Closing Bell - Closing Bell Overtime: Too Far, Too Fast? 9/15/22

Episode Date: September 15, 2022

The debate is on over whether the Fed is about to send stocks into a tailspin by raising rates too much, too fast. Dan Greenhaus of Solus Alternative Asset Management gives his take. Plus, could the tech wreck get even worse? Fundstrat’s Mark Newton breaks down the charts and reveals his forecast. And, top portfolio manager Avery Sheffield discusses what’s at stake at next week’s Fed meeting and how she’s navigating the uncertainty.

All right, Sharon, thank you very much. Welcome, everybody, to Overtime. I'm Scott Wapner. You just heard the bells. We're just getting started here at Post 9 at the New York Stock Exchange. In just a little bit, I'll speak to Fundstrat's technical ace, Mark Newton, whose new note is all about the state of the tech wreck and whether it is about to get stocks into a tailspin by raising rates too much too fast. That is the call from some of the world's biggest investors. But is it right? And what does it mean for your money? Let's ask Dan Greenhouse. He is Solus Alternative Asset Management's chief strategist right here on set with me at Post 9. Is that one of the issues we need to worry about today, the Fed doing too much. First, it was like they're not doing enough. Now they got serious. Now it's like they're doing too much. Some are saying that. Do you agree?

Sure. Well, admittedly, from the beginning, the risk was if you allowed, intentionally or otherwise, inflation to, quote unquote, get out of control, then the risk was that you would have to do a lot to bring it back into something resembling a reasonable level. And your ability to do that is constrained something resembling a reasonable level. And your ability to do that is constrained without causing damage throughout the economy. This was the argument put forth from day one by a whole host of people, Mohammed Al-Aryan, Olivier Blanchard, and, largely speaking, that has come to pass.

Well, I mean, it's gotten louder lately, right? Barry Sternlich today on SquawkBox said the economy is breaking hard. These are his exact words. Miserable CEO confidence. Rate hikes could spark a major housing crash, a serious recession in the fourth quarter. I spoke with Jeffrey Gundlach out in California this week. Here's what he said about what the Fed's doing. Thanks to the thing today, I might do 25. If we had this interview yesterday, it would have said do nothing. But, you today, I might do 25. We had this interview yesterday. It said do nothing. But, you know, I think I would do 25. Because they haven't waited long enough to see what the impact of the hikes that they've already done are going to have.

Right. It's oversteering. Right? He really wants them to do nothing after you got the CPI surprise. He said, all right, I can deal with 25 if they have to. What do you think? Monetary policy operates with long and variable legs is a saying for a reason. Obviously, it has a more direct and immediate impact on financial conditions,

aka stock prices and credit spreads. But its ability to impact the economy at large tends to take anywhere, we don't know for sure, but let's say 12 to 18 months. So underlying what I'm sure is Jeffrey's argument is that monetary policy that's been inflicted on the economy so far hasn't really impacted the economy as of yet. It hasn't. Isn't he right? Well, housing is in bad shape, certainly in a lot of pockets of the economy. The manufacturing sector is slowing down. But I want to make a point here. I brought a picture with me. Can we throw it if we have it?

Throw it up if we have it. So Jay Powell keeps referencing Paul Volcker as sort of someone in whose path he would want to follow. Yeah. And I think it's gone unnoticed by the market. In his speech in Jackson Hole, he mentioned how he's going to keep at it. Two times he said he's going to keep at it. He spoke to Cato Institute the other day, and one of the last things he said was he's going to keep at it. This is the title of Paul Volcker's book called Keeping At It. And I don't think this is an accident. No, he mentioned Volcker specifically in Jackson Hole. He's mentioned Volcker. I don't think the market is giving

credit. When Jeffrey says he should raise 25 basis points, and there are other people who make the case, not without merit, that they should sort of slow down. This is an important point that Jay Powell is both consciously and subconsciously trying to send to the market. Well, the point is that Volcker, when he raised rates, he kept them high for a long time. The Fed, for all intents and purposes, has just started on this raising rate thing, right? QT has just really gotten going. It hasn't really. I mean, because the way treasury maturities work, it's not really until today when you're going to see if you do and have to check the maturity schedule, any serious roll off of the balance sheet. But yes, it is accurate to say that Paul Volcker

raised rates, well, the second time, raised rates and left them there for a while. That's what's presumably going to be the case now, because even if the Fed gets up to call it four or four and a quarter percent by the end of this year, the CPI, which isn't their preferred measure, but the CPI is probably still going to be five to six percent or so. You don't even have the Fed funds rate above the inflation rate, which is something that a lot of people believe that you need to do. So then what does this all mean for the person who's sitting there watching, wherever they're watching? What does it all mean for stocks? Because I've got Ray Dalio today comes out and says, if rates rise where they are to about four and a half percent, you've got a 20 percent negative impact on equity prices. Scott Minard last week in overtime right here was suggesting you could get a 20 percent decline in

stocks by mid-October. I asked Gunlock directly about that. He's like, yeah, I agree with that. 20 percent sounds right. I don't know about mid-October, but he's got a target of 3,000 on the S&P 500. Is that what we need to start worrying about? Like declines of that magnitude? Well, first of all, I don't know Ray or Jeffrey, but I know Scott and Scott, I think the world of. I would put myself in that camp and I've been making that case with you for six or nine months now. We're probably going to test the lows, and we will probably make new lows somewhere in that $3,000 to $3,500 range. Why? The answer is, as we discussed earlier,

you haven't seen the broad-based economic weakness, nor profit weakness that's probably going to materialize later this year and early next year, the combination of which will probably necessitate an additional decline in stock prices. But see, this is the conundrum then for those who I suggested are watching this, right? The investor out there who says, OK, Dalio, Gundlach and Minard are all negative, but I'm a long-term investor.

So if they're right, then I back the truck up when the stock market goes down. And if I'm a long-term investor anyway, maybe I don't really care what they say. Maybe I care more about what Brad Gerstner of Altimeter told me today on halftime. Let's listen to what he said. We can react on the other side. If you need to make money over the next 90 days, it's a pretty treacherous place to be. But if you want to find great companies that you can compound in over the next three to five years, we think this is a very fair place to enter those names compared to last fall that we all know the multipliers were quite high.

OK, what about that? Well, sure. And listen, the network is littered with RIAs who are going to tell you. This guy's not an RIA. I know. Successful fund manager. Yes, I understand that. But I'm saying there are numerous people on the network who are going to come on properly

and say, well, if you're not retiring tomorrow, what's the difference? Bye, bye, bye. And truthfully, if you don't need your money for 30 years, that's probably accurate. We're an active fund manager. We manage risk. We are much more. So does Gerstner. I understand that. And we would also argue if you don't need your money for three to five years, then great. But we have investors, we have LPs that are going to say you're down 20 percent. We're not going to make it to three to five years. So does Gerstner. Well, then I can't speak for him or his LPs. I can only tell you my point of view, which is there's a lot of people who manage a lot of money in this market that can't bear 20 percent drops in their AUM. But he doesn't necessarily think that you're going to go down 20 percent

from here. He's covered all of his shorts. One of the principal questions I would have is now the time to cover your shorts or batten down the hatches. That's ultimately what this conversation comes down to. You either believe Dalio, Gunlock and Minard that you're going to have a big decline in stocks or you, it sounds like you agree with them, you could go down to retest the lows, you go lower, or you say, you know what, the stock market has already corrected a lot. And you know what? Maybe the Fed is going to wait. And they're going to wait. They're going to raise next week, but then they're going to wait and see.

And they'll let the market digest that, and maybe it's already in the market enough that if you're a longer-term investor, three-, five-year time horizon, that you do take advantage of some of these opportunities. Three to five years from now, the stock market's almost surely going to be higher. Credit spreads will probably be similar to where they are, maybe a little tighter. I would not argue with that statement. But again, we haven't seen the broad-based economic weakness outside of housing that's likely to materialize. You've discussed ad nauseum on this network with any number of participants how corporate profits haven't come down yet. They're likely to continue doing so,

although admittedly, energy earnings have been out in the stratosphere, which has held things up a little bit. But again, just do the simple math here. Put 14, 15 times on some reasonable EPS estimate for next year, and you have something in that 3,200, 3,500 level, which when that economic and profit weakness materializes is probably where we're going to end up. All right. Let's broaden the conversation. Let's bring in Anastasia Amoroso of iCapital, Peter Cicchini of Exxonet Capital. It's great to have both of you with us. Anastasia sitting right here next to us as well.

You've heard all of this. Which camp are you in? Are you with Team Dalio, Gunlock and Minard? Are you on Team Gershom? At Greenhouse. At Greenhouse. At Greenhouse. No disrespect. No disrespect. So, first of all, I don't think it's time to back up the truck right now and just load it all up and be risk on. And the reason why I say that is because I think the facts, some facts have changed over the last really literally a week. We were all expecting that inflation had peaked and the Fed is going to at least ease off. But you know what? Inflation does not seem to be peaking. If you look at the CPI basket, we know that 70 percent of the CPI is annualizing at 4 percent. You've got shelter inflation. You've got wage inflation.

So we have not solved that. And the Fed is playing catch-up. And I don't really know at what point they're going to stop. So as long as that's going to be the case, they might have to make a hard choice to make. Before, they were saying, we're going to try to have a soft landing and bring down inflation. Now, they may have to make a choice.

It's either a soft landing or bringing down inflation. In other words, they may have to engineer more of a crackdown on economic growth to bring down inflation. So if that's the case, then $3,700, $3,800 is probably not it. And then I do agree with Dan, I'm in Dan's camp on that one, that we probably need to see the valuations reset to the level of $3,200, and then you would back up that truck. So maybe for now you buy incrementally, but I wouldn't go all in. Okay. Peter, where are you on the markets? Which side, if you will, are you on? And by the

way, just to be clear, Brad Gerstner is not saying come in and back up the truck at these levels either. It's looking at your portfolio. And if you think that things you love came down way too much, in his case, a snowflake, for example, you're willing to buy more because your time horizon is long enough that you understand that you can compound the growth that you have in companies that you like. So let's just be clear, apples to apples comparisons. What side are you on? Sometimes snowflakes fall to the ground and melt as well. We've got to keep that in mind. Dan, I've known for a long time. He and I agree probably half the time.

We're in the same camp just about precisely, in fact. to expect on during a 30-year secular bull market in bonds is for the Fed to be able to continuously cut the funds rate and for the secular decline in interest rates to support asset prices and that's something that we don't have for two reasons right now first we have inflation which is a cyclical force on and a more persistent cyclical force, apparently, than the Fed thought. But we also have the zero bound, which we have hit. And so when we go into a recession,

the second piece of this that needs to be considered is how much, once the Fed is done hiking, and I think that's 4% to 4.5%, how much will the Fed be able to cut in order to re-stimulate the economy? And typically, the Fed cuts 5% to to cut in order to restimulate the economy? And typically the Fed cuts five to seven percent in order to jumpstart the economy. And it simply doesn't have that that room this time in the way it has in the past. And of course, it has QE now so it can control the long end of the curve more effectively in that manner. But I think those secular tailwinds are now behind investors and investors need to think somewhat differently about asset allocation. And equities, I think, are going to struggle to come

back the way that we've come to expect them once the Fed starts to cut. Well, expand on that, then, if we need to think differently, people are going to hear that and say, hmm, how so? Are you talking treasuries also as part of the 64? I mean, what exactly are you talking about? Yeah, no, certainly. You know, look, I mean, if our target for the two year four and a half percent is correct, you know, certainly the short end of the treasury curve will make sense at that point. And in fact, I'm starting to see some value in the long end of the treasury curve because I think the curve will invert more and more deeply. I'm also seeing value in the structured product market in which we specialize.

And in particular, there are a couple of sectors within structured products. We like Freddie Mac multifamily SBL bonds in which we are investors. And the reason for that is because housing is quite unaffordable. And we think that rents are going to continue to rise with inflation, at least for a time until the consumer feels a little bit more stressed. But even then, people do tend to pay their rents. And so I think defensive positioning outside the equity market is going to be something real again. Whereas if you were not in equities for the past 10 to 12 years, you really, you know, you made money in treasuries as well. But the real the real juice was to be made in equities and in growth equities in particular. And I think that paradigm has changed. Yeah. And people, Anastasia, seem to agree with this idea.

I mean, there is no alternative is dead. He. He's on the Gundlach trade, long-dated treasuries as well, something new for him. What about this idea of stocks versus bonds? Which is the better place to be right now? I think it's a very relevant discussion, and that tradeoff has changed significantly. The relative value is clearly emerging in bonds. I mean, if you look at the one-to-three-year part of the curve, you can get 3.8% in short-duration treasuries. That is very compelling. And I do tend to agree with a long duration call as well. If we are starting to make

the choice between a soft landing and inflation, and we think we're not having a soft landing by a recession, you want to go to the long end of the curve. But Scott, you look at high yield, for example, that's trading north of 8% yield to worse, and it's higher up in the capital structure. So I do think it's a more defensive play. It's a way to get paid while you wait out this volatility. Let's face it, when cash is going to be paying you 4 percent and the dividend yield on stocks is just shy of 2 percent, the tradeoff is clearly starting to shift towards bonds. Yeah. I mean, maybe you assume more risk. Unlock was talking about that, too. Maybe bonds like BBB are more attractive, but you have to assume a certain level of risk.

And he was very clear about that. What about you? We say Solus alternative assets. You're not just talking stocks. What do you think about the bond trade right now versus the stock trade? No, like Peter, who works for Clayton over at Exonic, and they specialize in structured products. He said he only agrees with you half the time, by the way. He left the door open for at least half. Yes, no, we agree with about half the time. That sounds about right,

which is better than most people who usually don't agree with me at all. But yeah, I mean, we do a lot of work across the capital structure, particularly in high yield. I think high yield yields as a sector about 8.5% right now. And obviously, the further down you go, the more yields you're going to pick up in commensurate with the additional risks that you're going to be taking. Certainly with respect to there is no alternative, traditionally we talk about it on CNBC through the prism of the treasury market. But certainly the credit markets are much more appealing now than they have been in some time. That said, if you're asking me do I think equity or credit is a more attractive prospect over the next couple of years, I think equities are much closer to a quote bottom than credit is. I think there's a lot more spread widening that has to go on in the credit market. Whereas the equity market, as we've discussed, when you're down 23, 24% at the lows, you've

gone a long way to pricing in a pretty solid recession. And if you bought down there, call it a 3,500, 3,600, you did a pretty good job of And if you bought down there, call it a $3,500, $3,600, you did a pretty good job of accounting for probably most of the declines we're going to experience. Hey, Peter, what am I supposed to do right now with growth technology stocks? You know, the more rates go up, the lower these stocks seem to get. And that dynamic doesn't seem to want to change anytime soon. What's your outlook there? If you're negative on the overall stock market, I can't imagine your overall bullish growth. Yeah, no, that would be correct. And look, to disagree with Dan, to fit into that 50% mold, you know, I think spreads have a lot of widening to do. But typically, you know, if they widen to

1,000, 1,200 basis points on high yield, which they may or may not, given the composition of the CDX index right now, you know, equities typically don't bottom until that widening is done. And I think the 1970s are a pretty good analog here, where we saw about a 47% drawdown in equities. And that's sort of what we're looking for. And I would imagine that spreads will widen around the same time. but yeah relative to growth I mean clearly you know given given this outlook in this view especially the tech the US speculative technology names that traded on such high multiples not only because if

a capital cost people will start to think about earnings in cash flows again this is what always happens right it goes from how much am I getting paid? How much capital appreciation will I get? This transition in this moment where people say, oh, my gosh, will I get repaid? Will this equity have value? And we certainly have a long way to go before we get there. But unfortunately, I think that moment will likely occur at some point. Anastasia, I'm looking at the NasdaQ today, right down 167, nearly one and a half percent. Seems to be the focal point of much concern in the market. It is. Look, the reality is for the tech stocks to do better here, we need to have a reason for multiple expansion. And we don't

have a reason for multiple expansion right now. We have a reason for multiple contraction as the Fed hikes rate. Also, we need to see the EPS momentum turn the other way. And once again, as the economy is potentially headed lower, that's not the reason. But to come back to see the EPS momentum turn the other way. And once again, as the economy is potentially headed lower, that's not the reason. But to come back to my initial comment on backing up the truck or not, again, I'm not in favor of buying all in today. But I think incrementally, you can be finding value in some of these stocks. I think when investors do start to return to the market, and by the way, we're seeing hedge funds do this, they're not buying the cyclical value type stuff because the economy is heading the other way.

They're going back to what they know best, which is secular growth, which is all things digital transformation, health care, and sustainability stocks. A lot of those have corrected 50 or 60 percent. And by the way, Scott, if you don't want to take that mark-to-market risk in public equities, you look to private equity. You look at venture. And I think we'll see several quarters of valuation resets ahead there. All right. We will leave it there. Peter, thank you so much. Anastasia and Dan Greenhouse right here on set with me. My thanks to you as well. Let's get to our Twitter question of the day. Now, halfway through September, we want to know which of these beaten down names has the biggest upside ahead.

Is it Adobe, which is down 17 percent this month, or NVIDIA, Nucor or Valero? You can head to at CNBC Overtime on Twitter. Cast your vote. We'll share the results coming up later on in our hour. And we're getting some news out of Washington right now. Eamon Javers has the story for us. Eamon. Scott, I just got off the phone with a senior official at the Department of Justice and people who are working inside American companies or contemplating doing some wrongdoing might want to pay attention here because they are changing a lot of internal rules over the Department of Justice. We're going to get an announcement this evening about a

crackdown on corporate crime enforcement inside the Department of Justice. They're trying to change the situation where companies have historically often been able to simply pay a fine, get a non-prosecution agreement, and move on in the case of corporate fraud. Now the DOJ says they want to go after individual executives inside DOJ says they want to go after individual executives inside these companies. They want to go after executive compensation clawbacks. They want to incentivize companies to turn over the names of individual executives who were responsible for the fraud here. And they're trying to make sure that these non-prosecution agreements don't happen again and again and again.

They're sending a message to corporate America here saying that if you have a non-prosecution agreement and you commit more fraud, do not expect to come back to the Department of Justice and be able to negotiate another one. The next one will likely be a guilty plea. So a whole host of changes here from the Department of Justice. All of this expected to be announced at 5.30 this evening by the Deputy Attorney General Lisa Monaco in a speech in New York, Scott. Just a preview of what's coming. Yeah, appreciate you getting us ahead of that. That's Damon Jabbers in Washington for us, where we're just getting started here in overtime. Up next, is the tech wreck about to get a whole lot worse? Fundstrat's top technician,

Mark Newton, joins me. What he's seeing in the charts. Later on, we're counting down to the Fed decision. What is at stake for your money? We discuss with portfolio manager, Avery Sheffield. That's right here at Post 9. We're live from the New York Stock Exchange. OT, back in two. Back in overtime, the S&P 500 is setting up for another leg lower, possibly pushing below 3,700 over the next couple of weeks.

That is the big call today from Mark Newton. He is Fundstrat's Global Head of Technical Strategy, joins us once again. So we've been visiting with you a lot lately to try and get a read on the charts because things change so quickly. I did notice today, though, S&P closed above 3,900. What's the significance of that before we get to part of your note? No significance, Scott. S&P, NASDAQ, and the Dow actually closed at the lowest levels in more than a month.

Gold closed at new two-year lows. We saw the 10-year yield almost closed at new highs for the year. So, you know, hibernation is officially over yet again, at least for now. So where are we going? Well, I think in the next three weeks, we're in seasonally the most difficult part of the year. So S&P likely is going to pull back to near 36.85 in my view. You know, I see it proving short-lived because I think yields are close to peaking out. And so it's not going to be right to really avoid technology. If anything, you want to wait for that pullback over the next few weeks and consider buying dips in technology and stocks

and also in bonds and commodities. For the time being, though, it's cash is king and it's really right to be in king dollar and cash. I mean, those are really the two safe havens. Cash is trash, is what Ray Dalio once said. I'm sure he has a different opinion of that now, considering he thinks now stocks can go down 20 percent. I mentioned Gunlock Minor. They're all in the camp of big decline coming. Why aren't you? Well, a lot of that has to do with sentiment and with cycles. And most of those start to turn up pretty dramatically, or at least cycles do in the month of October. Sentiment right now is bearish, but we haven't really truly seen evidence of capitulation, and I think we'll probably get there sometime over the next few weeks on further deterioration. Lee has talked about the fact that, you know, six out of nine regions representing about 75 percent

of GDP actually saw our rate deflation last month. And a number of different CPI components are, you know, well down off 18 month highs. So, you know, that's something that the Fed simply isn't taking into consideration. They're looking at past data. None of us know what these interest rate hikes, what the effect will have in the future. It takes some time for these to work out. So, you know, in my view, I think that I'm a no economist, but I think the Fed is going to be forced to pivot sometime in the next couple months or at least, you know, take their foot off the gas a little. In the next couple of months. I mean, look, let's be honest with one another. Tom's been way too bullish. And I know, you know, you have the name of the firm behind you and whether you will suggest that or not.

The facts are the facts. Tom has been way too bullish. The bear market is still intact. The trend is still lower. And there's nothing necessarily yet to suggest that it's about to change anytime soon. How do you counter that? We are in a cyclical bear market as part of a secular bull market. And I think that, you know, my own take, which is similar to Tom's, is that the final quarter of the year is going to be positive. You know, we both came into this year thinking there could be turbulence and really a rough first half and then we would rebound. And so, you know, Tom's point of view and timeframe is certainly a lot longer than a lot of the day traders that are looking at a two or three week timeframe. And so, you know, I agree with a lot of his data points that say inflation is going to start to pull back pretty dramatically. And my own cycles start to turn higher from October through the end

of the year. And whether or not we pull back early next year, we're going to save that for the year-end forecast. And we could pull back a bit more. But the next couple of years, I think, are going to be quite positive. So, you know, I'm not sure what the fundamental catalyst is going to be. Either inflation starts to pull back dramatically, we see some evidence of a ceasefire in the war, or, you know, who knows. But technically, you know, people are bearish. The B of A report said that investors right now, over 50 percent of investors have under exposure to stocks. We're clearly seeing, you know, bearishness not only from retail, but also

institutional investors, which have clearly been caught, you know, flat footed. And everybody right now is negative. And I just don't think these negative earnings revisions have to happen right away. So, you know, my thinking is give it three, four weeks. We're going to bottom out and markets should be higher by year end. OK. All right. Good stuff. I appreciate the conversation as always, Mark. We'll talk to you soon. That's Mark Newton, Fundstrat's technician, joining us there. Up next, navigating the uncertainty. Top portfolio manager Avery Sheffield with us reveals her forecast for stocks as she's trading this volatility. So join us navigating the uncertainty. Top portfolio manager Avery Sheffield with us. Reveals her forecast for stocks, how she's trading this volatility. So join us after the break. All right, welcome back to Overtime.

We have breaking news on FedEx. Our Frank Holland with those details. What do we know, Frank? Well, hey there, Scott. Right now watching FedEx shares. They're down almost 2% right now. The company issuing an earnings warning, citing some macro pressure that it's feeling after a miss on, and then this early earnings warning, a miss on revenue and an even bigger miss on EPS, more than $1.50 below the estimate of 514 a share. Also, the

company issuing some very weak EPS guidance for the current quarter. About half of what the street is looking for in EPS and Q2. CEO Raj Ramanian on the release saying in part, global volumes decline as macroeconomic trends significantly worsen later in the quarter. Also adding that the impact of cost actions that lagged volume declines and operating expenses remain high relative to demand. While U.S. volumes were soft, the company says two of the biggest headwinds were the integration of the TNT delivery network in Europe. That was a factor in addition to COVID lockdowns in China, reducing Asia volumes longer than expected. FedEx is one of the biggest carriers out of Asia.

FedEx will launch a number of cost-cutting moves, including reducing flights for its signature express air delivery service, cutting hours for workers, and closing about 90 FedEx office locations. Shares of FedEx down now about 7% and falling right now. One, I guess, potentially bright spot. The company says it plans to resume its share buyback plan, reaffirming that it will still do

that again. Shares of FedEx down more than 8 percent now. Scott, back over to you. You know, Frank, what's what's interesting here is as you describe these comments from the CEO of the macro deteriorating quicker than they thought. They just gave upbeat guidance a few months ago at the end of June. Right. And that gives you an idea of just how bad things became much faster than they thought if they had such a good view of things June 24th or whenever that was. Yeah, I was there at their investor day, Scott. I'm definitely an optimistic thought at that time, as they mentioned here in the release, that things kind of turned later in the corner.

Also, there were assumptions that as COVID lockdowns eased in Asia, that things would move a little bit better. So far, that just quite hasn't happened. And the COVID lockdowns haven't eased as quickly as FedEx and many others have expected. The other point that I want you to expand on, since you cover this company closer than most. I noticed last time they announced their volumes were all down in their three main categories, but their prices were up across all three as well, offsetting some of the declines in volume. Are they running out of the ability to price? Have they lost their ability to raise their costs from where they might otherwise want

to? Well, Scott, absolutely. I mean, the prices that FedEx and many other carriers, just to be fair in the transport industry, have been able to cost, they're just simply on the decline. Volumes are softer. Softer demand is not what it was. For example, FedEx gets a significant portion of its revenue from air delivery. Well, air rates from Asia to the U.S. West Coast, they're down 80% year over year, something that certainly impacts FedEx and the other air carriers. You look at trucking rates. Those have fallen in the spot market. A lot of people have tried to lock up contract rates.

Big retailers like a Walmart and a Target, they've locked it up in contract. But FedEx is the largest less-than-truckload carrier in the U.S. That's basically putting multiple loads on the same truck. So that's certainly hit them as a lot of companies have locked up that contract. It hits the ability of FedEx to have more pricing in the spot market. Yeah, interesting. We're seeing that stock down substantially. Frank, I appreciate it very much. Thank you. That's Frank Holland with this breaking news for us, this pre-announcement from FedEx, and it's decidedly negative and that stock is reflecting that. Should also note that the CEO of the company is going to be on with

Jim Cramer later on on Mad Money. You won't want to miss that. So you get the exclusive from the CEO with Jim. Get to the bottom of exactly what Mr. Subramanian is seeing out there. Let's bring in halftime committee member now, Steve Weiss. He joins us on the news line. Weiss, I wanted you to come on. You used to own this stock. I don't think you still do. But what do you make of this? Well, it's no surprise. Goldman actually, I believe this morning, had said it's going to be a quarterly miss. And they were right. And there's reason to be concerned, because you have seen, as Frank pointed out, you've seen freight rates really come down substantially. And it's sort of like an early indicator of what's happening with the rest of the economy. So there's ample room for

caution. So I would think that investors have to take this to heart and rethink what the bulls say is a strong economy, because it's simply not. In this situation, I sort of wonder what occurred in the handoff. So what Fred Smith, who is the outgoing CEO, still chairman of the board, I believe, and was the founder of the company, just an amazing individual. Was he too rosy looking to leave on a high note? And you have a new CEO coming in, and is he setting the bar very low so that he can beat it going forward? Because that's what new CEOs will often do. So I don't know if there's more here to meet the eye, if that's too Machiavellian,

but the direction regardless is lower. If you take aian. But the direction, regardless, is lower. If you take a look at UPS, that was pretty down. I actually tried to short some, but it's already down too much in this announcement. Where it impacts me is XPL Logistics. And that's sort of like a different kind of play because you're spinning off their brokerage business. So nonetheless, they've all been weak up to this point, and the dollar hasn't helped them either when they operate in other countries because of how strong it is going to maybe local characters instead.

Forgive me, Steve. I'm sorry. Maybe we can throw up, guys, in the back. We can throw up XPO because I'm just curious as to whether that makes you think about getting out of this entire space whatsoever. I had mentioned you prior owned or previously owned FedEx. XPO has been a long time holding because we have discussed it on numerous occasions. In fact, it's down about three percent in overtime as well. Steve, did it make you want to get out of the whole space? No. I mean, yes, if I didn't own XPO for a particular reason, and XPO is cheaper than FedEx number one, number two, Brad Jacobs, who I've said before, has created tremendous value by

spinning out assets and spinning out the brokerage business, which is the most technologically advanced in the world. It's going to be a great business. However, of course, with rates coming down, they'll make less money. Nonetheless, I still think the value is there. Now, I'd cut back XPO. As I said many months ago, they cut back all my positions, every single one of them. XPO is no exception to that, but it's still a position. And I'm just going to, you know, as of now, I'm going to hold on to it. All right. So you get this negative pre. Steve, thank you. I get this negative pre-announcement, obviously, from FedEx. And you can see the ripple effects from UPS, XPO. Anything really involved in that sector is going to be trading lower right now

in overtime. When we come back, Altimeter Capital's Brad Gerstner is taking aim at Meta. We'll debate his take on that company, what it might mean for the stock in today's halftime overtime. And don't forget, you can catch us on the go by following the Closing Bell podcast on your favorite podcast app. Overtime's right back. Stocks falling again today, and our next guest says, get ready for even more selling,

but seize pockets of opportunity. Joining us now, Avery Sheffield, co-founder and CIO of Vantage Rock. Welcome back. It's nice to see you again. Pleasure to be here. Let me just get your reaction quickly since I have you here to what FedEx just delivered, pardon the pun. I mean, it doesn't make you feel all that optimistic about the economy at this

moment. No, no. And, you know, this is something that we've actually been anticipating because, as you well know, we follow the consumer sector very closely and we've seen this massive inventory build so much earlier than anticipated. Certainly, it's led to a tough promotional environment, but also we've anticipated that this fall, we're actually going to see a lot less demand for deliveries because companies were bringing in goods so much earlier and that that would lead to a meaningful decline in rates. And then also, of course, we've seen e-commerce growth be slower than anticipated. So with capacity expansion, that leads less opportunity for pricing increases

than we've had in the past. Yeah. So it does play into your overall thesis about the market. We did suggest you think we're going a fair amount lower. I think that certain stocks have a lot further to go and that many stocks, maybe all stocks will be pulled down somewhat with it. I think that there'll be some great buying opportunities. But I think what I don't feel is as widely discussed or thought at this point is that there are a lot of companies out there that will never get back to maybe even the levels that they're at today after a further decline. Many conversations about when do we buy? How do we get back in? The market's going back up. Certain stocks, I do think, are like oversold for the long term,

but others are very much still dangerous to get involved in. What kinds of stocks are you specifically talking about here? Right. So, I mean, so growth stocks, stocks, I mean, a lot of stocks, even in sectors like the software sector that have very high valuations that have traded on non-gap earnings for many years. Maybe they have like a good business, but not necessarily a good business model in terms of generating real returns. And I think that as we start to see slowdowns in these companies, there's a lot of risk and a downside ahead. I interviewed Brad Gerstner of Altimeter earlier today. He suggested there's maybe 70 percent of those kinds of companies that will never see the light of day to where they once were, that 30 percent may get back. They'll,

in his words, I think he used the word grind. They'll grind it out and they'll get back. But 70 percent of those stocks which were once overvalued and came down a lot may not get back to those levels ever. I would agree that it seems like it's probably at least 70%. And I think you're going to have a host of other companies that have just traded at too high of valuations. So maybe 30 to 40 times earnings goes to 20, goes to 17 times earnings as the growth slows. And companies also, I think, are something also to watch out for is if companies make big acquisitions at very high prices, like an encumber maybe end up having to take on debt as a result of that at some point in time. Like those are vulnerable points where the upside might not be there anymore.

Leave us with an idea of something you like. RGA? Yes. RGA. Yes. So they are a life reinsurer. And so, as you could imagine, got really hit by COVID. And the good news, of course, is that we're here speaking in person without masks. COVID is reduced significantly. You have treatments like Paxlovid that mean that people, when they get it, probably going to do much better. And as a result, the earnings had been hit, but they're starting to come back. It's raised about 10 times expected contentious for this year. We see, you know, mid-teens, mid-to-high teens or more growth next year.

And it's completely, you know, it's acyclical, right? It's an idiosyncratic risk. So a good place to potentially hide out with appreciation potential longer term. I got you. We got to leave it there. My apologies, and I appreciate your understanding. We had the FedEx news breaking that we had to react to there, but we'll talk to you again soon. That's Vantage Rock's Avery Sheffield joining us.

Up next, we're tracking all the biggest movers in the OT. Christina Partsenevelos is standing by for us with that. Let's start with Boeing planning to find new buyers since China won't pay up. And gamers are spending less on virtual currency at Roblox. I'll explain why after this very short break. We're tracking the biggest movers in OT now. Christina Parts of Nevelos is here with that. Christina.

Let's start with shares of Texas Instruments. Moving higher right now, up by half a percent after announcing it would increase its quarterly cash dividend 8% from $1.15 to $1.24 payable November 15th. That means that Chipmaker has increased its dividend for the past 19 years straight. The company is also authorizing $15 billion in share buybacks, clearly a trend as of late across the board. Searching gears, Boeing moving slightly, let's see that, slightly lower. Yes, on the news, three-tenths of a percentage down after it said it would find new buyers for more than 100 max jets originally built for china so associated press reporting that china's aviation regulator never actually cleared

those planes to fly after two unfortunately deadly crashes boeing hopes though that they can find new buyers and this will bring down their inventory levels and lastly shares of online gaming platform roblox moving lower over one percent% lower after reporting its August metrics. Daily active users, yes, were up 24% year over year to 59.9 million. But average bookings per user, which is really just a fancy way of saying how much money players are spending on virtual currency, that was down about 14% to 16% year over year. Roblox blaming foreign currency fluctuations for roughly four percent of that drop in bookings you can see the share price down over one percent right now scott

all right christina thank you christina parts and elbows coming up a top cloud computing pick one money manager getting bullish on one key name in that sector that stock and the reason why is in our two minute drill it It's coming up. In today's halftime overtime, a reality check for Meta and a new buyer of Tesla. Altimeter's Brad Gerstner taking aim at Meta's management and the transition to transition to its new Metaverse business model. Gerstner also revealing that he's recently been buying shares of Tesla after being negative on that stock for a few years. Decatur Capital's Degas Wright just sold Meta, owns Tesla, joins us now. So, Degas, it's good to see you.

Gerstner saying that he has, quote, grown quite frustrated that management has done an absolutely lousy job of explaining the transition to the street. That transition, of course, about the metaverse. And he's speaking of Meta, which you just got out of. What do you make of what he said? Yeah, so first of all, I'm coming to you from New Mexico at the beautiful Philmont Scott Ranch. And so what we looked at is that with meta, the leadership dynamic was between Zuckerberg and Sandberg. Sandberg had the experience with the ads She developed ads for Google And also she focused on policy and operation Zuckerberg was able to focus on engineering

Sandberg left in August So now you have Zuckerberg without Sandberg And so that's a leadership challenge And Gerstner actually mentioned this And so what happens now is that Zuckerberg is trying to change the business model because right now Facebook or Meta gets about 97% of their revenues from ads. What Zuckerberg is trying to do is to change that business model to either a software as a service or a cloud computing model, and also a product model by selling Oculus, the VR headsets.

So I was very concerned about that because when we started looking at the leadership team at Meta, most of those members have been through their whole career at Facebook or Meta. So there's no expertise in cloud computing or product sales among the leadership team. And that was very concerning for me as an investor. OK, thank you very much. Degas Wright joining us today. By the way, it's our last call to weigh in on our Twitter question. We're halfway through September. We want to know which of these beaten down names has the biggest upside ahead.

Is it Adobe? Did that big deal today? NVIDIA, Nucor or Valero? You can head to at CNBC Overtime to vote. We're going to reveal the results when we come back. Welcome back to Overtime to the results of our Twitter question. We asked you which of these beaten down names this month has the biggest upside ahead. 63% of you saying NVIDIA. N-V-D-A. 63.6. Thank you. Time now for our two-minute drill. Joining me now is George C. He's chairman and founder of Annandale Capital. It's good to see you. I'd like to pick some stocks with you. You have a few names in front of me. Antero Resources. Tell

our viewers why they should buy this one right now. Scott, the natural gas industry, and thanks for having me on, is just hated as hated can be. It's toxic. And you've got a company called Antero that is just doing everything right and generating tons of free cash flow, trading at about a three to four times free cash flow multiple. I think Antaro is going to generate at least $10 of free cash flow next year and it might it might generate as much as $15 of free cash flow if they keep buying back stock and it's a $40 stock. That's a clear buy. All right. You want to stay in energy. Energy transfer. Tell me why. Yeah. Yeah. Energy transfer trades at about a 20 percent discount to the rest of the midstream

sector and the reason why is because their founder kelsey warren has been mistrusted by the street for years and that's no longer an adequate reason not to own the stock when they finish raising their dividend it's probably going to have over a 10 yield and they've got tons of free cash flow to buy back stock and pay down debt and it's super cheap it ought to be at least 17 bucks let's talk about technology for a moment because the name that jumps out to me on your list today is Snowflake. A once high flyer came down to earth, if you want to put it to that way. Brad Gerstner of Altimeter was on with me today earlier. Largest position in that name. Thinks it's one of the rare high valuation stocks, or at least once really high valuation stocks

that had come down a lot that can grind it out and get back to maybe where it was relative to some others that were in that same predicament. Why do you like it here? Well, I think a leopard's got to be able to change out its spots occasionally. And I just gave you two value ideas. And now I'm going to give you a growth idea because Snowflake is growing so aggressively and is in such a good marketplace and they're going to keep growing for many years to come. Is it a cheap stock? Absolutely not. It's still very expensive but it's such a quality company. It's got such a good future ahead of itself. I think it's a great buy for a small position right now and if the market continues to suffer and weaken and goes down quite a bit further, build a large position over time. You got 25 seconds to tell me why I should buy Qualcomm.

Because it's 10 times earnings management is executing to a very impressive degree, and they are going to buy back a lot of stock. It pays a reasonable dividend, and they're expanding into a whole lot of new markets. It's a no-brainer for over the long term. All right. So you got an old tech like Qualcomm. You got a new tech like Snowflake right at a time where technology stocks are under some serious pressure. We watch the Nasdaq have another tough day today. George, I'll talk to you soon. I appreciate it. That's George C. Annandale Capital joining us today. I hope everybody has a good evening. I'll see you back on the desk tomorrow. It does it for us. Fast Money begins right now.