Closing Bell - Closing Bell Overtime: Banks vs. the Fed, Apple's Smart Home Push, and Tesla's 2025 Outlook 12/24/24

Episode Date: December 24, 2024

HSBC's Jose Rasco and Interactive Brokers' Steve Sosnick talks the runup in stocks and where to place your bets in 2025. Fundstrat's Tom Lee on how much higher tech stocks and bitcoin can go. Former Saks CEO Steve Sadove analyzes holiday shopping trends and why consumers are shifting their preferences from experiences to items. Banking groups are suing the Fed over the banking stress tests; Eugene Scalia, one of the attorneys representing the plaintiffs suing the Fed, on the legal clash between banks and the Fed and Steve Westly discussing Tesla’s outlook amid potential policy shifts under Trump 2.0. Plus, our Steve Kovach details Apple's renewed efforts in the smart home market while Julia Boorstin explores Netflix's bet on NFL Christmas programming. 

All right, that's the end of regulation time. The Council of Autism Service Providers ringing the closing bell at the New York Stock Exchange, as you're seeing there. The Little St. Nick Foundation doing the honors at the NASDAQ market site as well. The market leaving a nice gift for bullish investors on this holiday short in trading day. The Dow extending its winning streak to a fourth straight day. The S&P 500 and NASDAQ higher for a third day in a row. That's the score caught on Wall Street so far today, but the action's just getting started here on the show.

Welcome to Closing Bell Overtime. I'm Dominic Chiu alongside Leslie Picker. John and Morgan, of course, are off for the holiday today, Leslie. Every sector in the green today led by consumer discretionary. Tesla driving that sector higher again. And coming up, former Tesla board member Steve

Wesley on the outlook for the EV maker under the incoming Trump administration. And Fundstrat's Tom Lee on whether today's market gains are the start of a year-end rally. All right, let's break down today's market action with a host of different voices on this. Jose Rasco of HSBC Private Banking and Wealth and Steve Sosnick of Interactive Brokers as well. If you take a look at the market so far today, this is nice. It's a feel good,

at least going to the holiday week, guys. And maybe, Jose, I'll start with you. Do you feel as though this is a rally that can carry on for the next few days into the new year in that so-called Santa Claus rally period? Yeah, yeah. Look, I think if you look, we got through a lot of noise in the last couple of weeks, everything from potential for government shutdowns, debt ceilings, et cetera. We've gotten

through a fair amount of that. I think now people are going to look ahead past the holiday season. Earnings begin pretty quickly as we turn the calendar page. So I think the market is going to start to look there. And no question, you could see some further downgrades in earnings expectations. But remember, for fourth quarter, we're looking for some pretty strong double-digit gains in earnings still. And going into 2025, according to Faxit, we're looking at 15% for earnings next year. And the most important piece, from my perspective, Dominic, is everybody talks about the broadening out of the market, is if you look at earnings gains for the MAG7 slowing, Q4 of this year from 24% to 18% fourth quarter of next year, whereas the forgotten 493 going from

4% to 14%, so more than triple, almost quadruple. So so we're pretty excited about the potential for a market broadening, even with slower Fed easing. Remember, in the 90s, the Fed funds rate averaged five point four percent and inflation went from one and a half to three and a half. So we think we're in a pretty good spot. I would venture to say anecdotally, based upon the number of folks that we talked to at CNBC, that it's become consensus that the fourth quarter and even beyond will be good for business, fundamentally speaking, in terms of earnings, revenues and everything else, maybe margins for these companies. The fundamentals are there, but we've seen a momentum shift at least a little bit to the downside since the election rally, post-election rally. Is that something to be worried about? Hi, Don. Yeah, I mean, you know, using the old adage, be a little bit fearful when others are greedy. I think right now this is a very greedy environment and there's nothing wrong with that. I'll, you know, I quoted Buffett, I'll quote Gordon Gekko, greed is good. But, you know, and particularly when you have a light volume period like now, the momentum is very much in command.

But looking forward into the, you know, into the coming year, you know, let's put aside what may happen over the coming days, which is probably just more momentum trading unless there's something to upend it. What Jose just mentioned are some very, very optimistic numbers priced into the market. So this is my issue here. When it's all priced in, you need something even better to surprise the market. This is already in the price. And so as you get into later in January, you have the inauguration on January 20th, which, by the way, is Martin Luther King Day, so we're closed. And then you have earnings season, you know, basically coming shortly thereafter on its heels. We're going to have to deal with the potential for tariffs,

the potential for immigration policy changes. And we also really need to listen very carefully to the guidance because any slip up in the optimistic numbers that Jose mentioned are already priced in. That can cause some trouble. So my feeling here is you you want you don't want to fight the tape, but you definitely want to consider insuring against some of the hiccups. Jose, do you agree with that notion that a lot of the good news is potentially already priced in? And if not, what do you see as the potential catalyst in 2025 that could drive that upside that you're predicting? Well, I totally agree with Steve. A lot has been priced in. But if you look at the expectations for earnings for next year, 15 percent from April to now, the Fed started easing. We got a sweep, a red sweep in the election. So that's all behind us.

And earnings are still 15% for next year. So I agree with him that some good news is priced in. I would argue not all of it. And you have to keep in mind, now the market just priced in the fact that the Fed's going to ease more slowly because they think inflation is going to be stronger. Next year, when you see that tech deflation really begin to hit, when you see with a strong dollar, you're going to see imported goods prices. And don't forget, China, the economy looks weak. So they're going to dump a lot of products here. Forget the tariffs. You're going to see the starting prices probably not go up. And with a strong dollar, it's going to be even more pernicious. So I think you're going to see some downtrend in inflation next year that I don't

think the Fed is anticipating. They have the inflation rate going from 2.1 to 2.5. That sounds a bit pessimistic from our perspective. And so I agree with Steve. We're doing some volatility, no question, and a lot of repricing and a lot of volatility next year. But we still think the potential is pretty strong. And remember, as my mother taught me when I was a child, you always pay more for quality. And so, therefore, multiples are not cheap. But look at the inflow of capital and clients, our clients at least, around the world. Number one overweight for them remains the U.S. well into 2025. That's good advice for those doing their last minute shopping, gift buying this season.

Jose and Steve, thank you both. Appreciate your time. Merry Christmas. Happy holidays. Today, bank industry groups filing a lawsuit against the Federal Reserve over the stress test process. These tests, they've been in place since right after the financial crisis

to see how the nation's largest banks perform in essentially a pretend economic shock. And then the regulators set each bank's capital requirements based on the results. Now, today's lawsuit takes aim not at the tests themselves, nor even the requirement that they hold additional capital as a buffer against future crises. This case focuses on the process itself. The lobbying groups say that each year when the Fed puts out its hypothetical economic scenario for the tests, they should open it up to public comment. Additionally, the bank group said the models that they apply,

the results of the test toward how much excess capital banks must hold, well, they're not publicly disclosed, but they should be, according to the industry. Now, the industry has become increasingly litigious against its regulators this year, suing them over new Community Reinvestment Act rules, plus a recent lawsuit against the CFPB over overdraft fee limit rules. And the industry had weighed taking them to court over a Zell probe as well as Basel III if it were to be enacted. But the Fed seems to be in agreement that more transparency is needed in this stress test process, putting out a notice just yesterday afternoon that it was considering major changes that would allow banks to comment on the models it uses. But the industry opted to stew anyway. So we'll get a better sense of why this is later

this hour with Gene Scalia, who co-heads the administrative law and regulatory practice at Gibson Dunn and is representing the plaintiffs in this important case. It's a big discussion we'll have later on the show. All right. So it's not the only thing banks and focus today. Shares of American Airlines are under pressure, although closing well off the lows of the day. This is all after the company temporarily grounded flights because of a technical glitch earlier this morning. And CNBC's Leslie Josephs joins us now to explain what exactly happened and the quick rebound that we saw from those technical glitches. Very lucky with the rebound. Busy travel day.

Very busy travel day, although not the busiest of the holiday period. So what happened was there was a piece of software. So airlines rely on a patchwork of software of varying ages. Sometimes they're decades old. And this one piece that provides data, I think weight and balance for an aircraft, failed. And when that happens, the planes cannot leave the gate. So what the airline did, ground stop, ask the FAA, holds the planes at origin. That means that the inbound airport is not overwhelmed with a bunch of airplanes and nowhere to park.

So American Airlines and their travelers were very lucky that this did not last a long time. This was about an hour. Because we hearken back to, you know, CrowdStrike, Microsoft, Delta Airlines. And that was the immediate thought. So I was here this morning for Squawk when that news broke. And I remember everybody said in our newsroom, oh, it's going to be like another software update again. But it wasn't, right? And this was something that was easily fixed.

And it wasn't minimally disruptive, right? Right. It was minimally disruptive. American Airlines is telling us that they don't even have any cancellations due to this issue. But this could very quickly have gotten much worse. When you get into three hours, four hours, and crews are timing out and they can't get to their planes, that's when you have an exponential effect. You see a lot more cancellations.

But they were lucky. Christmas miracle. And here we are. Yeah, but still, decades-old software. That seems like a gap there. Sometimes. Not throughout the entire airline, but still decades old software. That seems like sometimes a gap there. Sometimes not not throughout the entire airline, but there are some pieces that are old. Sounds like room for improvement. Yes. Another Leslie here today. Leslie Josephs, thank you for bringing this to us. Up next, Funstrat head of research, Tom Lee, on whether a year end rally is in the cards and where he sees Bitcoin heading in 2025. And then later on, former SAC CEO Steve Sadov on why experiences are no longer the hot holiday gift and what it means for all the retailers out there. Overtime is back in two minutes.

Keep it right here. All right, welcome back to Overtime. A few trends to watch in the markets as you head towards the end of the year into 2025. First of all is the market cap theme, right? The large caps have been real outperformers so far this year. 27% for the S&P 500, 13% for the mid-cap index, and the Russell 2000 small cap up about 11%. These two have been tracking relatively closely. This is the broadening out trade, but just in the last maybe few weeks or so, we've seen that large cap escalation of performance again. Will that continue in 2025? Another one is all of the so- called Trump trades, right? The ones that have kind of accelerated into the election and then

in the wake of it, keeping an eye on things like Bitcoin prices, the energy sector, which did have a nice rally, and then it's kind of selling off a little bit now. And then Tesla shares, which have been up 83% since the election. So whether or not that has momentum into the new year remains to be seen. We'll keep an eye on that dynamic. And then interest rates. The last one here. Will the bond vigilantes, so-called bond vigilantes, the people who put a verdict on the fiscal health of America, continue to push bond prices for our sovereign debt lower and then yields higher in the wake of what anticipated will be the policies of the new Trump administration. Remember, at one point, the iShares 20 year long term Treasury ETF tick is all on a full percentage point jump in interest rates

for the 10-year note yield between what we saw earlier this fall to what we see today. So keep it on those dynamics, Leslie. I'll send things over to you. It's remarkable as the Fed cuts rates to still see that pattern unfold given the state of the deficit and the bond vigilantes, as you mentioned. Now, the S&P tech sector closing at a record today and the Dow closed higher for the fourth straight day, its longest winning streak in nearly a month. Joining us now is Fundstrak Global Advisors head of research, Tom Lee. He is also a CNBC contributor. Happy holidays to you, Tom. Thank you for being here. I want to ask you about the animal spirits, because I was reading in the producer's notes that you believe they come back next year. What species of animals come back? And were they hibernating this year?

Because we saw some species out in full force in 2024. So I'm curious which ones you think will be in full force in 2025. What I'm thinking about with animal spirits, and it's a Milton Friedman reference, is the ISM has been below 50 for almost three years, meaning companies have been cautious. Their visibility hasn't been great. But finally, the Fed is cutting, and we have an incoming administration that's seen as very business friendly. And so I think companies, for the first time in a long time time are going to be expansionary, feel confident doing mergers. I think this is a very good

environment for small caps, mid caps, the financials and cyclicals broadly like industrial. So I think it's going to feel a lot like the market broadens in 2025, even as tech sort of keeps up with the market. Now, I know you are a quintessential optimist, Tom, but I'm curious, where do you see the biggest risks to that forecast for next year? Well, there's, you know, the big foil in 2025 is going to be whether or not there's a policy error and there can be two sources.

One would be if the incoming administration does implement tariffs that are damaging to the economy because we know that they'd be immediate effects or if there are mass deportations that have some unknown impact on labor markets. The other source would be if the Fed becomes too inflation focused and allows the labor market to weaken. And so we actually slip from the Fed sort of trying to support the economy to the labor market to weaken. And so we actually slipped from the Fed sort of trying to support the economy to the Fed trying to save it. I think that would be a very adverse development. Tom, one of the big themes that we just wanted to point out for viewers and listeners out there was this idea that cryptocurrencies will still be a focus, given the focus of the incoming Trump administration. We know that you're bullish on many aspects of crypto,

but I wonder if you might take us through where you see the best relative performance in that crypto landscape in 2025. Investors, you know, at our firm for the last eight and a half years, we have recommended an allocation to crypto, including Bitcoin or Bitcoin and Ethereum. That allocation probably should be much higher in

2025 because the regulatory landscape is actually becoming more friendly. So I think Bitcoin still has to be at the core of someone's holdings. And I see Bitcoin getting to around $250,000 next year. But that would allow Ethereum, which is around $3 thirty five hundred now to probably do even better. Your big Ethereum could get to five thousand or six thousand next year. And I think this is also probably the year where there's what we call alt season, where there's things like Solana and other alt coins do extremely well. Tom, if you feel as though and this is a gun, relatively speaking, that that Bitcoin is a commodity and that some of the companies that leverage those commodities could be in play as well, much like gold and gold miners. What types of companies are going to be the ones that benefit the most from that crypto expansion if it were to hypothetically happen? 2024 has given us insights. If we look at the best performing equities that are related to Bitcoin, what we would

call leveraged stories to Bitcoin, meaning that they're either acquiring Bitcoin as a treasury asset or they're leveraged to the price of very well. And that would be things like MicroStrategy, similar scientific and Coinbase. And there are other companies that are sort of doing what Michael Saylor would call the Bitcoin standard like Mara. But I'd say an investor's portfolio, if they're especially a large cap focus, a company like MicroStrategy, you know, gives you really good exposure to Bitcoin. Tom, I'm increasingly seeing advisors pointing out alternatives as a potential risk on play for 2025. And this comes against the

backdrop of a lot of alternatives managers looking to expand their distribution to retail, to high net worth. Do you think that is a good idea amid these animal spirits? And if so, what do you think is the appropriate allocation for something that is so illiquid in this current environment? Well, alternatives is a very large space as you know because that's referring to everything from real estate to private equity to private credit to venture capital um i think each of those is in various states of sort of their own valuation cycle you know it's been a very weak market for venture and private equity so i i actually think that those may be really benefiting from not only using Fed, but capital markets that is opening. Private credit has delivered some

solid returns, but as you know, it's actually very well funded. And that is probably going to help put a floor on things like commercial real estate. So, you know, I don't focus on alternatives markets that closely, but I don't think it's a source of risk yet because there isn't the kind of leverage that would normally create a contractionary risk if there was a shock in that market. All right. Tom Lee at Fundstrat Global. Thank you very much for joining us on this Christmas and Hanukkah Eve. Happy holidays, sir. We'll see you soon. Merry Christmas. All right. There's no place like home for Apple, which is making another attempt to run into that smart home market. Find out what's different this time around. That's

coming up straight ahead. And later, forward Tesla board member Steve Wesley on the potential risks and rewards facing the EV maker because of Elon Musk's alliance with President-elect Trump. Welcome back. Apple shares closing in a new high as its market cap closes in on $4 trillion. Meantime, the company is reportedly doubling down on its smart home efforts in the new year. Steve Kovach joins us now with the details. More Apple. More smart homes. And look, Leslie, like Apple is trying again here. This is nothing new. Apple has been failing to make a meaningful dent over the last six years or so since it really started dabbling around in this space. Today, Apple supports smart appliances, those are the stuff you go to Home Depot and buy, through its HomeKit platform.

But it's kind of a sideshow business right now, nothing like the iPhone or the services businesses. HomePod you have right now for voice controlling these things, and there's an iPhone and iPad app for controlling things on your personal devices. But reports now say Apple's going to take another crack at this space just as the smart home market is due to grow again next year. According to IDC, that's a research firm, back in September they said they're expecting 930 million smart home appliances to go on sale next or to be sold next year. More than 4 percent growth over what they're expecting this year. And Apple likely going to play a part of that, according to Bloomberg report. Starting with a smart home hub, which basically the way it's been described,

sounds like an iPad with fewer features and you stick it on your wall, lets you control all your smart appliances, maybe do some video conferencing, things like that. On top of that, Ming-Ching Kuo, he's an analyst over at TF International Securities. He said Apple is also working on a smart security camera that would compete with those from Google and Amazon's Ring brand, among many others. Bloomberg also reporting this weekend that Apple is working on a smart doorbell that would unlock your door automatically as you approach using the same facial recognition technology

used today to unlock your iPhone. Those latter two gadgets sound a lot further off than the hub I was talking about earlier. Still, this is not expected to be a big business for Apple. The iPhone sales are the most important thing here and still showing lackluster growth over the last couple of years. Services back to growth though and growing double digit percentage growth over the last couple years. Services back to growth, though, and growing double-digit percentage points over the last several quarters.

That brings us to one option Apple does have here, though. Low-margin hardware, but they could leverage more iCloud subscriptions by selling these products for storing security video, things like that, on top of those hardware sales, guys. So it's going to be interesting to see how they position this device if they do in fact announce it in March. Yeah, I like the application of not needing a key to get into your door, the facial technology. How does all the investment that they've made in AI play a role here? Because it seems like that could contribute potentially to some of the growth than some of the use cases here as well. You will not see Apple from this year on announce a product that does not have Apple intelligence.

I can just tell you that right now. Everything is going to be AI infused. Even if they wouldn't have once upon a time not called it AI, it's still going to be AI. So what does that actually look like on a stripped down device like this? I don't know. But we do know Apple has its own large language models. We do know it has partnerships with ChatGPT. It's opening up those partnerships to folks like Google and so on. So it's going to be interesting to see how that kind of integrates.

But more interesting than any of this AI stuff is, again, how do they position this? This is not a revolutionary, groundbreaking product. It's kind of low-hanging fruit. Dom, you're telling me you've seen these Google Hubs that they have for for their smart home, has a screen. It's kind of like a stripped down tablet, not a full computer. You know, that's not something Apple usually makes. They usually make something that, you know, does it all in one device. So it's going to be really interesting to say you need to buy this in addition to your iPad, in addition to your phone, in addition to everything else. Ecosystem effects, I think, are the goal. That's what they're going for.

And also the standard that they have. So all these devices can talk to each other, even if Apple doesn't make it and keep it secure. All right. Steve Kovac with the latest on Apple here. Happy holidays, sir. Merry Christmas. All right. Time for a CNBC News Update with Seema Modi. Good afternoon, Seema. Good afternoon, Adam. Former President Bill Clinton is out of the hospital after being treated for the flu. He was admitted to the MedStar Georgetown University Hospital in D.C. yesterday. Clinton's team said he was touched by the kind messages and well wishes he received. The Starbucks union strike is expanding to 300 stores across 45 states today.

More than 5,000 baristas are expected to walk out on the job. The strike began last Friday when talks between Starbucks and the union stalled with unresolved issues over wages, staffing and scheduling. According to the union, this is set to be the largest ever strike to hit the coffee giant. And the speculation over Christopher Nolan's next movie has come to an end. The two-time Oscar winner is set to adapt Homer's The Odyssey, the epic story that follows the journey home after the Trojan War. The all-star cast will include Matt Damon, Anne Hathaway, Zendaya, and Tom Holland. Release date set for July 2026. So a bit of a wait there, Dom and Leslie. All right, and it's a Nolan film, so it's going to be epic, I'm sure.

Anyway, thank you very much, Seema. We'll and it's Nolan. It's a Nolan film. So it's going to be epic, I'm sure. Anyway, thank you very much, Seymour. See you later on. Up next, former Saks CEO Steve Sadov on whether this is turning out to be a happy holiday season for retailers as consumers appear to be once again prioritizing gifts, things over experiences. Keep it right here. Welcome back. During the season of giving, the bank industry is reminding you to practice safe checks. I can't take credit for that one. It's actually a real campaign by the American Bankers Association. Dom is sitting here shaking his head. And that is because, Dom, serious issue here, checks are increasingly susceptible to fraud, even though their usage has actually plummeted in recent years. The number of suspicious activity reports filed by banks with the Treasury Department

related specifically to check fraud has skyrocketed in recent years. The number of instances has more than doubled in the aftermath of the pandemic. And the Treasury says the mail is particularly vulnerable to check interception, where criminals will steal envelopes from mailboxes and then alter the checks inside, deposit for their own benefit, or the thieves will use the checks they find to make more counterfeit checks. A recent government analysis of just a six-month period in 2023 found that mail theft-related check fraud was associated with nearly $700 million, which include both actual and attempted transaction. And of course, this can affect personal savings and business accounts,

as well as the financial institutions that often bear the cost of check fraud losses, Dom. All right. I'm just laughing because I think you can only get away with practice safe checks on cable as opposed to broadcast. You get the point. Anyway, speaking of spending and checks, the holiday shopping season may be coming to a close today, but investors will be waiting to unwrap which retailers will be on the naughty or nice list. Joining us now to discuss this is Steve Sadov.

He's the former CEO and chairman of Saks. He's also a senior advisor currently for MasterCard. He knows a thing or two about consumers and spending. Steve, thank you very much for being here on this Christmas and Hanukkah Eve. So let's start off with this. Is the American consumer in a good position to keep propelling this economy? I think so. It's clear that this holiday season they were out and shopping.

The final numbers aren't in the till yet, but it looks like it was a very good season. The forecast had been for about a 3% increase in sales. I think we're going to be hovering at or above that kind of a number. Overall, the consumer was shopping in-store and online, online performing better than in-store. And overall attitudes, confidence, the consumer was shopping across categories, both experiences and stuff. And I think that as we go into 2025, they have jobs. The wages are increasing. Overall confidence is really pretty healthy. There's a sense of optimism.

There are obviously clouds on the horizon. But I think going into the year, we have a relatively robust consumer. There are ebbs and flows. And since the pandemic, we've seen this kind of flowing towards experiences and ebbing and things. But from what we're seeing across many different data points and surveys is that the stuff trade is back again. People are going back to buy things as opposed to just experiences. Is that stuff that you're seeing right now? Does your data, does your insight back into that kind of conclusion as well, that buying stuff is back in vogue? Yeah, no question about it. I think what you had was a reversion to the mean.

Think about it. Early in the pandemic, you couldn't go out. So there was no experiences. People were buying things for their home. They were buying groceries. And you had a certain categories were the winners. You had a lot of categories that were experience related that were travel, getting out to sporting events, going out to eat. Those were losing. As you came out of the pandemic, you had a massive shift towards the experiences. And now what's happened is you're into a new cycle. You're getting renovations in electronics. You have a lot of innovation in other categories. So you're starting to see consumers back in to both goods as well as they're still going out. They want to go to restaurants.

Restaurants continue to do well. Food has done well over the period of time. A lot of it is, some of it has been inflation related. You now have an easing off on the rate of inflation, but there's a demand both for goods and experiences as we sit right now. As that pendulum swings back, Steve, how would you characterize the price elasticity? Because at least my online shopping, it seems like everything is discounted. Now, I don't know if it's discounted to the price that it actually should be, and it's just all psychological. But in terms of just the pricing power that retailers have right now, do you think they do have significant leverage in this environment?

Well, I think we're in an environment where value matters. If you look at who's winning and who's losing, the brands and retailers that are offering a value to the consumer have done extremely well. So while their consumer has a job, while they are getting their decent wage growth, overall, certainly at the lower end, the consumer is very stretched. And value is an operative word. That's why I see the off-price retailers doing extremely well. All of the chains that offer high value are doing very well. So I think that this question of price discounting is clearly there because the consumer needs it. And you're seeing it in the winners versus the losers. So I think, though, that the

level of discounting is controlled. If I were to compare the level of discounting this year to last year, I would say it's relatively in line. Inventories were in line. So as I would look at it, the margin expectations as we come through the fourth quarter are going to be relatively controlled and probably will be meeting the kind of expectations that analysts would have for margin. So I don't think discounting, while it is there and clearly evident, I don't think it's out of line and higher than you've seen, let's say, a year ago. All right. Steve Sadov on the state of the consumer. Thank you very much. Happy holidays, sir. We'll see you soon. See you soon. All right. Coming up next, former Tesla board member Steve Wesley on how president elect Donald Trump's tariff and foreign policy plans could impact Elon Musk and the EV maker and makers next year.

And later, what's at stake for Netflix tomorrow when its huge Christmas bet on the NFL kicks off? Over time, we'll be right back. Welcome back. Tesla stock, the top performer on the S&P 500 today, and it's up more than 80 percent since the election just six weeks ago. But will that run last? Let's bring in Steve Wesley, founder and managing partner of the Wesley Group and a Tesla board member. Steve, thank you so much for being here. How much of this excitement do you think will actually turn into upside for Tesla? And where do you see the catalysts that really play into this stock price movement in 2025? Well, look, 80 percent increase in share price just since the November election. That's nose bleeding territory. And the surge doesn't appear to be based on fundamentals or profits. So I think

2025 is really going to be a big year for Tesla, make or break. Here's what investors ought to be looking for. I think you're going to see auto sales. Last year, Tesla, 1.8 million units. I think this year it's going to be about the same. That's flat growth. That doesn't really justify this big uptick. The real question is, how quickly can Tesla get this subcompact, sub $30,000 Model Q into the market? I think that's going to be decisive. Steve, it's Tom. One of the big dynamics developing right now is not just in terms of Tesla's market position with other EV company competitors. It is also about Tesla, but for the U.S. auto and EV industry when it comes to competing with the likes of China? Yeah, so I think investors ought to be worried about that.

Here's the reality. The whole world is going electric. China is the world's largest auto market, almost twice the size of the U.S. They import virtually no cars to the U.S., so slacking tariffs on them doesn't really have a big impact. But if we do that and China responds in kind, that could be really a huge problem for U.S. automakers who need to sell cars into China. But the reality is the entire world is going electric. Seven of the 10 largest EV makers in the world are China based. The U.S. needs to up its game. And I think the U.S. would be wise to make it easier to sell cars in the U.S.

This is probably not the smartest time to take away that $7,500 rebate. And it certainly helps, of course, to have Musk in President-elect Trump's ear. But I'm curious if you're worried at all about a reputational issue or if there's an Icarus situation where Musk has kind of garnered all this power, but then somehow there's a souring or falling out of the relationship if things could work in an adverse way for Tesla. I'm concerned they happen. I mean, look, you've got two very strong personalities here. They seem to be best bros now. We'll see how long that continues. But I think the reality is, Mr. Trump said he did not like EVs up until literally a few months ago. Now he loves them. Could that change back? I think it absolutely could. But the reality is people are buying more EVs all the time. And

the reason is battery costs are going down. The U.S. needs to realize where the global auto market is going. We need to be encouraging not just Tesla, but General Motors and Ford to follow along. We need to sell more EVs in the U.S. as well as abroad. That's the way to win the auto wars. We'll see if that secular trend holds regardless of their relationship in 2025 and beyond. Steve Wesley, thank you very much. You bet. Thank you so much. Up next, former Labor Secretary Eugene Scalia, whose law firm is representing the Bank Policy Institute's new lawsuit against the Fed. He's going to discuss what's behind the challenge to the central bank's stress test.

Coming up. As we reported earlier this hour, bank industry groups filing a lawsuit today against the Federal Reserve over the stress test process. Let's bring in Gene Scalia, partner at Gibson Dunn and one of the attorneys representing the plaintiffs in this lawsuit. He is also former labor secretary under President Trump. Gene, thank you very much for being here on this important day. First of all, I just want to ask you, what is it that you're hoping to accomplish with this lawsuit? Well, Leslie, first, thank you. Good to be with you. And this lawsuit aims to improve the stress tests that are used annually to determine the capital that banks need to hold to maintain

their safety and soundness. My clients are not opposed to stress tests. They support stress tests. They conduct their own stress tests internally. What they are very concerned about is both the process by which stress tests are developed and applied by the Fed right now, and also the results, which are random, arbitrary, and ultimately bad for the U.S. economy as a whole because they're forcing banks, we think, to hold a lot more capital than is warranted. And so what we'd like to see is a new rulemaking process where the tests are vetted, where the public can see the stress tests, comment on the models that are used,

and we can be more confident in the program that we have going forward. But the Fed came out just yesterday and said that they were open to making the process more transparent. So why file a lawsuit? Why not go into negotiations with the Fed and kind of fix the process as you see fit from there? It seems like you're on the same page. I think it is good news that it's widely recognized that the current process does need to be improved. You know, ordinarily, when the federal government makes rules, it, of course, has to tell the public what the rules and standards are so you know what you're being judged by. And also, you know, in rulemakings, you've got an obligation to let the public know what

you propose. The public then comes back, gives feedback, suggests improvement, and those get incorporated into the final rule. You may recall when the Fed and other bank regulators proposed new Basel capital rules a little more than a year ago, there was a lot of public comment which said, wow, you know, those models are unrealistic. They're too onerous. They can be improved. So it's good news that the Fed sees some of these problems, at least with the process. My clients intend to work cooperatively with the Fed to bring those changes about. At the same time, we were running up against a statute of limitations. My clients have been asking for years to see reforms in this system. Haven't happened. And so the limitations period runs in February of next year.

And they concluded that in order to preserve their legal rights while they participate in this new process, the chair announced that it was it was time to go into court and bring this case. Gene, it's Dom. I wonder I'd like to tap your unique insight here. You were a member of the cabinet for the Trump 1.0 administration. And I wonder, because the bank stocks have seen a remarkable run this year, largely due in part to the fact that there's a regulatory, at least relief trade happening. As you look and forecast for what the bank industry will look like in Trump 2.0, do you feel as though a more loose regulatory regime will be in play and will it ultimately help the banking industry? I think what we're hoping for is, first of all, my clients want bank safety and soundness.

They want stress tests. We all want that. That's best for our economy. But, Dom, you're right. There has been too much regulation in the last four years. I think many feel that way. And the point is, it doesn't just impose costs on the banks. By the way, potentially tens of billions of dollars to a single bank

in random variations in the stress test from year to year. But it's not just burdens on them. It's burdens on the entire economy. It's burdens on the people who depend on bank loans, who depend on bank intermediation. So the hope is that we'll have a more transparent process, a more rational process. And with those things, a process that's less burdensome, not just on banks, but on our economy. One of the things we've also heard, Gene, about the idea of regulation is that it adversely impacts on a more relative basis, small and medium sized lenders, as opposed to the large money center banks like JPMorgan Chase, Bank of America and Citigroup. If we do see a regulatory regime in the next four years that moves more along the lines of what you're envisioning, what exactly can smaller and community type banks expect to see with regard to their competitive position versus a JPMorgan Chase or a Citi? Well, one of the striking things about

the current stress test regime is there's widespread concern with it across the industry. And again, my clients applaud the Fed for coming forward with its own recognition yesterday, and its representation will be making changes. I think you're right, Dom, that overregulation can at times have particularly onerous impacts on smaller entities. In this case, for example, small businesses are among those who suffer most from a banking system that's got less capital that it's able to loan out more than it has to hold. So I think that overregulation sometimes does hit smaller entities hardest because they've got less of a buffer. But again, this is one that's hitting

the entire banking sector in a way that's affecting American business broadly. All right. Gene Scalia, thank you very much for the time on this Christmas and Hanukkah Eve. Have a happy holiday, sir. Thank you. Merry Christmas. All right. Coming up next on the show, what's at stake for Netflix as it gets ready to stream two NFL games tomorrow and the potential fallout for the rest of the entire media business. And Netflix, a top performer in the S&P 500 today. Key Bank hiking its price target on that stock to one thousand from seven hundred and eighty five, citing optimism over its live events streaming. Welcome back to Overtime. Netflix investors will have a huge gift under the Christmas tree tomorrow

when the company live streams not one, but two NFL games. Julia Borson has the details. And Julia, full disclosure, I will watch both of them if my family lets me. You and millions of other people, Tom. Now, one reason Netflix shares are up more than 90% in the past year is the strategy we see in the streamer paying $150 million for two Christmas Day NFL games. Now, investors are bullish on Netflix's ad-supported tier, and sports drive valuable real-time viewership for advertisers. Oppenheimer estimates Netflix

is generating $150 million in ad revenue for the two games, plus it has subscriber acquisition opportunities. And for the NFL, Netflix offers new global reach ahead of its expansion from five international games this year to a record eight next year, and is considering as many as 16 international games. Here's what the NFL's chief business officer told us about Netflix's international appeal. The reach is global and you'll see global franchises like Squid Games and other programming that has really worked across the planet. That has given us the opportunity for the first time to think of one partner and think globally at the same time. As for technical glitches in last month's Mike Tyson, Jake Paul fight, sources

tell us the NFL commissioner is confident in Netflix's capabilities for tomorrow and that he is in very close touch with the Netflix co-CEO Ted Sarandos to make sure it all goes off without a hitch. Julia, I remember a day, and this was actually at the Dealbook conference back in 2015, so almost a decade ago, where Reed Hastings said they would never do live evening newscasts and they would never do live sporting events. And I'm just curious, what about the current environment really changed the game? No pun intended. He said no live sporting events and also no live advertising. He said also no advertising. So nothing live and no advertising. And I think that those two things, the decision to move into ads goes hand in hand with the decision to do live sports. And what I think

is so interesting is Netflix has really owned a strategic shift. They say the world is changing around it. And Netflix has really grown into this sort of everything streaming app. They don't want to just be your place for sort of sitcoms and documentaries and movies. They want you to be able to get everything there, including some sports content. And that includes some live sports because, of course, they have all those sports documentaries. So this is a decisive shift away from their strategy a decade ago. And they're owning it. And it all has to do with this ad business. All right, Julia Borson, happy holidays. We'll see you soon. Thank you, Julia. That does it for overtime.