Closing Bell - Closing Bell Overtime: Tesla Bear Makes His Case Despite Recent Stock Run; Apollo’s Torsten Slok 7/5/24

Episode Date: July 5, 2024

Nasdaq and S&P 500 set record closes; Unlimited Funds’ Bob Elliott breaks down the market action. Apollo Global Chief Economist is still saying the Fed won’t cut rates in 2024. He makes his case. Neuberger Berman’s John San Marco on his top retail picks and consolidation in the sector. Guggenheim analyst Ron Jewiskow on why he’s still bearish despite Tesla’s major runup in July so far. 

I'm going to sound like a broken record, but stocks have more broken records. New closing highs for the S&P 500 and the Nasdaq, and a dip lower for yields as we wrap up the first week of the third quarter. That is the scorecard on Wall Street, but winners stay late. Welcome to Closing Bell Overtime. I'm John Fort. Morgan Brennan is off today. Coming up, Tesla finishing up its best week in more than a year, but is the rally sustainable? We will talk to Guggenheim's analyst about why he's sticking by his Bayer thesis on that stock.

Plus, retail in focus today as Sachs and Neiman Marcus agree on a multi-billion dollar deal and as Macy's jumps on deal talks of its own. Neuberger Berman's retail portfolio manager is going to tell us which other names in the space could be shopping for M&A. And Apollo's Torsten Slack has been saying the Fed won't cut rates this year at all. But will recent data, including today's jobs report, cause him to change his tune? He will join us to discuss. And we begin, of course, with the market. Another day of record highs with chips and mega cap tech leading the charge, closing on a very strong week for the Nasdaq.

The only S&P 500 sectors negative in the session were financials, industrials, and energy. Joining us now is Unlimited CEO Bob Elliott. Friday, Bob, love having you here on set. With the markets, was this just the reasonable response to a jobs report that maybe reinforced the prevailing no landing narrative? Well, I think the jobs report gives a little bit of hesitation that growth is going to be as strong as maybe some folks are expecting in the equity market when we turn to the second half. You know, if you look at equity market earnings expectations, you're looking at 17 percent earnings growth, our analyst expectations, by the end of 2024. That's going to be a bit challenging as we start to see some softening

of the labor market. Remember, this income-led expansion is really reliant on continued strong wage growth and continued strong employment growth to keep that spending going, both for households and businesses. And if you don't get that continuing, it's going to be pretty challenging to put up the kind of numbers that are really being expected in the equity market. But not too strong, right? Because if it's too strong, then inflation fears, maybe the Fed doesn't cut at all. Some of those, you know, September rate cut voices got a lot louder after this morning's jobs report. I think one of the challenges is we might be in this sort of worst Goldilocks moment

where growth isn't quite strong enough to meet those expectations in the equity market, but it's not yet quite weak enough to cause the Fed to urgently move to cut rates quickly. You know, 200,000 jobs, even if it gets revised down another 50,000, you know, 150,000, 200,000 jobs, that's fine. That's enough to sort of keep the employment going enough to keep enough wage growth to keep the Fed concerned about that services inflation. Not to mention, important to recognize oil creeping back up towards new highs of the last couple of months. And that's got to cause some concerns. It's one thing to shift to an easing bias when oil is falling. It's another when oil is coming back and pushing to new nearby highs. All of those were government jobs, though.

Does that matter? Well, I think, you know, a government job is as good as any other job in terms of taking on employment. And I think if you look at, like, ADP as an example, which gives you a real sense into the private sector, that's mostly been flat about 150,000 jobs over the course of the last year. And so, you know, that is good enough to keep a tight enough labor market to cause some concern for the Fed, but probably not good enough to feel good about,

you know, the consumer going out there and spending aggressively. A week from now, a week from today, we start getting those earnings reports from the banks. J.P. Morgan's typically first. We saw the KRE struggle today, right? How do the expectations look versus the reality that you think we're likely to get from the bank earnings reports, and how should investors position based on that? Well, I think the financials are one of the places where there's this disconnect between the strength of expectations and maybe the reality of what it's looking at. You're looking at earnings growth expected in 24 there of something like, you know, mid-double-digit earnings growth. If you look back over the last year, it's been in the low single digits. You have an environment like, you know, growth that we have, plus some creeping up credit problems that is emerging. And particularly,

you see the regionals start to face that first because they don't have, you know, big diversified businesses in terms of, you know, trading activities and things like that, the way the mega cap banks do. And so they're the ones really in the crosshairs. If they can't get relief from the Fed and they start to see a slowing economy and some issues related to credit concerns, you put that together, that's not a great tactical picture for the regionals. So let me ask that about crypto and the overall risk picture. The NASDAQ overall had a very strong week, right? But we saw, particularly this morning, Bitcoin dip below that 55,000 level that we've been hearing is critical for it. Is there any other indication that you're seeing in the markets that there's hesitation around risk assets? Yeah, I think if you've been around the markets long enough, you see sort of the edges of markets often start to

get hit first before sort of the core starts to feel any tightening of financial conditions. And I think what we're seeing is that's happening. It's not just Bitcoin, although Bitcoin is often one of the most sensitive to tightening financial conditions. We're also seeing that, for instance, in the dollar and how it's trading against the yen or the Chinese yuan or the Brazilian real. We're seeing it in Russell relative to Nasdaq. So we're seeing... NVIDIA was one of the weaker megacaps today. That's right, which obviously had benefited a lot from a lot of interest and easier financial conditions over the course of the second quarter. And so you're sort of seeing, you know, any one of these things.

We could talk about Bitcoin specifics or Chinese yuan specifics or yen specifics, but you put the whole picture together. It looks like dollar financial conditions are starting to tighten. And, you know, the S&P 500 or the Nasdaq can only stay buoyant relative to those broader tightening financial conditions for so long. Same time, Walmart and Amazon hit all-time highs today. But you got this Macy's, Neiman Marcus Sachs, this consolidation also happening in retail as we have these questions about the stamina of the consumer in the second half. How do you put all that together to make sense of it? Well, I think it's

going to come down to whether or not the consumer keeps that, you know, whether the job growth keeps going. And that really, that's really the telltale sign of an income-driven expansion. And what's particularly challenging about that is if it starts to weaken, it can be self-reinforcing. And the Fed doesn't have a lot of tools to help arrest deceleration in the consumer. And so that's one of the tricky points that we see here which is that if this thing starts to get going which it's not yet there but if it starts to get going can the fed help you know even with 50 or 100 basis points of cuts are they going to be able to on the other side

prop up the consumer given the consumer isn't really borrowing and they aren't really you know they're mostly just spending out of income and i think that's kind of the let's say that's not a challenge that's going to happen in the next probably three months or even six months. But as we turn to 2025, that's going to be the real question if the downturn, you know, accelerates here. All right. We'll leave it there. We'll talk about gold next time, Bob Elliott. All right. Now let's bring in senior markets commentator Mike Santoli for a closer look at tech as the Nasdaq closes at a record. Mike. Yeah, John, in fact, the Nasdaq 100 is up 21 percent year to date, up about 40 percent over the last three years. So that takes

you to for before that, remember, bear market in 2022. So that's just impressive gains. But what's been driving it is somewhat kind of taking turns here. You mentioned Amazon trading at an all time high. Tesla's been a big upside driver in the last few weeks. However, look at how that's really just catch-up moves by Amazon and Tesla relative to some of the more bellwether names that have outperformed, like Microsoft and Alphabet. Two trillion dollars plus for Amazon. I keep pointing out three years ago, we got to 1.9 trillion. So there's this favorable rotation happening among the mega cap growth stocks, even apart from the overall rotations that are going on among different whole kind of cohorts of stocks.

And I think that that's so far worked, it's hard to know exactly whether, in fact, that can go on indefinitely. But for now, this is what's keeping that segment of the market moving at this point. Take a look here, too, at a more tactical measure. This is the equity exposure among the National Association of Active Investment Managers. They're trading advisors. They operate, you know, pretty nimbly out there. And you see right here, we're pretty much back to the highs in terms of their equity exposure. This is a weekly reading.

It goes over 100 percent because you can use some leverage. So it doesn't mean automatically that, oh, the market looks toppy and we have to actually have some payback here. But it does suggest that pretty much people are fully involved in this market, at least on the fast money side of things. And you did have some instances here where it coincided with short term pauses or pullbacks in the in the rally, John. So it sounds like you're saying you've got to be careful up there. I also noted Apple was up 7.5% this week. So adding to that narrative, you were showing us about the favorable rotation. No doubt about it. And Apple, it's, again, been one that sort of went to sleep for about a year or thereabouts,

or maybe 10 or 12 months. And it has, you know, done more than its share of catch up at this point. Also, part of the move recently in that group has been somewhat defensive, at least on a macro basis. These are stocks that are kind of sheltered from a lot of macro influences. And Apple is kind of exhibit A usually when we get into that type of market. Neck and neck to end the week with Microsoft, Apple and Microsoft. All right, Mike Santoli, see you in a bit. We turn now to Washington and a pivotal day for President Biden's campaign

as he tries to reset the narrative with an event in Wisconsin and a key national interview. Biden saying moments ago that he's staying in the race. Emily Wilkins joins us now with a look at how questions about Biden's candidacy are impacting donors, specifically those putting money into congressional races. Emily. Hey, John. Well, yeah, there are a lot of questions going on now with donors as well as with Democratic lawmakers. We just saw a story drop from The Washington Post saying that Senator Mark Warner, he is the chairman of the Senate Intelligence Committee, that he is looking at potential Democrats to join him in giving Biden a bit of a push to see if he can step down. And so that's something that we'll be, of course, following, especially as lawmakers come back to D.C. next week. Once they're all actually in the same room again, I mean, the

Senate hasn't been since before the debate. We're going to be paying a lot of very close attention on exactly what they're saying. But even beyond exactly where the senators are at, you're seeing also a move with support for down ballot races, both in the Senate and in the House. Senate Democrats are currently seeing a surge of support from both grassroots and major donors after Biden's disastrous debate, plus the Supreme Court ruling on presidential immunity. Just this past week, Senate Democratic campaign arm broke fundraising records in multiple categories. These are records in digital, in grassroots support, and it marks the best multi-day period of online fundraising for the 2024 campaign cycle, according to a national Democrat with

knowledge of the Senate races. House Democrats are also seeing a bump between the debate and the end of the month. Digital fundraising brought in $1.3 million for the House campaign arm. And last Friday, House Minority Leader Hakeem Jeffries and Barack Obama raised $3 million at an event in New York. Now, most lawmakers are keeping their concerns on Biden limited to private conversations. But again, we expect to hear more next week when they get back. We know there are a lot of concerns. We saw today Wisconsin Senator Tammy Baldwin. She's facing a really difficult race to keep her seat. And she wasn't with Biden today while he was in her state. So I think a lot is left in this story

to play out. And I think we're going to be in a lot more as lawmakers return to D.C. Well, Emily, of course, at CNBC, we like to follow the numbers. And I wonder if this boost in Democratic fundraising is, boy, they need it after that debate performance, or if some are going to try to say, well, it's a sign of confidence in the Democratic Party. Do we have to track this over weeks to really see whether this is a blip or a sign of fundraising strength? I mean, to a certain extent, yeah, you definitely have to track everything over a period of time. A lot of lawmakers say, hey, we want to see what some of these polls look like in these really key states for the Senate

and in House districts. They just don't have that polling data yet. But at the same time, this is really a wake-up call to a lot of donors that, hey, if you do have a Trump administration next year, what sort of firewall can there be for Democrats? Because if you have a Democratic controlled House, then you can block a lot of perhaps the more intense legislation that Democrats don't want to see happen. Stuff that doesn't have bipartisan support. Of course, if Republicans have a suite, then they're going to have the ability to implement a lot of things that they want to do. And for a lot of donors, they're realizing the importance, I think, of these down-ballot races with all the confusion and uncertainty at the top of the ticket. All right. In politics, as in markets, lots of moving parts. Emily, thanks.

After the break, Renaissance Macro Research saying today's jobs report points to the possibility of a rate cut in July. But our next guest has said the Fed won't be cutting at all this year. Apollo's Torsten Sloth will join us to discuss if today's data and recent inflation prints are leading him to change his tune. And later, we will talk to an analyst who is sticking by his bear case for Tesla, even after a massive rally this week. What was it, like 27 percent? Something like that. Overtime's back in two. Welcome back to Overtime. This morning's jobs report showed 206,000 jobs were added in June, while the unemployment rate rose to 4.1 percent. That's the highest level since November of 2021.

The report's giving confidence for some on Wall Street that the Fed could cut sooner than later. Not everyone agrees. Joining us now is Torsten Slott, Apollo Global Management's chief economist. Torsten, happy Friday. So Renaissance Macro says unemployment rate is climbing, payroll growth slowing, labor market cooling. So cuts. I know you said no cuts this year before. What do you say now? Well, I think if we look at the average payroll growth for the last three months is about 200,000. For the last six months, it's about 200,000. And for the last 12 months, it's also 200,000. Where is the slowdown in the labor market? We also got earlier this week the JOLTS data showing that job openings actually went up. So we're seeing some move lower in the quits rate. But jobless claims are still very low.

You still have the weekly data from Redbook for retail sales, also still very strong. Car sales still very strong. So there is very little drama in the U.S. economy at this point. Things are chucking along at a fairly steady rate. So in that sense, there's just no really reason for the Fed to cut rates at the moment. Beneath the surface, though, a lot of government jobs in that report and jobs for people with bachelor's degrees did not look as strong. Does that matter? Well, it's true. I mean, you can slice and dice the data in different

forms, but there's certainly also elements that are suggesting that there's less of a slowdown. So if you look, for example, at permanent layoffs started going down. So also, again, combined with jobless claims has been going up for seasonal reasons. So this broad slowdown is really not very clear in that sense that we're just not seeing the economy slowing to the degree that the market seems to have this strong view that the Fed will be cutting later this year. I mean, think about it. It's always the case that, yeah, it's not this meeting, but the next meeting. That's when it will start cutting. So let's get the data for inflation on Thursday next week. We still have three more inflation prints before the September FOMC meeting. And we still worry quite a bit about inflation being sticky. It's taken quite some time to get

inflation to come down. And we still think that we will get some more bumpy road ahead on the inflation front. So to you, this looks like the healthy kind of slow. I do think that this looks very much like a soft landing, which is opening up a lot of questions about, OK, if this is a soft landing and if therefore inflation is only very slowly coming down and if job growth is only moving sideways, what's the hurry for the Fed to cut rates? There is this very important debate among FOMC members that they have a strong view that our star, meaning where the Fed funds rate should be in the long run, is roughly two and a half to three percent. So given we're at five and a half, we got to cut rates soon.

But looking at the data just today, 206,000 nonfarm payrolls, that doesn't suggest that there's a significant amount of restriction coming from monetary policy. So, yes, I do still think that things are doing quite well. There really is no sign that this economy is falling apart. What about consumer spending and credit weakness, delinquencies there? Does

that concern you at all? Yeah, that's right. So there's certainly the case, not only for consumers, but also for corporates, that balance sheets that are sensitive to interest rates staying high, they are certainly seeing more and more weakness. But at the same time, the offsetting effect is the stock market going up and, of course, credit spreads tightening. So we have seen some distributional consequences inside the S&P 500 in terms of where is it that there's weakness and where is it that there's strength. But if you have rates higher for longer

and at the same time, the stock market continues to want to go up, partly for AI reasons, partly because of the Fed saying rate cuts are coming. And at the same time, we also have credit spreads very tight. I do think that these effects of the Fed funds rate staying high are being offset in a positive way by easy financial conditions with the stock market

going up and credit spreads remaining tight. So what kind of Q4? I know I'm skipping a quarter in a way, but what kind of Q4 does this set us up for, particularly the holiday season, given that there's this very uneven environment for consumers and lower income, middle income consumers are having a very different experience than just looking at the major averages and wealthier Americans would suggest. Yeah, that's very important, John. And as you just spoke to Bob about, this issue, of course, becomes very relevant also for the next earnings season. The way to look at it, in my view, is that, of course, if you have rates higher for longer, it is going to hit those balance sheets, in this case, consumers that have the most debt.

But at the same time, you have for higher income households, stock markets are still going up, as we're seeing today. You see credit spreads are very tight. And if you own fixed income, including private credit, the cash flows that you get at the moment are basically better than they have been in decades. So in that sense, households are getting a steady stream of cash from fixed income combined with stock prices up, home prices going up. It is really the case that the wealth effect continues to be quite meaningful. So in that sense, the tailwind

to easy financial conditions to the economy, in particular to consumers at the high end and the middle income who own assets, continues to be quite strong. So that's why, yes, ultimately the Fed will get what they want, namely inflation to come down. But what we're really debating is exactly to your point, is this in Q4 or maybe we have to get all the way into 2025 before we begin to see that slowdown that the Fed has now tried to engineer for many, many quarters. And I guess all that factors into when we get those cuts, Torsten Slock. Thank you. Thank you. Well, coming up, retailers are shopping for mergers. Sachs and Neiman Marcus announcing a tie up and Macy's is jumping after a suitor upped its buyout offer for the company. We're going to talk about the other retail names that could be in the market for M&A.

And speaking of retail, Walmart, Costco, Amazon, all hitting record highs today. For Amazon, the new record comes on the same day Andy Jassy marks three years as CEO. Overtime, we'll be right back. Welcome back to Overtime. Macy's getting a nice bump today, its second best day of the year, after an investor group that has been circling the retailer raised its offer to about $24.80 a share from 24 Even. That number had been raised from an initial $21 a share, according to the Wall Street Journal. In the meantime, a long-awaited retail transaction was officially announced. Saks Fifth Avenue parent HBC acquiring Neiman Marcus Group in a roughly $2.65 billion deal.

Amazon and Salesforce taking minority stakes in the combined company Saks Global. Amazon also providing tech and logistical expertise. Affiliates of Apollo Global are providing some of the debt financing. Joining us now, John San Marco from Neuberger Berman. John, under the surface, what is this deal really about? It's interesting to me too that Mark Metric, what a name for the data era, from Saks, the e-commerce business leader,

is gonna end up leading this venture. Why are Amazon and Salesforce in here kind of helping to fund this luxury retail consolidation? And what's the hope if it works out? Sure. Thanks for having me on, John. Yeah, I think there's likely great opportunity underneath the hood to share technology and digital best practices from one banner to the other and leverage what are two really powerful brands in a high barrier to entry industry. Just stepping back, you mentioned the news on Macy's, and there's more news out there in the department store space, too. A game of ownership musical chairs doesn't fix the fundamental challenge with the core brick and mortar assets, which is that, you know, the

department stores as a place of brand and product discovery, that use case has largely been disintermediated by digitization. So, you know, challenging industry and perhaps, you know, some synergies and a merger and shared best practices could unlock some value. So from your point of view, why are Walmart and Costco hitting all time highs, particularly Costco? You could argue they haven't been a trailblazer in digital, in e-commerce, but they're certainly big. They certainly appeal to a cost conscious,, yet well-moneyed consumer, and they haven't suffered the same fate as the department stores. Sure. Well, as a retail analyst, as a retail follower, what I'll say is both businesses

are performing remarkably well, playing offense, taking a lot of share, and sucking a lot of oxygen out of the room for the competition. And so they're sort of making this like winners take all, winners take most narrative, a really easy narrative to believe and to expect in the retail space. I mean, just stepping, taking a step back and sort of thinking across the market, it mirrors this dynamic of really concentrated performance in a few winters. And we've seen that. And we've very much seen that in retail and across consumer where, you know, the two big juggernauts are doing great and serving as a hiding place for a lot of investors. What does all of this mean for smaller businesses, insurgents like the DTC players? We were talking about them a couple of years ago, but they haven't fared well. And even Shopify. Yeah, I mean, DTC, I think one thing we've learned through the volatility of COVID is, you know, that's not a panacea to have direct access

to your consumer. It's still really difficult to stay on trend and have the right product at the right price marketed optimally. So, you know, I think you'll see more over the next two to three years what we've seen in the last two to three years, which is, you know, colossal failures for the brands that don't get that right. And then some big winners, too, because if you can own that consumer relationship and you've got a great product and a great value, you know, then the rewards are quite rich. So, John, who else is going to do M&A, you think, at this point? Who are the next targets and acquirers in retail? We don't spend too much time speculating on M&A. What we try to do is try to find great advantage businesses where there's

signal in our data that investors have under-discovered the concept or consumers have perhaps under-discovered the concept. So, you know, we think there's a handful of great retailers we own in our next generation connected consumer fund. And I wouldn't put them on an M&A list per se, but, you know, those would be names like like Ulta or the Home Depot or top holdings for us. Dollar Tree is another one we feel really good, good about at this price. All right. Dollar Tree at this price is John San Marco. Good to see you. Thank you. Time for a CNBC News update now with Contessa Brewer. Contessa. John, speaking at a campaign rally in Wisconsin today,

President Biden was defiant about his intentions to stay in the presidential race. Let me say this as clear as I can. I'm staying in the race. I'll beat Donald Trump. I will beat him again in 2020. Following the rally, the president is set to sit down for his first televised interview in the wake of last week's debate. Former President Donald Trump is looking to pause his classified documents case and the Supreme Court ruling that former presidents have broad immunity for official acts. In a letter to Judge Eileen Cannon, Trump's lawyers argue prosecution should be paused until she resolves motions regarding the former president's immunity from criminal charges

and claims that special counsel Jack Smith was illegally appointed by the Department of Justice. And Texas is now preparing for a hit from tropical storm Beryl. It weakened from a category two storm earlier today, but forecasters believe it could regain strength as it moves across those warm waters of the Gulf of Mexico toward Texas. We'll keep you apprised of the situation. John? Okay, and of course, we hope everyone out there is as careful as possible. Contessa, thank you. After the break, Mike Santoli looks beneath the surface of the jobs report at one metric that's sitting near record highs.

And check out the biggest winners of the week in the one metric that's sitting near record highs. And check out the biggest winners of the week in the Nasdaq 100. Tesla, of course, ARM, Apple, Meta, and On Semiconductor all making that list. We're going to have much more on Tesla ahead with an analyst's cautious take on the stock. Overtime will be right back. Welcome back to Overtime. S&P 500 and NASDAQ both notching record closes today. Bond yields taking a leg lower after a mixed jobs report before the bell. Mike Santoli is back with his take on one key part of the morning's report. Mike.

Yeah, John. So the overall unemployment rate did tick higher to 4.1%. This is the unemployment rate for prime age workers, so-called, between ages 25 and 54. Obviously, the bulk of the working population, the one that is going to give you some subtle cues about the trend in employment. So it ticked higher to about 3.5 percent. Obviously, very low levels, reflective of a strong labor market. But you can sort of see how that's creating a base and turning higher.

Now, other pre-recessionary moves, you know, look somewhat similar. That's the late 90s into 2000 recession. This one here is the global financial crisis recession. The point being, most of the rise in unemployment when it accelerates happens in a recession. But normally you have a little bit of an inkling that things are trending in that direction. Can you have some some false positives? Yes, absolutely. You can kind of sort of go higher and then trend back lower. The other slightly encouraging piece of this is the labor participation rate among this group, 25 to 54, which did go pretty aggressively higher, actually means more people looking for work was the what was what caused the uptick in the stated unemployment rate, the all time high right here here around the year 2000 in labor force participation.

But we're not far from it, and we're above where we were in the entire previous cycle. So I think that's good news in general, but it does show you this increased sensitivity toward any signs that the softening of the labor market is going to maybe kind of take on more of a life of its own here. And that's important to remember, right, that the unemployment rate is people who want to work, who are looking for a job and haven't been able to find one. And prime age is a great way to narrow that down. Have you heard any chatter out there about what exactly has driven this rate back higher again? Because the narrative out there was, hey, people just don't want to work anymore. And then it was the stimulus. People didn't have to work anymore.

What's changed? I think what's most persuasive is that it's a function of cumulative labor market tightness. So if you run a hot economy for long enough with a low unemployment rate, it just draws more people in. And I think that's what a lot of folks are arguing has been more or less proven by the current cycle. Now, obviously, there's some necessity to this, perhaps, and people looking for a second income or looking for another job. But it seems to me more that, you know, here you had just so much slack in the economy that it just

didn't have a lot of incentive for people who have been on the sidelines to wade back in. Is there a percentage out there that you're aware of that's considered full participation, which of course would be short of 100%, I guess, just like full employment is short of a 0% unemployment rate? Right. No, absolutely. I mean, in terms of where it would get to, I mean, I think if you get into the, you know, low 80s, it's going to feel as if it's pretty much full employment by this measure. Women coming back into the labor force has been a big part of this in the last couple of years, and there should still be upside to women coming into the labor force because they almost always

have a slightly lower labor force participation. So in theory, there's a little more room to grow there. Yeah, we got to get child care more affordable there, too. Mike Santoli, thank you. Well, still ahead, insurance stocks have been red hot this year, but coming up, why Hurricane Beryl and the rest of the hurricane season could create a major, well, headwind for that industry. Plus, Tesla is seeing big gains this week, clawing back from the depths reached in late April and turning positive for the year. Up next, a top analyst makes his bear case for the stock. And because you love overtime so much and you want even more of it, well, of course, we've got a QR code for you right there on your screen.

You can scan that with your phone. Follow us on LinkedIn. Lots of exclusive content for you there. Overtime will be right back. Welcome back. Tesla notching its best week in more than a year after a strong Q2 delivery report, turning positive for the year by one and a fraction of a percent and more than 70 percent off the lows in April. Despite these big moves, our next guest thinks the stock is a sell still and has fought that for some time. Let's bring in Jan

Jevsico of Guggenheim Securities. Ron, I believe this stock is up a little more than 43 percent year to date. That's got to be painful if you got a sell on it. So why are you still convinced it's a sell? Yeah, month to date. But yeah, it's been a very painful month. Oh, yeah, month to date. Yeah, it has been a very painful month. Just barely positive for the year, like I just said. Yeah, exactly. Yeah, we've said a 5% delivery decline has never looked so good. Ultimately, demand is still deteriorating for this business.

It was a modest improvement versus the first quarter rate of change or the percentage decline in the first quarter. But it only gets harder from here in terms of even trying to claw back to even in terms of delivery growth. They've lost a tremendous amount of market share in China. And the pie in China has much less room to grow. China is now 50% electric vehicle exiting the second quarter. So if you're losing share and there's less overall kind of EV pie to grow, that's challenging. You have tariffs hitting in Europe this quarter, which will be an additional 20% cost on about 25% of Tesla's European volumes that come from China. And ultimately, the way they got there with delivery upside this quarter was some pretty heavy discounting and financing promotions that we think show up in the form of

negative or down sequential gross margins when they report earnings this quarter. Now, if Tesla were being valued by investors on car sales, it wouldn't have an $800 billion market cap right now. There's an expectation that the technology that Tesla is developing, AI, self-driving, is worth a lot more than that. So what is it that you believe will cause that faith in Tesla to collapse in the near term? Because isn't that what needs to happen for the stock to meaningfully fall from here? Yeah, it's a great point. Great question as well. I think over the next month, there is the chance that ahead of the robo taxi event, this is kind of an increasingly noisy time period, both upside or downside. Just when you get

summer trading into a very hyped up event, post the robo taxi event, I think there will be a market realization that commercialization of robo taxtaxis is well into the future. For whatever reason, Tesla gets a very unique implied valuation in robo-taxis that other startups or established robo-taxi players today do not get. And ultimately, we think the event, the best case is a pretty aggressive timeline, but that kind of lacks credibility alongside a physical prototype. I'm not sure that's enough to support the stock at these levels. Is there a case to be made that as long as risk assets, including, say, Tesla, even NVIDIA and some of the AI names, remain elevated from a valuation perspective, that Tesla will too? Yeah, definitely. I mean, the correlation with

both interest rates and the rest of, I would say, the higher beta tech stocks is quite high, and it's certainly recoupled in the last month or two versus, I think, the start of this year, the stock had tracked some of the negative fundamental revisions. So it's tough. I mean, but ultimately, we try and have a fundamental basis for our valuation. We do see the auto business continuing to deteriorate. And I feel like we have pretty healthy energy assumptions even before this quarter's very strong energy print. And we can't get on a discounted cash flow analysis anywhere close to the current valuation. Our DCF is around 150. To be clear, our price target is 134. What's the impact of cheap Chinese EVs and

tariffs against them that might be seen as potentially benefiting Tesla? Yeah, it could help Tesla. Our view was that BYD and others would never really be able to participate in the U.S. market. I think both political parties, it's probably actually one of the few things they align on. But ultimately, there is going to be increased competition in the U.S. from other manufacturers in the form of Rivian, and even the legacy OEMs should be developing more competitive, lower-priced product. We've seen Hyundai, Kia come out with quite compelling electric vehicles, in our view. But no, I mean, it is the case. But ultimately, if we're underwriting Tesla for the U.S. EV market, this is the most challenging

electric vehicle market, I think, over the midterm. And it's much harder to underwrite that. All right. Ron Yusko from Guggenheim with Tesla up 43.7 percent for the month, 27 percent this week. Thanks for joining us. Thanks for having me. Up next, how one company is using AI to help protect supply chains against the threats of tariffs and trade wars,

and Bitcoin off the lows of the day after briefly falling below 55,000. On Wednesday, Renaissance Macro's Jeff DeGraff said on Overtime that breaking below that level could signal trouble for the cryptocurrency and the Nasdaq 100. We'll be right back. Welcome back to Overtime. Well, here we are in the back half of the year when the global flow of goods ahead of the holiday season is especially critical for the economy.

Today, let's take time out with a CEO whose company is using software to deepen the insights companies have into their supply chains and help protect themselves ahead of potential tariffs and trade wars. Evan Smith is the co-founder and CEO of Altona Technologies. It is a startup using public data and private data combined with AI to help companies analyze and optimize the value chains for their products. Well, what's a value chain? Think of all the suppliers, assemblers, shippers, distributors, insurers, all the companies it takes to make things and get them reliably to customers. Where are the risks? Where are the opportunities? Well, Altona raised $100 million Series B a couple years ago, and customers, including Boston Scientific, LL Bean, and Maersk, are taking advantage of the technology.

Now, the logistics of Smith's own life had been complicated. He grew up in Alaska, studied at Yale, interned in India, and later started a company developing renewable jet fuel. His logistics focus began a decade ago. The second arc for me was moving to New York and working with a family office to acquire companies. And I ended up running one of the acquisition targets, and we acquired, I don't know, three other companies into that business, and I was the CEO of that business. And this is where I started to get the supply chain bug. So we were digitalizing the textile and apparel supply chain,

creating a bridge between design and manufacturing and just kind of automating that whole thing. Now at Altona, Smith is working at a global scale. Last month, the company released a new product that helps customers literally map out their supply chain, including data on sustainability, compliance, and other factors. Smith is pushing to find ways for entities to share data in a safe way so they can make more informed decisions. Right now we have this collaborative data network, but the customers that connect into it are, you know, merely operating within their own world, within their organization. Now the next phase of the company is we're going to give them the tools to connect across,

you know, so I'm a major retailer. I'm going to connect with my suppliers and my suppliers' suppliers to do work, to do these value chain management jobs. I'm an insurance broker, and I'm going to connect with theorter to share its value chain information with me associated with that import in order to fast pass it across the border. So the timeout takeaway here, deep logistics. Globalization isn't dead, but it is getting put under the knife as countries rethink the impact of outsourcing on workers and on national security. Aside from generative AI and the mega caps, there are entrepreneurs developing ideas that could reshape global trade and the labor market. Well, up next, we will discuss whether this year's huge gains for insurance stocks,

speaking of, could be wiped out by what has already been a historic start to hurricane season. And do not forget, you can catch us on the go by following the Closing Bell Overtime podcast on your favorite podcast app. We'll be right back. Welcome back to Overtime. Property and casualty insurers have been significantly outperforming the broader market over the last year as premiums soar. But are those gains at risk from the impact of Hurricane Beryl and the rest of what could be a devastating hurricane season. Contessa Brewer joins me after warning us about it in the news update to talk about the financial impact.

I mean, the good news is we've seen it downgraded now to a tropical storm. But the bad news is it looks like it could strengthen again over the warm waters of the Gulf. And where that ends up, we don't know. But when it comes to Beryl specifically, given its primary impact in vacation hotspots, you can assume that the travel insurance companies are getting a surge of claims and that companies may also be sending in their business disruption claims as well. Aon estimates at this point damage will be likely in the hundreds of millions of dollars with insured losses much lower. But look, it's an unfolding weather event. The path through the Gulf still in question. And remember, this is the earliest ever in the hurricane season for a Category 5 storm even to

develop. An active, severe season would, of course, spell trouble for insurers and global reinsurance companies. Last year, it wasn't even hurricanes. It was thunderstorms and hail that caused so much damage. In all, there were 28 separate weather events in the U.S., each of which surpassed a billion dollars. That shattered records. And U.S. insurers have grappled with $381 billion in catastrophe losses over the last four years. That's the highest ever total, according to Aon. So, of course, you're going to look at the big insurers, Chubb, Travelers, Allstate, Progressive, the auto insurers, to see whether they can handle this. Do they have the reserves in place?

Have premiums risen enough for them to compensate for whatever claims might be coming down the pike? And we know premiums have risen. Why and how long do they stay high? At some point, does competition or maybe even a weaker consumer cause them to effectively lower premiums for bundling or something? Yes, but these are long markets. The hard market that we're in right now where premiums and rates are going up, it lasts a long time and it takes a while for the system to react to competition, for instance, in the marketplace. And we've seen in reinsurance, for instance, where rates had soared, you see all of a sudden now a lot of

business, a lot of investment dollars coming into the reinsurance business. Why? Because they're charging a lot. Why are they charging a lot? I've got the industry pointing out to me that construction labor costs and materials costs are up almost 40% over the last five years. So when you put in a claim, it's expensive to come back. Litigation is a big one, too. Wow. That's a lot. We all got to pay for it. Contessa Brewer, we care about this stuff.

It's important. That'll do it for overtime.