Bank earnings will outperform expectations: Brigg Macadam Founding Partner

Greg Swenson, Brigg Macadam Founding Partner, joins Yahoo Finance to discuss the outlook on Bitcoin, upcoming bank earnings, and the state of the energy market.

Video transcript

JARED BLIKRE: And we want to keep talking about the markets here. We're going to bring in Greg Swenson from Bigg Macadam partner-- you're a founding partner. Thank you for joining us here today.

I want to talk about Bitcoin. We got some comments from Jamie Dimon earlier today. He's at a conference calling it, quote, "worthless," although he does believe in stablecoins and blockchain. But given the price action we saw over the weekend topping $50,000-- $57,000, maybe $58,000, what do you say-- what do you see in the Bitcoin cards for the future here?

GREG SWENSON: Well, Jared, good question. Great to see you again. I think one of your earlier guests was talking about it I mean, there's just so much more institutional support. So, you know, whether Jamie Dimon likes it or not, I don't think there's any turning back. You know, this goes back maybe earlier this year when MassMutual announced that they were buying in size, and it's just every day or every week there's more, you know, institutional acknowledgment of Bitcoin. And especially with the money printing that's gone on in the last year, you know, it gets more attention now because I think investors are looking for ways to hedge against, you know, the debasement of the dollar and global currency.

So, you know, I think it's here to stay. You know, obviously went through a massive correction. Took a lot of the leverage out. A lot of trades had to be unwound on the way down. But I think, you know, when it broke out of that $30,000 to $40,000 range that it was really stuck in it-- it seemed to be stuck in that $30,000 $40,000 in the summer. Once it got through $40,000, you know, next stop was $50,000, and here we are in the mid $50,000s. So I'm not surprised.

JARED BLIKRE: Yeah, that was kind of a nail biter when it was testing-- I think it went as low as $29,500. I was ready to hit the sell button there but didn't have to, so very nice.

I want to move on to earnings season. Really kicks off this Wednesday with JPMorgan, some of the big banks, BlackRock, also Delta Airlines. Not going to get the same blockbuster numbers that we did for the second quarter, but there are some concerns that even if we have beats on earnings that the guidance could be weak. So I'm just wondering what you expect here.

GREG SWENSON: Yeah, look, I think the bank earnings will actually outperform expectations. You know, I think part of it is that the market's a little bit nervous about these rising energy costs and supply-chain issues, but banks don't really have to worry about that. And then, of course, you have the steepening yield curve and higher rates, which is good for banks. So I'm not sure that, you know, some of these issues are going to be reflected in the Q3 earnings. I think for Q4 earnings you'll see some of this supply chain and higher costs, higher inputs in certain industries. But I think banks are really well positioned. In spite of the fact that they've had a great year, I still think they're undervalued by many metrics.

So I like banks right here. I expect the earnings to be better than expected. And I think, you know, they can take advantage, as I said, of the steepening yield curve and higher rates.

JARED BLIKRE: Well, you mentioned energy, so I want to talk about the energy sector in particular. And if we can go to the YFi Interactive, I have a heat map of today's performance in some of these stocks.

But also-- I'm also looking at the clean-energy stocks. For instance, there's one ETF, TAN. This is still the traditional energy companies. But if we go over to our clean-energy heat map, we're seeing some really big outperformers. First Solar up over 5%. We have Enphase Energy up 6%. And a lot of these stocks at depressed levels because they saw a huge run-up into early January, February and just peaked out. But if you want to talk about the energy space, the clean-energy space, where do you see the most potential price appreciation in the stock prices?

GREG SWENSON: I think it's both. I think it's both the traditional energy as well as clean energy. Now, this morning I was thinking, you know, BP, Exxon, Chevron. Of course, they've rallied today again, so the yields aren't quite as attractive. But still, you know, with 4 and 1/2% to 5 and 1/2% yield on these oil majors-- you know, they're going to continue to pump oil. They're going to continue to pump natural gas. Look at the demand, and look at the supply problems that we're experiencing right now. So that's the one sector that's actually benefiting from inflation and these major supply issues.

You know, this is a headwind in the US for the economy, and it's a tax on consumers, these higher energy costs. But in in Europe-- here in the UK and in Europe, it is a crisis right now. I mean, the natural gas is up five times this year, 500%, and it's having an effect, a real negative effect.

As far as the clean energy goes, yes, in the long term, we love clean energy. We also love natural gas and LNG infrastructure. You know, LNG is a transition energy. So you can be all for the transition to renewables but still have a bid for natural gas and specifically for LNG.

So I think, you know, as we're seeing these major supply problems, especially in Europe but also we're starting to see it in the US with prices up, I think you have to look at LNG infrastructure as something that's going to be around for a very long time, and we desperately need it. The global supply chain desperately needs it.

JARED BLIKRE: That is an understatement probably. And speaking of Europe, I know you're looking at-- well, I know you're looking at the European market for potential opportunities. And a lot of those industries and sectors have been dead money for years but have been picking up recently. What do you see there?

GREG SWENSON: Yes. Look, I mean, you might argue that the European economic model is a bit broken in terms of these, you know, massive government welfare states. They're not-- you're never going to see, in the long term, the robust growth that you'll see in the US, but they are still major and productive economy. So I think there's a lot of opportunity. I think even the French market right now has outperformed the S&P recently. So there are opportunities here.

And also keep in mind that they are better positioned for the cyclical trade, the rotation out of tech into cyclicals. The indices are much lower-- are weighted with much less tech in Europe than in the US and much more weightings toward banks and energy.

So I think they're well positioned to take advantage of it. I think there are going to be some headwinds in the long term, though. I mean, look, this year I think equities will be fine. You're going to see the robust recovery continue. But these energy prices are already causing problems here in the UK. You've seen some companies go under. You know, you've seen a few bankruptcies in the last few weeks from not only energy companies, but you're seeing real problems with fertilizer, any industrial companies that use natural gas as an input. And you're seeing industrial production decline. We saw really bad-- poor numbers coming out of Italy today, and we saw poor industrial-production numbers coming out of Germany last week, the largest economy in Europe.

So, you know, there are some headwinds here. I wouldn't be too bullish in the long run. But I think for the next few quarters with energy just killing it, you know, with oil over $80 and natural gas at $40 per million BTUs in Europe while it's only $6 or $6.50 in the US-- there's that massive difference. It's 6 and 1/2 times higher here in Europe.

I think the US number will go higher. It was $2.50 earlier this year, so it's it's already doubled. You know, a lot of analysts are calling for $10 on US natural gas. But it's already at $40 in Europe, and that's really going to be destructive for a lot of sectors here in Europe and in Asia as well.

JARED BLIKRE: Yeah, the commodity market are-- the commodities markets are on fire, and we thank you for your comments. Looking forward to your return. Greg Swenson, Brigg Macadam founding--