Exclusive: Great Hills Management's Thomas Hayes says "expect more pain" when craving energy

Benzinga's Money Mitch had the opportunity to speak with Great Hills Capital Founder, Chairman and Managing Member Thomas Hayes about Benzinga's stock market movements on Thursday. Hayes, who is regularly on Fox Business TV, Yahoo! Finance, Bloomberg, and CNBC talked about the latest CPI data, which Hayes called a "wreck."

Here's the preview: Annual U.S. consumer prices jumped 9.1% in June, the biggest increase in more than four decades. The Federal Reserve is expected to raise interest rates an additional 75 basis points (0.75%) at the end of July.

The consumer price index (CPI) jumped 1.3% in June Year-on-year CPI soars 9.1% Core CPI increases 0.7%; up 5.9% year-on-year

Wednesday's larger-than-expected rise in the consumer price index also reflects rising costs for a number of other goods and services: clothing, furniture and automobiles are consumer goods. affected by rising inflation.

What caught your attention in these reports?

Well, the bad news, Mitch, is that it was a complete wreck. The good news is that [the data] is retrospective. The numbers couldn't have been worse, they were much higher than expected - both on CPI, Core CPI, PPI, Core PPI. Everyone expected those numbers to fall, meaning inflation peaked in April and the Fed could pivot in the next month. It just didn't happen. This is the negative.

The silver lining, however, if you look at June, all commodities have crashed. This even includes energy and oil. However long it takes to trickle down to consumer prices, then we'll see those numbers start to rise.

Opinion is following the trend and today seems to be the high point.

Are we getting the 100 basis point rate hike?

Yes, I don't think so. I think [Chris] Waller kind of took that off the table today. He said 75 basis points made us neutral in July.

If you look at the Fed, last month's quantitative tightening was supposed to reduce market liquidity by $47.5 billion. In fact, they only made $7.5 billion, they were net buyers of Treasuries; they actually bought $3 billion worth of treasury bills. Thus, all of the tightening has been in mortgage-backed securities.

That tells me the Fed is seeing these trends - they're trying to thread the needle. They can't print more oil, so the game in their book was to destroy demand, they managed to do that.

Where are the opportunities in this market?

Chinese tech bottomed in March and biotech bottomed in May, and both trended higher as the overall market was weak. We like both of these groups because there is an exceptional amount of stimulus now concentrated in China, and as they go through these short-term shutdowns, you will continue to see money flow back in that direction.

We have the big natural gas situation going on in Germany and Russia, how do you see this situation unfolding?

The Europeans locked themselves into this situation; so Putin can basically do whatever he wants. He has unlimited funds from China and India is happy to take barrels of oil from him at a reduced price, and he is happy to supply them.

If you take a 60 minute view, things are going to be tough. If you take a 6 month view or a 9 month view, that's where the money is made. When no one wants to come in and buy high-quality companies at discount prices, but if you calm down slowly over time, I think you will be very happy when you let the year pass.

Where do you see oil prices stabilizing?

I think there will be more pain here. I think later this year there will be another opportunity to re-energize, but it's too early right now. Expect more pain.