Closing Bell - Closing Bell Overtime: Game-Changing Week Ahead? 1/30/23

Episode Date: January 30, 2023

The days ahead could change the road of this market for months to come, with the Fed meeting starting tomorrow and earnings from more big tech names and the all-important jobs report on Friday. Trivariate’s Adam Parker breaks down what is at stake. Plus, the ultimate bull versus bear debate between Ed Yardeni of Yardeni Research and Eric Johnston of Cantor Fitzgerald spar over their market forecasts. And, is this year’s early rally really sustainable? Skybridge Capital’s Anthony Scaramucci explains his forecast for stocks and the Fed.

Michael, thank you very much. Welcome everybody to Overtime. I'm Scott Wapner. You just heard the bells. We are just getting started from Post 9 here at the New York Stock Exchange. In just a little bit, we're going to tee up a debate between two market watchers with completely opposite views on stocks, both of whom have stated their cases right on this show. Ed Yardeni, who says the lows are in, and canters Eric Johnston, who argues not even close. They go head to head, straight ahead. NXP earnings, they're imminent as well. Christina Parts and Nevela standing by to break in with those details and the all-important stock move. That space has gotten off to a really good start this year. We begin, though, with our talk of the tape. Four days that could change the road of this market for months. The Fed meeting starting tomorrow. Earnings from Meta, Amazon, Alphabet, and Apple. Jobs on Friday.

And all of it in focus with your money on the line. For what's really at stake, let's ask CNBC contributor Adam Parker. He is the founder and CEO of Trivariate Research with me here at Post 9. It's good to see you. Thanks for having me. It's hard to overstate what's riding on this week. How do you see it? You know, our setup for this year was maybe more of the hawkishness is behind us than in front of us.

More of the earnings revisions, negative earnings revisions, are behind us than in front of us. I still generally think that's the case. I suspect the Fed will stay relatively hawkish versus what maybe people thought a couple of weeks ago. Well, how's that going to go over then in the market, given where we've moved? Short, what matters is Fed fund futures and the perceptions about rates. If people get 100 pips more hawkish than today, the multiple comes down about one and a half turns for the market. I don't think they're going to get 100 pips more hawkish. I don't think they will. I think it'll be less than that. But the Fed's not going to, I don't believe what's in the price now, a little bit more than half the people think they caught by the end of this year. I think that's going to prove to be

too dovish what's in the price. So maybe 50 pips more than what is my base case. So there's probably a little bit of multiple contraction in the second half of the year. I mean, Jeremy Siegel is in the camp. He was with me on Friday, who says we could do 15% this year. Why? Because I believe the market. I don't believe the Fed. I believe the bond market. I don't believe the Fed.

The Fed's going to cut this year. That's what he said. You know, it's possible. Is it probable? I don't think it's probable. I don't think, you know, what's probable, if you look at what's in the prices, I think a 60% chance they do it before year end. I don't think that's likely, but, you know, they were six months late to start. What matters, though, is Fed Fund futures, the perception

about rates. The perception moved October, November of 21. They cut, you know, they lifted in March. So there'll probably be a few months lag versus what's in the price now, but I don't think that's a huge tailwind. So the reason I've been sort of optimistic on equities to start the year is revisions are mostly behind us. People got two negative, the big firms are out negative, negative, whatever, every day anchored to that thesis. Earnings are going to be below 200. That's not the case. We have an eroding and slowing backdrop, not one that's tanking. And one thing that's not really talked about enough is the public markets look cheaper than the private ones. You've seen big deal. You've seen some pick up in M&A. You're starting to hear more conversations. Microcaps are at seven times. Why would they be public? But isn't that only because the private markets operate on so much

of a lag? They react after the public markets, too. And they're great. And they're starting to see value. It started last November. You saw Emerson, $10 billion from Blackstone. You saw KKR put some stuff into some telco assets. You saw Amgen do it. You're starting to see more of that. And I think this could be a story this year where you see more deals. So I'm not wildly bullish or bearish,

but I think people got too negative and you see the power of positioning sentiment. You and I were on the air last November, the day of the CPI print. It was 30 bips less than people thought and the market went up, I don't know, 18 months of returns in five minutes. So it shows you were positioned in sentiment. So I don't want to get too negative and get locked in this bear den of like equities are terrible. I don't think that's the right position. But the flip side of that is that

you're starting to get a more positive narrative and whether that side of the argument has gotten too positive. I read you something from Marco Kalanovic, J.P. Morgan. We believe investors should fade the year-to-date rally as recession risks are merely postponed rather than diminished. Fundamental confirmation for the next leg higher might not come. And instead, markets could encounter an air pocket of weaker earnings activity and capex. But he was massively bullish in Q2 last year when the market was getting killed. I mean, like, it's hard to make a living making market calls like that. I mean, you're talking about the firm that was the most bullish during the worst quarter of the year last year.

So why am I going to be anchored to a negative comment three or four weeks into this quarter? Okay, so take the name off of it if you don't like that. But what about the thought? I'm sure he's a smart guy. This is the false hope view. This is the false hope view of the bulls. Earnings are probably going to come in around 215 to 220 this year. Okay, expectations were 252 last June.

So that's a lot that's come down. They're at 228 now. I think there'll be a little bit more negative revisions, but I don't think, you know, I think people got too negative. The way that beat the market this year, and I think there's two or three areas, there are cyclicals that are so cheap they can improve their balance sheets in this eroding backdrop. Consumer finance, metals, energy, pharma. There's things I can do well in, or I got to own gross stuff that could grow its gross profits pretty well through this eroding economy. So I feel optimistic I can find long ideas that are going to be up. And whether a bulge bracket firm is one guy's negative, one guy's positive, I don't know. I think they've proven they don't know, and you don't want to make a living making short-term calls.

What about growth, specifically the tech run that we've had to start the year? I mean, some say it's a sign of froth. That's no good. ARK is up 28% this month. When was the last time you looked at Tesla, right? It wasn't that long that we sat, Tesla was a hundred bucks. Now it's like 165. And it's not the only thing that's been running a lot. Crypto's up a lot. What is, is that? That's just a risk on factor bet. People wanted, you know, want to believe that they're going to get dovish and those things probably got oversold. But if I'm doing work, I would say, look, there's a lot of companies, some software, some healthcare that their EV to gross profit multiples got to the stratosphere. They've really cracked. And you're going to look back and they're going to have 30,

40% gross profit growth even in this eroding economy. So I think it's probably too early to make a big bet because I don't think they're going to be that dovish in the next six months. But there's a lot of software companies that are doing interesting things with the cloud. They're going to grow their gross profits. And you're going to look back and say they're reasonable. They're growing, though, at a slower pace than they were before. Sure, but the multiple's gone from 40 times EV to gross profit to 12 times. So some of that correction's in there. And you've seen Thomas Bravo and other guys start to say, hey, there's some assets at the gross profit line that look pretty good because they're going to whack all the R&D and SG&A and put it in one of the bigger companies.

So when you ask about tech, I think it's parsed into a few buckets. There's the big boys that are reporting, the FANG M types. I personally, and I keep saying, I don't think that people have really given up yet. Microsoft has 52 buys, five holds in one sell. It's not like people have thrown in the towel. You really think the analysts are going to throw in the towel on those stocks? I need them to throw in the towel. When will they? After the price is down. So I don't think you want to be big, overweight, that complex. I think they have some issues still to deal with. I think the rally is probably premature in semis and some of the risk-taking stuff. They're going to report another big round of down revisions in the first half this

year. Well, you're going to get an XPI any second now. And I'm going to say, wait, hold on a second because I got to go to that latest earnings report. So we're going to find out in a matter of moments what the latest is. But I think there's that, you know, I hate that triple-breaking thing of like, yeah, there's sentiment position, they go up, but then they're going to guide down, and then long-term you need them. So there's, semis at least have that. I'm a little bit more skeptical that Fang M is going to be like the market leader in the next up cycle.

I don't think it will be next time. All right, let's bring in CNBC contributor Bryn Talkington of Requisite Capital Management and Keith Lerner of Truist. Well, it's good to have both of you here. Bryn, you're sitting here and you were listening to our whole conversation. I think it's fair to say you've been pretty negative on the market because of what the Fed has already done. And we've yet to really feel the impact of that and what they're telling you they're

still going to do. You've been a don't fight the Fed all the way along. Absolutely. Has that changed at all? No, because the Fed still is the visible hand of the market. But what I've been really consistent about saying is that we've been invested all year, but how we've been invested. And so in 2022, if you were in staples, if you were in utilities, if you were in health care,

if you were in energy and covered calls, you did wonderfully last year. And you really protected capital. What didn't do well was high beta tech. And so if you were in high beta tech and even the large cap, that's really where in the ARK names, which, as you know, we sold towards the end of last year, that was just not the trade to be in 2022. So I think going into this week, what you want to fade and you you're seeing that, is you want to fade the high beta tech rally, because you can clearly see the most shorted names, the Coinbases, the AMCs, those are the names that are up between 20% and 40% year to date. And it's all because of what Adam said, is because people, the market, thinks they've already written the script of what J-PAL will say on Wednesday, and I think that is wrong.

I mean, you know, to your point, John Spallanzani, and thank you for sending me this, NVIDIA's down like 5% today. Some of the EV stocks that have gotten off to a really big jump this year, the Rivians, the Lucids, some of the Chinese stocks, Pinduoduo, JD, all down big to Bryn's point. Keith, what do you make of where we are and what lies ahead this week? Oh, great to be with you, Scott. Excuse me. We are somewhat cautious. I mean, earlier we came

on the program and we've been saying repeatedly as we move towards 4,100, we think the risk reward becomes less favorable. And if we look at the market today and we say, let's give the market the highest multiple that we've seen over the decade preceding the pandemic, which is 18 and a half. And let's say earnings stay where they are, the forward estimates, which we think are optimistic. The highest we get on that 18 and a half times forward earnings gets you to about 4,200. That's about 3 percent upside at this point. So we just think it's unexciting at these current levels from a broad-based market. And then also, as you look, as we just talked about some of these high beta names bouncing, we did an interesting study, Scott. We looked at the bottom 50 performers in the S&P last year,

and they're up an average of 20% this year. What's interesting, though, what's remarkable that what stood out to us is every single one of those 50 stocks are up. So what does that tell you? That's not fundamental. That's an oversold condition that's balancing with this kind of mean reversion balance we've seen in January. We don't think it's sustainable. We don't think more liquidity is coming in. So we don't think that's new leadership. And in general, we would be fading the string from a high level. But as Adam and Bryn talk, there's also opportunities below the surface. So you still have to look at that. But it's really unexciting where we are today at current levels. What happens, Adam, if Powell on Wednesday leads us to believe that they are near the end of their road trip, right?

Montserrat fest. I mean, big, big rally. Well, aren't they near the end of their road trip? But I think they're going to communicate that there's still a lot of things on the services and wages and other side that they need to crack the inflation more. I mean, I don't know, I was at some B-minus hotel in California, and it was $35 for a shrimp cocktail on room service. I mean, they still have some room to do on cracking the inflation. I think there's a ways to go.

So I think they're going to continue with the message. I agree with Bryn. They're going to stay more hawkish than people think. And I don't think that's going to be a great, very short-term view. But look, it's obvious there's been some positioning and sentiment rallying the low-quality stuff. But underneath, there's also been some stuff that's worked that I think makes sense. I mean, we upgraded at the beginning of the year consumer finance. Discover, Synchrony, Capital One, they were trading at five, six times earnings. They were embedding a huge consumer recession that

I don't think is likely. Well, I mean, you heard from Amex and Visa last week. Yeah, stocks are up a lot year to date, and I don't think it's over. They're still traded six, seven times. They've never, ever not outperformed 12, 18 months since when they've been this cheap. So then, Bryn, if the consumer, to Adam's point, at least partially hangs in there, what does that mean for the bigger picture? Well, so, I mean, that's where you get the narrative of can we have a soft landing? I think that Powell will come out. And don't forget China reopening. I think Powell will talk about China. It's the second large economy in the world and very important. That is inflationary.

And so the consumer is hung in there. And so, but I do think investors need to, as we have Apple, Amazon and Google come out earlier, later on this week, is that people do not need to anchor on these big cap cap mega cap tech names what worked the last 10 years most likely doesn't work the next 10 years and i just want to leave investors to remind them in 2000 microsoft cisco intel and qualcomm were the top four stocks in the in 2000 the s&p five years later they were six percent very rarely do these big mega cap names own other things i I agree with that. I agree it won't be the same leadership.

Keith, are you on that boat too, that the leadership of this market has just dramatically changed and that's the way it's going to be for a while? Yeah, I'm in the happy consensus, I guess. I mean, if you look back, especially these FANG names, some of these names are up 600%, 700%. There's a lot of money in there. A lot of investors are reluctant to move out of that. We see past cycles that leadership tends to shift. And then you look at the overall technology sector, it's still trading for more than a 20% premium to the overall market. That's where the pull forward demand is. So it's tough to be overly bullish on that area. I mean, obviously a lot of uncertainty going into earnings, which can go either way. But long term, we think the leadership shifts. I mean, we see better areas. I think I'm

along with Adam. We've been overweight energy for some time. That's actually a sector that's cheaper than it was last year because earnings have been strong. There's a much more focus on corporate cash flow. We still like industrials, which, you know, we think defense spending goes up quite a bit, not only in the U.S., but overseas, especially with Europe. We have a strategic battle with China still. So there's still areas there. And the same thing I've been saying for the last year is the equated S&P, the average stock in the market, looks much better to us than the market cap S&P. You're looking at thank you for that. We're looking at XP. They're obviously out. Stock looks like it's moving a little bit, a little bit lower.

They looks like they did beat on the top line. Their revenue is coming in ahead of estimates. EPS doesn't look comparable, at least to what we see right now. But again, Christina Parts and Novelist is going through that. Stock's down about 2.3%. We'll get to her in a minute. Give us the particulars there. I thought what was interesting that Keith said, he likes industrials.

You don't, right? Well, I mean, to me, I like energy and metals a lot more. And the reason is that there's no inventory burden there. The estimates are already for a big earnings decline. People expect earnings to collapse, and they're super cheap. I think what Keith's right about, I agree with, is there's certain end markets in industrials, oil and gas, air and defense, agricultural, that are good end markets. So if you could find industrials with exposures to those, that's good. But there's a lot of kind of widget ball bearing

kind of makers that are trading with 10% earnings growth expectations, high margin expectations, and high multiples. And in our work, the median industrial stock has the highest inventory to sales it's had in 20 years. So I think that's not the same cocktail as low expectations, low inventory, and cheap. Let me go to Christina Partsenevelos now, who can give us more details on this NXPI print. Christina. Yeah, part of the reason that you're seeing the stock movement right now has to do with the Q1 EPS guidance that the range is much larger than we've previously seen.

$2.82 to about $3.22 versus the estimate of $3.09. So that is lower than what the street was anticipating and a much wider range. And then you're also seeing for Q1 revenue, $2.9 billion to $3.1 billion. So that is also lower than estimates. So because of guidance, that could be part of the reason why you're seeing the stock sell off 2.5%. Just one, you saw, you mentioned revenues basically in line. We'll call it a beat at $3.31 billion. But in the report, this one quote stood out.

We have adopted a vigilant operational stance aiming to improve service to those customers who continue to experience material shortages while managing the distribution channel. So hopefully we'll get some more details on the call tomorrow morning when we hear about these operational changes. But so far, a lot of this has to do with what we're seeing with the EPS guidance and revenue guidance for Q1, which was the big concern, right? Yeah, yeah, absolutely. I appreciate that. I see a div hike as well. Oh, yes, that too. From NXP. They raised their dividend. Thank you. Come back with more as you have it. That's Christina Parsonevelos. You used to cover this space. Yeah, I think the key for these, I think the consumer electronics show in January, all the Semi's companies went.

You saw a continuation of the same trends. PC looks slow, but auto industrial looks a little bit better. So there's going to be a little bit of a different mix. I didn't hear. Well, this is more auto geared. I didn't hear what the comments were on inventory, but I think that'll be a big thing if there's stuff in the channel, if they overproduced or not. You got to kind of parse through whether people think they're finally going to be overproducing consumption or not. Because I think the industrial auto markets were a lot better because their cycles were prolonged.

But they're going to slow as these companies catch up. They say from an end market perspective, I'm quoting from their release because you're mentioning it. Our automotive business performed very well. In our consumer, IoT and mobile businesses experienced a softening demand environment. I mean, that seems consistent with what we're hearing, depending on what part of the spectrum you're on, right? The key will be, you know, what's their inventory to sales look like. When we produced our shorter or, you know, sell ideas at the beginning of the year, one of the biggest themes was, you know, year over year, big changes

in inventory to sales. There's no question that every one of these industrial semi-companies will end up over producing consumption because people couldn't get the silicon during the COVID recovery. So they went to their procurement officers and beat them up to order more and get in the queue. And eventually broad-based industrial and auto semi-companies are going to overproduce consumption. So we'll see. Brynn, last thought from you? Yeah, I think this is the semi-space is a hyper competitive space. I would look for on semi- ON semiconductors. They really focus, ON is a symbol, they really focus on that high-end auto chip, and they really don't have any other exposure to mobile or what have you. So I think comparing ON's numbers to NXPI will give you a much better idea

of what's happening in that space. Yeah, I mean, the uncertainty about the road ahead is clearly showing up in the results here. Stock down about 5 percent. Keith, thank you. Bryn, you're coming back in a bit. AP, always good to have you here as well. It's Adam Parker, Trivariate Research. We're just getting things started here in overtime. Up next, two of the most diametrically opposed market points of view you have heard on this show face off, head to head. It's one of the most important weeks of the year for stocks. On one side, Ed Yardeni. He says the lows are in.

Eric Johnston on the other says we're not even close. They square off next. We're back after this in OT. We are back in overtime. Stocks have seen their lows. That is the view from all-star market watcher Ed Yardeni, whose outlook on the market has gotten a lot brighter in recent weeks. Then there's Eric Johnston from Kenner Fitzgerald, who says stocks still have, quote, significant downside ahead.

They join me now to make their cases directly to you. Ed, you are first. So why do you think this market is correct to be rallying the way it is? I think we made a low on October 12th. I thought that back in late October. The bond market peaked on October 24th. The dollar peaked around that same time. I think we have to look beyond the United States, for starters, and see that there's more and more evidence that the global economic outlook is a lot better than people had feared last fall. Europe looks like they're not going to have a recession. China looks like it's coming out of its COVID funk, or at least there's lockdown situation. And meanwhile, when we come back to the United States, there's still a big debate about soft versus hard landing. And I think the economy is going to grow. It's going to grow

slowly, but I don't think we're going to have a recession. And I think we've already been in a recession for the past years. It's been a rolling recession hitting different industries, different sectors at different times. Eric, I mean, not an unreasonable point of view, at least on the surface. And you really haven't wavered much lately. You know that stocks are on borrowed time and it's all going to fall apart at some point. But what about Ed's argument here? Yeah, so thanks for having me. So I think the important thing is really to go to the numbers. And, you know, right now the market is trading at 18.4 times 2023 estimates. Those estimates, I think, are far too high. But if we put that aside, 18.4 times is a 50-year high,

X the two bubbles, post-COVID and the internet bubble. So you have to believe that we're going to go into a third bubble in order to get valuations such that you actually have upside for this market. Right now, the earnings yield of the S&P 500 is about 5.4%. Money market yields are 4.5%. It's about an 80 or 90-bip spread. That's the tightest spread since July of 2001, one of those bubbles that I was referring to. So the argument for a soft landing, I think, is it's possible. It's unlikely based on what the yield curves are doing, the leading economic indicators are doing, the lag to the 500 bps of Fed hikes we just had. But it's possible. But my question would be, in that soft landing scenario, what are the earnings in 2023? And what's the multiple that's going to be put on those earnings? Ed, how would you answer that?

Eric is absolutely right about 2023. I think that earnings are going to be basically up from last year, but it's very controversial. People are talking about $200 per share or less for the S&P 500. I'm at 225. The market is about 229 right now. Not the market, but the industry analysts. I think the market looks ahead, and I think it's already looking ahead into 2024. And 2024, I think, will be a good year. Nobody's really talking about it at this point, but I think it'll be a good year. And I think earnings are going to be $250 a share. Every single day of this year, as we approach the coming year, we're going to give more and more weight to 2024. And that's looking pretty good. $250 a share, I think, is a reasonable estimate for next year. And in terms of the valuation multiples, I think right now earnings have been weakening

somewhat. I think we're going to have flat earnings, not hard landing, declining earnings. And I agree. I mean, I'd be a lot happier if the multiples were 8 to 10 and we were starting there. But it is what it is. It's a soft landing. I think what the yield curve is saying is that inflation is coming down. Yield curve in the past anticipated financial crises, credit crunches, and then recessions. This time around, I don't see a credit crunch. I don't see a credit crunch causing a recession. And I think the market is basically looking at inflation continuing to come down. Eric, I mean, I've got, you know,

yes, the yield curve is inverted. We know what that traditionally means. Yes, the leading economic indicators are telling a difficult and perhaps stormy story. But on the other side of that, I do have a consumer that I'm sure has surprised you in its resiliency, at least to this point, that maybe this recession, if it even is one, doesn't look like ones of years and decades past. And that's what keeps us chugging along to the degree that Ed thinks we can. And the stock market doesn't fall apart as a result. Well, I think the recession doesn't need to be a deep recession for stocks to go down a lot. That happened, if you look at the recession back in the internet bubble of 2000 to 2003, that wasn't a deep recession, yet stocks

went down 50%. And the issue that we have right now is that because of the multiple of stocks, just to go to the average, if you go to a 15, 15 and a half multiple on the S&P, you're talking about down about 20% from here. And that's not even counting the fact that if you look at earnings estimates right now, it's not like earnings estimates are trough estimates. We are well above trend. If you draw a trend line over the last 20 years of earnings, we are well above trend, operating margins well above trend. If you draw a trend line over the last 20 years of earnings, we are well above trend, operating margins well above trend. And so those estimates have significant risk to the downside. And by the way, we've been talking about this for six or nine months. And over the last six or nine

months, they've been coming down. And we think that they have a lot more to go. And the other point I would make around the Fed is that, yes, they are almost done. But the issue is, saying they're done, if they were to raise rates tomorrow to 10%, but say we're done, well, that's not good news. And so the point is, is that, yes, they're going to be done. They're going to finish a 475, 5, 5 and a quarter. But that kind of Fed funds rate of 5% for many months and quarters to come, that's very problematic for multiples. And that's going to be a big headwind for the economy. Isn't that true, Ed, right?

That's the hire for longer argument. And that would be a problem, wouldn't it? But that almost seems a base case, though. There are a few outliers who think a rate cut is coming. But yeah, I think Eric's making a very good, solid case for a recession and a continuation of a bear market. I just don't happen to agree. I think the yield curve is inverted because bond yields have come down from four and a quarter percent to three and a half percent. And they've been amazingly stable at three and a half percent

for the past several weeks. And the two-year Treasury note is clearly signaling that the Fed is very close to the end of its tightening cycle. And they could certainly, it wouldn't be much to get it to 5.25% by May. And they could say that they want to keep it there. But that doesn't necessarily mean that's what they're going to do, especially if inflation continues to come down, and especially if we're talking about a soft landing, whereas there's some signs of weakness here and there. And there isn't much justification for keeping interest rates restrictive for as long as

they say they're going to go. But you know what? I kind of hope that we do wind up keeping interest rates around 5% of the Fed funds rate and the bond yield around 3.5%. I think it would be great not to go back to zero interest rates. I think it would be great to go back to the old normal where the economy was able to grow with interest rates at these levels without any problems whatsoever. And I think that's what we're doing. We had the new normal for all too long from 2009 to 2021, where interest rates were zero and central banks were doing

their best to get inflation up. Well, now they've gotten it up. And now they're trying to get it back down. I think the pandemic just kind of threw everything up in the air. And a lot of the confusion that's going on is still pandemic related. I think inflation is turning out to be very transitory on the good side. Services, too, by the way, if we calculated rents the right way. And so I'm an optimist on inflation. What can I tell you? All right. We'll make that the last word to be continued. Gentlemen,

thank you so much for your time. I appreciate it. Thank you, Eric and Ed. All right. We'll see you soon back here in overtime. It does bring us to today's Twitter question. We want to know who do you think has it right? Eric Johnston or Ed Yardeni? You can head to at CNBC overtime to vote. We're going to share those results a little later in the hour. It is time for a CNBC News update with Contessa Brewer. Hi, Contessa. Hey there, Scott. Nearly five and a half billion dollars in pandemic relief may have gone to small businesses that used fake or suspicious social security numbers. The Washington Post reports a top watchdog group looked at millions of applications and found more than 220,000 applicants had ineligible social security IDs. New York City prosecutors may be getting

ready to file criminal charges against former President Donald Trump. The New York Times reports a grand jury has started hearing evidence on Trump's role in hush money payments to porn star Stormy Daniels in 2016. Look, this is an about face for Manhattan D.A. Alvin Bragg, who was widely believed to have dropped efforts to charge Trump. And a lot of New Yorkers furious today after one of the city's best known landmarks, the Empire State Building, lit up in green and white to celebrate the arch-rival of the New York Giants, the Philadelphia Eagles, going to the Super Bowl, and then tweeted about it. The city's sanitation department called it traitorous

and suggested pretending the colors of the sanitation workers were really on display here. The guys who take out the trash every day, and they said next year it'll include the Eagles. I have never heard Scott more trash talking back and forth about this. And by the way, the Empire State Building said, oh, it hurt us more than you. And a couple hours later, changed it to red for the Kansas City Chiefs. But it was too late. The damage was done. Yeah. Does anybody know about Jim Cramer's whereabouts last evening when all this was going down. I'm just saying you never know. We'll see if he's on that tonight. I don't know. We'll have to talk to him about it. Contessa,

thank you. Sure. That's Contessa Brewer coming up. You're set up for the big week ahead. Sky Bridges. Anthony Scaramucci is here to talk earnings, the Fed and more. Don't go anywhere. Overtime is right back. We're back in overtime. What a week for investors, especially given this early year rally for stocks. The big question on everybody's mind is it sustainable? Let's welcome Skybridge Capital's Anthony Scaramucci. He is a CNBC contributor. Good to see you back here at Post 9. Good to be here, Scott. So what would you say the mood is from those that you're talking to in and around the hedge fund world? And, you know, you came from Davos, so you've talked to a lot of people. I would say bearish.

I would say cautious optimism now that there's been a little bit of a rally, but still bearish. And I would say since you're mentioning Davos, I think that is the big contrary indicator. In 07, we were growing to the moon. In 09, we were falling into the earth. And now I think they're decidedly bearish and positioned bearishly, which is probably why we're having this rally. So what do you make of what's at stake this week? Not only with the big earnings we have, obviously, in tech, but the Fed meeting and the jobs report. What's Powell likely to do? Well, I mean, for for 20 years since

the tips came out, we look at the tips and the break even in terms of the inflation rate. If you go on your data system and just look, it's about two point three three percent. That means that the bond market is anticipating 10 year inflation to be approximately two to two and a quarter percent. That's good news for the Fed. That gives the Fed some laxity, some room. Do they move twice, 25 and 25? That seems most likely. What they do after that, I think it's anybody's guess. I think that the weird thing about reflexivity, Scott, is the market rally is not helping the Fed. You know, if anything, if the market was weaker, it would give the Fed a little bit more license to lighten up earlier. I mean, that's the way it works. So the bond market effect,

so to speak. Sure. The bond market is obviously suggesting it doesn't think the Fed's going to get to where it's talking about going to. And some even foresee a cut coming in calendar year 2023. Well, you know, listen, I think I think the market is suggesting that, but we've had these situations before all of last year. We had the market rallying into the Fed meeting, and then he came out with a 75 basis point rate hike, and then the market traded off. So you think the market's wrong? No, I don't necessarily think the market's wrong, but I think we're in a tug of war struggle until we get more guidance from the Fed. I think the market's wrong, but I think we're in a tug of war struggle until we get more guidance from the Fed. I think ultimately Dave Tepper is probably right.

You know, the Fed is raising Fed super concern. Don't fight the Fed. But but I do think that what everybody's doing is it's sort of like a match sailing race. If I can get out there a month or two before the Fed and then the market rallies on my positions, that's good news. I think that's what's happening in January. It's been an interesting beginning of the year for some of the assets that have been rallying. Crypto included in that. And last I saw, what are we at? Twenty three thousand again. And we seem to be anchored at 16 for a while. What's that about? Is that is that believable

in your mind as bullish as you have been on that space? Look, I'm a long term bull on the space. Obviously, we had a brutal year last year. We're having a great month of January. No surprise there with Bitcoin up 35%. But, you know, listen, it's an uneven situation. We've got to step back two to three years and look at the horizon. I'm a crypto bull, Bitcoin specifically, things like Algorand, Solana, Ethereum. I think those things go higher, but we've been humbled by the markets. And so I'm not going to sit here and make price

predictions, but I do believe that the bottom is in as it relates to the cryptocurrency space. We'll have to see if I'm right. What is the current state? You referenced the rough year you had at SkyBridge. What's the current state of the firm? The last I read was a story late last week, which suggested that investors asked for 60 percent of their money back. Yeah. Well, listen, it's a tender fund. What happens is sometimes you get these wire houses. They put buys on the phone when it's going up. They put sales on the phone when it's going down. We have an outside board. We have to control the tender process because we have some privates in the fund. We have some publics. As an example, if we let everybody out at once, then the people that wanted to stay in, people that have had, you know, 20-year

investment in the fund, they'd get stuck with all the privates, Scott. So everybody knows that. It's stated up front in the prospectus. In times like this, the worst stock market since 2008, we've reined in the tender process for a little bit of a period of time. I hear you on that. That will change like everything else. But here's the thing I would say to people. Everybody's a long-term investor. They'll have short-term losses.

They've got to stay calm. I think we're going to be right. We're taking our investors into the future. Time will tell if we're right. But we're having a great month this month. 60% is a big number of people who want their money back. It was higher before. It was higher before, yeah. But that's the nature of a tender fund, Scott. You know, in 2008, I think that number got close to 80%. That was absolutely the wrong time to

leave. We had three years of historic growth thereafter. And so people that come into a fund like ours, they know they have to be patient. They know it's a long-term fund. We've been doing this now. This is my 18th year at Skybridge since we started the company. I would just recommend people be patient. I know we're a super important firm, though, because we get a story written about us every day. I mean, you would think we were running $2 trillion, Scott, instead of $2 billion. But Mazel Tov.

God bless. Publicity cuts both ways. It's a double-edged sword. But for my investors, I think the very big message is we're working super hard. We're extremely focused on the future. We have phenomenal positions. I personally added to the fund this month. I'll be adding to the fund next month.

And I think people who are patient are gonna be very well You said I believe it was the last time that you were on that you were looking into buying back the stake Yes, skybridge that you sold to FTX. Where does that stand today? So that's obviously the gating issue. There is the bankruptcy process the investment bankers working on that and the bankruptcy of stays attorneys We've had discussions with them. I think the discussions are going positively. It's anybody's guess on timing because of the nature of these things. I'd hope to get it resolved by the first half of this year. But we're the likely buyer of that. I mean, remember, we also have transfer restriction rights on that. So we'll see what happens. I'm positive that we're going to get it back, though. Just maybe that's my optimism, but it'll just take a little while. Have you spoken with Sam Bankman Freed recently? I haven't. No. The last time I spoke to Sam was on November the 8th.

So it's been a while. Yeah, he he still maintains he didn't steal any money and that customers could still get their money back. He did a sub stack I saw a couple of weeks ago in which he said. And I'm quoting here. Yeah, I didn't steal funds and I certainly didn't stash billions away. Nearly all of my assets were and still are utilizable to backdrop to backstop, excuse me, FTX customers. I mean, do you believe that statement? I don't believe this statement, but it's also like when you take a criminal law class like your first year in law school, they have this thing called pro se where, you know, criminals or alleged criminals defend themselves. And then they write nonsensical letters to the court or nonsensical sub stacks in the modern era. And so if you read through the whole thing, it really didn't make an awful lot of sense.

And I guess what I would say to people is if two or three of your closest officers that were working with you have already pled guilty, I'm surprised that his legal team isn't offering him better advice. You know, stay quiet, either get to a plea deal or do something that's better for the customers and less aggrandizing for yourself. That would be my message to Sam. Does it surprise you that he's been as public as he has? Well, it surprises me that he's not. I'm certain that he's getting advice not to be this public.

And so it's surprising me that he's not taking that advice. But I guess knowing what we know now about Sam, I guess it's not that surprising because there's a there's an element of him that wants this level of attention, notoriety, infamy or famousness either way. All right. I appreciate you being here. That's good to be here. Anthony Scaramucci from Skybridge. All things market, the latest crypto FTX and everything else. All right. Up next, the health care trade. One halftime committee member is selling out of a key pharma name. He makes the case for another. We'll debate the move in today's halftime overtime. All right. In today's halftime overtime, a drug maker debate.

SVB privates Shannon Sikosha selling out of one big pharma name. Take a listen. Sold Merck, significantly outperformed the S&P 500 last year. And this is a good company. It's good stock. But they increasingly have a large amount of revenues that are being generated from Keytruda. Unlike AbbVie, which we believe has done a great job of supplementing the pipeline behind

Humira, we don't believe that the pipeline is as strong behind Keydruda. All right, AbbVie shareholder Bryn Talkington is back with us now. It's good to have you back. I'm kind of surprised that she sold Merck, to be honest with you, in a space that was your sector pick for the year of 23, right? Yeah, absolutely. What do you make of the move? And then talk more specifically about AbbVie and the space.

So I believe we are late stage economic cycle. I think staples and utilities are expensive. Health care is the third that does best. I think that was a really good move because think about it. Valuations do matter in health care. Year to last 12 months, Mark is up 33 percent. AbbVie is up five. Year to date, though, AbbVie's up 5%. Year-to-date, though, AbbVie's down 10%. And so I think it was a really good switch being mindful of valuations and moving into a company that hasn't had the runway that Merck has already experienced from a performance perspective. And you think that healthcare itself still has enough growth? It's not as expensive as some of the other defensive natured areas? So what you want to look at, once again, you know, I don't think multiples in and of itself are a really good metric. I want to

look at free cash flow yield. Outside of energy and materials, health care is number three. And so really good high free cash flow yield. What can they do? They can do dividends, buyback, mergers and acquisitions. AbbVie's got a 4% yield, high free cash flow. And you have not only Humira, but you have, you know, they bought Allergan. And so they have all the aesthetics like Botox, et cetera, that I think are really recessionary proof. All right. Thank you. That's Bryn talking. Thanks for sticking around. All right. Coming up, we're tracking some big stock moves in overtime. Christina Partsenevelos is standing by with that. Christina.

We've got one oil jeweler that says they continue to make $30,000 a day. And another company shares earn a spin. That's the key after posting a quarterly loss. All details coming up next. All right, we're tracking the biggest movers in overtime. Christina Parts and Nevelos is back with that. Christina. Shares of Whirlpool, that was a spin pun, jumping in the OT. Well, they were jumping. They're up 4%. Now they're only up half a percent

after it posted a 15% sales decline and a $1.6 billion quarterly loss. The company, and you can see this jump right here, the company blames softer demand and a one-off on supply chain problems. The company sees an $800 million to $900 million benefit in 2023, and that's because of cost cutting and easing raw material inflation. Now, let's check out a couple of major players in insurance right now. UnitedHealth and Humana, both moving lower after federal health authorities said they are planning new standards for auditing their billings for companies that offer private Medicare plans.

One projection said the estimated recoveries for 2018 would total nearly $500 million. The insurers may challenge the new rule in court. United down 1.8 percent and Humana down over three or almost three and a half percent. Lastly, ticker HP is moving higher. The oil driller, not Hewlett Packard, Helmrich and Payne, posting an EPS and sales beat. Its CEO says the company met its goal during the quarter to achieve revenue per day in excess of $30,000. HP still plans to add 16 rigs in its North American segment where revenue came in higher than expected for the quarter. Shares are up 1.2% in the OT.

Scott. Christina, thank you. Christina Partsanova still ahead. Santoli's last word. We'll find out what he is watching as we kick off a massive week for the market. And coming up, top of the hour on Fast Money. They're live from Miami tonight.

Legendary short seller Jim Chanos joins the gang from the Sunshine State. Five o'clock Eastern time. Overtime is right back. All right. To the results of today's Twitter question, we asked who has it right on the market. Kenner's Eric Johnston, who says there's more pain to come, or Ed Yardeni, who says the lows are in. The majority of you agreeing with Eric Johnston. Well, 57 percent. All right. Ed got some votes. Santoli's next. All right.

Mike Santoli is here for his last word. I love the Twitter poll because I think it is very accurate to where we are. Skewing negative. That's right. But no longer overwhelmingly so. That's exactly right. I mean, so we haven't fully scaled the wall of worry, but people have felt a little bit of pressure, I think, to participate this month. You know, I saw some numbers out of Deutsche Bank as of Friday. They have this kind of overall measure of investor positioning, you know, hedge funds and futures traders and things like that. So it's the highest equity exposure

collectively since last April, but that's still in the bottom 25 percent of all readings since 2010. So it shows you people really were sitting it out. They felt a little pressure to get involved. And we are at one of those moments where it's, you know, is this another here we go again juncture for the market when it comes to, you know, if the Fed acknowledges that the economy might be holding up better than anticipated, that's what investors theoretically want to hear, but not because of the monetary implications.

So we're back in that zone. I really think the economy matters more than the Fed at this point, because the Fed is operating within a very narrow band in terms of where rates go and what they're likely to say. Well, the worry, though, is that the Fed's going to crush the strength that still seems to be apparent in pockets of the economy by doing too much. That's always the risk. It's always the hazard. At some point, the market's going to be right by trying to say, OK, you know, we can set that aside for now. And I really do think it's about does growth hold up? You know, you did have some some folks out there saying they're so conscious the Fed is of not doing a 1970s and not getting

too easy. That's right. They've talked about it for months. On the other hand, you know, you can't talk about long potential lags in financial conditions working on the economy and then just say, we don't have to wait. We're just going to keep powering ahead. What do you think it means that so-called froth has has rallied a lot? ARK is up 28 percent this month. Tesla from 100 to 165. Is that good or bad going into this meeting? I think it's just par for the course because I think on the real one, on the absolute rally that kicks off the next bull market, that stuff's going to be flying. And every head fake, it's also going to be flying. So I think it works against the idea that people hate the market, but it doesn't disqualify this rally in any way. All right.

It's on tomorrow. Can't wait. Mike Santoli will be back for his last word. I'll see all of you then. Fast Money in Miami is now.