Closing Bell - Closing Bell Overtime: Former World Bank CIO On Geopolitical Risks; Adobe CEO On New Generative AI Offerings 10/10/23

Episode Date: October 10, 2023

Third straight day of gains for the major averages. Janus Henderson’s Matt Person and Macquarie’s Thierry Wizman break down the market action and the fall in yields. Adobe CEO Shantanu Narayen on the company’s newest round of generative AI models and how enterprise customers are using them. RockCreek CEO and former World Bank CIO Afsaneh Beschloss on geopolitical risks to the market. Plus, Energy Fuels CEO Mark Chalmers on navigating global tensions while mining and refining rare earths and a first look at the Birkenstock IPO price with former Target Vice Chairman Gerald Storch.

Stocks extending their rally as investors shrug off geopolitical risks and yields fall, at least in part, on FedSpeak. That is the scorecard on Wall Street, but the action is just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan with John Fort, who joins today from Washington, D.C. Coming up this hour, we will talk to former World Bank chief investment officer turned investment firm founder Afsaneh Beschloss about the geopolitical risks facing investors as the crisis unfolds in the Middle East. Plus, an exclusive interview with Adobe CEO Shantanu

Narayan from Adobe's Max Conference in Los Angeles. We'll talk about how creators are using the company's brand new AI tools. And we are waiting for the other shoe to drop, literally, as Birkenstock could price its IPO at any moment. We'll keep you posted on the latest details. We begin with the market and more strength following Monday's turnaround, the bond market reopening today with a sharp move lower for Treasury yields. That's boosting equities with every sector seeing gains except energy, led by utilities, materials, consumer discretionary. CNBC Senior Markets Commentator Mike Santoli joins us now. Mike?

Yeah, John, so reversals across the board. You mentioned some of those real beaten-up groups that really took it hard when yields were on the rise. They did get the greatest upside. You also had the dollar down. You had oil down, along with yields. So all of those things that were applying all the pressure to the market for much of September into October at least alleviated for now.

So the market has built itself just a little bit of breathing room. You'd say about three, three and a half percent gain in the S&P 500 since the lows of last week, making folks feel as if, you know, we have the seasonal strong period right ahead of us, if not starting right now. And it might give some room to maneuver as we get into earnings season away from all the macro pressures of yields rising and all the rest. So I will mention that midday today had a not so great Treasury auction around 1 p.m. Eastern time. And that did sort of bring yields up off their lows and muted the rally in equities. So it does show you that we're continuing to be sensitive to those dynamics. OK. What to make, though, when you see the Russell 2000 finishing the day up 1.3%,

it's the fifth straight day of gains for the small cap. It's the longest win streak that we've seen since the middle of the summer. What does that tell us? I think it tells you, Morgan, that we're kind of rebuilding some of the hope for a soft economic landing, one that the Fed

is not going to be intent at choking off, at least based on what Fed officials are saying right now. So if you go back to last week, they had proof of economic resilience culminating in the jobs report on Friday. At the same time, the Fed is saying, look, maybe we don't have to do a lot more. That allows market-based Treasury yields to come in. And that gives a little bit of a lift to those parts of the market, small caps, you know, kind of core among them that have been kind of bearing the brunt of those fears of a of a hard economic landing. So to me, it's a lot of that. The last shall be first kind of a kind of behavior. OK, Mike, stay close. We're going to see in just a few more moments here. But first, let's talk about this market action with Matt Perrone, Janice Henderson, Director of Research and Global Head of Solutions,

and Terry Wiseman, Macquarie Group Global Interest Rates and Currencies Strategist. Good to have you both on. Terry, I'm going to start with you. The rate reprieve we've been seeing with a 10-year now at 4.649%. Does this continue from here? And what is contributing to it? Is it geopolitics and this idea of safe haven play or is it the Fed speak and all this job boning suggesting that perhaps rates don't need to go higher? Well, it's all in the above, above the above in respect of

the reasons. But let me try to address the first question first, which is, is this going to continue? I think that's highly contingent on whether we continue to see disinflation in the U.S. economy. And also, if we get to see a slowdown starting over the next few months, we do believe there will be a slowdown. We think that it will be significant, it'll be consumer-led. And if you look at the post-World War II recessions in the U.S., I believe there have been about 15 of them. There really have only been two in which 10-year bond yields did not fall from the peak to the trough. So if this is even a mild recession, the baseline view should be to expect that the 10-year yield will continue to fall. Again, all of this is a condition on whether you believe there will be a slowdown and or a recession. As far as what's causing yields to come down today, I think that has to do with the Fed and the Fed commentary

that's come out over the last few days. But if you're asking me what has triggered a more dovish tone coming out from some of the Fed speakers, I would say that the the employment report from Friday was actually very much looking like a Goldilocks employment report with the average hourly earnings posting no more than a zero point2 percent gain on the month. That was a very conducive situation, right? You saw payrolls growth be strong, but you saw wage growth be weak. That's exactly the kind of situation the market wants to see. OK, Matt, as we've seen yields fall, we've seen stocks rise. Does this rally have legs here? We've been talking about seasonality. Are we hitting that moment where the tide turns in October? Is it something else afoot? Well, I'm glad you went to Mr. Wiseman

first because the bonds are really driving the stock market. The bond market's in charge from here, no doubt. We see that most of equity returns are being driven by bond market action. So certainly if bond yields settle in here, move a little bit lower, that's going to be constructive for stocks. I think we had a relief rally last week when things like in the bond market seemed like they were getting out of control. So that set a nice constructive tone. Then we move into earnings, which look like they should be out of control. So that set a nice constructive tone. Then we move into earnings, which look like they should be okay. So near term, things okay. When you get out a little longer term, I think things get a little bit more complex. Terry, this market reminds me

in the equity side of a game of Jenga, right? You keep taking out pieces, but the market hasn't fallen over. If there is a recession, though, on the yield side, and yields do come down, as you said, that might be good for equities, unless it's a dramatic slowdown. You don't seem to necessarily have a view on how dramatic that slowdown might be? Look, my view is that if we do have a slowdown, it's going to be a consumer-led slowdown. I think the consumer right now in the U.S. is the weakest part of the economy. Certainly, it's not business investment that's being supported by policy. And I think by the time we do see the slowdown in the U.S., the rest of the world might actually be doing okay. So our

export growth might be okay in the U.S. I don't want to intone too much on the depth of the recession that we see or, for that matter, the slowdown. It doesn't have to be a recession. I think it will feel like a recession for the consumer. And I think the reason that bond yields conceivably go down in that environment, even if we don't see a recession, is because remember, if the consumer is weak, pricing power for consumer companies will be weak. Pricing power for consumer companies is weak. The things that we measure in the consumer price indexes, whether it's the CPI or the PCE deflator, will be weak as well. After all, what we're measuring there are consumer prices. So I am not just betting on a slowdown in the consumer taking bond yields lower. I also do believe that there is going to be a continuation of disinflation in the U.S. That, in fact, might be led by shelter price inflation coming down, as well as the broader complex of consumer prices.

OK, so Matt, off of what Terry was just saying, should investors prepare? Are you preparing for that relationship between bond yields and stocks to maybe take a turn. I mean, if the consumer is weakening, if bond yields actually come down, might that not be good for the stock market if people start trading on fundamentals with these companies and not so much on yields? Yeah, that's right, John. I think you hit the nail on the head. We'll be trading on fundamentals. So we're getting this relief rally that I spoke about earlier, which is like, OK, the market isn't really, the bond market isn't going to get away from us. So, you know, we can now, you know, let the multiples settle in, let equities kind of now turn to fundamentals. We do think, as I mentioned, near-term fundamentals look okay.

But after that, you know, consumer certainly is weakening. You're seeing some softness come through. We're seeing that in the real-timeening. You're seeing some softness come through. We're seeing that in the real-time data. We're seeing that when we talk to our companies, some tone of caution. So we do think the consumer, you know, which is a big part of the economy, obviously, will, you know, have some more headwinds thrown at it. We've got the impact of policy really just starting to come through, a very restrictive policy over the past couple of months and quarters come through in the next couple of quarters. So, you know, it keeps us focusing on quality and, you know, really strong companies stay a little bit defensive, keep some dry powder,

because I think there'll be a time to deploy that. Okay. Matt, thank you. Terry, thank you as well. Morgan, I don't know what you thought of that Jenga metaphor, but with these geopolitical shocks as well, yeah, it sure makes things hard to read. I liked it, too, because it's the inverse of the wall of worry, if you will. So I think that's going to be the new way we talk about this, since the other metaphor is a little worn out now. There you go. Well, as we mentioned at the top of the show, Birkenstock gearing up to price its IPO this afternoon following recent listings from Arm, Instacart, and Klaviyo. Leslie Picker joins us with the latest on what to expect. Leslie? Hey, John. Yeah, now that the markets are closed, Birkenstock and its private backers and bankers are huddling to determine the price for its IPO. At the high

end of the range it's been marketing, Birkenstock would be valued at $9.2 billion on a non-diluted basis. Birkenstock and its selling shareholder, Elkatterton, intend to raise as much as $1.6 billion, and $600 million of that is effectively claimed by three cornerstone investors. We've seen this in the recent deals that have indicated interest in purchasing at the IPO price. Now, the company traces its roots back nearly 250 years. Only two years ago, though, it was acquired by the private equity firm El Caterton and the family office of Bernard Arnault. That's the billionaire founder of the luxury conglomerate LVMH. So pretty quick turnaround for them. And we'll be closely watched by private equity and portfolio companies

as a barometer for the market's appetite for sponsor-backed deals, Morgan. Right. We know you're going to bring us those headlines, those pricing headlines whenever we get those. Leslie Picker, thank you. Let's bring back Mike Santoli with a look at two leadership groups that are seeing a rebound. Mike.

Yeah, Morgan. So some of the more beaten down groups have the most violent bounces off the lows, but semiconductors and homebuilders have been somewhat bellwethers, both of the cycle. There's some secular tailwinds that investors like about them. And then, of course, risk appetite tell. So you see they're both up on a year to date basis, 28 to 39 percent, still pretty strong. And they sort of held above those springtime levels for both groups. So, so far, so good. Still a lot of work to do to get up toward those highs. And why does that matter if it's still below those highs? Well, there's a lot

of buyers in those areas that bought near the top at higher prices. And just standard kind of Wall Street wisdom says a lot of folks would maybe be willing to kind of break even by selling in there. So we'll see how they perform from here. Of course, rates a big factor in the homebuilders move in particular. Now, the volatility index I mentioned back in September as we were tracking this pullback in the markets and what it might take to have a recipe for some relief at a potential bottom. Well, people said, well, the VIX has to get at least over 20. We barely touched 20. But what's been interesting is it's about the third time in a row that all the VIX did was effectively touch 20 in the last five

months. Starting in May, that was after we had this big shock after the SVB meltdown. You've basically gotten to 20 and that's marked the end, at least in the short term, for recent sell-offs. And what was going on last year? 20 was the floor. A lot of definitions of what a bear and a bull market is. One of them is, you know, when you have a very high volatility regime, and then 20 ends up being a time to get defensive. And here you have more of an uptrend.

VIX getting to 20, which means there's a lot more hedging than when there was, you know, down around 12. What it tells you is maybe it's time to start adding back some risk or shorting less. We'll see if that continues. There's no hard and fast rules about these things, but certainly a changed character of the volatility market. When you think about all the things that are going on in the world right now and you look at that VIX chart, I mean, it's kind of stunning and it raises the question, what actually moves the VIX? What matters to the market when we're talking about volatility specifically? I mean, if a war in Israel isn't doing it, what does? Well, here's exactly the point I would love to bring up on that score,

which is the only thing the VIX is meant to project is the expected 30 day daily volatility in the S&P 500. It's not supposed to essentially, you know, gyrate along with the societal mood or geopolitical risk or anything else. If it doesn't translate into is the stock market going to be more or less jumpy over the next 30 days? Also, just for benchmarking purposes, a 17 VIX basically implies a 1 percent potential daily move in the S&P. It's not saying things are fine and calm and not moving at all. It just means that they're not bracing for something worse. All right. Great reminder of Mike Santoli at the New York Stock Exchange. Now, Adobe getting a lift today with the rest of tech and the $240 billion market cap software giant up nearly 60%

for the year. Up next, the CEO, Shantanu Narayan on the latest AI features the company is showcasing today at its Max conference and how they're going to affect margins and revenue. Overtime's back in two. Welcome back to Overtime. Adobe shares closing higher today by a little short of a percent. The company announcing new versions of its generative AI model Firefly and aims to produce higher quality images, new types of media. This new addition was trained on about 70% more images

and includes new ways to control and prompt creation. Joining us now is Adobe CEO, Shantanu Narayan. Shantanu, thanks for joining us. From Max, I know you got an investor presentation today too, but I want to start with the news. So AI that renders humans more accurately, AI for vector art, which I find particularly interesting, making logos, things like that.

And now for layouts too. How's this going to expand the market for you? Well, John, we do miss you here at Max, but it was perhaps the most aggressive set of product announcements that Adobe has made in the 25 years that I've been here. And we've always been of the belief that AI is only going to enhance creativity. To your point, we announced significant new innovation, whether it's in imaging, allowing a new image model too. We announced Firefly as it relates to design so that you can actually create a complete template from scratch. And Vector for illustrators, the ability to actually, again, use Firefly to get an on-ramp to their products.

I think all these announcements fundamentally enable people who have a creative idea to tell their story faster. And so I think it brings tremendous new growth into the fold. We expect to see hundreds of millions of new users now use this technology in order to be able to create. And the last thing I'll say is that we also had some very significant announcements for enterprises. So how enterprises can look at all of the content that they're creating, how they can personalize it with a product called Gen Studio, which brings together all of our products. So

really exciting day here at Max and the audience reception to this has been absolutely fabulous. Now, I know you're planning to hold back some of the financial details for Summit in March, but give us a tease here, particularly when it comes to enterprise. You've made a number of AI announcements that have to do with enterprise, Firefly, now this. What's the uptake like from enterprises in these early days? Are they actually creating and training these models with their own data? And what's the margin profile of the enterprise customer going to be compared to the bulk of Creative Cloud? I think, John, when we first announced what we could do with the Firefly models, the excitement around the enterprise was significant because all of them were very concerned about all of the content that they have. And would the companies step up to being able to indemnify them and ensure that the content was trained properly?

So, you know, whether you're a Nike, whether you're a Coke, whether you're a Disney, whether you're NBC, we certainly have the ability right now to say you can customize your model. So we announced the availability today. So it's early in the development of that process, but it's extremely exciting. Where we've seen more uptake already is with the big agencies.

So whether it's Havas, WPP, Publicis, they've all already implemented our entire content generation studio, which allows them to say everything from the campaign brief at the beginning of a creative process to every piece of content that's created and then translated into 40 languages, how we can help them with the automation of that process. That's where there's really been tremendous excitement. Shantanu, what about the marketing side? We're getting ready to get the

first batch of numbers-based predictions on the holiday season, which is so important to the economy overall. Are you seeing AI applied there by customers as well? And do you have any sense that you can give us, early sense that you can give us on the economy state as we head further into Q4? I think every single company in the marketing department, John, is already, what I would say, dabbling with this technology. Until they understand the rights, until they understand the indemnification, I would say they're using it more in prototyping rather than in the actual production of content. I think today we changed that with our announcement of Gen Studio.

And so I think it's all ahead of us in terms of how they reduce their costs for marketing. As it relates to Adobe's own numbers, we're actually not doing intra-quarter update like we've normally done. But you know, the business continues to be strong. And based on our targets that we issued, we expect to have a really strong

end to our fiscal year. All right. Based on the numbers that you issued, indeed, Shantanu, thank you. Thanks for joining us on Overtime. Thanks for having me, John. All right. Great stuff. When we come back, former World Bank CIO Afsaneh Beshlos, who now runs $16 billion investment manager Rock Creek, joins us to break down the geopolitical risks in the market and where she's looking for opportunities right now. Stay with us. Welcome back to Overtime. Time for a CNBC News update with Bertha Coombs. Bertha? Hey, John. President Joe Biden called the Hamas attack on Israel sheer evil.

Addressing the nation this afternoon about the Israel-Hamas war, the president said that at least 14 Americans were killed in the attack and acknowledged for the first time that there are Americans being held hostage. Because as president, I have no higher priority than the safety of Americans being held hostage around the world. President Biden also confirmed the movement of more U.S. forces into the region. The forward carrier strike group now said to be in range to provide air support or long-range strike options for Israel if necessary. The president says the U.S. stands ready to deploy more assets if needed. Secretary Antony Blinken says he will travel to Israel tomorrow.

And as the death toll in Israel surpasses 1,000 people from the Hamas attacks, new footage shows the carnage left behind at a music festival in the Israeli desert. An estimated 260 people at the event were killed and an undetermined number taken hostage. Morgan. Bertha Coombs, thank you. Tudor investment founder Paul Tudor Jones telling CNBC this morning about the tough environment facing equity investors right now. Have a listen. It's a really challenging time to want to be an equity investor in U.S. stocks right now. It's really hard because, again, you've got

the geopolitical uncertainty, which we, I think, come to live with to a certain extent. But again, all those have the ability to have a nonlinear outcome. So something not just business as usual. But I think it's, I think equally as much of a problem is the fiscal situation that we're facing in the United States. Well, joining us now, Afsaneh Beshlas, CEO of investment management firm Rock Creek and former World Bank CIO. Here on set, it's great to have you. Great to be here. Thank you, Morgan. I do want to start with your reaction to what Tudor Jones just said there, this idea of nonlinear outcome.

I mean, geopolitical risks, we've seen the market at least today sort of shrug that off, but it's just the latest in a line of big uncertainties for the market here. How do you game it out? I think he's absolutely right, and I think he started his trading experience, if anything, when macro was sort of a thing and geopolitical risks were high. I think in the last few years we haven't seen anything like this, and I think it is very correct to call it nonlinear, because if you look just in the last week, so many unexpected things ending with this terrible invasion of Israel by Hamas.

And then before that, we've had a lot of uncertainty about the Fed. Before that, we had the ouster of Speaker McCarthy. So a lot is going on, which is unexpected, necessarily. But when you add it up, it creates that increased uncertainty in the markets, which is impacting the markets, as we saw today. I mean, I feel like geopolitics is like supply chain. Investors, markets, they discount it, they shrug it off, they don't pay attention to it until they have to. So in terms of what we're seeing in the Middle East right now,

when does it go from discount to this is going to be everybody's focus? What is interesting is the terrible events in Israel happened only four days ago. But it almost seemed like the markets today were not as concerned maybe as, you know, we saw markets react yesterday morning. Bond markets were closed, but in terms of equity markets. But today I think what the markets are seeing is what is going to be the scale of Israel's reaction? What is going to be the shadow war, if any? Will the Russians be involved in this in terms of sort of prodding other countries into more trouble, as it were?

And how will that impact the passage of oil through the Strait of Hormuz? So far, because those things have not happened, oil prices, in fact, were not up particularly. You know, they were, in fact, got weaker today after a little spike yesterday. So people are watching what is going to be happening, I think, in Israel very, very closely and what will be the impact in the rest of the Middle East world. Avsana, it's good to see you. We switched places. You're sitting there in Inglewood Cliffs and I'm here in D.C. I'm wondering what, if any, are the canaries in

the coal mine that you're watching in this geopolitical situation to see if things are turning? Particular commodities, you mentioned the energy market. Are there any particular equity sectors that you have your eye on? So I think we can talk about equity sectors, but first, in terms of commodities, anything that gets affected, as Morgan said, in terms of supply chain, right? So for example, 3 percent of potash goes through Israel ports, you know, short-term impact on those kinds of things. Anything in the rest of the Middle East, I think that is particularly, obviously, oil is the biggest commodity, or oil products that are going through the straits, I think, could get affected.

But more importantly, with equities, the interesting fact today, John, was that equities were up slightly. I think where we're going to have positive news is on the green economy because we saw the EV markets being up today. And I think as this kind of conflict goes on for longer and uncertainty about traditional oil and gas goes up, that is a boon for the green economy, if you want to call it that, or the energy transition-related stocks. And then on emerging markets, the equity markets might be shrugging the situation off for now, but are there particular areas where this kind of geopolitical shock, this tragedy puts particular pressure? For one thing, the countries that are

oil importers obviously have to watch what they have to pay for oil prices. So they're watching that very closely, but have not really been affected. As it happens, John, right now we're going through the World Bank IMF meetings in Marrakesh. So a lot is going on in emerging markets. I think their biggest concern as we speak is interest rates, U.S. interest rates being higher, and that impacts their being able to pay back on their dollar loans. So I think that is a very big issue. Plus, again, how climate change has affected a lot of emerging markets and what kind of resources they will have to rebuild their economies and their energy sectors and infrastructure. And that's actually where I was going to go with you with my last question here, and that is, how does the Fed and other central banks factor all of this into their economic modeling

right now? because we know conflict by its very nature tends to be inflationary on the one hand. On the other, a lot of uncertainty in an already uncertain time. And we've even seen it, arguably, with Fed officials coming out and being perhaps a little more, I'll say a little less hawkish in recent days, which has pushed yields lower. I agree with you. I much prefer the less hawkish than what some people were saying dovish today. I think they're just saying they're going to look at the whole framework. They're not just going to look at our own interest rates in terms of employment and inflation. They will look at the wider forces going on in the globe and the

geopolitical risk. And I think that is what has been impacting the markets as we speak. Afsaneh Beshlas, so great to have you here. Thank you. Great to be with you. Thank you. After the break, time for a little pep talk. PepsiCo saying it's not seeing an impact on sales from weight loss drugs, countering comments from Walmart that spooked investors. We will look at the long-term chart of Pepsi and another bellwether staple when Overtime comes right back. Shares of Pepsi getting a pop today after beating earnings estimates and raising the full-year outlook, and the company's CFO noting in the earnings call they are not currently seeing any impact from weight loss drugs. Michael Santoli is back with his take. Mike? Yeah, John, that pop comes after a pretty rough slide for PepsiCo shares as well as its valuation. Take a look here. This is a 20-year chart of Pepsi's forward price earnings ratio against Procter & Gamble's.

You can see the market treats these as very similar businesses. Owners of very premium brands, kind of best-in-class operators, get earnings growth even in poor economic times. But you see this slide from about 26 times to 21 times earnings, an unusual level of discount to what Procter & Gamble is. It considers the food segments of consumer staples, the market does right now, to be a little more vulnerable to volume concerns, maybe because of those weight loss drugs or because they push pricing too far. Take a look at the dividend yield for both stocks. Tells the same story. You actually have PepsiCo's dividend yield going higher because the shares have been down so much relative to Procter & Gamble. They've diverged at times in the past. But it does suggest that the market is kind of in wait and see mode about whether, in fact, we can believe that they're not going to have a long term muting of their demand because of less consumption with these appetite

suppressant drugs out there. My take is you only pay 26 times earnings for PepsiCo if you never even have to ask a question like that about long-term demand, John. Mike, I hope this isn't too unfair a question, but we go back to that first chart you showed. It seemed like there weren't too many times when that blue line for Pepsi took a precipitous dive below the orange line. Was there anything that you happened to notice that those moments have in common? There seem to be a couple between right now and 2018. So here's what I would say. This right here is was the pandemic when what we worried about in the pandemic is having enough toilet paper, having enough actual personal products, not going out and having a huge Pepsi at the movie theater.

So I think there was a bit of a divergence during that period in particular where Procter & Gamble was considered a beneficiary of hoarding, whereas PepsiCo was not. Interesting. Mike Santoli, thank you. Sorry, John, didn't mean to jump on you there. Up next, the CEO of uranium producer Energy Fuels on how his company is helping to ramp up mining of rare earth metals in the U.S. Stay with us.

Welcome back to Overtime. Shares of Energy Fuels, the leading producer of uranium in the U.S., is in the green today. Roth upping its price target to $9.50 a share to reflect a higher uranium price forecast. But Energy Fuels is pivoting to produce rare earth minerals as well, helping to build a fully integrated U.S. supply chain. Now, currently, China dominates the rare earth market, particularly when it comes to processing. But joining us now is Mark Chalmers, Energy Fuels president and CEO. Mark, it's great to have you on. I do want to get your take on uranium. But first, we need to start with this expansion into rare earth production. You're joining me from southeast Utah, where you had an open house of sorts to unveil this game plan. Walk me through it.

Yeah, it's my pleasure, Morgan. Yeah, we had a open house today and we have another one tomorrow. And we're showcasing what our company is doing, both in the rare earths and uranium. More recently, we entered into the rare earth business where we're processing monazite. And it's a really exciting time to be processing rare earths. And it's also equally as exciting to be in the uranium space. Yeah. And of course, monazite, there's different types of rare earths and rare earths processing that happens. Monazite is something that you're focusing on in part because of the existing uranium business and infrastructure, because

there is radioactivity involved in this mineral and processing it. So what are the use cases? And what does this mean in terms of the demand that's out there as we do talk about things like the energy transition? Well, the best sources of rare earth feed are monazite. And monazite, as you said, is mildly radioactive. It contains uranium, so we can recover the uranium and deal with the other radionuclides. So we're in a very unique space because we have the permits and we have the infrastructure and the know-how to do that. When you look to the future with all the car manufacturers amping up their rare earth or their electric vehicle production, we're going to need a lot of rare earths globally.

Are you working with or going to be working with the government on standing up the supply chain? I ask because I've had so many conversations with commerce and defense department officials about how crucial this is to national security and the broader U.S. industrial policy. Well, we we've always worked with the government, but right now we're pretty much building our plan out on our own devices, our own balance sheet. Now, if the U.S. government decides they want to help fund some of our expansion activities, we'll certainly consider it. So right now we're building our story. We're putting the pieces in the puzzle together. And we'll see where that all goes over time. You look at a stock chart of energy fuels for the year, it's green by pretty much any metric.

And part of the reason is because we have seen uranium prices shoot higher, your outlook. And as we do see increased discussion and perhaps even, I'd say, a shift in connotation around nuclear energy, given the geopolitical backdrop, how does that continue to grow? Well, I think the realization, if you want to decarbonize, you need nuclear power in the mix. So, you know, the future looks very bright for nuclear. And Morgan, our company is different because we basically straddle the rare earths and the uranium. And typically you'd invest in one or the other, but you get a hybrid with us. So, I mean, right now people want to decarbonize, they want improvements in electrification, and you have to have nuclear and you have to have the rare earths to get there.

OK, one final question for you here on this, and that is so much of the world's uranium comes from Russia. We know there is a war afoot in that region of the world right now. So much of the rare earths mining and processing, I guess processing specifically, happens in China. We know there are tensions with the U.S. and that country right now. How do you navigate all of this and how large, I guess, is the demand, whether it's on the rare earth side or the uranium side, to have an American producer such as yourself? Well, that's that's our business strategy to reshore this. And we've got significant production capability of both uranium and the rare earths. We're going to build out a rare earth program in phase steps. But we can be world material for,

as a rare earth producer in due course. And we plan to be over the next four or five years, three, four or five years. On the uranium front, we're well established as uranium producer in the United States. So the demand for rare earths is probably increasing greater than the demand for uranium, but both are going up. So Morgan is a really great place to be, and it's a great place to be able to straddle between these various elements required for the energy transition. Mark Chalmers, thanks for joining us, CEO of Energy Fuels. Thank you very much. The government's star witness in the fraud case against FTX founder Sam Bankman-Fried also happens to be his ex-girlfriend. She's testifying that Bankman-Fried directed her to commit crimes. We've got the headlines and the highlights when Overtime returns.

Sam Bankman-Fried's ex-girlfriend taking the stand in his fraud trial, delivering dramatic testimony against the FTX founder. Kate Rooney is outside the courthouse in New York with the highlights. Kate. Hey, John. So Caroline Ellison just wrapping up her first day of testimony. Got a few headlines here. First, Sam Bankman-Fried, if you remember, had acquired a 7% stake in another company, Robinhood, last year. Caroline Ellison on the stand saying just now that those shares were initially paid for by his hedge fund, Alameda. And then when the stake was big enough that they had to disclose it to the SEC, they actually transferred those shares to a separate entity. Ellison saying on the stand that was because Sam Bankman-Fried wanted to be able to talk about that Robinhood investment, but not have his name associated with Alameda, the hedge fund.

She also said that FTX Ventures, that was a $2 billion venture arm of FTX, was actually Alameda all along. They were paying for those venture investments with loans. But again, he did not want Alameda's name involved. So they called it FTX Ventures instead. And then finally, some of the financial calculations, guys. You might be familiar with something called NAV, NAV, also net asset value. They had something internally called NAV minus SAM coins. Those were certain cryptocurrencies. That's the way they valued the hedge fund. Without all of those cryptocurrencies that Sam Bankman-Fried either invented or invested in.

By that calculation, guys, the value of Alameda, that hedge fund, was negative $2.7 billion, according to Ellison. She also said that in order to buy back a stake that FTX, that Binance rather, a competitor-owned executives, actually used a billion dollars worth of customer funds. They say this was to buy out Binance's CEO, Chang Peng Zhao, a big competitor. The prosecution today, guys, coming out swinging, asking in the first 10 minutes, did you commit financial crimes when you were running Sam Beckman Freed's hedge fund, Alameda Research? Allison, rather, saying without any hesitation, yes. And she said, quote, Sam directed me to commit these crimes. We do expect her to continue that testimony tomorrow.

We'll get some cross-examination as well from the defense. Back to you. Well, that is pretty clear testimony. A lot to unpack there. Kate Rooney, thank you. We've got breaking news on Birkenstock. Leslie Picker has the details. Hi, Leslie.

Hey, Morgan. Yeah, Birkenstock is expected to price its IPO actually toward the middle of the range at about $46 per share. That is according to a person familiar with the matter. I am not aware at this time of the number of shares the company and its selling shareholder plan to offer, although in the prospectus it said it was about $32.3 million. but we should get updates on those figures within the next 15 minutes or so. At that $46 price point, Birkenstock would be valued at $8.6 billion. So noteworthy, just given the overall IPO climate and how recent IPOs have traded, in addition to some of the headwinds that they faced while they've launched the roadshow,

while they've been on the road, just on a macro front. So according to one person familiar with the matter, $46 per share is the price for this IPO. The Wall Street Journal had earlier reported that $46 would be the price here. Guys. All right. Looks like the middle of the range. Leslie, thank you. And up next, former Target vice chair Jerry Storch weighs in on that IPO from Birkenstock. And if it's a good time to go public as cracks emerge around the consumer, we'll be right back.

Welcome back. Our Leslie Picker reporting moments ago that Birkenstock plans to price its IPO around the middle of its expected range, $46 per share. Joining us now with his take is Storch Advisor, CEO, and former Target Vice Chairman, Gerald Storch. Jerry, is this the time to buy $100 sandals and or the IPO of a company that makes them? I wish you'd get them for $100. They're more like $150 to $200 now. Management's done a brilliant job, really.

Really amazing over the last decade. They have taken this brand, moved it upscale. You know, they thumbed their nose at Amazon. They cleaned up distribution. They said five years ago, we're not selling Amazon anymore. In fact, they dropped a lot of shoe stores that didn't display their product properly. They made it cool, something that no one thought could ever be cool. So great job. The real question is one evaluation here. I don't know. This price is about six times sales. Nike's like it three times sales.

So is that evaluation that you can justify going forward, particularly as we enter a more troubling time for the consumer? And, you know, the question comes down to is this a cheap luxury, sandals at $150, $ bucks, or is it an overpriced indulgence to pay that much for sandals? Time will tell. So along those lines, this has been an economy where the consumer has been spending more on experiences on services versus product. Does that how does that affect investors now? Should investors think about those product-type companies because maybe they've been underloved? Or has the inventory situation, the demand situation shaped up to this point to where it's still worth worrying about product companies? Look, generally speaking, in this time, you're correct. People are not buying discretionary products.

So apparel and footwear have done fairly poorly. As you know, Nike shares have not done well. But this is a differentiated offer. It's something very, very unique. And a company like Lululemon continues to do well, even in this economy. So it's up against a lot of headwinds. You know, it's not a time, if you didn't know what company we're talking about or how were they done or how well managed they are, it's not a time you say, want to buy a shoe company, you know, for six times sales. I don't think most people would go for that, but they've done a great job. So again, we'll have to wait and see. I don't think Bernard Arnault is a fool, you know, and he's backed this thing. And it's clear the objective is to keep

expanding it, moving it a little more, a little more upscale, you know, into adjacent categories. They've got a lot more growth ahead of them because they're smaller than a company like a Nike. So maybe it could justify it. Yeah. Jerry, I am curious, though, if we expand this out, your take on consumers right now, at least here in the U.S., continue to be resilient this year. But now we've got student loan repayments. We've got higher rates. We've got dysfunction in D.C. We've got geopolitical risk. Energy prices are coming off a little bit, still elevated. Energy prices are coming off a little bit, still elevated.

Inflation coming off a little bit, still elevated. Are you seeing signs that the consumer is cracking here or no? Absolutely. Again, my outlook for the holidays is very sobering. I think this is going to be the toughest Christmas in a long time. I've been saying that for a long time. If you look at sales of things, you know, physical products and adjust those sales for inflation, the number of units sold has been negative and declining for almost a year now. So one thing customers aren't buying is things, particularly

discretionary products. They're buying necessities. Look, we heard from PepsiCo today, even food. While their sales were up, it was more than 100% a pricing action on their part. So consumers are buying less things. What they are buying of things are necessities, you know, food, gasoline, whatever they have to buy. They are still spending more on airfare, on vacations, those kinds of services. But the rate of growth there is slowing down. And a lot of the so-called services growth that we hear about is higher rent prices and higher medical prices. So the consumer is stressed.

Okay. Jerry Storch, thanks for joining us. John, strength in Treasuries today, stability in oil, strong market breadth, helping stocks. The key question now is what we get tomorrow with PPI and Fed Minutes. Indeed, risk was on for sure if you look at the stocks that rose. That's right. Well, that's going to do it for us here at Overtime.