Closing Bell - Closing Bell Overtime: UMW CEO and Phoenix Suns & Mercury Owner Mat Ishbia Talks Housing, The Fed And The NBA’s Next Media Deal 1/22/24

Episode Date: January 22, 2024

UMW CEO and Phoenix Suns & Mercury owner Mat Ishbia on the housing market, whether demand is picking up and media rights. Archer Aviation CEO Adam Goldstein on his company’s deal with NASA. Plus, it was the second-straight record close for the Dow and S&P 500. Wells Fargo’s Scott Wren and Gentrust’s Mimi Duff break down how to position at these levels. Oakmark portfolio manager Tony Coniaris talks some of his favorite stocks right now. Third Bridge’s Peter McNally reacts to earnings from United Airlines. 

It looks like the Dow did it, closing above 38,000 just barely for the first time. New all-time high there as well as on the S&P. That's the scorecard on another record day on Wall Street, but winners stay late. Welcome to Closing Bell Overtime. I'm John Fort with Morgan Brennan. Well, the march to new highs keeps rolling on as the Dow and the S&P close in uncharted territory. Second straight trading session, we've seen this. Tech, once again, an outperformer. It's helping the Nasdaq 100 close at a fresh all-time high as well. And now investors are turning their attention to United Airlines earnings just moments away. It's

been a rocky ride for the stock over the last six months. Turbulence. Find out, yes, quite a bit for all kinds of reasons. Find out those numbers that are coming up can help turn things around. Plus, we will discuss how the recent increase in Treasury yields is impacting the mortgage market when we are joined by United Wholesale Mortgage CEO Matt Ishbia. But first, let's get more on this record close. Mike Santoli joins us now from the New York Stock Exchange. Mike, we can talk about the top line numbers and the fact that we just tracked you know new records and everything except the nasdaq composite which actually is trading at a fresh 52 week high but the fact that you saw the russell 2000 uh up 1.9 percent today or the dow transports up 2.2 percent it does seem like you're seeing that rotation out of just big cap tech at least today

as this rally continues yeah morgan key, key comment at least for today. You know, this is definitely kind of the pendulum swings back and forth sometimes on a daily basis. But it is a net positive, I would say, that you didn't necessarily have a continuation of the complaints being drawn by the fact that it's only a couple of stocks. Coming into this weekend, NVIDIA added a quarter of a trillion dollars in market cap. It was almost half of what the S&P as a whole has added on a year-to-date basis. That's a short span of time.

But it is showing you that there's just a general sense of the trend tends to be in your favor once you hit a new high. There's quiet on the macro front, I would say. I'm not saying that this is a wonderfully growing economy or we've totally escaped the late cycle shadows that are out there. But the market's a little bit more comfortable here. And I think more to the point, the market reset a little bit. You had that hesitation for three weeks and flows have not been aggressive. So people probably seeing all time highs, maybe feeling as if

they were not quite invested enough to play. Mike, I'm looking at the numbers, and Apple is just about dead even year-to-date, you know, in the month of January so far. NVIDIA's up a little better than 20%. Tesla's the one of the magnificent seven so-called that's lower, about 16%, 17%. So I wonder, is NVIDIA now the defining stock of this rally? Yeah, I think it has been for a while now. And I think it took the place of what Tesla had been, let's say, in 2020 to 2022, which is, you know, this company, founder-led, charismatic leader. It's going to be saving the world or changing the world. And there's, you know, basically open-ended

growth estimates you can just apply to the business. And basically, it has a cult following. Let's just be honest. If I look at the dollar volume of trading in either the shares or the options, Nvidia is basically now on par or better than Tesla on a lot of days, not to mention the overall market cap. So, yeah, it's sort of the source of a lot of the confidence, the speculative energy in this market for better and worse. Okay. We'll see you again in just a moment, Mike.

In the meantime, United Airlines earnings are out. Phil LeBeau has the numbers. Phil. Morgan, this is a beat on the top and the bottom line by United Airlines in the fourth quarter, earning $2 even a share, well above the street estimate of $1.70 a share. Revenue coming in at $13.62 billion, better than expected there. And then there are the numbers within the numbers in the fourth quarter. Total revenue per available seat mile down 4.2 percent compared to the same quarter in 2022. Cost per available seat mile up 4.9 percent compared to fourth quarter of 22. Capacity up 14.7 percent. Gives you a margin in the fourth quarter of 6.2 percent. By the way, free cash flow, negative 3.08 billion dollars. Now the all-important guidance, and this is what's going to be driving this stock

after hours and tomorrow morning. A wider than expected loss in the first quarter, between 35 cents and 8585 a share loss. A loss expected of between $0.35 and $0.85 a share. The street is expecting a loss of $0.21 a share. Total revenue per seat mile expected to be flat compared to a year ago. Cost per seat mile up mid-single digits year over year. And there is one important note regarding the 737 MAX 9. Remember, United has 79 of those that are grounded, have been grounded for the better part of two weeks.

They are saying right now that if this continues through the end of the month, they expect it to be a 3% chasm headwind, cost headwind, if it's through the end of this month. And again, we don't know when this grounding of the MAX 9s may be lifted. Finally, full year, they expect to earn between $9 and $11 a share. The street is at $9.58. Lots to talk about with United CEO Scott Kirby tomorrow morning on Squawk Box. We will be talking about this guidance for the first quarter and their expectation for getting the Max 9 back into the air,

as well as delivery cadence for all of the MAXs that are scheduled to be delivered not only this year, but over the next couple of years, because guys, many people are speculating that Boeing will have to push out any increase in 737 MAX production. We'll talk with Scott Kirby about that tomorrow morning. Looking forward to your interview there, Phil, and we see the stock up more than 5% after hours in overtime at the moment. That would take it back above $40 a share where it was a week and a half ago. Let's get to our market panel. Joining us now, Paul Christopher of Wells Fargo Investment Institute and Mimi Duff of Gentrust.

Looking ahead, guys, I mean, Paul, we're at these record levels. But you say it's time to get defensive because the overall S&P is expensive. Too many rate cuts priced in and earnings are overall going to disappoint. Yeah, I mean, we've been defensive for a little while now. I mean, we're still neutral on tech. We want our investors to get the full benefit of the upside in the market, but it's just too much. A lot of earnings priced in, maybe earnings fully priced. A lot of optimism about the Fed, maybe overdone and the economy still slowing. Look, earnings have beaten so far for the fourth quarter, 6 percent over forecasts. That's an improvement over Q3, but less than Q2 and Q1 of last year.

So the trend in earnings clearly down. We would just be a little bit defensive here. OK, and Mimi, you seem to agree that the S&P is too expensive. But here's my pushback on that. The equal weighted S&P isn't that expensive at all. And large cap tech has this AI tailwind that we've been seeing in NVIDIA. So isn't it possible there's a good reason why stocks like NVIDIA are expensive and that smaller names in the S&P are cheaper for an equally good reason? Yeah, I think you make a good point with the rest of the market not being as stretched. One way that we like to address that is we have allocations to small and mid cap. And you can see today the Russell performing well. That's

a healthy thing to see a greater amount of breadth, which we have seen in the past couple months. So that's kind of how we're addressing some of the richness of this magnificent seven. Paul, I realize that yields came off a little bit today, but we had a big run up last week. And my question on this is, why is risk appetite so robust in the face of yields and money market rates backing up in general since the start of the year? Well, I mean, rates have backed up just a little bit, but you've still got the Treasury very supportive of the short end of the curve. And then what that's doing is to create a lot of demand, a lot more demand than there is supply for longer term treasury notes. That's pushing longer term yields lower. And if you have a really long duration bet on AI or anything that's tech related, what would you like best is to have a really low discount factor to put against it.

That's why we're neutral on the tech. But we would agree with Mimi, here's the chance to really get into some things that are cheaper priced. We like industrials. We like health care. We like materials. And really, we've just gotten back into energy. We think there's value there. Yeah. Mimi, just to dig a little deeper into the earnings piece of this, I mean, if the market is arguably too rich, or we'll say maybe fairly valued, I mean, how much is going to hinge on earnings growth being realized in a robust way this year? And I ask that realizing that obviously the macro and this idea of a Fed back in play are going to be in focus as well. Yeah, we agree. There's a lot priced in. The bar is high. And I would say that the landing strip is fairly narrow to land the plane perfectly well. We probably have higher odds of recession penciled in than the market does for certain. Paul, one of the areas where you seem to disagree with Mimi is on the small caps. You say that they

would underperform on pullbacks. So what do you do with small caps? Yeah, we've been underweight small caps for a while. They underperformed last year. We think they're benefiting here from liquidity that the courtesy of the U.S. Treasury. There's a lot of broadening out of this market right now, which people are taking as a comfort, but we think is more liquidity driven. We would stay underweight here. Small caps. That would probably be one area where we would differ with Mimi. All right. Well, that's what makes a market. Paul, Mimi, thank you. Thank you. And right now we've got a news alert on the hack of the SEC's X, you know, formerly known as Twitter account. Nearly two weeks ago, Eamon Jabbers has details.

Hey there, John. The SEC is sharing a couple of new details about how its social media account was hacked earlier this month in a statement just posted to the commission's website. The SEC says the attack happened as the result of what's known as a SIM swap. That's a kind of a fraud in which a hacker transfers a person's phone number to a different device without authorization. In a SIM swap, the hacker then receives calls and text messages that are meant for the victim, and they can use them to foil security checks on an account. The SEC says access to the phone number occurred via the telecom carrier, not via SEC systems. SEC staff have not identified any evidence that the unauthorized party gained access to SEC systems, data, devices, or other social media accounts.

Once the hacker had control of the phone number associated with the account, the SEC says the hacker reset the password for the atSECgov account on X, formerly known as you say as Twitter. The SEC says it doesn't know how the hacker knew which phone number was associated with that social media account. One other interesting point here, the SEC says that multi-factor authentication, a basic but important security measure, was previously in place on this account, but the SEC staff requested that it be disabled in July of 2023 due to issues accessing the account. That security measure was then not in place on the date of the hack. We don't know exactly what the issues were that led the SEC staff to ask for the security measure

to be removed. But I am told by a source familiar with the situation that the SEC has now, guys, changed all of the passwords on all of its social media accounts. Back over to you. I'm not surprised to hear that. I mean, this does sound pretty sophisticated, Eamon. Just a quick question. I realize this investigation is still sort of in early stages, but given the reaction that we saw within Bitcoin, within some of these other companies associated with ETFs, is the SEC and potentially other regulators also investigating this for any kind of financial criminal behavior as well. Yeah, look, this is a law enforcement matter right now. So the FBI is on the case.

And I would imagine, you know, the first thing investigators would do is go look at the public ledger of Bitcoin and see if there are suspicious trades that happened just before or around this event to see if somebody was positioning themselves to make money from it. You know, you point out, Morgan, that this was sophisticated, and it was, right? I mean, the person who did this had to know that there was an expectation that the Bitcoin ETF was coming, around when it would be coming, what market expectations were for that announcement, and what the market might do when that announcement was made. And as the SEC points out here, they had to know which phone number the SEC was using to control

that account. That is not widely held information. So it points you to two directions. You know, just as I look at this as a layperson from the outside, it points speculation toward potentially some kind of insider compromise, somebody who knew inside the SEC how it worked, and then also potentially a very sophisticated outsider like a nation state or somebody with very sophisticated knowledge inside the SEC due to spying and espionage. This also suggests to me that two-factor authentication might not have helped in this case if it were text message based because that text would have gone to the hacker's phone.

If it were going to an authentication app, which is another option for two-factor, that would have helped. But two-factor wouldn't necessarily have saved them here, right? Yeah, exactly. And that's the big trouble with SIM swaps, right, is that you have the two-factor authentication in so that you get the text message in addition to what you're doing online. And you can say, yes, I confirm that was me. But if the hacker has your text, then the hacker can confirm it because the text messages are going to the hacker, not to you. So that can be really tricky to fight against. And in this case, what the SEC is saying, you note here in the statement that the violation here of the rights of the SEC happened at the telecom provider, not at the SEC.

That is, the person got into the telecom provider, not into the SEC system. And sometimes that happens simply by calling them up and posing as somebody who's transitioning their phone number to a different device and just basically bamboozling somebody in the call center at the telecom provider. Okay. Eamon Javers, thank you for bringing us the latest on this investigation. Well, stocks posting another record close today. So let's bring back Mike Cantoli with a look at how expensive, we were just talking about this. It was almost a preview, Mike, how expensive stocks are at the moment.

You were just talking about it, Morgan. And look, there are nuances to it, but I don't think there's any way to frame the current valuation picture as necessarily cheap or friendly for future returns. But let me point out the divergences. So this is a four year chart of the forward P.E. of the S&P 500 market cap weighted on top and then below that is the equal weight market cap weighted is above 19, well above 19, actually closer to 20. What I like about this is the first time we got to 19 and change was before the covid crash. It was early 2020. And at that time, it was about a 17 or 18 year high in valuation. And now you see that the equal about a 17 or 18 year high in valuation. And now you see that the equal weighted S&P, because of the absence of those richly priced mega caps, is around 16, which I would say is unremarkable. You wouldn't say it's dirt cheap, but it's basically neutral.

Now, remember, early 2020, 19 times earnings, 17 year high. What is the S&P 500 done since that point? Well, it's compounded at about 11 and a half percent annualized since then, which is slightly better than the long term, you know, annualized return of the S&P, which tells you not that expensive stocks always go up. It tells you that other circumstances matter a lot more. Now, obviously, during 2020 and 2021, we got trillions of dollars of stimulus. You had to go through a 35 percent crash and another 25 percent decline. So you paid for it in volatility. I guess the point is that, you know, valuation sort of matters in a slow moving way. But it's tough to frame your entire market view around it, even on a multi-year basis. OK. And I know you'll have more wisdom for us

later in the show. Looking forward to more from you, Mike Santoli. And up next, a top portfolio manager is going to tell us where investors can find value in this market as stocks just keep hitting new highs. Plus, the CEO of United Wholesale Mortgage, UWM, on whether he thinks a spring home sales surge could be on the horizon. Overtime's back in two. Welcome back to Overtime. The Dow and the S&P both closing at all-time highs for the second session in a row. Here to share his top picks as stocks continue to reach record highs is Oakmark Funds partner and portfolio manager Tony Canaris.

Tony, good to see you. So I want to start off asking about one specific call of yours, Centene Corporation, because it seems to have taken a hit a few days ago after UnitedHealth and sort of more of these care providers spending more than expected in Q4. Is this a specific thing to Centene where you think the selling in that is overdone or maybe the whole space? Yeah, our investment in Centene at Oakmark is specific to Centene. What you saw with Humana had to do with Medicare Advantage. Centene is the largest provider of Medicaid and health care exchanges. Only 15 percent of their business is Medicare Advantage. It is a problem area for Centene. And that's part of our thesis. It's a problem area and that's part of your thesis. And in.70 this year. That's 11 times earnings, a very reasonable price.

It's traditionally traded around 15 times or north of there. Private market values are higher than that. But they're losing $0.80 within that $6.70. They're losing $0.80 in their Medicare Advantage business. They bought WellCare a few years ago. They grew the business too fast. And as everybody knows about insurance, growth can come at a cost.

And so their services suffered, and therefore the government star rating suffered, and they need to fix that. Today, it's costing them 80 cents a share. If you back out those losses, the core Medicaid and health care exchanges business, you're actually paying a more terrific 10 times earnings for that. And if they earn half the margin of their Medicare Advantage peers someday by turning that around, just half the margin, it's trading closer to nine times relative to that trading history in the mid-teens. That's a terrific value. And we have confidence that management can turn it around. Okay. What gets my attention here is Phillips 66, another name that you've bought into recently. At a time where we've seen oil prices moving lower, why does a refiner look attractive here? Yeah, so I think sometimes

on a day-to-day basis, refiners have a high correlation with oil prices, but that doesn't drive the entirety of their business. And that's particularly true for Phillips 66, because Phillips 66 gets put in a refiner bucket at five times EBITDA. It gets categorized and compared to the pure play refiners all the time. That's only 40 percent of their business. The other 60 is a much higher quality and more stable business and things like midstream pipeline assets and marketing assets for like franchising gas stations and a chemical JV with Chevron that's very profitable. So they've got 60% of the business, which is a higher multiple, more stable business, and it kind of gets grouped in with all the refiners. And day to day, the stock sort of

trades around with oil prices, but that's not the key driver to the stock price. When I do hear you talk about it, though, it does sound like you are anticipating a soft landing the stock sort of trades around with oil prices, but that's not the key driver to the stock price. When I do hear you talk about it, though, it does sound like you are anticipating a soft landing and you're focused on certain names and some of the payments names, for example, American Express, perhaps, that maybe a recession is not in the cards. Well, we don't spend a lot of time thinking about whether or not a recession is going to happen in the next 60, 90, 120 days, something like that. We're thinking, what are the economics of a business going to look like over the next 10 years? That's our focus at Oakmark. And that way we can price the businesses. And then we look

at the market expectations for the businesses reflected in their valuation. And when we see a significant difference between the two, that manifests itself in a discount to intrinsic value, and then we'll purchase the stock. So for us, it's really not about the win on the recession. We all know we're going to have one someday. It's more about the what does this business look like over the long term. Okay. Tony Canaris, thanks for joining us. Thanks for having me. Existing home sales slumping last year because of higher mortgage rates. Up next, the CEO of United Wholesale Mortgage on whether he sees any signs of thawing in the housing market. And as we head to break, check out shares of United Airlines surging in overtime,

now up better than 6.5% and a beat on earnings and revenue at the top of the hour. We're going to talk to an analyst about what he wants to hear on the conference call and on CNBC tomorrow. That's coming up. Welcome back to overtime. The average 30-year fixed rate mortgage back to near 7%, climbing nearly 30 basis points so far in the new year. But it's still well below the 8% peak seen last October. And we'll get December new home sales on Thursday.

Joining us now is Matt Ishbia, chairman and CEO of UWN. He's also the owner of the Phoenix Suns and Mercury. Matt, it's great to have you back on the show. Thanks for being here. No, glad to be here with you. So the last time you were on with us, you had made the prediction that by the election this year that rates are going to drop. That was you said that was your that was your perspective. We have seen rates drop from that eight percent number back in the fall. What is your outlook this year,

especially as everybody is debating the Fed rate cuts, both the timeline and how many? Yeah, no, obviously rates went really high last year and people talked about it, 8 percent. And now they're down a little bit. And we think it'll go down more. I definitely think it'll happen before the election. But with the Fed's thoughts last, you know, last month in December, it could happen sooner. Maybe March, April, May, where rates get cut a little bit, where all of a sudden you'll

see a little more action. It's not just to help spur refis. What it'll actually do is help more people sell houses, so more inventory, more people get off the fence of buying houses. So we see just a small rate cut could actually create a lot of activity, and we're excited about that opportunity this year. So in terms of your own rate cut expectations, what are they? You know, I think that they are going to cut rates two to three times this year, but I don't really follow the Fed specifically, as in specifically overall interest rates for mortgages. Like, I think interest rates for mortgage will be in the low sixes this year, maybe even the high fives, which will create a little bit of an opportunity for, like I said, refinances for some of the people who bought at the peaks of interest rates, but also a lot more home selling.

So it's going to create some activity. So what are you seeing then in terms of this all-important spring home buying and selling season that seems to be getting started a little bit early this year? Yeah, it really has been starting early. Right at the beginning of the year, even December was not as slow as you expected, especially after the Fed made that announcement, I think December 13th. And so there's been activity, action, and we're seeing a lot more consumers reaching out, you know, go to MortgageMatchUp.com, finding websites to find loan officers that are going to go shop for them because they're looking to buy now and connecting with real estate agents as well

and so the action has started earlier than usually the march april may time of the year so i'm curious about the competitive environment of the industry and the broker channel specifically it was challenging 2020 to 2023 period what are your expectations for 24 especially as we do talk about a housing market that continues to thaw you know i think it's going to be a great year. You know, I said last year that that was one of the toughest years in mortgage history. And UWM, our company, actually really succeeded and did a really great job on all aspects of the business. We're really proud of what we did being the number one lender. But beyond being number one and growing, it's all about preparing for 24, 25, or 26. Because you guys know and everyone knows mortgage insurance is either peaks or valleys. It's about to become a peak. It's about to get

really hot in the mortgage industry from a housing perspective and a refi perspective opportunity, whether it happens this year, maybe even bleeds into next year and beyond. But we're real excited about it. The mortgage broker market has really heated up. A lot of loan officers have joined the channel. So we're seeing action and activity at a higher level than we expected at this point of the year. We've seen mixed results from the banks this past quarter. There's a lot of loan officers have joined the channel. So we're seeing action and activity at a higher level than we expected at this point of the year. We've seen mixed results from the banks this past quarter. There's a lot of discussion about the Basel and capital rules. Banks continuing to rotate potentially away from the mortgage business. And what kind of opportunities does this create for UWM?

I just wonder what it could mean for the cost and availability of credit if you do see banks, in fact, stepping back. You know, the cost of availability of credit, technically, if you look at the data, banks charge and a lot of retail owners charge more than brokers charge. So you actually charge $9,000 more on average. So is it the cost or credit availability? I think it's going to be better if banks are out of the game a little bit. Now, banks are great. They provide a lot of value in a lot of respects. But being great at mortgages

along with 30 other products is hard. If I want to go to a specialist, I go to a mortgage broker, you know, mortgagematchup.com, find someone that's a specialist, go to a lender that all they do. So the non-bank rhetoric of, oh, that's not good, they're not banks,

it's actually not the right way of thinking about it. We're regulated heavily by all 50 states. And at the same time, we do mortgages all day, every day. That's all we're great at. You know, we're not trying to be And at the same time, we do mortgages all day, every day. That's all we're great at. You know, we're not trying to be great at everything, just one thing, mortgages. And I think consumers like that because nobody wants a mortgage. They want the house or the savings. If you make the mortgage process faster, easier, and cheaper,

they're going to want to work with you. And that's why the non-banks or mortgage brokers are growing. Yeah. And certainly you've been taking quite a bit of market share. I would be remiss, I mentioned it, you're the owner of the Suns. I'd be remiss if I didn't ask you a sports question. You got ESPN reportedly approached by the NBA for a strategic partnership. That's been circulating for a couple of months, but some recent reports again on it. Would you be in favor of it?

You know, I'm in favor of positive things for the NBA. I'm a big NBA fan. Before I owned a team, I was a huge fan. And so the more exposure you get these amazing athletes in the NBA and the WNBA, I think the better for everyone in America and really throughout the world. It's a positive thing. So whether it's a partnership, whether it's a media deal, I'm not privy to all those details.

But I am privy to the fact that the more basketball people see, it gets people away from real life and they get to enjoy activities and entertainment. I think the NBA and WNBA are both amazing and I'm proud to be part of those. Yeah. And of course, the Suns have had a hot winning streak as of late. So, Matt, it's great to have you on. Yeah, it's fun to watch. Thanks for joining us. Matt Ishbia. Thank you.

Time now for a CNBC News Update with Pippa Stevens. Pippa? Hey, John. Israel has sent Hamas a proposal through mediators that includes a two-month pause on fighting. An Israeli government official says the multi-phase deal includes releasing all of the remaining hostages in Gaza. The proposal was first reported by Axios. The Supreme Court has allowed Border Patrol agents to remove the razor wire installed by Texas on the U.S.-Mexico border to prevent illegal border crossings. This afternoon's ruling grants the emergency request filed by the White House that said the wire prevented agents from doing their jobs. The wire installed near the

Rio Grande was part of Texas Governor Greg Abbott's immigration enforcement plan that includes busing migrants to Democratic-run cities such as New York. And Billy Joel is releasing his first new single since 2007. His label announced today that Turn the Lights Back On will be available to stream and in a limited edition vinyl February 1st. I wonder when the last time a vinyl release hit. I guess they're back. Oh, well, come on. You would know better than we would, right? Vinyl's cool now. Pippa, thank you.

Up next, Mike Santoli is going to look at whether expectations that cash is getting ready to move off the sidelines might add fuel or might not to this record market rally when overtime returns. Welcome back to Overtime. Mike Santoli's back with his take on why you shouldn't rely on cash on the sidelines, thinking it's going to boost the market. Mike? Yeah, John, I keep coming back to this because it remains one of the key talking points that you hear aired out there for why maybe the stock market can keep going higher. Six trillion dollars in money market assets is usually the number given. Well, this shows you those money market assets as a percentage of equity market value at every point in time since 1980. And what you see is at the right there, that's institutional on top, the orange line,

and retail money market assets or cash assets. And they are really unremarkable in terms of how large they are compared to equity market cap, which implies even if somehow we saw this mass rush off the sidelines of cash into stocks and somehow those people who they bought their stocks from quickly recycled it back into other stocks and all the rest of these things that have to happen, it's really not that appreciably high to move the needle, or at least it shouldn't be very central to your bullish case. It might happen. It might not. A lot of times cash levels go up over the course of a bull market. That happened in the 90s, too. It's not a zero sum game. Then, though, I'd like to look on a more short term basis. And with the recent experience of fund inflows is as a way of getting a read as to whether things are getting overheated or not. So Renaissance Macro had this. This is inflows into Nasdaq equity ETFs as a sort of rolling tally

compared to their assets under management. And you see it's kind of middling. This is basically a one year rolling tally, even though the Nasdaq is at a new high. This implies you're not seeing a mad chase of overheated money into that market as you did right in there. That was around 2021 when things got a little bit silly, guys. Let me ask you this, though, Mike. What about the changes in retail investor behavior over that period of time that you're looking at the amount of cash on the sidelines versus equity market value? Because people are more tilted toward equities versus fixed income and bonds than they used to be. And retail investors are using more options and trading on margin more. Yeah, I would say more than they used to be.

If we're comparing it to 1980, I would say not really more than they used to be. If we're comparing it to the late 90s or even just a few years ago, I guess there's just no way to perfectly capture the aggregate kind of risk appetites and exposures of the retail public at any one given time. I guess what I would mostly say is have other reasons to be upbeat about stocks besides people who missed this rally are going to somehow jump in and this cash is going to kind of over. I feel the same way about buybacks, by the way. Yeah, it generally helps at the margins, but it shouldn't be a whole reason for why you think stocks should go up. All right. Mike Santoli, thank you.

United Airlines shares a flying high after an earnings beat. Up next, the top analyst tells us what he wants to hear from executives during the earnings call, which will kick off tomorrow morning. Shares are up 6 percent right now. Plus, the CEO of electric aircraft maker, Evitol maker, Archer Aviation on his new battery deal with NASA, and the outlook for more government contracts. Welcome back to Overtime. Shares of United are taking flight up more than 5% in overtime after posting a beat on the top and bottom lines. Joining us now is Peter McNally from Third Bridge. Peter, it's a good moment, sure, with these numbers out and the beats on the top and bottom,

but I wonder how much of a factor, particularly Boeing, is in this, with nearly 10% of the existing fleet at United affected. And I guess questions about deliveries in the future. Their operations are running well now, but for how long? Well, it's the single biggest factor for United. They're giving us a very confident message this evening. CapEx in 2024 is going to be $9 billion, and almost all of that is going to go towards planes.

Now, that's up from about $8 billion this year. But here's how we'd be thinking about it. For the last five quarters, they've added 20 737 MAXs every quarter. And by the second and third quarters of this year, 2024, that's got to get to 23 to 24 after a dip to 16 in the first quarter. Now, the key there is, will those planes be in service for the summer travel season? And that will determine probably whether or not they're at the $9 end, the low end of the guidance, or the $11 that they're giving us a lot of different factors in there. But for us, that's the biggest one that we see. Right. OK, so that supply of planes. What about costs with pilots, flight attendants, other staffing?

This became an issue coming out of the pandemic. How much of that is figured out by now? So the way our experts at Third Bridge have described it, it's planes, people and pilots are the three big issues. Planes, it's about Boeing. The pilots are a three big issues. Planes, it's about Boeing. The pilots are a long-term issue. You can't get on a United flight these days without seeing them advertising to join their academy. Long-term issue, not going to be solved very quickly, but they're paying more people to be pilots, and it's a good place to work.

And then the other parts of the people equation, you know, the rate of increases, wages probably slowing here after surges in 2022 and 2023. A lot of the big negotiations are done and that's baked in. But we certainly wouldn't expect a retreat on those costs. And that people are the biggest cost cost for an airline. Fuel costs would be a bit of a tailwind, we think, in 2024, but probably not enough to offset the wage increases we've been seeing. So, Peter, the stock's up 5.5% right now, call it, United. Do you buy at these levels? Are there other, how does this set us up for the rest of airline earnings? And I ask this as the group as a whole, these stocks, they have just been hammered for months now. Well, let's roll back to, you know, last week.

Delta set the bar pretty low here by giving maybe a bit more cautious guidance. I mean, United has been the most aggressive of the major airlines in the United States. They spent more money in 2023 than American and Delta combined on CapEx. There is a long-term growth plan here, and United is not backing off one bit. So it is a more confident outlook than what we're seeing from others in the industry. The good news about air travel is demand is great. The question is, can we get enough planes to meet that demand? And that's the single biggest question that's out there.

Our experts are a little dubious that Boeing is actually going to be able to pull this off. We were questioning this prior to the door blowing off the Alaska Airlines flight a few weeks ago. But we're going to see. We're going to see. And certainly we're going to get some of those suppliers. Boeing reports results, but also the engine makers like GE and RTX tomorrow morning. Peter McNally, thanks for joining us. See you. And a quick programming note. Don't miss an exclusive interview with United CEO Scott Kirby. That is tomorrow morning on Squawk Box at 7.15 a.m. Eastern. We're going to stick with air travel here. Shares of Archer Aviation popping after announcing an out-of-this-world deal with NASA. The company's CEO joins us when Overtime.

Shares of Archer Aviation getting a lift today after the electric aircraft company struck a deal with NASA collaborating on battery technology. It's been a bit of a bumpy ride recently, but shares are up nearly 90% over the past year. Joining us now, Archer Aviation founder and CEO Adam Goldstein. Adam, it's great to have you on. We're talking about eVTOLs. We're talking about electric vertical takeoff and landing aircraft, something you have been developing for a number of years. You've got your first aircraft, Midnight, already doing test flights right now. What does this deal with NASA enable? Yeah, well, thanks for having me on the show. So we're building these vehicles to really launch a new category called urban air mobility,

where we will be replacing trips that are 20 to 50 miles on the ground that take 60 to 90 minutes by car with trips in the air that can be replaced with five to 10 minute trips. And this announcement that we had with NASA is really exciting because NASA was actually one of the places that helped create some of the origins of this industry in eVTOL. They were the first ones to figure out how to fly planes using multiple electric motors. And so this deal with NASA was really focused around

showing the safety and validity of these vehicles. And we're specifically starting with battery cells. It is interesting because you think of NASA, you think of space specifically, but NASA is developing technologies and capabilities that have air travel applications as well, to your point. So I guess the question this raises for me is if you are already doing flight tests, you're already working, I'd imagine, with the FAA to get to an approval as you look to delivery for next year. What does working with NASA mean in terms of being able to get to some of those regulatory hurdles being realized sooner?

Or does it? Yeah, so working with NASA will really help validate a lot of the safety systems that we already have in place. So we're working with lithium ion batteries that are very similar to the batteries that are used in EVs today. But when you move vehicles into the air, you can't have any incidents at all. You can't just pull over on the side of the road like you can with a car. And so by working with NASA to really validate the safety of these cells, this will just help further reinforce the safety of these vehicles, but I think also really reinforce the safety to the general public, because we believe this can be a mass market solution for transportation. potentially? And how does that break down across commercial applications versus military

applications, since I know you're also working with DOD and Air Force versus other potential businesses? So it's hard to say exactly how big the market can be. I always like to use the Morgan Stanley estimates because they're the biggest. But Morgan Stanley has referenced a multi-trillion dollar market potential here. And so the first use application that I think will actually be the biggest use application is moving people around. And so today that's done with helicopters. So there is an existing market, but because these vehicles are so much safer than helicopters and much quieter than helicopters, and ultimately a much lower cost point than helicopters, they have this ability to really scale. But it doesn't just stop with moving people.

There is certainly a large market in the defense side, as well as other places thinking about things like hospital systems or cargo logistics. So what does that mean in terms of if you're targeting delivery in 2025, do you have enough cash to get there? And what are the milestones and the levers, I guess, that need to get pulled to enable that? So Archer was very fortunate enough to raise a substantial amount of capital in our IPO and then follow on. We've raised some additional capital as well. So the company is in a good place from a financial perspective. The industry used to be 500 players and it's really consolidated down to just a few, and those few have really collected, I think, a lot of the capital as well as some of the best partnerships out there, like the one that we just announced today with NASA. I think a lot of the

momentum is really building towards the certification of these vehicles and the launch coming up here with a goal targeted at 2025. And there's a lot of confidence that's really been driven to the market, even with the regulators themselves. The FAA has put out targets saying that they think they will be ready to have the eVTOL vehicles, from their standpoint, the regulations in place by the end of 2024, to allow the companies to have a goal to begin to get to market in 2025. It's pretty incredible. We've been talking about flying taxis for years, but now we're on the cusp of actually potentially seeing them realized. Adam Goldstein of Archer, thanks so much for joining me. Thanks for having me. Shares of Archer finishing the day at 5% as well. You can catch much more on Archer Aviation and other space

related stories on the Manifest Space podcast, which you can get wherever you get your podcasts. My favorite space podcast. Coming up, ad spending, subscriber numbers, and which shows and movies will rule the roost. We'll tell you what to expect from Netflix earnings tomorrow when we come back. Netflix reports Q4 results tomorrow in overtime. Here's our Julia Borst. And, Julia, it looks like Netflix pulling away from the streaming pack maybe as rivals try to rein in costs. Well, Netflix certainly had first mover advantage.

And this quarter it's expected to add nearly 9 million new subscribers, which would bring Netflix's paid memberships to 256 million worldwide. Now the other key number to watch here is accelerating revenue growth of 11 percent. That's what the company itself forecast. Both numbers would reflect success cracking down on password sharing and advertising upside after Netflix recently announced 23 million ad-supported users. Investors are also looking to hear whether Netflix plans to spend less on content as its rivals push for profitability and what's next for its video game business. Now, despite the 37 percent run-up in Netflix shares since its last earnings, analysts are still largely bullish. 60% of them have a buy rating on this stock.

Don Morgan. Julia, it really seems like Netflix's rivals have shifted course before they were kind of kicking themselves. Why do we license stuff to them? Now they seem willing to do it in the push for profitability. Does that mean that Netflix perhaps has to spend less on its own? I think that's the key thing here, is that Netflix, of course, has been investing so

much money in producing content. It's less risky to license content that other people have made. You don't have to wonder whether or not it's going to turn out well. You can decide just to license the popular content. One thing we're hearing from a lot of the media companies is that they see a lot of opportunity in windowing. Maybe they'll put content first on on Max and then window it later and offer it later to Netflix. So all of this means is that Netflix is going to have more access to content without having to necessarily produce it themselves. All right, Julia Borson, we know you'll be joining us here on Overtime to break it all down. We get so many more earnings

as well in addition tomorrow, plus some macro data. Texas Instruments and Intuitive Surgical, particularly watching that one's bounced a lot off of those summer lows. All right, well that's going to do it for us here at Overtime. Fast Money starts now.