Closing Bell - Closing Bell Overtime: Big Win for the Bulls? 2/3/23

Episode Date: February 3, 2023

After a big week for the markets – the question remains: did the bulls get the leg up they were looking for? John Mowrey of NFJ Group gives his take. Plus, big tech shareholder George Seay weighs in on the state of the sector after a parade of earnings. And, market expert Mike Santoli’s Last Word as we head into a fresh week of trade.

All right, Sarah, thank you very much. Welcome, everybody, to Overtime. I'm Scott Wapner. You just heard the bells. We're just getting started from right here, post-9, at the New York Stock Exchange. Coming up, we are going to have a look back at one of our most memorable moments, the brawl that started it all, Icahn versus Ackman, can you believe, 10 years later? I spoke with Mr. Icahn today. I'll tell you what he told me about that shocking day a decade ago. That's coming up in just a bit. We do begin, though, with our talk of the tape. The state of the rally with the biggest week of this early year now in the books. Did the Bulls get a leg up? The one they were looking for? Let's ask John Mowry.

He's NFJ Group's chief investment officer with me here at Post 9. You are one of the Bulls. I am a Bull. Did you get a leg up this week? This is what we expected. There were a handful of things that were really culminating in the rally that we've seen. At the end of last year,

you had the highest cash balances on mutual funds on record. You had the most people calling for a recession since 20, okay, and then since 2011. You had commercial hedgers the most short, equity futures going back to 20, 2011, Operation Twist, as well as 09. So sentiment was washed out. You were playing the contrarian card.

Well, nobody wanted these equities, and everyone was just dumping them. And we very much believe that everything should be dictated by your next best alternative. Defense costs a lot, and it was costing a lot last year. The same way that buying hurricane insurance after the hurricane hit doesn't make a lot of sense. So we didn't really believe that the valuations in the defensive areas warranted positioning. So it was an easy decision for us to move into areas that looked very attractive, Scott. Isn't it too early to declare victory just yet? I mean, earnings are still not great. I think we've got some oak trees growing here. So if you

think about homebuilders, those bottomed six months ago now. I mean, Pulte is beating the S&P by 20%. A lot of people I know are pointing out what's happening in the homebuilders. So these are signs, you know, you can't always see it below the surface, but once you see these things start popping up, they become more apparent. So when we look at cyclicals, we think that there is a real turn that is occurring. And it's not just home builders, it's industrials, it's healthcare technology, it's industrials, semi-stocks, all these areas, Scott, were completely washed out. Nobody wanted them. The same thing with emerging markets. Well, we'll get there in a second. Do you think that Powell was friendly to you this week or was he misunderstood by the

markets? I think that Powell is doing a good job given where he is. And I think that, again, it's less important at this stage because inflation is rolling over. They've already raised rates significantly. Maybe we get to five. But the reality is, if you look at what happened in 94, Scott, that was the beginning of a rate-hiking cycle. We got the Fed funds at 6.5, and the market ripped from 95 to the end of 99. So you're telling me it doesn't matter if they raise again in March and then they go again after that, it doesn't matter? I think the market's telling you it doesn't matter. Well, the market doesn't think they're going to do it. But I had Richard Fisher, former Dallas Fed president, today on Halftime Report says the market's wrong.

And the market continues to tell, or the Fed continues to tell the market that it's wrong. Well, again, I would pivot back to the 1980s. And you saw a very similar scenario. Inflation was high. The Fed jacked up the short-term rates. The yield curve was deeply inverted. And then in the subsequent two years after 1980, the market was up 50%.

Over the next 10 years, it was up 400. So it's not that I think that they're wrong. It's just that I think the market already sees through this. I mean, 10 years at 3.5, everyone was panicked that they weren't going to be able to refinance debt, REITs, all these other companies. 3.5 is easy to refinance. The market's saying that there's going to be a cut. You really think there's going to be a cut this year?

I actually don't know if the market's saying there'll be a cut. Does it matter? Well, does it matter to your thesis if there is? No. Does there have to be? No, it does not matter. And the reason is, is because the valuations were at such rock bottom levels. You have Stanley Black and Decker Scott with yields over where they were in March of 09. You had significant dislocations that occurred. I mean, think about, I'll use a real estate analogy. Imagine if everyone on your block said, hey, rates are going to go up. That's going to take the cost of capital up. So let's all sell our house at the exact same time. That would create a massive dislocation,

but we don't have a Dow Jones industrial average of home prices. Okay. When you inject liquidity into the system, that creates panic. And I think that people conflate liquidity and risk. And the reality is the fundamentals of many of these companies had not deteriorated to the degree that people were selling them. So where are we going from here, then? Higher. How much higher? Well, you can't annualize this month and extrapolate that. That's impossible. But the markets are cruel. They could pause, they could shed a little bit, and then consolidate and move higher. So we have a long way to go with a lot of cyclicals. They were blasted, Scott. You had these things down 50, 60 percent. Some of them were garbage. Some of them didn't earn money. The reality is you shouldn't chase defensives and you shouldn't chase the hot dots that didn't earn any money.

But you think the run this year thus far is justified? It's absolutely. It's been pretty far, pretty fast. Well, it was pretty far. It does. I mean, we have three negative quarters in a row. That's rare. Last year, we had three negative quarters in a row. The second quarter was really bad. The fourth quarter was up. Why couldn't we have three positive quarters in a row? We know why it's rare, because it's rare also that inflation hits a 40-year high, and the Fed has to do what it did. That's rare. It is rare, but that created the massive dislocation. Everyone ran to one side of the boat, and they overpaid for insurance, and now they're all being punished. I mean, today, for example, utilities are off hard. Why are utilities off and the market's down? Why is energy off?

Why are staples off? All these things are lagging because they were priced for perfection. But, okay, so let's discuss that, okay? The leaders of last year are lagging. Yes. The laggers of last year are leading. Yes. Now, you're telling me that what you've seen in technology makes perfect sense to you or no?

I do think what we're seeing in technology makes perfect sense to you or no? I do think what we're seeing in technology makes perfect sense. Not every tech stock, but in general, semis in particular. You saved yourself there because I was going to come right back at you about the speculative tech and the highly shorted tech and all this stuff that's been running that people are trying to get behind now and say, yeah, this is the start of the next cycle for those stocks. Chasing junk is not a wise idea. And chasing defense is also not a wise idea. You want high quality cyclicals in this market. They have

extreme dislocations relative to defensives. And again, if you look back historically, when these dislocations occur, it creates opportunity. We have a saying at NFJ that you want dislocation in the valuations, but not dislocations in the fundamentals. And we saw this over and over again. Revisions were coming off, Scott. But the reality is they needed to come off because companies were over-earning coming off the COVID bump. That makes sense. You needed to see revisions come down.

And then humans think in a very linear fashion. What happened yesterday will happen tomorrow. And everyone extrapolated that they're just going to go lower and lower. You like mega cap tech here? Some mega cap tech is attractive, yes. What is some? Well, not all. I mean, we're active managers, so we don't think the whole basket is attractive. But Facebook is a company that we took a position in last year.

That's been a very attractive. I mean, that was down to 13 times earnings. I mean, the buyback that they announced, the reason that was so positive relative to Chevron's, OK, and Exxon is because. It was like $70 billion versus $40 billion, right? Well, correct, but you have price to book multiples at the highest level in 15 years for those versus Facebook was at the trough multiple. So that is a very wise decision that Zuckerberg did by saying we're going to buy back stock

when it's very attractive. Buying back stock when the prices are extremely elevated doesn't make quite as much sense, in my opinion. All right, let's bring in Jordan Jackson now of JPMorgan Asset Management. Emily Rowland is with us, too, of John Hancock Investment Management. It's great to have you both with us. Emily, what did we learn this week? Super Bowl of economic data this week. Really exciting. And it's pretty amazing to think about the fact that these big earnings misses from some of the world's largest companies weren't even actually the biggest story of the week. This market has been completely driven by the macroeconomic

elements this week, of course, the Fed meeting, the jobs report. It feels like we're in economic purgatory right now. We had this incredibly hot jobs report this week that suggests that we're nowhere near a recession. But meanwhile, the leading economic data is suggesting that recession's imminent. The leading economic indicators at negative 6%. We had the ISM index of new orders coming in at a very depressed 42. The yield curve now inverted to the tune of 77 basis points. So this makes the Fed's job tough. The Fed's got this hot jobs report that's going to limit its ability to slow the pace of hikes. Meanwhile, the leading indicator suggesting recessions imminent is also going to be challenging them. So I think now the path to this soft landing scenario that markets are pricing in is becoming increasingly narrow by the day.

OK, so completely different perspective than we literally just heard from the man to my left, John Barry. Economic purgatory. That's what she said. Well, you know, economic data lags. I mean, if you look at what, I mean, for example, I was to ask you, what was the GDP print in the fourth quarter or the first quarter of 2009? Negative eight and a half. That's a very bad print. That was a great time to step in and buy equity.

So I think if you're just looking at the economic data to roll and tell you when to buy, it's not going to be helpful. I mean, think about again, I'll pivot back to the home builders, rates at 7%. That's pretty bad. And they're up tremendously. They're up 50% since then. So the macro data is what provides the opportunity, in my opinion. Jordan, did we justify the rally this week in some fashion, or did we call it into question as we finish here on this friday you know i think we may have uh jumped the horse jumped the jump the gun a little bit uh on the markets look it's still too close of a call on whether the economy is actually going to dip into a recession or not obviously the labor market data continues to be quite strong and you

know i think this means the fed needs to be a little bit more cautious, right? They've hiked a lot of rates over the course of 2022. We've yet to see the cumulative effects of how that's going to impact the broader economy. You know, obviously, again, labor markets are strong. Inflation is showing signs of rolling over. Now, maybe the wage numbers seem to be a little bit firmer than I think that the Fed would like. We've continued to see sort of wage growth looking at the employment cost index, looking at the private production non-supervisory workers continue to run at around 4 to 5 percent. Small and medium-sized businesses continue to clamor for work,

while larger companies are sort of laying off workers. And so this is a very, very tricky economy that the Fed is trying to navigate. And I think if they feel that they can hike rates to, say, hike through May and maybe even into June now with this very, very strong employment report, that's going to have a cumulative effect into 2024 in terms of slowing down the economy. So I think it's just a really, really tough call in conducting monetary policy. And I think from an investment perspective, you've got to strike a bit of balance both across stocks and bonds, but also across cyclicals and defensives. All right, Mari, why don't you put in the cart before the horse here, right? You've heard caution

from Jordan, caution from Emily. It's not time to declare victory yet. All clear in the markets going higher, yet you offer just a completely different perspective on where we are, the job that still lies ahead for the Fed, and what ultimately the impact is going to be on the economy, which, let's be honest, we don't know. This is the most hated rally I can remember in my career. In 2009, when the market took off, that was a relief because the financial system didn't fail.

So everyone was happy about that. The reason that everyone is negative on this rally is because they weren't positioned for it. So everyone's hating on it. They don't like it. They're saying that defensives are going to be the place we're going to go back to. They're pointing at Deacon. I heard Fisher today. I'm a Dallas guy.

He's a Dallas guy. You know, we have those. So he says don't fight the Fed. I would say don't fight valuations. Valuations should shape investor expectations. Yeah, but if you have a recession, valuations are going to come in more. You think we're justified valuations where we are now if there's a recession? Well, I don't know if we're going to have a recession.

Well, that doesn't answer the question, though. If we do, do valuations make sense where they are? Yes. They do now? They do. The cyclicals, price-to-book levels, Scott, are washed out. I mean, if you look at what's going on with Silicon Valley Bank shares, that's a company that was trading at the lowest price-to-book multiple in a decade.

Why? Everyone's worried about people pulling deposits to put them in short-term treasury pills. Everyone's worried about the recession. That's going to be bad for reserves. That's going to be bad for, you know, charge-offs. And they were being swept up in the crypto craze. Maybe they had exposure there. These things were completely blasted. So I would argue that when the discount is there,

you have cushion. You have cushion in the market. The same thing, I'm going to go back to China again. Who would have thought that China would be up 50% in six months? No one predicted that. It was being called uninvestable. It was going to be delisted. There's warplanes flying over Taiwan. They have a lockdown. They take back Hong Kong too soon. They go after tech. They go after education. Jack Ma flees to Japan with his chef. I mean, it's bad, right? All these things are terrible. Great time to step in and buy the emerging markets. If you bought the emerging markets, Scott, in October of 2001, you were still beating the S&P 500 by 100 basis points per year. That's amazing.

So, Emily, what about that idea? Because John's not the only one talking about international markets or emerging markets doing better than the U.S. this year. Whether it's Jeffrey Gundlach, who I had on this program yesterday, who's been calling for that trade as the dollar was going to peak out and start to weaken. Jeremy Siegel, right? Noted bull. Always bullish. U.S. stocks is what they say. Even he thinks there's great opportunity in the emerging markets and internationally. What do you think? Yeah, by the way, it's not very much fun being a less optimistic panelist on here. So please make sure you have me back once the cycle turns and we are starting to add to risk in portfolios. But when I look at the international markets, to us, it's really been based on two key macro developments.

We've had China reopening. I don't know how many times China can reopen, but markets continue to rally on it. And we've had better weather out of Europe that's mitigated this full-blown energy crisis there. And I think that resulted in a lot of short covering that turned into a rally that was driven by technical strategies, macro-driven strategies, scooping it up, and then sentiment continuing to drive it into this year. And there's a technical element to the rally as well as in terms of investors rotating into parts of the market that underperformed in the last year. Look, all of our leading indicators are flashing global recession to us. There's never been a period that the U.S. has had a recession where the rest of the world hasn't been in it. We can't in our gut own more cyclical assets in the face of a recession that's going to be driven by something that investors are really underestimating, which is the lagged impact of these changes in monetary policy. So

we want to own higher quality assets, more defensive assets. I believe value is right. I do agree that you don't want to be chasing the junkier pockets of the market right now. But I just, again, owning European banks in a global recession is just not where we want to be. What do you say to that? Because I saw you shaking your head no. Well, I think you've got to be choosy. I think you've got to be choosy. So the European banking sector never recapitalized post-2008. There's leverage still in the system in excess of where Burr Stearns was when it failed. So I think European banking is a challenging area, but there are many bright pockets over there. ASML, Taiwan Semi. I mean, Warren Buffett bought Taiwan Semi. Is he crazy? Took a huge stake there. Doesn't he know that you shouldn't be buying emerging markets?

I still think the overarching view of people who are more cautious, like either of our other guests, is that the jury is still very much out on whether there's going to be a recession or not. Yield curve is still massively inverted. That's still a problem. It's just way too soon to declare that this economy is going to have any kind of soft landing just yet. It's just way, way too early. Labor market's too strong. Layoffs are just starting. Maybe it's a business-led downturn rather than consumer for all the reasons that we've discussed. And how do you respond to that? You have to do the least comfortable thing to have the most positive outcome. You really do. If you're waiting for someone to send you a postcard in the mail and say, hey, now it's time to buy stocks, it's not going to happen. It's already

happening. It's already happening. China, I mean, it's up 50. It's up 50. I mean, that is an enormous return. Cypticals are already up big, Scott. So it's already happening. I think that there was a lot of resistance because everyone was positioned on the other side of the boat. I mean, imagine driving down the highway and there's all these signs that say, hey, caution ahead. There's a wreck and everyone starts exiting to the right-hand lane. Well, that alleviates the problem. It's going to be able to go quicker in the left-hand lane. So this is a classic scenario where investors were 100% right that we did have issues because rates were going to be higher and that's going to knock valuations down. But they've over discounted. They've over discounted. The trashy stocks need to be dumped.

All right, Jordan, I'm going to give you the last word. Well, look, I think within border portfolios, it's still striking a bit of balance. The reality is if you look at valuations, relative valuations, historically international stocks traded at about a 15 percent discount relative to the U.S. You're now able to get a roughly 30 percent discount. And I would also acknowledge, taking the other end of that story, not that you don't fight the Fed. You don't fight central banks. The ECB is still hiking. The Bank of England is still hiking. And their economies are still going to be under a bit of pressure. It remains to be seen. You're seeing a lot of stimulus come out of China to try to revitalize their economy.

But you've still got fairly weak consumer confidence. You have still a weak housing sector. And so there's a big question mark on just how strong that impulse is going to be in terms of a broader China recovery, also helping to support a broader European recovery as well. And so I think you sort of paint the picture here. I do think interest rate differentials, generally speaking, are going to continue to support a downward trending dollar over the course of this year. I think that creates a bit of opportunity in emerging markets. I think a Fed that's still not out of the wood yet also does continue to create a bit of a headwind for U.S. stocks.

And so all this boils down to buy bonds, right, buy a little bit of duration at this stage, right? If inflation continues to come down, the economy comes under a little bit of pressure, at best slowing growth, at worst outright recession, you know, bonds are going to be that insurance. And if the Fed stays pat, you're able to get income at the front end of the curve. And so, look, I think it's again, we're all there's a lot of differing points of view. And I think if investors stay the point and remain a bit balanced across portfolios with a little bit of everything and remain broadly diversified, they'll probably weather the storm a little bit better over the course of this year. All right. You guys brought it on this Friday. I so much appreciate that. Jordan, we'll see you soon. Emily, you as well. And John Murray up from Dallas to sit at the desk.

We like that. Thanks for coming up. Thank you, Scott. All right. That's John Murray. And FJ again joining us right here. Let's get to our Twitter question of the day. We want to know, was this week a turning point for tech bulls? You can head to at CNBC overtime to vote. We're going to share those results a little later in our. We are just getting started, though, here on this Friday in overtime. Up next, your big tech playbook with all of the mega cap earnings now officially behind us. Where is the tech trade heading from here? We get a shareholder strategy coming up next, plus some late breaking headlines just crossing on Twitter.

New reports that the social media site is planning to charge all companies a monthly fee to stay verified. You won't believe how much they're talking about either. The full details when Overtime returns. All right, we're back in Overtime. The Nasdaq ripping higher this week on the back of those big tech earnings. Take a look at the moves from Meta and Apple, Alphabet and Amazon since Monday. There they go. Amazon is the biggest question mark, perhaps, after those earnings numbers.

Stock only up 1% on the week. It does beg the question, does the rally have more room to run? Let's ask George C. of Annandale Capital back with us today. So how do you feel, George, after all of these reports are now on the table? Well, Scott, as we all saw today, and happy Friday to you, they were very mixed. And some of them were better than expected, and meta was euphoric. And then you've got Amazon as kind of a disastrous one here today. So it's a real mixed bag.

There's a lot of headwinds to tech stocks, whether it's multiples, whether it's the Fed still on the alert, whether it's the economy still softening despite the employment report today. But the market wants to rip higher right now. And the fact it didn't go down very much today after two incredibly strong days back to back was very impressive. You know, Mehta especially, right? I thought maybe we, you know, we expected to give back after that huge run and it just really didn't happen. But you going in thought that this rally had gotten a little bit ahead of itself, right? I mean, that's fair to say, isn't it? I still feel that way. I think the market's going to chop a lot this year, and I think everybody should just enjoy these tremendous gains we've had in the

last few weeks and first month of the year, as long as they last. But I think they're going to get back at some point. There's just too many headwinds. Did you sell anything? Did you take any profits on the Metapop, for example? I was begging my team to sell some Meta and to write some call options against it, but we didn't do that. We wrote some calls on some other stocks, and I've still got about a half of my gross stock. I'm going to put it on at a lot lower prices. I mean, that's the interesting thing in which you told me before when we spoke about this move in tech to start the year, is whether you are going to get that chance to buy things lower.

And if so, if you're going to get the chance to buy them as low as you'd like. Those are two different questions. Do you think you will? I think you'll definitely get a chance to buy lower. Buy as low as I'd like. I'm pretty picky and pretty stingy, so they may not go down as far as I want or as far as some of the Uber bears in the market. They're going down another 20 to 30 percent wall, but I'm going to be disciplined in here because I still remember watching Microsoft flatline between 2000 and 2017 a 17-year period with a whole lot

of volatility in the interim. And I don't think we're going to do that again, but I think we could have a multi-year workout period where we've got a lot of chop for two, three, four years. I think you can afford to be disciplined and wait for your price points. Which one are you looking at more than any other to perhaps add to? Because you really have a full slate, whether it's Alphabet or Meta, Amazon, Apple, Qualcomm, Microsoft. I mean, you're really spread across the board here. I'm pretty well positioned in Qualcomm and Apple. I think Apple's a lifetime hold. I really don't ever sell the stock. I do write some calls, but I'm really focused on Amazon and Google right now. I think that I love weakness in great companies and they're both acting pretty

weak, especially Amazon right now. So I need lower prices, but I want to add to both of those significantly over the next year or two. I hear you. Hey, George, you have a good weekend. We'll see you soon. All right. That's George C. Annandale Capital. All right. Joining us once again in overtime. Up next, the fate of the rally. Goldman's Tony Pasquarello breaks down where he sees stocks heading next following this big week for your money. OT is right back. It's time for a CNBC News update now with Bertha Coombs. Hi, Bertha. Hi, Scott. Here's what's happening at this hour. Secretary of State Antony Blinken telling his Chinese counterpart that he canceled his trip to China because of the spy balloon currently floating over the central U.S. Blinken calls it an irresponsible act by China and a violation of U.S. sovereignty and international law.

Sightings of the balloon have now been flooding in from the Midwest over Kansas and Missouri. Jury deliberations have begun in the case over Elon Musk's tweets about secured financing for a Tesla buyout back in 2018. Moments ago, Musk was seen leaving the courthouse in San Francisco. A suit claims Musk drove up the price with misleading Twitter comments. Musk's lawyers say he was just sharing information with small shareholders that bigger investors already had. Ukrainian President Zelensky says negotiations for his country to join the European Union could start this year. However, there was no mention of fast-track talks during a summit with EU leaders in Kiev today. The EU did promise another round of sanctions against Russia, the 10th so far on February 24th, the first anniversary of the invasion of Ukraine.

Scott, back over to you. OK. All right, Bertha, thank you. Good weekend to you, Bertha Coombs. All right. The rally is intact. That is the message today from Goldman's Tony Pasquarello following a big week of earnings data and, of course, the Fed meeting and decision. Tony runs Goldman Sachs' global hedge fund client coverage and joins me here at post nine it's good to see you welcome back thanks scott it's intact i mean does that mean it's we're good it's going higher from here and if so how much uh a lot of big cards came down this week for sure for sure uh both macro and micro i wouldn't say uniformly in one direction per se but i think on net i think the positive,

the sensation is positive, I think affirmational of the trends we were on. We turned over some aces, not too many jokers this week. I think that's right. Keep your analogy going. I think that's right. I think in the end, it's still a story of last year at most turns you walked in the office and you confronted a Fed. The inconvenient truth was the Fed was tightening in to slow down.

I think today it's a much less intimidating macro backdrop. Why do I say that? Inflation's down six months in a row. The Fed, we think, is in the kind of the final innings, the fine-tuning of this tightening campaign. The U.S. avoided a recession. Europe's avoided a recession. China's fulsomely reopened. So again, I think the fundamental backdrop is friendlier. I think that's probably in the price. I don't think that's breaking news. And we're going to pack that a little bit. Well, I mean, that's the great debate. It's in the price of maybe the bond market.

It's not necessarily in the price of, you know, Powell and company in the room. So who wins out and why? So if I look at the market rounding up to a 19 multiple, which is in the 80th percentile of historical valuation. If I look at the compression in volatility, particularly long-day volatility, the tightening in credit spreads, our ratio of cyclicals versus defensives, I think the market has taken a fair amount of credit for the good news that we know. That's why I think my instinct is back at the dead midpoint of the range from last year, I actually think risk-reward is really

pretty balanced. It's not obvious to me we need to make a big move higher or lower from here. Well, because it was pretty out of balance last year, right? Risk-reward was incredibly low. You talked to, you know, most of the hedge fund, you know, heavyweights, so to speak, that I speak to were all pretty negative on where we were last year. Are you sensing a turn from them now? Voting with their feet a little bit. So yesterday, for example, was the biggest one-day short covering we've seen in eight years. Record day for volume in the options market with a very heavy skew towards the call side of the equation. So I do think faster money, both in the U.S. and elsewhere, have added some length for sure. What do you make of the way that the market has run this year and what's carried it?

What's lagged? Does that make sense to you that the big winner last year, for example, energy is not a winner thus far, technology? We've talked about this so much, but it's so pertinent to this conversation. I think the good news in general is if you look at equal weighted S&P, it's outperformed S&P 500, which I think is a marker of market breadth. And that's a good more stocks that participate in the rally. If I go a level deeper and this is picked up in our momentum basket, you've had this horrific movement in the momentum factor. What does that mean? It basically means last year's losers have been the strongest performers this year. we've seen that in high short interest names. We've seen that in popular retail stocks. We've seen that in nonprofit tech companies. This is 30 or 40 percent type rallies.

And then against that, you've had all the defensive parts of the markets trade down on their health care utilities and staples. So I think that's very painful. Those correlation shifts are very painful for stock operators. But I think on net, a win is a win. What is the best mix right now, do you think, of equities versus credit? How's that supposed to look? Because when I spoke with Gundlach yesterday, was it yesterday? Two days ago, post-Fed, this whole week's crazy. It was like 40-60, 40 equities, 60 bonds.

Does that make sense to you? I don't know if I'd pick a big fight with it. I think one of the features of the past couple months has been a lot of enthusiasm for what I would call carry. And that can take a bunch of different forms. One of those expressions has been buying short-dated, high-grade U.S. bonds, high-grade IG. That's fine. Mortgages, buying emerging markets, selling volatility, these are all kind of manifestations of carry. I think that's fine. I'm not so sure there's that much risk premium at this level of credit spread in the corporate bond market relative to equities, but I think a little bit of both in the horse race is fine. Now, I don't know if you had a chance to

listen to our conversation at the top of the show. I have a feeling you did, because when you sat down, you said, man, Maori was bullish. But what about this idea of how bullish people are getting on international stocks versus the U.S.? This is going to be a debate, I feel like, for weeks and weeks now. I typically carry a homegrown bias towards the U.S. that luckily was the right place to be really post-GFC. So it's been a very long story. It was particularly acute 2020, 2021, and 2022. I think a lot of investors said, you know what? I'm going to keep the capital here.

Again, that was the right judgment. Well, risk-reward obviously would lead you to do that. Exactly correct. Now, again, I think with the Folsom China reopening, people looking at the fact we have taken the recession dealt off the table for now in Europe, money's definitely looking for a new home. Take China, for example.

If you look at our prime brokerage data, again, always a pretty good teller of truth about what people are doing. Sure. January was the single largest month of buying we've seen on record, and actually the waiting, the relative waiting on record. One month. Hedge funds, fast movers. I would say strategic money, probably a little bit more thoughtful and slow moving.

But I do think people are, day by day, brick by brick, sliding a few more chips outside the U.S. Oh, interesting. Thanks for coming back. I appreciate it. We'll see you soon. Thanks for having me. Yeah, Tony Pasquarello, again, of Goldman Sachs. Up next, we're firing up the CNBC time machine.

The war of words between two hedge fund heavyweights is heating up with Carl Icahn bashing Bill Ackman over his short position in Herbalife. It's been 10 years, believe it or not, I can't, since that day, the big billionaire battle between legendary investors Bill Ackman and Carl Icahn. I did speak to Mr. Icahn today about that very day. I'll tell you what he told me some 10 years later. Overtime's right back. Well, hard to believe it was 10 years ago last week that Bill Ackman and Carl Icahn brawled live on CNBC over Herbalife. Ackman, of course, short the stock. He called it a pyramid scheme and that it was heading to zero. Icahn took the other side, then took issue with Ackman himself.

Here's how it unfolded that January day as I was hosting halftime from right here at the New York Stock Exchange. The war of words between two hedge fund heavyweights is heating up with Carl Icahn bashing Bill Ackman over his short position in Herbalife. Ackman, he does pump and dump. He's got one of the worst reputations on Wall Street. And I'm going to tell you, this Herbalife is a classic example of what he does. And I'm telling you, he's like the crybaby in the schoolyard.

Carl Icahn thought, you know what, this guy's roadkill on the hedge fund highway. I'm never going to have to worry about this kid again. He's not going to even have the resources to sue me. This is not an honest guy, and this is not a guy who keeps his word, and this is a guy who takes advantage of little people. But I wouldn't have an investment with Ackman

if you paid me to do it, if Ackman paid me to do it. He's not used to someone standing up to him. I told Carl, after the whole thing, he called me up, and he literally said,

you know, Bill, we can be friends now. And I simply said to him, I said, look, Carl, you are no friend of mine, and that was it. I never said that I want to be friends with you, Bill.

I wouldn't be friends with you. And I went, you said to me, you i want to be friends with with you bill i wouldn't be okay and i went you said to me you'd you'd like to be friends so that we could invest together i have no interest do you think i want to invest with you okay let's move on with you all right joining us now is kenneth squire he's the founder and president of 13D Monitor and a CNBC contributor. Welcome. Thanks for having me. I can't. Can you believe it's been 10 years? I mean, I can't. I still remember, as that all was taking place, the delay that the sound was on for the trading booths behind us here, where it was the ooze and the ahs a couple of seconds after all of this was taking place. And I spoke with Carl, as I said today on

the phone. I said, you know, what do you have to say about this 10 years later? He said, and I quote, Ackman never realized, and this is really interesting, Ackman never realized that he was right about Herbalife for the wrong reasons. And in this game, that can cost you a great deal of money. What do you make of that statement? Well, you know, Bill, Bill, in an ESG world, it ended up being an amazing ESG investment for him. He lost money on it, but he really believed that that it was a pyramid scheme. And he and he really felt for the people that were the victims of it. And the FTC ended up levying the biggest fine ever at that point, 200 million dollars that went directly to the victims, in their words, of Herbalife.

And I just think that Bill never thought that the stock wouldn't go down with that type of news. I mean, he still maintains that it's a pyramid scheme. He tweeted a thread on the 27th of January, so just a few days ago. He says, quote, After we covered, I learned that the FTC had commissioned a study by an economics professor in which he had concluded that Herbalife was a pyramid scheme based on an analysis of distributor quit rates. The study has never seen the light of day. Twitter, please find it. You know, obviously, Bill had a couple of really tough years right around this time, and then he recovered fairly well. But this episode really changed,

I think, how he operates in the future. There's no more single stock shorts. And certainly, I think the industry itself isn't as public as it used to be about just what they're doing in general. No, I agree. I think he's not, like you say, he's not doing the single stock public shorts, but he's also being a quieter activist. And he's becoming more, you know, cordial and constructive and just trying to be a helping voice for boards. I feel like in many ways this episode marked like peak activism. At that point, it was almost every other day that there was an icon or a singer or a Jeff Smith or a lobe or whoever pelts all, you know, circling the wagons around these these various companies. Where are we today?

Well, I think activism actually peaked a little bit later than that before Valiant. But today we're coming back. And, you know, in the last four or five years, it was a lot of growth stocks and it wasn't a great time for activists. But things are changing now. And I think we see a lot of a lot of activism on the horizon. Is it because of how dislocated the markets were? There are companies that are now ripe for activist activity. Well, certainly when the markets are down and the gap between price and value gets gets increased, there's a lot more opportunities for activists. So that's definitely one of it. Also, you know, also, it's a lot easier to spot bad management and flatten down markets and easy to get support of other shareholders. What's amazing to me, too, is we talk about sort of the evolution, I guess, of Ackman and how he does things now.

Carl's going to have a birthday in a couple weeks, right? As he gets up in age, he does not slow down. He's incredible. He's a real outlier. You know, activism, as you know, is an incredibly time-consuming strategy. Most activists can do three or four at a time. Right now, Carl and his team are on the board of 13 companies that they have an activist investment in, which is just incredible. Starboard, who's an amazing, prolific activist, has five. And you hear, I mean, Starboard's in the news, you know, these days with Salesforce, as is Elliott.

And I guess you're just going to continue to see more of that. And nobody follows it closer than you, which is why we wanted you here for this. Well, thanks for having me. I appreciate it. That's Ken Squire joining us, 13D Monitor. We do have a news alert on RH. Pippa Stevens has that for us. Hey, Pipps.

Hey, Scott. We'll take a look at shares of RH moving lower after the company said it is restating figures after misinterpreting guidance in a prior filing. Specifically, the company said revenue is going to be at the lower end of its prior guidance. RH said it will restate results for the last three quarters. Again, that stock down about three and a half percent. Scott. All right. Keep our eyes there, Pippa. Thank you. That's Pippa Stevens coming up. Late breaking headlines crossing on Twitter that you need to know about the big money.

The social media company is reportedly planning to charge brands to stay verified. Those details coming up next. Very interesting new headlines crossing on Twitter. The information reporting a short time ago that the social media company is considering charging brands $1,000 a month to keep their gold verification badge. Let's bring in platformers Casey Newton. He is also a CNBC contributor, one of the first people we call when there's a headline that, you know, makes us go, wow, what was your reaction when you heard this report from the information?

Well, look, I think it's fair to say that Elon's spaghetti against the wall phase of running Twitter has begun. The company just had to make their first big debt payment, and it's clear they need a lot more money. So I suspect this is only the first of many wild and wacky monetization schemes to come. Why do you suggest it's, in your words, spaghetti against the wall and an act of desperation? Well, look, when this company rolled out verification to average users for $8 a pop, it was a disaster, led to widespread impersonation of brands. They lost maybe even the majority of their biggest advertisers. And since then, they haven't really been able to prove that there's much value even in that $8 a month badge. So the idea that lots of corporations are going to step up and pay

$1,000 a month for a gold badge, just kind of beggars belief. Should they be charged something? And if so, what makes sense to you? I mean, you know, you could say whatever you want about Musk, but he has no choice in essence to throw things against the wall and hope that they stick, like many have done over the history of time who were, you know, entrepreneurs looking for crafty ways to make money. That's right. And look, there's no doubt that there is some set of features that power users would pay for. You know, for years, folks talked about maybe we should charge people to use TweetDeck, which is kind of this souped up client for power

users. So I do think that there is some set of features there, but it's notable to me that here Elon is beginning essentially with a price tag and then is saying like, well, we'll build the rest of the features later, right? They're going for quick fixes instead of being really thoughtful about what their users want. When do we get someone who's actually going to run this business, do you think? If we ever do, right? The assumption is that we will, but maybe we won't. You know, I'm really not sure that we are going to get there. I think as the weeks go on, we are seeing the platform just to show lots of little signs

of breaking here and there. I'm now regularly getting messages from people telling me that some aspect or another of the service isn't working, continues to be very expensive. And I don't think that they're seeing a big bounce back in their ad revenue. So, you know, I hate to say it, but I'm beginning to think more and more that bankruptcy is the most likely option here, you know, at some point in the next year or two. Wow. All right. We'll follow it. Casey, thanks for popping on with us. We appreciate that. Casey Newton, of course, platformer, editor and CNBC contributor. Still ahead, Santoli's last word of the week. We'll find out what he is watching as we do head into a new trading week. Overtime is back right after this. All right. To the results of our Twitter question, we asked,

was this a turning week, a turning point this week for tech bulls? The majority of you saying no. It was close. Fifty one. Forty eight. Interesting, though. Mike Santoli here for his last word. Ten years later, we'll get to the market before we get out of it. Ten years later. Honestly, I can't believe it. I mean, in speaking to Carl today and having him reminisce about it. And, you know, I ended up writing a book about it. Sure. The whole thing was just bananas to me that it was that long ago. That long ago. And there's kind of a reason it actually hasn't been replicated.

It's not like, oh, that started off a lot of the, you know, it was sort of a lightning in the bottle moment. Also, though, what does come up is that was a time when you did have these vociferous disagreements about prominent individual stock situations, right, where you had activists on one side felt like stocks were too cheap, management too lazy. And that was the kind of almost a golden 50 page research report. We're going to let it say say what it's going to say, as opposed to personalities clashing over, you know, bad faith and motivations and whether somebody's any good at what they do. I mean, the you know, the meme stock mania sort of, you know, put maybe the final nail in the public activist short thing. Absolutely. Or at least it really pointed up just the risks of being identified with anything. And by the way, this is not totally in the past either. We were talking last hour, you've been talking today about the Ryan Cohen Nordstrom thing. Well, it's no accident that there's 23% short interest in Nordstrom. Here's a guy who knows that his name appearing in the shareholder list of a company that's a crowded short. It's going to get jacked on day one, whatever happens after

that. So that's one of the stories of this day. What's the story of this week going to be as we head into this weekend? First of all, I think it's I think you have the bears who are now in the position of having to stretch for the rationale for why they're staying bearish, as opposed to the benefit of the doubt being with them for many months. I say that mostly because of the technical indications, the refusal to go down on some bad news, and just this idea that we've cleared a few of the big hurdles. So one of the stories of the week, I do think, when it comes to the tech question from the poll, is has the storyline changed, at least company by company there?

You know, they went up as a category, FANG and FANG Plus and unprofitable tech. They crashed kind of in unison. And now I think it's a lot more about which managements do we believe? Can they really switch the narrative over to we're helping ourselves and we can get profitability back? And that would help the indexes, but I don't think that that's going to be the only story for this market to work. You actually have to have the cyclical piece of it work. I go back to remembering what you said about a turn in how the Fed was discussing things. It became a two-sided conversation.

Yeah, that was a couple months ago. That was months ago, okay? And that is like almost a rolling effect. And it shows up in the poll about tech. A couple months back, it's a one sided conversation. Now it's close. It is. And it's it happens when you get to that point in the cycle where it's like, you know, OK, we took the pain. We did what we had to do. If you're, you know, the Fed on policy and now it's about really what's priced in. I mean,

I think that you're pricing in a pretty good odds of a soft landing right now. So that's different, too. I agree with Tony Pasquarello about that in terms of it not being a fat pitch in one direction or the other. Bears are bullish right now. Got some more, you know, interesting earnings next week. Disney and some others, too, that we need to keep our eye on. You have a great weekend. All right.

That's Mike Santoli. All of you have a great weekend as well. We'll see you on the other side. Fast Mondays now.