Closing Bell - Closing Bell Overtime: Hunterbrook’s Sam Koppelman On Shorting UWM; Blackstone Global Co-Head of Real Estate On Top Opportunities 4/3/24

Episode Date: April 3, 2024

Real estate investors are adjusting to a “higher for longer” environment; Blackstone Global Co-Head of Real Estate Kathleen McCarthy talks the impact on her portfolio and where she sees top opportunities going forward. Disney management held off investor Nelson Peltz’s bid for two board seats; shareholder and Peltz-backer Robert Schein of Blanke Schein Wealth Management weighs in on what’s next. The future of investigative journalism? Hunterbrook’s Sam Koppelman talks the company’s launch after it published a blistering report calling out practices at UWM while going short the stock. Plus, Klaviyo CEO on the state of the consumer.

Well, a late afternoon slump sending the Dow lower for the third straight day. Just barely, though. We did get slight gains for the S&P and NASDAQ. That's the scorecard on Wall Street, but the action is just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan with John Port. Yeah, and the Dow now on pace for its worst week since October. Energy, the best performing sector as WTI crude, keeps rallying. Consumer staples, the big loser. Now investors turn their attention to another read on the state of the consumer.

We're going to have instant analysis of Levi Strauss' results as soon as they're released. Also ahead, real estate. It's been the worst performing S&P sector this year. But Blackstone's global co-head of real estate tells us where she sees buying opportunities across the broader space. That's coming up. Yeah, let's get to today's action now with our market panel, Barbara Duran of BD8 Capital Partners and David Kelly of J.P. Morgan Asset Management. Welcome, both of you. David, we've got one more trading day before the jobs report. You're still expecting three cuts this year. Not everybody at the Fed is. So how important is that report? What are you looking for sort of in the hours ahead of it as we see the major indices sort of treading water here? Well, I think it is

important that we get three rate cuts. The futures market is nervously still pricing in three rate cuts this year and pricing in a first cut in June. But it's close. I mean, you can hear voices in the Fed saying, why do we need to do it now? Why do we wait? And my response to that is, look, the economy is in pretty good shape here. Inflation is coming down slowly but steadily. And it's not that high right now. So if the economy is basically where you want it to be, why do you have an inappropriate level of monetary tightening? So I think they ought to do it. I think J-PAL wants to do it. But I think it's going to be really difficult to strong arm all the members into agreeing to a rate cut in June. So I expect we'll get some dissent then. So it'll be interesting. But I do

think it's important for the market that the Federal Reserve get the business of bringing rates back down to more normal levels, given that the economy seems to be pretty well balanced here. OK, Barbara, we've been kind of chopping sideways for the last couple of weeks. What gets us moving in one direction or the other? Well, the market, as we know, has had a huge run this year, S&P up 10 percent, up 25 percent since last October. So it's either the Fed cuts rates. And we've talked about that. And I think, you know, David's right. There's some question about whether it's going to be three or two. But, you know, the rates cuts will come. Or the other one

is earnings. And I think it's where the focus is on earnings. You've certainly seen since the beginning of the year when expectations were for six to seven cuts, the market has absorbed the reality that at most it'll likely be three and could even be two. And so I think that earnings season starts next week again with the big banks, JP Morgan, Citi, Wells Fargo. And then after that, and we're going to hear a lot about earnings and company guidance in that because the fourth quarter was actually pretty strong. Guidance was mixed depending on the sector. But right now, the earnings estimate, the S&P average on the street is about 9 to 10 percent. So we'll see how this earnings does.

But I think that could kick us off again. OK. You know, it's interesting, David, because we did see the 10-year Treasury yield touch levels that it hasn't been at since November of last year. And it almost feels like there's a divergence between equities and the bond market right now. Treasury is at least earlier in the day responding to a hot ADP jobs report, also arguably that downbeat update that we saw from Ulta, whereas equities have been responding to this cooler services ISM. In terms of what's being priced into the market and where it goes from here, I just want to play this soundbite from David Einhort of Greenlight Capital, who was on CNBC earlier today and get your thoughts. How many times are they going to cut this year? I think fewer than are priced in right now.

So fewer than three? Sure. Do you think there's a chance they don't do anything? There's a chance. I think inflation is re-accelerating. I think there's a lot of indication of that. So if inflation is re-accelerating, I mean, is the equity market positioned for this, for the possibility of no cuts at all this year? Because we've started to hear, I realize it's still maybe somewhat of a long shot and it's going to be data dependent, but we've been hearing more possibility for more folks that are tied into the Fed about this in the last couple of weeks. Yeah, I just fundamentally disagree with that.

I think inflation is coming down. It's just cooling slowly at this point. But it's already below 3%. The core consumption deflation, which is the number the Federal Reserve looks at the most, is about 2.8% year over year. I believe that'll be down to about 2.6 percent year over year for the April read. And that's the last read they have going into that June meeting. So it's just coming down slowly. But if you if you look, if you dig into the components of inflation here, really, inflation

has been supported by very strong growth still in shelter costs year over year and in auto insurance. And both of those are smooth or overly smooth. They're very lagging indicators. We know that both those things should continue to come down, at least the shelter part should continue to come down and auto insurance should begin to come down in the months ahead. So I feel pretty good about the idea that underlying inflation is going to come down. One thing we're going to be watching for on Friday is I think that the year over year number on wages will go from about 4.3 percent year-over-year to 4.1 percent, proving yet again that you can run this economy at very high levels of labor force participation and low levels of unemployment. You can do that and still bring wage growth down. So

this is not an inflationary economy. The Federal Reserve doesn't need to fight a war that's already been won. Okay. Barbara, I want to get your thoughts on how oil factors into this story as we've seen it move higher as well amid geopolitical risks and demand, I guess, reinvigorating amid some of the stronger macro data as well. Right. And also some supply less than expected, the U..S., Russia and the OPEC cuts, which they look like going to do it. I think obviously the inflationary expectations for consumers have improved. But what will happen, you know, what people see is prices at the supermarket. They see prices at the gas station go up, you know, and they see that their rents or their home prices are not going down. So, you know, we will see it will have an impact on the consumer if gas prices stay up, get up higher

and stay there. So I think inflationary expectations could be dinged on the margin. But ultimately, I don't think it's going to have a major impact on the economy and what we're seeing and also inflation. And I just want to mention, too, on David, you know, said about the four point three wage increase a year over year could come down to four point one, 19 and 2019 pre-pandemic, the yearly wage increase was four point six percent. So we're still better than that. So inflation, I think he's right. It's coming down. And you saw the ISM service numbers this morning. They were very positive, encouraging that way. OK, Barbara Duran and David Kelly, thanks for joining us with a mixed picture for the stocks, but very, very range bound in trading today. Well, it's time now to bring in senior markets

commentator Mike Santoli for a look at cyclicals. Mike. Yeah, Morgan, the cyclical groups in the market have been leading off of that October low. That's been one of the consistent messages here. That includes industrials and consumer cyclicals, equal weighted right here. Take a look compared to the equal weighted S&P 500. What you have seen is some fatigue on the consumer side. That's this RSPD is the equal weighted consumer discretionary sector. And it's now kind of underperforming the average stock, whereas industrials managed to really hold their advantage. It does seem as if there's a little bit of a shift toward the production side of the economy, the ISM manufacturing numbers coming back strongly, where the consumer kind of held in there for the last couple of years. So maybe that's what we're seeing in the stocks. You were

mentioning the declines in Ulta today as well. So it's become a little choppier in terms of household spending, but in general, the industrial side hanging in there at least. Now, we've been watching the rise in Treasury yields. I think most relevant to S&P 500 type companies is corporate bond yields. And this is what we see here. Investment grade corporate bond yields are up to around five and a half percent. And you see that there are nowhere near those highs from from up last fall, which is a positive thing. And the other thing to keep in mind is that in general, in aggregate, companies also hold a lot of cash. This is approximately over 5% what a company would be earning on their idle cash. So on an overall basis, the net interest cost of corporate America is very modest relative to history. So that's been one of the buffers,

I think, against this yield move when it comes to how it's affecting equities more. Yeah, we talk about easing financial conditions where stocks are concerned, but credit spreads are another area, too. I just wonder, though, when you see credit spreads moving like this, is this a lagging or leading indicator for what we're seeing more broadly in the markets? It's more coincident. I mean, I usually treat credit spreads. Now, this is the absolute yield, not the spread. So this is the spread plus what's going on in treasuries. What I do think is that it's sort of a do it. Should I worry indicator? So if you see stocks back off a little bit, but credit's not bothered, that usually means it's not necessarily

a big, nasty macro thing. Sometimes credit can sniff things out earlier. But I will say, too, when inflation stays high, that doesn't always hurt credit spreads because it's easier to cover your debt obligations if you do have a little pricing power. All right, Mike Santoli, thank you. Now we got to get to Levi Strauss earnings. That stock is popping 8 percent. Courtney Reagan has the numbers. Court. Hi there, John. Yes, so this is Levi Strauss' first quarter and the first quarter underneath new CEO Michelle Goss. Levi Strauss and company reporting earnings per share of 26 cents adjusted. That's five cents better than the street had been looking for and also stronger than expected revenues at $1.56 billion compared to $1.55 billion. It looks like North America revenues stronger than expected.

Europe and Asia missed the consensus expectation from the street. Wholesale, those sales down about 18 percent, but direct-to-consumer up 7 percent and up in all segments, according to the quote from CEO Michelle Goss. Inventory down 14 percent. The company is reaffirming its previous full-year outlook for sales, expecting sales to grow between 1% and 3%. The street right now consensus is a growth of 2.4%. They are, however, slightly raising their adjusted earnings per share outlook for the year, now seeing a range of $1.17 to $1.27 versus the street's $1.21.

The range previously had been $1.15 to $1.25. And coming up on Last Call, we will speak with new Levi Strauss & Company CEO Michelle Goss in her first TV interview as CEO. Also an exclusive. Make sure not to miss that this evening on Last Call. For now, I'll send it back over to you, John and Morgan. All right, if this move holds,

it's a nice way to make an entrance up now 9.5%. Court, thanks. I'm curious about the Beyonce effect, too. That doesn't hurt. We've got a news alert on Google. Meanwhile, Pippa Stevens has details there. Pippa? Hey, John.

Well, Google is considering charging for AI-powered search, according to a report in the Financial Times. And this would be the first time that Google has charged for any product that falls behind its core paywall. And this comes, of course, as the company combats the threat posed to its business by ChatGPT. And so the traditional search engine would still remain free of charge. But it is those premium features that Google is considering charging. And it's aimed at people looking for enhancements to its core search project.

Shares are up about 1% here after hours. Morgan? All right. Pippa Stevens, thank you. Up next, Blackstone's global co-head of real estate, Kathleen McCarthy, on where she sees the biggest opportunities in the sector right now. Plus, Disney shares under pressure after the company easily won the boardroom battle with Nelson Peltz. Coming up, a shareholder who voted for Peltz on whether Disney

can turn around the business without the activist investor on the board. We'll be right back. Welcome back to Overtime with Fed Chair Powell's comments today about needing more evidence before any rate cut decisions are made. Markets are adjusting to a potentially higher for longer environment. So what does that mean for real estate? Well, joining us now in an exclusive interview is Blackstone Global co-head of real estate, Kathleen McCarthy. It's so great to have you here on set with us. Welcome. Thanks for having me.

I'm going to start right there. Higher for longer, a Fed that has rates elevated. What does this mean for real estate? Can we actually say that we're finding stabilization even a bottoming in values? Well, we do feel like there's a bottoming happening. And we've said there's no V-shaped recovery. It's not going to be a straight line up from here. But when we look at some of the key pillars of how a recovery comes into place,

we do see the cost of capital coming down with spreads coming in. We're seeing more liquidity in markets. And perhaps most importantly for the long term, we are seeing a sharp decline in new supply. So new starts, for example, in logistics and rental housing, where a lot of our capital is focused, down 30 to 75 percent, depending on the market. And so we think that sets up for long-term variable performance on the back of good supply and demand. Last time you and I spoke in September, last year you had raised a record $30 billion for a global real estate opportunistic fund. I believe you got $65 billion in dry powder for real estate at Blackstone. Are you deploying any of that, especially when you do talk about

some of these potential shortages? Absolutely. With all that dry powder, this is the kind of environment when we do some of our best work. And that's because we can combine this capital with the expertise and experience of our team. So if you just look at even the last couple of months, we've announced some really signature Blackstone transactions. We started the year announcing our 51st take private of a company called Tricon Residential, which focuses on high-quality residential development and management in Canada and the U.S. Also in data centers, which is one of our highest

conviction themes we're most excited about. We announced a $7 billion joint venture with Digital Realty, where across Europe and the U.S., we're going to build data centers. And that's just benefiting from explosive demand for that kind of digital infrastructure from some of the biggest technology users in the world. Kathleen, I've been hearing that a lot of commercial real estate right now is about quality, whether you're talking about office or commercial or data center, industrial within that, which is tricky when you have fewer new starts. So how does that play into your strategy and how capital gets used, maybe not to greenfield and build something new, but to improve something existing to get it better lead certified or to get it more attractive and rents higher?

Well, I'd say just overall, and you're highlighting that where you invest matters and what you own matters. And we've seen that, of course, in commercial real estate where traditional office, the story there that so many are focusing on is quite different than the strong performance we continue to see in warehouses and rental housing, data centers, hospitality. And so what we're always trying to do is buy high quality real estate in good locations, but make it better, make the company that owns and operates that real estate a better company. And so sustainability is a big part of that.

And that's in part because that's where the most attractive tenants wanna be. They wanna be in real estate that is high quality, that is a place where their people want to come to work and to create and to collaborate, and sustainability can be part of it. But, you know, so much of it is, you know, how do you operate? Do you bring that great customer service? Are you being a partner to your customers in helping them grow and do what they want to do for their end customer? Is the remote work trend that we saw reversing at all, particularly in larger markets? We hear that Gen Y wants to be in the office increasingly.

Well, I would say I think we continue to see news and evidence that more people are coming back to the office and you can look at turnstile data and just anecdotal evidence of talking to companies and CEOs. But we have long believed that we do our best work physically together in the office. We were early openers in July 2020 back in. We're in five days a week. And that's because we are feeling that we owe our customers our best work. And we do that when we're together. We are investors. We're trying to create and evolve. And the world's not a static place. And we can't be static either. And so being together certainly helps with that. I'd say equally importantly, our model works on training people.

I mean, I'm getting trained every day. And I think that's all done best together. And we're seeing more and more companies recognizing that while for some period of time, and maybe for people who have been part of companies for a long time, you can operate remotely, that same thing can't happen in perpetuity and particularly for new people. Yeah. And you and I have certainly had the conversation before about the fact that Blackstone, it's just a small, tiny piece of your portfolio office because you sort of saw the writing on the wall even before the pandemic in terms of

what we've seen playing out in that market. I want to get to housing, though, because you're involved in multifamily. You've also and you mentioned Tricon, you've also gone back into, in a bigger way, with that deal, single-family rentals. What are you seeing in housing, both in the U.S. and abroad, especially at a time where everybody's so focused on inflation, and we know shelter prices factors into that in a big way? Yeah. Well, I think globally, the picture is of a long-term imbalance between supply of housing and the demand for it. And that is really what's impacted affordability. It's also what's created so much resilience for rental housing, particularly in a market like here in the U.S. where for-sale housing is 50% more expensive than renting your home. And so what

we really focus on is delivering the best possible experience for the resident across all the different kinds of rental housing. We operate and do that globally. A company like Tricon we see is very much aligned with our values of delivering for that customer in terms of their experience, meeting their needs, having high quality property that we're investing in and we're being responsive always to what they need. And we right now see a world where certainly in certain markets, you're seeing some elevated new supply of rental housing, but that exists because those projects were started two, two and a half years ago. New supply now coming down sharply. And so what we're trying to do is position our investors in their capital to benefit from the fact that we do see

continued demand, a structural imbalance, and less supply coming online in the near term. LISA DESJARDINS I'd be remiss if I didn't ask you about B-rate. I know 2023 was a dramatic year in terms of redemption requests. And last month, the announcement, the disclosure from Blackstone that you had fulfilled 100 percent of those requests in February, but then just yesterday, also disclosure that the fund had failed to generate enough cash to cover its dividend last year. Your response, where are we at in terms of B-REIT?

So in 2023, B-REIT fulfilled 95 percent of distributions from cash flow from operations. In the fullness of time, it's been over 100 percent in terms of our cash flow generation to meet those distributions. And so we focus on that long term and we focus on performance and the go forward positioning of the company. The company has $8 billion of liquidity. It's 70% located in the Sunbelt markets, those top growing markets. And the capital is concentrated in logistics, rental housing, data centers. And that's where we see the strongest cash flow growth now and over the long term. And so we and our investors are really just focused on the performance. The class I shareholders have generated a 10.5% net return since inception.

That's two times the public REITs. And because of that portfolio, because of that liquidity and cash flow generation potential, we see a positive future ahead. And we're really focused, just like we are for all of our capital, on being on the offensive, taking advantage of the dislocated market to invest capital and to position them into great assets at good values. Okay. Kathleen McCarthy of Blackstone, thanks for joining us here on set. Appreciate it. Thank you. Well, Disney shares sinking after winning its boardroom battle against activist investor Nelson Peltz.

Up next, a Disney shareholder explains why he voted for Peltz and what he's going to do with the stock now. Plus, hedge fund research meets journalism. We'll speak with the publisher of a new company that's part media, part hedge fund, and whether this could be the future of investing on Wall Street. We'll be right back. Disney shares closing down 3% today after shareholders voted to re-elect the full board at today's annual meeting. This marks the end of Disney's boardroom battle and hands a major defeat to try-on partners Nelson Peltz, who had hoped to join the board. Joining us now, a Disney shareholder who voted in favor of Nelson Peltz, Robert Schein of Blanky Schein Wealth Management. Robert, I'm not sure you would characterize this as a big loss for Nelson Peltz, but so far it's been a sell the news event. What does it take from here, you think, to get Disney stock permanently moving in the right direction?

Well, we saw Nelson Peltz charge for the board seat. At the end of the day, it's not a defeat. He is that superhero character that Disney, with its true storytelling, loves to write about. And at the end of the day, he's actually made a lot of money, but he's been that agent of change. And he's pointing out one of the reasons why we voted in his direction was he's pointing out the obvious. Disney needs some restructuring. They need to go back to what made them great originally.

And, you know, Bob Iger, we're not against Bob Iger. In fact, we really like Bob Iger. I've been a Disney shareholder for well over 20 years personally. But at the end of the day, Bob needs to focus on profitability and moving forward in the shareholders direction. But more importantly, listening to the audience, getting the experiences to where they need to be for the true Disney community. All right. All right. I think Disney might say Nelson Peltz is more of a venom, maybe more of an anti-hero. I know that's Sony, but still. I wonder, though, what does Disney do about succession? If you're going to decide within the next year what to do with it, this must not be the most important issue to you because I doubt we get it figured out that soon

if we know the pattern of Bob Iger. But is that going to be progress in that direction important to what you do with the stock? Yeah, I'm holding on to Disney moving forward if Bob is at the helm, right? I mean, Nelson pointed out the number one issue is succession. It didn't work. There is a reboot right now playing out. Bob Iger, for the last 20 plus years, has been phenomenal making deals. That's in his blood. That's what makes Disney what Disney is most recently. And so what we're going to find is Bob's going to be doing a deal. He just did

a partnership with Epic for $1.5 billion, moving back into the video game world. But at the end of the day, when Bob decides to hang it up, who is going to replace his shoes? And they're large shoes. And that's the concern for all shareholders on both sides of the aisle for this. So we don't have an answer. We're going to be paying attention for it. Okay. So that's, so that's the number one issue for you as well, then it sounds like, I mean, do you, are you looking for an update on that process sooner rather than later then? Yeah, I think there's a lot of work that needs to be done. I know that James Gorman, who's a board member, former Morgan Stanley colleague, also said that they're clearly locked in on the succession planning with a process moving forward, unlike last time, which is it's very, you know have somebody paying attention to the finances as well. Moving forward, I think Bob Iger honestly has got a few more deals in him. And so I don't think

succession is right on the table. He's going to point to the board. He's going to use that board cover right now. But at the end of the day, you have to look at Disney Story. It's the multi-billion dollar brand. It's an iconic name that everyone knows and loves. They just have to focus on what's really right at hand for them. And, you know, here's what I love, what Bob Iger said. He calls it a distraction and now the distraction is put to bed. It's no different than when my son and I get a report card and I say, son, you know, your grades are failing right now or you're not doing as well as you should be doing. You know, and my son and I said, dad, we're actually having a conversation right now. I need to go back and study, we're actually having a conversation right now.

I need to go back and study. No, no. My conversation right now is about you getting back on track. Don't use that as a distraction. So I think, you know, you have last five movies in a row that really haven't done what Disney's great at. And so they just have to focus to their true audience. Bob Iger said, let's bring back the true storytelling, traditional storytelling. So let's just focus on executing and then let's look towards succession planning a little bit later on. All right, Robert Schein, thank you. See what Disney does. And we're going to have much more on Disney tomorrow when David Faber sits down exclusively with CEO Bob Iger. That's 9 a.m. on Squawk on the Street. Now, breaking news on the Fed. Steve Leisman has it. Steve. Hey, John.

Fed Governor Adriana Coogler saying in a speech right now that lowering the policy rate will be appropriate this year, along with several other Fed officials who have spoken. It doesn't say how much or when but she says she expects the disinflation trend we've seen despite two uh squirrelly months we've had to continue squirrelly is my word to continue without a broad economic slowdown she sees uh the recent 2.8 percent core uh pce representing considerable progress but still meaningfully above the fed's target so like the fed chair she sees that there's still work to do. Continued disinflation, she says, is going to require progress on both sides of housing and non-housing services.

But she believes that housing inflation broadly will continue to cool over coming months and this year. Talks about upside and downside risks to the economy from policy remaining too tight or too loose. But she notes that there's still room for further supply side improvement, echoing something that the Fed chair said earlier today. Labor supply growth, she was an economist at the Labor Department, should continue to ease both wage and inflationary pressures. Finally, wage growth, she says, has cooled as the labor market has moved into better balance. And one more thing, she says, immigration and population growth have been sizable contributors to the labor force growth. Morgan, leave it there. Capping a day full of Fed speak, beginning with my interview this morning with Raphael Bostic from Atlanta,

going on to the chair. And then there's a whole slew tomorrow, but kind of singing from the same hymnal, if you ask me. It does seem that way. And by the way, that Bostick interview was great, Steve. I watched it with with a lot of attention. But anyway, Steve Leisman, thanks for joining us. A lot more commentary on immigration as of late, too, and the role that that's playing in the labor market. Well, it's time now for CNBC News Update with Bertha Coombs. Bertha. Hey, Morgan. NBC News is reporting that President Biden will speak with Israeli Prime Minister

Benjamin Netanyahu tomorrow by phone. It will be the first call between the two leaders since March 18th, and it comes just three days after seven World Central kitchen workers were killed by an Israeli airstrike in Gaza. WhatsApp service is slowly returning after thousands of users experienced outages on the meta-owned messaging platform earlier today. Users on Down Detector also reported issues with Instagram, which is also owned by meta platforms. And ahead of next week's total solar eclipse, New York Attorney General Letitia James is reminding citizens

to make sure their viewing glasses are properly certified and have an ISO mark on the side. Viewing an eclipse without proper eyewear can cause permanent eye damage. I've got my glasses. I have to go check them out. Back over to you. All right, Bertha Coombs, thank you. Up next, the publisher of a new media company that says it doubles as a hedge fund.

Find out how he's trying to turn investigative journalism into big profits on Wall Street. Stay with us. Welcome back to Overtime, a hedge fund that's also a newspaper. That's the premise behind the organization Hunter Brook. The news side publishes news and investigative journalism, but before each investigative piece publishes, the hedge fund side gets first access so it can trade on the research. Well, this week, Hunter Brook unveiled its first piece. It basically launched, focusing on mortgage lender UWM,

and disclosed that it took a short position in the company and a long position in its rival, Rocket. We'll join us here on set, Hunter Brooks publisher, Sam Koppelman. Sam, it's good to have you here. Congrats on the launch. I just want to start with the business model itself, because we have long seen Wall Street firms, I think about short sellers, I think about hedge funds, etc., have employed or worked with journalists or researchers, analysts. How is this different? And how is the hedge fund piece of this financially supporting the media piece of this? The mission of 100 Book Media is very simple. It's an experiment to try to figure out if there's a sustainable and scalable way to fund reporting that we then publish for free, no ads, no paywalls to everyone. There will be a lot of reporting where we don't take any positions in the market

via our investment affiliate, Hunterbrook Capital. Yesterday, we published a story on United Wholesale Mortgage, which we believe revealed that they might be committing what we believe could be the biggest mortgage fraud since the financial crisis. How often are you going to be publishing stories? What is the cadence of that content going to look like? And I think just as importantly, how do you avoid perceived conflicts of interest or potential compliance risks? We report the truth based on publicly available information. We have advisors ranging from the

founder of ProPublica to the former editor-in-chief of the Wall Street Journal, and we adhere to the highest editorial standards. And then, after the stories have been reviewed by compliance to make sure that there's no inside information, we could pass them to Hunterbrook Capital. If the stories don't pass that test, we'll just publish them for the public to read. Sam, Neiman Lab, a journalist, kind of watchdog and resource organization today, says the reporting seems very strong of the same caliber as what you'd find in top national business news outlets. What you guys are saying here in this story on United Wholesale Mortgage is that while they claimed that brokers were serving the interests of people who were borrowing money, in fact, those brokers were not getting people the best deals. They were, you know, taking some off the top to give to United Wholesale Mortgage, which would be a big deal. Now, UWM is pushing back here. I'm going to read what they say. And in fairness, they say,

Hunterbrook is not a news organization. It's a hedge fund sensationalizing public information to manipulate the stock market to enrich themselves and their investors. Buried deep in their report and prior to its publication, Hunter Burke went short UWMC long RKT rocket mortgage and purchase derivatives. As you would expect, a hedge fund masquerading as journalism would knowingly mislead the public. The report itself is riddled with inaccuracies and incorrect information. A hedge fund scheme using journalists to short a stock is not only unethical, it may be fraudulent. Okay, so now I've read it. However, I don't see them pointing out any specific thing

that they say is inaccurate and actually took down some of their marketing, it seems, right after you published. Have they told you what they say is inaccurate? They have not. UWM would love for this to be a story about us. It's a story about them. About how they became the biggest mortgage lender in the country based on a lie. Which was that they sourced all of their loans from independent mortgage brokers who they said were looking out for the best interest of home buyers and actually, time and time again, were funneling business to UWM even when it was far from the cheapest option.

That's why they're so focused on Hunterbrook, because if people learned what they were doing, as they might have learned through a class action lawsuit that was just filed against them by Boies Schiller alleging that they're responsible for a conspiracy, a RICO conspiracy to defraud folks alleging mail fraud and wire fraud. If the public were aware of that, UWM knows that folks would likely not trust that the independent brokers who they market are actually independent. And I think the fact that they've deleted the marketing that claimed that these brokers shop

between dozens of options is a pretty good sign that they know that this is not necessarily true. I think it's an interesting dichotomy. Private equity has taken apart many local news organizations and now perhaps hedge funds, at least nominally, trying to put them back together. But it seems to me there's a problem in that your funding is partly linked to how the market reacts.

And so you're going to get the criticism that you're trying for a stock pop. What can you possibly say to that? Because it's true. People don't have to trust us. They can trust our work. So with this story, we didn't just publish what we know. We published how we know it. Full methodology, a 25-page document. Honestly, probably a little boring for most readers. If they want to verify what we've done, they can check. UWM on its website claims that they saved folks $9,400 in a study that they've never published. We reached out to them for

comment asking for that study so we could compare it to ours and see where we might have gotten it wrong. They responded with a cease and desist. I think that speaks volumes. So just to go back to the business model then here and how this funds investigative journalism, what are your expectations in terms of the ramp for growth for Hunter Brook, I guess both sides of the businesses and how it sustains the journalism piece specifically. This is an experiment. It might not work, but we all know what's happened out in the world where it's really, really hard

to fund investigative reporting, particularly on companies people maybe haven't heard of, but that impact many lives. Hunter Brook's a bet that if you hire really, really good reporters, you have them look through the universe of publicly available information, and you have them seek out the truth, that that does have value. We still believe that has value. Maybe we'll be wrong, but we think it's worth a shot.

All right, and we'll see how much you have to spend on legal defense as well. Sam, thanks for coming by and explaining it to us. I'd be significantly more worried if I were UW. They cut a lot of money, though. All right. Up next, Mike Santoli is going to look at insurging investor sentiment and whether that's really a bullish sign for stocks. We'll be right back. Welcome back to Overtime. Mike Santoli returns with a snapshot of investor sentiment. Mike? Yeah, John, a lot of ways to measure this.

You can look at the options. You can look at fund flows. This is a long-running poll. Investors Intelligence, Investment Advisory Services, that's the pool here. Bulls versus Bears, this is the spread between those two. Pretty extreme. This goes back a decade. You got to go back to early 2018 to see it much higher than this. That was the time when the market had been barreling higher for an entire year. Very low volatility rally, as we've had

recently. We did get a gut check, kind of a correction in the early part of 2018. However, it can stay elevated for a while. If you see in here, you know, 2019 is a very strong year for stocks and there was consistent bullishness. But again, usually you see it ebb and flow a little bit more. And that tends to happen in response to the market taking a pause or backing off. So it's just one of those signs of very short term tactical overheating, not necessarily, John, the end of a bull market. It's the most dramatic move within a year that I see on that decade-long chart from way sub-zero to over 40. Exactly, which is fascinating because really people were down in the dumps.

That's the 2022. That was the bear market low. And there was a massive swing higher, which actually speaks toward it perhaps being a little bit not necessarily the end of a bull run because you had this sort of a lot of negativity to burn off to get to this point. But I just flag it as one of those kind of yellow flashing lights as opposed to something that says, oh, it's a pure contrarian signal. You got to run for the hills. All right. Mike Santoli, thank you. Up next, much more on Levi's earnings beat as we count down to the analyst call that kicks off at the top of the

hour. You can see those shares are up six and a half percent right now. We'll be right back. Welcome back to Overtime. Levi Strauss higher by about six and a half percent after reporting Q1 numbers that topped estimates on the top and bottom line and giving strong guidance. Direct-to-consumer saw 7% growth versus last year. Don't miss CEO Marcel Goss on Last Call tonight at 7 p.m. Up next, though, the CEO of e-commerce marketing firm Klaviyo on whether he sees any signs of a slowdown in consumer spending. Welcome back to Overtime. We're getting a mixed picture on the consumer today. Levi's posting stronger than expected revenue and reaffirming previous full year guidance just earlier this hour. But Ulta issuing a warning just earlier today on slowing demand

for beauty. That stock closing down 15 percent today, the worst performer in the S&P 500. For more on the consumer, let's bring in Andrew Bialecki. He's the CEO of e-commerce marketing platform Klaviyo. Andrew, it's great to have you on Overtime. And I think you're such a key guest on this, given the fact that Klaviyo really got its start in e-commerce and by selling into that industry and those businesses. I realize you've expanded since then, but what are you seeing in terms of the data around and the appetite around spending where the consumer is concerned? Yeah, thanks for having me. So, right, at Klaviyo, we're a platform that powers smarter

digital relationships between businesses and consumers. So you can think of us as that CRM for retail and consumer brands, businesses like Mattel, TaylorMade, Dollar Shave Club, and, you know, hundreds of thousands more. So consumer sentiment. As we've surveyed consumers, we're definitely seeing there being more discerning with their dollars. But as we talk to them, what's interesting is they're preferencing businesses that they already know. And so we actually looked back at the end of last year, the holiday period, Q4. And what we found is some interesting facts. We found that for consumers that were spending money with smaller businesses, for the first time, more than half of the revenue for smaller businesses was coming from repeat purchasers.

So this idea of consumers that want to build an affinity to a brand that they love, that's a real trend. Okay. So is that a good thing? Does that sort of speak to the stickiness of some of these brands and the resilience of consumers willing to spend on them then? Or does it speak more to the fact that consumers are much more discerning with their dollars? Well, I think it's a little bit of both. So consumers are definitely being more thoughtful, but at the same time, we're finding they're choosing fewer businesses to shop with.

So in the past where folks may have been more adventurous, let's say, I think they're finding that now with the technology that's out there, the fact that so many brands want to cultivate that kind of personal relationship and they have the technology to do more personalization, they're actually going back to the same folks over and over again. Whether it's that first purchase or we're also finding that a lot of consumers will buy a few times and then they'll increase their loyalty to that brand by either following them on social media or subscribing to an email or text messaging list. And that sort of indicates those businesses that that's something that's likely to be back, you know, multiple times. Andrew, I want to follow up on that and talk AI at the same time. When you and I talked the week after Thanksgiving, you talked about that

loyalty trend, but also how you're trying to use AI to target product recommendations to drive those loyal customers to actually buy. So how has that continued to play out as we got through Q1? Yeah, it's accelerating. I mean, that kind of technology, it's bursting onto the scene. So at Klaviyo, we're big believers that the future of marketing and of CRM, of customer experience, is autonomous. What does that mean? It doesn't mean that AI is going to replace the humans in designing great marketing experiences, but it does mean that humans that are using AI tools

are going to outperform teams that don't. As an example, one of our customers, Willowtree, was running marketing campaigns without our AI tools. When they turned those on, they saw a 50% increase in engagement and revenue to those marketing campaigns. So we think those kinds of things are possible with artificial intelligence. And the reason is, if you think about it, a lot of marketers, they spend a lot of time experimenting, guessing and checking, using their intuition. But if you combine that with all of the data they have on their consumers so they can offer more personalized one-to-one recommendations, and they can sort of look over their past marketing efforts and do that in an

automated way, that's going to drive better results. So I want to ask you about this report from the Financial Times where Google is said to be looking at charging for AI in search. To me, I mean, Google's now, I think, down in overtime after that report. Paying for search, for AI-driven search, isn't so interesting. What's more interesting, I think, to investors is the idea that AI is going to help with commerce discovery and drive revenue there. So what's the future of AI used to drive discovery, not just on Shopify, where I believe about three quarters of your business comes from, but also on important entry points like Google? Yeah, well, in general, let's think about how we give those same tools to individual brands, whether small businesses or big enterprises. And what we're finding is by using AI to customize the recommendations,

say whether it's search or proactively showing products to consumers that we know they're going to like, that drives engagement with customers. It increases their spending. So we think that's going to become mainstream. And I think that additional AI, those capabilities as they're built. So we think that's going to become mainstream. And I think that additional AI, those capabilities as they're built into software, those are going to be new products, new products for companies like ours and for other software companies, where because you're able to show the value to the end business, you can actually charge more for it too. All right. Andrew Bialecki, co-founder and CEO of Klaviyo. Thanks for joining us.

All right. So, I mean, we had a mixed picture for stocks today. Very range-bound, though. Tomorrow, it's jobs. It's more jobs-related data. Challenger, jobless claims, and then you get some earnings before the bell, too. But really, come Friday, nonfarm payrolls. That's what's going to matter. Lots of Fed speak, too.

But I wonder how much that matters when really everybody's awaiting that jobs number. Yeah, we'll have to see. In the meantime, that's going to do it for us here at Overtime. Fast money starts now.