Closing Bell - Closing Bell Overtime: All-Clear for Higher Rates? 4/8/22

Episode Date: April 8, 2022

Could rising rates derail the market? Wharton School Professor Jeremy Siegel gives his take. Plus, shares of Robinhood fell more than 6% after a downgrade from Goldman Sachs. Dan Dolev from Mizuho defends his “Buy” rating on the stock. And, Ebrahim Poonawala from BofA Securities names JPMorgan a top idea ahead of next week's earnings report.

So you just heard it, the bell. Regulation time is done. Overtime is starting now. I'm Dominic Chiu in for Scott Wapner today. You just heard the bells, but we are just getting started here on the show. And we are going to begin this hour with our talk of the tape, a very big breakout in bond yields, those interest rates going higher, but it's failing to really wreck the rally substantially. The 10-year Treasury note yield hitting its highest level, by the way, since March of 2019. And stocks held in, relatively speaking, the Dow finishing in the green, actually, the S&P 500 near the flat line. So is the market giving the maybe OK signal that rising rates will not derail this bull run? Let's ask the professor himself, Jeremy Siegel. He is

the professor of finance at the University of Pennsylvania's Wharton School, a familiar face. Professor, welcome to Overtime. Thanks for being with us here. So let's talk about whether or not this market can be resilient enough in the face of that rising rate picture. Well, Dom, I think what you're seeing is a rotation. Like the Dow was up, the Nasdaq was down today. And I think that that's going to continue over the next three to six months because I think rates are going to continue to rise. I think inflation, I mean, next Tuesday is a very important date.

The CPI is coming out. It's the last CPI before the May meeting of the FOMC. And I think 50 basis points is in the bag. And honestly, if we get a bad reading next Tuesday, I know James Bullard will probably be calling for 75 basis points. So we have more hikes to look forward to. And that means more of that rotation towards the value stocks and away from those stocks with the cash flows far into the future. So that growth story that you mentioned there, the ones with the cash flows far into the future, we did see in the last 15, 20 minutes of trading or so a bit of an acceleration to the downside in some of those tech and growth oriented names. Is this one, though, that you feel could provide that really deep pullback in

the tech sector, in the communications sector that a lot of folks have been calling on for months, if not years at this point, but has never really materially happened ex a pandemic back in March of 2020? Well, I don't think we're going that low, but I think one could say that Nasdaq might test the lows that have reached the end of January and early February. I think people got a little bit too excited about that rally that we had, that two-week bounce, and said, oh, it's all over. But the rate rise is not all over. And I think that that's going to weigh on those stocks. That said, you know, the market is holding in very well because people say, I want to hold real assets in an inflationary environment. And stocks are really claims on real assets.

So I don't think overall the stock market is going to be damaged that much, but it's going to be a tough first half because the Fed, I think, is going to have to be even more aggressive than is indicated right now. So if the recovery professor since the great financial crisis back in 2008, 2009, didn't teach you something about this notion that you want to own stocks or real assets as things recover. The pandemic should have, right? And that was more recent, just in the last couple of years. Is there a case to be made, though, that this inflationary picture is perhaps not as much of a factor right now, given a very, very strong inflation narrative, the likes of which we haven't seen in four decades plus. Yeah, that's true. Well, history says in the long run, stocks will take care of inflation. The returns will take care of inflation. As the inflation starts, actually, the stock market runs ahead as it did last year, beginning of this year. When the tightening gets serious,

the stock market tends to flatten off. And then when they finally succeed, it'll take off again. So I think you're going to have that sort of an S shape in the market, being tough as the Fed says, I'm going to have to get much more serious and they're going to have to get more serious. I don't see that. I do not see a recession in the cards anytime soon. The job market is just so strong. Maybe out in 2023, and it might be mild. I'm also not worried about inversion. I think we're in a world where the long rate is never going to get as high as it once was.

We're going to see a much flatter term structure. And we're going to see many times when that short rate is going to be above the long rate and that doesn't necessarily signal a recession. So, Professor, you perfectly kind of got me to this next part of my questioning, because what I'm curious about is a lot of traders and investors have told me that this particular rate hike regime is not like any other rate hike regime that we've seen since the advent of the central back back in the early 1900s there's been a lot of Fed intervention central bank intervention overall how much though is the interest rate picture and those yield curve differentials going to be indicative of

what we've seen in the past in economic cycles? Or is this time truly different, not to coin a cliche there? Well, you're perfectly right, Diamond. In fact, you know, for 49 years I taught macroeconomics and financial markets, and I taught that an inverted term structure was a single best indicator of recession. But what we've seen in the last two or three years with the long-term rate being a favorite hedge of investors, and that's why it is so low relative to inflation, that I think we're going to see flatter term structures.

I think we need maybe 1 to 200 basis points or maybe even more of inversion before I'm convinced that there's going to be a serious recession. So I'm not worried at all right now about the recession. I think there are a lot of demographic forces, risk aversion forces, reserve forces driving that demand on that long bond. It'll go up above three, probably to three and a

half. But we're not going to see the five, the six, the seven. And of course, I don't know how many of our listeners remember I do 40 years ago when the 10-year rate was 16%. We're not going back to anything like that. I remember when my parents' professor told me about their mortgage rate back in the 1970s and the double-digit percentage numbers it was then. 18% in 1980. Exactly, right? And so if you talk about this notion, and we've heard many people on our air, experts on our air, come up and talk about this idea of what's priced in, what's not priced into the market with regard to Fed moves here. At this point, aren't we all pretty clear that the Fed is going to raise rates and reduce the balance sheet? What would actually be a surprise in this kind of a new cycle?

Well, I think the market is looking now at, you know, maybe two and a quarter, two and a half. Very honestly, we heard James Board and and I've interviewed him many times, and he says, I want to see it above three. He's been right so far being the most hawkish member. And I think if the data, I'm looking at a lot of this data, I don't see any relief from inflation soon, and the Fed is going to have to be more aggressive in this score. As far as the reduction of the balance sheet, very honestly, it's too slow. I know it's double the rate that it was three or four years ago. But the Fed, since the pandemic, has added $4 trillion to the balance sheet of the commercial banks and the Federal Reserve. They're going to reduce it $100 billion a month.

That's a trillion, or a little more, after a year. Well, by then, the Fed says the inflation and pressure should be subsiding. And they've only taken away a quarter of the extra balance sheet that they added over the last two years. So I really think they need to speed that up. Also, if they want to send a signal to the market, we're really serious about this inflation. These are the impediments that I think the hurdles that the stock market is going to have to get over in the next three to six months. And that's why we're going to have volatility. And I think some certainly choppiness in the market with the rotation towards the value stocks. So, Professor Siegel, I get it. You're adding your voice to this more hawkish narrative that's been permeating through the markets right now. Please stay with us because I want to bring in a couple other folks here to add to this conversation,

see if we can't shake things around a bit. We're going to talk to Barry Knapp now of Ironsides Macroeconomics. He's also a CNBC contributor. And also Megan Hsu of the Wilmington Trust. Welcome to you both, Megan and Barry. Megan, maybe I'll start with you. You just heard Professor Siegel talk about this idea that there could be a lot more chop and that there needs to be a more hawkish tilt towards monetary policy in this country.

Is this something that is going to derail this bull run that we can argue has been in place, substantially so, since March of 2009 at this point. Yeah, Don, thanks so much for having me. So I think what we've seen is that the Fed Funds futures market has certainly started to price in a much more aggressive Fed. I don't know if that's fully priced into the stock market, though. In particular, I think when you look at the tightening of financial conditions it's likely to play out over this year. We've already started to see it weave its way into the mortgage market and inflation is a big concern not only because of what it means for the Fed in terms of their plan for the year ahead but also in terms of what we're seeing from consumer sentiment which

is one of the indicators that probably gives me the most pause right now- the University of Michigan sentiment survey having been lower- only four other times in history. So consumers are already very worried- and I think when we look at the stock market. I totally agree with

the professor that stocks are generally a good inflation hedge. But they are not good at hedging is stagflation or even stagflation light. So that is one of the things that we are monitoring. We've taken down some of our equity exposure, but we stay fully invested because I think that there could be some upside risks later in the year. All right, Barry, I wasn't going to do it. I didn't want to do it, but Megan did it. She brought up the S word. She said stagflation. So now the window and door are both open. I'm going to walk right through it, Barry. Stagflation,

is it for real? Is it something we should be worried about? And what exactly do you do in the face of that kind of environment from an investing standpoint? Yeah, no, I don't agree that we're looking at stagflation whatsoever. Growth will slow, but it's not going to be slow. I generally agree with everything Professor Siegel said, particularly the emphasis on value. And as it turns out, the cheapest sectors are financials, energy and health care, generally cyclical sectors. Here's my perspective, though, on the yield curve, which I think will throw a little bit of a loop into what we've been discussing. The real driver of the inversion of the yield curve was not the so-called real rate curve or

tips curve, which is supposedly a proxy for the growth outlook, but hasn't been so since late 2003. It's really been distorted by policy, those tips yield. Remember, the Fed was buying 100% of the net supply of tips during the QE period. It was driven by a deep inversion of the inflation curve. And this is an expectation that the first order effects of the pandemic supply chains are starting to clear. You guys have been talking about trucking all week and the hit to the transportation. The ISI interview Sarah did in the last hour, I thought was really good. What he was really saying is this is a price effect, right? This isn't really all about demand. Yeah, demand is slowing, but

it's not going to be slow. So this deep inversion of the inflation curve really explains why the equity market rallied after the Fed meeting. If inflation is indeed going to peak. And by the way, I share Dr. Siegel's long term concern about this, because the second order effects that relate to the services sector housing, those are just kicking in. So I'm not so sure we're going to settle down below, say, 4% by the end of the year into next year. And that could be a bigger, longer term concern. But right now it's peaking. And so that driver of the yield curve is it really explains why stocks have done OK. I share, though, the broader cautiousness and would say, listen, at 4,400, I'm a buyer. At 4,800, for now, I'm a seller. The typical pattern would be that the bull market

wouldn't resume until much later this year. That's been my expectation, and I'll sort of stick with that. Professor, I wonder, from a valuation standpoint, when you look at your students, when you teach them about this notion of the intersection of finance, economics, and valuations fall into that, is this a market that is overvalued or undervalued or right-size valued in the academic opinion of yourself? Well, right now, we're looking at 19.5 times next 12 months earnings, which I think are going to be pretty well realized because I don't see any recession there. That certainly is above the long term history. But in a negative real rate environment that we have right now, that is that's a pretty good real yield. But I do agree that inflation is going to be much more persistent. By the way, I've been concerned.

Have you been looking at natural gas over the last two or three weeks, which most of us use to heat our homes here in the Northeast? It's doubled in price. And we're not going to be immune. It's not just gasoline that has gone up and the Ukraine war. There are going to be a lot of ramifications, a lot of humps. The stock market has to get over. But from a long term valuation standpoint, I you know, I'm still a holder of stocks. No question. All right. So if you're a holder of stocks, Megan, I will turn to you here. What is the place?

What is the sector? What kind of stocks do you want to be in? And what do you want to stay away from, given this view that you have about the current market environment? Yeah, well, I would stay away from the extremes. So I'd stay away from those deep value parts of the market. And I'd stay away from the very, very growthy parts of the market. We're really emphasizing diversification here.

The narrative for different factors and sectors has been very difficult to time, but relatively straightforward over the past two years. And I think that that narrative is a little bit more complex. We are also not forecasting a recession over the next 12 months. But I think if you do see oil prices spike back up and commodities start to weigh on consumer sentiment, we could see GDP growth below 2 percent this year. And I think in a slowing growth environment, you're going to want to have some growth parts within tech, within health care. But higher rates, higher inflation definitely do help the value parts of the market, too. So I would be diversified and I'd have a little bit in those core parts of the market. All right. Megan Hsu and Barry Knapp, both CBC contributors, thank you very much. And Professor, always great to get your thoughts. Thank you very much, sir. Have a great weekend, guys. Thank you. Thank you. All right. Coming up next on the show, Battleground Robinhood. Goldman Sachs is slapping a sell rating on the stock today, but your next guest says they're dead wrong.

He'll make the case why you should be bullish on Robinhood. And later on, a big call on big banks. One top analyst says there is one name to watch as we head into big bank earnings season. We've got all that and more coming up on the show when the OT overtime returns after this break. Welcome back to overtime. Shares of Robinhood are falling more than 5% today after analysts at Goldman Sachs downgraded that stock to an outright sell rating. The firm says street estimates are too high and sees a high bar for Robinhood to reach profitability by the year 2023. You can read more about all of this and that call on our website, cnbc.com slash pro subscribers

there. Get the full call. But our next guest says Goldman is dead wrong. He maintains a buy rating on the stock. Joining us now is Dan Dola from Mizuho. You know, I wonder, this is a situation where Goldman analysts are saying, Dan, that the street consensus, and that, I guess, includes you, is way too optimistic about Robinhood's prospects even into next year. Why are they wrong? You know, hey, Dom, look, great to be on the show.

I always respect, you know, my peers despite their, you know, young age and inexperience. But in general, what I would want to say is I don't think the debate here is on profitability. I don't think looking at consensus estimates is the right way to think about it. This one is a game changer from an engagement and a generational perspective. And I don't think just looking at the consensus estimates for next year of profitability is the right way to measure Robinhood. That's why, you know, we have a buy on it and I'm very bullish on the stock. All right. So what is Dan? I mean, you kind of opened the door, right? So what exactly is the right way to look at this if it isn't from that

kind of straight up, you know, discounted cash flow, look at future growth prospects, assign a dollar value to it today. What exactly are these analysts missing and why is the bullish case more intact than it has been in the past? Yeah, I think the bears on this stock are missing something very, very, very specific, which is there's over 20 million users on this one. And in every metric you look at, Robinhood is like the most engaged users. When you think about sort of single money app, when you think about the super app, Robinhood is making it happen. They're like

here when it comes to engagement, right? The number of times a week or a month you look at it versus all the peers, including some stocks that we really like, like the cash app, for example, right? Like Square. So they're like right here and they're gaining share they're gaining share in in terms of like people's um you know people are trading crypto on this on this right now right where does this come from it's probably coming from some of the other apps right so you're you're getting it and you're getting it for free and i think the right way to look at it is users which actually has bottomed in the fourth quarter so we've seen that inflect it's's ARPU, which stabilized at $64. It's resurrected account, which actually got better. It's turn, which got smaller. So all these, you know, when you kick the tires on all these metrics, you're seeing that we've seen the

bottom and that we're heading in a good, you know, to a good place from here. So, okay, you mentioned the crypto side of things. Maybe that kind of brings us into this next line of questioning. How important is that crypto story to what's happening with Robinhood versus, say, what's going to happen with crypto and Coinbase, which is a much more direct play, or crypto with PayPal and Block, which are kind of in the ecosystem of those fintech players? How is it that Robinhood is going to kind of capitalize on this crypto? Goldman says that there's declining macro conditions happening in that crypto trading environment. Yeah, look, I mean, I'm not taking a stance of where crypto is headed. And I think looking at the, you know, as an analyst making a macro call on anything, I think that's not my job. But when I think about the way they monetize,

right, they're offering something for free or essentially free that Coinbase is charging a lot of money for. So guess what? At some point, consumers are going to wake up for it and they're going to say, hey, why should I trade this on Coinbase if I can get it for free on Robinhood? So I think if you are into crypto and if you want to trade crypto, the place to be is Robinhood, not elsewhere. Okay, it's Robinhood. So then why is it that this story around Robinhood is so predicated on this notion that maybe the crypto side of things is not going to be as much of a help? Do you feel as though the free stock trading that we've associated with it, especially during times like the meme stock

craze and everything else. What should be the main investment thesis by which investors really want to be in a company like Robinhood? That's a great question. I think the main investment thesis is how fast can they take those users and grow the ARPU, grow the average revenue per user by adding additional products right so i view crypto for example is a great engagement mechanism right it gets people into the app to look at the app to trade crypto to trade stocks to trade options and to me the more services they offer like a debit card you know and you know additionally we've done some work actually it was on square but it's the same story that shows you that the ultimate artPU for these names is somewhere in the 200s, right? So if they become the single money app, a single bank

app, you're seeing massive ARPU upside. And by the way, you know, everyone I talked to that's in their 20s, young people, they all use Robinhood. It's a huge, huge draw for younger people. And I think that's what the bears are missing. All right, that's Dan Dolev at Mizuho. He's got a buy rating and a $19 price target on shares of Robinhood. Thank you very much, Dan. Have a nice weekend. You too. Thanks. All right. Let's get to our Twitter question of the day for you folks out there. Where do you think Robinhood is actually headed from here?

That stock, by the way, as you can see on your screen, currently trading right around north of $ bucks a share, does it end the year below $10 around current levels, 11 and a quarter, call it, or above $20 a share, more towards Dan Doliff's target? Head over to our Twitter feed, CNBC Overtime, at CNBC Overtime to vote on that. We will bring you those results later on in the show. Well, coming up next, let's make a deal. We'll tell you who's really driving all the M&A activity so far this year and what it says about the broader market overall. And then later on, today's MVP, most valuable pick, a bold call on one big bank ahead of the start of earnings season coming up next week. We will dig into that most valuable pick coming up when overtime comes back. All right, welcome back to overtime. You saw the Dow's up about 137 points at the close here. Time for a CNBC News Update with Kelly Evans.

Good afternoon, Kelly. Hi, Dom. Good to see you again. Hi, everybody. From the news on CNBC, here's what's happening. Will Smith will be banned from the Oscars and any other Academy events for 10 years. The Motion Picture Academy announcing the penalty after Smith's slap of Chris Rock during the Oscars. Smith said he accepts and respects the Academy's decision. A former water polo coach at the University of Southern California has been found guilty in the college admissions bribery scandal. Jovan Vavich was convicted of taking about $250,000 in bribes to help students get into USC. And Tiger Woods is having a rough day at the Masters. He bogeyed four of the first five holes after a strong showing yesterday, but he got a birdie

at the eighth hole and is currently two over par. If his game starts to waver again, Woods could miss the weekend rounds of the Masters for the first time as a pro. And on the news, corporate retreats are coming back. Events include golf and other team building events, though hopefully less heartbreaking than cheering for Tiger. We'll look at these new takes on staying connected with top employees. Join me right after Jim Cramer tonight, 7 p.m. Eastern on CNBC. Dom, back to you. All right, Kelly, promise me you'll watch at least some of the Masters this weekend, and we will talk about it on the Exchange Empower Lunch. I might put it on right now, Dom.

All right. I love it, Kelly. Thank you very much. Have a nice weekend. Something big is bubbling up under the surface of the dealmaking market right now. Let's get to Leslie Picker with what it is and why it matters. Leslie. Hey, Dom. Yeah, I know you're going to be busy this weekend, but private equity has actually been busy, too, taking an increasingly large slice of the deal-making pie. So far this year, almost half of the deal volume has been through a private equity buyout, a proportion that's grown increasingly higher over the better part of the last decade.

These include buyouts of Athena Health, Cyrus One, and McAfee, each taken over by a consortium of private equity firms this year. Investors have been piling into private equity in recent years, chasing returns that have outperformed public equities over both short and long-term horizons.

That's led to a so-called dry powder buildup of a trillion dollars sitting in buyout funds ready to be spent. It's a trend that J.P. Morgan CEO Jamie Dimon called out earlier this week in his annual letter. He noted that U.S. public companies peaked in 1996 at 7,300, now total 4,800. Meanwhile, the number of private companies backed by private equity has grown from 1,600 to more than 10,000 companies. Diamond said, quote, this migration is worthy of serious study to figure out why so many companies and so much capital are being moved out of transparent public markets to less transparent private markets. Dom. All right, Leslie Picker, thank you very much for that update on M&A and

private equity. Please stick around. Let's bring in another voice here for this discussion. Ann Barry from Wheelhouse Group. She invests directly in private businesses backed by venture capital money and growth funds as well. Ann, thank you very much for being here with us. You heard Leslie's report. Just how much of this is a near-term phenomenon with regard to private equity and driving M&A, as opposed to something that might be more secular in nature for the coming two, three, five, even beyond years? Well, Dominic, I think it's been secular for a while. If you look at 2021, we saw an explosion in private equity growth. It accounted for about 27 percent of the global M&A market and was at levels we haven't seen since 2006.

Private equity with the trillion dollar shopping budget that Leslie pointed out is absolutely now going to be hunting in the public markets as higher growth sectors like tech and health care that have been out of the domain of private equity start to become a lot more affordable. So for the next two to three years with that kind of dry powder, a lot of activity can be expected. So, Anne, if we are talking about that kind of dry powder, what exactly is the target right now? Is there a playbook, so to speak, for some of these M&A type deals with regard to private equity? Are there certain specific industry groups or types of companies, characteristics that these M&A players in private equity are looking for? Well, the trend, Dominic, has been for private equity to look for bigger and bigger deals, because the amount of work that goes into the larger transactions is very similar to the

smaller ones. So in terms of best use of time and resources, bigger is better. Last year, the average buyout deal broke that billion dollar mark for the first time. So when I look at the public markets and where there is now potential to put that kind of check, that huge amount of private capital, both debt and equity to work, there are a couple of trends that I'm seeing. Investors and private equity funds for a long time have said, we want you investing in above GDP growers. That's back to health care. It's back to tech.

And corporate carve outs have been popular for a long time. We saw that with Apollo and Verizon Media last year. I can see with activists, saber-rattling now, forcing companies to look at selling non-core assets. Those are the kinds of places private equity will start to play. So if they are going to look to play in those markets there, it is about trying to get these deals done in the most efficient way possible. And I wonder how much is the rising interest rate narrative right now driving a lot of this deal transaction volume and private equity? Because in essence, they're kind of like house flippers, right? They put a down payment down, they borrow the rest of the money,

take something else private. How much do rising rates factor into this notion that we want to get something done now because costs of borrowing are just going to increase in the coming months and years? Well, I think that's definitely a catalyst, Dominic. I do think one thing worth looking at, though, is yes, rates are coming up. They're coming up quickly, but they're still coming up off of very low bases relative to the private equity cycle. And so when you've got these large amounts of debt that private equity is taking out, like a mortgage to buy a house, this is a credit that private equity is taking out to buy companies, the amount of return that you can generate from having

leverage is so significant, even when interest rates are going up, that I think whether it's today or whether it's next year, you're going to still see a lot of demand for these kinds of transactions. Leslie, I wonder, I mean, based upon some of the companies that you cover, the folks that you're talking to right now, does it feel like this kind of a trend, this kind of a huge movement in driving M&A transactions is going to have staying power? Do we feel as though this is something where they're going to be looking for deals and hunting for them, not just in the next couple of months, but maybe even the next couple of years? I think it will, because the capital and private equity is extremely sticky. They usually invest in 10-year funds. And so this is something you're going to see for at least a decade. And the trend has been

really taking shape for a while now. And the tailwinds that really help them here are a few things. Number one, they do tend to seek out buyouts when the market has a downturn. So basically the comparables to what you're seeing in the public markets right now are looking really attractive for private equity firms and it's becoming much more of a benefit for them to be actually doing deals in this environment versus years past where the valuations have been so high. Additionally, antitrust from a strategic standpoint can hinder certain strategics from making acquisitions that then private equity firms are able to come in and do and do successfully without much in the way of regulatory intervention. So there are a lot of things that private equity firms are able to do in this current environment that would support additional dealmaking from here. Now, Leslie, before we let this conversation kind of go here, we do know that in the last several years, many of the biggest players,

if not all, in private equity are actually now public companies. Do you feel as though there's been a difference in the way these private equity firms operate because they are now under the public value microscope like they never have been in the past? Absolutely. Well, last year was a remarkable year for those publicly traded private equity firms in terms of performance. And they've done relatively well this year. I know you just had a chart up showing where they were at off their 52-week highs. But they've certainly seen some benefit. Now, these firms don't look like they used to before they went public. A lot of them have gotten into other areas to grow their AUM. They've gotten into credit. They've gotten

further into real estate. They've gotten into insurance and other types of businesses that can grow AUM because that's what public investors want to see. They want to see that predictability of a management fee in addition to the performance fee. The performance fee was difficult for investors to model out. It's easier when you have that bigger AUM base to model future cash flows and so forth. And so they don't look like the private equity firms of maybe a decade ago. They're in all these new businesses, but they do still have a buyout component. And they've been raising record-breaking funds as a result of just this quest to gather more assets as a publicly traded company. All right. We'll leave the conversation there. Anne Barry at Wheelhouse Group, thank you very much for joining us. And our own Leslie Picker

with the update on M&A and private equity. Thanks, guys. Have a great weekend. Still ahead, the most valuable pick, the MVP, a key call on one big bank, the biggest one out there, as we gear up for earnings next week. But first, Christina Partsenevelis is breaking down some big movers. Christina, what's on deck? Well, Dom, who says that people are ditching work early on a Friday afternoon because I've got some new stock stories ranging from lithium to rail. I'll even throw in a little Elon Musk for you fans. That's coming up right after the break. Welcome back to Overtime. Let's get out to Christina Partsenevelis live at

the NASDAQ tracking some of the big movers on this Friday trade. Christina. Yeah, it's Friday night, but we still got some headlines for the end of the day. Remind me never to sing again. See, we have learned CNBC has actually just learned that United Airlines is pushing back the return of dozens of Boeing jets until at least mid-May. And this is according to a note that was sent to pilots of shares of Boeing's down slightly on the news, but down also 30 percent on the year. Switching gears, Elon Musk tweeted this afternoon, quote, price of lithium has gone to insane levels. Tesla might actually have to get into mining,

which gives me the opportunity to look at Albemarle, a lithium mining company. The stock under pressure today, but the high commodity price of lithium has helped shares rise about 43% in the past year. And with food prices now switching gears again, hitting a record high, fertilizer, wheat surging, these higher commodity prices are a windfall for big agricultural companies like Archer Daniels Midland that buy and transport crops. So the stock outperforming the market today and is up a whopping 40% year to date. And in order to carry that food, we need some trains. Canadian Pacific

was downgraded to neutral today from buy at Bank of America. The bank says results remain depressed and there's lack of synergies even after the Kansas City Southern acquisition. So there you have it, Don. Four movers in probably about 45 seconds, give or take, if you're counting. Well done, Christina Partsenevelis. Thank you very much and hope you have a nice weekend. You too. Thanks, guys. Coming up next on the show, betting on the big banks. B of A is naming this financial stock. It's top idea heading into earnings for big banks next week. It's today's most valuable pick. The MVP will bring you that name when the overtime show returns after this break. Welcome back to the overtime here, Justin.

Details on some top executive compensation packages. SEC filings revealing that Alphabet CEO Sundar Pichai's total 2021 compensation fell to $6.3 million from a prior $7.4 million in the year 2020. Also, Meta Platform CEO, former Facebook, Mark Zuckerberg's pay climbed ever so slightly to $26.8 million in 2021 from $25.3 million in 2020. And Morgan Stanley CEO, James Gorman's annual pay also increasing to $34.9 million this year versus $29.6 million in 2020. So big name CEOs behind some big name companies making a lot of money these days. Now, sticking with the bank conversation, let's get to today's mvp our most valuable pick b of a securities naming jp morgan a top idea ahead of the bank's earnings report coming out next week joining us now is the analyst

behind that call ibrahim punawala ibrahim thank you very much for joining us right now i wonder if you might take us through why jp morgan of all the, it's been in many ways an outperformer. Why is it going to keep on outperforming in your mind? Dominic, thanks for having me. So you're right, over time, J.P. Morgan has outperformed. But when you look at the performance, especially coming out of fourth quarter earnings back in June, the stock sold off after management laid out their investment plan, the street wasn't too satisfied with how they responded to how these investments are going to play out in terms of the growth and return outlook, which is why the bank's holding an investor day in mid-middle of May. So the stock's down about 15 percent year to date. look at the macro environment, highly uncertain. In JP Morgan of the big money centers, sort of global mega cap banks, you have an institution which is highly diverse from a revenue profile

perspective. So in terms of the capital markets business, yes, we know investment banking is going to be slow, but I think trading revenues, both fixed income equities are going to be strong. Also, the bank is sitting on a trillion dollars in cash balances. If you think about what the Fed is about to do in terms of hiking interest rates, maybe 50 basis points in May, 50 basis points in June, 100 basis points in higher rates is $10 billion in annual revenue that JP Morgan will generate just by the virtue of the Fed hiking. So as we think about the diversity, defensibility of revenue, we like it on many metrics. And again, you're right, longer term,

the stock's done well. But over the last few months, the stock has been a bit out of favor coming out of that fourth quarter print. How much does the yield curve discussion, Ibrahim, factor into this conversation about banks and earnings? We kind of know what the trajectory is supposed to be. The Fed has pretty much laid out what it's going to do and what it's going to take for them to not do anything. It's going to take a lot. Is JP Morgan the best play given that kind of rising rate environment? And then how much should we be concerned for those money center mega cap banks when it comes to flattening yield curves, at least over the medium and longer term? Sure. So let's talk about the yield curve. When you think about the fundamentals of most majority of the banks, including the money center banks, their rate sensitivity relates to the short end. So think about the one to three month going out to at most the five year part of the

curve. All of that has reset higher. So when you think about purely in terms of higher rates translating to better earnings, all these banks, money-centered banks should benefit from that. The yield curve and the flattening, the 2.10 inverted back on April, it's positive again, the 5 to 10 years inverted. It's more of an indicator that investors have used around as a predictor of a potential recession. Again, it's not been the most reliable indicator in terms of timing. And what we've heard from our economics team at BFA, you could be a recession which could be two or three years out and the yield curve could invert in advance of that. So it's not a sure shot, but it's definitely something investors are paying attention to.

It's been a big factor that's weighed on bank stocks, I would say, over the last month. And the way we think about it is earnings are driven by the short end of the curve. Valuation, multiple sentiment are driven by the shape of the curve. All right, Ibrahim, before we let you go, we've just got a few moments left here. When it comes to the regional banks, are they a buy or would you rather be in those money centers? What's the regional bank outlook? So the regional bank outlook has gotten a bit murkier in the last month as we are worried more about inflation

and the fact that the Fed could push the U.S. economy into a recession 12 months out. So we are a lot more cautious today than we were, let's say, six to eight weeks ago. But there are selective opportunities. There are banks like M&T Bank where there are self-help aspects to the balance sheet that could drive strong earnings growth for them. All right. Ibrahim Poonawalla, B of A Securities, thank you very much for the big call on J.P. Morgan. Have a nice weekend, sir. Thanks for having me. Take it on, Nick. All right. Coming up next on the show, pandemic, darling, or just a fad? This stock was a big, big winner in 2020, but it's been feeling some serious pain on a year-to-date basis this year, down more than 40%. That's our mystery chart there.

But one money manager is making the bull case for this stock. It's in our two-minute drill coming up. And then coming up on Fast Money with Melissa Lee. Time to load up on those home builders. The chart master Carter Worth is laying out some of the strong foundations for the trade. See what I did there. Over time, we'll be right back. Welcome back.

Let's get to your rapid recap. Wall Street closing out a volatile week of trading in the red today. The Dow, the S&P 500 and Nasdaq each posting declines as you can see there for the overall week. The more defensive areas of the market outperforming this week with health care, consumer staples and utilities hitting new all-time highs. Transportation stocks, one of the biggest underperformers, having their worst week since June of 2020. Turning to today's action, the biggest S&P 500 winners include Occidental Petroleum, Dish Network and Halliburton. Among the day's biggest S&P 500 laggards were Enphase Energy, NVIDIA and Twitter. Well, coming up next on the overtime, we have a trade update.

Our next guest recommended this stock just two weeks ago. Since then, it's fallen more than 8%. We'll find out how he's playing it when overtime returns after this break all right welcome back to the ot let's get the results of our twitter poll for you folks out there most of you are seeing robin hood falling below the ten dollar mark by the end of 22 56 of you to be exact about 19% say it's near about 11 bucks, which is where it is right now. Above $20 is 24% of you. So that's your Twitter poll. Time now for your two-minute drill. Joining us now to close out the week is Eugene Profit of Profits Investments.

Eugene, before we get to your new picks, there is a bit of accountability that needs to be had here. We have a trade update. You recommended Moderna just over two weeks ago. In that time, Moderna has now moved down more than 8%. So how do you manage around that kind of a position? Or is 8% not enough to get you scared yet? No, Moderna is basically still a very strong company trading at about a 5 and 6 PE. If you want to sleep at night, you could always buy a put for insurance under here about either 155 or go above 165. It's up 24% on a one month basis and down 37% year to date. So it's been pretty volatile. But since the time I recommended it, Moderna actually came out and up their revenue guidance by 10% to $21 billion. So people think Moderna is going to do poorly because COVID vaccines are going down. But in fact, absolutely it's happening.

So I would definitely still be buying it here and then. All right. And maybe put a put option beneath it. Let's get your one of your other picks here. I like this pandemic play, but is it already done? Crocs. Why do you like it? Why do you not? Very similar story. I'm a relevant valuation system growth investor. OK, Crocs is trading at about a six P.E. But last year, revenue was up over 67 percent, 500 million in free cash flow.

The problem is that 80 percent of its revenue comes from the foam clog that it acquired at the end of last year. The market kind of thought that maybe management felt that they needed diversification and that the clog was going to go out of favor. But I think they just love it. And I think that this is a great way to buy a bus to grow stock at a cheap valuation. All right, Eugene Profit, have a nice weekend. Thank you very much for the two-minute drill. That does it for Overtime on this Friday.