Closing Bell - Closing Bell Overtime: Exclusive Interview With Eli Lilly CEO After Weight Loss Drug Gets FDA Approval; Oakmark’s Bill Nygren Gives Top Value Picks 11/9/23

Episode Date: November 9, 2023

The Nasdaq and S&P 500 snapped their winning streaks after comments from Fed Chair Jay Powell and a weak 30-year auction. Barclays Head of US Equity Strategy Venu Krishna breaks down the market action. Eli Lilly CEO David Ricks joins in an exclusive interview to discuss the company’s weight-loss drug getting FDA approval. CFRA analyst Zach Warring breaks down Wynn’s earnings. Oakmark’s Bill Nygren on his top value picks heading into the year end. Plus, NBER Director John Lipsky on the path forward on inflation.

Stocks finishing lower. The S&P 500 in the red, snapping its eight-day winning streak. 43-47 as it settles there. That's the scorecard on Wall Street, but the action's just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan. John Ford is off. We have a big show coming your way in just a moment. An exclusive interview you do not want to miss with Eli Lilly, CEO Dave Ricks, following FDA approval of the company's weight loss drug. Plus, noted value investor Bill Nygren joins me here on set with his year-end playbook and the stocks he's watching right now. And we're also awaiting earnings this

hour from Wynn, Unity, Capri, and more. But we begin with the market and the end of that winning streak. A poor midday Treasury auction. Also comments from Chair Powell from the Fed that he's not confident enough, that enough has been done to bring down inflation. All of that putting pressure on stocks. CNBC's senior markets commentator Mike Santoli joins us from the New York Stock Exchange. Mike, do you want to get your thoughts on this? Because very much so today, stocks took their cue from Treasuries. For sure, Morgan. It shows you we're still very sensitive to what's going on on the rate front. That decline in treasury yields that we got last week,

when pretty much everything broke the right way to get yields moving down, was tested today. So you have a little bit of an uptick. It's not necessarily off to the races. And what Powell had to say was mostly a reiteration of the current stance. They're not going to declare victory on inflation, but a reminder that the Fed doesn't want to endorse the market's expectation that the next move is a cut that might be coming within the visible future. So I think all those things, just a cause for a slight gut check. We had a 6% plus move in the S&P 500. You mentioned the eight-day winning streak. So a little bit of instability under the surface.

I do think you have to pay attention to that, the fact that smaller stocks are suffering just a little bit. And the weekly JavaScript's continuing claims. We're climbing. People are questioning, in fact, whether we're decelerating faster than we'd prefer. I don't think you can say we are, but that's the question in people's minds. That's the question in people's minds. And you just touched on it, Mike, but the fact that, yes, it was just a strong, voracious move higher for stocks last week. Up until today, we had continued to climb.

But this week, lower volume, negative breath. The quality of that rally had certainly deteriorated under the hood. I mean, warning signs here? Or is this just typical after you see a move like the one we just saw? You know, it's typical for sure to actually have a little bit of a setback after such an aggressive sprint. But I still think there's plenty for this market to prove.

It was not necessarily among the stronger kinds of follow through you'd like to see in the market. It wasn't the most aggressive stocks that were taking the lead. It still was the familiar mega cap favorites that really sort of supported things this week. So all those things we have to monitor and see if this was more than just a relief short covering rally last week that maybe finds a lower ceiling. We have to see. Yeah, you mentioned the small caps. Russell 2000 down 1.6%. The Dow Transports have been very weak, too, down another 1%.

Our first earnings report of the afternoon is out. It's Wynn. Contessa Brewer has those numbers. Contessa. Morgan, it looks like we're seeing beats on the top and bottom line for Wynn Resorts. Revenue of $1.67 billion. Consensus was $1.59 billion. Earnings per share adjusted of $0.99 when what was expected was $0.75.

But I do want to caution, there was a big $93 million goodwill item that was excluded from that EPS. The metric that really motivates here in the gaming industry is adjusted EBITDA. Wynn pulled in $530 million over the estimates of $488 million. On the call, we're going to listen for the team to tackle questions about market share in Macau, about whether the growth is sustainable in Las Vegas. And really, revenues there were 12% higher than last year. It was a tough quarter to keep beating because it's just been quarter after quarter of incredible profits in Las Vegas. And then I'm seeing Boston lower than last year.

Why? We'll want to know that. As you can see, the stock is up marginally in extended trading, Morgan. Okay, certainly bouncing around right now. Contessa Brewer, thanks for bringing that to us. And certainly it's been a stock that's up something like 90% since the start of the year. So tough comps to her point. Let's continue the market conversation with Barclays head of U.S. equity strategy, Venu Krishna. Venu, it's great

to have you back on the program. I do want to get your thoughts as we go into year end here. Likely trajectory for stocks higher or lower? I think we're going to be range bound. You know, our price target remains at forty one fifty. We said it's going to be range bound- in our price target remains at forty one fifty- we said it's going to range bond in middle of the year when it was at forty four hundred. I think pretty much stuck in that level. And

the reason is quite simple there is no meaningful upside catalysts from earnings. And meanwhile finally the market is paying attention to multiples we are paying. Are driven in good part by the rise- in the ten year and the volatility around that.

But on the other hand, the downside risk is also reduced because I don't think we're looking at a recession anytime soon. And the consumer is in pretty good shape. So I think we are in a situation in which fundamentals have to take control and earnings guidance has to improve. And that is still not happening, despite a markedly improved earnings quality in this quarter, breaking from the trend of the last three to four quarters. Real rates, are those fully priced into the market, to your point? You know, this is a question which has been coming a lot, Morgan. But our view is that I think what really matters is what is driving real rates and which really boils down to inflation expectation and growth expectations.

Growth in the U.S. is robust. It will probably moderate. And inflation is going to be stickier than the Fed would want. And so it will remain relatively high. But our work suggests that there's really no meaningful relationship, at least since the TIPS market came into existence in the last 25 years between real rates and equity valuations.

In fact, if you go back even further, call it 40 odd years, when we did have inflation, even then there is no meaningful relationship. So I think focusing too much on real rates doesn't make sense. Nominal rates do matter in the sense that at some point, especially around the 5% threshold, our empirical work does suggest that the valuations start getting hit. So I would say that, you know, that is why we're in a range bond market where we need earnings to be the meaningful catalyst and not necessarily depend on multiples, which we have been for all this while. Okay. So then if you're an investor,

where do you put your money to work right now? Where do you hide or I guess where do you wait out what could be, it sounds like based on some of your commentary, perhaps more pain or at least more uncertainty here in the near and medium term? So I think there are pockets of opportunity. Like, again, you know, big tech is something we've been positive on since October of last year. That is the only place where you're seeing meaningful upward revisions in earnings, double digits, you know, almost 17% for next year, over 15% this year. So that is rock solid. Excellent quality in terms of balance sheets and cash flow generation, things like that. The other area we've been insisting is energy. That's somewhat controversial. But the point is oil prices are likely to remain higher and oil companies have capital discipline and they're focused on profitability and return of capital. And the other area which actually starts looking interesting is discretionary, given the unusually strong strength in consumption.

So I think there are pockets of areas there which are worth looking at. But outside of that, I would say that it is tough to make a call for the broader set of sectors out there. Okay. Venu Krishna of Barclays, thanks for kicking off the hour with me. Thank you. All of the major averages finishing the day lower. Capri Holdings earnings are out right now. Kate Rooney has the numbers. Hey, Morgan. So this is a mixed quarter here for Capri.

The fashion brand, let's start with revenue here. It was a miss, $1.29 billion. That was shy of what the street was looking for. Wall Street looking for $1.3 billion there. Adjusted EPS, much better than expected, $1.87. Street was looking for $1.52, that's the adjustment. The chart's tapestry agreed to buy Capri Holdings for $8.5 billion. This is the parent company of Versace, Jimmy Choo, Michael Kors as well. I don't see guidance here, Morgan, but again, mixed quarter for Capri. Back to you. Okay, shares are down 1% right now. Thank you. Let's bring back Mike Santoli for a look at where the S&P 500 could be headed

after breaking its longest daily win streak in two years. We touched on this a little bit, Mike, but what do the charts have to say? Yeah, here's what history has to say about this, Morgan. So here are streaks. The S&P 500 was up seven or more days in a row since 1950. This is from Jeff Hirsch at Stock Traders Almanac. So this line is when the streak ends, right? So the nine-day streak, that's the strongest before and after the streak ends. You see it over the following 60 days or so after the end of the streak. Here we go. End of eight days. Typically, on average, you flatten out, maybe you give a little bit back,

and then it's on balance, tends to be a little bit higher over that time. So it's a reminder that strong markets tend to be kind of persistently strong in a boring way sometimes with just day after day of small gains. Obviously, no guarantees, but it seems that it's not purely a fluke and also not really the kind of behavior that has tended to accompany a very important peak in the indexes when you do have the end of one of these multi-day streams. So walk me through the bull versus bear debate right now, because it seems pretty evenly balanced on both sides and perhaps could be speaking to why we've seen somewhat of a range bound S&P, if you will. Yes, I realize we've had a big move since the summer, but just the fact that

we've only gone so far. I mean, I would say the bull case is that earnings estimates for the next year have turned higher from negative. It looks like we've seen the trough in earnings. They're going to be going higher. That's generally supportive of markets. A soft landing still seems plausible. The Fed is no longer actively fighting you on raising rates each meeting. And therefore, maybe there's room for companies to operate and for valuations to at least stay stable. I would say the bear case is we don't know if this economy can handle what's already happened on the interest rate front. It's been a very, very uneven market. And the strength in the very largest stocks are masking a worrisome message that's going on below the surface with things like small caps. And it's only a matter of time before we have a reset lower.

So to me, that's the push-pull. Seasonal factors would be in the bullish column, I would say, at this point. But also, next year is an election year. And usually you get not a lot of upside progress for at least the first six to eight months of an election year. Yeah, I mean, the Fed speak has been fast and furious. And one of the common themes that's been coming out of it, including today, is the fact that, to your point, the full impact of this tightening cycle has not yet perhaps been felt by the economy. When are we going to know that we're feeling it, fully feeling it? You know, only in increments over multiple,

let's say, quarters, I would say, from here. You know, one of the puzzles about why a 500 basis point increase in short-term rates has not really had more of an effect is answered by the fact that consumer and corporate balance sheets are in good shape. We do not have a very leveraged private sector at all. Housing has taken its medicine. Other interest rate-sensitive parts of the economy have. General consumer spending jobs and services have held up fine. So I still think we're multiple quarters from from deciding or determining whether, in fact, you know, there's been enough done to really stall the economy or just to to slow it down a bit. I would say the focus on lagging effects is also in a way a net positive, because if the Fed's talking about them,

it means it feels as if they've probably done enough by now and they can just more or less wait and see, let time do its job. OK, Mike Santoli, always great to get your take. We'll see a little bit later this hour as well. We've got more earnings this time from Trade Desk, and that stock is tanking. Steve Kovac has the results for us. Steve. Yeah, Morgan, this is despite a beat on the top and bottom lines, but it seems to be some weak guidance that's really driving the stock lower here. But let's go over the results for the Q3 here. Earnings were 33 cents a share adjusted versus the 29 cents the street was expecting. And then revenues coming in at 493 million dollars versus the estimates of 487 million dollars. But yet it must be this weaker-than-expected outlook for the current quarter

that's sending shares down 27% here. They're seeing $580 million for the quarter versus the 610 the street was looking for, shares down better than 27%, Morgan. Yeah, it's a huge move. Steve Kovach, thank you. Sure thing. After the break, there's a new weight loss drug in town.

Eli Lilly getting FDA approval to use its diabetes drug as a weight loss treatment. CEO Dave Ricks will join us exclusively to discuss on the other side of this break. Overtime is back in two. Welcome back to Overtime. Big news this week on the health care front, the FDA approving Eli Lilly's weight loss drug, which will be marketed as Zepound. It joins a field of other powerful weight loss injectables, including Lilly's Manjaro, which is used for type 2 diabetes, and Novo Nordisk's Ozempic and Wegovi. Lilly's stock is higher on the week. It actually traded at a fresh high yesterday, but moved lower in today's session after rival AstraZeneca announced a partnership with a Chinese firm to license an experimental GLP-1 pill. Joining us now in an exclusive interview, Eli Lilly, CEO and chair, David Ricks. Great to have you on, Dave. Thanks for being with me.

Great to be with you, Morgan. And it's a great week for people in America with diabetes. Yeah, this had been widely expected news, but certainly getting a lot of attention nonetheless. Expands the market, paves the way for wider use of terzepatide, which is the active ingredient in this new drug and also in Manjaro. The market rollout starts right after Thanksgiving. What do you expect in terms of that trajectory for uptake? take? Well, now Zepbound approved same active ingredient as Manjaro for use in people who have overweight or obesity. And we know that's a large group of Americans who are waiting for new answers. And Zepbound has the highest efficacy we've seen in an approved drug so far, 20% weight loss at the highest dose. So I think a lot of people are waiting for this,

a lot of physicians, a lot of potential patients. We'll start shipping, as you mentioned, before the end of the year, and we expect a swift uptake and ramp. We know there's high demand for these medicines and particularly for ours, and we're ready to meet that demand. And we're working really hard to make more product and most importantly, make this product ZipBound available in health insurance, which sadly it's not broadly covered today, this category. And we need to do some work there. Yeah. What is that work going to entail? And I ask that knowing you're taking a 20% discount versus Novo Nordisk's WeGoV. There's a lot of anticipation about what rebates are going to be needed to be offered to compete with Wagovi

as well. What does that process look like? Yeah, it's a multi-step process. It starts by us, you know, pricing our product responsibly. When we talk to payers who are really employers, as we're talking about now, because the federal government is barred from covering in Medicare obesity medications. Employers told us the list price matters. And so here we're offering 20 percent off of some agglutides highest dose. We think that matters as a signal that these drugs can become more affordable. Of course, we'll work with our partners in health insurance and PBMs to make these available on formularies.

But it's very important that employers opt in to obesity care in their formulary decisions. Today, about half of covered lives in commercial insurance are opted into that idea that obesity is a healthcare concern that needs to be addressed with formulary coverage. We want more to opt in. The second part is making it affordable for patients. And we've announced that as well, which is if you have coverage today, like half the people in commercial insurance, we will buy down your copay to $25 per month. So very affordable if you're covered on insurance. If you're not, we have a half-off offer out there. It'll be about $550 for patients who are paying with cash or out of pocket while they

wait for their employer or their insurance company to cover it. Yeah. And as you sort through all of this and you roll out all of these options into the market and build that access, I mean, certainly the key focus it would seem from Wall Street right now is what all of this is going to mean in terms of net price. So Wells Fargo writing that in their conversations, your company had previously noted that the rebates would be based on access, which they think could mean net price could be higher for obesity as initial access may be more restricted compared to the trial population. You think that's a fair assessment? Well, we don't get into net price details. We can look at the market that exists for incretins and terzepatide along with

single-acting GLP incretins like our own Trulicity or semaglutide. And there you see pretty significant discounting, as we see with a lot of primary care drugs. So we know this price isn't the full story, the net price being 50%, 60% below that on average. In obesity care, it's not that deep, but there's a reason for that, which is that a lot of these, even companies that do cover obesity care as a category, have a lot of steps to go through to get to the medication. And with fully open access, I think manufacturers are more inclined to discount further. So that's in the give and take with the insurers and the PBMs that we do have. So we'll see that develop.

I think we hope for a day when obesity is treated like any other chronic condition, which it is, and is treated as a serious health concern with real benefits to early treatment. Maybe that's another thing to mention, Morgan, is everyone's doing studies, Lily included. I think we have 36 phase three studies right now running to prove these benefits of weight loss translate into heart outcomes like less cardiovascular risk and less risk to your kidneys or developing conditions like diabetes. Yeah, and that's been getting a lot of attention as well. You mentioned it, but how confident are you that you do have enough supply, not only for launch, but as demand ramps up and access does ramp up to be able to

get this drug out there to everybody who's looking to purchase it? Well, we're working really hard on that. Of course, it's difficult to make promises. We're certain at launch we'll have enough supply as demand and access grows. And you're pointing out that those probably go together. We're building behind that. We've announced the completion of one very large site in North Carolina that's ramping into capacity that will essentially double where we were last year on this type of product by the end of this year. And then there's another site, sort of a sister site, just down the road near Charlotte that will be completed next year. And there's more things we're doing inside existing campuses we have already. So this is an

all-hands-on-deck, build-out-as-much-as-we-can effort from the company. But even with that, I mean, there are scenarios where demand exceeds supply. When we get to those points, we'll be clear and transparent about the situation. And we're committed globally to only roll out the product when we have confidence we can supply the market. All right. In the meantime, competitive landscape, obviously Novo Nordisk is out there. You're releasing ZepBound later this year. Pfizer is developing its treatment. We just had this news today about AstraZeneca partnering with a Chinese firm. How does the landscape evolve? Is there room for everyone?

Well, it's obviously a very large potential market that has to be proven out with the leaders now. I would just point out that, you know, probably on the one hand, if you're running a major pharmaceutical company, you have to pay attention to this category, and it's, you know, probably a malpractice not to consider investing in obesity, given the opportunity ahead. On the other hand, I think Lilly is a leader here, and we plan to make it hard to be caught. We have, of course, now on our third generation launch here with ZepBound and Monjaro. Terzepatide is our third incretin. It's the only dual-acting incretin that harnesses GLP-1, which we all know that word, but also a new incretin called GIP to really deliver unprecedented weight loss,

but also diabetes control. And we have already in phase three a triple acting medicine coming that's enrolling now. We also have our own oral program, which is a GLP-1 oral, already in phase three, pointing out that the announcement from our competitors are both behind us. So we plan to lead there as well. And we have six other new molecules in development in the clinic already. So I think we've really gone after this. And of course, competition's good. We're all for that. But Lilly aims to invest to win here. Okay, very quickly, how does this affect broader society? I ask that because we've seen investors sell out of medical device makers,

restaurant companies, food companies. Just how impactful could this be on demand for those types of products in the future? Well, I think I'm not an expert in all those areas and traders will have to make their decisions. Clearly in healthcare, our goal is to displace other types of healthcare. That's clear. I mean, we are doing with our triple G asset, I mentioned that harnesses three different incartan pathways. We're doing a phase three study. It's announced to show benefits on osteoarthritis. In the end, that could change knee replacements in America. Wouldn't that be a good thing to have fewer surgeries and fewer knee replacements? Of course, we are aiming to reduce cardiovascular risk and kidney risk and other things that have other consumption points in health care.

So that is our direct goal. Now, as it relates to food, people in our studies, they lose weight because they do eat quite a bit less, about 600 to 800 calories a day, depending on the study. That's about one meal. So that's, you know, people have to calculate what that is. Just pointing out here, though, that today there's about four and a half million Americans on on incretins. And maybe that number grows dramatically, but it's not all of the country. David Ricks of Eli Lilly, thanks for joining me today. Congratulations on the approval. Thank you very much. Sticking with health care, Illumina earnings are out. Angelica Peebles has the numbers. Angelica. Hey, Morgan. Illumina

beating on adjusted earnings per share, coming in at 33 cents. Analysts were looking for 12 cents a share, but revenues slightly miss at 1.12 billion compared to the estimate of 1.13 billion. Illumina is also cutting its guidance for the full year. They're now expecting between 60 to 70 cents a share, and analysts are looking for about 80 cents a share. The company is also saying that revenue will be down 2 to 3 percent this year compared to last year, and analysts were expecting it to be basically flat. That stock now down about 5 percent. Morgan? Angelica, thank you. Unity Software earnings are out. Steve Kovac has those numbers. Yeah, Morgan, shares down about 10% here on these results. Let me break down what's going on here.

EPS, we have a gap loss of 32 cents. That's not comparable. Street was looking for a profit of 17 cents adjusted per share. But we are comparing revenues, which was a miss, $544 million versus the $553.7 million expected. And then as we see shares tumble even more here, not giving guidance for this quarter, talking a little bit about, quote, a comprehensive assessment of our product portfolio. So it sounds like they're going over quite a few things now after losing their CEO last month. Interim CEO Jim Whitehurst took over. He was, of course, the CEO of Red Hat, which was bought by IBM. Now interim CEO at Unity.

So it sounds like they're doing some reassessment of the business here, therefore not giving guidance for the quarter. Down 11% now, Morgan. Yeah, perhaps not surprising, but some big moves here in overtime. Steve Kovac, thank you. Wins earnings call is kicking off in just a few moments. After the break, we're going to ask an analyst what he wants to hear from executives. And later, National Bureau of Economic Research Director John Lipsky breaks down today's message from Fed Chair Powell that he's not confident enough that he has done enough to bring down inflation.

And Niber, of course, will call recessions officially when they see them throughout history. Stay with us. Welcome back. TKO Group Holdings is announcing an $8.4 million share secondary offering from WWE founder Vince McMahon. Several executives, including TKO's CEO Ari Emanuel, are interested in buying portions of the offering, according to the release. The company is also planning to purchase $100 million worth of the offering. That stock is down about 5% right now in overtime. Wynn Resorts, meantime, out with their quarter numbers moments ago. Shares under pressure

despite beating on the top and bottom line. Joining us now is Zachary Waring, CFRA analyst. He has a hold rating at $100 target price. Great to have you on the show. Do want to get your initial reaction to the results, especially since the stock is under pressure right now. And we did see this miss on in the Boston market. Yeah, thanks for having me, Morgan. Yeah, it was a strong quarter across the board. Obviously, Boston underperformed a little bit, but Las Vegas was, you know, sound and strong growth there, double digits. And then, you know, China, extremely impressive. I think investors are kind of looking forward to next year. And, you know, with all the uncertainty in the global economy, I think that's kind of what investors are waiting to hear from the call. OK. You know, our own Contessa Brewer was saying

that market share in Macau, growth in Vegas and how sustainable that is, that that's what she's going to be watching. Are those the are those the types of key factors that are in focus for you, too, or is it something else? Yeah, I think the main focus for me is obviously Macau. You know, this year, obviously, they're benefiting from, you know, extremely low comps. So you're seeing, you know, five, six, seven hundred percent growth there. But what's next in China? So, you know, is next year going to be flat or up a little bit? You know, that's kind of what I'm hoping to hear from management as we move towards next year. OK, Zachary Warring, thanks for joining me before the call. It's time now for a CNBC News update with Bertha Coombs. Bertha.

Hey, Morgan, there's a new third party candidate for president, Jill Stein, who ran unsuccessfully in 2012 and 2016, says that she will run again in 2024 on the Green Party ticket. In her announcement this afternoon, Stein accused both major political parties of being a danger to our democracy. Apple co-founder Steve Wozniak is hospitalized in Mexico, where he was supposed to participate in the World Business Forum in Mexico City. Wozniak told ABC News he suffered a mini stroke right before he was set to speak at the event and that he's out of the hospital and on his way back to the U.S. now. We wish him well. And New York has a new ambassador, Dr. Ruth, the longtime sex therapist and talk show host, was appointed today as the state's honorary ambassador to loneliness. An idea she pitched herself during covid, the 95 year old pledged to counsel New Yorkers about dealing with loneliness and isolation and help efforts to battle mental health problems. She's amazing. Morgan, back to you. Bertha Coombs, thank you. When we come back,

value investor Bill Nygren from Oakmark says growth companies like Netflix that he bought last year have now hit his sell target. He joins us with a fresh list of picks, including one regional bank. And don't forget, you can catch us on the go by following the Closing Bell Overtime podcast on your favorite podcast app. We will be right back. Welcome back. We have breaking news on Apple. Steve Kovach has the details. Steve. Hey, Morgan. Yeah, Apple is going to pay $25 million in a settlement with the DOJ. This is over some of its hiring practices around the Permanent Labor Certification Program. This is a program often called PERM, P-E-R-M, that helps companies

hire residents of the U.S. that might be international workers originally. The DOJ investigation found that Apple was not posting publicly jobs under this program and thus the settlement of $25 million. We also have a statement here from Apple about this settlement saying in part, quote, when we realized we had unintentionally not been following the DOJ standard, we agreed to a settlement addressing these concerns. We have implemented a robust remediation plan to comply with the requirements of various government agencies as we continue to hire American workers and grow in the U.S. There you have it, Morgan.

So saying this was not an intentional thing, but that Apple did settle a $25 million payment. Back to you. Steve, thank you. Sure thing. Check out the iShares Value and Growth ETF. Growth more than doubling values performance so far this year. But our next guest says that has led to a wide price to earning spread and a lot of cheap stocks. Joining us now is Bill Nygren, Oakmark Fund's partner and a US CIO. Bill, it's great to have you back here on set. We have seen this incredible divergence between growth and value. And I do, just before we start getting to actual stock picks, want to get your thoughts on why that is and whether it's going to continue.

Well, at Oakmark, we've thought value has been a multi-year path toward getting PE multiples closer together again. And we were quite surprised this year at how strong the growth tailwind has been. And the result of that for us has been we sold a lot of the growthier names that we bought last year. And we've used those proceeds to buy pretty traditional value stocks, single-digit PE companies. So what are some examples of traditional value stocks right now? Well, some of the ones that we added in the past quarter, Centene, the largest Medicaid insurance company, stock sells just under 10 times earnings. They're losing almost a dollar a share in Medicare Advantage. They think they've got that problem solved. So if you assume that they will fix that next year, you're paying about eight times, a little more than eight times

earnings for a double-digit grower. A company like Phillips Petroleum, they get categorized with all the other refiners. But Phillips 66 really has more than half of their value coming from non-refinery operations. So if we normalize refinery spreads, then the stock's still at about 10 times earnings, maybe a little bit less. And like a lot of the other oil companies, most of their excess cash flow is coming back to the shareholders. It is interesting to hear you talk about Phillips. And I realize that you're very stock specific in terms of how you look through the market. But, I mean, energy's had such a strong run the last couple of years. Not the past week.

Well, that's true. But I guess the point being the fact that you still see opportunities, value opportunities in energy. Right. We would say that it's going to take a long time for the world to stop using fossil fuels. And the companies are priced like that's somewhere in the next five to 10 years. Most of these companies in this industry are single-digit PE ratios. And we think if the global economy is going to grow, we're going to consume more fossil fuels. And you need to have energy prices $70 or $80 a barrel for oil to encourage the existing companies to find more oil. You mentioned Centene. You've also invested in CVS recently as well. I guess just looking at

health care writ large, it has not had a good year so far, but we keep hearing about and certainly having these conversations on this show about the fact that health care, parts of health care, are on this secular growth trajectory. Right. Except for, as your last guest said, we're all going to start eating less, lose weight, and be much healthier. We tend to be skeptics when it comes to how rapid change like that can occur. And I think a company like CVS, which drugstores, pharmaceutical benefit management, also managed care operations. Stock sells at seven or eight times earnings. They're deleveraging. They're buying back stock. We think that's really attractive. I do want to ask you about some of the catalysts, potential catalysts, or at least

investor fears that are out there through the end of this year, one of them being government shutdown, because we're on pace for that, at least as it stands right now, to happen as soon as next week. How meaningful is that to the market here, given the fact that we've already seen so much uncertainty? Do you remember what the market did in December of 2018? No. That was the longest government shutdown. Oh, yes, of course. No, but the point is it didn't do much to the market. By the time the government had reopened, the market was higher than it was before it had closed. It was 30 percent higher a year later. If you go back to the first time there was a government shutdown, 1981, the investor who put money into the S&P at that point in time has made 90 times their money despite 21 government shutdowns since then. So the point to us is investors get

all worked up over this stuff. We get a government shutdown once every couple of years and then a bunch of others that come right up to the line, and then they don't shut down. It just doesn't matter to the long-term investor who's really focused on trying to compound their wealth, grow their savings for retirement or college savings. And I think it's a big distraction for individual investors that they'd be better off ignoring.

Okay, so maybe for long-term investors, you see a pullback in stocks, it's a big distraction for individual investors that they'd be better off ignoring. OK, so maybe for long term investors, you see a pullback in stocks. It's a buying opportunity. Bill Nygren, great to have you here on set. Thanks for joining me. Thanks for having me. Well, up next, Mike Santoli breaks down what's driving the Bitcoin boom as prices hit their highest levels in 18 months. Stay with us.

Welcome back to Overtime. Ether rallied on the back of reports that BlackRock has filed to register a spot Ethereum ETF and Bitcoin also rallied to an 18 month high. Mike Santoli returns with his take on this crypto rally. Mike. Yeah, Morgan. Well, clearly anticipation of potential ETFs in this area been part of the motivation. Who knows what else? But it has been an aggressive move. It's a five year chart of Bitcoin did have about a fifteen hundred dollar air pocket in the middle of the day today, hit about thirty eight thousand at the highs in the afternoon, did go down about thirty six and regain some other things going on, I mean, just the general enthusiasm for Nasdaq 100 type stocks often links up with Bitcoin. You have the move in gold. Maybe the Fed

is done. That idea is also working in maybe a little stretch in the short term. We'll see. That's at least part of the case of JP Morgan derivatives and quantitative strategists, which point out this, that it's been mostly retail flows. If you look at just sort of where the money is coming based on the blockchain data in this last run since, let's say, 2022, it has mostly been retail investors piling in as opposed to institutions which seem to kind of have their interest, at least their exposure peak around the time that the prices did peak. Now, we do have those potential ETFs coming. It reminds me a little bit of whack when the Nasdaq 100 did not have an ETF about it. QQQ, at the time, it was four Qs. In 1999 is when that came around. And it ramped in the year before that,

or at least the six months before that. So you basically had, let's call it right there, was about when you got that new ETF March of 1999. And then the market, the Nasdaq went on to basically go up about 150 percent in the next year. It's exactly a year almost to the day before you got that peak. And then we know what happened after. Not really saying it's a similar thing. There wasn't the same amount of anticipation here. But I do struggle to figure out why the existence of being able to own ETFs as a way to get exposure to crypto is somehow a game changer, even though certainly it will create a pool of steady demand for coins. You packed a lot of punches there, Mike. I would throw in geopolitics as a reason we're seeing this rally in Bitcoin, too, because you saw the decoupling with stocks ever since the Israel-Hamas war. And gold has perked up as well.

Exactly. All right, Mike Santoli, thank you. A tense moment today during a speech from Fed Chair Powell when climate protesters came onto the stage, causing organizers to cut the video feed and leading to a hot mic moment. By refusing to treat climate change like a systemic risk, Thank you. you are putting us at risk for a climate disaster. Thank you very much.

Climate change will get in the way of the climate crisis. Just close this f***ing door. More importantly for the market, though, Powell gave an update on the Fed's plan to fight inflation. We're going to break it down with National Bureau of Economic Research Director John Lipsky. Next. Some big earnings movers this hour. The trade desk tanking on a weak fourth quarter revenue outlook.

It's down 30 percent right now. Win and unity software in the red as well. Up next, we'll talk to a director from the National Bureau of Economic Research, the institution tasked with officially calling when a recession begins, about his outlook for the U.S. economy and Fed Chair Powell's inflation comments from just earlier this afternoon. The FOMC is committed to achieving a stance of monetary policy that is sufficiently restrictive to bring inflation down to 2% over time. We are not confident that we've achieved such a stance.

We know that ongoing progress toward our 2% goal is not assured. Inflation has given us a few head fakes along the way. If it becomes appropriate to tighten policy further, we will not hesitate to do so. Well, those are the comments from Fed Chair Powell that sent stocks lower this afternoon. Joining us now is John Lipsky. He is the National Bureau of Economic Research Director. It's great to have you on. And I do want to start right there with your reaction to those comments we got from the Fed chair, which don't sound that different from what we've heard from him in the past. But perhaps coming off of the FOMC press conference, being taken by the market at least today is slightly more hawkish again. Seems to me that it was quite predictable what he would say.

At this point, the outlook for inflation remains uncertain. And in the past, the Fed and other forecasters haven't had a very good record recently in anticipating the twists and turns of inflation. And so the chairman clearly wants to emphasize that the Fed remains fixed on achieving its inflation goals and is willing to do whatever it deems necessary. And there's not enough confidence about even the next few months to give a clear discussion about Fed policy, other than to say they will react as appropriately or they see as appropriate as the data unfolds. What are you seeing in the data? There's a lot of debate about it right now. Well, of course.

One of the aspects that, well, a number of aspects that have been surprising, the traditional linkage of unemployment to the inflation rate through the so-called Phillips curve hasn't been working for a long time, and yet conventional analysis uses that as a basis. So it's a little hard for the traditional models to anticipate where we are headed. It seemed to me for quite a while that everything or a lot of things about the economy's performance post-COVID have been rather unique. The rapid run of inflation and now the decline. I'm optimistic that we're going to get one moderation and certainly a moderation of growth rates in the economy following the unexpectedly strong third quarter figures.

But in general, a relatively moderate growth rate seems to be in store for the next year plus. And I would expect to see further progress on inflation. Many folks want to say this last mile of getting down to 2 percent is going to be particularly sticky, but it's not immediately obvious why that's going to be the case. We'll see. Sounds like you're in the soft landing camp, which raises the question, is this tightening cycle and what it will mean for the economy and the fight against inflation actually different than what we've seen during previous comparable cycles? Or is it just that it's taking more time? It sounds like, based on what you're saying, that maybe it is different. Well, the run-up was rather sharp.

The run-up in inflation was sharp and unexpected. And you'll notice that a bit of the chairman's speech today was devoted to noting that whereas the Fed took a while to figure this out, so did everybody else. Now they're being cautious about their optimism about what it will take to bring inflation down. What's not completely clear is exactly the linkage between Fed policy and the actual performance of inflation. After all, for many years in the decade before COVID, the inflation rate persistently was below the Fed's target. I'm trying to suggest that there's a lot of play between Fed policy and what actually happens. And it seems to me that the most likely outlook for the economy is going to continue to be disinflationary. But there are obviously risks. OK, John Lipsky, it's great to have you on. Thanks for joining me. Always happy to. Thanks,

Mark. All right. We're going to get another economic data reading tomorrow when we get the University of Michigan Consumer Confidence Survey. That's going to be a key one to watch. Stocks finished the day lower, snapping that recent winning streak. That's going to do it for us here at Overtime. Fast money begins right now.