Closing Bell - Closing Bell Overtime: Exclusive interview with Leon Cooperman 4/5/22

Episode Date: April 5, 2022

Stocks closed near session lows following hawkish comments from Federal Reserve Governor Lael Brainard. Joe Terranova from Virtus Investment Partners doesn’t think this is a bear market. But, legendary investor Leon Cooperman says there’s a chance we could see a recession in 2023. He explains why and reveals some of the top positions in his portfolio right now.

Welcome to Overtime. I'm Scott Wapner. You just heard the bells. We are just getting started right here at Post 9. In just a bit, we'll speak exclusively to billionaire investor Leon Cooperman on where he sees these volatile markets heading from here. We do begin, though, with our talk of the tape. The Brainerd bombshell, the fallout for stocks, which finished with a flurry of selling. Let's welcome in Joe Terranova of Virtus and the Halftime Investment Committee. This was all about, brainer, faster QE, QT, faster than the last time. I mean, this was like the most dovish person on the Fed going straight up hawk. Well, you could ask Lee when you speak to him, we have an adversarial Fed. That's exactly what is going on right now. And originally, the thought on Wall Street was that it was the price of equities. It was the price of bonds that the Federal Reserve was trying to kind of cool the fever.

No, this is more than that. The Federal Reserve is coming directly after the consumer. The Federal Reserve is trying to cool shelter inflation. They are going after what is right now an incredibly hot real estate market. Scott, look at rentals in downtown centers throughout the country. They're moving higher and higher. Utility costs are moving higher. So this is about going specifically after the real estate market, and that hasn't corrected yet. What's it mean for stocks, right? There's been a suggestion all along from the doubters, the haters, that this was just a bear market bounce to begin with, that y'all

needed a reality check if you thought this market was just going to continue to go up in the face of what Brainerd was talking about. And she just slammed the door shut. Did she not? She slammed the door shut in terms of taking out the previous highs for the year and doing it in a very aggressive way. I think the market right now is in a grind. I think the market remains in this kind of malaise. Volatility is the word, persistent volatility. I think investors are still thinking they could go to some of these longer duration assets. And I hate mentioning Cathie Wood's names, but these are the stocks, these Cathie's type of stocks. Investors are kind of clamoring towards that in the last couple of weeks. I think that's the wrong place

to be. I think the downside is kind of protected. We've been there. We've seen what that looks like. I think now it's about marking time. It's about being tactical. And how do you want to be positioned? I want health care right now. Health care is my most favorite sector. You see the move in, I know everybody's fixated on what's happening in the stock market, right? You see what technology did today in the steep sell-off and selling off into the end. It's one thing to show the level of yield across the curve. It's another thing when you put into perspective the move we had today in interest rates was 6% in many of the different treasury areas that I'm speaking about. It shows you

why when I spoke to some of the smartest money on the street earlier today, they're sort of mystified. It's like, how in the world are stocks hanging in there if bonds and yields are doing what they're doing because of Brainerd? And now I just wonder if the writing is on the wall for what lies ahead for stocks if rates continue to do what they did today. So first of all, in terms of a 10-year yield, you're right back to where you were in April of 2019. Ultimately, the high point was three and a quarter during that period. So I think there's further to go here on the upside for a 10-year. As I said, stocks are going to grind. They're going to basically trade in a sideways pattern. But here's the critical

component of this. Scott, it's the balance sheet. This is all about the balance sheet. So if you think about when we initiate the previous shrinkage of the balance sheet back in 2017, the size of the balance sheet was $4.5 trillion. We got it down to about $3.7 trillion in August of 2019. We're sitting close to $9 trillion right now. The pace previously was $50 billion per month that was coming off the balance sheet. You're going to have to double that or triple that to get the balance sheet back to where you started within the next four years. Trying to figure out what then as an investor I'm supposed to do. I can't own long duration, as you say, technology stocks, some of the higher valuation ones. What am I supposed to do with housing stocks, which have gotten creamed?

Utilities have been winning. Staples have been winning. Real estate, to your point, has been winning. Health care has been winning. And that's why you said you like health care. In fact, you made a move that represents that. Tell me about that. Bought Amgen today.

Sold out of Sensata Technologies, and that's a high valuation technology name. Took an 11% loss there. Finally went into biotech at a reasonable price. That's what Amgen is here, trading at 16 times earnings, 3% dividend yield, growing its dividend over the last five years by 11%. I want to be in health care. I own right now AbbVie. I own Merck.

I'm adding Amgen to that portfolio. Don't forget UNH, which is also working as well. I think to answer your question, it is about right now investors going back to a playbook from prior decades that focused on more quality companies. And guess what? Show me the revenue right now and what's your margin going to be as we move forward? I'm a little confused only because you told me the other day when we were talking about the technicals and some calls that we were going to have a breakdown in the market that you thought we could still bounce a little bit higher. Has your view changed now in a couple of days by virtue of the news itself,

which is totally your prerogative. If the news changed, the mind can change too. Are you there? So we had a significant bounce actually yesterday afternoon. Have things changed today? Yes, they have. Do I think this is a bear market? I don't think this is a bear market. I think this is a deleveraging process that occurred in very speculative areas of the market. And I think we've gone through that process. So I think stocks have seen the worst. The biggest concern I have and where I'm completely wrong on my analysis that we hit the reset button,

bull market reestablishes itself at the end of 2022 into 2023. Where am I wrong? Real estate. If the real estate market declines significantly, we've got a bigger problem. All right, let's go deeper on what all of this means to your money right now. And welcome in Cameron Dawson of Fieldpoint Private, Marcy McGregor of Merrill Bank of America. Ladies, it's nice to see you. Cameron, what is this? Joe just said it's not a bear market. I got these Brainerd comments weighing on me today. What is this? Where are we going from here? Well, I think we are stuck in this volatility and low returns. And I think the Fed is going to be getting exactly what it wants by seeing valuations for stocks move

lower. The Fed has told us that they want to see financial conditions tighten. They want to see financial conditions move off of all time low,-time easy levels, which necessitates stock valuations moving lower, credit spreads moving wider. So when that happens, we typically see more volatility and lower returns. So given the fact that this process is just getting started, we think that's just the world we're going to be living in until the Fed pivots dovish. But that's going to be a long way away. Wake me up when that happens. Marcy, is this a time for courage or is it a time for caution? You know, we're cautious right now. But when I think about equities this year, the word that comes to mind is actually resilient. If you think about what's been

thrown at markets between a geopolitical crisis, the sharpest Fed pivot any of us have seen in our lifetimes. And stocks are starting to find a way to recover from here. So I think this is a time to position for higher inflation. You know, we've been expecting the Fed to become more hawkish because if you look at the Fed funds to 10-year part of the curve, that tells you the Fed is really behind right now. So I'm not surprised at Brainerd's comments today. They're going to be catching up. But I think the position for a world where inflation stays sticky, stays elevated, that's cyclicals like energy and financials. And I think it's a world where we can add real assets and commodities to portfolios as well for the long term. point, right? She used the word resilience, which is fair because the market has absolutely been resilient. And I've asked the question as to whether that is now its greatest asset in the face of all of this uncertainty and these so-called headwinds that are out there. How much

can this resilience of the market carry it through these headwinds? That's why I think this quarter is going to be one of the more difficult quarters for investors because you are going to stress test the areas of the economy and the market where you see the most strength. Where is that? Corporate profits. What are they going to look like in the next several weeks? And the consumer. We are already beginning to see signs that the consumer is weakening. Apparel and accessories are down 19 percent, that index on the year. OK, that is significantly underperforming the overall S&P itself. So that's where the stress test is going to come on the consumer, on corporations. Cameron, am I supposed to sell the biggest bouncers that I've seen from the early March bottom?

I think you're getting a great opportunity to sell those long duration names that Joe spoke of. A lot of these names are in distinct downtrends. They have been in downtrends for quite some time and were oversold and we saw them rebound, but it's been just because of valuations, not actually fundamentals improving. So even though we've seen real rates move higher

over the past few weeks, we've seen areas like growth valuations go from 26 times all the way up to 30 times today. We think that's really susceptible to a Fed that's telling you it's going to tighten liquidity, telling you it wants real rates to move higher, which usually is a bad setup for valuations in those long duration and speculative areas that have seen the biggest bounces. Marcy, did I read the notes correctly? I mean, I know you're cautious. I could tell from the tone of your voice and the things that you just said, but you're still overweight equities. Yeah, we're still overweight equities because what we're talking to clients about right now is this is the most persistent and elevated inflation we've seen in 40 years.

That's the most important factor, I think, right now in portfolio positioning. I agree with Cameron's comments. We are in this world of volatility. It's going to feel like a bit of a grind. And overall returns are likely to come back down to earth, especially after the last three years. So it's about positioning for inflation. I do continue to see an opportunity in that sector positioning for the world that we're in. So I think while we're in this volatile environment, it's still equities over bonds because I'm not eager to invest in bonds right now,

given the trajectory for rates, given where inflation is and the Fed pivot. I think it's just too early. And then again, same argument for cash. So that brings me back to the best way to position for inflation protection is U.S. equities, because corporate profits and equity prices historically rise in inflationary regimes, although they are quite volatile. And maybe the most defensive of U.S. equities, and that gets me thinking about mega cap tech, right? Forget about the most obviously defensive sectors, the ones that I mentioned, the staples of the world, et cetera. It's the one reason the mega caps have done as

well as they have off the bottom is because they are viewed now largely as defensive stocks, capital, et cetera. I talk to financial advisors throughout the country. What they tell me for their older clients that are seeking income and traditionally look to fixed income, now the replacement, the bond proxy, is Apple. It's Microsoft. It's Amazon. It's Alphabet. It's companies with high margins, shareholder-friendly returns.

These are clearly the type of holdings that are going to replace those fixed incomes. Your first time on set in a couple of years. It's good to see your face. Thanks for having me. It'll be good to see you back here at Post 9. Cameron and Marcy, we'll see you again soon, hopefully right here at Post 9 as well. You guys take care. Let's get to our Twitter question of the day now. We want to know if you think the market is at risk of another decline, which tech stocks are most at risk of a big pullback? Some of the ones we were just talking about. Is it Apple? Is it Nvidia?

Snowflake's had a nice move off the bottom. Is it something else on your mind? Head to CNBC Overtime at CNBC Overtime. Cast your vote. We'll bring you the results at the end of the show. We do have breaking news on the airlines. Phil LeBeau is following that story. JetBlue making an offer for Spirit.

What do we know, Phil, according to reports? on the airlines. Phil LeBeau is following that story. JetBlue making an offer for Spirit. What do we know, Phil, according to reports? Well, according to reports, JetBlue has offered $3.6 billion or $33 a share to Spirit to acquire Spirit. Now, remember, Spirit has already agreed to merge with Frontier. That deal actually calls for Frontier to purchase Spirit for $2.9 billion. So this deal appears to be a little bit richer, according to the New York Times. Unclear at this point what Spirit will do. The board clearly could say, look, we have a fiduciary right to our shareholders to entertain another offer, even though we've already agreed to merge with Frontier. We have reached out to both Spirit as well've already agreed to merge with Frontier.

We have reached out to both Spirit as well as JetBlue and even to Frontier because this is now a three-way story, if you will, with Frontier and Spirit's merger being called into question now that JetBlue has reportedly made a bid for $3.6 billion. And what's at stake here, Scott, is Frontier and Spirit would have become the fifth largest airline in the U.S. if that merger would go through. If it's unwound and Spirit is purchased by JetBlue, then you're looking at them becoming the fifth largest airline. And I would

imagine that if this bid is accepted, the joint airline would be called JetBlue. But again, more questions than answers at this point as we look into this offer from JetBlue, reportedly for $3.6 billion. Scott, back to you. Let me ask you, I know this is all happening on the fly, but let me ask you a couple questions. Breakup fee. Do you know anything about Spirit, Frontier, that deal,

if there is a breakup fee and the size of it, if one exists? And then tell me. I don't know. Go ahead. I was just going to say, I do not know. In fact, I'm going back through old notes to see if there is a breakup fee. I have to imagine there is some type of a breakup fee. I don't know if there is in fact one and how much it would be for. I hate and I hate to throw that to you on the fly. I just didn't know if you knew the answer right offhand or not, as I know this is all developing, Phil. The other thing is lean on me now. Your expertise. Well, what does this do for JetBlue if this deal actually takes place and they get their hands on save?

What does it mean? Oh, well, obviously, much bigger airline than what they are right now. Now, they both have heavy exposure in Florida. Regulators would look at that and they would say, okay, do we want two airlines that already have sizable, sizable exposure to Florida to have that much exposure? You can bet that competitors would say, uh-uh, that is a highly lucrative market. Nobody should have that much exposure in one market.

So they would try to force regulators to say, if this deal were to go through, we want that to be unwound. For JetBlue, you want that size and scale. I'm sure they looked at the announcement between Frontier and Spirit in the beginning of February, and they said, okay, what's left on the dance floor for us? Do we try to strike a deal with Alaska, which would be problematic in the eyes of regulators in terms of the size of those two if they were to get together potentially? And there's no indication that there was ever a discussion there. But if you're JetBlue and you're looking around, you know how this goes, Scott. There's not many dance partners out there.

And if you know that Spirit is already out there and is possible, and even though it already has an agreement with Frontier, you got to pull the trigger. And that's apparently what they've done. All right, Phil, good stuff. Go do more reporting. If you have anything, you pop back on. That's how it works. Phil LeBeau, our ace reporter there with the latest on those reports. Again, JetBlue making a $3.6 billion offer for Spirit. Up next, legendary investor Leon Cooperman joins us exclusively. We'll get his take on the markets where he sees opportunity right now. Don't go anywhere. The legend is next in overtime. Tough day for stocks, as you know, after those hawkish comments from Fed Governor Lyle Brainard. For more on where it all leads from here, let's welcome in billionaire investor Leon Cooperman. He is the founder, the chairman, and the CEO of the Omega Family Office.

Welcome to the new program. It's good to see you. Congratulations on your new assignment. Nice to be with you. Thank you so much. It's good to have you with us. Last time we were together, you described yourself as a fully invested bear. So I'm wondering, it's been a while. Where are you today? I'm about 68% net long, and I'm still on a negative camp. I think we've had the most irresponsible package of fiscal monetary policies in the history of the country. And we have borrowed from the future and there's a price to be paid for what we've done.

I think the Fed has totally missed it. I think I was on your program a number of six, eight months ago. And I said that if the Fed was right, that inflation was transitory, I would tip my hat to them. And they've given up the word transitory. Sixty four percent of a typical business course is labor and labor costs are not going down. So, you know, I don't like jumping on when the sentiment is clearly turned very negative. I don't disagree with it. Where I distinguish myself, I guess, is I take a story out of the Bible.

In the Bible, there's a story about the pharaoh who had a dream. And a friend of mine, his name is Joseph, he explained to me that Joseph interpreted the pharaoh's dream. And the dream was that we were going to have seven lean years following the seven fat years. Now, I'm not making a seven-year forecast, but I think we have borrowed from the future. And, you know, we've had an explosion of debt. We've had total inappropriate monetary policies. We have to make up for some of this. I find it startling.

In 2017, the nation's national debt was $20 trillion. Here we are in 2021, and the national debt is $30 trillion. So in four years, it's gone up by 50%. That's a growth rate, foreign excess of growth rate economy. Unless we're going to a fiat currency, that debt's got to be serviced. And so I think that, you know, we're in a store for a difficult period, is my guess. All right. Well, so I don't, and I don't want I don't want this to get lost in the shuffle as we have this conversation. So, I mean, if you were a fully invested bear before, if you're 68 percent long now, I mean, you've reduced your risk by nearly a third. Yeah, well, the conditions when I said

the reason I was fully invested, as I said, the conditions that normally are associated with the bear market were't present. You know, we have accelerating and problematic inflation. We didn't have that a year ago. We had a hostile Fed would be on the list. We didn't have that a year ago. You know, basically everything I looked at, you know, would suggest the conditions for big decline weren't present. But I think things have changed.

We have accelerating and problematic inflation. And a point I made previously, I think's the most important point I will make, is that inflation historically has been a friend of common stocks because inflation accompanies costs that get incorporated in selling prices, which lifts the nominal level of revenues and earnings. Inflation becomes a problem when the central bank is moving to curb inflation because investors understand curbing inflation is tantamount to curbing growth and that's exactly who we are now even though the Fed is very late to the game they're intent now on trying to curb inflation which is tantamount

to curbing growth I don't think we'll have a recession in 2022 but I think there's a chance we could have a recession in 2023 and the recession is typically are preceded by bear markets and you're seeing a lot of the market now home builders and the banks and credit sensitive stocks acting very poorly so i think it's a time for caution my 68 exposure is recognizing that i'm basically a taxable investor i don't go in and out. I try to protect my basis. I had a large exposure in technology. I've written options against my Google, my Amazon, my Microsoft.

But, you know, the one thing I will say, and all of us have to be prepared for this, in a bear market, he who loses least wins. So I'm prepared to lose money, though I'm up nicely this year before today. I'm up about, after today, I'm guessing I'm up about six percent because I have a very overweighted position in energy, which is maybe a lot last year and this year. I mean, congratulations on just being up. I mean, I think being flat is like the new up after the kind of year we've had. It's interesting to me. We've spoken often over the last 10 plus years, Lee, and every time that we've spoken,

for the most part, you've said that the conditions for a big decline were not present. And you repeated that today. But you said, I think that now they are present. What are you most worried about? Is it is it that the Fed is going to have to do so much aggressive tightening? I think the price of oil or the Fed are likely to precipitate a recession. But I'm also disturbed by the political leadership of the country, the lack thereof. You know, I read a book 50, 60 years ago when I was in business school called How to Lie with Statistics. And I find it totally offensive when the president, who I voted for him, frankly, says that the taxes being paid by rich people are 8% of their income. That's total baloney.

He's redefining the tax code, basically. He's including in income unrealized gains. And last time I checked, we had an income tax, not a wealth tax. A wealth tax is not going to pass. It is counterproductive, but they keep talking about it as the rich people are ripping off the public. It's wrong. And I'm willing to pay my fair share of tax. I have no problem with that. The fact is I'm giving away all my money to various charitable causes, but I'm offended. I know you are. They keep talking about it. They keep talking about it because they think it scores political points for them.

But let's move off that. But let's find, you know, Will Rodgers said, if politicians did 10 percent of what they promised, there would be no need for heaven. OK, so let's just call it the way it is. You know, the fact of the matter is they're targeting wealthy people. Wealthy people, in fact, pay the majority of taxes in the country, as it should be, basically. But don't keep putting out falsehoods, or at least if you're going to put out something, explain it properly. You know, unrealized gains are not part of income. I don't think it's legal. I don't think the Supreme Court will allow it to happen. And it's also inappropriate. And well, as you said, maybe

other than the rhetoric, because you don't think it's also inappropriate. And well, as you said, maybe it's other than the rhetoric because you don't think it's going to happen anyway. Yeah, exactly. But 15 years ago in your program, if you go back to the news, Nexus, Lexus, Ries call, I said they should get rid of carried interest. They should get rid of 1031, the ability of real estate people to carry forward capital gains indefinitely. You know, there's so many other things they could do rather than mucking up the tax code. Let me ask you this. Let me ask you this. So it sounds to me like you're predicting a recession, just not in calendar year 22. What you're also saying, or at least implying by that, is that you don't think the Fed can pull this off. You don't think that they can pull off a soft landing. Is that what you're saying? Yeah, I would say it. You know, we've had an extraordinarily speculative period

we've been through, and it tests my imagination to believe that what we have gone through is going to resolve itself with a soft landing. I don't think so. I hope so. Listen, I'm long oriented, so I do better when the market does well. But I think the Fed has totally missed it. And I think that we have a lot of wood to chop. And I would think the price of oil or the Fed will push us into a recession in 2023. It's not written in stone, but I think that would be my guess. And I think some increasingly large parts of the market are showing that persuasion. Let's do this. Let's take a quick break. And I want to talk to you more about that. I do want to squeeze a break in. I also want to

update everybody. You may have noticed while Lee was speaking at the bottom of your screen, we showed you an update to the story that Phil was speaking of earlier, this offer that JetBlue had reportedly made to Spirit for $3.6 billion. Now, Spirit confirming receipt of that unsolicited offer, which just adds another layer to that story. Phil's continuing to do his reporting. And if he finds something else out, I promise you he will pop on. We're back after this with Lee Cooperman. It's time now for a CNBC News update with Shepard Smith. Hi, Shep. Hi, Scott. From the news on CNBC, here's what's happening.

The chairman of the Joint Chiefs says the United States must be prepared to counter Russian aggression as it tries to expand its sphere of influence in Ukraine and Eastern Europe. We are witness to the greatest threat to peace and security of Europe and perhaps the world in my 42 years of service in uniform. The Russian invasion of Ukraine is threatening to undermine not only European peace and stability, but global peace and stability that my parents and a generation of Americans fought so hard to defend. This war, he calls a protracted conflict that could last for years. The U.S. and Germany announcing a joint operation today to take down the world's largest criminal marketplace on the dark web. It's called the Hydra market. The German authorities say it

had been active since 2015, offering drugs, intercepted data and forged documents with more than 17 million user accounts. Tonight, we're live in Phoenix with people trying to deal with the highest rate of inflation in the entire country on the news right after Jim Cramer, 7 Eastern, CNBC. Scott, back to you. We will see you then, Shep. Thank you very much. All right, we are back now with the legendary investor, Leon Cooperman, of course, the founder, chairman, and CEO of the Omega family office.

It's notable to me 20% of your portfolio now is in energy. So you're making a big bet that this rise in commodities is going to continue. Well, it doesn't have to go up. It just has to stay here. I mean, I have found over 60 years of doing this thing, if you buy a company to three and four times cash flow, something good ultimately happens. The only thing that bothers me is coming into last year, I was heavily weighed in energy and nobody liked it. I liked the fact that I was somewhat contrarian. Everybody's talking up energy now and their stocks are up a lot. But the truth is, when I look at the individual holdings we have, they look extremely cheap.

I'm very favorably disposed towards a company called Paramount Resources up in Canada. The stock is, I think, about $30 now. They have $3 a share in other energy holdings that don't add to their earnings. They are generating about $9 a share in cash flow. They have a dividend of about a dollar, so it's a 3% yield cash yield. And they are generating substantial cash in excess of capex and they're growing production by about 5 or 6 percent. And the stock's like three and a half times cash flow. His brother-in-law is married, his sister's married to another very sharp guy, Michael

Rose, who runs Tourmaline, another large holding of ours. They're more gas than oil, but they're also in Canada. So we have big positions there. They're up a lot, but I think they look extremely attractive. I think as a group, the oil stocks are discounting $65 barrel oil and $3.50 natural gas per MCF. I don't think we get anywhere near those levels any time in the foreseeable future. Are you still in Devon? Are you still in Devon Energy?

We own PXD. We own Pioneer. We own Paramount and we also own Energy Transfer in the pipe business. Yeah, we don't trade a lot. We tend to be more investment oriented. But I mean, clearly you... By the way, I hate bonds, but my biggest position is a bond, which I think is a no brainer. I'm sure I've come to regret those words, but I have a large position in Legato First Lean Debt. So a really sad commentary about the Department of Defense and how they're conducting themselves.

But for a decade, these guys have been trying to get their spectrum approved. They own 35 megahertz of spectrum. Very vital, very needed by the country. Eric Schmidt, a Harvard professor, wrote an editorial page comment about the importance of 5G and spectrum. And for 10 years, they've been trying to get it licensed it became somewhat complicated when the Department of Defense in my opinion bogusly objected to their spectrum the FCC studied this for five years five years studying an issue and approved the use of the spectrum by a five to zero bipartisan vote they have a 15 percent pick uh uh pick bond pays pays in kind you're guaranteed interest until the end of 2023 if you add the 31 points of interest to the uh the bond is about 74 cents 75 cents of the dollar

to the 25 points of capital appreciation you'll make 56 points of return on a 75 investment and the attachment point which makes these bonds worth par is $4 billion. That's a 40 cents a pop. And there's nobody who thinks this stuff is worth under a dollar. I had an analyst down visiting me here in Boca two weeks ago. He said he thought the spectrum was worth $16 billion. I ran that number by the company. They said that's number that they wouldn't disagree with that number. Well, the accretive value of the first lien is $4 billion.

So you have four times asset coverage and you can make 50 odd percent. So I like that one a lot. It's my biggest position. I've owned it for a while. I've been surprised how poorly it trades, but I think hopefully we'll come to the end of the road pretty soon. Do you still have a position and a rather large one in Mr. Cooper that it's interestingly enough, I mean, the ticker is Coop. I'm sure you, if you do still own it, you own it for more than the fact that the ticker is Coop. We do. We have a high respect for the management. It's showing a big discount to book value. We got involved near five bucks a share and it went to 63. Currently, it's in retrenchment.

We've sold a little bit of stock, mainly because the mortgage business is turning down because of the rise in rates, but they have a unique situation in terms of a very large exposure to MSRs, which will be written up. So their book value will probably be well into the 60s at the end of this year. The stock is about 44. So let me ask you, let me ask you, with your permission, I'd like to give a shout out to Shepard Smith. You know, I hate these cable stations that are not really news stations anymore.

They're active advocacy stations. You know, my wife listens to CNN and CNN, NBC all day long. I tell you, you can be a socialist because you're married to a capitalist. But, you know, I think I respect him because he's giving the news the way it's been given objectively without an opinion. And that's the way I'm sure he's tickled by what you just said. And that may end up in a promo. And if it does, that's just the way it goes. Don't pay me. I'm unpaid. He thanks you on behalf of me.

Let me ask you a couple more things. Citigroup, of all the banks, that one seems to be in the crosshairs of investors. I know you've owned it. Do you still? I still own it. It's been a mistake. And I can't bring myself to sell it because of the large discount to book value and the I hope for an improving trend in profitability. But, you know, it's cheap and it's been a value trap and I've been wrong.

Not the first mistake I make, I've made, but I still own it. And how about Alphabet and Microsoft? And that will make that the last word. Yeah, I have a big position in Alphabet and Microsoft, and we'll make that the last word. Yeah, I have a big position in Alphabet and in Microsoft, but I've written calls against them, which takes me out about 15 or 20 percent above the last sale. These are not expensive stocks. These are great companies. There's my window in technology. These guys have forgotten more about technology than I'll ever know, and that's my bet in technology, and I think that they're very cheap.

I go back. I've been around long enough to remember the nifty 50 of 72 and the technology bubble of 1980. These stocks then were, you know, Avon was 60 times earnings. You know, Revlon was 40 times earnings. Sears Robot, 40 times earnings. These things are, you know, 20-ish times earnings. I think Microsoft is closer to 30 times. And a totally different interest rate environment. In 1972, the 10-year government was over 6%. And in 2000,

it was over 6.5%. So now we have a 10-year government at 240. I think that's the most mispriced instrument in the world, by the way. The last time the inflation rate was running where it is now, the 10-year government was near 13%. Now, a lot has changed in the world, but I hold Powell, I criticize Powell because a number of months ago he said the stock market was not expensive given where interest rates were, but he did not bother to point out that interest rates made no sense. The 10-year government has historically yielded in line with nominal GDP. Nominal GDP this year will be double digits. So we are so far away from historical norms, it's not even funny. And we have to get back to normalcy.

And normalcy, to me, I think I would be kind if I put an 18 multiple in the S&P, and 18 multiple on 225 or 230 in earnings is around 40, 50. We're currently around 4,500. So the market is not undervalued. And I think we're going in a negative direction. And most bottoms are undervalued. So I think there's a lot of room for downside. But if we don't have a recession, the market will meander along

and we'll be in a market of stocks rather than a stock market. I hearken back to my beginning career. I started my career on Wall Street on February 1st of 1967. I had gotten my MBA from Columbia the day before, January 31st of 1967. My son was at that time six months old, had no money in the bank, and had a student loan to repay. We were still repaying student loans back then, and now they want to give forgiveness okay i couldn't afford a vacation i went to go in the next day on february 1st 67 the dow was roughly a thousand and in 1982 it was roughly

a thousand but i made my money picking stocks and i think that's the environment we're in i don't expect much help from the s p 500 for quite a while. That's my basic story. I also could point out that, you know, the upper hand is now moving towards labor. You know, that is going to be a negative. I mentioned fixed income is mispriced. And I think the leadership in the country is lacking in many, many ways. We got to go.

Lee, I thank you so much for your time. Nice chatting to you. I will see you soon. It's a very enjoyable program. It's very enjoyable. You're getting interesting. Apart from myself thank you so much for your time. Nice to see you soon. It's a very enjoyable and interesting. Apart from myself, you're getting very good guests. I appreciate that very much. You certainly are the top of the list. That's Lee Cooperman. I appreciate your time today. Up next, inflation and supply chain concerns weighing on consumer facing stocks. There is one beaten down name, though, that could be worth buying right now. We'll debate it in today's Halftime overtime. We're back after this.

In today's halftime overtime, Josh Brown doubling down on RH less than a week after the company's CEO warned about chaotic supply chains, broadbased inflation for consumers as well. This stock is down 55% from its high. This is a company that had been growing earnings at a massively rapid rate, growing revenue as well. It's come down substantially because of inflation and all the issues in the housing market, higher mortgage rates, etc. I think it's just gotten to the point where it's come down too much. All right. For more on what lies ahead for consumer stocks, let's bring in Shannon Sakosha, of course, of the Halftime Investment Committee. It's good to see you. You know, you have a take on Josh in our age. I mean, it is interesting to sort of double down on a stock after the CEO kind of sounds the biggest alarm we've heard. Well, but if you if you kind of go through what that alarm was, I don't think it's

all that different, Scott, from what we're hearing from other companies. And so I guess it's something from a relative perspective. You know, if everybody's facing the same challenges, do you want to own a brand that has some equity that's potentially correlated to an area of the economy that I agree will continue to do well? And so therefore, it's it. And, you know, what we're experiencing right now in terms of food and energy cost inflation, it's exacerbating this K-shaped recovery that we've been talking about since March of 2020. And so I think RH is probably going to benefit from being tied to a higher income demographic over the next couple of years. Let me ask you this. So in terms of retail and consumer exposure, Amazon, Best Buy, Costco, Estee Lauder, those are four that you own.

Are you worried about any of those? I am. I mean, I'm certainly worried about Estee Lauder. That stock has been under pressure for some time. Scott, as you know, there's a pretty big international and China footprint for Estee Lauder. And it really does require for customers to be in store to benefit from that experience. I'm much less worried about Amazon. I mean, I think I've been pretty strong on Amazon on the show over the course of the last couple of months. I would say one area that bears worth watching is Costco. If you think about consumers continuing to feel the strain of higher costs, that, of course, might impact Costco's margins. But I think they have a perception of value for the consumer that

I think is going to become increasingly important over the next six to nine months. All right. Good stuff, Shannon. We'll see you soon. Thank you. That's Shannon Sikosha joining us then. Up next, of course, Santoli's last word, plus the big bet on cybersecurity, a stock that's up 20 percent in just the last month.

Is there more room to run? We'll discuss that in our two-minute drill. Overtime's back after this. Told you if Phil LeBeau had more on that big developing story, he would be back. In fact, he does. Phil LeBeau, what do we have? Scott, we have a statement from JetBlue essentially saying, look, we bid $33 a share for Spirit. And this is basically the start of an old-fashioned bidding war. In a statement, JetBlue says that they firmly believe that their offer constitutes a superior proposal to the Spirit merger agreement with Frontier.

The company goes on to say that it believes that Spirit, along with JetBlue, would create a true rival to the big four airlines. We're talking about American Delta, United and Southwest, and that JetBlue believes this is a true national low cost carrier. If Spirit were to accept the bid for three point six billion dollars, we know that we heard from Spirit just a little bit ago, Scott, where they said we will do our fiduciary duty and we will review the bid from JetBlue. But they at this point have not unwound their merger agreement with Frontier. Scott, back to you. All right. Days ahead are going to be

interesting. Phil LeBeau, thank you very much for the update. After the break, it's Santoli's last word. He's looking at some key levels for the S&P 500, what it could all mean for your money. Overtime's back after this. Let's get to Mike Santoli for his last word, I guess, or in this case, words. Michael? Yeah, Scott. Two words. Seven months.

Actually, seven months and two days ago, the S&P 500 closed at 45.35 or so. Today, we closed at 45.25. So essentially flat for a bit over seven months. We've been up six percent from there to the all time highs in January, been down eight percent. I bring it up just as a reminder that we are in a relatively prolonged retrenchment, sideways consolidation, whatever we're doing here, digesting the massive gains off the 2020 lows. Also, over that period of time, remember back then the Fed was saying maybe we'll raise rates once in 2022. Now we're up to about eight times at least. Oil's up 40 percent. So the market has absorbed and digested a fair amount. Final point on that, though, is it's not to say that we've accomplished anything in 2015. And then again in 2018,

we started these periods where the market went flat for about a year to year and a half. If you went all the way point to point. So maybe this is the way it is for a little while. I mean, it's hard to believe we've gone from not even thinking about, thinking about, thinking about to Brainerd today, which is about as far away. The Delta is like a massive there. You cannot think about it now because everyone keeps talking about it. Yeah. Is it inflection point? Do you think today, given it was Brainerd who was as hawkish as she was?

I think it's more of a I don't think it's an inflection point, do you think today, given it was Brainerd who was as hawkish as she was? I think it's more of a, I don't think it's an inflection point. I think it's a ratcheting up of this message. And it's just this additional sense of urgency out there that you can't really escape it. And if risk assets give the Fed more runway, they're going to take it, at least right now, at least until the data turn or something else. All right, good stuff. We'll see you tomorrow. That's Mike Santoli joining us with his last word.

Coming up, the two-minute drill, finding opportunity in today's tech pullback. That's next in Overtime. To the results of our Twitter question of the day, we asked, if you do think the market is at risk of another decline, which tech stock is most at risk of a big pullback? Is it Apple, Nvidia, Snowflake or something else? Sixty eight percent said Snowflake. Only nine percent say Apple, 11 percent Nvidia. So Snowflake takes the cake.

It is time now for the two minute drill. Joining us today is G Squared private wealth founding partner and chief investment officer, Victoria Green. Victoria, nice to see you. You are officially on the clock. And let's talk about some of your picks. IBM is a very interesting one, considering the one we're going to talk about next. Why IBM? Yeah, I gave you two hot stocks and a sleeper. I like IBM. It's a turnaround story. It's fairly valued. It's 14 and a half times PE, 5% dividend yield. And it is a turnaround story. They got Kindle spun off, their legacy services. They built this new company really around the Red Hat acquisition and the hybrid cloud and AI. Both of those areas, I think,

are high growth areas. Look, it pranks out cash. It's paying you a dividend to wait, and it's not overly valued. For somebody looking for a tech foothold that doesn't really want to be growthy or crazy valuations, I think it's a great place to be right now. Okay. Old tech trying to be new again, so to speak, right? Trying to be one of the cool kids like NVIDIA, which is one of your picks. Yeah. Look, NVIDIA is great. They're just getting into the omniverse now. Everything is averse, right? You have the metaverse, the omniverse. But they're looking at helping companies grow out their AI base.

So I think not only is it chips, they have the best computing chips by far, but they've got their omniverse. And then they're getting into AI and they're getting into their self-driving cars. You've got their Mercedes and Jaguar. And those are long lead times. You know, look, it came in with disappointing earnings with the automotive sector last quarter, but we think that'll rip back up when the supply chain eases. And they're just the top pick in a beaten down space, and they just have a better technology than most others across the street. So if you wanted to bet on a semi to rebound, it's NVIDIA. But that's not everybody's pick in NVIDIA,

right? Yeah, no, it's certainly one of the favorites. Real quick, if you could on CrowdStrike, like 10, 15 seconds at most, please. Look, it's a proprietary threat assessment graph. It's AI driven, cloud based. It's killing off the dinosaurs. It's coming for everyone. It's in a great security sector. I know the multiple is crazy, but I think it's a wonderful long-term growth stock. All right, Victoria Green, thank you for playing in the two-minute drill. That does it for us in overtime. I'll see you tomorrow. Fast Money's now.