I'm not gonna go into why. That's a whole podcast inside itself. But guns are selling; Cabela's is doing great; there is insider buying. Insider buying doesn't mean that the stock's a definite buy, but it's a good starting point, especially when stocks get nailed.
You look at Nike – you know, I was researching Nike the other day. It's down 20 percent, great brand, someplace I shop all the time. But I don't like the fact that they're selling off a lot of their individual brands. To me it's a sign of weakness. You always see activists who take large stakes in companies and say, "The company's worth more when you break the whole entire company up and sell it off." And how many times do we hear that from activists? That's when they take big positions. They want to just destroy the management team, fire everybody, sell off the whole company; it's worth a lot more.
To me – again, this is my opinion – that's like saying "Our brand is dead. We can't find any other ways to increase sales." I don't think Nike is dead, but it is a $40 billion power retailer with a lot of competition. I mean Under Armour's taken a lot of market share. You've seen Under Armour on college and even pro sports now, so it's all over the place. I mean the jerseys are made by Under Armour. It used to be Nike's and then Reebok, Adidas, whatever it is. A lot of a competition in that market. I just don't like the fact that they're selling off a lot of their brands.
Plus, if you're looking at value, it's trading at 15 times next year's earnings. That's not cheap. You know, it's definitely not cheap for a company struggling to grow, selling off its brands. Maybe another analyst might argue, "Well, Frank, they can get a lot of money for these brands. It's good they're selling off." I don't know about that. I would disagree with you on that. When I see a company selling off part of their businesses – all brands, like Chesapeake's doing – it's just not a good sign.
If it's a good asset, you wouldn't sell it, right? I mean, yes, you could say, well, we'd sell it at the right price, but I just don't like the fact that – hey, all right, if you sell one brand, it's different. But Nike's selling a lot of their brands right now. It just seems like they're struggling for growth. Interesting to see what route they take. Will they purchase an Under Armour? Who knows? Will they purchase – you know, make a big purchase? But right now they're selling off their brands. I don't like it.
That's another thing. I'm not just looking at whether I like Nike. I compare it with other stocks in its industry and I try to find what's the best company based on growth and value. Like if you're looking at technology, say, which is an easier example than retail, you look at Intel and Cisco, just like Jon Najarian said, right, in our interview. People have been telling me to buy Intel or Cisco for – what, five years, ten years? Say you could have bought Apple, which is growing ten times faster than these guys. And right now they're still growing ten times faster than these guys. I mean these guys are struggling to grow on a top line.
It's still – what? – 20 percent plus growth, easily, for Apple. Yet they're trading, when you back out the cash, the same value, the same valuation, the same multiple. So before you buy a specific stock and, say, if you like a specific stock – even in the retail industry – research its competitors. That's the best advice I can give you from a research analyst. See if it's the best in the industry.
I mean it doesn't mean it has to be the cheapest. If it's not the cheapest, if it's expensive, why? Are they expensive because they have the best brand? Are they a Lululemon, which deserves to be expensive? Every woman I talk to loves that brand. I mean maybe it gets too expensive sometimes and people start shorting it. But you want to compare it to certain stocks, and don't disregard buying it because it's expensive. You gotta find out why is it expensive to everything else. Is it better? Is it growing faster? And that's what you want to do before you buy any stock; make sure you research its competitors. That's one of the reasons why I do – I like Under Armour. I think Under Armour is a better pullback than Nike. I think it's a much better brand right now for the price.
Finally, in the retail sector, do your boots-on-the-ground research. It's one sector that you could do that in. Technology – what? Maybe you buy the company's software or whatever; you could ask 'em questions. With retailers, you can go into their specific stores. I mean visit them, talk to the people who work there. Now, you don't have to have a conversation and get buddy-buddy with them. Just ask 'em, "Hey, how's it going? How's business been? Is it always this crowded? Oh, is this a slow time for you? How long you been working here? Is it good? Are you hiring?"
People will answer every one of these questions for you. Trust me. It's like going – talk to a cabdriver, ask him how busy is it. "You picking up a lot of people? Where you driving 'em?" You know, in New York, "Are you going to the Jacob Javits Center? More people coming in for conferences? Is it busy? Are you doing well?" I mean that's a sign that business is good. But do the boots-on-the-ground research. Very important.
And then, if you do that, let me know. Send me the e-mails – [email protected]
– whether it's something like, "Hey, Frank, I was at Michael Kors, at the outlet. There was a line out the door. They're definitely taking market share from Coach. Coach was empty." Send me these comments. That's what this podcast is for, so we could all make money off of it. It's one of the biggest, free networks you're ever gonna see in the markets. People will pay millions of dollars for this, I guarantee it.
I've seen people create million dollar businesses off of podcasts. With this, it's a fantastic network. It's unbelievable. Send me the e-mails and I'll report back to you. Whenever I do a segment like this on retailers on my podcast – how busy the malls are or the outlets – I get hundreds and hundreds of e-mails, and it's not just from people like in Ohio, people in California, whatever state. It's from China. "Frank, you gotta see – Coach is expanding their brand all through warashi on. It's fantastic. Line out the door. People love this brand."
But this is something I can report back to you and tell you how the stores are doing. I can only tell you how Florida is doing. I can only tell you how a couple of other areas are doing from some of my friends. We have a network of tens of thousands of people e-mailing me, and that's how we all make money. That's how this podcast works. So send me your e-mails – [email protected]
I do like the retail sector. I'm looking for stocks to buy in this pullback, and you're gonna see them show up in both of my newsletters, probably, over the next few months.
Okay, guys, that's it for me. Phil Jackson to the Lakers – didn't happen. I knew it wasn't gonna happen. They said management turned down Phil. D'Antoni – I gotta say, Phil Jackson, I think you got really lucky. I think the Lakers are old, not a championship caliber team. They have little chemistry because they have absolutely no role players. Nash is scared that ___ Kobe on his team. Kobe's old, shooting percentages are terrible.
Howard, totally overrated, has always been overrated, in my opinion. I think he's got a huge talent, but he's gonna kill a team at playoffs 'cause he shoots, what, like 30 percent from the foul line and he's gonna foul a guy like crazy, like he did to Shaq. Gasol – man, his best year was, what, three years ago? So that's just starting five, along with Metta World Peace, and that leaves the bench, which is the worst by far bench in the entire league.
I don't know, man, I think Jackson got away with this one. I think he's very lucky not to come back. I mean maybe if you need the money, which I doubt. But, man, I think Miami and Oklahoma City are at least 15 points better than this team. But, Phil, at your age, I think you're much better to sit this one out. It would have been a very long year for you. I don't know – it might have been worse than ending your career, what, two years ago, last year, two years ago when you got swept.
So, yeah, it was interesting. A lot of stuff going on with the Lakers. From what I see, it's gonna get a lot worse from all your Laker fans that e-mail me all the time. So any questions or comments, e-mail me at [email protected]
You could also send messages through Twitter @frankcurzio. That's twitter@frankcurzio. Thanks for listening, and I will see you in seven days. Take care.
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