Closing Bell - Closing Bell Overtime: Dow Drops 1,200+ on CPI Report 9/13/22

Episode Date: September 13, 2022

It was a major sell-off day on Wall Street with the Dow falling early 4% and the Nasdaq plunging more than 5%. Virtus’ Joe Terranova gives his reaction and trading advice. Plus, Scott Wapner caught up with Doubleline’s Jeffrey Gundlach about his investment strategy. Plus, the one part of the market Gundlach sees as being a “gimmick.”

Welcome to Overtime. I'm Mike Santoli in for Scott Lochner. You just heard the bells, but we're just getting started. In just moments, you'll hear from DoubleLine's Jeffrey Gundlach, his take on today's CPI report and what he thinks the Fed should now do at next week's meeting. It is a red hot read on inflation. Send stocks tumbling. All three major averages plunging. You see there the Dow down almost 1,300 points. S&P 500 down 4.3%. NASDAQ composite downside leader. Once again, the big expensive growth stock suffering down more than 5% today alone. Russell 2000 down 4%. Now, Treasury yields rocketing higher. So clearly, it wasn't as if the bond

market was positioned for this unexpected tick higher in core inflation, which we got this morning. You see the two-year note up to 3.75%. That's about a 15-year high. And the 10-year at 343 or so. That's pretty close to the highs for the year. Joining me now to break down today's drop, CNBC contributor Joe Terranova, Virtus Investment Partners chief market strategist. Joe, great to have you here. I mean, you know, in addition to, of course, the number itself, the CPI number being unexpected, it clearly met a market that was off balance for exactly this kind of thing,

because as dramatic as those one-week drops are, it takes us back a week. It does. And it really is about positioning when you think about it. There was a lot of wishing. There was a lot of hoping. The inflation report this morning became somewhat of a binary event. Now, I don't suspect that the buying of the last four days was retail. I don't think it was retail in. I don't think today was retail out.

I think it's more algo-driven. And, Mike, I think that's been the nature of trading for this entire quarter. It's really been the non-discretionary funds that are participating. I think retail is kind of sitting back and saying, uh-huh, we don't want any part of this volatility. So algo's in, algo's out. Now I think what's in focus is the intraday low from last week, right? That's troublesome for the market because algos will react to a break below there. Right. So we're talking about 38.86.

Let's just call it 50 S&P points down from here. I mean, it's a little more than 1%. So clearly not much of a short-term cushion there. Joe, we'll get back to you in a second. But let's now get right to Scott Wapner. He's live from the Future Proof Conference in Huntington Beach, California, where he just spoke with DoubleLine's Jeffrey Gundlach. And Scott, what did he have to say? Yeah, Mike Santoli, thank you so very much. It's good to be here

in Huntington Beach, where I did just wrap up this conversation with Jeffrey Gundlach. Began in the obvious place, as anyone would, asking him to react to today's CPI print, what it means for the Fed next week. he said it likely means 75 basis points he doesn't he's not on the 100 basis point uh page now that's what he thinks they will do so i asked him what he thinks they should do thanks to the thing today i might do 25 if you read the survey yesterday it was said do nothing but you know had this interview yesterday, it would have said do nothing. But, you know, I think you do it. I would do 25. Because they haven't waited long enough to see what the impact of the hikes that they've already done are going to have. Right. It's oversteering.

I mean, he made the point over and over again that he's worried about the Fed doing too much, that what they've already done comes with such a lag that we simply don't know what the effects of the rate hikes that the Fed has already done are going to be until they get fully into the system. As he put it, he's worried about Powell driving the car into a dumpster. I also asked him what he thinks all of this means to the markets. You see what the one-day reaction all of this is. Whether he agrees with some of the calls that are out there, like the one that Scott Minard made in overtime with me last week. Minard calling for a 20% decline in stocks by mid-October.

Gundlach said he largely agrees. The action of the credit market is consistent with economic weakness and stock market trouble. My target on the S&P, I've been relatively neutral on the S&P, as you know, for about the last six months. But I think you have to start becoming more bearish. I've been looking ultimately for a target of 3,000 on the S&P, and we're about 3,900 or so. So that's about a 20, 25 percent decline. All right. So obviously a prediction for stocks to go much lower from Jeffrey Gundlach for the obvious reasons and ones that he just told you about. I asked him if he likes anything at all in the markets. He does. Here's what.

Buy long term treasuries because that now is the deflation risk, in spite of the fact that the narrative today is exactly the opposite, the deflation risk is much higher today than it's been for the past two years. And I'm not talking about next month. I'm talking about sometime later next year, certainly in 2023. And then, you know, you always want to own certain stocks, but I'd be a little, I'm still a little on the lighter side. Do you own stocks? Yeah, sure, of course. You always own some of them.

What do you own? I own European stocks more than U.S. stocks, which have outperformed. And I just do it on like a basket basis. I'm not really a stock picker very much. And the biggest opportunity that's coming, I've been talking about this for years. Emerging markets? It's emerging markets. You haven't bought that yet nope nope i'm not going to buy emerging markets until the dollar breaks below its 200-day moving average and when it does you want to be you want

to be in big all right so that's jeffrey gunlock on what he actually does like in the markets coming up i'm going to tell you what he said about crypto in the current environment, whether he thinks it's bottomed here, what he thinks of it in general as an asset class. And I also asked him what he thinks about ESG investing. Very interesting answer coming up from Jeffrey Gundlach. Michael, we'll do it a little bit later in the program, but I think the prevailing thought from Jeffrey Gundlach here is a big concern about the Fed doing too much, as he put it using the word oversteering and actually thinking that next week they shouldn't do all that much. But he doesn't think that's going to be the case.

I'll come back to you in a little bit with the rest of our conversation with Jeffrey Gundlach. Yeah, Scott, I mean, almost no chance that they do only 25 basis points, given the way they've laid the groundwork coming into it. The Wall Street Journal today saying at least three quarters of a percent likely next week at the meeting. But he is saying, Gundlach, is that that is the Fed policy error in his belief that by going that far and by the Fed sticking to its guns of saying they have to kind of make sure they get ahead of inflation, that that's the one that does it? Look, he had criticized them for so long. Remember the way that he put it to me in the conversations we had over the last couple

of Fed days was that, you know, Jay Powell has lost his credibility. He needs to, you know, paint in his words or get off the ladder. And then after the last Fed meeting, it was like, OK, Powell's finally painting. He's restored some of his credibility. The problem now is he doesn't believe that the economy is going to be able to withstand what the Fed is likely to do. He points to the inversion in the 210 spread, which he says is obviously ominous for the variety of reasons that we've talked about for a matter of weeks and what that typically means for whether the economy is going to go into a recession or not. But I'd say he's at the point now of saying, OK, they got their

credibility back, but they're now at risk of doing way too much, driving the car into a dumpster and causing a recession, which he almost sounds like is going to be a formality in, if not late this year, in the beginning of next year. Yeah, well, that's certainly the way he foresees all the asset classes behaving that would match up with that kind of scenario. We'll see, Scott. Thank you very much. We'll circle back to you with more in a little bit. Let's bring in Victoria Fernandez of Crossmark Global Investments here, as well as Joe Terranova, still with me. And quickly, Joe, let me just get your reaction to that notion of a 25 basis point hike, basically the Fed decelerating from here. I mean, look,

they've just spent months saying we have to stay vigilant. We don't want the markets to pre-celebrate the victory over inflation because it's only going to make it worse. So, Mike, one year ago, the Federal Reserve was in the middle of a very huge monetary policy mistake that has now led us into the situation we're in, where an economic contraction is the price that you pay to combat inflation and the only way out. So will the Federal Reserve make another mistake? Potentially. But they've already made a big mistake. I think next week you are going to get an incredibly hawkish chairman that probably is going within the bond market to set the expectation for November at 75 basis point hike. Yeah. I mean, with the intention that that should be the target or you think they just want

the market to stay on alert? I think that he is clearly trying to be more Chairman Volcker than Chairman Burns. That's clear. I think he's cleaning up the mistake that he made one year ago. And I think he's going to be very, very disciplined and dedicated towards the fight of inflation. Is that going to lead us towards what Jeffrey Feer is, where he oversteers the economy into a deeper contraction than maybe ultimately we want? Yeah, probably. Victoria, naturally, this tradeoff, this perceived tradeoff

between getting ahead of inflation and what it might do to the economy is right at the center of what's going on with the market today. I mean, where do you read it at this point, given the fact that, look, the Fed's made the case employment remains strong, the economy can handle what we have to do. Markets, I guess, aren't 100 percent sure of that. No, I think today is an obvious answer to what the market is thinking, just with a little bit of a higher CPI on the annual number about double what we were expecting on CORE, this is the answer that we get from the markets. And I think a lot of it is because there's just so much indecision. You do have Powell telling you, look, we're going to raise rates, we're not going to slow down, we're

not going to do that start and stop routine. We want to stay vigilant on this. And I think we have to take them at their word on this. I do agree with Gunlock, and it's what we've been telling our clients for the last quarter is that we don't see a recession this year. We see it next year when the lag from the rates that we've already done start to feed through. Yes, the consumer is strong, which is why I think we get slower growth this year for the rest of this year.

It's not until next year we're going to see things really hit the fan. And when you look at where that terminal rate is, that high April Fed Funds future today went up 25 more basis points. It's at a 430. So for us, that means 10 years are probably going to go to 375 instead of 350. I think there's a lot more turmoil and a lot more volatility that we're going to see in this market. Well, I was going to say, if in fact there's a recession waiting for the economy,

as you say or suggest, next year, and the Fed has clearly got a few more meetings where they're going to have to be in tough love mode and continue to hike, and the market says it's going above 4%. It's tough to see the daylight for the equity market in that scenario. Now, yeah, you can chop around. You can say maybe the growth resilience can shine through for periods of time. But where do you think that means we trade in terms of a high-low range in the stock market if that's the- sort of treadmill or walking. Yeah I mean when we look at where we are in those two lows do we get back to that

thirty six hundred thirty seven hundred I think we can I think part of the problem Mike is that we haven't seen some of those telltale signs that we look for in the bottom. I mean the VIX even today didn't get above thirty right or at least it didn't the last time I checked. So we haven't seen that VIX make a big move. The trend has moved a little bit, the trend readings, but not tremendously. We haven't seen the momentum and the breadth on a sustainable track that we wanted to see.

We started before Jackson Hole, but then it reversed itself. So I think we've still got a lot of jostling around to do. I think we can get back to those lows that we were at. Is that the final low? I don't know. I'm not sure I agree with Sun Life that we go down to a 3,000 level. But I do think we could see 3,600 again, and then just kind of move around between there and 4,000,

and then 100, quite a while. Joe, what about this idea that we still need some kind of a final purge of some sort and the market hasn't necessarily kind of undergone enough of this liquidation and you need to see some kind of panic? On one side, that's one standard playbook that you would look for those signals as a sign of some kind of a climactic low. On the other hand, market's been kind of moving away from risk for eight months right now. Equity allocations have come down. They're not rock bottom. And it's been

a grind as opposed to, you know, an all at once shock that things are tough. It's been really a rolling capitulation. Right. And it began last November with a lot of the hyper growth stocks beginning to have that valuation reset. So you ask, is there a recession? I think there's a valuation recession within the equity market itself. Time, Mike, is the only solution to this, right? Time is your solution. You need to understand the progression of monetary policy that's going to remain hawkish.

You're going to have to understand what the sensitivity on the part of corporations is to that monetary policy. And then you come up against the seasonality of midterm elections. And if you've got an S&P that's going to take out the lows from June, well, those seasonal midterm election results going back to 1939, where you have 20 consecutive years where there's been a positive market performance from the November date of the election to June 30th of the following year. That's going to look pretty compelling, isn't it? Right. I'll play those statistics. 20 consecutive midterm election years.

So over the course of 80 years or so, you've had that dynamic. Victoria, just more, I guess, in terms of tactics, in terms of allocation decisions right now, what should work in an environment like you foresee at this point? I think really and truly it's going to all focus on quality. I don't think you can say one sector is going to do better than the other. I mean, Joe mentioned there's been this rotation of different sectors going on for quite a while now, and typically you don't see utilities right leading into a bull market and that's kind of been the sector that's been doing well so I think you have to focus on quality within the sectors

we're looking at health care right now we like a little bit of that defensive play so we like health care like some of the financials that are there we like some of the staple names and So I think you have to be very particular within there. Focus on quality of balance sheets, quality of earnings, quality of management. That's where your focus needs to be. And when you're looking at fixed income, I think you need to start extending that duration, getting yourself out a little bit longer because I think once we hit around that 375 level I mentioned earlier, I think you're going to see some of the shorts starting to cover and those yields are going to come back down. Joe, oil prices kind of firmed up in the middle of the day.

There was this report out there that maybe the Biden administration is going to refill the Strategic Petroleum Reserve using forward purchases, perhaps maybe below levels of the current market price. I'm not sure if that's a decisive factor here. But if anybody looking for things like earnings momentum or, you know, inflation plays and all the rest of it has taken them to energy stocks and the stocks have held up better than the commodity at this point. Where does that leave us? I still think energy needs to be an overweight in your portfolio. The S&P weighting is somewhere a little bit less than 6%, somewhere around 5% probably. I think you could double that towards 10%.

It's a hedge against something going wrong geopolitically. It's a hedge against, within your portfolio, seeing not enough value strategically being allocated. So I think that's the right way to think about it. I also think you need to move away from looking at the spot price of oil because now it's about the energy equities, which have outperformed the spot price of oil. And the reasoning behind that is just you're seeing right now companies that are returning capital to shareholders. They've been disincentivized to increase production. So they're focused on what? Their share price. They're focused on buying back stock, maintaining dividends, and in certain instances, growing dividends.

I just think energy has to be in that portfolio at an overweight. Victoria, I know you certainly do a lot of shopping in fixed income as well. Are there attractive opportunities there, whether it's in the credit markets or, you know, even in treasuries at these levels? Yeah, I think there is. I mean, like I said, you want to focus a little bit longer duration right now. You need to start shifting that out because most people have been short duration for a while. And so start making that move. We actually have an overweight to corporates in the fixed income sector. I mean, we look at where spreads have been. We've had some tightening. We've had some widening. But there hasn't been a tremendous move in the investment grade sector. That's where we're

focused. I think you're already starting to see some widening in high yield. So I would avoid that sector for now, especially as we see some of the volatility in the equity market. So for us, it'd be investment grade, a little bit longer duration, maybe looking around 10 to 15 years in that sector. I think those are good plays within the fixed income market. All right. Duration. Well, the 30-year Treasury was the only one that had a bid today. We'll sit the yields down slightly. We'll see how it shakes out with regard to corporate spreads as well. Victoria, Joe, thanks very much. Appreciate it.

Let's now get to our Twitter question of the day. We want to know, what should the Fed do at next week's meeting? Jeff Gundlach thinks they should do a 25-basis point hike. Do you agree, or should they do 50, 75 or 100? Head to at CNBC Overtime on Twitter to vote. We'll share the results later in the hour. Don't go anywhere. We're just getting started in overtime.

Up next, much more from Scott Sitdown with Jeff Gundlach at Future Proof, including the one part of the market he calls a gimmick. But first, top safety plays for your portfolio. Bespoke's Paul Hickey, is drilling down on one key sector he thinks can withstand this downturn. He joins us next. We are live from the New York Stock Exchange. Overtime, we'll be right back. We are back in overtime. Stocks selling off sharply after today's red hot inflation report, the Dow falling nearly 1,300 points. My next guest has a few safety plays for investors to see more pain ahead.

Let's bring in Paul Hickey, Bespoke Investment Group co-founder. Paul, good to see you. First of all, let's start with the premise here. You know, a day like today puts you in mind of maybe finding some shelter, but is that the correct orientation at the moment, is essentially seeing what's relatively safe to preserve capital in this environment? Well, I mean, today's CPI was just no way to sugarcoat it. It was a nasty report.

But at the same time, investors shouldn't forget the fact that just about, I think, every single other inflation indicator that we track has been showing signs of inflation rolling over. So I think one report does not make a trend. And whatever today's report was, 4% Fed funds rate was pretty much baked in the cake by the end of the year. So we're maybe up 25 basis points from there. So I think when you have almost the Fed locked on that position, which may be too aggressive, people can totally have that view, and it may be, you just have to take a holistic approach and look at the indicators in some. And like I said, I mean, the ZW inflation

expectations report out of Germany showed the lowest inflation expectations for the U.S. going back to the financial crisis. So I think, you know, this isn't the, you know, the end of the world as far as. That being said, either what's working better or what looks like it's well positioned to withstand whatever we have ahead of us here. Right. So, I mean, one area you want to look for, say, megatrends in the market, and you want to look for areas where we'll have a tailwind at their back, no matter what the economic backdrop is. And what, you know, you've seen over the last several months is the trend for the upgrading and modernization of the electric grid and getting into the 21st century from what is probably the 18th century grid at

this point and you know the push to EVs is only going to increase that and make that more pressing of a need and you know one stock we there's several companies they benefit large cap stocks you can look at. One is Qantas Services, and they have a strong backlog of orders, and they will have the wind at their back as the government and the federal government will be supporting this trend for higher, you know, for increased spending to get the grid and able to meet the increased demands that we're going to need. Does it extend to utilities themselves, which obviously they're going to have to, you know, in some way spend the money to upgrade the grid, but also they've been outperformers

and there's been some puzzlement about that. So utilities are a safety trade for the market. So, I mean, investors flock to safety during periods of stress. And I mean, I think it's Richard Bernstein who's highlighted this several times over the years, that if you compare, you know, everyone likes to think of tech, tech, tech, tech to gain alpha. Utility stocks have performed just as well as tech stocks on a total return basis if you go over, you know, over the long, long term. So that's an area to focus on. It's defensive.

They're not going to see a lot of outperformance in good market times. But during times like today, that's when you see them do relatively well and hold up. I've also observed that they're almost never heavily recommended. The street tends to kind of be lukewarm on them. And people own them because they feel like they're going to perform and be safe, not because there's some dazzling story behind it. They're not sexy. Nobody cares about Con Ed, you know, but, you know, everyone wants to hear the highest growth stock. But, you know, sometimes Steady Eddie, you know, in the long run pays off. And, you know, you have

the yields that cushion the blow in times like this. Other areas? I mean, either because they're safer or because they just have these durable trends? Well, I mean, one area, maybe not as far as safer and out of favor sector. You couldn't really get more out of favor than European banks at this point. And you have a period where their valuations right now are near historic lows.

And if, you know, no one is expecting anything good out of Europe and the European economy going forward. If you see more positive developments over the war in Ukraine and energy prices coming in, that's a sector that's very leveraged to the European economy. And even just a reversal of the dollar strength from a U.S. investor that any European holdings will look relatively better on the translation of the currency. And there's finally yield, at least parts of Europe, right? Just like in the utilities, yes.

What about U.S. banks and financials? I mean, it's hard to know how to characterize them right now. I mean, clearly they're not just a yield play or a rate play. There's some credit sensitivity to them, but yet their balance sheets are in decent shape. Yeah, so the balance sheets are good. You get decent dividends out of there. They've underperformed, like European banks, not nearly as much, so maybe not as depressed valuations, still cheap relative to their own history.

And they do pay yields. And they, like you said, their balance sheets are in a safe position, relatively safe position. And, you know, but the problem is financials have been, we've been talking about that for years, how they've been cheap. And they don't necessarily always see that underperformance. But a name we like in that sector is Bank America. You know, we like the name there and, you know, decent yield and very strong balance sheet. And they continue to see the consumer showing strength. Yeah. And the CEO said as much this week. Paul, thanks very much. Thanks for having me. Appreciate it. Paul Hickey. Up next, sunnier skies ahead. Well, it was a rough day on Wall

Street, but Neuberger Berman's Charles Cantor is looking on the bright side where he sees some silver linings for stocks. He joins us when Overtime comes right back. Welcome back to Overtime. It was an ugly day for stocks. You see the Dow there down almost 1300 points, close to 4 percent. The S&P 500 also lost 4.3 percent on the day. And you see the Nasdaq downside leadership down more than 5 percent and the Russell 2000 off almost 4 percent. And worth mentioning, the S&P 500 is back to level scene about a week ago because we did rally into that CPI number, the two-year note yield, very dramatic move. That yield got up to a close to 15-year high. It's pricing in more Fed hawkishness going into next year, up around 3.75 percent.

Time now for a CNBC News update with Shepard Smith. Hello, Shep. Hi, Mike. From the news on CNBC, here's what's happening. The Queen's casket arriving at Buckingham Palace just about an hour ago after returning from Scotland. Thousands of people lining the rainy streets of London as the hearse made its trip to the palace. Her casket to be taken by a horse-drawn carriage tomorrow to the House of Parliament, where she will lie in state until the funeral on Monday. The NBA today suspended for one year the Phoenix Suns and Phoenix Mercury owner Robert Sarver. He was also fined $10 million after an investigation into what the league called workplace misconduct and organizational deficiencies.

The suspension and fines coming after a report last year from ESPN into what the league called workplace misconduct and organizational deficiencies. The suspension and fines coming after a report last year from ESPN that detailed years of allegations of racist and misogynist behavior and a hostile workplace. Sarver says he disagrees with some of the findings, but that he will accept the consequences. He also apologized for offending anyone. And time to crack open those civics textbooks. Get this. There's a new study from the Annenberg Public Policy Center at UPenn that says fewer than half of all Americans, half, can name the three branches of government and that 25 percent cannot even name one. Tonight, in-depth analysis of today's CPI report and the market sell-off.

Plus, we're live outside Buckingham Palace as mourners line up to say goodbye to the queen on the news. Right after Jim Cramer. Jim Cramer, that should be wild come 6 o'clock tonight. We're on 7 Eastern CNBC. Mike, I guess there's always a bull market somewhere. I dare him to find it today. Well, I'm sure he can. Energy, energy.

And I will talk to you right around 7 as well. So I'll see you in a little bit. Thank you, Shep. Well, today's Hot CPI Report, sending stocks tumbling. Our next guest, though, sees silver linings ahead for a select group of stocks. Joining us now is Charles Cantor, Newburgh Urban Senior Portfolio Manager and head of the Cantor Group. Charles, great to see you. Thanks, Michael.

Obviously, you invest across some public markets, private markets, long, short. But talk a little bit about today's CPI number, how it filters into the, I guess, general working assumption you have for what kind of economy we're in and what the Fed's going to present us with. I don't think it changes our long-term working assumptions much. have, for what kind of economy we're in, and what the Fed's going to present us with? I don't think it changes our long-term working assumptions much. I think from the Fed side, they have more latitude to go harder after waiting so long to go at all. And so I think we're on a bumpy road to normalization. We're doing that at breakneck speed and all things need to normalize, whether it's money supply, fiscal policy, and just demand trends that companies have got used to that are changing, you know, at a rapid rate as well. So with uncertainty comes volatility. It's not meant to be a smooth ride. It's been rather easy for very long. And as a fundamental investor, I think

we're super excited with believing that details matter again. And how this all plays out will be very different. It's not just how long and how low will interest rates change. I think the conversations we're having with our companies are very nuanced and will lead to very different results. You mentioned demand trends that some companies got used to. There is this sense out there that for across many, I don't know, consumer goods areas or whatever that might be, that they kind of over-earned through the pandemic and maybe extrapolated some of those trends. So that's got to create opportunity if you have winners and losers getting separated out of that. What areas, what kinds of companies work? Look, I think I think we're in an environment

where we we've had this unprecedented demand surge that was impossible to plan against. There isn't a business I'm aware of that didn't receive a covid bump. Some have happened in 2020, 21. If you're in the restaurant business, and maybe happening right now. And deciding how much of that demand you want to capture versus and change your cost structure versus not, I think, is really challenging. For us, we want to be with businesses on the consumer side that have a strong brand where people are engaged with, whether that be a Nike or a Sweetgreen. We want to be engaged on the consumer side with businesses that set price and get price, whether that's Amazon or Walmart or TJX, which I think is going to be a major beneficiary from this glut of supply and inventory you're going to see as you continue to head into Christmas.

I would say it's been a couple of years since you could find a discount over the Christmas period. If for some reason you've held off buying the flat screen TV or you haven't invested in the barbecue for the backyard or you haven't bought your favorite apparel stuff, you know, this will be the year where you're going to get, I think, quite remarkable discounts as companies work through, you know, the oversupplied inventory problems. And then away from the consumer, I think we want to own for the long term mission critical businesses. We call those beyond privileged and resilient. They have tremendously tight customer retention ratios. They've grown through

COVID. They've had a COVID bump as well. So there's some normalization that needs to take place as well. But whether that be a workday, a service now or a pay call, these are businesses that are deeply embedded within their enterprise clients. And those would be examples of businesses that, you know, the stock prices certainly have moved a lot more than the businesses have changed, most likely. I think there's a debate there. In general, I think by and large, the adjustment you've seen in equity values has been a reflection of the 10-year, you know, starting year at one and a half and three and a half today. I would just highlight that's only half the move you've seen on the front end, right? The front end's moved over 300 basis points. I'd say by and large, I'd say share prices reflect changing discount rates

and haven't yet baked in potential change in earnings. And that'll, again, that'll be bifurcated. It's going to be different for different companies. And there are many stocks, of course, Mike, as you know, that are down a tremendous amount, but on a unit economic basis still don't make money. And so I just and so that model, the model around revenue growth without cash flow is changing dramatically. And so for businesses that have have have grown up believing all that matters is revenue growth. I think folks like us and others are demanding, you know, a path to profitability, a path to free cash flow to get the valuations they thought they were deserving of. In that context, I'm interested to hear you mention Sweetgreen as a name that you believe has a resilient brand and sort of the staying power and pricing and things like that,

because that could have been lumped into that kind of busted IPOs of the of the pandemic bucket. Yes. I mean, we've been in a market that hasn't been discerning. And so amongst the turmoil, I think you've got to go find a few that while on paper may look like that isn't exactly that. And I think Sweetgreen has a company we've invested in privately. We followed them for a long time. We think they have a tremendous brand. They sit squarely in. We all want to eat healthy. It would help them a great deal if folks came back to work on a more permanent basis. They do a tremendous amount of their revenue through their apps,

so it's a lot of mobility. And by the way, when you look at the inflation data today, they sit on the right side of the gap between, you know, at home inflation and kind of away from home inflation, which has never been wider for 40 or 50 years. Somehow, some way, you know, that gap needs to close. demographics that Sweetgreen has, and you have the unit economics on a store-by-store basis, you can project out the number of stores they may have over the next five years. And when you do the net present values on that, while, yes, the stock's down a lot from its IPO price, it's a brand that people want to own and the cash flows will follow the store economics and the store economics are really attractive.

On the private side, in terms of new investments, what's happened to that landscape? Are the companies essentially giving more favorable terms? Do you feel as if you have to be more discerning? There's a lot going on um no doubt um there still needs to be realization of reality which is when you look at the amazons of the world and i think as of this morning they were trading at 15 times ebitda you know you got to evaluate that against say a private investment that will be liquid you know for a few years the private side, there is a lot more deal structure. There's a lot more downside protection being built into some of these investments. There's

still a lack of, you know, evaluation reset that hasn't really come. So you're making it up, you know, in structure. And then, as I said earlier, there has to be an adjustment from the management team that you've got to get to cash flow positive. And you've got to get that at not a billion dollars of revenue. Right. And so, look, in certain pockets, the end demand is spectacular, whether it's cybersecurity, other of the software businesses. So it's very discerning. We want to invest in businesses there that have three years of cash flow on the balance sheet to kind of get them to the promised land.

We're not playing the IPO-ARB game. And from a fundamental investor perspective, what we learned over five years ago in companies like Sweetgreen is once you got access to the private data, you are effectively inside the CFO's dashboard. And that knowledge you gain there transported to your public equity portfolios. We're about making good companies on the long side, great stocks. We think about that through financial communication and capital allocation and environmental and social and governance factors. And Sweetgreen, for example, again, and many others on the private side kind of need to tick all of those boxes. And they need to want to partner with us. Sure. Charles, great to catch up with you. Thank you so much. All right. Up next, we have more from DoubleLine's Jeffrey Gundlach, his take on two hot parts of the market.

That'd be ESG investing and crypto. We're headed back out west next. And don't forget, you can catch us on the go by following the Closing Bell podcast on your favorite podcast app. Over time, we'll be right back. Let's get back to Scott for more of his sit-down with DoubleLine's Jeff Gunlock. Scott, what else did he have? Well, we obviously asked him, as we said earlier, and you heard from him on inflation and the stock market and what he thinks could happen to the S&P 500. I thought it would be interesting if we got his take on ESG investing, since so many different investors are opining on that these days.

Let me just say he's not the biggest fan. ESG, I don't really know what it means. It sounds like a lot of empty words to me. But the data that people rely on says, look, it's a good investment policy because it's had a good performance. Well, that's a self-fulfilling prophecy. If you're saying, I will only, it's particularly big in Europe, right? I'm only doing ESG investing. Well, obviously, you're going to push up the categories that you say qualify as ESG.

And so that's already happened. So I would say the benefit, the investment benefit of ESG is largely in the rearview mirror. And it's probably going to turn into the opposite. It will be an underperformer. Speaking of underperformers, he thinks crypto is going to be an underperformer. Just doesn't think that it can work in the current environment. Not with inflation so high. Not with the Fed raising rates and intent on doing more. Here's what he said about crypto. I think you buy crypto when they when they do free money again, when if the recession

comes, if Jay's doing what he's doing, we're going to go back to free money. And Bitcoin basically got to 60,000 on free money. And now that there's no free money, Bitcoin basically can't get out of its own way. It's not really falling, but it could very well fall if stocks do that 20 percent down. So I would certainly not be a buyer today. OK, that's Gundlach on crypto. He was very critical of President Biden's policies, asked him about that. Also, the state of California, which he's tweeted about a lot lately, the energy policy here, he sort of railed on for a bit. Double Line is headquartered actually down in Florida, but it does have its main office here. Asked him if he would ever think about leaving the state. Don't think he, you know, maybe he's thinking about that today, but didn't seem to

write it off either. So those are the thoughts, according to Jeffrey Gundlach, from the Fed to the markets to ESG and to crypto. And Mike, in spirit, I'll make that my last word and send it back to you. And I'll see you back east. All right, Scott. Look forward to it. Great stuff. Appreciate it. Up next, we are wrapping up an ugly day on Wall Street. Christina Parts and Evalo standing by with the biggest stock moves. Hi, Christina. Hi. Well, what we have on deck, major Nasdaq market statistics. One company just lost $150 million in market cap, while another had its worst day in four years. I'll have those details, and I promise it won't be all bad news. Stay tuned. Stock selling off sharply in today's session. The Dow falling

nearly 4 percent. The Nasdaq dropping 5 percent. Christina Partsenevelis is here, has some of the biggest stock moves on the Nasdaq in overtime. Christina. Well, the notion of a more aggressive Fed hiking cycle is really, really what weighed on the Nasdaq today, which had its worst day since June 2020 and breaking its four-day winning streak. Given the Nasdaq is a weighted index, Apple actually dropped 6% and had the biggest point impact. It lost $150 million in market cap. That's the equivalent of the market cap of three Ford Motors. You can see on your screen, Apple down over 5%. But semiconductors are actually the biggest losers today. NVIDIA, the worst performer, along with AMD and NXP semiconductors, all three on your screen right now. They close over 8% lower. NVIDIA just had its worst day

in four years. Meta, though, the parent of Facebook, isn't too far behind, the second worst performer today and its worst daily drop in seven months. But we haven't seen the price this low, which is $153.13, since the dark days of March 2020. Netflix also plunging over 7% lower today, making it the second worst stock performer in the Nasdaq 100 on the year, followed by Okta. And I promised you a positive note. I was really, you know, scraping the end of the barrel. But the three-month chart scraping the end of the barrel, but the three-month chart for the Nasdaq composite, still green, over 7%. Mike? There you go. That's right. Just about three months ago was those market lows. We still have a little bit of padding between here and there. Christina, thank you very much.

Thank you. All right. Still ahead, we're trading the turbulence, how one money manager is navigating the market uncertainty after today's big drop. Overtime, we're trading the turbulence. How one money manager is navigating the market uncertainty after today's big drop. Overtime. We'll be right back. Welcome back to Overtime. Let's get the results of our Twitter question. We asked what should the Fed do at next week's meeting? Forty one percent said that the Fed should hike rates by 100 basis points. Somewhat lower percentage, finding 75 basis points as the right answer.

That's where the market sits, around 75 basis points with a chance of 100. Up next, we're setting you up for tomorrow's trading day. Overtime, we'll be right back. We are back in overtime following a brutal sell-off on Wall Street. S&P down more than 4%. Let's get set up for tomorrow's trading day. Joining us now is Ayako Yoshioka, Senior Portfolio Manager at Wealth Enhancement Group. And, Ayako, I mean, the markets all year have been trying to figure out if a soft economic landing is possible,

if the Fed can engineer such a thing. I guess a day like today makes you think that the markets are leaning a little bit against a real soft landing. What's your take? I think it's going to be very difficult for the Fed to engineer their soft landing. I know the economy has been relatively strong, the job market's strong, but continued Fed action and the high inflation rates that we're seeing are just going to make it more difficult, I think, going forward. Does that mean you expect the overall market is going to have to, you know, suffer a bit more at this point? We are down, what, 15, 18 percent, depending on the index that you look at, even more on the Nasdaq. Sure. We do expect continued volatility over the next few months, especially as we go through year end. You know, earnings have yet to reflect some of the economic slowdown

that we're seeing in certain parts of the market. Yeah, and I know that you still do see some opportunities here, and they seem like, in general, picks that maybe aren't so tied to, you know, the overall index move, such as American Tower, which I guess technically is a REIT. Yes. You know, during volatile times in the market, we like to lean into companies that have strong business models. And American Tower is one of them. You know, 98 percent of their revenues are in long term leases because it's a REIT and they own cell towers. And so they will continue to benefit from the

data acceleration as the world moves from 3G to 5G. So we like the stock over the long term. Martin Marietta Materials, this is kind of aggregates. It's an infrastructure kind of construction play. Is that a macro call or something else? No, we like the fundamentals here in the strong business model, again, with Martin Marietta. And, you know, they are going to continue to benefit from the Infrastructure Act that was passed late last year. A lot of the projects have just started and they will continue to start into next year. And so we like the fact that they have that visibility. Yeah they are they do seem to

that stock is- even even with those tailwinds down something like twenty four percent from its highs. I appreciate your time today thanks so much. Thanks Mike. All right on a rough market day that will do it for overtime fast money

picks it up right now.