Closing Bell - Closing Bell Overtime: Buying Opportunity 5/13/22

Episode Date: May 13, 2022

Dan Ives from Wedbush Securities explains why this is a “generational buying opportunity” for tech. Plus, will Elon Musk back out of his bid for Twitter? Casey Newton from Platformer weighs in. And, Michael Santoli searches for clues in his “Last Word.”

Welcome, everybody. I'm Scott Walker. You just heard the bells. We're just getting started here at Post 9. In just a few minutes, I'll be joined by someone who says the S&P 500 will hit new all-time highs next year. You heard me say that right. New all-time highs next year, despite this sell-off and the bear market. We begin, though, with our talk of the tape, whether the hardest-hit area of the market, technology, has fallen so far that it now presents a generational buying opportunity. Not my words, they're the words of Dan Ives. Let's welcome the Wedbush analyst to Post9 to make his case. You really think this is a generational buying opportunity?

Well, I think for the right stocks, because our viewpoint covering tech since late 99, in these downturns, you've got to separate the froth from what we believe are the names that are going to be able to navigate and valuations that we believe are way oversold. So I look at software, cybersecurity, I look at names like Microsoft, you look at names like Amazon, Apple, among others. That's why to us, we're not just going to sit here and say you paint them all with the same brush. It's a bifurcated tape.

Let's talk about the mega caps specifically, because who's to say that these stocks deserved to be deserved to be where they were before this recent sell off? I take a look and I raise this issue and I asked our team to put these numbers together because I wanted to raise this with with you. If you look at where the P.E.'s were for all of the mega cap all-stars, right? From the pandemic low, let's call that March 2020, okay? Apple's PE was 17. All-time high S&P, it got up to 30. Microsoft, 23, got to 34.

Alphabet, 22, got to 25. Meta, from 18 to 24. Nvidia, from 27 to 58. The point being that a lot of these stocks, if not the whole group, got that burst because of all that the Fed was doing from liquidity, right? Now that the Fed's pulling that liquidity away, why shouldn't these stocks go back to where they were around the time that the Fed injected this liquidity?

These stocks didn't run up in the manner in which they did on fundamentals, did they? And that's a great question. That would be a big debate. And ultimately, I just view it as fundamentally, when I look at the trends over the next, call it, two, three years, when I look at the cloud trends, I look at semis, I look at AI, I look at what I believe is the fourth industrial revolution. You stress test these numbers. Look, this is the fundamental difference. The buy side, they're already looking now 2023 numbers assume mild recession ahead of the sell side so my point is that numbers here relative i mean if you look at mfang from an ebada perspective i mean 12 times you're starting to look toward what i go almost be market multiples for what i've used probably the best growth names across tech.

But like these stocks were used as, in some respects, bond proxies in, I think, a large respect, defensive plays in an uncertain world during the pandemic. Can you make the argument to me today that Apple deserves to be at a 30 PE or does it deserve to be closer to the 17 where it was before the Fed put all of the punch in the bowl? Okay, so that's a good example. Let's just look at Apple. The services business is a different business today, and I believe going forward, than it was two years ago. So you're talking about an $80 billion revenue stream that basically has been a big part

of the re-rating in Apple. And it's always been my contention, Apple's a name. When you look at it as street PE, instead of some of the parts in terms of looking at services and hardware, you ultimately, what I believe is, you know, undershoot what should be the core valuation. So my point here is that I'm not saying the froth, the web vans, the global crossings, what we saw in 2000.com front and center, that's not going to happen. I'm just saying you have to separate the have and have nots and valuation here relative to when we go back to 08, 09 and even 01, 02 relative to growth.

We view now is the time for the names that we've talked about in our tech playbook to own them. But is Apple's services business 13 points of valuation better than it was two years ago? Well, I think, and I think when you look at Apple services business, you look at the growth, you look at ultimately the margin on the services piece. I think it's something going into the pandemic, the market was basically signed. Now it's worth three, 400 billion. And at one point in the pandemic, we're looking at signed. Now it's worth $300, $400 billion. And at one point in the pandemic, we're looking at $1.5 trillion. So I think a big difference with some of these names, I'd argue the same with Amazon. Some of the parts, what's the cloud business worth? With Google, I'd argue right here, you're assigning minimal growth and minimal

valuation to the cloud. You stress test numbers on the other side of this, get every bare argument out there, but it just comes down to, like, Scott, we've talked to 25 of our checks this week, CIOs, you know, product managers trying to understand spending. Stress test these areas, it's firm. And that's why we'll cut. You'll see numbers get cut because the street will ultimately assume a mild recession. Here's the greatest question, if not problem, that investors have today. We don't know what the right valuation should be for a lot of companies that ran up. And I'm not just talking about the high flyers.

All of these are well-respected companies with clearly defined fundamental businesses, and their growth trajectories are what they are. I'm not arguing that in any respects whatsoever. It's simply a matter of we are all trying to figure out what the proper valuations are when the liquidity gets pulled away versus where the liquidity was when the spigot was turned on full blast. That is a very difficult question to answer. Nvidia for example, from 27 to 58, multiple doubled. I mean, how do you assess something like that to where it should be today, irrespective of this most recent sell off?

So let's just take Nvidia as a good example. When I look out the next three years for Nvidia, for an Apple, for Microsoft, for cybersecurity, the growth opportunities over the next three years, basically, I would say, is more than the last eight to nine. So to me, it all just comes down to, where's the growth relative to valuation? From a growth perspective, now you could do a triangulated with PE, free cash flow, and I get, but my whole point is,

if you just look at free cash flow and PE, free cash flow, and I get. But my whole point is, if you just look at free cash flow and PE and just say straight, you would have missed the Teslas, the Googles, the Microsoft, the Salesforce.com coming out of what we saw in 2009. And that was really our point of our note today to basically just level set valuations and what we want to own and what we don't. You like to use the words table pounders when you're talking about stocks that you just want people to buy right here and now. And I know that you break things up into different areas of tech. As you said in your own words, the haves and the have nots, you break things up into different sectors. The three best names right now across all of your areas of coverage are what? Give me three.

Three, it's Apple, it's Palo Alto on cybersecurity, and it's Microsoft because of the cloud theme. Because fundamentally, those are the three names to me. As a proxy, they best encompass where I believe the massive growth and valuations today that I believe are baking in 2023 numbers already coming down by five to 10%. That is an important point because I think the next four to five weeks, sell side would just assume, okay, we're going to have a recession. Cut numbers ahead of management's guidance. And once that happens, I think you saw it with Rivian, you saw it with other names,

you start to now get to the point where you could at least start to own these names based on valuation. I believe we're close. Just today's bounce, and then I got to go. Just today's bounce in Apple gets back, it's up 3%, okay? Gets back up to 147 and change. Does that make you feel better at all

about where this stock is going in the near term? Because I spoke with Mark Newton yesterday. He's the technician who works with Tom Lee over at Fundstrat. He's like, man, I mean, it's not my base case, but the stock could go down to $133 or so. I mean, the stock looked a little bit broken for a little while before today. Because it comes down. The China zero COVID issues, everyone knows June's going to be a very tough quarter for Apple. Now it's happening today, and I believe you'll see it over the coming weeks. Street's going to toss June quarter out for Apple. Look at September and December and look at next year's

numbers. And I think when that starts to happen, that's how we believe the bottoming process starts to happen in tech. And I believe that's starting to happen. All right. Well, we'll see if we put anything together between, let's say, the last 30 minutes of yesterday and then the full session today. The NASDAQ has obviously had a good session. I'm going to see you in a little bit. You'll be back with me to talk about on the backside of our Twitter conversation what it really means for Tesla, which is an interesting discussion to have in and of itself. That's Dan Ives. But as I said, he'll be back with us. Let's get to our panel right now. Courtney Gibson, the executive vice chair at Loop Capital Markets,

a CNBC contributor as well. Katerina Simonetti, Senior Vice President, Private Wealth Advisor at Morgan Stanley. Ladies, it's great to have you with us. Katerina, I begin with you first. What about this move today? Is this bounce worth anything? Does it make you feel like we can do anything on top of this? Scott, thank you for having me on the show. It certainly is better to end the week on the positive note versus then the negative

note. But we are in the middle of the bear market. And what we tell our clients is to see these type of rallies exactly what they are, as bear market rallies, and not to get overly excited about them. We also tell them not to get overly scared about the dips in the market and not sell out of fear, because there is a lot of positivity in this market as well. Although because of all the pressure, sometimes it's hard to see because we have high inflation, we have slowing earnings, we have hawkish Fed.

But what we're also seeing is this earnings revision trends. And we in our view, and I know you have Mike Wilson on a lot and you hear his narrative that we believe that these earnings revisions are eventually going to lead to market normalizations where companies are going to be able to actually meet the earnings expectations, which will serve as the catalyst to the next bull market, because in his view, market cycles are getting shorter. But you can't, I mean, I know you cite Mike Wilson, but you can't agree wholeheartedly with his perspective on the market

if you still think that we can rise to 4,400 by the end of the year. And that's not your bull case. That is your base case. Well, that's correct, Scott. And so far he has been pretty correct in his expectations. And with all of the positive view in the long run, we're also seeing a lot of market volatility throughout this entire year because market pressures are here. And then on top of the normal pressures that we were expecting, now we have the geopolitical risk with the Russian-Ukraine war that puts pressures on energy prices, on prices of food that, you know, of course, are affecting consumer sentiment.

So we are concerned about all these things, but we see market kind of working its way through all of these issues. And towards the end of the year, you know, we're expecting a certain level of normalization. So, Court, it's good to see you as well. Welcome to Overtime. Look, the last two Fridays have been horrible. I mean, I remember, you know, looking to my left at the board and seeing 900-plus declines on the Dow each of the prior Fridays. So we have a little bit of a respite today. Does it make you feel better about where we may go, even if it's in just the near term? It's always so wonderful to see you. You know, it's really interesting. I've been talking to

our desk over at Loop Capital, and we all kind of agree that this has actually been a pretty orderly sell-off. Although the headlines have been painful, my personal portfolio is screaming pain right now, it is somewhat of a reset. But I think the light at the end of the tunnel really is that we are looking at a healthy economy. There's a little bit of kind of a Fed overhang right now that we're obviously dealing with. But let's kind of peel back this onion a little bit. You have corporate balance sheets that are the strongest they've ever been, the healthiest they've been on record. The consumer is healthy.

Jobs, more jobs than candidates right now, right? I think we all know what that's been looking like. When is the last time you saw that? The consumer, right? Two-thirds of GDP is the consumer. Two trillion dollars amassed during the pandemic. Think about that number. I know most of that's in your wallet, Scott, but two trillion dollars that was amassed during the pandemic, that has pent up demand. It's causing some of this inflation. But I think it's also going to help us to have, again, an orderly reset as we move forward, slow down some of this hot growth. But it's also going to allow us to move back to a market where companies that are doing well will be rewarded and those that are doing poorly will not. That's

what this market should read versus a rising tide lifting all boats. I just wonder if the economy court is as strong as you suggest that it is or if it has the very early feelings of a scratchy throat. And you go to get the vitamin C. That's not available anymore because the Fed just took that away. And then you go get the airborne. But you can't get that because, you know, the Fed's taken that away, too. And the economy actually is weakening quicker than people think. You look at the consumer confidence number today from UMich. That was below 60. You just get a feeling that maybe things aren't as strong today as people would otherwise suggest,

because they're looking in some of the wrong places. The travel economy, of course, is strong because of this pent-up demand in which you suggest is there. And it clearly is. But once you get past that, I just wonder, you know, maybe it's a little bit weaker. I'm not saying it's tremendously weak. We're having a recession next week or anything of the like. But it's a little bit weaker than some would like to believe.

But, Scott, one thing I've been waiting to talk about is this whole fear of recession, right? I hate the fear-mongering. Two quarters of negative GDP says recession. How many have we come out of? We're not talking about a 2008. We're talking about two quarters. And that is, again, when we talk about a reset. Rising prices are really eating away at the real value kind of of the savings. Right. Real income is kind of flat over the last six months or so, which which does imply, right, that real consumption is going to slow. That too is okay. We're not talking about a catastrophic end to our world. We're talking about good companies where people have discretionary income spending their dollars at those good companies. We're

talking about good companies investing. We're talking about real profits. We're talking about stock pickers being rewarded versus Courtney closing her eyes and being able to kind of throw a dart at the board and make 10, 20% returns. Those days are gone, but Scott, that's okay. It's okay. You can find good names in this market. I think the last guest, I thought he did an incredible job analyzing the market, in particular tech, in particular when we talk about technology companies and how we have really pivoted into a world where tech is going to lead. Whether it's old tech, i.e. a Microsoft, or whether it's fintech like a Square or PayPal, our world is changing. And those good companies that have solid business cases and good management teams, strong balance sheets, are going to do well.

Dan Ives is blushing now. I should let you know he's still sitting to my left and he perked up when you said his name. And I looked over at him, his face was a little red. You have a good weekend. That's Courtney Gibson, Katarina Simonetti as well. I was going to be back, as I said, shortly. All right. Up next, deal or no deal? Elon Musk putting his Twitter takeover plans on hold. Our next guest is all fired up. He calls it a circus show. If it wasn't TV, he might call it something else. Maybe he will on TV.

Others have. We are drilling down on the fallout. And later, a bold call for your money. When market protests, stocks are heading back to all-time highs. He makes his case when overtime returns. We are back at overtime. News that Elon Musk has put his Twitter deal temporarily on hold, sending shares of that company plummeting today. You can see it right there, down about 10%. The obvious question now, whether it is really just a temporary thing or if the deal is really in

trouble. Let's ask Casey Newton of Platformer. Dan Ives, as I said, is with us here as well. He's going to talk to us about the Tesla side of the story. But, Casey, I want to talk to you first about your reaction that I saw on Twitter today to this deal being allegedly temporarily on hold, that Elon still committed to the acquisition, as he said. You said, and I quote, I'm trying to think of a more obvious lie in the history of American business. Please tell. Well, look, we've known for a long time that Twitter has some automated accounts. They've reported that to the SEC for years now.

So the idea that Elon would sign a binding contract to come to buy the company and then come along after the fact and say, well, hey, wait a minute. Let's see how many bots on the platform. It just strains all credulity. We both know that this deal looks much more expensive today than it was when he bought it. And you have to assume that that's what's really going on here. You think that's the true motive? He's looking for a price cut. What about just trying to walk all together? Because it's not as easy, perhaps, as some would suggest that it is. Oh, just write a billion dollar check for the breakup fee and you can wipe your hands of this whole mess and just go on to do whatever you do. That's right. He has to have cause. I mean, there are still scenarios

where he would not wind up owning the company, you know, even in that case. But at the end of the day, it does seem like a price cut is more likely. Why go through all of this only to try to walk away after lining up all the funding? I mean, as recently as a couple of days ago, he was still lining up new investors to participate with him in this bid. So the only asterisk I put on that is that this is a highly volatile, unpredictable person. And there are some days when I don't even know if he knows what he's going to do next. Your reaction to what Gordon Haskett, the analyst over there, tweeted, you know, Twitter's made mention of this five percent spam figure in past filings. Musk has evidently decided to weaponize it. That's their word. He has since tweeted he's still committed. We don't see that tweet being worth the price of digital paper it was printed on.

They're clearly casting skepticism that they think that he really is still committed. Do you truly believe he is? Well, I guess I do. Like if I were to sort of, you know, guns on my head, I do think that he still wants to be in control of this company. But, you know, to that tweet, Elon very purposefully decided not to do any real due diligence on this company. He chose not to look at any non-public information about it before he spent $44 billion on it. So that's one more reason to be incredulous at the idea that bots have anything to do with what's going on. Yeah, you actually, and by the way, Twitter CEO Parag Agarwal, he tweeted out some interesting things a little while ago in which he says, while I expect the deal to close, we need to prepare for all scenarios and always do what's right for Twitter.

I'm accountable for leading and operating Twitter, and our job is to build a stronger Twitter every day. He really, you know, he discusses the fact that they made some leadership changes over the last 24 hours that he felt he had a need to address the market for today. You have been doing your own reporting inside Twitter in which you suggest employees told me today, quote, there's a mood of exhaustion. Rank and file staffers have little to no faith in the board or CEO Agrawal. Expand on that. Well, so yesterday, Parag fired Twitter's longtime head of product, Kayvon Bakefour, who had been doing, frankly, a really good job, was one of the sort of most productive people at the entire company. Parag also fired the head of revenue.

Now, if you really expect that this deal is going to close in two to three months and Parag is going to bounce out the door and make $39 million for his troubles, Why would he be cleaning house right now? So no one inside Twitter that I've spoken to really has a good theory on why you would do this now and not wait a little bit longer to see what's actually happening with this acquisition. Same questions I would have. Why would you do that now if you truly do believe that the acquisition is going to close? And if you were going to say what you did, why didn't you do it yesterday after you made these leadership changes? Or are you motivated by the fact that Musk did what he did? And I know you're laughing because, I mean, I think a lot of people are thinking about that. I mentioned Ives is next to me, still to my left.

Tesla shares are higher today. Twitter goes down. Tesla goes up for obvious reasons. What does this mean, big picture, for Tesla shareholders? And we've talked about it. Since it's down $300 billion, it's down 300 billion. It's changed his mind. I mean, this is a dog ate the homework excuse. I mean, fundamentally in terms of him trying to either get out of the deal, walk for a billion or basically talk down price. And look,

it's been a circus show, obviously, across the board for Tesla holders as an overhang. And then even when you look at the Twitter response today, look, unfortunately, it feels like watching the movie Airplane. It's just been a debacle situation. And Musk has obviously just had fuel to fire. I mean, there's been so much cynicism around this to begin with and skepticism, if you will, some suggesting that the whole thing was a ruse to begin with to be able to sell some Tesla stock at or near the high. What's your response to that? My response is Tesla at 1,000. He was confident to get the deal done, leveraged some Tesla shares.

Now, all of a sudden, the stock's down 300 billion. Changes the mindset. And also, when you start to all of a sudden get, whether it's margin calls or just more Tesla stock that he's going to have to ultimately add, that's why now you're starting to look for ways to get out of the deal or significantly talk down the price. And for Twitter, for its board, for its company, I mean,

backs against the wall because right now they're caught between rock and a hard place. But you would think that for Tesla shareholders, this is a good thing, right? I mean, having less of Tesla shares levered to a possible transaction is a good thing if you're the analyst, you know, looking at the stock. It's $100 per share at least overhang. And ultimately, as a Tesla investor, the nightmare scenario always was Musk ultimately buying Twitter because ultimately now you get caught in an ARB situation and it's been overhanging for Tesla.

That's why Tesla investors don't want to see Musk in any capacity at Twitter. It's basically an inverse relationship between Tesla and Twitter. You've heard all of the excuses today, Casey. He makes his own rules. He doesn't care what anybody thinks. He usually gets away with it. So why should this be any different in the way he's thinking? But seriously, what about his cred, given where we are now and obviously unbeknownst to us how this truly is going to end up? I mean, I think you said it. On one hand, this would seem to damage his credibility in the public eye. But on the other hand, so what? He's still the richest man in the world. He does what he wants. Regulators might throw a fine at him here or there.

But it seems like in this case, he really does still have the upper hand. One note that I would sort of put on that is keep in mind just how weak Twitter's board and management are. They rolled over for this offer basically as soon as it came in the door, even though the stock had been trading much higher as recently as a few months ago.

So if Elon wants to renegotiate now, as crazy as it seems, given that he's already signed the contract, it's not outside the realm of possibility at all. I don't think it's crazy at all. Why should he pay $54.20 for a stock that's only at $40.72 because he got involved in the first place and is still hanging around? Given where the environment is for tech stocks, you could make an argument that it should be even lower or it could be lower than this. So why should he pay 5420 in this environment? Well, you know, look, if you or I buy a house

and then the value of the house goes down while we're still closing, we can't come along and say, actually, I'd rather pay half for it, right? We've already signed a contract, but we're mere mortals and the laws of physics don't seem to apply to this guy. So we could very well get away with it.

I don't know. Contracts fall through in the housing market all the time, it seems. Last thought to you on what this does to Musk, his credibility, if anything, and how that relates to how you rate a Tesla share. I mean, this has been a black eye for Musk and ultimately for Tesla. The fear now is that this starts to cascade in terms of the more and more distraction. At a time, you need him more than you ever have because what we're seeing with China as well as just overall supply chain.

So I think it's just a very, as I said, it's a circus show. You guys are fun to kick this around with. Dan Ives, thank you very much. Casey Newton, I appreciate it too. Always fun with you as well. I'll see you again soon. Let's get to our Twitter question of the day. We're asking, will Elon Musk ultimately back out of his bid to buy Twitter? You can head to at CNBC Overtime. This is a very simple poll today.

A, yes. B, no. We'll bring you the results later on in the show. Up next, betting on a bigger breakout. Ed Yardeni says stocks are heading back to all time highs. I did a double take when I read that today. He's going to tell you why. We're going to test him on that thesis as well when we come back on the OT. We're back in overtime. It's time for a CNBC News Update with Kelly Evans. Hey, Kel. The case that has generated outrage across the medical community, a former nurse who accidentally killed a patient has been sentenced to three years of probation. Radon DeVaught was convicted of criminally negligent homicide

after she mistakenly gave the wrong medication to a patient. And Cordvaught apologized, saying she will be forever haunted by what she did. And not guilty? The plea today from the man facing federal terrorism charges after last month's shooting on a New York City subway train that injured 23 people. The lawyer representing Frank James warned against a rush to judgment in the case. The White House says an envoy for hostage affairs

will be overseeing Russia's detention of WNBA star Brittany Griner on drug charges. The court says she must remain in custody for another month now. Her lawyer thinks that's an indication her trial could start soon. And Robert McFarlane, the top aide to Ronald Reagan, who accepted legal responsibility for his role in the Iran-Contra scandal, is dead at the age of 84. Overcome by guilt, he unsuccessfully attempted suicide in 1987 because he felt he had so let down the country. Tonight on the news, intimate accounts of teenagers about their

struggles with anxiety, depression, and suicidal thoughts. I'm in for Shepard Smith, so I will see you guys then. Scott, back to you. All right, Kel, we'll see you then. Look forward to that. That's Kelly Evans joining us right there. All right, seems crazy to ask this question given the market environment right now, but is it really possible that stocks could hit new highs next year? Our next guest suggests it's likely. Ed Yardeni, the president of Yardeni Research, joins us now in overtime. Ed, it's good to see you. I got to say, I'm sure people hear this, their eyes roll and they're like, Yardeni's always bullish. What do I expect? But seriously, why? How can we? I'm serious. I mean, how? How are we going to get to new highs,

given all of the headwinds blowing around us, Ed? Yeah, Scott, I haven't been particularly bullish on this year. I've been thinking we're going to have a lot of volatility. It turns out that a lot of volatility has been on the downside. But I believe that earnings are going to continue to be very strong. If you look at analysts' consensus expectations, they continue to raise their outlook for both revenues and earnings. Now, some of that is the fact that stocks do a pretty good job. Companies do a pretty good job of being inflation hedges. The revenues obviously go up with prices. But what's really been phenomenal is profit margins are staying at all-time record highs.

I think companies are doing a phenomenal job of managing their profit margin. And that's really their number one job. Ever since 2008, my sense has been that companies are managing to the profit margin. I think they're going to find the revenues growth to leverage up with record profit margins. And so I think it's going to be earnings led. Right now, we're seeing a valuation led meltdown. But while that's happening, analysts continue to raise their numbers. Now, of course, the analysts don't see recessions happening. So that's my job. I don't think we're going to get a recession this year or next year. And so I agree with the

analysts about their optimism for earnings. Well, you've sort of led me into my next question. I mean, I have the greatest amount of faith in the companies of this country, too. Right. Maybe they do a better job than the analysts, though, Ed, in the fact that maybe the analysts are a little delusional, with all due respect, not speaking of you directly, indirectly, where earnings are going to go. I mean, for real, maybe the maybe the analysts just haven't caught up to everybody else yet. And there's no way there's no way that earnings expectations can remain where they are. Well, actually, I think there is a way, as I mentioned before, I think we're going to see two hundred and forty

dollars a share for the S&P 500 this year, $260 a share next year. And some of that is the fact that as inflation has been going higher, that's been reflected in revenues and in earnings. And the only way it can be reflected in earnings is if, in fact, profit margins are staying at an all-time record high. Look, Scott, we had a slight decline in real GDP in the first quarter. It was a very funky kind of quarter. But the reality is capital spending was at an all-time record high. Consumer spending was at an all-time record high. Now, you can come back to me and say that always happens. You always get record highs right before recessions. But maybe I find myself in the uncomfortable position of actually agreeing with

Fed officials, particularly Fed Chair Powell, who's recently said consumers are in good shape, businesses are in good shape, the banks are in great shape. There's no particular reason why this economy is going to go into a recession with interest rates having gone up already. So I think inflation is going to moderate. I think that'll help a lot in terms of stabilizing the forward P.E. The forward P.E. came down to about 16, which is what I thought would be the downside of the range. And I think the range is actually 16 to 19 looking into next year. I think you're going to find that companies are going to deliver better than expected earnings and investors are going to be surprised by that.

It's investors who are taking the earnings down, their expectations down. Well, can you blame them? I mean, and you cite the Fed chair. You cite the Fed chair, Ed. Yesterday, the Fed chair didn't exactly instill the most confidence in investors when even he said he

wasn't sure if they can engineer a soft landing, that it's going to be difficult. I mean, that's the Fed chair. And I don't like to be very short term about it. But as you said, this is we had a really nice Friday today. And that's after the kind of scary talk that we got of the Fed chair, the Fed chair basically said that he can't control everything. He'd like to have a soft landing. I happen to think that we are going to get a soft landing. I think we're already there with real GDP growth running about 2%. I think what people are missing with all the pessimism is companies are doing a great job of increasing productivity.

I think you're going to see it more and more going into next year. The reality is the biggest problem companies have right now is labor shortages. And those are chronic. Companies are starting to realize they're chronic and they are spending like mad on technology and capital spending. So here we have all these technology stocks getting trashed as the fundamentals are getting better, stronger and stronger. Last question. This little bit, I hesitate to even call it a rally because, you know, you can have egg on your face or omelet all over your suit in the matter of an instant in this kind of market. But this whatever we put together today and we managed to hold it in large part to the

close, does it have any kind of staying power? Do you have any confidence in that? Well, the the the positive I take out of it is I think that we've seen a tremendous amount of air come out of speculative bubbles over the past year. It started last year with air coming out of the mem stocks, coming out of the SPACs and the Cathie Woods kind of portfolio. And so we finally got around to taking some air out of this speculative excess that we've had perhaps in the big cap technology names. So now that they're in a bear market, I think it's really been quite extraordinary how much air has come out of speculative bubbles without causing a credit crunch, without causing a recession, with the economy still in fundamentally good shape.

So I'm betting on the economy. I'm betting on earnings. And I'm looking long term. I'm not looking today's action or next week's action. I think a year from now and over the next few years, we're going to see still higher highs in the S&P 500. This is a correction. It couldn't turn out to be a bear market like 1987, but I don't think it's going to be anything like 2008. I think this is a buying opportunity.

Some would say it's already a bear market. Some would say that. Look, you're not afraid to make a big call and better for us and our viewers. You're certainly not afraid to come on and argue your points and make your case. And we appreciate that. Ed, you be well. Thank you, Scott. All right. That's Ed Yardeni joining us there. Up next, the bull case for biotech. That sector is outperforming the broader market today. So is a bigger breakout building? We'll debate that. But first, Christina Parts of Nevelos is sweeping up some staggering stats as we close out a wild week. Christina?

Now, wild week is an understatement because stocks roared back today, but they just couldn't cut it on a weekly basis. I'll break down the winners and losers along with a few stock pops. Hint, it involves gambling. Stay with us after this quick break. We're back in overtime. Stocks rallying to finish out a very volatile week for your money. Christina Partsinovoulos has our rapid recap. Hi, Christina. Scott, we did it.

We made it through another stomach-turning market week. Stocks rallied today thanks to a little help from various Fed speakers who indicated bigger rate hikes are off the table for now. The Dow, though, is having its worst week since January, down just over about 2% today, its longest losing streak. I should say 2% this week. Its longest losing streak since 2001, the year Shrek hit movie theaters. The S&P 500 closing in the red for the week, down over 2% as well, 2.4%. Its longest losing streak in 11 years. And then last but not least, the Nasdaq ended the week in the red, down almost 2.5%, its longest losing streak in a decade. Consumer Staples was the only sector to record a weekly

gain, with real estate and financials the weakest among the group this week. A notable mover today, though, vegan meat maker Beyond Meat. The stock reversing course today, gaining 24, almost 25% after trading below its IPO price on Thursday. The company reported a bigger quarterly loss, but you got a lot of people that got in today. And then lastly, Las Vegas Sands also soaring above 15 percent today. It appears the end might be in sight for Shanghai lockdown. So the entire sector casino stocks did really well to end off the day. Scott?

Yeah, I was looking at some of those stocks, Christina, like, you know, beyond, as you said, Upstart was up 16% today. So a lot of those stocks over the last couple of days that got annihilated had a big, big move later in the day yesterday and then today. Do we call them bottom feeders or not? Call them whatever you want. Call them whatever you want. Christina Parts and Neers or not? Call them whatever you want.

Call them whatever you want. Christina Partsenevelos, you call them whatever you want. Your rapid recap. Have a good weekend. Up next, the bull case for biotech. One halftime committee member is banking on a big rally for that sector. We'll debate it in today's halftime overtime. But first, a message from Dan Suzuki of Richard Bernstein Advisors as CNBC celebrates Asian American and Pacific Islander heritage.

My advice to the community would be don't be afraid to stick out. Prove to people that you're unique and that you're much more than your racial identity. And don't forget that it's a two-way street. Just as you want to feel included in all society's circles, make sure that you're doing your part to include others into your circles, because how can you expect them to see the beauty of your culture and your individual personality unless you allow them to get close enough to see it for themselves? In today's Halftime Overtime, a bullish call on biotech. Halftime's Bryn Talkington making the case for that sector after its 25 percent decline this

year and why it is now shaping up in her estimation as a longer term buying opportunity. I think it is a fat pitch right now. You have crypto and biotech are trading very closely together. And if you think about it, people want cash flow, not cash burn right now. But, you know, Lizanne Saunders had a great tweet the other day where more than 20 percent of NASDAQ biotech members are trading for less than cash, less than cash. The last time you saw this was going back to 2002. So once again, if you can sift through the ashes or just buy like IBB or what have you, I think there's going to be some huge opportunities, but it's going to take some time. Let's now bring in Aas Asset Management CEO, Carrie Firestone. Carrie,

it's good to see you as always. Thank you, Scott. You have a tremendous amount of experience in this space, right? You used to run this area of funds for Fidelity. What do you make of this call right here? So, Scott, I think it's very interesting. Of course, the biotech stocks have been clobbered outside of Amgen and Vertex. I think the small cap stocks on average are down 60 percent or more since February 3rd. And we know that big pharma desperately needs good new drugs. They can't come up with enough for themselves. And biotech is the breeding ground for pharma, for their ideas. And it costs a billion dollars to bring a drug to market, and so biotech companies start them, and then the bigger guys come in and swipe them up and take them to fruition.

So I think on the one hand it makes sense. We just have Pfizer by Biohaven for $14 billion, but that was a drug that was approved, a very good migraine drug. The advantage to a basket approach like buying the XBI, the BTK, the IBP, is that you don't have to, as an individual or even as a portfolio manager, make a decision if you don't have the capability of what drug is going to work, because 1% of drugs that enter clinical trials, you know, get to development. I mean, or maybe less than 1%. So, yeah, buying that basket approach is probably a good idea. But don't be fooled with the idea that if they have a stock price with cash more than that, that's the panacea

because companies rely on venture, on new stocks, on deals with pharma to have the money to operate since they're not profitable. They don't, well, forget about profitable, they don't have any sales. So they need many years of cash. They need many years of cash in order to get somewhere. That's why what Bryn said was so interesting to me as it relates to this conversation we're having. People want cash flow, not cash burn. I mean, let's be honest. You're describing an industry where, at least for many, there is big cash burn because of the desire to develop life-changing drugs. We totally get that. Give me your best name in this space right now that you like. Yeah, well, I think of the large cap names.

You know, if you look at Vertex, which had a drop just recently because it's not a stock we own, but because of their diabetes drug, there were only two patients or perhaps three that had been dosed when it worked. That patient didn't need insulin, but the stock came down because the FDA said they needed more data or they needed to slow down on the dosing. And that right here is, I think, attractively priced at the multiple. And then, you know, if you're looking for something that's, you know, on the riskier side, Moderna. I mean, Moderna is a stock that has the platform mRNA. It's come down. I mean, it's one of the worst performing stocks over the last several months, but was the best performing stock, I think, in 2021 of the S&P.

So those are two names on different sides of the spectrum that I think are interesting here. But again, I think a basket approach is probably a decent and sensible idea given the high risk. It's very high risk and high reward in this industry. 100%. Carrie Firestone, have a great weekend. I'll see you soon. Thanks for joining us here in the OT. Up next is our two minute drill. Two minute drill time. Joining us now is Jessica Inskib, director at Options Play. Jessica, welcome. It's good to see you. I want to know what you think we're doing here. Are we are we bottoming? Did we bottom? Are we rallying? Where do you think we're going? Yeah, I think we're close to it. So according to the Dow theory, you look for a period of

consolidation before there's a trend reversal of some sort. So that's what I'm looking for, is that confirmation. There's a strong support zone based on Fibonacci retracement levels back in October 20 from 3484 to 437. I need to see that maintained to call that a bottom right at 3484 and then broken through 437 in order to see that as some momentum in a rally. So I think we're close. I just need some confirmation. Cautiously optimistic is the word I would use. Yeah, it sounds like you're not ready to declare a bottom quite yet. Let's talk about a pick you like. It's TMO. Is that Thermo Fisher? That it is. Yes. So I like the biotech sector as a whole. It offers really great secular growth and innovation like the tech sector, but with less global supply chain issues, which is something

that's really a concern with the macro environment. This one has a great profit margin of 24 and a half percent. It consistently beats earnings. Its net income is increasing faster than revenue and it's outperforming the S&P 500. So from a fundamental perspective, TMO is pick number one. All right. Good time. Good weekend for you, Jessica Inskip. Thank you so much for being here. Option play director. We will see you again soon. Up next is Santoli's last word when we come back. To the results of our Twitter question, we asked, will Elon Musk ultimately back out of his bid to buy Twitter? The majority of you said yes. Fifty nine percent of you think that he backs out. Shares ended the day just under

forty one. That is well below the deal price of fifty four twenty. Mike Santoli is with us for his last word. The last two Fridays have been horrible. This one, not so much. How does that factor into your last word? We haven't had a real good Friday. I think it was since early April or something like that. I think it's what matters next after a week like this is the key question. We thought inflation data was going to be the tell this week.

Not really. It was kind of a push. The bond market didn't react much to it. It really is about the tactical technical concerns we built up a ton of these kind of oversold fuel that the market can burn up with higher prices a lot of good things about this rally today i think you can say uh just how broad it was the fact that yesterday's low is looking okay but how far does that get you is the big question well you raised this issue earlier it's a good point about the up volume was better than 90 percent. Just like you look for confirmation to the downside that, you know, maybe there's a flush.

Yeah, exactly. Look, I mean, you can say, yes, that's great. You know, it's this nice little breath. But even that, I think bulls and bears alike agree you have maybe 5 percent upside, and it still doesn't change the overall story. So there's a good wall of worry out there. We'll see if the market can climb it. A lot of Fed speak coming up, too. That's the other piece of it, yeah.

Buckle your seatbelts. We'll see what next week brings. Thank you, as always. Mark Lazzari, Avenue Capital. He'll be with us exclusively on Monday. We can't wait for that. Hope you all have a great weekend. I'll see you then.