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  • AND THEY'RE NOT GOING TO CHANGE

  • ANYTHING THEY'RE DOING

  • I AGREE WITH ALL THE COMMENTARY

  • ON THAT.

  • >> ALL RIGHT

  • OUR NEXT GUEST WARRANTS THE

  • MARKET IS LOOKING FROTHY ONCE

  • AGAIN.

  • MARK WILSON IS MORGAN STANLEY'S

  • CHIEF EQUITY STRATEGY AND CIO.

  • HE IS HERE WITH US IN MIAMI.

  • GREAT TO SEE YOU IN PERSON IN

  • THE SUNSHINE.

  • >> IT'S NICE

  • >> THE FED HAS NO REASON TO EVEN

  • GIVE AN OLIVE BRANCH TO THE

  • BULLS AT THIS POINT, DOES IT

  • THERE IS NO GAIN FROM THAT.

  • >> I DON'T THINK SO.

  • I MEAN, THEY'VE DONE A LOT OF

  • HARD WORK.

  • THEY'VE DONE THE HARD WORK

  • THEY'VE RACED TO 4.5%.

  • WHY QUIT NOW, PARTICULARLY WITH

  • THE FROTH COMING BACK.

  • FINANCIAL CONDITIONS ARE

  • ACTUALLY WHERE THEY WERE A YEAR

  • AGO ALMOST WHEN THEY STARTED

  • RAISING RATES.

  • SO THERE IS NO INCENTIVE FOR

  • THEM TO DO IT.

  • BUT I HAVE NO IDEA WHAT THEY'RE

  • GOING TO DO.

  • THE WAY I LOOK AT IT IS THIS IS

  • AN EVENT THAT'S BEEN THOUGHT

  • ABOUT NOW FOR FOUR MONTHS.

  • THIS IS PART OF OUR CALL IN

  • OCTOBER THAT THE FED MAY PAUSE

  • AFTER THIS MEETING

  • SO WE'VE HAD THE RALLY AT THIS

  • POINT, RIGHT

  • TO ME IT'S SIMPLY THE MARKET

  • NEEDS TO GET PAST THIS EVENT

  • AND THEN WE CAN PRICE TO

  • FUNDAMENTALS AGAIN, WHICH ARE

  • DETERIORATING.

  • >> FINANCIAL CONDITIONS ARE AS

  • LOOSE AS THEY CAN BE

  • YET THE MARKET DOESN'T SEEM TO

  • ACKNOWLEDGE IT

  • ONE WOULD THINK GIVEN WHAT THE

  • FED HAS DONE FOR THE LAST 14

  • MONTHS, FINANCIAL CONDITIONS BE

  • AS TIGHT AS THEY'VE BEEN IN A

  • DECADE

  • THEY'RE NOT.

  • SPEAK TO THAT.

  • AND WHAT IS THE MARKET NOT

  • SEEING

  • >> I THINK THE MARKET DID ADJUST

  • THAT LAST YEAR

  • WE SAW A MAJOR ADJUSTMENT IN

  • MULTIPLES IN THE BOND MARKET, OF

  • COURSE, BECAUSE THE FED DID

  • TIGHTEN OR FINISH CONDITIONS

  • BUT NOW THE MARKET IS LOOKING

  • PAST AS IF ALL THE FUNDAMENTAL

  • NEWS CAN BE OVERLOOKED

  • A AND THE FUNDAMENTAL NEWS IS

  • DETERIORATING SIGNIFICANTLY.

  • WE'RE SEEING THAT EARNINGS

  • TONIGHT.

  • YOU GUYS WERE JUST DISCUSSING

  • THAT

  • WE THINK THAT'S GOING TO

  • CONTINUE TO BE THE CASE.

  • ONCE THIS EVENT GETS PAST US,

  • AND PEOPLE REALIZE THE FED IS

  • NOT CUTTING THE RATE, THERE IS

  • NO MORE HEROIN, SO TO SPEAK,

  • THEN WE'RE GOING PRICE THE

  • FUNDAMENTALS WHICH ARE CLEARLY

  • DETERIORATING IN OUR VIEW.

  • >> WE'VE SEEN THIS CYCLE BEFORE

  • THE LAST YEAR WHERE INVESTORS --

  • ESTIMATES COME DOWN END OF THE

  • QUARTER.

  • THEY'RE NOT AS BAD AS EXPECTED

  • WE SEE STOCKS RALLY OUT OF IT.

  • BUT AGAIN, WE'VE SEEN THEM PULL

  • BACK AND MAKE NEW LOWS

  • WHEN YOU THINK OF THE ROTATIONS

  • WE'VE SEEN OVER THE PAST FEW

  • MONTHS, MONEY INTO FINANCIALS,

  • INTO INDUSTRIALS, INTO ENERGY

  • AND LIGHT, THERE IS A RISK

  • THERE.

  • AND STOCKS THAT LOOK REASONABLY

  • PRICED

  • BUT IF WE DO BOTTOM SOMEWHERE

  • LIKE 14 TIMES EARNINGS, THEY MAY

  • LOOK REALLY EXPENSIVE, SOME OF

  • THESE INDUSTRIALS.

  • >> I KNOW WHERE YOU'RE GOING

  • WITH THIS.

  • THE CYCLICALS ARE PROBABLY MORE

  • RISKY THAN THE GROWTH STOCKS

  • THE GROWTH STOCKS, A LOT OF THEM

  • HAD THEIR COMEUPPANCE WITH THE

  • CONDITIONS TIGHTENING.

  • NOW THERE IS THIS NARRATIVE THAT

  • CHINA IS REOPENING, INFLATION

  • HAS PEAKED

  • WE CAN LOOK THROUGH THE VALLEY

  • HERE AND START BUYING EARLY

  • CYCLICAL STOCKS.

  • I THINK THAT'S A REAL MISTAKE,

  • GIVEN THE DEGRADATION IN

  • EARNINGS WE THINK IS COMING.

  • >> HOW SURE ARE YOU THAT

  • INFLATION HAS IN FACT PEAKED

  • WE JUST GOT SPAIN'S INFLATION

  • NUMBERS ON MONDAY.

  • I NEVER THOUGHT I'D BE TALKING

  • ABOUT SPAIN'S INFLATION NUMBERS.

  • BUT INFLATION WENT BACK UP

  • AND THAT'S GOING TO MAKE THE JOB

  • OF THE ECB WHICH MEETS LATER

  • THIS WEEK TOO A LITTLE BIT

  • HARDER.

  • >> AND THERE ARE SO MANY OTHER

  • CROSSCURRENTS.

  • WITH CHINA REOPENING, ISN'T THAT

  • DIRECTLY IN THE FACE OF FIGHTING

  • COMMODITY INFLATION, FOR

  • EXAMPLE?

  • GASOLINE PRICES ARE UP 30% OVER

  • THE LAST MONTH

  • WE'RE SEEING OTHER COMMODITY

  • PRICES SPIKE UP.

  • SO IT'S MAKING THE FEDS' JOB

  • HARDER, WHICH SPEAKS TO YOUR

  • POINT.

  • WHY GET OFF THE TRAIN NOW?

  • IF THINGS WERE CRASHING AND

  • THERE WAS ALL KIND OF DISTRESS

  • OUT THERE, I GET IT.

  • BUT THAT'S NOT WHAT'S HAPPENING.

  • THERE IS NO INCENTIVE.

  • >> A QUESTION FOR MIKE

  • >> YEAH, MIKE.

  • YOU TALKED ABOUT THE NEGATIVE

  • OPERATIONAL LEVERAGE

  • I THINK THAT'S A BIG PART OF THE

  • EARNINGS STORY

  • HERE WE ARE AT AMD REPORTING

  • TODAY AFTER THE BELL

  • AND WHAT WE'RE HEARING FROM AT

  • LEAST A LOT OF SEMICONDUCTORS,

  • YOU JUST TALKED ABOUT CYCLICALS,

  • YOU CAN MAKE AN ARGUMENT THAT

  • THESE FOLKS ARE GIVING YOU THE

  • CLEARANCE TO SAY THROUGH THE

  • MARCH QUARTER, THROUGH THE JUNE

  • QUARTER, WE'RE KIND OF AT OUR

  • BOTTOM

  • WE'VE REMEDIED INVENTORY

  • WHAT'S YOUR CALL ON THAT

  • BECAUSE, AGAIN, A LOT OF THESE

  • LEADING INDICATOR CYCLE STOCKS

  • HAVE ALREADY UNDERGONE A LOT OF

  • PAIN

  • >> YEAH, I THINK THAT'S FAIR

  • BUT WE THINK FIRST OF ALL

  • SEMICONDUCTORS NEVER REALLY WENT

  • THROUGH THE RECESSION BECAUSE OF

  • THE MAJOR OF THE PANDEMIC THERE

  • WAS A PULL FORWARD

  • THEY ACTUALLY HAD KIND OF TWO

  • CYCLES IN ONE.

  • WE ACTUALLY THINK THE DAMAGE IN

  • THAT SPACE IN PARTICULAR IS