Closing Bell - Closing Bell Overtime: Real Rally vs. Wall of Worry? 3/28/22

Episode Date: March 28, 2022

Stocks close near session highs, but Solus Alternative Asset Management’s Dan Greenhaus says, “We’re certainly not out of the woods.” Plus, Nicholas Colas from DataTrek Research breaks down whether a stock split helps or hurts Tesla. And, are stocks pausing at a critical spot? Michael Santoli takes a closer look with his “Last Word.”

And welcome to Overtime. I'm Scott Wapner. You just heard the bells. We, of course, are just getting started here. PIMCO's Aaron Brown, Ed Yardeni as well, along in just a few minutes with actionable ideas for your money. We do begin, though, with today's talk of the tape. Is it just a matter of time before this amazing move from the lows collapses under the weight of just too much worry? Or is the market's newfound resiliency now its greatest asset? Let's ask Dan Greenhouse of Solus Asset Management. He's here with me at Post 9. It's good to see you.

Welcome. Hey, thank you. I mean, it is a resilient market. You try and push this thing down and it comes right back in your face. Yeah, I saw you talking about it on the halftime show today. And it's really impressive. When you think about what happened in the Treasury market last week, two-year yields up by 30-plus basis points, Two-year yields up by 30-plus basis points. Ten-year yields up by 30-plus basis points.

Historically, at best, risk assets tread water during moves like that. And yet, obviously, you saw both the NASDAQ, the more rate-sensitive NASDAQ, and the S&P 500 up by about 2% last week. Looking at the VIX today at 20, that gets people talking. I don't know if that's a sign of complacency or kind of where we are. What do you think it means, if anything? Yeah, I don't know if it's complacency per se, because I don't think it's as if the market is not aware of some of the existing and growing risks. I think it is purely a function of the fact that sometimes in the short term,

things can diverge from relationships that you think that they shouldn't hold. And I think over time, some of the things that we worry about are probably going to come to the fore to a greater degree. You talk about some of these risks. Lloyd Blankfein is talking about a lot of these risks, too. And he tweeted about it. And I wanted to get your opinion on it. We've had a tsunami of negative news for stocks, crazy high inflation, he writes, Fed tightening, rising long rates, commodity shortages, war, trade sanctions, COVID spikes, etc. You could see it on your screen here.

And the market's mostly held up in the face of it all. Kind of bullish, he says. Hard to argue with that, right? No, that's right. And the only thing he left out was the cats and dogs living together. I mean, it's been... You know what he did leave out? He left out the fact that Shanghai is locked down, tens of millions of people, and the market today finishes up. Yeah. Had that

happened months ago? No, I don't... We'd be having a different conversation. I don't think it would have. That's right. And again, I think, you know, one man's complacency. It's hard to describe in the short term, again, why markets do what they do. I don't think anyone can realistically and honestly say X happened because of Y and Y happened next in the short term. I think, again, why markets do what they do. I don't think anyone can realistically and honestly say X happened because of Y and Y happened X in the short term. I think, again, the theme for investors over the course of the year is going to be the persistently high level of inflation that persists to a greater degree than we previously thought, largely because of the war, but because of other things and the amount of tightening that the Fed is going to have to impart on this market and how

the investment landscape deals with an environment where a 50 basis point rate hike, which hasn't happened in, call it, 20 years, now might happen at successive meetings. Yeah, I was going to say, maybe more than one. Maybe more than one. I mean, I saw Andrew Hollenhorst over at Citigroup, who's the chief economist there, has them hiking 50 basis points at three consecutive meetings. Does that mean we're not out of the woods because of what lies ahead? Yeah, no, I certainly don't think we're out of the woods. Listen whenever the Fed starts hiking rates

and you can go back and I encourage everybody to do so you can go back and look in the newspaper and there will always be invariably a quote from someone saying well the Fed's now tightening they've got this under control. They're already moving in there. The easy money's been made. I'm sure you're going to see a deluge of similar such comments today. And again, our view, my view is if you're talking about raising 50 basis points at several meetings, 200 basis, 275 basis points worth of cumulative hikes, you're talking about a different investment landscape than we've seen. I guess, although the market, look at the NASDAQ. Sure.

Look at the tear that tech has been on. And if tech was so worried about rates going up, I mean, it doesn't appear to be. Listen, my friend, in October of 2007, with the S&P 500 at 1565, housing had already turned down. Financials had already turned down. And you could have said the same thing. Oh, the broader market's doing just fine. But underneath, obviously, there was something brewing. I'm not saying that today is anything akin to that. No, but people are assuming that a recession is brewing. I mean, the bond

market is acting as if a recession is brewing. Look at the 210 spread, the yield curve. And everybody says, you know, got to watch that more than anything else. I got to tell you, I'm a big fan of the yield curve. You had Weiss on in the halftime show and he said it predicted nine of the last 50 recessions. That is inaccurate. It is rock solid. When the curve inverts, you can set your clock. Now, obviously, there are caveats and different reasons for why it inverts and for reasons why you can dismiss it. The curve inverted in late 2019. It obviously had no idea that a pandemic was coming and a recession would occur shortly thereafter. But the curve is the gold standard, so to speak, for economic forecasting. And you do have to wonder why short-term rates would be rising above long-term rates.

Let me ask you this. So we just got finished listening a short while ago to President Biden. He lays out his new budget. He's once again talking about a rise in the corporate rate. You have the wealth tax, et cetera. Now, you can easily say, well, none of that's going to get passed anyway because you can't get anything through the Senate. And I'm sure you're going to tell me that right now. But nonetheless, it is back on the table. And here we

are going to have a conversation about the risk of higher taxes. Sure. I make lots of proposals in my house and it doesn't mean my wife's going to go for any of them. And I think that largely speaking, that's what you see in politics. I mean, the president's budget is a worthless document. The president has no ability to pass a budget. Obviously, Congress does so. This is not some big secret. So he can propose all the higher taxes you want. As long as the Senate makeup is what it is, Joe Manchin and Kyrsten Sinema are who they are, Kyrsten Sinema are who they are, then it's not going to pass. And that's full stop. But to be clear, we have plenty of other things to worry about. There's obviously the war. There's the looming inflation, the persistency of that inflation,

the amount of tightening that's going to have to come into play, slower earnings growth, slower GDP growth. There's enough to keep me busy. All right. Slower GDP growth, slower earnings growth. But maybe just, I know people don't want to hear it, maybe good enough. Maybe good enough and that the whole story is not going to unravel. You may get some negative revisions

and the trend may look not great for a while, but maybe it's not going to be as bad as some people suggest it's going to be. It's not going to be as bad as some people suggest for call it the next 12 to 18 months. I mean, the funny thing about the yield curve is that the tone with which it's discussed, for instance, when it inverts, is as if you've turned the light on or you turn the light off, and instantly that's not how it works. You're talking about lags of what's called 16, 18 months between when the curve inverts and eventually there's a recession. And obviously the equities perform quite well

between inversion and eventual recession. You're talking 10% to 15% on average. So in the short term, I don't think the doomsayers, if you will, are likely to be right. In fact, I think they're almost surely going to be wrong. It is hard to keep it into perspective. As you said, you feel like the curve inverts. We talk about recession and then act like it's going to happen by Saturday. Well, because there's clicks. You know, one thing I've learned as an adult is the story nobody clicks on is everything is cool and we're all going to be fine. That's not a story that sells. All right, let's continue the conversation now

with PIMCO portfolio manager Aaron Brown and Ed Yardeni. He's with us as well. He's the president of Yardeni Research. It's great to have you both take part in our conversation. Aaron, where do you come down? Are you impressed with the resiliency of the market or do you think it's all going to unravel before we know it? I think anyone has to be impressed with the resiliency of the market or do you think it's all going to unravel before we know it? I think anyone has to be impressed with the resiliency of the market. And I go back to there is no alternative or Tina, what do you want to invest in right now? Do you want to invest in bonds when you know that the Fed is raising rates or do you want to invest in equities where you can get some type of dividend return, you can get real earnings growth, and it's going to give you a comfortable return in your portfolios. I think certainly the yield curve inversion is something

to be mindful of. But remember, the lag between yield curve inversion and equities rolling over can be quite long. And so in the meantime, I think staying invested within equities but moving up in quality in your portfolio makes a lot of sense. And I think that's how investors should be thinking about it right now. Ed, you say you're on alert for recession and all of the other pitfalls that are out there. Are you sensing that you see any? Not really. I mean, there are a few recession indicators. I am concerned about the Consumer Sentiment Index. It's very, very sensitive to inflation perceptions. And clearly, everybody perceives that inflation is a real problem. And consumers are quite depressed about it.

It's having an impact on their perceptions of their financial future. However, as we know about Americans, sometimes when we're happy, we spend money. And when we're depressed, we spend even more money. And the reality is the labor market remains extremely tight and wages are going up. They are, in some cases, beating price inflation, but overall kind of keeping up with price inflation. But I think the consumers will continue to spend. And by the way, I think we also have a big capital spending boom out there. So I'm watching out for it. I'm watching out for the same reason everybody else is because of the inversion between the 10 and the 2. But I'm watching out for the same reason everybody else is because of the inversion between the 10 and the 2. But I'm very encouraged by the fact that the traditional yield spread between the

10-year and the Fed funds rate continues to widen. And even the gap between the 2-year and the Fed funds rate is also suggesting that there's no recession anytime soon. Well, it all depends on what's going to happen, Dan Greenhouse, with earnings. That's going to be the big tell. And we're going to be talking about it on this desk every day incessantly for weeks because it's going to matter more than anything else. Ultimately, what drives stock prices, as our friend Larry Kudlow used to say, profits are the mother's milk for stocks. And I think that's obviously true. I think what the yield curve does and what rates are doing is just sort of, I don't know if sounding an alarm is necessarily the right way to put it,

but at least alerting you to the fact that you're probably closer to late cycle conditions than you otherwise might be. And to Aaron's point about stocks being a good inflation hedge, I think ultimately that's proven to be true, certainly in the 1970s when equities were going up roughly on par with what nominal inflation was doing. And I think right now still having exposure to these things while earnings are probably going to be good enough is ultimately the right path for investors. Erin, in terms of your best ideas and the places you'd rather be, you'd rather be long U.S. than Europe. I could say, well, there's certainly maybe more value over in Europe. That comes with more risk. Is that why you like the U.S. over it? I think there's a couple of reasons. Firstly, at this point in the cycle, I think you're absolutely right. We're in a late cycle

environment. If you look at the underlying components of the S&P and what's done well this year, it tells you very clearly we're in a late cycle environment where more of the inflation oriented sectors are outperforming. I think that Europe right now is really caught in the crossroads. Earnings growth needs to come down. We haven't seen earnings revisions to the downside yet, particularly in light of the fact that parts of the manufacturing sectors within Europe right now

are really constrained and prohibitively cross-constrained because of the increased energy prices and natural gas prices that are hitting them across their across their shores so I think it's going to be really hard for a European manufacturing or industrial company to compete versus the US given the fact that their energy costs are materially higher than the US at the same time they're going to be hit on the consumption side as well with the consumer being hit with higher costs because of higher inflation costs from energy prices.

So I think on both fronts, whether you're a consumer or a manufacturer, you're going to be really hindered vis-a-vis on a competitive perspective versus the U.S. consumer. U.S. index is also much higher in terms of its ROE. So I think it deserves the valuation premium that it trades at versus Europe. I don't think that you're going to see compression on the U.S. versus Europe. Rather, I think that you'll continue to see U.S. equities outperform. Why large cap over small cap, which is your view? Same reason, which is that small caps are going to be hit harder because they don't have the same economies

of scale in terms of pricing power that you see from large caps. Large caps also have higher cash balances, higher free cash flow generation, and are more exposed generally to better operating conditions, particularly as you move later cycle. So I think that you're going to see small caps underperform as you move late cycle because they're going to be hit harder on the margin side than you will see from larger caps. So I think staying liquid, staying large, staying U.S. in your portfolio makes sense. Ed Yardeni, there's an interesting note out today regarding the financials from Morgan Stanley, from Mike Wilson, who's notably negative on the market and has been as such. But he downgrades the financials today.

I'm wondering what your view is there. There was a point of view that, you know, if you're going to get higher interest rates, it's going to be better for the financials. He says not so much. The headwinds, he says, to growth from the Fed's policy shift, still historically high inflation, payback in demand, and the war in Ukraine are not priced. What do you think? Well, my view is what you want to overweight in this market is energy as a hedge against inflation. And I think you want to overweight financials as a hedge against rising interest rates. And then I think technology also makes sense. Financials,

I think the problem we have with financials is they had very large loan loss reserves that they didn't need. And they've basically used that to boost their earnings for the past few quarters. But on the other hand, if we're looking at the broad range of financials, I think M&A activity is going to remain extremely strong. I think loan demand is going to make a comeback here. And I think all in all, the economy is going to continue extremely strong. I think loan demand is going to make a comeback here. And I think all in all, the economy is going to continue to grow. Going back to the idea of stocks being an inflation hedge, I think that's kind of true. And I think what we're seeing here is a rotation out of bonds and into stocks. Last year, people don't realize this, but a lot of money went into bond

mutual funds and ETFs. And obviously, those people are trying to bail out, I think, and probably jumping into the stock market. And financials look pretty good relative to bonds. One of the things I would argue about financials, and this is not really an area that we invest in all that much, is the issue of deposit betas. And that is to say that banks right now are sitting on like $2 trillion more in deposits today than they were pre-COVID. And as the Fed begins to raise rates somewhat aggressively, I think you're going to start to see the amount that they have to pay out and some of those balances rising as well. And so from an earnings standpoint, and I'm not a financial analyst, so I'm not sure which regional necessarily is going to be impacted the most. But as a group, I think they're going to have to start wrestling with the fact that their expense line is going to probably be impacted, especially as the Fed starts going up by 50 basis points a week, if that's what happens.

I just wonder, Aaron, about things like loan demand. If we're talking about a slower economy, who knows what happens with the consumer? The consumer feels pretty strong now, but as was mentioned already, some of the confidence reads have been trending negative. That's something to watch closely. Yeah, and at the same time, you're also seeing one of the biggest drivers of consumer loans, which has been the housing sector, which is starting to roll over as well, which, you know, while we don't think we're getting into recession, we do think that there's going to be a lower growth outlook. So you're going to have compression from

lower NIMS as well as compression or net interest margins, as well as compression from lower loan demand. And I think that that is going to really hinder outperformance of the financials, which is why we are not overweight or bullish on financials here. All right, guys, good to see you. Aaron Brown, Dan Greenhouse, Edgar Denny. We'll talk to you all soon. Up next, the big headline out of Tesla that sent that stock rallying today. Why history shows today's gains could hold.

And later, tests to invest the controversial step regulators say they might take to protect retail traders from themselves. We'll debate it after this break. Overtime, back right after this. Reports that Tesla may pursue another stock split, juicing that stock today. And while some say such moves do little or nothing to change a company's outlook, history suggests investors have often been the big winners. Nicholas Kolas is with Datatrek Research, along with our own Mike Santoli. Guys, it's good to have you here.

Nick, what do you make of this announcement? Investors obviously get excited about it for a reason. Yeah, no, absolutely true. I mean, there's three ways a management can show confidence in the business in terms of longer term things. They can increase the dividend, they can do a stock buyback, and they can split the stock. Splitting the stock is the weakest of the three signals, but it's still a signal. It shows confidence in the stock. So stock's rallying and it's actually up on the year now, but you can't say a lot about a lot of big tech stocks. It's got a nice tailwind. Let's listen to what Dan Ives, who was on Squawk

Box this morning, had to say about this report, because it speaks to the greater issue we're trying to get at. Stock splits have been kind of rumored for the last four or five months. The fact they put it out there, I think this is going to be a massive catalyst for the stock over the coming months. All right, now we need to get to the devil's in the details when what the ratio would be. However, I mean, he is right when he says it's going to be a massive catalyst for the stock over the coming months. If you look back at history, they announced a five for one split in August of 2020. The stock's up 300 percent since then. Amazon stock is already up 21 percent. And Apple was up and Nvidia was up. This has worked out even though the pizza pie. Yeah. Is the same

size. Look, it's a it's I think it's a related to the fact that momentum works. Momentum is a actual performance factor in markets that delivers better future returns. It doesn't make a lot of sense. Maybe maybe it's counterintuitive. So it's one piece of that. It doesn't make a lot of sense. Maybe it's counterintuitive. So it's one piece of that. But to say that a trillion dollar market cap company is it's going to be a huge catalyst for the stock that people get excited about a lower nominal share price makes almost no sense. OK, except for the fact that this is a stock that really does rely on the enthusiasm collectively of all the people who love the company. Don't a lot of these other names, too?

Now, I mean, Alphabet maybe is a different story. And maybe why that's only up two and a half percent since they did the split. But Apple has the same sort of fanatic base that Tesla does. But look back to the 2014 stock split for Apple. It did nothing for it over the course of like the next year and a half or so. It's just one of those things where if a stock has a little bit of a spark to it and psychology is a tremendous part of what drives stock prices, then I think it could feed into it. It's also interesting that we're in a market right now where stock splits went out of favor for over a decade. People didn't care. They let their stock prices go higher. There really wasn't a mechanical advantage to having a low stock price since you didn't have to trade around 100 share lots and all that stuff. And now I think it's sort of like the leading edge, confident companies,

multi-trillion dollar companies are able to say, fine, we'll give you what you want. You like to own our stock by barreling into out of the money call options. We'll make it a little easier for you. Yeah. I mean, and I was going to bring that up to the options play because because most people say, well, Nick, you can you can already do this by owning fractional shares. Right. And we all get that part of the story. But Mike says is the options part of the story when you have more people trading options than ever before is significant. Yeah. And it's also interesting that Amazon and Google have done this recently as well, announcing those 24-1 splits. And I think there's just an element of management compensation in all

of this as well, because as a worker there, you're getting shares every quarter, every year, and perhaps having a lower stock price and more shares lets you parse out how you want to sell those shares to sell for tax purposes, for estate planning purposes, portfolio planning purposes. So having a lower price and more shares might let you fine tune that calculation better. And I think it's partly why we're seeing all these companies go at once and not coincidentally, like during tax season in the U.S. So it kind of all fits together as well. It feels undeniably to me that by doing this, you do open up your stock to a broader shareholder base.

How could you not? I'm not saying you don't, but should the trajectory of a trillion-dollar market cap company depend on people who can't afford a $1,000 nominal share price? No. That's a question you should ask. No, but over time, over time, if it opens up the door for more people to come into the party. Everybody split their stock when it got near 100. OK, that just happened.

It didn't necessarily mean most stocks were buys after split. So right now you have these kind of elite companies with dedicated followings that are doing this. I think when it comes to Amazon, I said this, too. I think Amazon is kind of like, let's just reset the benchmark under a new CEO at a different share price because the stock's been terrible for a year and a half. And let's just kind of get the the high watermark of this stock out of people's minds. And so there's all kinds of potential reasons to do this that fall short of being substantive or predictive. How about this? How about Elon Musk knows his base and he plays right to it like anybody else would? That's basically what I'm saying. Yeah, exactly. And so he knows what works.

Yeah. Right. I mean, why not feed the base what they want? No, absolutely. I think from that perspective makes all the sense in the world. He better than any CEO in America understands what his shareholders want and how story drives stock price. So God bless him. He's got it right. But when the 2020 stock split became effective on August 31st of that year, it put a peak in the stock for the next two and a half months. And in fact, it was the top of the NASDAQ when it became effective, the September 1st of that year. Is that all coincidental?

It was also Apple's split took effect that same day or two. My point is, if the benefits come from the actual split and the lower share price, why are all the appreciation front-loaded before it actually happens? You raise great points. That's why your mic's in total. Okay. Let me ask you this. Do you feel in any way that Musk is trying to have a more democratized company? He goes to Twitter and he says, you know, what do you guys think? Should I sell some stock? He wants small investors to own stock so much that he sold billions of dollars of his own stock to them.

Yes, that's what happened. But I mean, what do you make of that? I think that he's playing to the public. Yeah, absolutely. And it's worked. Now we can also look ahead and say, well, you know, I don't know what other companies are out there who may be interested in splitting their stock. I mean, Nick, you follow the market closely. Do you feel like we're in a new age of stock splitting? Amazon, the latest, which we've all been wondering, it was only a matter of when, not if, right? Bezos making the transfer of power. And I thought back then it was only a matter of when, not if. Should we start thinking about this more broadly? I think that's a very good point and absolutely true. We are in a new age in terms of retail

investors interested in the stock market. That's not going away. It started with the pandemic and it just continues to grow. And we're even seeing more interest in equity funds, ETFs. So it's really broad based. There is a re-equitization of how society thinks about investing and having an affordably priced stock is definitely going to be an edge. Nick, I appreciate it very much. That's Nick Colas joining us. Michael, here's what I'm going to do before I let you go. I know you're going to be back for Santoli's last word, okay? So this is not the last word. I want you to answer our Twitter question of the day.

Not for, you know, who do you, who should be the next, but who do you think might be out of this list? Here's what we're asking you. You can go to at CNBC overtime to place your bet. Who do you think should be the next to split their stock? Is it Berkshire? Is it Booking? Is it Chipotle? Or maybe it's some other name. And I just turn to you and I say, who do you think out of this list could be the next and why? I didn't look ahead. I would say of those three, Chipotle. Berkshire has the B shares at a lower

share price. And who knows under different management what they'll do. Booking holdings is logical. I was saying, though, after the after the Google split that booking holdings is the used to be Priceline. Priceline went from like nine hundred dollars down to single digits in the crash in the early 2000s. I just don't want don't know if that sort of makes them a little shy about splitting their stock forcibly and risking something like that again. You know, we have a really interesting news item to read. Just stick around for this, too, because I would like your opinion on something as well. It is breaking news on FedEx. The company announcing that COO Raj Subramanian will become the CEO,

replacing Fred Smith, the iconic CEO and founder of that company, who will now become the executive chair. Those changes taking effect on June 1st. You can take a look at shares. But if you take a look at shares, Mike, over a fairly decent period of time, they've underperformed. It has not been a good story. There had been some talk that perhaps an activist may get involved here, although the picture was difficult because Fred Smith is so beloved. He is an American hero. He is an iconic CEO. I'm wondering what you make of this. No, that's the story in its entirety.

It absolutely is. I mean, we're talking about almost 50 years, right, from founding to now. But it has been a thing that's hovered over the stock just because it has a massive valuation discount to UPS. There are some fundamental reasons for that, but also it's a sense out there that they couldn't quite get the strategic energy to kind of rejigger the business in time. It's one of those things that we were talking about this, I think, two weeks ago or so when they had earnings. It does seem that the kind of company that it would have been ripe for for an activist. Yeah. Nobody was saying, you know, Fred Smith did something wrong and therefore the company used to be in different hands. It was much more about maybe it's just time to execute this transition, which presumably was always going to happen at some point. You know, you see the move in the stock here higher in the overtime by by two percent. It

was at a 52 week high of about three hundred and. So the low was $199 and it's barely above, as you see, just $30, $34 and change, $35 above that level. So we'll continue to follow that breaking story. Mike, thanks. All right. That's Mike Cincholi. He'll be back with his last word. Up next, a test to invest the controversial step regulators could propose to protect retail traders. We'll give you those details and debate it ahead and later on the OT, protecting your portfolio. One money manager making the case for cybersecurity stocks in today's two-minute drill. That name and more when the OT returns.

It's time for a CNBC News Update with Shepard Smith. Hey, Shep. Hi, Scott. From the news on CNBC, here's what's happening. President Biden at a news conference last hour telling NBC's Kelly O'Donnell that when he said of President Putin, by God, this man should not be in power, he was not calling for regime change. I'm not walking anything back.

The fact of the matter is I was expressing the more outrage I felt toward the way Putin is dealing and the actions of this man. Just brutality. I wasn't then, nor am I now, articulating a policy change. First one, then another multi-car crash today on a snowy highway in Schuylkill County, Pennsylvania. At least 20 people taken to hospitals. Police tell us they have not even gotten to everyone because some of the cars are still on fire. Interstate 81 shut down as cops

investigate. And the Motion Picture Academy condemning Will Smith for slapping Chris Rock last night at the Oscars and announcing a formal review of what happened. Tonight, new developments in the January 6th investigation. Jared Kushner set to talk to the Congressional Committee and a hearing to consider contempt charges against former President Trump's aides on the news. Right after Jim Cramer, 7 Eastern, CNBC. Scott, back to you. All right, good stuff, Shep. Thanks. We'll see you then. All right, what if you had to pass a test before buying that next ETF?

Believe it or not, one group of market regulators is considering that idea. Our Bob Pizzani joining us now with more. You sent something around. I read it and I said, what? Yeah. You know, FINRA is one of the big regulators in the U.S. They regulate all the brokerage firms in the United States, all the exchanges. They put out a proposal saying two things. They're working with Gary Gensler at the SEC. They're very worried about what they call complex products, leverage and inverse ETFs, even options, even Bitcoin futures ETFs. They think that the retail investors are in way over their heads. And they sent out a statement saying, could we remind you brokers in the United States that you people have an obligation to make sure these products are suitable for your clients. And by the way, if you don't, we may bring enforcement actions against you.

Now they first think that retail investors may be in over their heads. Gensler's been concerned about this for a while, but Gensler has got a great aggressive agenda. And he's obviously working with FINRA. It's not a coincidence, they put it out now, that he has this huge regulatory agenda in front of him. It's because they're working in concert with the SEC, it seems to me. But the more interesting thing is a comment they put out along with it saying, we are concerned about these complex products. And by the way, we are wondering if there should be additional regulations about

it. So, for example, what would you people, the brokerage community, think about requiring tests for all the people who want to buy these things? You have to be able to pass a test to demonstrate proficiency. And if you don't, you can't trade it. What do you guys think about this? Now, if you know anything about regulators, this is the backdoor to creating new regulations. This is them saying, you know, this is an idea we're thinking. What do you guys think?

So the comment period ends in May. What will happen next likely is they'll start proposing regulations around the comments. So my point is this is not happening today, but this is how all of a sudden new regulations. So I got a couple of things. And by the way, you guys should tweet us at CNBC Overtime. I need to know your opinions on all of this. So a couple of things. Robinhood, for example. You got a lot of people going on Robinhood and trading, you know, whatever they're trading. What responsibility does Robinhood and other brokerage platforms have in safeguarding this sort of stuff? And then personal responsibility, too. Yeah. So they had a whole section on what they call the self-directed platforms. That's the SEC fancy word for Robinhood or any of the online brokerage communities.

And essentially, they said there is a whole new group of people that don't have financial advisors. They're sitting there on places like Robin Hood and trading. And by the way, what do you think we should do about those people? And the implication is somehow those platforms have responsibilities to somehow. And the question is, where is that responsibility? Where is the line? And what you talked about a person responsibility. There is people can lose money trading regular stocks, let alone complex products every day of the week. So there's going to be a real food fight about

how much handholding and daddy and mommy ism we want in the United States. Is it legitimate to say there are some products people should not be trading because it's so complicated, only a professional can understand them? And where is that line? And what responsibility does a firm like a Robinhood have? What are the chances that this goes anywhere? The chances are Gary Gensler is extremely aggressive. I have been very impressed. He's like the Energizer bunny. I mean, I have never seen so many new regulations, new proposals out. So he has a very ambitious agenda. He believes that there should be some more regulation and legitimately to protect investors. It's not some kind of thing he concocted.

He's had this concern for a while. Look, I mean, retail investors don't want to be taken advantage of. But in the same breath, do they really want to sit there and take an aptitude test to be able to trade? No, I don't think so. However, there are legitimate questions about products that are so complicated that the average person, like a leverage and inverse ETF that resets virtually every day, people get burned on these a lot. There's a lot of complaints around them. And so the SEC is sort of focusing on these complex products where they get a lot of complaints. Volatility products like volatility ETFs, they get a lot of complaints. Volatility products like volatility ETFs, they get complaints about these all the time because people buy them

and they don't really understand what they are. So what's the line? How do you educate people about where to go and what to do about it? All I can tell you is it's exhausting following Gary Gensler. I'll tell you every day there's a new proposal, a new idea. And I admire the man's energy. I really do. Thanks for calling attention to it. It certainly got us talking. Appreciate it. That's Bob Pisani. All right, coming up next here in Overtime, is now the right time to take profits in tech?

We're going to discuss in today's Halftime Overtime after this break. In today's Halftime Overtime, is it time to take advantage of tech's tear and sell some positions? Here's what our own Steve Weiss said about getting out of the semis. I bought the SMH to get exposure to the market, and that's how I've been doing it, whether the SMH or the Q's or some other ETF, because my net exposure is low. So when I feel the market technically is going to move, I don't do it often because it's very difficult to predict market moves. When you see massive momentum, as you did last week, I bought the SMH. I sold part of it, a good part of it, at a nice profit.

I sold the remainder at a loss. That made us think. Let's bring in Loop founder and managing partner Gene Munster. Welcome to Overtime. It's good to see you. Good to see you. I mean, these gains have been nothing short of unbelievable in just a few weeks or a couple weeks. The Nasdaq is up 13.5% from its low. The 100, the Q's, which Steve Weiss was talking about, is up 14.

I got stocks like Apple up 15, Nvidia up 33, and Tesla up 43. Am I supposed to just continue to ride this gene? The simple answer is no. What we're talking about is a two standard deviation movement in the market. And by definition, these are rare, as you just outlined. And when you think about tech, at the core, there's a growth component to it when we talk about growth there's a fear of missing out and that's why you see these wicked swings whether on the upside or the downside and then so i think a prudent investor that is thinking over the next couple months i would be more cautious regarding some of these that have had a big move of course everyone says that it is difficult to time the market that That is true. But if you really want to optimize returns, you need to think about where the pendulum

is and specifically that is going to rotate back. And I think to a more conservative view, the macro issues, of course, have been well outlined here. And I ultimately think that if you have a two month perspective, probably now is the time to be starting to think about taking some profits. If you have the luxury of owning for the next six months to a year, I still believe that this is to own tech. To own tech, and despite this big move back, the NASDAQ is still down 10% from its highs. And a lot of these tech companies are still down 60%. I still

think there's a massive opportunity for long-term investors. So I reluctantly give you a mixed answer. I think near-term, I'd be selling, but long-term, I'm a big believer. If you still had your sell-side analyst hat on, and you look at Apple, and you say that the stock two weeks ago was 150. And today it's not that far away from a new high. And you have news of an alleged, alleged production cut juxtaposed against an incredible move in the stock. What do you tell investors to do with Apple? Can you hear me? I got you now.

I heard you say Apple with my sell-side analyst, what to do about it. I was asking you to put your sell-side analyst hat on and take a look at apple from where it was 150 to where it is threatening to reach a new high juxtapose that against you have these alleged stories or reports of production cuts and maybe that's related to china and what's happening with the pandemic in china and also of course russia ukraine how do you view Apple today in the context of all of that? So maybe let's first talk about the supply chain cuts. I think that that is important, or the production cuts about the iPhone SE. The SE is going to be about 10% of total iPhone production. And this is a well-traveled dynamic. Specifically is that when a product typically ships, we see it year in and year out, you'll hear about production cuts. And the reason is that when a product typically ships, we see it year in and year out, you'll

hear about production cuts. And the reason is that before a product comes out, Apple will ask its suppliers to build more. That's always been the case. And so take these supply or these production cuts with a healthy grain of salt. But to your bigger question about how does Apple play into this and where I think it goes longer term, I think that Apple ultimately is going to have an expanding multiple, I think the low 30s. And you may sense I'm out of touch with reality there, but I think this is a $250 stock. And just to give you one quick sense, last week, there was some reporting about Apple coming out with hardware as a service. This is something that we've been anticipating for a long time. But if they can start to offer a bundled hardware

on a subscription basis, that is high visibility revenue and investors will expand Apple's multiple if that is in fact the case. So I'm still very bullish on Apple. I mean, what is it? Trades it around 29 times now. Can you, it's hard to believe

that we used to talk about this stock and not that long ago either at like 11 times. Right. And I think that at that point it was just obviously grossly underappreciated at the time. It was a belief that Apple would trend towards Nokia and BlackBerry and these hardware companies eventually hit the wall. But of course, they've seen success with their services business. And ultimately, they're viewed more of a consumer staple company today. And I keep coming back to this theme about visibility. That's what's really important here for investors. And the reason why the multiple has expanded is not because a growth rate has gone through the roof. Of course, it has during the pandemic, but over the past five years,

it's more about visibility and a sleep well at night. And I would say Apple is, I think, doing an exceptional job of navigating the issues that they've been through, whether it's the near-term supply chain. And there's a whole other dynamic about how Apple is going to navigate potentially production around Taiwan and how that plays out longer term. They're making huge investments, $430 billion committed to the U.S. in the next five years. I don't think people fully appreciate the magnitude that they're investing outside of China right now. And all of that comes back to justifying, in my view, a higher multiple. Yeah. No, I remember Kramer has been talking about the Staples multiple, too.

I just happened to look at P&G. And I mean, you basically P&G and Apple are almost at the same multiple now. Gene, I appreciate it so much. Thank you. Thanks for thanks for rolling with the technical issue there. Right on. Thank you. That's Gene Munster joining us up next. Santoli's last word. Why, it's all about hesitation. He'll explain that. Plus, the crude collapse, oil falling today. One money manager, though, is betting on two names in that space. We'll bring them to you when Overtime returns. Let's recap a big mover in the OT and see where shares are now. You can see that spike right there in overtime, some three and a third percent for shares of FedEx.

That company announcing COO Raj Subramaniam will become CEO, replacing the iconic Fred Smith, who will now become executive chair. Those changes taking effect on June the 1st. Certainly a stock to watch for the rest of overtime and then in the days ahead. Up next, Santoli's last word. We are back with Mike Santoli for his last word.

You're doing OT in the OT. I hope you're okay with that. Double OT. Yeah, double OT. What's your last word today? Hesitation. And now the index has had a nice push higher. We had a 0.7% gain in the S&P.

But under the surface, it was pretty much a dead dead heat today and it makes sense at this juncture. You've reached a level with the S&P 500 right underneath February highs. You know you were talking about this earlier I know is it's a very logical level where it might kind of roll over and fail if this is just a bear market rally. So I think that's in people's minds. We have month end quarter end end, a lot of cross asset action going on, not just the yield curve. You have inversions up and down, but you see the short pullback in oil today. We're seeing these currency moves with the end. So to me, it seems like a logical place to stop and step back a little bit. What's fascinating is under the hood, the market is showing more traction than slippage, meaning that you have all these rotations going on. Some groups are pretty weak, but it's all kind of getting to a boring place. And boring is bullish at the index level. Said VIX, 20. Yeah. Right. It makes you have that that feel. Do you feel like you can trust it yet? You know what I mean? Yeah. I feel like

until proven otherwise, you can trust that the lows are good. Now, that doesn't mean the same as we're up. No, no, you're right. You're absolutely right about that. But I guess my point being, I'm much more confident that those lows should hold up than I am that we're going to be barreling off to new highs. That's also kind of predicting the present to some degree because it is always a wait and see game. Very cognizant of the fact that we're in this late cycle mode. Everybody has on a vigil to say, are things really going to give way? You know, is there going to be a Fed mistake?

And it's hard to see how we get out of that, because if the market gets really happy and speculative and frothy again, is that just going to be licensed for the Fed to get that much more aggressive? And that's that's the push pull that we're working with. We can't get out of it because the yield curve keeps screaming at us. And, you know, you look at that and you're like, OK, I want to feel like everything's pretty good. Yeah. But the message here is not great. I looked, you know, over the weekend, did a piece about 1994, which is the quintessential soft landing. Fed tightened aggressively. The yield curve to 10 got very, very flat, almost zero, never did invert.

You never got a recession. But a couple of quarters later,, almost to zero, never did invert. You never got a recession. But a couple of quarters later, you're at zero percent GDP. The Fed's cutting rates and it orchestrated that transit. It's very difficult to do, but it doesn't necessarily mean that it's recession or at least that it's economy wide recession. You've kind of had corporate recessions. You've had just kind of a consumer malaise at times. So it's very difficult to know what the situation is because it's been such a compressed cycle. The naysayers would say, you know, we're right back where we were before. You got a small group of stocks carrying the load for everybody else. Take a look at the mega caps. And I just did with Gene Munster these incredible gains that we've had in the apples of the world.

And it's valid to say that, that it's not perfect. It's never perfect. The S&P, by the way, is just at levels we first got to in late October. So it seems great. The market's really on a roll. People got very, very negative. We're still burning off a lot of that pessimism, I think, and a lot of that under positioning in stocks. People seem like they need to grab more exposure. But we're not really making much net headway over the last several months. Yeah, good stuff. Thanks. That's Mike Santoli. All right. Up next, the answer to today's Twitter question about which stock should announce a split next. Over time, we'll be right back.

The results now of our Twitter question of the day, we asked what should be the next stock to split Berkshire Hathaway, Booking Holdings, Chipotle or other. Well, Mike Santoli's getting an ego boost. Chipotle, 44%. That was his pick. That's your pick. Good stuff. Thanks for joining us in overtime.

I'll see you again tomorrow.