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Bitcoin is ‘one of the biggest bubbles ever’: Strategist

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Payne Capital Management President Ryan Payne joins Yahoo Finance Live to weigh in on the November jobs report, the volatility of cryptocurrencies, and Charles Munger's evaluation of the markets.

Video transcript

ZACK GUZMAN: I want to turn our attention, though, to the markets, as we are seeing all three major indices wrap up a very volatile week here in the red. The Dow off more than 200 points after we had seen some moves to the upside following the jobs report. A lot of questions about whether or not this will knock the Fed off their course of tapering sooner rather than later or change anything they want to do when it comes to starting to reel in inflation. And for more on that, I bring on Ryan Payne, Payne Capital Management president and "Payne Points of Wealth" podcast host joins us once again.

Ryan, good to see you, man. I mean, when we look at this number, I don't want to look at it just in isolation, but obviously, it comes in the context of what we heard earlier from Fed Chair Powell. And when you look at it, I mean, is this soft enough to maybe start to rethink things? Or are you on the camp that it sounds like most people are, where it doesn't really change the story?

RYAN PAYNE: You know, I'm kind of with Adam on this. I mean, these numbers, they're always a little wonky, right, from month to month. And he had a fantastic collection of Nintendo games behind him. I wish I had the same background, but that's neither here nor there. But I do think that, you know, the bottom line is, like, look, things are getting better. Unemployment has obviously come down a lot. The only concern in that number, in my opinion, is that participation rate, right, the fact that we didn't have that many jobs, but we brought the unemployment number down to 4.2%.

And I think the bigger concern here, Zack, is that you've got a lot of people that aren't going to return to the labor force. I mean, you had a lot of baby boomers that decided just to retire, you know, during the pandemic. And, you know, we really have a population that's not growing that quickly. So I think this labor shortage issue is going to be a problem for a long time. I think hiring will continue. I think these numbers will be wonky month to month. But I think we have to worry about here more than anything is, we're just not going have enough workers to fill all the jobs because the economy is running hot.

ZACK GUZMAN: I guess maybe-- and obviously, you know, when we talk about wage growth here-- and that's different if you're dealing with people on the high end of incomes versus people on the low end. Obviously, you're not going to replace one with the other. But I mean, when you look at maybe what it all means right now when you back up and think about the volatility we've seen in the market right now, it's a strange time. I think a lot of people have been reacting to the way that the Fed kind of shifted their accommodative stance to a bit of more hawkish tune. Strange time to be doing so, given kind of the questions we still have around omicron. I mean, you've given us advice in the past around staying the course here. Are you still in that camp, given the fact that we've seen some pretty big sell-off?

RYAN PAYNE: Well, you know, it's hard being right every time, Zack. And this time, I'm going to put my neck out there again and say, yes, I think this is absolutely a buying opportunity, because I mean, look, when you strip away the news and then the headlines right now, I mean, nothing's really changed that much. We just got through the delta variant, so we already know what different variants look like. We know that it slows up supply chains a little bit.

But I mean, the reality of it is, look at last quarter. Look how well CEOs, CFOs were able to manage their companies, you know, through supply chain issues. And we had 40% profits year over year. That's insane, right? So I think, you know, economy is going to continue to grow. We've been dealing with this pandemic now for nearly two years. We've gotten better at dealing with it. You're seeing TSA numbers go up at the airport. You're seeing more people travel again, you know, go on vacations.

So, you know, I think the bottom line is, if you look at it, we kind of zoom out here a little bit, things are going to continue to get better. They are getting better. And, you know, any dip in the market that we've seen this year, because there's so much liquidity out there, so much money has been printed, is going to keep funneling its way into the market, buying these dips, because a lot of people are still sitting in cash because they didn't take my advice when I was on your show before, Zack, which is just wrong.

So I do think that's the bottom line here, is money's going to continue to funnel in this market. Take advantage of the dip. You're not getting many of them. And we know every dip has been bought here. That trend is going to continue.

ZACK GUZMAN: Yeah, you know, it's interesting. You're a value guy. You've obviously advocated for a lot of the cyclical names that we cover here on the show. And interesting to see Charlie Munger, right, Warren Buffett's right hand man here, coming out and talking about how crazy the market is right now, relative to the dot com era and saying that some of these valuations might not be as high as what we saw back then, but still a crazy time. I mean, when you listen to that, is that maybe true to maybe what sectors you lean in on here? Because we have seen a lot of those names really shellacked the last few weeks. Obviously, a lot of travel concerns, so maybe no surprise that airlines would be down. But are you still kind of leaning in on those names in this recovery or broadening out maybe into some of those other sectors?

RYAN PAYNE: Yeah, no, I think the cyclical trade is going to be more sensitive. So any time you get something like this omicron variant of the virus where it's going to slow up economic growth in the short-term, your cyclical names are going to take the big hit. But again, we want to win the war here, not the battle. The bigger picture is the economy is getting better. Even oil prices took a shellacking last week. Oil's still up, like, 50% for the year, right? Financials are still up over 30% for the year, dramatically outperforming the overall market. So that cyclical trade is the long game because things are going to continue to get better.

But I agree with Charlie Munger here. And I said this on my podcast, "Payne Points of Wealth," this past week, one of the fastest growing podcasts in the country, is that there are pockets of bubbles being formed. And I agree with them 100%. I've said on your show, I've said it on all the major outlets that this whole Bitcoin thing, this whole cryptocurrency is one of the biggest bubbles ever. And to put it in perspective--

ZACK GUZMAN: Whoa, whoa, whoa.

RYAN PAYNE: --right, if you look at all-- sorry, go ahead.

ZACK GUZMAN: No, no, I'm just saying. You know, now we're getting into bubble territory here on crypto. It's actually held up better than the markets as of late, but I'd like to hear the point.

RYAN PAYNE: Well, we do have a minor 20% correction, right, in the last two or three weeks. But I think the bigger picture there is-- and I think it can go higher here, by the way, because I think there's still too much money that can funnel into this market. But it's just becoming a bigger and bigger casino, right? At the end of the day, we're not using it for that much more commercial use. It's just more people speculating.

And I think it's very analogous to when the tech bubble burst or you go back to the housing bubble, where it's just, like, pervading society now. Like, everybody's involved. And the reason for owning it don't make a lot of sense because really, I mean, it's not a great store value of money as we know. It's extremely volatile. It's fake scarcity. You know, it's not like gold that has real scarcity. And it's compared to gold, which we know is a long-term horrible investment.

So I do think eventually that bubble is going to burst. It's going to be ugly. You know, the market cap is somewhere over $2 trillion. To put that in perspective, when the dot com bubble burst, those dot com stocks were worth, like, a half a billion dollars. So, you know, inflation adjusted, that's, like, a trillion dollars in today's dollars. Most of those stocks became worthless. Even Amazon went down 80%, 90% when the tech bubble burst, and it took you, like, 14 years to get back on your money.

So I do think that bubbles are there. They're pervasive right now. And the smart money here is you can get out early. It's better to be early than late and get into some of those cyclical names, which are selling off right now. Diversify your portfolio. Protect yourself because eventually, the music's going to stop. And when it does, no one's going to tell you ahead of time.

ZACK GUZMAN: Yeah, I think we might have to have you back on for a broader crypto discussion here, Ryan Payne, because you and I come from different camps on that one. But it has been interesting to watch. I mean, as volatile as Bitcoin has been earlier in the pandemic, we're seeing a little bit of a different story here in 2021, as we see these omicron fears rattle the market. Bitcoin still holding relatively well right now. But Ryan Payne, we got to leave it there. We'll have you back soon. Payne Capital Management president, thanks again.

RYAN PAYNE: I'm excited to arm wrestle with you about Bitcoin.

ZACK GUZMAN: Every time, man.

RYAN PAYNE: Thanks, Zack.

ZACK GUZMAN: Thanks again for the time.

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