Closing Bell - Closing Bell Overtime: CRISPR Therapeutics CEO On Milestone FDA Approval; Rick Caruso On Potential Macy’s Sale 12/11/23

Episode Date: December 11, 2023

Major averages notched their third straight positive session. Wells Fargo’s Scott Wren and CFRA’s Sam Stovall break down the market action. Jefferies analyst Brent Thill breaks down Oracle’s revenue miss. Caruso Founder Rick Caruso talks rumors of a Macy’s sale and the broader state of commercial real estate. CRISPR Therapeutics CEO Sam Kulkarni on his company’s partnership with Vertex Pharma leading to breakthrough FDA approval for a sickle cell treatment, the first in US to be approved that uses CRISPR gene-editing technology. 

New intraday highs for the year for the S&P 500 and the Dow Industrials. As stocks continue the year-end rally, that is the scorecard on Wall Street. But the action is just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan with John Fort. And coming up on today's show, we're going to speak exclusively to the CEO of CRISPR Therapeutics following the FDA's first-of-its-kind approval of the company's gene therapy, in this case, to treat sickle cell disease. That stock has been selling off the last two days on the back of that news.

Plus, Oracle is gearing up for earnings this hour with the $300 billion software giant handily outperforming the market this year. We'll bring you those numbers as soon as they cross. We begin, though, with the market and green across the screen as we kick off a crucial week on though, with the market and green across the screen as we kick off a crucial week on Wall Street with CPI print tomorrow, that inflation gauge, final Fed decision of the year the day after that on Wednesday. Mike Santoli joining us now from the New York Stock Exchange. Mike, a lot of green, but communication services, the one sector that

set it out today and to an extreme, it was down a full percent. Yeah so the alphabet and meta were big decliners in fact all the big Nasdaq stocks were on the downside it's reflection of this continued you know money flowing out of the big year-to-date winners into the rest of the market there also has been a Nasdaq index change that I can talk about in a bit that actually has to do with that too but the rest of the market it seems like it's in a NASDAQ index change that I can talk about in a bit that actually has to do with that, too. But the rest of the market, it seems like it's in a pretty benign state. Investors have been conditioned to expect relatively good economic news that fits in with the soft landing scenario that happened on Friday with the jobs number. People generally expect that happen tomorrow with the CPI.

Of course, we could get a jolt. We could get a surprise on that front. But the market is reflecting a general state of things look OK for now and we can have some comfort with how this market is almost kind of rewound the benefit of the doubt in the short term. We saw huge offerings in terms of Treasury auctions today. That really seemed to be something that the market brushed off. To your point, it is this quick drop that we're seeing in inflation expectations and some of these data points leading up to CPI that really seems to have, and leading up to the Fed, Mike, that really seems to have investors' attention right now. For sure. And it's the one thing really that matters. It's the one thing

that has explained why the market has been strong this year in most respects. Inflation coming down faster than the economy has weakened has been the one line story of the market this year. And the recent data flow have confirmed that there is some downside momentum in inflation. We don't know if it's going to get sticky. We don't know if it's going to change. The expectations piece is nice to see. I think it's less important than the numbers themselves. But it reinforces this view that we're on the right side of the inflation sock. Now, it's more about whether the economy hangs in there and we don't see the lagged effects of higher rates really starting to

bite going into next year. Okay. It's really a game of timing. Mike, stay close. We're going to come back to you to talk a little bit more about that rebalancing in just a few moments. In the meantime, let's bring in our market panel. Joining us now is Sam Stovall of CFRA and Scott Wren of Wells Fargo. Sam, I'll start with you because you recently put out your 2024 price target for the S&P 500. And it tickled me a little bit because you talked about the fact that we may test 5000 next year. But that that might be tricky. There might be resistance there. So 4940 is what you're going

with. Break it down. That's right, Morgan. Well, Mark Arbiter, the technician over at S&P when I worked there, used to say that round, large numbers act like rusty doors and require several attempts before finally swinging open. So I think that could be the case that we see in 2024 with the S&P 500 around 5,000. That said, basically, I looked at three things when coming up with my target price. I looked at fundamentals. I looked at the target prices for the stocks within the S&P 500 set by CFRA equity analysts. I market cap weight those to get a fundamental target price. I look at point and figure on these stocks to come up with a technical target price. And then I also look to history, the period after the Fed has stopped raising rates. We're in year

two of the bull market. Also looking at the election year of first term presidents, which, by the way, have never declined since World War Two. And that's what helped me to get to that number. Yeah, the election year piece of it's particularly interesting. Bespoke pointed that out just this morning, the fact that we seem to be on pace for that for that trend. Scott, you've come on. You've been more I'll call it cautious. You've made the argument that there's more downside risk to stocks. Do you still see it that way headed into 2024? And given the fact that you've been telling clients and investors to put a certain amount of money, part cash and short-term fixed income, at what point does that

shift? Yeah, Morgan, I tell you, we are still cautious. And we don't want to chase this rally. We'd rather fade it. And really, when you look at the Beige Book last week, I think the Fed pointed out just exactly the things that have been concerning us. And as I look at my list, consumers are pulling back. They're more price sensitive. The labor market's easing. Credit's tougher to get. Delinquencies are rising. Corporate pricing power is waning. So those are the things that we've been concerned about for a while. They've taken a little bit longer to probably play out than we initially thought, but we're still in the camp that we're at the upper end of the range here. You know, this 4580 to 4630 is some pretty good resistance. Obviously, we're going to test 4630. We're right

there. But we don't think we're going to see that carry much above that. And some of these issues that we see as headwinds are going to have negative impact in the market as we move into 2024. OK, watching that, we're also watching Oracle results are out. We're going through them. The stock's initial move is down by a little more than five, maybe six percent. We'll see what the numbers say. Sam, back to you and your S&P views. Forty nine forty or fight, I guess, for next year for the Oregon folks out there. But in the nearer term with CPI coming up, what would it take for the CPI print, you think, to shake us out of this comfortable spot? The S&P is found over the last week or so around 4,600? Well, a good point, John.

I think the reason that the market just continues to work its way higher, even the day before CPI, two days before PPI and the Fed meeting, is because they really expect these items to be non-events, that there's not likely to be a surprise to unfold. Unfortunately, sometimes in the near term, that could serve as a bit of a shock and a reawakening. But when we look at the CPI components, our expectations are for an equal to or lower reading from the month before, particularly looking at the year-on-year core percent change. So that is still in a downward stair-step fashion. Our expectation will probably hit the low 2% area by fourth quarter of 2024 from the PCE perspective. So really only if we end up getting

some sort of an upward hiccup in either of those two numbers, I think will jar investor confidence. OK, now let's get to those Oracle earnings. Christina Partsenevelis has the numbers. Christina. A mixed report for Oracle right now. You have earnings per share of $1.34. That was a beat. Revenue is coming in light at $12.9 billion.

If you break it down according to categories, there's four categories. It seems like three of those four are misses. The only one that beat was hardware. That came in slightly higher, but services was lower. Cloud licensing and on-premise licensing lower. Cloud services and license support also lower. In this actual release, we aren't getting any outlook just yet for the following quarter, but you have Oracle CEO Safra Katz saying, and I quote, our cloud business is at nearly $20 billion annual revenue run rate and cloud service demand continues to grow at unprecedented levels. Business is good and getting better. But nonetheless, you are seeing just a negative reaction in stock down 7%, even though it did climb 40% year to date.

So a beat on the top line, a miss on the revenues. All right. Christina, thank you. Now, Scott, we have always been used to getting Oracle's guidance on the call. So investors have to be careful about just trading the release at the same time. And a lot of enterprise software names, think about MongoDB and some others last week, we did see those stocks take an initial move down, even if the numbers were decent, even if the guide was pretty strong, depending on, you know, whether investors wanted to take profits. Well, John, you know, when we talked about, when I talked about fading this rally, if you look at technology, if you look at communication services, if you look at consumer discretionary, those three sectors have done really well, obviously, this year. Those are the ones that we would tend to fade in here.

And I think, you know, I'd like to say something, you know, Sam mentioned CPI. You know, what we're concerned about is that, you know, core CPI hangs up here 4%, 3.74%. I mean, the Federal Reserve's not going to sit there and let that happen. So we think inflation is going to work its way lower. It'll work its way lower over the course of the next 12 to 18 months. But we don't think the Fed's going to do anything at this particular meeting. But it wouldn't surprise us if core inflation hung up there. And certainly, if we get a number that it's dicey tomorrow, you combine the resistance that we're heading toward and a little bit of bad data. And, you know, you could expect some downside here

in the market, at least in the near term. OK, we'll leave it there for now. Scott, Sam, thank you. Thanks, John. Let's bring back Mike Santoli now for a look at the Nasdaq 100. Mike. Yeah, John, some significant underperformance today in the headline index, the NASDAQ 100 relative to its components on an equal weighted basis. Yep. There's an index and ETF for that to NDX. Now, this is the ratio of the NASDAQ 100 to the equal weighted version. So you see, obviously, the market cap weighted, the mega caps have done the job all year, but a pretty significant little retracement there. And we also had another one. There was a rebalancing on Friday, basically six stocks leaving, six stocks coming in thereabouts.

And it also changes the weighting scheme of the largest stocks. There's some discretion in there with some of the biggest weights. Top five stocks or 40 percent of this index can be kind of held in check on a weighting basis. So they were for sale today, really for mechanical reasons. I doubt it's going to have a long term effect. But it also happened here when we did this special rebalancing the Nasdaq decided to do because it thought the largest companies were getting too much influence within the index. So we'll see if this is the start of a trend or just another one of these resets before the largest stocks maybe can resume their leadership. Also, the broader market was about 50 50 today in terms of up and down. Also, the broader market was about

50-50 today in terms of up and down. Now, take a look at the 10-year Treasury. You see that really significant rollover, the downtrend. Now, we've migrated up a little bit to around four and a quarter. And there's a couple of levels. It's around the mid four threes. That's all right. That's not a straight line. But basically, back to those August highs, that's where you'd start to question as to whether we're going to be, you know, maybe getting a little uncomfortably close to the former highs. So I think for now it's OK, even though the market was up while yields were also up today. I think that it's explained by the fact that they're down so far, so fast, almost one percentage point in yield over the last couple of months.

And so, therefore, a little bit of leakage higher is not a big deal just yet. OK, Mike, so back to that first chart, the NASDAQ 100, you're saying the larger stocks, their share of this rally had been fading a bit. But this latest move down is more on a technicality. So investors should just be beware of reading too much into what happened today. Yeah, basically, it was just on today's basis anyway, it does seem as if there was a little bit of surprise as to the degree of it. But look, even though the QQQ is a big ETF, even though there seems like a lot of money, a couple hundred billion dollars or so in this ETF, it's nothing compared to the size of these companies in aggregate. So I wouldn't say that the tail is going to wag the dog over the longer term. So yes, be aware that, sure, they could go down in relative terms for all kinds of reasons, because maybe evaluation, maybe they're too crowded. But today seemed to be much more about

relatively technical adjustments. Okay. Mike Santoli, we'll see you later in the hour. You've probably noticed things look a bit different on our screen today. It's all part of our exciting new look for CNBC. Some information and data might be in a different place than you're used to. But over time, we hope it will make the market action and the stories we're telling more clear and more understandable. And if not, tell us. I mean, because these things, they have to be tweaked. You and I look the same way.

Folks have been telling me on social media today. Yeah. We'll say lots of feedback, all kinds of feedback. We appreciate the feedback. We didn't do the work ourselves, of course, but many professionals here did. After the break, much more on today's after hours action, including what an analyst wants to hear from Oracle's management on the earnings call. And later, Macy's getting a huge boost today on news of a nearly $6 billion takeout bid. We'll talk to commercial real estate billionaire Rick

Caruso about that bet and brick and mortar and how much he thinks macy's real estate portfolio is worth stay with us oracle reporting second quarter earnings just moments ago the stock is down about eight percent want to note they did not give guidance in the release. They never do. That comes on the call. Joining us now is Jeffrey Senior Analyst Brent Phil. Brent, how much of a concern particularly is this revenue number and all of these business lines, maybe except for hardware, what could they say on the call that would change sentiment about this? Hey, John. Yeah, it was a revenue miss. Q1 was soft. Q2, soft again. OCI, which is their cloud

infrastructure business, which competes against AWS, was 52% growth. The street wanted to see over 55% growth. And last quarter, they did 66%. So top line miss, infrastructure miss. I think Google, Microsoft, and Amazon are gaining share. So it's definitely concerning. We'll have to see what they say on the call. And they've said that they don't expect AI revenue till mid next year, which is implying that to many that their infrastructure isn't ready for these AI workloads. So I think there's a lot of open questions we're going to have to get a better answer here coming up on the call. At the same time, though, Brent, we're starting to see application players,

ServiceNow, Microsoft, others, that are rolling out AI-enhanced offerings now. Does that mean Oracle is behind? Are they just talking about revenue recognition in a different way? Is it too early to gauge how much relative benefit Oracle might get out of AI in 24? Oracle's behind, there's no question, right? They're behind the cloud, which makes them behind in AI. So if you think about what's happening in Amazon, Microsoft, right, they have the infrastructure to then do the workloads on AI. And Oracle is still trying to convince their customers to move to their cloud.

So while they're behind, we do think Oracle has a shot in the capability to be one of many in a multi-cloud world, right? It's not going to just be Amazon. It could be Amazon and Oracle or Amazon and Microsoft. Unfortunately, they're a rounding error relative to the overall equation. And what you've seen out of Amazon, good numbers, Microsoft, good numbers. Now you have two bad quarters in effectively the wave that AI is about to hit tells you that those customers may not be moving as quickly to Oracle. I believe they're moving to Amazon and Microsoft,

and those are our two best ways to play this. Oracle will benefit, but not at the same magnitude of those other two. I mean, for Oracle specifically, how much of this is going to be a, and I realize that they're on their own fiscal reporting schedule, so I'll say a calendar 2024 year.

I ask this because the commentary in this release from Safra Katz that as a measure of the demand for generative AI services and cloud infrastructure, that remaining performance obligations climbed to over $65 billion that that exceeded annual revenue. And then commentary here from Larry Ellison about the fact that they're working to expand their existing cloud data center. So I wonder how much of this is that they're in this investment phase, your point, versus realizing the actual monetization of that process. And if so, what that means in terms of permanent loss of market share versus delayed loss of market share. Well, remember, Oracle's been losing market share in cloud for a long time. So this isn't necessarily new. And backlog is a measure of committed contracts. But at some point, you know, they're not going to be able to sell that because they can't recognize revenue. So, I mean, at this point,

I just say that I think overall what we're dealing with is the same thing we saw in cloud. Oracle was late. They caught on. There's two leaders and the others are growing. I mean, put this in perspective, how big these other companies are and their growth rates. They're still, I mean, Oracle just grew, you know, 4% and the rest of the industry is growing a double digit and they're multiple times the size. That basically tells you that they're behind. So Brent, quickly basically tells you that they're behind. So Brent, quickly, do you keep a buy rating on the stock then? Yeah, I mean, we think, again, in a multi-cloud world, they're going to benefit.

This is more of a value, cheaper way to play it. There's not as many people invested in this as Amazon and Microsoft. So we think they will benefit. Stocks worked pretty well year to date, but certainly is going to give some up on this. And it's been to, you know, disappointing quarters back to back. So you can't sugarcoat that. It's going to be down tomorrow. All right. And it's down almost nine percent right now in after hours. Brent Thill, thanks for joining us. We'll keep a close eye on that call over the next hour. We have a news alert on some C-suite changes. Meantime,

Steve Kovac has the details. Hey, Morgan. Yeah, I got a double whammy here for you. Let's start with Discover Financial Services. They are appointing a new CEO. His name is Michael Rhodes. He's going to take over as CEO either on or before March 6th of next year. This is after back in August, their CEO stepped down amid some regulatory scrutiny. He is coming from the Canadian division of TD Bank Group. We see shares here up about half a percent for Discover. And now let's move over to Lucid. Their CFO is stepping down effective

immediately. This is Sherry House, the CFO of Lucid Group, to pursue new opportunities, they say, although she is going to stay on through the end of the year to help with the transition. In the meantime, the VP of Accounting will take over as interim CFO. We see shares down nearly 4 percent here. Guys, let's head back to you. Steve Kovach, thank you. Thanks. Up next, the CEO of CRISPR Therapeutics on the landmark FDA approval of the company's gene editing treatment for sickle cell disease and why the stock is selling off despite clearing that key regulatory hurdle.

And check out shares of Cigna today up 16 and a half percent, finishing at the top of the S&P 500 after the company scrapped plans to take over rival Humana, opting instead for a $10 billion buyback. Well, that explains it. We'll be right back. Welcome back. CRISPR Therapeutics closing lower today, about 6.5%, as investors digest the FDA's approval of treatments for patients with sickle cell disease. CRISPR's therapy, in partnership with Vertex Pharma, will cost $2.2 million per patient. It's the first therapy approved in the U.S. based on the CRISPR gene editing technology. Stock's down about 15% from before the approval, but still above where it traded at the beginning of November, up about 50% year-to-date. Joining us now is Sam Kulkarni, chair and CEO of CRISPR Therapeutics. Sam, welcome. I want to understand exactly your place in these CRISPR treatments that are going to be coming to market. You got a $200 million payment for this approval.

You've got about, I believe, a 40% share of profits going forward. It kind of seems in a way like an arm or a Qualcomm in the chip world providing some of the key technology for a smartphone or a PC to work. Thank you, John, for having me. It is a watershed moment in the history of biomedicine with the first CRISPR approval and a great day for patients suffering from sickle cell disease who now have an option. This is the first time we as humans have figured out how to modify our own genome to provide a potential cure for various diseases, and in this case, sickle cell disease. This is all powered by this powerful technology called CRISPR-Cas9 that was elucidated about 10 years ago and was the reason for the Nobel Prize in 2020. CRISPR Therapeutics is at the vanguard of taking this technology platform and enabling various medicines with it, whether it's sickle cell

disease or thalassemia, heart disease, cancers, et cetera. And we are sort of like the engine, like you said, with ARM, John, we are the engine that provides the technology, but we also take the risk and make the medicine. So we're excited about not just this approval, but everything else in our pipeline that's coming behind it. So I want to talk about the pipeline. Tell me about that. But also on behalf of investors, I'm concerned about the delivery mechanism. Oversimplifying here, you're using bacteria to edit genes, and there's this immune response sometimes that cells have. How scalable can you be sure that the technology is at this point, and how full is the pipeline potentially of solutions to diseases

that can be addressed at lower cost than this initial sickle cell treatment. If that was a risk about seven or eight years ago that people wondered if there's any immune reaction from forward towards the CRISPR-Cas9 proteins, but we've now done several clinical trials and in our clinical trial for sickle cell, for instance, we show that there's no such risk. Thepr cast line delivery technology can be delivered safely into cells or directly into patients without any reactions and we're trying to make it more and more a scalable platform in in these diseases we can deliver to various organs of interest for instance we can deliver gene editing in the case of sickle cell we edit the cells ex vivo outside the body and then deliver the cells to the patient. And the

data so far are remarkable. And we think this is a very scalable platform that can apply to many, many diseases. So it raises the question, I realize when we're talking about sickle cells, specifically, Sam, you're partnered with Vertex on the commercialization and the access and the manufacturing of this treatment specifically. But when you talk about all of the different applications for this type of gene editing technology writ large, how big is the total addressable market? The sky's the limit. We're not just talking about one or two indications or tens of indications. In fact, it's more than that. In fact, I see the whole biopharma market shifting.

You know, in the late 80s, you saw a shift in the biopharma market from small molecules to antibodies. And today, proteins and antibodies make up 50% of the entire biopharma market. You can see a similar shift over the next 10 to 15 years towards cell and gene therapies. And my prediction is a third of the biopharma market are going to see a similar shift over the next 10 to 15 years towards cell and gene therapies. And my prediction is a third of the biopharma market are going to be these advanced cell and gene therapies. And we sit right at the cutting edge of this secular movement in the industry. So what does that mean in terms of near-term, medium-term, long-term strategy for the company specifically,

given the fact that you did update your pipeline just last week, cut two cancer programs, and announced that you're going to expand into autoimmune diseases? Yeah, first of all, with Casgevi, this is a remarkable medicine. For those who don't know sickle cell disease, these patients live with chronic pain, but they also have acute crisis, end up in the hospital several times a year. And with Casgivy, what patients have said is, and the data have shown, is that they are eliminating these hospitalizations, they're eliminating these acute crises. Some of our investigators and patients call this a cure. So with this type of transformational therapy, we have a partnership with Vertex. We're now commercializing this around the globe, and we expect several patients to benefit from this therapy.

Beyond this, obviously, we're trying to bring many of the programs to the clinic. We're particularly excited about our cancer programs where we retrain immune cells to kill and eliminate the cancer cells. We also have a program where we directly inject the CRISPR-Cas9 delivery solution into the veins that go to the liver and edit your liver cells. And a one-shot injection can reduce your LDL cholesterol by 40 to 50 percent for life, as we've shown in monkeys. We also have a program towards type 1 diabetes where we make artificial pancreatic islet cells. So the sky's the limit here. Sam Kulkarni, thank you for joining us on the heels of this milestone for the company and for this new and emerging technology and industry. Thank you for having me. I say new in quotations

because I realize this is all years in the making. It's time now for a CNBC News Update with Bertha Coombs. Bertha. Hey, Morgan. The House is expected to vote to formalize the impeachment inquiry into President Biden on Wednesday, according to two sources. Before going to the floor, the resolution to authorize the inquiry will go before the House Rules Committee tomorrow. President Volodymyr Zelensky spoke at the National Defense University today where he asked Congress to approve additional military aid for Ukraine. The Ukrainian president said that Russia's dreams come true when Congress delays more aid to Ukraine. Zelensky is scheduled to meet with President Biden Tuesday. And Apple is reportedly overhauling its iPad family next year to make the product line less confusing, or product line overall, less confusing for customers

to differentiate between models, according to a Bloomberg report. Apple also hopes the effort will boost iPad sales. Customers can expect new versions of the iPad Pro and iPad Air as early as next March. John? Bertha, thanks. We'll see if they can simplify that iPad product line. Meantime, Macy's turning in its best day in more than a year on reports that, hey, it might be on sale. There's a nearly $6 billion bid for the company, and it centers on Macy's real estate assets.

We're going to talk to real estate mogul Rick Caruso about the value of those properties next. And don't forget, you can catch us on the go by following the Closing Bell Overtime podcast on your favorite podcast app. We will be right back. Welcome back to Overtime. Macy's surging today after the company received a $5.8 billion buyout offer from Arkaus Management and Brigade Capital Management. Shares finished the day at more than 19%. Arkaus focuses on real estate investing.

Joining us now, Rick Caruso, founder and executive chairman of Caruso, a privately held real estate company. Its portfolio includes residential and retail properties, including The Grove in Los Angeles. Rick, it's great to have you back on the show. I do need to start here. This isn't the first takeover offer we've seen come for a big retail and brick-and-mortar chain in recent months or recent years. But, of course, the big focus with Macy's, and I think it's indicative in this news today, is the real estate portfolio. Your thoughts? Well, Morgan, my thought is that the offer is obviously a lot less than what's being reported on the value of their real estate. So

probably this is the opening offer and it's going to go somewhere beyond this. But they do have some good real estate. They're not putting a lot of value based on the offer they've made on the operation of the business. So I don't really know what their intent is, but it's going to be fun to sort of see this thing play out. They've got some good real estate, no doubt. How does it speak to the value of brick and mortar writ large in an omni-channel world? Well, I would break it down between a department store and other brick and mortar, right? Other stores. I think the department store sector definitely needs to get reinvented and be more engaging, more interesting, have more experiences, be easier to shop, less friction, all of those

things to start driving more sales. Because the department store format is a pretty old format that hasn't been changed in a lot of years. So what would be exciting to me is, are the buyers looking at this to reinvent the operation, including to take advantage of the real estate? Or are they buying it to start sizing down and just selling off the real estate? I'm not sure what their goal is. But brick and mortar is strong. And we've seen, as you know, strong growth across the country in brick and mortar sales, as we've seen online.

So it's not going away anytime soon. Rick, educate us on this. A decade and more ago, department stores like Macy's were what we called anchors in malls. They were the destination that people went to, and then they might go to the rest of the mall. It seems like over the past 10, 15 years, things like Apple stores have become those de facto anchors, department stores less so. If that's the case, what do department stores need to do to recapture that anchor status if it can be recaptured at all? Well, John, I think it's a good question. I think the question is also, do you need an anchor? And what really is the definition of an anchor? I mean, the indoor mall format, as we know, is really a format that was

a moment in time. And the effectiveness of the indoor malls, the sales per square foot generally around the country have gone significantly down. And so the importance of that old format of two big department stores and all the shops in the middle, I think that's gone. I mean, there hasn't been a new indoor mall built in decades. So that tells you something. But you're right. Stores that really drive sales, stores that have great experience, great product, value to the consumer, is meaningful to the consumer, the Apple stores, the Lululemons, the Alayogas, the Sephoras, those are all anchors. And when you look at our properties, we're designed around a whole series of great retailers and restaurants that are anchors also that drive traffic. And

we're not dependent on the department store. So in this case, is the mall now the department store? Because you just named a bunch of brands that a generation ago would have had little featured areas inside a Macy's, but not anymore. So do we need department stores anymore? What do department stores need to become in order to be needed? Well, I think department stores, there's some department stores that are doing some interesting things. If you look at the Saks department store down in Florida and Miami, they've got a great not only restaurant, but a whole food service in there that's incredible. So they're broadening the experience for the shopper, which I think is smart. Shop and shops, I think, are very smart. You take a look at what Bloomingdale's has done, obviously the same kind of company as Macy's.

They've got a very aggressive shop and shop. So they've got luxury stores inside the department stores. All of those kind of things make the shopping more interesting to the consumer and more engaging. And probably the department stores don't need to be as big. They can be much more efficient now on how they're selling product. But it really comes down to are there innovative CEOs running these department stores that are willing to reinvent this format that is pretty much not changed over decades and decades? And I think that's what we need to look for. OK, so, Rick, a macro question for you, because it is the holiday season. It's also Fed week. We're seeing economic data that's showing signs of softening, but not completely buckling. So the soft landing narrative persists. What are you seeing in your properties in real time right now?

Yeah, across the portfolio, we're still seeing growth. We're seeing double digit growth of attendance on the properties. We're seeing strong growth in sales. Most of our retailers are having sales that are exceeding their projections for the holiday season. So that's all good. But I will tell you, we're being cautious from a planning standpoint, looking into 24. I just got to believe that with the interest rates that have risen, the default rates on credit cards has risen, default rates on automobile loans has risen. Moreault rates on automobile loans has risen. More people are buying now, paying later. That's up about 40%.

So people still want the experience. They want to be out. They want to shop. There's just got to be less spendable income out there. And I think we're going to start feeling that. Hopefully, with interest rates coming down a bit, and we're not seeing a lot of deterioration in the labor market, we're going to have a nice soft landing. But we're going to be prepared for something a little bit more difficult going into 24.

We'd rather plan for the worst and we'll celebrate the best. All right. Real strength, but real caution. Rick Caruso, thank you. Thanks, John. Now we've got a news alert on Berkshire Hathaway. Steve Kovach has it. Steve? Hey, John. Yeah, Berkshire Hathaway is cutting its stake in Hewlett-Packard HP. This is going from an 11% stake to a 5% stake.

This is, of course, according to SEC filing, and we see HP reacting here down about, you know, two-thirds of a percent, looks like, John. Set it back over to you, Steve. Thanks. Sure. Up next, Mike Santoli is back to break down the city U.S. economic surprise index and whether it supports hopes for a soft landing. Be right back. Welcome back to Overtime. Recent economic data has come in essentially in line with forecasts and has led many to buy into the soft landing narrative. We were just talking about it a few moments ago, actually. Mike Santoli is back with a look at what the lack of surprises has meant for the market. Mike. Yeah, Morgan.

So not only have the data been coming in sort of in a friendly mode in terms of jobs, in terms of the recent inflation numbers and others, but also very close to economists' forecasts. That's what this line of the Economic Surprise Index down near the zero mark tells you. Zero would be exactly on forecast. Above that level means things are coming in on balance better than anticipated and vice versa for below. And this is actually calendar 2023. We actually haven't cracked below zero for this year. We were close back in the spring after we had the Silicon Valley Bank washout. But it's unusual in a given year not even to go negative. So this tells you that we're comfortable with where things are. Maybe economists are going to raise their sights

and we're going to have some disappointments. So at some point you fear the calm. But right now, the economic fundamentals say, you know, we're pretty much on course with what the projections are telling us to expect. All right, Mike, thanks. Well, that might not be a surprise, but here's a surprise today. RingCentral's founder is back in the CEO seat after just four months. Stock is down, let's see, it closed down about six and a half plus percent on the shakeup. The company announced in August that founder Vlad Shmulis would move to chairman and former Hewlett Packard Enterprise CFO Tarek Robiadi would join as CEO. Here's what Shmulis told me in September when they joined me for a Fort Knox update just after Robiadi took the job. What are we trying to accomplish with the CEO situation is uplevel the team.

The teams that I built and led by myself took the company from zero to $2.2 billion. Profitable, still growing, decent business. But we have aspirations of growing from here and going places. And what Tariq brings is operational experience at a much higher level. Now Shmudes back at the wheel, leading perhaps by himself again. He says product and innovation strategy will be driving all that they do. Investors getting set for another key reading on inflation. What tomorrow's CPI data could mean for the Fed and your money coming up on Overtime. Welcome back. The Biden administration announcing

today its first investment under the $52 billion Chips and Science Act, a $35 million grant to BAE Systems to quadruple the defense contractor's production of semiconductors used in F-35 and F-15 fighter jets, among other things like satellites and commercial aerospace products. The announcement made at the company's New Hampshire foundry, where the funding will go to the modernization of equipment. The award is the first of a series expected in the coming months as the Commerce Department begins distributing the $39 billion in federal funding, specifically earmarked that Congress authorized last year to incentivize the establishment of a domestically based semiconductor supply chain. This first investment sending a strong message about the prioritization of national security in these funding decisions.

It's something I discussed with Commerce Secretary Gina Raimondo at the Reagan National Defense Forum earlier this month when I asked how geopolitical tensions involving the world's biggest source of chips, Taiwan, are factoring in. The reality is it takes time. It takes a couple of years to build one of these facilities, which is why we need to get going right now. You have said, I've heard you say, that that kind of a disruption to our supply chains

would make COVID look like a walk in the park. It's true. And that's why we're running as fast as we can to make our supply chain more resilient and, you know, make in America the leading edge chips that we need for American national security. Now, she reiterated the U.S., quote, can't gamble with our national security by depending solely on one part of the world or even one country for crucial advanced technologies in a call focused on today's news with myself and other reporters. On that same call, National Security Advisor Jake Sullivan adding that, quote, the chips inside our weapons systems and other military platforms are becoming as important as those systems and the platforms themselves. John, I think the takeaway here is you're going to see more of these types of announcements really pick up steam through the first half of next year.

But by making a first announcement focused on the defense industrial base, really hitting home and underscoring the fact this is about national security and that's a key priority within this act. Yeah. Yeah. At the same time, it's a tenth of a percent of that total 39 billion that companies are looking for. Exactly. There's going to be a lot more announced. Up next, we'll discuss how tomorrow's key consumer price index data could impact the Fed's interest rate decision on Wednesday. Overtime will be right back. This is a big week for Wall Street. Tomorrow we get November's CPI results on inflation. The final Fed decision of the year comes on Wednesday.

And all of Wall Street is going to be looking for any clues about when a Fed cut could come. Joining us now is Neil Dutta from Renaissance Macro Research. Neil, on top of all of that, Rick Caruso just told us mall traffic's up double digits. Consumers are spending more right now, but he's skeptical that it can last. What shows up in CPI and what does the Fed do about it? Well, I don't think they do anything about the CPI that's coming out tomorrow. I think it's highly likely that we'll get a donut, a goose egg on the headline CPI inflation. Obviously, gasoline prices are down. I think what's notable, John, is that diesel prices are also declining and that's going to bleed into food. Obviously, you know, how does food get to the grocery store by a truck?

And that truck runs on diesel. So I think consumers are going to feel quite a bit of relief at a critical time of year. And this is all happening with the labor markets still reasonably healthy. So, you know, I think the growth aspect of this is holding up reasonably well. Is there any incentive for the Fed to sound dovish at this point? Well, I think they have to respond to the data, right? I don't think it's almost too cute to sort of play these games and trying to, you know, place, you know, a psychiatrist with the financial markets. Just follow the data as it's coming to you. They should sound dovish

because inflation is falling much more rapidly than they anticipated. They expected core inflation to be 3.7 percent this year, fourth quarter over fourth quarter. It's not running anywhere near that at this point. In order to hit that forecast, John, you need to see core inflation of half a percent in each of the next two months. It's just not happening. Keep in mind that since June, core inflation is running just 2.3 percent. That's actually below their estimates for 2024. So I think it's likely that they revise down their inflation estimates for each of the next two years. So why would they sound hawkish in that situation? And what you raise is a key point, that the market expects the Fed to hold steady and to sit unchanged in terms of short-term rates at this meeting. What really is going to matter

is the dot plots and those economic forecasts. And it's not really a matter of if, but when and why we start to see Fed cuts your thoughts well i think they're going to be cutting next year they're already telling you that i think they'll end up going three times but i do not believe that this is anything about growth i think that's what people are making the mistake around i mean there's this view in the markets that if the fed ever cuts it's because growth is falling off a cliff. And I think that's sort of us anchoring to recent cycles. This is about a recalibration of policy. The Fed hiked very aggressively this year.

And now inflation is slowing. And because inflation is slowing, they can recalibrate policy to put the economy on a more even keel. Neil, I've got to interrupt you right there. Stay with us because we have some more breaking news here. News on Hasbro. The Wall Street Journal reporting the toy company is cutting nearly 20% of its workforce. That's more than 1,000 jobs on weak sales trends. The journal notes that Hasbro already had cut around 800 positions earlier this year.

The company's CEO telling the journal, quote, headwinds have proven to be stronger and more persistent than planned and said challenging sales are likely to persist into 2024. To have you pick up your thought, Neil, I mean, when you start to see some of that, and I realize it's been industry specific so far, but we're starting to see some companies announce more job cuts. Is this something that could potentially pick up the pace as you do see these rate increases take greater effect in the market? Well, I don't know that they'll take greater effect on the market. I think the statute of limitations on the long and variable lag story has kind of run out.

I mean, we've had hikes for a while now, and the economy has absorbed the shock. So if you're a growth pessimist, you need to point to something new beyond the Fed to kind of satisfy your call. So I just don't see that. I think the labor markets are fine and the economy is growing slightly above 2 percent. I don't think growth is particularly... I'm sorry, I've got to cut you off again. We're at the end of the show. Thank you so much for joining us. We'll have you back to share more thoughts. That's going to do it for us here at Overtime. Oracle Guidance on the call. Fast Money starts now.