Closing Bell - Closing Bell Overtime: Goldman's Tech Playbook, Port Strike Impact on Retailers 12/27/24

Episode Date: December 27, 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.

That's the end of regulation. Best Friends, Emerald Society, ringing the closing bell at the New York Stock Exchange. Click Holdings doing the honors over at the Nasdaq. Stocks falling to end this holiday week with outsized declines for some of the year's biggest winners. Names like Tesla, Palantir, and NVIDIA. That's the scorecard on Wall Street, but the action is just getting started. Welcome to Closing Bell Overtime. I am Frank Holland with Leslie Picker. John and Morgan, they're off to it. Ahead this hour, Goldman's tech playbook analyst Eric Sheridan joins us with his top picks in tech as the Nasdaq sees a sharp pullback to end the week. Plus, Elon Musk biographer Walter Isaacson will be with us to talk about the growing rift in the Trump orbit surrounding H-1B visas.

And former Fed economist Sam Wolf, creator ClaudiaOM, will discuss her outlook for the Fed in a wildcard factor that could throw its rate path into question. Let's begin, though, with this very active market today. Joining us, Scott Wren of Wells Fargo Investment Institute and Brenda Vangelo of Sandhill Global Advisors and CNBC contributor. Thank you both for joining us. Scott, let's start with you. We've got thin trading, but still a significant sell-off to end the week today. No major catalyst, but do you think the soured sentiment continues into next week for the end of the year? Well, you know, to be honest with you, Leslie, we kind of wish it would because we're trying to be patient here. We could take another step toward cyclical risk and just stock risk if we felt like we had a halfway decent pullback,

you know, 7%, 10% total, something like that, which, you know, if you look at the charts right now, you know, somewhere in the 57-50 range would be good support there. So, you know, if you get a pullbackback there I think we'd be more interested here in the meantime we're trying to be patient and I think anytime there's confusion with the Fed is inflation going to go up is it going to go down are they going to hike more they going to hike less that's the kind of volatility that can help investors if they have a decent feel for the economy going forward. If you get

some downside and you think the economy is going to be pretty good, you know, you want to step in there and buy. So that's what we're trying to do. And I think we're going to certainly be in for some volatility here over the next few months. Brenda, it feels like uncertainty with the path of monetary policy has been the narrative for the last few years now. What is your read on the economy and how is it affecting the way that you're balancing your portfolio right now? Well, I think the economy is still very healthy and that's the good news. So healthy economy, healthy corporate earnings story. But I think when you look at valuation, it's starting to get to that stretch level. So I think it's something to pay attention to. It's not an end all be all,

but I think it does mean in our view that the market could be more susceptible to volatility. So I agree with Scott that as we head into next year, I think we could be in for a year of more volatility, particularly around policy with this new administration. There are still a lot of questions. Things could work out beautifully or they couldn't. So we just don't know that right now. But certainly watching for anything that would impact the corporate earnings story to the positive or negative and same thing on the economy. But overall, we think it makes sense to maintain exposure to equity. But in our portfolios, we have been trimming some exposure to large cap stocks just given the

decent run that they've had this year and recently added the equal weight S&P 500 vehicle, which hasn't acted very well. But we think it's a good setup heading into next year when we think there should be more broadening in the overall market. Brenda, if you don't mind, I'm going to stick with you for a second. I want to talk about tech. The Mag7, mega cap tech really leading the declines today. Again, low volume trading. We know that it's a holiday week and all that. But is there anything we can take away from the action that we saw today? I think if you look at some of the larger names, like an Apple, for example,

it's all the way back up to 30 times forward earnings. So it's expensive. Yes, there's a great story there unfolding with the replacement cycle we think though that that could be a little bit more prolonged and not happen all at once because of the gradual rollout of the ai products but i think just in general there's a lot of good news uh baked into the mega cap tech stocks and they have acted well over the last month even though a lot of other sectors have not uh so i do think that this is probably potentially some profit taking, which we would agree with at this stage.

And we think we could see even more of that as we head into next year. People are waiting for the new year to realize gains, but we think it makes sense to probably realize some gains this year as well and to get ahead of that because I think there could be more volatility in the first couple of weeks of the year as a result. It's always smart to take some profits, especially at the end of the year. Scott, I want to come back over to you. I know you're watching The Dollar, something we've talked about here on this show yesterday.

I've talked about it on some other shows as well. It's rising more than 4% since the election. As you look into next year, how big of a concern is The Dollar when we talk about Q4 earnings that obviously get reported next year, but also this broadening out story that so many people continue to talk about? I mean, the strong dollar, doesn't that hurt the broadening out story? Well, it could, especially certainly if you have some international exposure. So I think the dollar is going to be stronger because really, you know, Frank,

if you look at the European economy, you look at the Japanese economy, you know, you look at what the Federal Reserve is doing with interest rates, which is, you know, we've only got one more cut priced in between now and the end of 2025. So I think monetary policy, economic growth, there's a lot of things that favor the U.S. dollar. Now, do we expect it to scream higher from here? I don't think so. But the dollar, there's really, in our minds, there's no reason to think that we're going to have a weaker dollar, at least a significantly weaker dollar than what we're looking at right now through year-end 2025. So strong dollar.

It can be painful, but I don't think we're going to get to the levels where the market really panics over a strong dollar. All right. Looking at the dollar chart right now, year to date up more than 6 percent. Scott and Brendan, great to see you both. Have a great weekend. Happy New Year's, guys. Let's talk more about today's tech sell off. The Nasdaq falling one and a half percent and giving up a big chunk of its gains for the week. Joining us now is Eric Sheridan, managing director at Goldman Sachs. Eric, good to see you. Great to see you, Craig.

All right, let's dig into this tech sell-off. I mean, what do you think happened today? Again, we're going to continue to say this throughout the show. It's a low-volume day. It's a holiday week. Whether you think it's algos or real traders, what do you think led to this action? It's kind of got a multiple choice for you. Is it the strong dollar? Is it Fed uncertainty? Is it high valuations in the market finally getting some religion when it comes to those valuations? I think it's a little bit of all the above. It's a thin market volume at the end of the year. The week between Christmas and New Year's is historically highly volatile on low volume. But it has been a very good year for tech. Even in our preview for 2025, we pointed people towards names that we hadn't in a while, names like Uber that had underperformed more recently in the last one to two months, as opposed to the names that are exiting the year at 52-week highs.

We are starting 2025 in a strong end-demand environment that typically is good for tech when demand is good. But interest rates are volatile. FX and currency translation is likely to be a headwind in the way companies talk about Q1 guidance. So you could see heightened volatility to start the year. And we would maybe shift a little bit into some of the names that are less at the top of the mind among the largest cap names in the group and look at some of the smaller mid cap names or even a name like Uber. All right. So, Eric, you brought it up. That's your top pick for 2025. It's Uber. I've got a lot of questions about this being your top pick. So if you look at the chart, it's basically flat since the Fed's hawkish cut. So small sample size. But at the same time, it's a very inflation sensitive company. It's also a

disruptive company that might be getting disrupted by autonomous driving. I mean, why would that be your top pick when we continue to talk about the growth of AI going into next year? AI is going to enable that autonomous driving. Why Uber? Well, I always try to pick something that's a little bit contrarian at the end of every year. A year ago, it was Amazon, and there were fears about Asia e-commerce into the West and how AI would impact AWS. And you saw how Amazon performed in the last 12 months. Right now, Uber is weighed down by a handful of debates, as you pointed out, autonomous vehicles. We think that is a potential risk factor, the one that will play out over a very long duration, a period of time. And over

the next one to two years, the vast majority of autonomous vehicle supply has nowhere near the unit economics to go direct to consumer in most markets and will end up as supply or choice for you inside the uber app we acknowledge they're lapping inflation and pricing but in the trends we can see through q4 we actually think the company is well on track for hitting or exceeding uh the themes and the the targets they had laid out at their investor day just this past february it's outsized growth and it outsized growth and it's re-rated down to a lower value on gap earnings looking out to 2025 and 2026 that makes it quite compelling here. What does the market need to see, however? Because I look at the street, 88 percent of analysts are recommending this stock by our overweight rating,

but the shares this year are flat. Over the last six months, they're down 13 percent. So why do you see that disconnect, especially, you know, your point is that it's one of the few value plays in big tech right now? I would say, number one, Leslie, it's results. You need to see results. There's fear about volumes on the mobility side. People are taking a small sample size of what's happening with Waymo in San Francisco and extrapolating that out as if that's going to be the normative fact pattern for the rest of the world. That's going to play out over very long periods of time. And we still think San Francisco isn't exactly what we would

take away as an indicative exhibit. So we look at results in February. We look at the company's actions potentially on returning more capital to shareholders. And by the way, there are no questions about their delivery business, where we're seeing quite high-end demand. And we highlighted in our year-ahead piece that local commerce, broadly defined as things delivered to you same day and within a few hours feeds well into these food delivery businesses, morphing into wider local commerce platforms, the DoorDashes, the Uber Eats, and the Instacarts of the world. We think that's a theme that's underappreciated and undervalued right now inside Uber as well, away from the mobility business.

Well, and last year's e-commerce play, Amazon, up 47%. So your 2024 pick certainly paid off. We'll see if Uber is the same way. Eric Sheridan, thank you very much for joining us. Happy holidays. Thanks. Happy holidays. When we come back, former Fed economist Claudia Somm joins us with her outlook for the Fed rates and the economy in 2025 and how AI driven productivity could complicate the Fed's plans. And then later, there's some growing tension between Elon Musk and others in President-elect Trump's orbit surrounding visas for foreign workers. Musk biographer Walter Isaacson, he's going to join us to discuss this emerging rift in Washington. Overtime, we're back in two minutes. Welcome back to Overtime. The new year could present a major new challenge for the Fed, how to navigate a productivity boom without sparking a new bout

of inflation. Steve Leisman joins us now with a closer look at the Fed how to navigate a productivity boom without sparking a new bout of inflation. Steve Leisman joins us now with a closer look at the Fed's productivity problem. Steve. Hey, Frank, thanks. Yeah, the U.S. has experienced a productivity boom, which is really a good thing, but it also presents Fed Chair Jay Powell and the Fed with one of its great challenges for 2025 in how do you steer monetary policy through it. Productivity has averaged 2.6% over the past six quarters. That's a turnaround from negative numbers that followed the pandemic. It averaged just one and a half percent from the great financial crisis to the pandemic. And this is likely before any AI impact comes into the picture here. Even a fuller half a point extra productivity

growth, that's a big deal, raising how fast the economy can grow without sparking inflation. Investors, they got to figure out how to invest in it. The Fed has to figure out if it's real. Well, back in 1996, same problem for Fed Chair Alan Greenspan. He famously saw productivity even when it wasn't obvious in the data. With the economy running hot and threatening inflation, Greenspan held the line on interest rates even while colleagues urged to hike. He was right that we did question the value the stock market placed on that productivity. So the question for the Fed now is, is it a short-term or lasting episode? Will AI, Trump tax cuts and deregulation possibly push up productivity growth? Or could tariffs and possible deportations derail it? And of course, how does monetary policy steer its way through it all? Higher productivity generally would mean Powell can let the economy run somewhat hotter,

like Greenspan did in the 90s. But it could also mean a higher terminal funds rate because demand for capital ends up being higher when investments have high rates of return and productivity. Guys? Yeah, definitely an impact on that neutral rate and sounds like it's pretty fragile as well, especially when we don't really know the true source of it. Steve, thank you. For more on what's ahead for the Fed, let's bring in Claudia Somm. She's the chief economist at New Century Advisors and a former economist at the Fed.

Let's start there on productivity. Do you have any expectations for productivity and its impact on the economy right now? Right. Well, I just want to underscore what Steve said, having productivity boom that we've had recently, this is the best kind of problem the Fed could have to deal with, right? Because this is, you know, very good for the economy, grows, you know, grows the pie faster. What it's the difficulty for the Fed is, is trying to figure out of the growth we've had. And we have been living through this. The past two years, we have had well above trend growth.

And the Fed has had to try to navigate how to get inflation down. At the same time, we've seen disinflation. So a lot of that above trend growth we've had, that was this supply. That was this productivity. We also have had more workers come online. So the Fed does not need to fight that kind of growth. The Fed fights when demand-driven growth gets out ahead of supply and they need to slow things down. But, of course, you can't look at a GDP number and have it tell you this is a demand part, this is a supply part. And it's very important because monetary policy takes time to work its way through the system, is how persistent do we think things are? And frankly, at this point, and when you look at the Fed's projections, when you listen to them talk, most of them are taking a pretty cautious view of the productivity path going forward. And we really haven't seen a lot of officials taking on and saying, hey,

it's here to stay, this productivity boom, we're going to build on it. So they don't have that optimism built in their forecast. But I think productivity boom, we're going to build on it. So they don't have that optimism built in their forecast. But I think that's something they're going to obviously continue to watch. Well, is part of it, too, just understanding exactly what's causing the productivity boom, to understand its resilience and the implications for monetary policy, really kind of getting to the root of what's driving these buoyant numbers that we've seen? Right, absolutely. And really, this productivity boom, the seeds of it appear to have been planted soon after the pandemic. And in all of the disruptions

that were happening, we saw a burst of business applications, which has held up over time, which researchers have carefully traced through other databases to see it's not just the applications, it's businesses starting. it's businesses starting with employers. And we know that younger, more dynamic firms tend to get the productivity going. So that's been important. It took, you know, years to play that out. And then the other thing the United States has really stood out in this cycle since the pandemic is we have had a really dynamic labor market in that we moved a lot of workers to better and different jobs than they were before the pandemic. That was very disruptive. We can remember the labor shortages and how that was tough on businesses and on some workers.

But that really put people like matched workers up with jobs where they were more productive than before. And it gave businesses a big incentive to make some more capital investments to make the workers they had more productive. And so we're reaping the benefits of that now. But then the question is, can we hand the baton off to emergent technologies and further capital investments? And that's where there's a big question mark. And technically, history is on the side of the productivity growth returning back down at a more normal, lower pace. So, Claudia, I want to come full circle. What does this all mean for the Fed long term? I mean, coming up on January 10th, we get the jobs report. But before that, on the 8th, we get those Fed minutes. What are we expecting or what are you expecting to hear from these Fed officials about productivity, about the incoming administration.

I feel like Jay Powell said, you know, Fed members at least acknowledge that some of these policies might take place and the impact that would have on the labor market, on inflation and other parts of the economy. Now, you can see it showing up in some of the Fed discussions this year are around what the neutral rate of interest is. Right. And it's a structural parameter in the economy that gets saving and investment in alignment. Productivity potential output growth these are integral leader considered to be. Things that would tie in like if the economy is just

more productive it's growing faster but growing faster in a very sustainable way. Well interest rates should be higher that's a sign of a healthier economy the fed funds rate should be higher that's what the account that you're not

fighting inflation you just got a healthy economy. With higher rates. So be higher. That's what the economy, you're not fighting inflation. You've just got a healthy economy with higher rates. So, but the thing the Fed officials haven't done thus far is though they have been nudging up their neutral rate of interest estimates, their R-star estimates, we haven't really gotten a lot of dialogue on why. And they haven't moved their potential output estimates, which would typically be, the median official hasn't moved them, which would typically be where that is. And they haven't moved their potential output estimates, which would typically be, the median official hasn't moved them, which would typically be where that is. And J-PAL has been pretty allergic to going through in careful detail, you know, parsing out

the neutral rate of interest. So I think they're going to have to have this conversation. And yes, I think the minutes are one place to be looking for this and definitely listening. Any time to get a Fed official like, hey, you raised your neutral rate. Why? What's going on? What changed? See if it's productivity. Claudia Assam, really great to have you here. Thank you very much. Enjoy the weekend. Thank you, too. All right. Coming up here in overtime, the holiday shopping rush. It may be over, but the headaches could just be starting for shipping companies as they face the possibility of a major port strike in just a few weeks. We're going to break down what's at stake. That's coming up next. And we'll talk to former

Target Vice Chairman Jerry Storch about how a strike could impact retailers and which companies won and lost the Christmas season. Welcome back to OT. Global shipping stocks, they're up performing this week as the market appears to be increasing its bets that there will be a strike at the east in the Gulf ports, whether you believe it's algos or real traders. It's one thing we know for sure. The January 15th deadline for the port operators in Longshoremen to reach a deal is fast approaching. So this week, MSC and Hoppog Lloyd, two shipping giants, they announced strike-related surcharges for shipments to the U.S. that will begin in January to cover additional expenses related to the strike and possible congestion. Container shipping rates from Asia to the U.S., they've already increased about 15% month to date.

That is largely attributed to the shift by retailers and other importers away from the East and Gulf ports over to the West Coast ports to try to mitigate the impact of a possible strike. It's also setting up for what could be one of the biggest supply chain challenges since the pandemic. A possible strike at the East and Gulf ports on January the 15th, possible new tariffs on Inauguration Day and Lunar New Year. Earlier than normal, there is generally a freight surge in the week ahead. So the biggest retailers, they're often seen as the best position to deal with a prolonged strike with names like Walmart, Target and Costco often getting priority from supply chain companies due to the size of their

operations. So for more on how a port strike could impact retailers, let's bring in Storch Advisor, CEO Gerald Storch. He's also the former vice chairman of Target and the former CEO of Toys R Us. Jerry, happy holidays. Good to see you. Thank you. So Jerry, I've been talking to some of the biggest logistics companies. They're telling me big retailers like a Walmart and a Costco, they're shifting over to the West Coast ports. They're also bringing things in early to try to mitigate a port strike. So I want to ask you, besides a one or two week strike,

when will we start to see the impact when it comes to these major retailers? What are the signs for investors that it's having a negative impact? Well, certainly it's going to be a lower impact, whatever happens, than it would have been last fall. This is a pretty low volume time of the year when you put it in perspective. And, you know, frankly, the retail didn't do too well. been last fall. This is a pretty low volume time of the year when you put it in perspective. And, you know, frankly, the retail didn't do too well. They don't mind if it's a little bit delayed because they might have too much inventory already. But the strong retailers, as you pointed out, they pulled forward inventory. They saw this coming, you know, months away and they shifted to

other ports, other modes, in some cases to air freight where that made more sense. So it really shouldn't be a drag on business right away. Hopefully the whole situation won't drag on too long. Obviously, if it does, costs will increase and you'll have some shortages. There are things you just can't bring in early. The famous example of bananas, where how long can you store a banana? And certainly there are problems for automobiles coming from Europe into the East Coast port. So eventually it could become a problem. But smarter retailers don't just put this in its own category. They put it together with, look, look, the threat of wars.

Look what's going on in the Red Sea with the Houthis. Tariffs and all the uncertainty that provides. The pandemic, you mentioned that earlier. So there are so many issues with supply chains that the old thinking that just in time was best has been thrown out the window. And people are saying, let's build flexibility into our system. And that's what the best retailers have already done. So they should be able to handle this unless it just

drags on for a month or longer. All right. So you're saying that they're able to handle it logistically. But what about their financials? I mean, what about a margin impact? What about EPS impact? When we talk about shifting supply chains, that costs money. When we talk about holding inventory longer by pulling ahead, that's a higher carrying cost. So how do you see that impact in these retailers when it comes to earnings after the holiday season? Well, you're right. It's something. But in the broader scheme of things, I just don't feel that it's a red. You know, it's a yellow type thing. You know, green, red, yellow, red. This is yellow right now. It's not red. I think they have much bigger issues. The winners and the losers here in retail are pretty stark.

And if people are winning, are winning by so much and people that are losing are losing by so much that they're still going to be winners and losers. Jerry, one of my favorite stats of the day was from Bespoke, where they said that the most correlated stock to Apple in the S&P 500 over the last year has been TJX. And I wonder what you think that says about the state of retail right now. Look, there are some, you know, people say, oh, the consumer had a good holiday. OK. You know, all boats did not float for over a year now. I've been recommending four companies as being best on strategy and best run. They're Walmart, TJX, which you just mentioned, Costco, and Amazon. And they have just done phenomenally, both in the stock market and in terms of gaining market share. And frankly, I think that's what's going to continue. Retail hasn't changed that fast. The consumer doesn't change that fast. They love

those companies just as much as they hate some of the more traditional retailers like department stores or some of the aging apparel chains. So is the fate of department stores just over? Can they turn it around? I mean, this has been a year of many headlines in the department store world. Macy's closing stores amidst activist pressure. You've got Nordstrom family taking the company private again. I mean, is there a light at the end of the tunnel here or is the business model just over? Well, the way they're running it right now, I don't think it's going to work. The change just isn't significant enough to resonate with consumers, particularly younger consumers. Look, your mother or your grandmother may still love shopping at department stores,

but you don't and your children won't. And, you know, that's what's going on right now. It's almost a generational shift. To change it, they have to totally change how they do business, become a much more desirable place to shop. And, you know, people might say, oh, look, Walmart and Costco, those stocks are way the heck up. I can't buy those.

Would you rather buy the stock of a company that's mired in strategic disarray and operational weakness? I don't think that's a very good bet either. So I think there's a tough road to hoe for the retailers that have been losing share. And I wouldn't put my money with any of them, whether it's, you know, Costco or I'm sorry, whether it's a Kohl's, Costco, I love whether it's a Kohl's or whether or not it's Macy's, whether it's anyone in that bracket. Yeah, I'm going to assume Costco sells country and Western gear. I know that's your jam, Jerry. But on a serious note, I want to ask you about something I've been hearing kind of bubbling up, gift cards.

Shorter holiday season this year, a lot more people turning to gift cards to give their gifts as opposed to actual physical gifts. How does that play out when we look at the next quarters and this quarter? Because in this quarter, these gift cards, when they're purchased, they're a liability. They're not really realized until me and you actually use them. How do you see that whole narrative playing out? Look, as a retail CEO, I love it when the consumer buys gift cards instead of a physical item. There's no return. I mean, returns are a mess. You've heard about that. You've read about that. Let me tell you, it's more than true. You don't want to be dealing with returns this week. You know, so no one returns gift cards. They're fantastic. And it's almost like, you know, the gift giver is doing our job for us.

They're giving their friend or their loved one a gift card that the only way it can be redeemed is if the person who receives it goes to the store, goes to the website. So they're marketing for us. And then there's always a couple of percent, say around 3% on average, where they never spend it at all. And that just goes straight to the bottom line. So we love it when people give gift cards. It's advertising for the retailer for the future. I feel like I'm in that 3% because I always wait for that perfect item and then it never comes up and then it just sits in my drawer forever. I get lost or anyway. Jerry Storch, thanks so much. Happy holidays to you.

My pleasure. Bank stocks pulling back today, but still pacing for a banner year. And 2025 could bring a wave of consolidation under Trump 2.0. We'll look at which names stand to benefit and why M&A doesn't always lead to shareholder gains. And then later, why 2025 could be another breakout year for crypto. Even as Bitcoin, it retreats further back from the 100,000 mark right now, trading at about 94,580. Overtime will be right back after this.

And welcome back to Overtime Time for a CNBC News update with Kate Rooney. Kate. Hey there, Frank. Starbucks lost most of an appeal to overturn an LLRB decision that the company illegally fired two Philadelphia baristas who wanted to organize a union. A federal appeals court said the National Labor Relations Board had substantial evidence to support its argument that Starbucks engaged in unfair labor practices, but the court also said the agency went beyond its authority by ordering Starbucks to pay the baristas expenses. Meanwhile, the U.S. is expected to announce on Monday that it will send one point two five billion dollars in military aid to Ukraine. Officials tell the Associated Press the package includes surface to air munitions as well as stinger missiles and artillery rounds. It's part of a Biden administration push to give Ukraine as much aid as possible

before President-elect Trump is inaugurated next month. And a ninth U.S. telecoms firm has been hacked by a massive Chinese espionage campaign known as Salt Typhoon. Deputy National Security Advisor Ann Neuberger said the unnamed company was added to the list after the government released guidance on how to detect hackers in their network. Guys, back over to you. Kate, thank you so much. The banking bulls see the prospect of consolidation as giving a boost to the banking sector in 2025. Over the past few quarters, we've seen a rebound in activity with U.S. banks notching $14 billion worth of mergers this year, surpassing 2022 and 2023 levels.

But the question is whether that momentum continues or even accelerates into the new year. Banks may be emboldened by the recent performance of their peers that have made acquisitions, as KBW pointed out in a recent note. Examples they cite include Old National Bank, South State and UMB. KBW also recommends buying shares of potential acquirers such as Cadence Bank, Citizens, First Bank, Prosperity, and Tompkins. PNC CEO William Demchak has been outspoken about M&A plans for banks with strong core retail deposits in what he calls desirable markets. Washington also seems to be amenable. The House Financial Services Committee recently proposed measures that would reduce obstacles for community bank mergers and revisit the way

regulators evaluate bank deals. This is the vision of Representative French Hill, a former bank CEO who was recently named the next chair of that committee. But the flip side to deregulation is it may bring down the cost of compliance, which could make scale less of a necessity. And the banking industry may opt to use that extra capital for digitizing operations and expanding capabilities instead of buying targets. Additionally, 2024 saw a cautionary tale of Bank M&A with New York Community Bank, which had been bulking up through acquisitions of Flagstar and Signature, to name a few. And those acquisitions pushed it above $100 billion in assets threshold, which meant stricter capital rules that it was ultimately unprepared for, as its commercial real estate book soured, Frank. We saw that story take place this year.

It's lost 71 percent of its value year to date, largely due to some of these issues. Yeah, quite the chart there. You know, I think after SVB, we thought a lot of this disruption in the banking sector was over. But I mean, look at a chart like this. You can see not quite. Yeah. I mean, it was kind of an idiosyncratic situation. We didn't see too many others like that this year, but certainly one telltale sign that sometimes bulking up and becoming bigger may create more problems than it does benefits. All right. Very interesting there. Leslie, thank you. All right. After the break, are cracks starting to form in the Musk-MAGA alliance? Elon Musk biographer Walter Isaacson joins us. He's coming up next to talk about that rift surrounding H-1B visas. A lot to talk about there. Stay with us. Potential cracks forming in the relationship

between Elon Musk and President-elect Trump's base around foreign worker visas called H-1Bs. Musk, Vivek Ramaswamy and some other Trump appointees have been arguing in favor of expanding visas for highly skilled workers. Musk tweeting, in part, if you force the world's best talent to play for the other side, America will lose. While some of Trump's core MAGA supporters, like Ann Coulter, saying American workers can leave a company if they want to, and H-1B workers cannot, comparing them to indentured servants for big tech companies. So what comes next for the Musk-MAGA alliance? Joining us now is Walter Isaacson. He is an advisory partner at Perrella Weinberg, history professor at Tulane and distinguished fellow at the Aspen Institute.

He is also a CNBC contributor and author of the book Elon Musk. Thank you very much, Walter, for being here. It's been a year since I have read this book, but I'm just curious from your vantage point where you think the Venn diagram is, at least the overlap in the Venn diagram between kind of the Musk side of the tech billionaires and tech executives that have this way of thinking, and then kind of the America First base, which is, you know, against this type of immigration? It's probably the most interesting discussion you could have now. And it's not just some food fight happening on X. It's a fundamental question about the economy.

And in some ways, CNBC viewers will probably understand, definitely will understand it better than some Americans, which is that when you bring in really good workers from whether it be India and China, or for that matter, Germany or Senegal, and they're adding productivity to the economy, that does not mean there are fewer jobs for other people, for heritage Americans or whatever, because you grow the economy and you have more jobs. And so what we're seeing now is people who are in favor of growth and technology growth and people, for understandable reasons, who say, wait, wait, wait, we're going a little bit too fast here. We have to take care of America first, as the phrase goes. And it's going to be a tricky thing to resolve. As someone who knows Musk well and has really

studied his way of thinking, is he someone who would capitulate on issues if it meant preserving this political power that he's been able to garner over the last year? Is this something we would see a 180 on if Trump said, hey, this is important to me in my base? Capitulation is not one of the top 10,000 adjectives you would ever put on Elon Musk. And he feels very strongly that you have to be hardcore all in. When he took over Twitter, I remember those first three weeks there described in the book in which he said, OK, who's all in and who isn't? Now, as Ann Coulter and others may have said, if you have an H-1B visa, you're more likely to want to be all in. So it is, as Vivek Ramaswamy said, to some extent a cultural issue.

Are you the type of person who really wants to be all in? Those are the type of people Musk thinks we need to have. He's not into work-life balance or B-plus students just making it along, trying to go along. I think he's going to push very hard for a hardcore all in, whether it be federal government or H-1B visas in Silicon Valley and elsewhere. Hey, Walter, this is Frank Holland. Good to see you again. Happy holidays. Hey, Frank, how are you? So I want to ask you, I read your book. You and I talked right after you released the book. In the book, I don't want to get too into the book, but you kind of described Elon Musk as being, you know, a bit erratic, and so did his friends. Is he definitely pro-USA? I

know he's a citizen now, but is he definitely pro-USA, or is he pro-MAGA? When we come to issues like this, are we going to see him lean more towards the president, or is he more pro-USA, in your mind? I think what you're seeing with this dispute, Frank, is him pushing the pro-USA side. In other words, pushing back against the MAGA people who are not only against illegal immigration, but against many forms of immigration. And he feels that if America is going to compete with China or compete in the world, it needs to have the best engineers, the best thinkers, the best doers, the hardest core workers in the world. And that's what's causing this rift with a MAGA base that is a little bit nativist, to some extent, against different diverse cultures coming here, and to some extent wants to protect an American way of life, which, as Vivek Ramaswamy said, includes loving sports

or cheerleading or whatever. I think Musk is all in on growth and productivity in the U.S. So given all of that, are you going to write a Musk biography part two? And if so, do you have any predictions on how it would conclude as it pertains to Musk's relationship with Trump? Not right now. I think all you need to know about Musk is in that book, including the hardcore, including what he did when he came into Twitter, which will be what he does when he comes in to the United States. I think in five or six years, there may be another book to be done. But right now, I think you've got all you need. All right, Walter Isaacson, we've got to leave the conversation there. Great to see you.

Thank you, Frank. Good to see you. Thank you very much. And remember, we've still got to get that cheesesteak, Walter. We've got to talk about that. I know. We've got to. All right. Have a great weekend. Oh, you've got to come down to New Orleans here, and we can give you a po' boy. Sold. That wasn't a hard sell there. Walter Isaacson, great to see you. Thank you very much. All right, still ahead here on Overtime, Bitcoin and crypto-related stocks

pulling back hard in today's sell-off, but still up significantly since the election. We're going to talk to one expert about why he says crypto is entering a new phase of maturity. Stay with us. And welcome back to Overtime. We have a news alert out of Washington on TikTok. Megan Casella has those details. Megan. Frank, we're starting to learn some of the arguments in this case about TikTok that's before the Supreme Court. In its main brief before the Supreme Court, the Biden Justice Department, led by Attorney General Merrick Garland, is arguing that Chinese control of TikTok threatens national security and that letting a foreign adversary spread propaganda and collect data about its users.

TikTok then countered with its own brief, arguing that a ban on TikTok saying that he wants to resolve the issues through political means once he takes office. He said he was not taking a position on the merits of the dispute in this brief, but that he wanted to pursue a negotiated resolution, one that would prevent a shutdown of the app, but still protect national security. And guys, remember that unless the Supreme Court makes a move here and decides to strike down this ban, this law would take effect on January 19th, the day just before President Trump is set to take office on January 20th. Such an evolving story. Megan Casella, thank you for staying all over it.

Will 2025 be the year of Bitcoin? The CEO of crypto firm BitGo joins us to explain why he sees rocket fuel being added to the crypto rally under the second Trump administration. And welcome back to Overtime. Bitcoin is falling today, but it's still a major winner this year, more than doubling in 2024. And crypto investors, they're very enthusiastic about 2025, expecting friendly policy from President-elect Trump. Joining us now is BitGo CEO Mike Belshi. BitGo is a cryptocurrency trading and storage platform. Hey, good to see you, Mike. Hey, Frank. Good to see you also. All right. So, Mike, we're just talking about it just now. Bitcoin, huge run up year to date, even big, bigger run up after the election.

What's going to push this higher? What isn't already priced in? Actually, I think the regulatory is somewhat priced in. But in general, we've seen that these news events don't always price in until they're actually here. So, look, we have a new administration coming in. Things look very promising. People are very excited. They're very bullish. But it's not here yet. So, actually, I think we're going to continue to see the effects of that all through 2025. Remember that for the last two and a half years, we've had not just a regulatory environment that didn't want to help you. We had a regulatory environment that was actively trying to kill you. So all of a sudden, with that changing in the

opposite direction, we're going to continue to see good gains next year. All right. What about David Sachs? He's going to be the, you know, quote unquote, crypto czar. Do you think that's not priced into some of these upside moves we've seen in crypto? I think it's indicative of what this administration is about. They want to see innovation happen. They want to see it happen here in America. They want to see America's strength. So, you know, David Sachs helping both on the AI side as well as on the crypto side. It's phenomenal. He happens to be a big investor in BitGo. I've known David for 10 years, I think, at this point. So, look, he's a phenomenal mind. He happens to be a big investor in BitGo. I've known David for 10 years, I think, at this point. So, look, he's a phenomenal mind. He's been seen all over the

All In podcast for the last couple of years. And people see exactly how capable this man is. So, I think he's going to be a great help to the administration. And he's going to help make sure that the policies that they're looking for come through. Do you expect to see in 2025 more companies adding Bitcoin to their balance sheet? That obviously was a big theme of 2024. And I'm curious if you think that continues and whether there's any kind of reputational risk that goes along with that size of purchase of Bitcoin. It's absolutely going to happen. We're talking with multiple clients right now about doing that. It's been a conversation for the last couple of years, but frankly, the regulatory changes make it a lot easier. Having ETFs available make it a lot easier.

People don't remember exactly how much balance sheet cash some of the largest top seven companies have. I mean, it's hundreds of billions of dollars. So having some access to Bitcoin into that portfolio, into that treasury management just makes sense. And remember, it's a hedge against whether the U.S. can curtail inflation. And while we're optimistic about what's going to happen with the new administration over the next few years, you know, America has not had a track record at all of being able to curtail spending. So if we're going to continue to see monetary supply go up, Bitcoin is the perfect hedge against that.

Is there a concentration risk, though, if companies do start to adopt this en masse? Some people talk about that from like, would ETFs become mass accumulators of Bitcoin? I don't see that as an immediate problem at all. And I think we're going to see a mixture because, you know, we do talk with corporates, but a mixture of some taking self custody, others using different providers, and then using the ETF. So I don't think it's a foreseeable problem. I mean, it could become a problem in the long term, but we'll see how that

goes. So, David, I mean, I think, I think I mean, sorry, Mike, I apologize. I was thinking about David Sachs right there because we want to make sure we had a disclosure that he's an investor in yours, but you already did did it. I do want to ask you, what is Bitcoin actually used for? I asked a lot of people on my show, Worldwide Exchange. What's the actual purpose of Bitcoin and people invest in it? They're very bullish on it. But overall, as we look into 2025 and beyond, what's the purpose? Is it stored value? Is it, quote unquote, digital gold? Does it have some other purpose that's going to reveal itself later on? It's a great question. Look, I mean, Bitcoin and then more broadly, it represents a category of

digital assets that have a number of use cases. In the case of Bitcoin, I mean, right now, it's clearly a great store of value. It's a hedge against the dollar that's available today. While it's true, some people are speculating on it. They're speculating far more on the long tail of coins that come behind it. But there's two other real use cases that are happening right now that are super important for Americans in the short term and long term. Number one is stable coins. So stable coins is a digital one to one back dollar. It can be used for payments all around the globe. You've seen this taken off over the last couple of years. Mike, so sorry to cut you off.

We are about done with our show today, but we do really appreciate your time. We'll get that second use case shortly. That does it for overtime.