Closing Bell - Closing Bell Overtime: Can Montana Actually Ban TikTok? With David Sacks & Sal Khan On Bringing AI To Education 5/19/23

Episode Date: May 19, 2023

Indices closed lower, snapping a two-day win streak. G Squared Private Wealth’s Victoria Greene and BNP Paribas’ Carl Riccadonna break down the market action. After testifying in front of the Senate oversight committee on financial regulation, Acting Comptroller of the Currency Michael Hsu joins to talk steps to restore confidence in the banking system. David Sacks, Craft Ventures co-founder, on Montana’s TikTok ban and if there is any chance it actually sticks, plus investing in China during high geopolitical tensions. Cadre CEO Ryan Williams discusses opportunities in the distressed commercial real estate sector and where he sees the most upside. Plus, how Blue Origin landed a NASA contract and Khan Academy Founder Sal Khan on bringing AI to education. 

A down day, but an up week for stocks. That's the scorecard on Wall Street, but the action is just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan with John Fort. Coming up this hour, acting comptroller of the currency Michael Hsu joins us to talk about the latest drama in the regional banks that certainly had an impact on the markets today, as Janet Yellen reportedly raises a red flag about the potential need for more mergers. Plus, we're going to talk to Khan Academy founder Sal Khan about how artificial intelligence is changing the game for education companies. Markets turning lower in midday trading after downbeat debt ceiling negotiations, or at least some commentary about that. Also, some hawkish talk from Fed Chair Powell, if you want to call it that, but recovering some of the losses by the afternoon. Let's get to the action with our panel. Joining us now is Victoria Green, G-Squared private wealth CIO and a CNBC contributor.

We also have Carl Riccadonna, BNP Paribas, chief U.S. economist for Markets360. Good afternoon to you both. Victoria, I'll start with you. The fact that we did see, and with the S&P, we were down fractionally. We ended down around 4,193. Technicals have been in focus, particularly the last 24 hours or so. Your thoughts on these levels and what moves us in either direction in a more meaningful way. Absolutely. Thanks, Morgan. There's been so much optimism lately. The debt ceiling is getting done.

We're bursting above 4,200. I have to point out that the close today, right 4,200 is exactly what happened in February. We had a brief step above it. Everybody got excited. We cannot hold the technical level. And again, it becomes this resistance that is held. We have these lines in the sand. It's going to be difficult for them to process in the negotiations. The Republicans want to roll back and they want actual cuts. The Democrats want to freeze and they are very hard pressed to be able to get their constituents together for a vote. So I think you're going to see a rough week ahead. But I have to say, again, on a technical basis, this failure right at 4200 is a lot like what happened in February.

And I think it bodes poorly. Yes, we had an up week, finally a little bit of pressure off. But we're still stuck. We cannot break out of this trading range. And a failure here technically is a bear signal, at least in the short term. Yeah. Carl, I mean, we had a lot of Fed speak today. You had some more hawkish tilt to some of the officials that spoke yesterday. You had Powell this morning, too, seen as opening the door, continuing to maybe hold the door cracked open to a pause in rate hikes as well.

Meantime, pretty big move in the two-year note in terms of the yield moving higher this week. How to make sense, I guess I should say, of some of the different commentary we're getting right now and what it means for the market? Well, I think what we saw over the course of the last couple of days was really the hawks are trying to push to have some optionality around that June 14th FOMC meeting. So from Lori Logan at the Dallas Fed through a couple of other more hawkish members of the committee, they're really trying to make the case that maybe we need to keep going. Maybe not at the June meeting, maybe at some later meeting this year, but they're pushing for a need to do more as they're not seeing the improvement they need to see in the economic data, in particular in the inflation data. Now, they've been kind of trying to push to maybe get

it towards 50-50 odds of a rate hike at the June meeting. And the market has been very resistant to that. And I suspect a big part of that is the dark cloud of the debt ceiling looming just ahead of that meeting, possibly as early as June 1st. And so, you know, it's a tug of war, a push, push, push between the two. And then today, of course, as Jerome Powell was speaking and his remarks were strikingly similar to what he said at the May press conference. I don't know. The only new information there was that there was no news on that front. But at the same time, we had Janet Yellen talking about bank consolidation and Republicans walking out of the negotiations, and that pushed that probability of rate hikes back down.

I think people are falsely attributing that to the Powell comments, and it was really those other factors. Okay, so Victoria, Carl mentions the debt ceiling risk. And I wonder if the debt ceiling risk isn't so much default as repricing. You know, like when you're having a really good dream, you don't want to wake up, but your spouse rolls over or the cat meows or something, and then you're out of it. Like, is there the risk that this brinksmanship around the debt ceiling actually just causes a repricing across the market? And so even if things do get solved, if there's a bounce back, it's not as strong as where we are today.

Yeah. And I think the markets are absorbing the fact that we are going to maybe see a more acrimonious week next week than we thought. Wednesday and Thursday, everybody loved each other and the deal was going to get done. They would have the right people in the room working on it. And then reality hit today that they're still a little farther apart. I tend to think it will get done, but it's going to be dragged out. And quite frankly, politically, it is in the Republicans' best interest to kind of make this hurt. They have a little bit of leverage. It would be horrible to default. I have to say that is a long lasting scar if we default. It's not just today, but you're talking 30, 50 years down the road. I have to say there's a long lasting scar if we default. It's not just today,

but you're talking 30, 50 years down the road. You have all these increased costs. You know, can you imagine if we get downgraded again? So I think the political games are very dangerous here. But you have a lot of factors coming into this, and that's going to drive what happens with the Fed hikes. But I do think I like to say eventually the adults are going to show up to the party and we will get it done. It just might be a little painful getting us there. Carl, quickly, you've described as what we're experiencing as a gradual downturn. I'm guessing you still feel that way after earnings from Walmart, Target and others. Is it gradual like soft landing or you think too gradual like the Fed might actually have to hike again?

Well, it's first a little and then a lot. So I think what we're seeing now is a deceleration. The economy grew about 1% in the first quarter. I'm looking for a similar growth profile in the second quarter. But then as we go into the back half of the year, I think it actually turns into outright contraction and recession. We're not there just yet. But if we look at the pace of hiring, consumer trends, those headlines you mentioned from Target and Home Depot, things are slowing. Okay. Victoria, Carl, thank you. Thanks, John.

Now we've got CNBC Senior Markets Commentator Michael Santoli at the New York Stock Exchange. What's on your radar, Mike? Well, John, you guys were just talking about these levels we managed to touch this week in the S&P 500, 4,200. On a longer-term chart, you can see that it essentially gets the index around halfway back to the peak from the trough last year. So rough numbers, 4,800, down below 3,600, and now 42. So kind of in the middle. We gained a little more than half of it. What I also find interesting is a few things.

First of all, every pullback has stopped at a higher level so far this year. And it's also been a gradual grind up here this time as opposed to last August when you really had that really kind of aggressive, steep climb into it and then a sharp sell off. So we'll see if that actually allows the market to absorb some of these concerns that we might be facing with the debt ceiling and everything else. Now, also noteworthy, it is a global move higher in equities. Take a look at how the Japanese and German stock markets have done relative to the S&P 500 on a one year basis. And you see outperforming, not only outperforming, but accelerating recently. So clearly there's a sense out there of, you know, global liquidity is not getting any worse. Maybe yields have topped globally, at least in the big picture way. And you do have some traction in global growth, perhaps with with China coming on and Europe not being as bad as for the other.

Quick point is nobody seems to complain about the German DAX being too concentrated in a few stocks when almost 20 percent of it is SAP and Siemens, much more than our two big ones, Apple and Microsoft, are within the S&P 500. And actually, Japan similarly top heavy as well with, I think, fast retail and Tokyo Electron. So, Mike, we only got one more full week of trading left in May. And, you know, then we got June and then the second half. So is the bar after all these earnings and guidance relatively high or relatively low with that grind up for what we expect, investors expect out of the second half? I think by definition to me, when valuations go up, the bar goes up. And that has been what's happened this year. So you can't really kind of accept too much in the way of

eroding earnings estimates from here, I would think, broadly speaking. On the other hand, just sort of structurally, the market has kind of looked at all these macro concerns, tried to assess them. We've been on recession watch for a year now. It hasn't come to pass. There's still a pretty solid wall of worry. People seem somewhat underexposed to stocks if they're not going to fall away pretty quickly and let them in lower. So I think there's a pretty decent push pull. That's that's the reason we're staying up at these levels, even if, you know, we're not going to compound the S&P likely at whatever we're doing now, like close to a 30 percent annualized pace after this week's gains. Yeah.

The concentration stats getting my attention, too, for some of these global indexes. I mean, Siemens and SAP, for example, both big movers related to earnings or earnings pre-announcements. Mike Santoli, we'll see you later in the hour. Regional bank stocks taking a hit midday after reports said Janet Yellen flagged the possible need for more mergers. We're going to discuss that with acting comptroller of the currency, Michael Su, who testified, I'm going to say these words, about the failures of Silicon Valley and signature banks. Overtime is back in two. Welcome back to Overtime. Treasury Secretary Janet Yellen saying today that more bank mergers may be necessary to combat confidence and worries in the industry,

according to a report from CNN. This sent the regional banking ETF, the KRE, down sharply in midday trading. It finished the day down about 2 percent. This coming after yesterday's Senate oversight hearing on financial regulators. Here is Senator Elizabeth Warren asking why a large bank like J.P. Morgan was allowed to buy First Republic's assets. The single biggest threat to the U.S. banking system is concentration. We're all pushing harder for merger guidelines so that we don't get more concentration in the banking system. You are the one person who was supposed to use judgment on the question of, as between multiple sales, which one was the right one to go with and which one presented more risk to the banking

system. According to your own metric, you chose the one that gives us more concentration in the system. I am very troubled by that decision. All right. Well, joining us now is the man who Senator Warren was questioning there, Michael Hsu, the CEO or acting the acting comptroller of the currency. And sorry, our thing is a little messed up. You're acting comptroller of the currency. It's great to have you on right now. I do want to get your reaction to that soundbite we just played and what you had to say in front of lawmakers yesterday. Thanks so much for having me.

What's really important when there's a failed bank situation, especially where that bank is fairly large, is that financial stability is first. We've got rules, we've got laws, we've got to follow those. And in addition, we've got to make sure that the government's acting in a coordinated and timely manner, that losses to the deposit insurance fund are minimized, and that the risk of contagion and uncertainty is kept in check. That's what drove my decision that weekend. Okay. So we have had some commentary. There was the reports today about

Secretary Yellen talking about the possibility of more bank mergers. She had discussed that actually earlier in the week in an interview, too. This came up yesterday in front of lawmakers. You made some comments as well. Just the fact that we're seeing some of these headlines, sent regional banks lower, in the sense being from investors, that perhaps there was still more turmoil, more pain among the regional banks,

and that would be triggering potentially a wave of M&A that regulators would be open to. Is that the right way to see this, given everything that we've had play out in the sector in recent months? I'm not sure. Let me first say the banking sector as a whole is sound and resilient. It's strong. It's got capital. It's got liquidity. We've been on the balls of our feet with banks in terms of their risk management. So that's not the primary concern right now. Now, we do need and want a diverse and vibrant banking system, and that includes healthy mergers that are pro-community, pro-competition, pro-financial stability. Those are the kinds of things that we're focused on and we're very open-minded to. Practically, Michael, what does that mean about on the balls of their feet?

I mean, you said that stronger resiliency requirements, stronger resolvability requirements would have helped the situation that we've seen over the past couple of months. So when you go into these banks over the past several weeks and you're kind of pressing them onto the balls of their feet, what is it that you're finding? And I know you don't want to, you know, necessarily mention details, but what kinds of things are you finding and helping them to fix at this stage related to those things? So when I took this job a couple years ago,

I made guarding against complacency one of my top priorities. And what does that mean? That means in terms of risk management, always being very diligent and vigilant in identifying the risk, measuring it, managing it, monitoring it. I think what you saw with the bank failures was that there was some textbook mismanagement. And being on the balls of defeat means kind of kicking the tires and constantly going over your assumptions to say, is this a prudent loan? Is this a prudent set of activities? Are we taking risks that we can manage and deal with? And that's what I'm talking about. Are you finding any complacency? When we do, we deal with it swiftly. You know, that's, it's a big banking system, so you can't say, you know, yep. Yeah, yeah, okay.

Just wondering, if you do, you do and you're dealing with it. Now, tell me about deposit insurance. You mentioned that as something that should be updated. In what way do you think it should be? So, the FDIC put out a report. It's a really good report that lays out both the history of deposit insurance and, more importantly, some of the tradeoffs for how we move forward. Clearly, the deposit insurance needs to be updated. But there are some tradeoffs between financial stability, moral hazard, costs to the system that have to be weighed.

And that report does a really good job. Should you agree with that report, or are there ways that you specifically think it should be updated? Should small businesses have access to higher insurance, and how much higher? I think the report does a really good job. There's that third option on targeted expansion for business payment accounts. I think that deserves very careful consideration. So in light of that, I wonder how you think regulations are going to evolve and how quickly, given the fact that, as we've just seen with SVB as an example, bank runs, for example, or these crises of confidence can happen very, very quickly in the course of days or even hours. So how quickly can regulations catch up? So I should start off

by saying the system is sound and resilient. Depositors' money, the money is safe. Your money is safe. And that's because of the things, the actions that banks have taken, the supervisors have taken to ensure that. Medium to long term, I do think that large banks need to be more resilient and more resolvable. We're going to work through the normal procedures and processes for notice and comment to get there. That's something we're working with the other banking agencies on. All right. Michael, thank you. Comptroller of the currency, Michael Hsu. Thanks so much for having me.

Coming up, venture capitalist and all-in podcast co-host David Sachs joins us to talk about this week's move from Montana to ban TikTok. Plus, his take on new reports that Meta is working on a Twitter competitor when we come right back. Welcome back to Overtime. Morgan Stanley, CEO of James Gorman, announcing earlier today he plans to step down within the next 12 months after 13 years in the role. Mike Santoli returns with a look at how the stock has performed during his tenure. Hi, Mike. Hey, Morgan. Yeah, quite well, actually, certainly relative to Morgan Stanley's traditional direct rival Goldman Sachs. Take a look here since right around the time that James Gorman did assume the CEO role. That was back in 2010, actually beginning January 2010.

And you see it's actually performed roughly in line with J.P. Morgan, which, of course, is kind of the class of the banking industry. It's valued now for its kind of stability, the more predictable wealth management model. And Goldman Sachs, of course, with less leverage in the system, less ability to make huge profits on the trading side of things, has lagged to some degree. Now, this is also reflected in the valuations assigned to these three companies. Take a look at the price to book value of each one of them over that same period of time. And it's gone along a similar path. We at CNBC know about the Morgan premium, always highly value the Morgans around here. And you see that JP and Morgan Stanley and Morgan Stanley are roughly similar in terms of about one point four times book value, really leaving Goldman Sachs behind. So at this point, it's pretty much a vote yes for Gorman strategy, which involved, by the way, buying Smith Barney's half of this retail brokerage joint venture years ago,

which was considered to be kind of an overpay and a little bit risky. But it's definitely paid off in the end, Morgan. Yeah, I like this whole idea of Morgan premiums. Well, you might. I'm into it. I'm into it. I mean, mind you, I had a little bit of my own Ron Burgundy moment earlier today on the show, but I think there's still a premium to be had. I'm just curious.

I mean, looking at JP Morgan, does anything even remotely come close if you were to pull this out and just and just look at the tenures of all the different current CEOs of all the biggest banks? No, certainly not. And what's always fun is to see how J.P. Morgan itself portrays its stock performance under Jamie Dimon. It goes back to Bank One, which Jamie Dimon, of course, was CEO of, and then he merged it into Chase and J.P. Morgan. And so going all the way back to the mid 2000s, I guess it is. No, it's pretty much in a league of its own just in terms of being well capitalized and being treated essentially by the federal government as sort of the indispensable bank. But over the shorter periods of time, you actually have seen some of the rivals come close. All right. Mike Santoli, thank you. Yeah. Let's turn to tech.

Meta's Instagram is making a move to take on Twitter, according to a new report, with a new text-based app planned for a summer launch. It's not the first time Meta has looked to replicate competitors. Notable examples include disappearing stories, similar to Snapchat, and Reels, which is similar to TikTok videos. Craft Ventures co-founder and partner David Sachs' notable investments include Meta and Twitter. He joins us now. David, great to have you back on the show. I do want to get your thoughts on this. Is there a market for a competitor to Twitter right now? And do we think Meta is actually developing it? Well, the details on this are still very early, so we don't exactly know what it is or how to react to it. But what's been announced so far, I think, is a little bit contradictory. On the one hand, what they've said is that they're going to integrate with Mastodon.

This is an attempt to kind of reach out to those Twitter users who were upset with Twitter because Elon was basically recommitting the platform to free speech. And so they wanted more censorship, and they're going to Mastodon to get it. And then at the same time, they're saying that this is going to be a decentralized app. It's not going to be a walled garden. So they're going to let anybody in. And I think this is the conundrum is that the only people who are really unhappy with Twitter right now are the people who want, you know, more censorship on the platform. So I don't see why they would want to flock to something that's even more decentralized than than Twitter. Speaking of censorship, David, talk to me about what's

happening with TikTok, the Montana ban, which already has all kinds of legal challenges. It doesn't look likely that this is necessarily going to hold up, but it does show that there's increasing pushback against TikTok's presence here. Yeah, I think that's right. I don't think it's going to survive the legal challenges. I don't think that the way to ban TikTok, if that's what you wanted to do, would be to do it at a state level. That doesn't really make any sense that you would get it when you cross state borders, but you couldn't get it in the state. In practice, they don't really know how to do it. They're trying to basically punish Apple and Google for listing it in its app stores. I think this needs to be tackled at a national level. And I

think that if they are going to do it at a national level, first, they need to prove that this is actually a national security threat. There's been a lot of rhetoric around that, but I would like to see some more proof, more details. The other thing is that you don't ban TikTok by prohibiting Americans from using it. All the punishments so far have fallen on Americans. That's not what we bargained for. If you want to prohibit TikTok from operating in the United States for national security reasons, put the prohibitions on TikTok, not on United States citizens. So what would that look like then? Well, I think you would just have some sort of regulation that would make it very tough for a company like TikTok to operate in the United States. I mean, I think it should be, again, the regulation should be directed at TikTok, not at U.S. citizens. I think the problem with that is

it could be a bill of attainder. So I think they don't really know how to accomplish what they're setting out to accomplish. But I think it would be good for everyone just to take a breath here and again, lay out the case for exactly why this is such a big national security threat, because I don't know that that's been conclusively proven. Yeah. I mean, it does speak to the rising tensions that we're seeing between the U.S. and China, this decoupling, if you will, of tech supply chains as well. And by the way, not just the relationship between the two countries, but even what you're seeing in terms of maybe some crackdowns on Chinese tech companies within that country specifically. I just I wonder what you make

of all of these dynamics and what it means to navigate it as an investor in this tech landscape. Yeah, I think the relationship with China, like you said, it's now become much more conflictual. It's seen primarily through the prism of geopolitics now rather than economics. I think if you go back 20 years ago, we primarily saw the relationship between the U.S. and China in terms of economics.

It was seen as a trading relationship. It was sort of seen as a positive-sum game. I think once the prism shifts to geopolitics, you're talking about the balance of power, which is a zero sum game. And I think that as the relationship is now primarily seen as a great power competition or rivalry, it makes doing business there, I think, much tougher. The way we look at it is we've never really done business in China and we've never taken money from China. And from our standpoint, it's just easier to operate that way, to not get to basically not do business with countries that are seen as adversarial to the United States. OK, David, now I can guess where you're going

to place the lion's share of the blame in this debt ceiling drama, because you've been pretty critical of the Biden administration. But I wonder to what extent you think the end game here is going to affect the markets and the tech ecosystem in particular that's been reeling from the SVB aftermath and sort of a repricing of valuations. Well, I think ultimately this debt ceiling showdown will get solved. It's a good thing if the Biden administration is indicating a willingness to negotiate. I think a lot of the things Republicans are asking for are reasonable. For example, clawing back unspent COVID relief funds if we don't need to spend that money because the pandemic is basically over. Why wouldn't

we claw back those funds? I think putting some reasonable caps on the growth rate of spending, I think the Republicans have proposed a 1% growth cap. That makes a lot of sense to me. I mean, we have a massive fiscal deficit and something like $32 trillion in debt. I think putting some reasonable spending constraints on Washington would be a very good thing. And I think that would be ultimately good for the economy. So I think this will probably get worked out. But what about that spending cap? When you want to keep spending on the military and you've got entitlements that are costing more and more, in effect, and you also want to permanently cut revenue, right, and maintain those tax cuts from a couple years back, what you're in effect doing is trying to force smaller government and force some painful cuts

in areas where the other party doesn't want to make them. Is the debt ceiling the time to do that? I think we've got a lot of tough decisions to make as a country, and I think that everyone's going to have to basically share some pain here. But I don't know why we couldn't do something like what we did the last time this came up during the Obama administration, when Obama and the Republicans agreed to the sequester. The sequester actually did a really good job controlling spending for a few years. It basically put a cap on both defense spending and on discretionary spending. So for social programs, and so both Republicans and Democrats had to share some pain there. So I think that actually worked quite well. I think we should look at doing something like that again until our fiscal situation sorts itself

out. Very interesting. We'll see what happens. David Sack, great to have you. Good to be here. Meantime, breaking news from the Fed. Leslie Picker has the details. Leslie. Hi, John. Yes, this is the H8 data that comes out on a weekly basis showing the deposit levels for banks. Interestingly, we are continuing to see some signs of stabilization, although still declines within deposits across commercial banks and large domestic and small domestic banks as well. On the commercial banks in totality, we saw about a $26 billion decline in deposits for the week through May 10th. That's about a decline of 0.15%. Large domestically chartered banks saw declines of about $22 billion, which was a decline of 0.2% for the week through May 10th. Small domestically chartered, though, this is pretty interesting. We saw declines of about $2.6 billion for small domestically

chartered banks. That was a decline of 0.05. So you can see kind of some sense of stabilization. We could turn positive if this trend continues in the near future. But overall, declines of about 0.15 percent for commercial banks in the week through May 10th, John. And small banks doing pretty well, relatively speaking. They're interesting. Leslie, thank you. You got to wonder if it's reflecting the hunt for higher returns now. Indeed. And time now for a CNBC News update with Contessa Brewer. Contessa.

Hey there, John. Hey, Morgan. Nearly 100 wildfires are burning in Western Canada right now. Temperatures are reaching record highs. In fact, massive plumes of smoke are making an appearance now across the U.S. border, dipping into states like Montana, downtown Nebraska and Washington. Several states issued air quality alerts in response. The region normally doesn't see temperatures this high so early in the year.

Brittany Griner is making her long-awaited return to the basketball court tonight with the Phoenix Mercury. She missed the entire WNBA season last year because she was detained in Russia. Russian officials had arrested her at a Moscow airport in February 2022 on drug charges and released her nearly 10 months later as part of a prisoner swap. And football legend Jim Brown has died at the age of 87. The Hall of Famer led the Cleveland Browns to their last NFL title, widely regarded as pro football's greatest running back. He retired at the peak of his career to become an actor and civil rights advocate. A spokesperson for his family says he passed away Thursday in Los Angeles with his wife by his side.

And Morgan, he was really known to me. I first became aware of him and as an illustrious career because he's also an orangeman from Syracuse University, number 44, and they retired that number after he moved on. May he rest in peace. Contessa Brewer, thank you. Up next, from regional bank turmoil to the work from home revolution, a number of factors are clouding the outlook for commercial real estate. We're going to talk about the risks and opportunities with the CEO of real estate investing firm Cadre when Overtime returns. Welcome back.

Commercial real estate prices in the U.S. falling for the first time in more than 10 years since 2011. That's according to Moody's Analytics. This as the sector comes under pressure thanks to banking turmoil and growing resistance about return to office mandates. Joining us now is Ryan Williams, who's the chairman and founder over at Cadre. Ryan, good to see you. Before we launch into that, though, I've got to ask you about this report from the information a couple of weeks ago about fundraising.

Just to clear the air on that, how challenging has it been to fundraise in this environment? And what are your prospects going forward? Hey, John, good to be with you. Thank you for having me. The first thing I'll say is that there's a lot that's reported that's inaccurate. Nearly everything in that article you referenced was inaccurate. But what's not inaccurate is that it is challenging in this environment to raise money, period. Real estate, venture, private equity, I don't care what space or sector you're in.

And so, you know, that is the truth for sure. But in our case, we have significant interest both in the GP as well as the LP side of our business. We've raised significant capital. Nearly every one of our major investors have backed us and continue to back us. And we're focusing now on playing offense. I always say that with volatility comes opportunity. And that's our perspective at Cadre. And we're on the strongest footing we've been since I founded the business.

Well, tell me about opportunity, particularly in office. I think the last time you and I talked, you were saying how multifamily was a bit more of your portfolio. That's been doing well. Maybe you had some target regional office properties that you felt were shielded from what's going on in the broader market.

But I'm starting to see stories about property selling at, you know, an 80 percent discount. Are you looking at those even in places like San Francisco? At what point do you decide as an investor it makes sense to get in? Yeah, it's I would say it's the quiet and calm before the storm, but I think we're past that point. I think we're just on the precipice of the storm. And we're hearing and seeing fire sale-like offers across the board in the office space. And I think that signals a new chapter for the sector. And it's a new chapter in which those who are willing to play offense and invest can capitalize

on some of these dislocations. That's why we have launched a new fund offering. And I think the sectors that are going to be most interesting are micro office assets, for instance, where you may like the tenant base. Others may shy away from the space at large. And so we are sharpshooters. We're micro investors. We think there's always opportunity even in tough macro environments. Others may shy away from the space at large. And so we are sharpshooters. We're micro-investors.

We think there's always opportunity even in tough macro environments. But you've got to be careful, and you have to acknowledge that the fundamental demand picture has changed. People are not returning back five days a week. Genie's out the bottle. And I think that's actually a good thing. And so office as an overall sector, we don't generalize and say we're not touching it, but we're being incredibly selective.

And then on the other side, we're leaning in even more heavily to multifamily and industrial. And on multifamily, you just saw data recently that existing home sales continue to drop, just given lower seller inventory, given where rates are, and inflation. And so, multifamily on a relative basis is a much more attractive sector to be investing in. People are renting longer. I know a lot of folks in my millennial contingent are staying in rentals longer. And we like that play. Yeah. I mean, when you talk about dislocations, it's pretty clear that we have dislocations within the office market. What's not as clear to me is if you're seeing the same sort of meaningful dislocations in things like multifamily or whether more time needs to play

out and you need to see prices come down even further to really have meaningful investments right now. I believe there will be dislocations across and distress across every major asset class, multifamily included. And the reason is, while there may not be stress at the prop co-level, there's going to be stress at the op co-level. Many of these operators, developers, managers invest across asset classes, and they're going to need liquidity. And so if they need liquidity, they're going to look to their crown jewel assets to sell. And multifamily typically fits that bill. So I do think you will begin to see distress.

I also think there are a lot of owners, operators, developers who took on leverage right as the Fed was raising rates and now are facing negative operating leverage across multifamily investments. A lot of the hot markets, you think, you think about those in the southeast and southwest, they're going to cool down pretty quickly as people reckon with this new reality, which is we're in a different capital markets environment. Regional banks are on unsteady footing. And, you know, the rubber is going to meet the road pretty soon when people have to refinance, sell or otherwise. Yeah. Liquidity. It's the word that keeps coming up in every major conversation. Ryan Williams, thanks for joining us. Thank you. The billionaire space race heads to the moon as Jeff Bezos joins Elon Musk in efforts to land astronauts back on the lunar surface.

We've got those details on the other side of this break. Welcome back to Overtime. Jeff Bezos' space company, Blue Origin, winning a key contract today to land humans on the lunar surface as soon as 2029. This is part of NASA's Artemis program. The contract, $3.4 billion for Blue Moon. It's the lunar lander. It's a more than $7 billion project. The company is contributing to those costs. And Bezos tweeting today, quote, honored to be on this journey with NASA to land astronauts on the moon, this time to stay.

He has said that before. Blue Origin leads a team that includes Boeing, Lockheed Martin, and a number of others. And it beat out Leidos-owned Dynetics in this competition. The decision is a second chance for Blue Origin after SpaceX was rather controversially awarded a contract for Starship as a lunar lander back in 2021 worth nearly $3 billion. That decision had elicited legal protests, public jabs between Musk and Bezos, and had even unsuccessful offers coming at the time from Bezos to front billions of dollars in costs for Blue Moon so it could be a part of Artemis.

Now it is actually a part of the Artemis program as of today. So for more involving space, check out my podcast, Manifest Space, which is available wherever you get your podcasts. Morgan, is this just a rocket measuring contest between Bezos and Musk? Or does this mean a business gets built on top of whoever successfully gets to the moon? It's the latter. Maybe it started as the former, but it is the latter. And I don't think you'd see somebody like Bezos a couple of years ago saying, hey, listen, I'll put up $2 billion, I'll put up $3 billion to help develop this lunar lander, just let us be a part of this program, if he didn't see a meaningful business, future business to be had where space and

what's called cislunar orbit is concerned. You're seeing other companies, too, like Lockheed Martin, for example, starting to front the money for its own development of its own commercial space infrastructure for all of these lunar colonization efforts over the coming years as well. OK. So it's not just all right. No. machines is another one it's publicly traded it's small but lunar is the ticker there so there's a number of companies all right great well Chegg shares moving to a different subject nearly cut in half

since CEO Dan Rosen swag warned right here on overtime earlier this month that chat GPT was having an impact on the company's new customer growth rate. Up next, the founder of Khan Academy on how AI is impacting the education industry. Can't wait for this one. We'll get right back. Welcome back. Education nonprofit Khan Academy is piloting a new AI-powered tool called Kanmigo. Get it? Spanish. Guiding students in their studies, even serving as a debate partner.

The kids you see here are asking if Kanmigo can have a sassy debate with them. This move comes as ed tech companies like Chegg grapple with competition from AI, such as ChatGPT. Joining us now, Khan Academy founder, Sal Khan. Sal, great to have you. I'm a bit of a Sal Khan fanboy. For viewers who don't know, Sal's like a movie star. You're like Mr. Rogers for the current generation, say under 25. My question for you on AI to start is this. In the broadband and streaming video era, you sort of exemplified the ability for one person's teaching to have scaled impact. So in the AI era, what is the opportunity for scaled learning and interaction? You know, my whole life journey is a little bit of me trying

to scale myself. Many folks know that Khan Academy started with me tutoring cousins back in 2004. I was a hedge fund analyst back then. My cousins were in New Orleans. I was in Boston. I started tutoring one. Word spread in my family that free tutoring was going on. And before I knew it, I was tutoring 10, 15 cousins. And I really created Khan Academy as a way to scale that one-to-one tutoring model, create exercises. A friend suggested I make videos, to your point. So we started using streaming videos for that. And that kind of got us to where we are at Khan Academy today with millions of learners.

But we always dream that, well, what if one day artificial intelligence is good enough to really emulate what I was able to do with my cousin Nadia back when she was 12 years old? And when OpenAI reached out to us last summer, so this was well before ChatGPT existed, and they were doing their first training run of GPT-4 and I and others within Khan Academy got access to it, we said, we think we're at that point where we could use artificial intelligence to give every student on the planet a one-to-one tutor, an artificially intelligent one-on-one tutor, and every teacher a teaching assistant. So this has the power also, though, to destroy businesses, which is what investors fear is going to happen to Chegg, though Dan Rosenstreich tells us that that's overblown. This is also

expensive. GPT-4, you got to pay for, though you think the cost is going to come down. Who is this really going to be available to? And is this going to perhaps widen inequality if the costs don't come down quickly? This is something we're laser focused on. Our mission as a not-for-profit is free world-class education for anyone, anywhere.

But now we're seeing, you know, we launched Conmigo as part of the GPT-4 launch with OpenAI, and we're seeing the token cost, which you could use a token as maybe two-thirds of a word when you're interacting with one of these large language models. The token cost base, it looks like it's going to end up being between $5 and $15 per user per month. So it's dramatically cheaper than, say, one-on-one tutoring or even some of these online players that try to give students help in some ways. But it's definitely not at the bar that we wanted at where we can make this super accessible to everyone. So we're working on efficiencies on our end. We're working with OpenAI. We're working with Google. We're working with whoever wants to work

with us to figure out how we can bring these costs down so that we can make this as accessible as possible. But I do think it is going to create, I think for the most part in the education space, a healthy disruption. That at the end of the day, you want more people being able to learn. If they find a better solution to do it, that's good for learners and good for teachers. Yeah. Education space could use a healthy disruption too. I know you're piloting this technology with a number of institutions and schools right now. What have you learned so far? What has been working well with the technology

and what still needs to improve? You know, the underlying idea that if, let's say a student is doing their traditional math problem or science problem on Khan Academy, and if you had an artificially intelligent tutor that doesn't give the answer, but says, hey, how would you approach this? Or what do you think the next step is? And helps diagnose the math mistakes that would help engage kids more. They would get less stuck. We're seeing that. We're seeing Conmigo act as a,

I have a master's in computer science. It is a better coding tutor, coding teacher than I am for my own kids. And so there we're seeing kids just run in ways with learning to program on Khan Academy that we haven't seen before. We've piloted with high school students who said the ability to debate topics with the AI in a safe environment, an environment that's not judgmental, has gotten them excited. We have Khan World School, which is an online high school we do with Arizona State University. We have a student from India. Her name is Sanvi. And she was reading The Great Gatsby. And she was wondering why Jay Gatsby keeps looking at the green light. And so she decides, she realizes that she can ask Jay Gatsby because we have simulations of

literary characters within Conmigo. And so she has this long conversation with Jay Gatsby about why he looks at the green light. He says, oh, old sport, it's Daisy Buchanan's light at the end of her dock. So it really is entering into science fiction in terms of level of engagement and being able to unblock students. And of course, as it does enter into science fiction, we're seeing more and more talk about regulations. You had testimony with Sam Altman, for example, in front of lawmakers on the Hill this week. Your thoughts on what needs to happen there? You know, for me, the bar for regulation is we need to understand where the harm is being created and whether regulation is the best way to mitigate that harm. I think all of us have read the science fiction books, so we all have our dystopian visions of how this could go wrong. But I encourage everyone to kind of see

where the pockets of suboptimal things are happening and then think, are there market forces going to solve that? But if not, then maybe regulation makes sense. But not to just regulate out of fear because that might slow down the good actors, but it's definitely not going to slow down the bad actors. Sal Khan, thanks for joining us. I appreciate it.

Thanks for having me. Retail earnings and key economic data will be in focus next week. We're going to tell you about all of the big events that should be on your radar when Overtime returns. Investors awaiting another big week of earnings on Wall Street. Zoom kicks it off Monday. Tuesday, retail and security with Lowe's, Urban Outfitters, Dick's Sporting Goods, and Palo Alto Networks. Wednesday, Kohl's, NVIDIA, and Snowflake. Then Costco, Gap, and Best Buy on Thursday. And Big Lots closes it out. Buckle also on Friday. But also a lot of key data. We're going to get new home sales Tuesday. Fed Minutes Wednesday, the latest reading on first quarter GDP on Thursday. And then Friday before Memorial Day, PCE price index, a key reading on inflation.

Inflation is so important these days to keep track of. Yeah, and of course, this is the Fed's preferred measure. So this is going to be very much in focus next week. It's interesting just looking at this week because we ended the day lower. Regionals were a big part of that, but it was actually a big bump for regional stocks in general this week. And it's also worth noting we've seen a divergence between tech stocks, which have been rallying, and consumer staples, much more defensive, which are now starting to underperform. True. And also the case for growth needs to be made next week. NVIDIA reporting, I mean, the valuation on that, pretty wild.

Palo Alto's also been doing well. Can it continue? All right. Well, that is going to do it for us here at Overtime. Fast Money begins right now.