Ted Oakley – CHEDDAR TV – June 19, 2020 – Video Transcript

Again, it’s this reopening this valve that investors are focused on and that’s why we’ve be en seeing volatility throughout the entire week, but to try to parse what is happening. We’re going to bring in an expert here joining us now is Ted Oakley. He’s the founder and managing partner at Oxbow Advisors. Ted thank you for joining me here today. I don’t want to start with the obvious. But I’m going to the volatility that we’ve seen this week. We’ve seen concerns about reopening of businesses. We’ve seen obviously civil unrest on racial injustices. What do you think

investors were paying attention to most this week.

You know Nora, I think you know it started out really with the FED buying the bonds and that that changed the atmosphere over the last four five six days. And I think that set them up so that they thought you know things will be okay, but generally I’m I feel as though the covid situation the the reappearance is not as strong this time around is the last time with investors. Now, I may be wrong on that. I’m just noticing that they don’t seem to be as uptight about it.

So I don’t think that’s as much in the marketplace right now is just as much as the speculative nature of everything going on.

I want you to explain a little bit more what you mean by the FED announcing its purchase of corporate bonds how that change sentiment because it’s not the first time the FED has announced a new measure or relatively new measure during this pandemic. So what did change as far as how investors are viewing fed action

Well Nora, that’s true. But this time if you remember about a big down day

a on Thursday that day the market was down six percent and it came back a little bit on Friday started back down on Monday and the FED basically came in and bought corporate bonds now not not low-grade the corporate bonds and everybody’s like you have to be manipulating the market or you wouldn’t be doing this. There’s no reason to buy those. There’s nothing there that would tell you to do that and they can say what they want to Jay Powell but it’s pure Market manipulation has been since March and

Yeah, I think they’ll continue to throw it out there. Every time you have weakness. They’re going to continue to throw it out until they can’t and that’s but that’s where you are right now and that’s what I say. When you start doing things you don’t need to do then, you know, there’s something else going on.

So if the fed from your perspective is seemingly announcing these measures to manipulate the market. Where does the responsibility lie going forward when it comes to aiding small businesses aiding consumers. Is there more onus on

The federal government or what, do you kind of expect as far as as stimulus measures broadly?

Nora I wish it was on fiscal policy. That’s what I wish it was on but we don’t have the type of leadership either side and Washington to really get that done. They sort of delegate that to the fed and the FED only has money powers. Unfortunately and money powers won’t get the job done. I mean, yeah, you give money to people for a little while but you don’t get in a situation where you give them incentives to build things to add employees to do things like that. I think that is where fiscal policy really makes a big difference and we don’t you know, we don’t have that right now and the FED is only thier in the money game. And so whatever the treasury gives them to SPV or whatever. That’s how they make this work.

Even though we saw volatility this week. We did end on a high note this week. We saw weekly gain the S&P 500, Dow and NASDAQ closing the week up. I’m curious. What impact do you think the closing of these Apple Stores will have because it’s been this indicator for other retail companies with these brick-and-mortar locations to try to track how Apples reopening has gone. Do you think this is going to put a damper on investor sentiment going into next week?

I really don’t think so and let me say this we own Apple and we own Microsoft too, now Microsoft never never opened their stores. Apple did perhaps it was too early. That’s not my call, but I don’t think it will have a big impact on them. Other than the fabric is there’s a lot of other places that are still closed and so I don’t your question about will it dampen their appetite. I don’t think so.

What do you think is going to give investors more optimism then. It feels like the indicators we’ve gotten this week is of a risk of increasing infections across the u.s. Risks to businesses reopening what are investors looking towards to give them optimism that we are on this path of recovery.

From an investment standpoint. I don’t think they’re looking at the covid side at all. I think what’s happening here is you have this momentum going so that all of a sudden, you know, it’s the only game in town and you have a lot of small players a lot of things happening. And so when you get this momentum going and things keep on going up you feel a little better everyday you almost get addicted to it. And I think that’s what’s driving this thing right now is like, you know, if I sell something I’m probably making an error because

Because two weeks from now it probably might be higher. I think that’s what’s happening here. It’s has nothing to do to me with covid right now.

So you’re saying that investors generally are writing this momentum. We’ve also seen a lot of movements from Robin Hood this app that is used. Sometimes we use as a proxy for Millennial Traders. We’ve seen this kind of driving overall market sentiment to do you think these kinds of apps this kind of FINTECH is going to also drive sentiment going forward.

I do for a while I think until you get an extended down period where you know right now for most of the Robin Hood Traders when they buy something that’s down. It may go down a little more one more day and then it comes back but I’ve been around longer than most people’s I’ve been able to see a lot of different instances where hot money was really doing something and I noticed it back in the in the 80s with oil in the early 80s where everybody was trading oil.

And then in 99 and 2000 I knew it wouldn’t end well because too many people quit their jobs to day trade and now you have this situation where they don’t pay anything and so they’re just sitting at home and I don’t know how much you know about betting but in betting you have to pay you what we call The Vig or the juice. It’s about 10% of the bet. Well, you don’t do that now with stocks you just go in and buy them there’s no commission and you try it out. And so that’s created its own type of Casino. And you’re getting a lot of young people somewhat addicted to it. I know about the app. I’ve seen the app and know what goes on with it, and it’s easy to operate and so I think that’s where you are right now with that. I think that I think that’s something will come unfortunately to a bad ending eventually, but I just not right now

Ted. Thank you so much for your time. And for your Insight today, that’s Ted Oakley. He’s a founder and managing partner an Oxbow advisors. Thanks again.