Closing Bell - Closing Bell Overtime: Brave new world for investors, Jeff Gundlach reacts to Fed decision 3/16/22

Episode Date: March 16, 2022

Ritholtz Wealth Management’s Josh Brown and Loop Capital’s Kourtney Gibson are out with the post-Fed play and discuss how investors should trade following a Fed rate hike. Plus, top investor Jeff Gundlach from DoubleLine Capital strikes an optimistic tone. He gives his take on equities, inflation, and Bitcoin.

And welcome to Overtime. I'm Scott Wadner. You just heard the bells. We're just getting started here in OT. The Fed has now spoken in just a few minutes. One of the top investors in the world. Double-line capitals Jeffrey Gundlach will be here to have his say on what the Fed did and, most importantly, what happens now. Our talk of the tape, the brave new world for investors, where your money goes from here. What a finish to the day. Let's welcome in some familiar faces, Josh Brown and Loop Capital President Courtney Gibson. It's great to have both of you in overtime. As I said, what a finish. And it was a classic sort of post Fed reaction. Take a little bit of time. And then we finished on the highs of the day court. Should we feel better at this moment about stocks or worse?

Well, Scott, so good to see you at the end of my day. You know, at the end of this, what do I always say? The markets hate uncertainty. Regardless of whether or not we had priced in seven hikes going into this or not, whether we priced in five, six, three, whatever you want to think about it, the market had it priced in around five. The market doesn't like uncertainty. So we needed to make sure exactly what the Fed was going to do and be very, very clear on how the Fed was thinking. And I think that Jay Powell did an incredible job messaging and signaling what we've known for months. I mean, how much more leading into this did you need to know? Now, obviously, there were some challenges around the geopolitical issues that are going on, humanitarian crisis, in addition to, obviously, an economic

potential crisis. But ultimately, this is much better for stocks to know that we're at 25 pips here and that the Fed will use their flexibility as we move forward to obviously combat one of their focuses, which is price stability and inflation. So it's interesting you use the word flexibility, Josh. Was it that flexible? Make no mistake, this was a hawkish Fed today. Was Jay Powell soothing the word of the moment? It appears in his news conference, perhaps it's a hawkish Fed, which is why I ask whether we should really feel better or worse about stocks. How do you see it now that the Fed has spoken? So normally these things are telegraphed well in advance, especially the first hike of a cycle. The Fed in recent years has gone out of its way to over-communicate when there would be some sort of a shift in policy. But this time really takes the cake, so much so, in fact,

that the bond market had already done seven rate hikes for the Fed in advance of us even getting to this place. I think most rational people, about nine months, let's say, ago, were screaming for a taper of the asset purchasing. There was absolutely no benefit to having mortgage rates be 20% below their average if the average price of a home was 20% above. Of course, that's unsustainable. There were just a whole host of things along the way that told rational people

that the Fed was behind, they should speed up, they should speed up. All right, fine. What's done is done. Now we're here. So now the Fed has to taper into essentially World War III being a coin flip away. I don't think that that's what they wanted to do, but it is what it is. I don't think we've ever seen a Fed have to do this kind of thing. And when I say have to, I mean literally have no choice at gunpoint, have to continue to raise rates into a situation where there could be a global, global conflagration on the ground on the continent of Europe. But that's where we are. So today's nice. Up 500 points. The banks rallied. The FANGs rallied. I love it. You love it. But in reality,

this is like a very suboptimal way to kick off a rate hike cycle. Wait a minute. I'll get to you in a sec. No, no, no. I'm going to get to you. No, no, no, no, no. I want to jump in because you had a blog post today. No, I will get to you. Which asked the question whether we have enough for a bottom. You say, one, oil way off its high. Number two, China putting a bottom in the tech stock decline. And then three, get the rate hike out of the way. Your blog sounds a little more optimistic than your words do here.

You got it. You got it. You got it. Look today. Look at yesterday and today. You got what you needed. Keep in mind. Keep in mind.

We were talking about Chinese stocks being liquidated to zero and being repatriated to Hong Kong 24 hours ago. That now looks like it's not necessarily going to happen, at least not yet. The Chinese are masterful at manipulating their own stock market. They did it to us this time. OK, a lot of shorts get squeezed there. That's that's helpful. That's that's very helpful for the tape.

That had been one of the landmines that all of us had been dancing around in the professional asset management community. The Fed today, get that done. Agree. That's great. What we really need is a ceasefire and some sort of a lasting, let's just say discussion happening in Europe rather than escalation. And until then, everything that we just saw today, it's happy talk. People are absolutely kidding themselves. I honestly believe it's only me and Bill Ackman being rational about how bad things could potentially get militarily.

And I honestly don't believe that the market can sustainably put in a real bottom until we know what's going to be there. And we don't. We're very far away from there, unfortunately. So that's what I think the real backdrop is. I got you. I'm looking at the NASDAQ with a tremendous gain.

And I want to see some of the stocks in overtime, too, to see if they're continuing this move. I'm talking about some of the higher valuation ones, whether it's the ARK ones, even the mega caps. This rally in the NASDAQ into the close today. Do you think that it's sustainable? Is it OK now to buy tech stocks? The market seems to suggest over the past couple of days it is. Do you think it is?

I absolutely do personally. And, you know, I just got a note from Chris Levin on my trading desk just talking about the volumes that we're seeing. And we are three to one better to buy. We were today in tech, in health care, in financials, those names that have just been battered and beaten down. Now, I just gave you general sectors, but our clients are picking stocks here and they're picking them at levels that you just can't pass by. When I think about when I was adding, I told you a month ago, Scott, I said I was sitting on my hands with our clients, which happen to be institutional clients, just sitting on my hands. I'm like, I don't want to do anything.

I don't want to buy. I don't want to sell. But where valuations have gone, where this market had come into, you had to buy, especially if you were a long-term investor like I am and many of our clients are at Loop Capital. And so at the end of the day, you nibbled a little bit. And we did nibble a bit here. And as I said, on our desk, we were three to one better to buy on our equity desk today. And corporate bonds are ripping. I mean, you nibbling on the Facebook meta, one of your biggest holdings. What about PayPal? That stock's been hit really hard. I'm nibbling on all of those. I mean, you getting Facebook below $200 is a steal. I was at a conference this past week, as you know, I sit on a couple of corporate boards

and there were three areas of focus, Ukraine and Russia, right? Thinking about the dollar and whether or not it'll be a reserve currency, but that's a conversation for another day. And the third was how are your companies adapting and thinking about the metaverse? The metaverse. And I mean, these are companies in this room that range from some of the largest companies on the planet down to some smaller names. But you have got to know that Facebook and the Zuck are forced to be reckoned with. All right. Well, they're not going to be making money off the metaverse.

That's like a pipe dream at this point. But I hear you. Josh Brown, last question goes to you. The financials, another big mover today. Higher rates, good for the financials. It's a really slowing economy, not good for the financials. If Jay Powell was soothing anywhere, it was his comments about the economy being pretty strong. You could have a, dare I say, perfect environment

for financials and rising rates, but yet strong enough economy. Am I right or wrong? Well, look, what you have in your favor with the financials is that the real economy is still very good. And the consumer has a very strong balance sheet still. And corporate balance sheets are still very strong. Capital markets are healthy. That does bode well for the large cap banks. I think it makes sense that they rallied today. But again, this is a shifting situation. And we just saw February retail sales disappoint. Fortunately, January was revised higher. Talk to me when we see March numbers. I think they're going to be atrocious.

I don't think that your average person gets their 401k statement for the first quarter of this year and is happy, then looks at what their bill is to heat their home, then looks at what it costs them at the pump to fill their car and says to themselves, hey, you know what I feel like doing? I feel like going buying more stuff at Lulu and maybe subscribing to nine more apps I can watch movies on. It ain't going to be that way. So if you lose the consumer and consumer confidence, according to all the surveys, is already nosediving. If you lose the consumer, you're in big trouble because that really is the thing that's been holding us up now, despite a lot of headwinds. So let's hope that doesn't happen. Last thing, we did 17 weight hikes in the cycle two times ago.

Last time we got to nine before the yield curve inverted and everything went to hell and the Fed had the reverse course. You think we're getting to nine this time? I would bet you not. Not in a slowing economy. I don't think so. So a lot of what we should expect on the rate side may have already been priced in, which is shocking considering how early we are in the actual rates themselves.

Court, you've got to be quick if you want the last word, because I got to bounce. I got to come in on two things. Inelastic demand and people buying right now. Alulu, as you know, and I'll take that jab, Josh, it's not a demand problem. It's a supply problem. And when you think about where wages are right now and unemployment, that's almost nonexistent. People have money to spend. They're just trying to wait on some stability in the geopolitical space and where they are. Jobs are there. The consumer is doing well. All right. Feisty and good. That's how we like it. Courtney, thank you. Josh Brown, our thanks to you. We'll see you again in overtime. I'm sure our Twitter question now

in OT, we want you to we want to know from you, will the S&P 500 be higher or lower by the next Fed decision on May 4th? You can head to at CNBC overtime. Please cast your vote. We'll read the results at the end of the show. Now to our overtime exclusive. Double Line Capital's Jeffrey Gundlach is with us live to react to what the Fed just said and what the Fed just did. Jeffrey, welcome back. It's great to have you on the new program. Nice to be on your new show, Scott. Congratulations. Thanks so much. So you heard the Fed. They've spoken. It's your turn. What do you think? Well, the Fed follows the two-year Treasury, and I've been saying this for years and years. I don't know if your viewers can see this chart here, but it's a chart of the Fed funds rate in red and the two-year Treasury in blue.

Look what the two-year Treasury in blue did starting the fourth quarter of last year. It went up by, guess what, 175 basis points. So what did the Fed do today? They said they're going to raise Fed funds by 175 basis points. And so that's just them following again. And they're way behind. I was listening to the prior segment. Here's one more chart I'm going to give you.

The blue line is wage growth wages and salaries and employment cost index the the red line is fed funds the blue line is the wage growth if you look carefully at that chart the fed follows wage growth historically that chart goes back to 1985. this time wage growth has exploded higher and the Fed has been behind the curve. And I thought that Jay Powell did an okay job today. He was a little bit of an equivocator. I thought it was better than the last time we were in this sort of a predicament, which was in the fourth quarter of 2018, when the Fed was raising rates and doing quantitative tightening. I think the stock market was way oversold i think commodities got way

overbought and so i'm not surprised that we've had relative market stability into this fed decision and i expect that the oversold will continue to work its way higher in other words stocks will higher i saw your question about will we be higher on the s&P at the next meeting. I think probably we will be over that time period. I think we'll be happy higher because we're oversold. And we didn't get the 50, which the market was fearing, I think, although I thought the probability of that was awfully low. And we didn't get any clarity on reducing the balance sheet. And I think that the market kind of likes the fact that the party's going on. They sort of like the fact that the Fed is behind the curve for now,

even though it means that they may have to accelerate and get in front of the curve. For now, rates are still really accommodative. And the Fed didn't do the 50. And they're not shrinking the balance sheet yet. I think the market will roll over once the Fed raises rates a couple more times. And if they start the roll off, which he sort of alluded to being the base case at the next meeting, I think that's when you've got the double whammy. At least he didn't pull the 2018 thing of autopilot. He tried to have some flexibility. He gave the impression of autopilot, but he didn't say it. And I think he even said the word flexible or nimble or something like that. And so the market likes that over this office oversold.

So the median Fed official now sees seven hikes this year, right? So six more for the remainder of the year. Is that sound right to you? Is it too aggressive? Not aggressive enough? Too late? We know it's too late. But how do you see where the Fed sees things today in terms of the number of rate hikes that we now expect? When we visited about a month ago at the Super Bowl, you said probably five or so was the number. This appears to be more aggressive. And make no mistake, this was a hawkish Fed today. It was definitely on the hawkish side. We tried to thread the needle, but it was too hard to do. So it was a little bit hawkish. I'm just going to say it one more time, Judge. The Fed follows the two-year Treasury. Two-year Treasury went up 175 basis points. Now they're talking seven hikes. The two-year treasury has gone a lot higher in yield since we met on February 11th.

And so it's totally appropriate for the Fed to be adjusting that higher. But the one thing, I heard a lot of discussion about financials, and it relates to where we are in the cycle. I think Josh Brown really nailed it. And that is we're starting this Fed hike cycle with a very flat yield curve. Typically, when people say financials are good for the first three or four rate hikes, that's because the curve starts out steeper than where we are right now. The curve twos to tens is basically puts you on recession watch when it's inside of 50 basis points. And it gets you on a really big recession watch when it's inside of 50 basis points and it gets you on a really big recession watch when you get down to flat we're right exactly in the middle at 25 basis points and that is an incredibly flat yield curve given uh where we are in terms of the absolute

rate level versus the inflation rate and the whole thing also investors should look at fives thirties the yield spread between the five-year treasury and the 30-year treasury. Same deal. You're on recession watch when you're inside of 50 and when it inverts, you're pretty much on your way to recession. Well, same thing as twos, tens. We're right there in the middle. But the big message of the market today that people haven't really talked about is that the 30-year treasury bond rallied. The 30-year Treasury bond one year ago was basically at exactly the same level as it is today. The attitude about Fed policy has changed so mightily in the last year, and the 30-year Treasury rate is unchanged. Interest rates in Europe have gone up on 10-year Treasuries by a fair amount from a year ago. They've also gone

up in Japan, but not the United States. All we've done is flatten the curve. And that puts us later in the cycle, I think, because as people have said correctly, the bond market has done the tightening. They're following the two-year. And the flatness of the yield curve at these rate levels is something that is going to be problematic.

But again, the market is working off an oversold. When the VIX gets towards 40, I've just gotten to the point in my career where I've seen this movie so many times. When the VIX gets above 35, I don't care how bad the tape looks. I don't care how bad geopolitics look. You're supposed to get more bullish, not more bearish.

And you get an oversold bounce. And the market was very oversold particularly nasdaq and kamais were very overbought one thing on the inflation inflation has surprised everybody to the upside just about and it's going to remain sticky but you are going to get some relaxation on inflation you're going to have these base effects it's a it's a true narrative that you have huge month-over-month increases that are coming in several months from now. And it's likely that we're going to see the over year inflation rate go down somewhat. So that might give the Fed a little bit of a tailwind and not have to work so hard.

But Jay Powell said powerful tools, using our tools. We're going to use our tools. We're going to bring the inflation rate down. So you're right to coin that, to frame that as a hawkish meeting. Yeah. 10% inflation is what you recently said you thought the projection would be. Are you sticking with that today? Or was that a little bit hyperbolic? It was a little hyperbolic. I actually said, I think, 9 and maybe 10. I don't, I'm not sure we're going to get a nine now because the commodity prices have

come down a fair amount. That was at the moment that oil was at about $125 a barrel. And the decline from there has been sufficient that it looks like we're going to get eight handle inflation. We might even get it in the next print and it might stay there for a couple of months. But I don't think we're going to have the same inflation rate for the full year 2022. I think it's going to be lower for the full year than it was in 2021. But not what the Fed is forecasting. We're not going to get low fours. We're not going to get mid fours.

I think we're going to be talking about, again, it's going to have a lot to do with the commodity complex. I think we'll be talking about something around a high fives inflation for 2022, which is still not close to the Fed's stated target, all the way down to 2%. So one thing I want to talk about is there's a way to project what the yield curve will look like in a year using the one year forward curve of the Treasury markets. It's pretty wonky. But it predicts one year from now that the two-year Treasury will be at 250, and every other rate along the yield curve will be at 250. Now, I respect the bond market message, of course, but I think that's too high. I think actually the yield curve will be flat, but it won't even be as high as 250. So we've already seen, I think, the peak potentially in the 30-year Treasury bond because it just doesn't go up in yield in spite of all of the changes we've seen macroeconomically and with the Fed. We're just getting a flatter and flatter curve.

So the strange thing is that this year, year to date, we've had highly correlated S&P 500 stocks and treasury market and the bond market broadly. Unfortunately, it's correlated on the downside. So stocks down, you know, 10, 12% through yesterday, some down much more than that. Bond funds, even some that call themselves core bond funds, there are some that are down 9, 10% total return year to date, not mine, thankfully. But, you know, just a bond market index is down, you know, 5%. So the 60-40 mix that people traditionally have, and I think they've probably wandered from that in recent years, but that 60-40 mix is a pretty lousy return for the first quarter. It might get a little bit better in the final two weeks. But I think what Josh Brown said again, I thought he made some good points. I think he said that

when people get their statement, they're not going to be happy. And that could lead to the next, you know, some volatility as we enter the month of April. Let me ask you this. Do you think we're going to have a recession? And are you more or less confident today that the Fed can actually pull this off, in part because of what you said about inflation actually coming down a bit? Not to target clearly, but certainly not going the opposite direction any any steeper. It's a really bad bet to count on the Fed engineering a soft landing in this kind of environment with the curve partially inverted, but let's just call it quite flat at this low yield level. I just don't see it. Again, I can't reiterate enough. This balance sheet tapering or shrinkage is going to be correlated with a significant headwind for the S&P 500. I've talked about this for years,

that there's a tremendous correlation between the size of the Fed's balance sheet, which is now just under $9 trillion, and the market capitalization of the S&P 500. And we talked about how that was going to be supportive back last summer, that was going to be supportive into year end. But now we're going the other way. We've got the Fed raising interest rates, and the great Marty Zweig used to say, rule number one, don't fight the Fed. Rule number two, see rule number one. And the Fed is raising rates sequentially as a base case, and they're going to be tapering. And that means multiple contraction is going to continue. And this is going to be, I don't think we're going to go back to the highs of of the year of the stock market i i think we're going to be higher in may but i think we've seen the high

of the year with this with the fed and the yield curve and the consumer sentiment uh being pretty soft although i will say something on the consumer sentiment i know i noticed somebody commented that it was in a free fall and that's true from the University of Michigan. But it's really because of autos and housing. And autos are up so much that people realize that it's a very uneconomic time to buy a vehicle. And housing is up 30% on the national median over the last two years. It's just possible that the sentiment will get a little bit better if the inflation numbers start to peak out. And if we can just get that inflation rate below six, it's possible that the recession gets forestalled. I don't I don't have a base case of a recession this year, but I do think that we'll probably get one in 2023.

OK. Jay Powell talked about that, too. Doesn't see it this year either. Not that he's going to come out and say it today for certain, but you get my point. Jeffrey, sit tight. We'll take a quick break. I'll come back with Jeffrey Gundlach, get more opportunities on where to put your money. Don't go anywhere. Overtime is back in just two minutes. Welcome back to Overtime, more of my exclusive conversation with DoubleLine CEO Jeffrey Gundlach. We've had a lot of big hitters on the network this week. Jeffrey, Scott Minard among them who said, and we've talked a lot today about the two-year, and you mentioned the 30-year, but the 10-year, he thought maybe the yield was topping out in his words. Two to two and a quarter was the range he saw.

Do you agree with that? I think the long end, as I referenced in the first segment, I think the long end saw its peak last year. I mean, the long bond was up substantially higher than at its peak, where it is right now. And so I think broadly that the long end of the curve is reasonably safe place to be, which is a very strange thing for me to say, because the valuation of it is so terrible relative to inflation. You have a long bond, you know, below two and a half percent, you've got the inflation rate pushing eight percent. But basically, it's because of the economic situation and the uncertainty and the relative comparison to other bonds in the world

even though that comparison has gotten less favorable for the united states but i do think i do think that investors we've been talking about this uh in our our get-togethers uh scott for the past few times as weird as it sounds i think investors should own long-term treasuries as part of their portfolio i own some long-term treasuries as part of their portfolio. I own some long-term treasuries as part of my core strategies and even my flagship fund, which is, and we own the long ones, because they will do well during a turnover in the economy. And certainly if the inflation rate is rated lower as we move forward in the year. So I think those are okay. In fact, I think bonds broadly are sort of okay, in spite of their bad valuation. In fact, one area that I have not been very enthusiastic about for quite some time is the corporate bond market. The investment-grade corporate bond market, the yields have quietly been going up and going up faster than treasury

yields, which means their relative spreads are getting wider and the balance sheets of corporate america are in great shape the other thing that now has turned into a potential positive uh with with corporate bonds and longer term treasuries is that duration interest rate risk isn't any isn't it isn't a problem at the present time so corporate balances are in good shape corporate bondsate bonds have a lot of interest rate risk, which hasn't been good, but now it's not being that painful. They have a duration. The LQD ETF at times has a duration of 10, which means it has more interest rate risk than even the 10-year treasury.

But they've gotten cheaper, and credit product broadly has gotten cheaper, even as yields have gone up. So until such time as there's a closer to a recession in view, I think it's a reasonable time to be moving into some of these areas that have been widening kind of stealthily in the last several months. So this is very interesting. Yes, go ahead. I'm sorry. Finish your thought. My bad. I didn't mean to step on your toes. That's all. That's fine. I'm just saying that we've been actually buying some corporate debt and we had like bank loans in the junk bond market relative to regular high yield. But our answer on that has really neutralized. And now we're sort of favoring regular high yield more. I think that the investment business is always anticipatory.

So everybody knew that the Fed was going to go on a sequential rate hike thing. And so the fact that that was going to happen got priced in the bank loan market. So BKLN, the bank loan ETF, held up until very recently far better than JNK, which is the ETF for junk bonds or so-called high yield bonds. I call them junk bonds because their yields aren't high. But I think what's been happening in recent weeks is people are starting to realize that the Fed is priced into the market. The two-year treasury is priced in all these rate hikes, and the bond market is saying that we're not going to get that much more of a yield increase on the two-year treasury. It'll go higher, of course,

but I think the two-year treasury even could be getting close to its peak for this cycle. The bond market says it's going to peak out around 250. As I said in the prior segment, I don't even think it's going that high. So at 2%, which we kissed today on the two-year, what's wrong with the two-year treasury? I mean, it's very low risk. It matures in two years. It's probably a good time to have dry powder sometime in the next two years if you're going into

a recession. But just shorter duration product in general that has very little interest rate risk. And I've been talking in the past with you, Scott, of having cash. And these days, I think you're better off in the two-year treasury than you are in cash, because it's going to take time for cash to get your yield up to that 2% level where the two-year is. So a barbell in the bond market is sort of interesting, where you own sort of the short end and the long end, because there is really no yield difference. You own them for totally different reasons, but both of them have a spot in a portfolio. I love the fact that you're giving our viewers

in overtime some real actionable advice. But I have to say, in listening to you talk for the past several minutes, I don't know what was in your breakfast this morning. You're more positive on a lot of things than I expected you, frankly, to be. You think stocks can go up until May. You're suggesting that bonds can be a good investment, so bonds and stocks can go up at the same time. You talk fairly favorably about high yield in certain opportunities. And you even think inflation is going to come down even, albeit slightly. That's a much more positive, if you want to call it that picture, than, frankly, Jeffrey, I expected from you.

Well, Judge, I'm old school. When you mark down the NASDAQ 20 percent, I like it better. I don't like buying stuff what's an all-time high and a massively stretched valuation. I didn't like junk bonds at all, you know, several months ago. I didn't like corporate bonds because their spreads were too tight. But when the market reprices, you've got to reallocate your thinking, your portfolio. So on a really big picture thing, I want to show the viewers two more charts. The one I've been talking about, European stocks versus U.S. And here's the chart. When the blue line is going up, that's the S&P 500 outperforming Europe the chart when the blue line is going up that's the s p 500 outperforming

europe and when the blue line stops going up which happened back in 2020 almost two years ago europe has performed in line even even lately which is sort of shocking given how much exposure europe has to this to this war that's going on between Ukraine and Russia and yet yeah they underperformed briefly when the invasion started but they basically snapped back and have been in line with U.S stocks so I kind of still think that you have a reason to be longer term allocating and one last slide which is the Nasdaq versus uh the&P 500. When the blue line is going up, the Nasdaq is outperforming. This was the dot-com thing. This is now, and we've rolled over.

So I think that the Nasdaq is not the place to be. For the short term, yes, because it's oversold. But if you're truly an investor, I'm not talking about between now and May here. I'm talking about looking forward to 2023 and beyond. I think you want to avoid these greatly overvalued momentum stocks. And I also think that the investors should potentially think about investing in emerging market equity gradualistically. It's volatile. It as all get out. But I think ultimately it's going to be a strong performer for a multi-year horizon and it's cheap.

So you said at the Super Bowl when I talked to you about emerging markets that, and I think you said it almost exactly, you hadn't start buying it. You didn't start buying it yet. It's okay to start, you know, averaging into it. Have you started doing that yourself in emerging markets? No, I have not. I've not bought emerging market equity. I really one of the reasons is that for the emerging market trade to really work, you need the dollar to go down. And the dollar is is on a flight to quality bid. And it's also bid up because the yield curve flattening is one of the best short-term indicators of the direction of the dollar. So the yield curve flattening leads to a higher dollar. And the yield curve steepening

tends to lead to a weaker dollar. So with the yield curve flattening, the dollar has maintained a bid and with the geopolitics. The trade I'm talking about with emerging markets is one you want to invest for your grandchildren's college education. It's one where you want to buy it systematically. I'm not in any hurry to start doing it, but I don't think it's foolish to start doing it. I watch this stuff like a hawk day in and day out. For somebody that has a real job, they might want to put in something systematic. You can't watch it tick by tick. But I will observe that emerging markets have also stopped underperforming

in spite of all of this upheaval. Also, emerging market debt ex-russia is is has widened out a fair amount stealthily as well it's about 450 basis points over over treasuries and that's wide by by a fair amount so emerging market debt is something we've been cautious on and thankfully for uh various reasons we were extraordinarily underweight in Ukraine, Russia and the like. So we've managed to sidestep that banana peel. But I do think that a lot of these things that have widened out, I'm expecting some stability. As a trader, you want to be increasing risk. As an investor, I mean investor, I mean two plus year horizon.

You actually want to use this period of strength to reduce risk. OK, let me ask you finally, before I let you run, Bitcoin or gold in this new environment that we're now in, we at least have a little more certainty on where the Fed path looks to be. What would I rather own today if I'm watching this program, Bitcoin or gold or crypto? Or you could take crypto in general or gold. i use i use bitcoin um you know bitcoin has fallen into a range with the high end being 60 000 and the low end being 40 000 it seems like every time we get together it's either at 60 or at 40 uh last time it was at 40 so it hasn't moved since then the time that it was at 60 so with the range of 40 to 60 and gold being in a range that's sort of, I don't know, let's call it 1750 to 2000. Gold is sort of in the middle of its range. Bitcoin is at the low

end of its range. So I would take, or now through the next Fed meeting, I will take Bitcoin over gold. Ah, interesting. Okay. Yeah, I appreciate it. I can't believe all this positive stuff i'm saying but it's for the short term again i haven't my long-term view is is still that we're in a debt disaster situation and the only way out is to monetize or to default that's always going to be the case the mathematics just doesn't work with paying off one hundred sixty eight trillion dollars of unfunded liabilities with a twenty four trillion dollar nominal GDP. That's still coming and it's coming in the next recession. Unfortunately, that's when that's when the dollar goes down. So that's what I'm telling you. You gave us and our viewers a lot.

That's that's for certain. Put the next Fed meeting down on your calendar. We want to have you back in overtime to digest and discuss that one to Jeffrey Gundlach. I appreciate your time today. Thanks so much. All right. Thanks, Judge. Good luck, everybody. All right. All right. We'll see you soon. Up next, an OT alert. Stephanie Link making a few late day trades. She's going to join us and tell us what she just bought. And don't forget to follow the Closing Bell podcast. It's available on Spotify, Apple or wherever you get your podcasts. We're back in a few. Welcome back. We have an overtime earnings alert.

There's the stock of Lenar. It's greater by two percent. They missed on earnings, beat on revenue. As you see, the stock is up. The conference call is tomorrow morning. Good thing for you. You don't have to wait until then to get insight from the CEO. Why? Because Diana Olick just got off the phone with Lennar's CEO, and she's going to join

us in just a few moments with those comments. Again, tomorrow's news in overtime today. And we look forward to doing that. It's time for a CNBC News update with Shepard Smith. Hey, Shep. News in Diana. I'm Shepard Smith. Scott, thank you.

From the news on CNBC, here's what's happening. President Biden said last hour he thinks Vladimir Putin is a war criminal for his attacks in Ukraine. This appears to be the first time the president's labeled Putin that in public. The Kremlin fired back, calling the comments unacceptable and unforgivable. The Justice Department charging five people with stalking, harassing and spying on Chinese Americans. The federal court unsealed three separate cases today. The feds accused the defendants of working for China's secret police and targeting people critical of the Chinese government. And a real tragedy on a West Texas highway. Six college golfers and their coach killed when a pickup truck collided with their van.

Police say two other students critically injured. Texas Highway Patrol says the pickup drove into oncoming traffic and hit that van head on. The driver and the passenger of the pickup also killed. The golf team from the University of the Southwest in New Mexico. Investigators there say the exact cause of the crash still under investigation. Tonight, the cost of war in Mariupol, Ukraine, as the only two international journalists left in that city document the scale of human tragedy. On the news, right after Jim Cramer, 7 Eastern, CNBC.

Judge, back to you. All right, Shep, we'll be there. Thank you very much, Shepard Smith. Up next, we have an OT alert. Stephanie Link jumping on the CNBC news line with some late-day buys that she's making. You've got to hear about that, where she's putting her money. Overtime's back right after this. I told you we had an overtime alert with Stephanie Link. She's making some moves in her portfolio. Joins us now on the news line. What are you doing, Steph?

Hey, Scott. How are you doing? So I'm buying Bank of America and Target. Bank of America is down 15% from its highs. It's now trading at a more reasonable valuation times book. It is a rate-sensitive play. I think net interest income could grow 15% in 2022, which is better than what people expect. But I like their diversified revenue mix with capital markets and fees.

They're very disciplined on cost trucks. You're going to see their costs be flat in 2022. So that's the definition of operating leverage we talk about all the time. Liquidity up 24% last quarter on a sequential basis. It's the second highest on record. They've got a lot of flexibility to continue to grow, and so this is quality on sale. Target is the other one. It's down 18% from its highs.

It trades at 15 times earnings. Best-in-class retailer. Their algorithm is consistent. Low single-digit comps, mid-single-digit op income, and high single-digit earnings. I like the mix of consumables and discretionary. And don't forget, they beat earnings and they raised guidance last quarter and the stock is down 18% from the highs. So they also have a $10 billion buyback versus $2 to $3 billion pre-COVID.

So another one that's quality on sale. I'll continue to buy this one. I appreciate you giving us the lowdown, Steph. We'll see you back on the half. That's Stephanie Link joining us in overtime. Lenar shares. I told you they're higher by a couple percentage points in overtime. The conference call is out tomorrow. You don't have to wait, though. I said Diana Olick just spoke with the company's chairman. Those comments are coming up next. There's the stock now even higher,

3%. We're back after this. All right, we're back in overtime. Lenar up 3% in the OT on earnings. The call isn't until tomorrow morning. Doesn't matter because Diana Olick spoke with the chairman today. What did he tell you, Di? Well, Scott, Stuart Miller wanted to make clear that while Lenar missed on earnings per share, EPS would have been just over a dollar per share higher, excluding mark-to-market losses. And those losses stem from Lenar's heavy investments in startups, things like 3D printing and iBuying,

which Miller says is core to the business. He said housing demand is still very strong. I, of course, asked about rising mortgage rates, and he said interest rates have clearly moved up. But even with the move in interest rates, wages are moving up. The cost of rentals have been moving up. And therefore, a fixed-rate mortgage on an owned home remains the best protection against inflation. And buyers continue to buy. So, Scott, he is not worried about rising rates. Not yet. Diane Olick getting tomorrow's news tonight. We appreciate that. That's Diane Olick

down in Washington for us. After the break, Santoli's last word, reacting to something he heard from Jeffrey Gundlach. We'll be right back. All right, it's time again for Santoli's last word. What do you have for us today? Well, lots of good stuff in the Jeffrey Gundlach interview. Lots of great market feel. But I did have to take exception to his positioning of the Fed just following what the two-year treasury yield is doing. Now, yes, that's true. But why does the two-year Treasury yield is doing. Now, yes, that's true. But why does the two-year Treasury yield do what it does?

It's because the Fed tells the market where it's headed. Last November, two-year Treasury yield, 0.4% in early November. We've got hot CPI reads. We had every Fed official coming out saying, we're stopping the QE earlier. We're raising rates more. That's what got the two-year note to where it is right now. And I think more broadly, it explains why the market has priced in a fair bit of financial condition tightening going into this meeting. Perhaps one of the reasons the market powered through what really was a relatively hawkish press conference by Powell and did not back off too much. So the Fed sets the expectations for the bond market and expectations maybe is your word of the day because we got

what we expected and that's why we finished so much higher in the stock market. We did largely and also an oversold market and also good stuff on Ukraine. So you don't necessarily know why the market does what it does. Tomorrow morning might be a cleaner week. All right. That's Santoli's last word. Thank you. All right. Coming up next, your two minute drill. We're back right after this. All right. Let's get the results of our overtime Twitter poll. Optimism. Sixty one percent of you say the S&P is higher by the next Fed decision. There it is. Sixty one to thirty nine. We appreciate you taking part. Follow us at CNBC Overtime so you can vote in this poll every day. It's time now for our two-minute drill, and guess

who? Courtney Gibson is back with us. What's the first stock you want to talk about with two minutes to go, Court? Well, let's see. How about, you know, you brought up PayPal. Why don't we touch on PayPal for a minute? You know, I think investors have become incredibly cautious about fintechs and technology companies for a myriad of reasons. But PayPal has just been brutally, brutally hit over this past year. And I think they're best positioned to actually take advantage of the ecosystem and fintech as we move forward. So that name is a name I love. And you're getting in here as a long-term investor, you will be very pleased with this position. OK, I mean, it's look, it's one of these stocks that has gotten absolutely crushed,

right, in the higher valuation, high growth universe. And, you know, the next stock you got is SoFi, right? Oh, yeah. Oh, yeah. So SoFi is another one where, again, a leader in kind of this neobank situation that we have going on here. I mean, and SoFi, with more recently becoming a bank holding company, is positioning itself to not only diversify its business away from what we see in student loans, but under other lending opportunities. And I think that they are absolutely poised to grow from here. Again, just been a bloodbath in that name over time. I got in under nine dollars. And that's a name that, you know, we will see north of the 20s very, very soon, Nicole, the next 12 months or so, assuming we continue on the path.

All right. So you heard me ask, Gundlach, gold or Bitcoin? Bitcoin. You like Coinbase? Tell me why now. Well, Scott, you gave me an out on that one. You know I love to pivot. So from a diversification perspective, I personally, in my portfolio,

and nor do we at Loop Capital Markets trade in Bitcoin or Ethereum or any of the cryptocurrencies. But I do like coin as a publicly traded exchange. When you look at global crypto and coin as a diversification play to play on crypto, but allowing you in a little bit to the exchange stability. And they're a winner. Okay. All right. Great stuff. You beat the two-minute show. You did.

We'll see you next time in overtime. Don't miss tomorrow's show. We have another big lineup. Eminence Capital founder and CEO Ricky Sandler, Nancy Davis of Quadratic as well. Fast Money is now.