But first mike santoli is going to join us to break down cpi the impact today on stocks, volume, vix. There is a lot to watch here. A lot of stuff was already moving pretty hard in one direction. We got an accelerant at the open how do you make a 1. 5 drop in the nasdaq feel okay start with the 3 drop in the nasdaq, basically where we are we are down enough you have to look at a longerterm chart to situate us in terms of where we are and how far back in time we have here you go. That is the precovid high in the nasdaq 100 it is around 9600 between 96 and 9700 down a thousand points from here you know what . We went down a thousand points in the last 10 or so trading days in the nasdaq 100 you are kind of in the zone there of going back to the precovid levels of course a ton of stocks, maybe half of all stocks are below precovid peak right there we did kind of lose out on some of those other areas i was looking at more like in the twoyear roundtrip range that would have brought us back to sort of before the 2020 election that was a correction we had right there. Apple continues to be this big story. It is kind of a sector or an asset class of its own this goes back a couple years to show from the end of 2020 i guess, this goes back to show how the equal weighted nasdaq 100, the average big growth stock in the nasdaq, and more or less in tune until the overall market peak, the nasdaq peaked and then apple became something different, a safety play now, it is threatening those lows we had from earlier this year in the 130 area well see if we have to get down there. But in a market where you want to look for pockets of relative strength, apple stands out also in a market where youre waiting for that last hold out of hope to give way, youre also looking for an apple maybe to break down further as a further sign that people feel like theres no safe shelter out there, which is sometimes a formula for some kind of low. Which is exactly why we talk about apple so often thank you so much. How do you navigate the tech sector in this environment we saw some of the Historical Data lets go forward with the fund founder, dan niles, telling us all year Retail Investors would be better off in cash and you were right even with the rate of inflation. Cash has certainly preserved its value more so than the Broader Markets. If you have a longer time horizon now is now a good time to start nibbling especially at some of those tech names we just saw mike break down, how we are getting closer to the prepandemic peak what do you think . Well, there is the long term and the short term in the short term i actually believe october will end up being up and the reason i say that is if you look at it historically october is up 60 of the time over the last 70 years average gain is 1 when you go into october with a market down 15 in the prior nine months, your odds of it being up go up to about 83 and your average gain is about 3 . Even if you look at so far this month, horrible ppi numbers. Ugly preannouncements. And the market is down about 1 so far in october. So youre sort of setting up, even if you look at some of the action today, Applied Materials, you know, big negative preannouncement. Stocks actually up on the day. You look at microntechnology, they cut tit from 70 cents to 10 cents for next year. Fedex, right, massive preannouncement. Eps down by almost 50 for the next quarter nike numbers go down over 20 . Looking forward. All of those stocks are up 6 to 9 from their lows a few weeks ago. I think this is all signs that in the very, very short term, my belief, is that the market rallies. From the longterm perspective, though, in the tweet i put out this morning, the bottom i think is still s p 3000 which is a 15 multiple on a 200 eps unless you are willing to trade this market on a daily basis and, you know, willing to go to cash and short, you should just stay in cash because 3,000 on the s p is still a lot lower than today you are essentially saying even if we see a rise in october that could be another head save like we saw in the summer. You painted some of the negative points we got but there was a little optimism in today earnings numbers delta fuel costs down quarter over quarter i think i know what youre going to say though. This is you point to the fact that energy and supply chain only accounts for 10 of corporate costs. Wages are worth a lot more when do we start to see that are you waiting for wages to come down to sort of any sign of a bottom youre exactly right. Energy is about 10 of corporate costs. Supply chain is another 10 . Wages is twothirds of corporate costs. If you look at what determines wages, it is really simple how many jobs are available . How many people are unemployed if you look at that, youve got about 10. 1 million job openings and about 5. 8 Million People unemployed you have 70 more jobs than you have people unemployed the prior record as far as we have data is about 25 more jobs youre going to need much more pressure on the employment picture to get that down to a level where you get wages under control because it is great looking at, you know, gasoline prices or used car prices and all this stuff at the end of the day the u. S. Economy is 75 Services Based and wages is the biggest component of that. Rents by the way is the other big piece of inflation, which is 30 to 40 that typically peaks out a year and change after home prices peak out and they just peaked out in march so you can expect pressure on rents through march of next year so thats why we have a very big picture view that inflation is going to remain, it is going to come down but remain higher than everybody wants through and into next year. Dan, first i want to point out to everybody the dow has climbed back to almost flat from that dramatically low open s p down 0. 5 . The nasdaq is still off by about a percent. What you said about october and the possibility it ends higher, what does that mean for what we should expect out of earnings season then . Well get guidance at least from some folks for q4. The dollar has remained pretty strong how bullish are they going to have to sound in the guide despite whats happened with inventories, how much theyre going to have to comment on discounting, and overall weakening consumer demand . Theyll sound absolutely horrible, john i think that is actually what you need as i said earlier, micron, nike, fedex, those are about as ugly forward looking numbers as you can get. Applied materials last night on their negative preannouncement so to some degree this is going to be what happened already this year you had six rallies in the s p this year that averaged 9 apiece youre not up 50 this year. Right . Youre down 25 . Those rallies occurred for the same reason. Numbers get cut. Investors mistakenly think this is the bottom. They run them up thinking oh, this is a great company. Let me buy nvidia or amd or tesla. Pick your favorite rate company. Im not arguing they arent great companies. But the problem is the numbers have to keep coming down they rally a couple months june to august if you remember, the s p was up 17 and now youve given it all back because numbers continued to come lower so that is all were saying is bear market rallies and we have in on our site where we went back and analyzed them they happen all the time right you had five rallies between 18 to 21 in the s p during the Global Financial crisis and during the tech bubble break on your way to losing 49 to 57 of your money so this is pretty typical. I think in some ways it is counterintuitive but the worse the guidance is the more likely the market is going to mistakenly have another bear market rally and then youll figure out the numbers are still too high when we get to the end of the Fourth Quarter and well be back in the soup again. I think that is how you want to think about this. Right dan, as we pay attention, before cpi this morning the discussion was a lot, largely about uk and their uturn if we get that. If there is a dramatic stability event, even if were not quite back to 3k yet is that when you start jumping in more aggressively i think back to the depths of covid when disney shut the parks and thats when you got long. You have a great memory, carl yeah yes. Actually the first thing i look at when i wake up in the morning is typically where credit default swaps are on credit swees, Deutsche Bank, what the tenyear is doing in the uk not the u. S. And those are the things i sort of look at because i do the tail risk in my mind is another lehman type moment which is i firmly believe youre going to get some kind of big Financial Institution in big trouble. I dont think its going to be one of the big banks but i could see another archigos type situation because so many hedge funds, 6040 funds, parity funds, whatever you want to call them have gotten murdered on their bond positions and crushed on their stock positions i think you could see Something Like that. That is the tail risk. You know, theres a lot of other stuff like whats going on in the uk that im watching Credit Suisse and Deutsche Bank are up this morning. So that is a pretty positive sign as well so there is the very, very short term where i think it bounces and, you know, i sent you those notes last night saying, you know, thats what we thought would happen then there is the long term and the long term is what you want to remain deadly focused on because the fed is nowhere near finished you may get shortterm optimism but you want to be defensive if youre going to be in stuff. We own walmart because they were up 18 in 2008 with the market down 38. Were in health care another defensive space. The stuff that isnt defensive were getting clobbered in but we think there is going to be a shortterm rally that were playing for. Even before this morning cpi numbers theres been concern building among fed policy makers that the fed could over shoot. Something could crack or even break. I guess is that what youre saying does that risk increase after this mornings number . The prospect that the fed cant stop doing what it is doing . Well, you have to remember, its how you look at over shoot. They under shot. Right . They were a year late in raising rates. They massively screwed this up so theyve got to play catch up because the problem here is that inflation hits the segment of the society that can least afford it, right 35 of people dont own homes. They didnt benefit from the covid Price Inflation and home prices you know, 45 of people dont own stocks they didnt benefit from all that massive stimulus pumping up meme stocks and the stock market and everything else. Crypto so the fed has to focus on those people and not people who can afford to invest or own their own homes and thats what they should have been focused on over a year ago so i think, you know, thats just going to keep the pressure on things for longer than what, you know, the average investor wants to believe a tricky market, dan. Thanks so much for being with us always great to hear your insights dan niles, satori fund. Thank you meantime Chip Companies like taiwan semi cutting capital as you know amid the semi slowdown. Were watching all of that so many huge stories today yes, so many. Lets start with the foundry of the world tsmc finally sounding a little cautious though it posted the best profit in two years and beat analysts expectations benefiting from Pricing Power and of course the strong u. S. Dollar taiwan semiconductors, actually the largest madetoorder chip maker and its projecting the industry will contract in 2023 that is next year. The company is cutting Capital Expenditures by roughly 10 . But the weird thing is tsmc doesnt seem as worried about u. S. Export restrictions that aim to hamper chinas ability to make advanced chips. On the Conference Call which was really early this morning management said the new rules were, quote, limited and manageable then you also have silicon design firm sinopsys saying the rules wont impact revenue and reaffirmed guidance, the stock is trading a little higher up, 1. 3 right now but you have other chip makers that are sounding the alarm. Equipment maker Applied Materials cut the forecast yesterday evening blaming the new china export rules they predict it will cut sales by 400 million in q4 give or take about a hundred million then nvidia we know about a month ago previously warned of the same 400 million impact there are also reports now Companies Like kla, alam, has started to pull employees from chinas chip makers or like asml have told u. S. Employees to stop servicing chinese customers. The export restrictions clearly hitting an industry that is already suffering a downturn john yeah. Kristina, thanks so d, it is interesting. If you are an equipment maker that sells into china, yeah. It is going to be even though it is european then that is going to affect you a lot more than if you are a chip maker and most of your oem customers and what not are in the u. S. Or in europe or in other parts but if you are investing in chips you are not investing necessarily based on what is going to happen in 2023. Youre investing on what is going to happen beyond that. What dan niles just said not with standing what do you think will happen three to five years from now who is going to be able to win with the fabs being built out or maintained in process technology right now . That is what investors have to think about. Bingo if youre looking three to five years out you are looking at who is building and spending money which is why i tend to focus on the capx number out of tsmc reducing that quite a bit down to 36 billion and it begs the question what does intel do now it is already under so much more pressure than some of the other chip makers and has plans to invest a ton in manufacturing and business set it is just getting into what does it mean for their investment plans we should note intel is a relative out performer in todays session. What is going on in this name . I think if you are intel, it is full steam ahead. Look, you have a certain amount you have to spend because your case is intel is not going to shrink were not shrinking our ambition were going to do foundry and lean into process technology as well to be special and youre going to make cuts you have to make in order to finance what you view as being strategically por important for the future you dont pull back now because the chip market is going to be bad in 2023 because the fabs arent going to be operational for three to five years anyway i understand what youre saying but if job cuts are really planned, how patient are investors . Youre also seeing margin compression at intel did these plans, the plans in manufacturing, get scaled back in the current environment no. You cant. How long can it hold out . You cant those fabs have to get built. If youre cutting costs operationally now so that you can afford to spend what you have to on the fabs, that is what you do. Im not saying thats absolutely the right strategy that is for smarter people but if that is the strategy youre continuing to follow thats what you got to do. All right. Well break down the hardware landscape. More on that with Morgan StanleysEric Woodring on the other side of this break techcheck is just getting started. Oh, the stock market is doing that fun thing again. News from the future youre going to live through that about 10 more times laughs no stress. I just discovered yieldstreet. They vet investments that dont ride the stock market rollercoaster. [narrator] yieldstreet private market investing. Dow is up 215 nasdaq green lets check on meta. Is today the day to buy the dip . Bernstein is calling the stock its top pick today they say they see light at the end of the tunnel, looking for an increase in global engagement, demonstrating improvement in the revenue trajectory they do cut the target down to 195. John, pretty interesting no doubt, saying he doesnt need to prove the bull case from here for the stock to work. Yeah. It certainly has been beaten down the bull has been gored. If it is a bull in meta. To add to what you were saying s p also peaking above 3600. Well see if it holds. A long day ahead lets turn down to hardware. You have enterprise demand slowing, weaker consumer what does it mean for apple, the broader pc market, broader hardware lets take a closer look with Morgan StanleysEric Woodring and i want to start not with apple and pcs but with enterprise at large. I keep hearing from ceos at these companies that it is a rip and replace argument right now about who can get in there and make the company more efficient on the spending they are still going to do. All that money is not going away who is going to lose Going Forward and get ripped out so when a rebound happens theyre not going to rebound what should investors avoid because of that . Thanks for having me on, john right now in down turns what happens is that enterprise is typically cut, what is most easily cut it is typically more transactional businesses unfortunately like hardware. We published our three q 22 cio survey earlier this week and we learned cios continue to cut hardware budgets they thought 2. 5 year over year growth at the i think of this year right now were looking at about 1. 7 year over year growth this year and expectations are for growth to decelerate next year to 1. 5 growth what is getting cut unfortunately is a litany of hardware projects, pcs, servers, storage, printing, peripherals and so again, because transactional hardware is easiest to get cut, typically my space is the one that falls under the first cuts. Yeah. I guess pcs are easier to cut if youre not hiring as many people as you were before you hire somebody you have to have a pc for them but if youre not hiring or even cutting people that opens up some space there so how much of it is that and then what did they buy before that theyre not going to buy when the budget gears up again . Do you have insight into what is getting obsoleted. Yes. As Technology Transformation continues even in the down turn . Quickly on the pc market, again, we have to remember before the pandemic the market globally was doing about 260 million pc shipments it peaked in 2021 around 340 million shipments. Were going through a period of digestion now. There were a lot of incremental pcs sold over the last two years. Companies and consumers alike have to