Why the Dollar is Slipping and Navigating What’s Actually Moving Markets with Karen Finerman

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3:15So I feel like the story this week is less about the moment-to-moment headlines like it was last week, and instead looking ahead to settling down into this new normal. Nothing happened this week that was as crazy as what went down last week, for sure. I mean, we don't have any tweets moving trillions of dollars to discuss today. So we can kind of take a deep breath and talk about how to adapt to the economic conditions that seem to be staying here for a while, whether it's six weeks or six months. To help me do that, I'm joined by Karen Feinerman, one of my favorites. She is the co-founder and CEO of a New York-based hedge fund, Metropolitan Capital Advisors, and has been a panelist on CNBC's Fast Money since day one, literally.

3:55She's also the host of the podcast How She Does It, conversations with powerful women about how they're embracing challenges and managing success, both personally and professionally. So today we talk about the value of the dollar, the opportunities and challenges with all the tariff chaos, and Karen's best performing stock pick of 2025. Here's our conversation. Karen Feinerman, welcome to Money Rehab. Nicole, thank you for having me. So good to reconnect. Normally, we kick off our interviews by getting straight into the headlines, But in this economy, it just feels important to ask how you're doing.

4:32How am I doing? I mean, it's exhausting. I have to say it's exhausting. And, you know, you just never know what you're going to find. And this idea of there could be monumental news at any moment is it's tiring. Are you monitoring Twitter for a monumental potential tweet? Well, I'm on the computer all day long. At any moment, it could be something really market moving. So you have to sort of be in this high level of, you know, high alert, exactly. So has your investing strategy changed since Liberation Day? liberation day no it hasn't it hasn't worked i can tell you that you know i'm always long i have various hedges on but always always net long very net long and that's been the strategy for years and years and you know it's painful when you are long going into the pandemic or going into the great financial crisis whatever it might be but the idea of sort of being able to market time So know when to sell, know when to get back in, and then have that gap be wider than whatever taxes you might pay, to me is just a strategy that is too difficult.

5:52So I don't try to do it. But what I do try to do, one of my favorite quotes, which I always come to, is buy when there's blood on the streets, even if it is your own. And I can tell you recently, there's been a lot of my own. So I look at the VIX. I don't know how closely you follow the VIX, but it's sort of in no man's land now. It was up in the 50s. So I'd be a buyer when it's terrifying. It's not low enough now. It's in limbo at, I don't know, 30 where it is right now. So I'm not really doing much, just being exhausted. it. So can you give us a sense of the VIX? We've been hearing it a lot in the news lately.

6:33So when you say that the VIX is high around 50, what is it normally? And then you say that you look to cover some hedges. What do you mean by that? So the VIX is really, it is a measurement of how likely the volatility is in the market, more than 1 % on any given day. But it's really become known to be the sort of fear-greed index. So when the VIX is really low, and the kind of lowest I've ever seen it drag along for a long time is low double digits. So, you know, 11 or 12. And then in periods of high uncertainty. So the highest I've ever seen it is during the pandemic, during the really, really dark, dark days of the pandemic, as high as about 80 intraday, maybe.

7:21So now the VIX has gone from mid-teens to as high as 56. I guess it was Tuesday morning. Was that when the bottom was sort of the, I can't even remember all the days, but so it hit somewhere in the mid fifties. And I like when the VIX is super high. I like when things start trading down integers at a time, because that just tells me someone just wants to get out regardless of price. And if I own that, that's not fun. But if I can buy more at a price where I'm buying from someone who says, I don't care what price I'm selling it, I just need to get out. That's ultimately been a good thing to do.

8:06It's been in the past, historically been a good thing to do. Exactly. You know, we shop, we love to get things on sale. We do not want our stocks on sale. That feels bad. Well, unless you're a long investor, like betting on the future, holding onto your investments for a long period of time, not trying to bet against the market. So when you say you see blood on the streets, including yours, what kind of blood have you been shedding? I hate saying that. I don't want you to shed blood. Yeah. So, well, you know, I have a lot of meta, very big position. So that, you know, that that's been a very difficult one.

8:41I have Netflix as well, sort of hanging in the best. Amazon, which I have, I like a lot, like how they're positioned, particularly in tough times like this. But the stock's down. I don't know where it is today. 172 or three. I don't know the moment, but it's down considerably. and I still believe in the AI story. I still believe in AWS and then they have this remarkable retailing business, gigantic retailing business. So that hasn't been fun. The banks, JP Morgan, my biggest bank position has went to 280, probably shouldn't have been at 280 and then went down to about 210. So that's a fair amount of pain.

9:25Citigroup, I could go, I don't know how long this podcast is, but I could go on and on for a while if things that haven't worked. Yes. You had right at the beginning of the year, you shared the stocks that you were looking at for 2025. Yep. The acronym was CARBED, which is making me hungry, but it was, right? City, Alibaba, United Rentals, Boeing, Energy, and Dell. How do you feel about those picks moving into the second half of the year with everything we've seen in January? Well, Dell certainly is most in the crosshairs of all of them. The tariff wars, you know, it was somewhat of a reprieve.

9:58I don't know that it's a permanent reprieve of China. We'll see. But the combination of the concern about AI and data center growth, that's obviously right in Dell's wheelhouse. And then aside from that business, there's also the PC business. And that has sort of slowed, but also the PC business really is affected a lot by tariffs. So that's been the most painful one. But Alibaba having an amazing year. That's been having an amazing year. Yeah. I feel like there was sort of not regime change because the regime is exactly the same, but a change in policy. And that doesn't have tariff issues, right?

10:42They do very little business in the United States. And they have a huge business. They have a huge cloud business. They have, I mean, they're in so many different things. logistics, and they really are a conglomerate. They have an extraordinary amount of cash, and it's not expensive. But it's subject to who knows what. Who knows. With the success of your Alibaba pick, are you looking to double down more on Chinese D2C companies? I did buy some more Alibaba Friday, I think, Thursday, Friday. I think that even in the situation that we're in, that China really feels that they need to support their economy and that that will that will benefit Alibaba.

11:29So I have at it. Have you looked at anything else or does anything else DTC? I own some FXI, I own K-Web, so some ETFs, but that's the only individual stock that I own. Does it worry you what's going on with the de minimis exemption? I'm assuming you've been following this being sunset for Chinese products next month? Right. So that doesn't affect Alibaba as much. So Timu and Xi 'an, that's really affecting them. and I think we're also going to see meta is sort of a collateral damage there as well. Not this Super Bowl, but the one before that, it seemed like every other ad was Timu, Shi 'an. And so we're going to see a meaningful contraction there.

12:17And that's, those are big advertisers. So I think that's part of what's weighing down meta. I mean, you've got a lot of things, but that you've got the lawsuit. Because there's this big push, especially on TikTok right now. And we did an episode about how Chinese companies are now trying to market to individual Americans to buy directly and skirt around the tariff stuff. I mean, I'm my, I don't know if you know, but my house burned down in the LA fires. And so now I did not know that where do you live in the Palisades? Where do you live? I did. Yeah. Oh, sorry. Thank you. Thank you. You're the best.

12:52It's only recently that we found a new place to move into and I need to buy everything. And so I was looking at Alibaba and I was like, oh my gosh, is this something that I can do directly? You can. And not pay the tariffs? Well, the de minimis is$800. That's what a shipment, anything below$800. So I actually don't know if you aggregate for more than$800. Maybe there's a way around it. I actually, I don't know. I don't know. I think it's really interesting to see what's happening with the Chinese companies that are trying to take the tariff news and, you know, spin it or sell their dock offs or God knows what.

13:35Do you have any thought about what's going to happen? Well, it was interesting to the extent that any of that is about luxury high end goods. If I were Louis Vuitton, and that were one of my suppliers, I would be very, very unhappy. so unhappy that I might look for another supplier. So if that is part of their game plan, I think that part is going to end up being very problematic. But for other things, I know these manufacturers are just carpet bombing TikTok every 40 seconds. Yeah. Are you seeing, well, so let me go back. I'm assuming you're not surprised by LVMH then tanking or the luxury sector.

14:18No, I actually was a little surprised that American Express was good because I would have thought the correlation between the LVMH consumer and American Express was high and that Louis Vuitton in the U.S. was a miss. In Asia, it was a disaster, but it was a miss. And so, meaning, well, they were expecting for, it was about four percentage points low on same store, same store sales or comps rather. And so that's a, you know, that's a miss. And I would have thought AXP would, that customer would overlap directly. And that wasn't the case. That's interesting. I mean, what's tricky to understand is when a company is on sale or it's just not good.

15:05So if you're looking at some high quality investments, maybe on sale, we love a sale, but what about the LVMHs of the world? That's not been a good one for me, but I look at LVMH versus Kering, for example. So you have two conglomerates, each has extraordinary brands. Kering has really struggled with Gucci. And that is the main driver of their business. And it's just been a disaster for a couple of years. So, I mean, we're talking about like revenues down 20, revenues. That's enormous. And so to me, that would fall in the, oh, we might have a material change here in that a couple of things. Something happened about two years ago that I really didn't like and made me sell my stock in Caring, which was the CEO, who's married to Salma Hayek, the actress, bought CAA, took control of Creative Artists Agency.

16:00and I hate acquisitions like that that are a huge distraction and it sort of really shows sort of taking your eye off the ball and coincidentally that was when this sort of all the pent-up demand and spend from the pandemic was starting to wane and so for all of the luxury houses that was sort of weighing on them, but caring is, you know, pretty levered. And so that distraction I thought was really not a good sign. So one thing about Bernard Arnault, he is all in, he is engaged all the time. Yeah. It seems like one of these things is not like the other, because they're the parent company of, you know, YSL, Gucci, Balenciaga, Bottega, Alexander McQueen, Mm-hmm.

16:52CIA? Yeah. Yeah. And so I don't know if, I don't know why you bought it. I don't know. I assume she's represented that, I guess. So I really didn't like that. And I, if I thought, all right, if I'm going to have exposure in that area, I'd rather have LVMH.

17:17Hold onto your wallets. Money Rehab will be right back. And now for some more money rehab.

17:30Are there other opportunities right now in this market that you're seeing of things that are legitimately on sale? So when we talk about on sale, we talk about high quality investments being down, not the things that are probably not going to come back up. I think Amazon is really attractive now. it hasn't traded here at this level. So I like to look at PE, assuming a balance sheet's fine, which their balance sheet is, it's very good. It's not as good as Alphabet, but it's very, very, very good. That's not an issue in any way at all. It's a positive. So I think we haven't had a chance to buy a business like this, AWS, which I don't know if you saw on CNBC, Andrew Sorkin's interview with Andrew Jassy last week.

18:19And he talked about AI is the most transformative thing. They are not slowing down their AI business. And like what they saw as the opportunity in cloud, maybe a decade ago, this is what they think the opportunity is now. The margins in that business are gigantic. And then they have this extraordinary retail business. And so together you're trading, it's trading at about 28 times earnings. It hasn't been here probably ever in its entire history. So that's one that I've been adding to that I like. Yeah. If you just look at our packages outside. Right. Well, for your guys, for you guys, that must be all the time every day.

19:03Yeah. A lot of packages. I'm trying to glean though from your strategy, whether or not you think we're recession bound or not? I don't know. I think it's 50-50. The thing that's so unusual about this particular time is that it seems to be a self-inflicted wound, right? That I think we could get out of this fairly quickly if we had some clarity. The market hates uncertainty. So So even bad news with certainty is better than vague uncertainty with no news. So it's hard to know. Could the president just switch strategy and say, all right, we got, you know, 15 % across the board. That's it. That's the deal around the world.

19:49I think the market would rally tremendously. But I'm also not optimistic that that will happen in the short term. Is it harder to hedge because of that? Because, you know, as you said, when the VIX gets cuckoo high crazy, you want to cover some of your hedges. Right. What is covering? So if I'm short queues against a portfolio that has exposure to the MAG7, I'll buy some back. So I bought some back. Often I own puts that are, I'm not looking to buy puts that start to make money right if the market goes down right from the point that I buy them. I'm looking at as protection if the market goes down 5 % or more, that kind of move.

20:32So what I think of as sort of insurance with a high deductible, I'm going to take some pain the first 5 % down before that hedge really starts to kick in. It'll start to move, but it won't. It'll really kick in the lower it goes. And when you own those and the market's going down, you're like, oh, thank God I own these puts. That's the time to sell them. It's hard to do. but yeah, almost always it's the right thing. Can you talk to a new options investor who might be exploring puts and calls and, and all the fun right now? I wouldn't be exploring them now for the first time. I can tell you it is a wild, wild market out there.

21:15And with, you know, zero day options, I wouldn't touch those. And those are options that expire the same day. Right. Although We did see that crazy trade of somebody with zero day SPY. Yeah. With probably very, very good information. Yeah. Yeah. So there's that going on. That's not luck. No. Would you want to step into that? I mean, would you follow it? Maybe. That might not be so dumb, right? That could be like, look, I don't know what's going on, but I know that that guy does. That's not an even playing field right now. It is not. And so this isn't the time if you don't use options, this isn't the time to start trying them out.

21:58But I do, I think it's a good tool to have sort of in your toolbox to be able to express you can, a long bet, right? You want to know the name, but let's say there's a lot of risk. You feel like other business could be terribly damaged in a tariff war that's protracted. then you can buy calls instead of the stock and know all right here's the most i could lose you know with certainty you know what the call how much you can lose you don't know how much you can make on the upside and you know really is a lot that's great but you know what you can lose so certainty again is is a good thing to have yeah it's insurance you know buy insurance after the fire right how much how much is fire insurance now it's not even available probably right Yeah.

22:46Right, exactly. So same thing with hedging, lock in your protection before the chaos. Right. Chaos, it's very expensive and usually doesn't work out well when you buy protection in chaos. Let's talk about the value of the dollar. I think this is not getting as much attention. It's fallen by about 8 % this year, recently trading near three-year lows. Can you help us understand why this is happening? I can sort of, but honestly, I'm not sure. I can tell you sort of what's happening. So we're seeing normally when there is a crisis such as this, there is this, it's called a flight to quality and ask money around the world goes to the United States because it is the safest, the biggest, the rule of law, all of the things that make the U.S.

23:33market great. And so people buy U.S. dollars and they buy treasuries. They might buy short term, they might buy the 10-year, for example. And that's usually what happens in a crisis. That did not happen in this crisis. In fact, the reverse happened. So there was selling in treasuries. We saw the 10-year yield. When people sell the bonds, yields go up. They need to, you know, if you want to entice more people to buy those bonds, you have to pay more interest. So that worked the opposite way that we would have seen. And so when you have people from around the world, let's just use the example of Chinese sellers.

24:12I don't know how much of the selling was Chinese sellers, but they own hundreds of billions of dollars of bonds,$750 billion of bonds. So they sell their 10-year bond. You get dollars back for the bond. They sell those dollars. So you have this effect of the bonds going down and the dollar going down, which is the opposite of what you thought would happen. In addition, there was this giant levered basis trade on that had people buying the 10-year, selling the 30, and they have to get out. That was sort of on top of it in a chaotic market. And then you had one more thing, the Japanese yen trade, which has been on for years.

24:55Carry trade. Yes, the yen carry trade. So people, short yen, they take that money, buy dollars, buy treasuries. Well, that started to unwind when China, when Japan started to raise interest rates and the yen appreciated. And then there's this question mark of, is the U.S. dollar going to remain the reserve currency of the world? I think so. But the idea that that's even a question right now is scary. So a lot of things going on. Plus one other thing, which is in the last year or so, there's been a move out of some U.S. equities into other countries, mostly Europe, because the valuation differential has gotten so huge that we talk about U.S.

25:45exceptionalism and how great this country is to do business and rule of law and all of that, great capital markets, all of that. But the EU had underperformed for so many years and the U.S. markets had done well. The value proposition changed. So money started to leave the U.S. having nothing to do with tariffs. This predates Trump's election. So let's recap, because I think this is really important. Typically, in the textbook world, stocks go down. Bonds go down. bond yields go down prices go up right that's sometimes confusing if you're new to it it's like a seesaw right and then the dollar goes up and then the dollar goes up but now we saw stocks down bond yields up up dollar down all i mean the stocks down is sort of the the constant but the way that bonds reacted and the way the dollar reacted was really weird.

26:51Was really weird. And one more thing to think about was that the Trump administration's plan was, OK, if we slow the economy, then bond yields in the 10 year in particular will trade down, meaning the interest rate will be lower. So we know we have this enormous deficit that we need to fund. And one of the ways to fund that you sell 10 years, you can sell much nearer in but then you got to keep rolling and you don't know where interest rates will be. So it wouldn't have been a terrible thing if the 10 year traded down, because there were concerns about a recession, and that we were able to issue 10 year, you know, 10s of billions of dollars or hundreds of billions of dollars of 10 years at a low rate.

27:37And so our interest rate costs would have gone down. But that's not what happened. And I think that correlation breaking down is what ultimately made Trump put on the 90 day pause to cool down the things that seem to be almost breaking. Yeah, I mean, it makes sense, right? If you're issuing that much debt. And when we talk about the US being in debt, it comes from our treasuries selling the US debt in the form of treasuries, other countries buy that. And so when you're issuing that debt, every basis point, so fraction of a percent, Matt, are billions of dollars. Right. Yeah. And what we have to pay back for somebody to lend us money, essentially.