Closing Bell - Closing Bell Overtime: James Bullard To Step Down; SoFi CEO On What Student Loan Payments Resuming Means For The Stock 7/13/23

Episode Date: July 13, 2023

Averages extended recent strength, closing positive each day this week. BD8’s Barbara Doran breaks down the market action while our Steve Liesman on the impact of James Bullard stepping down from the St. Louis Fed next month. Goldman Sachs analyst Richard Ramsden in a rare media appearance gives his bank stock playbook. SoFi CEO Anthony Noto talks student loans and its soaring stock price. Priceline CEO Brett Keller on travel trends during this red-hot summer. PitchBook Senior VC analyst Kyle Stanford gives his outlook on the second half for the VC world. Our Courtney Reagan on the stock impact of the coming Barbie movie. 

Strong day on the S&P as well. That's your scorecard on Wall Street, but winners stay late. Welcome to Closing Bell Overtime. I'm John Fort. Morgan Brennan is off today. Coming up this hour, SoFi CEO Anthony Noto joins us exclusively from Sun Valley. His company's stock catching a downgrade from Morgan Stanley today, which says SoFi should be valued like a bank after a massive run this year. And speaking of banks, we've got Goldman's Bank Earnings Playbook. We will speak in a rare interview with the firm's head of financials research ahead of tomorrow's kickoff to bank earnings season. Now, the Nasdaq and S&P closing at the

highest level since April 2022, while all three major averages extending this week's gains today. Joining us now, BD8 Capital partner,IO, Barbara Duran. Barbara, welcome. So one trading day left in a week defined by that cool CPI print. Now the PPI report, equities up, yields down, bank earnings start tomorrow. Do you trim more here, waiting for a pullback, or do you hold tight? Well, that's a good question, John, because in the last month or so, my instinct has been to trim positions because after such a strong run in the first half, it just sort of common sense and risk management and years in the business, you know, that's the prudent thing to do. However, the inflation numbers that have just the CPI, the

core CPI, which was the best in two years yesterday, is very encouraging. You know, it shows inflation. If you look at the core CPI number since last September, it has steadily come down from 6.6 to 5.7 in December. We had a little tiny blip up in March, but it continues to trend down. So now we're at 4.8 percent. And if we keep at that rate, it will continue at year end, could be 3.8 percent next year, mid-year 2.8, which is still above the Fed's target. But it's showing we're going the right direction.

Meanwhile, we have strong jobs, strong wages. You know, we've seen the recent payroll numbers. The ADP number last week was a big blip. Jobless claims this morning, even it's a shortened week, still showed no signs of stress there. You know, so the economy looks in decent shape, although there are clearly, you know, Albus claims this morning, even it's a shortened week, still showed no signs of stress there. You know, so the economy looks in decent shape, although there are clearly, you know, slowing parts of the economy, mostly the interest rate sensitive. So I think what you see from here, the question is, you know, what happens now?

Have we seen most of the gains? And I think we haven't. I think the Fed will, you know, it's pretty much baked in that they're going to raise in a few weeks, but then I think they're going to be on hold. And unless something happens, inflation doesn't keep coming down, and there's no reason to think it won't, I think you will continue to see the market hold up. The question is where to be. Yeah, so what do you do with a stock like Delta, which you own in some accounts? You know, best in class airline. Travel has been strong.

Services have been strong. CEO on CNBC today sounded pretty bullish. Do you just hold on to it? Do you add to it? What? We know there's still these this post-COVID behavioral changes. And normally airlines, even though they become an oligopoly, have tended to be very cyclical. So you go, OK, they're discounting the current current traffic. Things are going well. And Delta, in particular, it is a best in class. I agree with that. I've owned it for a while. But you've seen they beat the numbers on all metrics. Their guidance going forward is strong. In fact, they upped it, which is interesting. You think, okay, maybe this is it. But they're paying, you know, capital expenditures will be down. Free cash flow is up. And they're also still only a 7 PE, where historically they're paying, you know, capital expenditures will be down. Free cash flow is up.

And they're also still only a 7 PE, where historically they're 8 to 10. The key question, though, of course, is demand. And I think demand will continue to hold up. There is this incredible pen up demand that consumers are spending. And this year, it's international. Last year, you started to see a little bit of international. But I think, as Helene Becker pointed out earlier, you know, you were still getting tested as of June to get back into the country. And if you got COVID, you were stuck at whatever country you were in.

So I think there's unbelievable demand that's going to continue well into next year. So I think their optimistic guidance for next year could hold up. And this stock then could be a 70 plus dollar stock a year out from here. Oh, wow. OK, well, Barbara, stay with us. We also want to talk today's big Fed news. James Bullard, president at the St. Louis Fed, announcing he's stepping down next month. Let's bring in our senior economics reporter on the overtime news line, Steve Leisman. We're talking to you about this since the news broke. I mean, it seems like, you know, bedtime for hawks in a way.

James Bullitt is definitely at the moment a noted hawk. He was not necessarily in 09 in the great financial crisis when he did advocate for quantitative easing and for the Fed's big action to get back to its 2 percent target. But in a time of higher inflation, he has indeed been a noted hawk. he was uh early in advocating for those 75 basis point rate hikes that we uh have undergone in the last summer um he was also uh strong about reducing the balance sheet and also the idea that maybe the funds rate had to go a lot higher than many in the market believed certainly at the time um and so uh he has uh garnered the uh uh... uh... general uh... impression of being

uh... noted hawk on the committee and maybe someone wall street might be kind of relieved that he's going but i don't think that that will have a measurable impact on the fight against inflation and partly i say bedtime because we had uh... san francisco fed president mary daily on cnbc earlier today with you steve and she seemed maybe a little less hawkish than she has in the past take a listen two rate hikes this year is still a reasonable projection it's for that very reason you said it is it is a risk that we under tighten it's a risk that we over tightentighten, and that's why data dependence, meeting-by-meeting decisions, is so important right now. A little more measured, maybe.

She acknowledged the CPI print was surprising in a good way, wouldn't you say, Steve? I would say so. I mean, she's still on board with the idea of two more hikes. Didn't talk much against that, but didn't say it was definitively going to happen in the interview that I did with my colleague, Sarah Eisen, for sure. It was she is in the camp, I think, of those who will take it meeting by meeting and based on the data. And I think there's other Fed folks who think, you know what, almost no matter what the data say, they think the funds rate is too low. And so they're a little bit more hell bentbent on getting up those two additional hikes. But look, if inflation keeps coming down, I think the Fed may well stop after at least one hike here. I think it's notable that Bullard has been there, John, for 15 years. He is the

dean of the Federal Reserve Presidents, the longest-serving one. And he will go on to become dean of the business school at Purdue. And he'll be missed. And it was kind of an unusual departure in the sense that he resigned as of today, but it looks like it's because of the job offer he has. He seems to start at Purdue August 15th. All right, Barbara, on this Fed news and responding a bit to Mary Daly. How much does it matter when the two hikes come, just as long as there are no further big shocks in the economy? Do you think that investors should pay close attention to that anymore, or are we pretty much past the Fed and more onto the

fundamentals now? Well, it looks like the market is looking past the Fed. I mean, I think they've sort of the 25 bips is baked in. The probabilities, even for a November hike, are down to 21 plus percent. I think there's going to be another hike, because as I said, I think the Fed will have to stay high, you know, where they are and where they're going to be in another few weeks because there's going to be, excuse me, because they have to continue, you know, to hold up here because the inflation is coming down so slowly, you know. But I think later on in the second half, you are going to start to see there's all this fiscal stimulus that's sitting in the system. You know, it's the CHIPS Act.

It's the infrastructure bill, you know, $1.2 trillion that's been filtered out to the states and localities that will start to be put to work. And that's going to be more jobs. So we'll see. People are looking at the second half could be a slowdown. Well, the fact is, when you look at the earnings estimates for third and fourth quarter S&P, they're actually going up. So there's a widespread feeling that this is the trough in earnings, which interestingly, typically, the market does bottom six months before the trough in earnings, so which would be, you know, a happy coincidence, you know, in terms of what we've seen the market do this year. So if anything, I think a second rate, we might start to look at it later this year just because of all that fiscal stimulus.

But otherwise, assuming inflation continues to dribble down, you know, in the core PCE and core CPI, I think the Fed will hold its pattern after this hike. All right. Good intel for our viewers there, Barbara, Steve. Thank you. Thank you. Thank you. Also, the dollar hit its lowest level today since April 2022 on pace for its worst week of the year. Senior markets commentator Michael Santoli joins us now from the New York Stock Exchange with a look at how the dollar's bust is a boost for foreign indices. Mike? Yeah, John, that's the reflex tradeoff.

In fact, the U.S. dollar index almost in mini crash mode in the last week, down 3 percent. It's a big move for a currency basket. And you take a look here at the ACWX, which is all foreign markets in the world, essentially all markets except for the U.S. in the all world, all country world index. And look at this jump higher just in the last couple of days to try and catch up. As you see, over the last year or so, foreign markets have actually kept pace pretty decently. They've made up some ground over many years of underperformance. So we'll see if this ends up being one of the areas where you see some rotation. Remember, the S&P 500 market cap weighted very, very much driven, at least for a

few months, by those big tech stocks that are very much U.S. animals and we'll see if you get some rotation. Now, another spot where you might be able to see some catch up, some rotation is everything in the S&P aside from technology. Now, of course, there is an ETF that tracks everything in the index aside from the tech sector. That's an orange right here. So what I think you could take a little bit of comfort in if you've been worried about the concentration of the market is a very similar shape to those lines. So it's not been, you know, one going up, one going down. It hasn't been completely a zero sum game. And you've seen a little bit of acceleration in the outside of tech.

What I do find interesting, too, is X tech is still below. That's a bad line, but it's still, trust me, below the highs from last summer. Last August, S&P, of course, has taken those out. And I will mention that even though it's S&P X technology, it does still have all the communication services companies. It has Amazon, Meta, Alphabet in there. So essentially, it's strictly speaking, does not have Apple, Microsoft, NVIDIA, Semis, and software, John. But Mike, let me ask you about the other flip side of a weaker dollar,

which is the impact on multinationals, many of which are big, many of which are in tech in one way or another. Won't their earnings look better than some might have expected as the year continues if, indeed, the dollar stays weak or weakens further? Probably so. In my experience, that game is a little tough to play. In other words, the market either kind of figures it out and there's no real thing to exploit there, or it's a benefit that's sort of widespread enough and hard to isolate enough

that I'm not sure it should be the sole basis of things. Now, yes, technology is one of the most global sectors, but you want to talk about some of the other, you know, communication services stuff as well. It's got plenty of global exposure there, too. I think what you're looking at is some areas that would be left in the cold. Probably some things like, you know, utilities and retail, very domestic sectors that maybe would not be as big a beneficiary. All right. We will watch that as well. Mike, thanks.

Bank earnings kicking off tomorrow. J.P. Morgan, Citi, Wells Fargo and State Street set to report while Bank of America and Morgan Stanley come Monday. Richard Ramsden of Goldman Sachs joins us now. Richard, what's the big sort of headline to watch or number to watch out of these earnings. The smaller banks had been the area of a lot of concern. The bigger banks seem to have been OK up to this point. So what are we going to learn? Yeah, so I think the market's going to be focused on three things tomorrow. First, I think there's going to be a lot of focus on what's happening to deposit funding costs within the banking system. I think the good news is, you know, the deposit instability that we saw around Silicon Valley Bank has really subsided.

I think the bad news is that deposit funding costs are increasing very rapidly, you know, for regional banks, but also for the larger banks too. And that's putting some pressure on margins. So I think there'll be a lot of questions around what banks are seeing in terms of deposit flows as well as expectations around deposit costs heading into the second half of the year. I think the second thing is credit quality is always a focus. I think the good news is that it is a bright spot at the moment, but there will be, I think, a lot of focus on commercial real estate in particular, where you've seen concerns specifically within office,

where obviously you have seen a decline in values given low occupancy rates and a number of major metropolitan centers. So again, I think people will be looking at these large bank earnings to get a read across for regional banks that have greater exposure to commercial real estate. And then lastly, I think there'll be a lot of questions. Let me stop you there, because we've been talking that quite a bit on commercial real estate. So you're saying we're going to get commentary from the larger banks that are less exposed to commercial real estate, but have good insight into it that could move the regionals. Absolutely. I think, you know, Wells Fargo in particular has got quite a large commercial real estate portfolio.

You know, obviously, you know, they're involved in a number of the markets that are seeing issues. So, obviously, Manhattan, San Francisco, and LA. And I do think investors will pay a lot of attention to what they're saying in terms of what they're seeing at refinancing, in terms of just ability for borrowers to meet the higher cost of repaying loans, as well as expectations around what's going to happen to loan-to-value ratios, just given the decline in office values. I wanted to double-click on that for a moment, but you were moving on to your last point. Feel free. Yeah, I think the third thing is regulation. You know, so obviously after Silicon Valley Bank, there's been a lot of

focus on what will happen in terms of the regulatory framework for the banking industry. There is a lot of focus on the large banks in particular. The Basel III rules are in the process of getting finalized. We saw a speech from Michael Barr recently that suggested that capital requirements are going to go up. And I think that will be a focus, too, specifically around, is it going to change the way that banks think about capital returns in the near term, both buybacks as well as dividend increases. So would you say overall there's a risk to the downside for the large banks based on where valuations are?

I mean, I'm looking at the JP Morgan chart. They've done nicely since since March. There's sort of a flight to size, flight to quality out of that. When you talk about the net interest margin concerns and whatnot, how should investors gauge how exposed these banks are to that? Well, I think the interesting thing is the three banks, three commercial banks that report tomorrow, I think are all actually going to see pretty good trends. And I think J.P. Morgan in particular is a bank where we do think there is some room for market expectations around net interest income to increase in the second half of the year. Obviously, they did acquire First Republic very recently. We think the market

is still digesting the benefits of that, and it could be a source of earnings upside. Wells Fargo is another one where they're previously guided to 10% net interest income growth for the year. But I do think the market believes that that guide is conservative and that there could be some upside to that in the second half of the year, depending again on what they're seeing in terms of deposit flows and deposit repricing. So I think two out of the three of the banks that report tomorrow, I think are going to see actually pretty good trends. And you could actually see earnings estimates edge up coming out of that. But I do think that the early banks in the reporting season

are going to see the best trends. All right. A lot of investable info to glean, even if you don't own those particular banks. Richard Ramsden of Goldman Sachs, thank you. Thanks for having me. Speaking of banks, don't miss an exclusive interview with Citi CFO Mark Mason after those earnings come out tomorrow, 1 p.m., on The Exchange. Shares of SoFi have doubled this year, but Morgan Stanley just downgraded the stock, saying it should be valued more like a traditional bank.

Up next, CEO of SoFi, Anthony Noto, joins us exclusively with his look on the stock, saying it should be valued more like a traditional bank. Up next, CEO of SoFi, Anthony Noto, joins us exclusively with his look on the business, the consumer, the impact from the Supreme Court student loan decision. Overtime's back in two. Welcome back to Overtime. SoFi's stock up some 83% in the past two months, but getting a downgrade to underweight today for Morgan Stanley. Analysts there saying, as SoFi looks increasingly like a bank, we believe it needs to be valued more like a bank. Let's get out to Sun Valley now. Julia Borsten's there with SoFi's CEO, Anthony Noto. Julia. Thanks, John and Anthony. Thanks for joining us here in Sun Valley. I want to start off the conversation. We have so much to talk about, but start off the conversation on that Morgan Stanley

note, saying that SoFi should be valued as a bank, not as a tech company or a fintech. What's your response to that analyst downgrade? My response would be we're a diversified financial company that delivers our value proposition via technology. And so analysts can value us any way that they would like if they want to value us like a technology company or as a bank. If you look at us as a bank, we're a bank that's structuring our business over the long term at steady state to have a 30% ROE. Banks that have a 30% ROE trade at four to five times tangible book. We're trading below that today. So that's my point of view if you want to value us as banks.

Okay. Well, I want to talk a little bit about some of the news from this week about inflation. We had the Consumer Price Index and PPI today lower than expected, showing slowing inflation. What does that mean for your business at SoFi? A strong economy is great for our business. We've had a strong economy. It's allowed us to really operate in different environments over the last two years. We haven't had the student loan business be's allowed us to really operate in different environments over the last two years. We haven't had the student loan business be as robust as it can be in 2024. But over the last two years, we've had eight record quarters in a row of record revenue with rates going up. I think in a period of stability where rates are flat, we can operate incredibly well.

And we've done really well while they're going up. I want to talk a little bit about the student loan business. Of course, so if I started out in the student loan business and there have been a couple of big news items that have been very relevant to that. Most recently, the Supreme Court ruling that was rejecting student loan forgiveness. Also the news around the debt ceiling. What does that mean for your business going forward? The most important thing for our country is there's clarity. Now people can decide what they want to do. They have to resume their

federal student loan payments. We give them a great option to lower their cost of that payment by refinancing with us if they can get a lower rate or lowering the payment by extending it out over time, which in this environment where they haven't paid that student loan for three years, they may have other costs that don't allow them to make that payment again so they could spread it out over a longer time and lower the monthly payment. That will be a contributor to our business. It's been a real negative the last three years, but as I mentioned, I couldn't be proud of our team in hitting eight quarters of record revenue in a row. But the fact that there's clarity is most important. I do think the administration has to find ways to give relief for those people that need it And we're in the right economy to do that now where before we had to give relief to everybody

John Ford had some questions here John. Yeah. Thanks Julia Anthony You just gave us the case if the street wants to value you like a bank Give me your point of view if investors are gonna treat you like a technology company, focusing maybe on margins, AI, how you're going to grow users, and your ability to expand into new markets. So, John, our business doesn't exist without technology. We have no buildings. We have no branches. You access our product via the mobile phone or your PC. So, we're absolutely a technology company. We have our own technology platform, which is also part of our business that contributes 20 plus percent of our revenue. And we're using our technology to power other fintechs and B2B companies. Our growth has been

over 40 percent in the Q1. We had really strong member growth, as I mentioned, record revenue and record EBITDA. We're seeing great trends in our business on the back of our strategy to be a one stop shop for all your financial needs. We're the only trends in our business on the back of our strategy to be a one-stop shop for all your financial needs. We're the only company that provides for you on one digital platform all the financial needs or products that you need as a consumer. And we do with a superior value proposition. And that's allowing us to gain huge market share. We've added over $2 billion of deposits every quarter since we got our bank license. And we continue to see that trend very positively. But Anthony, are you better than other banks at technology? I know you were sort of born as a technology company, but when it comes to retention, when it comes to net revenue retention

in particular, and whether customers are going into additional services that have more value for you, what metrics can you share? Yeah, we are absolutely better at technology than other banks. That's why we're stealing share from all of them. It's been a great phenomenon. I joined the company in January of February of 2018. We had less than a million members. We finished last quarter close to 6 million members and growing quite significantly.

We also report products, and we have about 1.5 products per member, but that's with our denominator, the number of members actually growing over 40%. So it's a great testament to the value proposition that we're delivering through technology. It's a superior value proposition. As an example, our checking savings account, we give you 4.3% interest on savings, no fees, the ability to pay any way that you want from your phone. We can send a check for you. You can do P2P payments and you can set up payments and do auto payments. So very unique approach to each one of the products, all because of technology at a superior level. Anthony, as you've diversified into all these different businesses, you really have many different touch points with the consumer, whether it's mortgages or borrowing or payments what are you seeing right now

in terms of the health of the consumer? We're seeing a really strong consumer we continue to see strong spending through checking and savings accounts also on a credit card we're seeing strong trends in our invest business in fact we're doing the first IPO that we've done in a couple years at SoFi the Auditory IPO you can access that at IPO prices right now through SoFi and we're doing the first IPO that we've done in a couple of years at SoFi, the oddity IPO. You can access that at IPO prices right now through SoFi. And we're still seeing strong demand for personal loans. So strong economy, strong demand for financial products. A quick final question on a very different topic, since you used to be the CFO of Twitter, and I have talked to you many times when you were back in that role.

What is your take on Threads, the Twitter rival, and Twitter under the new leadership of Lindy Iaccarino? The thing that attracted me to Twitter as the CFO and then as the COO is that Twitter has the best content in the world, better than any other company, and it's largely for free. It's real-time content, so you get it faster than anywhere other place, and it's conversational. Those tenants have allowed it to be the leader in what I call an information network, not social network. But the challenge is how do you make that product mass market?

How do you get product market fit so it's easy to use for everybody? Today the mass market person can't use Twitter because they can't figure out how to find the content, but it's in there. So that's the opportunity. Deliver product market fit and you'll deliver billions of users on a daily basis. Threads is a copycat of Twitter. They've copied all the challenging things of Twitter. What they'll have is a leaky bucket, millions of people coming in to try it and millions of people not coming back. Well, we always appreciate your perspective, whether it's on Twitter and Meta or, of course, your new business, SoFi. Thanks so much for joining us here, Anthony Noto, SoFi CEO.

And John, I'm going to send it back over to you. And thank you, Julia, as well. After the break, Delta reporting record revenue and earnings before the bell, pointing to strong international demand, cheaper fuel. We will ask the CEO of online travel agency Priceline if he's seeing similar demand this summer from his customers over time. We'll be right back. Delta reporting record revenue before the bell, hacking its full year outlook on the travel boom. Here's what Delta CEO Ed Bastian told our Phil LeBeau about the demand they expect to see in the months ahead.

I think the international business is going to continue. What we can tell, stay really strong. It's going to be a long summer to Europe. We're going to be flying the summer schedule longer and hotter than anything we've ever flown. So September, October, great times to go to Europe. I think the corporate demand for travel is going to start to pick up a bit more. We're hearing that from corporate travel managers. Joining us now with his perspective on the travel sector is Priceline CEO Brett Keller. And Priceline is a division of Booking Holdings. Brett, welcome. So I'm really curious, in bookings thus far, are you seeing any

sign of a trade down in accommodations or more intense bargain hunting from consumers in travel? We have not seen any trading down happening yet in our business. We are seeing consumers doing a lot of shopping, looking for discounts because prices, as you know, have risen significantly over the past two years. Although prices for the summer are just starting to level off on the hotel side. And even with flights, we're beginning to see some reduction in prices, which is great for consumers as they start to really finish out the summer here. I wonder how much of this is pent up. Disney CEO Bob Iger was on our air this morning talking about how demand or really, I guess, supply of places to go has shifted from Florida to Florida and everywhere else over the past year.

Take a listen. Florida opened up early during COVID and created huge demand and didn't have competition because there were a number of other places, states that were not open yet. So if you look at the numbers in Florida in 2023, which is recently versus 2022, where not as much was open and Florida was the only thing in the only game in town. There's a lot more competition today. Brett, is that panning out? I mean, you got a Disney package on the front of Priceline.com.

Was it really just there were no other options last year and people are still going to Disney, going to Florida about a usual rate, but just other places too? Yeah, I would absolutely agree with that. You know, what we've seen on the Priceline side is that Orlando and Florida is still a top destination for consumers. However, there is a lot more competition now. We've seen a significant outflow to Western Europe and even parts of Asia, including Japan. Those are very popular destinations this summer, and many consumers are, they just want something different. You know, for the past three years, a lot of folks have stayed either within the United States or

just outside, whether in Mexico or even flying, you know, out to Hawaii. And so I think now folks feel a lot more free to travel to different parts of the world, and that's providing competition clearly for some of the local destinations here in the U.S. There was a prediction that business travel was largely done, that a huge percentage of people would just stay home and Zoom. And I don't know to what degree that's panning out, but we were also hearing that people were tacking personal travel onto business travel and that that was having a benefit for the industry. What trend do you see? Yeah, we see a couple of trends here when it comes to business. First of all, traditional corporate travel, where you have single individuals flying

out to meet businesses or going to consulting opportunities, et cetera, that is still recovering. We have not seen that come back to 100% of what it was. Let's call that 70%, 80%. What we have seen rebound very strong is event travel and group travel. So what's happening is as employees are no longer, you know, commuting into their office all of the time, they still want to get together. And so what's happening is they're traveling to destinations for these events. And that does play into some additional leisure demand as they move in and then have an opportunity to travel. All right. Brett Keller, CEO of Priceline, which is part of Booking Holdings. Thank you. You bet. Thank you.

Time now for a CNBC News update with Contessa Brewer. Contessa? John, the former CEO and founder of Celsius Crypto Exchange pled not guilty to fraud charges this afternoon. He appeared before a judge in a New York federal court on the seven counts against him, and the judge released him on a $40 million bond secured by his home in Manhattan. Earlier today, federal regulators announced the bankrupt exchange agreed to pay a $4.7 billion settlement over claims Celsius schemed to defraud investors out of billions. Young people are consuming toxic levels of marijuana at increasing rates, sometimes resulting in emergency room visits. A new report from the

CDC found the majority of ER visits are young adults between 15 and 24 years old. But for children younger than 11, there was a 200 percent spike in ER visits from 2019 through 2022. That's concerning. A hidden gem in the Fed's beige book yesterday, the central bank credited Taylor Swift for helping to fuel U.S. tourism with her Erez tour. Fed officials reported that hotel bookings in the city showed the strongest growth since the beginning of the pandemic, thanks to Taylor Swift's show dates there. Look at that showing up in hard economic data. John Contessa, thank you. Up next, Mike Santoli looks at some signs that investor positioning is getting more aggressive.

What that means for the market. And as we had to break, check out shares of Viasat crashing to earth today. The satellite internet provider saying its recently launched communication satellite suffered a malfunction that could, quote, materially impact performance. Shares finished lower by 28 percent. We'll be right back. Welcome back to Overtime. Mike Santoli returns with a look at investor positioning. Mike. Yeah, John. Welcome back to Overtime. Mike Santoli returns with a look at investor positioning. Mike? Yeah, John. And in general, it has swung from quite cautious to somewhat more aggressive here. This is the National Association of Active Investment Managers. There's a weekly equity exposure reading that gets released.

This group is certainly very tactical, a lot of trend followers and their professional traders and trading advisors. And you see it's up above 90. It's a zero to 100 scale, but you can actually go above 100 if you're leveraged long the market. So the exposure can actually be above 100. So this is as high as it's been in a couple of years, as you can see there, it's 90th percentile for the long term. So it's perhaps feeding into this idea that on a contrarian basis, people are getting too bullish in the short term. However, this phase right here, 2020, 2021, it was routinely at this level. So in a bull market, uptrending market, which is what we had in 2020 and through 2021, this is nothing too remarkable. I would say it's not universally across the board the case that all sentiment indicators are showing excess short term bullish bullishness. But we'll get there. And we're trending in that direction. And so far, I could

say that no longer is pessimistic sentiment really a tailwind for the market. But in bull markets, you know, people start to buy in and chase. Unfortunately, yeah, it looks like when people should have been putting more into the market when things were low at the end of last year, it actually dipped. Right. So does this mean these folks are the same as as retail investors in that regard? Largely so. Yeah. I mean, I think they're trying to get out of the way of downtrending markets. And, you know, it almost can't be otherwise, John, because if you didn't have people negative and trying to sell at lower prices, then you wouldn't have the buying opportunity that in retrospect looks so good. So, you know, that's just the way

that the ebb and flow of sentiment and dollars running through the market tends to operate. All right. It's like why you need bears in the ecosystem or beavers to make those dams. Without a doubt, yeah. All right.

For the longs out there. Thank you, Mike Santoli. Now we've got breaking news on SpaceX. Big valuation numbers. CNBC.com's Michael Sheets broke the story. Joins us now. How's it look? Hey, John. Good afternoon. Great to talk to you again. Yeah, we have a new valuation for SpaceX now official. Near $150 billion as a purchase offer was sent out to insiders today, which was at

$81 a share. This puts the company's valuation at roughly $150 billion. Now, since it's a private company, we don't know what the share count is, but SpaceX's valuation continues to climb. Maybe not as fast as it did in prior years, but that's the market we're in. Well, I mean, yeah, this is private, but is SpaceX essentially the Tesla of space? Because we've seen space stocks tank. We were just talking about Viasat and the bad day that it had.

Does Elon Musk's SpaceX just stand alone? It does stand alone in several respects. And the first example I'll point to you that is their Falcon rockets. They've launched now 47 launches since the beginning of 2023, currently putting up satellites at an average of every four days, which is just an unbelievably blistering pace. If that's not enough, they have this huge moat with their human space flight business. And now their Starlink business just recently crossed over 1.5 million subscribers. They're expecting to start making money on that business. So you have all these different pieces of the puzzle

that are all starting to really turn up the heat. We'll see if and when that one comes public. Michael, thank you. Up next, we will discuss whether AI excitement in the venture capital world is showing any signs of slowing down. We'll come right back. Welcome back. Welcome back.

PitchBook out with its second quarter venture monitor report today. Data showing the venture capital ecosystem continues to struggle with deal value coming in at a decade low. Joining us now is Kyle Stanford, lead VC analyst at PitchBook. Kyle, welcome. So 50,000 VC-backed companies out there now, two times as many as seven years ago. They're not going public so that money can recirculate back into the system and they're finding it harder to raise. How is this going to end? Right. So I think 50,000 companies is a huge, huge data point in this entire market slowdown, right? Again, like you mentioned, double the number from 2016. We've seen a lot of capital pull out of the market.

And even though there's still a high number of investors, 50,000 is a number for the US market alone. IPOs have stopped more or less. M&A is really kind of trudging through. It's been many small deals going through. So there will be a lot of companies that we believe do end up having to sell off for pennies on the dollar or end up going out of business. It's not something you want to see, but with that many companies and very poor exit opportunities, that's probably the likely outcome for many of these companies. So this bears on the public markets in the sense that the IPO pipeline eventually is filled by these companies, usually the later stage ones. So either we're probably

going to see some forced M&A, like some combinations of private companies to keep them alive or, you know, companies that have to come public or smaller companies have to die, right? Yeah, unfortunately, that's what it is, right? And we have a model that looks at kind of the estimated number of IPOs that we should be seeing on a monthly basis and then compare that with what we're actually seeing. It's been 18 months since the number of companies that are actually completing an IPO was above that estimated line, right? So there's a huge backup of tech companies, especially waiting to go public. So even though Kava's had a nice IPO, you know, there's been some small movement to S1s. We're not seeing a huge number of companies rush to market. No one wants to be the first. And there is going to be that backlog when we do finally see a market that's willing to accept these VC

backed companies. So, yeah, I keep hearing that SaaS-based companies are not able yet to get the kinds of valuations that they'd want to come public in this market. But at the same time, AI startups are still popular. So are you going to see AI perhaps remain popular, but everything that's not AI and that can't go public really have a hard time? Right. I don't want to compare AI to kind of the crypto craze a couple of years ago, but, you know, it really feels the same right now. AI has been around for some time and investors have been putting money to AI for years and years and years. Obviously, now, with everyone being able to go on their phone and ask Chad GPT a question, it's kind of

come back into the limelight. But it also checks a lot of boxes for investors, what they're looking for right now. They want their companies to be more efficient with the capital that they've had. AI is a good step toward doing that. You hear a lot about, oh, AI is going to take some jobs. And it won't necessarily do that, but it will make the mundane operations of many of these tech companies that much easier. Then the workforce can spend their time focusing on that other 50% that is much more employee intensive. They can spend that much more time.

We do see this having some legs and continuing on for some time. Looks like you're in an office, Kyle. I am. Is that still a thing in California? Oh yeah, San Francisco. San Francisco did fall under 20% of deal count for the fourth consecutive quarter, which is definitely an interesting move in the market. But we're seeing movement. We're seeing an increase in deal flow across the U.S., and it's not necessarily a decline in just San Francisco. There is a bit of an echo there, though.

I will note. Kyle Stanford, thank you. It's a large room. Thank you. Nostalgia is leading to a merchandise boom for Mattel ahead of next week's release of the Barbie movie. We will tell you which retailers stand to cash in when Overtime returns. Breaking news this afternoon. The Screen Actors Guild voting to go on strike,

meaning film and television productions will shut down, adding pressure on an industry already facing a writer's strike. The decision comes after the Actors Union failed to reach a deal with the Alliance of Motion Picture and Television Producers. Negotiations involved higher wages, working conditions and artificial intelligence. Disney CEO Bob Iger telling CNBC this morning the union's expectations are, quote, not realistic, and the strikes are adding to the challenges the industry is already facing. City analysts saying in a note, the strike could cost the film and TV business around $150 million per week,

which Citi says should be manageable if it does not extend into 2024. Now, sticking with Hollywood, business is booming for Mattel ahead of next week's release of the movie Barbie, but the huge increase in revenue is being driven by merchandise, not dolls. Courtney Reagan is here. So Barbie Corps is a real thing and it's not just for kids. It is a real thing. I'm glad you noticed the hashtag Barbie Corps. It's kind of hard to miss. actually. Mattel has over 100 licensing partners selling Barbie merchandise, and much of it, to your point, is not for kids at all. From Barbie clothing at Bloomingdale's and Forever 21 to beauty tools by

Revlon, much of it is aimed at millennials and Gen Z, kind of a bid for nostalgia in the cadult. And according to an analysis by Jungle Scout, Amazon searches for Barbie martini glasses up nearly 900 percent in the last 30 days over the prior month. Barbie accessories for adults up 400 percent. The Barbie detangler brush, that revenue on Amazon, up more than 6,700 percent in the last 30 days compared to the month prior. Now, branding experts say that Mattel will get licensing fees and a percentage of merchandise sales most likely for most of these deals. But a renewed Barbie brand, Halo, that's the real value and likely, John, the blueprint for Mattel's IP strategy to generate new revenue streams going forward. Investors seem to like it. Michelle Mattel shares stealthfully up about 14 percent in a month. Well stronger than the Consumer Discretionary Index and the broader XRT Retail Index.

Maybe they should change their name to Michelle with all of this, like, female revenue they're going to be getting. Now, this is funny to me because I remember the 90s when Ani DiFranco and Alanis Morissette were in, and that feminist movement had no space for Barbie. Barbie was like the devil because her body proportions were all off and she was like a horrible influence. This nostalgia thing, maybe Instagram is the bad guy now and Barbie's great. It's funny, John. There's a lot of confluence and factors kind of hitting each other against the head there. Ironically, the 90s was Barbie's peak revenue years, about $2 billion annually.

They did fall after that. It wasn't until 2016 that Mattel said, OK, we're going to revamp Barbie. We're going to introduce new body sizes, new skin tones, new physical abilities. You're right. She's not representative. It did actually help a little bit. We saw Barbie sales tick up at least from the trough at $900 million. Still off the peak.

But I do think that that is sort of part of it. Mattel is trying to recapture someone like me that played with Barbie as a child, but now has a daughter and has rethought about whether or not Barbie is a healthy image to send. So they're really trying to recreate that brand equity and say, hey, look, we've changed, and remember how much fun you used to have? That's still there. If this is Barbie's Robert Downey Jr. Iron Man Marvel moment, I'll just be amazed. I would not count that out, folks. It could be. It could be. It could be.

You going to watch the movie? Absolutely. You got the pink blazer today, so we're ready. Not an accident. Not an accident. All right. Big bank earnings will kick off tomorrow morning. There's another key report that should be on your radar. Find out what else could move the markets when overtime returns. The trading week ends with a bang tomorrow. Investors are going to be digesting earnings from financial giants J.P. Morgan, Citigroup, Wells Fargo, and BlackRock, as well as results from health insurer UnitedHealth. And on the economic front, we'll also get this month's preliminary reading of consumer sentiment.

Mike Santoli rejoins us. Mike, I can't remember a stretch of days in the market with macro headlines and news like the one we've had, like from ADP to CPI, right? Like just people going, oh no, oh yes, right? Yeah, exactly, yeah. What's yes. So. Yeah, exactly. Yeah. What's coming next week? Big emotional swings. I think a big whipsaw in psychology and prices. I think tomorrow bank earnings typically they're not necessarily a broad market mover,

but because they sit right at that point of stuff we're still possibly worried about in terms of credit conditions, the effect of higher rates on their balance sheets. They could matter a little bit here. Actually, the bank stock index, like the KBE ETF, has started to act like it might be in a kind of a bottoming mode right here. And aside from that, University of Michigan sentiment, the low for this cycle was a year ago. It was June of 2022. So we're basically going to anniversary that meeting. We're only up slightly off of those lows. So I think you probably want to see a little more good feeling running through those numbers. There was a time when we were fixated on the inflation expectations component of the Michigan sentiment index. I think we're beyond worrying

about those secondary inflation indicators, but it won't hurt to either reinforce or maybe raise questions about the current comfort we have with the path of inflation. Yeah, Mike, so interesting. You mentioned the banks, watching the KRE as well and how it moved between ADP and CPI. Mike Santoli, we'll see you back tomorrow. All right. Cue up the QR code. It's on the other hand time. Sign up at the link, the newsletter CNBC dot com slash OTOH. The latest installment of my on the other news on the other hand newsletter has the topic. Will the Supreme Court's ruling striking down affirmative action be a setback or progress for college campuses and corporate offices? Yeah, I went there, did it this morning on Squawk Box. You can share it, read it again there with the code. All right, that's gonna do it for overtime. Fast Money starts now.