Closing Bell - Closing Bell Overtime: Minerd’s Big Market Warning 9/8/22

Episode Date: September 8, 2022

Star investor Scott Minerd says markets are in for a 20% drop by mid-October. He makes his case, exclusively, in Overtime. Plus, Rich Bernstein explains why he sees a new growth sector developing. And, a late-day trade alert from Capital Wealth’s Kevin Simpson. He reveals why he is now getting back in on a big cap tech stock.

All right, sir. Thank you very much and welcome everybody to Overtime. I am Scott Wapner. You just heard the bells. We are just getting started here post night at the New York Stock Exchange. And we want to get right to our talk of the tape. That dire warning moments ago about stocks from star investor Scott Minard, the chief investment officer of Guggenheim Partners, tweeting, as we said just a few minutes ago. Here it is. Quote, Since 1960, P.E.'s have trended lower when inflation is higher, with year-over-year core PCE now at 4.6%, and S&P 500 trading at 19 times. We should see stocks fall another 20% by mid-October, if historical seasonals mean anything. We welcome in Mr. Minard right now. He joins us in a CNBC exclusive interview. It's great to talk to you again. A rather ominous

warning. Why now? Well, Scott, look, first off, when you're looking at history, and that's one of the things I try to spend a lot of time doing, it really is stark to see the price earnings ratio where it is. And why right now? Well, this is seasonally the worst time of the year. And August, September, October are the worst performing times for the stock market. And, you know, given the recent strength over the last few days, it just appears that people are ignoring the macro backdrop, monetary policy backdrop, which would basically indicate that the bear market is intact. And given where seasonals are and how far out of line we are historically with where the P.E. is,

we should see, I think, a really sharp adjustment in prices very fast. You're basically saying there's no justification for why stocks are trading at what you think is an elevated valuation, whether it's to where they should be now or relative to history, because you don't believe that earnings are going to be able to be sustained at these levels. Exactly. And the other thing, too, Scott, you know, it's interesting. The P.E. that I'm looking at in the tweet is the trailing PE. And so we're looking at the comparable data for the market with a trailing PE.

So the argument could be, hey, we're going to see earnings pick up, and that'll help the price-earnings ratio. But, you know, given the backdrop we're in, which we may very well already be in a recession, I don't see earnings picking up dramatically. And actually, I see some downward pressure on earnings coming out of energy and other sectors where we've had price declines. So, you know, the four most dangerous words in investing is this time it's different. And this is just so stark from history. And when I was on the show with you back in April, we were talking about recession. And I said one of the most important indicators of recession would be if the three-month bill began to trade higher than the 10-year note. And as we sit here today, the three-month bill is still slightly below

where the 10-year note is. But if the Fed delivers on 75 basis points, we're going to have a pretty sharp repricing in the front end. And we're going to start discounting a complete inversion in the yield curve. What do you say to those who suggest, to those who say like you are, that we may already be in a recession or we are, that we just simply can't be? The job market is too strong right now. And frankly, some of the economic metrics that we've had of late don't show recession either. So how do you respond to that? Well, I think there are two factors here that we have to take in consideration. One is productivity. Productivity has just been abysmal. And so we are getting more people back to work,

but we're actually seeing a decline in the output per worker. And so that's obviously a very important component of corporate profits. The other thing is that the employment indicator is a laggard, and that is that we tend to see unemployment rise as the recession just gets started. So we're after the recession has started. So I think at this point, a lot of the things people are pointing to are what I'll say nominally positive. You look at some things like some of the components of consumption, other things like this, wage growth. But at the same time, inflation is running so high that in real terms, these are actually negative numbers.

And that's how we measure GDP in real terms. 75 basis points is the number that you threw out moments ago. Is that your base case now for a couple of weeks from now? You think they're going to do that? I think so, Scott. I think that the message is being telegraphed very clearly that they want to front load this and show the world that they're serious about inflation. And given where the market's pricing for the next rate hike, we're very close to it anyway. So I think the Fed will want to take advantage of that and, you know, see if they can get ahead of the curve and the tightening. You believe the Fed? And I ask you that because there are a number of people who don't.

And there are also those who say that the Fed is not going to do what they suggest they are. And for that matter, they might not have to because they look at inflation metrics and they say it's starting to roll over and it's rolling over in some key areas, although it is sticky, admittedly, in others. So maybe they're not going to have to do what they originally said they would or what investors broadly think they will. Right. Well, I mean, I'll come at that a couple of angles. First off, I think we're already in restrictive territory. I think the neutral rate is somewhere in the neighborhood of 2 percent, give or take. And so we're just moving into a more restrictive mode. The other side of the coin, however, is that you get people like Muhammad Al-Aryan who will tell you that the neutral rate is higher, that if the Fed stops because we get a few months here where we have month-over-month increases in prices basically flat to negative,

that that might risk their credibility. And so I think there is a thought or a fear at the Fed that if they abruptly end or pause, that they're going to run the risk of blowing their credibility as an inflation fighter. So I'm not ruling out a pause. I actually made a comment about that about a month ago. I think, you know, that the Fed is trying to leave the door open for what I call a soft pivot. But given the latest rhetoric, I think they're trying to send a message loud and clear, don't expect us to do it right now or anytime soon. I'm glad you say that because you do have the Fed chair himself today try and pass the message of how resolute he and his colleagues are. I can assure you that my colleagues, he said, and I

are strongly committed to this project and we will keep at it until the job is done. And Scott, he went further the longer that inflation remains well above target the greater the concern that the public will start to just naturally incorporate higher inflation into its economic decision-making our job is to make sure that doesn't happen the question is can they do that well Scott I think the the tweet kind of ties into all of this today, because if we do get the kind of decline that I would expect going into October, then that is going to raise concerns about markets instability,

and that would be the kind of thing that would, I think, cause them to pause. Otherwise, you know, there'll be concern that the financial system may be becoming destabilized. And so they could justify a pause then. And then, of course, with equity prices down 20 percent, that could be a real blow to confidence. And it could deepen the concerns I have about recession. So, you know, I think they are. I think the chairman is his rhetoric is overdoing it a bit. You know, he was too soft on inflation initially. I think he's probably moving in the direction of being too hard on it. You know, it's funny that we keep talking about all these causes of inflation, and anybody who's studied inflation knows that it's all related to the money supply. The Fed is really, really restricting the money supply very hard.

And, you know, you do start to see signs that with M2 contracting, with QT going on, that perhaps the pressure of monetary policy on the economy is a lot more robust than is being expressed solely in the overnight rate. You sound obviously, you know, so negative, but you do at the same time reintroduce the concept of a Fed put, that a stock market decline, the likes of which you say could happen, could bring the Fed back in when many still think that that is dead. I mean, maybe if you get a seize up in credit, it would be the credit markets that would bring the Fed back to the table. But certainly a stock market decline, I they need they need conditions

to tighten you think that would caused too much of a dislocation that would bring them back yeah i think so and let me tell you that the u u bring up an interesting point about credit i think if we get a an abrupt decline in the stock market and then that will cause credit markets to seize up. And the truth is, when you look at where a lot of high-yield debt is not trading, that is, you know, it's been put away, and there are a lot of triple-C companies out there,

and, you know, I pull up my screen, and I see it indicated at 10% for like one year or whatever, if that bond comes due in this kind of an environment, they're not going to be paying 10% for new money. They're going to be paying 13% or 15% or maybe there is no price at all. And so if we did get that abrupt decline in equities that I'm anticipating, then I think we would probably see the high-yield market seize up and a lot of concern about people being able to refinance their debt. How are you positioning as a result of how you feel and this view that you're expressing to our viewers who would

admittedly are probably a little unnerved by what they're hearing from you? Well, I think that, look, you know, I'm not prescient. I don't have a perfect handle on the future. You know, in terms of we look at things in terms of our beta. In terms of our credit beta, we're running about 70% of the max, which means we're above average because the bonds are cheap relative to Treasury, corporate debt, even high yield. But, you know, we have dry powder to increase that exposure if what happens happens here. We have a fairly sizable position in puts on the S&P 500 and other indices as a hedge against the events that I'm talking about.

And in terms of treasuries and interest rate exposure, we're pretty much max long. I think we're in the process of putting a top in in long-term rates. And we've been running with an above-average position on a duration basis now for the last few months. And it's been a little painful over the last four weeks, but has actually been a pretty good position to be in. And I think that if you're thinking of the backdrop I'm talking about, where we would have a stark decline in risk assets, that would be extremely good for treasuries, and we would see long-term rates come down. Do you get more bullish on equities if, in fact, they do go down 20%? We'll call it, you know, 3,000 or so on the S&p or thereabouts you know i would you know somewhere in that zone i'm thinking

somewhere between three thousand and let's broadly say three thousand and thirty four hundred we'll we'll figure out the bottom when we get there but uh you know i would say uh at that point i'm a buyer uh because if you believe everything I just said, if you believe that the Fed will pause it's going to be supportive for risk assets and the seasonals turn around

seasonals turn positive in November through March actually through June so the old adage of buy in May, sell in May, go, you know, or sell in May, go away, come again at Labor Day. Statistically, it's actually the first game of the World Series, and I would expect the Dodgers will sweep the World Series this year. You may have a vested interest in making that call. I totally understand. But are you also

suggesting that while the next, call it four to five or so weeks, could be decidedly painful, that if the market presents itself to become more advantageous, that we could actually have a decent finish to the year at the same time? I would expect so. I mean, I think that if my scenario plays out, I think it'll be a buying opportunity, and especially for traders. I think it'll be a great time in November and December and going into the first quarter. The real question, Scott, is will that be the ultimate bottom? And not that I think this is anything like 2008. I don't think it's like the financial crisis. But for people like me, who were big buyers at the lows of October of 2008 after Lehman failed, we didn't really get the ultimate low until March of 2009. And that was a painful period for me. But it was still a great, for

long-term investors, it was still a great time to get in. We'll make that the last word. And I so much appreciate you calling in and having this conversation. I really enjoyed it. However dire it sounds, I certainly like to get the view of Scott Minard of Guggenheim. Let's broaden the conversation now. Bring in CNBC contributors Joe Terranova of Virtus Investment Partners and Stephanie Link of Hightower Advisors. It's great having both of you here. Joe, you're to my left or right here at Post 9. Your immediate reaction to a fairly ominous call, to say the least, from Scott Minard just now. That's exactly why the market has been rallying the last couple of days, because there is indicative of an earnings outlook that should see earnings

contract and see a lower valuation in particular for hyper growth type of equities. But collectively, with all that being said, if I'm thinking that a very strong period is coming between November and March, and I ultimately have to incur 20% down in the market ahead of that, okay, individual equity holdings, I'm not so sure I'm going to be selling them here. I'm going to go to the derivative market, and it sounds to me like that's what Scott was doing. I think he said he's got some S&P puts. I'm going to go to the derivative. He said sizable. Okay. I'm going to go to the S&P derivative market.

I'm going to go to the derivative market overall, and I'm going to formulate a position to take advantage of a near-term outlook that I have, believing that prices can fall precipitously. But for my core portfolio equity holdings, I'm not going to move on those. I'm not going to sell those. I'm going to maintain my long exposure. So, Steph, Joe brings up a good point that I feel like our viewers are going to be thinking about as they just listened to the conversation with Minard and wondering what they're supposed to do. Conventional wisdom would say you're not supposed to sit here and call your broker and say, sell everything, because when are you going to know when to get back in? That's conventional

wisdom. And I think most of our guests on this network, whatever program they're coming on, would suggest that. However, if you do think that we're going down 20 percent or so in the next four to five weeks, what would you advise people to do? Well, I think it's really hard, Scott, to time it. And I think Scott was saying it's going to be a great time to trade stocks if you're a trader. But if you are a long-term investor, you do want to have a diversified portfolio. You want to upgrade your portfolio in terms of quality names, free cash flow companies. We've been talking about it all year long. I've been doing it all year long.

And so I think you stay the course and you stay patient and keep your head down and just try to focus on the fundamentals. We've talked about this year being a very choppy market, a trading range market. We're up 9.3 percent from the June lows. And nothing really has changed from the June lows. And today, the Fed just reiterated what they've been saying. All of the governors and Powell himself have been saying that they have to be more hawkish because inflation is still very persistent. And as a result, they're going to slow down the economy. And so none of that was a surprise today. I don't know why we rallied today.

Maybe we got oversold. But I think in these kinds of environments, you have to just stay the course, be committed. Equities are a good long-term investment, especially if you have companies that are growing their dividends. That's why I mentioned free cash flow. So I can't day trade and I can't time the market. All I can say is I'm looking at my companies where at least I have some confidence in earnings. Maybe they're going to come down a little bit. They probably will. But I still like the long-term themes at companies, long-term market share positioning and good company management teams. miner does a quandary of sorts for somebody like you, Steph, who describes, if you will, for our viewers, what essentially is a sit on your hands market, right? Don't do anything dramatic.

But then I look at the moves that you've been making of late, and it has been dollar cost averaging in, taking advantage of some of the dislocations in the stocks that you've liked. He raises the question that I ask you next of simply whether it's too early to do that. If you're the average Joe or Jane watching. Probably because September is historically a choppy month for sure. And the early part of October, starting in the second half of October into the end of the year, it's seasonally a strong period. So if you want to be cute, yeah, you can wait. But at the same time, I mean, if you have some cash on the sidelines, we talked about this on Halftime. I have a little bit more

cash. I'm still very invested in stocks, but I have a little bit more cash. I'm trying to stay patient. And we have a whole bunch, a couple of weeks coming up of conference season. This is the time to start to do the homework and pick ideas. But sure, I mean, I've been kind of taking some profits along the way. We talked about American Express. I sold that. But I bought more Berkshire. I bought more Bank of America. I sold Wynn. And I bought Dollar General. So, like, I'm looking for opportunities to upgrade, as I mentioned, and to try to find companies that are not really high beta, right? I mean, just companies that, you know, they don't move up 5% and 10 percent in a day kind of thing. They have strong earnings, good balance sheets, et cetera. You know, Joe, one of the other provocative things that Minard

had to say was the idea of reintroducing the Fed put. Right. Those are my words, not his. But he made the point that if you get a dislocation, the likes of which he suggests you might, of some 20 percent, you're going to get a credit event along with that. And that could be in and of itself enough to reintroduce the idea that the Fed backs off. I think he used the terminology a soft pivot. But you get the point of what he is suggesting. And it's going to feel rather ugly at that moment that the market does go down to that degree. Sure. I mean, that's a nightmare scenario. I understand that. But the evidence as we have it right now, Scott, is that we are seeing the credit markets functioning well. The leveraged loan market is functioning well. We've got a Citrix leveraged loan

that went with overwhelming demand. $4 billion has been actually taken down by the street. So there's strong demand there. The Federal Reserve is going to. I sat with you on the night of Jackson Hole that Friday. I said the Federal Reserve is going to. I said this. I sat with you on the night of Jackson Hole that Friday. I said the Federal Reserve is going to go 75 basis points in September. That's what they have to do. They're going to continue to do that.

I think markets understand that. They understand that that's ultimately the position. Well, they understand that 75 could be coming in a couple of weeks. What I don't think they understand is that if inflation remains elevated or if the Fed truly remains as resolute as they sound, that it may not be 75 and then 25 and then 25. It could be 75. It could be more. They could keep rates elevated for a longer period of time than people think. That changes the whole ballgame of what it means for the economy, earnings and ultimately stocks. So for me, the perspective that I have

looking at markets is my theory is that the Federal Reserve will will stop raising rates either in December or in Q1 of 2023. The risk to my theory is that you are correct. The Federal Reserve continues to raise rates. They cannot properly affect bringing down inflation. And therefore, these interest rate hikes are going to be with us for a large majority of 2023. That's problematic for risk assets. That's the scenario where my thesis, I look at it, I say I'm wrong. We'll see what happens. I appreciate you being here to break it down. Joe Terranova, Stephanie Link, I'll see both of you soon. I know. Let's get to our Twitter question of overtime. Following Scott Minard's call at the top of the hour.

Do you see a 20 percent sell off in the S&P by mid-October? You can head to at CNBC overtime on Twitter. Cast your vote. We'll share those results later on in the show. DocuSign earnings. They are out. Steve Kovac has those numbers for us. Hi, Steve. Hey there, Scott. Yeah, shares surging on a huge beat here from DocuSign earnings, they are out. Steve Kovach has those numbers for us. Hi, Steve. Hey there, Scott. Yeah, shares surging on a huge beat here from DocuSign, up 16% now. Let's go over the numbers. Earnings per share coming in at $0.44 adjusted. That's versus the $0.42 adjusted Street was looking for. On the revenue side, also a beat, $622 million versus the $602 million Street looking for. And guidance also coming in better than expected, up to $628 million in revenue for the Q3. That's versus $625 million expected.

I would also note another software company, Zscaler, is surging as well. Oh, now we're up 17%, Scott. COVID beneficiary. Indeed. Proving perhaps that it can do well on the backside of the pandemic. Steve Kovac, thank you for that from out in San Francisco for us. We're just getting started now in overtime. Up next, recession worries front and center. Our next guest is remaining solidly bullish despite all the noise, despite that call from Scott Minard. We'll ask him about it coming up next and later going for growth. Rich Bernstein says there's one sector that's evolved into an even growthier space than technology. He joins us to make that case.

We're live from the New York Stock Exchange. We're right back in OT. All right, welcome back to Overtime. We gave you the bear case at the top of the show with Scott Minard of Guggenheim. Let's now get the bull case with Credit Suisse Chief U.S. Equity Strategist Jonathan Golub, who came here at Post 9. So I hope you heard the interview with Minard. Down 20 percent by mid-October. Your rebuttal, if any, is?

Well, there's a whole bunch of things I thought that I would take the other side of. Let's hear it. So first, everybody's talking about recession as if we know what that means. And so we went back just recently and we looked at the last 50 years of recessions to see what are the patterns. And it really comes down to one simple thing, is that recessions are a disintegration in the labor market. The unemployment rate on average goes up by about 3% in about a year. Roughly what that means is 4 million Americans lose their job around the recession with a low end on that range of 2 and a high end of 6. So recessions are really ugly things. What you see typically before recession is that the weekly jobless claims, which just came

out today, better than expected, they start to rise. Companies start to fire workers. That's what normally happens. We've seen that already. But when things are healthy, those workers get a new job and the unemployment rate doesn't rise. And that's exactly what we're seeing right now, which is we're seeing terminations. And you see this, you guys report on this. But there's so many excess jobs in the marketplace that our work shows that it takes probably from here 18 to 24 months before we work through all of those open job recs. So we get to a point where unemployment rates. So there is a recession in our future. The question is how far if it's six months from now, you want to bail on stocks. And Scott's right. If it's 18 months, then not the case.

So one of your headlines is historically earnings hold up best when inflation is elevated. He says off the top of his tweet, since 1960, PEs have trended lower when inflation is higher. I mean, both of you can't be right. Why do you think that earnings are going to hold up in the kind of environment that we're in if the Fed is as resolute as it says it's going to be and is now. So let's unpack that. First, if you look at earnings, what most people quote and look at is the last couple of times, the last couple of recessions, we've been in a low inflation environment. And low inflation environments, earnings peak about 15 months beforehand.

And Scott says something really interesting, which is it's all about 15 months. Beforehand so and Scott's it's got to something really interesting which is it's all about real earnings so. Earnings are probably not going up in real terms but in novel terms they are. We're likely to see earnings continue to trend perfectly fine. Until that recession actually begins so. If you're looking at the last couple of of recessions. You you're really looking at environment that doesn't look like this.

This looks more like we had in the 70s and 80s, and the earnings held up much better. Now, with respect to the Fed, there's a whole different set of dynamics. I can jump on. Do it real quick. Yeah. So the- You can't leave me hanging like that. All right. So the Fed needs us to fear them, to fear that, you know, to not spend money because we fear that we're going into a recession where companies shouldn't spend and the like. But the inflation expectations, the tips market, the break-evens, the economist surveys, they're all telling you that what's actually baked into the market is that inflation is going to collapse over the next year or go. Now, you and I could say that's crazy. Wages are high and rents are a problem.

But if you look at the tips market, it's saying that inflation a year from now will be under 2 percent. The Fed is not managing this month's inflation number. They're managing an inflation number that's 12 to 18 months out. And if the tips market is saying that we're under 2 percent, they really don't have an incentive to crush us and push us unnecessarily towards that recession. We'll see. We'll follow up with you as well. I appreciate it very much.

That's Jonathan Golub joining us right here post-9 at the New York Stock Exchange. It's time for a CNBC News Update with Shepard Smith. Hi, Shep. Hi, Scott. From the news on CNBC, here's what's happening. As the world mourns the death of Queen Elizabeth II and thousands of Londoners pay their respects at Buckingham Palace, Prince Charles is now king. According to the British line of succession, he immediately ascended to the throne when Queen

Elizabeth died. Royal officials say he will be known as King Charles III. As for what happens over the next few days, the palace has long had a plan in place known as Operation London Bridge. No official details yet, but it's expected the Queen will be given a full state funeral, likely around 10 days from now. Her body also expected to lie in state to allow the British public a chance to say goodbye to the only monarch most have ever known. Tonight, complete coverage of the Queen's death. Wilfred Frost joins us from London.

We'll explain the monarchy's line of succession and the Queen's impact on generations of world leaders. That plus the rest of the day's big news headlines, and there are a lot of them on the news. 7 Eastern, CNBC. Scott, back to you. All right, we'll join you then. Shep, thank you. That's Shepard Smith. Overtime, be right back. Given the recent strength over the last few days, it just appears that people are ignoring the macro backdrop, monetary policy backdrop, which would basically indicate that the bear market is intact. and how far out of line we are historically with where the PE is, we should see, I think, a really sharp adjustment in prices very fast. All right, that ominous warning on stocks from Guggenheim's Scott Miner just moments ago. Let's bring in now Rich Bernstein.

He's the CEO and CIO of Rich Bernstein Advisors. So you just heard Minered. As I said, you're the CIO. I mean, you've got to make these key investment decisions at your shop. What do you do with it? Do you believe it or not? Well, I wish I had the foresight, the short term foresight that Scott has to make a prediction for four to six weeks. But I will say that I think that people are grossly underestimating what the Fed is going to have to do to fight inflation. It seems to me it's incredibly ironic. The

investors are even considering a Fed pivot. When the real Fed funds rate remains about as most negative as it has historically been. So the Fed isn't isn't even really hardly fighting inflation yet we don't have a positive real Fed funds rate. It's hard to argue that we should turn wildly bullish anytime soon. So I don't know if I'm in Scott's camp, but I think the tone of his discussion is probably the correct one. Well, what camp are you in then? I mean, if you're not as perhaps dire as he suggests, 20 percent lower and also saying, by the way, that he has a, quote,

sizable puts position in the S&P right now. What's your camp? So we have, Scott, we have we have probably the biggest cash allocation we've had in years. We are underweight equities in our multi-asset portfolios. So as I said, I think I'm on the same side as Scott on this. I'm just a little bit poking fun at his ability to forecast four to six weeks. No, I hear you and I get that. That said, are there areas of the market that you are are still in favor of, even if you have such a tremendously large cash position relative to your own history? Yeah. So I think there's, look, when we have a situation where the Fed is tightening and profits are decelerating, which is really two themes that you've been talking about in the past hour or so, that what works in that environment with the Fed tightening and

profits decelerating? A very bad environment, by the way. You don't want that combination of events, but that's what we're kind of faced with. What works? Consumer staples, health care, utilities. Traditional defensive stuff works in that environment. That's hardly people's favorites right now, right? People are really still focused on the growth themes, and growth doesn't work in the environment that we're outlining here. Well, we're going to see if it does or if it doesn't moving forward. I'm tight on time and I appreciate you understanding that. Rich, we'll have you back. Thank you. That's Rich Bernstein. Rich Bernstein advisors up next cashing in on the energy pullback. One halftime committee member is buying the dip in oil.

Debate that move in today's halftime overtime next. In today's halftime overtime, buying the energy pulled back with NatGas having its worst week since late July and crude oil touching its lowest level since January. Josh Brown is hitting the buy button on two new names, NextEra and Southwestern Gas. Let's listen. Joe Terranova is back with us. You can listen to him instead. You didn't listen to it earlier. Of course I did. I watched it. Half the time I heard Josh.

What about this idea? I mean, you're a big proponent of energy here. I am. Well, first of all, let's understand something. So far, year to date, energy equities are up 41 percent, while the spot price of oil is only up 10 percent. Since July 1st, the spot price of oil is down 21 percent. Energy equities are up 10 percent. So the energy equity trade is the right trade because you have companies that focus right now on shareholder return. They're not incentivized to increase production. But you really think that if oil continues to go lower and that gas continues to go lower, that the equities are going to still work in that environment? I believe that gas continues to go lower, that the equities are going to still work in that environment? I believe that they will. And I believe that they are

critical to have in your portfolio. We just heard Rich Bernstein talk about the defensive nature of markets include energy in that because potentially if something were to go wrong, you want to have that energy sector allocation within your portfolio. What's your favorite? What's your favorite name? I'm sorry. We're tight. I got to get that out of your favorite name right now. Favorite name right now would be One Oak. Why? Natural gas play. Strong shareholder return. OK, good stuff. And thank you for understanding as well. That's Joe Terranova. Up next, we're tracking all the biggest movers in overtime. Steve Kovac is all over that action for us back out in San Francisco. Steve. Hey there, Scott. Yeah. Coming up, shares in both halves of a former combined company taking in overtime,

plus a stock buyback announcement helping boost a telecom company. That's next when we're back. We're tracking the biggest movers in the OT. Steve Kovach here with that once again, Steve. Hey, yes. Check out shares of cloud security provider Zscaler, up better than 11% right now. That's after beating estimates on both lines, including revenue of $318 million versus $305 million expected. Growth was up 61% year over year and bill' growth up 57% year-over-year. However, the stock is down 52% so far year-to-date. Turning to two stocks that are not faring as well in the overtime, both Smith & Wesson and American Outdoor Brands falling sharply. Remember, American Outdoor Brands is a sports products manufacturer that was spun out from Smith & Wesson in 2020. Both companies

reporting earnings that disappointed investors, but Smith and Wesson management saying the inventory correction should largely be behind the company. And finally, let's get to T-Mobile. That stock moving higher in overtime as the board authorizes a buyback program for up to $14 billion of T-Mobile common stock. That purchasing expected to come from cash on hand and at least one debt issuance. Those are your movers in overtime. And back to you, Scott. All right, Steve Kovach, thank you very much. Up next, a late day trade alert. Capital wealth planning's Kevin Simpson is getting back into a big tech name. He's going to reveal it right after this. And do not miss the CNBC special report, Blue Chip Playbook, hosted by our own

Sarah Eisen, 6 p.m. Eastern Time, OT, right back. Apple giving up gains today after yesterday's broader tech rally. Shares of that stock falling about. There you see just about 1% on the day. My next guest says he's buying back into that stock after calling it away in late July. Kevin Simpson, founder and CIO of Capital Wealth Planning, joining me now. It's good to see you. I appreciate you alerting us to this move. Why today? Well, we were talking just last Tuesday, Scott, saying if the trend could pull back under 155 into 145 range, that it was a good buy, good opportunity. We've exercised a little patience,

and it sure hasn't been easy. You know, you and I've had fun talking about it for the past few months and we were writing covered calls like crazy. And eventually it got called in late July, but it got called at 157 and a half. Of course, as luck would have it, Murphy's Law, whoever you want to call it, kept going higher and higher and higher right after that. I think it peaked up over 170. But with a little patience and a little dry powder, we were able to get back in lower than what we had it called away for. And the really neat thing is we've generated $11 in premiums since May 1st as well. So we like the name. I think there's still weakness in this market. We're heading into September and October and you and I know what happens occasionally in those months.

But reentering at this point to me seemed like a prudent call. And I'm excited to be back in the stock. You know, it was interesting. We had our Twitter poll the other day asking our viewers 170 or 140. What's the next stop for the stocks? 141 overwhelmingly. I'm wondering what you what you make of that kind of pessimism around a name where there rarely is that. Yeah, I texted you. I voted a thousand times in that poll yesterday. The PE is at 25. So it's got recurring revenue. It's a great, I mean, it's a great name. It's a great revenue stream. But if we're concerned about valuations, if we're thinking about where S&P earnings can be next year, if we're thinking about where Apple earnings can be next year, it was great news yesterday that they didn't increase prices on the products on one hand as

a consumer, but as a shareholder, you know, you're looking for margin growth. And that's something that maybe we're going to be in a little bit of a stalled pattern for a while. Could it get down to 135? Absolutely. We're going to continue to buy the stock. We're going to accumulate a position. We're going to write covered calls on it. And're going to be a long-term investor in a great name yeah what about this call by minored at the top of our program today i know you were busy and you may not have heard about it uh calling for a 20 decline in stocks from here by mid-october the gist of it is stocks are just too expensive with inflation this high well what if we cut that in half and we said there's a 10 downturn i just think that's a little bit too overly pessimistic pessimistic looking at the

numbers looking at where earnings are going to come in this year taking any multiple you want it seems like maybe he's taking it down a little bit too far but i think we're talking about a range bound market that's forward-, thinking about the prospect and probability of a recession. Certainly, we know there's going to be an aggressive Fed and the quantitative tightening is probably something he's taking into great consideration and perhaps thinking that maybe markets are discounting too much. So I don't disagree with a little bit of a scary call here over the short term. I think he might be a little bit more on the extreme side than I would be. And again,

being a glass half full guy, Scott, next year we could be coming out of a recession. So if we're range bound for the next six, 12 months, 18 months from here, we've got some pretty sound prospects. And if he's right and it goes down 20, we'll back the truck up and buy whatever we can. Sounded like he would as well. I appreciate it very much. That's Kevin Simpson joining us up next. Santoli's last word. We're back in overtime to the results now of our Twitter question of the day. We asked you, do you, like Scott Minard, see a 20 percent sell off in stocks by mid-October? 61 percent of you said no.

Let's bring in Mike Santoli for his last word. They either don't believe it or they don't want to believe it. Well, probably both. I tell you, the news to me is that more than a third of the people are willing to say this market is so mispriced that we're going down 20 percent in six weeks. It rarely happens. Calling a crash usually requires some other conditions to fall into place, not just necessarily a valuation reset. I have respect for the idea that there are a lot of tricky things that we're contending with here. Obviously, the Fed is tightening into some kind of a slowdown at minimum. You clearly have seasonal effects and maybe earnings seem like they have a lot of air under them. We'll see. But, you know,

if you go back four months, this market's been in a four month trading range since early May, May 10th of this year, the S&P closed at 4000. You had a little less than 10 percent downside max to there, yet a little bit less than 10 percent upside from there. That's where we've been. And we closed at 4000 today. Valuation is about the same as it was then. Market seems to be behaving as if 2022, the calendar year, could be the year that we load in a lot of the tough stuff that we had to get through, meaning speculative parts of the markets get purged, valuations to some degree compress and the Fed finishes or at least gets most of the way to where it has to go. Ultimately, his point is that there's no justification for valuations to be where they are relative to where inflation is, seasonality and what lies ahead from from the Fed's standpoint. The problem is, is you cannot answer what the correct valuation is because you have no idea where earnings are going to be in the next 12 months. You never can, and that's exactly right.

So you don't know what earnings or what path they're going to take. You also don't know what inflation number you're supposed to plug into a forward valuation. We're talking about future returns here. So if you think inflation is staying where it's been for the last year, absolutely. The market should be crushed, and valuation should not be anywhere near here. Clearly, the market-based inflation indicators are saying, no, the market should be crushed and valuation should not be anywhere near here. Clearly, the market based inflation indicators are saying, no, that's not the case. Either the hard way or the easy way we get inflation down is the current bet that's in aggregate in the markets right now. The hard way is a recession. Probably earnings, you know, have a lot of room to go down in that scenario.

Or if not, if Jonathan Golub was saying because you have high nominal growth they can hold up better that's a different equation so I think it's I think there's another way of actually kind of squaring this which is you start with somewhat elevated valuations versus prior market lows that just means future returns are lower it doesn't mean it's a cataclysm and you get all the excess out in one burst it could just just mean it's choppier. It's not a steep angle of ascent once we do start going higher. Now, what do you make of the idea, which he also put forth of this cataclysmic event in the market, a crash, and that causes a credit event in its own right. And that brings the Fed to a much softer place, if you want to use that word.

It would absolutely happen. That kind of volatility concentrated in that shorter period of time, no doubt about it, credit would not be unscathed, and then you're back to the Fed coming to the risk. Going to get a lot of people talking for sure. I'll see you tomorrow. That's Mike Santoli with his last word. Fast Money begins now.