Thomas Hayes, the chairman of Great Hill Capital, joined Cheddar News to discuss the market.

Stocks opened on Monday morning higher after a wild week of trading last week that ended with the Dow 400 points down on Friday afternoon. Thomas Hayes, the chairman of Great Hill Capital, joined Cheddar News to discuss if the market movement is a trap. “There there are no sellers left," he said. "What you basically saw last week was retail traders bought $19.9 billion worth of put premium to open. They only bought 6.5 billion of calls. This is the first time in history where puts were three times calls and every time this number even got close in history you were near a major low whether that was 2020 pandemic 2016, or 2003. So as I said, you know, no one's position for upside."

'No Sellers Left' Amid Current Market Rise, Says Great Hill Capital Chair

Joining us now to discuss all of this is Thomas, Hey, is chairman of Great Hill capital Thomas, welcome to the show. Thanks so much for joining me this morning. We're talking about the Dow that ended on Friday 400 points down after a wild week of trading. What are you watching today and what are your expectations for this week? Well, I think the positioning is so pessimistic right now Chloe. No one is positioned for good things happening. We came off september, which was the weakest month of the year seasonally now we move into october here, mid october and of the 23 bear markets since World War two, Eight of them have bottomed in October. So we may be getting close here and then you add on top of that Chloe, you've got the midterm election coming up November eight. If you look at the data, it looks like the Democrats will hold the Senate, but they're probably gonna lose the house by a lot, which means we move into the end of the year in a gridlock environment and markets love gridlock, less regulation, no new taxes, less spending is a good thing for the stock market. And that could set off a rally. That's no one, no one is positioned for the levels of pessimism we've been seeing in the last few weeks only rival the pandemic lows and the great financial crisis lows. We haven't seen anything like this. But what we do know is when everyone gets on one side of the boat. Uh and no one's position for good upside. That's when it happens and it does remind me of sentiment in june if you remember going into Q. Two earnings season, all the analysts were say the world is ending earnings estimates are going to come down 20%. And so far with the S. And P down 22.5% earnings estimates have only come down 4%. And as well as you mentioned, we've just started earning season while 7% of the companies have reported in the S. And P. 569% of those have beat on the earnings, 67 have beat on the revenues. And I think that's going to persist and it's going to take a lot of people by surprise. All right thomas. I want to circle back to those earnings in just a minute. But it did sound like you're pretty optimistic here that we could see a bullish rally coming up here perhaps by the end of the month. I want to ask about the data that we've been seeing come in from the U. S. We've had inflation numbers, retail sales. You know, news from the Fed. How do you interpret these when it comes to the state of the US economy? Us consumers then of course the Feds potential action here. Yeah. I think Jeremy Siegel had really pointed out that there's a flaw in the calculation with core CPI I and that's what the Fed looks at and the flaw is in the housing number which came in at plus 7/10 of 1%. Uh Siegel's showed that first off housing prices have come down uh And the rents work on a lag basis. And if you balance those out, the number should have actually been negative 0.7 which would cause a core CPI I to be flat because it's such a heavy weight 40 to 50% of the core CPI I is housing. Uh And I think more and more people are coming around to that idea. As a matter of fact, Esther George the Kansas city Fed press was out over the weekend saying uh there are major risks to moving too fast with the with the hikes and with the hawkishness and what we're seeing around the world is central banks are relenting. The E. C. B. Has had to go back into the Market to buy Italian bonds at the periphery. Bank of England had to go back in the market and buy guilt. The R. B. A. in Australia was expected to raise rates by 50 basis points. They only went 25 basis points. And I think they're coming to the conclusion that the cost of another economic crisis is much higher than And running inflation slightly above trend for the next 3-5 years. And a good parallel was World War II, we got debt to GDP up to 120%. We were borrowing aggressively to fight a visible enemy. This time we got debt to GDP up to 122% in the pandemic to fight an invisible enemy. Uh And what they did post World War two was they simply ran inflation above trend 3 to 6% for five or six years. And that brought debt to G. D. P. Down to 63% in just a handful of years. And I think that's a playbook that can work moving forward. What we find is people would rather pay an extra 25 or 50 cents for a gallon of milk and still have a job than crush inflation and have nowhere to go to work. Now Thomas I do want to mention that since we've been talking the Dow is now up over 500 points here. So I wanna ask you, there's a lot of chatter about this current rally being what's called a bull trap. So how do you identify a real rally from kind of a trap here? Yeah. There there are no sellers left Chloe. What you basically saw last week was retail traders bought $19.9 billion 6.5 billion of calls. This is the first time in history where puts were three times calls and every time this number even got close in history you were near a major low whether that was 2020 pandemic 2016, or 2003. So as I said, you know, no one's position for upside, even institutions have the highest cash levels they've had since the pandemic lows since the great financial crisis lows since the tech wreck close. Uh, consumer sentiment ai sentiment survey is at just 20.4% bullish. Just to put that in perspective the great financial crisis, they were at 18.92% bullish. And the pandemic lows, they were at 20.23% bullish. You know, I've been in this game for for quite some time. And the periods that I've made the most amount of money and significant amounts of money were periods just like this when they were selling was just completely exhausted. Everyone was shorting in the hole and everyone was buying insurance premiums after the house already burned down. I mean, look, we've had our 25% bear market correction. Could it go lower? Sure, it could go lower. But I would say expectations for earnings are so low going into earnings season, they've, they've lowered the bar so much you barely have to step over it to beat. And I think you're going to see that I think analysts are going to look through the strong dollar and look at the underlying fundamentals of the business and the key will be guidance and guidance won't be great because there is a lot of uncertainty. But I think it'll be slightly better than people expect. And that's all we need to have a year end rally thomas, let's talk about those earnings, of course we are looking to big names like netflix, Bank of America. Tesla, what are the markets pricing in for some of those biggest names and what are you going to be watching in this week and weeks ahead here? Yeah, I think the key is the theme, you know the the issue is not whether IBM beat by a penny and red hat works or netflix adds you know, a couple 100,000 subscribers or misses by a couple million subscribers. I think the theme is going to be, people are surprised at how resilient the economy is. As a matter of fact, I mean go to any decent restaurant in the last three weeks, you can, you still can't get a table. Uh, you know, there was $6 trillion of money supply increase over the last two years, so if they reduce a trillion or $2 trillion of money supply, it will have an impact. It'll slow things down, which is perfectly okay. But the other underlying economy is strong and I think what people are also overlooking is the largest portion of our population here in the United States, which gives us a great advantage are the millennials, they're bigger than the baby boomers you got 72 million in their early thirties, starting housing formation when you buy a house and you move out from the city, guess what, you buy couches, you buy refrigerators, you buy cars, you buy baby strollers, you buy diapers, you buy all those things and those were some of the same characteristics that led to the bull market from 1948 post World War 2 to 1968 and we have the exact same bulge in demography and housing formation and family formation that we have then. So yes, we have some short term chop happiness. Yes, things got a little too extreme with all the money printing coming out of the pandemic and will take some of that liquidity out of the system. But if you look out 123 years, you know, some of the stocks that you can buy at these levels Chloe, I mean look boing boing has one competitor in the entire world called Airbus, they're down 71% and you can't give it away, no one would take the stock and these are generational opportunities to buy the highest quality businesses on sale. If you look at Disney, Disney is down 55% off the lows. Do you think more people are going to be going to Disney in three years or less? And I think the answer is a no brainer and then finally you got jpmorgan down 41% it's the best bank in the world and and no one will touch the stock and I think that's going to change really soon, thomas, we're gonna have to leave it there. But thanks so much for your time this morning. That's thomas Hayes, chairman of Great Hill Capital.