Closing Bell - Closing Bell Overtime: Stocks Drop in Final Minutes of Trade 11/14/22

Episode Date: November 14, 2022

The Dow dropped to end the trading day – finishing out lower by 210 points. Dan Greenhaus of Solus gives his instant reaction. Plus, under-the-radar growth plays with Josh Bennett of Weatherbie Capital. And, Berkshire Hathaway’s 13F filing officially out in Overtime. Market expert Mike Santoli gives his instant reaction.

All right, Sarah, thank you very much and welcome everybody to Overtime. I'm Scott Walkney. You just heard the bells. We're just getting started from post nine here at the New York Stock Exchange. In just a little bit, I'll speak to a top technician on how far this bounce can go, what the meaning of today's sell off into the close is, if anything. We also expect new filings this hour from some of the world's biggest investors. Good chance to see what the so-called smart money is buying and selling in this current environment. We begin, though, with our talk of the tape. Despite today's late session drop, the market's newfound momentum coming into today and why some say it can last a lot longer. Let's see if our first guest agrees with that. It's Dan Greenhouse, Solus Alternative Asset Management. He's here once again on set. Welcome back. It's good to see you.

Thank you, sir. I'm wondering, you know, what you think of that question, the momentum we were feeling, and then this sort of unraveling at the end and the way that we closed here, as Mike Santoli said a few moments ago, this resistance at 4,000 on the S&P. Yeah, I mean, I've been here with you. So if there was a headline, I haven't seen it. But I think, listen, to your point about how far this can go, I think the most important point is that you are entering or already in easily the seasonally strongest period for markets year after year after year. And that's compounded in midterm election years as well. And I think with the tailwind of how far you'd fallen, the better than expected, although not good at all,

CPI report that we had, and then hopefully a cooperation and other data points. It was good relative to where we were. I mean, obviously it's not great when you're doing 7-7 on inflation, but relative to where we were, I mean, can we make some incremental steps in the right direction? Yeah, but listen, we've talked about this all year. It's important for people to remember that the year, for the viewers, that the year-over-year rate doesn't matter. You want to look at the month-over-month rate. Because of the nature of what we call base effects, almost any outcome would result in a decline in the year-over-year rate. What you want to look at is the month-over-month rate. So are you suggesting that we did too much too soon in the market on the back of the CPI?

I think when you have one of the 10, 15, 20 best days in modern market history... I was going to say, we only did a year's worth of gains in two days. What's your problem with that? That's true for the NASDAQ. That's true for the S&P. It's true for small caps. Those types of days. Now, let's pivot to another conversation here. The idea is that those types of days only occur in bear markets. And that's not totally true. They do occur in bear markets. Most notably, the most egregious upside gains occurred in October of 2008 when you had 5, 6, 7, 10 percent swing days each. But another day occurred after the day after the bottom in the covid low. You've had other bottoms in the in previous bull markets. So the idea that somehow that only happens in the bear market is not borne out by the data.

It could be signaling something of a bottom. I don't think that's necessarily the case. I mean, there are some who are, you know, even the more negative voices over the last many, many months. Mike Wilson, for example, over Morgan Stanley, says you could go to 41.50 or above. That was the top of his range. But he still thinks you're going to go to new lows in 23. Yeah, because that camp, in which I have long been, is simply arguing that you can't have 500 basis points of rate hikes in, call it, a 12-month time frame

and only see its effects manifest itself in the housing market. There's just, it's hard to believe that you're not going to have further declines in the manufacturing sector, you're not going to eventually have at least a slowdown in hiring, if not outright layoffs, and that tends to occur, or that assumed to occur, let's call it in the first half of next year, maybe the third quarter. Do you normally, though, have that magnitude of rate hikes at a time where the economy started off at such a high level? No. Well, listen, we haven't dealt with anything like this in 40 years.

And also, I would argue, on the positive side of things, and I think we have a chart of how much money people are sitting on, just to remind everybody of the obvious, we gave everybody a bazillion dollars. Here it is. This is the change in consumer banking, cash that people have in their bank account, the percentage change for different wealth quartiles since the start of the recession in 2020. And you can see, no matter where you fall on the income or wealth spectrum, you have infinitely, infinitely, you have exponentially more cash in the bank. I wish it was infinitely. Oh, yeah. Don't tell me about it. But you have

exponentially more cash in your bank account today than you did at the start of COVID. And that's providing an important ballast against some of the negative headwinds. So to your point, you've never had a situation like this before. I think those of us in the bearish camp are just sort of operating under what I've often referred to as this expected value outcomes. Yeah, but are you appreciating the cushion that we started with enough? Maybe not. I think I am, obviously. I think we all are. But again, when you deal with 500 basis points of rate hikes in 12 months, you're going to see a labor market slow down. How much it slows down remains to be seen. You're already seeing it, right? Amazon today, you know, these reports of

10,000 workers. You've had, you know, a number of layoff announcements already, thousands and thousands of workers within tech, especially. You have seen it in the anecdotal data for sure. Disney is sort of the first non-tech company of some large size to start announcing layoffs, but you haven't seen it in the macro data. The jobless claims number still remains exceedingly low, and the monthly job support is still quite high at a couple hundred thousand. What about the comments today from Brainerd, Vice Chair Brainerd?

Quote, I think it will probably be appropriate soon to move to a slower pace of rate increases. So they're obviously going to slow down, and they're probably going to slow down next month, right? The chances of 75 are, I think, growing slimmer. Wouldn't you agree? I would agree. To be clear, there is a monthly jobs report that comes out in two weeks.

So the CPI, the day before the decision. Yes, the day before the decision, the day of the meeting. So there's two really, and there's retail sales. And this week brings a slew of reports from retailers who are going to give us some up-to-date data or at least anecdotal data on the consumer. So there's a lot between now and then. But, yes, the likelihood is that they slow down to 50.

But I would also add that she's not really telling us anything we don't know. No, obviously. I think it probably will be appropriate soon to move to a slower pace. You're not going to hike 75 basis points in perpetuity. No, but she wouldn't say that if she didn't think that they were, A, starting to do what they need them to do, and B, that inflation has peaked and it actually is trending in the right direction. So we give her, you know, a little bit of credit on the thought of where we are going forward rather than just say, well, obviously. Yes, no, I agree. And listen, you can make a strong case that they should slow down. But the argument isn't, are they going to keep hiking in perpetuity?

Now the issue is, to what level are they going to go? And even more importantly than that, how long are they going to leave it there? And that's something that nobody's going to opine on just yet, because there's 17 pieces of data between now and the February 1st Fed meeting. All right. Let's bring in Alicia Levine of BNY Mellon Wealth Management as one of our guests today as we broaden the conversation. Kevin Gordon of Charles Schwab here again. It's great to have you both with us. You've listened to this conversation. Alicia, where do you come down? I mean, you've been negative on the market like most other people, but even those see a window

of opportunity, if you want to put it that way, over the next six weeks or so. Look, it's very hard to fight the seasonals right here, as Dan said. But the bottom line is the fundamentals don't support a market much higher than this because we're trading at 17 and a half times next year's earnings, which is more or less where you'd expect to be with some inflation into the system and a normalized Fed funds rate, not rock bottom zero rates. So the fundamentals don't really support anything much higher. But yes, could you get to the 200-day moving average, which is 4080? Yes. Could you go past it because everybody expects it to stop at the 200-day? Of course you could going into the end of the year. You know, in the end, the CPI was important because it was a rate of change, which is very important to the market.

But that's just not the only data. And let's not forget, the services inflation is still growing. So while core slowed down, core was slowed down by the goods sector, not the services. And in the end, it's the housing and the wages, which is going to be very sticky. And I'd say just one last thing, which is none of the inflation data has been linear this entire reopening. Yeah, that's for sure. And I suspect we're going to be there again. And don't forget, a softer dollar brings higher commodity prices. And then we're in that loop again.

Yeah, but softer dollar is what the market has wanted to see. And it's been getting it. And that's one of the reasons why we've rallied. So, Kevin, fade it or ride it? Fade what's been leading the rally. I mean, if you look at, you know, one of the things that I sort of had most discomfort with over the past couple of days was anything that was highly shorted, non-profitable. All of that junky, those junky parts of the market had led us into the rally. I mean, even that non-profitable tech basket that's tracked by Goldman, up 25% in two days.

That is a ridiculous move that was highly reminiscent of something that we saw, not to the same magnitude, but that had led us in that June to mid-August rally that had been sort of predicated on the idea that we were going to get a pivot by the Fed. Are you talking about like the ARK stocks, like the ARK kind of thing? Similar type, yeah. I mean, anything that doesn't have profits that has, you know, cash flows way out into the future, now you have the discount rate factor in. And I would agree with what Dan said. When you take into account the cumulative tightening, not even just the 500 basis points, but 375 basis points of tightening in just eight months, you know, you can't really say that that's not going to affect us in some way. And we are arguably just feeling the impact of the first couple of hikes. We now have to wait until we

see the impact of the 475 basis points hikes and then what comes after that. So I just think that given all of that, fade definitely the junky parts of the rally, but just keep a close eye, you know, keeping in mind the seasonals obviously carrying us into the end of the year, keep a close eye on what is leading and where you can sort of take opportunities in that. What, Alicia, turns the commentary more positive? Is it a pivot by the Fed and that's it? It's not the pivot. What is it? It's the inflation data, right? So it's PCE next and it's the inflation data because in the end, the Fed has already changed the goalposts. Right. They've already stretched out the hiking and they've moved higher on the goalposts, which is a five Fed funds rate. The issue is the data. If you get another month of this, but I think you have to see it in the labor market.

What's really sticky here is that we don't have labor showing up. So we have a supply shock in the labor market, keeping wages higher, which is going to keep inflation higher. If that changes, if you see it in the labor reports, you get participation back up, softness in wages, then I think you're good. And your earnings have to come down. Earnings are still reflecting growth next year. They have come down, though. But not enough. It's not reflecting the slowdown in the real economy. The housing market has just started. The reverberations in the real economy

are a ripple effect, and it's just beginning now. So you're going to see more of this next year. This is the conventional view, by the way. I mean, this is not an outlier view. When you say to somebody, well, what makes you more positive? It's hard for a positive story to be built because the effects of all of the tightening have barely started. Yeah. Other than in like housing, obviously. Housing is a lot more to go. If you look at median home price to income, rent to income ratios, everything says you have a lot more downside. And if you just look at a chart of the price of a home post-COVID, common sense tells you that it's going to have to come down. But the second point I would make is to this is a conventional view. This is a conventional view now. Six months ago, it wasn't

particularly conventional. There was the idea that this would all work out and you wouldn't have a meaningful decline in equity or credit prices. So now everybody's bearish. But six months ago, and I don't know that Alicia was there or not, but six months ago, it was very difficult to make this case. Looking ahead with respect to earnings, I would just say, listen, I agree, and we've talked about this forever. Earnings should come down. Fourth quarter, EPS is now probably going to be on the other side of flat. Over the summer, it was going to be plus 10%. So you've done an enormous amount of work on the earnings side of things. But also remember that nominal earnings are a claim on nominal GDP. And that's important for people

to remember because in a higher inflationary environment, you're going to get your top level growth bolstered. And so that's what we've seen thus far. And so I'm not so sure that some of the more bearish EPS estimates for next year, let's call it $180, $190 a share for the S&P 500, necessarily have to come to pass. You can, I hate to say this because it's not going to work out this way, but you can grow into that number. I want it like in stone so we can look back. You can grow into this number somewhat. No one's going to look back. I want to make sure we look back. No, but I would argue that the decline in EPS doesn't have to be as dramatic as some people are testing. Okay. Now, Kevin, does it matter,

if you think the rally can go further, does it matter that tech doesn't participate? I think it, I'm not sure if it matters as much as something maybe that's more cyclical in nature, because I think that we've now known for definitely the past few quarters, certainly was made evident in the third quarter that tech no longer is going to be that leader coming out of this, whatever crisis we have from an inflationary perspective. I'm just not sure that it's going to be there because they house so many of the heavyweights. And we can no longer look at those as a monolith anymore. You know, Apple is different from Amazon. It's different from Meta, with three of those doing completely different things over the

past year. So I think we have to look more to different parts of the market, meaning the average stock. So if you look at the equal weight S&P versus the cap weight, it's been outperforming since September of 2020. I think we can call that now a pretty firm trend. And it was very similar to what we saw in the tech bust when the bear market started in March of 2000. As the market rolled over from a cap weight perspective, equal weight started outperforming. So, you know, our perspective has been that you have to sort of flip the view that we've had, flip the lens in terms of what was leading into the pandemic, which was, you know, cap weight in the mega caps and just the five names.

I know. Why are we putting I feel like we're still putting if you say, well, the five names are like a monolith put together. Maybe we're still lumping all of tech together in that the maybe closest thing to the upset of 2000 in tech was the already happened rollover in the kind of stocks, the junky ones that you mentioned here. They may take a longer time to recover. Maybe money doesn't go back there, but are you really telling me that the so-called monoliths that you said money's not going to go back there at the first sign that things may be better than people think? Yeah, money's still going there. I mean, if you look at flows year to date in an area, whether it's semiconductors or big tech, I mean, flows are still heavily biased towards those areas. Nothing towards cyclicals, whether, you know, it's energy or materials or industrials.

The spread there is still massive. So I think money will still go there. I just think that the outperformance and what the leader will look like will be different. And that doesn't mean that tech or consumer discretionary or communication services have to materially underperform or even stay negative. I just think that the profile shifts a little bit and it gives, you know, maybe active versus passive. It gives them a little bit more room to grow, which we haven't seen for a while, decades. How would you answer that same question about growth versus, I mean, this is essentially growth versus value. A lot of people are lining up in the value camp saying that this is the moment. There have been false starts before, two steps forward, you know, three steps back.

What about now? So I'd say right here I would sell into the tech rally that we had last week because precisely for this reason, you still have a valuation problem in some of the tech names. Growth is slowing on the top line and bottom line in the tech names. They're just not growing as fast as they did previously. It's going to take earnings and the multiple with it. You can find great stocks. They have to be earners. They have to have low P.E. and they should have dividends. But hasn't valuation, I'm sorry to interrupt, hasn't valuation already reflected that to a large degree? Not entirely. The valuation fever is not fully done here. And if you look at what's

happening with the top 10 stocks, you can see the relative weight rolling over. So if you're asking, can the S&P outperform the average stock in the next cycle, my answer would be no. And our answer is no for that reason, because we see cyclicals and we see industrials and healthcare doing much better than the average tech stock. Your question is obviously well asked. People are trying to think of whether the valuation correction has run its course, even in the mega caps. But if you look at, to Alicia's point, the slowing sales growth in some of those names, as David Koston of Goldman Sachs was talking about today in his own note, you would suggest that these companies are not what they used to be.

Their valuations were overly inflated during the pandemic, and they've come down to a more reasonable, if you want to use that word, area. But they still have further to go because their sales growth is not going to be what it was before. Listen, it's hard for that sales growth to be what it was before in perpetuity. The law of large numbers kicks in. But let's also remember, we're going to look back in 10 years on that post-COVID period as, I want to say this properly, like a period of insanity in markets akin to any bubble that we've seen in quite some time. Just the money sloshing around the system into housing and the non-profitable tech companies. Crypto. Crypto. Well, they're linked.

We invented a whole asset class, crypto and non-fungible tokens. Oh, my God. The Internet's going to drag me here. But we invented a whole asset class just to take advantage of low interest rates and free money. And I think as we withdraw that liquidity from the system, it's completely unsurprising historically to see those types of assets completely that, I don't want to say completely devoid of value, but a lot of devoid of value, sucked out of the system and paid down. And I think that's probably going to be the story of this error when we look back in five or 10 years. And let me just say, what is the first thing that a former high-flying growth company does when growth slows? It chops headcount. And there's a reason you're seeing the headlines.

It's anecdotal, yes, but it's all in large cap tech, because they simply can't sustain the growth anymore. And the easiest thing to do is just to cut costs by cutting bodies. And that's the first round. The next thing is what do they do with the business? And I think you're seeing that with, I just want to say from a micro standpoint, boiling up to the macro story. Now it is very much becoming a macro story because the spread between unit labor costs growth and productivity growth

has almost never been this massive. You have to go back to the early 80s, late 70s to see that. And to Alicia's point And, you know, to Alicia's point, when you start seeing productivity growth sag like that and unit labor costs are still elevated, hoarding labor just doesn't work anymore. So you have to start cutting people. And the impact now is how much or the thought now is how much does that infect the broader economy and wade over into it? And I would say that we're starting to see that fall. If we're saying that, you know, tech is not the greatest place to be right now, then what's the best? Alicia. So we think in the next cycle, it's actually industrials,

because we think the reshoring and the rearming, the higher inflationary world and labor with more bargaining power. We just think labor comes out of this with a higher growth rate in wages. So we think industrials are great. We like we like. But you don't you don't think like this reshoring, onshoring, whatever shoring is inflationary in and of itself? It is. That's why you can't be in tech because you're going to have higher rates going forward. Like if you look at every cycle, there is a break between what worked before, either a bear market or recession and what comes out of it. And we've all lived through this 13 years of growth so outperforming. We have a whole sector of investors who never invested before the global financial crisis. That's all they know. It's actually a great opportunity. If you're looking at where to go to next, we think

value is going to outperform growth here. You can see it. The breaks happen and then the other stocks outperform. The old leaders don't work. Best area right now is what? I mean, even if obviously you want more of a defensive bias. Yeah. But some of those areas seem expensive. Yeah. I mean, defensive, not in the sense from a traditional sector standpoint, defensive in terms of earnings quality and what's doing well right now and where you're seeing a dearth of activity. So right now, anything with positive earnings revisions, high return on equity, return on invested capital, the number of companies that exhibit those qualities is shrinking. So you can't look at just something like consumer staples or utilities because they actually have weak earnings profiles right now and compressing profit margins. So I think you

have to shift your focus to factor-based investing and just focus on what is scarce right now. And right now that's positive earnings quality. If like hands in the air have a set of thousand words, what was that? No, it's very, everyone's very defensive. I'm not saying that he necessarily said this. Everyone's very defensive. Everyone's positioned defensively. You have to be careful, blah, blah. The stock market's down. I mean, at its worst, it was down 25%. Credit spreads were somewhere between five and 600. You're supposed to, I mean, if your timeframe is more than three or six months, I think they would both agree. You're supposed to start getting a little offensive here. Now, obviously, I've been making the case that you're going to have more downside.

I still think that's the case. But you're never going to pick the bottom. You're never going to sell at the top. And if you're looking out three or five years, a lot of companies are probably screamingly attractive. I know. It's hard to convince people that, though, if you think that we could still go up. But then, like I said, Mike Wilson thinks you'll get new lows in 23. You're going to tell somebody to buy the S&P at 4,000 if they know in the back of their mind it's going to 3,000.

Do they need that money tomorrow? Good luck with that. Okay. I'll give it a shot. Send an email to Scott Wapner and we can talk about it. We're going to leave it there in the interim. Guys, great conversation. Thanks, Scott.

I enjoyed it very much. It's Dan, Alicia, and, of course, Kevin joining us here at Post 9. Let's get to our Twitter question of the day. We want to know which of these retailers reporting earnings this week is your best bet. Is it Walmart, Target, Home Depot or TJX? You can head to at CNBC Overtime on Twitter. Cast your vote. We'll share the results coming up a little later on in the show. We are just getting started here in overtime. Up next, under the radar growth plays one top money manager breaking down the key names he is betting on right now. We're live from the New York Stock Exchange OT.

Right back. We're back in overtime. Value stocks have been beating out growth this year. You know that by now. Our next guest says there's still opportunity in a few under-the-radar growth names. Joining me now, Post9, Josh Bennett of Weatherby Capital. It's good to see you. Welcome to Post9. Thank you. What's it like being a growth investor in this environment? I mean, you just heard the conversation we just had, right? There

was value, value, value is the place to be. Absolutely. Yeah, it's a challenging time to be a growth stock investor, but our team has experience in finding these kind of under-the-radar opportunities. So, you know, the market is likely to continue to be volatile, but we see incredible opportunity if you're willing to kind of pick your places and have a longer-term view, longer-term horizon the market has. What kind of growth works now relative to what doesn't? Great question. I think what we think is the type of growth that's not going to work is going to be the high multiple, not seeing cash flow, not seeing returns for, you know, five years, 10 years.

The whole SPAC frenzy that happened last year, that's dead. That clearly didn't work. The type of growth that we think does work would be shorter duration growth. So what we mean by that is companies that we believe with high confidence can generate free cash flow and returns in the near term, meaning the next, if they're not doing it already, in the next one to three years. So you're not waiting, you know, way, way at the end of the rainbow for the profitability to come. You're looking for it in a much sooner place. Exactly. Because, I mean, if you think about it, that's one of the implications of a higher interest rate environment

is if we're discounting those out-year cash flows at that higher interest rate, then those out-year cash flows are worth less today than they used to be. So we need to focus on companies that are generating cash flow today. Bear with me two seconds. Speaking of cash flow, we just got the 13F from Berkshire Hathaway, Warren Buffett's firm, of course. Christina Partsenevelos has the details. Christina? Well, what we are seeing right now is the company selling some big financial names in the third quarter, ending this past September 30th. So Berkshire decreased its stake in Bank of New York Mellon by over 10 million shares. That is a 14 percent drop in its holdings.

It's also cutting its U.S. Bancorp state, dumping over 35 percent of its holdings. A caveat, though, the U.S. Bancorp selling was announced previously in another recent filing, so not necessarily new news right now. But Berkshire tends to focus on financial names. And it did take a new stake in Jefferies Financials and a giant new stake in the largest chip contractor in the world, Taiwan Semiconductor, snapping up 60 million shares. That is why you're seeing Taiwan trading over three and a half percent higher in the OT right now, as well as a 14% increase in Paramount Holdings. Those shares are up ever so slightly, 0.8% right now. And lastly, GM shares initially falling on the news that Berkshire's 13F shows the company sold 5% of its holdings,

but we can see that the shares are coming back up ever so slightly. Berkshire does own more than 90 companies, so it is very hard to know if it's Buffett who is making the trades or the company's two other portfolio managers. Scott. Yeah, no doubt. And an important caveat, as we always make, and I'm just looking up some stock tickers as we're having this conversation, as of the end of September. Yes, September 30th. Yeah. All right. I was looking to see Paramount because Paramount more recently has has not done well. And I was really curious to see what was going to be in the 13 F regarding that position, if anything. I mean, over the last three months, it's down near 30 percent. I bring it up because I have the conversation all the time with Jim Labenthal in the Halftime Report, who's been an investor here on the side of alongside Buffett.

So interesting. Christina, thank you. We'll talk to you again soon, depending on what hits the tape. Back to our conversation with Josh Bennett. Names that you like. We'll look inside your holdings now. Waste Connections, Montrose, Paylocity. Don't think I've talked about either or any of those stocks on this program yet. Why those? Great. Well, one of the things is we believe that if we're we're going to we're likely to see continued volatility in the market so one thing we look for is companies in general in our in our strategy that can kind of supersede the market trend so waste connections. Whether we like it or not and good times and bad we generate

trash what waste connections does is they're one of the largest waste collection and recycling companies in the nation. So the reason we really like it is, if you think about it, it's a highly predictable business model with steady revenue growth year after year. In fact, they already have close to 10% revenue growth built into next year, which is outstanding. On that revenue growth, they generate incredible returns. And the way they do that is, this is what we look for, is we look for companies that have unique process, unique technology, better management. And Waste Connections has all three. So they're in the right markets, they have the right process and technology, new ways of collecting waste, new ways of processing waste, and even better for the environment because these companies on the back end are producing

renewable natural gas from the waste that's in the landfill. So Waste Connections is one of these kind of off the beaten path growth companies that we get really excited about. Let me ask you this. Are there companies that you never would have touched before that in the upset of some of these higher flying growth tech stocks pulled back so much, their valuations corrected so much that now they became attractive enough to be on your radar? The way we think about it is we always have a core, at least two-thirds of our portfolio in these stocks that are more predictable. We call them these foundation growth stocks and waste connections. It's a good example. What maybe

has changed in the current market is we think in the current market, given what I said earlier on profitability, that we need to focus even more than we typically do and upgrade the quality of our already high quality profile. So we're quality growth investors, but we emphasize quality more now than ever. And we emphasize cash flow in the near term from a company like Waste Connection. Is everything that you own, I mean, I'm only looking at your top 18, you have top 20 holdings here. Is everything on the list profitable? The vast, vast majority are.

There are a few companies that are not profitable yet, but we have a clear line of profitability in the near future. What is the near future like? Can you characterize or quantify for me what that looks like near future, what you're willing to wait for? We typically think about, in the current portfolio structure, we want to see profitability within, say, one to three years. We're not looking out. We're looking out three to five years. But if it's going to take that long for a company to even cross over into profitability, it's not of interest to us today. Josh, appreciate it very much. Great. Thank you.

That's Josh Bennett joining us here. Julia Borsten now has the CNBC News update for us. Hi, Julia. Hi, Scott. Here's what's happening at this hour. More details coming to light about Christopher Darnell Jones, the student accused of killing four University of Virginia football players. Back in September, University police received a report about Jones saying he had a gun.

Officials interviewed Jones' roommate, who said he had seen no weapon. Comedian and famed car collector Jay Leno has suffered serious burns after one of his cars erupted into flames. He was working in the Los Angeles garage where he stores his vehicles. Leno has been hospitalized with burns to the left side of his face. He said he's OK, but will need a week or two to get back on his feet. And Democrat Adrian Fontes has declared victory in the race to be Arizona's next secretary of state. Fontes told supporters democracy prevailed in Arizona. His opponent, Mark Fincham, a Republican and prominent 2020

election denier, has not conceded. Vote cows show Fontes with a substantial lead with nearly all votes counted. Back over to you, Scott. All right, Julia Borson, thank you very much for that. Up next, debating the bear market. Top technician Jonathan Krinsky on the key levels he's now watching and where he sees stocks ending the year. Can't miss that. We'll do it next. We're back to the S&P 500 up nearly 6 percent since Thursday. NASDAQ's more than 8 percent. We did see some weakness into the close today, and our next guest says, don't believe the recent bounce. Joining us now, Jonathan Krinsky, BTIG Chief Market Technician. Good to see you as always. Why not believe it? I mean,

it's been a pretty powerful bounce. Yeah, I mean, look, I think if we just take a step back and just look at kind of the simplest definition of trend, I think a lot of people just continue to want to fight what we view as a pretty established downtrend. I mean, if you're talking about the S&P 500 peaked at 4,800 in January. We made a lower high, 4,600 in March. And then another lower high, 4,350 in August. And here we are at 4,000. So we're still, you know, 350 points below the August high.

And yet there's a lot of talk about this new sustainable market. But I think, you know, when you do take a step deeper, obviously, and we want to look more than just at the surface, you look at what's going on under the trend, it continues to be by all accounts, you know, a somewhat defensive led rally. And one of the things we can look at is the relative performance of the Dow Jones Industrial Average relative to the S&P 500. You know, that's still, even after the two-day underperformance last week, the Dow is still outperforming the S&P by 6.5% from early October. So that trend has been in place for a while. And if you look at the major bear market bottoms, whether we're talking about 1982, 2002, 2009, or most recently, March of 2020, all of those consistently saw the Dow underperform the S&P. So we're seeing the opposite right now.

Again, not saying maybe it's different this time, but by our work, we're still a bit skeptical here. Well, I mean, maybe it is different this time. Are you fully appreciating enough the move from growth to value? It would obviously show up in the kind of metric that you're sort of throwing water on. Well, you know, we do think small cap value actually, you know, should do fairly well here. It's kind of been underperforming for the last four or five years. Your previous guest talked about some similarities and analogies to 2000 to 2002, which we think are applicable. And small cap value actually did very well then. But again, you know, if we're talking Dow Jones, which is, you know, yes, it's value, but it's also, you know, I mean, the largest component right now is UNH, which is, you know, pretty defensive. You know, if we're talking purely on the Dow, it just doesn't feel or look historically like a lot of bull market, the new bull markets.

You just said that 2000 to 2002 is applicable, implying that the upset we've seen in tech and may still see as applicable. What exactly are you talking about there? Yeah, I mean, look, so we know that in 2000, March 2000, NASDAQ topped. By May of 2001, the NASDAQ 100 was down 60% from its highs. While that was happening, ECOID S&P was up 25%. Industrials actually hit a new all-time high in May of 2001. So we're seeing some strength of industrials right now. Again, sounds familiar, but we have to be cognizant that that's not necessarily the start of a new broad baseball market. And if and as economic data deteriorates in the next year, we wouldn, we continue to see new relative lows from some of the large cap tech names, similar to what we saw in 2000. So history doesn't always doesn't always repeat, but it often rhymes. So are you suggesting that tech is dead for another year or two as a result? I mean, you can't think that tech is going to recover if you're likening it to 2000.

No, I think what we're saying right now is that, you know, tech has been underperforming. It should continue to underperform. As far as duration, you know, could it be another year? Sure. I think the point here is that, you know, tech is such is a big part of the market. As long as that relative strength continues to underperform, that's going to be a headwind for the cap weighted indices. And really, where you're going to find value is probably going to be in some of that value oriented stuff. But the message from the Dow, we're not saying necessarily to fight the Dow itself. We're saying that that underlying relative performance is indicative of a more defensive market and not one that typically is the start of a new bull market. OK. All right. We'll see what happens. And we'll talk to you many times along the way. I know that. Jonathan Krinsky, BTIG, thank you very much for that.

Up next, ARK's big bounce. That fund seeing some serious gains in the past week. So how should you trade that? We discuss that in today's Halftime Overtime. In today's Halftime Overtime, the recent ARK rally, Cathie Wood's ARK Innovation Fund giving back some gains today after posting its best week since mid-June. Some of the fund's top holdings have rallied a lot, more than 20 percent over the past month. They're still way off their recent highs. Requisite Capital's Bryn Talkington is a small position in the ARK ETF and joins us now.

So what do we think about this move? Is it just simply a bounce that's going to soon evaporate, or do you think there's something here? So I know you and Jonathan were talking about the analog between today and 2000 and 2002. And between 2000 and 2002, Scott, the NASDAQ had 14 days where it was up 6% or more. And one would have been wrong all 14 times that the bottom was in. And with the data that I look at from last week, there was a tremendous amount of short covering happening on top of Long's buying. And if you look at Goldman has a basket of the most shorted stocks, and on Thursday, that was up 11%. I mean, in one day, a basket of names up 11%. So I think at this point, we are in this short covering mode where when inflation, we get that one read that was slightly better than expected and the shorts come in and cover. But I don't think we will have a durable rally and these kind of names anytime soon.

Wow. I mean, you sound pretty pessimistic. Why do you still hold the position? That's a good question. I mean, you sound pretty pessimistic. Why do you still hold the position? That's a good question, man. More realistic. You know, I'm realistic about where we are in the market cycle. I mean, 95 percent of our portfolio is moving in the right direction. And when we originally made this investment back in March of 2020, we wanted this to be our venture capital type exposure, but with the liquidity and rigor of the public markets. And so, you know, we wanted this to be our venture capital type exposure, but with the liquidity and rigor of the public markets. And so we haven't given up on that type of exposure, but it's definitely painful.

We've talked about this before. It's just not fun. And I don't think, once again, that inflation is all of a sudden going to go from 7.7 to 3, because that's not how it works. And so I think ultimately these names have bounced like ARCA has bounced around 36 to 40, 36 to 45. And I think that continues for a while. So so so we'll we'll see what happens over the next few months. If I think that inflation and interest rates are going to stay at this level for a long, long period of time, we wouldn't we wouldn't continue to hold the position. Are there any names within here that you would strip out and own individually rather than in the basket form?

Yeah, well, I think, you know, I try not to armchair quarterback it. I can probably point out the names I wouldn't own easier than the ones I would. I mean, there's a lot of biotech in there. I mean, I've never been a fan of Robinhood and, you know, she maintains that in the portfolio. I'm just not a believer in the strategy and not a believer in the space. And so, but once again, I'm not going to armchair quarterback her. We hired her and her team to own that basket because I don't have the ability and I get too biased on these. I mean, you know, Tesla's been, I think it's the number two name right now. Zoom is number one. You know, Tesla in March of 2020, I think, was about forty dollars. So I wouldn't I wouldn't have had the ability to buy it back then.

And it's had like, what, five fold from there, at least five or six fold. So I would stick on kicking out Robinhood and some of the other names that I don't agree with. But if I'm going to have an active manager, I have to buy the basket and just either stick with it or sell the whole position. I hear you. I appreciate it, Bryn. Thank you. That's Bryn Talkington joining us from Requisite Capital. Coming up, we're tracking some big stock movers in overtime. Christina Partsenevelos is standing by with that. Christina. Well, let's start with some furloughs at FedEx and building a foundation.

Warren Buffett's Berkshire Hathaway adding to a position in one materials play in its latest 13F filings. Though details are going to be coming up right after this break. All right, we're tracking the biggest movers in overtime. Christina Partsenevalos is here with that. Christina. Let's start with digital media content company Getty Images. Shares that are falling right now over 6%, almost 6.5% in the OT after reported third quarter results. Getty posting a loss compared to a slight profit last year in revenue that missed analyst expectations.

We're also watching shares of FedEx right now. The company announcing that it's enacting temporary furloughs in some U.S. markets due to business conditions negatively impacting freight volumes. And lastly, Warren Buffett is getting into the housing trade, or at least Berkshire Hathaway. Louisiana Pacific shares are surging right now, up over 9 percent after Berkshire Hathaway reported a new stake in the building's materials company. That stock, though, still down on the year, falling roughly about 18 percent. And since I know you want to know all the details, I got the latest with Carl Icahn, Scott, as well.

Chenier Energy, Carl Icahn is selling 3.5 million shares in his latest 13F filing. That's a 62% drop. That's the biggest change in the portfolio. As well as Southwest Gas Holdings increasing that stake by 29%, so buying about 1.5 shares. Those are two of the biggest moves for Carl Icahn. Okay, good to know. Christina, thank you very much.

Christina Partsenevel is still ahead. Santoli's last word. Find out what he is watching as we kick off a fresh week of trading. Got some big earnings coming up, 13 Fs, etc. And coming up on Fast Money, Walmart results are on deck. What to expect out of tomorrow's report. Don't go anywhere. Overtime's right back. Last call to weigh in on our Twitter question.

We want to know what retailer reporting this week is your best bet. Head to at CNBC Overtime on Twitter. Cast your vote. There they are on the screen. TJX, The Home Depot, Walmart, Target. Santoli's last words next. All right, let's see the results of our Twitter question here. Which retailer reporting this week is your best bet? Well, it's pretty close. One of the closer polls we've done recently, Walmart wins 29 percent. Otherwise, we're pretty close across the board. Mike Santoli with his

last word. I mean, that's the I guess the news of the moment is going to be these earnings. But the news of the real moment now in overtime, 13 F's. Yeah. Buffett. Interesting. I mean, really no huge surprises or big new moves. But the fact that, you know, he's kind of doubling down, re-upping the stake in Paramount Global. Very typical of how he would approach. Not afraid to be 15 percent of a stock. Not afraid to keep buying when the stock goes down. I was very not afraid to be 15% of a stock, not afraid to keep buying when the stock goes down. I was very surprised, to be honest with you. I was looking to see, I was very interested what was going to be shown there, if anything, and they added.

He, well, I say they, right? You say they, because we don't know. You're right. You don't know if it's Buffett or the CIOs. But I do think it's interesting. It's statistically super cheap. He's not somebody who deals with stop losses or things like that. Now, he's not flawless either. I mean, you know, Berkshire has had its share of value traps. It was in and out of IBM before it came back. It was in and out of the U.S. Air and some other airlines. But I do think that is interesting, as well as just the general fact that this is a moment for Berkshire Hathaway. It's outperformed the S&P by 20 percentage points this year. It's quality. It's boring.

It's cash flow. It's concentrated. Infrastructure. Very, very concentrated. What if we do a story, I don't know, last week, the week prior, it's like six or seven stocks make up 70 some odd percent. Well, yes, in terms of the actual public securities portfolio, absolutely. Apple, its Apple stake is 20 percent of Berkshire's entire market cap. And by the way, Berkshire's market cap now close to 700 billion is again bigger than Tesla. It's again one of the top five market cap companies in the S&P 500. So there's been definitely, you know, the ebb and

flow of he's in favor, out of favor is is still intact. The you know, aside from the public securities, the insurance business has been one of the stronger areas. Also, Taiwan Semi. That's interesting. A new a new position as a position. And if you want to just connect the dots, infrastructure, you know, kind of capital intensive. But, you know, only a few big players. I mean, he owns a railroad. He owns, you know, kind a few big players. I mean, he owns a railroad. He owns, you know, kind of pipeline and energy utility infrastructure. So it just fits in a lot of those modes. Looking at it right now, TSM getting a nice bump here in overtime, some 6% on that news. What about

the market itself today? What do you make of that end of day? I mean, really end of day. Yeah. Selling into the close. Is that that, as you said, that 4000 resistance is pretty strong on the S&P? I don't know if it's if it's outright true technical resistance where people are just sitting there waiting to sell at that level or it's just more than 6 percent last week. What are you up to three or four weeks in a row? And I don't know that there was a trigger to it. But if you just step back and say, well, last week we benefited from yields down, dollar down. Today, yields kind of perked up a little bit, dollar up a little bit. I think it's noise in the short term just because of how much we

wore up last week. But you don't want to be completely dismissive of when the market in this seasonally strong period takes a breath. Has the Fed rhetoric, do you think, turned a corner in a sense of being now a little more dovish than it's been? Right, got brainered midday. Stocks seem to get a lift off of that. And it's certainly different than, as you said before, what was a one-sided conversation. Now we have a two-way.

There's nuance. There's a little more balance to it. I also think the market is going to try and look through as much as possible because the market realizes everybody has to say what Waller said over the weekend, which is we're not done. Well, nobody said you're done. Right. Nobody said you're done after, you know, the next move. Yeah. And so I think that there's a little bit of a grain of salt being taken with all of it. Look, again, every time I've thought that the market repriced

sufficiently for what the Fed was going to do this year, it's been incorrect because the Fed kept having to go farther. One of these times, it's going to be right. One of these times, it's not going to be the false dawn. It's going to be the real dawn. We don't know if it's there yet. Can you have a real dawn with tech not doing well? I mean, the broad market, not really. I mean, the index is to is somewhat captive to it, but less so than it was. Right. It's slightly less as a weight in the overall S&P. But yeah, I don't think it's it's really about the index getting moving that much as much as it is. The typical stock has has weathered things better because you look up today, Nasdaq down a little

more than than one percent. I mean, yeah, Microsoft down. Yeah. All right. See you tomorrow. Mike Santoli with his last word. That's mine. Fast money begins now.