Closing Bell - Closing Bell Overtime: Gold Near All Time Highs, Reddit Shares Rise & China Cracks Down on U.S. Chips 3/25/24

Episode Date: March 25, 2024

From the open to the close, “Closing Bell” and “Closing Bell: Overtime” have you covered. From what’s driving market moves to how investors are reacting, Scott Wapner, Jon Fortt, Morgan Brennan and Michael Santoli guide listeners through each trading session and bring to you some of the biggest names in business.

Well, the record market rally taking a breather as we kick off the last week of the first quarter. That is the scorecard on Wall Street, but winners stay late. Welcome to Closing Bell Overtime. I'm John Fort. Morgan Brennan is off today. Industrials, which have been a big driver of the rally lately, are the biggest drag on the market. While energy is the best performer, Boeing, one of the bright spots in the Dow, after CEO Dave Calhoun announced he's going to step down at the end of the year as the company deals with the 737 max crisis. Coming up, a top analyst on how that shakeup could impact the stock. Plus, we're going to speak exclusively with the CEO of Massimo on

his plans to spin off the company's consumer products business. But first, let's get more on this pullback. Mike Santoli joins us now from the New York Stock Exchange. Mike, just like the market, you got to take a breather, I guess, for the New York Stock Exchange. Mike, just like the market, you got to take a breather, I guess, for the past couple of minutes. But it seemed like a status quo day for the major averages, lower but not that much lower. The Russell actually did the best in the green. I struggle to find a narrative. Is this one of those pauses that refreshes? It's not too clear exactly if there was a main driver. And that's why the market, in this sort of self-satisfied way, says we'll probably just kind of churn around and tread water right near the highs and really no harm done along the way.

Even the Russell 2000, it's tough to tell a story about that because SMCI remains the largest stock in that index and was up huge. So it wasn't even really about, you know, the little companies that could. So I do think that you're in a moment right now where we're sitting on a lot of house money. The market has outperformed most expectations. You have strategists increasingly trying to scramble to raise their year end price targets. But even with doing that, the average or aggregate projection is not for a tremendous amount of upside. So it's still this sense out there that the market kind of has pulled a little bit ahead of itself. But that's the way bull markets often feel. Honestly, they kind of lunge ahead and then we find the reasons why they got there. Bomb markets calm, not giving

the stock market a whole lot to react to just yet either. What, if anything, do you read into? you mentioned Supermicro up 7 percent today and Bitcoin also reclaiming 70K? I mean, that doesn't sound like an overall market that's asleep, especially not on the risk side. No, you're right. I mean, there's parts of the market that continue to, you know, get a little bit overexcited in the short term and especially on a day when it's not as if there's going to be some macroeconomic reason to move. We're out of earnings season. And so it's about the intraday, you know, playing, you know, for another extension of a very strong trend, things like that. So, again, I don't want to overstate what the sentiment implications of that are, because a lot of that is just a bull market acting like a bull market, which is people get captivated by bright, shiny things. All right, Mike, we'll let you take another break. Another breath. See you again in just a couple of minutes and continue the conversation with 314 Research co-founder Warren Pies. Warren, you say in this environment,

despite the rally, you can't be underweight equities. Why? Yeah, thanks for having me, John. We've been saying that since Q4 of last year. You just can't be underweight equities. Our base case is for a soft landing. Soft landing ingredients in our world has always meant a resilient economy, rapid disinflation, and more than anything, a Fed that really wants to go for a soft landing. Our calculation was that this is a political, an election year, so politics is kind of important, and the Fed was going to go for a soft landing. Our calculation was that this is a political, an election year, so politics is kind of important. And the Fed was going to go for a soft landing. I think that was the message of last week's big Fed meeting. I still think, just like Mike alluded to, there are a lot of people who are underweight or are underexposed to this market, and they're

going to scramble to get exposed. So I think the combination of a soft landing, a Fed that has your back and underinvested strategists and just institutions in general means that this rally can keep going. A few months ago, you had a bold call that energy was going to rally, that oil was going to rally. I should be more specific. And it did get to 90-ish, up toward 100. Then you're like, OK, got about as far as it can get in the near term. Any more bold calls? Yeah, I'd say the bold call for me, we came into the year, we've traded oil pretty well. It's really our model, which our model has been great over the last few years. And it's been really locked in on the sentiment component of oil.

And so we came into the year, and there was a lot of pessimism, a lot of short positions from the hedge fund class. And so our model wanted to take the other side of that and go long. And we predicted that Brent crude oil would be in the upper 80s to call it 90 by the end of Q1. But my call now is that we're in the, say, eighth inning of this rally. So I think it's about as far as we're going to go. I've been saying 90 is a soft ceiling for oil on Brent. So we're not that much more distance here. There's a lot of spare capacity from Saudi Arabia and from OPEC in general.

So I think that sits on top of oil here. So my bold call from here is just, you know, I would take profits if you were playing the oil beta in your portfolio. OK, not sure that's what I meant. The bold call being no more bold calls, perhaps, at least on that one. But housing is important to you. So what's what's your conviction about what's maybe going to do continue to do well, particularly well in this environment or something that's going to do even really badly? Large home builders have been an area that we like and we continue to like. I think this is a market that's tailor-made for national home builders. So you have the existing home market,

which is locked up. Everybody who has their 3% mortgages really can't move. So existing homes are frozen. We have rates which are high. And I think that in this soft landing environment, you don't see a bunch of downside for mortgage rates. So you have this kind of 7-ish percent mortgage environment. And the large homebuilders can offer the incentives and buy downs to capture share. So we have a system, full cycle trend. This is a monthly stock selection system. We grab 20 stocks out of the S&P 500 every month. Since 2022, there's always been exposure to these national homebuilders, and we continue to have that exposure. I think everybody just says high rates are bad for builders, bad for homebuilders, and it's just

a very shallow analysis for this cycle. So I still like, and we still like, our system still like homebuilders. All right. Despite the rates not coming down, Warren Pies, thank you. Thanks for having me. Meanwhile, Boeing shares closing higher today after news of a major leadership shakeup. CEO Dave Calhoun is going to be stepping down at the end of the year. The company's chairman won't stand for reelection and the head of its commercial aircraft business will be replaced by chief operating Officer Stephanie Pope. That's a move our own Phil LeBeau asked outgoing CEO Calhoun about earlier today. Stephanie's track record speaks for itself. She has been a leader in every position she's had. She has seen every part of the company. She has most recently led our global services business.

It services both our military customers and our commercial customers every day, all day, taking calls, responding, doing the work. She has really differentiated herself. Joining us now, Boeing analyst Douglas Harned from Bernstein. That's a pretty glowing recommendation, but is Stephanie Pope safe hands or perhaps the next CEO? Look, Stephanie has done a great job, I think, at Boeing Global Services. I mean, margins have been great. The performance has been excellent. Moving into this role of running Boeing commercial airplanes, though, is a much more challenging job. So we'll see.

There's going to be a lot of learning there. It's manufacturing, design, a lot of operational complexity. So Stephanie's done a great job, I think, at BGS. And we'll see how this all plays out in PCA. Okay. What about Malenkov, the former Qualcomm CEO? You know, I don't know him, so I don't have a strong opinion one way or another. But I think the changes here overall, first of all, Dave Calhoun stepping in at the end of the year. For us, this was not a big surprise.

I think it would have been unlikely for him to stay, say, two years. Originally, he planned to be in the job for about five, for five years, which is the end of this year. So I think we're making a somewhat orderly transition. But for us, there are two big questions out there for the stock. One is, who is the next CEO? And we are not going to know that probably for a little while. And then second, can Boeing work through the quality issues on the MAX? And this is all going to take place.

They have to have a plan delivered to the FAA in about 60 days. The FAA is monitoring them closely. So we also want to see that rate starts to step up, which would be an indicator that they actually are making real progress on the quality side. Now, can you answer that second question of whether Boeing can work through the quality issues on the MAX without answering the first question, who the next CEO is going to be? Because it doesn't seem like these quality issues are going to get solved very quickly. I think they can be addressed even without the answer to the first question. Obviously, that's an important one. But one of the challenges in Boeing, and I think any CEO, particularly coming from the outside, will have, is that it's a difficult

company to penetrate. So if you look historically, most of the senior executives have been in Boeing for 20 to 30 years. And so the ability to go from the CEO level at corporate all the way down three levels or so to the line in Renton, working through the challenges that are real between quality assurance people, mechanics on the line, that's something that has to happen down in the trenches. CEO will be important for that, but they've got to be able to make that happen as well. Yeah, reminds me of Intel with its operational issues, where for a new CEO, they went to someone who had previously been at Intel already, Douglas Harnett, thank you.

Thank you. Well, the S&P 500 has delivered nearly historically strong returns since the financial crisis low 15 years ago. And up next, Mike Santoli is going to look at what that could mean for future returns. And Massimo delivering strong returns for investors today after announcing it's going to spin off its consumer products business while it's under activist pressure. Up next, the company's CEO is going to discuss that decision in an exclusive interview. Overtime is back in two. Welcome back to Overtime.

Mike Santoli's back with a look at S&P 500 returns. Mike? Yeah, John. Over the somewhat longer term, as a matter of fact, this chart shows the trailing 15-year return, price return of the S&P 500. You see it shot up into rare territory here, about 550 or 600 percent. Now, 15 years ago, the start point was the bottom of the bear market and the global financial crisis. So, therefore, that's a pretty fortuitous spot to start counting, and that's why you see the gains have been massive.

The only times we were above that were in the late 90s and into 2000. Now, what was late 90s 15 years earlier, starting in 97, was 1982. That was a historic low for stocks, too. So it doesn't mean we've got to fall off this perch, but on a very long-term basis, it means you've kind of been over-earning a little bit, and you would expect, let's say, 10-year returns from here not to be quite as generous.

If you go over spans of 20-ish years, usually the returns start to migrate toward an average level. So that's sort of one of those red flags. The other possible thing to keep in mind here is that just by the market slowing down or staying flat, that number is going to come down because your start point is no longer going to be a bear market low, John. Mike, what concerns me looking at that chart is the relationship to the late 90s and early 2000s. Because even though many people might remember

that early 2000s is being not that bad for my perch in Silicon Valley at the time was almost a decade long malaise for the companies that had been big already in the late 90s, the Microsoft, the Cisco's, et cetera. I don't know. Is there is there some other point of comparison to look at that's not quite so bleak? Well, the one thing I'd say about that is that this is multiple years in which you kind of hovered in that rare thin air. So, in other words, it's not as if you reach this point in time and all of a sudden you have your comeuppance. I guess I would say that you want to see how it develops from here. We may never get up to those heights. Therefore, there's not quite as far for the pendulum to swing in the other direction. And the other part of it is, you know, you're right. Early 2000s were completely bruising for the tech sector,

which is where most of the kind of malinvestment or overcapacity or excesses were loaded in the late 90s into the 2000 peak. So it's hard to escape that the returns have been that good and there's nothing else to compare it to. But I don't think in detail we necessarily have to brace for something similar. Okay. Mike Santoli, thank you. Yep. Well, health tech company Massimo shares ending the day up 3% off the highs earlier in the session. And this comes after CEO Joe Chiani said he would explore separating its consumer business, which includes audio equipment, baby monitors and smartwatches, which he's talked to us about before. And joining us now is Massimo's founder and CEO, Joe Chiani. Joe, good to see you again. All of this happening with the backdrop of Quentin Coffee and Politons activist push. They wanted this spinoff to happen.

Could this signal that you're willing to settle? Good to see you, John. I hate to be talking about the activist. He has not been constructive, has been destructive. So I look two years ago when we bought Sound United, I told shareholders at the time that if three years from now, two years ago, it doesn't look like it should be part of healthcare, we'll spin it off. Now, we still had another year to go, but I started thinking after meeting with shareholders in January, I went on a listening tour and learned that investors are telling me, look, there's healthcare investors and then there's consumer investors. For us to invest in you, we've got to go get both parties in our funds to agree.

And if these were separate, then we both could make our decisions. So I came back and talked to some of our board members, including the activist board member, and said, I think we should do a spin. We've been working on it for a couple of months. Now, we have other options. Spin is not the only way to separate. In fact, over the weekend, we've been discussing with a group that came forward after they saw our announcement, and we had talked with them before, but seeing our announcement got them excited, and they're talking about maybe we do a joint venture with them. So, at the end of the day, what I really want to do, John, I want to not only continue doing

the great work we're doing for hospitals with our healthcare business, but I want to go do great work at home. Because if we can, at home, keep people healthy, increase their, not just their lifespan, but their health span, the healthy years, and minimize the time they have to spend at doctors and hospitals, not only it makes people's lives better, it actually reduces cost of health care. And the hospitals or health care customers love where we're going. And I think we found a way to do both. So, yeah, I mean, politics trying to take control of your board. It sounds like your message is you don't need an activist in order to see shareholder value in different structures created within Massimo.

Am I reading that right? Yeah, that's correct. We've always done what's best for shareholders. I started Massimo 35 years ago. We did things everyone thought was impossible to do. This new venture going into consumer health, I expected that my track record, the shareholders would be more patient. But unfortunately, we have some shareholders that are patient and they thank me for what I was doing. But some saying, look, I don't know how to invest in you.

So we try to come up with a way to help both. All right. Well, it sounds like you're still going to have a fight on your hands, but you're used to a fight. Speaking of Apple, which the DOJ is now after on antitrust grounds. I'm wondering what you think of that. I'm kind of critical of some of the DOJ's reasoning, not saying that Apple's been nice and fair to everyone. But do you think Apple's a monopoly? Absolutely. And what does a monopoly do? They not only have incredible margins, but they force you to buy their products. I think what I heard Merrick Garland say, they didn't just buy their products. I think what I heard Merrick Garland say, they didn't just make their products better to get more market share. They purposely

made their competitors' products worse. And I love that example of the video. Yeah, I've tried to send video. I've got an Android phone. I like it very much. But if my friends that have Apple phones want to send me a video, it's blurry. Why? We can, on WhatsApp, send great images. So it's not a technology issue. It's not a security issue. This is just all blah, blah, blah, blah to make more, more, more money. And it's just what Apple has become, a very greedy company.

So what does this potential spin mean for the debut of your smartwatch? I know you want to be chairman of the spun-off company as well, correct? Absolutely. I want my team to know I'm with them. My vision is going to carry it through. I have a great team that's going to help me. Our chief operating officer Bilal, who's been helping me at the healthcare side for years, he's going to be our CEO, hopefully, for a new company. Yeah, it means hopefully we debut the Freedom Watch, and it means freedom for many reasons you'll see soon, in a way that could even be better done as a company that's focused on audio, which is the way to the home,

and wearables and hearables, made for people that really want to get better and be better. Finally, I want to ask quickly, are you comfortable with the macroeconomic environment and what that's doing for your core business, which, you know, buying health equipment had been a little iffy lately? Yeah, you know, we have, if not the best healthcare company in the world, one of the best,

not just because of the amount of innovation that's helped people's lives, but the business model. We never got high on capital dollars. We've always been a recurring revenue business company where we actually place our equipment many times for free and return for sensor business. So the macro world doesn't hurt us. The only thing that would hurt us if census drops, that's something we can't control. Our business is driven by patient census in hospitals. All right. Heard you loud and clear, Joe, on spins, activists, the economy and Apple. Thanks for joining me here on Overtime. Thanks for having me.

Well, the European Union probing Apple meta and Alphabet. Meanwhile, while China is cracking down on Intel and AMD. Up next, we're going to discuss what's at stake for those companies and the entire tech sector. And later, a top investment banker on whether a wave of IPOs could be on the horizon following Reddit's successful debut. Overtime will be right back. Welcome back to Overtime. European regulators launching the first big investigation of big tech companies

under the new Digital Markets Act law. And Steve Kovach has the details. Hey, Steve. Hey, yeah. And John, look, we're only 18 days into this new law going into enforcement, and the EU is already cracking down. That shows how serious they are. The company is officially under investigation for violating the DMA.

That's Apple, Google, Meta, and Amazon. They're investigating a variety of different things for each company. For Apple, the most important one is the new fee it'll charge developers that choose to operate outside the App Store. Apple's going to charge them 50 cents, that's in euros, of course, per install after the first million. As for Meta, it's what the EU calls, quote, pay to consent. Meta asks EU users if they want their data used for ads,

and if not, they have to pay subscriptions for ad-free versions of Instagram and Facebook, which could cost up to 13 euro a month. And for Amazon and Google, it's showing preference for their own products over third parties in search and otherwise. All four companies tell CNBC they believe they are in compliance with the DMA, despite the EU's challenge today.

It's really telling here the EU is not wasting time starting these investigations pretty much right away. And the violations have a very steep penalty. Fines of up to 10% of global annual sales. We could see these tech giants cave and make changes rather than pay those fines. And by the way, if they have repeat violations, it's up to 20% of global sales.

Steve, I can't help but notice you got the U.S. potentially slapping TikTok, Apple recently, Europe slapping all three of these, China slapping Intel and AMD. It's almost like they're protecting their homegrown companies. Or no, not in the U.S. That's not what's happening in China. If you remember Jack Ma, remember when we used to see him? And he disappeared. Right. So not even about homegrown companies. Is it about business in general and some government saying, no, here's who is in charge and here's how we want you to do it? It is kind of like that.

And what is interesting, though, is they all have similar ideas from what we're seeing from the DOJ case. What they're going after is largely what the EU is going after as well. And I think what we've learned in the last two and a half weeks or so since this came out, Apple is making changes before some of these punishments can even come to effect. They reversed their decision on Epic Games, let them back into the App Store. They lowered the barrier a little bit to have your own apps, your own App Store, rather. So they're already noodling around with this, knowing that these penalties are stiff and knowing that the EU is looking into it. I think another interesting one is this meta idea and what we kind of learn about meta,

the fact that they're willing to ask users to subscribe if they don't want their data shared. That says a lot about how valuable the data is they're collecting. And it's also telling that the EC is just saying, no way, we're not going to take this anymore. These little fines don't do enough to make you guys make the changes that we think you should make. And it's working in a significant way. It seems like the Western governments are saying to the Western companies,

we don't trust you because of the power you want for yourself. Exactly. But between the U.S. and China, it's we don't trust you because of the power you represent governmentally, which to me is interesting. Thanks. Yes. Thank you. Well, as we've been talking about with Steve,

Europe is not the only place that might be cracking down on American tech companies. China introducing new rules that are going to phase out Intel and AMD chips from government computers, so they say. That's according to a report in the Financial Times. It's part of a larger localization drive from Beijing as the country aims to replace foreign tech with homegrown alternatives. Joining us now is More Insight and Strategy CEO Patrick Moorhead. Patrick, good talking to you on a Monday. We've been talking a lot recently. So

what happens here practically? Do global OEMs start buying Chinese chips to serve that market, or do they just back away from selling to the Chinese government? Yeah, so first off, John, I did a little research on this, and it doesn't look like it's a government ban. It looks like a defense ban. And inside of defense, the defense industry in China can still bring in 50% of non-Chinese PC chips. So I think the report may have been a little bit overblown there, but it's still going to leave a little bit of a mark. And China would then rely on some of its more homegrown technology, companies that obviously track here on CNBC, but Longzhu, Zhaoxin, Phytium, and then HiSilicon, which is the silicon arm of Huawei, using x86 arm RISC-V technologies.

In a way, doesn't this sound like China and the U.S. government agreeing we don't want China's military buying U.S. chips? That's exactly what it is. And, John, this has been a decade-long tit-for-tat going all the way back to when the Chinese government banned Cisco and IBM for critical infrastructure. And then what the U.S. did with Huawei and smartphones and ZTE, what we saw with Micron. So this is just the long list of tit for tats, the most recent one here. It seems like this works for China if Chinese homegrown companies are able to design and get manufactured some really good chips. What if they can't? Well, and it becomes an issue. And they need to contemplate, let's say, doing something at 70 percent the performance, 50 percent the performance versus 100.

And what productivity gains are lost in doing that. And, you know, China's very pragmatic when it comes to these things. China's been trying for 30 years to one-up Intel and AMD. And in some markets they have, like in high-performance computing, where they have found alternatives. But for the PC market, not so much. The recent comparisons in Phytium are about, I would say, five years old would be the best that you could get in the West. So it is behind. But sometimes history is a great determinant of the future. But I think that China could catch up given the investments that they're doing and also the options that they have with ARM and with RISC-V. Well, a big story of the semiconductor market, especially recently, has been

eventually catching up, right? As we can see when we look at Intel and AMD and NVIDIA. Patrick, thank you. Thank you. Coming up, we're going to hear from the CEO of one American apparel company who's sharing his domestic manufacturing know-how in this increasingly fractured world. We'll be right back. Ah, wait, we're still here. Time for a CNBC News update. Before we go, with Bertha Coombs. Bertha. Yeah, I thought you were going to a break, but here we are. A San Francisco judge threw out a lawsuit filed by Elon Musk's X platform that targeted the nonprofit organization Center for Countering Digital Hate, saying that it was an attempt to punish the nonprofit for its criticism of the platform. Musk sued the center after it released a report called Toxic Twitter and that it stood for to profit from advertising on reinstated accounts of white supremacists and

conspiracy theorists. The court clerk in Colleton County, South Carolina, during the Alex Murdaugh murder trial, resigned today from her position, effective immediately. Kansas State has been investigating alleged jury tampering in the case. Murdaugh's defense team has called for a new trial based on remarks clerk Becky Hill allegedly made to jurors. And thousands of Hindu devotees flocked to temples today to throw colored powder in celebration of the Indian Festival of Colors called Holi, which signals spring's arrival. The festival is celebrated by millions of Hindus around the world and draws tourists to its festivals across India.

Happy Holi, John. Bertha, thank you. And up next, Guggenheim Securities' Eric Mandel on the outlook for the IPO market and where he sees the biggest opportunities for dealmaking in the tech sector. Center operator, or I should say equipment maker, with an overweight rating and a price target of $11.50, which implies upside of nearly 20% from Friday's close. Really going to take a break this time. Overtime will be right back. Welcome back to Overtime. Reddit building on its initial pop after last week's IPO, now up more than 75% since its debut. But there have only been 15 tech IPOs in the last couple of years, according to University of Florida Professor Jay Ritter. So is this the green light for deals to start flowing again?

Joining us now is Guggenheim Securities Senior Managing Director Eric Mandel, focused on tech, media, and telecoms. Eric, especially Estera Labs was interesting to me because it's not a company that's been around forever. It has a strong AI story. Is this an all-clear? Well, it's a great question. First of all, thanks for having me on. Always a pleasure to be here. I think the short answer is there's some cautious optimism. People are definitely excited, and that's for a whole host of reasons. I'll give you a statistic, which even when it comes out of my mouth, I'm always shocked by it. There are 1,000 unicorns right now, 1,000. And when you start going through what they're actually worth and

the $4 trillion, $5 trillion number starts coming up, there's so much pent-up demand on both sides of the equation. In the equity market, people want to be able to play high tech. They want to be able to play AI. They want to be able to play all the great things that we're talking about. But on the flip side, many of these companies are not necessarily designed to go public right now. It's a tremendous amount of need for capital. And what's interesting is you have a bifurcation. The companies that are best capitalized are the ones that don't have to go public. And then there are companies that have a huge need for capital and they have to decide, are they going to do a down round? Are they going to put pressure upon themselves? Are they going to try and sell

themselves? And I think the thing that's interesting, and that's why I was a little apprehensive in answering the question, is because as dealmakers right now, this is the conversation we're having. Should we go public or should we sell ourselves or should we raise capital? And that kind of middle ground of where you can get the best possible outcome is where we're spending all of our time. I wonder why it's even a conversation, because this is a way that this is not like the late 90s. In the late 90s, it was just like, oh, we're going public, right? Doesn't matter if we have, let alone profits, any real revenue that's not sort of manufactured. So we look at Microsoft buying out an AI company that many saw as very promising. Reid Hoffman had invested in. What does that mean about the equity

environment that we're in if companies that are in a hot area are still thinking, should we even go public? Wonderful question. And I think ultimately there are going to be a small number of businesses that opt to go public. They will be the best ones. They will be the preeminent ones. And they will also be the ones with the highest level of confidence that they really believe that being public every 90 days, talking about what you're doing, not behind the cover of night is something that's going to be attractive to the investing public. I think the second part of your question, though, is the most fascinating. Once again, with my deal hat on, there is so much pressure, especially if you are in these cap tables, to investigate what has the likely outcome.

And the likely outcome is a lot of an M&A discussion. And this is no more apparent than in AI. So I think the reference you made in Microsoft, we're seeing this across the board, the open AIs, coherence. Every single one of these private companies, how many of them do the public investors actually get to play, right? They may stay private for a really long time. And we're also seeing a land grab in the amount of pressure that they need to have to create very longstanding partnerships to end up being Swiss. We looked at what NVIDIA did last week. They announced more partnerships than I think anybody ever imagined. And it was phenomenal. As someone who's a deal person, it was amazing to see how focused they were in saying,

we're not playing just one player. We're playing everything. So trying to represent the equity investor here, I guess my concern, it's awkward to say this to an M&A guy, is most M&A is a mistake. And especially when you've got valuations as inflated as they are, a thousand unicorns, every one of those isn't really worth a billion dollars. Some people are about to buy lemons, aren't they? I don't know if I'm going to say mistake, but thank you for the tee up. I will say it this way. M&A is driven heavily by a push-pull in the buyer's mind.

And it's a very simple push-pull. How many dollars do I need to spend to solve a problem and in what period of time? And you almost have to think back to like your intro to finance discounted cash flow. You know, if it takes three or four years to solve a problem by yourself, is it worth paying twice as much to buy that asset today, create the disruption? And I think in your point that, you know, whether it's a mistake or whether it's a lot of happy accidents, because sometimes people will buy a business and they had no idea how much disruption it could create. I think we're living in a moment right now, and this applies even to the magnificent 7-slash-6, right? The companies that are going

to really win are the ones that are willing to disrupt themselves. And we hear this all the time now. There are board members that say, we understand we're in a regulatory environment that's very tough. We understand that people now have the opportunity to go public. And we understand that private equity is a force to be reckoned with. But we need to solve the problem today. And there's no way you can go into a boardroom and say, listen, just give me four years. You know, tech doesn't wait.

So that pressure for speed is there. Okay. Well, we'll see who both understands the problem and picks the right solution. Eric Mandel, thank you. Well, gold trying to avoid a three-week losing streak. Up next, we're going to discuss whether the precious metal can regain its luster. And check out shares of Take-Two Interactive. It's the worst performer in the S&P 500 today.

On a report, the latest Grand Theft auto game might be delayed again from its spring 2025 release date. Overtime, we'll be right back. Welcome back. Gold recently hitting a record intraday high after the Fed reaffirmed its rate cut outlook. It's now a golden opportunity for investors to get into the commodity. Well, joining us now, World Gold Council market strategist Joe Cavitone. Joe, welcome. Why should I buy gold instead of a Bitcoin ETF? Well, it's pretty simple. I think that gold serves a purpose in a portfolio. It has the right kind of diversification that you are looking for when the markets are rising,

but also it buys you protection on the risk side. Secondly, it's a very liquid asset. Third, it provides long-term returns. So when you think about understanding the gold market, you need to pay attention to a couple of key factors. That includes the monetary policy outlook from the Fed, where rates are going to go and how the dollar will strengthen or weaken. What we've just heard as of the last meeting of the FOMC is that that outlook for rate cuts, which is usually a headwind in terms of high rates against gold, that's usually an impediment for the gold price.

But those rate cuts are likely on the way. That would be a good environment for gold. Second, pay close attention to geopolitical and local political risks. We've got a lot of central banks that are looking at their dollar-weighted portfolios, but also the geopolitical tensions that are rising around the globe and that risk that comes along with that and even these elections that we're facing on a global scale. So what about the fracturing of relationships, the decoupling that's happening between various economies? Does that affect gold

at all? Well, I think it kind of does, but I think what's important to understand most is that gold is a global asset. So when you look at the demand in different parts of the world, you'll see that places like China, when the markets are having a problem, when the real estate market's overheated, when equities are not doing well, the renminbi is under a lot of pressure, you see gold performing well as an investment asset in that market. Okay. So when you start to see these markets break apart, you start to see gold rising in these different pockets of demand. All right. Well, we'll continue to watch it then. Joe Cavatoni of the World Gold Council. Thank you. Thank you. Now, who says making clothes in the U.S. needs to be cost prohibitive? Up next, the CEO of One Apparel

Maker shares his domestic manufacturing expertise in this fractured world. And because you love Overtime and you want even more of it, you can scan that QR code on your screen. Follow us on LinkedIn where we'll post exclusive content. Overtime, we'll be right back. It's become rare to make clothes in the U.S., but it's not impossible. That's part of a broader conversation about the future of domestic manufacturing. I spoke last week with Bayard Winthrop, the CEO of American Giant, a company that not only makes clothes in the U.S., but uses textiles grown here, a truly domestic supply chain. Bayard's one of the main characters in a new book out this month called American Flannel by Stephen Kuritz, a New York Times features reporter. It chronicles the efforts of a few entrepreneurs who are reshoring American clothing.

Of course, quality isn't cheap. I think it's appropriately expensive in that by making things in America, you make things within the construct of American values. When we manufacture in America, we comply with human rights standards, with environmental standards, with worker safety standards, with OSHA standards. And those things make it harder and more expensive to make things. That's a good thing, I would say, because it reflects American values. That's why those laws exist. I think it's a bad thing when we let our largest brands, and this is particularly true in apparel and textiles,

our largest brands benefit financially, have their shareholders benefit by exploiting not having to comply with those standards that Americans support by offshoring to places that avoid those things. American Giant sells a flannel shirt made in the U.S. and a lot more casual wear. Bayard's pushing for Congress to pass laws that make it harder for manufacturers in China to send goods here on the cheap. It's another side of what we were covering here on Overtime last week with CHIPS Act funds helping to bring more semiconductor manufacturing to the U.S. Well, up next, Mike Santoli is going to look at how improving non-tech earnings growth expectations could impact the market when overtime comes right back. Welcome back to Overtime. Before we go, we've got to bring back Mike Santoli with a look at earnings growth expectations.

Mike. Yeah, John. So they're trending higher. And I think the little change recently is that outside of technology, they've actually ticked a little bit higher. So this is the percentage growth rate of the next 12 months anticipated by consensus estimates in blue. It's the tech sector. You see where that really started to launch higher in the latter part of last year. It really does help explain why tech has dominated returns and why the P. E. on tech is also much higher it's about twenty seven for S. and P. tech it's around twenty one for the rest of the

market and the good news is it's you know kind of trying to curl higher from this ten percent level we don't know if we're gonna hit that sometimes later half of the year things get revised lower but it is important for earnings to growth to broaden out to substantiate this move we've had in the market. You know, only about a third of all S&P 500 stocks are reporting earnings in the most recent quarter that were a two-year high. So even though overall we've been at record levels of earnings, a lot of companies have some catch-up to do. So I feel like this is the next thing to look at after we've rebuilt valuations to basically where we were near the top of the market in early 2022. OK, Mike, but do higher earnings expectations make investors harder to impress? If they come through, the market usually gives credit for them.

I'll put it that way. And there's this sort of complex dynamic where you have the year ahead starting estimates. They tend to get whittled down over the course of months and then companies beat those estimates. So wherever they come in is not always, you know, kind of a linear path. But yes, I do think that in general, if they come through at 10 percent, the market can usually stay supported if the Fed is not tightening and bond yields stay tame and earnings are at least growing. Although, of course, it's going to be, you know, company by company at some level as opposed to all votes rising. So maybe in a way we're looking at what's already priced in. To a fair degree, yes. I think part of the premise of where we are in the market is

the economy is better than expected. The Fed's looking for a chance to trim rates into a good economy and record high stock prices and earnings are going to come through. So, yes, it'll take some work on the fundamental side as opposed to the sentiment and positioning and multiple probably to get significant upside from here. All right, Mike. Well, speaking of expectations tomorrow, don't miss my exclusive interview with Adobe CEO Shantanu Narayan from one of the company's biggest product events of the year, Adobe Summit. Investors are going to want to pay attention because demand for AI software

from the likes of Adobe and others, really what's going to drive demand for AI chips and data centers from companies like NVIDIA and Supermicro. And Adobe also has an investor meeting tomorrow that starts right after this show. Plus, Morgan is going to interview the UPS CEO tomorrow, 1 p.m. Eastern, after that company's investor day. Don't miss that first on CNBC interview on the exchange. So we've got delivery of physical goods as a read on that piece of the economy, perhaps, and also the delivery of digital goods.

Adobe does a big part of that in designing and then tracking the delivery through Experience Cloud and Marketing Cloud of that kind of information through e-commerce and beyond. We'll get a good check here on overtime on how both of those things are shaping up. That's going to do it for overtime. Fast Money begins right now.