Closing Bell - Closing Bell Overtime: Fed Downshift Sparks Upside 11/23/22

Episode Date: November 23, 2022

Stocks pushed to a two-month high while bond yields sink. So, what’s ahead for markets and the Fed? Ritholtz Wealth Management’s Josh Brown gives his take. Plus, Ryan Detrick of Carson Group breaks down some big opportunity in small caps. And your Black Friday look ahead. CNBC’s Melissa Repko explains the 3 things every investor needs to be watching.

Welcome to Overtime. I'm Mike Santoli in for Scott Wapner. You just heard the bells, but we're just getting started. Coming up, we'll hear from one strategist who is bullish into year end, and he's highlighting the one sector that he's betting has the biggest upside. Now, a Fed downshift drives a market updraft. Hints of a slowing pace of rate hikes in the minutes of the latest Federal Reserve meeting help stocks to a two-month high while sinking bond yields. Let's bring in Josh Brown of Ritholtz Wealth Management to talk more about it. He's also, of course, a CNBC contributor. So, Josh, I tell you, bear markets aren't easy, even for bears.

As they say, we're up 15 percent. If you, for the last few months, have been saying, look, the economy is decelerating, the Fed's still tightening aggressively. We still don't know exactly what the effect on earnings are going to be. Who knows? Maybe crypto is going to blow up. There's been no net downside in the S&P for six months. So how do you read that? Is that a selling opportunity or just the way it goes? Well, I think the new lows are still occurring, but they're occurring mostly in stocks that are not even in the indices. So they're occurring in the growth stocks that were never profitable. A lot of those stocks this summer were down 50 percent.

The market has been able to recover, but those stocks are now down 70 and 80 percent. A really good poster child for what I'm talking about is SoFi. This is a company where the momentum has been horrible the entire time, regardless of market bounces. They're getting absolutely no relief from the headlines. Now we have to worry about them in terms of crypto. Then we hear about a student loan repayment moratorium. It's like one thing after another, after another. There are a lot of stocks like that. On a day like today, though, they're getting these bounces. And I think that's because of what you were talking about. The idea that the Fed is way closer to being done than maybe we thought two or three weeks ago. And the data would give them that cover.

So it's what I call an inside out day. You have the hardest hit stocks up the most. I see DocuSign bubbling up, for example. And then what's taking a break? Staples are flat down and energy is pretty much all red. So that is all counter trend stuff. And I don't know that that's the bet that you want to make going forward, even if this could last for another week or two. Right. That is true. Now, if your choices were, you know, bombed out, high growth, low profitability, story stocks that have been killed or super defensive, maybe you have to pay up for the stability of Staples and health care. It's tough to know. But you also have, as we were just hearing, you know, deer and cat pretty much making new highs. Pockets of industrials doing well. Financials are actually outperforming over the last little while as well.

And so you could either say there's a macro message there, or you could just say the market is trying to latch on to where there's a little bit of low expectation and some decent earnings trends. Yeah, listen, there are subsectors and industry groups that are at all-time highs. We were talking about the insurance stocks for the last couple of weeks. And yesterday, across the board, they all made new highs, all the big ones. Healthcare fits into that basket where you don't really have to worry quite as much about what the Fed might do because a lot of the growth stories in healthcare are secular. And they have price and power, and these stocks are working. So I don't think that everyone has to play the same game of is the Fed doing 50 or 75. And quite frankly, if there's a stock that

you would buy right now because the Fed's about to raise the overnight rate 50 basis points, but you would not buy it if they raised by 75. What is that stock and who trained you? Like, where did you learn how to invest? Right. So I think that that game has gotten played out. And now we're really more focused on the broader earnings picture. But we're seeing demand slacking. Look at the PMI numbers, manufacturing and service continuing to contract. Things are getting tougher and tougher. Housing market still looks terrible.

These are really important indicators, I think, telling us that 2023, even if the stock market is going to be better next year than this year, will continue to be a challenge. No, that's absolutely the thing to focus on right now, because we can get comfort, perhaps, that the Fed is slowing down. We got the destination that they're heading for roughly in sight. We're months away, let's say, before they they pause. But a Fed pause or even a Fed pivot to easing is only a bullish trigger if the underlying economy is not falling apart underneath it. Right. I mean, yeah, because the Fed's usually cutting in the early part of the downturn. Right. And so that's that's the tricky part right now is figuring out what

lagged effects are yet to come and what it means for earnings in 2023. Michael, to me, what you just said is the number one question right now. I put this on my Mastodon account this morning. Yes, I am a member of FinTusk. And what I basically did was I took a chart from the journal that showed the rate, the start of the rate hike versus the start of the historical bear market. And this is a really weird one. If you look at the top for the S&P this year, it happened the first day of the year in January. We didn't get the first rate hike until March. So we were already heading into a bear market before that rate hike.

Historically, you have the rate hike cycle and you have like months or even in some cases years before the market tops out and we head into bear market territory. And that's going back to 1980. This is really the first time. So what do you do with that information? Maybe you try to be optimistic and say, for once, the stock market started to sniff out

both the rate hike cycles beginning and end. And maybe we've done a lot of the work in advance, getting rid of some of that excess and getting down to a more reasonable valuation. That's like maybe the silver lining that we can take away from this. I totally agree. I mean, and by the way, I came to that observation independently because I am not yet a Mastodon member. And we'll see if I end up getting there. But I have to say, so many of those things apply. Right. I mean, the yield curve is deeply inverted. We know that. Right. That's typically been a longer, longish lead time indicator of something bad. But you So many of those things apply, right? I mean, the yield curve is deeply inverted. We know that, right? That's typically been a longish lead time indicator of something bad.

But usually the market's rallying to highs by the time the yield curve first goes negative and even beyond it, right? So does that mean we have the most over-anticipated recession in history that may or may not show up? Or, you know, are we coming from too high a valuation peak to have these cadences match up? I guess that's the big issue. This is the one where everybody knew it was coming. And that might be a reflection of just how excessive everything got in 2021. And you and I probably talk to people that I talk to people that will say things like I made way too much money in the market in 2021. I didn't deserve it. Like I've had those conversations with people. So I feel like this was the one that we all thought we were due for the one that should have maybe happened in 2020. And if in fact it does come to pass with the yield curve being this inverted for this long, it will have been the easiest to predict recession ever.

And then, you know, the smart aleck in me says, well, when can I start anticipating the most anticipated recovery in history? And maybe that process gets started as soon as, you know, we get the as soon as we get the official word that we're in recession, which takes a while. Yeah, I mean, maybe the missing piece of it is all the people who are most convinced that a recession is inevitable are focused on housing for sure. There's no doubt about that, that that has that has led the economy lower most times. But also they're focused on things like the trajectory of the ISM and all these things that say, are things better or worse this month versus last month? And it's much worse. It's been consistently worse.

However, we're starting from such a high level of activity after the stimulus and all the rest of it that maybe it doesn't bring you down to such a nasty point with consumer and corporate balance sheets. OK, so I think that we've already we've talked ourselves into a point of ambiguity here. But there is one additional smart aleck point to make, which is if you were waiting for the financial accident that the Fed was going to prompt, was crypto it? Is a multi-trillion dollar on paper loss in that world? Yeah, we just stress tested the traditional financial markets for this outcome that people were bracing for. Yeah, if the worst of the contagion is going to be Masayoshi's son

like owing his own company $5 billion, like if that's going to be the sum total of the contagion, then maybe. I mean, there have been a lot of things along the way. Credit Suisse blowing up because of Bill Wang and Archegos. I feel like that's kind of important to the story. It's not like it's all crypto. There are a lot of stock-related things that also blew up,

but none of us have seen anything yet that's so systemic that the Fed has to slam on the brakes of normalizing and do something different. So I guess I'll let you know when we get there. I know there are a lot of people that like to speculate and they have candidates in mind. I'm not clever enough to see one of those things coming. Right. No, it's totally a puzzle. And we have to see how it plays out. But the stuff that got blasted the most was really like fast money that that in other words, it only took you back a couple of years for the most part in terms

of, you know, round tripping those prices in the overall market. You barely got to a two year break even level before bouncing. Maybe that means there's more to go on the downside. We obviously are going to have to monitor all of it. Let's now bring in Justin Bergen of Ameriprise Financial Services, widen out the conversation. And Justin, what is your general posture here? You know, looking through the final weeks of this year, looking into 2023, you're talking to clients, they have a certain risk budget to spend. How are they allocating it? Yep. Thanks for having me, Mike. Appreciate it. So you get a seasonal uplift right now that's definitely working. And I think your big kind of aha moments with, you know, being through

the earnings season, there's not a whole lot of extraordinary news outside of what, you know, like FedMin is today, incrementally better news. I think everybody has an idea of what's going to happen at the next FOMC meeting. So I think the big thing is, is when you start looking at next year, and I know there's been a lot of talk about earnings, but look, we started at 250 back in June for 23, went to 230. And honestly, I think you can have that number, if you can have a two handle on it for 2023, you're doing pretty good. So is that technically an earnings recession? I don't know, maybe, But I think there's more there's more downside to come on the corporate earnings side. And so what does that imply in terms of how you approach next year? I mean, just just to assume the market is somewhat more expensive than it looks on the surface? Yeah, so we actually take like a barbell approach on our overweight, underweight sectors, right? So on one side, you've got those traditional defensive areas,

like healthcare and staples that were overweight. And then you have not so defensive with financials and tech. So I think if you can play both sides of that, you're not going to get left behind. Obviously, until we come out of this, you've got to focus on quality. And then honestly, I think what's worked this year is not just dividend, but dividend growth. Right. That gives you that gives you a hedge against inflation. And a lot of those companies out there, they're double digit, you know, dividend growers year after year. Yeah, no doubt about it. Those stocks have have protected you to some degree. What about on the fixed income side? I mean, it's almost a novelty to people who haven't

been in the market very long to have this source of relatively safe yield running through the system at this point. And I guess, can it be trusted right here to do its job in a portfolio? Well, this year, no. But look, if you go out and look at next year, look, you can go out 15 months and get five and a quarter on investment grade credit. That's fantastic, right? We haven't seen that in years. And the flip side of that, if you talk about rates, if you're 40 or younger, you don't know anything other than 0% interest rates. completely foreign to you and your entire upbringing has been, or at least growing through your younger years, has been on lower rates. So it's a completely different mindset. I think the 60-40 works again. And those are decent rates when you don't have to take a whole lot of risk. Josh, just your take on that piece of it in terms of how you should think about bonds right here, because even though it seems like it's a bit of a gift to have that kind of source of yield rebuild throughout this year,

you could have other people saying, look, first of all, these absolute levels are nothing special based on longer term history. And also, if inflation doesn't come down a lot, it's a little bit of an illusion that you're getting much for your risk. Yeah, it's tough. Like when you build financial plans for potential clients, existing clients, you have to play around with a lot of variables to come up with the right risk budget and the right answer and what you're really trying to achieve. And one of the levers that you have to pull on is your expected inflation rate. And I think a lot of people in our profession, rightfully so, remain at very high inflation rates for a decade or more, like 2010, 11, 12, 13.

Inflation was like 0.3, 0.8. And they had these models, these long-term financial planning models built with 4% inflation rates. And every year you would surprise a client to the upside. Hey, great news. We can pull back on how much risk we're taking because we're way ahead of where we thought we needed to be. Why?

Well, equities did 15% on average every year and inflation underperformed. That is now reversed. I'm not saying it reverses for the next decade, but you're not going to have that lever to pull with the inflation rate. And 4% may not be high enough. I know the Fed wants to stick to this 2% target, but what if they shift the target to 3% and we have trouble getting below 4% for structural reasons, for demographic reasons? I don't know. So that's one aspect. The second aspect is, yes, valuations have come down, but can you really count on annualizing at 15% returns for the next decade like we did last decade? That's a really big assumption when you understand

that the long-term reality is closer to seven or 8%. So these are the things that we have to do for clients that don't really involve making a year-end price target in any of these assets, but do involve some degree of subjectivity. And I think that that's really going to result in who's got a plan that actually works and who's got a plan where maybe one of the kids goes to state school or something, you know, something to that effect. So that's the that's the challenge right now, working with individual households. Justin, do you find that customers are gun shy after this year? Clients are essentially kind of willing to hang in cash or are they still thinking that this is just a little bit of a blip in the markets? Because you can really argue both

sides. Retail equity allocations have stayed pretty high, even though, you know, the other sentiment gauges look like they're pretty fearful. Yeah. So honestly, Josh, you put the nail on the head, right? So you don't look out to, you're not trading a month or two and saying, hey, we need to shift our allocation, but you take a longer term view of it. Yeah, there are some clients that are a lot more pessimistic and in cash, but on net net, they're sticking with the plan. As long as you didn't go outside of your risk budget, when there was no alternative, then you're doing okay. And I think that's part of the three Ds, right? Diversification, playing a little defense and looking for dividends

that you work properly. You know, your portfolio wasn't 50% tech because that's what had worked for the last, you know, five, 10 years. And you weren't, you know, tilted way over on growth side because that is also what works. So, you know, as long as you're spread out and, you know, in the right pockets, you're doing okay for the long term. All right. Good perspective, Justin. Josh, appreciate the time today. Happy Thanksgiving. Thank you. Happy Thanksgiving. All right. Let's now get to our Twitter question of the day. We want to know which will be the better performer over the next year, stocks or bonds. Head to at CNBC Overtime on Twitter to vote. We'll share the results later in the hour. We are just getting things started here in overtime.

Up next, big opportunity in small caps. Why investors should be looking to this part of the market as we round out 2022. That is next. We're live from the New York Stock Exchange. Overtime. We'll be right back. We are back in overtime. Stocks finishing higher on the day with the S&P hitting its highest level since September 12th. My next guest says this rally has more room to run into year end, and he's been finding big opportunity in small caps. Let's bring in Ryan Dietrich of Carson Group. Ryan, great to see you. Thank you, Mike. Happy early Thanksgiving, everybody. Yeah, absolutely. And you as well. So let me just maybe frame out what seems like the general

take on things at the moment, which is, OK, markets got oversold in October yet again. This is that was a low, not the low. Perhaps the market's going to have some upside challenges as it gets toward the 200 day moving average. And, you know, the yield curve is telling was a low, not the low. Perhaps the market's going to have some upside challenges as it gets toward the 200 day moving average. And, you know, the yield curve is telling us a recession is likely to hit before too long. So where would you maybe take issue with with some of that? Yeah, well, I think the issue biggest issue I have is the low might not be in. I mean, we look at those October lows. Mike, I was on with you right before the October lows. And we talked about the seasonals and the over-the-top pessimism. Any good news,

we could have the low because bear markets, six of the last 17 ended in October. And I know it's not that simple, but again, now we've got inflation rolling over. We've got some of those things, but let's not forget here. Most stocks made a 52-week low back in June, right? Less stocks made new 52-week lows in October. So I know the S&P made new lows in October, but small caps didn't, right? A lot of other groups did not. So I think you could make the argument, this new bull market's been alive for four or five months. I know it sounds crazy, but that's kind of what's happening. Most stocks have not made a new low since June. Yeah, and it's worth noting that that, you know, in some sense is how it typically goes, right?

You have sort of a difference between how the index behaves and the average stock behaves. And also, you never know a new bull market has been underway until it's kind of been rolling for a little while for the most part. Now, why do small caps seem to make sense to you here even after what they've done recently? Yeah, well, for starters, like I said, they didn't violate their June lows back in October. So something's happening there under the surface. But I'll tell you, we're more optimistic about the economy. And you guys had some great discussions all day about this. But I'll tell you, so much negativity is priced in, right? That Bank of America Global Fund Manager Survey, 77% of people expecting a global

recession sometime the next year. We don't think the U.S. is going to go into recession, or if it does, it's mild. What can benefit from that, right? Your cyclicals, your cyclical value, and small caps, in our opinion, can really do well in that. And also, don't forget, small caps are historically oversold and really cheap, I should say, relative to large caps. It doesn't mean they have to go up, but when these other things line up, we think small caps can do pretty well the rest of this year and honestly, probably most of 2023. So the call that perhaps, you know, a recession is not the most likely scenario or maybe it's just a mild downturn. How does that link up with what the expected message is from the bond market here

with short term rates way higher than longer term. I know there are long lead times sometimes in terms of predicting a recession, but it feels like that's the main thing that people are fixated on that they don't want to look past. Absolutely. I mean, it is what it is, right? The last eight recessions, you've had the 2.10 yield curve invert eventually before the recession. But I'll tell you, also, I like to look at the credit markets, right? High yield spreads, investment grade corporate spreads. We've seen spreads blow out before recessions. We're not seeing that now in the credit markets. In fact, the credit markets got a little bit stronger. So it is a very messy kind of crystal ball,

if you will. But again, when we look at the consumer, 70% of the economy with those retail sales numbers today, industrial production was still strong. Economy is not perfect by any means, but we just think we can avoid a recession. I like kind of ninety four, ninety five when the head when the Fed hiked a bunch, the economy slowed down and then it expanded. We think that could happen. One final stat. The last 13 recessions, Mike, not one of them started in a pre-election year. So just, you know, I know. But just be aware of that. It's kind of rare to see a recession next year. You know, that's that's an interesting point. It's essentially a glass half full or empty type of thing, because when folks like me and you point out that stocks have

always been up in the in the year after a midterm election, it's basically been the case since 1950, at least other people say, well, that's because you never had a recession in one of those years. So either, you know, one causes the other or allows for the pattern to hold. But it is it is interesting that you mentioned the 94, 95 scenario. It seems like that was the popular view. And I was all over it when the Fed started to hike and they were talking soft landing. But people have abandoned that, right? They don't think that that's necessarily something that we should bet on at this point. Yeah, exactly.

I mean, we'll get a soft landing. It's probably going to be pretty bumpy. But again, we think we could still avoid that recession. Like, we also like industrials. It's hard for us, Mike, to think the world's about to end. This big recession's coming when industrials are strong. Look at what Deere just had to say today, right? I mean, industrials had a great earning season. So to us, again, these little tea leaves we look

at, but when industrial strong, small cap strong, it's hard to think of recessions on the horizon in those areas we like. In terms of the market rhythms here, you point to the old saying that, never short a dull market. The market has been quiet even before this little bump higher. It was really gently going sideways. Others are saying, look, every time that the volatility index has gotten down to around 20 this year, it has meant that rallies were kind of petering out at that point. So what should change in that, if anything? You're right. I mean, again, we had that 5% bounce after CPI Thursday a couple of weeks ago. And since then, we had seven straight days without so much as a 1% move up or down, longest in a year than yesterday happened, right? That's the old don't short a dull market.

But you're right. What's the message of the market? When the VIX has gotten around here, we have seen sell-offs. But in our base cases, maybe something different is taking place here with some of the leadership. So if we don't have a sell-off like we have in the past, that's the signal that, hey, those lows very well could be in and expect Santa Claus to come to town. Yeah, of course, historically, VIX can certainly drop well below 20 once an uptrend is in place. Ryan, great to talk to you. Have a great holiday. Thanks.

Appreciate it. Thanks, Mike. All right, up next, pockets of opportunity for your portfolio. Payne Capital's Courtney Garcia is highlighting three segments of the market that deserve a closer look. That's after the break. Over time, we'll be right back. Time for a CNBC News update with Contessa Brewer. Hi, Contessa. Hi there, Mike. The Georgia Supreme Court has reinstated the state's ban on abortion after six weeks of pregnancy. A week ago, a judge in Fulton County overturned the law. But now the high court has issued a one page order, putting the lower court's ruling on pause because it's considering an appeal. The Department of Justice is seeking to question former Vice President Mike Pence and its criminal probe of former President Trump and his attempts to remain in power after he lost the 2020 election. The New York Times reports Pence is considering

cooperating with the probe, though he has refused to cooperate with the select House committee investigating the January 6th Capitol riot. Crews are working to inflate those balloon characters ahead of tomorrow's Macy's Thanksgiving Day parade. Always fun to watch the night before. The parade kicks off at 9 a.m. Eastern. It will cover two and a half miles through the route. And by the way, Mike, did you know this? Our own colleague, Christina Partsenevelis, will accompany the Snoopy float as a clown gesture this year. So we have to keep an eye out for her. And kudos for walking the two and a half miles with all of the gang out there.

I was not aware of that. Absolutely. We're going to have it on. And, yeah, it's fun to watch them inflate the balloons, though too many people come into my neighborhood to crowd things up. I'm sorry for that. But you know what? It's all in the spirit of sharing, right?

Yep. It's one night a year, and it's a lot of fun. And the weather's good. So we'll look for Christina as well. Thank you, Contessa. Have a good one. The November market rally has been strong in the United States, but even more impressive overseas. iShares Emerging Markets ETF, that's the EEM, has nearly

tripled the S&P 500 this month. Our next guest says that outperformance should continue. Joining us now, Courtney Garcia, Payne Capital Senior Wealth Advisor. Courtney, good to see you. Thanks for having me. I guess we should say that over the last one year, two years, five years, emerging markets have lagged pretty badly. So there's plenty of catch up in theory to be done. What makes you think that it might be ripe for it at this point? Yeah, I think we're in this period right now, especially in a higher inflation environment where valuation really is going to matter. And your emerging markets are a lot better value than the U.S. right now. And especially when you look at China, it's always this question of when are they going to open? And we've had a lot of false starts there. But I think that really is a question of when, not a question if they're going to reopen. And I think you want to take

advantage of the pricing now, because once the reopening happens, there's a lot of money that's still going to go in there and that can happen very quickly. So you want to take advantage times like now that it's still priced very well. And especially right now when you're seeing emerging market currencies compared to the dollar is still at record lows. And so you want to make sure you're taking advantage of that because that can turn very quickly here. Right. I was going to say it's really to a large degree a China bet just because China is waiting in the emerging markets. And also, I mean, is that your general sense that the dollar, having rolled over a little bit, is now on a downswing or you feel like it can only go down from here or no?

I think that the idea is it will continue to weaken. I mean, obviously, you know, we have to see how things continue. But if we do start to see inflation starting to come down, there's a lot of data that's supporting that. I think that's really what's holding up the markets right now that is going to likely lead to a lower dollar, which is going to benefit your foreign markets, especially emerging markets. In terms of the U.S. markets, obviously on a pretty good upswing over the last five or six weeks. It's definitely gotten to this period where it feels like the economy is in a bit of a thaw and the Fed maybe is going to be less hostile. Is that enough to carry things higher, do you think, from here?

I do. I mean, I think the big thing that's been overweighting the markets is inflation. I think we're finally seeing some data that's coming down. That's really what the markets are holding on to right now. But I think if inflation is coming down, we have the midterms behind us and the economy is still on pretty good footing. The consumer is still really strong. And I think that it does put you in a position here that we can continue to see a rally through the end of the year. You know, one of the reasons that I think people are getting comfortable about the peak inflation story and the fact that it should keep coming down, of course, is what's going on with oil. It feeds directly into,

you know, lower bond yields, lower inflation expectations and the pricing of inflation. And yet energy stocks have, you know, they've pulled back a little bit, but they're still near their highs. How does that equation work out for you in terms of the risk reward for energy stocks? Yeah, and energy stocks, I think what you need to keep in mind is energy prices can be a lot lower for them to still be profitable because they came in so much more efficient, especially back in 2020 when oil prices went negative for that short period of time, they were forced to become more efficient. So even if oil prices come down, your energy companies are still a really good opportunity here. But not only are oil prices coming down, but housing is a big portion of CPI and you're starting to see

that come down as well. That is, takes a little bit longer to make it, make its way through CPI. So I think over the next six to 12 months, you're going to see that continue. I think those are really the things that the markets are focusing on right now. If those things come together, because it's been this race, perceived race between can inflation come down quickly enough that the Fed doesn't have to really choke off economic growth more than we were anticipating. Do you think that that somehow can can land in a favorable place in terms of avoiding recession? Yeah, the soft landing we've all been talking about. I mean, it's still a possibility. It's obviously we're going to have to see how things continue here. And we have seen the Fed overshoot in the past. We need to make sure they're not going to continue to do that. I don't think they're going to stop raising interest

rates here. I mean, they're definitely expected to raise interest rates in December, maybe early in the year. But I think at some point, if we see them, inflation come down enough and the economy continue to be on strong footing, I think it's still a possibility. Okay, so a possibility, but you wouldn't necessarily have to bake a great growth year into your forecast for next year,

I guess, for earnings to be okay? Because I'm trying to figure out as to whether we can, in retrospect, are going to view 2022 as the year when we took all the pain that we had to take in the economy and on rates. Well, I think it quite quite possibly could be right. And it is I think it's largely dependent on inflation that we have to see it come down because at a certain point it's going to become unsustainable. And if inflation doesn't come down, the consumer is they're starting to dip into their savings. And the benefit is they have so much cash on hand still from the pandemic that it's keeping them in a good position. But at a certain point in time, they're going to draw that down. So that's why we have to see that come down. That's what this is really hinging on right now. That's another one of the races that we're talking about

that's underway. Courtney, great to see you. Thank you. Thanks for having me, as always. Appreciate it. Have a good Thanksgiving. You too. All right. Up next, clear skies ahead. Airline stocks higher today as the holiday travel season gets underway. But is the sector really set to soar? We'll discuss with the top analyst after this break. And don't miss a CNBC special, Taking Stock, tonight, 6 p.m. Eastern time. Overtime, we'll be right back. New developments in what's being called the crypto crisis

in the wake of the bankruptcy of Sam Bankman Freed's FTX. Kate Rooney is here with some details. Hi, Kate. Hey, Mike. That's right. So Genesis and its parent company are really the big risks crypto investors are now worried about following what's happened with FTX and that bankruptcy you mentioned. This, for some context, Genesis was the first lending desk in crypto. It started about a decade ago and it suspended withdrawals last week. It's reportedly considering bankruptcy as well. The company, though, is saying that that isn't imminent and that it's having constructive conversations right now with creditors. Its loan book had been around $14 billion earlier this year. If you can see there in the first quarter of 2022,

it had about a billion dollars of exposure to the now bankrupt hedge fund, Three Arrows Capital, and it's got about $175 million right now locked up at FTX. Its loan book was just under $3 billion if you look at the most recent quarter there, Q3 of 2022. There are also potential effects, Mike, around its parent company, Digital Currency Group, CEO Barry Silbert, in a letter yesterday trying to calm shareholders, saying that we have weathered previous crypto winters before. He says, while this one may feel more severe, we will come out of it stronger. DCG is also the parent company of Grayscale. That runs Grayscale Bitcoin Trust, GBTC, as the ticker's known. And that lack of confidence you can see showing up in the price of GBTC at about a 43% discount to where Bitcoin is actually trading.

Investors have been worried that if that lending desk I mentioned, Genesis, collapses, DCG may be forced to wind down that Bitcoin trust. This crisis of confidence after FTX is also showing up elsewhere in crypto. You can see exchanges are seeing record withdrawals as people look to put their coins into safekeeping and offline, basically off of exchanges. There's been a lot more selling also by some of the older wallets. These are the long-term investors that are usually and tend to be the least likely to sell that data there from Glassnode. Back to you, Mike. All right. Fast moving situations. These chain reactions keep playing out. Kate, thank you very much. Talk to you again soon. Despite airline stocks outperforming in the S&P 500 over the past month, they're still down roughly 20 percent from their highs earlier this year.

With the busy holiday travel season kicking off, is the group facing more headwinds or tailwinds at this point? Let's bring in Sheila Kyle. She's aerospace and defense analyst at Jefferies. And Sheila, it's been this situation where all the airline executives keep saying the level of activity is very high. They're not really seeing an observable fall off in demand in the coming months. Yet there's the market is expressing some, I guess, skepticism that that the good times can continue. What's your general stance? They're not. They're not seeing a ball off. I just tried to book an 8 p.m. flight out of JFK and prices are still sky high.

And that's really what's helping the airlines. So capacity is pretty limited right now. We're seeing capacity 2 percent lower. That's because some of the airplane shortages that we're seeing. But TSA numbers are up 12 percent this going into this holiday week versus 2019. So that's better than the trends we saw on Labor Day and July 4th, which was actually in line to below 2019 levels. So airlines are seeing very good top line trends, especially with leisure customers. Corporate right now is staggering around 80 percent. And we're going to see if that improves. We won't see that till about February, March time frame. So airlines are given a little leeway on

what they're gonna see. On the corporate side. So corporate you're saying eighty percent of pre pandemic levels. Exactly it's kind of staggering around that. Are eighty percent of pre pandemic in the Q three quarter and it was the same trend that we saw in July so- you know does zoom come in and permanently replace ten percent of travel so do we only have ten percent more to go. And we don't ever get to those pre-pandemic levels for corporate? So that's a trend we're watching, of course, of course, because corporate customers tend to pay more.

So if inflation cools off airfare pricing, you know, what does that do to the top line? The top line story is critical. But what I think we're looking forward to most as Southwest and Delta and some other global airlines have analyst days in December is the cost side of the equation. So cost, airlines projected costs to be low single digit above 2019 levels. And right now they're 20% above 2019 levels. And that's really what's driving airline stocks these days at a 70% market discount. So these airlines stocks are, you know, the buy side is pricing in costs going up. Got it. And we were just showing

there that Delta is the one of the majors that you recommended. Is that because they're better positioned in that sense or is it, you know, is it a better balance sheet or what goes into that call? Delta is our only buy rated stock within the network carriers and that's because of its ancillary businesses and that's what we think Delta is going to highlight during its analyst day. So Delta has um a maintenance repair business that's about five billion of revenue that we value um at ten billion dollars. They also have a loyalty program business that we value in the uh you know in another $10 billion. When you compare that to the enterprise value of Delta, which is around $35 billion, that's where we really see the value of Delta.

Not that it's a sum of the parts story and they'd ever split these businesses off, but we like the option value created in terms of buying Delta. Not only are you buying an airline, but you're buying a commercial aerospace maintenance facility as well as a card business. So I think we like the diversification within Delta. We also like its exposure to where they're exposed with corporate customers, which is small to midsize businesses where you're seeing the recovery improve at a much faster flow. And what are the main things that would, I guess, hold you back from finding the other carriers more attractive? Is it just that margin story and the risk that we do see demand suffer next year? Yes. A lot of the airlines are going through pilot negotiations right now. And as I mentioned, costs are up. They forecasted

costs to be low single digits above 2019 levels, and we're up almost 20 percent. And we haven't even touched the salary equation of the cost equation yet. So we're seeing what the pilot negotiations do. And right now we're hearing it could be up 20% in terms of wages. So we're going to see what happens with that. And I think, you know, some of the things that would drive us more constructive on the other airlines is, you know, valuation. As we see, you know, valuation at 70% discounts, it looks appealing. Those are wide discounts even compared to their relative history. Airlines tend to trade at about a 50% discount to the market.

So they are already pricing these higher costs. All right, Sheila, appreciate it. Thanks for the time today. Have a good Thanksgiving. Thank you. All right, coming up, we're tracking some big stock moves in overtime. Christina Partsenevel is standing by with those. Hey, Christina.

Hi. Well, Warren Buffett is once again following through on his pledge to give away billions of dollars attached to his estate. I'll explain who are the most recent beneficiaries and news from NASA on how it plans to better track hurricanes and cyclones. Details next. We're tracking the biggest movers in the OT. Christina Partsenevelis more specifically is tracking them.

Well, Mike, it seems like I don't have your audio, but I'm going to start right away saying that NASA is on a mission to track storms, and it's enlisting the help from aerospace manufacturer Rocket Lab, sending shares soaring. Obviously the pun. Rocket Lab will help launch NASA's Tropics mission to help identify tropical cyclones, including hurricanes, and that also means their intensity, temperature, as well as humidity.

Stock was soaring, I should say. Now it's only up about 3% in OT. We're keeping an eye on shares of Coupa after a late afternoon Bloomberg report that says private equity firm Vista Equity Partners is exploring an acquisition of Coupa Software. Coupa shares jumped and closed, what, 29% higher today? But you can see they're trending a little bit lower in the OT. And lastly, we're getting Warren Buffett's latest philanthropic moves. The billionaire investor who has pledged to give away more than 99% of his wealth

has gifted 2.4 million shares of Berkshire's class B stock to four organizations, including the Susan Thompson Buffett Foundation and the Sherwood, as well as the Novo Foundations. Shares have outperformed the broader market this year, up almost six percent. Mike, back over to you. Christina, thanks so much. Thank you. Still ahead. All right. The countdown to Christmas is on, and one of the biggest shopping days of the year is just two days away. We're breaking down the key themes every investor needs to watch this Black Friday. And speaking of retail, former Walmart U.S. CEO Bill Simon joins the Fast Money team

on what to expect this holiday season. Overtime is back after this. Last call to weigh in on our Twitter question. We want to know which will be the better performer over the next year. Stocks or bonds will bring you the results next. Plus, your Black Friday look ahead. Overtime will be right back. Let's get the results of our Twitter question.

We asked which will be the better performer over the next year. And two-thirds said stocks over bonds. Sixty seven percent saying stocks. Obviously, this latest rally has brightened the mood about equities among investors. Now, it's been a tough year for retail stocks. And now we're just two days away from Black Friday, one of the busiest shopping days of the year. CNBC dot com's retail reporter Melissa Repko here with a rundown of what to watch. Hi, Melissa. Hi, Mike. The pressure is on after Macy's, Best Buy, Nordstrom and others spoke about a lull in sales in late October and early November on earnings calls. I'll be watching for three things. Just how many people will show up and will they be in stores or will they be shopping from home?

Also, how promotional will it be? Do retailers offer deep discounts or do they try to hold the line on price? And then, of course, winners and losers. Which retailers get it right and which ones miss the mark? One of the reasons for high hopes is the National Retail Federation is predicting a record number of shoppers over the weekend as people hunt for deals. But one pandemic-related tradition will continue. Walmart, Target and others will keep their stores shuttered on Thanksgiving, nudging people to shop from their couches, or, of course, they can gear up for Friday morning instead. Interesting, Melissa. I mean, and what about the previous appetite for these heavy promotions on Black Friday? Is that game still underway or not?

It's actually taken on more importance this year. Over the past two years, we've seen a lot of people shop early. They've really bought into the sales starting early. This year, we're really not hearing that dynamic. It's kind of a rotation back to the days where people were eager for the bargain. And of course, inflation's really intensified that. So people seem to be holding out for those biggest and best deals. Now, a year ago, it's kind of amazing how much things have changed. The only question seemed to be, would there be enough supply? We had the supply chain issues.

People worried about grabbing things early. Where do inventories sit right now with regard to most of these retailers? Pretty much every retailer has made significant progress in clearing through the inventory from a quarter ago. But, you know, Corey Berry, the CEO of Best Buy, talked about how even though Best Buy is one of those companies with limited inventory, it's still harder to motivate the shopper this year. She mentioned there's just not the same impetus to spend as there was a year ago because people aren't hearing constantly about sales. And instead, they're hearing, or the shortage of items, they're instead hearing about sales and an abundance of inventory. So it really changes the dynamic. Right. And of course, we did have that pull forward of a lot of goods demand,

I guess, during the pandemic. And then quickly, Cyber Monday. I don't know. People don't necessarily need to wait till Monday to do shopping online. But are there still companies that are trying to promote that for volume? Yes, definitely. There will be a lot of sales available. Cyber Monday, that still is a big deal. But I think a lot of retailers think of this time of year as really kind of Black Friday weekend. It's spilled into the earlier part of the month and it extends through Cyber Monday and beyond. All right, Melissa, we'll be watching how it plays out. I know you will, too. We'll see you probably on Friday. Thank you. All right. And as we finish up here, we had a pretty decent rally. S&P 500 up a little more than half a percent on the day. The Nasdaq was the outperformer on the day, up 1%

after we got that Fed minutes. That was reinforcing the idea that the Fed is poised to slow down a little bit on its pace of rate hikes. You did have yields lower, the 10-year going out below 3.7. The S&P is now up more than 15% since its bear market low that was set October 13th. That does it now for Overtime.