Closing Bell - Closing Bell Overtime: Snap Cracks 10/20/22

Episode Date: October 20, 2022

Another earnings report from Snap, another slide in the stock. SoFi’s Liz Young, Truist’s Keith Lerner and NewEdge’s Cameron Dawson dig into the quarter hot off the results. Plus, Wharton’s Jeremy Siegel lays out his expectations for the Fed and inflation as yields hit new highs. And, top private wealth manager Chris Toomey of Morgan Stanley gives viewers a sneak peek into his year-end playbook.

All right, Sarah, thank you very much and welcome everybody to Overtime. I'm Scott Wapner. You just heard the bells. We are just getting started from post nine here at the New York Stock Exchange. Snap earnings, they are less than five minutes away. We'll have the report and the stock move, which, as we've seen over the past many months, can be pretty volatile to say the least. Investors, at least, are certainly hoping the worst is over with shares already down more than 75 percent year to date. And we begin, though, with our talk of the tape. Another hawkish Fed member speaks, another move higher in interest rates,

and another cooling off of stocks. Stop me if you've heard this before, but it is becoming the norm. The question is, is it too much to overcome for the bulls, who are hoping this rally has some more legs and point to strong earnings as a reason why? Well, let's ask SoFi's head of investment strategy, Liz Young. New Edge's Cameron Dawson and Truist's Keith Lerner, all three, of course, are right here at post nine. Liz, I'll ask you that first. I mean, should we bet on the rally resuming or rolling over because rates remain very much the story?

So rates do continue to be the story, but I think actually the bigger story right now is earnings, and we're really going to heat up into earnings season later this week and next week. We have to remember, this earnings season, we're hearing about a quarter that started in July. So really, companies still had a lot of pricing power. There was still an ability to pass through those costs and grow their revenue. I don't think earnings are going to give us this terrible alarm bell this quarter, but it's not over yet. So the question of can the rally resume, can we still go up from here? Sure. Do I believe that it's lasting beyond a few weeks or maybe a month or beyond the next Fed hike? No. But are you suggesting, though, that earnings can trump rates,

that that story is going to be good enough and maybe, dare I say, surprising enough that a move higher in rates won't derail this move that we're experiencing now today? Obviously, we're down as rates continue to go up. If it's a big enough story, yes. I mean, so far, earnings have been pretty good. If we start to get some surprises to the downside or we start to get guidance for 2023 that's materially different or materially worse than it was before, yes, I think they can trump it because the market already has rates priced in. The market's already expecting rates to be a problem. They are. I mean, the market Fed funds are now at 5%, Keith, mid-23. So the market's gotten there, at least part of the market has. What do you think?

Do we have more room to go here or are we about to give it back? Well, I think time frame is important. On a short-term basis, we do think there's a little bit more room for this rally. You are still deeply oversold, 20% of stocks above the 200-day moving average. Sentiment is pitiful. And even today, look at today, you had rates up a lot. The market actually held in there pretty well. Energy was up. Defense companies were up. So you're still seeing some pockets of strength. So to answer your question more directly, we think the short-term rally has longer to go, but the medium-term outlook is more challenging because this is the other thing. As you look out, with these rates moving up, the equity risk premium is now the lowest since 2010. So what

does that mean? Stocks are getting cheaper on an absolute basis, but on a relative basis, they're actually becoming more expensive. So we would use that rally to reposition and become more defensive. So Cameron, who's been very defensive, joined today by David Einhorn of Greenlight, who writes in his letter, and I want your opinion to that. This is your opinion on that. This is to his investors, quote, as long as official policy is to make the stock market go down so that people are less wealthy, so that they buy fewer things, so that prices stop going up, all while doing nothing about fiscal policy, we believe the correct posture is to be bearish on stocks and bullish on inflation. Sounds like you guys have been speaking. Yeah, well, that's exactly

what the Fed has told us that they want to do. They want to see financial conditions tighten. To see financial conditions tighten, you have to see valuations go lower. And that's why the Fed is okay with this financial market volatility. And it's also why the Fed is okay with higher unemployment, because they need to see demand go lower, which means that valuations go lower, earnings go lower, and that's why this market still has challenges. Yeah. Keith, what's wrong with anything that Einhorn said? Makes perfect sense. Essentially, you can boil it all down to that one sentence, don't fight the Fed. Well, not only don't fight the Fed, don't fight, you know, the global central banks around the globe. We have the tightest global central bank tightening we've seen in about 40 years. So it's

not just about the Fed. And if you think simply, I mean, we think that recession risks are high for next year, but we're going to be slower, and eventually that will catch up with earnings. So earnings are holding up well right now. We think in the first half that changes a bit. What if, Liz, we're slower getting into a recession because the consumer is still good, the labor market is still strong, and earnings, as we're witnessing day by day, are better than people feared? So what if the runway of decent news lasts a little longer than we thought? What does

it mean for the market? The market would have a hard time getting to what I think are oversold conditions. So I actually disagree that we're deeply oversold here. If we're heading into a recession, we have to be down much more than we've gotten to, maybe not much more, more than we've gotten to so far this year. But see, that's my point, though. What if we are heading into a recession ultimately, but it's pushed further off? So doesn't that change the calculus a little bit for the trajectory of the market, at least in the near to medium term? It probably doesn't change the end game. The end game is that there's still a deeper correction to come. And while we all sit around and wait for that to happen, you try to trade around on that on a weekly basis, you're probably going to end up chasing your tail.

So I wouldn't recommend it. I don't think it's going to take that long. I don't think it's going to take as long as Jamie Dimon does to get six to nine months out into a recession. Do you think it's going to be sooner than that? I think it will. Yes, I do think it would be sooner than that. If it happens, I think it's sooner than that.

I think by the end of the year, we're going to see the labor market start to show cracks. That's when the consumer gets scared. When the labor market starts to show cracks and people are worried about their jobs, people stop spending. Wow. So, Cameron, we've been talking about rates, right?

They're the driving force, driving the train, so to speak. Gundlach points out where the 2, 5, 10, and 30 are on the longer end of the curve, he notes, is flat. He thinks it could be a sign of yield increase exhaustion. Treasury yields may be peaking between now and year end. Do you agree with that? And if he's right, what does it mean? That could very well be.

But as you and I have talked a lot, it's not just where you get to in rates, it's how elevated that they stay there. If we go back to 2007, the Fed stayed at peak policy rate for 14 months. And so if the Fed stays at this level of restrictive territory for an extended period of time, the result is that you will see demand slow materially, not just in interest rate sensitive sectors, but it will metastasize to the rest of the economy. They're telling you that, aren't they, Keith? I mean, hawkish harker is what I'm calling him today, right? He's been one of the more middle-of-the-road members of the economy. They're telling you that, aren't they, Keith? I mean, hawkish Harker is what

I'm calling him today, right? He's been one of the more middle-of-the-road members of the Fed, and he was pretty darn hawkish about noon Eastern when I was on earlier, and we broke the headlines with Steve Leisman. Yeah, it's kind of what you just talked about. The Fed's basically boxed in, right? If the economy continues to be strong, they're going to continue to raise rates. And if they're starting to pull back on that, that means the economy is softening, which will hurt earnings down the road. So I think the Fed's in a difficult situation. I do want to go back to a point made about recessions. Around recessions, markets go down about 29%.

At the lows, we were down about 27%. That's the average. Each cycle is different. So kind of keep that in mind. But the other thing that's important is markets don't, historically, there's no precedent for markets to bottom before a recession begins. So I actually think you could have a window based on what you said. But if you have that window, we would be getting more defensive because markets historically, again, do not bottom before the recession even begins. And we don't think we're in a recession today.

I mean, one thing is clear. You've got to have earnings and it's kind of early to declare victory. Right. We just started. And next week is going to be critical. Look, in the next five minutes is going to be critical, at least for one corner of the market. And that's, you know, social media stocks. Snap is expected momentarily. They have the first mover disadvantage in some ways in that space because they've been so punished. The options market is looking for a 20% move off of earnings, which sounds to all of you like a lot. It's not based on the way that the stock has moved, but Facebook and Google have moved off of it. So it just starts the real important tech parade

that we need to keep going if you think the rally can in and of itself. Yeah, so the tech parade, I think, is a separate conversation. Look, at 25 to 27 percent of the index, as tech goes, so does the index, right? Snap, as we start to get some of these results from social media companies, first of all, they serve as such a proxy for the younger investor, the younger consumer, and what's going on in trends in the industry. Secondly, they are the indicator of what ad spending is doing. And when you think about that from an economic perspective, the first thing that companies are going to cut before they have to lay people off

is ad spending and sales costs. So if ad spending continues to go down, continues to see pressure, we're going to continue to see pressure on a lot of this social media. You know, Cameron, I read one headline leading into the results, which, again, we expect in maybe a minute or so, that Snap is about to play canary in social media's coal mine. Right. It's going to be bad for for meta, bad for alphabet. Now, maybe the worst is over for Snap. We're going to learn that in seconds. But maybe it is the tell on where things are.

Well, it's always good to remember that one company's expense is another company's revenue. So if companies are starting to dial back, as Liz says, on expenses, that is going to hit these social media companies. But it's not just about tech companies. That's the message here. Transports are screaming at us that there are things slowing down materially. We heard from Union Pacific. We heard from Knight, we heard from J.B. Hunt today, all of them saying that there's a significant deceleration in demand. Yeah. So tech, Keith, what's your outlook here? How important do you think Snap is to get these earnings?

Now, it's obviously, it's a different market cap size than the biggies, right? We get it, but nonetheless, and it is out, and we're going through it right now, our Julia Borson is going to pop on momentarily and give you the— She's ready? All right, Julia Borson, I'm told, is ready. Jules? Well, earnings coming in at a beat, $0.08 versus the flat earnings results that were expected. Revenue did miss by a hair, coming in at $1.13 billion versus the $1.4 were expected. Revenue did miss by a hair coming in at 1.13 billion versus

the 1.4 billion expected. And daily active users were stronger than anticipated. The company adding 16 million daily active users in the quarter for a total of 363 million. The street had been expecting the company to report 358 million. What was driving the greater daily active user growth, whereas revenue was just a hair light of expectations, is that average revenue per user was lower than anticipated at $311 versus the $321 estimated. Now, there is a key stat here that is what is really driving the stock down 12% right now. The company gave some insight into Q4 revenue growth, saying that so far in Q4, they've seen revenue growth of

about 9% year over year. But they say that visibility remains incredibly challenging. And this is compounded by the fact that revenue in Q4 is typically disproportionately generated in the back half of the quarter, which further reduces visibility. They said, given all those factors, they're not going to perform. They're not going to provide formal guidance. And they warned that they believe it is likely that year over year revenue growth will decelerate as they move through Q4. Due, in fact, due in part to various things, including relying on brand oriented advertising. And they have set their internal forecast based on the assumption that year over year revenue growth in Q4 will be approximately flat and also estimating adjusted EBITDA would be about $200 million under that revenue assumption. So with

that approximately flat outlook for Q4 revenue growth, we see the stock is down 17% right now, Scott. Yeah, I mean, amazing for a stock that's already down, Julia. 77% year-to-date. That was coming into this report. It's the worst in the Nasdaq 100. The stock's down more than 17 percent. And Julia, you know, going in, Brian White, who follows this company as an analyst, said, quote, we believe the darkest days of this economic downturn are ahead of us. Maybe Snap is confirming at least part of that because their inability to have visibility into the environment that we're in. And that's the reason why they give no guidance yet again. DAU is good, but if you're making less on them, that's not good. Yeah, that's what's so interesting here.

And getting this very granular revenue growth from Snap is so interesting because they've actually seen an increase in that revenue in the first part of the quarter, you know, with that 9% so far this quarter. But they think things are going to continue to slow down or will slow down to end up having a quarter that's flat. But one other thing I want to point out here is that Snap announced that the board authorized a stock repurchase program of up to $500 million. This is on top of another $500 million stock repurchase that was announced last quarter. So this is a company that's, you know, they announced restructuring in August. They're buying back stock and they're trying to figure out how to really streamline because they have the user growth. User growth is accelerating. The challenge is getting the revenue to reaccelerate again.

Yeah. And as you know, right, a lot of social media companies have been cutting costs, eliminating positions like Snap announced in its own right in August. They've also had some key executive departures, haven't they? Yeah, two of their top ad executives went over to Netflix. That was part of the whole Netflix ad-supported business. Snap has said that they are streamlining. They did these layoffs that they announced in August, and they're really focused on what really matters. And that includes their advantage with augmented reality ads, this idea that AR ads will bring

more of these, especially retail advertisers, onto the platform and help them generate higher ROI. But this is so interesting here because they have such a negative outlook for the back half of the quarter. That's what's driving that overall flat outlook for Q4. And we have to wonder what this is going to mean for the other players looking at Meta down over 4% and Pinterest down over 7% in light of these results. Yeah, ugly, no doubt. Inflation, the war, recession, all taking a toll on the ad market and lack of visibility from Snap. Julia, thanks so much. If you have anything else, please come back on here in overtime. But we'll follow that. Liz, you see the carnage in these other big names.

Not great for very widely and large held stocks. Right. They're guilty by association right now. And look, the other thing is, if you start to see pressure on revenue, I think I've made this point on one of your shows before. This is an odd time where we're seeing revenue growth well above earnings growth, pretty much across the board. And for the full year, we're seeing that. So if you start to see companies underperforming on revenue growth, they're not going to look great compared to the

rest of the landscape. And they're going to probably be punished harder than other companies would be. Quickly from you both, but Cameron, you first. The idea of this buyback, is that something that we're going to continue to see as stocks like this get creamed? That the opportunity is just too good to pass up? And I'm thinking about how that translates into the individual. Yeah, companies don't necessarily have the best track record of buying back their stocks at the most opportune times. $8.50. I mean, it's a stunner to see it. Well, but we have to remember this stock was trading at 40 times sales just last year. Now it's at four times sales. But what would you pay for sales that are flat? And I think that's the reality here is that the air has come

out of this market from a valuation perspective. Now it's all about earnings and it really will be about the restructuring and how much cost they can take out because this top line likely is not going to grow with this macro environment. Real quick, Keith, wrap it up. Yeah, I would say that technology is not leadership. You buy tech because they can outperform on earnings. The earning trends relative to the market are going down. This is a concept hope stock. When you're going through an economic uncertain period, you don't want to be overweight.

These higher beta names where there's no earnings as well. So we would stick higher quality relative to this. Glad you all were here on the set. It was fun. That's Keith Lerner, of course, Cameron Dawson and Liz Young joining me right here. I'll see all of you again soon. Thank you. Let's get to our Twitter question of the day. We want to know what is the best social media stock to own right now? You're not feeling too good if you looked at the chart that Julia threw up after Snap's results. But with the decline, is it Snap? Is it Meta, Pinterest or Twitter? You can head to at CNBC Overtime on Twitter. Cast your vote. We'll share those results later on in the

hour. We are just getting started, though, here in overtime. And we have a surprise, frankly, for us and you. The professor Jeremy Siegel in person right here at Post 9. We'll get his take on everything markets next. All right, we're back in overtime and we have Wharton School professor Jeremy Siegel. He's joining us live at Post 9. It's good to see you. I looked over and I thought I was like, is that Jeremy Siegel? I was like, get this man on the set immediately because you've been so passionate of late about where we are in the market. And by the way, you said that you haven't been here in 30 years in person? Down on the floor, no. Well, it's great to see you. We're trying to figure out if this

rally is going to keep going or not. What's your sense? The market wants the rally and it seems like the Fed wants to keep it down. I mean, every time you hear Fed speak, you know, it goes down 100 points. Again today, right? Yeah, same thing. He was hawkish. Yeah, and he was my former dean and my Fed president. I'm going to have to have another breakfast with him and talk to him. Is he wrong to be as hawkish as he sounded?

I believe so. I mean, you know, my position is they've done enough. It's time to wait. I mean, I can understand another 50 basis points and you know, and then wait. But, you know, I mean, you know, Bullard, well, 75-75 I think that's too high.

And wait. And in my opinion, they're there. And I just hope the data you know, convinces them that that the disinflation in the service sector. And as I talked earlier last week on Squawk Box, the housing statistics are so lagged. Housing is really going down, not going up like the data shows. We don't have the service inflation that is in the official statistics. And that's so important to realize

because they think, oh, service inflation keeps on going up. It's because of the way the Bureau of Labor Statistics computes that housing data, distorts it on the upside right now, just like they distorted it on the downside going up. When you see Fed funds, which have moved five to five percent in May of twenty three. Yeah. You think what? I think that's way too high in this world with inflation coming down, with ongoing inflation. Don't quote year over year. Look forward on the real prices. I think you're really getting, you know, two, three percent forward looking real inflation going up five percent in today's world. It's too tight. What if I say, though, how how is that

possible if the labor market is still strong? And as we're witnessing, snap notwithstanding, that earnings to this point have been pretty good. Yeah. Surprising you? Not not really surprising me. Actually, I thought earnings were really going to be good. I mean, actually, we're supposed to get 2 percent GDP growth this quarter. We've had zero in the first and second quarter. And firms, don't forget, a lot of them locked in their debt at 2 and 3 percent. They have been raising prices. And don't forget, wages, though they're going up, have not matched the inflation in goods prices. They've been able to maintain pretty good margins. I mean, they're coming down in some places. If we have a recession,

they'll come down more. But right now, they're kind of in a sweet spot in terms of locking in low debt, being able to raise prices, leveraging the gains on the wage front in corporate America has not been going up that much. But I mean, for the sake of the Fed's credibility, don't they have to stay the course? Right? I mean, how could—you kind of wanted it both ways, right? You wanted them to go big, right? So they had the credibility to—they acted, and now you want them to go home after you wanted them to go big.

I'll never forget the expression on your face. I was the biggest hawk for them to raise for a year and a half. And then one day I come down and I said, you know what? I think they're going to get too tight. And you did a turnaround. You said, Dr. Zinko, you've been like one of the biggest hawks around. And I said, yeah, but take a look what's going on in the real market there. And I think the more you look, the more you see that.

And particularly, I look at liquidity, the money supply. I've never seen a deceleration and a decline from March, almost record in the postwar period. This is, to me, playing with fire in terms of what could happen to the economy. You worried about a recession that some say is a formality. It's just a matter of when. Right. Diamond, Jamie Dimon, right. JP Morgan suggesting, I don't know, six, nine months away. You know, a lot of respect. Is he is, Jamie Diamond. Right? JP Morgan suggesting, I don't know, six, nine months away, you could have something happen. You know, Jamie Diamond, a lot of respect. Is he an economic forecaster

on GDP? I don't know his record there. I mean, he's got a good, runs a pretty big institution. I think we could save... No, I admire him tremendously, and certainly in... What's going on in the banking world? No one is a good forecaster, particularly the Fed.

No one really has been able to forecast recession. I believe if the Fed goes up 150 basis points and stays that way through 2023, they're guaranteeing an inflation. If they can stop now or just a small increase and then wait and look around, I think we have a chance of avoiding a recession. What if yields have topped out, perhaps like Jeffrey Gundlach suggested last night on Twitter, to which I'll refresh your memory if you didn't see it. He points out where the 2, 5, 10 and 30 are. He says the 10 and the 30, the long end is flat. Sign of yield increase exhaustion, he says. Treasury yields may well be peaking between now and year end. What do you think about that? I think that's true. I think we are near the top, but it gets me

nervous. They keep on creeping up. And you know why I think one of the reasons is? All of a sudden, people are saying, you know, bonds aren't good hedges against stock risk anymore, like they were for 20 years. You know, I thought they diversified my portfolio. Now they both go down together. Why should I hold something that's 4% before inflation? That's not the world's greatest yield. I think that's one reason prices are slipping and yields are going up. Don't forget, a lot of Treasury demand is what's called hedge demand. Again, shocks in the economy. When bonds don't serve as good a hedges as they did before, their prices are going to go down and the yield's going to go up. Would you buy the two-year today or a stock today?

I'll buy stocks over any of this fixed income. I think they're both going to go up. I mean, I think the yields will go down, but you're going to get a bigger bang for your buck in the stock market. Oh, that's a good last last word Thank you so much for being here. I'm glad we saw you today Fortuitous for us and fabulous for our viewers, too That's the professor Jeremy Siegel of the Wharton school up next big money advice from one of the highest rated private wealth advisory teams in this country

Morgan Stanley's Chris to me is with us exclusively We'll find out how he's navigating the market right now and later much more on that big move and snap. The stock is plunging. There it is. Man, another 25 percent down. We've got Gene Munster standing by with his instant reaction to those results. Overtime's back right after this. All right, welcome back. Time for a CNBC News Update now with Shepard Smith. Hi, Shep. Hey, Scott. From the news on CNBC, here's what's happening. Just today, the White House says Iranian troops are directly engaged on the ground in Crimea, supporting Russian drone attacks on Ukraine. The national security spokesman, John Kirby Kirby saying the Iranians are largely there for training and tech support with the Russians actually piloting the drones. Both Russia and

Iran deny it's happening at all. The Justice Department is now running out of money to finish its January 6th probe. NBC's Sahil Kapoor reports the DOJ is asking Congress for an additional $34 million. The Attorney General Merrick Garland calls the probe the most wide-ranging in its history. And for the third year in a row, college enrollment is down. That's according to a new report from a national company. The number of undergrads in school, about 7% lower than the fall of 2019, just before the pandemic hit. Tonight, Wilfred Frost, live from London on the mess in the United Kingdom and Prime Minister Truss's resignation, what it means for us.

Steve Leisman breaks down his latest all-America economy survey. And Jane Wells, live on the drought-ravaged Mississippi River. On the news, right after Jim Cramer, 7 Eastern, CNBC. Scott, back to you. All right, Shep, thanks. Good stuff. We'll see you then. That's Shepard Smith. Stocks, as you know, pulling back for a second straight day. So how's the big money navigating the recent volatility?

Let's ask somebody who knows. Our next guest, he runs one of the highest rated private wealth advisory teams in the country at Morgan Stanley. He is Chris Toomey, and he has come to Post 9. It's good to see you. It's good to see you. It's good to see you. I think our viewers will, I hope, remember you've been cautious. Yeah.

Right? Are you still as much or less so? You know, I think the last time we were here, we talked about, you know, how we were concerned about the data. We were reducing risk. We were reducing equity. We were hedging. When we got some of these rallies, we've been selling even more. So we're probably at our lowest equity exposure I think we've ever had. Oh, my gosh. When we got some of these rallies, we've been selling even more. So we're

probably at our lowest equity exposure I think we've ever had. So we're still very concerned. You think this goes pretty sour? Yeah. I mean, I think the news just keeps getting worse, right? And so I think from our standpoint, until the story changes, the most important thing for us is price. And so until price gets down to a level that we feel comfortable with, we're going to continue to remain defensive. I mean, even the guy at your shop, right, Mike Wilson, was suggesting that you could get a pretty good rally in stocks before, you know, it all comes home to roost eventually. But I mean, he's been as bearish as they come. And even he thinks you could have some pretty decent upside. Yeah, I think if you look at the note, I think Mike is speaking to two specific things. One is the market is very one sided. I was just in Las

Vegas at a conference for Forbes and Shook, and there was nobody that was positive on the market. Right. And that type of negativity, you only need to spark for the market to move in the other direction. That's number one. Number two, there's a good chart that we've been following, which is the 10 year versus S&P 500. And the bond market has done a really good job of leading the equity market. And we're in a situation right now where the 10-year is probably a little extended versus the S&P. So whether Jeff Gundlach's right or whether it's a situation where the S&P is going to catch up to the bond market, which would be even worse, we could see a situation where we

could get another one of these bear market rallies. But do you think this is the biggest game and the only game in reality in town is the movement of the 10 year, if not the two year, right? I mean, pushing for 460, that that's the biggest game in town over earnings, which have been pretty good, probably surprising you like many. Well, I mean, I think the last in April, since April, when I was last here, earnings have come down about 10%, right? So expectations have come down fairly dramatically. The big problem for earnings is going to be next year, right? So right now we're projecting about 212 on S&P 500 earnings. That's about 20% lower than the street. So I think you've had this right. When somebody talks about P.E.

being cheap, the peg ratio is looking good. Equity risk premium looking good. The problem with all of that is if earnings going earnings going forward are wrong, none of that matters. And in our view, next year's earnings are going to be pretty, pretty bad. So as little exposure as you have to equities, as you just said, might be the lowest you've ever had. Are you looking for more opportunity in credit or are you kind of sitting out and as much cash, if not more than you've ever had as well? Well, yeah. I mean, you were talking to the professor about bonds and equities right now. The short term treasury right now is looking very attractive. To everybody, though, it's like kind of what you were saying before. If everybody's in the same boat, is it really a boat to get in? Well, I mean, the benefit of a short-term

Treasury is the fact that you've got maturity, right? So maybe it fluctuates up and down, but if you're short enough, you know you're going to get your principal back. If you're looking at equities, which are discounting the future, and the future doesn't look bright, you want to be defensively positioned. Because remember, investing is geometric. It's not arithmetic. You get penalized more for losing money than you're rewarded for making money. So this is a period for caution. Some are worried that, you know, things can get a little asymmetric. To continue that analogy, given what's going on in the bond market with the volatility and liquidity, how do you see that? I think that's

a big problem. I think, you know, the big thing that I'm concerned with is the dynamic within the bond market. So what is liquidity looking like? And you're hearing different things about concerns around different parts of the bond market that are becoming less and less liquid. And so that's something that we're particularly concerned with. So I don't necessarily think you want to be a hero here taking on credit, going into high yield. We haven't seen the bankruptcies. We haven't seen the defaults that you would typically see at this stage of the cycle. So from our standpoint, just continue to remain defensive. Okay. So that makes me think of, right, you haven't seen some of the things that you would look for if we were closer, perhaps,

to a recession. The things you just said in credit, the strength of the employment market, the stability and resiliency of earnings. So that goes back to where we started the program some 35 minutes ago, whether the runway to the wreckage, so to speak, plays out longer than we thought. And that gives an opportunity for equity investors, like they didn't think they had had before things go a little south. No, I'm in agreement. I think if you look at the U.S. economy, I think you have to look at it in two separate phases. You've got capital goods, which are going to be in real trouble because of the inventories that are building up. Right. Supply is coming back online as demand is coming

down. But services are being pretty resilient. And that's two-thirds of the economy, right? So if services companies are doing well, they're having a hard time hiring people, it's going to be hard to really push the brakes. And so while I might not necessarily agree with everything that the professor just said, I think he's probably 100% right in the sense that the Fed is specifically focused in on moving forward and the carnage that's going to come from that we're going to see in 2022. But even if the runway is longer, you're still sitting it out. Right. You just said you have the lowest exposure you've ever had. So even if you miss it, I don't think I don't think we'll get a chance to miss it. I think the thing is, is until price gets down to a level that is in in in relation to the risk that we're seeing right now for the next 12 months, we can be happy collecting four to five percent income off of our portfolio as we're waiting for the markets to get to a level where margin of safety is there and we can feel comfortable getting in.

You've got two issues. You've got prices you suggest and then you have time, which people just suggest the bear market has been too short to be declared over. Well, I mean, and that's one of Mike's other points. Typically, an earnings recession lasts about 15 months. We're only about three months into that earnings recession. So we've got some more time before companies have to capitulate and really say, we're really feeling this. And I think that's the other thing that I think I'm concerned with is, you know, we're going from a situation where we had the accelerator on like we've never done before, and now we're hitting the brakes like we've never done before. What is that going to do to businesses where they worked when interest rates were at zero, and now that interest rates are at four or five percent,

those businesses don't work anymore? What does that mean for those businesses? And then how is that going to transition into the market? OK, well, the Fed hopes that maybe you just skid, right? You do one of those circle moves. If you're going real fast and you hit the brakes, you skid out, but you don't crash into the wall. And that's what they need to have happen. I got to go. It's good to see you as always. It's good to see you. All right. That's Morgan Stanley, private wealth's Chris Toomey joining us here at Post 9. Up next, a trader triple three big stock moves today for one halftime committee member. We're breaking it all down in today's halftime overtime. Of course, we're all over the huge move as well in Snap.

That stock, there it is, down more than 25%, tanking on its results yet again. That call kicking off in minutes. We're digging in. We've got Gene Munster coming on as well when we're back in overtime next. All right, welcome back in today's halftime overtime, a triple play for Jenny Harrington's portfolio today. IBM shares leading the Dow after its earnings beat AT&T, the second best S&P performer after upbeat cash flow guidance and defense stocks having their best week in some five months. Driven by names like Northrop Grumman, Jenny owns all three. And she, of course, joins us now because no matter what she was doing,

she was going to come on and talk about these three winners today. Right, Jenny? I know how happy you must be. And I'm just wondering if there's any surprise at all that some of these names delivered what they did. Well, it's awfully fun to be the ray of sunshine for a change. I think the surprise is more in the response. Remember when I was on on Tuesday, Scott, and we were saying that our thesis here at Gilman Hill is that this earnings season is going to end up being worse than forecasted, better than feared? Well, what was interesting today was that these were better than forecasted, better than feared.

The numbers weren't actually that amazing. They were just not worse, and they were a little better, and they actually guided better than forecasted, better than feared. The numbers weren't actually that amazing. They were just not worse and they were a little better and they actually guided better than expected. I'm talking about AT&T and IBM, not Northrop on this because they haven't reported yet. But so I think that's kind of an interesting theme that we might see emerge also,

which is if you just don't do badly, you're gonna look like a hero in this environment. Yeah, so we were pretty excited by the responses. Yeah. Are you more surprised by IBM or AT&T? I mean, they've obviously had their challenges, AT&T especially from a stock standpoint, and that's the bigger winner from a percentage standpoint today. Again, not really, because they haven't had bad quarters. They've actually been kind of okay on numbers for a while now, particularly IBM. So that big response was really the more promising part. But IBM's numbers, this is what was great about them. Again, not a surprise,

but just great. So IBM comes out and they say they guided to $14 billion a year, sorry, $10 billion a year in free cash flow. AT&T guided to $14 billion a year in free cash flow. And you take those and you kind of juxtapose them with money burning snap, and you see the market starting to change its lens. I mean, the lens has been changing for a while, and that's why the dividend stocks overall have held up so much better than the broader market. But it's nice to see the investment environment, particularly in a down day, pay attention and appreciate stocks that just deliver on cash and guide up a little bit. I mean, if these numbers had come out a year ago in 2021, people would have snored and ignored them. Now they look wonderful.

Real quick, and forgive me, but I got to go. 20 seconds. Give me something on defense, right? We mentioned the kind of week it's having. Yeah, it's fantastic. So this is our thought on defense, which is people want protection in their portfolio and they frequently buy bonds, but you're better off buying a Northrop or a Lockheed because when times are tough, these stocks shine. We've actually owned this since 2013. We've had it forever. It's got a 20 percent annualized return versus the S&P at 10 percent.

It's got 12 percent consistent revenue growth. We expect that to continue. Huge free cash flow. So I think this is kind of a better than a bond way of putting real diversification and real safety in your portfolio for times of trouble. It's also something you can probably hold forever. All right. All right. We'll make that the last word. Good stuff. Go enjoy it. Jenny, thank you. That's Jenny Harrington in halftime overtime. We are tracking some big moves as always in overtime. Christina Parts and Nevelosa standing by with that. Christina. Let's start with a rail operator, CSX, taking a big hit because of union and higher wages. But the stock is jumping and one company admitting they suffered a, quote, very active COVID spike

among employees. I'll break down the stock movements next. We're back. Shares of Snap are sharply lower after reporting results at the very top of the hour. We do have some other earnings to tell you about, though. Christina Partsenevalos is here tracking all of that for us. Hi, Christina. Hi. So let's start with rail and real estate firm CSX seeing its shares move higher, up 4% after posting a revenue and earnings beat, and that's including higher labor costs related to new union agreements, $42 million to be exact for the adjustments of wages and bonuses from prior quarters. Shares of Whirlpool right now moving lower on a significant earnings miss and light revenue. You can see shares down over 3%.

The company blames weak demand, with countries like Mexico and Brazil down double digits. Because of that weakness, Whirlpool plans to cut production volumes by 35% in the third quarter. Lastly, there was an interesting quote from Tenet Healthcare earnings report, which beat on earnings, but revenues came in just in line with expectations. The outlook was pretty weak, too. Management said, quote, we work to recover from our cyber attack and dealt with a very active covid spike among our employees. The company is also announcing a one billion dollar buyback. Shares are plunging, though, down 17 percent on its weaker outlook. Scott. All right, Christina, thank you. Christina

Parts in Novolos. Snap shares losing a quarter of their value on week Q4 revenue guidance. The conference call kicking off in moments. Up next, Gene Meister tells us what he needs to hear, what you need to hear, really, from the company, if you're an investor or not. Overtime, right back. Let's get another check on shares of Snap. You see it there.

It's plunging more than 25%. That's more than, I mean, it's the same story seems to be. That's after giving weak revenue outlook for the quarter. Let's bring in loops. Gene Munster, he joins us now. That conference call kicking off in about 10 minutes. I mean, I say it's kind of the same thing because I think it was last quarter. Didn't we just say that the stock lost 25 percent of its value?

I think it was like 30 percent. But, yeah, the point's well made. And Scott, I want to step back and just outline the big trend about why the stock is down 25% here. It is about the trend. It's about decelerating revenue growth. It was 38% in March, 13% in June, seven in the just reported quarter. They got it to flat and you pull this forward. They're going to, essentially the street's going to essentially, the street's going to come out negative in March. That is not a growth story. And this is a total loss of confidence. We had a loss of confidence before, but now the stock is even at a further loss of confidence than three months ago. I want to quickly outline what is going on with the

business, what causes this massive deceleration. There are effectively four headwinds. One is the overall ad market is soft. Second is Apple, some of their privacy changes that we've talked about for about a year now. Third is TikTok. Everyone talks about those three, but there's one that doesn't get discussed as much. And this is a more difficult one to solve. And that fourth headwind is how they monetize. Today, Snap monetizes primarily through a discovery page, a discovery tab. They don't have the same kind of ultimate scroll that you would see in like Instagram for that monetization or TikTok has. And so they need to solve the monetization problem to solve this revenue decline problem. And what I'm asking myself right now, I mean,

this is a bomb that just went off. And we loop our shareholders in Meta and Google. And I'm asking the question, are we going to be at risk next week with these two giants? Well, why wouldn't you be after these results and the kind of commentary they gave about lack of visibility and also where the macro is and what the ad market seems to be? Well, it's not what I wanted to see. So my concern increased, but I mentioned those four points. Yes, they're all in these advertising business. So both Google and Meta is subject to that first point about the broader ad market. But if you just take Google, for example, they're really impacted by only one of those four points. And in the case of Snap, they have a lot of their advertising business is branding and direct advertising is doing better or typically

does better. That's what Google does. And so I think Google, the street's looking for 6% revenue growth just to focus on the December number 6% for December so flat and six to me they're they're close enough so I'm not as concerned my level of concern going into before the snap results for Google next week is I was thinking it was going to be a good quarter I still generally think it's going to be a good quarter I know it sounds like I'm out of touch with reality but I'm just trying to parse through what's actually going on with snap versus an industry and then as fara, two of those four headwinds apply to Meta.

What we saw with the Apple changes of privacy and the overall ad market, I'm more concerned. We'll see that. But keep in mind, the street's looking for down 4% revenue for December for Meta. So it's not as high of a bar. Gotcha. Gene, thank you very much. That's Loops. Gene Munster joining us with his reaction

to what Snap delivered this evening. Up next, Santoli's last word is next. To the results now of our Twitter question, we asked what is the best social media stock to own right now? Meta was the winner with 45% of the vote. Snap, which reported tonight and is plunging as we speak, will call it 10 percent. So there still is 10 percent. Mike Santoli is here with his last word. You want to opine on or react to what Dr. Siegel had to say

in his first trip to the stock exchange in 30 years? Look, I get exactly the sentiment that he's expressing, which is impatience with the way the Fed seems like it's on this kind of autopilot, not responsive to thinking about the lagged effects of what they've already done. But I really don't see the Fed really adhering to anything close to their mandate. If the CPI at last report was three to four times their target, they just can't say that they're looking for a turn, even if they expect at some point soon they'll get there. The question is, will they get there? Right. I mean, there's such a there's a lag effect and you just. Yeah. Yeah. Well, that that's that's what matters more than anything else. I also think, you know,

this idea out there that the Fed from this point wants to inexorably tighten financial conditions. I think that the other way to cast that is they don't want them to loosen. They think tighter financial conditions to where they are right now, thereabouts, is doing the job and it just needs time. And so if they signal that they're almost done with raising rates, then they're afraid they'll loosen up again and be counterproductive. I mean, I know that's been the party line on their part for a while, but I see why they have to stick to it. I mean, they don't want to see a big rally in the market. Right. They're not going to say that explicitly, but that's one of the things

that they don't want to see. They don't want a rally that's premised on the idea that they are basically, you know, losing their nerve, that they're going to just hope that inflation gets better. No, that's right. They don't want that. Now, does that mean they need the market to go down a lot from here? I don't know. I don't think so. But they're happy to have valuations in check. It's been a controlled demolition of equity values down toward neutral levels or maybe even cheap, depending on what you look,

and having bonds get decimated in a way they haven't in decades. What if the rally is in part based on the fact that the market sniffs out that they can pull it off? They're trying to have a soft landing because things are still pretty good. That's fine. If they're if they believe they're close enough to where they can just, you know, throttle back. It's fascinating because I remember Powell being asked at the first press conference when they raised rates, do you really think in real time that your rate hikes are one to one restraining inflation in the moment? And Powell said, no, not really. That's not kind of how it works, but we just have to set the stage for it. Well, they've set the stage to a dramatic degree and it's going to be

one year of perhaps five percent change. They also need to be, to your point, Siegel's point, a little bit patient to let it work through the system and see how it all plays out rather than overdoing it. But eventually I'll see you tomorrow. All of you as well. Fast money's now.