Closing Bell - Closing Bell Overtime: Blue Origin’s Historic Flight, Oil Prices & Rate Cuts 1/10/25

Episode Date: January 10, 2025

That bell marks the end of regulation for the week. Three-edge asset management ringing the closing bell at the New York Stock Exchange. MindBody doing the honors at the NASDAQ and hot jobs number. Surging inflation expectations. Sending yields higher. Stocks tumbling to end the week. That's the scorecard on Wall Street, but winners stay late. Welcome to Closing Bell Overtime.

I'm John Fort with Morgan Brennan. We have a great lineup to help you navigate the sell-off and the impact on your money, including Mohamed El-Aryan from Allianz, David Zervos from Jefferies, Bob Elliott from Unlimited, Apollo's Torsten Slock, and Richard Bernstein from Richard Bernstein Advisors. Let's get straight to the market. The major averages all finishing sharply lower for the day and the week. Bond yields surging higher. Joining us now is Jefferies' chief market strategist and CNBC contributor, David Servos,

and Unlimited CEO, Bob Elliott. Guys, happy Friday. Bob, you say the big money, some people call it the smart money, hedge fund manager conviction in the stock market near historic lows. How does that get reflected in the stock action on a day like today when we got these two significant signals? Well, I think the biggest thing that money managers are seeing is that the rise in interest rates that is reflecting the strong growth of the past is undermining the strong growth to continue in the future. And that's happening at a time

when you see expectations of growth in the U.S. economy about as strong as they've been in many years. And so this economy is doing pretty well, all things considered, but not so well that it could face 100 basis point market base tightening and continue to thrive as much as it has the last few years. And that's really, when you look at that set of conditions, we're teeing up for 25 likely being a pretty big disappointment. Huh. OK, well, David Zervos, you're still bullish risk assets in this environment because you think rates are still headed lower. Why? Well, I don't think I'm alone in that. I think Governor Waller was talking about that this past week and we've been writing about it. I think a number of people still have that trajectory. Certainly,

the Fed has that trajectory. This was a strong number, John. There's no question about it. And when we get a strong number about the economy, even when there's not an inflation story to it, because the wage side was actually quite contained, and you get a 2% move down, I think something else is afoot. And what I would argue is that the market is struggling a little bit with this idea that the Fed is possibly going to make a mistake and stay a little bit too restrictive. And the data are going to come in strong. But really, what's baked in with all of the rate hikes that we've had, the balance sheet contracting, is that policy is going to get restrictive and

they're going to get a little bit behind here and stay too restrictive for too long. I think that's why you got the curve to invert a lot today. I think the two-year note was up 11 basis points, the long bond barely moved. That's not a sign that there's inflation expectations. That's not a sign that people are worried about Fed credibility. That's a sign that they're kind of going to stick around at high rates for a little too long and maybe make something a little bit more negative for the economy happen. I think that's what the market's getting a little bit jittery about. And also the politics matter there, Morgan. Okay. I want to get your thoughts on how you would be positioning in this market right now, given the fact that I do hear the caution from you. And I guess just

as importantly, would you say that the bond vigilantes are back in this market? Well, I think naturally what happens is that rise in yields creating the prospective economic slowdown then necessarily creates the bid in bonds. And we've seen this a few times over the last couple of years. You get to rates that are a little bit above 450. Stocks start to sag a little bit. Rates go a little bit higher. You get towards $5. And, you know, that's basically where the bid is. And odds are we're going to continue to see that. And given the significant strength that's priced into the stock market, right now this is a time to favor bonds relative to stocks.

And today may be, you know, the first of many days along that dimension. David, do you want to get your thoughts? Because I know you're basically making the argument that at some point you're going to see yields come down and maybe come down meaningfully. So you see this as a buying opportunity here? And if so, what would you be buying? I mean, it depends a little bit on your horizon, as always, Morgan. But, you know, we use the bond market as a hedge to the stock market, right? We talk about our risk parity trades. We like having a levered position in the fixed income markets in case something goes wrong with our equity risk asset trade. That's really the story. And is it an outright bond trade? I'm not advocating

that. I certainly think we could trade north of 5%. There's no issue with that. But I don't think that's where we're going to be over the medium to long run. I think the story that happened today, and I'll reiterate this from the previous comments, is that the market is getting nervous that the Fed is going to stay at too restrictive a level for too long. There's politics involved in that. And the data, when it's stronger, means that they kind of have an excuse to do so, even if the forward parts of the data look like they might be weakening. So I think it's not a big move, but I think it's important to note today the 30-year bond

yield didn't really move that much. That's not a sign that people are losing faith in the U.S. government bond market. They're buying 30s over two-year notes. They're slamming the front end. That's changing rate expectations. That's changing the narrative on Fed cuts. And that's getting the market nervous that the Fed might be mistaken down the road at staying at these rate levels, these high rate levels for too long, much like they did in 2018 when Jay Powell and Donald Trump were having a little bit of an argument about what the right rate level was. We were just talking about 2018 with you last week. Here we are again.

I think we were. I keep bringing it up. It was not a fun time. And I think we got a little messy because of it. But I don't think we're going back there, by the way. I don't want to be that pessimistic. I certainly don't. But I think there could be a little fight. Yeah. Gold. How does it help you, particularly in the type of market action we're seeing now? Well, I think, you know, gold has taken a bit of a breather in the last couple of months. But if you look at it on a global currency basis, it's actually pushing back towards new highs. And what I think that reflects is the fact that on a global basis, these economies are in need of easier monetary policy, whether it's China, whether it's Europe, even the U.S. You know, we had a decent jobs report number today, but hikes from

here certainly doesn't line up with the overall shape of the economy. And I think what we're seeing in gold is global asset managers sniffing that out, continuing to see gold as an attractive asset in a monetary easing environment. And so I think it's a nice pairing with bonds relative to stocks right now. You take that gold bond relative to stock position, and I think you're going to do pretty well for the next couple weeks. Okay. We're going to leave the conversation there. Gentlemen, Bob Elliott, David Zervos, thanks for kicking off the hour with us

with all the major averages finishing down more than 1 percent. The rest are actually finishing down 2.2 percent and lower on the week for the second week in a row for the major averages. Let's turn now to Mike Santoli with some perspective on today's jobs report and the market reaction. Mike. Yeah, Morgan, no doubt a definite upside surprise to the headline jobs print, but it was not wholly alien to the market and the issues that it's been contending with as the discussion you guys were just having suggests. And we are at very familiar levels.

The S&P 500 did not break new ground lower in terms of its trading range since the November election. In fact, it's kind of sitting right on that level in the October highs. It spent the majority of days this month trading at least a little bit in that range that was traveled on the day after the election, November 6th. So it's kind of fascinating. Keeps testing and testing and testing. Now, whether that means ultimately this level

gives way and there has to be maybe a test of those mid-year levels in 5600, whatever the technicians might think about that. I do think it's interesting that we keep fighting it out in here. Now, part of the story is that interest rate sensitive cyclical parts of the economy have already taken a lot of this medicine and have already reset lower. So the yield move today was not really incrementally that dramatic. And it's already been priced in to things like home builders. This is a community bank. So it's even smaller than regional banks. That's an ETF that covers that.

And, of course, the Russell 2000 looks a whole lot like regional banks. So bad underperformance in the last month, six weeks or so from those groups that already have been bracing for perhaps a better economy, sticky inflation, a less generous Fed and therefore higher yields. I do think it's interesting at this juncture because buyers probably, as Bob was saying, probably should be coming into the bond market right around these levels. You know, corporate credit's giving you close to 6 percent for high grade. It's not so bad, especially as an insurance against a potential downturn. Finally, just as an expectation setting exercise, it makes sense to look at the third year of a bull market historically.

That's the blue line. This is all of the cyclical bull markets we've had since World War Two that have been plotted. That's the average path. So great gains through two years as we had in the two years going through October of this past year. And then it kind of flattens out, becomes more choppy. So two things here. One, maybe don't get your immediate sights up in terms of how much more upside can be piled on to what we've already gotten in the near term. But two, just because we get some choppiness and some corrective action and maybe we go sideways and it's frustrating, it doesn't mean the bull market's over because most of the bull markets did have a little bit more left in them after this point. Mike, this is always your superpower is adding historical context on days like today where you have the Dow closing down almost 700 points.

It's definitely a sloppy day for stocks. Bespoke talked about it. You just touched on it. The fact that we've now erased, the S&P is basically flat now, has erased the gains post-election day. The last three elections saw gains of 4 percent or higher between election day and inauguration day. That's what Bespoke tells us today. How atypical is this moment in the cycle, especially when you take it into the context of seasonality?

Well, it's interesting. I mean, obviously, that piece of it in very recent terms is atypical. What is very common, though, is and, you know, take this for what you will, but very common if there is a an incumbent party loses that that transition period that entered starting the new year of the first term has been unusually weak. And if you think about it, it makes some sense because the level of uncertainty about policy might be pretty high. Probably there was some reason that the incumbent party lost and maybe things are a little bit in doubt. Who knows what the reasons are? But that aspect of it isn't so strange.

And I guess you'd have to say there's over a week until until the inauguration. So who knows exactly what it's going to look like at that point? Yeah, a lot could happen for sure. Mike Santoli, see you in a bit. When we come back, much more on today's sell-off and what it means for the Fed's rate path. Apollos Torsten-Slock gives us his take. And later, Mohamed El-Aryan joins us with his thoughts on the hot jobs number soaring inflation expectations and what it all means for your portfolio. We have a packed show ahead for you. Overtime is back in two. Welcome back.

Prospects of another Fed rate cut may have dimmed for investors after this morning's jobs report and after the latest read on inflation expectations. But Chicago Fed President Austin Goolsbee still sees lower rates on the horizon. Here's what he said earlier on CNBC. If conditions are stable and we don't have an uptick in the inflation rate and we keep having them come in around 2% with stable and full employment, I think that the rates should go down to what I consider to be neutral. And so 12 to 18 months from now, they will be a fair bit lower than they are today. The thing that will explain, justify the speed at which we do that are going to be what happens

to conditions. Well, joining us now is Torsten Slott, chief economist at Apollo Global Management. Torsten, it's great to have you here on a Jobs Friday where we got a very hot labor report. We got strong numbers, particularly in the inflation piece of the University of Michigan's Consumer Sentiment report as well. We know Goolsbee tends to lean a little more dovish and certainly got the Waller comments earlier this week that were a little bit more dovish. But then we've also gotten Bowman, who I know leans a little more hawkish, but as well as Schmidt, basically saying that, you know, we're at neutral and near neutral. We might be done cutting. Ben Emmons talked about this today as as a lame duck position for the Fed. How do you see it? Well, you're right, Morgan.

And I think the two data points we got today, namely a strong employment report and inflation expectations jumping up from three% to 3.3%, this was not a good day for the Fed because both these numbers are saying that the risks are indeed rising now that the Fed may have to hike again. Because the backdrop with a dual mandate for the Fed is, of course, that we should have full employment and we should have inflation at 2%. And on both fronts, employment was stronger than expected.

It was stronger than full employment in terms of the headline number that came in and their unemployment rate coming down. And on inflation moving higher on the expectation side, it's also pointing towards that we're starting to drift away from the dual mandate with the risk again that rate hikes might be coming. When you look at the jobs report today, how much of this is seasonality and just noise that we tend to see at the beginning of the year? At what point does this become a trend? Well, this is also an important debate, Morgan, because normally the discussion in the dual mandate has been that it's a seasonality, it's all about inflation. There's a very significant debate about residual seasonality

and inflation because remember, of course, as we all know, the pandemic started in March of 2020. That means in Q1 of 2020, the data got really heavily distorted. And it is still the case, and I know it may sound a little bit funny, but it's still the case here five years later that the seasonal adjustment method can remember that there was such a big distortion in the data in the first quarter of 2020. And that distortion last year pushed up inflation in the first quarter. And the worry today is that we may also have some residual seasonality pushing inflation up. So that's why we're now also having a debate

about the labor market may be also having some seasonal issues that can create better data. It does begin to look more like, well, maybe we should just take the data at face value that maybe the economy is just strong and doing better. Torsten, with the benefit of hindsight now, how expensive is that 50 basis point cut for the Fed? Well, this is really important, John, because if you think about it, it is really unusual. The Fed since September the 18th has been, of course, cutting interest rates

100 basis points. But in the meantime, we now have that been, of course, cutting interest rates 100 basis points. But in the meantime, we now have that 10-year rates are up more than 100 basis points. It is highly unusual that when the Fed cuts rates, that loan rates begin to go up. And that's, of course, why, as we enter 2025, the discussion is around exactly as you just also debated on the previous segment, why are rates going up? And what's particularly worrying about this is that the 60-40 portfolio has taken a really big hit over the last few weeks, including today, when, of course, rates are going up and stocks are going down. And this brings back memories and worries about what happened in 2022, where the 60-40 portfolio really underperformed in an environment just like we've seen today, where the Fed is at risk of beginning to hike

rates again. And at the same time, stocks are going down. So after these cuts, the Fed's not going to want to turn around and hike again. What would force their hand and what impact do you see on equities? Well, I do think that next week we get the CPI print. That turns out to be very important because now we know that the labor market is stronger and we actually also know from inflation expectations that that's also stronger so now when we get cpi next week we should be watching very carefully are there signs that cpi is still sticky that is not coming down to the fed's two percent inflation target and the fear that we have is indeed that there might be some upside risk and this is even before we have started talking about the implications of tariffs, implications of restrictions on immigration,

even implications also of lowering corporate taxes to 15 percent, as Trump has been talking about. So the fact that inflation is still sticky at a level higher than the Fed's 2 percent target, we're currently roughly at around three and now potentially some policies in the pipeline and a strong economy in the pipeline that does increase the risk that we could begin to see some upward drift in inflation as we go through the coming months. Torsten Slag. Thank you. Is it time for you to say I told you so? Maybe. I don't know. Have a great weekend. When we come back, Mohamed El-Erian breaks down how the latest jobs print, inflation expectations and the surge in bond yields is informing his thinking on the market. And later, advisor Richard Bernstein on why today's action may mark an inflection point

that could set the tone for this new year. Welcome back to Overtime. Stocks closing sharply lower after a hotter than expected December jobs report and a jump in inflation expectations. Ten-year yield surging to its highest level since late 2023. Let's bring in Allianz chief economic advisor Mohamed El-Erian. Mohamed, good to see you. So you combine those inflation expectations with the hot jobs report. What has to happen for this to be good, say, for an S&P that's already trading at a historically high multiple? So first, it is good that the economy is doing well, John. We must not lose sight of the fact

that U.S. economic exceptionalism provides the only locomotive of growth for the global economy. So as disrupted as markets may be, because this was a hot employment report, the alternative of a weak one would be much worse news for not just the US but around the world. In terms of what it means for investors, investors are going to be increasingly pushed into a barbell, looking for high quality yield over here and being more opportunistic over here and more agile, including going to private markets. I think that what you're seeing is this transition from market-based investing to theme-based investing. And now it's going to be much more individual names. Okay. Well, now also that we have this jobs report behind us, attention is going to turn to earnings.

But we've got the strong dollar. So for multinationals in particular, how's that going to affect guidance? Yeah. And we also have an inflation report coming up next week, as you discussed earlier. Look, analysts right now have to take seriously that the dollar index is almost at 110. The euro is almost at parity. the euro is almost at parity, and that is going to impact multinationals. And they should take that into account, and it's going to be a headwind to U.S. denominated earnings from abroad.

And that's just the reality of U.S. outperforming the rest of the world. Mohamed, I'm going to ask you a question I asked Bob Elliott earlier, and that is, are the bond vigilantes back in this market? And by the way, not just here in the world. Mohamed, I'm going to ask you a question I asked Bob Elliott earlier, and that is, are the bond vigilantes back in this market? And by the way, not just here in the U.S., but globally, especially when we look at what's been happening in the U.K., for example. They're definitely back globally. And what you see in the U.K. is that very strange combination of them having had higher increases in yields than us, and yet that currency has weakened

significantly. That combination of high yields and weak currency, you typically see more in an emerging economy where bond vigilantes are much more active. So yes, they are back. I think what we are having here, Morgan, is not as much the bar vigilante, as much the reality of three things. One is growth is stronger than anticipated. Two is inflation is stickier than anticipated. And three, we have the reality of high deficit and high debt. I want to get your thoughts on this quiet climb we've seen in crude oil in recent weeks.

Energy stocks are actually the best performing sector to start this year after being the worst performing in the S&P last year. But oil in general has been moving higher, maybe part of its sanctions, but is it sustainable? Yeah, I mean, you got a 3% move today. You've had a 10% move over the last few weeks. This is significant and it adds to the inflationary pressures. The one today is purely in terms of sanctions on Russia that the market believes will be much firmer this time around than they've been in the past. So you're looking at a supply-side issue, and the big question is whether OPEC Plus will, OPEC in particular,

because the plus side is Russia, but OPEC and Saudi Arabia in particular will want to increase production. But this is all supply side. It is not a demand issue. It's a supply issue. A lot of cross currents for investors to navigate right now. Mohamed El-Aryan, thanks for joining us. Thank you. Throw earnings into the mix starting next week. It's time now for a CNBC News Update with Deirdre Bosa. Hi, Dee. Hey, Morgan.

Amazon is just the latest company to roll back some of its diversity and inclusion programs. Amazon's announcement follows a similar move by Meta earlier today and joins a wave of companies reversing plans for DEI programs such as Walmart, John Deere, and Ford. Meanwhile, a majority of the U.S. intelligence community found no evidence that foreign powers were to blame for the mysterious Havana syndrome incidents reported by some government employees. But in a new assessment released today, two intelligence agencies, which were not identified, said it was possible a foreign

power could have developed or even used a weapon to cause the incidents that first appeared in Cuba in 2016. And more than 150,000 doctors have signed a letter urging senators not to confirm Robert F. Kennedy Jr. as President-elect Trump's Secretary for Health and Human Services. That's in a letter posted online. The doctors said Kennedy's well-documented promotion of false medical claims made him dangerous for the position. Back over to you guys. Deidre, thanks. Up next, Walgreens bucking the downtrend in a big way, surging on the back of strong earnings. Is it indicative of a bigger comeback for healthcare stocks? We'll discuss next. You could call it healthy gains and a major test for Jeff Bezos and Blue Origin is coming as he takes on Elon Musk's SpaceX with a key rocket

launch this weekend. We're going to tell you what's at stake when Overtime comes right back. Welcome back to Overtime. Stocks closing sharply lower today, but Walgreens surging nearly 30 percent. It was the best stock in the S&P after beating earnings estimates. Is it a one off or a sign of a comeback for health care names? Let's ask Mike Santoli. Mike. Yeah, John, a huge day coming after a horrible year. So this chart of one year return in Walgreens, Boots Alliance, as well as Moderna shows two of the most beaten down stocks in all of the S&P 500 over the course of 2024. Both of them showing tentative signs of life.

Maybe there's some different fundamental reasons, whether it's avian flu or whether it's, in fact, maybe results have bottomed at WBA. It does raise the question of do we have one of these typical January trades underway where looking for laggards pays off. Now, in years past, there was a traditional strategy that was oversimplified, but known as the dogs of the Dow, which is you would take the 10 or 5, depending, highest dividend yielding stocks in the Dow Jones Industrial Average, buy them in January, and essentially bet that those beaten down levels, beaten down stocks would come back by the forces of pendulum swinging and mean reversion. Well, there actually is a ETF that sort of encapsulates that strategy. S-Dog over there actually goes across sectors, buys the highest yielding stocks in each, weights them equally.

And again, bets on a comeback trade. You see over the last two years really has not worked. Buying value, buying anti-momentum names has not really paid off very well. It's lagged both the equal weighted S&P as well as the market cap weighted one. But, you know, sometimes characters of the market changes and you can see if if that helps. Now, by the way, Walgreens no longer a member of the Dow. But if it were, it absolutely would be one of those dogs. Its dividend yield is above 8 percent right now. OK, Mike Santoli, thank you. A decade in the making.

Jeff Bezos long awaited orbital rocket is poised to make its maiden flight as soon as 1 a.m. Eastern Sunday morning. Blue Origin's powerful 32 story tall Newland rocket will lift off from Florida's space coast without people for the first time. It will carry another company creation, Blue Ring. This is a spacecraft designed to service satellites to orbit and even attempt to land the orbital booster on a platform in the Atlantic Ocean. That's a feat until now only accomplished by rival SpaceX, and even then, not on the first try. Now, New Glenn is key to Bezos' vision for his company and for humanity's space-faring future. While Blue Origin has been flying people and payloads to suborbital space for years, and in a reusable rocket system, it hasn't had the ability to go to orbit and beyond.

New Glenn enables that, paving the way with launch access for other company projects, including space stations and lunar landers. Now, it also injects a new entrance into a launch market that is largely dominated by Elon Musk and SpaceX. Last year, SpaceX's Falcon fleet launched one hundred and thirty four times. That's more than the rest of the world combined. And when Starship comes online, that will shake up the market even more. But Blue's New Glenn will be the most direct competitor, especially since it's been designed from the start to be partially reusable. Much is made of the space rivalry between Bezos and Musk, but SpaceX has been really in another stratosphere.

This could mark the beginning of a shift. Also watching closely, NASA and the U.S. Space Force, which both have contracted Blue Origin for launches, also commercial customers, including AST Space Mobile and even Blue's sister company, Amazon, which will use this rocket, among others, to help launch its multibillion-dollar Project Kuiper satellite constellation for broadband service. Lastly, Blue Origin is not the only milestone mission that's on the docket in coming days. It's going to kick off a year that's filled with space milestones, including several commercial lunar lander missions. The first from Firefly Aerospace, which is scheduled for next week.

And as soon as Monday, another test flight by SpaceX of Starship. Now, speaking of Firefly, check out my podcast, Manifest Space, wherever you get your podcasts for my conversation with Firefly Aerospace's CEO, Jason Kim, ahead of that mission next week. All right. See if Busk, if Busk, if Bezos can give Musk a run for all that money. Well, we just mentioned health care stocks. A number of them are moving right now in overtime. Angelica Peebles has that story. Angelica. Hey, John. CMS is out with its proposed 2026 payment policy updates for Medicare Advantage and Part D programs.

Now, the government's saying that they are expected to increase payments on average by 4.33 percent, or over $21 billion from 2025 to 2026. As you said, we are seeing big moves today. Take a look at those insurance stocks. Humana up almost 7%. UnitedCBS also moving on this update, John. All right, Angelica, thank you. Well, President-elect Trump says he wants to make Greenland part of the U.S. Up next, a look at why the world's largest island has value from both a natural resource and national security perspective. And a lot of red arrows on Wall Street today, but there are some big outperformers.

Constellation Energy powering higher after announcing it will buy Calpine for nearly $27 billion. Delta taking off on better than expected earnings. And Capri Holdings, the owner of Michael Kors and Versace brands, surging on upgrades to buy at both Wells Fargo and Citi, as well as a report that Prada may bid for Versace. Stay with us. Welcome back. President-elect Trump expressed an interest in acquiring Greenland during his first administration.

And as he gets set to settle back into the White House, his interest in the world's largest island is heating up again. Pippa Stevens looks at why Greenland is so important to Trump and to this conversation around the U.S. Hey, Morgan. Well, President-elect Trump is eyeing Greenland for three key reasons. Rich mineral resources, access to valuable shipping routes, and strategically important location,

especially as Russia and China ramp up their operations in the Arctic and its tensions with those two countries' flair. Now, drilling down a little bit, Greenland has 25 of the 34 minerals deemed critical by the EU. That includes lithium, graphite and copper. Those are vital, of course, for iPhones, electric vehicle batteries. Greenland also has a large deposit of rare earths, which are really important for everything from wind turbines to military equipment and computer chips. And China currently dominates that market. Now, the Arctic ice is melting, meaning that shipping routes around Greenland are becoming more accessible, significantly cutting transit times and costs. The two key ones to watch are the Northwest

Passage. That is the orange line there, as well as the trans-Arctic route. That is the purple line. And as you can see, it really cuts down on the time and the cost of going all the way around. You also avoid bottlenecks like the Panama Canal. And finally, the location is really important. The U.S. has had a base in Greenland since the 1940s, and it currently operates the Pitufeek Space Base up there in the northwest of Greenland. It includes things like missile defense and space monitoring. And with Russia and China increasing their operations in the area,

the ongoing U.S. access, Morgan and John, is really what's key here. Yeah. And from a military defense, national security perspective, we're talking about ballistic missile defense and early warning systems. It's absolutely crucial, our footprint there and being able to monitor the airspace there and the space there as well for the future. So certainly there's a conversation to be had about what military presence from a U.S. standpoint looks like in Greenland moving forward. But I want to go back to the rare earths piece of this, because I realize we have an earth that is warming in temperature. You're starting to see some of those glacial masses melt in a more meaningful way. So when we talk about rare

earths and extraction of rare earths in a place like Greenland, is that even on the table now because of that? Well, so far they are not extracting anything and certainly at nowhere near commercial scale. They did have two mines in operation for rubies and anorthosite, which are not critical elements. Anorthosite is found in things like paint and glass. And so while there are all of these hopes that there could be one day in this massive extraction effort,

to date there hasn't been, and it's really, really hard. They only have 56,000 people. They don't have the workforce. If you want to have a mining operation, you would have to bring in skilled labor from elsewhere. Not really open to that at this point. And also, they are very aware of not having their resources plundered by other countries. And so when the natives of Greenland look to what their future looks like, I think they want to bring in companies that are thoughtful about their extraction methods.

However, they have really been targeted as a key area. And we've seen Bill Gates and Jeff Bezos, among others, backing a company called Cobalt Materials, which is just one of the companies that's exploring in Greenland. So for the time being, Morgan, a lot of hope. But so far, nothing is actually coming out of the, you know, more than 80 percent ice that covers Greenland. All right. Pippa Stevens, thank you. Well, is today's sell off a warning sign the market, or should investors be buying right now? Coming up, Richard Bernstein tells us what he's telling clients to do when markets open again Monday morning. And Apple closing lower today, but Tim Cook is coming off a very good year. Apple just disclosing in a filing that Cook's total compensation for 2024 was $74.6 million, up from $64 million in 2023. We'll be right back.

Welcome back to Overtime. We've had devastating scenes from Los Angeles over the past few days as authorities battled to contain several deadly wildfires. Estimated economic loss is being pegged at north of 50 billion dollars which would make it the costliest blaze in US history and it raises questions about how prepared American cities are for disasters. Joining us now is Mark Morial, he's president of the National Urban League and mayor of New Orleans from 1994 to 2002. Mark, Happy New Year, good to see you. So you were mayor of New Orleans before Hurricane Katrina. We had the levee failure. L.A.'s mayor right now under a lot of scrutiny

for wildfire response. How do American cities get better at preparing for this kind of thing? John, thank you. Well, if you don't deal with the underlying cause, it is virtually impossible to adequately respond to natural disasters on this scale. The scale of this fire is massive. The unexpected nature of this fire is massive. So you could have 10,000 fire trucks, 25,000 fire personnel. But the issue is, the underlying issue, it's very dry in Southern California. The rain levels have been lower than normal. That means that the risk is not going to go away.

How they prepare to try to abate it, I think, is going to be part of important discussion and indeed debate. But I also think it's important for people to understand with Hurricane Katrina, it was a natural disaster and a man-made disaster. And I want the listeners to know I left office three years before Hurricane Katrina. So I was not involved in the response at that time. But it's important to understand that cities have to strengthen. But it's not just cities. It's counties, it's states. And it's also the Federal Emergency Management Agency.

It's got to be a combined effort. What is in California today could be another city or another state next year or next month. And certainly it's heartbreaking when you see disasters like this take place. And in L.A., as we're showing videos and footage of some of the damage, I mean, you have entire neighborhoods that have essentially burned to the ground. So the other key question here, Mark, is how do you rebuild? How do you rebuild in a sustainable and fiscally responsible way and in a way that is not going to lead to hidden costs of higher homeowner or of more expensive homeownership and and greater bills for taxpayers? And how do you do that when you look at damage like that? Let's understand the source of resources to rebuild are first going to be insurance

proceeds, that homeowners have taken out insurance to prepare for this unfortunate eventuality. Second, under the law, FEMA is obligated to compensate city-states and other local authorities for the rebuilding of public infrastructure. And then thirdly, they'll be, because these were people's homes and this is a beautiful place, sans the great risk of natural disaster, to live, there'll be private money that will be invested. You put your finger on the issue. How do you do it in a sustainable way?

And there certainly has to be a discussion as to whether some areas which are more prone to fire may not be smart places to rebuild private homes. That discussion, I'm confident, is going to take place. And those are tough discussions because a person's home is their castle. Their memories, their loves, the raising of their children are wrapped up in those homes. But this is going to be a major insurance impact. It's going to be a major impact on the fiscal strength of the United States. But we must rebuild. It's important to rebuild. But you've got to think about how you best do it. Mark Morial, thank you for joining us today.

Thank you. Our hearts go out to everybody who's been affected by this tragic situation. Well, is the sell-off a by the moment? Up next, Richard Bernstein on what he's advising clients to do when the market reopens Monday morning. And cue the QR code for the latest installment of my On the Other Hand newsletter. This week's debate, are H-1B temporary visas for skilled workers essential for bringing the global talent to the U.S.? Or are they just replacing U.S. workers with lower-cost labor? You can scan the QR code on your screen now and join the conversation.

We'll be right back. Welcome back. Stocks plunging to end the week and volatility jumping. So how should you be thinking about your portfolio when trading opens on Monday? Well, joining us now is Richard Bernstein. He is the CEO and chief investment officer at Richard Bernstein Advisors. It's good to have you on, Richard. And given the fact that we did have a down day for the major averages, another down week for the major averages. What are you advising clients right now? How do you position yourself looking to next week, which is going to bring more macro data plus earning season in a bigger, more meaningful way? So, Morgan, I think what's happening is that we're coming to the realization,

or I should say the markets are coming to the realization that the economy is much stronger than people thought. I think the key word to use there might be nominal economy, real growth plus inflation is a lot stronger than people thought. And that means the probability of the Fed cutting rates, or I think if you really want to be a contrarian, you should start talking about the Fed maybe raising rates in 2025, means the liquidity trade is basically over. What's been the liquidity trade? What's been the MAG7, cryptocurrencies, all those kind of things. If you look at liquidity conditions, if you look at their performance, you see it's a very, very high correlation. That's probably ending, which means you probably want to err on the side now of the economy being stronger and the companies that have sensitivity to that stronger economy.

Now, I realize, especially in light of the hotter than expected data we got earlier today, that you have a market that is repricing Fed cut expectations to basically nothing for this year, and that in turn is pushing yields higher and then putting pressure on stocks. So there is this shakeout underway. But what would it actually take? And are you actually telling your clients that there is a possibility on the table that the Fed hikes again? Well, I wouldn't say that that's our baseline by any means, but I think it's something that people should be considering. I mean, look, the leading indicators troughed several months ago. The Fed turned a blind eye to that. The leading indicators of employment have been strengthening. The Fed turned a blind eye to those leading indicators. And now they're finally coming to the realization maybe things are a bit stronger than they thought, or maybe a boatload stronger

than they thought. We'll see what happens. So I think you really have to start thinking about, is there a possibility that the Fed may have to actually reverse course? I think that's what the market's trying to figure out right now. So is this environment with the data points we got today better or worse for risk assets? Well, I think it depends how you define risk, right? I mean, I would define risk as sort of cryptocurrencies in the Mag7. I think for those groups, the risk is going up pretty dramatically. For most people, they would say risky assets are the things that haven't worked. And I think that's where the opportunity is,

because they're going to be more economically sensitive and probably will surprise on the upside in earnings over the next quarter or two. Anything in particular that haven't worked that you can highlight? Well, I think there's things that have worked that people have ignored. In particular, I would point to things like mid-cap and small-cap industrial stocks. I mean, they've been outperforming the market for a decade, and nobody cares. I mean, I think it's the greatest untold story out there. That would be certainly one place that I'd be looking. I'd be looking even at things like energy and even larger cap industrials. And I know mid and small cap are very out of favor. There's 85 reasons not to own them. But if we do have a couple of quarters here of stronger

growth than people think, mid and small might do pretty well. We were talking to Mohamed El-Aryan earlier today about this idea of U.S. exceptionalism when it comes to investing and where to put your money to work. Is that how you see it as well? I'm not quite so sure. I think the notion of U.S. exceptionalism is two things going on here. One, the U.S. has outperformed for 15 years. Nobody was talking about U.S. exceptionalism 15 years ago. It was was all about emerging markets so i think it's performance driving some of that the second thing is that we have to come to the realization that the u.s. market is dominated by the tax actor but if you look at places like europe

the very small tech sector so if tack has been the driver of our performance in this liquidity driven period naturally europe's gonna pay however if one were to think that maybe there's a recession looming, again, not our baseline. I don't think that's what people should be thinking about. But if you think there's a recession, 25 at the 26th, Europe might perform pretty well because it's pretty defensive sector heavy. So there might be an argument to be in Europe if you think a recession's coming. Okay. Richard Bernstein, we just covered a lot. Thank you. Appreciate it. Thanks, guys.

Well, looking to next week, Monday on Overtime, we will get the read on consumer spending when I am joined exclusively by the CEOs of Abercrombie & Fitch, Shake Shack, and Dutch Bros. That's live from the ICR conference in Orlando. John, there's going to be a lot of pulse-taking on the consumer from that particular conference through the first half of next week. It's one of two big ones that are on the docket, JP Morgan Healthcare being the other one. The head scratcher for me is how much caution there's been about the consumer and the consumer driven economy at the end of Q4, right? Getting those signals. And now we get these numbers and it signals such strength overall. Where does the truth lie and for which segments?

It's going to be very important for a lot of these companies. Yeah, and we're going to be digging into that quite a bit on Monday and beyond. And certainly you've seen some bullish notes ahead of this conference, too, saying, hey, maybe the consumer was stronger than we thought they were going to be in recent weeks. So what does that mean for 2025? We had a down date for the markets. That's going to do it for us here at Overtime.