Closing Bell - Closing Bell Overtime: Interviews with CEOs of Tilray, Crowdstrike; Why Bitcoin Crossed Above $30,000 For The First Time in 10 Months 4/11/23

Episode Date: April 11, 2023

Stocks finished mixed and near worst levels. Vital Knowledge’s Adam Crisafulli and Cantor Fitzgerald’s Eric Johnston battle out where the market goes from here in a bear versus bull debate. Evercore analyst CJ Muse on why it’s a “stock-pickers paradise” in the chips sector. Tilray shares fell today. CEO Irwin Simon discusses the latest quarter and big acquisition. CrowdStrike hosted its first ever government summit. CEO George Kurtz joins from there to talk public/private partnerships in cloud and cybersecurity. Why Weight Watchers soared nearly 60% higher today and our Meg Tirrell discusses the weight loss drug market with the FDA Commissioner Dr. Califf. Plus, former Kansas City Fed President Thomas Hoenig on upcoming inflation data, short seller Brad Lamensdorf on CarMax and our Mackenzie Sigalos on bitcoin’s recent rally.

A mixed session for stocks as the S&P clings to 4,100. 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 Fort. We've got a big show coming your way. We're gonna talk to the CEO of pot company, Tilray, whose stock is down sharply today

on the back of a revenue miss. Plus, CrowdStrike CEO George Kurtz is gonna join us following the company's government summit today in Washington. Let's get straight to our market panel. Joining us now are Adam Crisafulli from Vital Knowledge and Eric Johnston from Cantor Fitzgerald. Good afternoon to you both. I'm going to call this a bull bear debate here. Adam, you're bullish, constructive, I'll call you. What do you make of the market now? What would you be doing? So, you know, I think as we

head into earnings season, that's really going to be the next major catalyst. You know, I think where I differ with the consensus most comes down to this particular earnings season being relatively unique versus prior pre-COVID ones. And I think that a lot of major headwinds that companies have been facing throughout the COVID bubble, the boom era of COVID, that had helped drive revenue, but it actually driven costs up even more, compressed margins and weighed on earnings. I think a lot of those headwinds are now in the process of reversing. So costs, supply chains, inventories are normalizing, dollar pressure is easing. And then China, which has been kind of in its COVID winter for the last several years, is now finally coming online. So corporate America is a unique set of tailwinds, even though you are seeing certainly a softening in the domestic economy.

So that's kind of the dichotomy that I'm looking for as we head into earnings season, which starts on Friday. Yeah. Eric, do you agree with that? How do you see the market here at these levels? So at these levels, we're incredibly bearish. We think that, you know, our base case is that we go to the low, you know, three thousands and are importantly, our best case is that we go approximately sideways from where we are now, which would be, you know, big underperformance versus money market funds as an example. You know, the bottom line is, is that, you know, we think the economy is going to slow down from here. We think it'll slow down significantly, but for stock prices to go down, it just needs to even just slow moderately from where we are today. Our view has been that the economy is going to be weak throughout this year,

and it's based on a whole bunch of factors, you know, a lot that we that we already know, the yield curve, leading economic indicators, and so many ISM and so many other factors. But I think what's important is that it's being pulled forward. And there are real time indicators that we're seeing right now that suggest that this slowdown is coming very soon. So,- Yeah, just to point out, sure. Yeah, go ahead. Just to point out a few of them very quickly is, we had the H-8 data that came out on Friday.

It showed the biggest two-week drop in loans in the history of the data. If you look at job openings, which are still very high, they had one of the largest two-month declines that we've seen. And we know that credit standards are tightening quickly as we speak. Well, so your base case is down about 20 percent from here. So I'd love to hear your bear case, first of all. But then it seems like for that base case to happen, Apple and Microsoft on the S&P have to fall apart. So what triggers that?

So I think it's important to know where we are from a starting point from a valuation perspective, because this definitely applies to Apple at 26 times earnings and Microsoft at 31 times earnings, both of which the earnings are probably not correct and need to go lower. But right now, the overall capitalization of the equity market relative to nominal GDP is at the same level as the year 2000 peak bubble. On a price to sales basis, we are at the year 2000 peak. And then you look at the PE multiple on its own right now at 18.3 times earnings, that's in the 90th percentile looking back the last 30, 40 years. So the starting point is not what you would typically see when you have all these concerns that are out there. So for example, at 18.3 times earnings, if we take that multiple to 15, right, which is a very reasonable multiple

in history, we've already gotten the 20% that I was, you know, that I was speaking about. So it doesn't, it's not heroic to get to numbers in the low 3000s. It seems that way based on where things are now, but it's not. Okay. But Adam, what I was trying to get at with Eric, and maybe you can comment here, what actually gets investors to give up on names like Apple and Microsoft that have been safe havens? How bad would things have to get, right, with everything else in order for that to happen, given that so much of the S&P waiting is now toward those big, at least people think, safe tech names? No, certainly. And I think, you know, it's interesting. Today, you actually did see these stocks come for sale. The days that those stocks come for sale, it's almost for good macro reasons.

You know, the composition of today's market was actually quite bullish. You saw very strong price action in a lot of the most economically sensitive sectors, and it was the safe haven super cap tech stocks that came for sale. So I guess to get, you know, I think, you know, where I differ in terms of my outlook is that normally pre-COVID you had concurrent cycles in the economy and with earnings. I think COVID distorted that relationship. And so what you saw is earnings have already been in relative down cycle as far as margins are concerned. Like I've been talking about, cost pressures have been enormous for the last couple of years, even though you had a very healthy broader economic backdrop. And so as we move forward now, this cycle

is going to stay somewhat disjointed, where earnings are going to be much more resilient than the broader economy. So I don't push back that aggressively on the caution on the U.S. economy. There certainly are growth headwinds. I wouldn't, you know, I'm not too concerned about what happened with Joltz. You know, there was some noise in the recent H8 data when it comes to bank lending data, bank lending numbers, you know, with Signature and Silicon Valley, and there's a big seasonal adjustment. So there's some noise in the data because of COVID. But I guess my core thesis is that, you know, pre-COVID earnings and the economy kind of had a concurrent cycle, but they've become separated to an extent. And that's going to help earnings hold up a lot better than the overall economy.

All right. We'll see how much more noise we get on inflation with CPI tomorrow. Adam, Eric, thank you. Thanks, Simon. Now let's talk chips. Slipping today, but having a strong year so far with the semiconductor ETF up more than 20%. Evercore out with a note today saying it's a, quote, stock picker's paradise in the space and adding NXP Semiconductor to its top picks list. Let's bring in the analyst behind that call, CJ Muse.

CJ, even NXP aside, so interesting to me that you like NVIDIA and Intel. I mean, somebody who likes Intel. I haven't heard that name on a likes list in a long time. Why? Yeah, yeah, John, thanks for having me, first off. But for Intel, you know, I think that when they cut the dividend and the stock didn't go lower, that was a clear signal of a bottom. And since then, data points coming from Taiwan suggest

that PCs are recovering, and they're undershipping PC sell-through by 40%. So if we were to speak to what we were hearing earlier in your discussion with the other panelists, you know, what's going on is that semiconductors, you know, have been cutting for the last 11 months, basically, you know, clearing away inventory. And so now we're going to have a PC recovery. And on top of that, Intel had a data center analyst day a couple weeks ago. And you know what? First time in seven years, they didn't downtick. So I think slowly but surely, you're going to see rising optimism here. Numbers are going up through the year. And really, this is an under-owned name that investors, I think, over time are going to have to chase.

So, you know, tactically, Intel is along from here. Okay. So, stock picker's paradise. What specific names, you just mentioned Intel, but what other names would you buy here and what would you steer clear of rather than, say, a broad-based purchase of the Sox or something else? Yeah, sure. That's a great question. So, you know, our focus is that the market is realizing that March-April is the fundamental bottom for semiconductors. From here, the call is, what is going to accelerate in the second half of 2023 and, more importantly, into 2024? On that front, you know, we like data centers, so we're sticking with NVIDIA. You know, the next bottleneck in AI is the network.

That is now causing problems for these large language models, chat GPT, et cetera. And so Marvell, Broadcom, those are winners there. You know, what would we avoid? You know, we would avoid semi-cap equipment right now. We love that group, but, you know, the group is at a good run. Numbers are not really going to move higher over the next, you know, three to nine months. So that's a sure that they're going to do that given all of the projections of a slowing economy in the second half? Does it require a stronger second half in order for that to pan out? Another great question. I'd say that, first and foremost, we've been cutting for 11 months in semiconductors. So if you look at June

a year ago through today, revenues for semiconductors on average are down 15 percent. EPS is down 27 percent for calendar 23. So the numbers have been cut. We're under shipping and demand. Our estimate is that Intel is under shipping PC sell through by 35 to 40 percent. So we are naturally going to have a catch up trade. And then to your question in terms of GDP implications to demand, you know, looking out three, six, nine, 12 months, yeah, you know, at some point that's going to have

a role on what the steady state demand picture looks like. But in terms of the catch-up, it's set in stone. You know, we're bottoming it here and we're going to see numbers move higher. CJ Mews of Evercore, thanks for joining us. Thank you for having me. Shares of Tilray burning out today, adding to steep losses over the last year after the cannabis company posted a big quarterly loss and missed on revenue. We're going to talk to CEO Erwin Simon about those numbers and also about another new acquisition. That's coming up next. Overtime is back in two.

Welcome back. Tilray shares up in spoke today, down 8% after a revenue miss. The cannabis company also announcing the acquisition of rival HexoCorp. Tilray CEO Erwin Simon joins us now. Erwin, it's great to have you on the show. And I do want to start. Great to be on the show. And I do want to start with that acquisition, because you already had a partnership with Hexo. So why make the acquisition now,

all stock acquisition, and why do so when you've been fairly critical about the Canadian cannabis market, given the fact that there are hefty tax rates and a lot of regulatory red tape? So first of all, good afternoon. Number one, the partnership was an equity partnership where we owned about 49% of the company. And, you know, with the Canadian market, yes, I've been critical about the Canadian market, how it's grown and what else we need to do there. And, you know, spending nine months with HEXO and getting to know them and the opportunities there, they had some great brands. Hexo did a great job on cost cutting. But it is now time for us to move our team in to be able to market the brands, to build the brands.

And you know what? The Canadian cannabis business really needs a leader there to take hold of the marketplace there. And with Tilray today and Hexo together, we have close to a 13% share. You know, our challenge is to do something in regards to excise tax, do something how we market to, you know, the Canadian consumers. So it was a good price.

We paid $56 million for the outstanding stock. And there's a lot of synergies, a lot of savings. And like I said before, it really gives us a big share in the marketplace. And you know what, Megan? Cannabis will legalize in the U.S. And we will ultimately be out there ready to move into the U.S. from our Canadian business.

I want to get to that, too. But first, I mean, Wall Street seems less convinced about this acquisition. A number of analysts showing some skepticism today. Bernstein writing, it feels like Tilray is running just a standstill as it seeks to gain share and slash costs to survive in the challenging Canadian cannabis market. Your response? So, listen, you have to be that low cost producer. As you see, you know, we've been the number one in Canada. We had about eight and a half percent share and buying Hexo now gives us 13 percent share. to be that low cost producer. As you see, you know, we've been the number one in Canada and we had

about eight and a half percent share and buying Hexo now gives us 13 percent share. There's over a thousand LPs in Canada. There's multiple stores. So consolidation has to happen there. If you come back and look at our other competitors, they're not growing either. So how do you grow? You got to do acquisitions. And with acquisitions, ultimately, you've got to grow your share. You've got to grow your sales there and you've got to take costs out. There's still, you know, a big business in Canada. It's still about five and a half, six billion dollar business at retail. And we still see a big opportunity there. And what it does, it prepares us for legalization, whether it's in Germany or whether it's in the U.S. Okay. Erwin, I want to take a turn from where Morgan was going with the questions and talk about the macro as we go further into this difficult economic environment.

Your CFO talked about controlling what you can control, getting more efficient during this period. But do you find consumers going to inferior goods you know to maybe street pot during a time like this arm how do you distinguish yourself in a down economy that's got this kinda competition so number one hey we are selling consumer cannabis tickets cannabis to consumers that goes through some pretty stringent quality control

and regulatory. You know, you hear about all this, you know, cannabis that's brought in the illicit market that's laced with fentanyl, laced with other products. You know, when you're buying products in Canada, that it goes through tremendous regulatory scrutiny. And that's real important today. And I think the biggest challenge in the Canadian market is, listen, 50 percent of it today goes through a legal market. The other 50% goes through an enlisted market. You know, Tilray paid over $120 million in excise tax together with, you know, together with Hexo will pay over $150, $160 million. But, you know, step back for a second. Let's look at Tilray.

It's got number one share of cannabis in Canada. We own some of the top beer businesses in the U.S. We own some of the top spirits business in Breckenridge Brewery. And we have a big medical cannabis business in Europe. So we're a diversified company in diversified categories that has tremendous opportunities upon legalization of cannabis. Yeah, let's talk about legalization in the U.S. Your expectations for when that could actually happen, and I know there's different steps and different legislation, for example, the SAFE Act that keeps coming and going in terms of being proposed. How are you thinking about that?

And is your strategy shifting as we do see some other Canadian cannabis companies start to get creative in terms of how they're plotting out their entrance into this market? Listen, 37 states have it legalized, whether it's recreational or medical cannabis today in the U.S. Ultimately, something's got to happen. You know, I expect within the next couple of days something come out in Germany in regards to legalization. So whether it's safe bank, whether it's full legalization, whether it's just medical cannabis legalization, something should happen. You can back and look at the tax dollars that Canada, you know, is deriving from cannabis. It's tremendous.

You can back and look at some of the states where legalization happened, whether it's Colorado, whether it's Washington, and how much it's contributed to tax dollars. So with that, we need to legalize cannabis in the U.S. once and for all to straighten out, you know, these different states and what's legal and what's not. We also got to do something about the illicit market out there and why cannabis is coming in here that doesn't go through the quality regulatory that a regulated cannabis company does. Yeah. Germany legalization, if and when that happens,

how meaningful is that to your company, especially given the fact that in this last quarterly report, international sales were down dramatically? Well, international sales were down because we're no longer shipping into Israel. But actually, we're doing quite well in Europe today. We sell into 20 different countries. It's all medical there. We have a distribution company called CC Pharma. We have, you know, operations in Portugal. We have growth facilities there, growth facilities in Germany. It will be big. It's worth billions of dollars for us to found legalization, you know, in the German market. And with that, it opens up the rest of Europe. And I think that's a big thing. Once Germany goes, which is, you know, 80 million

people, it will open up the rest of Europe. All right. Erwin Seilin, thank you. CEO of... Thank you very much. Now, after the break, the CEO of cybersecurity company CrowdStrike is going to join us exclusively following the company's first ever government summit in Washington. And later, the bear case for CarMax.

That name jumping today after earnings nearly doubled estimates. But we'll talk to a short seller who says a looming credit crunch could stall this rally. Welcome back to Overtime. It's time now for a CNBC News update with Bertha Coombs. Hi, Bertha. Hey, how are you, Morgan? Here's what's happening at this hour. The gunman who killed five people in a Louisville bank yesterday purchased his firearm legally. Louisville police say that the 25-year-old shooter purchased the AR-15-style weapon from an authorized dealer in the city less than a week before yesterday's attack. Officials are expected to provide additional updates and release body cam footage in the city less than a week before yesterday's attack. Officials are expected to provide additional updates and release body cam footage in the coming hours. The White House is proposing

new cuts for states that draw water from the Colorado River. California, Arizona and Nevada could see their water supply cut by as much as 25 percent as the federal government tries to save the remaining water from overuse. Final decision on cuts could come as early as this summer. And President Biden has spoken with the family of detained Wall Street Journal reporter Evan Gershkowitz. Biden has called the detention totally illegal, and the State Department now classifies Gershkowitz as wrongfully detained. The reporter was detained in Russia last month on accusations of espionage, which the U.S. government and the newspaper both vehemently deny.

Back over to you. Bertha, thank you. I'll take it. Meanwhile, check out WW. It used to be Weight Watchers, and now it's gone back to that name. Investors feeling light on their feet today as the stock's having its best day in over a month. The catalyst, a Goldman Sachs upgrade to buy from neutral after WW closed its acquisition of telehealth platform Sequence, which of course caused this stock to spike a few weeks ago. Sequence subscribers potentially get access to popular treatments for obesity like WeGoV and Ozempic. Goldman writing that this

new type of customer should add 30 million in total addressable market by the end of the decade, potentially adding two bucks to variable EPS. We had WW CEO Seema Sastani on our show last month after that acquisition was announced. Here's what she had to say. And we've been known for being science-backed, providing behavior change and lifestyle therapies. And what is incredibly exciting about this space is the science has advanced. And when the science advances, so do we. So we know now that there are biological underpinnings, genetic underpinnings for those who are living with overweight and obesity. And, you know, we want to be able to address those needs.

And so this isn't just a this isn't a pivot. It's an and. Weight Watchers closing just about 59 percent higher today. Meanwhile, Meg Terrell sat down with the commissioner of the FDA to discuss the fast-growing weight loss drug market, and she joins us now here on set with the highlights. This is just a story that keeps growing, dare I say? Yeah, no, it definitely does. People are incredibly excited about these medicines because for the first time,

they really are showing these incredible results in weight loss loss and so far the safety profile looks really good. On Thursday I went down to the FDA's headquarters in Silver Spring, Maryland to talk with Commissioner Dr. Robert Califf, himself a cardiologist who talks about a lot of things but of course these drugs are getting a lot of attention. Here's what he said about the question about having to take these medicines sort of in perpetuity to sustain weight loss. Check it out. I think any drug that we take for a long period of time, we should be concerned. And it's why I'm so focused on our evidence generation system. We just need the data. And so I'm overall optimistic. I also want to point out the thing about needing the drug forever. I'm not sure that's sort of early.

It's true. If you stop the drug after some period of time, the weight begins to come back up. But I'm not sure these people have gotten the behavioral interventions. So guys, I thought that was really interesting that he said that, especially in light of when you think about companies like Weight Watchers getting into this, when they can offer sort of those behavioral changes in tandem with taking these medications, that was what he's talking about here. The conventional wisdom about these medicines is you do have to take them for a really long period of time. And when he was talking about the data generation, that's following these things to see any sorts of long-term safety signals

that may arise from having to take these for such a long period of time. He was saying we really need good systems in place to do that, and the U.S. has not caught up technologically on that yet. How concerned is he? Is he concerned at all about the market sort of getting flooded with these injections if people don't need to continue taking them and maybe they can give them to somebody else or sell them to somebody else? Yeah, I think he is really concerned about that part of the market. You know, we talked in particular about these sort of compounded versions of these medicines. That's

when you can order them online from these unauthorized suppliers. And he said that is a dangerous thing to do. And you have to be careful about fraud use for weight loss when it's off label. You know, you may not fit the label of the drug, but your doctor says it is right for you. He says the FDA is not going to get in the way of that. That is something that's OK. Has the FDA ever looked at medications or drugs in a holistic way, I guess is what I'm getting at, this idea of looking at it alongside lifestyle aspects of somebody's daily living,

as that comment with WW suggests? Have they ever done that, looking just beyond the drugs and looking at these other aspects? Yeah. I mean, usually when they run these trials, the drug makers do it on top of diet and exercise or behavioral changes and things like that. But it was interesting that he pointed out in the early days, he doesn't think we've necessarily seen enough of the clinical management and the behavioral change in addition to the medicines themselves. And he compared it with stopping smoking. Maybe you feel like you can't do it, but once you take a medicine and you have the behavioral change, that actually helps you overcome that hump. So we'll have to see

if that actually is the case. All right. Meg Terrell, thanks as always for the insight. Thank you, guys. Now, she has a crowd strike up about 23% this year, handily outperforming the cybersecurity ETF. We're going to talk to the CEO, George Kurtz, about his outlook for the industry next. And check out two industrial movers as we head to break. Carrier Global getting a lift on a report saying the company is aiming to sell or spin off its fire and security business. Also, Norfolk Southern higher today after Citi noted the potential for a relief rally once investors hear more about the company's liabilities

relating to the East Palestine derailment. We'll be right back. Welcome back. CrowdStrike hosting its first ever government summit today, bringing together a range of industry, government, and education leaders to discuss best practices and methods for data and cyber threats in the public sector. Joining us now, CrowdStrike's CEO, George Kurtz. George, good to see you.

Put this in the context of what's happening with the company overall. It seems like in fiscal 23, your annualized recurring revenue per customer for larger customers is growing faster than for smaller ones. Does public sector, do governments fit in there with the more predictable revenue and a big market opportunity? Well, certainly the governments, whether federal or whether state and local, is a big opportunity for CrowdStrike. And we service many of those organizations throughout the U.S. as well as internationally. So today was an important day for us. It's really about public-private partnership and being able to understand what the adversary is doing, how the government can protect itself, and more importantly, how it can leverage technologies,

state-of-the-art technologies like CrowdStrike, to be able to identify and prevent these breaches that we continue to see over and over. Now, how do the new government regulations around cybersecurity affect you? There's more responsibility on cybersecurity companies to actually provide the kind of protections that they claim to provide. How are you using that in your go-to-market? Well, I think when you look at what we've done with CISA, which is really America's cyber defense agency, we're really the technology of choice for them and for civilian agencies. And I think we're able to leverage that high ground because we've been

very effective in stopping breaches. And when you look at the latest regulations or guidance, I should say, around things like zero trust, we're squarely in the center of that, being able to identify breaches, stop breaches. And more importantly, when we look at a lot of the attacks, they're identity based, meaning these identities are stolen and laundered. And this is where you see systemic risk in organizations. So by leveraging our technology and helping them implement the zero trust architecture. It fits squarely with their goals, and certainly we're here to help them. So how is the long-term value of a government customer different from a run-of-the-mill enterprise, especially a smaller one? Yeah, it's a good question. And when you look at enterprise, of course, we've been very successful in many of the large enterprises.

But from a government perspective, it takes time to get certified to be able to sell into the government, which we took many years to get through that certification process. And then once you acquire a customer, it's very sticky. As you know, governments tend to move a little bit slower than commercial enterprises.

So once you acquire that customer, it can be very sticky for many years to come. And given our net retention rates, our ability to cross-sell into organizations, we've been very successful at that commercially. And the idea, obviously, is to be able to get into the government and be able to continue to cross-sell the Falcon platform with other services, which we've done a good job so far with. George, how is the threat landscape evolving and changing? And I ask that,

and I'll ask you from a more geopolitical standpoint right now. We saw the role that cyber played as Russia was invading Ukraine last year. We're seeing these war games and military drills play out in China where Taiwan is concerned right now. There's a big concern around cyber and hacks where that island is concerned too. How are you thinking about it? And what does that mean in terms of ways to counter some of these future prospective threats? Well, any time you think about cyber warfare in the modern era, it's, or warfare, I should say, is going to start with cyber. And the war is going to start way before missiles and bombs are dropped. So if you think about cyber, it really is about understanding what the adversary is

doing and basically getting that signal intelligence electronically. And then when we think about conflict, before even kinetic weapons are dropped, you're looking at things like disabling command and control, communications, satellites. We've seen some of that with the Ukraine and disrupting the battlefield. And I think from a dollars and cents perspective, there's a huge impact in what cyber can actually do before the first bomb is actually dropped. And certainly in the South China Sea, this is going to be an active region for cyber. And we continue to see China be very active in its intelligence gathering and everything associated with that, including the high tech manufacturing and chip companies. Let's talk competition for a moment.

There was a lot of conversation about Microsoft at your investor meeting recently. And you said that when customers test CrowdStrike versus Microsoft, you win eight out of 10 times. So it seemed the challenge is to get everybody to test CrowdStrike versus Microsoft. You win eight out of ten times. So it would seem the challenge is to get everybody to test CrowdStrike. How much do you have to spend to make that happen? And how much is that a focus of what you're trying to do? Well, the good news is we're actually the leader in modern endpoint security, according to IDC. So we're number one in market share, and we've got over half of the Fortune 500. So we've got a pretty good install base of companies who trust CrowdStrike.

And when you look at what we're able to provide eight to ten times, it really is the AI approach that we've taken when I started the company over 10 years ago. And you look at something like Microsoft still relying on signatures that have to be updated multiple times a day, and there's just a huge detection gap. And that's purely just on basic AV type technologies. And beyond that, we always talk about being the sales force of security, being able to consolidate spend, whether that's around identity or firewall, host-based firewalls, whether it is tracking data movements and really helping organizations understand the assets

they have in the state they're in and the vulnerability state they're in. We can do all that with the Falcon platform with 23 modules. So we take a much more modern approach to security, and then we back that up with things like Overwatch, which is our managed detection response service that actually actively hunts for adversaries. And I can tell you, we routinely stop more breaches than any other company that's out there. And we do that with a combination of technology and services on the Falcon platform. Interesting bets of breed versus bundle story playing out in cybersecurity. George Kurtz, thank you. Thank you. Well, don't look now. The Bitcoin is rallying above 30K for the first time in nearly a year.

Find out what's driving the crypto comeback when Overtime returns. Welcome back to Overtime. Bitcoin has been one of the biggest winners in 2023, rallying more than, get this, 80% this year to cross 30,000 for the first time since last June. Mackenzie Sigalos, I always say your name wrong. Did I get that right? Sigalos. Sigalos explains what's behind the Bitcoin boom and joins us here on set. Mackenzie. Hey, so guys, it all started March 10th as fear of contagion hit the banking sector. Bitcoin and Ether began this breakout run higher. Both have been outperforming the bigger and more regional bank stocks the last month. Now, the bulls say it's because of an erosion of trust in the traditional banking system

and the call for more regulation in the space. And yet that very same banking crisis that set off this run higher has made it harder to invest in the crypto sector. Silvergate and Signature were the two most crypto friendly banks out there. And without them, it's much more difficult to get U.S. dollars into the crypto ecosystem. And the industry is heavily reliant on ever-increasing inflows of dollars to support prices. That lack of liquidity is ultimately going to be a problem for prices, guys. I was just going to say,

I just wonder how much the banking crisis has affected the price of Bitcoin. Yes, we can talk about inflation. We can talk about the Fed. We can talk about this idea that, you know, traditional finance has spooked some people, but also just in terms of actual deposit flows as we've seen them come out of the banking system and into things like money market funds. Not all that money's gone into money market funds. Do we know how much has gone into Bitcoin? Well, if anything, it's been much more difficult to put U.S. dollars into the crypto ecosystem

because of all those on and off ramps between the crypto world and fiat cash closed once you lost the two payment networks operated by Silvergate and Signature. And that's ultimately going to be a difficult thing. But in a very counterintuitive twist of events, essentially less liquidity in the crypto space has made it easier for these outsized price movements to happen. So even the slightest bit of momentum or big buy, you know, always a price. Is it possible that the scared money has left, though, and that this leaves, you know, the prices of Bitcoin, for example, more buoyant? Oh, I think it does leave a lot of like bullish trades and then that has bigger moves but it comes back to

the fact that we always see these outsized price movements around macroeconomic data tomorrow you've got the cpi read and you've got fed minutes and i imagine that we'll see movement in the crypto sector right now there's a sentiment that we're going to see a slowdown in growth which means looser monetary policy from the fed ostensibly which is good for a speculative asset class like Bitcoin. Well, Eric Johnston would beg to differ. Thanks for giving us a sober look at the space. Thanks, guys. Carmack shares, meanwhile, firing on all cylinders after stronger than expected earnings. But our next guest says investors should be selling into this rally. He's going to lay out the bear case when overtime returns.

Welcome back to Overtime. CarMax shares are surging up more than 9% today after earnings and gross margins beat estimates. It is the top performer in the S&P 500 today, but our next guest says to hit the brakes on the enthusiasm, recommending a short on the stock. Joining us now, Brad Lehmann-Storff, co-portfolio manager of Ranger Equity Bear ETF. Brad, welcome to the show. Why? Why are you bearish on this name right now? So we're very bearish on the sector in general. We think that these are top margins that they're going to be seeing per unit. You just had this banking crisis that's going to contract the amount of buying that's going on, especially in the subprime area. We're at 3.5% unemployment in the United States, and yet 60-day delinquencies on subprime auto paper is at a 20-year high. So we are very bearish on the space,

and we think that CarMax is moving into quite a tough storm. Yeah. I mean, CarMax did sort of lay some of this out in its earnings today, including the fact that they're starting to see those tighter lending standards take root on top of higher interest rates, on top of some of the other issues, waning consumer confidence and the like that they've talked about in previous quarters as well. The stocks still jump today in large part because they seem to be prioritizing margins and profitability. Yeah, and the stock's been in a trading range for six months. We have been reducing and upping our positions with inside of the volatility. But we think it's a $40 stock.

We think that they're going to have a lot of problems. We think that their volumes are going to drop quite a bit, maybe as much as 15%, 18%. If you looked at, so let's say that half the FICO scores out in the United States gets cut out at, say, 625. That's a tremendous amount of the auto market. So if you're cutting, 45% of CarMax's business was created through finance. So intuitively, if you knock out 20% of the people that can actually buy your volumes are going to die quite a bit and i think that people are underestimating

what that does to look like are there further read throughs here when it comes to housing or other things that people have to borrow money for did you sort of stop the car now uh... oh yeah there's a lot of uh... i mean we're short on sunrun and uh... uh... sonoma energy you know they do this does the There's a lot of them. I mean, we're short Sunrun and Sinova Energy. You know, they do the panels, the solar panels and stuff. I mean, all that takes consumer financing.

So we're very bearish on the consumer financing space. We're short. Go ahead. I'm sorry. What would change your mind? Is there, you know, if CPI comes in relatively benevolent tomorrow, if if we achieve a soft landing, if if if are there what are the things that make you wrong here? Well, if the private sector were to come in and start filling the void or and or other companies were to start coming in and filling these voids that are getting you know the credit crunches occurring just because of

higher standards and less capital with inside of the banking system now so if they can private equity has a lot of money on the sidelines they certainly can figure it out if they're not going to figure it out in a quarter or two i mean it'll take quarters for private equity to come in to start sopping that up. Brad, your ETF has outperformed the market over the past month. But in general, it's largely lagged over looking at three months, looking at year to date, looking at three years, five years, 10 years. Have you been surprised that the market's been going against you here? Yeah. I mean, there's no question that the market's been a lot stronger. The interest rates have stayed a lot lower for a lot longer than we thought. But again, we're not making some

big bet. There's a lot of different products out there that people can use for hedging. We have a portfolio of 60 or 70 names. And I can assure you, when the markets are down like they were mid-year last year, which was, let's say, 20 percent, we were up 35 percent. So our downside capture is what we traditionally and what our investors traditionally are really looking for. They think the markets are going to go down. Therefore, when they do, our downside capture traditionally has quite a punch, much more than indexes do. Brad Lehmansdorf, thanks for joining us. By the way, we did reach out to CarMax for a response, and they say they, quote, have nothing further to add than what was in our earnings release.

Up next, former Kansas City Fed President Thomas Honig on how tomorrow's key inflation reading could impact the Fed's next move. Welcome back. In a week full of Fed speak, newest voting member Austin Goolsbee made some of his first public comments. At the Economic Club of Chicago, Goolsbee warned we should gather further data and be careful about raising rates too aggressively. Joining us now is Thomas Honig, former Kansas City Fed president. Thomas, great to have you. You've warned recently of the dangers in not continuing to fight inflation. So looking to the CPI print, how much does it matter, given the Fed seems to think that the restriction in lending is coming and is going to put the brakes on on its own? Well, I think tomorrow's number matters a lot.

I think it will be down at least modestly. The more it's down, the more breathing room I think the Fed will have for its discussions and perhaps pausing in the May meeting. That's something that they haven't even gotten close to deciding yet, I'm sure. But if the inflation numbers are down, that means the real rates are rising on their own. That should further slow the economy. And the Fed has to be mindful of that. Also, as much as they say, we're still concerned, they should be at least, about the condition of the banking industry overall. And you don't want to make that part of the industry even more vulnerable by raising rates unless you absolutely have to. And I understand that. And that's when some of my comments were about in terms of inflation has to be the first priority. They have to get it down, have to show it's

continuing down, and then be confident of that before they really start thinking about pivoting. Pausing may be one thing, but pivoting, I think, would be way too soon. So given the fact that we did get this first real extensive outlook commentary from Goolsbee earlier today. Is your sense that we may not actually see an increase next month? Or I guess I should say that there could be a debate about whether we see an increase next month. I think there certainly will be a debate. First of all, it's clear now you have a vulnerable banking industry. I mean, we talked about the unrealized losses in the portfolios of banks, but there's a whole series of assets. I have $23 trillion of assets under pressure from this rapid increase in interest rates.

So the banking industry is vulnerable. They know that, and they have to be mindful of that. And I think that's probably on Goolsbee's mind. But I think with that in mind, they also know that if they let inflation come back up, they're going to have a new problem. So there's going to be there's going to be a debate inside that committee. I'm confident of that. And where it comes out, I don't think they know yet. I don't think the chairman knows yet. Did the jobs report most recently add to concerns about how inflation could come back with the unemployment rate actually ticking lower,

despite the fact that we've had some encouraging, encouraging signs from jolts, at least the job openings are coming down, that labor seems to be pretty resilient. Well, labor is, and that's part of the leftover from the pandemic difference in demographics, there's no question. But I don't think that should necessarily be the only factor the Fed looks at by any means. If employment isn't going out of sight again by 500,000, it was down from that and the unemployment claims are up. They'll have a little bit of room for that debate. And I think they I think they should debate. I think they should be very careful because they are in a they are in a self-imposed bad situation right now with high inflation and this vulnerable banking industry because they had to raise rates so quickly and so high. Yeah. How much do the Fed minutes matter tomorrow as well? I think the Fed minutes will matter in terms of where the debate might be going. There'll be

some early signs, I think, of discussions around that. And so you'll get a hint, at least, of how that debate in May may come out. All right. Thomas Honig, thank you. One more thing, actually, before we let you go. Quick question here. How convinced are you that the danger is more on the side of not being, I guess, vigilant enough on inflation versus overdoing it? Has the balance shifted significantly? Quickly, if you can. I don't think the balance has shifted significantly. I think the Fed knows their priority still has to be getting that inflation number down,

and that's why tomorrow will be so important. However, they were surprised by these two bank failures. I mean, that's a big deal. And there's more in there. They know there has to be more asset quality. So that's going to be impacting them as well. That's why this debate is going to be pretty, I think, severe. I think it's going to be an important debate.

Thomas, thank you. Appreciate it. You're very welcome. Good to be with you. All right. Well, it's going to be a busy day tomorrow for the markets, but that's going to do it for us here at Overtime. Fast Money begins right now.