Closing Bell - Closing Bell Overtime: Meta’s Nick Clegg On The White House 7/21/23

Episode Date: July 21, 2023

The Dow notched its tenth straight positive session – the longest winning streak since August 2017. Fundstrat’s Tom Lee breaks down the busy week and looks ahead to next week’s earnings reports. Nick Clegg, Meta Global Affairs President, was part of an AI meeting at the White House. He joins the show to discuss what was agreed to. CalSTRS CIO Chris Ailman on where he is positioning. Calibrate CEO Isabelle Kenyon on the heavy cost of weight loss drugs. Bespoke’s Paul Hickey on three under-the-radar names to watch next week. 

What is the scorecard on Wall Street? At least for the Dow, it's kind of hard to say, but winners stay late to find out. Welcome to Closing Bell Overtime. I am John Ford here with Morgan Brennan, and the Dow was trying to close higher for a 10th straight day. Did it? Maybe. Maybe just by its fingernails, like Mission Impossible Tom Cruise style. That would have been its longest streak since August 2017. The blue chip index rallied about 2% this week. The S&P was higher by nearly 1%. The NASDAQ down less than 1%. If you thought, Morgan. That this week was big for the market.

We'll wait until you see what's on tap for next week. Investors are preparing for the latest Fed decision on interest rates in the busiest week of earnings season. Coming up, an all-star list of guests are ready to give you their investing playbooks. And we are finishing each other's sentences. We are. A first on CNBC interview with Meta's president, global affairs, Nick Clegg. He was among a group of tech executives that just met with President Biden, pledged to develop safe, secure, and transparent AI technologies. But first, let's get into today's market action

with our first guest. He's the man the bears love to hate, Fundstratz, Tom Lee. The Dow isn't up and it looks like maybe the Dow closed higher by like 3.3 points. That's about the closest I've ever seen it. Yeah, I mean, there it is. Tom Lee, so let's look ahead to next week because that's when the action gets started again. I wonder if it's a pretty key test next week for market breadth, especially since this week we had a pretty strong start and a relatively weak finish. Earnings from Danaher next week, Visa, Coke and Boeing, Mondelēz Thursday. Are those important? Yeah. I mean, earnings really matter because one, you know, there's a lot of concern that, you know, the Fed hikes have slowed the economy and, you know, our company is able to deliver numbers and then keep guidance. That's

going to matter a lot. But of course, as you know, there's a huge macro event next week as well. Yes. Yes, of course. That Fed decision. Something in your notes, though, I mean, made me raise an eyebrow. You say we also have to recognize stocks have advanced sharply in the past month. So profit taking is healthy. Tom, you profit taking is healthy here. Yeah, I think profit taking is healthy because I think that's going to be part of the investor mindset. You know, investors who've been involved with tech and FANG are enjoying pretty stupendous returns year to date. Now, it doesn't mean that when they take profits, they have to necessarily exit the market. But to me, next week is a story of, well, if the Fed surprises us in a way because it's more

of a dovish pause, I think investors are going to look for ways to sort of find stocks that rise on easing financial conditions. And they may not come back to the fang. They might stick with tech, but they might broaden out into industrials and financials. So, yes, profit taking, but doesn't mean the market has to go down. And to your point, I mean, we did see the Nasdaq take a breather today. We did see some of those big tech, big, or end this week, the big cap tech names in general sell off, in part because of earnings over the last couple of days with Netflix and Tesla, this rotation. One of the other questions that's getting raised right now is if we're overbought and we're due for a pullback or even a correction. Your thoughts?

I mean, the market's definitely overbought. You know, we're 13 percent above the 200-day moving average. In the past, that's a sign of a strong market. But it is also a market that's vulnerable to bad news. So I'm kind of sympathetic to the view that there are signs of a correction. That's what Mark Newton, our technician, wants us to be alert to. But on the flip side, I think there are too many who are quickly calling this a top. And that puts me in the camp that we might, whatever weakness we have, may end up proving to be shallow, especially

given we have a huge FOMC decision next week. Expectation that we're going to see another rate hike next week. And I guess just as importantly, given the fact that we do have data like PCE at the end of the week, what does that mean for the disinflation narrative that is playing out in the market? And I know you've been speaking to. Well, I do think investors are still skeptical that there's disinflation. You know, we have many conversations with our institutional investor clients, and they talk about how inflation is going to be sticky because of wages, and it might stick at 4% for far longer. But we're finding the glide path to core inflation and core PCE, you know, could actually undershoot what a lot of people think over the next few months. And so I think that's one of the upside stories that as soon as inflation softens at that pace,

you know, Fed officials themselves can actually start to breathe easier. And I think it causes many investors to rethink higher for longer. So you say a couple hundred points worth of a correction. Well, it's not really a correction, I guess, if it's only a couple hundred points in the S&P. Five percent, we'd need more than that for it to be technically a correction. But, you know, a pullback of around five percent would be possible. Do you recommend rotating into some of those other names, cyclicals, versus the larger tech names that have done so well this year? Yes, to an extent. I think it's important to stick with groups that are showing strength because we know that those are going to be groups that could end up having dip buyers. So that would put industrials, financials, you know, I mean,

I think one of that thing in energy, of course, but what makes us a little bit wary is some of the strength this week has been in the defensives. And I wonder if that's more of a reflexive action. But, you know, if the defensives keep strengthening it, John, that would put us, you know, put the market more likely into a correction camp. But I don't think we're at that point yet. What do you think of the dollar here, Tom? Because we had seen it weekend. I think there's this expectation that maybe it actually creates a tailwind as we really ramp up an earnings season. But on the flip side of that, we've gotten some softer inflation data from places like the UK in recent days, and that has actually added some more strength to the dollar. So how are you thinking about that?

Well, I guess it's two parts. I mean, for the S&P, I think the most important effect for dollar is how it affects earnings. And that's really like the year over year parts. I mean, for the S&P, I think the most important effect for dollar is how it affects earnings. And that's really like the year over year comparison. I mean, if the dollar even just hangs out here by third quarter, it's like a 12 percent tailwind year over year. So I think it's already going to help earnings. And could it get weaker? Mark Newton, our technician, does think we've sort of seen a breakdown in the dollar. So even though there's been maybe some counter trend moves, you know, he does think we, you know, dip into the 90s. And again, that would really help forward earnings as well. So,

you know, it's something to watch. Okay. Are you buying banks, particularly regionals? We put a tactical rally, tactical buy on the regional banks on May 7th with the idea there was a temporary Fed put. With a lot of continuing talk about commercial real estate and the refinancing there being a risk, I think that temporary put is still in place. So we still like the regional banks, but they've run a lot, too. I mean, they're up, I don't know, over 25 percent since our tactical buy. All right. Tom Lee, great to kick off the hour with you. Thanks for joining us. Thank you. The S&P ending the day slightly higher, 4539. Senior markets commentator Michael Santoli joins us from the New York Stock Exchange.

Hi, Mike. Hey, Morgan. You know, in the S&P 500 continuing to claw back the losses of last year now actually has regained more than 75 percent of the complete loss from the 2022 high to the low. This goes back a little farther to early 2021 because I've been noticing for a couple of months right now that the S&P 500 is kind of going up in lockstep to what it was doing two years ago. So it was keeping roughly flat with two years earlier. I don't think there's any magic to this pattern, but it's just a reminder that we're not exactly breaking new ground. So if you see starting, you know, right back in the in the spring, you were at these roughly similar levels at the same time of the year. And then now you also you're up a little bit over two years over this period of time. But for exactly two years ago in July of 2021, you're kind of right

in this scaling up mode that culminated for a while in September of that year. And I just do that as a reminder of, you know, are we actually really still partly in mean reversion mode and just a few percent from a record high, as opposed to people getting newly excited and putting newly high valuations on things. It also applies to the Nasdaq 100. Take a look here at some of the leading areas really closely linked both to consumer spending, consumers' propensity to spend, but also interest rate sensitivity. AutoNation had a pretty rough day today. That's partly an effect of a moderating used car prices, which is a good news for the economy. But AutoNation has been on

a huge roll as demand for new and used cars has remained strong. Then you have the Home Builders Index, very similar looking chart over this period of time, just backing off a little bit right now. We know all the favorable supply demand. That's the airline index over there. And so in every case, you see just kind of coming off the boil a little bit right here and moderating, but still massive outperformance relative to the broader market. So just something to keep an eye on and still think that cyclicals over defensives has been a theme and it's probably something that's not going to go quietly if it goes at all. But as Tom Lee was just mentioning, there has been a little bit of a bid in defensives and other laggards. So we'll see how that plays out. Interesting. I mean, AutoNation definitely

got my attention today that car prices are coming down. It's seeing pressuring margins as well. I wonder just how this sets us up for and what the market is pricing in and expecting around that Fed decision next week and beyond. It seems to me the actual Fed move next week is in the books, 25 basis points. I'm not concerned about necessarily the direct impact of the slightly higher rates. Beyond that, it is going to matter what they say, how they characterize things. I still think Fed's going slow if it's going at all. So the next meeting is not till September. But they may have feel a need to emphasize that the job against inflation is not done yet and to try and make sure the market has the has its attention on the persistence of relatively high rates from here. All right. And of course, when it comes to travel, the airline earning Mike Santoli,

thank you. The airline earnings we got this week, very, very strong, similar situation to Delta, and really helping the transports this week to gain 2.5%. See what happens next week, Alaska and Southwest. All right, well, met a president of global affairs. Nick Clegg was among a group of tech executives that just met with President Biden and pledged to develop safe AI tools. Up next, he joins us in a first on CNBC interview to discuss how Meta plans to put appropriate AI security in place. Stay with us. We're back in two.

Welcome back to Overtime. Seven leading AI companies pledging to commit to a variety of measures around safety, security, and transparency in their models today. In a meeting with the president at the White House, Meta is one of those companies that was in that meeting. And joining us now, Nick Clegg, president, global affairs at Meta. Nick, it's great to have you on the show. You're joining us literally on the lawn of the White House. You just got out of this meeting a short while ago. Seven companies, eight voluntary commitments. Why did Meta decide to sign on here? And what was the discussion like with the president? Well, we decided to sign on, as did the other companies in this White House led effort, because I think everybody recognizes this technology, AI,

it's evolving so fast. And, you know, it's bigger than any company or any government or any country. It's going to transform so many aspects of our lives. And so it's right that people should try and work across the industry, with government, with regulators, with civil rights groups, with academics and others who are looking into this, so that we can start together thinking about what the rules of the road should be going forward. Because everybody wants to strike the right balance, which is to innovate. And that's, of course, an area where U.S. companies in this area at the moment really do lead the world,

but innovate as responsibly and safely as possible. And that was very much the subject of this of this first meeting. And I think it'll sort of kick off a process which will, over time, evolve into, yeah, kind of new rules, new guardrails for this technology. Because like all new technology, people kind of have lots of questions about it. And everybody wants to get the best out of it and mitigate the worst. Yeah. So this implementation of these early guidelines, is this domestically specifically for Meta, or are you thinking about this globally right now in real time? And I ask that because we know there's something of an AI arms race afoot, particularly when you think about China.

So these are things that, because we're a global platform and because AI touches so many aspects of our business. And by the way, it's worth remembering, I mean, AI itself, of course, is not new. We've, you know, for years been using AI in all of our products. It's just evolving really fast with this new so-called generative AI, these large language models like ChatGPT, where you can ask it to write your school history essay or your wedding speech, and it comes out with these extraordinarily perfectly phrased texts. That's the thing which is kind of evolving very fast. But we obviously want to incorporate these guardrails of transparency, of working across

the industry to be able to detect and watermark AI generated content, publishing research, explaining to people how our models are assembled. We want to do that in a way that operates globally. Nick, you admitted to the BBC four years ago that Facebook at the time hadn't done enough in the past to ensure data privacy quite a lot, you said, but not enough. Why is it going to be different with generative AI? Well, I think one of the really encouraging things about this meeting is that we're not actually, most of the discussion wasn't even about AI as it is currently constituted it's about the future evolution of AI models and that's kind

of different to what we've seen over the last 15 years or so where for instance you'd have this you had a huge technological change with the advent of social media and so on and then ever since then we've been having a raging debate about you know whether it's good or whether it's bad and what guardrails and laws should be put in place. Whereas this time, we can actually get ahead of that, try and anticipate where this technology is going. That's why it's quite different.

Nick, I guess I'm asking Meta specifically, is the approach different, particularly to data privacy, because that's such a key issue with artificial intelligence because it you know it builds so much on data is meta's approach better different now than it was you know for four or so years ago when there was all that heat around data privacy and meta it's kind of different all the industry is doing the same thing as they build these large language models everybody's using public data out you know out there in the internet. We are as well. We're not using meta users data where we have built and as we did earlier this

week released our new large language model, open sourced it so anyone can use it. Any academic researcher developer can use it. We're using publicly available data. We don't use data sets which have got a lot of kind of personal information on them. But that doesn't mean that doesn't mean to your point there isn't a totally legitimate debate going forward about about copyright about intellectual property. But I think that's something that the industry as a whole hand in glove with regulators and governments needs to have as we all move forward together. OK. I want to ask you related to this about Meta's independent oversight board. We don't talk about it a lot, but maybe we should.

It's handled some heavy cases lately, overturning Meta's decisions about hate speech, threats of violence from political leaders. How is the oversight board going to weigh in on AI policy and practice? Do they have the needed expertise are they being given access to AI models within meta that they would need to even understand what's happening so the the oversight board already deals with content which is in one shape or form affected by AI because if you you know if you open up Instagram or Facebook the order in which you see things you know which post do you see first and all that is heavily affected not only by your own choices, but also by the algorithms and the AI systems that lie behind them.

So the oversight board is already pronouncing on cases which, in a sense, have AI integrated into them. We at Meta, we already use AI as an incredibly effective tool to suppress or downgrade content that we don't want to see and that users don't want to see. I'll give you a very concrete example. The prevalence of hate speech on Facebook is now down to 0.02%. So that means for every 10,000 bits of content you might see if you're sort of scrolling on Facebook. Only two bits of content are hate speech. That is down by over 50% over the last year or two, precisely because of advances in AI. So the oversight board is already pronouncing on those things. It's something we're very proud of. No other company's done this. It's an independent entity, which basically, a bit kind of like a court almost, when there was a dispute about whether we

should have kept something up or taken something down, they basically hand down a ruling and say, no, you've either got to keep this up or you've got to take it down. And we then abide and obey by those rulings. I think it's a really good innovation. I hope it's something which will be used more widely in the industry as a whole in the years to come. Yeah. Along those lines, Commerce Secretary Gina Raimondo was on our air earlier today. Here's what she had to say. It's a consequential election here and in many other countries. We've seen already the problems with disinformation, misinformation, and AI just puts all of that

on steroids. I will say that's why we're focused on, you know, quote unquote, watermarking. So you can you can know, is this content a real human being or is this content created by a model? Is this something that you're already dealing with on the platform, some of this artificially generated content? And if so, how are you in real time assessing it, combating it, analyzing it? Yeah, we already have policies on deep fakes. And of course, AI and generative AI is evolving very fast. But remember, there are technologies which people can use to manipulate photos,

which have been around for ages, like Photoshop and so on. So I think it's about velocity and scale rather than, you know, something a materially new threat when it comes to manipulated images and so on. We are working across the industry because no company can deal with it on its own. We already have been doing some work within an organization called Partnership for AI to compare notes on how best to detect and watermark and then act against material like that. We've got to carry on doing it together. No company is going to come up with perfect answers on its own. I also should stress it's going to be easier perhaps to detect audio or visual artificially generated content than it is text. And these are all the kind of things we need to dig into together. Like that DeSantis supporting Super PAC that did an audio number on Trump. Got to ask you

about threads. Still not available in the EU, though it is in the UK. Is it ever coming to the EU or do the data rules there prohibit a certain kind of data sharing that kills the business case? Oh, no, no. We want to make sure it's available in the EU, but we're going to take our time to get that right. There's a whole raft of new laws and the ink is barely dry on the new legislation in the EU. There's still a lot of detail to be filled in about exactly how it's going to be applied in practice by the regulators. They themselves are still trying to cross the T's and dot the I's on that. So there's just a lot of regulatory kind of, you know, flux in a major market like the EU. And so we thought with a new product like this, which, you know, absolutely ballooned in its first few days,

it was the first app to reach 100 million users in the shortest time that it did. We just want to make sure that we roll it out carefully and we'll do the work in the months ahead to make sure that when it's available in the EU, it's done so in conformity with the latest version of the regulations. Well, Nick, you might have found your first advantage to Brexit right there. At least the UK gets it. Nick Clegg, President of global affairs at Meta. Thank you. Pension fund giant CalSTRS underperforming its most recent investment return target. Up next, the chief investment officer, Chris Ailman, on why the fund fell short and where he sees opportunities right now when overtime returns. Welcome back to Overtime. CSX, one of the worst performers in the S&P 500 today after missing Wall Street's revenue forecasts because of lower fuel and coal prices, a decrease in

intermodal shipping volumes. This was due in part to some softening in consumer retail demand. Despite those headwinds, though, CEO Joe Henricks told me on Squawk on the Street that he doesn't think the economy is heading towards a recession. We've seen strengths in autos, metals, minerals, aggregates, coal, softening and chemicals, paper and pulp products, and then that intermodal business international that you talked about. So it's very mixed. We were able to grow based on our service and we're able to see that improvement. So I'd say it's mixed. I wouldn't say that we're headed, you know, at what we see, we're not headed to a recession. The domestic intermodal business showing some improvement really is an optimistic sign. That being said, Henrik's adding that the

company is not yet seeing green shoots in its international intermodal business. But John, it did actually manage to grow merchandise volumes. Think things like autos that are being shipped on the rail, metals and certain types of minerals, which speak to some of this secular growth and investment we're seeing in infrastructure and chipset, et cetera, and the like. They're also taking market share from Norfolk Southern and also from some of the trucking companies that are out on the road, too, right now. All right. Let's talk about some of those macro implications. CalSTRS, the world's largest teacher pension fund, falling short of its 7% target rate of return in the last fiscal year. Joining us now on the investing environment, CalSTRS Chief Investment Officer Chris Ailman. Chris, welcome. You know, unlike CSX, I guess, you were at least expecting a recession or a soft landing scenario that wouldn't feel good.

You talked a few months ago here on CNBC about a possible two years of sideways three to four percent inflation. And so far, it doesn't look like we're heading there. So what did you get wrong and how does it shape your plan from here? Well, John, it's a challenging environment, just like the board behind you. It's very mixed, 50-50, and trying to figure out, are we having a soft landing or are we actually going to have a recession? All the economists are still predicting that recession. Yet, as Rick Santoli said, the market's climbing that wall of worry. So last year was a challenge because we were a bit defensive, but the market had really strong double digit returns. We came close to that 7 percent target, just didn't quite hit it. But we're going to be somewhere in the 6 percent range, which is OK for last year, but not what I want. So do you stick to the same playbook,

just figuring, OK, now it's right now that we've had this huge run in equities, do you tilt toward utilities, energy, health care areas like that that haven't performed as well? What? Well, you know, you see days like today where the market at least is positive. It's on an amazing streak. But the chart Rick Santoli showed about how the fact that we were climbing up the same kind of place we were back in 2022 makes you want to pause. And we'll see how the fall goes. There are still a lot of forecasts. The Fed will probably pause after next week. But what is inflation going to be through the rest of the summer?

What's the job market? I still put it at a 50-50 chance of a small recession, which is not good for earnings. Yet, next week's earnings will be critical, and then we'll have the third quarter earnings reports to look forward to. So it's a year where it really is a mixed future, and it's tough to call and tough to be aggressive, even though the market's being strong. I mean, we do have interest rates higher. That's translating into fixed income right now, too. It does seem like there's this moment for private credit that hasn't existed for quite some time. How are you thinking about that? We like private credit, Morgan. We think it's an interesting area to be into, especially, but you've got to do your due diligence and know your credits. Because if we come into a bit of a recession, that's where

you're going to see a real big difference in the quality of those underlying credits. But you can get a nice yield of maturity and fixed income is attractive. We're actually slowly increasing our allocation to fixed income. After 30 years of dropping it, we're now moving it back up a little bit. Yeah. I mean, in terms of public equities that you've held and that we've spoken to over the years, I mean, we were just talking to the president of Meta. There's obviously a lot of fervor in the market right now around AI and those future capabilities and how some of these big companies are going to monetize them. How are you thinking about that and those tech holdings that you do have?

You know, the Magnificent 7 and the fact that they've gone up so dramatically is not healthy for the market. I worry about the breadth of the market, Morgan, because I own the entire market in its proper weightings. So the fact that those are so strong does make me pause. I'm glad to see the Russell 2000 come back, small cap stocks come back a little bit. So improvement in the breadth this summer would help me be a bit more comfortable about the market. But we've seen this before where the market has performed and a very narrow group of stocks at the top have done well. Those companies are phenomenal. They are producing earnings, and that's a big difference from past bubbles. OK, so given that, outside of those big seven,

what's the most pivotal earnings report next week that you're watching to get a sense of where we might be headed for the rest of the year? Well, I want to know what the Twitter account said, but I would say it's going to be interesting. I'd still get to look at Microsoft as really part of the key. And as CSX, the president said, the base economy is quite strong and the consumer is quite strong. To me, that's baffling, given rates have gone up 500 points. You've got to think there'd be a bigger slowdown in the housing market, more pain in the real estate market,

yet we're muddling through, John. So I think those base earnings on the consumer are critical, as well as continuing to see the Magnificent Seven perform well. All right. Chris Almond, thanks for joining us. Great to get your thoughts. My pleasure. Kind of reminds me of what Bob Elliott had to say yesterday, that this is not a credit crisis or about a credit crunch as much as it is about

the labor market right now, and that that's what is playing out in the market more broadly and something to watch where the economy's developments or evolution is concerned. Also reminds me, how many people are watching those Mike Santoli charts? A lot of people, I think. Yeah. It's time now for a CNBC News update with Contessa Brewer. Hi, Contessa. Hi there, Morgan. President Biden is elevating CIA Director William Burns to a member of his cabinet. Burns is a veteran diplomat. He's been a key figure in the administration's dealing with Moscow since the war in Ukraine began. In a statement, the president said, under Burns' leadership, the CIA is delivering a clear-eyed, long-term approach to the nation's nonstop security challenges. A powerful tornado that ripped through part of North Carolina

Wednesday destroyed Pfizer's Rocky Mount warehouse. But production facilities appear to be structurally sound. That's according to CEO Albert Burla, who toured the plant today. Nearly a quarter of the company's sterile injectables used in hospitals are produced there. And the company says repairs will take weeks. Pickle and wine lovers have a new treat coming their way. Treat maybe should be in quotation marks. Clausen Pickles is teaming with Spritz Society to create a first-of-its-kind pickle-flavored cocktail. It really started as an April Fool's joke, but people liked it. They

liked it enough for Klaassen to put it in grocery stores and online, at least for now. If you order it, you're going to shell out 50 bucks for eight cans. No. Yes, I would try it. I would, because think about it. Have you ever heard of a pickleback? The whiskey pickle juice cocktail? $50, though. $50. You know, if you're part of the 1%, Morgan, you just shell it out like it's nothing. All right.

I will say, that has been the most compelling argument just now, pickleback, that I heard from you all day on this story. We haven't argued enough. Let's argue about it more. Contessa's bringing pickleback. Good one, John. Then you can drink enough. Let's argue about it more. Contessa's bringing pickle bath. Good one, John. Then you can drink that and go win Wimbledon. All right.

Don't look now, but gasoline prices are creeping toward the highest levels of the year. Up next, Mike Santoli is going to look at what that could mean for consumer spending. And don't forget, you can catch us on the following on the go. The Closing Bell Overtime podcast, your favorite podcast app is where you'll find us. We'll be right back. Welcome back. We have a news alert on AMC and it has nothing to do with Barb and Heimer. A judge has blocked AMC from converting its eight preferred units into common stock. Very unexpected. Many retail investors opposed to the conversion because it would have diluted their shares. If you take a look at shares of AMC, they're shooting up. They're up almost 52 percent right now. The eight preferred units are down 27 percent right now. Mike Santoli is back with us. Mike, this has been an extraordinary series

of events and litigation that has been playing out in real time really all year around these two different types of shares. And today seems pretty this judgment from from a court seems a little bit unexpected. It definitely was unexpected. And the story really starts well before this year. What happened was AMC did distribute these preferred shares. Now, remember, if you go even farther back than that, AMC wanting and needing to raise more capital because, of course, it was struggling against the lack of box office revenue and generally declining business, really tough debt load on its balance sheet, all the rest of box office revenue and generally declining business, really tough debt load on its balance sheet, all the rest of it.

They were trying to issue more shares and were blocked because they were capped out at the number of authorized common shares they were able to issue. They tried to get shareholders to vote in favor of raising that limit, and it failed. Then they issued these preferred shares, saying that they didn't have an immediate intention of converting them to common shares, but then they sought to convert them. They did get a settlement that seemed to enable them to do this. They got a vote that seemed to suggest they would have authority to do so. But there was a big group of retail investors in the AMC common that felt they didn't want to be diluted, that it was against their interests and that the company effectively

went back on its pledge not to convert them. So we now have this decision. It's unclear where it goes from here. What would have happened had these been converted, obviously, is the preferred shares become common shares. They're kind of economically equivalent anyway. So we'll see where it goes from here after this immediate reflex move higher in the common. But, Mike, I mean, this was going to be a cheap way for AMC to access more capital, right? But an end around what they were authorized to do. So doesn't this mean that they have to either go to the debt markets now and AMC is in sort of challenge shape or do without that capital? And so who knows what impact that has on the stock, even in the medium term? Absolutely. I don't think it's a tomorrow issue that they you know that they need the cash.

But, yes, in general, that was management's objective was to be able to have access to the capital markets in this fashion. And, yes, we're getting a little bit of a bump in this particular weekend's box office. But in general, it's not been a good year at the movies. It's not necessarily been a good year at the movies. It's not necessarily been a heavy slate of future releases. And of course, we have a writer's and actor's strike, which who knows what it means for next year's slate. Yeah. All right. Well, we're going to keep an eye on all of these different AMC shares right now in the aftermarket because the moves are very big. Mike Santoli, thank you. The countdown is on for the new rocket that will send Amazon's

satellites to space. Up next, the latest timing on that mission when we hear from the CEO of United Launch Alliance. Welcome back. Amazon announcing today it will invest $120 million in a satellite processing facility at NASA's Kennedy Space Center in Florida. Project Kuiper is Amazon's multi-billion dollar plan to build a constellation of more than 3,000 satellites to offer broadband service back on Earth. This new facility will be used to prepare those satellites before they head to low Earth orbit. Lockheed Martin-Boeing joint venture United Launch Alliance will transport the first two prototypes for Amazon on its new Vulcan Centaur rocket. Vulcan suffered a setback after a propellant tank cracked during a test and ignited

into a fireball on the stand back in March. But ULA CEO Tori Bruno tells me Vulcan is still on pace for that maiden flight this year. I literally have nothing else to do to qualify the Vulcan rocket other than reinforce the top of a steel tank so it's a little bit stronger. And that's happening right now. Jeff Bezos' other company, Blue Origin, is supplying some of the engines that will power Vulcan. Bruno also telling me that the recent explosion of a Blue Origin BE-4 engine during testing, which was first reported by CNBC, and which we talked about on this show, will not affect this first mission. This was an acceptance test failure, which will happen again, happens in a production run on a rocket, somewhere on a rocket, pretty much every month. And it won't be news once, you know, once the other things we're doing are less

interesting. The ones at the launch site have already been through this successfully and even been hop fired in a flight readiness firing. Now, I also asked Bruno about reports that the one from some of the members of Lockheed C-Suite when I spoke to those executives about earnings earlier in the week. But the entire interview with Tori Bruno of ULA will be released next week on my podcast, Manifest Space. In the meantime, we have a new episode that dropped yesterday, John, with Accenture and the big bet that that company, the consultant, is making in the sector as well. Awesome. We know where to find it. All right. Morgan Stanley, not Morgan Brennan, Morgan Stanley, significantly upgrading its sales outlook for

obesity drugs today. Up next, the CEO of one weight loss company on how drugs like Ozempic are impacting her bottom line. Welcome back to Overtime. The global obesity market could reach $77 billion in 2030. That's what Morgan Stanley analysts say in a report published just today that's 42% higher than their estimate a year ago. But one unexpected group that may have to pony up as weight loss drugs boom in popularity, employers offering workers health plans. Well, joining us now is Isabel Kenyon, CEO of metabolic health company Calibrate. Isabel, it's great to have you on the show. Welcome.

Thanks for having me. Excited to be. I want to start with this report from Morgan Stanley, $77 billion. It's a 66 page report. There are it's an army of analysts that have worked on it. Is that how big you see this opportunity to be, too? And I ask that knowing that you have a startup that is quite literally focused just on this particular group of drugs and how companies are going to deal with it with their workforces. We think it's easily a $100 billion market. And the real question is, how do you make sure the right people get the right medications

for the right amount of time? And how do you make sure that you're fundamentally changing people's metabolic health in a way that leads to long-term sustained results so that payers see a decrease in the total cost of care? This is, Isabel, a huge market, even by pharma standards, though, if it's anywhere near that size. And there's still uncertainty about exactly what drugs are going to be approved and with what limitations. Right. So there's there's a lot of bets being placed with a lot of uncertainty. It's the most interesting market and we're in the most interesting time. If you think about where we were on mental health 10, 15 years ago, that's where we are today. You have employers saying, I want to cover this. This looks effective, but I can't justify the cost. And so I think what's really going to have to change to be able to figure out who can get access, how can we expand

access to this market? How can we get more people access to these medications? Who are the right people to take the right medications for the right amount of time? And what we did at Calibrate was build a program that wraps around the medication. It's delivered virtually in all 50 states. And the idea was really to say, how can you make changes to your food, your sleep, your exercise, your emotional health, using the medication as a tool rather than a long-term treatment? And that'll ultimately, we hope, expand access to medication, let more people get access, and really create a new standard of care for treating obesity. How many companies are you working with right now?

We've got about a million lives today. And the really cool thing is that we started about a year ago with our employer business. And it was primarily tech companies, primarily people with pretty healthy populations. And as we've expanded over the last year, we've seen this change to all sorts of employers with all sorts of backgrounds and employees all over the U.S. And really, I think the shift is very similar to what you've seen in other categories in terms of how do we make sure that we're really meeting employees where they are and how do we make sure that we're employees are going to move. Employees know these drugs work and they're going to go work for employers that cover these drugs. And so how do we build a real benefit that has value for those employees while also driving down the cost for employers who are looking at $100 billion of drug spend

they don't spend today? Wow. Okay. Isabel Kenyon, thanks for joining us. Thanks for having me. CEO of Calibrate. Well, Monday kicks off the busiest week of earnings season. While many investors are focused on the big names like Alphabet and Microsoft, bespoke's Paul Hickey says there are some under-the-radar reports to watch. That's next. Welcome back to Overtime. Investors are awaiting yet another big week of earnings on Wall Street. Names like Alphabet, Microsoft, Meta, and Intel are grabbing headlines. But our next guest has some smaller names he says investors should be watching. Let's bring in the co-founder of Bespoke Investment Group, Paul Hickey.

Paul, good to see you. So you got IoT chip maker NXP, French fry company Lamb Weston, and Invisalign maker Align. Why do you like those? So I think, John, if you look at all three of these companies, three different sectors, they'll give us a good read on what the economy is doing. I think, you know, you can't lose. NXP Semiconductors is the first read on semis for the quarter. We're going to see there how it's done. The company has habitually raised guidance.

Last year, they weren't able to do that as much. But last quarter, they resumed that trend, reporting an earnings triple play. And that gives them visibility. So what we want to see here going forward is how is their guidance looking for the quarter ahead? So that'll give us a good read on semis, which we call the transports of the 21st century. So that's the first one to look at. You move, that's Monday. Tuesday, you have Lamb Weston. I mean, why are we focusing on a French fry company, you ask? Well, the company was a big COVID winner, has continued winning since then. Stock has done very well.

And it's mainly because they've been able to push through price increases in excess of what their input costs are. So the company has, you know, every quarter has been talking about expanding margins. Last quarter, they said the environment remains favorable going forward to increase prices. So they reported an earnings triple play their second in a row. That's companies that report better than expected earnings, sales and raise guidance. But at some point, you know, you can't just keep raising prices forever. Like, I mean, this is a bag of French fries. It costs seven bucks.

Like, there's two potatoes in here. So I think in that respect, this quarter we'll see, is that environment conducive still to raise prices, and are they getting any pushback? So that tells you, that'll tell us if the consumers are pushing back on producers raising prices. And then the last company is Invisalign. It's a premium product. And for most people, it's out of pocket. So, you know, it's a premium, it trades for 40 times earnings. They reported earnings triple play last quarter. But one thing in the report last quarter was they reported about a 1% decline in the number of cases they had. So the stock declined 10%, quickly rebounded,

but investors gave it the benefit of the doubt. So we want to see on Wednesday how they report what the volumes are looking like to give us a sign of consumer health. Are they still willing to pay for a premium product when there's cheaper alternatives? Paul, I mean, I'm all for props on television. So way to go with a bag of frozen french fries there. We have a lot of potential. Well, my daughter just got the braces yesterday. So we have a lot of potential catalysts next week, whether it is earnings or whether it is some of the macro data we're going to get as well. What's going to matter the most? So, I mean, I think we're going to be talking about, everyone's going to be talking about the Fed. But, you know, that's a big thing.

That's mostly priced in. The commentary will be important. How the inflation data towards the end of the week comes out. But I think we're going to have $1.5 trillion in revenues of companies reporting next week. So that's a lot. We're talking a lot about Microsoft and Alphabet, but we can't lose sight of the forest through just focusing on a couple of big trees. And those are the companies that we want to look at the broad array of companies reporting and see how they report as a trend on what the health is. And I think these three companies are three companies to watch in their commentary.

All right. Paul Hickey, thank you. All right. Thanks. Have a good weekend. You too, Morgan. Right off the bat, Tuesday, Danaher and 3M. Those are going to be a couple of important ones for the overall economy. Yeah. And some of the industrial names in general, going back to what Tom Lee was talking about earlier in the show, the fact that you have seen this rotation out of and beyond big cap tech into some of these more cyclical parts of the economy. Does that continue? And what are the earnings tell us next week? Have a great weekend. You too. All right. That does it for us here at Overtime.

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