Closing Bell - Closing Bell Overtime: Debating a year-end rally 11/21/22

Episode Date: November 21, 2022

Investors closely watching the pause in the rally and whether it means the year-end jump for stocks is not in the cards. New Edge’s Cameron Dawson gives her take. Plus, why EMJ’s Eric Jackson thinks investors should fade the Disney C-suite shakeup. And, Mike Santoli says there is an asset class that is starting to crack again. He explains what it might mean for your money.

All right, Sarah, thank you very much and welcome everybody to Overtime. I'm Scott Wapner. You just heard the bells. We're just getting started from post nine here at the New York Stock Exchange. In just a little bit, I'll be joined by a former Disney investor who says don't buy the stock on Iger's stunning return as CEO. He will tell us why. We've also got Zoom and Dell earnings about to hit. We'll follow those reports and of course, the stock moves that follow. We do begin with our talk of the tape, the pause in the rally, and whether it means an end-of-year jump for stocks is not going to be in the cards. Let's ask Cameron Dawson, the chief investment officer for New Edge Wealth. She's made her way right here on set at Post 9. It's good to see you again. Welcome back. What's up with this pause, do you think, over the last week or so, right? We had

this massive rally off of the mid-October low now we kind of haven't done anything what's going on well we're hitting resistance we are bumping up right into very powerful resistance at that 200-day moving average add also the summer highs and lows right there was a lot of congestion around that 4100 level and we simply don't have enough yet to push us through that resistance so that means that we're still digesting these headwinds from earnings, digesting headwinds from valuations. Now, could we see some kind of seasonal rally that tries to push us above that 200-day moving average? It's possible, but we think that it's less likely given how stuck we got at this level.

You say, you know, what gets us through that resistance? I'm trying to think, what's the answer to the question, right? If we think seasonality is kind of all we have going for us, is that enough? It probably isn't enough just for seasonality. Maybe some window dressing. That's what typically happens at the very end of the year. You try to see some performance chasing, but we could also have a little bit of a breather in some of the bearish sentiment around earnings. Look at growth numbers coming in. They're coming in better than expected in the very near term. Might do 4% this quarter GDP. Exactly. That Atlanta Fed GDP now is showing really strong growth. Now, does that mean that a recession is off the table for next year? Does it mean that we're out of the woods or have really strong growth in 2023? Not necessarily, but there could be a period where it helps lift sentiment just enough to

give us a breather. So let me ask you on that note then, because I'm hearing you and I can remember Ed Yardeni last week saying, what if we get no landing? What if the economy is much, much stronger than people think? The Fed's not going to go through with all that they suggest they might. And then you don't get any landing. Forget soft landing. You just get a nice moving economy. You don't get a boom, but you also don't get a complete blow up. Well, if you don't get any landing, you do not get any cut. The bond market is pricing and interest rate cuts into the end of next year. That's what yields are starting to reflect, which means that the bond market is

expecting some kind of landing. So if we do not get a hard landing or let's say we get a soft landing, why would the Fed be cutting interest rates into what would be a full employment economy? Because then they really would risk stoking inflation to come back. My gosh, we're so far away from thinking about cutting. I mean, Mester last hour with Sarah, quote, I don't know that we're anywhere near with Sarah. Quote, I don't know that we're anywhere near stopping. Forget about cutting. I don't know that we're anywhere near stopping. We're just basically entering restrictive territory, she said. We do need to bring rates up somewhat.

Obviously, she, you know, thinks the cadence, I think that was the word she used, is going to be different, right? 50 next time, not 75 is appropriate. Does that get you enough to have a six-week run into the end of the year? Probably not, because in that scenario where they're continuing to raise rates, this means that we are still in an interest rate-driven market. It means that we still will see pressure on valuations. So if growth is coming in better and they're saying they're going to raise rates, that should push up the long end and the short end of the curve, which then pushes down valuations.

But if we don't have to worry about earnings coming down any more than they have, at least in the near term, right, we're going to see what happens for next year. But we have a little bit of runway. We think the Fed's going to do 50 in December. They're pretty well telegraphing it, Mester included. If you get a decent inflation read and maybe the market starts to anticipate that, isn't that set up for an end-of-year move higher? I think it can set you up. And there's an interesting historical analog here with late 2001, early 2002,

where we actually traded above that 200-day moving average for a couple months. We got up to about 7% above it. And then we rolled over, and the bear market continued, and you saw the valuation pressure, saw earnings pressure. So maybe we have something similar this time around. It could draw people in thinking that the worst is over, when in reality, we still have headwinds from the Fed with valuations and still have headwinds from earnings. I mean, let's see if we can even get to 4,100, right? That's a key level of resistance. And even the more negative strategists like Mike Wilson, Morgan Stanley say, yeah, you

could get that. In fact, I think you're going to get it. You may even exceed it. But reality hits you straight on in the new year, which I think people are prepared for. It's this expectation of between now and then the rally off the mid-October bottom sort of setting us up mentally for a better market environment for the next five, six weeks. And that's one of the things is that we would not want to chase this rally. I think that's the really important discipline. Just as we talked

about at the beginning of October, not being too short when the market was oversold. You don't want to get too bullish and chase to the upside thinking that the worst is over once we hit this resistance. And we would be trading at pretty elevated valuations. Even if earnings are flat next year, which is normal for a tightening cycle, to have it be flat without a recession, we'd be trading at nearly 19 times. That's expensive with a 10-year that's nearly 4%. You know, Zoom is out, everybody. We've been waiting on some more earnings. I do see it crossing right now. Steve Kovach, our reporter, is going through that report. He'll show you the results. You can see a stock that's moving higher, at least from an

earnings-adjusted standpoint. It looks like that's a beat as we continue to go. It looks like it's a beat on the top and bottom, frankly. Revenues look at 1.1. That's a slight beat on the 1.09 billion in revenues there. And the EPS looks ahead, too. But Kovacs going through all of that. He'll bring us the latest. I'm thinking about this in the context of once high flyers that got totally blasted down to earth and whether they've come

further enough down to see them as attractive here? Well, with Zoom, it was trading at a peak of 70 times sales back in 2020, which means that even though you saw sales grow by about six times since then, you still were pricing way too much growth into the stock. And that's why it's performed so poorly. It's now trading at just five times sales. Now, is five times the right number for a company that's growing sales just about mid-single digits, is facing huge revenue headwinds potentially from higher competition, and is guiding to lower margins?

We'll see. The bar was certainly low going into this earnings season, which has allowed it to have some relief. Yeah, the market's going to go through and decide what the guidance is here, too. It's a volatile stock, as it has tended to be. So we'll have to get to the bottom of that. You do have an opinion, too, on Disney. Obviously, in light of this stunner of an announcement today that Iger's coming back, do you like the stock here or no? Well, we certainly have made a lot of progress on valuations. And I think this is another

really important lesson in that valuations do matter. Disney traded at a peak of 79 times earnings. Now it's down to about 22 times earnings. You've certainly taken the air out of this, but there are certainly major pressures that we have to consider with Disney. The fact that you're still seeing big losses at Disney Plus, they're not have to consider with Disney. The fact that you're still seeing big losses at Disney Plus, they're not guiding to that breaking even. And so what can Iger actually do to pull on the cost lever in just two years to get profitability trending in the right direction? You gave our producers a comment that I thought was quite interesting. The golden age of content is over. Did you say that? Yeah. What does that mean? Because I think people would take

big issue with that, right? Content is king and is always going to be king. But the arms race that caused every single content creator to absolutely throw money without any kind of pause in order to get as much content as possible, to take advantage of the big valuation that they were seeing at Netflix, to take advantage of what they saw that they were seeing at Netflix, to take advantage of what they saw was the future growth, now it's likely that they're going to have to be far more parsimonious with their capital, which means that you won't see them just throw money at creating content. They'll be much more careful.

Yeah. They do have one heck of a library, though. Yeah. So maybe they don't have to. We're going to see that. Steve Kovach is ready with Zoom. Did I see this right? Steve, is it a top and bottom beat?

And then you probably know better than me, according and certainly the guidance. Yeah, it's the guidance that are sending shares kind of bouncing up and down. It was up quite significantly at first. But let's go over the results here. It is a beat on EPS and in a significant way. Dollar seven cents versus 84 cents adjusted. Expected revenue about in line. Scott, one point.1 billion versus $1.099 billion Street was looking for. And look, it's the guidance that's amiss here, especially on the EPS front. Up to $0.78 a share expected for the current quarter versus the $0.81 the Street was looking for. And a tad light on revenue guidance, $1.105 billion versus $1.12 Street was looking for and a tad light on revenue guidance 1.105 billion versus 1.12 Street was looking for

so shares were about up what what is it now a percent and a half it was up as much as like six or seven percent earlier Scott but it's like guidance sending it a little bit on the lower side yeah volatile as usual uh Steve thank you that Steve Kovac with the latest you pop back on uh if you have anything we need to know about don't't miss Zoom CFO, by the way, on Squawk Box tomorrow morning. So you get the story directly from the executive there and you don't want to miss that. Let's expand our conversation here. Let's bring in Marcy McGregor of Bank of America and Patty Brennan of Key Financials. Great to have you both with us. Marcy, you first. Are the risks for investors getting any better or are they getting worse? Yeah, I would stay on guard here.

I think we do have some strong seasonality. I think sentiment is really bearish but improving a little bit. There's a ton of cash on the sidelines. And buybacks might be this quiet support for markets into the end of the year. But I think that means markets may just tread water. I agree with Cameron. I wouldn't chase this rally. What we've seen is a huge pickup in equity inflows in our internal data, the biggest

that we've seen in 35 weeks. So I would stay on guard. The bottom line is the earnings backdrop is deteriorating and the Fed is not ready to pivot or pause. So I would stay on guard here to stay really balanced. And I agree. I wouldn't chase this rally. Yeah. Patty, do you agree with that assessment? Is it matched with your own thinking here? I do agree with that, Scott. I think that, you know, the big

the big emphasis in the prior quarter was emphasizing dividends, emphasizing value. And to Cameron's point, I would not do so at and ignore growth. They've been pummeled. Those stocks and those companies have been pummeled all year long. And I think there's some very interesting opportunities in that growth sector. It's ugly, certainly today, but we're not going to look at just one day. And there are some really well-run companies that present interesting opportunities over the next six weeks, six months and certainly six years. Yeah. But Marcy sounds pretty cautious, though. Did you not tell our producers that you think this is a good entry point? I do. I absolutely do, Scott. I don't

pretend to know what's going to be the bottom. I think this is a great entry point, especially given the fact that inflation is beginning to moderate already. And when you look out six months or a year, historically, at least, the S&P, the market, broad market is very attractive, done double digit returns historically. So again, you know, if people don't need the money in the next three months, for example, I would definitely stay invested and add. Cameron, how about that? Right. It's an interesting way to sort of describe the choices that investors have. They can rightly so be negative on the bigger picture. But if you're a longer term investor and you think that stocks have come down appropriately enough, what do you make of that advice? Well, it was one of the

things when we saw in early October, we put out a note talking about wanting to be buyers of weakness, even if we weren't catching the ultimate low. It wasn't about ringing the bottom and saying that this bear market is over and that we're completely out of the woods. But when we look out two years around that thirty five hundred, thirty six hundred level, the risk reward is a lot better. Now, would I buy today and chase today after the big move that we've had coming off of those lows? Likely not. We likely still have more volatility. And so our stance is still is to be buyers of weakness and not buyers of strength. Marcy, I mean, you yourself, you think a new bull market could happen within the next six months, right? So, you know, who's going to ring the alarm bell and say, OK, investors, now that's now's the time to buy because that's what's

coming. Yeah, I think the last shoe to drop is going to be earnings. I think this has been a very rates driven market so far. All eyes are on the Fed. I'm optimistic that inflation is coming down. And I actually even think there's a risk that inflation comes down faster than the street thinks when we look ahead into 2023. But like I said, I would just say on guard here, when I think about the full year, the first half of the year, in my view, is probably going to be better for the bond market. And then 12 months from now, if we were having this conversation a year from now, I think this is going to be more of a time for equity strength. So I do think it's going to be more about a Fed pause versus a full pivot just because of how unusual the inflation is in this cycle. Patty, you know, your strategy for people, reduce or get out of cash, go 50 percent short term fixed income, 50 percent

longer term debt, overweight U.S. equities? You bet. And when I say overweight U.S. equities, we have trimmed down earlier this year on the international equity side. But we decided to go global because I don't want to be out of that area of the world entirely because the valuations are so much more attractive. They are 21 percent below their median valuation where we're basically just flat. And so I think there will be terrific opportunities overseas. And I think this is where really good managers really come into play. They can keep an eye on what's going on with currency and really overweight, you know, one side of the ocean versus the other. That is the key. Overall, longer term, I'm very, very optimistic. Yeah, we could have some volatility here. That's

the way these things work. But I think it's going to be a very interesting 12 months. Yeah. Areas that have done quite well. Cameron Energy. I'm looking at oil again today below 80 bucks. What am I supposed to think about the direction of energy? I've got OPEC issues, you know, headlines that are changing, you know, hourly almost. And what am I supposed to think about the correlation between the price of oil and equities, oil equities? Well, I think first we have to talk about the price of oil and broader equities, which is that if oil prices resume their ascent and they have been weaker lately, but if they start to rise, we think it'd be a key negative for equities simply because you would have the higher inflation data and higher inflation expectations really pressuring the Fed to stay super hawkish so we still like energy within our portfolios

because it's essentially a hedge against that if oil prices rise in the rest the market really struggles at least our energy exposure can do well. Marcy your favorite part of the market is what. You know energy is one of my favorite sectors I

think in the very near term it is overbought. So you may see some profit taking here. But we have to remember the EU embargo on Russian energy doesn't start until next month. I think the fundamentals are really strong. So I like energy still in the longer term. But I would balance it with a really defensive sector like utilities that I think will weather this earnings downturn a bit better, both of them have a strong dividend growth story. So that's a kind of balance on striking energy for the world we're in and utilities for this profit cycle peak that I think we've already seen. Patty, you have stocks that are right in the wheelhouse of the more controversial sectors of the market right now.

I'm talking about Apple, Microsoft and Amazon. The thought being that those stocks are going to be out of favor for a while. Do you agree with that and you're holding them anyway, or do you take issue with that assessment? I definitely understand where the assessment is coming from, especially, for example, with Apple, right? You know, they're going to have delays in the iPhone deliveries. So people are going to have to wait until after Christmas. Therefore, they may not want to buy it at all. So Apple's definitely got some headwinds because of what's going on with China and their COVID, zero COVID policy. But longer term, it's a really well-run company. I would not want to abandon them or Microsoft for that matter. They are getting hit with this rise in interest rates and the way valuations work, but they're

good, solid companies that are going to grow their earnings over time. Disney's interest to me, I think the losses experienced because of Disney Plus, $1.5 billion the last quarter, Bob Iger's going to have some work to do there. They've made some strategic decisions, even something like, you know, bringing cricket to the people of India. That's a huge sport for India. And now they've got all those people that could be potential subscribers. So I would keep an eye on Disney as well. Again, it's going to be rough sailing. Well, you own it, don't you?

Don't you own Disney? Yep. Yes, we do. You feel better today than you did yesterday? 100 percent, Scott. 100 percent. You've got a leader that has been there for 25 years and navigated through lots of different market environments, made great strategic decisions with purchases

of Pixar and the like. So I'm very optimistic about that company. I know, but some would say that the most recent transaction wasn't the best. And that is in part what has saddled Disney with the issues that it has on its balance sheet, the Fox transaction. So how do you square that with some of the ones that, you know, admittedly are many years old at this point? They are. Admittedly, they are old, but the basic framework from which they make their decisions is still there. Nobody's going to hit a home run every time they come up to bat. The most recent didn't quite work out. Remember, he hasn't been there really since 2020. So time will tell whether or not he's going to be able to lead this company out of where they

are currently. Again, I'm really optimistic. Yeah, obviously, the market is, too, with Mr. Iger's return. It's up better than 6 percent. Ladies, thank you so much. We'll talk to you again soon. Marcy, Patty and, of course, Cameron right here at Post 9 with us. We're just getting started here in overtime. Up next, debating Disney. That stock popping is Bob Iger. We just told you, returning as CEO, which you already knew. One former Disney shareholder says don't buy that news. Eric Jackson makes his case ahead, which brings us to today's Twitter question. We want to know, are you more bullish on Disney now that Mr. Iger is back? You can head to at CNBC Overtime on Twitter. Cast your vote. We'll share the results coming up in just a little bit.

Overtime is back right after this. We're back in overtime. Investors cheering the news. Bob Iger returning as Disney's CEO. It's a stunner. The stock having its best day now in more than a year. Our next guest, though, he's a former shareholder who says you should fade that rally. Joining us now is Eric Jackson. He's the founder and president of EMJ Capital. Come on, man. You're a party pooper. Everybody loves this news. Stock's up six percent. Iger's iconic. Why should I fade it? I've been watching the coverage all day, Scott,

and I don't think I've heard one person say anything negative about Iger. And, you know, I can't say too much either. But basically, the problems, there are no quick fixes for Disney here. And, you know, Chapek had to go. He needed a personality transplant. Iger is certainly an improvement over Chapek. But Iger, the stock was treading water for the last five years of his tenure. Now, with the Chapek years, you've got seven years where the stock has been around this $100 level. Up 6% today. Yeah, that's great. But we're down like from a year ago. I think it peaked out just over $200. So a long way to go to get back to that number. I mean, if anybody knows how to fix it, though, presumably it's the guy who's taking the job again, no? Well, the reason why the stock treaded water for the last five years is it's basically ESPN is the problem. That thing was such a cash gusher for Disney for so long, they kind of took it for granted.

And when they started to realize that this big super steamer had termites in the bottom of the boat that was slowly eating away and starting to leak subs and leak revenue, you know, there's not a great solution for that problem. You know, their solution was to step on the gas and spend more money on streaming. Streaming itself is just not that great a business. It's not really free cash flow positive the way that cable networks were. Or even for Netflix, sending DVDs out by mail was a ton more free cash flow positive than streaming. So you're left with this theme parks business, which is a nice business, nice profitable business, but you've got a money loser in streaming and you've got this legacy cable networks business. What's the solution there? Are you going to sell that off and sit

and kiss sports rates goodbye for ESPN plus? It's not it's not easy in front of Iger. No, no question about it. I'm sure he is aware of that. DTC is a money loser for now. But once you come to the realization that it seems Reed Hastings has come to that, it's not subs at any cost anymore. Right. There's a paradigm shift that's clearly going on in the direct to consumer industry across the board that you just can't spend whatever you want anymore to try and get to a number. But when the marketplace realizes that fully, do you think that the stock will be viewed in a different light? I don't think there's some, like, Apple bid for Disney coming. I think that, you know, competition-wise, government's just not

going to allow that. So, you know, that's just wishful thinking of the Disney shareholders, thinks that's coming. So I think they do have to buckle down and they do have to cut costs, Scott, like you say, and make streaming as good a business as they can. The good news for Disney shareholders, there's no question, they've got this incredible stable of brands and library. They and Netflix are the winners. I think the problem that they're going to face is that, you know, when I owned this stock four years ago, my hope was that not only was Disney going to get a Netflix multiple, but that the peak in terms of global subs for Netflix or Disney was going to be 400

million, 500 million, maybe a billion down the road. But you've seen Netflix stall out at just over 200 million. Disney's caught up to them quick, which is great, although the ARPU is not super. And so if the ceiling is a lot lower on those subs, well, they could jack the prices up to, I don't know, 35, 40 bucks a month, but you're going to lose some subs then. You can go with ad tier, which has been the thing that has really propelled Netflix over these last few months. The stock has almost, I think, doubled off of its lows. But that's for selling ad tier. Is that really going to take Netflix to the next level in terms of its own stock trajectory? I doubt it. I think they're going to hit a ceiling at some point,

too. So Iger has to make the best of it. He's got a great company behind him, great brands, great talent, management talent. But it is a tough hand he's going to have to play. So you sold it when? Did you say you, I know you owned it four years ago. Did you sell it four years ago? Or have you owned it more recently than that? I sold it in 2019, pre-pandemic. So I thought that Disney Plus was going to be a catalyst. It was. But, you know, where it went from there, you know, I wasn't sure. And that was before JPEG, by the way. So I think now we're in the situation where, you know, I would love to get back into it. And so I might be wrong, but I do

think you have to fade this move today because I think Iger is not going to come out tomorrow with his five-point plan, his brilliant strategy for how to turn around Disney. It's going to take him weeks, if not months, to kind of get his arms around the company again. And again, I don't see a quick fix here. See, inherent in my question to you about when you sold it is it was before Dan Loeb was in it publicly. And now before we learn that Nelson Peltz is there, too. Not exactly, you know, wallpaper material, wallpaper guy who just sit there and do nothing. Right. The hang on the wall. Can they affect change at all? Pelts wants a board seat and who knows, maybe he'll get one.

And he certainly didn't get into the stock to just sit there. No. Yeah, I agree. I think I mean, they both have tremendous track records. They both should add value if they were to get a board seat or to get involved more deeply. I mean, I didn't think I didn't see a quick fix in Dan's letter from a few months ago to Chapek and the rest of the board. But they certainly can add value. What's interesting is this board is filled with a lot of non-impressive people to my eyes. It's a mostly consumer packaged goods board, which says something, I guess, about the way Disney sees itself as sort of a collection of brands rather than as a tech company or even as a media company. You're not going to find many media people on this

board. And I think if Pelts was to come in, if Dan was to come in, I think they would certainly look to refresh the board. And I think that's warranted, especially since this is the board that signed off on shape. This is the board that in June gave him a three-year extension to his contract. And then all of a sudden, you know, basically after one kind of bad earnings call, he's got to go. It raises questions about them.

I think Peltz can help. But again, difficult to see the easy solution for these activists to lobby for behind closed doors. But yeah, before I pivot you and ask you some questions about the market itself, we are learning some more details through a filing on exactly what Mr. Iger is going to be paid for his encore performance at Disney. It's going to be an annual rate, a base salary of a million dollars. We're learning. We're also learning that Chapek is going to receive separation benefits payable in accordance to what the terms of his employment contract were. And I don't have those in front of me, but nonetheless, he's going to receive those. And that Iger is also eligible for an annual performance based bonus with a target equal to 100 percent of that one million dollar annual base salary. So I would suspect we'll learn some more details about the particulars there.

But at least we have a base understanding about what Iger is going to make in his encore back at Disney. So let me pivot you to the market. I discussed with with Cameron Dawson, who was here at the beginning of our conversation about, you know, this pause that stocks have made after they had that very strong move off of the mid-October low. Do we still have something in the cards for a late year move or no? We do, although time's running out, obviously. I think the CPI number we got a couple of weeks ago was definitely a shot in the arm. Finally, we are seeing this thing start to drop,

and I think it's going to continue. It's only going to go down from here. I will remind you, I was wrong in that I thought the CPI would start to drop sooner. But I've mentioned on the show with you before, Scott, that back in 1982, in that inflation scare, what really set the market off like a rocket was when the CPI started passing, dipping below 6.6%. The market knew then that the fix was in. This thing was going to keep dropping. It wasn't just sort of like dropped and it's going to bounce back up or anything. And they got religion. And suddenly, a year later, the NASDAQ had increased over 100% from its then lows.

So I think we're going to get a number, obviously, in December and then January. I don't think we're going to get to 6.6 in December. We might get there in January. And so I think the market has found its footing. It can move up from here between now and the end of the year. But watch for that 6.6 number. When it eclipses that, I think that's going to be the all clear to see the market have a big rally in 2023. All right. The big buy signal. Eric, we'll talk to you soon. I'm sure of that. Have a good Thanksgiving. If we don't see you in the meantime, good holiday to you and your family as well. We'll see you soon. That's Eric Jackson. Time for a CNBC News update with Christina Parts

of Neveless. Christina. Hi, Scott. Here's what's happening at this hour. Just outside of Boston, an SUV plowed through the front window of an Apple store, killing one person and wounding 17 others. A trauma doctor at a local hospital described some of the injuries as life-threatening. Police right now are interviewing the driver. Colorado Springs authorities lowering the number of people injured in this week's gay nightclub mass shooting from 25 to 18. All but one suffered gunshot wounds. Makeshift memorials continue to grow for them

and the five people who were fatally shot. Comedian Jay Leno has been released from a burn center in Los Angeles. He was treated there for second degree burns on his face, hands and chest. The injuries happened after one of his vintage cars caught fire while he was working on it. And old Krispy Kreme stores in Moscow are being replaced with new donut shops called Crunchy Dreams. It's the latest imitation of a Western brand that suspended operations in Russia after the invasion of Ukraine.

This shop has a deal right now on three donuts for the equivalent of just $1.60. And speaking of those imitations, Scott, there's World of Cubes, which may be like Legos, and Star Coffee taking over the Starbucks locations. Back over to you. All right. All right.

Thank you. Christina Partsenevelos, thank you. All right. After the break, your hard landing playbook. Five-star fund manager Kevin Simpson laying out his strategy if the U.S. economy tips into a recession. Don't go anywhere. We're back in OT right after this. Welcome back. Showing you Zoom here. Reported a short time ago, stock has obviously reversed negative now. It's down about 4 percent. EPS was a beat. So a bottom line beat there. Revenues came

in largely in line, maybe slightly better than expectations. But the guidance certainly a question. And that's why the stock seems to be trading off by some four percent. Just wanted to keep you up to date on what's moving in overtime stocks at large, pulling back to kick off the week. My next guest sticking by his quote unquote hard landing playbook, saying a recession could come early next year. Joining me now, five star money manager Kevin Simpson of Capital Wealth Planets. Good to see you. Welcome back. So you've given up hope of a soft landing. Is that where we're at? Well, I think it depends on what side of the ledger you're on. If you're the stock market, you haven't given up hope. The PPI number, the CPI number, the fact that we might have a 75 basis point break and only get 50 basis point hikes in December have been cause for celebration

and markets have done really well. The bond market, on the other hand, continues to flash red, and it's been inverted for so long on the 210 yield curve that I think we've forgotten about it and become somewhat numb, Scott. But I don't think we can, because here in the U.S., the bond market is twice the size of the equity markets. They're telling us in no uncertain terms that the Fed's going to push things too far, that they're going to push us into a recession, and we're going to have economic contraction. So a lot of people say that sometimes the bond market is smarter than the stock market. I don't know if that part's entirely true. But I think from the landscape, we've got to keep the hard landing playbook out and in full force until we get information to say otherwise. What does that consist of?

When I open it up, what's page one say of that playbook? Yeah, it's not that scary. You know, whether it's a hard landing, a soft landing, no landing, you own high quality companies with good fundamentals that earn money and pay cash to shareholders. But specifically on page one, it goes down to multiples. Because what you worry about heading into next year is continued multiple compression, higher interest rates, compressing on multiples. So if you stick with consumer staples, energy, healthcare, financials, companies that are trading closer or in single-digit multiples, then you've got less of

that compression fear. You also have companies that can generate earnings. And then as you and I talk about all the time, we want cash flow, we want cash on cash. And most importantly, we want cash flow to shareholders through dividends. So when we go through bottoming processes or low periods, we're getting compensated with good dividends. Yeah. Are you finding fewer opportunities in these last handful of weeks to the year? I mean, I only ask you that because normally when you show up on the show, you're like, yeah, I bought this, bought that. I don't see anything on the list, which tells me, are you running out of ideas for the moment or what's happening? I mean, there's always opportunities. You know, the market had a great run. We sold out of our Cisco position on Friday in its entirety.

Just again, thinking of that playbook and moving a little bit away from technology and focusing more on energy with this WTI pullback. We tried to buy SLB today. We just couldn't get filled, but we wanted to rotate some of those proceeds from tech into energy. We'll get it this week. WTI coming down is affecting the energy names. Still tremendous cash flow and tons and tons of dividends available to shareholders. So we've got 12.5% cash. We're going to keep writing covered calls, and we're just going to keep adding to those low multiple names because this too will pass.

The good thing about the recession play is that markets are always forward-looking. They're looking past the recession play is that markets are always forward looking. They're looking past the recession maybe already. And when you look at the inversion of the yield curve, most of the time, the stocks do really, really well. The S&P, the broad markets in the 12 months following the inversion do great. I think 2002 was maybe the only recent exception to that. So we're just in a waiting period, but there's always opportunity, Scott. Kev, I appreciate it very much. We'll see you soon. That's Kevin Sipson joining us once again in overtime. Up next, more on Bob Iger's surprise return as Disney CEO. We have another shareholder standing by with their reaction to the news. Don't go anywhere. We're back after this.

We're back. We have some new details on Disney. Julia Borsten following the story, of course, for us and has the latest. Julia? Yeah, Scott, just to put things into perspective here and to give a little bit of detail on how much money Chapek was getting paid when they extended his contract back in June. Back in June, when they extended Chapek's contract, they announced that his two and a half million dollar salary would remain unchanged, but his annual long-term incentive stock grant would be increased from 15 million to 20 million, with 60 percent of that grant being performance based RSUs. So it is unclear exactly how much Chapek will be walking away with. Bloomberg is reporting that he may walk away with as much as 23 million dollars.

But there are a lot of different qualifications in that contract, which are detailed in an aid case. We don't know exactly how much it is just yet, but just want to clarify that he was getting that two and a half million dollars up front and he did have his contract extended back in June. Back over to you. Yeah. All right. Julia, thank you for the update there. That's Julia Borsten, of course. Shannon Sikosha of SVB Private owns Disney, joins us now. Love your take. What is it? Well, I think one of the things that we can see is that there's clearly been a positive reaction to this. But, you know, I guess there's this the ask is still there in terms of succession here, Scott. We have two years now to figure out how to actually get a successor prepared for the next probably five to 10 years in which Disney is really trying

to morph its business model. So I think while we're seeing a nice bounce in the stock just from this news, somebody else is better than nothing, I think we're still going to face some challenges in terms of sentiment around this stock as they try to balance out cash flow generation from the parks with content spending for streaming. What do you want them to do, right? And do you think they could be successful? I do think they can be successful just from the brand itself. It has, you know,

international appeal and there's so many different ways that they're able to touch the consumer. But I do think getting very prescriptive and very disciplined about how they are going to be able to continue to generate cash flow back to shareholders through the parks, but also again that discipline on content spend because if we go back to when Disney Plus was launched, the benefit was that the content was all there. We know now there needs to be content spend and so being extremely disciplined and prescriptive around how they're going to price Disney Plus in order to pay for content, not just through parks, is going to be the important part over the next two years. But the succession question remains and should be the first thing that they start working on tomorrow.

I mean, the market is so fickle, too. Let's be honest. You know, I'm sure you've owned the stock for a while, right? So when Disney Plus gets launched, shareholders love and some influential shareholders were urging Disney to do whatever it needed to do to spend on whatever content it needed to spend on to get the service, you know, more competitive with Netflix. And in a short period of time, well, lo and behold, here we are in a different economic environment that we were a couple of years ago. We're still trying to come out of the pandemic. And companies like Disney and some others have had a tougher time doing it because their businesses were shut down for longer than businesses in other industries were. So because of that new environment we have now, we're like, OK, now, you know what?

The number of streamers isn't the most important anymore. We want you to be more profitable. So, you know, be careful what you wish for, because this is what you end up with. Yeah, I mean, the competition has certainly amped up as well on the streaming side. And, you know, the the capacity for us to take on additional streamers when we're out living our lives again certainly is more limiting. I think, again, it goes back to the global brand. I think it goes back to what were shareholders prior to Disney Plus really looking for Disney to do. They were looking to continue to land and expand their brand, whether through parks or through movies, shows, television, ad spending in those domains. And I think that we go back to probably a more disciplined approach from a

capital perspective, which I think could bring back some of those Disney shareholders who really liked that dividend back before Disney Plus launched. Yeah, we'll see. Shannon, thank you. Shannon Sikosha joining us on Disney. Coming up, we're tracking some big movers and over time, Christina Partsenevelos is back with us for that. Christina. Well, Dell's shares right now are soaring despite a weak PC market and Urban Outfitters climbing higher, even though Urban Outfitters store sales plunged in the quarter. What happened? I'll explain after the break. We are tracking the biggest movers in overtime. Christina Partsenevelos, of course, is back with that. Christina. Let's start with shares of retailer Urban Outfitters actually popping right now in the OT, despite an earnings miss up over almost two and a half percent higher. And that is a small one or I should say two and a half percent.

It climbed higher. The company posted a beat in revenue thanks to strong sales at its anthropology and free people stores. There was a nine percent decline in sales at Urban Outfitters, although still in line with expectations. And that's why the stock is higher. A top and bottom line beat for Dell, even though the personal computer market, we know we talk about this all the time, has softened dramatically over the last few months. The company says they were able to weather macro headwinds by improving their supply chain and reducing backlogs. Shares right now were up about 7%, coming down about 4.7% at the moment. And let's move on. Lastly, the top S&P 500 mover right now in overtime, Agilent Technologies, up nearly 4% right now

after topping streets estimates for earnings and revenue. In fact, fourth quarter revenue rose 11% with higher sales across each business unit for the Life & Sciences tech company. Shares, though, I want to point out, year-to-date down 5%, but if you don't account for today, it's down about 10%. So still an outperformer compared to a lot of other companies right now. Back over to you. All right, good stuff.

All right, Christina, thank you. Christina Partsinello. Still ahead, Santoli's last word. And coming up, top of the hour, media mogul Tom Rogers joins the Fast Money team. He's going to lay out what Bob Iger's return means for Disney. Don't go anywhere. We're back right after this in overtime. It's the last call to weigh in on our Twitter question.

We want to know, are you more bullish on Disney now that Bob Iger is back as CEO? Head to at CNBC Overtime to vote. It's the last call. We'll bring you the results next. Plus, Santoli's last word. He says there's an asset class that is starting to crack again. He'll tell us exactly what that means next. The results of our Twitter question, we asked you, are you more bullish on Disney now that Bob Iger is back as CEO? The majority of you saying yes, near 60 percent. There it is. Mike Santoli here for his last word. Teased folks with this asset class that is cracking again, and it is. Just in the last few minutes, crypto took another leg lower.

Bitcoin down some 9% or so on the day. Is that right? So it's 15-something now? It's basically two years ago. You're going back to those prices. Yeah, it's 15 and change. You know, some headlines out there, yet more potential stress. Genesis, a crypto firm, maybe is going to need some new capital.

DC scrutiny right here by all of the headlines. Right. Hearing there was an investigation of FTX before it even went down. The fascinating thing is it's like real world, real time experiment of exactly what the linkages are, whether in fact the regular financial markets are hooked into this or not. The other piece of it is, I mean, I'm not going to say it's massively deflationary, but it's not inflationary when you're seeing wealth loss like this. Yeah. Mester, she piqued her interest today. And anything she said, I mean, you know, not even close to pausing or stopping, but, you know, laying more groundwork for 50. Moderation of the extreme

hawkishness. And she also did say that she thinks the market's roughly priced correctly for where Fed funds are going to have to go. In response to the question about Bullard saying five to seven, that's the question which she said, well, I think it's priced pretty adequately. It comes as also out of San Francisco is saying, look, if you consider overall financial conditions, it's almost as if the Fed funds is closer to 6%. So you see enough pushback on this idea that they have to catch up to inflation, the Fed does. So, again, I feel like it's almost feels like the market is looking past that to saying, OK, what kind of weakness are we going to have to deal with on the lagged effects next year in terms of the overall economy? Staring at this Treasury yield curve, which is glaring at them in the face and all the rest of it.

So it seems like the Fed was the enemy most of this year, and it's a little bit less so. And now we're on to worrying about other things. Still waiting for this end of year rally, right? We had a nice move and then we've had a pause, somewhat elongated. And we'll see. It's a hold. In days ahead. Could be a plateau.

Good stuff. That's Mike Santoli back tomorrow for his last word. I'll see you then too. Fastest now.