Closing Bell - Closing Bell Overtime: Post-Powell Sell-Off 11/2/22

Episode Date: November 2, 2022

Fed Chair Powell says the tightening campaign still has “a ways to go” even if the pace of rate hikes slows. Stocks fell and yields jumped as investors back away from bets on an eventual fed pivot. Ritholtz Wealth Management’s Josh Brown and Schwab’s Liz Ann Sonders give their takes. Plus, Qualcomm shareholder Jason Snipe reacts to that company’s quarterly report. And – the headliner of the hour – DoubleLine’s Jeffrey Gundlach gives his first reaction to the Fed, Powell’s press conference and the market’s big turn lower.

Welcome to Overtime. I'm Mike Santoli. Scott Lopner will join us shortly with an exclusive interview with DoubleLine's Jeffrey Gundlach. Hear his first reaction to the Fed decision. We also have earnings coming from Qualcomm, Robinhood, and others. We will get to them as they filter in. But we begin with our talk of the tape. A post-Fed sell-off after Chair Powell says the tightening campaign still has, quote, a ways to go, even if the pace of rate hikes eventually slows. Stocks down, bond yields up a bit as investors back away from bets on an eventual Fed pivot. Let's bring in Ritholtz Wealth Management's Josh Brown. Josh, also a CNBC contributor.

So, Josh, you know, in a sense, this is a consistent message we've gotten from Powell. Maybe you had a little bit of a faint from the formal statement by the FOMC talking about the lag effects of what's already been done in terms of rate hikes. Where do you think it leaves the market here? We S&P kind of backed off to where we were, let's say, 10 days ago on the on the press conference. One of the things I've been talking about all year is how absurd it is on the one hand to be enduring seventy five basis point rate hikes month after month and then be rooting for a dot a dovish pivot

uh... that really is not going to do anyone any favors why would we want to prolong what is essentially has to be done at this point? So I actually think the Fed did its job, not that they're asking me. One thing that should be obvious to anyone who's been paying attention, the market really doesn't like it when the two-year yield starts to trade like a penny stock. Take a look at that intraday action in the two-year yield. Before the announcement, you had four spot, five five, okay fine, fairly sanguine.

Then you get this drop off when he's talking about the accumulative effects of the hikes they've done so far, to your point, a faint, and then all of a sudden he says, we have a long ways to go, which if you remember back in 2018, were the fateful words that sent the S&P down to the Christmas Eve 20% correction point. So we didn't like it then. We don't like it now. The two-year goes out closer to spot six than 4.4. And that's a really big intraday move.

I would say on the stock market, Mike, this is about in line with what we've seen on Fed announcement days this year. We've done plus or minus 1.9% on average for the S&P 500 on actual FOMC days. And we've got a whole bunch of them for this year. It's already November. So it's not that far out of line. Of course, a lot of people would have preferred higher by one point nine percent as opposed to lower. But it is what it is. But the state of the course language is really the story. The two year, the dollar. One other thing, anything touching the consumer, anything even remotely discretionary or consumer, is just getting housed right now. Lowe's, Home Depot, Nike, Starbucks, Chipotle, TJ Maxx, the travel names got slaughtered. That, again, also in character with what we've seen with the hire for longer rhetoric. For sure. Let's now bring in

Lizanne Saunders, chief investment strategist at Charles Schwab on this. And Lizanne, you know, Jay Powell was asked again, is the path toward a soft landing become narrower? And he said, certainly it has. And each, you know, step the Fed takes in trying to tighten things by its own declaration, trying to mitigate consumer demand, would seem like the path gets that much narrower. Has the market assimilated that at this point, do you think? He did have a 27 percent drop, peak to trough at least, in the S&P at the recent

lows. Powell is doing his darndest to try to communicate what the Fed is thinking and potentially planning to do, but I'm not sure he has fully given the market that message. Clearly at Jackson Hole, you have to push strongly against the notion of a pivot. I think now what is yet to be fully communicated, maybe because the Fed is data dependent and they're not on a glide path, is not so much where is the terminal rate

and or when they're going to get there, but getting the market to understand that once they get there, it is not going to be an imminent shift to a pivot, meaning rate cuts, that they're likely to stay there for some time in the interest of not having the fits and starts of monetary policy that occurred in the 1970s that ultimately led Volcker to have to come in and do what he did. So I think, in fact, Powell using the terms keep at it, which is in essence the title of Volcker's book or some derivation thereof, I think is a message he's trying to be fairly clear about whether the market gets it or not. You know, the market's going to do what it's going to do.

Yes, absolutely. And certainly, as I mentioned, we went back less than two weeks in time in terms of this back off in the S&P. So maybe that means people weren't completely hoping for an outright dovish turn. We do have Qualcomm earnings out. Let's get to those. Christina Partinevelos has enough. Well, Mike, we should probably expect some growing pains as Qualcomm transitions from a wireless communications company to a connected processor company. And the company's EPS fell in line with the street at $3.13 adjusted. Revenue was slightly higher at $11.39 billion, but it's the Q1 outlook that just falls short. And that's why you're seeing the stock drop over 7% right now. The company is guiding for a Q1 EPS of about $2.25 to $2.45. The street estimate was $3.42, so a big miss right there. Qualcomm says the COVID lockdowns in China are only adding to

demand weakness in handsets as well as consumer internet of things. They project handset volumes in calendar 2022 to decline by low double digits year over year. And the second major reason for that lower outlook that we're seeing for Q1 is elevated inventory levels. Inventory is high because demand is weak and supply chain problems are actually starting to ease. Management says this will probably take a couple of quarters to work itself out. Last really important part, though, is that Qualcomm has announced that with Apple, that was a big question. There were several questions around it. But with Apple, they will be supplying the majority of Apple's iPhone 2023 modems.

That was a big question that they answered in this earnings. All right, Christina, thank you very much. You see the stock down about 7 percent. By the way, don't miss Qualcomm's CEO on Mad Money tomorrow night. Josh, let me just get to you quick. This has been a bit of a pattern where you'd have, you know, a decent result on the quarter, a guy down on a lot of companies, especially hardware related. And then the stock market, you know, takes the hit, but it already had gotten part of the way there, right? I wonder, at this point in earnings season, what do you think the market has already figured out, what point we've reached

in terms of assuming that earnings still have some downside to them? You know, Qualcomm has just been such a tough stock, but not tougher for anyone more so than the value managers. This is a name that went into the report tonight, already down 39% year to date. They did the same thing last quarter. They beat top and bottom line, but then guided down. This is the result of that guide down. Now you have a stock at a 10 times PE ratio. The median for Qualcomm has been 17 times over the last decade. And the average P.E. for semis is 25 times right now. So it's a cheap stock, both in absolute terms and very much so relative to the group. But we still have cycles and cheap inside of the downshift in a cycle is never going to be cheap enough.

And Qualcomm is like one more piece of evidence of that. Yeah, I think it is like a 12% free cash flow yield or something like that. But that's a lot of that's backward looking, naturally. I'll let you know when it starts mattering. Yeah, no, it's fair. Lizanne, more broadly, though, on earnings, what would be your assessment of what we've learned so far this earnings season and what it maybe indicates about 2023, which really is where a lot of the focus has to be?

Well, to some degree, it's been a better than expected earnings season, but that's against a much lower bar than where we were even at the end of the second quarter. So the consensus estimate for Q3 for the S&P was more than 11 percent back then. And now with the blended estimate, we're in and around 4 percent or so. And, of course, X Energy, we're in negative territory. And that's the third quarter in a row we're in negative territory. I think given all of the macro conditions, including what we're seeing in PMIs and in housing, which is an interesting, has a pretty high correlation to

overall earnings, the strength in the dollar and the hit to the more internationally oriented companies, I think the path of least resistance for estimates is still lower. If you just correlate CEO confidence, which is obviously plunged, and things like PMIs and PMI new orders, that points to an earnings decline overall, inclusive of energy, of down year over year, maybe even to the tune of double digits. And that's just not baked into the estimates right now. So I think at least for Q4 and Q1 and Q2 next year, I think there's more room to go on the downside in terms of revisions. And so, Lisanne, would that imply that you still think there's a hazard in looking toward more cyclical stocks because we're not yet at that point where we've bottomed out in estimates? You know, I wonder, with some of the cyclical bias and the strength in areas like industrials

and aerospace and defense, I do wonder how much of that is tied to the expectations with regard to the midterm election and the possibility of Republicans picking up one or both houses of Congress. That has an obvious feeder into the narrative of it's better for some of those areas. So I'm really asking the question of myself. I don't know that I have the answer, which is, how much of that cyclical bias is driven by an expectation that we're going to see a lift in the economy and maybe other shorter-term reasons?

I don't think we're out of the woods yet in the economy. I think we still have the earnings leg that is not yet sort of finished on the way down, and we haven't yet seen the definitive labor market weakness that, quite frankly, Powell and others on the Fed are saying is a necessary ingredient in bringing inflation down. So whereas I think a lot of the tighter monetary policy, the rise in interest rates, the inflation problem with which we're still dealing, I think a lot of that is sort of baked into the cake in terms of markets. But I'm not sure it is yet fully reflecting that further deterioration likely in earnings or the

labor market deterioration that the Fed is really trying to engineer to some degree. Yes, and certainly thinks and has said is likely to be necessary. Speaking of earnings, we do have numbers out from Roku. Julia Borson has them. Hey, Julia. Hey, well, Roku has an interesting report here because the stock is plummeting, but it's not on the Q3 numbers. It is on guidance, far worse guidance than expected for the fourth quarter. The company actually beating estimates on both the top and bottom line, reporting a loss of 88 cents instead of the dollar 28 loss expected. Revenues coming in at 761 million versus the 694 million estimated. But the company sees far lower Q4 revenues than Wall Street had been looking for

and also expects an EBITDA loss of $135 million, which is nearly three times the loss that Wall Street had been anticipating. I just want to flack the commentary here about the rough holiday season because this may have implications for other streamers. They say, We expect the macro environment to further pressure consumer discretionary spend and degrade advertising budgets, especially in the TV scatter market. We expect these conditions to be temporary, but it is difficult to predict when they will stabilize or rebound. We therefore

anticipate fourth quarter player revenue and platform revenue to be lower year over year. So the stock down now nearly 20 percent on that grim outlook for the fourth quarter. Back over to you. Julia, thanks. Yeah, Roku trading now at levels that would be a new 52-week low as well. Robinhood earnings also out. Kate Rooney has those for us. Hi, Kate. Hey, Mike. That's right. Robinhood with a beat on the top and bottom line for Q3. It looks like that's thanks to lower expenses for one and then a boost from higher interest rates. Net revenue came in at $361 million. That was a beat and up about 14% from the prior quarter. Transaction-based revenue, that, of course, down from a year ago as we've seen trading really pull back.

But it was better than expected. EPS was still a 20-cent loss on the quarter, but it was better than Wall Street expected. It was a beat by about 11 cents here. Net income was in the red, but losses narrowed from the prior quarter. It also returned to EBITDA profitability. MAU's monthly active users came in a bit late. That dropped by more than a million users in the prior quarter and revenue per user. It looks like that was also slightly lower than expected here. Net interest income was a huge bright spot here for Robinhood driven by Fed rate hikes. It was up 73 percent sequentially. I caught up with the CFO, Jason Warnick, about the

results. He talked about higher rates. He said it definitely helps. And he said when interest rates rise, we get the benefit of that revenue. But it does tend to cause trading to be subdued. We're seeing that in the market. So there is a bit of an ebb and flow between trading as well as interest. And Robinhood also lowered its outlook for operating expenses for the full year. It's taking that OPEX number down by about 30 percent. I asked Wernick about some more cost cutting on the rise, and he says we're in a place now where we just want to stay lean and scrappy, making the investments that we need to grow the horizon. He says we're in a place now where we just want to stay lean and scrappy, making the investments that we need to grow the business. But he says, I don't see additional

opportunities to get more lean from here. But we are seeing a bit more cost discipline from Robinhood shares up more than 4 percent after hours. Back to you, Kate. Thank you. Yeah. Interesting action. That stock bottomed under seven in June. It's been kind of basing since then up toward 12. Now, Booking Holdings earnings also out. Seema Modi has the numbers. Hey, Seema. Hey, Mike.

Booking Holdings seeing its highest amount of quarterly revenue and adjusted EBITDA on record. And third quarter is seasonally strong for the travel companies. But revenue of $6.05 billion versus the analyst estimate of $5.9 billion, a 29 percent increase from the prior quarter. Room nights, that's the key metric to watch, booked in the third quarter of 2022, increasing 31 percent. CEO Booking Holdings Glenn Fogle saying despite the rising concern around the macroeconomic environment, we are encouraged by the slight improvement in room night growth we have seen in the month of October and by the level of bookings for travel in early 2023. Remember the guidance from Airbnb, that's what sent shares lower today

by 13 percent. Booking holdings was down as much as 6 percent on the day. It is moving higher here in after hours, spiking now basically flat. We'll look for comments from Fogel on the conference call at 4.30 p.m. Remember, of all the online travel operators, Mike, booking has the highest exposure to Europe. So even with the impact of the war on travel, the recessionary fears, the company's still beating expectations on its top and bottom line.

Back to you. Seema, thank you. Josh, Roku, Robinhood, what strikes you in these numbers? Let's do Robinhood, what strikes you in these numbers? Let's do Robinhood. So I almost bought this stock purely on technicals, but then I remembered, don't buy Robinhood or Coinbase into earnings ever. But this is its seventh straight quarterly loss,

which for traditional brokerages, you've never seen that before. Maybe MF Global, I don't know. MF Global. It's almost impossible for a Wall Street based brokerage to lose money for two straight years. But this is part of the excess that I think the Fed is like fighting to ring out of the system. That being said, here's a company where every negative thing that could possibly happen has probably already happened. We don't think there's any big legislation coming down the pike that's going to materially change the business model right now. That was something that was hanging over this company for two years. Technically, this is on my list of stocks that did not make a new low in September versus the June low. And actually, over the last six months, not including what's going on in the after hours, this stock's up like 30%. And there are,

even in a strong tape for financials, very few of these archetype stocks have anything like that in terms of gains. So it's weird, but there's like a little bit of momentum here, at least on a relative basis, when you look at all of the other companies that we categorize along with Robinhood. So I'm going to keep my eye on it. I'm not sure when they're supposed to go positive or whether or not anyone even cares, but this one looks really interesting technically. Yeah, it does. It seems like it's been sort of basing, as I said, for a few months now. We've got to leave it there. Unfortunately, Josh, Lizanne, thanks very much for the time. Appreciate it. Thanks, Mike. Let's get now to our Twitter question. Will stocks

be higher or lower by the next Fed decision on December 14th? Head to at CNBC Overtime on Twitter to vote. We'll share the results later in the hour. We are just getting started here in overtime. Up next, Qualcomm shares moving lower after reporting just a few minutes ago. We'll get reaction from a shareholder after this break. And Jeffrey Gundlach standing by with his first take on the Fed decision and the post Powell sell off. We are live from the New York Stock Exchange O Over time, we'll be right back. Let's get a check on shares of Qualcomm. They are lower by about 6%. The company reporting just minutes ago, the conference call kicks off in under a half an hour. Let's get instant reaction from a shareholder. Joining us now is Odyssey Capital's Jason Snipe. Jason, I guess a picture of a company undergoing kind of a bumpy transition. What

did you see in the numbers? Obviously, guidance was a good deal lower. What are you listening for on the call? Yeah, Mike, obviously, the price action in Qualcomm hasn't been grazed down almost 40 percent year to date. And to your point, obviously, the guide wasn't great. They guided lower last quarter as well. I think what I'm looking for is, you know, what automotive is looking like. And obviously, IoT. I think Qualcomm has done a great job in diversifying their business. Obviously, this is going to take time. You know, the auto business represents only less than 5% of their revenue. So this is going to take time. You know, the auto business represents only less than 5% of their revenue. So this is going to take time. They got $30 billion in the pipeline,

you know, on their investor day call on the auto side. They talked about the TAM being $100 billion business by 2030. You know, so I think there is opportunity here, but obviously the price action has been difficult this year, and I don't think it really connects to the fundamentals here. The focus on things like automotive and Internet of Things, does that mean that the smartphone side, the core business as we've come to know it, is just in longer-term decline or just in a rough patch? Yeah, obviously it's decelerating. I mean, the semis are a cyclical space, you know, so when you look at a nine times earnings stock that's very attractively valued,

I mean, what you're paying for is a decelerating handset business, right? So that's kind of how you need to evaluate it going here, going into, you know, as an investor and looking at it maybe from the next couple of quarters. But, yes, I do think handsets are decelerating. Clearly, Apple has been resilient and their relationship will remain with them. You know, we'll look at the Android business and see what that looks like. But, yeah, I think that's really what's weighing on the stock here. All right. We'll see what we hear out of the call. Jason, appreciate your take. Thanks a lot. Thank you.

Coming up, an overtime exclusive, a sit down with DoubleLine's Jeffrey Gundlach, his first take on the Fed decision, Powell's press conference, and the market's big turn lower. That is ahead. Overtime, we'll be right back. Time for a CNBC News update with Shepard Smith. Hi, Shep. Hey, Mike. From the news on CNBC, here's what's happening. The White House says North Korea is sending artillery shells to Russia for use in Ukraine. The National Security Council spokesman John Kirby says the regime is trying to hide those shipments by funneling them through countries in the Middle East and North Africa. North Korea is denied ever selling or planning to sell weapons to Russia. Bibi's back. The former Israeli Prime Minister Benjamin Netanyahu appears set to return to his old job.

His right-wing coalition projected secure the majority of seats in Israeli parliament. Of course, Netanyahu is currently also on trial for corruption. And there could soon be a for sale sign out front of the Washington commanders. A source familiar telling CNBC that the team hired Bank of America to explore a sale. The team confirming only that it's looking into potential transactions. The commanders and owner Dan Snyder under investigation by both the U.S. Congress and the NFL for sexual harassment and financial misconduct in the front office. Tonight, Steve Leisman's in on the rate hike that happened today. New calls to ban TikTok and the rise of the pet-friendly on the news right after Jim Kramer, 7 Eastern CNBC. Santoli, back to you. All right, Shep, thank you very much. Up next,

double lines Jeffrey Gundlach joins our Scott Wapner from the Schwab Impact Conference. His first take on the Fed after this break. Welcome back to Overtime. Let's send it right over to scott wapner who is at the schwab impact conference with double lines jeffrey gunn hey scott michael thank you so much once again with jeffrey gunn lock on a fed decision day it's good to see you thank you so much for being with us again nice to be with you live like to get your first reaction as always, because it certainly seems what was at the beginning was not what it was at the end. It sure did. It kind of turned into a Lucy and Charlie Brown in the football sort of a deal. It throws out there that he's getting mindful of the tightening that's already gone past and respectful of the fact that there's lags in monetary policy. And that sort of created a little bit of a party. They had a big rally in the two-year treasury yield went down and stocks went

up a lot. And then the presser comes and it's kind of like old times when the presser comes out and all of a sudden the message starts to get sculpted a little bit differently. So he sort of contradicted himself. He sounded kind of dovish with sort of a, huh, you know, we've tightened a lot already. And then suddenly it's what we think rates are going to go higher than we thought before. And kind of put the kibosh on the idea of anything resembling a pivot, a plateau of quite some time. And I think that really was intentional to kind of, Peele said he had to thread the needle. He kind of like straddled the problem

rather than threaded the needle. We were watching it at the same time. You did think that it was significant that that language was put into the statement, the language of we'll consider the cumulative effects and the lag effects of what we've done to this point. And that was the dovish message. You thought it was important that it was in the

statement. Yeah. I mean, it's quite a shift from we need clear and convincing evidence, which were statements prior this year. And he put this one in, I think, to just show that he's mindful of the fact they've gone a long way. You know, Scott, I was very critical of the Fed back in May. I thought they were way behind the curve. I've kind of somewhat facetiously said they should raise rates 200 basis points and then see what happens. But they've kind of done that. And they were miles behind the message of the bond market. And now they're pretty much beyond the same block as the message from the bond market. And so I think that he's trying to make sure that he's not just perceived to be on a scorched earth path. The real question is,

what do they do from here? What should they do from here? I think they're going to do what they should, because when I glue these statements together and try to figure out how they can be consistent with each other, I think what Powell said without saying it out loud is we're not going to raise 75 at the next meeting as a base case. I think that's kind of what he meant by we're respecting how far we've gotten. We know that there's lags. So I think we're probably going to get them slowing down. And the bond market has basically got the two-year treasury at 450. And that's kind of, you know, they're talking about 425, 450. So they're pretty in sync. Larry Summers tweeted yesterday to the suggestions that the Fed should either slow down or pause very soon. He said it's, quote, badly misguided. On balance, given its past errors, the Fed should stay on the current course

and then evaluate things. You agree or disagree with Mr. Summers, a former Treasury Secretary of the United States, who's been one of the chief critics of the Fed? I was very much in line with what Mr. Summers is thinking back in May to July. But I think what he's missing with this analysis, because he doesn't talk about quantitative tightening, because quantitative tightening has an effect too on things. Remember 2018 in December when we were on autopilot with both rate hikes and quantitative tightening, and they had to pivot almost immediately. So I think he's kind of missing that. Also, the big inflation pop that caused all this tremendous change in attitude of the Fed towards rate hikes was fueled primarily by the

terrible CPI data of the first few months of this year. And so suddenly we went from very modest rate hike expectations to very big rate hike expectations. But of course, what that means is those numbers are going to be rolling off. So while the CPI has been hanging out on the headline in the eights and even got to 9.1, it's coming down next year. We'll end this year at around seven. We'll probably be below four and a half as a base case. Things can always change with commodities by the May reading. So I don't know. It just seems like if that's what's coming, you're getting the CPI rate down by a few hundred basis points. And we've got

quantitative tightening. And the Fed did not say they're not raising rates. Quite frankly, they said they're going to raise them more than they thought maybe a few months ago. But you think a slowdown is warranted for the very reasons you're suggesting, that you think inflation is going to roll over hard, like David Rosenberg has talked about in the last 24 hours or so, because of, in some part, the money supply coming down, that inflation is going to get crushed. The money supply coming down is already a fact. It's not a prediction. It's something that's already percolating through. And the Fed raising these rates has inverted the curve. And the Fed got pretty frightened, I think, of how flat the three-month to 18-month, which Jay Powell claims is his favorite yield curve analysis, how flat that got. So that all suggests to me that we're getting

more deeper into the process. And I think that Rosie is right, that when inflation starts to come down with all of this Fed activity, thanks to the M2 and the recent decline, which could be reversed, but so far recent decline in commodity prices. Who thinks the inflation rate, well, the economists think the inflation rate is going to go from 8.2 today on the CPI to something like two high twos, mid twos by the end of 2023. Some people even say 2% by 2023. And then the weird part of the forecast is they say it's going to stay there, right at two, like a rock for the next many quarters, which is completely implausible in my view. If you're manipulating through policies a seven-point decline from peak to trough in the headline CPI in that compressed of a time frame, I think your chance of it stopping

at two is very low. You think it's going to go well below two? It's a conditional prediction. If they get it from nine in the past couple of months down to two by the end of 2023, it's going to go negative, I think. What about the terminal rate? Where do you see them taking that? There are suggestions by some former Fed officials. Fred Mishkin was on in the lead up to the event itself today, said five minimum. And I think more than that. Can they do that? I don't think they're going to be able to pull that off. I think that

there's too many signs of the economy weakening already. The leading economic indicators, which no one wants to talk about anymore, but they're negative year over year. They're negative 5% for the last six months annualized. That's a very strong sign of a recession in several months. The yield curve is inverted. Of course, that's twos, tens at negative 50. That's a precursor with a few-month lag of a recession. So I just think that with the CPI coming down and the unemployment rate will probably start to cross its 12-month moving average

just by going up a little because 12-month moving average just by going up a little, because 12-month moving average is falling, that's another high-frequency important indicator of recession. With all those things going, I just kind of think that where the market's priced right now might be a little too aggressive. The market might be at 5 for the terminal rate. I'm going to go with more like 4.5. So you go 50 in December?

Depends on the data, but yeah, I would, I certainly, as a base case, I would say no 75. And then after, you'll just have to see based on what the data is. Well, how are you going to get, what's 450? I guess it's 75 basis points more or something, so a 50 and a 25. So you tweeted maybe a week ago or so that you thought yields, particularly on the long end, have looked like they have peaked or they might be peaking.

Do you think they have? It might have. I guess this today changed the calculus of that projection from you? No. The yield curve, you know, flattened a lot. You know, long bond ended up giving up the goes goes too, but it didn't drop very much. It's really the short end that really got hammered, as it should have been during the market today. So, yeah, we peaked out on the 10-year at about four and a quarter.

It didn't last very long. And I just think that if it gets back to four and a quarter, I think you're supposed to buy it. So, we've spoken many times, as we've told our viewers, reminded them of these conversations that we've had every Fed decision day. And you said yourself how critical that you have been of the Fed. We're on a seven months into this new regime of raising rates. You've likened Chair Powell to Mr. Magoo. Yeah. Right. Going to drive this car into a dumpster. How would how would you now assess what the Fed has done, taking, going to drive this car into a dumpster. How would you now assess what

the Fed has done taking everything into consideration to this point? I think they've played catch up in a pretty, I think an admirable way that they've played catch up. I mean, they were slow and it was compounded by the problem that the CPI was being driven by all these commodity spikes that have since relaxed. But they're kind of in the spot where I think that they should be at this point. I really think he's getting better. He does seem to have a tendency to get more hawkish the more he talks at these press conferences, and that really took the market into the woodshed today. We actually had an outside day down on the NASDAQ. The high today was higher than yesterday's close.

Yesterday's high. The low is lower than yesterday's low. We closed below any print yesterday. That's a very bad technical reversal signal. The question is, will the real Jay Powell please stand up? Who is the real Jay Powell? Is it the one who, from here forward I'm talking, sounded dovish in the statement or was decidedly hawkish in his own rhetoric? I think when people saw that in the statement, people often hear what they want to hear. I've learned that people hear what they want to hear and hear what they fear. And so when they heard that, it sounded dovish. But you definitely, I would not call that a dovish Fed press conference and meeting in its totality. I'd actually say, when the Fed chairman says, we think we're going to have to take it higher than we thought last time I talked to you, that sounds hawkish to me. It certainly did to the market. Still have

a ways to go, he said. The ultimate level of interest rates will be higher than previously expected. That was literally the moment where the market rolled over you showed me the two year which ripped higher and that's kind of where we stayed for the rest of the day well we kept we kept selling off stocks close at the low the two year treasury closed at the high yield and so yeah the market definitely took that as a pretty easy to comprehend statement. When someone talks about we're going to have to consider lags of monetary policy, okay, I'm glad that you're aware that there's lags, but you know that they're variable, right? That's the other part of the monetary lag quote from Friedman, I think it is.

And it's sort of like, well, so how do you know what the lags are going to be? And frankly, he answered a question. He said, well, we used to think they were long, and now research thinks they might be a little shorter. So the fact that he respects the lags might be fine, but I'd like to know how that is going to enter the conversation. So we're no longer just data dependent. We're now data dependent with a framework,

thinking about what we've done so far and what the lags might be. I'd like to hear more on that. Okay. I'd like to hear more from you on the investment opportunities that lie ahead, given what happened today and what you just articulated, your feelings about it. Let's slip in a break. All right. We'll come back here in Denver to Schwab Impact more with DoubleLion's Jeffrey Gundlach. We'll find out where your money will work best in the months ahead next.

We're back in Denver at the Schwab Impact event with Jeffrey Gundlach of DoubleLine, of course, who is still with us today, reacting to the Fed meeting and the news conference. You have said that you thought recession was inevitable. You still stand by that call? Well, under a long enough timeline, everything's inevitable. But yes, I think a recession is easily 60 percent in the next, I'd say, six to eight months. And for the year 2023, I'd put it more like at 80. At 80. OK. In terms of investing opportunities that I wanted to get from you, you tweeted at the end of September that you'd been buying treasuries. You told us that as well. You called it an unprecedented opportunity. Does that opportunity still exist to that degree?

It has to do with, yes, it's the short answer. It has to do with how it fits into a portfolio. Because I'm not saying you're going to make a lot of fortune on long bonds. But what's happened in the bond market and the treasury market is part of this, so is the stock market intertwined. We entered this year with no yield anywhere and stocks wildly overvalued versus their own metrics historically of PEs and price to book and all that. And as overvalued as stocks were by historical comparisons to stock valuations, they were actually cheap to bonds. Bonds were just terrible, but not anymore. Everything has changed. Stocks are, of course, way less overvalued than they were at the beginning of the year, but bonds have done really badly. And they've gotten so cheap

to stocks that that whole relationship has reversed reversed so not only our treasuries now potentially a profit maker I mean if the long bond is four and a quarter it can go down I mean our model which is the price of copper the price of gold which has worked very well over time suggests that since copper has been so weak and gold has been stable it actually suggests that the 10-year treasury is overvalued by about 200 basis points in yield. In other words, it could fall a couple of percent in yield if there's a recession next year, which is kind of what the model seems to be predicting. So that's a pretty interesting way of maybe making some money.

But it allows you also, by owning those securities, it allows you to buy this bombed-out credit market. Treasury yields have risen hundreds of basis points this year, but spreads on non-treasuries have widened. Spreads on guaranteed mortgages have widened by 100 basis points. So their yields are up 450 basis points. Junk bond yields got out to 600 basis points. They've come into about 480. When you tack that on to a 4 plus percent tenure,

you're starting to push 9.5%. You've got emerging market debt that's up with those yields. There's things in the single B, triple B category in fixed income that are asset-backed securities or different parts of the credit market where there are yields of 12%. Now, to take those yields, you've got to take risk and you've got to be aware that you could have some bumps along the road. That's what the treasuries do for you, because the treasuries will yield over four. And if you can get a 12% return prospect from this credit stuff, you glue it together, you've got an 8% that has a natural hedge. Because if the credit does badly, the treasuries will do well. And if the Treasuries

just hang out, credit will probably have a pretty good year next year. And so that's a really good opportunity. It's far, far more attractive than stocks. Complete reversal of early January. We've had many people sit next to me in overtime in this program and suggest that munis are the place to be right now. They were. Not anymore. They're just, they're rich to treasuries in my view right now. They were cheap and there was a big treasury rally, irregular, but a big treasury rally

that munis didn't really participate in. So, sorry, I said rallies, a sell-off. So the yields went up on treasuries, they didn't go up on munis. And so treasuries became more attractive and muni yields were more static. So as a trade, I think the yield comparison favors Treasuries right now. Although taxes are going up. They just raised my taxes in California by 1.1%, I found out. And there's a proposition on the ballot next week to raise them another 1.75%. So that obviously makes Munis a little bit more attractive. But they were cheap a few weeks

ago, for sure, versus Treasuries. But maybe that opportunity has... I think that's kind of been... The juice might be out of the orange on that one for the short term. Interesting. Also, I think there might be some tax loss selling that goes on. This will be a big tax loss year-end because there's losses everywhere. Everybody knows that 60-40 has been terrible. It's actually not the worst 60-40 of our lifetime anymore. It's now, 2008 is now worse again, back in the driver's seat. So there's a lot of losses. Bond index funds down 16%. Stock index funds, some are down, Dow down nine, NASDAQ down probably 24. A lot of tax loss selling. That could affect parts of the mini market it might make an opportunity.

You said we were on stage. For those who don't know, we were on stage and we came right here. You said that you thought that tax loss selling was one of the key risks right now. I do. In the market between now and the end of the year. I do, because there's so there's so many losses to be harvested in every category. The only thing that is up year to date is the dollar and commodities. That's it.

And the only thing that's up since the Fed started going to 75s, the only thing that's up is in traditional asset classes is the dollar. Everything is down. So there'll be pretty high tax loss selling, I would think. I even got a white paper from somebody saying they're proclaiming to their clients this was the greatest tax loss selling, I would think. I even got a white paper from somebody saying, proclaiming to their clients, this was the greatest tax loss selling opportunity of a generation. I would say it might be two generations. Wow. Speaking of the dollar, you have been looking for the dollar to weaken eventually.

Yes. Because you think that yields have peaked. Do you think the dollar's peaked also? I think we're getting close to a recession. And the response to the recession will be a collapse of interest rates. And since the dollar has been strong, thanks to the aggressive Fed, who has pretty much told us they're going to stay incrementally aggressive versus other countries, they're going to raise rates higher than they thought, they're going to keep them there for a long time. So I don't think

the dollar, the moment for the dollar weakness is here yet, but it'll come in the next recession. So maybe the time to position for weaker dollar will be later in the first quarter, early in the second quarter of next year. So that would mean, for those who have followed our conversations, you've suggested one of the best trades that you're waiting for is a weaker dollar and then a move by you into emerging market equities. That's right, and I once had a profile written to me

that called me Mr. Patient, and that's what I've been on this emerging market equity trade. I've been thinking about it for a couple of years, have not pulled the trigger, not even for a penny, because we need that dollar to weaken. But once that happens, I think you're going to have a double whammy of outperformance of the equities and a currency appreciation potential, which could lead to some pretty eye-popping returns, which should only be expected because market pendulums do not, they don't swing and stop, just like inflation doesn't swing and stop. They swing and go past.

So we could see some pretty eye-popping numbers out of this horrific, horrific couple of years in emerging market equity securities. We'll leave it there. I really appreciate your time, as always, on this Fed Day, and I look forward to doing it at the next meeting. Yes, sir. It's always good to get your first look at what happened and what was said.

That's Jeffrey Gundlach of DoubleLine joining us here in overtime exclusively. Mike, I'll send it back to you. All right, Scott, thank you very much. Coming up, we're tracking some big stock moves in overtime. Christina Partsenevel is standing by with those. Hey, Christina. Etsy shares soaring right now, even though it rode off a billion bucks for one of its purchases. And the elevated threat environment means future growth for this cybersecurity firm.

I'll explain it all after the break. A quick check on this afternoon's earnings movers. You see Qualcomm down 5%, Roku off 18%. Both those companies issuing weak guidance. We are tracking some other big moves in OT. Christina Parts de Nevelos has them. Hey, Christina. Well, let's start with shares of online marketplace Etsy soaring right now.

The company posted an earnings beat of 58 cents a share. That's excluding a billion-dollar impairment charge from its purchase of resale website Depop. Q4 guidance fell in range with estimates as well. The company increased revenue was actually helped a little bit by higher transaction fees. And the CEO saying, quote, we don't know whether consumers will spend more or less on gift giving. But the good news is that Etsy doesn't carry a lot of inventory. Shares are up 9 percent right now. eBay shares jumping in the overtime. That's after topping analyst estimates for the third quarter. Maybe more importantly, the current quarter guidance was within analyst estimates for both earnings and revenue. The CEO

attributing the success in part to recent technological investments, making it easier to operate during the pandemic. Shares are up 7% or 7.5% at this point. And a beat on the top and bottom line for cybersecurity firm Fortinet with Q4 revenues a touch higher than the street estimates. That's guidance, of course. Managers are saying future growth will be driven by the convergence of security networking and the elevated threat environment. But look at the stock down over 12% right now, most likely because Q4 billing estimates fell short. And that's why the street is reacting right now. Mike. Christina, thanks so much. Last call now to weigh in on our Twitter question. Head to at CNBC Overtime to vote. We'll bring you the results

after the break. Overtime back in two minutes. Now for the results of our Twitter question. We asked, will stocks be higher or lower by the next Fed decision? The majority of you saying lower. Don't fight the Fed or the tape, apparently. That now does it for overtime. Fast Money begins right now.