Money Rehab with Nicole Lapin - Change Maker - Guy Adami, Financial Expert, on an Inside Look at Wall St and Gold

Episode Date: July 16, 2021

The Wolf of Wall Street can’t actually be real life… right? Today, Guy Adami (investor, CNBC’s Fast Money legend and former NYMEX trader), breaks it down. Spoiler alert: Leo got it right. Learn more about your ad-choices at https://www.iheartpodcastnetwork.comSee omnystudio.com/listener for privacy information.

Money rehabbers, you get it. When you're trying to have it all, you end up doing a lot of juggling. You have to balance your work, your friends, and everything in between. So when it comes to your finances, the last thing you need is more juggling. That's where Bank of America steps in. With Bank of America, you can manage your banking, borrowing, and even investing all in one place. Their digital tools bring everything together under one roof, giving you a clear view of your finances whenever you need it. Plus, with Bank of America's wealth of expert guidance available at any time, you can feel confident that your

money is working as hard as you do. So why overcomplicate your money? Keep it simple with Bank of America, your one-stop shop for everything you need today and the goals you're working toward tomorrow. To get started, visit bofa.com slash newprosmedia. That's b-o-f-a dot com slash n-e-w pros p-r-o-s media. bfa.com slash newprosmedia. Hey guys, are you ready for some money rehab? Wall Street has been completely upended by an unlikely player, GameStop. And should I have a 401k? You don't do it? No, I never do it.

You think the whole world revolves around you and your money. Well, it doesn't. Charge for wasting our time. I will take a check. Like an old school check. You recognize her from anchoring on CNN, CNBC, and Bloomberg. The only financial expert you don't need a dictionary to understand. Nicole Lappin.

As you know, every Friday we talk with a public figure making change in every sense of the word, and along the way has been in or is still in money rehab. Today I'm talking to Guy Adami, investor, CNBC's fast money legend, and former trader on the floor of the New York Mercantile Exchange, aka the Merc. Basically, he had a front row seat to the IRL wolf of Wall Street. And if you haven't been to the floor of the exchange, you might think that Hollywood has really taken some artistic liberties with their finance movies. But as Guy and I could tell you, it's all true. I called Guy to chat about how real it all is, the wins and the losses.

So Guy, welcome to Money Rehab. So Guy, I'm so excited for all the things. But before we dive in, we start Money Rehab with a quick round of Never Have I Ever. Oh, I love this. I love this. It's going to be fun. Go ahead. When was the last time you played the drinking game?

Last drinking game I played was probably early 90s. I'd say 91. How's that? So it's 30 years. Is that? Yeah, it's 30 freaking years ago. So there you go. Well, I apologize if we're not having alcohol during this drinking game,

but it's the financial version of it. So if you have done it, say I have. And if you haven't done it, say I haven't. Okay, never have I ever maxed out a credit card. I have not. Come on. Never have I ever bought crypto. I have not. Never have I ever bought myself a six-figure gift? Oh, no, never. I have not. No, no, no, absolutely. Six-figure gifts. So that's north of just $100,000 or more for my... No, you roll large. No. Never have I ever bought somebody else a six-figure gift. I have not. I have not. I'm not in that time zone. I'm not in that zip code. Never have I ever bought a used car. Oh, I have.

Never have I ever lost six figures in a day. Professionally or personally? Professionally. Professionally, absolutely. I mean, six figures, those were good days. I mean, you're talking seven, eight figures. Okay, so then never have I ever made six figures in a day. Oh yeah. No, we, we, we had some ridiculous, ridiculous days.

Did you know you wanted to be in finance? So the short answer is no. My parents were both attorneys. They met the first day of Fordham Law School in 1960. My mother's one of four women in the class and the administrator, whoever got up in the auditorium that day, looked over the new students, found these four women and said, I don't know why you ladies are here. You might find your husband, but you're not going to get a law degree. And he was right about the husband part because my mother met my father on the first day literally, but he was wrong for the other part because all four women graduated.

I mentioned that because they practiced law together and my senior year in college over Christmas vacation, they asked a guy at Drexel Burnham that they were representing if I could come and interview. I had no idea what Drexel Burnham was. I couldn't find Wall Street with a fricking GPS machine if they existed back then. But I knew enough to get my ass on a train and take the subway to lower Manhattan. And for a week, I went to the desk. Nobody talked to me. And on Friday, somebody said, you've been here all week. You haven't said a word. I won't use the vernacular,

but why are you here? I said, I was hoping to get a job when I graduated. They said, when you graduate, I said, May. They said, come see us in May. And that's how I started. I had no idea that's what I wanted to do, but I knew that that's what a lot of the guys and gals that were graduating were doing. So I figured it was close enough to home. I'll give it a shot. And when you started, you were on the New York Merc. So I appreciate that. You did a little research, I see. Yes, I started on the trading desk at Drexel Burnham, 60 Broad Street, and quickly they sent me down to the floor of the New York Mercantile Exchange.

I'm sure your listeners are familiar with the movie Trading Places. If you're not, please go to your local Blockbuster this weekend and rent it, because the ending scene was filmed on the floor of the Mercantile Exchange on a Saturday, and all those crazy guys, and I say guys in this because mostly men, were actually brokers and traders from the floor that came on just to be in the movie.

So that's what I did. To the extent that you've seen the end of that movie, that's actually what went on. That was a little theatrical. I get it. But that's where I worked for a good six months from, I'd say, the summer of 86 to early 87. Did you know what the Merc was? Fun fact, Guy, I actually started when I was 18 on the floor of the Chicago Merc. Did you know that?

Like a boss. What was that? That must have been. So I'll turn the tables on you. That must have been a really interesting environment for you, right? I mean, that's very, listen, mostly men, high testosterone, a lot of assholes. You have to hold your own and you have to very quickly earn their respect. And that's not for the faint of heart. So good for you for doing that.

Thanks, Guy. It was not for the faint of heart. And there was, I think, one or two other women then. And I knew the difference because the girls' bathroom or the women's bathroom was so small. Like it was a little closet compared to the guys' bathroom. And I remember walking in, you'd have to have your heel no bigger than I think an inch or two. And then your skirt no more than five fingers above your knee or something crazy like that. It's like going to Catholic school. Exactly. Except it wasn't Catholic school when you got in there.

For sure. I mean, it was full on like Wolf of Wall Street style. I'm not hyperbolizing when I say that, right? No, not at all. That's not an over-dramatization of what really went on. No. And I think there are a couple documentaries out. Your listeners should watch.

It's a fascinating, I will tell you that the six, seven months that I was down there, that was an education that you could not put a price tag on, not in terms of markets, all that was important. Human behavior, interaction, just the way people treat each other, self-regulating stuff, which we get into as well.

It was a real, real hands-on education every single day. And I'll tell you a quick, funny story. So I'm not a small person. I probably go about six to, at the time, probably 220 or so. So I'm not a small. And as you know, that job called for large people because you needed a presence in the ring, right? That's what it was. A lot of it was about. And one of the days I was there pretty early on, I was standing too close to the pit, as they say, and I feel hands on my shoulders. And the next thing I know, my feet were off the ground and somebody lifted me up and moved me. And I'm saying to myself, holy, who is this human being? And I turn around and this guy's about 6'6", 6'7", 280. His name was Rich Rezica.

And Rich was the floor broker for Jay Aaron, which was a commodities group at Goldman Sachs. And he basically moved me out of the way. Rich played football at Columbia, was in the NFL for a couple of days, went on to be a partner at Goldman Sachs. But I said to myself, holy shit. I mean, if this place is like this, you know, I really got to up my game. Fistfights almost every day. And then these guys would all go out and drink together in the afternoon. It was fascinating.

It's fascinating that you say that because I often tell the story of when I got picked up and moved in the middle of the floor but I am five four and a buck I'm not six two and 200 pounds and so in the middle of a report that I was doing in the middle of the pit some guy just picked me up and moved me out of his way and I was like what the actual fuck is going on? Right. It's crazy. And that's what it was like all the time. And then, you know, at the end of Crazy Days, I'd see guys like throw so much money all over the place. Like it was a whole other world. So if somebody hasn't been to that world, can you explain it or we can explain it together?

Like what it used to be like with what is the pit? What are all those outfits? Yeah, it's great. So you were in Chicago. I was in New York. But the the basically the logistics, the everything about it is effectively the same. And you've seen the guys again, I say guys in this case, because they're mostly men wearing the trading jackets, different colors. And that would sort of represent the firm you worked at. What in our day, we used to have something called the locals and the locals were guys or gals that traded for their own account. They would typically be in the lower portion of the pits. And as you sort of worked your way out towards the end, the brokers from the different houses would be at the end so they could turn around and get orders or instructions from their clerks. And those were the guys working back in the day at a place called EDF Man, EF Hutton back

in the day, Morgan Stanley, Merrill Lynch, Goldman Sachs, Drexel Burnham, all those types of firms. And they would get orders from their clerks who were on the phone with the traders upstairs, relaying those instructions. And when you say open outcry, that's exactly what it is. There are people just yelling bids and offers to each other and then trading verbally and then visually with their counterpart. And earlier I said self-regulating and you're saying yourself, well, how could that be accurate? Like how were things done? How were the errors? And errors would happen from time to time but if guys tried to get over on you nicole and you know this if somebody bought something from you that day and it went straight

down at the end of the day they came to you and said i don't remember buying that you know 10 lots of crude oil or natural gas or gold from you at that price uh you'd be like okay you don't know it that's fine you're gonna get on me this time. But tomorrow, nobody in the ring is going to trade with this guy. So he's effectively shut out. So when I say self-regulating, self-policing, that's exactly it. And it worked and it worked extraordinarily efficiently. And you talk about capitalism and markets in the truest sense. That was it back in the day. Yeah, I did sort of a spoof after the Oscars about what the traitors were wearing. And you would also see like little four leaf clovers and all sorts of stuff.

And then they had three letters that depicted what firm they were in. And, you know, they'd get a little creative with their outfit because you basically wear the same thing every day. And your outfit is really important to determine, like, how you're actually trading and making money. It seems kind of barbaric now, looking back, doesn't it? Well, it might seem barbaric. That's a good word. And it might seem inefficient.

That's another word. But you know what? You know, as we talk about now the days of Robin Hood and inefficient markets and the retail trader getting rooked or hosed by the high frequency traders and payment for order flow and all that stuff, you go back and see what was going on in the 80s and early 90s. And you say, maybe that's the way markets should trade. And again, I understand technology changes and you have to evolve. I totally get it. And there was something barbaric about it. There was also something extraordinarily, and I'm going to use the word by choice, beautiful about it. Well, and I miss those days. Really? Yeah, really. Vraiment, as the French

would say. Vraiment. What do you miss, monsieur? What do I miss? I miss the energy of it. I miss the stories. I miss the interaction, the camaraderie. I miss the stories. I miss the interaction, the camaraderie. I miss the vibrancy of the markets. I miss being in the middle of things, talking to the traders upstairs, learning from them and then learning from the floor traders what was actually going on. Hold on to your wallets, boys and girls. Money Rehab will be right back. Money Rehab will be right back. Now for some more Money Rehab. So if somebody doesn't know what a commodity is, in the colloquial sense, I think we all know what it is.

But what does it mean in the trading sense? Yeah, no. So commodities are things with an end use effectively, right? I mean, we know, I think people would say, I know what a commodity is. It's crude oil. It's gold. It's silver.

But there are also commodities that trade in Chicago. The soft commodities, we used to call them the grains, soybeans, corn, wheat. Back in the day, they traded potatoes. Natural gas is a commodity. Aluminum, obviously, the base metals, zinc, the trade in London. Those are all commodities. And typically, those are things with an end use. Lumber is a commodity. Orange juice was traded, a commodity. Now, I mentioned gold, but what I'll tell you is I don't think gold, although characterized as a commodity, I get it. It's really not a true commodity because it doesn't have an end use in the sense that a lot of these other things have. Gold to me is a store of value and something that I think should be in

everybody's portfolio, but it's not necessarily, jury notwithstanding, a commodity in the true sense of the word. Why would you say that is? Because it's a hedge against? Well, it should be a hedge against. I think it's a hedge against fiat currencies. And if you look what's going on, obviously, with the world right now, you have these. Please hold for the listener. A fiat currency is just old school currency. Yeah. And basically it's backed by the good faith of the government, which is effectively horseshit. Pardon me. But what's going on now in the world, if you're really paying attention, which I know your audience is, you have all these central banks globally trying to devalue their currency against the next guys and gals. And by definition, that doesn't necessarily end all that well.

And I think gold wins to this. I think Bitcoin was born from this fear of fiat currencies. So I think Bitcoin has taken some of the thunder away from the gold market. Gold market market cap, effectively the size of the market, is about $10 trillion, give or take. When Bitcoin was at its zenith, $65,000, I think the market cap of crypto was about $2.3 trillion. So if you think about it intuitively, if crypto didn't exist, that money probably would have made its way into the gold market, I think. Obviously, you can't do the counterfactual, but that's my sense. So for a lot of people, Bitcoin crypto has been a substitute in a lot of people's eyes, a better substitute for gold. So just to sort of break it down in basic terms,

if you think the dollar is going in the wrong direction, yes you're gonna try to buy some gold because it would be you know something that's concrete compared to the dollar um and likewise if you still thought the dollar was going in the shitter then bitcoin would be an alternative currency compared to the fiat currency that you mentioned, which is like the dollar, the yen, the euro, and the currencies that you and I know. I think that's correct. I think that's exactly right. I think that's what you're seeing. And obviously, you know, the dollar had been under considerable pressure for a myriad of different reasons, not least of which the amount of spending that's been going on. You had this

infrastructure bill out there. Right now, debt in this country, I think, is north of $31 trillion or so. When you think of that in comparison to GDP, we're probably at about 140% debt to GDP levels, numbers we've never seen before in our history. And I would submit that's unsustainable. And almost by definition, that's going to be negative for the dollar. The good news for the dollar is everybody else is doing the same thing. The bad news for the dollar is everybody else is doing the same thing because in a race to zero,

nobody wins. So I do think gold's going to have its day. But to your point, I also think crypto probably makes sense. Although, as I told you earlier, I just can't wrap my head around it. And I've talked to a lot of people. If somebody is listening and they're like, I get it, guy, Nicole, gold. It's a hedge. But I wasn't at Drexel and Goldman. I wasn't a gold trader like you were. So I'm confused. Is this the gold that I see on the commercials in the middle of the night?

Like, where am I buying this? How am I doing it? That's fair. I mean, for a lot of people, they want to get into ETFs. And the GLD is the way a lot of people would play it. I would submit, and this is just my opinion. I'm not suggesting I'm right. That's the wrong way to do it.

I think you actually want to be in the physical metal. Because if this does play out the way I think it is, I think you actually want to own the commodity. And you can do it vis-a-vis coins and stuff. Or you could do it vis-a-vis coins and stuff or you could do it vis-a-vis some of these mining stocks i think the one mining stock that everybody knows is newmont mining which obviously had a huge run to the upside when gold was trading higher last summer sold off in relation to gold and has recently bounced but you can do with the equities as well but the reason why i think it's

going to work is because gold's not a story until it's a story. And you would die hard fan by any chance those looks great Bruce Willis movies. If you're not just lie to me and say yes. Yes, of course you are, because they were great movies. But one of the diehards, I don't know which one it was, but took place in lower Manhattan in basically the vaults. You know, most a lot of gold in this country is stored in lower Manhattan. And the backstory was these guys were going to basically try to rip off the Federal Reserve's holdings of gold. Funny thing about gold is I don't know if you ever picked up a gold bar. It's extraordinarily heavy. I mean, the density of the metal, it's a beautiful thing to hold for a lot. You know, it's just amazing. You can't believe what's in your hand, number one. Number two, it's really hard to move.

And I would say about a decade ago, and your listeners should go back and go to the Google machine and check this out. The Bundesbank, which is effectively the German central bank, woke up one morning, decided they wanted to repatriate. In other words, they wanted their gold back, their physical gold back. Now, the back story there is pre-World War One, they shipped all their gold outside of their borders for fear that the Soviet Union was going to come in. So they moved their gold to Paris and they moved their gold to the United States. And not an easy thing to do. But they woke up and they said, we want it back. And the question is, why would they want it back? They didn't just wake up one day deciding Germans don't make rash decisions. And then Google this as well. Recently, and when I say recently, within the last year and a half, two years, when Venezuela was going to shit, they wanted their gold reserves back from the Bank of England. And the Bank of England basically told them you can't have it.

So what does that mean? Well, what do they say? Nine tenths of the law ownership or possession is nine tenths of the law. Well, that holds true here. And I think you're seeing a lot of people scramble to get their gold back. OK, so I'm going to decode some of that. non-trader. I'll sit back. So ETF is an exchange traded fund which trades like a stock, but it's a smattering of a bunch of stuff. And then GLD is gold. Yes. GLD is the gold ETF. OK. And if you're saying to look for some kind of mining stock in the equities market, equities is just a fancy way to say the stock market.

Stocks. So, okay, you're saying, though, get the physical metal of coins. And you can see that. Listen, everybody's seen those commercials, you know, with the aging actors or actresses sort of humping these coins to you. And I get it. And you think it's a scam, but it's really not a scam. I actually do think having a physical metal in your possession makes sense.

And you're going to see them from tinfoil. You can go, you can get yourself a safe deposit box, or if you're Italian or Sicilian, you can put it under your mattress. And then you're going to say, wait a second, aren't Sicilians Italians?

And I'm going to say, actually, no, there is a distinction. There is, uh i don't know if there's a distinction to putting like gold bars under your mattress or in a safe or in your house in any form because like what are you going to do with a gold bar so that's so that's the argument against it so people say if you're betting for the world to explode like like it only happens once. And, you know, what are you going to do if it gets to that point? What are you going to go with your little gold bars? You're going to

buy chicken cutlets at your local A&P. I get it. But it's not it's really not about commerce, per se. It's about price appreciation. And this is sounds glib. It's not meant to be. Gold's not a story until it's a story. And I believe given what's going on in the world, if you're paying attention, it's about to be a story again. worth what it used to be. So inflation to the extreme, like, you know, if you're in Argentina, one day you wake up and your money doesn't buy you chicken culets. It doesn't buy you anything. But maybe gold. If you got your gold bar out, you could buy some stuff somewhere else. You're not going to your local supermarket and buying stuff. I get it. It is effectively a hedge. And listen, you can say the Fed can say what they want about inflation. Inflation is here in spades. As a matter of fact, Kyle Bass, you can go to the Google

machine and check him out, recently said that he thinks real inflation in this country is north of 12 percent. But what I'll tell you, even if inflation is not going anywhere, each day the U.S. dollar goes lower. By definition, that's inflationary. And although the governments will tell you they favor the strong dollar policy, it's complete horseshit. As a matter of fact, President Trump was the first president in my memory, maybe ever, to actually openly talk about the desire for the dollar not to be as strong as it was, which is fascinating that somebody would come out and say that. And the reason why is a weaker dollar for a myriad of different reasons, not least of which makes our goods more attractive overseas, is really what they do want. And they don't care that you can't buy those shoes at Neiman Marcus

and they cost more because they don't really necessarily care about the public. And that is a hidden inflationary thing. Each day it goes lower. You're buying power decreases by definition. So a very, very quick lesson on inflation, deflation, disinflation, all the flations go. That's a hard one. So, you know, in technology historically is the most deflationary force in the history of mankind. We can go back and look. Technology is deflationary and we're living in one of the most deflationary force in the history of mankind. We can go back and look. Technology is deflationary, and we're living in one of the most technologically advanced periods maybe ever. So you can't win that battle.

That's out there. Inflation, on the other hand, is created. You have more dollars chasing fewer items and more people trying to chase those items. And we're seeing it manifest itself in a myriad of different places, not least of which a housing market that's probably the best it's been in 30 years. So inflation is all around us, health care, education, food costs, energy, you name it, it's there.

But the flip side of that coin is a deflationary spiral that technology puts us in. And the Fed is trying to wage this war. And I would submit it's a war that they can't win, that they continue to do it. They continue to throw money at the problem. And what they've created effectively is the greatest wealth chasm in the history of the United States that's only getting wider. And it's only pissing people off more and more each day. So when you were on the air talking about stocks, do you ever feel self-conscious? Do you ever feel like you have imposter syndrome? Because I think one of the things I learned from anchoring a show on CNBC is that even if you know a lot about money stuff or finances, you don't know everything. And if

you're a trader in one area, it's not like you know what, what somebody in the bond world is doing exactly. And I think a lot of folks are scared to say they don't know. No, I think that's a great I'm glad you bring that up because I say it all the time. I think, first of all, people really they admire, they respect when you say, I don't know. And they also admire when you say I was wrong. And I got to tell you, I say I was wrong a lot. And it just happens.

The market has a way of humbling you. And it doesn't mean I haven't done my homework. It doesn't mean I was factually incorrect. It's just that the observations I made and the decisions I made based on those observations, the outcome wasn't what is desired. The market has a way, again, of humbling you. So I say it all the time. Have I ever been self-conscious? No. I mean, I've had some shitty haircuts, but short of that, no. But in terms of overconfident, absolutely not, because I'm just I'm just basically providing opinions on something that I've been doing for the last 35 years. And I'll say all the time, I don't know if I'm going to be right or wrong. This is what I think based on the information that I have.

And we'll see what the outcome is. People are we live in a world where people love to cast blame. Everybody else is, you know, it's somebody else's fault that I lost money. We get that a lot and I understand it. But what our show has tried to be is not a stock picking show. We're sure to try to help people move up the learning curve and ask the right questions and understand markets a little bit better. Here's a tip from Guy you can take straight to the bank. Have a plan. Fear is paralyzing. You know, if you don't have a plan, emotion takes over. So what does that mean? It means if you want to buy Apple at $140, you have to have the plan that if it trades $125, for example, I'm going to get out of a portion of that position because I'm wrong.

And you have to have a plan in place. Typically, people have no plan and they become paralyzed when things move against them or when things move in their favor. So before you push that button to buy or sell a stock, know what your out is if you're right. More importantly, know what that out is if you're wrong. And the other side is don't be scared of this stuff. I mean, you should go in eyes wide open, understanding what you're getting yourselves into. But this is not rocket science. And I think if 0809 taught you one thing, there are no experts and nobody cares more about your money than you do. So just take ownership of it. Because as much as you want to put it in other people's hands, you're the one that ultimately makes the decision. Money Rehab is a production of iHeartMedia.

I'm your host, Nicole Lappin. Our producers are Morgan Lavoie and Catherine Law. Money Rehab is edited and engineered by Brandon Dickert with help from Josh Fisher. Executive producers are Mangesh Hatikader and Will Pearson. Huge thanks to the OG Money Rehab supervising producer, Michelle Lanz, for her pre-production and development work. And as always, thanks to you for finally investing in yourself so that you can get it together and get it all. You spend my money, money You spend my money, money, money You spend my money, money, money