Closing Bell - Closing Bell Overtime: Affirm CEO On How Its Customers Are Holding Up Amid A Slowing Economy; Zuckerberg Swipes At Apple Vision Pro 6/8/23

Episode Date: June 8, 2023

Stocks closed broadly higher today with tech outperforming. 3Fourteen’s Warren Pies and Annandale Capital’s George Seay break down the market action, including earnings from Docusign and Vail Resorts. Affirm CEO Max Levchin on the company’s partnership with Amazon and what kind of stress his consumers are seeing. Former Atlanta Fed President Dennis Lockhart talks the hot jobless claims number and how it impacts the Fed’s decision next week. Hashicorp shares tumbled in trading today after weak guidance; CEO Dave McJannet weights in on the latest quarter and the macro demand environment. Plus, our Steve Kovach on how Mark Zuckerberg is responding to Apple’s new AR headset. 

Well, closing near the highs with the NASDAQ leading. That's a scorecard on Wall Street. But winners stay late. Welcome to Closing Bell Overtime. I am John Ford. Morgan Brennan is off today. Coming up on today's show, Affirm CEO Max Levchin will join us exclusively to talk about his company's new partnership with Amazon Pay, which is sending Affirm shares sharply higher.

Plus, we're going to talk to the CEO of DevOps software company HashiCorp after the firm slashed revenue guidance for the year, pushing the stock lower by around 25%. We are also awaiting earnings this hour from DocuSign and Vail Resort. We're going to bring you those numbers as soon as they cross. But let's begin with today's market action. Joining me now is 314 Research co-founder Warren Pies and Annandale Capital founder and chairman George C. Guys, welcome. George, you point out the market's really narrow. Cash pays. So does that mean you stay on the sidelines and wait for a new entry point?

What should investors do with this? Great question, John. I don't think you ever time the market. Nobody does it very well consistently. And you've got to make two good decisions, not one. You've got to time when to get out and then when to get back in. But I would definitely trim some of these really concentrated big cap tech positions that have run so hard and reduce your risk there a little bit. And I would add to sectors that have lagged tremendously this year, energy, financials, international stocks. But it would be trimming along the margins and keeping core positions in place.

And Warren, you say the recession now is not a 2023 thing. It looks more like a 2024 thing if it happens. So does that mean, you know, small caps are the way to play that. Does it mean commodities, cyclicals? What do you do? Yeah, I think there's a whole host of trades that kind of flow from that overarching conclusion, which is that, you know, all the evidence points to the recession not hitting this year. We came into the year with the most anticipated recession on record, number of forecasters predicting a recession in the next 12 months and it hasn't materialized we're waiting for residential construction payrolls to roll over at 314 and that hasn't happened we haven't really seen any progress on that front you need an eight

percent drawdown before a recession so i think the market is starting to catch wind of all this and you get a rotation because of that you get a rotation out of these kind of safe haven stocks into a more cyclical basket and to some extent into small caps as well. So you kind of this this this rotation can power the market higher. I think it's positive for stocks over bonds as everyone starts pricing these cuts out of what's baked into the fixed income market. Fixed income market is quite pessimistic in what it's forecasting. So I think it's stock positive over bonds. And then within stocks, I do think it's a cyclical tilt. George, investors need a strategy. So help us out with that, maybe refining or revisiting the strategy. Say you got some dry powder, right? And the numbers show us a lot of investors do. There haven't been a lot of ETF inflows or as many as you might expect in this market run up.

So if you've got dry powder, what are the sort of entry points in what sorts of areas in this kind of market? Not trying to time the market exactly, but say you're trying to average it. Well, there was a great research piece that came out this week that said that, you know, normally people are really concerned about value stocks and cyclicals during a recession. And whether we get a recession this year or next year or the year after that, the research says that's really not the case. The value stocks don't underperform dramatically during a recessionary period. So I would not try to be too cute in terms of what you do. And I would buy stuff that's out of favor, that is really well priced and has a good perspective next one to three years, and that would be energy,

financials, and international stocks. That's where I would put new capital work right now. If I've already got positioned to growth and technology, some of these things have been on fire this year already. Broad international index or some specific geographies? I would definitely not try to pick geographies or any kind of active management there. I just pick an index and let it as cheaply as possible and let it ride. Warren, how much does the Fed's language matter coming up? Or is it just enough that we know whether it's a pause, whether it's a 25 basis point hike this month, next month, we're toward the end of the cycle? I mean, I think the Fed's going to keep kind of talking hawkish. But the problem with the pause here, which I think they will pause, is that the market's probably going to take this pause. And then you go through the summer months

where we have really positive base effects for energy and other things that kind of give a tail wind to disinflation. I think the market's going to take one meeting skip as a pause that's kind of a permanent pause. And the risk is that the Fed has to come back and do more work later in the year as some of those kind of base effect factors start to fade. And so especially if you start to get a pickup in crude oil prices, which I think is a decent possibility here. And so I think that oil and energy exposure is a good divers here. And so, you know, I think that oil and energy exposure is a good diversifier. It makes sense for this rotation play we're talking about. Saudi's just cutting supply, I think, as you go into the summer demand months. And the fact that

the recession isn't going to be hitting in 2023, you know, I think oil becomes kind of a risk for the market and a positive for portfolio as well. Do want to mention DocuSign earnings have hit the tape. That stock is up about 8 percent at the moment. We are going through it and we'll bring you those numbers as soon as we have a clear sense of them. George, is your sense the same about what the meaning is of the Fed's language from here and how investors should digest that. I mean, this is if there's a pause, do investors just take that as good news? And do you think we've felt perhaps the full breadth of those 75 basis point hikes and their lagging effects, as well as whatever credit pullback might have been expected off of the March banking issues?

I think unless the Fed goes full Paul Volcker and raises rates dramatically higher, they're much more irrelevant now than they were previously. And I think that if you look at the market, you've had a lot of very wise, smart investors in the hedge fund land and in active management land who've been predicting a 50 percent decline in the market for many, many years now. And it just hadn't proven to be the case. But you look at DocuSign up eight and you look at Meta up 20 and so forth, NVIDIA up 25 and so forth and so on. The animal spirits are back.

And after the big tech bubble burst in 2000, it took the NASDAQ over a decade to come back. And here the NASDAQ is back in about a year and a half. And I think that's too much euphoria and too rapid a transit back into bubble territory. So I think that's pretty unhealthy. And I think a pullback would be healthy for the market right now, for sure. Yeah, parts of it back. George, Warren, thank you. Thanks, John. Now I got to send it over to Senior Markets Commentator Mike Santoli at the New York Stock Exchange with a look at consumer stocks. Mike? Yeah, John, you know, the message of the market has been that the consumer remained in okay shape in aggregate.

Take a look at a one-year chart here. This is the equal-weighted consumer discretionary sector. We do the equal weight so it's not really too skewed toward Amazon and Tesla, which in those sectors, see it's comfortably outperforming the equal weighted S&P 500. But look at the retail ETF. That's a very, very broad, mostly kind of old bricks and mortar type chain store ETF. And that has struggled. And we know in the last couple of weeks, you've seen a lot of those mall type stores have really had a tough time this quarter.

And that's been reflected in the market. But I think home building stocks or housing related travel, a lot of the services sector areas have been really robust. It mimics what we're expecting and seeing in the overall economy. So at least right here, it's not necessarily flashing a warning signal. In terms of those recession expectations, her warm pies and you guys talking about how one of the most anticipated recessions ever, Deutsche Bank surveyed some investors and issuers here at a conference, asked when the U.S. recession will come. You still have 65 percent of them saying within the next year they do expect a formal U.S. recession. A very small percentage said we're not going to get one at all in 18 months. Here's the building area, more than a quarter saying that, yes, there'll be a mild, somewhat inconsequential recession.

The market won't really care that much about it. It won't have that huge an impact on the market. And there is some precedent for that. But it is interesting that that's starting to kind of get into the market psychology a bit, John. Yeah, mild recession. I used to live in California, kind of like a mild earthquake. Anything below three, you don't really feel. You might sleep through it.

That's the situation for the market, or at least that's the expected situation, if that's what we get. That is somewhat the expected situation. Yes, technically you might see some negative GDP. You'll see unemployment go up a bit. You know, I'm a little bit wary of that because a lot of times leading into a recession, that is a prevailing thought that, oh, we're just going to take some around the edges. It's not going to be a big deal. But when the economy starts to shrink, some further accidents are prone to happen. So, you know,

you don't want to wish for something like that. But again, there is precedent for the market having really discounted a somewhat mild downturn well in advance, or at least not really found that it was a punishing result for stocks and credit. Got to beware of those aftershocks. I remember that chart from yesterday, that green line from 2000. It went down again. Right. Mike, thanks. Meanwhile, DocuSign earnings are out, as I mentioned. Now we've got the numbers. Steve Kovach, how do they look? Yeah, John, pretty good. And shares surging as much as 11 percent here after beats on the top

and bottom lines. EPS was a really solid beat, 72 cents adjusted versus 56 cents adjusted expected by the street. Revenue also a solid beat, $661 million versus $641.8 million expected. And Q2 Guidance, also very good, basically beating expectations. They're looking at revenue for Q2 between $675 million and $679 million. And you see shares up 10 and nearly 11% there, John. All right. Looks like they're outlining the new executive team. We've got to remember they had a CEO switch out during this whole turbulence with the stock over the last year. Steve Kovac, thank you.

Thanks. Vail Resorts earnings out as well. Seema Modi has those numbers for us. Seema? Hi, John. These are third quarter results for Vail Resorts. Gap EPS of $8.18, which did come in below expectations. Revenue in line at $1.2 billion, although we did

see total lift revenue decrease by $4.7 million or 0.7% compared to the same quarter a year ago. Kirsten Lynch, the CEO of the company, says after the challenges experienced in the second quarter, driven by weather disruptions in Tahoe and across the Midwest, the results in March and April improved as expected with strong demand from local and destination guests. I would point out ski school revenue increasing 20 percent as we try to better understand the consumer here in the United States. John, dining revenue increased by 27.4 percent. Stocks seem to be moving lower here in extended trade. John? Well, yeah. I mean, people are skiing. Not buying diamonds, apparently, is what we heard from Sigmund. There we go.

It lines up. Thank you, Seema. Shares of General Motors up slightly after hours. CEO Mary Barra just tweeting she will be doing a Twitter Spaces with, yes, Elon Musk at 4.30 p.m. Eastern. We will keep you posted on any developments on that front. Shares of Affirm getting a big lift today, one day after announcing a new partnership with Amazon Pay. Up next, we're going to hear from Affirm CEO Max Levchin about that news and the one X factor he sees for the American economy. Overtime is back in two. Welcome back. Shares of a firm making a huge move, a full trading day after the news that the credit card alternative will be an option under Amazon Pay.

A firm stock up about 16 percent. 16%. I spoke with Affirm CEO Max Levchin about the integration with Amazon and his reads on the surge in Joblitz claims, Affirm's access to capital in the wake of the regional bank fallout, and more. We started with the Amazon deal, which centers on Affirm's place in Amazon's digital wallet. Digital wallets are accelerating. We expect half of e-commerce to be done through some form of digital wallets. Being offered within the leading ones is really important to our mission of bringing honest financial products to all consumers. And this is one major step towards that. Very excited about it. What's making the difference in which wallet customers choose and sort of choose to be a part of? If I can use a firm because my credit quality is good enough, if I can use Apple Pay, if I can use my credit card,

what do you find makes a difference in people using a firm? I'm a little bit biased, but I think the wallets that offer honest financial products, ideally, those offered by a firm or made by a firm are the soon-to-be winners. But I think everything from excellent user interface, access to credit, products that really need consumers where they are, that's what makes a winning wallet. We are obviously very hard at work partnering with the very best ones. What are you finding is different between your approach right now and other even larger companies

that are moving into this space? We've heard about Apple, we've heard about Amazon and others exploring this, but last time I talked to you, you said you're paying a lot of attention to credit quality. How much attention do you think they're paying, and how is that affecting your ability to compete for that end customer? I think everyone better be paying attention to credit quality. The jobs report today is just another little signal that, hey, not all is ultimately going to be great in the US economy. And the differentiation of payments providers, credit providers, is fundamentally a function of, are you good at underwriting or are you not? We've been paying attention to credit quality for 12 plus years, and it's been paying

really good dividends. You saw it in our last earnings. We reduced delinquencies while the rest of the pack, both outside and inside the credit card issuing world, has been showing increased delinquencies. And so we're very focused on it. I think those that offer buy now, pay later products, that partner with buy now, pay later providers, are all very attentive to it as well right now. Give me a read on initial jobless claims then,

because there are some puts and takes in there. But from your perspective at a firm, what did that tell you? No, I primarily look into my own data, trying to figure out the tea leaves of the U.S. consumer. Right now, the primary driver of spend shift in the U is still inflation. It is not yet pressure on jobs. We've seen folks move from buying discretionary items into consumables, non-discretionary items as long ago as almost a year ago now. We're still seeing exceptional growth in travel. That's a category where there's near insatiable demand just post pandemic, got to get out of town, got to see the world. And so that's doing really well.

But you can see a lot of consumers trying to pull back a little on sort of outfitting that extra bedroom and spending a little bit more attention to how I'm going to feed my family. So for the moment, things are solid, robust even, but prices are up and folks are careful to not overspend. What about your access to capital? Regional banks, at least the prediction has been that they are going to seize up in their willingness to do loans at all, make loans at all. I think we had an analyst on Overtime just

yesterday saying that lenders that have direct and consistent access to capital are going to do better and sort of questioned a firm's position, maybe in part because you're not a bank yourself. How has that played out for you and how has your data and your history helped or not? The good news is that we do not partner with regional banks for capital at all. So we do not have exposure to that segment. We have a really, really well-managed, very diverse set of programs that allow us to access capital, everything from selling whole loans to everything from hedge funds to large banks and insurance companies and everything in between. We also have a tremendous number of warehouse lines that we're able to tap when that's the appropriate thing to do. We securitize our loans, both publicly and privately. And so we have quite a variety of

capital access points. And we did that very intentionally on the odd chance that there will be a disruption in any one of these channels. We have plenty of others to pull back on. So we've done really well. Obviously, the real impact on our capital access and really price of capital is the Fed moves and the fact that the Fed appears to be settling into a policy that is a lot more paced is very good news for us. It allows us to plan our business a little better, allows us to negotiate with our funding partners a little bit more precisely. And so, all of that is generally speaking good news for us. Our access to capital remains really strong. We are not constrained by capital access to grow the business, which is

exactly how it should be. We're only constrained by capital access to grow the business, which is exactly how it should be. We're only constrained by our willingness to take the right amount of consumer risk. Are you modeling the possibility of a recession in the second half and how severe? We're certainly mindful of the possibility of a recession in the second half of the year. I am very, very focused on the return of the student loan repayment. I think that is the X factor that is hard to predict. I'm still trying to figure out exactly what the debt ceiling deal is going to do for the economy, just given the puts and takes of the Treasury that have to take place there.

But fundamentally, our consumer, I care a lot about what happens when they have to start repaying their student loans and will remain conservative in our posture until such time that I know what impact it really had. I asked him what he'll know. He said November, December. That's a pretty key time to know how the consumer is feeling. And we'll be sure to check in then. Up next, former Atlanta Fed President Dennis Lockhart on how the larger than expected jump in weekly jobless claims could impact the Fed when it meets next week. Welcome back. Weekly jobless claims jumped unexpectedly to 261,000 ahead of the street's 235,000 forecast. That's up from 233,000 in the prior week, and it marks the highest level for initial claims since October 2021. And ahead of next week's Fed decision, we're going to get the latest read on inflation with CPI

on Tuesday, PPI on Wednesday. That's consumer prices, producer prices. Joining us now is former Atlanta Fed President Dennis Lockhart. Dennis, I'm not sure at this point whether, you know, pause or hike matters so much as whether investors should think based on how things are going that the Fed has this inflation situation under control. Do they? I don't think they do yet. I think we're living in a 4.5% world of inflation. You know, there are some signs that can be grasped of declining inflation, but it's very gradual. And I think the committee still has a big challenge,

particularly with a 2% target. So why signal the possibility of a pause? Is it this thought that the credit markets were going to seize up after March, which at least anecdotally doesn't seem to have happened? And then how much pressure does that put on the CPI and PPI reports? Well, I think the question of credit tightening is something that's on the mind of members of the committee, and they would like to see more evidence that it's happening, particularly if they're going to treat credit tightening as some kind of a trade-off with

further hikes. But overall, I think they can support a skip based on the cumulative tightening that's occurred to date, the factor of credit tightening, and the argument that there are lags that haven't kicked in yet. So those are the arguments I think that would support a skip. And it's my view that probably they will skip next week. Well, looking at a micro level, at some qualitative information, we're just talking to Max Levchin from Affirm. It doesn't seem like he's doing any wholesale pulling back in credit availability. His sources of credit are still eager to deploy it, relatively speaking, but he is watching the impact later this year of student loan repayment coming back. How much are you thinking about that and how it influences the back half of the year,

particularly Q4? Well, I heard that comment in the run-up to this interview. I find that interesting. I haven't given it a great deal of thought. I would think that the student loan repayment resumption would be a factor in consumer demand and how the pretty large population that has educational loans is actually going to treat its monthly spending. And that could be part of a slowdown. There's no question about it. Beyond that, I really don't have a comment. I just I haven't given a lot of thought to that as a factor. Right. But just conceptually, it could be sort of like inflation, right? If there's less money that consumers have available to spend on other things because there's this other cost that they now have to factor in monthly? It could contribute to disinflation,

which is exactly what the Fed wants, actually. So in some respects, a little bit of slowing down of consumption would be very welcome from the Fed's point of view. And yes, the student loan question could be a contributor to that. I just meant it could feel like it in terms of the consumer doesn't have as much money to spend on other things because of costs that have appeared. And, you know, based on that, then what's what's the investor position usually during times like this? I mean, I know that the markets were exuberant when money was easy, that that's that's happening less traditionally. How much do market gyrations influence what happens here? Well, on the question of market gyrations influence what happens here? Well, on the question of market gyrations and how they influence what happens, clearly it's part of the calculation among consumers of how wealthy they are and how comfortable they are with major outlays and spending.

So it's a factor, particularly IRAs factor into the thinking of, let's say, a broad swath of the population. In other respects, you know, from an investor's point of view, you're always dealing with uncertainty and always dealing with risks that could develop. And at this time, I think the question for many investors is going to be how much further does the Fed have to go to actually get a decided disinflationary trend moving toward target? Right. And I think that's sort of the that's the question of the moment. All right. Thank you, Dennis Lockhart, the former Atlanta Fed president. Time now for a CNBC News update with Kate Rogers. Kate. Hey there, John. White House COVID czar Dr. Ashish Jha is leaving the post. President Joe Biden announced the

departure today, less than a month after the federal coronavirus public health emergency ended. Jha will be the last of the Biden administration's rotating COVID response coordinators, according to the Wall Street Journal. Also today, the president promised to send more firefighters to Canada as smoke from wildfires in the country billows over the U.S. border,

creating unhealthy air quality conditions for millions of Americans. States like New York, Connecticut, and Maine are also sending help. There are nearly 150 active fires right now in just the Quebec province. And attorneys for former President Donald Trump are asking for a new civil trial or a reduced award in the case involving writer E. Jean Carroll. In a court filing, they called the $5 million award to Carroll for sexual abuse

and defamation, quote, grossly excessive. They said if Trump does not get a new trial, it should be reduced to $900,000. Carroll's attorney called that argument frivolous. John, back over to you. All right. Kate, thank you. And now we've got breaking news on GM. Phil LeBeau has it. Phil. John, take a look at shares of General Motors. Two weeks after its competitor Ford said it would strike a deal with Tesla to use the NACS Tesla charging standard, GM is now saying that it will do the same thing. So starting in 2025, it will be incorporating the Tesla NACS charging standard into its EVs so that four, or excuse me, GM EVs will then be able to charge at Tesla supercharger sites. Also before then, starting in 2024, General Motors EVs will have access to about 12,000

Tesla superchargers. GM will go through the process of manufacturing adapters so that its current EVs, which have the CCS charging standards, will be able to use the Tesla NACS charging standard. Lots to discuss about this with GM CEO, Mary Barra. You do not want to miss our exclusive conversation coming up on Fast Money in about a half hour, John. We're going to talk with Mary about why GM has made this decision. Yet another automaker saying, you know what? Let's just go with Tesla. It's a better way to go than to have a separate charging standard. And again, this is for those public charging standards stations. You've got the Tesla superchargers and then you got everybody else.

And John, I should point out, if you talk with those who have studied the public chargers in this country, the ones that are not Tesla, they get terrible reviews. And about 20% of the time, they do not work. Either the credit card doesn't work, or it's slow, or it just plain doesn't work. So GM is saying, you know what, let's give the people who buy our EVs more access, and they'll have access to about half of the Tesla superchargers. John, back to you. Phil, what are the revenue and profit implications for Tesla here? Is this like licensing revenue that they're going to end up getting? Good question. We don't know what the parameters are. One of the questions

we'll have for Mary Barra, similar to what we had with Jim Farley in terms of, look, you can't charge for power in this country. In other words, you can't say to somebody, well, you're going to pay this for power, but everybody else is going to pay a different rate. You can't do that. But you can charge people to have access to getting to the same power. So that's one of the questions that we're going to have for Mary Barra about whether or not, you know, GM owners, will they have to pay for this access to Tesla sites? Yeah, I would think I would think so. I don't know. Sure. A heck of a thing to get that. Tesla didn't do this. Tesla didn't do this out of the heck of a thing to get that Tesla didn't do this. Tesla didn't do this out of the goodness of its heart to spend the billions to build the supercharger network.

And remember, John, they were doing this long before everybody else was even thinking about public charging stations. Yeah. Elon Musk likes to get paid. Looking forward to that interview, Phil LeBeau, coming up in the next hour. So everybody stick around for that. Shares of HashiCorp, meanwhile, plunging nearly 30 percent today after issuing weaker than expected guidance, raising red flags about the current customer and economic environment. The company's CEO is going to break down those concerns straight ahead in an exclusive interview. And do not forget, you can catch us on the go by following the Closing Bell Overtime podcast on your favorite podcast app. We'll be right back. Welcome back to Overtime. Breaking news from the Fed. Seema Modi has the details. Seema. John, the Fed balance sheet rising slightly this week, 8.35 trillion. That's significant because this does follow 10 consecutive weeks of the balance sheet shrinking. Moving on to borrowing at the Fed discount window, which actually fell by $804 million to $3.2 billion.

Then if we look at the bank lending facility borrowing, up $6.6 billion to $100.2 billion. The combined borrowing by banks in total reaching $103.3 billion. And then if we look at the loans to bridge banks, that fell by $2.9 billion to $185.2 billion. And that is the fifth straight week in a row that we have seen loans fall. So I guess one takeaway here would be that we continue to see stabilization in the banking sector, John, although we're keeping an eye on the broader balance sheet, which did rise slightly week over week. Back to you, John. All right, Seema, thank you. Back in technology, HashiCorp under serious pressure post-earnings. The company beat on

the top and bottom lines yesterday in overtime, but the sales outlook weaker than expected, even as the full year loss per share guide is above estimates hashi corp also announcing an eight percent reduction to its workforce investor reaction comes in contrast what we saw from mongo db on thursday when that stock spiked after its report mongo's ceo told us here on overtime that while he's feeling some macro headwinds mongo's revenue is closely linked to application usage, and that continues to be strong. Let's see what we can learn about demand and enterprise software ahead of big reports from Oracle and Adobe next week. Joining us now is Dave McJanet, HashiCorp's CEO. Dave, good to see you. Help me understand what happened in Q1. As analysts

pointed out on the call, you had been holding up so well in this environment of optimization in the cloud, but now it's hitting you. Hey, John, good to see you. Yeah, I think as we shared on the call, we had a solid performance quarter Q1. But what we, on both the revenue side and the EPS side, what we tend to be aligned to is the budgeting cycles of the 2,000 or 3,000 largest companies in the world. And I think in a word, they're demonstrating a good amount of caution. And I think that is what we communicated.

What that tends to do for all software companies, and we're no exception, is extend sales cycles for those organizations. And that's really what we communicated, and that's what we're expecting to see continue for some period of time. That being said, it doesn't change the level of interest there is at the top end of the leading indicators of the funnel. That is as vibrant as ever. I've been traveling a ton over the last couple of months,

and the leading signals are all as consistent as they have been for several quarters. But what's just taken a bit more time is progressing those things through procurement. I think that's what we communicated with our guidance yesterday. An 8% cut to the workforce seems to me like an indication that you expect this process to take a while, though. Am I wrong in that? Yeah, I think we ought always keep that in context. Obviously, these are difficult things for us to do, but we feel necessary to do as well as a responsible management team. I think as we communicated over the last couple of years, we've been in an

investment cycle. We have massively grown the scale of our workforce over the last four quarters. And that was in the anticipation of a particular economic environment. And what we've seen is the actual environment that has transpired is a bit different from that. The interest rates having risen as much in the last six months as they have in the last 30 years has thrown a dose of caution to big infrastructure investments. So as sales cycles extended, we've had to take the unfortunate position of reducing some of those roles. But it doesn't change the long-term outlook. I think what you see for us, our products play this critical role in the transition to cloud for the biggest companies in the world. And those things are not changing. That cycle is not

changing. So what you're seeing really is there's some optimization of people's cloud estates, but Fundament, which is bringing the revenues down on things like the hyperscalers to some degree. But at the same time, there's this push for more and more things going cloud. And we think that's the enduring trend that we're aligned to is that long-term push. But no, we're in an optimization cycle. Are you in the position where customers were overbuying during a certain period of time, whether, you know, certainly not intentionally, but it seems like certain enterprise software, and we've talked to Snowflake about this a bit as well, we're in position where people could buy a bucket of consumables and they're buying larger buckets before and smaller

buckets now as they really need to conserve. Are you in a similar position? I think every software company is seeing the same thing, to be honest, which is, you know, whether you're selling a consumption-based model or an entitlement, like Snowflake, or an entitlement-based model like we do, you know, it's very normal for large organizations to procure the entitlements that they think they're going to need in the next six months, nine months, you know, whatever it might be. So, in a sense, yeah, you're buying in advance. In these optimization cycles, there's pressure from finance teams to say, okay, just buy what you need for the next 30 days and we'll come back to you in another 30 days. I think that causes a sort of slight depression in expansion rates, a slight slowdown in sales processes for everybody.

And so, yes, that is a general trend that happens in the software market. But it's a little bit like a digestive period that needs to pass. Once you get through that particular optimization cycle, you will return to normality. Are we seeing a flow through of the consumer slowing down, perhaps not in travel and certain services, but, you know, in core retail and some areas like that, going through the customers and then eventually hitting enterprise software players such as yourself? You know, it's a fascinating thing to observe, actually. I think the caution that you're seeing in the capital expenditures for these biggest companies in the world is predicated on uncertainty about their own businesses. And that is a direct tie to the consumer in that they're saying, well,

I'm not sure what will happen in the second half of the year. People are talking about a slowdown. Therefore, I'm going to be cautious in my capital investments in the next little bit. And as it turns out, the consumer has actually been incredibly durable, but their budgets were set predicated on the assumption that there would be a slowdown in it. So I think that's a little bit what you're seeing is sort of this sort of the standoff expectation of slowdown in the consumer. But in fact, it hasn't been much of one. But on the B2B side, yeah, it's actually caused a slowdown in capital acquisition. So, you know, I'm not an economist. I have no idea how this flows out.

I think what you see us trying to do is control what we can control, understanding that this is a cycle and the consumer plays ultimately the controlling role. But their long-term secular trends remain unchanged. And our responsibility is to build a business to reflect both the current moment and what we think best suits our partners and customers as we think about the next several years ahead as well. All these themes connecting this hour, though, we were talking about the consumer with Max Levchin earlier and talking about what the Fed is going to do. And we see the results with innovators as well. Dave, thanks for joining us here on Overtime. Thanks for having us. Appreciate it. Up next, Mike Santoli is going to look at what moves in the high-yield bond market could mean for stocks. And another look at GM and Tesla both getting a pop in Overtime on news that GM customers will be able to access 12,000 Tesla superchargers starting early next year.

That follows a similar move from Ford last month. GM CEO Mary Barra is going to be on Fast Money next hour to talk about the news. And we will be right back. Welcome back to Overtime. Guess what time it is? Mike, Mike, Mike Santoli is back with a closer look at the signals from the credit market. Mike? Hey, John.

Yeah, a day late with that, but I'll take it. Take a look at what's going on in the bond market. Volatility last year in bonds was really destabilizing for stocks. It was at historic levels. This is a measure of the Treasury market's volatility, implied volatility in those options. See these highs right here? Very, very high historically above 150, of course, surged above that in the wake of the SVB collapse. Now it's calmed down and we're kind of at the low end of the range from the second half of last year. You wouldn't call it really placid, but it's definitely staying out of the way, allowing the equity market to make some progress, at least in the big cap indexes. High yield debt, the spreads to treasuries are also relatively tame. Remember, when this is up, it means that the market's very fearful. They think that default risk is going up and they're very afraid of owning riskier credit.

So when it's going lower, that's bullish. This is very calm here. 2017 kind of mid cycle, lots of liquidity. So we're on the right direction here, kind of going down in the last few months. I wouldn't say that this is very tight spread. So it's not really saying a risk on mode altogether. This is probably also why smaller cap stocks and credit sensitive parts of the stock market have not really kept up with the big growth days. But it's definitely not really flashing any sort of alarms either. Now, I would point out, even with this level of spread, because Treasury yields are where they are above three percent, it still means close to 9 percent on average for high yield borrowers. So that's still restraining the economy a little bit if you have that much of an expense to actually take on riskier debt. But for now, markets are

able to absorb it. Fascinating. We would get these shocks and then things calm down. Mike Santoli, thank you. Coming up, Mark Zuckerberg takes a dig at Apple. Meta hosted a rare all-hands meeting today, and CEO Mark Zuckerberg reportedly had some choice words for the new Vision Pro headset that Apple rolled out at the beginning of the week. We will explain when Overtime returns. Welcome back to Overtime. The networks across the NBC News family are going to shine a light on people who are inspiring America in a special airing this weekend, including the founders of the Bombas Sock Company, who have embraced a buy one, donate one business model. Here they are in their own words. I don't think any of us looked at each other thinking, oh sock business, that's how we're

going to build something big. The idea for Bombas came around back in 2011. Scrolling on Facebook and I came across a quote that said, socks are the number one most requested clothing items at homeless shelters. And eventually we thought, hey, you know what? A one for one business model really makes sense for this category. so let's make the most comfortable socks in the history of feet and sell as many as we can and for everyone we sell we donate one and then we'll help solve this problem in our community.

These sell out every season. When we first got started we had no employees because we couldn't afford to pay anyone including ourselves. I think one of the biggest challenges when we first started the business, you know when we talked to friends, family, you know business colleagues, potential investors and said that we were starting a sock company, you know people chuckled and kind of thought that maybe we were joking. Some people laughed us out of the room. I think it really grounded us and just saying like all, like we're gonna grind this out. We're gonna bootstrap this thing.

You know, if nobody else is gonna believe in us, we're gonna believe in ourselves. And now 10 years on, we've donated over 100 million items to shelters and organizations across the country. Being on Shark Tank is an absolute game changer for our business. Thank you. All right guys, great decision.

Great decision. Before going on Shark Tank, guys, great decision. Great decision. Before going on Shark Tank, we had been in business for about nine months. We did about $900,000 in sales. And the two months following Shark Tank, we did over $1.2 million in sales and completely sold out of all of our inventory. And we're now the most successful company by revenue

in Shark Tank history. After 10 years, putting on a new pair of Bombas is still the best feeling. I get blown away every time. When people look at Bombas, what I hope they see is a company that's walking the walk. I hope that, you know, entrepreneurs today look at Bombas and say, wow, they've achieved not only financial success, but they did it the right way by treating people well. Up next, Meta CEO Mark Zuckerberg reportedly telling employees at an all-hands meeting today that Apple's new headset is too expensive. We're going to bring you those details next. Meta CEO Mark Zuckerberg taking a dig at Apple's new Vision Pro Mixed Reality headset

during an all-hands meeting today, according to a report in the New York Times. Zuckerberg reportedly criticizing the high-end materials and costs of Apple's $3,500 headset, adding, I was really curious to see what they'd ship, and it's a good sign for our own development that they don't have any magical solutions to the laws of physics that we haven't already explored. Steve Kovach joins me now to discuss. Steve, maybe this isn't fair, but this reminds me of the CEOs of Microsoft

and Nokia and RIM talking about the iPhone when it first came out and how they weren't impressed. Yes. Oh, it doesn't have a physical keyboard. Remember those arguments? And I would point out, Zuckerberg says, nothing we haven't explored, but they haven't implemented yet. So I've tried both of these headsets. I did a control demo with Meta last fall around the Quest Pro.

They're a $1,000 headset. And then just the other day, I was at Apple's HQ and did the Vision Pro demo. It's night and day difference. It really is. When you look through the Vision Pro, it's like I'm looking at you right now through my own regular glasses. It's crystal clear, whereas the Meta headset, it's blurry. The apps kind of look pixelated. It's tough to read text sometimes. You have to adjust it just right. At least my glasses do fit in that one. So it really was, it was just impressive. I couldn't help when I was trying it to compare it to what Meta did.

I was waiting to hear what Mark Zuckerberg would say about it. I'm curious for him to try it and hear what he thinks. But it's clearly, he's going on a price war here. That's what his take is. And yet, do we know, are analysts thinking that Meta is making a profit on this headset, or are they subsidizing the hardware or at least selling it at cost just to try to build an ecosystem? It's not a profit. They're not making a profit on it. And I think they've said as much in the past, too. Their idea is, you know, sell it at cost or maybe at a little bit of a loss and then make that up on software and apps and so forth.

The video game console model. Exactly. But that kind of doesn't work if Apple gets enough traction with something that they're selling at a profit, right? Exactly. And Apple, maybe they're barely selling this at a profit. There is a lot of technology in this thing. And it's just interesting.

A lot of the ideas are the same between Meta's headset and the Apple Vision Pro, such as just the eye tracking and the hand tracking. But Apple just executed it so much better. So even if the cost isn't really, you know, palatable to a lot of people, it at least works, unlike the Meta headset, which is incredibly buggy at times. I guess Zuckerberg's got to hope that Apple overbuilt here because a lot of the technology in the Vision Pro comes from

the iPhone and Facebook decided not to stick to it and develop a phone. So exactly. All right, Steve Kovac, thank you. Now, before we go, don't miss today's On the Other Hand newsletter, where I'm going to argue both sides of today's topic, what Steve and I were just talking about, whether Vision Pro can become Apple's top-selling wearable. You can sign up using the QR code on the screen or go to cnbc.com slash O-T-O-H, and I will send that out in just a bit. You sign up now, you'll actually get to see it later.

That's going to do it for overtime in a day when the markets were higher. We'll look ahead to what's going to happen. And of course, that GM interview coming up in just a few minutes. Fast Money begins right now.