Closing Bell - Closing Bell Overtime: Lululemon CEO On China, U.S. Consumer; New (And Former) Flexport CEO On What’s Next For Company; Apple’s Event Roundup 9/12/23

Episode Date: September 12, 2023

Averages closed lower today with the Nasdaq falling over 1%. Vital Knowledge’s Adam Crisafulli and Wells Fargo’s Sameer Samana break down the market action. Our Steve Kovach breaks down what’s new from today’s Apple event while Fenway Summer Partner Javier Saade and Bank of America’s Wamsi Mohan talk the investment implications. Morgan sits down for an exclusive interview with Lululemon CEO Calvin McDonald to talk the state of the consumer and growth in China. Nuveen CIO Saira Malik on the tech investing playbook. Jon sits down with new Flexport CEO Ryan Peterson on what’s next for the company.

Stocks weaker today with tech the biggest underperformer in the NASDAQ down 1%. That is the scorecard on Wall Street, but the action is just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan with John Fort. Apple, that's part of the reason. Some weakness in that stock. It's unveiling its iPhone 15 lineup along with several other new devices. We will bring you all of the highlights and what the next catalyst could be for those shares. Plus, we will get the read on retail in the state of consumer spending, an exclusive interview with Lululemon CEO Calvin McDonald and Flexport founder Ryan Peterson

running the company again after the exit of his handpicked CEO. Coming up, Peterson tells us why Dave Clark is out, lays out his plan to build logistics while getting profitable. But first, let's get to our market panel. Joining us now, Adam Crisafulli of Vital Knowledge and Samir Samana of Wells Fargo Investment Institute. Adam, I'll start with you. Yes, stocks finished the day in the red. But really, right now, the focus is on CPI. Do you see that as the next sort of key catalyst to break us out of this, what's been a narrow range?

Yeah, I think CPI is going to be critical. In the last couple of months, you've seen some doubt creep into, I think, the narrative about the state of inflation in the U.S. A lot of the drivers of disinflation in the last 12 months have started to kind of turn more neutral, have started to teeter out. And so it will be very incumbent going forward that you start to see more contribution from shelter, housing and then other services categories. So you're expected to see an acceleration on headline CPI tomorrow, but a deceleration on core. And I think people will be looking very, very closely. If you see the baton get handed off to the services, to shelter, to housing, and those categories really start to move lower,

I think it will provide a lot of relief that we are kind of back into a disinflationary cycle. And that can put us back to where we were earlier in the summer. We've been range bound ever since those inflation doubts crept into the market. Samir, do you see it the same way? I mean, I'm sure it'll drive trading on the day. But look, big picture with oil doing what it's doing. I mean, we all know where CPI is going, right? At least on the headline. I mean, I'm sure it'll drive trading on the day. But, you know, look, big picture with oil doing what it's doing. I mean, we all know where CPI is going, right, at least on the headline. I mean, it's going up. And the problem is going to be that the core is just not going to come down fast enough. If anything, we believe it may end up kind of living in that 3% to 4% range. And so what that probably means is the Fed has to go a little bit further than the market expects.

And that's where we think the biggest disappointment will start to hit later this year. Unfortunately, we think the economic data will also start to soften at the same time. OK, well, stay right there, both of you, because we do have some breaking news from the CDC. Angelica Peebles has the details. Hi, Angelica. That's right, Morgan. Advisors to the CDC recommend everyone six months and older should receive a new COVID vaccine this fall. Panelists voted 13 to 1 in favor of the broad guideline to encourage as many Americans as possible to get the new shot. Once the CDC director signs off, boosters from Pfizer and Moderna should be available across the country within a matter of days. Back to you, Morgan.

All right, Angelica, welcome to the show. Welcome to the network. It's great to have you on. In terms of this new booster, is there actually going to be demand for it? That's the big question. Last year, only 17 percent of Americans got the new booster. This year, we might see some more interest. The CDC today showed some poll results that about 40 percent of American adults are interested. They definitely plan to get it or they're thinking about getting it. So we might see some more interest, but we'll just have to see.

All right, Angelica, thank you. Meanwhile, today also Apple unveiled its new iPhone lineup, as well as some AirPods and watches. Steve Kovac was there, has the highlights. Steve, I mean, we were talking about pricing. It wasn't exactly what everyone expected. Yeah, I think that's pretty much the big thing that our viewers are going to care about, John. So while the iPhone 15 Pro is remaining at the same price, that's $999, it's that Max model that they're adding some even better camera features to, including an optical zoom that got that $100 price increase. It's going to start at $1,199 when all these phones go on sale next week on September 22nd, that Friday. But look, no real shockers here.

Everything we expected to see, two iPhone 15s and two iPhone 15 Pros. The 15s take a lot of the features we saw last year in the 14 Pro, including the same processor, including that spring with the cutout at the top, gone now with the hole punch look that Apple calls the dynamic island. So nothing too surprising there. The biggest change, though, that everyone's probably going to be talking about is that new connector at the bottom switching from the lightning port that we've been used to

be using since 2012, that is now changing to what's called USB-C, a standard port that EU regulators have demanded Apple and all gadget makers start using next year. Android phones have already had this, laptops, tablets, even Apple devices other than iPhone have had it, and now that's coming to the iPhone as well. As for the watch, very minor upgrades here to be honest. Its design looks the same. There's a new version of the regular Apple Watch. It's called the Series 9. Really playing up the chips here, Apple is.

They're talking about this new processor inside that can detect motion so that instead of touching the screen, you just tap your index finger and thumb together to make selections on the screen. You know, hang up a call, stop a song, things like that. And then the Ultra, the Apple Watch Ultra is getting a new version too with a brighter screen and also that double tap feature as well, John. All right, Steve Kovac, thank you. And we're going to have, yeah? I was just going to say, I know one person who is not probably surprised about the pricing dynamics here, and that would be you because you called it like days ago on the show. Thank you. A little bit. It was indeed storage at the high end that kind of accounts for the price increase. And we're going to talk a lot more about that and Apple's events.

All that coverage coming up. Let's bring the panel back in and get a take on perhaps how Apple influences the market or not from here. Samir's biggest market cap stock out there. Big tech has been a big deal. And this one was, well, it didn't perform so great today. Down not quite 2 percent, but that's par for the course post-announcement, no? Yeah, I mean, look, we're not surprised at all. We actually downgraded tech a couple of months ago from favorable to neutral. And it's not so much that we don't appreciate the fact that we're all using more technology, right? One, three, five years from now, I can pretty much

tell you that we will all be using more technology than we are today. The tricky part is it's still about valuations and the multiple you pay. And I think a few months ago on the AI ramp up, a lot of these valuations got to pretty nosebleed levels. And we just knew there was going to be some type of disappointment or adjustment. We didn't know exactly which stocks would drive that, but this move doesn't surprise us at all in Apple or some of the other high-flying names. Speaking of, Adam, Oracle was also quite disappointing stock-wise, if you were long it, on the back of earnings. These are two large stocks with very different stories, very different drivers behind them, both in technology. Is there anything to read into the fact that they've responded the way they have to

announcements, results that really aren't disappointing, but perhaps just as expected? Yeah, I think there are some distinctions between the two. So for Oracle, this had gotten caught up in a lot of the AI optimism. Justifiably, they do have a lot of legitimate exposure to what's happening in AI. So the bar was very elevated. The results did fall a little bit short. The guidance was a little underwhelming. But if you listen to the whole call and kind of really appreciate the story and what they're talking about, I wouldn't say fundamentally there was a lot of dramatic change with what's happening in Oracle.

I think it's more just a question of the froth in these types of stocks that are very closely associated with AI. For Apple, I think the real critical variable for Apple and the big change in the last two weeks, call it, has been what's happening out of China. Really not anything, any of the product announcements today. It has to do with the new Huawei phone and the chip that it contains inside, the quote-unquote breakthrough chip, and then a report that the government is imposing restrictions on their employees' ability to use iPhones. So I think the lack of clarity in China, the China risk, that is really the big issue with Apple. It's really nothing to do with the product launches today, which were all very much consistent with expectations. Okay. Well, we're sure to talk about Apple once or twice again before the end of the year.

Adam, Samir, thank you both. Let's talk more. Yeah, before the end of the show. Before the end of the minute, let's talk more Apple with senior markets commentator Michael Santoli right now. Mike. Yeah, John, never enough. Take a look at Apple here, along with Microsoft, compared to not just the NASDAQ 100, but the equal weighted version of the NASDAQ 100. I use it on a three year basis to point out just how in sync Apple and Microsoft have been the two largest stocks in the market together, the 13 percent of the S&P. And yet they don't really move along with the S&P in general. Yes, directionally, but not at all magnitude wise. And it's even left behind the average Nasdaq 100 stock, which really is kind of the elite growth

basket. So what's really going on here? There are this separate sub asset class, in my view, of kind of just mega platforms that essentially have these impenetrable balance sheets and franchises that have gotten this reliability premium. The market just treats them in a different fashion, at least over this time span. Yeah, the fundamentals matter. How many phones they sell is going to matter. The earnings trajectory is going to be relevant. But in, you know, kind of market mechanics, they've managed to benefit and then lose when people just in general like or dislike that category of stock. Now, take a look at Apple relative to Berkshire Hathaway. Berkshire Hathaway owns almost 6 percent of Apple. Apple shares represent almost half of Berkshire's

public stock portfolio and about 20 percent of the market cap. So not a surprise over a three year basis, even though Berkshire's got dozens of other businesses that they've moved in sync. What I do think is fun, though, is the times when you've had these risk off markets and Berkshire has held up better because it does have exposure to real industrials and energy and all those other things. And we might be in another one of those phases right here where Apple has crossed down below Berkshire. So I could say in a kind of facetious way, maybe Berkshire Hathaway is the way to own Apple more cheaply and with less volatility. Yeah, more cheaply unless you're buying it by the share, I guess. So, Mike, you've got B shares, you know, a little cheaper.

Yeah, there's a term that we used to use a lot on this network talking about stocks, blue chips. We don't say that as much anymore. There's a term that we used to use a lot on this network talking about stocks, blue chips. We don't say that as much anymore. We talk a lot about mega cap tech. But is it possible that Apple, Microsoft and Berkshire maybe are the new blue chips? For sure. I mean, I think in the sense of these are stocks that have a certain level of stability, a certain level of importance. They're not going to be displaced in their businesses.

And also, you're not going to get fired if you're a professional investor for owning them. I mean, frankly, that was part of what the blue chip story was, was it was just like, well, I'm not really sure what to pick. But these are these are kind of indisputable as the important stocks in the market. So I think that is positive. They're probably a little more volatile than previous generations of blue chips are. And of course, they can get overpriced and fall out of that that category. But I think that does make sense. Interesting. Mike Santoli, thank you. Up next with Apple's iPhone announcement in the books, what could be the next catalyst for the stock? Those details after the break. Plus, the CEO of Lululemon on how the company is dealing

with shrink, which has been plaguing the retail industry in recent months. Over time, back in two. Apple Watch helps us stay healthy, active, and connected. And iPhone impacts just about everything we do. They're with us all the time. And if you left either one at home, I bet you'd go back and get it. Ah, you got me. That has happened. And that's Apple CEO Tim Cook earlier today presenting at the Wunderlust event where we got updates on the new iPhone 15, which will include USB-C charging at the high end. Shares in the red on the session, although still up 35 percent for the year. Joining us now, Apple shareholder Javier Sade. He's a partner at Fenway Summer Ventures. And Wamsi Mohan, senior analyst with Bank of America Securities. Guys, welcome. Wamsi,

what's the next catalyst potentially for this stock either way? Is it reading the shipping lead times once these things come out, trying to figure out what demand looks like? Yeah, I think that's right, John. Thanks for having me. Look, I think that generally when Apple announces its products, people pay a lot of attention to what the demand trends look like. And one way to infer that is looking at shipping lead times, which you noted. I think that in this particular case with the Pro Max, we still think which has slight supply issues, the lead times could get extended,

which could send an incorrect signal of strong demand. We'll see. I mean, demand could be strong too, but that is indeed the next catalyst. And people are going to look, and we are going to look at what is happening with order rates and build plans in the supply chain. And that's going to give us some some tea leaves to look at to understand what demand trends look going through the end of the year and how that votes for the entire 15 cycle. Javier, Apple just continuing to run its premium playbook here.

But things like Apple television and Apple car never happened, even though a lot of people wanted them to get into those things. So as a shareholder, better that they didn't or you wish they'd break into something big? I mean, look, this franchise is like nothing the world has ever seen. It generates two hundred million dollars of free cash flow a day. And, you know, I think a lot of the impetus on the stock right now, and I think as some of your previous guests were talking about it, the company has moved from a purely a top line growth story, basically because of gravity and the law of big numbers, to a margin story. And their margins are enviable. And they have a lot of levers to pull. The apps, the Apple ecosystem,

the apps ecosystem, last year billed $1.1 trillion, of which 90% went to developers. Another thing that I look at with the company in terms of the franchise and the platform is that 90% of teenagers in the United States that have a phone, it's an iPhone. And last time I checked, teenagers have 70 years of runway with very sticky products and very sticky pricing power. So today was a very interesting day for Apple, for sure. But in terms of what this company has been able to achieve, I think they have all kinds of runway.

Wamsi, you have a neutral rating on the stock, but your price target's 210. I guess what would change your mind or shift your investment thesis right now, especially given the fact that your price target is higher than where shares are trading? Yeah, no, it's a one-year-out price target, Morgan, and I appreciate the question. Look, I think that when you look at a story like Apple, right, and then to the points that even Javier just made, very compelling franchise, the fundamentals in the long term are very, very solid. You could have made that case at $125 where the stock was earlier at the beginning of the year or at $190 when it was mid-year. So the question really is, how does the risk-reward balance really play out when you incorporate things like China, maybe what will happen with

the iPhone 15 cycle. While the long-term trajectory is truly very robust, and I agree completely with the point on margins, that there is actually room for a company of this scale of $400 billion in revenue to grow margins is kind of, you know, stupendous. Now, all that said, there are times where it's cyclically more attractive and cyclically less attractive. So we're kind of balanced between the two. We think that there is some increased cyclical risk at the moment. As we get more clarity on where some of those cyclical things go, you know, we're always open to having a more constructive or a more negative view on any stock, including Apple. But where we stand today, we think that there is ample amount of risk that we got to factor in, particularly as it pertains to weaker consumer demand in the near term, which is a cyclical risk, also coupled with the fact that there is this increased China risk right

now. Okay, so let's springboard off of that. Javier, you're a shareholder. Do you stay invested or do you do some profit taking here at these levels because of some of those risks in the cyclicality? I'm a long-term holder of the stock. And, you know, once he was talking about, and we keep talking about China, the reason Apple is such a bellwether when it comes to the geopolitical chess game going on, it's because there's a global war for dominance between the two superpowers. And front and center of that is tech. And front and center of that is Apple. But I think at the end of the day, regardless of the cyclicality of the consumer, it's going to be very hard for anyone to compete with the franchise of Apple. Yeah, there may be Huawei curiously just launched their phone. And yeah, that may compete with the iPhone and some of the bands and whatever.

But the fact is that you got to look at Apple as a franchise, as an ecosystem that is sticky. OK. And that has staying power. All right. Gentlemen, thanks for unpacking this event. Javier Sade and Wamsi Mohan. Thanks, guys. Shares of Apple did end the day lower. But up next, the CEO of Lululemon on the state of consumer spending and how the company's inventory management is impacting gross margins and so much more. Stay with us.

Welcome back to Overtime. I sat down earlier today with Lululemon CEO Calvin McDonald for an exclusive interview from Goldman Sachs annual retailing conference. This is his first broadcast interview since second quarter earnings came out a week and a half ago when the athleisure retailer beat Wall Street expectations and raised guidance, again, posting a double-digit sales increase year over year. Lululemon is on pace to hit its multi-year targets, what it calls its power of three times two growth plan, early. And all of this despite a challenging macro environment for retail more broadly. The growth and success that we're seeing at Lululemon is rooted in what differentiates the brand and how we activate and reach out to guests. And at the center of it, it's product. How we innovate through unmet needs, creating solutions, science of feel,

the way the fabric feels and the way the product performs, and then amplifying that and connecting with guests through our community activations are definitely rooted in how we've gone to market and continue to sort of support and invest behind. And it's definitely breaking through and giving guests reasons to buy and stay interacting with the brand. Yeah, you've talked about this. I'll call it a trifecta strategy of product innovation, international expansion, market expansion, and growing brand awareness. I guess just starting with product innovation, you've teased about some new products that are going to be hitting store shelves this or being unveiled before the year is out, including a new women's line. More details you can share on some of that? Unfortunately, not as much as I would love to, other than it really begins with

an incredible fabric that I've fallen in love with and actually had them make me a couple of t-shirts just so I can, you know, get the sensation of it. So I'm excited for her to see the line and to experience it. But it's just one of many as we continue to sort of bring new innovation as we did with Steady State and Soft Jersey for him at the tail end of Q2 into Q3. We're launching men's footwear next spring. So the pipeline is very full, robust, and very much rooted in solution-based and bringing feel to the guest. Inventories, you've said for a while that Lululemon doesn't have an inventory problem, but Wall Street, more broadly looking at retail, has been very focused on inventories,

what that's meant for gross margins. How are you thinking about it right now? Would you say that in terms of management of inventories, we're approaching a normalization, a post-pandemic normal? We did indicate that we were comfortable with our inventory numbers and I know you know many you know raised questions around that but we leaned in purposefully because we saw the demand, we saw the challenges that was happening globally around freight and flow of goods and we wanted to make sure that we had our inventory here to satisfy the demand that we were seeing behind the brand and we did that and I think leaning in and leaning in on a business that has half of the sales from core allowed us to generate the sales we did allowed us to

acquire the guests that we did and we're benefiting from that today end of q2 inventory was at 14% so we've managed it down as we indicated we would we did it at full price markdowns are flat year flat year over year in line with our 2019 pre-pandemic markdown levels. So we didn't discount. We didn't have to. We sold through it as we knew we would. And we're in a very good position. Still opportunities to moderate, but it's now behind growth of sales.

And that's a pretty balanced position to be in. North America, you also mentioned a reacceleration in demand in North America coming into this quarter. Has that continued? It's continued and we had a very strong Q2. Our North American business still grew 11 percent. When you put that into context and compare that to all other players in the space, we're very pleased with our performance and excited to see the guests continue to respond to newness and innovation that we dropped as well as some new digital marketing opportunities that we are leaning into. We have a huge unaided brand awareness opportunity. We're leaning into the fourth quarter. We have a get into it campaign for him and her on our bottoms business. So, you know, there's a lot of opportunity to keep fueling and driving

the growth at Lululemon. Yesterday,PMorgan CEO Jamie Dimon basically said it would be a mistake to assume that because the consumer is strong now that the economy is going to continue to boom for years. How do you see it in terms of the U.S. economy and consumer in the specific part of that market that you're servicing, especially as you do see the reactivation of student loan payments, you do see people working through their savings accounts? We definitely keep monitoring it and make sure that we have agility within our system and I think that's the best strategy for a brand retailer that's growing. What we don't want to do is over anticipate and prevent the growth that we're experiencing and at the same

point we don't want to be caught flat-footed if the market pivots for us. So agility is definitely top of mind for us. But rooted in that is we're driving and giving reasons to buy through innovation. And we saw through the pandemic, very proud of how the team proved agility, reacted to the marketplace. Every store in the world was closed and the way that the brand performed. So we know we have the ability to react to whatever comes our way

as at the same time lean in and grow the business and the growth drivers. So agility is what we're managing, staying close, but leaning in and still fueling through innovation and investment. China continues to be an area of strength as we've seen reopening there. 60% plus growth for you in that market. How do you see that moving forward and how does it speak to more broadly this quadrupling of international that you've talked about? Our international opportunity is so exciting. Last quarter, international was 22% of our business, and I've said it should be 50%. Lululemon is a global brand. We're in 25 markets today.

Every market we're in is growing double digit and has single digit unaided brand awareness. We're just at the beginning outside of North America, even though we continue to see growth in North America. And China is definitely a big part of that, but it's not the only part of our international growth expansion. But within China, couldn't be more pleased with the growth, the growth we continue to experience, the success of our stores, our digital, and the response.

And we're doing it similar to how we built the brand in North America. Grassroots, community, building and relationships, and great differentiated product that we sell at a premium price because of the quality of it and don't play discount. And that strategy is resonating, working, and is really unique in the marketplace as well. Final question for you, because it has gotten a lot of attention more broadly in the retail earnings season, and that is shrink. How are you contending with it? Has it been an issue you have had to navigate

more than the past? It's definitely a different environment and we are experiencing and have seen pockets of increased shrink activity. In the quarter, we didn't have any impact from a year-over-year perspective, continued to work with our local teams and local law enforcement to address it. But as an environment, it's definitely a different environment for retailers and something that I would just continue to encourage working with local law enforcement so that we can collectively address it as a group. Lululemon closed lower today, but more than 4 percent. It's up more than 4 percent since reporting those earnings. It's up 21 percent this year. John, to me,

some of the most interesting comments there were about the continued acceleration of consumer behavior for them in the U.S., because at the same conference today, you had Walmart CEO Doug McMillan also sending an upbeat message about the state of American consumers, saying that he felt, quote, pretty good about where the consumer is in the U.S., that they had a strong back to school and that, you know, this bodes well for the upcoming ever important holiday season, of course, before the Fed and updated economic forecasts there. These are key comments from key retailers. When Courtney Reagan showed us that earnings quadrant thing, post-earnings, the needs for the lower end of the income spectrum, Walmart was doing well. And the wants for the upper end, where Lululemon sits with Apple, were doing well, too. So very, very interesting stuff.

Time for a CNBC News Update now with Bertha Coombs. Bertha. Hey, John. Minnesota voters filed a lawsuit to remove former President Donald Trump from the state's ballot. The suit is based on a provision in the 14th Amendment. The voters are claiming that Trump cannot be president because he violated his oath of office after losing the 2020 election. Last week, Colorado filed a similar suit to keep the former president off the ballot. Florida and Michigan have also issued challenges. Investigators could not pinpoint why

a dozen horses died at Churchill Downs last spring. A report on the findings was published today. It calls for safer racetracks, urged better medical record keeping and warned about not pushing horses too hard. The recommendations also included asking Kentucky regulators and the industry at large to update policies, including collecting and reporting more data on horses and say goodbye to self-serve soda at McDonald's, at least in a little while. Fast food giant announced it is phasing out self-serve soda stations by 2032. McDonald's says the goal is consistency at all ordering points, whether you grab food through a drive-thru window or from a delivery driver. All of it will come the exact

same way. I kind of like the self-service because you can grab your soda while you're waiting for your order. So they're actually going to have an employee do something? That's weird. Hey, they work hard. Listen, my first job was at McDonald's. It's a hard job. Yeah, I'm not saying that. I'm saying it's moving in the direction of either automation or check yourself out, make your own soda.

So this is surprising to me. Bertha, thanks. Well, Apple might be stealing the headlines today, but up next, Nuveen's CIO tells us which tech names outside of Apple are at the top of her investing playbook. And don't forget, you can catch us on the go by following the Closing Bell Overtime podcast on your favorite podcast app. We'll be right back. Not a great day for tech. The Nasdaq 100 posting its worst day since August 24th, and the tech sector was the biggest laggard in the S&P 500. Joining us now is Nuveen's chief investment officer, Sarah Malik. Sarah, you think that at least for some tech stocks, things could get better here, but aren't valuations stretched, especially in the AI hype? Why should we believe that tech is a

good spot? I think as the Fed pauses and yields start to roll over, that'll be a tailwind for tech stocks. But there's going to be winners and losers. Let's start with Apple, where no news was bad news for the stock today just coming out of their event you're really just incremental news on new products iphone 15 is just a incremental upgrade to the to the prior iphones also two other headwinds from covid in china they're dealing with covid normalization of units and also china headwinds with 20 of their revenues from china expected negative revisions for their earnings and a premium valuation. So I think that's also that's going to be a lot of headwinds for Apple and Oracle, too, where growing pains from

the Cerner acquisition, you know, issues in their cloud business. And this was a crowded value stock coming into earnings. So not surprised to see Oracle also down today. But then there's winners in the software space like Palo Alto Networks. These are companies that could benefit from a slowing economy, low M&A risk for Palo Alto Networks, These are companies that could benefit from a slowing economy, low M&A risk for Palo Alto Networks, revenue growth based on the cloud. So there's a lot of winners and losers. We like software stocks, semiconductor stocks that are suppliers to AI, but there's also going to be losers like Oracle and maybe Apple going forward. Okay, I hear you, but I got to say, people have been saying that these iPhone updates are evolutionary, not revolutionary,

for at least the last trillion dollars in market cap. So I don't know. But but OK, so let's talk macro a bit when it comes to CPI. Right. That number. What's it going to take on the downside or on the upside, depending on how you look at it in that number to move markets one way or another? Well, going into CPI, we think there's going to be three factors people are looking at. Headlines, CPI, goods and services. So we think headline will be stronger than core because gas prices are up about 7 percent since July. Now, digging into core, good services should show a decline because of lower car and truck prices, but services should still continue to accelerate. The wild card will be airfare prices, and we expect continued heat in shelter prices and also health care prices. If all of that is basically the status quo,

I think markets will digest it fine. Now, if we see a hotter CPI number than that, especially within the core, then that Fed rate hike that has been priced out for September may be back on the table. We still expect the Fed to perhaps raise rates in November, though, before they take an elongated pause. I think one more thing the markets are worried about is will we get rate cuts in 2024? We don't think you're going to see those in the first half of 2024. So, Sarah, have yields peaked or is it still too soon to tell? I think yields are plateauing as we get to that final potential rate hike in November. Yields will basically peak. And that's why we do like tech stocks from here. Not only yields

peaking and the 10-year rolling over, but also inflation continuing to moderate. And the AI tailwinds, while they will take a long time to play out, they are real. So companies like NVIDIA, also Broadcom, the ones that can win sort of in any environment in the AI space, should continue to benefit. All right. So disinflation, is this a good thing for markets or are there unintended consequences? I mean, it can depend on the day. It really depends on the economy. And that's, you know, to me, there's a tug of war right now between economic growth and inflation. Investors are happy with inflation moderating as long as the economy continues to hold up. What's been holding up the economy is two factors, the consumer and employment markets.

Employment markets still look strong to us. We like the consumer. We heard good news out of the conference today, but we are concerned about a credit with the consumer. Auto delinquencies, credit card delinquencies are up significantly for the consumer. That is starting to show signs of cracks for the economy. Sarah Malik, thanks for joining us. Great to get your thoughts.

Thanks for having me. We've got another IPO filing. The pipeline continues to thaw. Perhaps Kate Rogers has the details. Hi, Kate. Hey there, Morgan. This one out for popular shoe company Birkenstock filing with the SEC saying it intends to apply to list ordinary shares on the New York Stock Exchange under the symbol BIRK, B-I-R-K. The underwriters on the IPO will be Goldman Sachs, J.P. Morgan, Morgan Stanley, and Citigroup. Timeline on that IPO, TBD. But once again, Birkenstock announcing it's finally going to go public. Guys, back over to you. Wow, very 90s.

Next thing you know, hemp necklaces will be going public. Kate Rogers, thank you. Thank you. Hacky Sachs. Hack and Sachs. Hacky Sachs going public. There you go. Thank you. Thank you. Hacky sacks. Hack and sacks. Hacky sacks is better. That's good. Mike Santoli next is going to break down another monthly decline in a key economic survey

and whether it's a warning sign for the economy and your money. And check out shares of RTX, formerly known as Raytheon, hitting the lowest level in more than two years following downgrades and target price cuts by Barclays and RBC Capital over the growing concerns about the company's jet engine issues, which it updated on investors on just yesterday. We'll be right back. Welcome back. Small business optimism soured last month as inflation continues to be a top concern. That's according to a survey from the National Federation of Independent Business. Let's bring back Mike Santoli for his take on the latest NFIB data.

Yeah, Morgan, it is. The overall index is bumping along relatively weak levels. That has not really changed at all. But what's interesting is that the report contains this breakdown of the hard data components inside the survey and what they call the soft components. So hardest things like, you know, hiring intentions and job openings and CapEx plans and inventory trends, those things that are, you know, in the here and now you can measure them. The other stuff is sort of broader expectations about business conditions and where they expect, you know, credit conditions to be, things like that. So what you see right here is the hard data pretty much held up nicely in the

net positive territory, where basically more respondents saying things are better versus worse, whereas the soft numbers really plummeting and they're bouncing around their lows. There's also, and it's long been documented, there's absolutely a political component to this survey sample. This is a group that's basically kind of anti-government regulation and taxed by orientation, not by design. And what you see right here is right there, oh, that was President Trump getting elected. They all of a sudden said that the soft data looked a whole lot better. This is a global financial crisis, but also that's Obama getting elected and it stayed very low, even as the hard data improved.

So the point being is, what you would really want to latch onto here is how they say their business is going. And it also mirrors things going on in other data sets, like the PMI manufacturing indexes are kind of survey-based. They look weaker than overall industrial production. So, you know, it helps to look under the surface to see what's at work. I mean, it really is fascinating. And it

kind of reminds me of the comments we got from Suzanne Clark, the CEO of the Chamber of Commerce yesterday and what she and the insight she was gleaning from small businesses as well. But even Ursula Burns, the chair of Today, talked about this. And she sits on a number of boards with larger companies and how uncertain the macroeconomic environment is that even as the data is proving to be stronger, the sentiment not necessarily is robust. Yeah, there's no doubt that there is a lot of uncertainty. People have this sense out there that the Fed hasn't been intending to slow the economy. The economy perhaps is slowing in some areas very quickly. You know, what seems like

normalizing conditions might also deteriorate further. I don't doubt that at all. Also, a lot of trade frictions around the world. The rest of the global economy is a little bit wobbly. So I understand that. I'm just suggesting that, you know, for what we know in terms of current snapshot of business conditions, not yet looking too worrisome. All right. Mike Santoli, always great insight. Thank you. And now Flexport founder Ryan Peterson taking back the CEO's seat at the logistics startup after ousting his hand-picked successor. He explains what's behind the C-suite shuffle. And Overtime returns.

It has been a packed week for logistic startup Flexport, last valued at $8 billion last year when it also topped CNBC's disruptor 50 list. The new CEO, Dave Clark, who joined Amazon a year ago, is out. The previous CEO, founder Ryan Peterson, is back in that seat. Peterson since rescinded some outstanding job offers, emphasized profitability and said Flexport needs to go back to close communication with customers. In his first broadcast interview since this shakeup, I spoke to him today about all that. That product that we're launching today is the combination of that acquisition that we did. But it's much, much more because what we've done is take our international services and connect it seamlessly through so that you can ship freight all the way from any factory in over 100 countries

into these retail networks. So we have over 50 sites with more than 3 million square feet of storage. That's reserve storage, as well as pick pack and final mile capabilities. So we can replenish wherever you're selling your goods. If you're selling it on Amazon or Walmart or any other service, you can pick your own fulfillment provider. We're merchant first, we're neutral. You choose whatever's good for you as a business and we'll replenish that automatically. So you don't have to be constantly monitoring your inventory stock at these different services. Our technology integrates and then automatically ships out whenever that whenever stocks are running low based on your sales volume through those platforms.

That new product announced today in Seattle designed to sort of show the power of that acquisition of the logistics business from Shopify just back in May. Now, I also asked Peterson what wasn't working with Dave Clark as CEO. Peterson wanted to emphasize not the spending issues as much as customer relationships. The big thing about business to business that's different from consumer logistics is it's how you engage with customers and therefore how you engage with your own team. Because it's professionals who are out here selling every day, who are out here talking to customers, meeting with them, understanding the problems they have, the issues they have, things that we need to resolve, the opportunities we have. And as the CEO of Flexport, your job is to be out there, whether that's out there meeting with the customers or with our own teams and

engaging. And that's the thing that we understood that wasn't happening. And honestly, that's the reason we built Flexport. One was the technology. We felt like tech wasn't good enough in global logistics. But two, and just as important, is the companies have to be obsessed with how they help customers. Really engaging, seeing the world through their eyes, solving problems. I pressed him on the cost issue, though. Look at Amazon. Won't building out a last mile logistics network require big spending and periods of losses even after Flexport reaches the profitability that he wants? Ryan said no. We'll have some physical assets where it really solves the customer problem.

We're not dogmatic about asset ownership. But in general, our view is we should be profitable as a business and then reinvest those profits in a way that just compounds capital. And that's where business honestly gets simpler and more fun is if you're just compounding capital, that's the eighth wonder of the world, right? Compound interest. And if we can just generate that cycle, it's a simplification of how you think about your business. Where are you going to reinvest? How do you earn return on capital? And investors are going to love that framework that we bring to this business in the years to come. So no, I wouldn't expect that we go up and down. We're going to get to profitability and then stay there. But we're

also going to find great ways to reinvest the profits. You can find a lot more, the whole Fort Knox interview, almost 20 minutes on Overtime's account on Twitter or X, if you will, and on my LinkedIn. I mean, this is fascinating also because Dave Clark built the transportation and logistics network at Amazon, which we know has always been very almost maniacal about the customer experience too. So a lot of palace intrigue around this entire shift in leadership. He pointed out to me in that interview, Flexport, very different from Amazon because they're not consumer logistics, they're business to business, business to consumer. Right.

They're customers of the businesses serving consumers and logistics. Great stuff. Thanks. Well, up next, what's at stake for the market and the Fed when another key inflation report is released tomorrow morning? Overtime. We'll be right back. Welcome back to Overtime. Investors anxiously awaiting tomorrow's latest key reading on inflation, the August CPI.

It's expected to show a 3.6 percent increase from a year ago, according to FactSet, well below last summer's peak of 9.1 percent, but higher than last month's read of 3.2 percent. Mike Santoli rejoins us. Mike, why are we seeing a tick higher? How much how much this has to do with things like energy prices and and other aspects of inflation that the Fed typically strips out when it's when it's looking at this data? Well, it has a lot to do with that. In fact, the headline number is expected to back up to a higher level than the prior month. The core is excluding food and energy is supposed to still continue to moderate, though at higher levels above 4 percent.

So it's going to be a little bit of a mixed picture, kind of a stutter step along the way, hopefully to further disinflation. There's probably also going to be a lot of commentary, as there typically is around this time, about what about the CPI components tell us something about the PCE inflation number, which the Fed is, that is the actual Fed target, the one they prefer to use. And while they normally try to exclude food and energy to try to get a sense of the overall pattern, the overall core trend, the actual target is for headline PCE. So, you know, there's a lot of ways to boil it down.

To me, it's all about how the bond market reacts to it. Right now, you have long term yields really hovering near their highs from back in the fall. And that's largely because energy prices have been going up. Inflation expectations have ticked just a little bit higher as priced in the bond market. Also want to go micro for a moment with you, Mike, and talk stocks, Birkenstocks, right? I mean, they're back. They were back from the 90s and back from the 60s, kind of like Apple and Microsoft, which were hot stocks in the 80s. And you were just telling us in the show that they're top of the world today. Well, both, of course, created in the 70s. A lot of folks will point that out, that they really did have their birth in the 70s. So yeah,, there's no doubt that, you know, these are the the survivorship bias that people talk about when you look at an index over a long period of time.

So, you know, the top stocks, you know, they're just the select few that survived as everything else fell by the wayside. That's Apple and Microsoft right here. You don't have too many stocks that mattered 40 years ago that matter today. Those are two like Apple and Microsoft. I was also born in the 70s. OK, me too, born in the 70s. Okay. Me too, but barely. All right. I'm a child of the 80s myself.

I just want to call out financials. You had some of the banks move dramatically higher because there's been a financials conference, some updates there too. Mike, thank you. That's going to do it for us here at Overtime. Already? We were having so much fun. I know.

Well, tomorrow. There's always tomorrow. We'll be back tomorrow. Okay. So were having so much fun. I know. Well, tomorrow. There's always tomorrow. We'll be back tomorrow. Okay. So fast money begins right now.