Closing Bell - Closing Bell Overtime: Timing the Tech Trade 11/18/22

Episode Date: November 18, 2022

The tumbling tech trade front and center on Wall Street – so when is it safe to start buying again? Requisite’s Bryn Talkington gives her take. Plus, a new memo from Elon Musk has triggered a slew of resignations at Twitter. Casey Newton and Alex Kantrowitz discuss what’s at stake for the company. And, market expert Mike Santoli breaks down what he is watching in the upcoming shortened trading week.

All right, Michael, thank you very much, and welcome everybody to this Friday edition of Overtime. I'm Scott Wapner. You just heard the bells. We're just getting started from Post 9 here at the New York Stock Exchange. In just a little bit, I'll speak to Ed Yardeni on where this market is heading in the weeks ahead and whether he is sticking with his call that the bottom is in. Plus, Casey and Alex, they're back. They're in the house for the latest on the Twitter turmoil. By the way, Elizabeth Holmes, the verdict we are told out in San Jose at that federal courthouse is imminent. And we are going to take you there live once, in fact, that happens. Our Scott Cohn is outside the courthouse waiting for all of that.

So we'll go to San Jose when we hear that. It could be a matter of moments. We do begin, though, with our talk of the tape. The tumbling tech trade, why the selling is probably not over and when it might be safe to start buying again. Let's ask Bryn Talkington, Requisite Capital, of course, here on set with us. Good to see you. I wanted to start things off on tech because there's not much stability whatsoever to that trade. No, there's stability to the downside. And I think that if you look really clearly at the 200-day moving average, the NASDAQ is firmly, just like the S&P, well below its 200-day moving average.

And once it gets close to that, it gets slammed right down. And so I think that until we get clarity from Powell, not the other Fed presidents, from Powell in December, the NASDAQ will continue to be a sell the rallies, not a buy the dip. Wow. So you're talking about, you know, four weeks before we can get any kind of clarity whatsoever. And that might even, you know, not provide exactly what investors are looking for. Right. Well, so you have to remember the S&P is still around 34 percent technology. If you look at tech and then big tech collectively. And the S&P is still only about 2% away from 4,100. And so I think it's going to be very, very difficult for tech

and the S&P to break through that while we still don't have any type of confirmation from the Fed. And I would just be so hard pressed that Powell comes back after just slightly better than expected CPI and says, we're all done. And so I think that the market is wishing and hoping, which we all know is not an investment strategy, that this is over. And this is like we're in a bear market. Be patient. Don't try to catch that knife. I think tech investors will continue to be frustrated. This goes right to the heart of your whole argument for the last many months. Don't fight the Fed. And this is probably where that has shown up more than any other part of the market, right?

Right, because not only was tech overvalued relative to the rest of the market and had over-earned its return, but you also have other sectors. When we have this inflationary environment, tech just doesn't do well. And we haven't been in this environment in around four decades. And so it's like you have energy. The delta between energy and tech this year is close to 100 percent. XLE is up about 65. The Nasdaq's down 28. I think overall that trend, not necessarily the magnitude, but that trend will continue because inflation, while it will fall, I do not think that inflation is going to be at 3 or 4 percent anytime soon. Because as I said before, Scott, the two things the Fed can't do is print humans and print oil. And the labor market's tight and we have an energy shortage.

They can only print money, as we've learned wholeheartedly. So if that trade doesn't work, right, if near 30 percent of the S&P doesn't work, what does that mean for the S&P at large, for stocks at large? Well, right. Well, so that's where other sectors like, and other, look at the Dow. The Dow is down only 7% year to date. I know, it's crazy because of the, you know, the rally from the mid-October low. Right. But you also have, think about it, you know, the Dow, because it's price weighted, UnitedHealthcare is close to 10%. And healthcare is like this defensive growth. And so you have UnitedHealthcare, close to 10%. And healthcare is like this defensive growth. And so you have UnitedHealthcare, you have Amgen,

you have J&J making up really big percentages of the Dow. You also have McDonald's. So these like high quality, stable earnings, more defensive with growth are gonna continue to be the leaders in this market. And tech is just gonna take a backseat until we have further clarity. Well, at what point though, do some of the other areas that have been working become

too expensive, where you look and you just say, you know what, so tech's not going to work, but the other areas that have just have now become too expensive to touch here either? Yeah, so I mean, we have been underway consumer staples and utilities, because that's really at the heart of what you're talking about, because consumer staples and utilities are trading well above the S&P, but they're stable. And so McDonald's, people will trade down. Are people going to go to Chipotle in a recession? Are they going to go to McDonald's?

And so a lot of those companies have earned a premium. And look at Walmart. Walmart has a, it's not a cheap stock, but look at their earnings versus Target. And so I think those will continue to be places to hide out. But if you want to know the cheap sector that has growth, it's volatile. You've got to come back to my home state where we have energy. You're going to talk about energy. So oil below 80.

Questions about where oil is going to go. Energy stocks recently have done better than the price of crude. What does that mean for the trade? I think that you've seen that separate for quite a while. Ultimately, WTI does not pay a dividend. WTI does not have a cash flow. And really, so it's looking at the oil curve, which is a different constituency of traders. And so I think you've now had more institutional investors saying, hey, you know what, this is not an uninvestable asset class. If you look at the energy sector, it has a free cash flow yield around 11, a PE of around 9.

So no other sector in the S&P is even close to that. And so I think you'll continue to see that separation between WTI, which offers no cash flow or dividend, and the individual companies, which offer both. So should investors then not pay such close attention to the price of crude oil when deciding if this trade actually has many more legs to it? It sounds like that's what you're suggesting, that one doesn't necessarily correlate with the other. They are correlated with the magnitude, right? And so the direction, if energy, if WT all of a sudden is at 50, Devin is not going to be at $70, right?

And so, but the magnitude- Well, right, because you're talking about the lower profitability of all of these companies if you get down to a level below, let's say, 60, which is typically thought of the point where these companies make money. Correct. And so I think that you will see correlation, but not the magnitude. And that's where you're seeing the magnitude in terms of the sell-off in WTI versus energy right now has had a nice little sell-off, right? You've seen a sell-off over the past week or so, but just not the magnitude of WTI. But investors, I think for high quality cash flow, you will have volatility. You can sell

calls against these names and get really high premium to even amplify your income even more. I think it's really a great space for investors to have a piece of that in their portfolio. All right, let's broaden the conversation, bring in John Mowry of NFJ Investments and Jordan Jackson of J.P. Morgan Asset Management. It's great to see everybody. John, I go to you first because you've been more positive than I think many others who've been on this program. We've had a really nice move from the bottom, well, maybe the bottom, in mid-October.

Does it last? Does it hold? Are you still as positive as you sounded last time we spoke? Scott, great to see you. So cyclicals are an interesting group. If I was to, you know, poll, you know, the average person and say, hey, do you think homebuilders are beating the S&P over the last six months? I think most folks would probably say no. The reality is homebuilders are beating the S&P by 1,500 basis points over the last six months. Lamb Research, a name that we like in the semi-space, is up 40% the last month and is tied with the S&P over the last six months. So I think that investors should be cautious writing some of these areas off because we do see trough multiples, particularly when you look at price to book. And I completely agree with Bren that you do not want to fight the Fed, but you also don't want to fight the market. And I kind of picture a seesaw

analogy where the Fed is putting as much weight on one side as they can. But the fact that the curve continues to invert tells me that the long bond is signaling, hey, we know that CPI is rolling and employment continues to be a concern because you see layoffs in the tech space. And those are the dominoes lining up to put pressure on the Fed. The Fed does not have as much water left in the squirt gun as I think the bears tend to believe. So we want to not fight the market. And when I look at that long bond, it's signaling that we could be ready for some reprieve. So we do see cyclicals that have some really interesting values here.

And the utilities, I agree, are egregiously priced. But to be quite candid, I think some of the HMOs are egregious as well. Those have all the revenues coming from the U.S. So it's not being affected by the strong dollar. If the dollar peaks and rolls over because interest rates roll over, those trades are going to quickly move out of leadership, in our opinion. I mean, Jordan, there is this belief that, you know, John puts forth that people just don't think the Fed's going to be able to do all that it says it may do right now, right? This is more jawboning than everything. Believe what they do, not so much what they say.

Are you on that page or not? Well, I'm on the page that the Fed is in fact going to stick to its guns. I mean, you've got some members of the committee, even Bullard, revising up his estimate to north of 5%. And I feel like the core of the committee may be a little bit biased to and be willing to do a little bit too much because they're trying to maintain their credibility. I think they still feel behind the curve

in fighting inflation back from 2021. And, you know, I think that they're willing to stick to their guns. And so, again, I'm of the opinion that they're willing to stick to their guns and so again i i'm of the opinion that they go fifty uh... but i think there's actually some upside from the go another fifty uh... in their uh... february first meeting uh... before they take a step down to a twenty five basis point cadence

uh... but uh... i i don't think we're out of the widget and and i think it's it's going to be a few uh... several weeks before we see that quote unquote pivot from the fed uh... really providing, I think, a broad rally to the markets. If not months. I mean, that's part of the problem. We're all trying to game out something we don't we don't really know. And we're in some respects throwing cold water on what the Fed itself is saying. Right, John? I mean, your position is clear, clearly stated. Bullard just threw out five to seven percent on the top end of of rates.

You are saying to our viewers, I don't believe him. I don't believe they're going to do what they say. Well, I guess what I would say is that I think it's it's it's it's the rate of increase. So the rate of increase is going to slow. And I would rather be positioning for that than trying to play catch up. I mean, if you look at those standard deviation moves we saw last week, they were material. And most folks are aware that, hey, if you miss the 10 best trading days over time, that's going to cut your return in half. Some of the biggest returns come out of bear markets. So you need those days

to participate in the overall market and get that return that everyone's expecting in their portfolio. So I would argue that the risk of being out of the market and get that return that everyone's expecting in their portfolio. So I would argue that the risk of being out of the market and particularly being invested in more defensive names at this point, even with the negative rhetoric, would be a greater risk than being in the market. It's not that I think the Fed isn't going to maybe push rates higher, but the long bond is telling us something. I mean, the curve is the most inverted since 89. And so I think when you look at that, you have to be respectful of how much the Fed can do. They only can control the short end of the curve. Jordan, right, you want us to be in staples. John just said, don't be in some of those more

defensive areas of the market. What's your retort to that? Well, it sort of goes back to this Fed pivot, right? And I actually think that the pivot takes place in two stages. That first pivot will probably get in the first quarter, and that'll be signs that the Fed is gearing up to pause, right? Getting up to that terminal rate and finally pausing. And then the second pivot probably won't happen until, I'd say, the fourth quarter of next year, in which they're actually going to start to talk about beginning to cut interest rates. And again, this is very much will depend on how inflation develops, how labor market develops.

But I think that first pivot, I think, sort of allows a broader market rally, allows a little bit more breadth for relief in the markets. And then I don't think it's till that second rally, where the Fed is considering cutting rates, that you get that stronger pivot back towards growth, back towards tech, and you pass the baton on to the leadership in the growth sector again. So I think we're talking more about still a tactical, shorter-term overweight to your defensives.

And I'll also add that when we think about the earnings outlook, the volatility in the earnings outlook, we've seen some significant earnings per share, earnings growth revisions for 2023 and a lot of those revisions you know generally speaking those revisions are hitting sectors like energy consumer discretionary materials less so in sectors like health healthcare utilities and staples and so I think in a volatile earnings outlook and in a period where earnings are being revised pretty materially I still think it makes some sense to be a bit defensive. All right. I want to debate semis before we get out of here, because, Bryn, a lot of people have been lured into that trade and they've done well, at least

over the last month. Stocks were crushed. Now they're up a lot over the last month. Time to sell those, take some profits on where you've gotten big gains or stay? Depends which semis, right? Talking about Intel, AMD or NVIDIA. Three different companies in one sector. So in my opinion, an Intel is still frozen in time. I feel like Intel is a value trap. It's done fine this year relative, but I think long term people want to own the AMDs, the NVIDIAs. Well, I'm thinking of NVIDIA. NVIDIA was up 40, what was it, up 40 percent into the print the other day other day right so that's a huge gain over a month right and i think that as long as going back to once again i don't always think it's that complicated looking at where the 200-day moving average which is like lower earth orbit we're just not going to move above that very easily and so as the nasdaq continues to butt

up against that nvidia will do well as it moves up, but will come right back down. And so I think you have to be patient here. And I do think to the comment earlier about growth coming back into favor in the next few months, I think investors need to be open to the idea that the next few years are going to be different and inflation is going to be higher than it was in the past. And your portfolio needs to be different from there. So you need to have other things besides what's worked the last three, five and 10 years. And I don't think investors I think investors are trying to go back to 2020, 2019, 2018. It's all about tech. I think you have had a paradigm shift.

But people's portfolio is still looks like the S&P that has 35 percent tech. I think that's a fantastic point, John. Do you agree with that? Because I do feel like we almost assume that, OK, once the Fed gets done doing what it's doing and inflation goes back down, we're all going to just return to the way it used to be. We're going to buy the same stocks we bought for the last few years and everything's just going to be fine. The flip side, of course, is what Bryn just said, that inflation just remains higher than we think for longer than we think. Despite the Fed being done, they may be willing to tolerate a higher inflation rate than we think at this particular moment.

And that's going to change the trajectory of certain stocks for the next couple of years at minimum. I would agree that leadership definitely will shift. My personal view is that energy is more of a concern to me than semis because you have price to book multiples at the highest level since 2008 when oil was at 150. So I see that as a more expensive area. I guess I would make this comment about semis. Warren Buffett just took a position in Taiwan semi. He did not add to his position in Coke. He's not adding to Hershey. Scott, I know we've joked about chocolate chips and semi chips. Chocolate chips are trading at 30 times earnings. Semi chips are trading at single digit multiples. And if you strip out the PE and look at price to book multiples, you're in trough areas as well. I also don't know how many chips are currently in the studio or on my body, but I

think that the reality is that the world we live in has a much greater demand for chips. And the end markets have matured dramatically, whether it's washing machines, whether it's cars, whether it's cell towers. So I think the end markets have matured. I think, candidly, it would be a little bit naive to assume that we're going to have an implosion of semis like we saw in 2000. Many of those companies had no earnings. The companies in the tech space that I think are not going to regain leadership are the more speculative areas of the market, the companies that did not have strong balance sheets, did not have earnings. Those are of a higher concern to me. I don't see semis as a huge problem area. Again, I see the risk of not being there. And the reality is the tailwinds are structural for the space and you're getting very low

valuations. So I would be bullish on the space. I would be reluctant to not be there. And one other point I will make is that semis have a lot of exposure to China. And if you look at the emerging market space, it is the most discounted to the U.S. since the late 90s. You're getting enormous dislocations there. If the dollar weakens, that is going to create an enormous tailwind for the emerging markets. And that is also going to create a tailwind for semis, in our opinion. Jordan, last word goes to you on this very topic. Sure. First, I'll hit on the semiconductor piece. Just from a macro perspective, looking at Taiwanese and Singaporean exports

over the last month does suggest that there's still a bit of weakness, at least in the short term, from the semiconductor space. And just to reiterate that point on China, right, China, global demand is around 70 percent. Now, a lot of that makes a complete roundabout. They take in the chips and they repurpose them and ship them back out. But with weak demand coming from China, that also poses a bit of a headwind to the sector as well. But, you know, I do think that the demand for chips over the long run is certainly going to be there.

And this is more so a tactical short, but an overweight long, at least from my perspective, from the semiconductor space. And then in terms of the paradigm shift, you know, I'm certainly sympathetic to the notion that inflation is likely going to be higher coming out of a mild recession, which we think will materialize in the U.S. economy next year. I think part of the story there is going to be deglobalization bringing workers back here into the U.S., and that's likely going to attribute to higher wages. And we know tech companies have to pay a lot for wages. So, as you think about the margin and earnings growth or CAGR on those earnings growths,

they're likely going to be lower coming out of the tech sector. But if you think about real growth, I think we're going to step right back into an environment in which real growth remains very, very challenged. We have a low growth in the working age population, still very low levels of productivity. Even amidst a decade of low interest rates, you didn't really see a massive pickup in CapEx. And so when I put all that together, it stands to reason that investors will be willing to pay up for that growth premium again. And so I do think that leadership does favor growth in the long run over value. We're going to leave it there. Jordan, thank you. John as well. And Bryn, of course, thanks to you for being here. We will see all of you soon. Let's get to our Twitter question of the day. We want to know which story had the biggest impact on your investing outlook this

week. The FTX implosion, more tech layoffs, or St. Louis Fed President James Bullard's aggressive outlook for interest rates. You can head to at CNBC Overtime on Twitter. Cast your vote. We'll share the results coming up later on in the hour. We are just getting things started here in overtime. Up next, finding fresh opportunities. One top portfolio manager is sticking with the growth trade, even as rates head higher. Alger's Ankur Crawford joins us with the names she is betting on. And also, you're looking live at the federal courthouse in San Jose, California. Any moment, we're expecting the sentencing of disgraced Theranos founder Elizabeth Holmes. Our team

is there standing by live to bring you all of that breaking news as soon as it is handed down. Do not go anywhere. Overtime is right back. We're back. Live shot of San Jose, California, their left hand side of your screen, of course, waiting on the sentencing of disgraced Theranos founder Elizabeth Holmes could come any moment now. We are expecting that. And when, in fact, it does happen, we'll take you live to California. Our Scott Cohen is standing by for that event, which we do think is imminent. In the meantime, let's talk more markets value outperforming growth by a wide margin this year. And the recent market bounce has been no different. The iShares growth ETF down some 14 percent in the past three months. The value ETF down only two and a half. Our next guest is finding opportunity in select parts of the growth trade. Joining me once again, Ankur Crawford, Executive Vice President at Alger.

Welcome back. It's good to see you again. Growth versus value, I mean, right, that is the debate right now. And lately, it's kind of been no debate. Is that going to change? Yeah, you know, I think, as I said in the previous time I was on, you know, there's different types of growth. There's long duration growth, there's short duration growth. You just had some of your guests come on, talk about semiconductors and how they're trading at price to book multiples that are at trough valuations. They generate a lot of free cash flow. And these growth stocks are taking on kind of value-like characteristics.

So I think everyone likes to dump all of growth into one bucket. And I think there's disparities between these different kinds of growth stocks. Okay, so let's separate the pack then. Do you think that the mega cap ones, which have lower valuations than some of the high multiple, high growth names that really got whacked. Do you like those? Are they going to start performing again? Because those remain in question. Yeah, I think that there's some secular issues with the mega cap stocks that, you know, will curb the earnings power of them as we go through the next few years. And so those multiples may remain depressed. The high duration or the long duration stocks, very high multiple stocks,

those are at risk of the Fed being a little bit more aggressive and inflation being a little bit more aggressive than the market thinks. However, there's this middle ground of stocks that generate free cash flow. They will continue to grow despite the recession. And the choosing ground should really be in that group of stocks. We just had a debate, and I'm not sure if you heard it or not, on the semis, whether they've gotten too frothy. We had NVIDIA, the earnings in overtime this week, which were characterized, I think, in some corners as good enough for a stock that had gotten creamed but was up huge into the print. Now what am I supposed to do?

Yeah, I think it's not in an obvious spot right now. So NVIDIA, I mean, when I came in here last, it was trading at $125. It bounced to $170. That's a 40% move in the stock. In a month. In one month. And so going into earnings, does it surprise me that it's pulled back a little bit? No.

But if you look at this business over the next three years, it's a highly interesting business because all of the end markets that you want to be levered to, it is effectively the compute engine for every single one of those. So, you know, if you, again, look past the divot that they're undergoing now, you'll be happy that you bought it. What happens if, as one person in our last conversation suggested, we have a new paradigm in the kind of returns that we expect over the next few years, that inflation comes down, but it still remains high, rates remain higher than many people think, and thus the paradigm of that whole trade shifts, doesn't it? It absolutely does.

However, it only shifts from the multiples where we came from versus the multiples that we are at today. Okay, so what was absurd before is not necessarily now. I'll give you that. They still may be too high, though, no? They may be too high depending on where the Fed decides to take the Fed funds rate. And I think, I mean, this is something that we've been discussing a lot internally of like what is the right inflation number? What is the end point for inflation? Because that will dictate the multiples on the market.

Yeah. It's good to see you again. Thanks for being here. That's Ankur Crawford with Alger once again joining us. Up next, the fate of Twitter. The future of the social media company hanging in the balance as a growing number of employees and users call it quits. What is the ultimate end game for Elon Musk? Alex Kantrowicz, Casey Newton, they are live at Post 9 together next.

We're back in overtime. It's time for a CNBC News update now with Contessa Brewer. Hi, Contessa. Hi there, Scott. Here's what's happening right now. Attorney General Merrick Garland has appointed veteran prosecutor Jack Smith as special counsel to oversee two investigations involving former President Donald Trump, the Mar-a-Lago case and parts of the January 6th probe. Garland says the need for independent oversight has become clear. Based on recent developments, including the former president's announcement that he is a candidate for president in the next election, and the sitting president's stated intention to be a candidate as well, I have concluded that it is in the public interest to appoint a special counsel. Smith most recently served as the chief prosecutor for the special court in The Hague,

where he investigated war crimes. A Trump spokesperson called Smith's appointment a political stunt. Closing arguments have begun in the sedition trial of Oath Keepers founder Stuart Rhodes and four others. Prosecutors say those defendants discussed using violence to overthrow the 2020 election for weeks ahead of the January 6th insurrection. Defense attorneys said prosecutors failed to show there was an explicit plan to attack the Capitol. Scott, we're keeping an eye on it. Sure. All right. Contessa, thank you. That's Contessa Brewer. More turmoil at Twitter unfolding within the last 24 hours. Another round of employee resignations last night amid rising concerns about the future of the social media company.

Let's bring in Alex Kantrowitz of Big Technology and Casey Newton of Platformer. Both are CNBC contributors and both are with me here at Post 9. It's good to see you both in the house for a change. I'll start with Casey first. I mean, he's certainly keeping his business in the news. It feels like there's a new development like every 10 minutes. It really does. Well, look, Elon Musk is super focused right now on figuring out who is loyal to Elon, who will implement the plans that he has for this company.

He's been obsessed with the idea that there are leakers and saboteurs lurking within the company. And he believes that after today and this latest purge, he's working with loyalists. So you got the Alex, the office apparently temporarily locked last night. Right. I mean, Twitter was a place to be last night. I got to tell you, you got the emails to the engineers today in which one said the following, at least reported by Zoe Schiffer. Anyone who can actually write software, please report to the 10th floor at 2 p.m. today. Before doing so, please email me a bullet point summary of what your code commits have achieved in the last six months. That's just one of many that I could cite. But what do you make of this? Well, last week I was on with you saying we need to give Elon some time before we say whether he's done a good job

or not. I didn't expect it to only be a week before we could say he's really messing this platform up. Do you really think so? I think that the plans are good. I like the idea of him trying to transition Twitter away from advertising and towards subscription. When the users are the customers, you make healthier decisions. Some of his content decisions, the fact that we're not going to have people have their messages taken off the platform, but you keep them on and then you question the amount of amplification, that makes sense to me. But the execution to me is just so puzzling. The idea that you'd want to cut teams and have people in your core infra leave and potentially risk the service shutting down

in the middle of the World Cup, which is going to be its peak usage. I mean, that and also NFL season. You know, on top of that, I just don't personally understand exactly the way he's going about things. Maybe he'll turn it around, but it's been a bad week for him. So you're speaking to some of what the policy is going to be. And Casey Musk himself has tweeted in the last two hours, quote, New Twitter policy is freedom of speech, but not freedom of reach. Negative hate tweets will be maxed, deboosted and demonetized. So no ads or other revenue to Twitter.

You won't find the tweet unless you specifically seek it out, which is no different from the rest of the Internet. Yeah, so what you're hearing right there is this company is seeing a free fall in advertising, right? This company depends on 89% of its revenues coming from ads. Most major advertisers at this point have paused. Elon is getting out there and saying, whoa, whoa, whoa. There might be bad stuff on our platform, but it's not going to be amplified. You're going to have to look really hard to find it. And by the way, that's not a terrible policy, but keep in mind, he just has eliminated most of the trust and safety folks who are trying to keep the platform safe.

Do they turn the advertising story, Alex, around? Or at some point, does they get too far gone to bring these companies back? I mean, they might eventually, but I don't think it's going to happen anytime soon. You think about it right now, the entire advertising industry is in a pullback, especially when it comes to digital ads. Think about these companies, Facebook, Twitter, Snapchat. They're all struggling. They're begging advertisers, please come spend with our platform. And advertisers are like, maybe we'll throw a few dollars your way, Facebook.

Maybe we'll throw a few dollars your way, Snapchat. And then Elon Musk comes in and just barrels through and says we're not going to do trust and safety anymore, or at least, you know, implies that with some of his earlier pronouncements. And now he's like, well, we're going to pull back a little bit. Maybe you want to spend with us. If you're a media buyer at the table with your boss and be like, here's our plan. OK, we got Twitter at the top. You're going to get fired. OK, so I think that you definitely need to, you know, if you're Twitter, be patient here because there's been enough damage caused at kind of like the worst time, the time where you need to make the best

pitch to advertisers. They've made the worst pitch to advertisers. So could it recover? Maybe one day, but I don't think it's going to be this month or next month or maybe even, you know, into 23. You agree with that from an advertising perspective, because that's really what boils down to how he is going to try and make some of the money back that he spent on this property in the first place. That's right. He has lost a lot of trust with advertisers in the past three months, and it's going to just take time for that to rebuild. And one of the ways he has to rebuild it is just by hiring a bunch of people, proving that he can keep the lights on in that place, right, proving that he could keep the service going. So there's a lot of really low-level tasks he has to accomplish in the near term before I think those advertisers are going to want to come back. So to the point of maybe

everybody needs to just chill out and give the guy some time to figure it out. He is unconventional in nature or by nature and give the guy some runway. I'm going to I'm going to tell you what a VC said to me today who's from the Valley. All right. Give the guy a shot. I'm going to tell you what a VC said to me today who's from the Valley. All right. Give the guy a shot. He's done the impossible two to three times. Twitter was broken, unprofitable. OK, before he took over. So why not? Why not that? This was a platform that wasn't making any money. They were broke. They were unprofitable in fighting the whole other bunch of nonsense that had gone on there for the last many years. Now Musk comes in. Why not give him a shot? Yeah, I think there is something to this. It's kind of interesting. There's two views, right?

You speak to journalists and analysts and the people that use Twitter, and they say something's broken here. You speak to people who've built companies before, and they say the same thing. Give Musk a try. He's setting the tone. Maybe he'll turn it around. I don't think that that's wrong. In fact, that's exactly what I said last week. The one thing that I want to see for Musk before I say, OK, we're going to go all the way to that side. I want to see some vision. We have Twitter employees, Twitter engineers who said they left because they didn't know what they were going to be building. They needed the vision. There's been vision in places like SpaceX and Tesla. Twitter, you know, sort of lacking right now. What is Twitter 2.0? It's, you know, right now we know that it's extremely hardcore. What's beyond that? And once we hear that vision, then I say, OK, you know, this could take a couple of years. And I think

that Elon's heading in the right direction, but we haven't heard it yet. And I think that really is the main problem. So how do you take what Alex said, Casey, a few moments ago, jeopardizing the platform ahead of the World Cup, one of the biggest sporting events, if not the biggest sporting event in the world. The level of engagement is going to be off the charts at football season, et cetera. How does he harness all of that into a more profitable enterprise while still being Musk? Right. You want the genius of Musk to rub off on what he's trying to do. How does he do that while harnessing the whole thing? Well, we know what he's up to. He's going to release a new enterprise offering, let businesses sort of buy seats in Twitter for

all of their employees. So it will give them verification, maybe a handful of other features, basically trying to turn the thing into a SaaS product. I don't know that that's how you're going to replace 89% of your revenue though, right? So I think he's got a really tough road ahead of him. And to your VC friend, I would just think, don't over-index on how successful Musk was at SpaceX and Tesla, because I truly believe this is a different Elon Musk. Believe that? Well, I do think that Elon Musk building rockets and cars is different than Elon Musk running a social network. But again, like I think that he could do better. He could have vision, more vision here.

And he could, you know, be a little bit less reckless with some of his activities. But for the folks that are looking for hope with Elon, I mean, usage is high on Twitter. That's one thing you can point out. That's good. And I got in trouble for saying it last week, but he is shipping. So, you know, it's not a hopeless situation. I like Twitter. I want Elon Musk to succeed. And, you know, time will tell. It's your shot, Elon. You know, it's time to take it. The problem is, Casey, the company.

Is there even a competitive worry in all of this? Part of the reason why he may be thinking he can do kind of whatever he wants is because he knows that what else is out there. It's so true. Look, I mean, Instagram exists, Reddit exists, but there's nothing in the world that feels that feels exactly the same hole that Twitter does. But I would say, man, if you've had a great idea for a Twitter competitor, the lane has never been more wide open than it is right now. Guys, it's been fun, especially having you both here. Thank you, Alex and Casey, Alex and Casey joining us here at Post 9. Up next, is the market bottom officially in the rearview mirror? We'll put that question to Ed Yardeni. He'll join us next. And yep, we're still waiting on sentencing for Theranos founder Elizabeth Holmes. That's a live picture of the

federal courthouse in San Jose, California. We're going to bring you that event as soon as it happens. Scott Cohn standing by live and we're going to go to him. We're right back here in overtime. We're back in overtime. Stocks higher to close out the week. Our next guest sticking with his call that the bottom is in, saying the Fed has already done enough. Joining me now is Ed Yardeni. He's the president of Yardeni Research. Ed, welcome back. My first question was going to be, are you sticking with that call that the mid-October, October 12th bottom is the bottom?

Yeah, I actually thought it was made on June 16th, but we tested the June 16th low, went slightly below it, but now we're solidly above it. I think we're solidly above it. I think we're going to end up close to 4,300 by the end of the year. So I think there's still more upside. We're not talking about a runaway bull market here. But I do think it's a trading range kind of market, a stock picker's kind of market. And I think what's making the big difference for the market is the resilience of the economy.

It's been spectacular. Everybody's been debating whether we're going to have a soft landing or a hard landing. Meanwhile, there's no landing whatsoever. The consumer just didn't get the recession. Now, what do they keep spending? Yeah, I mean, they keep charging, right? I mean, they keep charging things on their credit cards. At some point, doesn't the chicken come home to roost? Well, it's not just charging, Scott. As you know, the payroll employment numbers have been extremely strong. We use the monthly employment data to calculate a proxy for wages and salaries and personal income. And adjusted for inflation, it's at an all-time record high. So jobs are increasing. Wages are increasing just a bit

faster than prices. And you put it all together and consumers are in good shape. And as you know, and you've talked about it many times, there's this excess saving of one to two trillion dollars. Nobody knows the exact number, but there's a tremendous amount of liquidity still sitting in the balance sheets of consumers. This, in fact, is true. But look, when there's a couple of things between thinking that the bottom might be in and suggesting we could go to forty three hundred by the end of this year, I mean, you're looking at that strong of a rally, seven, eight percent. Well, yes, I am. I think that we're going to find that the economic data that we get up ahead here continues to show that there's no hard landing. There's barely even a soft landing in the economy. I think we're going to continue to get evidence that inflation's

moderating pretty sharply. I know that Jim Bullard said that he doesn't see much progress on inflation. But I don't know, as you're looking at the durable goods inflation rate and consumer prices, those have come down quite a bit. The price of energy continues to be trending downwards. I think we may see gasoline prices actually contribute once again to lower inflation. The big problem, as everybody knows, is services. But I think durable goods inflation could be showing negative prints on a year-over-year basis by early next year. But maybe, since you brought up Bullard, maybe they'll make a mistake. Maybe just as they got the transitory question wrong, they'll get it wrong now. And the tough talk will

actually turn into tough action, much tougher than you think. And there's no way stocks are rallying as hard as you think unless they stop, pause, do whatever somewhere in between. Scott, I wish there was some way to put a gag order on these people. They talk way too much. And we've got a few of them talking almost every single day. And sometimes they contradict what they said a few weeks ago. Bullard only a few weeks ago was saying that he wanted to front load tightening. And he very strongly implied that he wanted to see 75 basis points in November, which is what they did, and that he wanted to see 75 basis points in December and then pause. That's what he said only a few weeks ago.

Now, all of a sudden, he's being an academic out there and saying that the Taylor rule says we should be 5% to 7%. And the market's kind of yawned on that. I took that very positively as a sign that the markets are just kind of getting bored here with all this chatter coming out of the Fed. At the end of the day, it's going to be about the economic indicators. They keep saying it. They should just say that. Our policy is going to be data dependent. And I think the data is going to show the economy is hanging in there and inflation is moderating. Well, Powell's likely to say that. I mean, and the market did take a little bit of a body blow yesterday when Bullard said what he did. It fought its way back, at least it tried to. And then, of course, Dow finishes up where it did today, near 200 points. That's what I meant. It

was a short-term body blow. It didn't last very long, and the market kind of blew it off, and the market did okay, considering that somebody who's relatively well-respected suddenly is talking about numbers that nobody has put on the table before. Let me ask you quickly before we go. If somebody says, yeah, I mean, I like Ed. I listen to him. I like his work. But I still think bonds are better than stocks right now for a variety of obvious reasons. How do you counter that? Well, I have no problems with bonds. I think we made a bottom in the bond market a few weeks ago at a yield of 425 percent. We're now more like 3.8 percent.

I think the fact that the yield curve is inverted is the market's way of telling us that bonds have just about peaked, because that's what typically happens when the yield curve inverts. That's a sign that investors are buying bonds, figuring that even if short-term rates go higher, they're not going to stay higher for very long. Ed, we'll leave it there. Good weekend to you. We'll see you soon, I'm sure. That's Ed Yargeny.

Yargeny Research. We're wrapping up another big week on Wall Street. Christina Partsanova standing by. She's had a busy week. Now she has a rapid recap. Christina. Yeah, well, we have another yield curve inversion raising the recession alarms and diverging retail stories this week.

We make sense of the American consumer right after this break. We are wrapping up a busy week on Wall Street. Christina Parton-Novellos is here with our rapid recap. Christina. The rally today, not enough for MarketStand the week in the green, but all three indices up on the month, led by the Dow up about 10% on the month. But Thursday, what happened is we started to come off the better than expected CPI rally as investors heard from several Fed officials this week who tried to pretty much rein in optimism that inflation is slowing down. So that hawkish tone weighing on the treasury

yield curve, especially the 10-year yield, sinking further below the two-year. And so that inversion is the biggest we've seen in more than 40 years and definitely raising some recession alarms. Well, let's talk about retail because we got earnings from Walmart, Macy's, Target, and they told diverging stories. And it was also reflected in the week-to-date prices. Look at, you could see Target down 6% versus Ross up 11% and Macy's up 5% and a bit. And so Walmart gets a bigger share of revenues from groceries versus Target's more discretionary items. And given we've got inflation and concerns about our budgets, discounters like Walmart are showing an edge over the competitors. And the same theory applies to Ross stores,

which was the best S&P gainer this week, up about 12% on the week. Energy, though, the worst performing S&P sector, with West Texas instruments down by, what, 10%, almost 10% this week on lackluster demand for crude this upcoming winter. Scott, happy Friday. All right. Yep. Christina, have a great weekend. We'll see you on the other side of that. Christina Parts of Neveless.

All right, still ahead, Santoli's last word. We'll find out what he is watching as we gear up for a holiday-shortened Trading Week next. It's the last call to weigh in on our Twitter question. Last one of the week. We want to know which story had the biggest impact on your investing outlook this week. Was it FTX, the tech layoffs, or Bullard's rate remarks? You can head to at CNBC Overtime to vote. Results on the other side, along with Santoli's last word.

All right, the Twitter question. We asked you which story had the biggest impact on your investing outlook this week. The majority of you saying Bullard. Interesting. Mike Santoli's here for his last word. Yardeni is your part of your last word, right? Just the fact that he, Ed Yardeni throwing out there, look, not a soft landing or a hard landing, maybe no landing. And I think it's interesting that that remains at least a viable point of view. I mean, you could look at the fact that some parts of the economy have reaccelerated in the third and fourth quarter. We're looking at a 4 percent tracking rate of GDP. And we're coming off of such high absolute levels of activity. So the people that are really convinced about the lagged effect of Fed tightening and the fact that we're going to have a recession inevitably are looking at the yield curve. But they're also looking at the ISM, which is a is this month better than last month or worse than last month type of an indicator.

Housing completely locked up. I mean, the market has seized right there. So you have all these kind of push poles within the economy and everyone knows everything operates on a lag. So to me, it makes sense to be confused. An inverted yield curve doesn't always mean you're going to have a recession. You just don't have a recession without an inverted yield curve. That's pretty much exactly right. And not only that, when the yield curve has first gone inverted, historically, it's up to like a year before you actually officially have entered recession. And in that intervening year, the market has tended to act as if things are still probably OK.

In other words, the market goes up or has been going up into that point. So it's a lot of, I think, conflicting signals. Some have to do with this complete bullwhip effect from the pandemic and the reopening. And some of them just because we got so much stimulus thrown at the economy and then had it pull back. I feel like, you know, it's our Denny today. But people like Lloyd Blankfein have been talking about that on Twitter for the last, I don't know, six months. The Goldman Sachs house view is now that you could have a soft landing. You started, as you said at the outset, from a very high base of activity.

Yeah. So it's not just going to unravel overnight. And maybe it doesn't. That's the part that I think we're not used to, which is inflation's here. High nominal growth, you know, has been there. And so if you're slowing in real terms, the absolute dollar level of activity has remained pretty high. It's not to say that the rulebook has totally been torn up and you're not going to have recession risk next year. But I think it's a viable argument on both sides. And that's why the market is caught in between. All right. You have a great weekend. That is Mike Santoli with his last word. I will see you all have a great weekend, too. I'll see you on the other side of that. Fast money begins now.