Closing Bell - Closing Bell: Overtime: MicroStrategy’s Saylor On Bitcoin Surge; Masimo CEO On Apple Patent Dispute 12/18/23

Episode Date: December 18, 2023

High-profile interviews with CEOs of Cleveland-Cliffs on why he’s happy to not buy IS Steel and Masimo CEO on Apple’s decision to pause some Apple Watch sales amid Masimo’s patent dispute with the tech giant. Plus, MicroStrategy’s Michael Saylor on Bitcoin’s surge and why he’s still bullish for more upside. Market talk with John Hancock’s Emily Roland and Wells Fargo’s Darrell Cronk. TD Cowen President Jeff Solomon gives his outlook and predictions for 2024. Former KC Fed President Thomas Hoenig parses recent Fedspeak and the market’s reaction.

There's your scorecard on Wall Street. Downs down, well no, everything's up. Welcome to Closing Belt Overtime. Winners stay late. I'm John Fort with Morgan Brennan. We have got a big show coming your way in just a moment. We're going to talk to the CEO of Cleveland Cliffs about the deal news of the day as U.S. Steel agrees to sell to Japan's Nippon Steel. Remember, Cleveland Cl cliffs kicked off the bidding

for u.s steel back in august with a 7.3 billion dollar offer plus apple says it's pausing sales of some of its smart watches the apple watch after an import ban on those devices was set to take effect next week following a patent win by medtech company massimo. Massimo's CEO is back with us on overtime on his win and Apple's consequences. And MicroStrategy co-founder Michael Saylor will join us to talk about Bitcoin's major rally over the last two months, which has pushed prices firmly above $40,000 for Bitcoin. Now, let's begin with the market. As stocks come off seven straight weeks of gains, big tech pushing the S&P 500 and the NASDAQ higher today with solid gains from Meta, Alphabet, and Amazon.

Joining us now are Emily Rowland from John Hancock Investment Management and Daryl Kronk from Wells Fargo's Wealth and Investment Management. Okay, so Emily, how do you read the market to start this week? Last push, end of the year. There haven't been a lot of sellers showing up. What do you think about what investors should do here? Yeah, John, the pivot party from the Fed last week is certainly continuing into this week. Of course, we heard the very dovish message from Chair Powell last week, which really helped continue this rally that was sparked back in October when we got clear readings on CPI that inflationary pressures are coming down.

So markets are celebrating right now not only disinflation, but the soft landing scenario. The Fed had indicated that they feel that we're landing on soft landing island here, and we're seeing risk assets participating across the board. It's really amazing to look at high yield bond spreads that three hundred and thirty six basis points well below their 20 year average. Investors are participating. Optimism is is coming into view. And it looks like it's really a strong end of the year here for risk assets broadly. Darrell, you think some investors might be partying too much here, too

much anticipation of rate cuts next year? Yeah, I think that's right, John. I mean, sorry for Darrell. Sorry. Yeah. So I actually think what you've done in the last couple of weeks, call it maybe even the last seven weeks, is you've pulled forward a lot of the macro tailwind and good news. So as Emily mentioned, soft landing, Fed interest rate cuts, inflation coming down, all those things are now priced in as the consensus for next year.

But what we need to see kind of post-holiday when we come back in January is the micro to deliver, meaning we need to see kind of post-holiday when we come back in January is the micro to deliver, meaning we need to see earnings growth. We need to see margin defense, you know, and making sure companies can deliver on those type of things. What we think you might see is CEOs, CFOs come back in January and February and tell you that the demand side is still a little bit challenged. You're seeing in some of the numbers, you'll probably start to see pickups in layoffs, which is going to push unemployment higher. So, you know, the next two weeks, yes, nobody wants to realize gains heading into a big, strong year. So the risk on party probably persists for the remainder of this year.

The real test of the metal, John, will come in January and February. So along those lines, Daryl, do you think earnings estimates for next year are too high, especially if we are in an environment where disinflation continues? Yeah, it's a good question, Morgan. So we're below consensus right now, whether it's top down or bottoms up consensus. We're about 220 for next year for earnings. We think there is going to be some margin and earnings pressure. And, you know, if you take today's levels at that earnings expectation, you're paying 21 and a half times next year's earnings. So what's interesting about the November-December rally

is that it's all come from multiple expansion. Earnings estimates didn't really tick up in November, December. They stopped going down, which is good news. And hopefully we see those inflect and move higher into next year. That's what we want to see. But I think the markets really need to see that earnings growth resume into next year to support some of the valuations that we've created at this year-end party. Emily, it's been a big year for the bond market and big moves there, too. Does that

continue into next year, especially if you do have a Fed pivoting towards rate cuts? And given the fact that we have had yields that have been competitive with stocks this year in a way we haven't seen in many years? Yeah, finally, I will celebrate that for sure. We're seeing bond yields at the highest levels in over a decade here. We do think that bonds can do more heavy lifting in portfolios next year. And this is really just about the math. Daryl laid it out really well on the equity side. The multiple expansion has been significant. We started the year at 16.7 times forward earnings.

We're sitting at 19.3 today. And that's on top of 12% earnings growth being baked in from the street. So it's not that stocks can't do fine next year. It's just the starting point is really, really elevated. Now, when you look on the fixed income side, there's actually been more value unlocked in bonds. So the ag started the year yielding 4.7 percent. We got as high as about 5.7. We're just over 5 percent today. But we look at that as a really, really attractive entry point here as we think that bond yields will come down over the course of the year. And income is a pretty exciting way

to generate returns in portfolios. That's something that I haven't said in a really, really long time, if ever in my career. So bonds for the win into next year. Well, Darrell, it looks like you're thinking the same thing, reallocating some from equities into short-term fixed income. What kind of percentage in a portfolio? Yeah, it really depends on your objective. But we've been barbelled, John, towards short-term and long-term. Obviously, the fall from 5% at month-end October down to sub-4% on the 10- year, the long side, has been really good.

And to Emily's good point, the average investor hasn't seen these interest rates. They forget about what's called bond convexity or bond math, that when rates fall that amount, you're getting outsized gains compared to what the downside is if rates move higher. So we would have investors barbell that fixed income exposure right now.

We are thinking you wanna add a little bit more to fixed income here if you're looking for places to put capital to work. It's not that equities aren't attractive, but typically you're going to get a little bit of fade of this big seven-week duration rally. We'd use that maybe as an opportunity to leg into equities at a little cheaper price going forward. All right. Daryl and Emily, thanks for kicking off the hour with us with another Monday rally in the Dow hitting a fresh

all-time high, the S&P closing in on its previous all-time high as well. Let's turn now to the deal news of the day. U.S. Steel being acquired by Japan's Nippon Steel for $55 a share. That's a significant premium to the $33 a share that Cleveland Cliffs originally offered back in August, which in many ways, at least publicly kicked off months of deal speculation. Cleveland Cliffs surged on the news, closing higher by more than nine percent today. Joining us now exclusively is Cleveland Cliffs CEO Lorenzo Gonsalves. Lorenzo, it's great to have you on the show. The fact that your stock rallied today, as one analyst pointed out to us, that maybe you dodged a bullet here in terms of not being successful in at least your initial ambition

to take over U.S. Steel. How do you see it now? LORENZO RIVAZI, CEO, I feel really good. Thanks for having me, Morgan. It's a pleasure to be with you and John. Look, at the end of the day, what we accomplished with our bid to acquire US Steel is to show investors that there's a lot of value to unlock in our space. We see a lot of talk about tech. We see a lot of talk about AI. We see a lot of talk about lots of things. We don't see a lot

of talk about manufacturing. And the United States lost track of what makes for an important basis to the economy. And we're bringing this back, and the investors will come along. So today was a good day for Cleveland Cliffs and a good day for the shareholders of Cleveland Cliffs. Yeah. I mean, you raised such a key point, and I want to get into that in a little more detail here in just a moment. But first, the fact that you said today that you're going to up your share repurchases, focus on the fact that you've reached your debt target for the year as well.

Are you also thinking about reinvesting into your steel mills and your infrastructure as you do see this secular growth opportunity in the industrial part of the economy? We have been doing that. By the way, we are very pleased that we are now with a net debt in the order of $2.9 billion, so below the $3 billion target. We are not even borrowing any money from our ABL. So that's mission accomplished on behalf of our shareholders. With that said, we keep investing in our steel mills. We acquired assets that were not being well treated by the previous foreign owners. We had to invest a lot of money to bring them up to speed. We had to invest to create jobs among these two workers. We did all that, not only preserving jobs, but generating more jobs.

So that was the entire value proposition, which the entrenched board of West Steel did not recognize. But, you know, it is what it is. They were trading based on their cash on hand. We brought them back to the world with our offer. And we are glad that their old three times multiple was now seven multiple. So the entire sector has been regraded by our offer to buy U.S. steel. We can't make an offer to buy U.S. steel. We would be blocked by the Japanese government.

So let's see how the U.S. government will react to this proposal. It's not a deal yet. Yeah, and to your point, I mean, it is a high bar to hurdle, and we've seen this across sectors, the M&A landscape with regulators. But when we talk about steel

and an American steel company like U.S. Steel, there's a national security element to all of this as well. And we certainly know industrial policy under this administration is being viewed with a very wide lens around national security. Want to get your outlook for steelmaking in this country as we do head into 2024,

as we see economic growth slow. But as you just mentioned, fiscal policy is in place, whether it's the IRA or infrastructure spending or CHIPS Act or on-shoring and re-shoring that are actually propelling and spurring more demand for steel products? Yeah, it's all of the above. The Cleveland Cliffs is very well equipped as is to benefit from all that. But the good news is that, based on the interest demonstrated by Nippon Steel to come to the United States, my point has been proven. It's important to keep our production inside the United States. We need to understand that the workers are important in the entire big picture, and that's why I started with the workers.

Because in order to have an M&A successful deal in that space, you need to have the buy-in of the workers. So that's why I started with the USW. There's no way a deal would close without support from the USW. So there's a lot to come after this announcement. So that's why I said good luck to Nippon Steel and good luck to U.S. Steel and their integration board. I wonder what kind of a good luck that is

because the unions don't seem to like this, Lorenzo. So let me just ask you flat out. You point out that you wouldn't be able to buy Nippon Steel. Should the U.S. lawmakers, regulators, allow this transaction to take place? Well, we are in a situation here, John, that it's very unusual in this country right now. We have support from Ro Khanna of California, all the way to the other side, Senator J.D. Vance of Ohio, and passing by Sherrod Brown and John Fetterman and Joe Manchin.

So I think the answer is in the question. The answer is no. We can't allow foreign ownership. We can't allow for a foreign company to come to just liquidate American jobs and take over what we have here. We have been doing that for too long. China does not do that. Japan does not do that.

Any other big country, they don't do that. Why here in the United States, everybody believes that they have the opportunity to do that? Because we still have people like the board member of US Steel that they have the opportunity to do that because we still have people like the board member of US Steel that they don't really work for the shareholders. They work for themselves. So I started this conversation talking to the shareholders and talking to the workers. And that's how I built my bid. We're successful because we brought attention to the sector. But this thing is far from over. All right. So in light of that, very quickly, Lorenzo, if this deal were to fall apart,

would you be back in there as a bidder for U.S. Steel? Absolutely. But with a much, much lower price, because at that point, it will be abundantly clear that I am the only viable buyer. So they missed a chance to sell this company in the 40s. They'll end a chance to sell this company in the 40s. They'll end up selling this company to me in the 30s. Lorenzo Gonsalves, Cleveland Cliffs CEO. Thanks for joining us. Thank you for having me.

Always a pleasure. Stock finishing up more than 9%. Be sure to tune in to Last Call's interview with the president of the United Steelworkers Union, who is blasting this deal. That kicks off tonight at 7 p.m. Eastern. All right. Coming up next, TD Cowan president Jeff Solomon is going to tell us the biggest opportunities he sees in the

market for 2024, including in health care, energy, banks and A.I. as the Dow hits another intraday record high. Overtime's back in two. Well, the Dow might have ended about flat, but it touched another record intraday high today, the Nasdaq notching an eight-day win streak as this year-end rally looks to stretch into its eighth straight week. So where should investors be looking for opportunities in 2024? Let's bring in Jeff Solomon, president of TD Cowen. Jeff, welcome. I want to start off maybe in somewhat of an odd place. You guys have invested a lot in research. And Tom Lee, who was with us last week, saying small caps could be up as much as 50% in 2024.

These are stocks that don't get a ton of coverage. What do you think can be found there through research that investors need to know? Well, I mean, first of all, yeah, we have invested in research, and that's been something that I think has been contrarian over the last decade. We cover over 1,300 stocks now.

We have 92 publishing analysts. And even since we've done the merger with TD, we're up four or five senior analysts. And so our investment in research has always been because we think there's undervalued or misunderstood themes. And really small companies, like small companies and mid-cap companies where we cluster a lot of our research just are less covered and less well understood. And I think Tom Lee is not wrong about that. The rally has been very narrow and at the top. And there's a case to be made that you'll see the small caps rally and we think there's a lot of value in them today. So, yeah, I would agree with Tom on that.

So before we get into the specific themes, how do you get your people to do it better? Because frankly, there are analysts who are all over the place with some of this research and very often chasing stock moves rather than being predictive of performance and trends. So in 2023 and in 2024, how do you have a better on-base percentage? Yeah, so again, we do focus on individual stocks. We also focus on themes. And that's part of the reason why I'm here today is we published our 2024 themes this year, this week. And so there's a lot for us to be just discussing. The way we get it done is collaboration. We actually published this year, I think we published over 300 ahead of the curve pieces. That's our deep thought pieces. These are thematic. And I would say 96%

of those thematic pieces are collaborative, meaning you have more than one research analyst covering more than one sector collaborating on a theme. And we believe for a long time that there's a lot of alpha when you look at thematic investing. And again, as a former buy-sider, picking individual stocks is difficult. But when you look at thematic approaches to portfolio construct and really leaning in on key themes and figuring out who are the winners and losers within those themes, that's actually where you make a lot of alpha as an active manager. We set up our organization to cater to that very specifically, starting about 10 years ago and continuing even today. So very proud of what the team does, but it's a collaborative culture and it really focuses on these, I would say, undiscovered or unrealized themes that we can highlight to people.

Yeah, Jeff, it's great to have you on the show. It's good to see you. Looking at it, it's like you got you got a couple of pages worth of themes here. So what are some of the most compelling as you look to 2024? Yeah, so it's interesting. There's 96 pages in this summary. The whole themes piece probably has four or 500 pages in it, and that's way too much to cover. But I think we're looking at a couple of things. So first of all, everyone's been talking about AI. We actually think that 2024 can be the year in which regulatory actually has a lot to say about where AI goes.

And we're looking also at how AI plays out in the data center space, which could be really interesting. I think when you look at health care, we continue to look at places like cell therapy, liquid biopsy. We also look at personalized medicine. We're trying to assess what the public policy is going to be. We know there's going to be a lot of drug pricing policy debate as we head into the election. I think when you look at energy, people just don't understand yet energy transition and how prevalent it's going to be. I think we think that there's still a lot to be done in small nuclear investments and maybe hydrogen as an alternative fuel source. There's so much that's going on in that space. And if you get it right over the next two or three years, you just have a lot of tailwinds. And then the last thing I would say is that, you know, you talked a little bit about it on the last couple of segments, industrial policy. I know, Morgan, you and I have talked about this.

Industrial policy is so important, especially in an election year. One area where pretty much Democrats and Republicans agree is China. And how do we rebuild our supply lines here, our supply chains here in the United States? And how do we make sure that we put industrial policy as a critical strategic imperative as part of our game plan long term in this country? Of course, we're seeing as we see consolidation in steelmaking as well, something we just talked about with the CEO of Cleveland Cliffs. Jeff, just earlier this year, you closed the deal with TD of Cowen. The integration is afoot. But when I think of Cowen, I think about investment banking. So I am just curious, looking to 2024, what your expectation is for more M&A potentially, especially at a time where

regulators seem to be taking a much harsher lens, both on this side of the Atlantic and in Europe, to dealmaking and or to the IPO market? Yeah. So, listen, I think we talked about this also, that this is not an administration that really likes bigger. Bigger is not better, as according to this administration. You've got a very active FTC chair that takes a good hard look at that. And our strategy at TD Callen is really to look at north of the border, south of the border, right? So Canada, U.S., be North American focused. And North American focus actually fits really well within the industrial policy of the U.S., particularly if you're looking at making sure that, you know, whether it's Canada, the U.S., and Mexico as a bloc are pretty well positioned against the rest of the world. And so, again, our view is that there could be significant M&A, particularly strategic M&A,

probably over the course of the next year. I would also say that with the Fed doing what it's doing and likely to see some pivot at some point next year, you could see more M&A and sponsors having more activity. So what we're seeing, not just at TD Calum, but at TD Securities more broadly, is significant M&A activity as the backlog starts to get unclogged, kind of hitting it at 24. All right, Jeff, thank you. Great to have you. Good to see you.

Up next, the CEO of medical tech company Massimo joins us in a first on CNBC interview to talk about the news that Apple's pausing sales of its top Apple watches this week following a patent dispute with his company. We'll be right back. Apple making a big move today, surprising to some, saying it will pause U.S. sales of two of its Apple Watches this week. And this comes after Apple lost an intellectual property ruling to medtech company Massimo centered on a blood oxygen feature. Joining us now in a first on CNBC interview is Massimo's CEO, Joe Chiani. Joe, great to have you back. Are you surprised it's come to this? No, but it's great to be back on your show.

OK, so what comes next? Well, I think the world now knows we are the rightful creator and inventor of this technology. So hopefully we will get our chance to give the public a truly continuous pulse oximeter watch that they can rely upon that just got FDA approval. And when I saw this news, I thought, well, maybe Apple is pulling this early to get people's attention so that they start asking the administration, hey, what's going on? Can you get those Apple watches back on shelves? Do you think that there's any of that to this or just take a while in the supply chain, in retail stores to pull those things off?

You know, I hate to guess what people are thinking, but it's so funny that you thought that too. That's the first thought that went through my head, knowing that the Biden administration is unlikely to intervene. I think this was their last-ditch effort to see if they could get the public somehow mad at the Biden administration to get them to intervene. Has there been any conversation between you and Apple since you and I last talked? No. In fact, on your show, despite the fact that I don't care much about the Apple leadership, given what I know and how they run the company, I still extended the olive branch and offered to work with them for the betterment of people and our mutual shareholders and not even a call. OK, how soon can you get your product on the market?

Well, we're already in the market with this product called the W1, which I think you've seen before. And we're actually in the pre-market release phase of this product, which is actually a full smartwatch that has all of the texting, messaging, phone calls, everything. And hopefully that'll come out beginning of 2024. Okay. Okay, you say beginning of 2024. That's what I was trying to get a little bit more detail on, see if you can give me some more details. Is that first quarter? Is that January, February? Well, given that we want to make sure customers are elated with our products, we don't launch anything until it's been through two other steps, what we call a pre-market release, which is a number,

probably about 100 people that will be evaluating this to give us their feedback, and then a limited market release with paying customers that will give us feedback. Assuming all is smooth, then we go to full market release. So if we're lucky, there will be no negative feedback on the PMR and LMR, and we'll go to full market release in Q1. How broadly, once you are prepared to release this widely, do you expect to get this distributed? I mean, there's not that much of a smartwatch market outside of Apple Watch. Google's done a few things, of course. Samsung's done a few things. Well, worldwide, we bought Sound United, a company that owned Bowers & Wilkins, Marantz & Denon. These are 100-year-old-plus companies in the audio business. They have 20,000 distribution points around the world. So we intend to use that channel to get this widely out there.

And, John, a third of the market that buys smartwatches have chronic illnesses. They need a serious product. We're the only company that has a continuous and accurate pulse oximeter that catches true hypoxemias and issues before it's too late. So we're hoping once this product is out in our channel, given hopefully people's true interest of getting a serious product, we will make a significant inroad in the market. And I guess we'll see if Apple calls you and how long after Thursday these top models of Apple Watches stay off the market. Joe, good to have you back on Overtime. Thank you. Great to be on your show always. Joe Chiani.

Well, it's time now for a CNBC News Update with Leslie Picker. Leslie. Hey, Morgan. A federal appeals court ruled this afternoon that the criminal case in Georgia against Mark Meadows must remain in state court. It upholds the ruling of a lower court judge who ruled the former White House chief of staff to President Trump must stand trial in Fulton County, not federal court, for alleged efforts to overturn the 2020 election. Actor and Marvel Universe star Jonathan Majors found guilty of one count of assault and one count of harassment today, but acquitted on two other similar charges. Majors was charged with the misdemeanor counts after an

altercation in March with his then-girlfriend. He faces a maximum of one year in jail. Sentencing is set for February 6th. And a scrub launch today for Jeff Bezos' Blue Origin Aerospace Company. The company pointed to a ground system issue for the new Shepard rocket and said workers are troubleshooting the problem. Its last attempt in September 2022 ended in failure. The company said it would announce a new launch window soon, and I am sure Morgan is all over it. I am all over it. I'm watching this and I'm watching this on the heels of Rocket Lab with its return to launch at the end of last week as well. So certainly a busy burst here of space activity

into the final days of the year. Leslie Picker, thank you. Oil and other energy futures higher today as shipping companies cancel Red Sea voyages. The Iranian-backed Houthi militants in Yemen have been escalating attacks on vessels in the area amid the Israel-Hamas war. On Saturday, U.S. and British warships shot down more than a dozen drones launched by the group. The Houthis have been targeting a route that allows trade, especially of oil, to enter the Suez Canal and avoid circumnavigating Africa, which cuts down on both costs and time. A growing list of shipping companies are now rerouting vessels and suspending activity in the area, including oil major BP and tanker

operators like Frontline and Euronav. Also, container shipping giants Maersk and Hapag-Lloyd and others. The attacks, in addition to the conflict itself, have set insurance rates skyrocketing and with reroutings are expected to cause delivery delays potentially. DHL, for example, already issuing an advisory, as CNBC's own Lorianne LaRocco has noted. Ships sailing around Africa could mean an additional two weeks or so of transit time. The U.S. military helps ensure safe passage for global trade. Defense Secretary Lloyd Austin and Chairman of the Joint Chiefs General C.Q. Brown are expected to announce the formation of Operation Prosperity Guardian.

This is a new multilateral task force to protect shipping in the Red Sea and the area. That news should come as soon as later tonight, Eastern Time, as they make their way through their Middle East trip. But, John, this is certainly going to be one to watch. And folks that are very focused on geopolitics and national security will tell you this has the potential to be a very big deal. And this is the type of dynamic that also has the potential to risk further escalation or U.S. involvement more directly in the region. In the history books, so many wars get intensified by what happens in shipping lanes. Yeah. And not to mention what this the impact of this on supply chains and potentially inflation, too. Up next, we'll talk to former Kansas City Fed President

Thomas Honig as Fed officials put out fresh comments on rate cut probabilities, trying to cool things down, and the market's big push higher since Powell's comments. We'll be right back. Welcome back to Overtime. Let's talk crypto, Bitcoin specifically. Bitcoin's been surging lately, hitting a 20-month high earlier this month on optimism over potential approval of a spot Bitcoin ETF coming soon. That's boosted other names in the sector, including Coinbase and MicroStrategy. Separately on Friday, the SEC denying a petition from Coinbase to issue new rules on digital assets, saying it disagreed with the company that current regulations are, quote, unworkable for the crypto sector. Coinbase is now turning back to the courts to challenge that decision. Joining us now, though, is Michael Saylor, MicroStrategy executive chairman and

co-founder. Michael, it's great to have you on the show. Yeah, thanks for having me, Morgan. I do want to start right there with the regulatory landscape. The fact that Coinbase is now filing a petition in federal appeals court requesting review of the decision by the SEC. Is this the type of situation that could impact Bitcoin or impact the type of work you're doing at MicroStrategy? No, there's a lot of uncertainty around the rest of the crypto ecosystem. But the one certain element of the ecosystem is Bitcoin is universally acclaimed to be a global commodity or an asset without an issuer. So the one thing we can count on is Bitcoin goes

forward in the year 2024. And a strategy built around Bitcoin is generally a pretty safe one for institutions. New rules, speaking of regulations, recently announced by the Financial Accounting Standards Board, the FASB, that are going to require companies to account for cryptocurrencies like Bitcoin at fair value. Set to go into effect, these rules, in the next year or so, but companies can begin to apply them earlier than that. How is that going to affect MicroStrategy? You know, we welcome fair value accounting. It's going to create much more transparency and clarity in P&Ls and balance sheets for any companies that are holding Bitcoin. I think the real significance is that there are companies like Berkshire Hathaway and Apple Computer that have $100 billion plus in cash. And right now,

they have to invest it in treasuries and sovereign debt. And with this change in fair value accounting, you're going to have a commodity that's valued as fair value, and it becomes a legitimate treasury reserve asset for publicly traded companies. Yeah. And we've had that conversation before and the potential for more adoption, although I suspect Berkshire Hathaway is probably not going to be on that list of companies looking to adopt based on commentary there. I do want to get your thoughts, though, on Bitcoin and the rally we've seen just in the last two months or so, since early October, up something like 56 percent. What do you attribute that rally to? You know, we're going through a digital transformation of everything. Apple represents

a digital transformation of telephones and cameras, and Google's the transformation of books and libraries. Bitcoin represents a digital transformation of capital. 99.9% of the capital in the world is tied up in real estate and stocks and precious metals and bonds. And so we're 0.9% of the capital in the world is tied up in real estate and stocks and precious metals and bonds. And so we're 0.1% transformed. People, as they get educated on digital assets, are realizing that they ought to be allocating more and more of their capital to this digital asset. And so they're moving from 0.1% to 0.2%. And I think that's really driving the trend. I've said before, if Bitcoin's not going to zero, it's going to a million. The real question is, is it a legitimate asset? If it's a legitimate institutional asset, everybody is under-allocated to it.

So along those lines, how much is the possibility of a Bitcoin spot ETF contributing to this recent rally, geopolitics, risk on rally that we've seen more broadly across markets amid the Fed pivot, and also next year's halving. Are all of these factors that are contributing? They're all factors. Education makes a difference. Institutional adoption makes a difference. The spot ETF news is good news.

You know, loosening of monetary policy is good news. Inflation anywhere in the world drives Bitcoin adoption. And of course, the halving is going to cut the available supply of Bitcoins for sale in half from the miners. And so we've got a confluence of very bullish milestones over the next six months. And I think smart money is investing into that ahead of it. I do wonder what you think about the centralization of mining, though, and whether you're concerned since so much of the crypto community does seem to be flagging it right now. You know, people focus upon mining pools,

but the actual mining is taking place in Bhutan and in Argentina and South America and Texas and Europe and Iceland and Africa, everywhere in the world. And so the miners themselves are very decentralized. They'll remain decentralized because they're chasing after power that's effectively marginally free. And the pools, they will accumulate hash rate from time to time, but they don't really have the power. The power is sitting next to a geothermal or a hydroelectric project somewhere in the world. Yeah. Argentina is going to be one to watch, especially with Miele in power now and devaluing the peso amid rampant inflation. A lot of

expectation that we could see some more Bitcoin adoption there. Michael Saylor, thanks so much for joining us, the co-founder and executive chairman of MicroStrategy. Thanks for having me. Coming up, San Francisco Fed President Mary Daly just telling the Wall Street Journal that rate cuts might be needed next year to prevent overtightening. But other Fed officials say the market might be getting ahead of itself. We will ask former Kansas City Fed President Thomas Honig for his take on overtime return. Welcome back to Overtime. San Francisco Fed President Mary Daly telling The Wall Street Journal this afternoon that rate cuts will be likely appropriate next year based on the inflation picture.

Three, potentially. But is the market getting ahead of itself? Well, here's what Chicago Fed President Austin Goolsbee had to say on CNBC earlier today. The market expectation of the number of rate cuts is greater than what the SEP projection is. So whether that's priced in or not priced in, that is a difference. Those comments echo Cleveland Fed President Loretta Mester, who said markets are a bit ahead of themselves in their rate cut expectations. Joining us now, former Kansas City Fed President Thomas Honig. Great to have you back on the show. We have seen we have seen a little bit of divergence in terms of some of the Fed speak since that decision last week. But overall, I would say most of the officials that

have come out have really kind of pushed back on how aggressively the market is pricing in cuts next year. How do you see it? Well, I think the market is reading a lot into those projected three cuts. At the same time, though, I think the market is also listening to what the chairman said and what has been the speeches otherwise. For example, even though the economy has been strong, rates have been high enough and inflation has come down to the 4% core and 3% total. And they're saying lagged effects should take it from here. So they're feeling more comfortable in terms of their projections for rate decreases. And then banking industry is still vulnerable, and they know that. So if you keep them high too long, they're afraid you'll trigger another banking problem.

So you want to be thinking ahead to lower rates. And finally, they have the government debt coming at them, and that'll be more pressure for lower rates. So there's a lot of momentum out there for rate cuts, and the Fed is not as aggressive as a market, but in terms of saying, yep, we're going to cut, no more rate increases, that puts a big signal to the market. The market's a little bit ahead of itself, but not that much. And finally, I would say the Fed's willing to take on some risk. That is the risk of putting this out there, reigniting inflation if they get a little bit ahead of

themselves. But they're willing to do that to make sure they don't have another banking crisis and a real recession. They want that soft landing quite a bit. That's what they're saying. And time certainly seems to be of the essence if the Fed is actually going to realize a soft landing here. Is that the way to see it, that timing really matters and that this moment of prospective Fed pivot helps to helps to drive that narrative home potentially based on the data we've seen so far into 2024? Yeah, I think the Fed is time-sensitive. They know they can't get behind the curve too long

and trigger a recession. And that's really on their mind, especially given the vulnerability in the banks. But I think the other part of this is they are willing to take the risk that they ease too soon to avoid that recession. And if they do that, take on that risk. And if it happens and they reignite inflation, then they'll have to start over. So that's why they're pushing back this week. They don't want to get that much ahead

of the, they don't want the market to get that much ahead of them to where they can't keep control of their rates where they are until they're even more confident that inflation is coming down without a recession. So, Thomas, where does that even more confident come from? Just give me a scenario, maybe data wise. How long do you think the Fed waits for the lagged effects to do the rest of the job? I think if they see inflation, total inflation, or let's say total inflation below 2.5 or core below 3, excuse me, below 3, closer to 2.5, on a CPI basis, I think they'll feel confident that they've got enough lag effect going on so that they can begin to moderate their interest rate stand, that is from its current level down the 50 to 100 basis points over the next six months,

they would do that. If they see in the December numbers when they come out in January or in the February numbers when they come out, the inflation coming down, they'll begin to cut. And whether it's three or six, who knows, but they will certainly begin to cut at that point. All right. We'll see if hopes stay higher for longer,

just like rates. Thomas Honig, thank you. You're welcome. A big deal for Big Blue being announced today, just as another tech tie-up falls apart. We got those details next. And take a look at SunPower, losing a third of its value today after the solar company issued a going concern warning in a 10-Q filing.

Shares finished down 31%. We'll be right back. Welcome back. Two pieces of news today on the tech deal front. First, IBM announcing plans to buy data and app integration platforms, stream sets, and web methods for $2.3 billion in cash. The two platforms are owned by Software AG, which is majority owned by Silverlake. I have a statement from IBM CEO Arvind Krishna on the rationale. He says, almost every organization is in the process of deeply embedding AI into their business. While there are different ways of thinking

about how AI can drive value to an enterprise, one constant is that success or failure of any AI transformation largely hinges on the management and integration of data and applications. Our intent to acquire stream sets and web methods from Sable is a part of solving this equation for clients and will lead to the development of one of the most comprehensive data and application integration platforms available. IBM fractionally higher today, I believe. Also today, design software giant Adobe up almost 3%, 2.5% as it walks away from its planned $20 billion acquisition of Figma

and pays the billion-dollar breakup fee. Adobe had raised eyebrows when it announced the deal in September of last year. The deal faced some steep regulatory hurdles in the U.S. and Europe, Morgan, in large part because this was not a vertical merger that was proposed. Yeah, I mean, this was, what, 15 months in the making to get to this point and this outcome. And certainly Dylan Fields, the co-founder and CEO of Figma, posting a blog about all of this as well, too, saying that Figma's founding vision was to eliminate the gap between imagination and reality, the focus on the shift to the digital economy and huge advances in AI.

That's what they're going to focus on moving forward. Exactly what you'd expect to hear. I wonder, though, I do wonder if this would put, and this is a question for you, whether this is going to put other tech players sitting on cash piles into the market now to consider Figma. No. Figma's too big for anybody but the likes of Adobe to consider. I mean, there was a while when Microsoft, I think, was eyeing this kind of thing, getting in and competing with Adobe.

Some even wondered if they'd acquire Adobe, but it's a much bigger bite now than it was then. I think Figma can afford to pursue more of an IPO-type path. The window, perhaps, open again for that sort of thing. The information had a story that said that Figma continued to grow at about 40%, even during this period.

So that's usually the concern you have as a startup during acquisition process. Does it potentially slow you down? But it seems like they just scored the equivalent of a billion-dollar investment without having to give up any equity with this breakup fee. So nice for them. The deal environment, though, is really interesting. Illumina also saying it's going to divest Grail. I mean, when you talk about the regulatory environment for some of the M&A right now, it's certainly far from certain, even as we head into 2024 amid all the expectations that we see more of it. We'll see how long it lasts.

All right. Well, FedEx shares are up more than 60 percent this year, trading at a fresh multi-year high today. Up next, we'll discuss whether the company can keep delivering for investors when it reports earnings tomorrow. In this hour, on the show, after the bell. Let's get you a quick bit of news from Enphase Energy. That solar company says it is cutting about 10% of its global workforce, part of a restructuring plan to increase efficiencies, reduce operating costs, and better align with current market conditions. Enphase has been on a tear this month, up around 23 percent.

Fed speak and FedEx earnings. Those are taking center stage tomorrow. First, investors will digest the November housing starts and building permit reports. Wall Street will be looking for interest rate clues when Atlanta Fed President Rafael Bostic speaks during the afternoon. And then after the bell, we will break down FedEx's earnings. That stock has been red hot. It's rallied more than 60 percent this year. Cost cuts, holiday season, geopolitics, John. All right. That does it for Overtime.