Closing Bell - Closing Bell Overtime: Jamie Dimon’s Big Warning 10/10/22

Episode Date: October 10, 2022

JPM’s Jamie Dimon says stocks could have a lot more downside to go if things get a lot worse for the economy. Solus’ Dan Greenhaus reacts and gives his forecast. Plus, our most valuable pick is one Wall Street firm’s big bet on big pharma. And, 5-star fund manager Kevin Simpson of Capital Wealth Planning breaks down where he is seeing opportunity in the market right now.

I'm Scott Wapner. You just heard the bells. We're just getting started from here at Post 9 at the New York Stock Exchange. In just a little bit, I'll speak to the analyst who sent Merck shares surging today on why he says it's a stellar stock for your portfolio. We begin, though, with our talk of the tape. Jamie Dimon on the record on the markets, the economy, and certainly your money, and why he says stocks could have a lot more downside to go if things get a lot worse for the economy. If you need money, go out and raise it, he said. Let's bring in Solis Alternative Asset Management's Dan Greenhouse for his reaction to that, which we'll get to in two seconds. But this market in and of itself, a couple of great days last week, 5 percent in two days, gave like three or four percent of it back quickly. And now we're trying to figure out what we want to do. What's your best guess on what we do want to do? I mean, the market clearly has no memory for one day or the next.

Everyone has discussed it. And I'll just reiterate, you're getting really conflicting data. Some are getting worse. Some are holding up. Obviously, the housing market's in trouble. The manufacturing sector is deteriorating. The jobs numbers have been strong. So you're getting conflicting messages. And obviously, sometimes when that happens, along comes earnings season to try to break the tie. What's the conflicting message on the good side? I mean, what's conflicting with the bad? Well, the jobs market. You have jobs claims that remain at exceedingly low levels. The headline jobs number at 260 plus thousand jobs is outside of the recent period when you've had three, four, five hundred thousand jobs would be a pretty strong month. There's other data points, the labor differential

and the conference board report, for instance, but on balance, the labor market's holding in there. And ultimately what you care about, macro prudentially, so to speak, is jobs. And to the extent that jobs are holding up, that's all else equal to positive. But this has happened before. You get a bounce,

and when you think that you can actually put something behind it, before you can finish your sentence, the market's already reversed. Is that it for this particular bounce or what? Yeah, I have no idea if that's it for the bounce. I think, again, you know, we're largely speaking in a holding pattern in front of the CPI report and then subsequently earnings season. The inflation data is so dominant in every conversation I have with everybody, both on the street in terms of focusing on it as it relates to markets and just in my personal life. It's basically the

conversation everybody's having everywhere. So before that Wednesday number, I think it's hard to have pretty much conviction in either direction. The conversation everybody's having everywhere today is about what Jamie Dimon said to our correspondent over on CNBC Europe. I'm going to play a couple of soundbites and I want your reaction. The first is on where he sees the market going from here. Same kind of question I asked you as to whether he sees, you know, have we bottomed? Listen. Stock markets, where do you see the trough for the S&P 500? Oh, I don't know. It may have a ways to go. I mean, it really depends that soft landing, hard landing thing.

And since I don't know the answer to that, it's hard for me to answer that. But it could be another easy 20%. And I think the next 20% will be much more painful than the first. Rates going up another 100 basis points are a lot more painful than the first 100 because people aren't used to it. And I think negative rates, when all is said and done, will be, have been a complete failure. Okay. So, I mean, that essentially is the fear of a Fed-stimulated crash. I mean, another 20% would be just that. That's what it would be. Yeah, well, crash or not, 20% down is call it 2,900 or so on the S&P 500, that's a pretty substantial drop in stock prices.

I think it's a little further than I think the stock market ultimately goes, but we know markets to the extent I'm perfectly correct. We know that stocks traditionally overshoot on the downside just as much as they overshoot on the upside. So I don't think $2,900 is out of step with what might happen. And just to reiterate a point that now everybody's making, or a lot of people are making, you haven't seen the type of weakness that tends to play into broad stock market weakness in the manufacturing sector in the form of the PMIs, in the labor market in the form of the monthly jobs reports. Those numbers are not great in the form of the PMI, but neither are they anywhere near, call it the 45 level for the PMI or zero to 100 in monthly jobs, that would be commensurate with something resembling economic

pain. If you looked at a PMI at 50 and a jobs report at 250,000, all else equally, you'd say everything's doing pretty well. Yeah, but the problem is, is what Diamond said. You got 100 more basis points of hikes, it seems, minimum, minimum coming, right? They're probably going to go 75 next. I think 75 is probably... Are they just going to do 25 the next time? I don't know. So you've got 100 minimum coming. The whole point is that what's good now ain't going to be good on the other side of that. No, that's right. And this has sort of been a main point of ours and mine for many months now, that there's always this idea of a Fed pivot coming right around the corner, and they're just going to tighten enough to bring inflation

down without affecting the economy more broadly. All of that was always hopes and dreams. I mean, the most likely outcome was always what history shows always happens, which is the Fed tightens. They tighten too much. They cause an economic dislocation. The market goes down full stop. I mean, that happens almost every time.

And it's just ridiculous to believe that it wouldn't likely be the case again. It all goes back to the whole point of whether the Fed's doing too much, whether they've already done too much. Yeah, but again, they put themselves, and not just them, the fiscal authorities as well. I mean, let's not leave both the previous administration and the current administration off the hook for some of this inflation. It's not all the Fed just buying bonds. Although, again, buying mortgage-backed securities in January and February is just one of the most egregious policy errors in modern history.

But, again, the mistake is not tightening so much now that you have to bring inflation down. The mistake was allowing the inflation, the proverbial inflation genie, out of the bottle in the first place. No, but the mistake is not now being patient enough to wait and see what happens with all you've done. But you've got to. Charlie Evans said it takes 12 to 18 months. That's right. Today, he said that to Steve Leisman for the hikes to be felt throughout the system. The point being is they've done a lot and there are already ripple effects of that,

to which Lyle Brainerd today said liquidity is, quote, a little fragile. And they're monitoring that. Yeah, listen, in the credit markets, you have inklings of trouble. We've got to get you a molded earpiece. I should get a custom one for how much you're generous enough to allow me on. But in the credit markets, you have some trouble, like the Citrix deal that everybody's written up is a microcosm of some inklings of stress, although you have not seen it in the credit markets more generally. High yield spreads remain at exceedingly attractive levels. IG spreads are, call it 150 basis points. They normally get north of 200 if there was a problem. But what the 12 to 18 months is really an important point. This is another way of saying

monetary policy operates with long and variable legs. So if you're the Federal Reserve, you've got to sort of understand, and they do, that it's going to take some time for this stuff to work its way through the system. But just to push back on you a little bit, when you've got an inflation rate at 6, 7, 8, 9 percent, you don't have the luxury of patience, the likes of which we've seen certainly for the last 15 years. I know, but it doesn't happen overnight no matter what the inflation rate is. You have to give it time to work through the system. Nothing they say or do is going to take inflation from 9 to 6. You have to wait. They first started raising rates six months ago. That's right. But that's not a particularly long tightening cycle.

Obviously, it's been more rapid. And we've not, I mean, it's been 20 years since we've seen a 75 basis point rate hike at all. And now we're going to see four in a row. But they have basically telegraphed, for lack of a better word, that they're almost done. They're going to hike at the beginning of November. They'll probably hike again in December. And then there's a, we'll call it an open question, whether they hike one more time in the first quarter of next year. That is almost done. So to your point about wait and see, at that point, assuming things unfold the way that we expect, and of course we know that always happens, they'll wait and see. Oh yeah. Assuming they don't break the vase along the way.

This has been my point with you all year. This is what they do. They tighten too much because it's 12 guys and girls in a room trying their best to bring inflation down. They're not going to get it right because they're human. And the most likely outcome is that they cause some distress more broadly and in markets. And you've seen that already with the stock market down 25 percent. All right. Let's bring in CNBC contributor Stephanie Link of Hightower, Sean Cruz of TD Ameritrade to continue the conversation. Steph, what's your reaction to what Diamond said? By the way, I'm going to play another clip of that on maybe what the ultimate conclusion is about what the Fed does. But what about this notion of the market? 20% may be easy, and it's going to feel a lot worse than the first 20 did.

Steph's frozen. Sean, can you hear me? Sorry, am I frozen? No, now you're not frozen anymore. You're back. You're thawed. Now I'm not frozen anymore. I'm back.

All right. I'm not surprised. I don't know if we're down another 20% from here. We're already down quite a bit, Scott. But we've been talking about it all year long that the market's churning and it's in a choppy trading range and it's volatile because there are too many unknowns. I 100 percent agree with him on all the things he listed on what we don't know because we don't know about the Fed. We don't know about if they're going to be able to get inflation down. Doubtful. They don't have a great track record, but that's another unknown. The economic data, we are definitely seeing a deceleration,

except in the jobs market. Every place else, it's decelerating. War, currency. So across the spectrum, there's a lot of unknowns. Markets don't like unknowns. Higher interest rates are really bad for long-duration assets. Long-duration assets tend to be technology and growth stocks. Technology and com services are 35 percent of the S&P 500. So I kind of thought last Monday and Tuesday was silly that people thought that the Fed was going to pivot. They can't pivot. The inflation is way too high. Core PCE at 4.9 percent. The CPIs and the PPIs this week are going to be north of 8 percent, even if they come down and they're a little bit better than expected. It's way too high. So the question you guys were just or the biggest question that you guys were just talking about is when will the Fed hikes actually be felt? And it is going to be something like 2023. I think it's sometime in the first half. The

irony of all this is the Atlanta Fed GDP now, they actually revised GDP for the third quarter to 2.89% from up from 2.7. So the growth is still here. Momentum is still here in the economy, but it's slowly going south. I actually think the biggest question now is what are they going to break along the road? Right. And that's sort of what Diamond discusses earlier. Sean, listen to Jamie Diamond today discuss the economy, the Fed, the fallout, and we'll talk on the other side. Currently, right now, the U.S. economy is actually still doing well. Consumers have money, you know, fiscal stimulus. They still have more than they had before. They're spending 10 percent more than last year, 35 percent more than pre-COVID. Their balance sheets are in great

shape. Yes, debt's gone up a little bit, but not nearly to pre-COVID levels. And therefore, even if we go into recession, they're going to be in much better shape than 08 and 09. Companies are in good shape. Credit's very good. Markets are still open, though, rocky and stuff like that. But you can't talk about the economy without talking about the stuff in the future. And this is serious stuff, okay? This is inflation, which obviously is changing the effect of those numbers I just told you about. It's rates going up more than people expected already, and probably a little bit more from here. It's QT, which we've never had before. So therefore, the unknown effects, you see it today in bond markets around the world and sovereign markets and people selling U.S. Treasury debt. And it's the war. And these are very,

very serious things, which I think are likely to push the U.S. and the world. I mean, Europe is already in a recession, and they're likely to put U.S. in some kind of recession six, nine months from now. The one guarantee which we've been consistent with is volatile markets. You're going to have volatile markets. You've already seen markets down quite a bit. No IPOs, very little high yield, bridge loans being hung and stuff like that, which is pretty typical, but it's still been orderly. I think it's possible you're going to see it be disorderly sometime in the near future. Right? Disorderly sometime in the near future is a possibility. So Hurricane Diamond suggests that it could be a Category 4 or worse.

If you need money, he said, go raise it. That's the line that stuck out to me maybe more than anything else. What about you? Yeah, I mean, I think right now there is a lot of attention being given to credit markets because we haven't really seen a lot of the distress you would associate with an economy that is potentially going to head into recession. We're not really seeing that show up in terms of defaults or the expectation for defaults getting priced in. So if we do get a scenario where liquidity dries up to the point that credit markets

start to dry up, that can really be something that is going to impact assets across the board. The one thing I think looking at this, going into it and why he mentioned the balance sheets being in pretty good order, which might help weather any sort of a recession or a slowdown. But also, I think just in the financial system, leverage, if you look at the FINRA margin debit numbers, leverage has actually been coming down all year. So we're also not sitting on as much leverage as, say, we were when we were up around $4,300, $4,400. That coming in could also be something that may limit the volatility we see if we do see an acceleration of selling on the downside.

The fact that there's not as much leverage that has to get pulled off the table alongside that could be a calming factor. So I think it will be interesting to see if we get that recession six to nine months, really how deep is that recession going to be felt? If it's a little bit more moderate, I think you can actually see equities in particular hold up a little bit better. You know, the other thing, Sean, and you have a bird's eye view, I would assume, of this, given you're at TD Ameritrade, there's been a suggestion that, you know, the professionals, institutions, they've de-risked, but retail has yet to really sell. And that's where that next wave of selling is eventually going to come from. And I'm curious, from your vantage point, what do you see? I think we put out our IMX data, which sort of measures our investor sentiment.

And that's actually been coming down all year alongside some of those leverage and margin debit numbers for an aggregate that I just pointed to. So there's still some interest. They're still in the market to some extent, but they're not going out there into the more speculative areas. They're also not levering up to do so. So I think there's a little bit of a defensive posturing being taken place, but we aren't seeing complete panic running for the hills, selling everything. They're just being a little bit more defensive and thoughtful in what they're going out there and purchasing when they do. So, Steph, I mean, this notion of being a little bit

more defensive rather than, as you said, you know, longer duration assets, technology stocks, NASDAQ two year low today at a 52 week low is the is the NASDAQ, you know, 100. That's not a great place to be if you think that somehow stocks can rally from here. No, it's not a great place to be. And you know, I've been underweight tech all year long. I am kind of sniffing at Google. We talked about that last week. We'll see. But I'm underweight both com services and tech because of this very reason. Right. And it's what's interesting is what has actually worked in the last, say, since the July lows. We had a little bit of a growth rally,

but then that faded in September. And now you have energy back as a leader. You have financials holding in. You have materials also doing okay. And you've got utilities and staples actually decelerating because they've held up the best and they are now very expensive. So it's interesting to see, you know, what is leading at this point in time. It's a little bit more value versus growth. And then we get this Friday, we're going to get a

bird's eye view of the financial services we have. I call it I'm calling it Super Friday because we've got four out of the big six banks that will report and we'll have to listen to what they have to say about the consumer and the balance sheets and that sort of thing. Are earnings, Dan, going to save the day or confirm the uncertain environment that we find ourselves in? Yeah, I mean, I think it's a little rudimentary when people come on and talk about earnings saving the day. I mean, at the end of the day, we know what earnings are going to be. We know that right now expectations for the quarter are about two and a.5%. We can slice that any which way you want. We should just change the whole thing and call it guidance season.

Yeah, guidance season. That's what I was going to look at. I know that's where you're going. Backward looking, okay, whatever the numbers, we need to hear on what they see in terms of FX, right? In terms of their outlook, supply chain, inflation, everything else. Every season, it's guidance season, so to speak, but even more so now. Listen, I think it's incredibly difficult right now for anybody to have a handle on the macro environment. We talked about it before. Forecasting these numbers are basically impossible, even though you know what the beat rate normally is. But again, corporate commentary on the ability to hold margin will probably be the most important thing because we've done exceedingly well. We, corporate America, has done exceedingly well in holding price.

You've seen that in the form of S&P 500 margins, which remain in the low teens. Six months ago, nine months ago, 12 months ago, people would have told you they'd be meaningfully lower than they are. So guidance and commentary on that front, I think, will probably be where you want to hang your hat in terms of corporate ability to maintain price. Pepsi on Wednesday is one that you're watching closely. We're looking for the banks. And then before you know it, we're talking about tech. Sure. But this is a good one on a variety of levels.

It's one of the first. I mean, we used to think Alcoa started earnings season, and obviously that's not a thing anymore. But Pepsi, which has no bearing on Solis or Arday, it's just it's a big multinational. And to the extent that you want to get a handle on the FX side of things, in addition to what like Nike has told us, you know, Pepsi will be the first one out of the gate and obviously their global nature. So, Steph, I know you watch that one. Maybe you owned it. Yeah. Yeah, I don't own it now. So Pepsi, I think it will be really telling to find out what is happening in Europe and what is happening in China and the demand side of the equation. Also, they have been raising prices double digits for a lot of quarters now, and we'll have to see if the demand starts to wane.

So I think that actually the demand will be fine. It's going to be margins. It's going to be cost pressures, labor pressures and that sort of thing. The stock is not cheap. In fact, Coke is a lot cheaper, believe it or not. So but I think it's going to be the banks to me this week that are going to really show us what's what's happening real time at the front line. Sean, last word to you. We're at thirty,600 on the S&P as we're having this conversation. How much different, if at all, do we look some four weeks from now when we really get through the bulk of major earnings? I think it'll move from margin and possibly even move up to that top line. We've been talking a lot about supply chains or markets getting oversupplied in

some situations. There was a note put out about that on electric vehicles today. That's all more or less of a margin related item. But I think when you start hearing warnings about demand, and we've heard that from FedEx, we've heard that from AMD, hearing from a lot of these very big, big companies with a large global footprint, when they start talking about demand, now you're starting to talk about that top line. And what you'll have potentially is growth coming down at the top line and also what is coming in that that top line is now at a lower profitability measure that can really shock us shock the market and

potentially send us down and we could be looking up you know towards the middle of the 34 hundreds very quickly if that really does start to become a consistent theme, is lower revenue and lower margin on what revenue companies are getting. All right. We're going to leave it there. Jamie Dimon, he has us talking once again. He has a knack for doing that. Guys, thank you. Steph, Sean, Dan Greenhouse right here next to me. We'll see all of you soon. Let's get to our Twitter question of the day. Speaking of Mr. Dimon, we want to know if you agree with him. Could the S&P 500 drop 20 percent if there is a hard landing? You head to at CNBC Overtime. Cast your vote on Twitter. We will share the results later on in the show. We are just getting started, however,

here in OT. Up next, today's MVP, our most valuable pick. One Wall Street firm making a big bet on Big Pharma. The analyst behind the call joins us next. And later, five-star trading advice from Capital Wealth Planning's Kevin Simpson. He's got new moves he seemingly always does. He'll tell you where the opportunity is amidst the volatility. We're live from the New York Stock Exchange. OT right back. Welcome back to Overtime.

Shares of Merck climbing more than 3% today after getting upgraded to a buy at Guggenheim. The firm pointing to growth in some of Merck's key drugs, as well as a positive outlook for upcoming drug trials. It's today's MVP, our most valuable pick. And joining me now, the analyst behind the call, Seamus Fernandez. Good to have you on the show. It's interesting. You downgraded Merck last year. Keytruda, which is one of their key drugs, was one of the reasons for the downgrade. You cited what you called concentration of that drug.

Now it's being viewed as one of the catalysts Keytruda is. How so? So I think more so the catalysts are going to be the pipeline for the company. And we got some great news this morning. I guess we better to be lucky than good in some cases. We upgraded the stock this morning, largely on the acquisition of Acceleron that they did more than a year ago. And the work that we did on that pipeline assets, so Tattercept really got us excited from work that we did with some experts in the field. We see this as, you know, potential $4 billion product for Merck over time, and that's something that can actually reduce Keytruda's concentration risk.

Another positive is just the pace at which Keytruda is actually coming and growing in the market right now, as well as Gardasil, their HPV vaccine. Both of those products are growing, frankly, faster than expected, delivered an extremely strong second quarter. We're anticipating a strong third quarter as well for both products. And I think, frankly, in 2023, we're likely to see Merck as one of the companies that actually can deliver upside to consensus estimates next year. One of the drivers there was also a positive decision that Merck had from a patent perspective on their large diabetes product, Genuvia. So we don't think that that's really factored into consensus expectations yet.

And we're also quite positive on that being able to bridge to potential improvements in merck's overall pipeline portfolio including potential extensions of uh katruda's life cycle where they're developing a number of new products in combination with katrina so i was going to ask you i mean what percentage of their revenues come from keytruda and Gardasil? Yeah, so Keytruda and Gardasil probably represent over 60 percent of Merck's revenue, you know, in the middle of this decade. So, you know, that's definitely going to be major, major drivers of the overall story. The major, you know, sort of decision point in Merck going forward is going to be whether or not they can extend the Keytruda story

beyond 2029 and 2031. So you have two different sort of patent lives, one overseas that goes longer to 2031, and in the U.S., it's December of 2028. So there's a number of years between now and then that we think Merck can really build a potential lifecycle management strategy around Keytruda. And we're going to see some major clinical trials emerging in the next two years. But another part of that is also what's happening in the rest of the pipeline for Merck that can actually mitigate the loss of Keytruda in the second half of the decade. And a couple of the products that we highlight in our report this morning is a product called B.1.1.6, which is a pneumococcal vaccine for adult pneumococcal disease. You would know Prevnar 20 from pfizer uh is actually dominating the market today there may be an adult opportunity there for merck to really compete effectively

and then separate from that is their pcs k9 oral uh product that's in development right now i just wanted to get one more in forgive me for um for interrupting you uh there but i do want to fit one more in um are these recession-proof? Is a stock like this recession-proof? I mean, I wouldn't say anything is truly recession-proof, but it's definitely recession-resilient. And that's kind of how I would characterize it. All right. Good stuff. Seamus, I appreciate your time so very much. Seamus Fernandez joining us there. Merck shares higher today by some 3%. Up next, five-star fund manager Kevin Simpson is breaking down his newest trades, including a beaten-down chip stock.

He joins us with his top picks right after this break. OT is right back. All right, welcome back. It's time for a CNBC News Update now with Shepard Smith. Hey, Shep. Hey, Scott. From the news on CNBC, here's what's happening. North Korean state media announcing the regime's recent volley of ballistic missiles

was meant to be a simulation of tactical battlefield weapons in use against South Korean and U.S. targets. Leader Kim Jong-un also signaling he'll conduct more tests. Brittany Griner and Paul Whelan could be home by the end of the year. That prediction from the former U.S. Ambassador Bill Richardson. He visited Russia just last month and spoke with senior officials there, but Richardson said he's working to bring home the WNBA star and the Marine veteran as a private citizen and not on the government's behalf. And the jailed Hollywood mogul Harvey Weinstein facing another sexual

assault trial. Jury selection started today in Los Angeles. He's charged with four counts of rape and seven other counts of sexual assault. Weinstein's already serving a 23-year sentence in New York for rape and sexual assault. Tonight, missiles rain on Ukraine as Russia accelerates its attack. Plus, a first-of-its-kind study on whether colonoscopies are actually effective after all. And the hero bus drivers who saved a toddler on the news right after Jim Cramer. 7 Eastern CNBC. Scott, back to you. We'll be there, Shep.

Thank you. That's Shepard Smith. Stocks moving lower again today. Our next guest is a five-star fund manager who is using that pullback to do some dip buying in a few key names. He is Kevin Simpson, the founder of Capital Wealth Planning. It's good to see you, as always. How do you think we are in terms of the rally having any more life to it? Was that it? Because we just got too much going on.

CPI is going to confirm that inflation is still hot. Earnings are going to confirm that the situation is deteriorating. That's the problem, Scott. We're not going to see any reprieve from this. The markets can't have a sustainable rally until they stop hiking rates. As long as they're going to have a hawkish tone, we can bounce a little bit to the upside. We can certainly be range bound. And as we've learned and grown somewhat accustomed to recently, stocks can go down. But until they pivot, we're not going to see a sustainable or lasting rally, unfortunately. So if that's the case, right, and we're going to have more dips than not, as we suggested in the

intro, you're using them to your advantage, at least what you hope is to your advantage. You bought more UPS, you bought more Qualcomm, and you sold Marathon. Give me the reasons why more UPS and Qualcomm here. Well, UPS is a stock that we had called away and sold at a nice profit somewhere in the 205 to 207 range. And we started reaccumulating the position. Admittedly, Scott, we started a little bit too early. It was before the FedEx news. And then they just tanked in sympathy with FedEx. You and I had a great conversation that day about it. But what we like to do is, with great patience and a long-term time horizon, take our time as we build positions.

So we finished off that what is now a 5% allocation UPS, you know, you've got almost 4% dividend, very, very attractive PE ratios now. Obviously, the stocks come down a lot, trading around 12 times earnings. But over the past 10 years, they just continued to raise that dividend. And that's our playbook. If we can have stocks that turn a profit, they have an EBITDA, they return cash to shareholders. Certainly in a time period like this, that type of methodology can work. Same trade with Qualcomm, PE of around 10, low for a tech name, 2.5% dividend, strong dividend growth over the past 10 years. Now, they've had an issue with chips as a result of the government's decision to hold off exports to China. We don't know exactly how that's going to play off, but these stocks have tanked as a result of the government's decision to hold off exports to China. We don't know exactly

how that's going to play off, but these stocks have tanked as a result of it. We're using that as an opportunity to really start putting this in as a new position. Could it be worse before it gets better? Absolutely. So we're going to be very patient, very slow and very careful. We own 2% of Qualcomm with a target of 5%. Why'd you bail on Marathon? Yeah, you know, this is the second time that we've sold out of Marathon because it got called away at 101. You and I talked back in August with the same exact trade. We originally bought it in late 2021 around $61. We accumulated a little bit more in January and February in the low 80s. We had half of the position called away in August. Again, 101, 105 range. We brought some good premiums in.

We only sold half at that point. Stock pulled back. It rolled over. It came down around 22%. We were able to re-enter it in the low 80s. Here at this point over on Saturday with Friday expiration into Saturday, we let all of the stock go. We had brought in $5 in premium recently. And again, looking to take some profit, looking to enjoy some strength. We still own Chevron. We still own Devin. We believe in the sector.

But we like to sell when things are rallying and we'd like to look for weakness when we can accumulate. We now have 14% cash in the portfolio, even after the UPS and the Qualcomm buys. So we've got really nice dry powder and we think the next three to six months are going to provide ample opportunity to buy amazing names, not again for a couple of months time period, but for a couple of year period. And the

Fed will pivot and markets will go higher, just not tomorrow. No, I hear you. The problem is what kind of damage, you know, they do along the way before the pivot. And to that note, I'm just curious for your reaction to Diamond today. Maybe get 20 percent more if things get bad and it's going to feel a lot worse than the first 20. I listen to you and Dan. I think you guys had a great conversation about it. I mean, I don't think that, you know, he talked about the next 1% of rates going higher, being more painful. I mean, for the people that are in pain, the recession, the massive global recession and economic slowdown that he's calling for is no surprise. Like that's not newsworthy. A potential 20% decline seems a little extreme for me. It could happen. None of us have a crystal

ball, but it seems like that's a little bit more pressure on the markets than I'd be looking for. And as far as the future, the recession here in the U.S., no recession is good. It's horrible. But if it is short-lived, if it is shallow, and then you look at the possibility for next year having a conversation about a Fed pivot, about coming out of a recession, we can't time the market. We can't go to cash today because we're scared, because we'll miss that capitulation to the upside.

The second they pivot, and they will at some point, markets will go on a tear. And we want to be invested when that happens. We don't want to be on the sideline thinking like, oh, we had a two-decision process. We wanted to time the market. Way, way too difficult. So a little bit more pain, a little bit more volatility, a little bit more downward pressure. We're expecting it, but we're closer to the end than the beginning. And what they're doing will work and the Fed will pivot and times will get better. All right. We'll make that the last word. Kevin Simpson,

thank you very much. Talk to you again soon. Thanks, Scott. Up next, slamming the brakes, a pair of automakers getting hit with big downgrades today. We debate the call in today's Halftime Overtime. And don't forget, you can catch us on the go by following the Closing Bell podcast on your favorite podcast app. Overtime is back after this break. In today's Halftime Overtime, hitting the brakes on automakers, UBS downgrading both Ford and General Motors, calling for profits to fall by 50 percent. Those two stocks among the worst performers in the S&P 500 today. But Serity Partners' Jim Labenthal isn't changing his bullish

outlook on GM because of this call. He joins us now to tell us why. Somehow, I didn't think you were going to. I'm glad to have you on anyway. But tell me why you are undeterred by this call. Scott, good to see you on overtime um you know i woke up this morning i saw the downgrade and it kind of slapped my forehead because i think what the analyst community is doing right now is they're looking for anything that's still standing and whacking it what i mean by that is if you look at the last three months and and the downturn to new lows that we've seen in the market overall general motors is and i'm focused on general motors because i own it but it's hung in there really nice. It's flat over the last

three months while the market is down about 7%. So the analysts are coming for it. And they're saying a recession is coming. Maybe it is, maybe it isn't. I mean, the labor market's strong right now. And that means that there's demand for cars that to date has not been met by production. As production picks up, we should expect prices to come down. But that should be made up for by the volume. And at less than six times earnings, at 80% of book value, with a heck of a lot of good things going on with the autonomous vehicle unit, cruise, bright drop, the other electric vehicle programs,

I don't think this is a time to sell General Motors. I think you're supposed to step into it here. Well, I mean, they don't suggest sell it. They just say it's neutral, right? Don't buy it. Just sit tight and let's see how it all plays out. Why would you want to buy the stock here, given some of the risks that exist? Quote, the overall sector outlook for 2023 is deteriorating so fast, they say, that demand destruction seems inevitable at a time when supply is improving. So this isn't the sky is falling, get out of it. It's just sit back and let's see how this all plays out. Yeah, I think I may be responding to the fact that it was down at one point almost 7% today.

So that kind of felt a little bit ugly. But to your point and to your question, I think there is a debate obviously going on about when a recession will hit. How bad will that recession be if it does hit? And what my sole point is here is if you look out six months from now, the economy is likely to be through. Maybe it's 12 months based on what Jamie Dimon says. The economy is likely to be through whatever it's going to go through. And to the point that several of us are making in commentating, the market is soon going to sniff out that the Fed can only go so far. The market is getting poised for a spring. And you

want to be in a stock like General Motors when that happens. Again, below six times earnings, now has its dividend reinstated, below 80 percent book value. This is really a good time to own it in anticipation of what's not long away. You're not suggesting a shallow recession, then, if you think six months from now, we're going to be, in your words, through it. That's like a baby pool. You are properly surmising what my viewpoint is. And I know you and I have had some good conversations, some robust discussion about this. I still look at where the economy is, 2.9% Atlanta Fed GDP in the third quarter. I know that's backwards looking. I know that's backwards looking.

I know the Fed wants to whack that, and they will. But my point is there's a lot of economic activity still yet to come, whether it's jobs, which are still strong, ISM surveys. There's a lot of strength in this economy. By the way, by the way, Scott, you you know there is a lot of capex to come. And that is going to depend on that's going to rely on pickups being sold which are the highest

margin products that these companies sell. I just don't see the doom that everybody else sees coming out. All right Jimmy thank you we'll talk to you soon that's Jim Labenthal. Joining us in the show time over time up

next stocks ending the day in the red but the action action is far from over. Seema Modi is tracking all of it for us. Hi, Seema. Hey, Scott. Yet another company cutting its financial guidance for the year as recession concerns continue to grow. We'll tell you which name right after this short break. We're tracking the biggest movers in the OT sima modi is back with that hi sima and scott a change in leadership at z scaler amit sinha is resigning as president from the cloud security firm to become the ceo of a privately held company effective october 21st sinha will

remain on the company's board of directors you can see the stock is moving lower on that news by 3% in the OT. Manufacturer Leggett & Platt cutting its full-year guidance primarily due to lower volume and a slower-than-anticipated recovery in the automotive segment. The company also blaming geopolitical disruptions in Europe for a slowdown in demand for betting. Stock down about 8% to 9 percent here. And chip stocks extending their decline after the close. VanEck Semiconductor ETF trading at its lowest level since November 2020, following the Commerce Department's announcement that they're releasing export controls, which will make it increasingly difficult to export to China. Marvell, Qualcomm,

you can see all moving lower in the overtime. Scott. All right, Seema, thank you. Seema Modi still ahead of fast food play. One money manager sees big upside for this name. We'll break it down in our two minute drill. Santoli's last word still ahead to. Time for the two minute drill. Joining me now, Brian Vendig of MJP Wealth Advisors. It's good to see you, Brian. Let's talk about some stock names that you like in the two minutes that we have. APA is number one. Tell me about it. Yep. Thanks, Scott. So APA is a holding company for Apache, and it's an oil driller that has wide-ranging capacities across the globe, both onshore and offshore. And when I look at it, it's just trading about 3.8 times forward-looking earnings. And when I look at it, it's just trading about 3.8 times forward-looking earnings. And when I look at the fact that it's also helping to sell natural gas to Europe, I think it's just a pure play moving forward. And as I said before, last time I was here, I like the companies are

going to help Europe out of the crisis, not the ones that are in it. Okay. Number two, CF Industries. So right now, fertilizer demand is peaking as we get to the end of the year. It's usually part of the seasonal business. When you think about the demand for agriculture right now, we expect fertilizer prices to go up. And also keep in mind, again, natural gas is an input to creating fertilizer. And with your pretty much offline regarding that point, North America is there to supply and that's where CF sits. Okay. Chipotle is your last pick. That's right. I think the company really has addressed a lot of the headwinds this year with operational as well as pricing improvements. And when you look at the consumer shopping at

Chipotle, demand is still very strong. Plus, Scott, I'd like to highlight that they're bringing in robotics into automating the meal prep process, which might unlock some efficiencies when you think about an inefficient labor market right now. Yeah. You think they still have pricing power? I mean, I know that they've raised prices the way they have you look at the spending numbers and the income levels relative to the consumers that are shopping there, I think right now there is still a little price elasticity there, Scott. All right. We'll leave it there before the buzzer went off. Brian, thanks. We'll talk to you soon. That's Brian. Thank you. There in our two minute drill. Up next, it's Santoli's last word. All right. So the results of our Twitter question now we asked you do you agree with jamie diamond could we see a 20 drop for the s&p 500 if there's a hard landing the majority of you

say yeah yes we could almost 64 mike santoli's here for his last one i'm not surprised by that at all i think you know many people if we have a hard, ugly landing, that could be a real possibility. I don't consider it a surprise, especially in the context of if you have a hard landing. I also tend to live in a world where you always have to have in mind that down 20 percent is always at least a possibility if things don't break right. 20 percent more. More, of course, which would bring your total to about 40 if you do the math. And it brings you well below where the S&P started, you know, before the pandemic, the peak there. So clearly, that's the downside risk.

And actually, if you thought the downside was anything less than that, you'd probably be bullish right now. Because whatever the ultimate low is in a bear market, the market tends not to spend an enormous amount of time there. You can try to finesse kind of getting in and out and dancing around it. But if you thought the downside is only 10 percent from here only, I mean, it would hurt, but it probably wouldn't stay there very long. So I see it. Look, JP Morgan shares, along with all the other big banks, are trading at levels they first reached almost five years ago. So why wouldn't you feel as if there's something nasty coming if that's the world you're existing in every time? We've been burned by the CPI many times along this journey that we're on.

Are we setting ourselves up for that once again? Potentially. But I also think that's why the market's so apprehensive this time. Going into the prior CPI number in September, the market wasn't that far off the highs. It seemed as if we were trying to get hopeful. We had one good number in a row the month before that. And we've dialed off the highs. It seemed as if we were trying to get hopeful. We had one good number in a row the month before that. And that's we've dialed back the clock. So it's probably good that we're all kind of back on our heels going into this one. Bob market's going to tell us it's open again tomorrow. We're probably going to be flirting with the 10 year at four again. I feel

the same way at the top. Well, that's what the ETFs kind of told you. The global yields pretty much told you that the 10 year most likely would have been around there. If that's not the top, well, that's what the ETFs kind of told you. That's what the global yields pretty much told you, that the 10-year most likely would have been around there. If that's not a ceiling for the 10-year, the market's got that to contend with, even though everybody's pretty bearish and pretty defensive, and you do have the seasonals that should start to work in the market's favor soon. About this diamond notion of, you know, 100 more basis points, you're going to feel bad. Yeah. Because you already knew

what was coming before. We've already experienced it, but then you've got to do another and that's going to feel a lot worse and have much worse repercussions on the overall market picture. I think it's plausible in the sense of, look, we already have mortgage rates at seven, right? And we brought the housing market to its standstill. So if we have a similar leap from there, what does it mean in terms of the economic pain? I get that. However, the reason the market was able to take a little bit of comfort in what Brainerd had to say today and before that, Evans, because if the numbers don't get there, whatever they say about we're aware of the lagging effects and we're aware that we can't over-tighten, it's not going to matter too much to the market.

An inflexible Fed would be the worst takeaway for the markets. That's always the way. This stubborn sort of we're staying on this road no matter what we see. If we're dogmatic and we're not paying attention to the effects along the way, yes, that's always what the market fears. I mean, even Bostick, you know, last week sort of gave you a feeling that they could be flexible too.

We'll see you tomorrow. All right. I appreciate it. Mike Santoli with his last word does it for us.