Closing Bell - Closing Bell Overtime: Charlie Munger Dead At 99 11/28/23

Episode Date: November 28, 2023

Berkshire Hathaway Vice Chairman Charlie Munger passed away at 99. Our Becky Quick has known him for decades and reflects on his life and legacy. Plus, interviews with AWS CEO Adam Selipsky and Zscaler CEO Jay Chaudhry. 

That's a scorecard on Wall Street. Got some little moves in the major indices. We've got big moves after hours because winners stay late. Welcome to Closing Bell Overtime. I'm John Fort. Morgan Brennan is off. It's a big day for those with their heads in the cloud. In just a moment, we're going to talk to the CEO of Amazon Web Services, Adam Solipski, in a first on CNBC interview from the sidelines of Amazon's biggest developer conference of the year in Las Vegas. Plus, the CEO of cloud security provider Zscaler joins us on the back of last night's earnings. That was wild in overtime. The stock was down. Today it was up again and more cloud-related earnings are coming in just moments from the likes of Hewlett Packard Enterprise, CrowdStrike,

Intuit, Workday, Splunk, and more. Let's begin, though, with the broader market action. The major averages closing off their highs of the session despite comments from the Fed's Christopher Waller signaling possible rate cuts next year if inflation continues to fall. Joining us now, Charlie Babrinskoy of Ariel Investment Group and Adam Christofouli of Vital Knowledge. Guys, welcome. So, Adam, first to you, the action in the markets today was rather muted from a volume perspective. I mean, just a little over half the normal volume on the triple Qs and on the SPY. What does that say about these muted moves and what's going on?

Yeah, so it was an interesting day. You saw a very large move in treasuries off of those Wall remarks, which were quite notable, not so much because he said anything that's shocking. I think the market is already looking for a pretty substantial series of great cuts next year. But it is very important that the Fed is finally starting to shift rhetorically in the direction towards a more neutral policy. And I suspect that the upcoming meeting on December 13th, you're going to see that become kind of formally codified in the Fed language and guidance that they're essentially finished hiking. And now it's a question of how long do they keep rates at the ceiling? And then, you know, what Waller

said about cutting rates next year, having to with disinflation and making sure the real rate doesn't actually get pushed higher by falling prices. But I think, you know, again, markets are already far ahead of where Waller shifted the Fed to. And now it's a question of, you know, is the Fed going to start pushing back aggressively again about rate cuts that are expected for next year? And I think there's a lot of important economic data we'll get between now and the next meeting, including jobs report next Friday and then the CPI the day before the 13th meeting. And I think investors are just waiting to see clarity on that front. We've already had a very strong move in November. So it's digesting part of that.

That's at work as well. So I think markets are just kind of waiting to see the next step. Waller today was very important, but again, it's really, the market's already ahead of where he moved to today. So Charlie, what does that mean for the stocks you love, value stocks? If you wanted to buy those up until this point, you had to fight the Fed. What now? Well, I think what we're doing is we're taking some of the risk off the table that has put pressure on these value names. There's no doubt that people thought the right thing for the Fed to do was to stop raising rates. But when you listen to the Fed, it seemed like they still

thought that maybe they had to raise rates further and slow down an overheated economy. The rest of us didn't know what they were talking about. There was no overheated economy, but it looked like they might do something silly, like try to cause a recession, which would have frankly been tough on a lot of value stocks and cyclical stocks. And so now it does look like the chance of them doing something really stupid is down. And if we can get reassurance of that, then there are a lot of names in the building materials, in homes, in consumer discretionary, in banks that are going to do very well when the risk of the Fed doing something stupid finally We'll see how this landing, if they stick the landing. But you like Mohawk Industries, Resideo Technologies. Both of these are kind of home improvement-y stocks. Mohawk is rugs and flooring. Resideo is thermostats. Why? When existing homes aren't moving, inventories are low, you think people are

going to spend on that? When you can't buy a new home because you have a wonderful 3% mortgage that you don't want to give up, you do repair and remodeling of your own home. And so people are doing a lot of upgrading of the carpeting in their house, on the floors, the cabinets, the ceilings. That's going to help Mohawk. And then secondly, what you get is in this kind of environment, people have to stay put. And so what I would also mention is that demand for housing is not being met by supply. We're having a very nice increase in the number of households, over 1.2 million new households formed in the last 12 months. We haven't had anywhere near enough homes built.

And so there's going to be new house construction that will also be helpful to the Mohawks and the thermostat companies of the world. All right. We want to take a pause here. We have some sad news to share. Charlie Munger, Berkshire Hathaway's vice chairman and Warren Buffett's longtime business partner and close friend, has died at the age of 99, just a little more than a month shy of his 100th birthday. Berkshire Hathaway just releasing a statement. Berkshire Hathaway a few minutes ago was advised by members of Charlie Munger's family that he peacefully died this morning at a California hospital. Warren Buffett says in the release, quote, Berkshire Hathaway could not have been built to its present status without Charlie's inspiration, wisdom, and participation. Munger was well known for his one-liners at the annual Berkshire Hathaway meetings and for packing the house at his own Wesco and then Daily Journal meetings. A man of deep knowledge, Munger worked as a lawyer before

moving into investing. Munger had eight children and countless fans. Charlie Munger was, again, 99 years old. Charlie Brinskoy, Warren Buffett himself, he's a brand name in investing. Charlie Munger clearly was his right hand man. Your thoughts? What I should say is what Charlie always said, which is I have nothing to add, but I will go on more than that and say that he was a really important voice in value investing and all investing. He was a voice against fads. He was a voice against fraud. He was a voice against irrational activity. He was a voice of reason. He was right there with Warren Buffett throughout all of the great Berkshire Hathaway years. A true, true master of investing. And by the way, his book, Charlie Munger's Almanac, sits right behind my desk. And I would highly recommend a very good book on investing. Thank you for that. And CNBC's Becky Quick is going to join us with more on Charlie Munger in just a moment. Right now, let's get to Steve Kovach with some

earnings news. Steve? Yeah, let's go over to HP Enterprise here with a beat on earnings, John. We got 52 cents a share adjusted versus 50 cents estimated. And then basically in line for the revenue, $7.35 billion versus $7.36 billion expected. Non-gap gross margin was a miss, though, 34.8 percent. Compute revenues also a little light here, but some strong beats here out of the AI unit, which was $1.2 billion. Street was looking for $951 million. We see shares down slightly here, John, in reaction to these numbers. I'll send it back over to you.

Thank you. Just about flat. Here's one that's moving. Workday earnings are out. Julia Boorstin earnings are out. Julia Borsten has those numbers. Julia. John, Workday beating on the top and bottom lines with adjusted earnings per share of $1.53 versus expectations of $1.41. Revenues of $1.87 billion a hair ahead of the $1.85 billion. That was estimated. You see shares are up about 3%. I just want to point out here that the company attributing the momentum to the AI innovation at the company,

noting that the strategy to build AI directly into the core of the products continues to resonate with the customers and is fueled by our platform strategy, data set, and emphasis on being what they call human-centric. So a lot of talk here about the AI capabilities driving that better than expected performance in the quarter. John. Yeah, Julia, thanks. Now let's go back to Steve Kovac again for Intuit earnings. Steve. Yep. And that one is a beat on the top and bottom lines with let's go over earnings here to 47 a share adjusted versus the dollar 98 a share street was looking for and revenues a slight beat here, 2.98 billion versus the 2..98 a share Street was looking for. And revenues, a slight beat here, $2.98 billion versus the $2.88 billion expected. Let's see what we got here.

Also, Q2 revenue guidance up 11% to 12%. Street was looking for 11.9%, so that's mostly in line there. And then for Q2 EPS, looking at $2.25 to $2.31. Street was looking for $2.56, shares up about half a percent. All right, Steve, thanks. Adam Christofoli, your sense, I mean, these earnings, not huge surprises one way or the other, but Intuit in particular can be a bit of a read on small business spending on technology. Yeah, it'll be interesting to hear kind of what they say on the call. They have obviously a lot of exposure to small business activity, payroll processing, invoicing,

et cetera. So they give some real important insight into kind of how that area of the economy is performing. You know, for HP Enterprise, you know, they have two parts of their business. One of them is being displaced or it's being hurt by the AI revolution. The other part is benefiting and they're kind of,'re kind of offsetting one another at the moment. So it's hard. They're having some revenue struggles that they're managing to offset on the cost side. And then on workday, we've seen now for a lot of these higher growth software names in the last couple weeks,

they're posting pretty healthy results. Their growth has been strong. A lot of it is share gain. The management teams are acknowledging some macro headwinds in the environment, but they're managing to work through that. Zscaler last night was another good example where the company talked about how they are some macro headwinds, but the numbers are very strong and they raised guidance for most of the key numbers last night. And it looks like Workday is a similar story. OK, we've got some more. Keeping Steve Kovac busy. NetApp earnings are out as well.

How do they look? I actually believe Julia is doing that. All right. All right. I've got NetApp here. We're tag teaming. NetApp earnings beating on the top and bottom line as well. We have adjusted earnings of $1.58 versus $1.39 estimated. Also, revenues coming in a hair ahead of expectations at $1.56 versus, I'm sorry, $1.56 billion versus $1.53 billion. That was estimated. And I want to get into guidance here. The company guiding for third quarter revenues between $1.51 and $1.67 billion. That's sort of a hair above the estimate consensus of $1.56 billion. The company also guiding to better than expected earnings of $1.64 to $1.74, sorry, $1.64 to $1.74 in earnings per share versus the $1.53 estimate. So the guidance

range for earnings ahead of expectations, we see shares up 8% on the better than expected top and bottom line results, as well as much better than expected guidance. Will mention, I will be speaking with George Curry and the CEO of NetApp tomorrow. I'll bring you the relevant comments here on overtime. I promised you Kovac, so we are going to go back to him, but on CrowdStrike, not NetApp, CrowdStrike. Kovac, how does it look? Yeah, it's a beat on the top and bottom lines here for CrowdStrike. 82 cents a share earnings versus 74 cents the street was looking for. And

revenues, a good beat here, $786 million versus $777 million looking for. And Q4 revenues looking at $836 to $840 million expected. Street was looking for $836, a little above there. You see shares now down a little more than 1%, John. Steve, thanks. Charlie, I'm not going to ask you about those names, but in tech, you like Oracle when you're thinking about value there. And these are some names that compete with Oracle in some ways. Workday, specifically, I'm thinking about. Why do you like Oracle? Because if you talk to big companies or even middle-sized companies about AI, what they're excited about is mining their own data.

They think that they can use AI to look at how they've made decisions, how they've put processes in place, and they're going to do that with their own data. And the company that has more software that helps them with that data than anybody else is Oracle. And Oracle is going to be able to bring AI products to companies to help them think intelligently about their own processes. And so we don't think it's reflected in the stock. The stock is up. It's up 40 percent this year, but not trading at any thing like the kinds of multiples that many of these companies with, frankly, a lot less of established AI technology have. And so AI, Oracle at 19 times earnings, we think is very well positioned. We will keep an eye on that one.

Charlie Babinskoy, thank you. Adam Crisofulli, thank you as well. Let's get back to CNBC's senior markets commentator, Michael Santoli, with a look at the current state stocks and bonds. Mike? Yeah, John, both playing with some potentially significant levels here. Take a look at the S&P 500 first here. We've hesitated over the last five or six trading days, just under the July highs, which was intraday about 4,600. You can see they're just kind of getting a little bashful as we try to go above the year-to-date highs. I would say 4,400-ish. A lot of stuff clusters together in that area if we were to get a pullback from this very steep reversal higher that we got starting in late October.

So we're not really showing signs of much of a pullback, but 3%, 4%, 5% would probably be no big deal from here. Take a look at the 10-year Treasury yield, because that has actually been showing signs of possibly breaking down here. 4.34 is this area right there. That was the August high before we really got that launch higher toward 5%. It also happens to coincide with the high from October of last year. And so essentially it would bring you into a new range. It's not quite decisive, even though we're, you know, basically one basis point below that right now. You'd probably want to see some confirmation of that.

But it's certainly friendly for stocks. Real quick, on a month-to-date basis, stocks, long-term treasuries, and also small cap stocks have moved very much in tandem. So you can see that this move lower in yields has been coinciding with this final boost we've gotten in those indexes toward the highs for the year, John. So for the more traditional balanced portfolio camp, what does this mean? I mean, you've got wind at your back on both sides for the moment, because stock and bond prices are both going up in tandem. For now, it's recovering the losses to some degree from 2022.

So you're not up in the clear, but it's moving in the direction you'd prefer to see. Now, Mike, I've got to ask you about Charlie Munger, quite a personality, quite an investor. What's the legacy? I tell you, just six months ago or a little more than that, when I was in Omaha covering the Berkshire Hathaway annual meeting, he was remarkably cogent, showing no signs that he was slowing down too much. But I think one thing to keep in mind in terms of his role and how Berkshire was built, Warren Buffett has always credited him with getting away from the pure quantitative deep value investing of, you know, Ben Graham from the 30s.

So in other words, Munger was the guy who said instead of paying a bargain basement price for an OK company, pay a fair price or even a slightly elevated price for a very high quality company. So if you look at Berkshire Hathaway's holdings, both its wholly owned companies and the stocks it owns, they are more quality and enduring over a cycle. And Buffett, at least, always gave monger credit for that insight. The man had a sharp tongue, sharp mind, and he hated crypto. That's right. What about that? To the end, for sure. I mean, I think he just felt as if it was something that didn't need to exist in the world, that essentially was a workaround from the banking system, which is regulated and controlled and mostly an instrument of speculation that had not proven it had utility

elsewhere. So that's not really a brand new take, but it's one that he seemed to deeply, deeply believe. That being said, if you think crypto has relevance long term, you're probably not in the business of trying to convince 99 year old-old folks about that. You can work your campaign elsewhere. He had strong opinions, even designed dorms in his spare time. Mike Santoli, thank you. We'll talk more about Charlie Munger with Becky Quick, who just sat down with Munger at his Los Angeles home two weeks ago. Charlie Munger, Berkshire Hathaway vice chairman,. Charlie Munger passed away today at the age of 99. Joining us now on the phone is Becky Quick. Becky, you spoke with Charlie Munger and with Warren

Buffett so many times over the years. And when I think about legendary duos in any industry, those two names come up. They were partners on so many levels, John. They'd worked together for so many years. Charlie was vice chairman at Berkshire Hathaway for 46 years and was on the board of directors there going back to, I think, about 1982. That alone doesn't describe the impact he had on building Berkshire. I think Ben Tolley put it very well. I was listening to what he had to say about this. The idea that Charlie Munger's thinking really influenced Warren Buffett and how he built Berkshire Hathaway from 1962 on.

They were friends and collaborators. And while Charlie didn't have an ownership stake at that point, he was very actively involved with kind of extending Warren Buffett's mind and how he thought about investing. Ben Graham was, of course, very interested in value investing, and he was kind of the disciple that Warren Buffett learned at his feet how to really be a true investor about those ways. But Charlie Munger took it to the next level. He said to look for great companies at decent prices, not good companies at cheap prices.

You know, the idea of cigar butts kind of picking things up, that was the earlier version of that. Warren Buffett said a lot of times that buying Berkshire Hathaway itself, the textile mill, was the biggest mistake he ever made. Charlie Munger kind of told him, don't worry about the textile mill. Just look for other good companies, great companies to build around that. And he did. And, again, 46 years as a vice chairman at Berkshire Hathaway. I think it's fair to say that at the age of 99 in 11 months, 99 years in 11 months, he is somebody who is probably the

oldest director at an S&P 500 company, and clearly somebody who, as Mike said, is so vivacious, so full of life. We saw that six months ago at the annual meeting in Berkshire Hathaway, and then I was out in L.A. two weeks ago, Los Angeles, to sit down with Charlie Munger at his home. There's a new book that's coming out. It's a revision of Poor Charlie's Witten Wisdom, Poor Charlie's Almanac, The Witten Wisdom of Charles T. Munger. That new updated book is coming out on December 5th. And we sat down for this extended interview to put together an hour-long special that we were planning just ahead of his 100th birthday that had given us just about five weeks away. We have a lot of parts of that conversation that we will bring to you, and we're going to bring some of it to you very shortly.

But even two weeks ago, he was in fine form mentally and was able to really kind of go through and talk about his life and things he's learned along the way. Becky, in the world I deal with most often, technology, I guess the best example of buying great companies at decent prices might have been Berkshire Hathaway starting to buy Apple stock in 2016, about nine years after the iPhone came out. So a lot of people already thought it was expensive. It's gone down to be one of the firm's best investments, right? It has. It's now by far Hathaway's largest investment in its entire portfolio. And yeah, they've made quite a bit of money on that investment alone. And you're right, it happened after a big part of the crowds were already there.

Warren Buffett and Charlie Mucker would both say that they're not really technologists. They tend to steer away from technology stocks. But that was one that they looked at as a consumer stock, that they understood the consumer pull for it and the moat that it had built around itself. So, yeah, buying great companies for decent prices, that's certainly an example of it. Becky Quick, I know we'll be hearing a lot more from you getting your expertise on Charlie Munger, his life, his legacy.

Thank you. Thanks. And now Amazon Web Services kicking off its reInvent conference in Las Vegas today, where they unveiled several AI-related products, including a new AI chatbot, two new AWS design chips, and more. Joining me now from Las Vegas to talk about all the new announcements in the first on CNBC interview, AWS CEO Adam Solipski. Adam, great to have you back on CNBC. I want to talk the bulk of the time about those announcements. So I got to start with AI, the elephant in the room, and OpenAI.

In my conversations with enterprise customers since the blowup of Sam Altman, OpenAI's board last week, what I've heard most is the idea that it was a wake-up call to diversify their investment in AI models. Your statement last week said there's not going to be one model provider to rule them all. So after this OpenAI apocalypse, what's the strategy? Well, hi, John. It's great to be with you. And again, as you said, I think we've been very consistent. We've said since the beginning of when we unveiled our generative AI strategy that it was all about what AWS has always been about, providing choice, democratizing the technology for customers. And we have been committed since the beginning

to providing a choice of a bunch of different leading model providers, including Amazon's own models, but also many other industry leaders like Anthropic and Coherent, Stability, and AI21. And we're going to keep on adding to that list. Meta's Lama 2 model as well. And there's not going to be one model to rule them all. As you said, there's not going to be one model provider to rule them all. All the customers we're talking to now are saying, yeah, we have to have choice. We have to not only have technology choice, but we have to know that

we have choices of who's a dependable business partner, who are we going to want to be in business with long term. And I think that we're just seeing great customer interest because of the powerful capabilities we provide, the choice we provide, and the enterprise-grade security and privacy that we're providing in Amazon Bedrock and other generative AI services. So tell me about Q, Q-Star, this AI-powered chatbot. How is that going to change the customer experience? Do you expect it to save people money? Because there have been a lot of questions from customers about, am I running all the workloads in the optimal places? Well, I think in the past

year or year and a half, obviously many, many of us have been using or experimenting with these generative AI based chatbots. And they're great for consumers and they're not perfect yet, but they'll continue to evolve rapidly. So many of them just don't work at work. They haven't been secure enough. They haven't been private enough. There's been the specter of your data leaking out into the internet, maybe accessing databases that you as an employee don't have access to. Amazon

Q is a generative AI powered assistant, which is tailored for your business. So, first, it works really well on AWS. And if you've got any AWS questions or want to develop features on AWS or configure code on AWS, it's trained on 17 years of AWS data and does a great job for both developers and IT professionals in working in AWS. But Q is also your business expert. And we've built connectors to over 40 enterprise systems from Salesforce to Microsoft 365 to Zendesk to ServiceNow and many, many others. And Amazon Q is going to be able to access, when you tell it to, access those systems within your company and help employees of all kinds, from HR to legal to product managers to designers to manufacturing and operations, everybody.

Be more effective. Be more efficient. Be able to find data. Be able to draw conclusions and take action faster. And so we're really excited about Amazon Q really, I think, helping to reinvent the future of work. It's an incredibly exciting announcement. And let's talk now about the chips that you announced today, Tranium 2, Graviton 4. I was just with Satya Nadella at Microsoft a few days ago. They're getting into this chip game as well.

But I want to understand from an investor perspective why this matters. The way I've been thinking about it is that they should help you compete on cost, right? If you understand customer workloads and how to optimize those and you can offer performance based on that, it should be cheaper for you to run those cloud data centers and run them cooler, run them more efficiently. Is that part of how investors should think about this from a margin perspective? Well, I think the first thing that they should be thinking about is who's actually delivering. And we started with our own custom silicon program almost a decade ago. And we today announced our fourth generation,

fourth generation of general purpose computing chips. I happen to have one right here with me. This is Graviton4. It's not an idea. It's not a slide. This is an actual Graviton4, you know, ARM chip. And it is shipping today in preview. And, you know, as you mentioned, some other cloud providers are just, you know, talking about, talking about, will have future tents, their own custom chips. And I guess we'll see. Meanwhile, we're on to generation four. And then in the AI-specific space, we announced our second generation of training-specific chip, Tranium 2, which is going to be up to four times faster than the first generation of Tranium. We're really excited about that coming next year. You really did put your finger on it, which is

customers have to have fantastic price performance. As the compute needs go up, as the storage needs go up, you've got to have the economics work or else these workloads just aren't going to be economically feasible. By getting all the way down to the silicon and being really, really good at it now for almost a decade, we're able to just dramatically improve price performance for customers. And that's going to allow them to do things just wouldn't be economically feasible without this work that we're doing. One thing that's not cooling off is the competition between these mega-scale cloud players and AWS long been in the lead.

Adam Solipski, thanks for joining us here on Overtime. Breaking news now on Las Vegas Sands. Contessa Brewer has it. Contessa. John, Las Vegas Sands' majority shareholder is selling $2 billion worth of shares. Dr. Miriam Adelson and the family own 56 percent of the casino company. Shares they inherited when founder, CEO and chairman Sheldon Adelson died in 2021. It represents roughly 10 percent of their stock and a little more than 5 percent of the overall company's shares. Now, the typical procedure is for the shareholder to use a brokerage to place the shares, in this case Goldman Sachs and B of A.

Sand says it will buy $250 million worth of those shares. Its board authorized $2 billion for repurchases through 2025. The company had announced that in its third quarter earnings release. And I may have buried the lead here, John. Sand says in its filing it was informed that the Adelsons will use proceeds from the stock sale to buy a majority stake in a professional sports team, though the release does not say what sport, what team, or what city. The stock, by the way, is down about four and a half percent, but year to date, it's still off by almost a percent,

as though investors have totally discounted the fact that Macau reopened with casinos there. And there is a big rebound happening in Singapore. By the way, expect a lot of rumors, speculation and innuendo about Las Vegas, an NBA expansion team, which Adam Silver, the commissioner, said is a matter of not if but when. So that's a big question. The A's, as you know, they just got approval from MLB owners to move from Oakland to Las Vegas. Questions there. What other professional sports team might be open to a $2 billion or more investment from Miriam Adelson? Well, the timing doesn't look great, Contessa. May, June sure would have been a better time to announce you were selling this stock and to do it, right?

Yeah, well, exactly. And let's see if we get any indication on pricing here as we move forward. All right. Contessa Brewer on Las Vegas Sands. Thank you. Up next, energy trader Bill Perkins breaks down the brutal month for NatGas, which is pacing for its worst stretch since January. Overtime, we'll be right back.

We have a news alert on J. Bill, the high-end contract manufacturer, 100 plants in 30 countries, about a quarter million employees. Steve Kovach has details. Steve? And an Apple supplier as well, John. They are slashing their guidance for Q1 and Q2 well below what the street was expecting. Let me just give

you here for Q1 now expecting revenues between $8.3 billion and $8.4 billion. Street has them at $8.7 billion for that quarter. And for Q2, adjusting to $7 billion in revenue to $7.6 billion. Street has them at $8.1 billion. They're blaming softening demand for their products and short-term inventory corrections. John, you see shares down about 8.5%. They're down as much as 11% when this first came out, John. From a manufacturer of that size, quite a signal. Steve Kovac, thank you. That stock down a little more than 9% at the moment after hours. Natural gas falling nearly 25% so far this month, on track for the worst month since January when the commodity fell 40%. So far this year, net gas prices are down roughly 40%. Joining us now, energy trader Bill Perkins. He's CEO of

Skylar Capital Management. Bill, it's getting colder outside. Is that going to change the equation here? Maybe not enough. We had a very brutally hot summer and a low renewable generation that created kind of a tight scenario, slightly bullish. But the warmth continued. And so far, not only has it been warm, but producers have upped their production. They've kind of managed when they wanted to turn on those wells. They've turned them on now. And so we have high supply and weather that's just not cold enough to create a bullish scenario. Bill, is this, just following on from that J-Bill news about softening demand, you know, for what they crank out, high-end product for aerospace, for technology,

et cetera. Is this just what we see happening with nat gas, what we see happening with gasoline, part of the same story about consumer demand worldwide cooling off and the ripple effects? I think there are some macro concerns out there. But quite frankly, the U.S. with the lower gas prices actually is under a manufacturing boom. And you can't open up the news any day without hearing about NVIDIA selling a bunch of chips or more data centers or Bitcoin mining centers. And so those are heavily power intensive, which use a lot of natural gas. And so on the industrial side, we aren't seeing a slowdown yet. What we are seeing is the resilience of the American producer that keeps producing more and more natural gas and gets more efficient. And therefore, there's pressure on the prices

when there isn't any weather. So there's not an OPEC to deal with in the same way here. So really, we should think of this, you're saying, as more of a supply story. Yeah. Generally, it's a supply story. All eyes are on supply, frack counts, rig counts, acreage, how long the lateral is going to be, but ultimately, how much gas is available to the market. And most producers are preparing for the increase in LNG exports in late 24, 25. And so we are in a kind of a renaissance period of efficiency gains and more production. All right. That should help investors know how to play it with NatGas on this long slide. Bill, thank you. Thank you.

Bill Perkins. Zscaler bouncing back after selling off an overtime yesterday over concerns about rising costs. Up next, the security software company's founder and CEO addresses those worries as well as Zscaler's better than expected earnings and outlook when we come right back. Welcome back to Cloud Week on Overtime. Zscaler making a big comeback in today's session after initially being down 6 plus percent in reaction to the quarter's earnings, really the billings guidance. Bears focused on the fact that that guidance didn't change despite the beat.

But there was plenty to like for the Bulls. Strong beat, raise on both lines. Joining us now is Zscaler's chairman and CEO, Jay Chaudhry. Jay, thanks for joining me. I've got to start right there. Beat on the results, a beat in billings that grew 34% in the quarter, but a lot of people initially focused on the guidance. You just being conservative here? I think we need to be prudent in guidance. We have a great track record of beating every quarter. Our quarter was extremely strong. Think of it. We beat all metrics. Our revenue growth over 40%.

Our operating margins are very strong. Our net cash flow, 45% of revenue. We're very happy with it. So I think it's a wonderful quarter. So six months ago, there was some criticism, at least out there in the ether, about the fact that it seemed to me like you guys were holding firm on your pricing. The stock took a bit of a dip. It's doubled since then. What's been the environment pricing-wise for your product? I've heard from CTOs saying, yeah, it costs me, but I've got to buy it.

Yeah. So we are a mission-critical service. We must work. So the service is critical. We have a premium service. We like to say we charge non-premium price for premium service. The biggest thing that CIOs look for when they buy Zscaler, what is my ROI? The best thing we do is we replace a lot of point products. It is tangible, tangible savings our customer get. That's why a customer buy us. That's why over 40 percent of Fortune 500 companies are our customers get. That's why customers buy us. That's why over 40% of Fortune 500 companies are our customers. We have over 468 customers that pay us a million dollars or more.

But the amount of money we're saving, the kind of cybersecurity protection we are providing us is invaluable. The platform approach that you take, and I also got to mention CrowdStrike, which is also in the space with you, is out with earnings today, seems to have done decently well. But the platform approach and that getting rid of point solutions, how important is that in this economy where we're hearing about demand slowing down overall? We just got that warning, that adjustment from Jabil. Yeah, macro is tight, but CIOs are looking for two things. One, I must have top-notch cyber protection. Number two, if along with that, you can give me cost-saving, cost reduction, the two together become wonderful. And we're able to provide both of them. Look at how many software or SaaS companies can actually do solid cost reduction.

Not very many. We remove the whole range of firewalls, VPNs, data protection products, and the like. It becomes a lot simpler. In fact, I like to say complexity is the enemy of security. Complexity is the enemy of resilience. We provide both. That's what's driving our growth. Jay, tell me, as we head into 2024, how is the threat profile out there changing? We've talked

a lot about ransomware. We talked about AI emerging as a tool for bad actors to more easily put attacks out there. What are you picking up there at Zscaler? You know, threat has been an issue for a while, but the two factors that are fundamentally changing it significantly. One, some of the attacks you saw on gaming industry that raised the profile quite a bit. Along with that, SEC comes along and says you must do reporting within four days. And then SEC goes and sues solar winds, as well as the CISO personally, those things have made things really, really cyber. They need to look at it carefully. They can't just say,

I got so many firewalls and VPNs deployed, I'm safe. On top of that, AI ML is making it much easier for bad guys to find vulnerabilities to attack customers. So we need to fight with AI with AI. Zscaler is doing a lot of work. And to do so, one of the most important things Zscaler has is logs. We are the switchboard that provides communication between users and applications. And those logs are precious because those logs tell us

what bad guys are trying to do, what steps they're taking. And by doing so, by applying AIML, my personal mission is to really predict a breach and help my customer take care of it before it happens. And it's the logs, it's the position where we sit, allows Zscaler to do it better than any other security vendor. All right. The stock's about doubled year to date. Jay, thanks for joining us here on Overtime. Jay Chaudhary. Sean, appreciate the opportunity. Now, could Fed rate cuts be on the horizon? Well, former Fed Vice Chairman Roger Ferguson is going to weigh in when Overtime returns. Berkshire Hathaway Vice Chairman Charlie Munger died today at the age of 99. Becky Quick rejoins us.

Becky, a passing of the torch here. Yeah, clearly Charlie Munger was somebody everybody in business looked to. Warren Buffett, his partner for so many years, looked up to Charlie, too. Charlie was somebody who had a very philosophical view of life. He looked at things in buckets. He had systems for how he adjusted and looked at things. And he was really a Renaissance man, somebody who had learned from lots of different areas of intellectual study, everything from physics and mathematics to sociology, psychology. He took time and spent a lot of time in all of these things, architecture too. And I sat down with him just a couple of weeks ago. We were trying to put

together a package for his 100th birthday that's coming up in just about five weeks' time. He would have been turning 100 on January 1st. He had a big birthday party planned for New Year's Eve. Sat down with him and talked to him about looking back on his life, if there was anything that he would change, anything he wished he would have done differently. And this is what he had to say. Is there anything left on your bucket list, anything you'd like to do? Well, that's an interesting question. I am so old and weak compared to what I was when I was 96 that I no longer want to catch a 200-pound tuna. It's just too goddamn much work to get it in.

Takes too much physical strength. So I don't know why I would have paid any amount to catch a 200-pound tuna. When I was younger, I never caught one. And now, given the opportunity, I would just decline going. I won't even go out after them. And now I, given the opportunity, I would just decline going. I won't even go out after them. There are things you give up with time.

You're pretty active. You've got a busy social schedule. You're on Zoom. You have breakfasts and lunches. Well, I like it that way. That's my idea of a proper old age for me. And I didn't plan it. It just happened. And when it happened I welcomed it. I am very good at recognizing unfair advantages. And I got unfair advantages in old age the way I got unfair advantages in non-old age.

And when they came, I just grabbed them. Boom, boom, boom. Charlie Munger also lived his life very deliberately. He knew exactly how he thought you should do things, and most of the time that included invert, invert, invert, look at things and live backwards. He offered some sage advice to Warren Buffett many years ago about how you should live your life, and I asked him about that, too. Charlie, Warren Buffett told me that a long, long time ago. You told him he should live his life, he should write his obituary the way he wants it written and then live his life accordingly.

Yeah, sure. I assume you've done the same thing for yourself. Well, no, I've written my obituary the way I've lived my life. And if people want to pay attention to it, it's all right with me. And if they want to ignore it, that's OK with me, too. I'll be dead, but what difference does it make? And so, but I think it's a good, it's not a bad idea. Listen Warren and I both lived in the same house for decade after decade after decade.

All our friends get rich and build better, bigger and better houses. And naturally we both considered bigger and better houses. And naturally we both considered bigger and better houses. And I had a huge number of children so it was justifiable even. And I still decided not to live a life where I looked like the Duke of Rochester or something. And I was going to avoid it. I did it on purpose. Why? I didn't think it would be good for the children.

That it would spoil them? Yeah. When you're in a rich family, you think your duty is to use the wealth and live grandly. That's what everybody's doing with the money. You will learn from the people that are doing it. Is the plan for your life, the obituary you would write in your 30s, the same you would write today? Sure.

I basically believe in the soldier-on system. Lots of hardship will come and you've got to handle it well by soldiering through. A few rare opportunities will come. You've got to learn how to recognize them when they come and not make too minor a trip to the bike counter when the opportunity is available. Those are simple lessons. And so, Duran, he did. He was talking about making trips to the pie counter. That was a

reference to making sure you took opportunities when you knew you had a sure thing. He said he did. And Warren Buffett did, too. And that's how they built Berkshire Hathaway, by making those targeted opportunities, knowing when you get the trip to the pie bar and loading up when you do. Becky, you're a journalist, so I know there's remove here. But at the same time, when you spend the amount of time with someone that you spent with Charlie Munger and with Warren Buffett, it's tough. But you know and knew him so well. We talk a lot about how right people were when they reach this kind of stuff, what they were right about. But how did Charlie Munger respond, react to being wrong about things? First of all, yes, Charlie was my friend. Known him for a very long time and respected him enormously.

I think Charlie recognized and is quick to admit when he's wrong. I don't think he often thinks he's wrong. He even said to me at the time, a couple of weeks ago when we were there, he said, look, people think I'm too opinionated sometimes, that maybe I come away with my own thoughts on things, and he did, But he came to those opinions through deep study and deep thought. And again, this system of processes for how he

thought about things. But I think he had no problem inventing when he made a mistake and when that became obvious, too. One of the clearest examples of his different thinking, to me, I didn't know him personally, was this dorm design. You mentioned his interest in architecture. It makes sense to me, but to a lot of people on paper, you know, the idea that people would live in these dorms without windows, but then, you know, really socialize in big, well-lit, common areas. There's a bit of an uproar over that, but he stuck to his gun. He did. He was willing to make a gift of a lot of money. I think it was over $100 million that he was willing to donate to the school in California if they would take and use it to build

student housing using his own designs. He was an architect. He designed the house that we did that interview in 70 years ago. He lived in that house for 70 years, designed it himself. And he had these thoughts about it. In fact, he did one at the University of Michigan, which also has no windows and they accepted it. So it was built there. His thought process on this. And I did talk to him about this at one point a few years ago. His thought process on this is that, yeah, you're not going to get a window, but you get your single room, a place where you can go if you want to stay. But he didn't want it to have windows and have people to stay in their rooms. He wanted them to go there to sleep, to study if they needed to, but then to get out into the common areas and meet with other people because he thought it was really important to kind of push people out to socialize and interact face to face.

Where I went to school, to Paul University, sororities did something like this. It was called cold dorms. And you'd have, I mean, I'd never been in one, but you'd have these bunk beds without windows. I'd never been in it. And they would sleep in there, but socialize in the social space. So there's some legacy of that and of it working. By the way, Charlie would not think he was wrong. He thought he was right.

I'm sure. I'm sure. And such a track record, such a personality. We're getting close to the end of the hour, but what's going to stick with you, either moment-wise, wisdom-wise, about Charlie Munger? Charlie is the fastest brain, I think, of just about anybody you've ever seen. Warren Buffett says that he can look at any deal and pick it out faster than any person on the planet and know what's wrong, what might work with it, what might be wrong. But it was the same thing with just about anything you fed him. You feed him a problem and he could spit back and answer instantaneously. And he'd

think through so many different things. He was opinionated, sure, but he was kind and a very decent, decent person. And that's what I'm going to miss most about him. And able to carry on an interesting conversation with a very good interviewer. Well, no, able to carry on an interesting conversation with just about anybody on any topic, because he really was just a jack-of-all-trades, somebody who knew a little bit or a lot of it about so many different topics. A legend, once again, partner to Warren Buffett at Berkshire Hathaway. Charlie Munger died today at the age of 99.

With that, that does it for Overtime. Fast Money starts now.