Closing Bell - Closing Bell Overtime: Palantir CEO & L3Harris CEO On New Partnership, Defending America and Its Allies; Compass CEO On Housing Market 10/24/24

Episode Date: October 24, 2024

Morgan sits down with Palantir CEO Alex Karp and L3Harris CEO Chris Kubasik to talk the strategic partnership announced between the two firms, advancing AI in the military and defending America and its allies around the world. Compass CEO Robert Reffkin on the surge in new home sales and mortgage rates. Plus, digging into Tesla’s best day in over a decade. 

Well, that bell marks the end of regulation. BMO ringing the closing bell at the New York Stock Exchange. BlackRock doing the honors at the Nasdaq. And Tesla providing a turbo boost to the S&P 500 and especially the Nasdaq today. But it was a more mixed picture beneath the surface with most S&P sectors finishing in the red and the Dow lower as well. That's the scorecard on Wall Street. But winners stay late. Welcome to Closing Bell Overtime.

I'm John Fort with Morgan Brennan. Well, coming up this hour, an exclusive interview with Palantir CEO Alex Karp and L3Harris CEO Chris Kubasik as the companies team up on a new partnership centered around defense tech and intelligence. And also ahead earnings from L3Harris along with Western Digital, Capital One, Decker's Outdoor, Dexcom and more. But first, let's get to our market panel. Ariel Investments, Vice Chairman Charlie Bobrinskoy, and BNY Investments Head of Investment Analysis, Jake Jolly. Guys, welcome. Jake, you think from here that there's a relatively low risk of entering a bear market, but it sounds like you also think stocks are in a real shift now from worrying about the Fed to focusing on earnings growth if they're going to go higher. We do. Yeah,

I think, you know, the next few weeks are going to be a bit tricky for obvious reasons. There's going to be a lot to digest for this market. But looking into, you know, as an investor looking into 2025, you know, we still see this as a very favorable backdrop, right? We have an economy that's proven to be much more resilient than we all expected, especially after the growth scare that we went through at the end of July, early August. But now we're seeing a Fed that's cutting into a resilient economy. And historically, that's just a very positive backdrop. So while we think the next couple of weeks and into the end of the year could be a little bit tricky, especially, you know, the event risk as well as

the labor market, I think is still, you know, a critical data point that hasn't been settled. When we look to 2025, we're much more positive because we think that, you know, the earnings follow through is likely to be pretty solid because we see growth remaining positive in 2025. Well, that's encouraging. Charlie, I was just looking at Jim Paulson's newsletter before the show. He points out how poorly large cap value stocks have performed in this two year bull market, second worst of any of the 13 bull markets since 1949. I know how much you love value stocks. Should I think that's going to change? Yeah, it's been a tough time for value on a relative basis. The absolute returns have

been fine. My fund is up something like 18% year to date. So we're making money, but clearly not anywhere near what large cap growth is making. And we do believe that a lot of that can get fixed if we get worries about a recession behind us. I mean, we have some names here at Ariel like ADT, the security company that had gone nowhere for years. They had a decent number today and the stock was up 18% plus. So there are value names where the expectations are pretty low. You get a decent result from a quarterly profit point of view and the stock can explode higher. You're not going to get that from some of the growth names that are priced

fully with expectations of very good growth going forward. Jake, the fact that the Fed is data dependent and so far the data has been pretty solid or at least Goldilocks. How likely now is it that you could see a Fed, if that continues, actually take a November cut off the table? And if so, how much does that matter to the stock market here? I think it would matter a lot. Um, but I don't think it's very likely. I think, you know, we've, we've certainly been hearing from the Fed speak a little bit more cautious, you know, they're trying to kind of talk down and make sure that the market is not getting used to these 50 basis point cuts that we started with. But I think when you look at a read of the data, there's more concern on the labor market side than on the inflation side.

Now, we have had two inflation prints that were hotter than expected. But when we look at those forecasts, I think the Fed is much more confident that that trajectory is still towards 2%, even if it's slow and maybe a little bit bumpy. Whereas the Fed has been very clear that they want to support the labor market. They don't want to see further weakness. And if they're committed to that, they need to continue with this trend of lowering rates, right? Because we've already seen that in terms of Fed cut expectations, we went from 10 into the end of next year, which I think was way too extreme. Now we're looking at, you know, five to six cuts until the end of next year. I think that's much more

reasonable and it's in line with the Fed expectations. So in that perspective, I think, you know, the rates market looks a lot more reasonable now. But Charlie, it does get to a key question for investors, and that is, yes, I realize yields took a little bit of a breather today, but you still have a 10-year Treasury yield at 4.2 percent. We've seen this run back up. And what is causing it? Is it a repricing of Fed policy or is it something else? It's the fact that the bonds tend to be where people go when they're worried. They are a flight to safety trade. When people were worried about a recession, they buy bonds and send yields lower. Now that people are feeling better about the economy, yields are going to go higher. There also, by the way, I think is a little bit of growing expectation of what inflation is going to be over the next 10 years. That number was

probably two and a quarter. Now I'd probably put it up closer to 275, given some of the things we're hearing from our presidential candidates. So 420 is a hair above the long-term average, but not much. It's higher because people are not as afraid of the economy. I want to mention that Dexcom results are out, that medical companies' shares are taking a beating right now in overtime, initially down like 13 percent, it looks like to me. Let's see. We've got them ready, actually. Kate Rooney has those numbers. Kate. Hey, John. So we are still going through the numbers for the quarter. It was a beat on the top and bottom line, despite that stock drop revenue, $994 million versus 990 million that

was stronger than expected revenue did fall year over year down two percent or so down actually excuse me this is on a full year basis uh sequentially grew two percent and three percent on an organic basis on eps that was also beat a two cent beat here, that was also a beat, a two-cent beat here. Adjusted, that was 45 cents versus 43. Estimated gap operating income, that was 15.3 percent of revenue. That did fall about 580 basis points compared to the prior quarter. We're still looking through this for any sort of guidance, guys, but you can see stock down sharply here, more than 13 percent after hours. Back over to you. We've seen a lot of big moves in this name recently with earnings. Kate Rooney, thank you. L3 Harris earnings are out as well. And for that company, it's a beaten raise. The defense

contractor's earnings per share coming in at $3.34 adjusted. That's versus estimates of $3.26 per share. Revenue of $5.29 billion. That was up 8%. It was slightly better than expectations. The maker of military radios and rocket motors for missiles, reporting orders of $7.2 billion, a book-to-bill ratio of 1.4 times. L3 Harris raising the lower end of full-year guidance, both for EPS and revenue. Now, for revenue, $21.1 to $21.3 billion for adjusted earnings. It's now $12.95 to $13.15 per share. Also increasing 2024 guidance for adjusted segment operating ratio to about 15.5%. You can see shares are up fractionally right now. But in just a few moments, we will be joined exclusively by L3Harris CEO Chris Kubasik to break down those results, as well as Palantir CEO and

co-founder Alex Karp. The two companies have also announced a new partnership, so we have a lot to get to. Jake, I'm going to come back to you on this one. We've been talking a lot about rotation into different parts of the market. And what do you find compelling, especially as we do start to get through this earnings season? And it really does seem to be a little bit of a case-by-case scenario for stocks across industries. Yeah, I mean, this might be a little bit off consensus, but I think, you know, healthcare is actually a sector that has, you know, been a laggard. It's been beaten up over the last couple of years. But I think, you know, valuations look very attractive from an entry point right now. When you think about some of the event risks that are coming up, I think that, you know, valuations look very attractive from an entry point right now. When you think about some of the event risks that are coming up, I think that, you know,

health care is probably a sector that's a bit insulated from some of the volatility that we could see in the coming weeks. And when we look out sort of longer term, I think, you know, a lot of the big trends are still in the favor of health care. So, you know, that's the sector that I think, you know, from a rotation standpoint, it's been out of favor for quite some time. But it's a sector that I think is worth taking a second look at now. All right. Jake, Charlie, thanks for starting off the show with us. And now we got Capital One

earnings out that stock heading higher by about three and a half percent. Hugh Sun has the numbers. Hugh. Hey, John. Yeah. so beats across the board for Cap One. We have EPS of $4.51 a share versus the $3.76 estimate. Revenue coming in at $10.01 billion versus the $9.86 billion estimate. And perhaps the cause for their beat, loan loss provisions of $2.48 billion compared to the $2.83 billion estimate. Obviously, the shares are still up just about 3% so far. We'll keep an eye on the stock, Joan. Back to you.

All right, I'll take it, Hugh. Thank you. We've got gold prices climbing today, heading back toward records, while silver trades around a 12-year high. Mike Santoli is digging through the charts for some nuggets of wisdom. Mike. Yes, Morgan. Well, obviously, it's been quite a run and it's

gotten a little more exuberant recently, both gold and silver. We can talk about the likely reasons, the surmised reasons. We have obviously big deficits domestically. There's a lot of capital flight out of unstable parts of the world. There's maybe even a catch up with Bitcoin, which has outperformed on most time frames. But you see the angle of ascent has been pretty steep recently. This is a five year chart of silver versus gold. I want to point out is silver is real like vertical spurt here. And when that happens after a gold or precious metals rally has been going on for a while, sometimes it means the overall rally is getting ready for a breather. You see these instances where silver decides to really make a run for it. I know a lot of folks will eventually find their way to silver. It's like, well, it kind

of moves with gold and it's at one 80th the price per ounce. Why not take a run? So this is, I think, a little bit of the backdrop. And then you have the mining stocks, which, depending on the time frame, have actually some catch up to do, arguably to the underlying precious metal prices. Here you see this is an ETF, the gold bugs index of gold and silver mining stocks. It's trailed on this basis, although you see in the last year or so performed very well. But there's always complications, right? You have operating costs, you have CapEx. Newmont Mining today was down 15 percent on some of those concerns about margins. It's not just a pure play, obviously, on the underlying metal price, Morgan. This is fascinating. Gold, we know, we've seen a lot of countries stockpiling as well in the face of either directly or indirectly

sanctions, too. That's been part of the puzzle. And on the silver side, there are industrial use cases as well. But historically, there's always been this gold-silver ratio that everybody's sort of watched to have a sense of what pricing between the two looks like. And that does seem like in recent years it's broken down. Could that be restoring itself? Yeah, I wonder if there's any kind of long-term mean that we're reverting to when it comes to that ratio. It's pretty hard to generalize about it. I don't necessarily know if this is what this process here of silver outperformance

in the short term is trying to normalize for that. But arguably, it might be. I don't know that there necessarily is a rationale on that in terms of annual production of each metal and whether, in fact, it stays in some kind of a self-correcting ratio or not. What I do find interesting, though, is, again, once you get the excitement finding its way through the silver price, sometimes you have to say maybe it's time for the rally to take a little bit of a break. All right, Mike, we'll see you again in just a bit. Now, Decker's outdoor earnings are out. That stock is up. Julia Borson has the numbers. Julia. Decker's beating on the top and bottom line, reporting

earnings per share of $1.59 versus estimates of $1.24. Revenues of $1.31 billion ahead of estimates of $1.2 billion. Stock is up 8.2% on that news. Terms of guidance, revenue guidance for the full year right in line with estimates at about $4.8 billion. But the company's EPS guidance for the full year guiding to between $5.15 and $5 525 is below the consensus estimate of 536. Just pointing out two key areas of strength here for Decker, the direct-to-consumer business growing very quickly, growing 20%. And then if you look at the Hoka brand, this is, of course, the popular shoe brand, the Hoka brand net sales increased 35%, whereas UGG sales increased 13 percent. Back over to you.

All right, Julia Boorstin, thank you. Shares are up 8 percent right now. We've got breaking news on Tapestry and Capri Holdings. Kate Rooney has those details for us. Kate. Hey there, Morgan. So the Tapestry-Capri merger has officially been blocked by a U.S. judge. That's according to court documents. This was a highly anticipated decision and trial. It was an $8.5 billion bid by Tapestry, the luxury goods maker, to buy Capri. They cited intense competition in the handbag market and have been defending claims by the FTC that this was going to eliminate or that this would basically eliminate any sort of competition. Tapestry had fought back in this eight-day trial,

saying that the deal was spurred by some of the competition abroad. European players, they say, like Gucci, which have been grabbing market share. Again, it came down to prices and competition. The FTC coming out on top here. It's a win for the FTC in this merger market. And the Biden administration, guys, especially as rising prices, have been a key issue ahead of the election. Back over to you. Wow. I'm just looking at the stocks right now. Tapestry is down 52%

on this news. Kate Rooney and or not Tapestry, Capri, 52%. Tapestry is up almost 15% on this news. All right. Well, Tapestry couldn't secure the bag. After the break, an exclusive interview you don't want to miss. Palantir CEO Alex Karp, L3Harris CEO Chris Kubasik. You're joining me right here on set to talk about their new strategic defense partnership and much more. Plus, more on all of today's after hours action in this very busy hour of earnings season. And Mike Santoli is going to return with his take on Tesla's best session in more than a decade. When Overtime's back in two.

Welcome back to Overtime. Palantir and L3Harris announcing a strategic partnership to bring together Palantir's AI and L3Harris' hardware to help the military make better decisions, faster, improve communications systems, and accelerate L3Harris' digital transformation. So joining me right here at CNBC headquarters on set, Pound's CEO and co-founder Alex Karp and L3Harris chair and CEO Chris Kubasik. Gentlemen, welcome. Great to have you both here. Good to be here. All right, so I got to start with earnings because L3Harris, you just also reported earnings, a beat and a

raise. You're boosting your margin guidance as well. How much of this is a reflection of growing defense demand? How much of this is a reflection of growing defense demand? How much of this is a reflection of the normalization of supply chains? Yeah, look, Maureen, it was a great, great quarter. This is the fifth consecutive quarter we've exceeded expectations. And it really goes back a couple of years to the strategy that we've laid out. Everything we're putting in place is starting to fall together. You know, when I look at our board, we have about half the board is new.

Half my leadership team is new. We brought all the employees back, did away with hybrid earlier this year. So I obviously have to recognize and thank them for a great quarter. Supply chain is easing. Our LHX Next initiative is working. So really everything is coming together nicely. We bought two, made two acquisitions that are aligned with the future of the warfare and national defense strategy. We divested non-core assets. So if you're going to be the trusted disruptor, you have to have change. You've got to embrace change. We've had a lot of change and, you know, it's it's exciting. But the hallmark of the strategy is partnership. So I'm actually more excited to be on stage here with Alex to talk about our partnership than I am a great third quarter.

So that's how I look at it. So let's talk about this partnership. Alex, you've inked a number of them at Palantir in recent months, even just Microsoft, Oracle. What does inking a partnership with another defense prime enable? Well, first of all, delighted to be here. Congratulations on the quarter. You know, there's a lot of reasons to deepen our partnership and expand it, but primarily, actually, Chris, you know, he's a real disruptor. He drives innovation inside of his company. And then, quite frankly, he's better networked and understands the D.C. environment, certainly in a way that, you know, we may never. And so the combination of and then, you know, what I think our nation needs is the Americans, America's best unifying around where

we have a structural advantage, which is the integration of hardware and software. China and Russia are just not as good at software, and the integration of both allows you to produce more lethal technology. So how do we move from passive defense to we scare our adversaries every day, obviously in a way that they can't replicate. And the obvious way you do that is you move to AI-driven targeting with ethical means that's going to require software with the most disruptive companies in D.C. led by, you know, a quite inspirational leader. So, you know, we want to bring innovation to America commercially. Also, they're a massive commercial company, just purely. One of the things about L3 is that they're like one of the things that unifies us is we're not really defense integrators.

We're commercial companies that are patriotic. And so how do we get the best patriotic companies to produce the most lethal technology in the world for America and not for our adversaries? And how do we get it to the DOD in ways that are cheaper, in ways that the margins are better? And it's a great partner. So how do you do that, Chris? And I think about, I mean, you're a defense prime on a number of programs, but you're also a subcontractor on some like Titan, which Palantir is the software prime and the defense prime on. So what does this enable from your standpoint? How quickly can you develop these new technologies, next generation capabilities for the warfighter? Yeah, well, as you and I have talked about, you know, the arsenal of democracy.

So you go back to World War II, right, where the defense industrial base and the government worked collaboratively to build 300,000 airplanes, 85,000 tanks, and 9,000 ships to win the war. The future of warfare and the future arsenal of democracy is not more platforms, not more planes, ships, and tanks. It's the convergence of our leading edge hardware, software, and AI. So you mentioned Titan, a perfect example. I'm happy to prime sub merchant supplier. They're leading this. We're providing all the resilient comms, all the communication architecture, the communication hardware. There's another

program. We talk about real-time targeting. We have targeting systems. Think of those as the eyes for the warfighter, usually airborne platforms. And we can identify targets. We've integrated their AI. It lightens the workload for the warfighter. It increases the probability of detection and you end up with a better result. So it's all about shortening the kill chain. And what we've seen in Ukraine and in other places is the old ways of doing battle with like kind of hard, large systems that are not AI driven, just cannot survive on the battlefield anymore. The Russians and our peer to peer adversaries are using electronic warfare. And so what you're going to have to do is deliver a cheaper, more accurate payload. That is the convergence of AI autonomous systems and

hardware. And that's got to be done then. And then you also have to produce at rates we haven't produced. So how do you get the manufacturing to work better? How do you get the supply chain to work better? How do you bring violence to our enemies while using ethical standards that the West believes in? So when do you attack? Under what conditions do you attack? Do you attack if they're civilians? How many civilians? In what area? What radius to schools? How do you make sure that the people we're hitting are our actual adversaries?

How do you take out this dumb? But keep leave the intelligent generals alive that are kind of misaligned with their own their own country and take out the idiots or vice versa. These things are these things are really important decisions. And then for Americans watching this, Americans want to know that their dollar spent is a dollar well spent, whether that's in the DOD or any other place. So commercial entities, commercial companies that are also patriotic or in our case,

patriotic first and commercial equally are important also for the integrity of our country. Every single person is wondering, okay, of course I want the best war system in the world and I want something our adversaries couldn't replicate. What did it cost? What were the margins? Did it work? Is this something that is commercially viable? Would a commercial entity ever buy this? Those are very legitimate and important questions for the integrity of our society. And our partnership goes a long way to answering them because, quite frankly, there are some rooms where I'm more welcome, mostly people who are investors in Palantir or often, in many cases, on the

battlefield. And there are some rooms where they would rather talk to Chris and I'd rather have them talk to whoever they'd rather talk to. We need to get the best products on the battlefield, and that often requires partnership. What are the lessons learned, to the extent you can talk about them, about AI deployed on the battlefield? I think about the Middle East, where CENTCOM's using Maven, Palantir's involved in that program. It's now being deployed to other parts of the world as well. Just today, the White House issuing this national security memorandum on AI, talking about that, the fact that they need more AI deployed more quickly to the warfighter in military context, but that there need to be guardrails in place as well.

When we took over Maven, it was, I mean, AI was viewed as a joke. We took it over because Silicon Valley notoriously thinks the job of Silicon Valley is to get rich first and to not support our warfighters. So we took that over. And then what the DOD, and I'm very happy to see Jake Sullivan writing about, it's very important, has learned is being able to identify and take out our adversaries in a way that's more precise, quicker, and more lethal than anyone else in the world can gives us a structural advantage, a structural A, because it's quicker and better and safer and more violent. And it's also better because our adversaries just are not that great at doing it. And so what the U.S. has learned in Project Maven, what the Ukrainians have learned, what the Israelis have learned is this is a structural

way both to integrate the base. So also it makes companies that are already valuable five times more valuable because you can control what you buy. You control the base. So also it makes companies that are already valuable five times more valuable because you can control what you buy. You control the manufacturing. You can control right down to where you can use fewer munitions. The munitions can be lower cost, but they have to be produced quicker. You can explain to your people. So all these lessons, what they're basically seeing is Congress, the DOD, the White House are saying, wait a minute, we have this amazing structural advantage and we need to take advantage of it. There's a banality that we forget.

Almost everybody in the AI world is American. And then almost everyone who's doing kind of munitions and targeting at scale with hardware and software is also American. And another advantage we have is we can just transform our industry because we have exceedingly agile CEOs and work environments unlike Europe. So what we're basically seeing across the legislative and DOD is people saying, wait a minute, we need to do a lot more of this. We need to see partnerships. We need to see people working together and we need to bring this to our warfighter. And that's exactly what that memorandum basically says. Speaking of agile work environments, we just talked about the fact that you have this next program. You're going to one of the things in this release, you're going to hit your cost saving

targets a year early. Right. You are also a commercial customer of Palantir. Absolutely. As well. So so when we at a time where more broadly investors and company CEOs are saying, OK, application layer of AI, where is it going to go in my company? How am I going to deploy it? How much am I going to invest? And most importantly, what's my return on investment going to look like? What are you seeing at L3 Harris? We're seeing great progress. So we've laid out a transformation of the company. We call it LHX Next. First phase was really focused on cost takeout. We're going to meet those goals, beat them and exceed them. The second phase is transforming the company, right?

And in the old days, you'd just blow up your system, spend hundreds of millions of dollars and shut everything down for years. We have hundreds of systems, ERP systems, finance, labor, manufacturing. The Foundry product has the ability to extract the data, knit it together, and get it to us in real time. So we're getting data timely and accurate. We're able to make database decisions. It ultimately leads to a better company, more agile company, more profitable.

It's been a great partnership. This is something that's going to change for the benefit of the shareholders and our customers. Palantir, third best company, third best performer in the S&P 500, even though it's a new entrant. A lot of analysts don't necessarily fully understand, I think, what you do on all aspects, but investors certainly seem to get it, particularly on the commercial side. I realize there's been a reacceleration in the U.S. government business, but the commercial business is really what's propelling the stock. What are you seeing, especially as you do have these artificial intelligence platform boot camps and adoption levels?

Well, look, I mean, first of all, to your first, you know, intelligent people learn from their mistakes and learn to realize when they made a mistake in the pattern, everyone else becomes an analyst or an advisor. So, you know, people have been saying we're overvalued for the last 20 years. People have been saying we did, our products would make us profitable, that we would not be able to become a juggernaut, that we would not become gap profitable, we'd not get on the S&P. And, you know, keep saying that about us. We love it. It discourages people from doing anything like what we're doing.

And we are winning. Now, why are we winning in U.S. commercial? Because we learned in the government that what makes AI valuable is the ability to manage algorithms or large language models. Every financial analyst wakes up in the morning and after, with notable exceptions that we revere, really revere, wakes up in the morning and after they stay at Motel 6,

they have a huge opinion about how to manage large language models. It's completely theoretical and idiotic. If you want to manage large language models or AI, the infrastructure that allows you to manage them is where the actual value is. The large language models or AI, the infrastructure that allows you to manage them is where the actual value is. The actual, the large language model is essentially a commodity that you can value and use depending on cost and veracity. And they completely don't get it. But you know who does get it? Our commercial American customers. And despite the fact that we barely

have a sales team and that I'm providing my pontifications of truth, including America is a great country, which many of them don't like. Our allies deserve protection. Israel is in the right. Whatever is pissing them off, they're still buying the product. And the reason they're buying it is because our ontology and our AIP allow you to deploy and use AI in a way where it changes your margins. It changes your go to market. It changes your ability to kill or take out adversaries in a much safer way with much lower costs. And American companies are dynamic and interesting and run by some of the best people in the world, some of whom are much better at partying cooler than you'd ever imagine on TV. And they adopt. And so, you know, it's like, do you want to believe what the librarian says about a book or do you want to go out in the world and see if it works?

And we are in the business of making our commercial customers work. And sure. Yeah, we have a ton of player haters. Keep hating on us. That's yeah. OK, I was just a final question for for both of you, really. I'm not going to get into the election specifically, but when you look out to 2025, no matter what that outcome looks like, what are the key areas, whether it's regulation, whether it's defense spending, whether it's something else, what are the key areas of policy that are going to need to be addressed? Well, look, I've said it before. The whole ecosystem needs to be on a wartime footing. Right. We need a budget. I've said before on the show, China and Russia don't have continuing resolutions. We need a budget. We need the DOD to award contracts quicker. I don't care if they're commercial or traditional defense.

I think there's huge opportunities to allow our company and other companies to be treated as a commercial enterprise. Everybody in DOD and D.C. loves commercial companies. Put out the RFP, let us propose, make a decision, and let's move quickly. And then, of course, you know, we have all in industry have been building up capacity. There's not enough capacity in the defense industrial base for the demand that we need. So I think let's get a budget, let's make some awards, give us a chance to execute. I think the future is hardware, software, and AI. I think we're well positioned for the long term. I couldn't be more excited to be here with Alex and be a partner of Palantir. So I obviously agree with what Chris said. I think for me, the most important thing any administration can do is articulate a patriotic message.

America and the way we organize things is something we are willing to fight for. And then once you've articulated we are going to fight for our way of life, a lot of decisions follow. And then how do you fight for it in the DoD context? Well, if hardware, software, hybrid AI is our advantage, then maybe you should look at like, OK, well, who are the people who do it? Buying software and AI from somebody who's never built any system that's ever worked or buying it from a PowerPoint or not having a commercial vendor preference is literally suicide. So, you know, but the first thing is to say, and then I would start renaming things. It's like, I don't understand why we have a Department of Defense.

We should have a Department of Offense. Like, you know, and the other, I personally believe this with this, like, I don't understand why we have a department of defense. We should have a department of offense. Like you know, and the other, I personally believe this with this, like we have to have red lines and then we should go ahead and violate them to show people how serious we are. Like why do we wait till our enemies attack? It makes no sense. It does not lead to peace. You know, you have this famous thing, it's a paradox of thrift where if you over save

you get poorer, which every progressive learns, it's tattooed on our bodies. There's a paradox of violence. If you never use violence, the world gets more violent. And so we need patriotism and competence and a willingness to use violence. And I don't know why we wait till people get up and hurt us, kidnap us. And last not least, as I've said over and over, if you touch an American citizen, we will go after you, we'll go after your assets, we'll go after everything. We can keep on going for generations. We cannot allow people to just kidnap and kill Americans wantonly and then say we're going to have a memorandum at the United Nations, essentially an academic institution that pushes papers for despots.

So we really need to change our footing on this. And by the way, we're in a position to do it because our economy is the strongest in the world. We're the only people producing AI. We have the best CEOs in the world and we have the best warfighters in the world. All right. Palantir CEO Alex Karp, L3Harris CEO Chris Kubasik. Thank you both for joining me here on set. Good to be here. Thank you. Thanks. All right. Big exclusive there. Well, breaking news now on Morgan Stanley. Leslie Picker has the details. Leslie. Hi, John. Yes. Ted Pick, the CEO of Morgan Stanley, adding the title of chairman, getting the torch from James Gorman, who as expectedly is stepping down from the chairman role at Morgan Stanley and retiring from the firm at the end of the year. He is going to be named chairman emeritus at that time.

And, of course, you recall earlier this week he was named chair at the board at Disney. So starting his next chapter there at Disney. But Ted Pick will assume this role as of January 1st, 2025 as the chairman in addition to CEO. Guys. All right, Leslie, thank you. Well, coming up next, gaming out the election's impact on your money. Neuberger Berman President Joe Amato joins us to discuss how tariffs, taxes, and the deficit could be impacted by election results.

Plus, Tesla shares exploding to the upside today following earnings we brought you right here on Overtime. We're going to put the huge pop into perspective and look at one potentially overlooked part of the Tesla story when Overtime returns. Welcome back to Overtime. We are less than two weeks away from the election. An investor should be gaming out how the results could impact your portfolios and the broader implications for trade policy, tariffs and the deficit. Joining us now is Neuberger Berman, President and Chief Investment Officer Joseph Amato. Joe, good to see you. So tariffs, tariffs, and the deficit. Joining us now is Neuberger Berman, President and Chief Investment Officer, Joseph Amato. Joe, good to see you. So tariffs, taxes, regulation. Let me start

with taxes. Depending on when we get a President Trump or a President Harris, how do you look at your portfolio and decide what shifts you would make in a tariff situation? Well, from a tariff standpoint, you know, that's going to be a hugely important issue. We think by the time if a Trump presidency occurs, it'll probably be more later in 2025 when tariffs actually get implemented.

You know, our view is that the 60% number for China, the 10% across the board is a negotiating starting point for for Trump. And if you if you think back to 2018, the list of products that were supposed to have tariffs was quite long. And then what actually got implemented was was much more narrow. You know, so it's going to be something that we're watching closely. But but certainly tariffs broadly are going to be inflationary. If you look at the basket

of products that had tariffs in 2018, they were probably up three to four percent a year after the tariffs were put in place. What kind of impact would that have, particularly on Chinese stocks, you think, and then on EV and energy stocks that I guess hypothetically would benefit? I think there's been so much talk of tariffs. I think the market is assuming that there's going to be some level of tariffs. And I think the betting markets right now are expecting a Trump presidency. We'll see. It's clearly going to be close. But those products that end up getting applied are going to have real impact there. It's hard to determine now because of the nature of Trump administration's approach is very transactional. So it's very negotiating. So if they are able to cut deals with certain industries or companies, right,

you're going to have less tariffs and that's going to impact those companies less. So it's unfortunately a bit of a wait and see approach, right, in terms of what exact companies or products ultimately receive tariffs. Joe, I'm going to ask you the same question we asked our market guests earlier in the hour, and that is the fact that you have seen yields move higher in the last couple of days, couple of weeks. What is it signaling here? Is this gaming out perhaps a more restrictive Fed policy moving forward if economic data remains resilient? Or is this more about perhaps greater worries on the horizon like deficits and fiscal policy? I think, Morgan, it's a combination of both of those. I think certainly the economy has proven to be more resilient than one might have expected a couple of months ago.

So the expectations of Fed cuts is less than it was going back a month or two ago. GDP now numbers in the mid threes. That's a pretty strong performance from an overall economic standpoint. So that that would push yields higher on the long end in particular. And certainly as as Trump has improved in the polls and the betting markets, if you will, have leaned into a Trump victory, I think generally if you if you could drill it down to two simple things, Trump's president, it you could drill it down to two simple things, Trump's president, it tends to be more, probably more growth, more inflation.

If Harris, it's probably less growth, less inflation. So as Trump moves up in the polls, I think the market's going to assume you're going to get potentially a little bit higher inflation. Joe Amato, thanks for joining us. Thank you, guys. Up next, Mike Santoli returns with a closer look at the huge move higher for Tesla today and if it's sustainable. And later, new data on new home sales just out as mortgage rates take a turn higher. We'll talk to the CEO of real estate brokerage Compass about what he's seeing in the market. Over time, we'll be right back. Welcome back.

Tesla notching its best day since 2013 today in a post-earning surge. Mike Santoli is back with his take on the move. Mike. Yeah, John, a pretty stunning move in magnitude in the short term, although it's over pretty well-traveled ground. Here's a five-year chart of Tesla. And you'll see the average price of the shares over this entire span is around 240. We actually crossed above 240 to 260 today. You see kind of on the verge of making a new one-year high, but it's really remarkable. In late 2020, essentially, the market said, we see it getting to scale.

Finally, it's going to be profitable production, and we're going to give it credit for it all at once. And then it's just chopped around this range since then. Now, take a look at how they preserved margins. Cost of goods sold on the auto business have declined, actually even a little bit more than pricing. So still pricing pressure, but managing to preserve margins, plus those regulatory credits they sell to other car makers, is free money, and there was a lot of them this past quarter. But take a look at consumer purchase intentions for Tesla.

This is net purchase intentions. Goldman cited this from a survey here. And he took a dip, obviously, relative to peers for Tesla. So it seems as if it'll still be a market share battle. But so far, at least the car business on firmer footing. And folks seem to want to believe a higher probability of full self-driving and robo taxis, at least in the short term, John. It sure is a weird chart, isn't it, Mike? I mean, if you're looking even from the beginning of 2021 versus what the S&P has done, that's maybe a bad starting point. I mean, because it had a huge

surge ahead of that for any unbelievers. But now one has to wonder, what, if anything, is it tracking with? It's interesting. It's really just tracking with obviously the car business is worth some percentage of this, but it trades like, you know, 80, 100 times expected earnings. So clearly it's not just about the business as it stands today. There's a massive premium in there for all the rest of the stuff that might actually really click and create this grand future. And it's really tough to know

if it's connected to, let's say, the excitement over AI on one turn or something else. But it is a massive... Look, this is a really big company to trade this way. So clearly, there's a huge following and they bring a ton of money to bear every single day. I just wanted to point out that we kind of got here at the end of the of the of covid. And it's been mostly working off that that excess since.

All right. Mike Santoli put in context, as always. Thank you. When we come back, an insider's view of the housing market. The CEO of Compass joins us to break down what he's seeing from buyers and sellers and why the absolute mortgage rate might matter less than you think. Stay with us. Welcome back to Overtime. Here's a look at some movers this hour. We've got Western Digital.

That's getting a big boost after beating on earnings. The revenue narrowly missed. Estimates still shares are up more than 8%. Joby Aviation pulling back sharply. The Air Taxi Company announcing a public offering of up to $200 million in common stock, saying it will use the funds for its certification manufacturing efforts and prepare for commercial operations. It's an EV tall player. You can see those shares are down 7.5%. All right. Well, now a mental exercise to consider is the bottom end for Peloton shares. They're up big in the past month, extending their gains this week after David Einhorn said the

stock is significantly undervalued. So is Peloton finally set for a sustainable move higher after peaking during the pandemic? It's the subject of my latest On the Other Hand newsletter. You can scan that QR code on the screen now to join the conversation or type in cnbc.com slash OTOH. Well, mortgage rates moving higher this month with Treasury yields on the rise and coming up, CEO of Compass on what he is seeing from customers and what accounts for the divergence between new and existing home sales. We'll be right back. Welcome back to Overtime. September new home sales hitting their highest level in nearly 18 months at 738,000 units.

That's according to new data this morning from the Commerce Department. But mortgage rates have been back on the rise so far this month. So joining us now to discuss is Compass co-founder and CEO Robert Refkin. It's great to have you here on set. I'm actually, before I start getting into mortgage rates, I do want to get your sense of where we are in the housing market. Because, yes, new home sales today were strong, but existing home sales yesterday, the complete opposite, multi-year lows. And so existing home sales are down 3 percent, while new home sales are up 6 percent.

That said, pendings are up 10 percent and mortgage applications are up 3 percent. So we're in a better place. But I think there's something happening that people aren't aware of for new home sales. They're put at an advantage to existing home sales. There's something called clear cooperation, which the National Association of Realtors and the hundreds of MLSs they own, where they force every homeowner that's working with an agent in the entire country to put their listing into the MLS after just one day of public marketing, while the builders of new homes have complete freedom

to market their home in any way they want. And so I'll give you a couple of ways of why that's an advantage for the builders. Builders can have listings with no days on market. Days on market is the killer value. Individual homeowners, days on markets everywhere. Builders can have no price drop history, while individual homeowners, 40% of the homes right now, more than any time in history, 40% have a price drop. They all look like damaged goods. And the last example I can give is that every individual that puts a buyer inquiry for a listing, when it goes to a builder, they can make it so it goes to the listing agent they hired, while the individual homeowner, when you put it in the MLS and it goes to thousands of sites, the listing agent that the homeowner hired is only on one of them. That's really fascinating. And I feel like that's a key piece of nuance that we haven't

really dug into when we've talked about the housing market. But I do also wonder how much of this is the fact that, yes, we've had the Fed beginning to cut, but you do have mortgage rates that are still very high and so-called golden handcuffs, therefore not a lot of inventory coming to market, which means existing homes. Yeah, so there's the lock-in effect. Two and a half years ago, which was the peak, 75 percent of homeowners were locked in from selling their home. And now it's about 50 percent. And the lock-in effect is when it's 4 percent or below relative to the current mortgage rate. Now, mortgage rates, yes, I wish they were lower. They went to 6.04% in September.

Now they're at 6.9%. But it's a lot better than it was this time last year. This time last year, it was 8.2%. And consumers react more to the change in the mortgage rate than the absolute rate itself. So we are in a better position. You can see that in the pending home sales data, which are up again, 10% year over year. Let's talk about your stock and your operations for a moment. You're up considerably year to date. I think about 60%, well off the highs from years past, but how, you're a platform,

a technology company as well. We're talking to AI here. There's plenty of real estate data. There's plenty of human interaction also. How do you apply that in a way that gives you a sort of unfair advantage going forward as a technology platform? agents to work with their clients from first contact all the way through the transaction to cash. We launched earlier this week a client portal. It's our beta. Full launch will happen in January. And it is for buyers, for sellers, and multiple homeowners, putting everything in one place. The transaction timeline, all the documents, the appraisal, everything will be there. The CMA, the collection with all the search results, listing insights, and more. So AI applied how?

So AI, we have something called likely to sell, which rates. In our contact database, our CRM for agents, we have 33,000 agents. We've got like 15 seconds left for you. We have 100 million contacts. Every one of them are rated through AI on how likely they are to sell. All right. Well, Robert, thanks for joining us. You got it.

You explained it. You got to what we're looking for. I appreciate it. Glad to be here. Morgan, one more day left in the trading week. One day more. And it has been quite a week for sure. It has been quite a week.

It's really earnings, election, and economic data when you start to look to next week, which is also going to be back in the market. That does it for us here at Overtime.