Fox Confronts Meet Kevin on Stock CRASH

guys let's start with the the big

predicament for Corporate America profit

squeezes right now despite all of the

noise about profiteering that we're

hearing uh from the administration

producer prices continue to run way

ahead and way faster than consumer

prices we've got in fact on the screen

here producer prices up 11 consumer

prices up eight percent that's not

profit tearing what it does mean though

is that these companies have to eat the

difference and that's giving Target

shareholders uh heartburn right now Phil

Target warned that their margins are

going to be under pressure for the rest

of the year so what does that mean for

the overall economy in the market

well look the consumer was quite strong

going into this but unfortunately the

high cost of gasoline and then issues in

the inventories so I'm getting earliest

I'm getting late created a scenario

where Target didn't do a very good job

of managing this outcome if you're

compared into a say at Costco look how

much better Costco did versus the target

so some of this is company specific Home

Depot versus Walmart different

businesses but managed properly you

focus on the strength of the consumer

you'll do just fine the economy let me

jump in one second because I got a lot

of stuff I want to go over at you and

Kevin but last time you're on you see

you said the consumer was very strong I

got to tell you my Twitter feed was

outraged they could not believe you keep

saying that I mean people don't

understand like do you have any poor

relatives do you have any relatives who

have middle income does everybody in the

in your family wealthy because there is

a major divide between the Haves and

have-nots right now it seems have gotten

worse the stemmies have run out all that

extra money is gone and I don't know I'm

not sure where this this strong

household stuff you see thing is coming

from

it comes from the when we look at how

much people owe versus how much they

make it's the best it's ever been and

yes if you're making fifty thousand

dollars paying five dollars the pump

hurts no doubt about it but instead of

making 45 like you did last year you

might be making 55 or 60 this year and

that's the difference I get right now

there's pain because of the price of

gasoline specifically but in whole when

you take a step back

you can make the case of the consumer

today is in better shape than they've

ever been this is

my wife bought two lamb chops yesterday

and it cost twenty three dollars and it

came when my wife starts complaining

about lamb chops I know we're in trouble

Kevin let me get you into this

conversation all right uh there's been a

lot of talk about the shift into value

uh coming into the session here's the

thing Target had a 13 and a half four p

e ratio 15.7 p e ratio that was less

than half of what Costco had so how does

anyone even discern what's value and

what's not value anymore

you know it's gotten really difficult

the msci tech relative to the S P 500

and then compared value to the S P 500

shows us that Tech is almost as cheap

now as value and that's a sign that the

market just doesn't know where to flee

to safety but I think I have a path and

I want to share that here we know that

spending on stuff is going down we know

that in response to you asking where's

the money look folks still have more

money than they did in 2019 they're just

spending on things to do rather than

things to own and it's following

textbook inflation first Coca-Cola and

Heinz told us that it was harder for

them to raise prices at the beginning of

the year now Target and Walmart are

saying we're seeing higher income

Spenders still spending on gaming

consoles but that lower income

demographic is spending less money

they're spending Less on apparel and

Home Goods this is expected here's

what's next Nike Lululemon Under Armor

they get hit next followed by Proctor

and Gamble and then Home Depot Home

Depot is going to get hit when housing

prices go down the ones that are more

resilient in this time are going to be

those that cater to higher income

consumers for example Apple's average

household incomes closer to 90k they

might be a little further down the line

Tesla caters to that hundred forty

thousand dollar a year average household

income so they might be more resilient

getting hit pretty hard yeah and what

happens with them though those

households are impacted by the stock

market going down and there's a certain

threshold level of wealth effect that

starts working in Reverse even for the

top 20 percent of earners hey Phil I got

up the income statement for for um for

Target I want to share this with you and

the audience so total revenue to your

point was higher it was up it was four

percent so so we've got total revenue up

that's not bad but costs of sales up 10

percent selling in general

administrative that's Workforce they're

paying their warehouse workers more they

hired too many people between those two

inputs their operating income is now 43

net earnings down 52 so from a stock

market point of view forgetting about

the debate on where the consumer is

we're seeing Staples That was supposed

to be a safe fan even getting crushed

the worst performer two days in a row

where's the flight to safety here

And yet when you look at the project S P

500 we're expecting 12 total bottom line

growth which would be the best numbers

ever where you go here you go to

companies that pay dividends how you

survive inflation how you survive

markets like this is you've got to be

paid to wait around tilt towards large

cap value tilt towards mid cap value

earn a three to four percent dividend

like you got at a Costco or some of the

big caterpillar John Deere names they're

going to pay you money to weight the

volatility out and you'll be just fine

that's how you survive this so Kevin in

the meantime Goldman says okay they've

downgraded equities the neutral for the

next three months they're talking about

stagflation being this macro having all

this macro momentum they say overweight

cash is cash a good place to hide out

just or or do you want to still mess

around and try to find a sector that's

at least impacted

yeah absolutely first thing people have

to get out of debt stop using margin

Vanda track said this morning that

younger individuals are getting into

margin because they're trying to make up

the losses they've had in the last six

months whereas older individuals are

moving to cash I think cash is good for

those with higher incomes because you're

not really affected by inflation with a

higher income because the stuff you want

to buy assets like stocks and real

estate are actually going down so

inflation is actually ironically helping

your cash become more valuable not less

valuable so I do still like cash but I

also can't help myself that when Tech

and value are almost aligned relative to

the S P 500 this is the opportunity of a

lifetime to get into tech place so

that's what I'm doing I I admit I am

salivating I'm trying to hold people's

hands I am salivating and some of these

opportunities I'm looking at I'm ready

to LEAP real soon just going to give it

a little bit more time Phil Kevin thank

you both very very much really

appreciate it guys