Closing Bell - Closing Bell Overtime: Markets Close Higher Despite Midday Swoon; Randal Quarles on the Fed 3/23/23

Episode Date: March 23, 2023

Stocks finish higher despite briefly turning negative in midday trading. G Squared’s Victoria Green and JPMorgan’s Phil Camporeale discuss the market action. Former Fed officials Randal Quarles and Alan Blinder weigh in on this week’s rate hike and why Blinder called the 25bp move a “mistake.” Plus, Evercore’s Mark Mahaney on why this time is different for TikTok and regulation as the CEO gets grilled on the hill. Block shares dropped nearly 15% after a scathing short seller report: SVB Moffetrnathanson’s Lisa Ellis and Empire Financial Research’s Herb Greenberg discuss what to make of the claims. 

Well, you got your scorecard on Wall Street, but winners stay late. Welcome to Closing Bell Overtime. I am John Ford. Morgan Brennan is off today. On today's show, did the Fed make a mistake by raising rates? That's what former Vice Chair Alan Blinder says. He's going to join us to explain why. Plus, we'll talk to the man who headed up bank supervision for the Fed, Randall Quarles,

about the turmoil in the financials and the oversight changes during his tenure. But let's get straight to today's market action now with major averages all finishing in positive territory, though off the best levels of the day and frankly, all over the place. Joining us now, Victoria Green from G-Squared Private Wealth and Phil Camparelli from J.P. Morgan Asset Management. Great to see you both. Phil, why all this chop? Is this just the typical post-Fed, everybody trying to figure out which way things are going? Yeah, so the uncertainty is really high right now. So I think it's kind of ironic that on the three-year anniversary, you know, I love dates, March 23rd of 2020, Fed comes out and says, we're going to buy corporate bonds.

They basically saved capital markets back then. Three years later, people are like, they don't know what they're doing, right? Should they be going? Should they be cutting? One of the things that's overlooked here, John, is that we think at the end of the day, they are really close to the end of their tightening cycle. That's the bigger signal through the noise. It's not if they go 25. It's where are they in relation to their terminal rate. So we think that they go one more time and stay there. Too premature to price in easing, though. So we're not at that point yet. And bonds, which we just lamented over last year as multi-asset investors, because bonds had their worst year ever. The relationship between stocks and bonds, if you look up in the dictionary,

you see the last two weeks. You do not see last year. So the bonds are really helping us right now. And people are paralyzed in cash. They don't know what to do. The opportunity cost is greater in cash because bonds have been up 3% in the last two weeks. It takes you a long time to get 3%, even at these cash levels. So these are all the conversations that we're having. But the signal through the noise is that the Fed is almost done and they're just leaving their options open as they should as central bankers. OK, well, Victoria, Phil says that the Fed is just about done with its tightening cycle, but maybe the banks are just starting theirs. You say that you're I think you said a cautious bull. What does that mean, right, when we might be

at the beginning of a cycle where banks are tightening credit, slowing down the economy, and you don't know how hard they're slamming on the brakes? Yeah, I think it means you got to be ready to pull the ripcord and go a little bit more defensive if everything deteriorates. But for now, with the Fed looking to slow and pause, we are cautiously optimistic. We do need to see what plays out with the banking contagion right now. And I think there's a little bit of fear that there might be this second wave coming. Remember, even with Yellen changing her remarks today and coming out saying, yes, we're going to look and make sure depositors are secure, being a depositor of a bank and being an equity or a bondholder in the bank are two different things.

So we are looking and saying, hey, there might be risks in some of these regional financials. There's maybe a reason they're selling off and the bond markets and spreads are blowing out on them. But we think the rest of the market remains attractive, especially growth and tech, that we think that'll run. They're going to get some support from the Fed. The Fed, we would agree with Bill that it looks to pause. So we think we're cautiously optimistic. However, it does seem like we are going to end up in a little bit of a crash. I do not think a soft landing with what's happening with banks, with what's happening with tightening.

I think that's going to end up with the wheels on the bus come falling off in the second half. What determines, Phil, whether that recession is brief or long and painful? Yeah. So the Fed left the options open yesterday and said additional firming may be needed. They took the number off of their tightening. What determines the recession is going to be how much does credit lending and the deterioration in credit lending lead to an increase in financial conditions?

So that has yet to be determined. So how much GDP is coming off, and we don't have that much GDP to spare, right, because we're so close to zero in the back half of the year. So when it's harder to get a mortgage, when it's harder to get a credit card, when it's harder to get credit, when it's harder for small businesses to get that capital, how much does that take off? How much does that take off of GDP first? But second, the up in quality trade is still OK. So Apple doesn't need to tap into a regional bank, right? So there's an up in quality trade of companies with free

cash flow that's really important in both stocks and bonds. Investment grade corporate credit, we have a record allocation there. 25% of our fund is an investment grade corporate bonds. Not the most glamorous trade in the world, but something to take advantage of high quality that makes a lot of sense right now. Okay, but Victoria, those high quality names, Apple, for example, pretty richly valued here. One could argue that it's already built in the idea that they're going to win. Where is their opportunity? What sort of out of position, what perhaps were investors betting against or thinking was going to lose that now, you know,

you might take another look at? The one I really don't understand why it's falling, selling off is Charles Schwab. Their CEO came out today saying we could have 100% run on deposits and we still don't have to sell securities. They're actually gaining money. They're having it come into their money market, which they make money on. They're more diversified than a regional bank. So the reason they're getting hit, to me, I don't really understand because they have 100 million in liquidity. They came out today saying we don't have to sell that.

We could lose all our deposits and we're still okay. Yet the stock very unfairly punished today. So for me, that's something I'm excited about. Names like this, what we think is a quality Yet the stock, a very unfairly punished today. So for me, that's something I'm excited about. Names like this, what we think is a quality name. They have a great business model. They had success in growing their different lines of business and they have very deep relationships. And to me, it's a confusing mismatch and I'm not sure what the market's seeing here and why it's unfairly punishing Schwab. Okay. Now, Phil, I think you were talking about bonds. Yes. This is probably historic opportunity for some people to restructure their portfolio with fixed income. Aside from

government bonds, what are some of the best ways to lock in these rates for longer term, even retirement benefit? Yeah. So there's two sides of the coin. I mentioned the investment grade corporate bond opportunity, John. That's the five-year part of the curve that we find very attractive, where you can get between 100 and 150 basis points over treasuries. The other part to play protection is the longer-end part. So we would be adding duration in the longer-end part of the curve, not because we necessarily think rates are going to fall, John, but because we have equities on the other side.

So if equities sell off because this shifts from inflation risk to growth risk, we have that longer duration in the back end of the curve that's just sitting there. And 3.5% is going on the 10 year is going to be a very, very attractive level, John, if the Fed is indeed forced to ease in the back half of this year. That old balanced portfolio. Let's do it. Back with Bill. Victoria, thank you. Thanks, John. All right, now CNBC Senior Markets Commentator Mike Santoli joins us from the New York Stock Exchange with his market dashboard. Mike. John, great setup, like when it works out this way. Phil mentioned it's a three-year anniversary of the COVID crash market low, March 23rd of 2020.

Here's what the S&P looks like from that date. It doesn't get much better in terms of liftoff out of a 35 percent drop in several weeks, which is what we had at that low. What is interesting, so we're about 76 percent since that point, all of it in the first year, right? What does that mean? It means for two years now, we've essentially on a net basis gone nowhere. So there has been a real reset. It looks as we go in ahead in time as a kind of real choppy, wide swinging, sort of flattening out consolidation type thing. I will point out, too, that on a five year basis, the market doesn't really owe you

anything. It's still 10 percent annualized total return from the S&P over a five year span. So that's in the historical range. It's not as if we've really cut into muscle with the decline we've gotten, that 27 percent drop high to low last year. So that's just the broader context. On a shorter-term basis, stocks versus bonds, what's a balanced investor going to be doing? Here's what it looks like on a month-to-date basis, the aggregate bond index relative to the total U.S. stock market. This is what you would typically be holding in an asset allocation like a target date retirement fund. So you see a pretty good performance spread here, five percentage points or so just in March. So to the degree you do monthly rebalancing, that's going to be a pretty decent net flow into equities and out of bonds. However, on a year to date basis.

So for the first quarter, these are very close in terms of their performance. So there's not really much of a swing. And I just want to point out that back in 2020, that March 23rd day, people felt like there was some significance to it because a week ahead of the end of the quarter is when a lot of those types of funds mechanically rebalanced. It seemed like it might have given just a little bit more of a push to the upside, John. Mike, so you say we're back where we were in the major indices after that first year, right, post the COVID bottom. But after that first year, some individual names like, say, a Zoom or a Peloton were still sky high. So give me your sense of within that sameness, some big things have changed. Those

names are down. What's done so much better? Well, some of the well, energy last year was the big one. Right. So the huge upside outlier last year and certainly from the mid 2020 lows was energy and value more broadly, except now you've had financials have such a struggle that that piece of value has fallen away. And we're back to the real small handful of financially bulletproof growth companies like you've been mentioning Microsoft, Apple. Those guys really have separated from the growthier, kind of more aggressive parts of tech. So I'd say those areas have kept us afloat more than any.

Yeah, amazing. Mike Santoli, thank you. Maybe some airlines, too. After the break, we'll talk to Randall Quarles, who oversaw bank regulation for the Fed about the meltdown of Silicon Valley Bank and the latest comments from Treasury Secretary Yellen about insuring deposits.

Overtime is back in two. Welcome back. In the doghouse today on Capitol Hill, TikTok CEO show Z. Chu. Lawmakers grilling the executive over Chinese spying concerns. But will there really be long term stock impact from this controversy when it comes to social media fights on the Hill, Congress's bark has tended to be worse than its bite. Maybe you remember Platform Competition and Opportunity Act from 2021. That would have blocked tech giants from buying competitors. Or the Honest Ads Act from 2017, reintroduced in 2019, targeting online political ads. Nothing passed. Execs have been hounded on the Hill before. Mark Zuckerberg in 2018 and 2020. Jack Dorsey and Sundar Pichai in 2020. Nothing big changed as a result. So is this time different? Let's bring in Evercore's head of

internet research, Mark Mahaney. Mark, short-term moves when these potential legal and regulatory issues bubble up, but is this time any different? Should we bet on there being a big TikTok-related change? Well, John, I'm sorry. It is different this time. And that's, you know, I've had the fortune or the misery of watching a good number of these hearings. And, you know, these are very important issues that have come up. But there's a new angle today, which is national security. I mean, this is not social health. Social health was part of it. But the much bigger issue, and it was clearly bipartisan in what I watched today and what I read today,

was the concerns over national security and who would own the data, particularly with the Communist Party in China own this data. You never had that with Facebook. You never had that with Twitter. So, yeah, it is different this time. The risk is much greater. And that's why the sentiment I thought was much more negative and bipartisanly negative, if you can use that as an adjective. Now, when you say risk, Mark, is it the type of risk that causes advertisers to flee TikTok or at least hedge their bets into other platforms? And so they get the benefit that way? Or do you really think that there's more than a 50-50 chance that TikTok gets entirely shut down

in the United States? I've yet to hear, John, advertisers, and we've done a bunch of checks recently, I've yet to hear advertisers pull dollars away from TikTok out of a concern over national security or reputational risk. I haven't heard that. I think there's a distinct possibility that that will happen in the next six months, but I haven't seen any evidence of that. I don't think it's greater than the 50% chance, but if you and I had talked six months ago, we would have said the chance of TikTok getting banned was low single digits. That's not the case now. I don't know exactly what the odds are, but it's, you know, 30 percent, 40 percent.

And I realize there's a lot of constitutional First Amendment issues here. But, you know, you run into a buzzsaw now of Chinese-U.S. political turmoil, and TikTok's right at the center of it. And there's nobody in the U.S., nobody in Congress that I can see willing to step up and defend it. And most are being either cautious, thoughtful or the center of it. And there's nobody in the U.S., nobody in Congress that I can see willing to step up and defend it. And most are being either cautious, thoughtful or very critical of it. OK, you go back to 2016 with national security and it was Apple and encryption. But that didn't happen either. How different is it really because it's China?

Well, I don't know, John, you're taking me out of, in the areas that I'm not so good on, but I just, if, I think the average, put out your political antenna, I think the state of U.S.-Chinese relations is worse than it's been in a couple of decades. So this is akin to a Russian, it's akin to a Russian company now attempting to own a social media asset in the U.S. That's how volatile the issue is politically and socially in the U.S. That's what makes it so hard for TikTok. And I give TikTok a lot of credit for amazing innovation. That's what I focus on as a technology analyst. Amazing innovation.

Now, what's also unfortunate for them is that it's been nicely copied by a bunch of different companies, YouTube, Instagram, Snapchat. So they don't have that kind of monopoly on innovation that maybe they had two or three years ago. That's another issue for TikTok. All right. TikTok's time might be running out. Mark Mahaney, thank you. Thank you, John. Well, time now for a CNBC News update with Seema Modi. Seema. Hey, John, here's what's happening at this hour. Saudi Arabia and Syria are in talks to restore diplomatic ties, according to Saudi State TV, which made the announcement within the last hour. The Wall Street Journal reports the negotiations are being mediated by Russia.

A normalization would be the most significant development so far as Arab nations restore ties that were broken when some of them backed rebels trying to overthrow Syrian leader Bashar al-Assad. The Pentagon is looking into how Boeing employees with lapsed security credentials were able to work on the current and future Air Force One jets. All the 250 workers did have top secret clearances, but an additional credential known as Yankee White is needed for presidential aircraft. And the president of World Athletics says the governing body for track and field events has voted to ban transgender women from competing in elite female competitions if they have gone through male puberty. Sebastian Coe told a news conference it was a difficult but necessary decision guided by the need to protect the female category. John, back to you. Zima, thank you.

Coming up next, former Fed Vice Chair Alan Blinder explains why he thinks the Fed made a mistake by hiking rates. Plus, talk about a blockbuster report. Shares of Jack Dorsey's payment company getting slammed on a new short thesis from Hindenburg Research. We're going to get an analyst's take on the findings when Overtime comes right back. Welcome back to Overtime. Mike Santoli returns with a look at the correlation between banks and the broader market. Mike? Hey, John.

Really a core piece of long-term Wall Street wisdom is that the overall market generally can't rally if the banks are not participating. Well, a long-term look suggests that really doesn't hold up, at least not multiple cycles, across multiple cycles. 25-year chart of the S&P 500 relative to the KBW Banks Index. That's an index of major banks in the country. Remarkably, the Banks Index has gone nowhere since 1998 on a net basis. Obviously, you see the kind of ups and downs there,

but basically, right across the board It's around where we are right now this right here that cute little dip is the 1998 global Financial crisis Russia defaulting long-term capital management, so it's recovered from there But it suggests that you know over time bank centrality to to the markets has maybe Diminished and maybe other parts of finance have stepped in to sort of bridge that gap a little bit. So I grant that in an individual month or a year or individual cycle, it's hard if the banks are going down every day and they're really in distress for the overall market to hold up for long. But it doesn't necessarily mean it's a hard and fast rule.

Now, interesting, I guess that that point where they really seem to diverge is that the dot com bust and the or is that the financial crisis right here? That's that's the global financial crisis. I mean, just for context, Citigroup is still down 90 percent in market cap in value from before the global financial crisis. So you had massive dilution of the big banks that existed before that. I mean, I could you could point to things like the credit card companies, which are now categorized as financials, did really well over the span. They weren't even public back then. Also, capital markets firms like exchanges, investment banks have done better. It's much more about the core banking function, which traditionally was considered super important. Right. They create credit throughout the economy, kind of a mark of the confidence in the economy and have a

role in corporate finance but I don't know at least right here you're also by the way the other story you're seeing right here is just the massive increase in the value of tech and things that that's where I was going to investors yeah so without a doubt so how much does tech now take the place of banks as that thing that the rest of the market can't move without? And how much does it matter that I mean, maybe this is just the case when you've got a large basket of stocks, no matter what it is. But the banks are still moving in tandem with the market, even if the moves are less pronounced. They are. I mean, you can't really escape it for long, the general moves of the market. You know, tech is one of those things where I think because of the math of how heavy it

is in the index, it clearly can't underperform for very long and have the rest of the market do well. Although last year, you know, the average stock did a whole lot better than tech did on a net basis. What you don't have with tech is that idea that there's this feedback loop within the economy that's very important, at least not yet, you know, as you do with banks. At least that was part of the logic that was surrounding the banks idea. Fascinating. Mike, thank you. All right. So did the Fed make a mistake in raising 25 basis points? Let's bring in former Fed Vice Chair Alan Blinder, currently a professor at Princeton. He says they didn't need to do it.

Alan, is that because you think the banks are potentially in more trouble than the Fed seems willing to admit? No, I think it's because they're in the same kind of trouble that the Fed is willing to admit. I want to emphasize when I say a mistake, it's a small mistake. It's 25 basis points, not the end of the world. So why is it a mistake if it's so small? Yeah, I would say if you listen to the words that Jay Powell uttered in his press conference

or just read the statement, they talked about the cloud of uncertainty created by this event or series of events. They talked about, Powell talked about the notion that tighter credit coming from the banks is a kind of a substitute for tightening monetary policy. All of that I agree with 100 percent. And to me, it added up to a case for a pause. We got this tremendous uncertainty. Let's see. Let's let it resolve a little and see how bad or not so bad this turns out to be. It seems like to use a metaphor here, it's one thing if you're flying a plane and trying to keep it from going too fast and you're in control of the braking. It's another if the engines are going out, which I guess is the concern if credit tightens up

in the economy. Is that the issue here is that we don't know to what degree the economy is going to slow from the expected slowdown in availability of credit? Exactly that. We know the direction. This is going to put a crimp into the credit granting mechanism. It should be it could be a small crimp that you hardly notice. It could be a big crimp. We don't know the answer to that. And therefore, we don't know how much of a slowdown this is going to cause. And that's the case for pausing. Just wait and let's see a little bit. All right, Alan, hold on for a moment. We've got some breaking news on the Fed.

Steve Leisman has it. Steve. Thanks very much, John. The Fed's balance sheet out of which we're looking too closely to see how much borrowing banks are doing uh from the federal reserve and the balance sheet did rise again by 94 billion dollars uh not as much as last week which went up by nearly 300 billion dollars so how did it happen well there was additional uh there was sorry there was less borrowing at the feds emergency discount window, that fell by $38 billion compared to last week. However, the Fed's new lending facility, which it opened to provide additional liquidity to the bank system, that totaled $53.6 billion. That was up by nearly

$42 billion from the prior week. So banks are liking this program where they can take their discounted treasuries and mortgage-backed securities and get loaned at par. Something that I'm curious about, I don't quite know the reason for this, but the Fed's loans to the bridge bank that have been for the banks that have formed in place of the banks closed down, it rose to $179.8 billion from $142. That was another source of the rise. So the Fed is still doing quantitative tightening, but it's also increasing the size of its balance sheet through this additional lending that's going out there. John, it's a pretty good deal for these banks to borrow from this new fund. So I would be a little careful in thinking that that's a sign of stress in the market.

It could be a sign of preemption, just prudence on the part of banks. It could be a sign of stress, but it could also be a sign of preemption, just prudence on the part of banks. It could be a sign of stress, but it could also be a sign of banks getting a pretty good deal at this new window where they can borrow at the one year OIS and basically pay the Fed or the Fed pays them interest on reserves. There's a bit of a spread in there. So just be a little careful. There is the fund is being taken down by the banks and and we're watching it closely. Yeah, explain. This isn't contradictory. Powell was talking about this yesterday, that the Fed tightening while also, in this case, expanding the balance sheet. How does that work?

Yeah, it's a little complicated to explain, a little complicated to understand. But the idea is, and I'd love to hear Alan Blinder's explanation for this, the idea is these are temporary measures that are designed to provide additional liquidity, and they create reserves upon which banks won't be out there lending again. So these are temporary reserves that are out there that some of which will go away. For example, when the banks are sold, the receivership are sold, that loan to the FDIC, that'll go away. And when this program runs out in a year's time, these reserves will also go away. So it's a temporary thing. The Fed is continuing to sell or allow its balance sheet to run off through quantitative tightening while

providing some temporary liquidity that should not be inflationary because it should not enhance economic activity in that time. Whether or not it has a downward impact on interest rates, that's another story. All right, Steve Leisman, thank you. Alan Blinder, back to you on this. The Fed balance sheet, is it important to watch in this case? Do you agree this is not a contradiction to be tightening while increasing at least, the balance sheet? Mostly, but not quite as much as Steve agreed.

Look, if the Fed wants to ease credit conditions, the normal thing to do is to buy assets. That's what quantitative easing was all about. But another thing it can do is lend money to banks, which it normally does only in very small volume. But in meeting this emergency, it's lending also in peculiar ways, as Steve's pointed, but lending in very large volume. And that's intended very clearly to stave off further echoes of contagion coming from Silicon Valley Bank and Signature Bank. So we know why the Fed is doing it. I wouldn't call it a contradiction, but it is an easing of credit to prevent it. Let's put it this way. It is an easing of credit by the Fed to try to prevent or forestall a

tightening of credit by the banking system. Okay. Okay. I get that. So tell me about when we get to see what normal is becoming for this economy. Is it late Q3? Is it Q4? Do we have to wait to hear the guidance at some point to get to see how businesses are even changing their positioning and maybe even their hiring practices in this economic reality? It'll be a while, as you suggest, but I think we'll know a lot in another month, say. What we know in another month, how many banks ran into the same wall or a similar wall as Silicon Valley and Signature and a few others. Was it just a handful in total, or was it 10 or 30 or 50 or, God forbid, 100? I think we'll know that a lot faster than the third quarter. And you think there's still that chance? 50 or even 100? I don't think it's going to be 100. I would bet against that. But I don't know.

And it makes a big difference if it's just 5 or 6 versus 30 or 40. That makes a big difference in the impact on the economy. And I certainly don't know that. And I don't think the Fed knows that either at this stage. They're trying to keep it as low as possible. Certainly. A sober and experienced look from Alan Blinder. Thank you. You're very welcome. All right. Block has been beaten up after becoming the latest target of short seller Hindenburg Research. Up next, we're going to discuss whether you should be following Hindenburg's lead.

Be right back. Welcome back to Overtime. Check out the move in shares of Block today, getting hit after a blistering report from short seller Hindenburg Research. Hindenburg, run by Nathan Anderson, gained headlines in recent months for its report on Indian conglomerate Adani Group that led to a $70 billion market cap loss and an investigation from India's Supreme Court. Some other recent calls from Hindenburg include Clover Health, Nikola, Lordstown Motors. But Anderson isn't nailing 100% of his shots. DraftKings has shaken off a report from 2021, as has Geothermal Company or Matt.

Hindenburg also took a short position in Twitter after Elon Musk announced his acquisition offer, betting the deal wouldn't close, although later went long after Twitter sued Musk for trying to back out. Joining us now on block is SVB Moffitt Nathanson's Lisa Ellis, who covers the company, and Herb Greenberg, editor at Empire Financial Research and a CNBC contributor. Great to see you both. Lisa, I'll start with you here. You still have a buy on block.

You think this is much ado about nothing. But if they are indeed facilitating, I don't know, money laundering, as this report seems to imply, might there not be some trouble for them? Look, we think the Hindenburg assertions are overstated and incomplete, largely backward looking. The reality is all of these P2P services, because they are cash-like in their nature, face an unusual amount of, you know, they have to deal with a lot of bad actors, a lot of attempted fraud and scams. You know, there's been a whole look at Zelle, for example, for this exact type of challenge. And so I'm sure there's, you know, some of that going on with Block, just like there is with all of the other players in the space, and they do their best to kind of stay ahead of all of the fraudsters. But the assertions in the space, and they do their best to kind of stay ahead of all of the fraudsters. But the assertions in the report are wildly overstated. I mean, there's independent

verification of the users of Block that match exactly the user numbers that they report. You know, they're audited. There's a lot of other, they are a money transmitter and have oversight by regulators as a money transmitter, which means they have to follow all of the KYC AML requirements that money transmitters do. This is not like social media where you can just sign up for a bunch of accounts. So there's many reasons why it's, you know, it's not suggesting that there would be none of this. There never is in anything payments related. There's always some bad actors and some bad activity, but it's in our view just wildly overstated. But Herb, could this be a case? I mean,

there's no direct parallel to Silicon Valley Bank here, but the nature of your customers, even if a bank is a bank is a bank, can turn out to matter. How are we going to know? How does this look to you? How are we going to know if Block really has put itself, particularly with Cash App, in a tricky position? Well, look, Lisa knows a lot more about Block than I do. I know something about short sellers and something about Nate Anderson and Hindenburg. And what I can say is that, you know, knowing Nate Anderson and the type of person he is and the team he has and the diligence they tend to do is the key thing is you can't ignore what they're saying it's going to be subject to interpretation uh lisa makes a very

strong point from the bullish perspective as somebody who knows it but i also uh think that uh you know from what i've seen reading the report um it's concerning okay but again that's as some that's as somebody who doesn't know Block. You know, I look at that report and I say, boy, those are some interesting things. It'll be interesting to see if it leads to any interesting outcome. So, Lisa, how much do we have to worry about the valuation, even if Block does turn out to be OK here? Has it enjoyed a sort of halo over the last period of time at an EBITDA of about 30 times. That's on consensus forward numbers. That's very much in line with peers.

It's actually below somebody like an Audion. That's a pretty good comp, but in line with other sort of high growth software services companies. And Hindenburg tries to compare them very directly to PayPal, which is an inappropriate comparison, given that PayPal is growing at less than half the rate of block, is facing major leadership turmoil and, you know, and a lot of competitive pressure from Apple Pay. It's sort of an odd for a firm, you know, honestly, that I

feel like I kind of agree usually does. It's just sort of an inappropriate and kind of loose valuation comparison. Also, a lot of the upside in Block is coming from factors that they don't even mention, like big cost program the management team has underway. They're expected to grow on their own numbers, you know, grow EBITDA in excess of 50% this year. The seller business, which is more than half of the revenue of the company and a significantly higher proportion of profit isn't even mentioned and is doing perfectly well. So like I said, it's kind of incomplete in many ways. All right. Now, Herb, talk to me about short sellers in this market environment. It seems like it wasn't long ago, a couple of years ago during the meme stuff, during Tesla's run,

a lot of short sellers were being demonized, you know, especially naked short selling. But the idea, we should do away with this. People shouldn't bet against stocks. The tide seems to have turned. People always seem to want to go after the short sellers. Look, I co-ran a short research firm through that boom and got so fed up with it, I walked away because I couldn't take it anymore

because short sellers were so vilified and any information they put out, even if it was correct, didn't matter. But as Jim Chanos was saying, as it relates to fraud, it was the golden age of fraud. And there's more than fraud when it comes to short selling. There's also just business models and fundamentals and things that could cause stocks to have variations. And so for so long, the short sellers were vilified and they still are. Look at Silicon Valley Bank. Look at the situation where you have David Sachs, a venture capitalist, coming out and

saying the short sellers have caused the run on the bank, which is so far from the truth. It's the silliest. He has two tweets that are the silliest tweets I've ever seen when you can basically lay out where short sellers have been warning people, which is often the case. Look, whether Hindenburg is right here, I don't know. I haven't done the research. I don't know the company. What I know is historically, it's not a good, it's not good to ignore what the short sellers are saying because there's often something there. Not always. They can be right and their timing can be off. But you still need to pay attention.

On the other hand, but in the market form, Herb, Lisa, thank you. We should note Block has put out a response to Hindenburg's report. They say we intend to work with the SEC and explore legal action against Hindenburg Research for. They say we intend to work with the SEC and explore legal action against Hindenburg research for the factually inaccurate and misleading report they shared about our cash app business today. We're a highly regulated public company with regular disclosures and are confident in our products, reporting, compliance programs, and controls. We will not be distracted by typical short seller tactics. Up next, a pair of under the radar movers you might have missed today. Over time, we'll be right back.

Let's get a check on a pair of today's under the radar movers. HashiCorp rallying after BTIG initiated the software company with a buy rating, saying it is well positioned as the near dominant player in the rapidly growing infrastructure as code market. We just had the CEO on overtime two weeks ago. And Roblox under pressure after Morgan Stanley warned the metaverse game maker is facing increased competition from Epic Games Fortnite. Now, this chip stock just posted its longest winning streak since 2016. Chip nerds could have guessed which stock this is. We will reveal the name when Overtime returns.

Welcome back. Chip stocks turning in a strong session today. Names like Micron, Marvell, and Lamb Research were among the top performers in the NASDAQ 100. But the hottest of the hot, look at NVIDIA. Just posted its ninth day of gains in a row, the longest winning streak since 2016. The stock is pacing for its strongest quarterly gain since 2001, up more than 85%. Mike Santoli, you talked about NVIDIA yesterday in your dashboard. Quite a run. Absolutely, John. You could really just feel the desperation of investors to try and find some big, recognizable name,

riding some trend that doesn't force them to worry about bank credit and the macro economy and all the rest of the things that have really been kind of dragging on this market. And they have it crystallized in NVIDIA. It's a very streaky stock. If you look at the way it ramped up into the highs of late 2021, kind of a similar story. It's just about as overbought right now on a short-term basis as it's been since then. Not as much as it was in late November of last year, but really fascinating. It's really dwarfing every other company pretty

much in the semiconductor, you know, index. It's pushing 700 billion in market cap. I think Taiwan Semi is under 500. You compared it to Tesla. The year didn't start so great for Tesla. So how vulnerable valuation wise does this leave NVIDIA being apart from the from the pack? It looks pretty toppy. It's pushing 60 times earnings. The thing is, everyone who likes the stock will tell you the earnings estimates are way too low. They got slashed since the summer of last year. This fiscal year was supposed to be six bucks a share as of last July. Now, it's next year at six bucks a share. Doesn't matter.

People are saying the AI backlog, everything is going to kind of make the numbers somehow justify this run that the stock has been on. It's got a legit story for every hot trend. Metaverse, AI, you name it. Mike, thanks. And that's going to do it for overtime. Fast Money begins right now.