Closing Bell - Closing Bell 12/30/22

Episode Date: December 30, 2022

From the open to the close, "Closing Bell" has you covered. From what’s driving market moves to how investors are reacting, Closing Bell guides listeners through each trading session and brings to you some of the biggest names in business.

It is the final trading session of 2022 and a pretty fitting end as it happens. Stocks close out a rough year with more losses. This is the make or break hour for your money. Welcome to Closing Bell. I'm Mike Santoli in for Sarah Eisen. Here is where things stand in the market. See the S&P 500 down a little bit over 1% at the moment. The Dow slightly outperforming. Nasdaq, small caps still pressure to the downside, underperforming on NASDAQ, small caps, still pressure to the downside, underperforming on the day. The 10-year note yield is higher, could have something to do with equities

being on their back foot as well. And here is the scorecard for the year on the major averages. The S&P 500 has been bumping along that down 20% area. We're actually just under that right now. We'll see how it actually closes up. The Dow's been a big outperformer with a lot of those defensive names as well as some energy. Coming up on today's show, we'll talk to former Spotify executive turned venture capitalist Michael Mignano about the brutal year for IPOs and the biggest opportunities

and technologies that he's watching in 2023. Plus, what's New Year's without a countdown? All hour, we're revealing the top five most searched tickers on CNBC.com this year. And some of the names may surprise you. We will kick off with number five in just a few minutes. First, though, let's take a look at what this year has looked like in the S&P 500 chart. The 3800 level, that's right where we are right now. The low for the day over every trading session in the last two weeks has been within 1% of 3800. Every single day, it seems as if we at least test or drop below 3800. Does that mean it's a support level? It's unclear. It's also exactly halfway between this September through December trading range. It's exactly 300 points up to the high, 300 points down to the mid-October lows. So clearly not really getting any upside momentum.

There hasn't been any breakout. We haven't capitalized on the traditional late December seasonal strength, but also kind of holding in there. A lot of the kind of non-technology, non-growth areas of the market are kind of hanging in at the moment. We'll see what that sets up for next year. But bond market really, if anything, has been a bigger driver of what's gone on in equities than it's been for years. This is the volatility of the treasury markets, the move index, it's called. It's essentially the VIX of treasuries. And you'll

see it was really stable down here when the Fed was not in the game and when bond yields were subdued here you had this surge and really it was the source of a lot of the unease in equity markets along the way now we're down off the highs in this index as yields have settled a little bit and obviously the fed maybe is pulling into an area where it's going to be done hiking for a while but it's still well above the sort of, let's say, five year range that it typically had existed in. Now, let's talk more about how bonds are looking for 2023. Let's bring in Bill Campbell from Double Line Capital. He's a portfolio manager focusing on global bonds. And Bill, maybe talk just in general. There's obviously a lot more yield out there right now than there was a year ago in the world. Is it worthwhile to try and capture it here

or is it more risky? Do you think yields can go higher still? Well, Mike, thank you for having me. And what a year it has been, especially in the bond markets. As you've mentioned, central banks have really been the big story as they've been chasing inflation mostly throughout the year, as inflation has really been the pace car for where yields have gone, which has been straight up. So 2022 is now behind us and we're taking a look at 2023 at double line. And what we're seeing is a much more interesting bond market outlook as far as potential returns. And we always start with the carry. And I think there is no question that

the yields that we're getting at the beginning of 2023 are much more attractive than they've been for the better part of a decade. You know, with the aggressive hiking that we've seen and the back-upping yields across all international markets, you know, I think bonds are needing to be reconsidered as a potential place both that not only hang out, but even make some money in 2023. Now, we think that near term markets, especially, well, all markets, bond markets, equity markets are going to remain

volatile. And that's because the growth outlook is now challenged. What we saw in November is potentially what was the peak in CPI across developed markets and, you know, globally, including international and emerging markets. You know, potentially we've seen, you know, globally, including international and emerging markets, you know, potentially we've seen, you know, the near term peak in CPI, which may allow for a pivot of central banks in the near, you know, over the course of 2023. But at least the stance of central banks going into this year, this coming year, is much more aggressive and much more hawkish. We saw the ECB hike and announce their QT plans for the coming year, starting in March. They're going to be looking for active reduction in the balance sheet by $15 billion. And that's on top of increased issuance. So near term, really the pace setter of yields going higher over the past month actually has been coming out of Europe.

Now, if you take a step back and look out across the year as a whole, we do think that the higher yield and the potential for banks eventually pivoting on slower growth and slower inflation is going to present a very attractive outlook for investors, not just in U.S. markets, but looking at international markets and emerging markets, as far as their bond allocations for 2023. You know, Bill, you mentioned that inflation, should it continue to decline, would create the opportunity for the Fed and other central banks to pivot to a more diverse stance. But are the markets correctly priced right now for the likely outcome? I ask because many people are focusing on things like, oh, the two-year Treasury yield is above the upper end of the

Fed funds rate range. That is typically implied that the Fed was due to pause. In other words, that maybe they're in danger of going too far. We actually have an investor survey delivering AlphaDid that said essentially a plurality of investors say Fed should stop right now. Maybe that's not a plausible option with CPI still at high levels. But do you think there is a risk that they're over tightening already? Oh, I think that, you know, that risk is front and center. And, you know, the biggest risk, obviously, is to growth. Central banks not only are raising interest rates, but they're reducing their balance sheets.

And that's tightening global liquidity. We're seeing M2 actually flat on a year-over-year basis when it's been positive for, you know, much of the past three decades. And all of this is a risk to growth. And it's been, you know, actually, I don't think in the U.S. we've seen a hiking Fed into a falling, you know, growth outlook scenario when we take a look at the leading economic indicators, which puts together a lot of the economic indicators for the U.S., that's actually turned negative on a year-over-year basis. And when we look internationally, not only in the U.S., but across the globe, the majority of manufacturing PMIs are below 50 or in contractionary territory. And most central banks are still on a hiking path. So I think the bond markets are correctly interpreting that this tightening of central bank policy to address high inflation is going to have a growth impact. And that's why we see yield currents inverted, not only in the United States, but, you know, in many developed and even emerging market countries

with the 10-year below the two-year, suggesting that central bank policy has gone, you know, a little too far and is risking a bigger growth correction, which, by the way, if you get a bigger growth correction, that's not only going to help pull CPI lower, it's also going to help yields rally as well. So on top of the attractive yield that you get, you can get a nice yield rally across bond markets. And then also one item to consider is when central banks pivot, you know, we have started to see a little bit of correction in the dollar, but currencies will likely rally against the dollar in the second half of the year,

you know, on a more aggressive central bank pivot that, you know, first, you know, in the beginning of the year, if you're, you know, a little bit more aggressive investor, we do think interest rate, I'm sorry, currency volatility is likely to stay due to the challenge growth picture. But the second half of the year, I think there could be a second very interesting trade for international allocation that if you're a long term investor, you know, these, you know, are fairly attractive, you know, currency rates to get in it. Yeah. For the first time in a while, potentially, Bill. Appreciate it. Thanks a lot for running through all that with us. And Happy New Year. Happy New Year. Thank you, Mike. All right. Appreciate it. Most days on this show, we give you a rundown of the top search tickers on CNBC.com. And today, for the last trading day of 2022, we're counting down the top five most searched tickers of the year based on total page views. So let's kick it off with number five.

It is Amazon. And it was, of course, an ugly year for that stock. Amazon shed around half its value this year, pacing for its worst performance since the 2000 dotcom bubble and falling out of the trillion dollar market cap club along the way as well in CEO Andy Jassy's first full year on the job. We will reveal number four on the list after a quick break. Also ahead are unicorns on the brink of extinction. The Wall Street Journal out with a piece warning some billion-dollar startups are at risk of slipping below that benchmark. We'll discuss with the top venture capitalists next. You're watching Closing Bell on CNBC. Welcome back. On this final trading day of the year, we're counting down the top five most searched tickers on CNBC.com this year.

Number five was Amazon and number four, the 10-year Treasury yield, which started the year below 2 percent but has been on a mostly upward path all year as the Fed raised rates for the first time since 2018. Actually at a historic pace as well. The yield peaked in October above 4 percent. Mortgage rates have followed that move as well, touching the highest level since 2001. We will reveal number three on that list in just a bit. Turning now to tech valuations, the Wall Street Journal out with an article, some billion dollar startups risk losing unicorn status. We asked

Reddit co-founder and venture capitalist Alexis Ohanian earlier this week if he's expecting a rough year in 2023. We've been telling founders really since the start of this year to plan for a scenario where, you know where they're encountering probably some of the hardest economic times many of them as CEOs have ever built businesses through or grew businesses through, and to have at least multiple years of runways. This is with the early stage companies. And in any case, to really find paths toward profitability and to take the cues from the publicly traded tech companies that have been really seen a new, sort of renewed appreciation for efficiency,

for finding profit. And I think, look, the good news is these tougher times that I do think we'll see ahead are going to help create much better companies. Joining us now, Michael Mignano. He's of Lightspeed Venture Partners. Before joining Lightspeed this year, he was the head of talk for Spotify. And Mike, I assume that sounds familiar to you as you go out, look for potential investments, talk to portfolio companies. Has the environment changed the approach of what's going to make a successful

startup or maybe created a little bit, maybe a higher hurdle rate for when you expect companies to actually get to critical mass? Absolutely. And thanks for having me, Mike. Look, it's no secret that valuations at all stages are down, be it at the early stages or the growth stages. But deals are getting done because there will always be opportunities for great companies, especially when you take a long-term view, which is what venture capital is all about, right? So venture is a long-term business at light speed. We take a 10-year view on companies we invest in. And so whether you're investing in 2008 or 2016 or 2022, there's always a great opportunity for a really, really fantastic company.

In fact, historically, lots of our best investments have been made during the 2009 downturn when we invested in companies like Nutanix or MuleSoft or AppDynamics. So the space is still absolutely ripe for creative founders and problem solvers right now. And we're still bullish in every economic climate. You know, if you look at the way the public markets have behaved and the areas of the market that seem like they had this very dramatic boom-bust cycle, whether it's some fintech or some cloud software applications, things like that, that would send a message that says, OK, there was overinvestment in those areas. Maybe the amount of capital thrown at these opportunities exceeded what could really be realized in the short term. Is that the case

in the private markets as well? What areas do you think look still ripe and not yet overplayed? I think I think all these areas, when you take a ten year review are still going to be attractive investment opportunities like cloud computing or even consumer technology. I think it comes back to like Alexis said that if you're a founder

building building in any of these spaces right now. You need to be mindful of your core business and capital so. Whereas previously founders were maybe raising capital for say eighteen months of runway. We now think that somewhere between two to three years of runway is more appropriate. And, you know, we've actually been telling our companies this since last year and even before to prepare for this exact moment, because obviously market cycles like this are normal and they do happen. But look, I think in general, we're looking for founders who can

execute right now, who can not simply whiteboard founders that can be lean and do a lot with a little. We know this is possible. I know this is possible from personal experience. Like you said, I ran the talk division of Spotify before founding Anchor, the world's biggest podcasting platform. We went from 0% market share to being the global market leader in three years with a team of less than 20 people and under $15 million capital total raised. So there are countless examples of companies in all sectors that change the world if they operate in a very, very lean way. And I think this next stage of tech investing is going to be the same. Probably the area that's created the most recent excitement, I suppose, is AI applications. Everyone's been talking about the chat GPT and what it means and whether, in fact, this is a business or just kind of a trick

and what potentially might be the threat to some established big companies. I know that you sort of play in that area. Where is it headed most immediately from here? Look, I think possibly it's the most exciting breakthrough in consumer technology since maybe the iPhone. If you just look at the history of the Internet over, say, the past 20, 30 years, one area in particular where we see a tremendous amount of opportunity through AI is in creativity. If you look at creativity online, there's massive, massive value created in the democratization of creativity. And I think you can look no further than Adobe's recent acquisition of Figma for $20 billion. AI stands to greatly accelerate this trend by enabling virtually anyone to be creative.

And that's what led us to Lightspeed to invest in Stability AI. They are the leading open source software technology for AI driven image generation. And so we see a massive, massive opportunity ahead by unlocking and democratizing more creativity on the Internet. All right. Well, that would certainly be welcome on a number of fronts. Mike, I appreciate the time today. Thanks so much. Good luck next year. Thanks, Mike. the time today. Thanks so much. Good luck next year. Thanks, Mike. Happy New Year. All right, you as well. Let's check the markets now.

Firmed up just a little bit in the last several minutes. The S&P 500 is down about three quarters of a percent at the moment. The Dow down just a bit less and all the indexes are sitting on losses

of less than one percent. Natural gas prices are sinking again today, still tracking for gains on the year, but down sharply in the past few months. We'll tell you what's behind the latest slide when Closing Bell comes back. Time to reveal the third top search ticker

on CNBC.com in 2022. Now remember, Amazon, number five, the 10-year yield was number four. And number three, the Dow Jones Industrial Average. It is by far the best performer of the major equity averages, down less than 10% for the year. The S&P, for its part, on track to be down close to 20% for the year, and the Nasdaq will likely close more than 30% lower. The top winners on the year in the Dow are Chevron, Merck and Travelers, while the biggest decliners, Intel, Salesforce and Walt Disney will reveal the

runner up on this list in just a moment. Let's now turn to energy, which will close out as the only positive sector this year. Natural gas is also higher for 2022, but it's taken a downturn lately, is lower again today. Pippa Stevens is here to explain exactly why all this whipsaw action in natural gas. Pippa. Hey, Michael. Nat gas is closing out the year, not with a bang, but a whimper. The contract falling to its lowest level since March today, with weather driving much of these declines. Last week's cold snap is proving to be short-lived, and forecasts are now calling for a warmer-than-expected January, which will cut demand for gas heating.

We've also seen record injections into storage in recent weeks, meaning that inventory is now back around the five-year average for this time of year. Freeport's LNG Texas facility restart has also been pushed back yet again to the second half of January, and it's now been offline since June. Finally, recession fears and what that means for industrial and commercial gas demand also playing a part in this recent weakness. Now, NatGas has lost a third of its value this quarter, and it's currently trading right around $4.43 per MMBTU, a far cry from the more than $10 it fetched back in August, but still in the green for the year, gaining 20%. And that's helped lift the S&P energy sector, which in addition to being the sole group in the green for 2022, is also posting its best year ever. Mike, a lot of

volatility really across the entire energy space this year. Oh, without a doubt. And of course, natural gas famously is an extreme version of that in general. Where does it leave us with regard to, you know, a lot of the stories coming into the winter about what Europe was going to be facing? You mentioned LNG, you know, one of those plants being maybe offline for a little while, reducing demand for Henry Hub gas. But are we, you know, in decent shape for the winter at this point? Well, we are right now with inventory levels back around their five-year average. But so much of this has really just depended on the weather. And that's honestly kind of what saved Europe

this fall is that they had much warmer than forecast temperatures. And so their current facilities were able to keep up with demand and they were able to send some gas into storage. And so they have healthy levels over there as well. But going forward, it's really anybody's guess about what happens. Since this market is still precarious, we still have that price cap on Russian gas going into effect next year. And so there are still a lot of variables. And with the market so much driven by weather,

we could see things whipsaw based on the coming temperatures. Yeah. So got lucky for now. Hopefully it lasts. We'll see, Pippa. Thank you very much. President Biden this week signing the $1.7 trillion spending bill into law, which includes a ban of TikTok on most government devices. We'll discuss what the crackdown means for social other social media companies. That is next. Welcome back to Closing Bell. Time to reveal the second most searched ticker of the year on CNBC.com. To recap, Amazon, the 10-year treasury yield, and the Dow all made the list. Number two is Apple.

Like many names in the tech space, it is on pace for its worst year since 2008, currently trading roughly 30 percent below its high, though it did hold up better than the rest of the FAANG stocks. And 74 percent of analysts on the street still have a buy rating on Apple, the, of course, largest stock in the S&P 500. Sticking with tech, the pressure on TikTok heating up this week after President Biden signed the spending bill that includes a ban of the Chinese app on federal devices. So could a national ban of TikTok become a reality next year? Joining us now is Rohit Kulkarni from MKM Partners to talk about that. And Rohit, I know that, you know, one of your predictions for the year was that TikTok would likely be banned. Now, do you think this might would take the form of an outright ban on the app or would they force a sale of the company? And what does

it mean for other social media companies, do you think? Again, like, thanks for having me, Mike. With regards to predicting whether TikTok is banned in the U.S., I think it would be unpacked in several layers, in my opinion, if it were to go that way. They would probably need to go through a series of data scrutinies, data investigations around how they are storing data. Some analytics, TikTok will probably have to go back and forth between US government agencies and how they are using the data. I feel just the overall pressure on kind of privacy and what TikTok's algorithms, which remain as a black box, is just going to grow.

Whether it gets banned or not, that just helps with the sentiment on social media names, the US-based social media names, Facebook and Snap in particular. So whether it actually gets banned or not, just the early signs of just the news getting tighter around TikTok would probably help with the sentiment and a little bit of engagement. And finally, with regards to revenues, it would still be long ways away. But sentiment and engagement, that should drive stock price for both those companies in the near term.

That's Facebook and Snap. Got it. Now, more broadly, when it comes to some of the larger Internet stocks, for example, I mean, there's a lot to pick from if you're looking to be opportunistic. I guess Amazon's been cut in half, Meta, Alphabet trading at their cheapest valuations ever. What looks in particular attractive for next year? I like Amazon the most in the mega cap land and also like Uber in the other large cap internet land. Amazon, I feel there is still a downside with regards to estimates in the first half. So probably the stock is going to be range bound in the first probably 90 days of 23. But beyond that, i feel once we are

at a point where we see leverage flowing through the model amazon started cutting back in fulfillment centers and some of its employees back in march of 22. so they are they are they have already anticipated cost cutting for almost nine months so March of 23, we should start seeing leverage even in soft revenue days and months and quarters. So I like Amazon here. I think as we go into the recession, the end markets that they operate in, advertising, commerce, and cloud, they can gain market share. And that's why we feel Amazon is absolutely a no-brainer if you're looking beyond, say, June of 23. And for Uber, I mean, I guess there's probably a cyclical aspect to it, but that's not maybe the main driver. Why do you think that the company is finally going to be able to persuade investors the business model is really clicking here? Because that's been, you know, still a question. Yeah, I think Uber, when you look back in 22, they are not getting the credit they deserve.

I would put it that way. When we look across all the large caps across internet land, I think Uber is one company that has had very consistent upside to street estimates. They have consistently beaten estimates, although by a small margin. Some of them are inorganic. Some of them could be organic. But they have continued to grind higher and higher through what we saw through the COVID draft. So I think as we get into the next year, they have some organic growth drivers. They are going to be generating a lot of cash. So it is a show me story. And the valuation remains cheap so long as the numbers remain stable and they show the leverage and they have a variable cost structure so they can adjust very, very quickly in a nimble fashion. So I like Uber here. It is a show me story, very cheap valuation, cash flow coming

on the horizon, and they should get the credit they deserve. All right. Yeah. Well, cash flow has been on the horizon for a while. It seems like maybe it's closer. We'll see if we can get there. Rohit, thanks so much. I appreciate the time. Thanks, Mike. Happy New Year. Happy New Year. And here is where we stand in the markets. Market continues to narrow the losses just a bit. S&P 500 down two thirds of one percent. It's just above that minus 20 percent level on a year todate basis at this point. See how it finishes. Still to come, Disney is on pace for its worst year since the Ford administration. We'll take a look at what went wrong and what to expect in 2023. Plus, we'll reveal the number one top search ticker of the year on CNBC.com. And Closing Bell comes back.

We have a development on the FTX story. Founder Sam Bankman-Fried is likely to enter a not guilty plea at his hearing next week. That, according to the Wall Street Journal, citing a person familiar with the matter. Bankman-Fried was charged earlier this month with eight counts of financial fraud, with the U.S. Attorney's Office for the Southern District of New York calling it one of the biggest financial frauds in history. And now it's the moment you've been waiting for all hour, if not all year. We've been counting down the top search tickers in 2022 on CNBC dot com. Now, so far, we've covered Amazon, the 10 year Treasury yield, the Dow and Apple. I guess we'll need a drum roll for the most searched name of the year. It is Tesla.

And no surprise, really, given the retail interest, the barrage of headlines surrounding the stock and CEO Elon Musk. And Tesla is on pace for its worst year ever as a public company. It is underperforming other automakers like Ford and GM. Sharpest downturn in the stock happened around the time Elon Musk said he would buy Twitter and sold Tesla shares to fund the acquisition. And you see it down as lost two thirds of its value over the course of 2022. After the break, the final minutes of trading before we put 2022 in the books when we take you closing bell market zone. Charlie Bobrinskoy from Aerial Investments is here to break down these crucial moments of the trading day. Plus, Deirdre Bosa on Chinese tech going out with a whimper and Julia Boorstin on Disney's dismal year. First, let's start it with the markets. We actually have a little more of a bid entering the S&P 500.

Nothing too dramatic, but we were down 1.2 percent at the lows, about half that loss at the moment. And, Charlie, as we survey what was accomplished, I guess you could say this year in terms of, you know, wringing out valuation excesses, trying to absorb what the Fed had to do, navigating a peak in inflation, where does that leave you with regard to how the market is positioned entering next year? The good news is we burst two out of the three bubbles. We burst interest rates at 10-year Treasury at 162, made no sense. Bonds were at a bubble level. Growth stocks were at bubble levels at the beginning of the year. And you could actually argue we burst three out of four because we burst the crypto bubble as well.

And bubbles are dangerous things. And when they exist, people can lose a lot of money. And unfortunately, they did. But we were able to take those risks off the table. The fourth one that's still out there is China residential real estate. It is still way overvalued compared to annual incomes, monthly incomes. There was a lot of source of growth in China, and that is still not, although prices have come down, still not come down enough. So on the positive side, we've gotten rid of some excesses. The one thing that I missed was I didn't think the Fed was going to come out and try and cause a recession. And the market clearly thinks they are. And that's been very tough on cyclical stocks.

Right. It absolutely has. And so that is the big call into next year as to whether, in fact, cyclicals have perhaps already priced in that kind of a downturn. We will get to that. But first, Micron falling today after Argus Research downgraded the stock to a hold from a buy, the firm warning of potential deep operating losses ahead as weak demand for memory chips persists. The rest of the space, semi-space, also under some pressure today as tech more broadly sells off. Christina Partsenevelos joins us. And Christina, talk about the growing disconnect between inventory levels, user demand. This has been the overhang over the chips for some time. Yeah, and it's part of the reason why you have so many analysts right now negative on Micron and other chip companies. Why is that? We know that we drove up demand. We bought electronics in 2020. Demand is down. Tie that with inflation. And you're left with

these piling inventory levels, which is why customers are telling companies like Micron, hey, I don't want to use your chips right now. I don't need to do business with you right now. I'm going to write off the inventory and let's hold off for a bit. And so that's the disconnect that we're seeing. Also part of the reason the average selling price for DRAM and NAND chips within Micron have dropped 20% quarter over quarter. So, of course, that's going to hit margins. And, of course, that's going to continue to hit margins into next year. The other interesting thing, particularly with Micron, is there are three actions that they're going to be taking. One, they want to cut CapEx.

So that means lowering their spending for wafer fab equipment by 50 percent next year. So that's going to affect other chip equipment makers. The second thing is, you know, cutting salary, possible layoffs. A lot of companies have talked about that. And the third, which is the most interesting within the tech world, is that Micron is looking at slowing down their tech node transitions. And that's not something you necessarily want to see within technology. The slowdown of innovation, especially when you're dealing with a commoditized product like Micron memory chips, when just a competitor can easily swoop in and steal a market share. Yeah, that is all of them are tough decisions, I'm sure. And I guess, you know, Micron, Charlie,

has sort of recently emerged from that sort of pure commodity status, I guess, as a producer of memory chips. This is the kind of stock where it's down by half over the course of this year. It looked cheap at the highs because earnings estimates were overinflated. The earnings estimates have been cut back. It still looks, you know, cosmetically cheap. Where would that bring you in terms of assessing whether there's true value here? You know, one of the things I'm going to try and emphasize in 2023 is that there really are good industries and bad industries. You can make money trading in a bad industry with bad economics, but long term you can't. And the semiconductor industry is just not a good industry. It's

highly capital intensive. There's lots of technological obsolescence. And very importantly, lots of governments try to build their own capabilities by subsidizing semiconductor stocks because they think it's strategically important for the country. And so you get way too much capital coming in in a very cyclical fashion. Obviously, all kinds of literally tens of billions of dollars of new CapEx has come into the industry, producing supply at exactly the wrong time. Well, and Christina, I mean, our government certainly falls into that category, doesn't it, with the CHIPS Act. And so we have this industry-wide investment cycle going on with reshoring.

I suppose that's going to create kind of winners and losers, and who knows what it means for ultimately capacity down the road. It means a completely fragmented market, even more so than it is now. And what about the focus on are we in the United States really going to focus on advanced nodes? You have TSMC opening a plant here, but no, they're not going to create the most advanced chips in the United States. So there's going to be a divergence in terms of supply between the most advanced nodes and the lower lagging nodes that are often used in autos and stuff. And I still think that's going to be a major issue.

But you just said it. Everybody around the world is investing money. This is going to take years before we see this another supply issue down the line with chips. Yeah. Interesting little moment for the industry, if nothing else. Christina, thank you. Online brokerages Futu and Up Fintech plummeting today after Chinese regulators accused them of allowing illegal cross-border trades. Those two now banned from signing up new customers from mainland China. Let's get to Deirdre Bosa.

And Dee, what does this tell us about Beijing's regulatory crackdown? You could also tell me if it's Up or UP. Actually, I'm not sure. I've been saying up. We should check in with you on that one. But what does it tell us about the regulatory crackdown? It tells us that it's not over. There may be some green shoots coming from China. If you're an investor in Chinese stocks,

like a loosening of those COVID zero policies. However, this crackdown is here to stay. Remember, it first went after video games, ride sharing, any tech company with a lot of data. Now it's the online brokerages. You're looking right now at the share prices today of these two companies, Futu Holdings and UpFintech, as I'm going to call it as well, crashing today. UpFintech, now its market cap just over $500 million.

Both issued statements saying that, surprise, surprise, like every company does, they will comply with regulators. UpFintech said that 90% of their new clients are coming from outside of mainland China anyways. But the point, Mike, is that the opportunity is in the Chinese market. And Beijing is very protective. Of course, they don't want any one company having too much control, too much data, especially when it comes to financial services. We saw what happened a few years ago with Ant Financial. So in a way, this shouldn't come as too much of a surprise. However, zoom out a little bit. Take a look at how Chinese stocks have done or ADRs have done this year. The K-Web has actually outperformed

the Nasdaq by a very wide margin. It's only down about 17 percent this year versus the Nasdaq, which is down more than 30 percent. However, take a longer view, say two, two and a half years. And the K-Web has been the much riskier and lower return bet. Yes, absolutely. It is kind of coming out of a much deeper hole than than the U.S. tech stocks were. And I guess, Charlie, you were talking about about sort of the Chinese property bubble potentially being a risk out there. This is another reminder that the Chinese authorities seem not to want the public markets to really flourish in some sense. They don't want a lot of power built up either foreign investors throwing capital in their companies or their own investors participating very much. Yeah, I hate to keep being too long term focus here, but this is just what we're seeing. She is just not the capitalist that Deng Xiaoping was.

She is a communist who doesn't believe in foreign investment and is very, very suspicious of even Chinese stock ownership and wealth generation. And so the Chinese government has taken lots of of anti-corporate steps in the last couple of years and frankly, over the last five or six years. So and that doesn't even mention that the structural problems in when a lot of U.S. investors buy Chinese stocks, they're investing in the VIE structure where you don't really even legally own the stock at all. You own something that owns something that owns shares in a Chinese company. So as you can tell, I hate to be gloomy in the first two ideas that have come up, but I just don't believe in this sector for all the regulatory reasons. Yeah, it's a tough thing to get around. Andy, thank you very much. I appreciate that. Check

out Disney, though, heading for its worst year since 1974. Put that into context. In 1974, Disney World's gates had only been open a few years and a one day ticket would run you just five dollars and twenty five cents. The stock is also on track for its seventh straight quarter in the red, its longest losing streak ever. Let's bring in Julia Boorstin. And Julia, this, of course, comes off of a time when the market loved Disney during the pandemic because of what was happening on streaming and the fact that, you know, the theme parks were going to roar back with a reopening. But what are the key challenges and opportunities that are ahead right now? Well, I certainly have to say it's a very different landscape for Bob Iger running the company now than it was when he was running the company the last time around. Certainly in terms of the broader media landscape, so many challenges in terms of a contracting ad market. Questions about streaming subscribers, whether or not we're going to see slowing growth amid growing competition

and subscribers wanting not to pay for so many services. Although I do think that Disney has an advantage because it does have that kids content that so many parents can't live without. But this question of whether consumers are going to be switching over to the ad supported version, which is something that they did just recently launch. So these broader questions about the streaming landscape plus ad revenue. But then, of course, don't forget about cord cutting and the paid TV business. That's all different pressures on the company. And I would say the opportunities are in the choices that Bob Iger has to make.

He has some choices maybe about ESPN and ABC, Wells Fargo, speculating just last week that these are assets that he might consider spinning off. I think that's probably less likely, but I do think he has a really interesting choice to make around the remainder of Hulu that Disney doesn't own that is currently owned by CNBC's parent company, Comcast. So deciding what to do about that. And just remember, Mike, when it comes to these brands, Disney has the iconic brands, the ones that are still performing at the box office and getting people to sign up for the subscription service. So this is a company that could really benefit from that direct to consumer relationship that they've built.

Right. There's no doubt that most of its competitors would would actually want they would covet the actual IP resources and the ability to produce what needs to be produced to feed a streaming platform. And you mentioned, you know, the ESPN spinoff idea seeming less likely. I mean, to me, it doesn't make a lot of sense. At this moment, it's hard to know what the market would actually reward in that environment. And also, ESPN still produces cash flow. It's still something that is an earning asset. And they have experience shrinking the broadcast network over many years at this point if it needs to be shrunk on a cost basis. Yeah, they have plenty of experience with that. And I think there's this question,

at what point do they move some of those sports rights over to the streaming app? But I think just to take a step back, though, and also talk about the parks, which is something that I haven't mentioned, obviously, there are concerns about consumer spending. But the parks have been incredibly robust. These are assets that have been incredibly robust during other economic downturns. And there is a sense that this is something that Bob Iger understands are really a crown jewel and an opportunity to keep consumers really connected with the brand and think down the line about all the potential to make sure that you're targeting the people who've come to your parks with a different way in their Disney Plus experience. And really, again, using the parks plus Disney Plus to get

that direct-to-consumer relationship stronger and make sure that those consumers spend, whether it's on taking a trip to the theme parks or on consumer products or buying movies to download. So I think really strategically figuring out how to exploit those relationships. Yeah, absolutely. Franchises and cross selling. And Charlie, is this the kind of stock that makes sense to look at at this point? Just being kind of so beat up and yet having that brand franchise that is probably going to carry it through? Yeah, full disclosure, our co-CEO Melody Hobson is married to George Lucas. So, yes, take what I have to say is with a grain of salt here. But this is a package of intellectual property that's unrivaled.

You said it already. Marvel, ESPN, Lucasfilms, Mickey Mouse, Minnie Mouse. This is an incredible library of IP. The problem is that people just don't know the business model, don't know the profitability of the business model. But they are the best positioned company in this media space. The market is very binary on Disney. There are times in which the market absolutely loves Disney, and then there are times in which the market hates Disney. And right now is the latter.

And so I do think this stock looks very washed out. Yeah, it's certainly an interesting debate, if nothing else. And, Charlie, broadly on the markets, look, you're a value investor. Value has led by a lot this year. You did see growth deflate. Looking into next year, the call on cyclical stocks, is it time for them yet? They're certainly out of favor. And that's what we look for is what is trading at a discount to intrinsic value. And right now it is the cyclical names. It's frankly, energy companies are very cheap. Fertilizer companies are trading at five times earnings. And BorgWarner, which I was talking about on your show, is a great auto

supplier, very well positioned in electrical vehicles, trading for eight times earnings. So the market thinks there's going to be a recession. When that happens, earnings will come down. But in the longer run, I still think we've got something of a coiled spring with a lot of demand for autos, a lot of demand for housing and growing demand for food around the world. So we're going to get to the other side of these recession concerns. And when we do these cyclicals, I think are very attractive right now. Do you think we're in for several months, though, where people, even if we don't get a recession, are going to be anticipating it and refusing to touch these? Yeah. And I don't I don't want to pretend like I can call the short term, but I think I will say

it's going to be volatile. These cyclical stocks are going to be volatile. I think the Fed wants to bring on, if not a recession, certainly a downturn in the labor market. And if the Fed wants to cause a recession, they can. They took up the money supply by almost 40 percent, and now they're taking it down, which is very dangerous. There really haven't been a lot of periods in which the Fed has shrunk the money supply.

They have since February, and that absolutely will cause a recession if they keep it up. Pretty unique moment, yes, in this cycle. Charlie, thank you very much. Appreciate it. Happy New Year. And take a look at the market into the close right here. It has actually narrowed the losses. S&P 500 down only one-third of 1%.

It was down more than 1% an hour or so ago. Dow down 100. S&P poised to close for the year. Down less than 20% on a total return basis with dividends. Around 18% right now. The volatility index going to finish the year under 22. Relatively subdued. That's because we've been range-bound in this market really for seven months.

That's when we first got down toward the 3,800 level on the S&P back in May. That is going to do it for Closing Bell.