Closing Bell - Closing Bell Overtime: Qualcomm Sinks On Downgrade; Top Opportunities In Alternatives 8/12/24

Episode Date: August 12, 2024

Stocks slid into the final hour today ahead of a major week of data and consumer earnings reports. We get you set for the week ahead with Carson Group’s Ryan Detrick, Silvant Capital CIO Michael Sansoterra and RockCreek’s Afsaneh Beschloss break down the market action. Plus, Wolfe analyst Chris Caso on his QCOM downgrade that sent the stock lower and Deutsche Bank analyst James Shin on why Eli Lilly is his unicorn. Neuberger Berman’s Anthony Tutrone on top opportunities in alternatives and where private equity is getting active.

That's the end of regulation. USA Volleyball ringing the closing bell at the New York Stock Exchange. Xometry doing the honors at the Nasdaq. Well, stocks trading in a very tight range. Out of retail earnings and inflation data, with most S&P sectors lower, small caps pulling back as well. Looks like the S&P is almost perfectly flat here. We'll see where it settles. That's the scorecard on Wall Street, but the action's just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan. John Fort is off today. Well, coming up this hour, a major price target hike for $800 billion pharma giant Eli Lilly. We will talk to the analyst who just upgraded the name to buy and raised his outlook for the stock by $300, calling it a high-growth unicorn. Plus, NVIDIA bouncing back in a major

way today. But fellow chipmaker Qualcomm is under pressure. That's after Wolf dropped its outperform rating on the stock. We will hear what's behind that downgrade in just a moment. And Rock Creek founder Afsaneh Beshlas joins us with her read on market volatility and how the 2024 election is impacting her investment decisions. But first, let's bring in our market panel to break down today's action. Joining us now, Ryan Dietrich from Carson Group and Michael Sansaterra from Sylvan Capital Management. Good afternoon to both of you. Unchanged, Ryan, on the S&P. I mean, man, what a difference a week makes after the stark sell-off we saw last Monday.

I mean, we talk a lot about seasonals in August, but here it is. No, you're right. Thanks for having me back, Morgan. Appreciate it. And yeah, what a difference a week makes, right? I think it's really impressive. We had that big drop last Monday. That's not the impressive part. Then Thursday, we had obviously a big rally. What's happened the last two days? Like nothing, right? It's almost like watching paint dry, which we think is a really positive thing. But I think it's so important. I know a lot of guests have pointed this out.

For whatever reason, August tends to be that month where he's out of the blue. A lot of times international things, right? Iraq invades Kuwait in 1990. Another U.S. debt downgrade. And then the one I think is a lot like 2015, the surprise Chinese yuan devaluation. That was the first 1,000-point drop ever in the Dow. And that was one of the more recent times we saw a 50 spike in the VIX. I sound a little bit familiar. And that was

a fairly significant low. So we get into all the details. We think that the economy is just fine, slowing, yes, but not a recession. And this is just your August volatility, which is normal. All right. Love the references from history. Going to dig into that a little bit more. But first, Michael, want to get your thoughts here, especially as this does feel like it's the calm before the storm. I realize we're talking about low volatility. We're well into August now, but we do have a number of potential catalysts here for this market at a time where investors are trying to get their footing, whether it is some of the retail sales and retail earnings we're getting, some of the tech earnings we're going to get this week as well. And then, of

course, perhaps the biggest, the inflation data. Yeah, no question. We're about 85 percent of the way through earnings. So now we're looking back to more macro data until we get NVIDIA in a couple of weeks, which I think will be a bit of a bellwether moment as well. But I would agree with Ryan's output, at least at the end there. There's no question that the growth has been slowing, but does not appear to be recessionary. So as long as the data doesn't drastically change, we've seen inflation sit pretty tight, lower, but not a lot lower. At the same time, we didn't see the jobs number get notably worse in July, which I think is sort of in that long-term Fed range from an unemployment

standpoint. It looks like things are still on track for growth. And that's a good thing. So now we wait. We watch the paint dry until we get some more data. Ryan, Russell 2000, the small caps down almost 1% today. It was really the big cap tech names that led for the market. And you saw that with the Nasdaq eking out a gain here on this Monday afternoon. The rotation we were talking about before we got a correction or a pullback, depending on what average you're looking at, does that still have footing here? Now, we think it does. And again, it does come down to inflation, which we're going to find out with the CPI coming on Wednesday. Mike pointed out before we joined, right, the three-year expectations on inflation,

according to New York Fed, is the lowest it's been in the time of their survey, which is at least 11 years. So we're seeing inflation coming back. And we do think, you know, the idea that Fed rate cuts are coming. Yes, we're in the camp. Maybe they should have cut before, but maybe we get 50 in September and then kind of reevaluate. But the bottom line, again, is the economy strong. I mean, look at productivity numbers, right? We haven't talked about this yet. Productivity has been really strong in our country for over a year. The last time we had extended strong productivity was the mid to late 90s, another time where the Fed was able to cut a couple times, wages stayed high, economy wobbled, but then expanded higher. And again, we think this

rotation trade, you want to call it that? I mean, we like industrials. We like financials. We do like small and mid caps as well. We're overweight those areas. We don't see a recession. And industrials and financials led last week, and they're hanging in there again. And we we think those are some areas that are still gonna be pretty good the rest of this year michael what are you buying here uh you know we still like the stocks we've liked pretty much all through 2023 and into 2024 uh we like nvidia on this pullback that's been one of our long-term holdings of owners since 2020 uh we think that's still got the best fundamentals in the space and despite the fact that there's a lot of fear and hand-wringing around the DOJ potentially looking at them, as well as some of the issues around the Blackwell launch, we think NVIDIA continues to do well,

continues to dominate. This is a very long-term prospect on the generative AI story. We like Eli Lilly in healthcare quite a bit. We've been big fans of the Deutsche Bank upgrade today, also a stock we've owned since 2020 in the Focused Growth Fund. And our goal here has been to just ride these trends when the expectations are wrong. We've seen 2020 expectations for the Manjaro market was $250 million on the sell side. And then two years later, they did $5.2 billion. So we know that number continues to just exceed investors' expectations. They continue to grow the market, expand the market, reprice the market. We think that works well in health care. And from a sort of a little bit of a cyclical growth name, we're big fans of

General Electric, believe it or not. Not a stock we thought we'd own for a while, but the conditions for growth were met, the key metrics were inflecting. And as they continue to do exceptionally well, the one thing they've always done well, which has been aerospace and defense, particularly engines. We like the short body and the narrow body plane engines for with the leap deal. And we like the slow but steady recovery at Boeing at some point when we see more production from both Boeing and Airbus. Keeps those engines getting sold, keeps those service margins rolling in. We think General Electric's got good prospects going forward as well. What a difference half a decade makes, speaking of GE. All right,

Michael Sansaterra and Ryan Dietrich, thanks for kicking off the hour with me in what was a mixed day of trading for the major averages. The S&P, though, basically finishing unchanged here, 53-44 and the 10-year Treasury note at about 3-9 right now. Let's get to one of the big calls of the day on the street. Wolf Research downgrading Qualcomm to pure perform from outperform, citing concerns over Qualcomm losing modem sales as Apple closes in on an internal modem for its new iPhones. Qualcomm shares recovered from their lows the day but still closed in the red. You can see down about 1% on a day when fellow chipmaker NVIDIA, which we just talked about, jumped 4%. So joining us now is the analyst behind that call, Chris Caso from Wolf Research. Chris, it's good to have you back on the show. Going to start right there with the downgrade. Why now? And haven't we heard this before about internal modems and the decoupling from Qualcomm

with Apple, and it didn't actually come to fruition? Well, we did. We've been hearing it for a while and we think that's what changed today. It's really what drove the downgrade that we've been hearing this for so long. And we think that Apple has finally made enough progress on the internal modem in order to get some of those units in there. So what's different now is a couple of things. One is that we think Apple has made some progress and it's not in the numbers for either Qualcomm's fiscal September. The stock is up 25, excuse me, 50% since that point. So, you know, it's a combination of finally we're here is a little bit of boy who cried wolf and the wolf is finally here. And then plus the stock is up since that situation is why we made the decision to downgrade today. OK. You also seem like you're skeptical based on this note on the IOT play. And we know in the last earnings recently, Qualcomm was really

talking about industrial IoT. Well, and when you go back a couple of years ago when this came up for one of the earlier times, you know, we defended Qualcomm stock at the time because what they had in their pocket was very strong auto revenue. And, you know, right now, you know, going out to fiscal 26, they now have $4 billion in auto revenue that's coming in. And the nice thing about auto is you have a good three years of visibility on that. Again, since then, the stock's up a lot. Auto is now in the estimates. The iPhone reduction is not.

And what the company hopes to replace that with, which they'll talk about their analyst day in November, is IoT. And the problem is IoT, it's a more competitive market. There's more companies in it. It's harder to get visibility. And with auto already in the numbers, we just think that's going to be a tougher sell to investors. OK, I'm going to ask you a twofer here because we have AMAT earnings later this week. How much of that is a leading indicator to what we're going to see more broadly in the second half of the year with semis? And then later this month, we have NVIDIA, and we know it's sold off pretty aggressively, but now people are buying again. Yeah. So for applied materials on Thursday, you know, we think, you know, kind of near term,

it's fine. We're starting to see some of the memory spending coming back. What they've already said is some of the China spending is declining for them in the second half. But really, the real prize for applied materials comes next year where we see stronger memory and then stronger TSMC spending as they bring up their two nanometer node. So really, that's what we're playing for on applied materials. The other thing we say is Intel cut CapEx two weeks ago. That's going to have some effect on calendar 25. Now, Applied's probably not going to talk about calendar 25 there, but it's something to consider. We think it's about a 2% impact to AMAT. With respect to NVIDIA at the end of the month, listen, we think things are fine. And the bottom

line there is demand is well ahead of NVIDIA's ability to supply. There's been all sorts of noise about, you know, some of the product delays and whether or not the hyperscalers would step up for the CapEx that's needed. But for right now, and especially for this report at the end of the month, as long as demand is far ahead of supply, we think the company is going to sound good. All right. Chris Caso, thanks for joining me. Thank you. Now let's bring in CNBC's senior markets commentator, Mike Santoli, with a look at how so-called high-quality stocks are performing. Mike. Yeah, Morgan, they've been hanging in better than the broader indexes,

as you might expect as the tone of economic sentiment gets a little bit more defensive here. So you see on a year-to-date basis, this is the S&P 500 high-quality ETF. It's one methodology for screening out better balance sheets and returns on capital. And it has opened up a pretty good lead against the broader S&P 500. So yes, it's a big tech holding in this ETF. It's like one-third technology, but it's also got a lot of things like staples such as Costco and Johnson & Johnson, which has had a great run in the last month, is also a very big holding. So, so far, it's doing what it's meant to do when waters get a little bit choppy. Now, on the other side, talk about the parts of the market that have really been abandoned. The airline index,

obviously, that JetBlue news today did not help this. But if you see where this has brought it down to, down 4 percent today on a five year basis, it's obviously down 50 percent. But I find it interesting that we're essentially at these significant lows that we have only really exceeded during the pandemic. So basically, investors are signing very little prospect of near term improvement in terms of profitability in this group. Now, this also gets to a different point, which is if you're an economic bull, if you think the U.S. economy is just having a stutter step and is going to pick up again, there's just a lot of parts of the market that have been discounted severely, going entirely based on another view.

So, you know, it's definitely some opportunity if you have a variant perspective on this whatever kind of landing we're going to have, Morgan. It also kind of speaks to when you look at the airlines, it kind of speaks to the impact. And this has been, you know, sort of an active debate. Adam Crisofulli, who's on the show regularly, has talked about it. The impact of disinflation and even deflation on the companies themselves after such a strong run with earnings these last couple of years. I want to go back to the quality stocks for a second, because Bespoke today basically pointed out that dividend stocks have outperformed since the S&P 500 peaked in mid-July. So when we talk about quality names, how much of that speaks to the

dividend component as well? Yeah, the huge overlap with the dividend stocks, in particular the dividend growth parts of the market, I would say. But the other thing there is yields have come down so much that on a relative basis, the other thing there is yields have come down so much that on a relative basis, the equity dividend yield is starting to look pretty good again. And so all that's working in favor of those parts of the market. Again, you can't necessarily say, well, that's it. That's going to be the whole trend for the next couple of years. But for right now, those parts of the market where people are willing to give up some of the great upside in a very aggressive momentum market are paying you back. All right. Quality stocks, quality analysis, quality correspondent Mike Santoli. Always great to get your thoughts. We'll see you

later this hour. See you soon. It's been one week since the yen carry trade on wine sparked a massive global sell off and a number of firms are sounding the alarm that the volatility is not yet over. Up next, Rock Creek's Afsaneh Beshlas gives her take on this uncertain environment and where she's putting money to work right now. And later, Eli Lilly has surged more than 50 percent this year. One analyst thinks the stock has another 15 percent rally in the cards. We will get the bull case for the pharma giant. Overtime, it's back in two. Welcome back to Overtime. It's been one week since a global sell-off rocked investors, and some Wall Street firms are not convinced the worst is over. Raymond James and Cantor Fitzgerald say investors should expect more volatility. Canaccord says the

correction has more room to run, but UBS calls it a favorable backdrop for equities. Well, joining us now is Asana Beshlas, Rock Creek Group founder and CEO. It's so good to have you back on. Welcome. Great to see you. Thank you. So I'll start right there. We saw the unwind of the yen carry trade last week. We've seen some fears about economic growth slowing and a jump in the unemployment rate. How do you see this market? I think we had the technical changes last week, but we also had sentiment shift last week with what was going on in our own markets that really quickly spread through Asia, through Europe and across the globe. We also saw the corrections. But as we've seen today, things are still a little bit softer. And I think what is going on is on the inflation front, certainly inflation is slowing down. We're

seeing all the indicators. And our guess is that the Fed might have been slightly behind and might jump in with more likely a 50 basis point cut in the next cycle and potentially another 25 basis points before year end. Unemployment also is shifting and we are seeing both white collar and hourly wage earners being affected sort of a little bit negatively. And that could continue. However, I think what is going on at the same time is we don't see a recession per se. We are seeing much more a scenario of soft landing. Some people in the administration call it a feather landing. A feather landing. Is that just synonymous with soft landing or does that...

Softer than soft. Softer than soft. OK. So in light of that, then, what does it actually take for the Fed to get to 50 basis points in September? Because this is the great market debate right now. And whether it's going to take more deterioration within the economic data or whether it's just the Fed behind the ball. Obviously, the numbers that are coming up this week will be very important. We've seen a lot of earning numbers last week, but we'll see things that are more consumer-related like Walmart this week. We also are going to have inflation numbers come out and other numbers that will come out this week,

and I think that will obviously have a big impact. You have a Jackson Hole meeting coming up. Again, I think the Fed does not want to make the same mistake last time being behind on the other side. And this time round, if you're seeing signs of softening in the economy, given how high the rates are and given that there are other measures they're taking that is still shrinking the size of the total economy, I think it's likely that they would reduce, start reducing this September. Okay. So if we shift from monetary policy to fiscal policy, you're starting to see that volatility associated with the election

inject itself into the markets here. You've got the Democratic National Convention next week as well. You've been doing a lot of work gaming out election outcomes. What are you finding? It's really interesting. Obviously, I think people start focusing on the election after Labor Day and after the convention. But what we're seeing is this big shift that is happening even before Vice President Harris has come out with her economic policies, we saw a very, very positive sentiment shift in terms of the economy that has just been happening in the last week without much action. And our expectation is that she will be most likely more business friendly and reaching out to broader groups of business, not just Wall Street, but also small businesses,

medium-sized businesses, which will be potentially positive for growth. Also, it's an administration that is likely to start executing on some of the things related, let's say, to the IRA, like permitting, permitting, which is executing on permits so that a lot of the projects, whether they're about clean energy or other sectors, can move forward will be very important. And you've seen with Governor Walz that he was relatively early in this area in Minnesota. So I think those are things that are going to be very positive for the economy. Also, an economy that is more pro-labor is likely to ensure that wages stay higher, which means that there will be higher consumption, hence growth in the economy.

That's the positive, obviously. Plus rule of law, which I think is frankly the most important if we want to have internal capital flows into our markets and foreign flows, international flows into the U.S. You need rule of law and you need Fed being independent. It's very, very important. And those are things that are going to be things that you don't think about, I think, with a democratic decision. OK, there's definitely some nuance there versus I think the debate we've had about the two political parties over the years. I do need to ask about geopolitics because we are starting to get more

reports, more signs that maybe that retaliatory strike potentially from Iran toward Israel could be coming, could be imminent. How should investors be thinking about this? What does that mean in terms of geopolitical risk premium? So two things about that. I think in the past, Iran has sort of come to the verge and done just enough damage not to create a war situation in the past. This could be different, and that would obviously be hugely negative in terms of geopolitics, but more broadly about markets in the short term. I think in general, when the Middle East has experienced tension, the area that gets affected most is energy markets, and particularly oil markets. I think in this case, given where oil prices are, given the

very big rise in alternatives to oil, including LNG, including natural gas, including alternative clean energy that has been growing quite fast. The impact will be there in the short term, but maybe not in the longer term. So the impact of a potential war scenario, and I am not suggesting that there will be a war. I think they will go to the brink and have a lot of conflict, but not necessarily have an outright war, would be likely not as big in the markets as one might expect. Okay. We just covered a lot. Thanks for joining me. Thank you. Up next, the bull case for Eli Lilly, Deutsche Bank's analyst who just upgraded the stock and bumped his target, his price target by 300 bucks. He's going to join us to explain why

he says the stock is a high-growth unicorn. And later, are private investments your best hedge against volatility? Newberger Berman's head of alternatives breaks down the best opportunities he sees right now in private equity. Stay with us. Welcome back to Eli Lilly. Coming off a major week of gains after posting solid earnings on Thursday, the company hiked its full-year revenue forecast by $3 billion on demand for its diabetes drug, Monjaro, and weight loss injection ZepBound. Today, Deutsche Bank raised its price target on the stock by $300 from $7.25 to $1,025 per share, calling it a, quote, low beta and high growth

unicorn. Joining us now, the analyst behind that call, James Shin of Deutsche Bank. James, it's good to have you on. Why upgrade now? Hi, Morgan. Thanks for having me on. Why upgrade now is a great question. Quite frankly, Lilly had an excellent quarter. They executed in the US with both Monjaro and Zepbound, so they didn't have to pick between their favorite child. And then they unlocked to Europe. That was a huge surprise to us. And again, they're supplying both US and Europe somehow.

That's a huge lift. And supply has always been a question for these Eclipse 1s, right? Like Lilly is treating their manufacturing like the Olympics. They're racing really hard. And to us, when we look at the data, the injector data that's available through IQVIA, we can see that they have actually crossed their bogey of one and a half times sellable doses, which we think is injectors. And they've done that already towards the maybe earlier part of this year so they had good visibility into this guide lift and they're probably going to keep there's upside maybe possibly into the second half of the year so we feel good about the back half and then you know the backdrop competition that's coming we

acknowledge that but they're so far out and when you think about holistically the problem space there's very few names that have li's properties of low beta, high growth. So, you know, like I said, there's very few alternatives. So really, it's a great destination for investors. Yeah. And as our own Bob Pisani pointed out last week, it's it's part of the momentum stock ETFs as well. Just talking about the secular growth story. I mean, stocks up already more than 50 percent so far this year. Do you feel like you've by just upgrading now, do you feel like you've missed most of the run or is there really still

that much more to go, especially as you do start to have more competition coming online and you do have production ramping up and maybe the supply demand dynamics starting to shift? Well, if supply dynamics start shifting and let's say Lilly bridges towards meeting real-time demand, that just further cements growth looking better and better, right? Now, your point on competition is true. It's coming. But they're far out. And I think the most pressing competitor that Lilly would have to worry about is a very easy-to-manufacture oral. And there are companies that are working on things that fit that criteria.

But we're talking maybe 2030s, early 2030s before that happens. So until then, you still have a lot of runway in terms of growth looking good and solid for Lilly. It's just a destination name where you can just rely on that growth being there. They've also got the Alzheimer's treatments that are starting to roll out as well. They have other things in the pipeline. Investors are really focused on the GLP-1s. Is that really, is that the story? Is that the catalyst for this name right now?

Or should you be looking at other parts of the portfolio as well? It's hard to look elsewhere. I mean, you are right. They have some other great products. Kisunla is the Alzheimer's product you're talking about. They have Rosenio, a great breast cancer drug. But boy, it is hard to get away from this GLP-1 narrative. I mean, it's just a blockbuster. It's growing. It's meeting huge demand. There's clinical data

coming out that shows cardiovascular benefits improve mortality. It is hard to look past the GLP-1s, and rightfully so. The clinical benefits are there. As you start to see, assuming you start to see more insurance coverage pick up around these treatments, is that a tailwind or is that a headwind if you start seeing negotiations on the price? So you're right. These negotiations eventually lead to a price-volume trade. Anytime that's your scale and, you know, name an industry where if you don't trade price for volume, that kind of happens. Pharma is no exception.

Lilly is still early on, right? They're still working with commercial payers, third-party payers. They still have a little bit of time before they get to some of the Medicaid and Medicare, which they will have to get through comorbidity approvals. Remember, obesity is not covered by Medicare and Medicaid yet. So once they start negotiating with Medicare and Medicaid, yeah, they'll probably go through some of those problems, what those headwinds call it. And we just saw that with NOVA as well.

But that's just the name of the game of getting volume, right? You have to give up some price. Okay. James Shin, Deutsche Bank, thanks for joining me. Thank you, Morgan. Time now for a CNBC News Update with Bertha Coombs. Bertha. Hey, Morgan.

Massachusetts has reached a $600 million settlement with several tobacco companies, including Philip Morris USA. The state's attorney general announcing the agreement earlier this afternoon, calling it the state's largest resolution. The deal resolves several disputes from a 1998 master settlement agreement over annual payments. Several tobacco companies have held back for past and ongoing smoking-related medical costs. A new study suggests there could be an ocean of water underneath Mars' surface. The findings, published today in the Proceedings of the National Academy of Sciences, are based on computer models and seismic measurements from NASA's InSight lander. Scientists believe that the water is about 17 to 12 miles below the surface, most likely from the planet's rivers and lakes billions of years ago.

And a 4.6 magnitude earthquake hit the Los Angeles area just hours ago. According to the U.S. Geological Survey, the earthquake was centered near the city's Highland Park neighborhood. The quake did not cause injuries or major damage, and the National Weather Service said a tsunami was not expected. I guess in Los Angeles, that's just kind of a small earthquake, right? Not a big deal for them? They do happen. They do happen. Bertha Coombs, thank you. Glad everybody's okay so far. Keycore getting a big boost today on news of a minority state from Scotiabank. Up next, Mike Santoli looks at how far valuations have fallen for regionals and which other names could be takeout investment targets. And check out shares of Elf Beauty as we head to break. Having another ugly

session now down nearly 20 percent in a week. The company's CEO telling us on Friday on this show that he doesn't pay attention to the day to day volatility. Welcome back. Shares of KeyCore closed higher today after the Bank of Nova Scotia agreed to a stake in the company for $2.8 billion. The deal puts a spotlight on regional bank valuations. Mike Santoli is back. He's looking at the charts once again. Mike. Yeah, Morgan, you see here the regional bank ETF, the KRE.

It actually didn't finish up today, despite the fact that key was up nine percent. It opened higher and then sold off throughout the day. There still is hesitation just around, obviously, the general strength of the economy and consumer credit. But on a one year basis, it's kind of haltingly tried to keep up with the S&P 500. Obviously, if you go back a couple of years to before the Silicon Valley bank meltdown, it's way underperforming. Take a look here, though, at price to book values, because that's one of the things that this Bank of Nova Scotia investment in Key maybe puts a little bit of attention on is the willingness of that bank to pay a decent premium over the traded price to book value forBank. Key is very similar in valuation to Comerica.

Comerica did trade higher, about a couple percent on the day. And you see here that they're a little bit above the overall valuation for the group, which is like one times book value. But you see it's relatively modest, a small premium to book value. So maybe public investors are suggesting you have a strategic buyer out there willing to participate in regional banking, knowing what's going on with the cycle, and maybe it creates some kind of a psychological floor for some of these banks. You also got to wonder where we've got the Fed poised to begin cutting or maybe I should say cutting normalizing rates from here.

To your point, valuations are down and you have regulators who have basically said over the past call a year and a half, we'll let deals in this sector go forward right now. So how much does that continue to propel this type of dealmaking? Well, I think that's very supportive. The other thing about this deal for Key is that it's going to allow Key to kind of reposition its balance sheet, those kind of bond portfolios and things like that, really give it much more flexibility. Now, all those things you mentioned should be a help, but it's only if the economy hangs together. Because if the Fed's cutting rates, because the economy is really sagging, that's not necessarily going to help these banks or have those valuations hold up. So I think that's it's sort of a microcosm of the debate that's going on market wide.

All right. Mike Santoli, thank you. Up next, Neuberger Berman's head of alternative investments on his top opportunities outside of stocks and bonds. And check out shares of Barrick Gold surging after beating Wall Street's earnings estimates. But the gold miner is still significantly underperforming its rivals this year. Good finish today of 9%. Stay with us. Welcome back to Overtime. Global M&A activity jumping 17% year over year in the first half of 2024,

driven by a resurgence in North American markets. Meantime, Blackstone and Aries Management both making hefty investments in the latest quarter. So how can you cash in on the bump in deals and the money that's pouring into private markets? Joining us now is Tony Tutrone, global head of NB Alternatives at Neuberger Berman. He runs NB Private Markets Access Fund. It's an actively managed portfolio of private and alternative investments. It's good to have you on the show, Tony. I want to start right there. Private markets, it's been a hot investment for a number of years. It's just more so as of late. We're seeing a lot of money going towards retail investors and individual investors and high net worth investors getting into this area.

How are you positioning yourselves to capture some of those flows? Yeah, first of all, Morgan, great to be on the show today. And you've been talking all day about the volatility in the marketplace and some of the lack of liquidity that's occurred that's been temporary, hopefully. But these are the kind of markets that really favor private market investments. When you have long-term locked-up capital that's very flexible, you can take advantages of parts of the traditional markets that fall away where the air pockets happen, and you can deploy capital there very attractively. And I think that's what you're seeing Blackstone and the other firms you talked about doing right now, taking advantage of the current opportunities in the marketplace. Yeah. And you hear about that, right? That's part of the pitch that like less liquidity can't sell out on a down day, but less liquidity can't sell out on a down day. So it actually means that you trade that off for longer term gains. Historically speaking, I'd imagine that's the situation now and what you're the argument you're making to

investors now. Yes, it is. I mean, I've been in private markets since the mid 80s and private markets in its essence is about taking advantage of opportunities in the marketplace that other traditional capital can't. And so it's just given the long term focus of the private markets. We're not interested in day to day volatility. We can take long term view. And also remember the companies that private equity invest in, they control. So they can add a lot of value to the operations as a private company that might be more difficult to do in the public arena. And so you're able to take advantage of all those aspects to create greater returns. So where's the fund investing and how do you decide whether to co-invest or whether to jump in on a secondary? Yeah, so great, great,

great question. We, you know, we have, we manage about 120 billion in private markets here. We invest about 20 billion a year and both very active in the secondary market and the co-investment market. On the co-investment side, we do about 50 transactions, 60 transactions a year with really great lead sponsors. And in the market right now, we're seeing great opportunities again, because with the lack of the IPO market, with a constrained financing markets, private capital really has a role to play. And so we're seeing great opportunities on the co-investment side. I also think we're going to see a pickup and take privates with this volatility in the marketplace

and some of the short-term focus of the public markets. Seeing similar on the secondary side, we do have some investors that are over-allocated to private markets given the reduction in distributions that are coming back. And so they are using the secondary markets to reduce their exposure. This is mostly some of the long-term investors on the public pension side in the U.S. and some other places. And so the pricing in the secondary market is excellent right now. And also the secondary markets can be used by private equity firms themselves to access capital for their companies and to continue to

hold companies longer than their traditional fund lives allow. I'm glad you brought that up, too, and the impact that's having on the secondary market, because we've been hearing about that, right, that, you know, you've got interest rates at multi-decade highs right now. It's basically put dealmaking into paralysis. We saw that start to perk up the end of last year, even into the beginning of this year. And then that got softer again, too. And so it does seem like a lot of folks in the private markets are sitting on their hands and exit strategies and the deals are not getting done to the same extent they should be for a healthy market. Yeah, that's absolutely true. And the market, although I think it's recovering,

is still nowhere where it was a few years ago. And so I think the secondary markets, I think the credit, private credit markets are all available liquidity for investors in private companies and for private companies themselves. So there's great opportunities as a result of the lack of activity that we're seeing. And basically, private equity firms themselves are having to be more creative on ways to get money back to their investors. So you're seeing an increase in minority interest transactions, non-control transactions, what we refer to as GP-led secondaries or that where they're taking part of their companies or their portfolios and putting it in a new vehicle with new money from secondary investors and giving their investors, their existing investors, the option to either roll into the deal or to take cash. So if they want liquidity, they can take it. And if they don't, they can participate in holding those companies

into the future and hopefully generating even higher returns. Okay. Tony Tutron, thanks for joining me. Thank you very much. And for more on alternative investing, tune in tomorrow to Blackstone COO Jonathan Gray on Squawk on the Street. In the meantime, another private company in the news today, CNBC's Laura Kalodny, reporting that SpaceX has violated environmental regulations by releasing pollutants into bodies of water in Texas near its Starbase launch facility. That's according to a state agency. This comes after the EPA told SpaceX it had violated the Clean Water Act earlier this year. The violations could potentially delay approvals for future launches at the site and

result in monetary penalties. You can read more about this story right now on CNBC.com. Up next, we will discuss whether Macy's plan to close a third of its stores could be the death knell for shopping malls or force the industry to make a surprising evolution. And JetBlue having its worst day ever after announcing a plan to raise $400 million in cash through a convertible note offering. Those shares finished down more than 20%. It was a hard landing. Stay with us. Welcome back to Overtime. Macy's is set to close roughly a third of its stores by early 2027,

and that could spark a major change for the shopping mall industry. Melissa Repko has the details. She joins me here on set. 2027, it's not that far away when you think about how many Macy's stores we have around the country. Yes. As Macy's closes 150 stores, it'll leave behind a lot of empty spaces across the country. Its stores are big, typically 200,000 to 250,000 square feet. I spoke to real estate experts and mall owners about what may fill those stores.

Some of those uses might surprise shoppers. In a San Francisco mall, a former Macy's has been replaced by a movie theater, sporting goods retailer, and Whole Foods. In another mall, former department stores have been demolished and turned into apartments. A former Macy's in the Salt Lake City area will get an especially unique makeover. It will soon become the training facility for Utah's new professional hockey team. Macy's, for its part, has not yet said which of its stores will close. But as it shutters the stores, it said it plans to invest in the 350 Macy's that remain and will open new locations of its better performing stores,

Bloomingdale's and Blue Mercury. This is really fascinating to me. So, I mean, and we are starting to see it in even just here in the New York metro area, some of these conversions to other things. I know you've been watching, for example, conversions to housing. How does it speak to, I guess, the local demographics and how malls have to now shift to the constituents in the area? Malls really have to adapt to both the changing times and their changing demographics. They have to draw people in the area. And the reality is there's parts of the country like Northeast Ohio, where I'm from, where it's grown older in some areas and there's not the same kind of foot traffic to malls. And so maybe there's a need for a retirement community,

for example, or a medical complex. And that's different than before. The other thing I talked about with Brookfield Properties, which is a mall owner, is that, you know, the challenge that really intensified during the pandemic is getting people off the couch. You have to think about what is at the mall that forces people not to online shop. So

is that a bowling alley? Is that a restaurant? You know, is it a more experiential retail type store? What will get them actually in the mall? And then maybe while they're there, they'll actually go to the stores that are doing well, like a Lululemon or a place like that. Yeah, it's really fascinating to me. I feel like many times when I go into a brick and mortar, it's because I'm looking for inventory. I need it fast. And then sometimes I can't find it. So that's sort of a key piece of the equation. All right, so we get Home Depot tomorrow. We get Walmart later in the week.

We also get retail sales. And according to global data, at least 10 consumer-facing companies have already reported lower growth rates for North American revenue versus the previous quarter. Some of that includes stuff on the services side. But how much now hinges on what we hear from the retailers? The question is really, is the consumer tapped out? And the thing we'll be wondering and we'll be asking Walmart and a lot of the discretionary retailers target with wellness category two is, are they seeing any sign that that discretionary spending is picking back up? Are they seeing any relief? We heard last quarter from Walmart that inflation was moderating on the food side, but that wasn't really lifting

enough of other parts of the basket. Think clothes, home decor, things like that. And one early indicator may be the back to school season and how that's shaping up is Target, for example, or some of these mall retailers seeing a pickup as people get new outfits back to school, things to decorate the dorm. And what does that tell us about the holiday season? Usually it's seen as a precursor. There's a lot of that happening in my house right now. Melissa Repko, thank you. Thank you. All right. Well, up next, how a key reading on inflation could impact the market tomorrow, plus all the earnings that need to be on your radar. And it's not just retailers. Don't forget, you can catch us on the go by following the Closing Bell Overtime podcast

on your favorite podcast app. We will be right back. Welcome back to Overtime. Dow Component Home Depot is the big name on tomorrow's earnings calendar, but we will also get results from Madison Square Garden Sports, Tencent Music and Ibotta. Investors are also going to be closely watching a key inflation gauge when the July producer price index is released. The latest small business survey is also on the docket tomorrow. And Google is holding its annual Pixel hardware event, where

it is widely expected to release the latest versions of its smartphones, its watch, and its earbuds. So we have plenty on the calendar. And Mike Santoli is going to rejoin us now for what he's watching tomorrow, Mike. I think the Home Depot numbers, Morgan, are probably the first thing that we'll react to and also one that will have the most forward-looking information, I think the Home Depot numbers, Morgan, are probably the first thing that we'll react to and also one that will have the most forward looking information, I think, about the outlook for the consumer right now. Home Depot in particular, I mean, sales and net income have been flat for like three years. It's been a long kind of post pandemic hangover. So whether they see a turn, whether they don't, whether they see consumer behavior and finances changing or not is an issue. The PPI number will probably have to be way out of bounds to really jolt the market.

But we do not have a Wall Street right now that is willing to look through anything that's going to distract the Fed from getting rates lower to try and forestall some weakness in the economy. So maybe there's a potential for some outlier activity there. And I know CPI, for that reason, is going to be in focus. But it is interesting when you see Bowman over the weekend, and she wasn't the first to be tilting slightly more hawkish in terms of the Fed in September versus what the market's expecting. They are withholding any guarantees at this point,

and I think we'll see if that changes with these numbers. Yeah, and of course we are going to get Jackson Hole and the Powell address next week. So one more thing to add to the list here. Well, Mike, thank you. I will see you tomorrow. Mike Santoli. It was a mixed day of trading today,

but that's going to do it for us here at Overtime. Fast Money begins right now.