Closing Bell - Closing Bell Overtime: Redfin CEO on the Wild Housing Market; Polaris CEO Unveils New Marketplace 3/28/23

Episode Date: March 28, 2023

All three major averages closed lower—the second straight negative session for the Nasdaq. Bespoke’s Paul Hickey talked the market action while Micron and Lululemon reported latest quarterly numbers. Needham’s Raji Gill, the first analyst on the Street to capture negative gross margins, gives his instant reaction while Oppenheimer’s Brian Nagel talked Lululemon’s strong quarter that sent the stock higher in overtime trading. Former FDIC Chair Sheila Bair weighed in on the recent weeks of volatility in the banking sector—and what she would have done differently. Our Meg Tirrell reports on the antibiotic shortages across the country and Michael Santoli on the stock impact of Alibaba’s plan to split into six business groups. Plus, as home prices fell for the seventh straight month, Redfin CEO talks the latest signals in the housing market while Polaris CEO Mike Speetzen discusses the state of the consumer and Polaris’ new online marketplace for customers to buy and sell new and used vehicles. 

Well, the market's just closed and stocks taking a breather today. That is the scorecard on Wall Street, but the action is just getting started. Welcome to Closing Bell Overtime. I am Morgan Brennan with John Ford. We are just moments away from key reads on the chip sector and the consumer. When we get earnings from Micron and Lululemon, we're going to bring you those numbers and analysis as soon as they cross. Plus, we're going to break down today's Senate hearing on the collapse of Silicon Valley Bank

with former FDIC chair Sheila Baer, who has been sharply critical of the government's response. But first, let's get straight to the market action. Joining us now is Bespoke Investment co-founder Paul Hickey. Paul, great to have you today. I want to get your take on the chop we did see in the market here with the major averages ending the day lower, yields popping a little bit, and really tech and communication services, some of the biggest leaders in recent days and recent weeks under pressure.

Yes, I think just like you said, it's a reversal of what we've seen over the last couple of weeks here, partial heading into the quarter, people getting positions in check. But, you know, the choppiness today, it just reflects the lack of certainty in the market. I mean, we always people will always come out and say it's an uncertain environment. But I can't remember in several years the last time when you could make a credible argument for the Fed to hike rates, to pause or even cut rates. That means that that's where we stand right now. You could have someone come on here and give a very well-reasoned argument for all of those potential scenarios. And what

that leads to is investors not knowing what to do. And what you've come, just the case in point, very high uncertainty, negative sentiment towards stocks. The Consumer Confidence Report today showed that sentiment expectations for higher stock prices was lower than expectations for lower stock prices. So more consumers think the stock market's going lower than higher. For 15th straight month, we've seen that type of reading. Second longest streak since 1987. And the only other streak where it was that long or longer, I should say, is 18 months ending in April 2009. So it just goes to show that there's the sentiment investors are taking a pretty negative tone because there's really not any certainty to speak of. Yeah, we just got micron earnings. We're going through those numbers right

now, but you can see shares of micron are moving higher right now in the after hours so far. In the meantime, Paul, it is pretty incredible to see that we've been in a relatively tight trading range for the S&P, despite what is a mounting wall of worry for investors. Yeah, so I mean, again, it's perspective and a bifurcated type of market. The S&P looks range bound. It's been closing between its 50 and 200 day moving average the last six or seven trading days. The NASDAQ 100, which is more mega caps, that's at six month highs. Russell 2000, small caps, six months lows. And micro caps are at 52 week lows.

So it's just depending on what area of the market you're looking at, you tend to see a very different picture, and it's at the sector level as well. But to what you said, Martin, the wall of worry, you just look out there today, and it's really hard to have a positive outlook on the market here. But at the same time, those types of environments are the times when the market tends to surprise the most people. And so, go ahead. Paul, give us some perspective here, because we can get caught up, I think, sometimes with the trees,

miss the forest. Take the Russell 2000. I know you like to talk about small caps. It seems like it's right about at that level, the pre-pandemic highs and near the low end of the range where it's been trading for more than a year. So is there too much perhaps that's been made of the vulnerability of smaller companies? If you're looking to hold on to something for a while, is this a good place to buy the smaller stocks and maybe the Russell itself? Well, so it depends on the stocks, John. So people will always quote

the Russell 2000 and say it's richly valued because there's so many stocks in the Russell 2000 that make no money or lose money. But you look at the S&P 600, which is also a small cap index of stocks that are more established companies, and that's trading at like 13 times earnings. So depending on where you're looking and what types, the Russell 2000 is full of biotech companies that are very speculative, whereas in the small cap 600, it's a much more focused index of companies that have been established. And so I think in that respect, small caps are a place where you can certainly find good opportunities. Hold on, Paul.

Let's get some more detail on Micron earnings. Christina Partsenevelis has the numbers. Christina. The company posted a loss, adjusted loss of $1.91 a share. That is a little bit larger than the street anticipated. You have revenues that came in slightly less at $3.69 billion. The street was anticipating $3.7 billion for Q3. We want to see the guidance. Revenue came in line with expectations. Loss, though, for Q3, they're anticipating a little bit of a larger loss at $1.58 adjusted per share. And yet the

share price is climbing higher. The inventory write-down. So the CFO earlier this month warned that they were going to take a material inventory write-down, and we're seeing that inventory write-down at $1.4 billion. All of the analyst reports that I was reading previously had anticipated anywhere between half a billion and a billion. So that is a little bit higher, too. But I'll end with this. The company saying in the statement, customer inventory levels are getting better and we expect gradual improvements to the industry supply demand balance. So trying to calm concerns at the moment. Shares are a little bit 1.2% higher, but inventory write-downs still pretty big. Guys? Yeah, it's hard to find the good news in that.

Paul, back to you on this one. I don't know how closely you watch chip stocks specifically, but inventories have been a concern, and any read-through on memory here to what the mega caps, the hyperscalers, Amazon, Microsoft, Google, et cetera, who've been very much in the driver's seat with components, what they're going to do, I imagine we're going to be listening for on the call. Yeah. So as far as the impact on the hyperscalers, I'm probably not the person you should be talking to on that. But for Micron specifically, this quarter, no one was expecting good numbers here. The estimates have been rationed down throughout the quarter since their last earnings report.

Okay, so the report wasn't necessarily good, but just look at what the stocks are doing and the semiconductors in general. The Philadelphia Semiconductor Index relative strength made a 52-week high in the last week or so versus the S&P 500. That was the first time in more than a year that it's done that. And that kind of strength in the semis always portends good things for the market, at least historically, over the next six to 12 months. And you may come and respond to me, John, that, oh, that's because NVIDIA is up 70% this year. Well, so NVIDIA is the biggest weight in the index, and it has

outperformed the market. But all but two semiconductor stocks in the stocks. So 28 out of 30 stocks are up this year. The average return is 20 percent of all the components. So it's been a broad based rally in the semis. Yeah. Paul, stay with us. Speaking of inventories, Lululemon earnings are out.

That's in focus there. Pippa Stevens has the numbers for us. Hey, Morgan. Well, the stock is jumping here about 2 percent after the company beat top and bottom line estimates for the fourth quarter. EPS coming in at $4.40 on an adjusted basis. That was ahead of estimates for $4.26. Revenue coming in at $2.77 billion, ahead of the forecasted $2.7 billion. Now, total comparable sales were up 27 percent during the period, once again ahead of the 23.9 percent that analysts were looking for. And also the inventory levels, those decreased by

50 percent to 1.4 billion dollars. That stock now up 3 percent. Back to you. All right, Pippa Stevens, thanks. Paul, I want to get your thoughts on this and the read-through to retailers, because we have been, I think, about Nike last week. I think about PVH yesterday. The focus has very much been on inventories and pricing to bring those inventories down and what that means for gross margins. Yeah, so, I mean, I didn't hear a whole lot of details in what people was just talking about there, but the inventories, that's a key. Stock last quarter fell 13 percent because inventories had ballooned. So you see a 50% drop in inventories. That should be taken as a positive. Their revenues, they guided slightly lower last quarter.

But since that report, estimates have been slowly creeping higher up until this report. And they still managed to beat those numbers. So that's a positive. Look, the stock's not cheap. It trades 28 times this year's earnings. But the fact that they're doing this well in an environment where you had a report from Barclays saying that high-end consumers aren't spending as much, but Lulu looks to be weathering this storm somewhat. And it has dropped from its post-COVID high by a lot. But if you take a step back and you take a long-term picture,

it's been in this range of about 270 to 350 for the last few years. So it's pretty much right in the middle of that range right now. So, I mean, I think things got carried away post-COVID, but Lulu has been pretty much range-bound for the last several years now. All right. Lulu Lemon shares are up about 3% right now in after hours trade. It's worth noting that both Lulu and Micron pre-announced ahead of these results today. Paul Hickey, thanks for joining us. Thanks a lot, Morgan. Have a good one. All right. Back to Micron joining us now for instant reaction

to those results. Needham Global Semi Analyst Raji Gill with that stock kind of trending right around the flat line. Raji, after hours, I was looking for the good news here. Maybe I found it. Industry demand growth of around 10 percent for DRAM, 20 percent for NAND. That's around where it had been. A lot of people had expected that to come down. So perhaps demand holding up. What do you see here? I agree. I think the other thing to note, too, is that investors are expecting, you know, the May quarter to really represent that the trough and the earnings.

And I think we are we've seen it. They guided to a negative 21 percent gross margin. I was at a negative three percent gross margin. I think the street was indicating some somewhat of a positive gross margin. I was at a negative 3% gross margin. I think the street was indicating somewhat of a positive gross margin. But buy side expectations from my conversations were expecting a negative margin. So I think they're writing down an older excess inventory, taking the large inventory drawdown. It is larger than what I initially thought, but it is at least clearing out that exit inventory. And so if we can contemplate a bottom in the May quarter, then we start to go to a

recovery and a growth recovery year in the second half of this year and potentially a return to growth in calendar 24 as the end markets start to start to stabilize. So that's kind of our hope. Raji, here's what I kind of wonder about looking at these initial materials before Micron's call. It sounds like they're taking a bunch of cost actions, which investors tend to like, cutting their CapEx,

saying that they're cutting discretionary spend. But I don't see anything in here that indicates confidence in hyperscaler demand throughout the rest of the year. And there's been such a reliance on those big customers, AWS, Microsoft, Google. Could the commentary on that play a big role in where the stock goes this evening and tomorrow? Yes, but I think if we take a step back, you know, 50 percent of Micron's revenue still comes from smartphones and PCs. And both of those segments had significant challenges last year, and it's continuing to bleed into this quarter. And we think it's going to

bottom in the May quarter. So those two end markets for the past now 18 months have been going through an inventory correction cycle, you know, driven by kind of the post-COVID, you know, lockdowns and China demand and kind of the buildup that happened over the last two years in PCs and smartphones that all unwinding the last 18 months. And so that really has been the main driver of the weakness. Yes, there is in the hyperscaler data center business, which is about a quarter of their revenue. We are gonna be paying close attention to that segment. That segment is kind of bifurcated. I think spending on accelerated computing and AI that continues to be quite robust and resilient.

You know, we cover NVIDIA and others, and that demand has been strong. On the other hand, demand for enterprise servers and small, medium-sized businesses spending in the cloud has been soft. So I think it will be a mixed bag on the data center side. Auto industrial still continue to be quite strong, but this has really been driven by smartphone and PCX's inventory that is hopefully starting to clear out by the May quarter. Okay. Busy evening ahead for you with this one. Thanks for setting the table for us ahead of time. Raji, thank you. Thank you. Let's turn now to CNBC Senior Markets Commentator Mike Santoli at the New York Stock Exchange, taking a look at Lululemon on the back of those earnings. Hi, Mike.

Yeah, hey, Morgan. Pulling back a little bit for a wider frame of how Lululemon has performed over the last five years relative to a couple of other specialty retailers in growing categories, kind of catering to particular lifestyles, tractor supply and Dick's Sporting Goods. All of a very similar outperformance relative to the overall retail sector. You see that the RTH and it's, you know, they're in the kind of mid cap to small, large cap area. They still have room for more store growth. And it seems like they've kind of figured out where they belong here.

Now, as Paul Hickey was saying, Lulu has really kind of flatlined for two years, even though it has had that great performance over five. So a bit of a lull here, but it did really shoot kind of overshot to the upside during the pandemic. Now, take a look at the valuation. Somewhat of a rare situation relative to history is Lulu on a forward PE basis is now less expensive than Nike is. You see they've kind of tracked it again. There's that overshoot for Lulu back toward the pandemic when it got super expensive. In fact, at some point early in its history, it was a very popular short because it was so expensive. But you now see this gap has opened up.

Part of that is Nike is in a little bit of an earnings lull with China and inventory issues. So they're not really in earnings growth mode. That could represent some of the premium there. But also, of course, Lulu is a bit more of a mature company. It's larger. It's tougher to grow as fast. But, you know, long term, Lulu bills would probably say the relative value story has improved versus its biggest competitor there. This is fascinating. And I think the retailers that you highlighted in that earlier chart speak to some of those names that really benefited in the pandemic as folks shifted more towards being outside, shifted more towards comfortable clothing. They weren't in offices, et cetera. But to your point just now, I mean, Lulu's geared towards or exposed to a China reopening, too.

So this valuation differential is, I think, pretty fascinating. It's true, although I would say to a lesser degree. And the fact that that Lulu still has such strong comps and it's, you know, very skewed toward becoming more skewed toward direct to consumer revenue. I think a lot of that kind of works in its favor and insulates it from a bit more of the macro concerns, as I said, to, you know, they add 20, 30 stores a year. It seems like they're still in that ramp-up phase. So, yes, I agree with you on the comfortable clothing, if, in fact, you're talking about the overalls they have at Tractor Supply. Oh, wow. I feel like we need a picture of that.

Maybe you need to come do the show in your overalls one day. So I've heard. It'll be your Friday attire. Yeah. Don't wait for it. Regulators are facing heat on Capitol Hill It'll be your Friday attire. Yeah. Don't wait for it. All right. Regulators are facing heat on Capitol Hill as congressional hearings kicked off into the collapse of Silicon Valley Bank. We're going to discuss with former FDIC chair Sheila Baer, who wrote this month that regulators set a dangerous precedent with their handling of the crisis. Overtime is back in two.

Welcome back to Overtime. Regulators from the Treasury, Fed and FDIC grilled on Capitol Hill today about the collapse of Silicon Valley and signature banks. Republican Senator John Kennedy questioned Fed Vice Chair for Supervision Michael Barr on why the Fed didn't stress test SVB for a rising rate environment. Well, you didn't test for Silicon Valley Bank's problem. I've read your report. Your stress test, you stress tested these 34 banks for falling GDP, spike in unemployment and defaults in commercial real estate. Isn't that correct? Yes, in a typical adverse scenario for banks, we're testing falling interest rate. But that wasn't our problem in 2020.

I completely agree with you. It's not our problem today. The problem is inflation, high interest rate, and loss of value in government bonds, isn't it? I completely agree with you. So you stress-tested in 2022 for the wrong thing. Former FDIC Chair Sheila Baer warned about this very issue last year in an op-ed for the Financial Times, writing, quote, regulators must act to rein in Wall Street as risks rise. And earlier this month, in the heat of the crisis, she wrote, quote,

U.S. regulators are setting a dangerous precedent on Silicon Valley Bank. Sheila Baer joins us now. Great to have you on today. Thanks for being with us. Thanks for having me. I want to get your reaction to the testimony we got, including that exchange we just played. Right. Well, I'm really glad he asked the question.

It's a good question. What I've been asking for over a year now, the Fed hasn't stressed rising interest rates since 2018 in their severely adverse scenario. And I must add, emphasize, this is true for all banks, including the multi-trillion dollar G-SIB, what we call G-SIB banks, the most systemic banks. This isn't a problem unique to these midsize institutions. These stress tests need to focus on interest rate increases and the market losses that are causing and whether there's capital adequacy to absorb losses. If they're in a very distressed situation, they have to sell those assets that have lost market value. So I'm really glad he pressed him.

I feel bad for Michael Barr. He wasn't involved in those former stress tests. He owns the one this year, which also doesn't stress rising interest rates. So maybe now he'll correct that. But, you know, he's kind of coming into this without having been involved in some of the decision making of the past that could have been better, especially on the risk of interest rate increases. Another big topic, related topic of the testimony of the hearing today was this notion that mid-sized banks need stricter regulations. And as you did hear, those regulators all agree that that is something that should probably happen. You did see bank stocks move lower.

Do you agree? And if so, what would stricter regulations look on these regional banks? Well, again, we have a problem with all the banks, that not doing an adequate job of stressing interest rate increases. For the mid-tier banks, they did get some special breaks that I think need to be revisited. But those are targeted things. I don't want people to get this idea that somehow there was some vast deregulation of mid-sized banks. That's not true.

The vast majority of them are quite healthy. They're a backbone. Regional banks are a key part of our banking system. We're very healthy during the great financial crisis, so people shouldn't get that idea. A couple things. I think they probably do need annual stress tests. Stress tests for all banks need to include interest rate increases. If you're below $250 billion now, it's every other year. That's

probably not enough. I think, again, for all banks, too, some of these mid-sized banks have a special break in terms of when they have to mark-to-market securities that they hold in what's called an available-for-sale portfolio. That means they think they might sell them, but they still don't have to mark them and deduct that from capital. That should change. Banks should have to do that. Large banks have to do it now. The midsize banks should, too. Those are discrete areas, but I think overall we don't need to raft new rules for midsize banks. The sector is quite healthy, and people should not be worried. So, Sheila, you mentioned that Barr was not responsible for the stress test,

but last week on Overtime we had Randall Quarles on. He was the vice chair for supervision at the time. He pointed to this tech-driven increase in the speed of bank runs as being the real issue here. Do you agree with that? So I think it was a factor, but that does not really, that kind of begs the question of what happened here, which is a fundamental failure of basic interest rate risk management by management. The management of these banks bears the lion's share of responsibility, but examiners were not vigilant. And again, the stress testing process is not focused on that.

So yes, does it speed up the risk of bank runs? Yeah. But still, this was Silicon Valley in particular. This is a very close knit community. They talk to each other all the time. They didn't need Twitter to get the word out. They were running. And that's exactly what they did. So with Silicon Valley in particular, I don't think social media was that big of a factor in the bank run. It was a highly unstable deposit base. So bottom line, if the supervisors aren't testing for the right things at any level, are you convinced that the banks are safe now? So I still am, yes, because supervision is still better. There is a lot more capital in the system. There is liquidity stress testing.

It needs to be improved. But it is in place. And I do think, I still feel very good about this, besides the banking system, but I'll feel a lot better about it if Michael Barr now will amend the assumptions in the 2023 stress test scenario. So we're stressing higher interest rates. And let's see how those big banks do. And let's, yes, let's include the midsize banks as part of the exercise as well. The unanimous vote to invoke the systemic risk exception to the FDIC's deposit limit. Was it warranted? Does it set a precedent for future crises? I think it does.

I mean, I think these banks were not systemic. Combined assets of $300 billion and a $23 trillion banking industry. The inference has been, the statement has been made that, well, they had to bail flows. They should be able to tell us what deposit outflows were like during the time period that these banks failed. It troubles me that they haven't provided that type of analysis. The other reason has been that, well, a lot of these startup companies needed access to their payroll accounts. Well, with an advanced dividend, they would have had access to a lot of liquidity anyway, using the FDIC's normal rules without any kind of bailout. And I got to tell you, kudos to Marty Grunberg, the current chair of the FDIC, for a high level of transparency in his testimony. But he indicated there were $13.3 billion

of deposits concentrated with 10 depositors. Those aren't small startups trying to get payroll. And you think about that, they're going to take it, they have about a 10% loss on the Silicon Valley failure. So they're not getting a 10% haircut. So that's $133 million per person. The FDIC, through a special assessment, is paying these very wealthy depositors. I think that's troubling. I do think they need a lot more explanation on this. They did what they did. Listen, I've been there. It's hard to make a decision. It's got to be a snap judgment sometimes. But boy, there's a lot of public cynicism about this, and they need to get more public information out about why, whether it was needed, whether other deposit runs, and who exactly is benefiting and by how much by the bailout of the uninsured, particularly

Silicon Valley. A lot of questions. Maybe we'll get at least some of those answers with day two of testimony in the House in front of lawmakers there tomorrow. Sheila Baer, thanks so much for joining us today. Thanks for having me. Up next, much more reaction to today's overtime movers. Lululemon looking pretty good in its yoga pants after hours so far, up more than 8 percent. We're going to talk to an analyst who sees a lot more upside ahead and ask what he wants to hear on the call, which is about to kick off. We'll be right back. Welcome back to Overtime. Earnings calls for Micron and Lululemon are about to kick off. Both those stocks higher after reporting strong results at the top of the hour.

Let's get into Lulu's numbers further with Oppenheimer and company senior analyst Brian Nagel. Brian, I know you like Lululemon. The stock's looking good after hours so far, up 30 percent on revenue, a little better than that on earnings per share, I think. But tell me, so many people think we're going to have a recession in the back half of the year. Why shouldn't I be worried about gross margins being down, inventory situations getting bigger, better, but there's still an overhang? Why aren't they in a dangerous position if this economy slows more than expected? Well, good afternoon. Look, I mean, I'll start by saying this is an extraordinarily solid report from Lululemon. And I'll just make it really quick. I mean, I talk to investors a lot. That's my job. And there's a lot of there had been a lot of

concern on Lululemon into this report. And frankly, I mean, right now, Lululemon is basically saying there's nothing to worry about. OK, so look, your question's a good one. I mean, I'll answer different ways. One, you know, we've got the gross margin pressures we saw here in Q4 and maybe we'll continue to see in the near term, I think are transitory in nature. Lululemon, like other athletic brands, were over-inventoried as the supply chain constraints let up. They've been clearing that product. I think they've been doing it successfully. Longer term, look, if a recession hits, we've got to admit, Lululemon could be in danger, right? It's a high-end, premium-type

brand. But, like I said with Nike last week on your show, we're just not seeing it. The consumer here continues to react extraordinarily well to the products Lululemon's putting out there. So could a recession come? So let me ask it this way, then, to move this ahead just a bit. These are all good reasons to have bought Lululemon yesterday, right? If you believed that those things that people feared were wrong, were not wrong. But why would you buy it tomorrow? Yeah, OK, so I think an answer to that question is we were when we're talking about the results of Lululemon put up and the guidance they provided for 2023. The more here we have a historically low multiple

Lululemon right now. And again, it's moving around aftermarket. So I would have to check my math to be precise. But Lululemon trade trades a lower multiple than Nike. I mean, right now, and I know some people out there will disagree with me on this, but Lululemon trades a lower multiple than Nike. I mean, right now, and I know some people out there will disagree with me on this, but Lululemon is a cheap stock. You know, that to me is the discounting mechanism that's to some extent considering a potential recession. So if we head through the balance of this year, say recession doesn't happen, recession's mild, we'll continue to see upside to numbers for Lululemon. But at the same time, we should see that multiple expand back to historic levels as well. All right.

We'll leave it there. Brian, thank you. Brian Nagel. After the break, Baba's big bounce. The stock just turned in its best day since June of last year. We're going to go behind the decision to reorganize the Chinese tech giant. That's coming up next. Welcome back.

Wall Street went gaga for Alibaba today after the company announced it will split into six business groups. The company is saying the move is designed to unlock shareholder value and foster market competitiveness. Mike Santoli is back to discuss. Mike, here, the tech reporter in me, maybe just the tech reporter is me, scratches my head on this one because I know why investors like this kind of thing, but this is what U.S. tech companies do when they fail. The founder is sidelined. They break into a half a dozen pieces. And so begins the decline. Why is that not the Alibaba story, you think? Well, I think among the discounts that have been applied to Alibaba since it became a public company in 2014, there probably is a conglomerate discount, meaning it's got this big, far flung set of businesses. It's not particularly transparent in how it's run. And maybe you can surface some value by separating those things out over time, giving people more

accountability for individual business lines. That's kind of the financial engineering spinoff type playbook gives you a sum of the parts value. But I think, you know, it's not the only reason that there's been an overhang on Alibaba stock, as we, of course, know. And the motivation, seemingly, for this move is probably much more about how the Chinese authorities don't particularly want massive, super, you know, powerful tech companies out there. And it's not the reason you would hope for something like this to happen. So I think you have to kind of look at it a little bit through the Chinese lens and not just through the big tech company lens that's kind of surrendering

its model. Big bingo is what I was going to say, Mike, because Alibaba shares, and we've seen this with other Chinese tech ADRs that trade here, tend to move with geopolitical headlines where U.S. and China tensions, for example, are concerned. But it's key for investors to not just focus on those type of dynamics, but also domestic politics in China, too, because if you're going to invest in these companies after a multi-year clampdown on a company like Alibaba, whether this was explicitly a breakup on the heels of that or implicitly, it's very much a risk. For sure. There's no doubt about it. And arguably, maybe if there is a rational market response here,

if it is broken up into smaller, somewhat less threatening, if you want to call it that, companies, then maybe they will have greater freedom to exploit whatever businesses they're in. It's really unclear. I mean, you have a lot of these sort of anointed verticals in China where you can be an industry leader and it's sort of tolerated that way. So I really do think that in general, there was a period of time where Alibaba was considered to be almost a shadow member of Fang. And then all of the other kind of, you know, issues with geopolitics, but also with the structure of the company. Right. It's kind of just got this secondary claim on the business. The profits are routed through another entity, you know, in the Cayman Islands.

It was always the case from the beginning. But I do think some of that war on global investor appetite for the stock. All right. Mike Santoli, thank you. Shares of Alibaba did finish the day at 14, almost 15 percent. Are Americans still spending on big ticket discretionary items like ATVs and motorcycles? Up next, we will take the pulse of the consumer with the CEO of Polaris. Stay with us. Welcome back. Power sports vehicle maker, she says. Polaris out with news today, announcing the launch of an online marketplace called Polaris Exchange, where customers can shop and trade new and used vehicles.

Joining us now is Polaris CEO Mike Spitz. And Mike, great to have you on the show. Break this down for me. Thanks for having me on, Morgan. What is it and why launch this now? Well, you know, we saw a huge opportunity during the pandemic as more customers moved to wanting to shop and buy online. And if you remember back, we launched Click Deliver Ride. But it was a very manual process, and it took us an incredible amount of effort to be able to take remote orders and deliver vehicles to customers. We ended up partnering with JoyDrive, who's a West Coast technology provider. And really what we wanted to do is provide a seamless

way for customers to not only get access to new vehicles, but also use. And so working with them, we've created this marketplace. It's going to provide the most extensive access to both off-road vehicles as well as on-road motorcycles and motor roadsters. And we're evaluating our marine business right now in terms of bringing that into the platform. And what it does is it gives consumers the ability to see inventory across the entire United States. They can complete a fair amount of the transaction ahead of time, and it really facilitates selling equipment quickly at a dealership. So in terms of this situation, is this one where you essentially get, you take a little bit more control or a little bit more ownership or management of the existing inventory that's out there across the country?

And if so, does that help you to determine future pricing dynamics and manage your own inventory levels for new vehicles? Yeah, and it's really around the used market. The used market was really disjointed. A lot of it was sent off to auctions. As we've built up our Polaris Adventures and Polaris Adventures Select platform, we now actually have the largest, we are the largest source of used inventory. And so by funneling that through the exchange, one, we give customers access to that inventory, but it also provides access to our dealers. So they're able to bid on that inventory, get it into their dealership. And that's a really important

platform for them, not only to bring new customers in, but from a profitability standpoint. We're talking about big ticket discretionary items, whether it's razors or Indian motorcycles or the pontoon boats that you sell as well. What is your sense of the consumer? And walk me through those supply demand dynamics right now. Yeah, the high-end consumer continues to do quite well. I was out with a number of our marine dealers last week, and the high-end pontoon and deck boats continue to be in high demand. The same thing is true with our Razor platform, motorcycles, and our Ranger platform. We've seen a little bit of softening in the low to mid levels of the consumer,

and a lot of that's probably driven by financing costs going up. They tend to buy on credit. So we're working a number of different avenues trying to steer more promotion into rate buy downs. But, you know, by and large, the consumer is holding up better than we had anticipated. Supply chains have improved. We're not back to pre-pandemic levels, but it is allowing us to get more output through our factories. The inventory and the channel with the dealers isn't quite back to where it was pre-pandemic, but it's in a much healthier position than we've been for the past two years. Mike Spitzin, we appreciate the time today. Thanks for joining us. The CEO of Polaris.

Thank you for having me. Up next, prescription crisis. Why America is facing a critical shortage of some of our oldest, cheapest, and most important drugs. We'll be right back. Welcome back. Antibiotics are some of the oldest, cheapest, and most important drugs on the market. But right now, they can be very hard to come by. Meg Terrell looks at what's causing this prescription drug crisis.

Meg? Yeah, guys, if you've tried to get antibiotics for your kids over the last winter season, you've probably seen how hard it is to come by amoxicillin. That is one of many antibiotics that is currently in shortage. More than three dozen right now on the FDA shortages list. And antibiotics are some of the drugs most frequently found to be in shortage. We've got a graphic here to show you the classes of drugs, which you most commonly find on this list. Antimicrobials are at the top there.

It's been a tough respiratory season, so that is contributing to this, but that is not the only reason. It's emblematic of a really bigger problem with generic drugs in general. You can see that we're at a historic high right now when it comes to drug shortages. That looks at the number of shortages over the last five years. There are a few reasons why this happened. Antibiotics in particular are usually very old drugs, so they're very inexpensive. So there isn't the incentive there for manufacturers to keep their supply chains really robust. There are also really murky supply chains. We don't know where all the ingredients are made. So there's not a lot of transparency into what is going on.

And a lot of this happens outside the United States. We talked with Eric Tisci from the End Drug Shortages Alliance about some of these factors. Here's what he told us. There is a high cost to cheap drugs. In a competitive market, sometimes the profit margins can be very thin

and it could lead manufacturers to exit the market. If something happens with that limited number of manufacturers, that can be a way that we end up with shortages. And then there's not a lot of incentives for manufacturers to jump in. So we did see this get exacerbated with the pandemic, but it wasn't caused by the pandemic. This has been going on for decades. There is a high cost to cheap drugs. And it has gotten a lot worse. So is this a global problem or is this a U.S. problem that also has to do with how we, I don't know, run our medical system? Well, it's not a uniquely U.S. problem, but it is especially bad here.

You do hear about drug shortages happening in other countries, though, particularly the U.K. But we do run into issues a lot because our generic drugs are actually cheaper in the U.S. than they are in other countries, even though our branded drugs are way more expensive. I mean, I think about this. I think about the baby formula shortages that went on for way too long and are only just starting to be corrected a little bit now. What is the policy that's in place or is there discussion about future policy to try and change this dynamic? Definitely. The FDA is looking at this really closely, both in terms of drug shortages and the formula shortages. A lot of it has to do with the infrastructure, the plants that are making these things, the kind of inspections that FDA does, the kind of oversight it has, how much information we get about the quality of things. That is

something that a lot of the experts are pushing for. Can they share more of that quality information so it's not just a pass-fail? You actually know how good the quality of the manufacturing is behind things you buy. Meg Terrell, thank you for joining us on set with such an important story. Thank you, guys. I appreciate it. Well, up next, we will get the outlook for housing with the CEO of Redfin. As investors await tomorrow's pending home sales data, stay with us. Welcome back to Overtime. New data revealing another slowdown in home prices.

Today's Case-Shiller Index showing the seventh decline in a row on a monthly basis as mortgage rates remain stubbornly high. And tomorrow we're going to get pending home sales along with weekly mortgage application. Here to discuss what he's seeing in the housing market is Redfin CEO Glenn Kelman. Glenn, we can talk about prices coming down, but inventories are still so low. If you've had your house for more than 10 minutes, do you really have to sweat it?

Inventory is really low, so new listings are down 25%. So even as home buyer demand has declined because of higher interest rates, it's affected sellers even more. If you refinanced your home at a 2.5% rate, you're going to hold onto that for the next 30 years. It's really hard to coax sellers into the market. The only people who are moving are the ones who are moving across the country, not across town. So have we ever seen a market like this and how much of this rests on what happens with the labor picture? As long as people are employed and think they'll be able

to pay that mortgage, hey, maybe they'll just shift into an arm instead, expecting rates to come down, but they'll still buy? Well, I think the major issue has been interest rates. So the housing market has reacted poorly almost to any good news about employment or prices because if we see that people have jobs, we know that the Fed is going to be hard on interest rates, and that's going to affect homebuyer demand as well as supply. What's really changed over the past two or three weeks has been the banking crisis. Some of our customers have just gotten spooked by that, and they're trying to figure out where the economy is going. You just have to remember that people are making a 10-year

commitment to a house and they're trying to figure out what's going to happen in the next 10 minutes to the U.S. economy. So I think it's interest rates and the banking crisis, not just rates. And that's a new twist in housing. So is there more pain potentially to come for housing? Have we seen the worst of this correction with home prices coming off, I guess, as much or as little, I should say, as they have? Are you in the stabilization and bottom camp or do you think there's more to go? Well, it's hard to predict rates, but I'm fairly confident about home prices. What's really uncertain is home sales. Redmond is a business that grows or expands as the number of homes sold in the United States goes up or down. Prices just aren't going to come down much more, at least as long as inventory is this low.

So Case-Shiller is a really lagging indicator. It's reporting on January right now, and that's a three-month average. But if you look forward to March, we're seeing for well-priced homes and good neighborhoods 10, 12 competing offers. So even though home buyer demand is low, inventory is even lower. The real standoff is in sales volume. I think prices are going to be fairly stable depending on where you are. Even in places like Sacramento, though, now that I think about it, that was dead as a doornail this winter. It's pretty hot right now in terms of prices. It's the sales volume that's off. Read through to rent prices as we look to another round of inflation data later this week. Rent is going up, but not very much. So I think we saw 1.7% last month. So I think the pressure

on rents is easing faster than on home prices. There's more supply in the rental market than there is in the for sale market. And some of the data is tracking what people are paying month to month who have been in a building for years. But if you just look at the folks who are moving, those people are getting better deals than ever before. And that's a leading indicator for the overall rental market is going. Glenn Kellman, always great to get your thoughts. Thanks for joining us today. Good to see you, Morgan. Bye. All right. Let's get another check on today's movers, overtime movers. Lululemon is the big winner. It's jumping after a revenue beat.

You can see shares are really flying up 11% right now. Micron is higher, too, despite missing on both lines. And check out CalMain, the country's largest egg producer. Quarterly revenue has more than doubled thanks to soaring egg prices. Well, didn't egg prices just sort of like flatten out inflation wise? I wonder if that's going to come off a little bit, but they're still elevated, right? Yeah. Yeah. But are they going to grow further from here? And so do you have to wonder about that? And then, wow, I mean, Lululemon stretching that stock price. Yeah. But I still have that that economy question about what

happens to some of these names if we do indeed find ourselves in a tough position in the second half of the year. My crown, of course, will address that on the call with the mega caps. But then Lululemon, you know, Chris Rock did a whole bit on really expensive yoga pants. Really expensive yoga pants. I also thought it was interesting. This is a much smaller business for them. They did buy that mirror workout technology a couple of years ago, and they talk a little bit about that as well and the fact that they're going to be pushing further to digital app-based services and launch a lower price tier there. So I think this idea of trying to drum up more demand for those yoga pants. Yes, and that area is in trouble. If you look at Tonal, which is a business that

had taken on a lot of investment and has had to mark down quite a bit. So probably makes sense for Lululemon to try to integrate that into some of their other stuff that's working. All right. Both of those conference calls are going on right now. We're going to continue to monitor those, but that's going to do it for us here at Overtime. Yes, indeed. Fast money begins right now.