Closing Bell - Closing Bell Overtime: UWM CEO & Phoenix Suns Owner Mat Ishbia On Housing Market, Pro Sports Media Rights; IMAX CEO On Taylor Swift’s Record Breaking Weekend 10/16/23

Episode Date: October 16, 2023

Stocks powered higher to start the week despite rising yields. Crossmark Global’s Bob Doll and Richard Bernstein Advisors CEO Richard Bernstein break down the market action ahead of a busy week of earnings. UWM CEO and Phoenix Suns owner Mat Ishbia talks housing market, mortgage rates and the business of pro sports. Sri-Kumar Global Strategist Komal Sri-Kumar on how to play fixed income. IMAX CEO Richard Gelfond talks Taylor Swift’s box office dominance. BMO analyst Evan David Seigerman on the trade in vaccine stocks. Our Kate Rooney on the bounce in bitcoin today and Hugh Son previews what to expect from the big bank earnings this week.

Lots of green and decisively so. There's your scorecard on Wall Street, but winners stay late. Welcome to Closing Bell Overtime. I'm John Fort with Morgan Brennan. And coming up this hour, we're going to talk about today's pop and the geopolitical headwinds that remain for investors. And we're joined by longtime market strategist Komal Srikumar. Plus, billionaire mortgage titan and NBA team owner Matt Ishbia will speak with us about rising rates and the impact on the housing market. And later, a new era at the box office. IMAX CEO Richard Gelfand breaks down Taylor Swift's record-breaking weekend on the big screen as her tour film notches the biggest IMAX musical artist opening ever.

We begin, though, with a market and a strong start to the week for stocks, even as Treasury yields do take a leg higher. Today's rally comes on the back of two straight winning weeks for the S&P 500 and ahead of a big week of key earnings from the likes of Bank of America, Goldman Sachs, Netflix, Tesla and more. CNBC senior markets commentator Mike Santoli joins us now from the New York Stock Exchange. Mike, as we see stocks settle here, it looks like the S&P at 4,373. We did test last week's high in the trading session, but bounced back below that again. Yeah, just a touch, Morgan. So sometimes it does have to knock on that level a few times before really getting through. And it's really above 4,400. That would be a little more of a decisive recovery and kind of

climbing out of this hole that we've been in September into October. And I think part of that is the market in general has been, you know, somewhat battle tested in recent weeks. We obviously got a geopolitical shock, worried about it feeding into the oil markets. Oil markets were quiet today. Treasury yields, yeah, up a tick, but not really at alarming absolute levels just yet. So all that fit together with, I think, an investor base that is eager to turn attention, if possible, from a lot of those big macro factors toward the company-by-company fundamentals. So far, they've been okay. We're going to get a whole lot more earnings to figure out if people have been correct to be relatively enthusiastic about the profit trough to have been behind us.

Yeah, I wonder, Mike, this is the time of year when the market's supposed to turn positive. So between that, strikes, wars in Europe and the Middle East, a U.S. legislative branch that isn't functional. I'm going to go back to my Jenga metaphor from last week. Are you more impressed that the market has held up thus far or expecting something to fall over if another piece has to come out? I'm certainly impressed to a degree that the market has been able to absorb a fair amount of selling out down here.

There was a little bit of an uptick in some downside hedging and people trying to get negative on the market in recent weeks. I would say the Jenga metaphor is not quite perfect because I think the way it works is sometimes you can put a block back toward the base. You know, it's not like you pull it out and it's gone forever. And I think that's what goes on here when yields calm down and oil comes in and you can start to say, OK, maybe $240 in S&P 500 earnings over the next 12 months, which is the current consensus, looks more achievable than it did when we were at that same level in June of last year. The economy's bigger. The S&P's around the same level it was two years ago. There's a certain kind of big-picture case that says maybe it doesn't have to go down much more from here.

That can change quick, obviously, because we've been kind of crisscrossing these same levels for quite a long time. All right. Toppling the Jenga metaphor, but that's okay. Mike, we'll see you in just a bit. For now, let's bring in our market panel. Joining us now, Bob Dahl from Crossmark Global Investments and Richard Bernstein from Richard Bernstein Advisors. Guys, welcome.

Bob, so consumer discretionary was the best performing S&P sector today, up almost 2% despite worries about the consumer in Q4. So what do you read into that? Are you heartened? Well, there's no question that's one of the higher beta sectors in the market. So when you get a run like this, you would expect them to bounce, particularly since they got hit fairly hard over the last couple of weeks when the market went down. I want to underscore the yield story, 488 to 463, that 25 basis point decline. I know we're back up some today, but that's what I think caused the equity market to breathe a sigh of relief, more green on the screen

over the last bunch of days, despite the geopolitical situation, et cetera. Okay. So, Richard, if you wanted to make the case then that today's action signals the start of a new bull market or continuing that start a year after the bear market low, how would you make that case? Well, I think, John, the important thing today, if we're going to look at 10 minutes, I think the important thing today is that small caps actually outperform better than the large caps. I think that's a major step as a very positive event, because if the economy is going to reaccelerate, which it is doing, and if profits growth is going to reaccelerate, which it is doing,

then small caps should lead the way. That's what history says. And so I think there's a little element of rationality returning to the equity market and that market is starting to broaden out a little bit. You know, I mean, the way I've described it, and I think I've said to you and Morgan before, are there really only seven growth stories in the entire world? The answer to that is, of course, no, there are plenty of them. And I think the fact that we saw small caps lead the charge today was a very positive sign. Yeah. And we're also getting earnings underway here, them. And I think the fact that we saw small caps lead the charge today was a very positive sign. Yeah. And we're also getting earnings underway here, Bob. And we do have this disinflation story afoot as well. What's coming down faster? Do we know yet prices that companies can charge to their end users and their consumers and customers?

Or the costs actually make those products and services? Because that's going to really set the stage for where this goes from here no question about it look prices are getting a little tougher to get through with increases as consumers are are balking a bit but as you say on the other side you're getting some some cost relief that's let's hope that contains I think the margin story has got to be watched real carefully here we'll be looking at management's projections about the fourth quarter and next year. Earnings are what it's all about. I don't think we get a whole lot of PE improvements, so we need the better earnings for markets to go higher. And I'll echo what my friend Rich said a second ago, and that is the broadening of the market.

It's a one-day thing so far, but if that can continue, that's good news. Richard, do we know yet whether equities, particularly as we talk about this broadening of the market, things like small caps or transports, which had a 1.9 percent gain today, do we know if they can coexist with a 10-year treasury yield that's pushing 5 percent? Well, Morgan, I think we have to take a step back and say, why is the 10-year pushing 5%, pushing towards 5%? And people have a million different excuses for that. They talk about the government, they talk about spending, they talk about debt issuance, but there's an obvious one. And the obvious one is the nominal economy is turning out to be an awful lot stronger

than people thought, right? We have to go, if to go back to June, the beginning of the quarter, or the end of June, rather, the beginning of the quarter. What we'll find is that the consensus forecast for GDP growth was 0%. People thought we were going to have a flat quarter. That's now up to 3%. And GDP now is about 5%, roughly the highest it's been in the last 10 years outside of the post-pandemic period. So why is it 10 years up? They're 10 years up because the nominal economy is a boatload stronger than people thought. Well, if you're looking at stocks, you want the stocks that are going to have sensitivity to that increase in GDP growth, to that increase in profits growth, which would lead you to more cyclical sectors.

Remember, cyclicals tend to outperform as interest rates go up, long-term interest rates go up, not as long-term interest rates go down, because that would signal a weakness in the economy, and cyclicals don't do well when that occurs. Okay. Bob, finally, with rates as high as they are, what's the challenge? What do we need to see from consumers this Q4 as we're about a month away from really really talking about holiday spending we want to see those consumers spend some money and if they're still working and they're getting increases in their pay they will spend the money and that's been the case so far we have to carefully watch the labor market if there are cracks there then we have to ask the tough questions

again and to throw some cold water on this i I'm not convinced that the zero to five and a quarter percent increase on the part of the Fed in the last 18 months has been fully impacting the economy yet. Probably more of that to come. So we have a fight on our hands. Okay. Bob Dahl and Richard Bernstein, thanks for kicking off the hour with us. Every major industry industry index is higher and every sector in the S&P in the green as well. Let's turn now to the volatile day we've seen in the crypto market. Bitcoin briefly jumping above the key $30,000 level after a report, which was later retracted, raised hopes about regulatory approval of a spot Bitcoin ETF. Kate Rooney has all the details for us. Hi, Kate. Hi, Morgan. So Bitcoin's rally, as you said, it's been all about this hope for an ETF approval. The cryptocurrency popped this weekend after the

SEC did not appeal a court decision around an ETF application from Grayscale. The deadline for that was Friday. This had to do with its application to convert the Grayscale Bitcoin Trust, rather, GBTC, into an ETF. Then today, bitcoin climbed above 30k after false reports that a spot bitcoin etf was approved the news outlet coin telegraph has since deleted that tweet and apologized bernstein though writing the market was really waiting to see if the sec would appeal that court decision that i mentioned and now the they say, of an approval by the January 10th due date looks, quote, highly likely. The SEC faces a final January deadline to respond to ARK's spot Bitcoin ETF application there. Bernstein also says Bitcoin is reclaiming its status as a safe haven.

And it points out its, quote, enviable return record outperforming physical gold in the long term. Guys, back to you. All right, Kate, thank you. As we just mentioned, the uptick in yields has become a cause for concern for many on Wall Street. But Mike Santoli is back with a look at the relationship between bonds and stocks. Not strictly a seesaw, huh, Mike? No, exactly.

That's right, John, or zero-sum game. You know, all relationships, sometimes they come into question for various reasons. But take a look at a two-year of the S&P 500 relative to the corporate bond investment grade bond ETF. This is what we've looked at for a while. So last year tracked pretty perfectly. The story was yields going up. Inflation was out of control. People were worried about what it was going to mean for the overall economy. And it started to diverge in here. This is from the end of 2021, by the way, as the stock market peaked. So here you see the S&P 500 led and now dominated by those very large, very financially flush companies of mega cap growth has managed to diverge.

There's another reason, though, in aggregate, the S&P 500 is well positioned. Take a look at the effective interest costs that those companies collectively now face. This is a longer-term chart from Bank of America. It's just barely started to curl higher, not quite at 4% yet. Now, this is because it moves very slowly. The company's locked in a lot of low rates. A lot of companies have no net debt. And so this is only the cost of the debt that is outstanding. And, of course, those who have cash are earning more

on it. And if you project ahead if rates are currently around these levels they will have to refinance at higher. Rates but even by twenty twenty five or six it means maybe two to three percent. Downside pressure on overall earnings per share for

the index so it's one explanation for why. The market cap weighted S&P 500 has really outperformed almost every other benchmark and the average stock out there, like the Russell 2000 or other measures. Mark John. Interesting.

Now, within those S&P 500 companies, are there some that are more exposed than others, either because of their size or, I mean, I guess there's a smaller percentage overall than in the past that did manage to lock in those rates, which is good. For sure. I mean, look, if you just look at the real estate sector, I mean, it's a it's a debt finance business. They've been just destroyed in terms of their equity value because they really will have to roll into higher rates or maybe they won't even have much of a market for refinancing. So there's no doubt there are parts of the stock market that are not as well positioned. I think a lot of the sort of, you know, capital intensive, not very fast growing businesses out there,

they're in trouble. Small caps, you know, subject to floating rate bank financing and things like that. But I think a lot of that has already been registered in the market. Maybe not all of it. To me is if the economy can handle rates at this level, the companies can. That sounds trite, but I think that's the big question. Are the consumers going to buckle? If they don't, then perhaps companies can navigate this. All right. Higher for longer. The longer we're higher, the more we'll see what happens. Mike Santoli, thank you. Speaking of rates, Philadelphia Fed President Patrick Harker saying in a speech today that high interest rates are denting demand from first-time homebuyers. Up next, we'll talk to Matt Ishbia, the billionaire CEO of mortgage giant UWM,

about the renewed upward pressure for yields and the impact on the broader housing market. Overtime, back in two. We have a market flash on Allstate. Contessa Brewer has details. Contessa? This is coming to us from Reuters that Nelson Peltz's activist hedge fund, Tryon Fund Management, has built a stake in the insurer Allstate, one of the insurers that has been struggling, of course,

to cope with the fallout from the natural disasters. We saw the hurricane results, the floods in New York City, and, of course, wildfires in Hawaii most recently. This is a move that is expected to raise pressure on the CEO, Tom Wilson. He has led all states since 2007, Reuters points out, but has had five quarters of earnings losses. And in fact, in the second quarter of this year, they announced that they had spent more than a billion dollars on catastrophes alone, 18 weather catastrophes in June, in the month of June. In that, in spite of raising rates 11.6 percent across various jurisdictions. Allstate, we're told by Reuters, has hired investment bankers to advise it on how

it will handle Trion. I personally have reached out to Allstate and I'm waiting for them to get back to me about what this could mean for the company, if indeed it's true. But again, we have Reuters reporting that Nelson Peltz's Trion is planning to have a big stake in Allstate. By the way, Travelers will announce earnings on Wednesday morning, and it's really the first view, guys, that we'll get into the third quarter catastrophe losses and whether that is still affecting other big insurers. We saw Travelers reporting a similar impact in the last quarter. The other financials. Contessa Brewer, thank you. Sure. Of course, shares of Allstate are up about 4% right now.

Let's talk housing. It's one part of the economy where high interest rates are certainly being felt. Philadelphia Fed President Patrick Harker saying today those elevated rates are raising borrowing costs and limiting inventory, leading to higher prices and roadblocks for first-time homebuyers. The average mortgage rate is around 7.57%. That's according to Freddie Mac. It's the highest since late 2000. That's for

a third year fixed. Joining us now is Matt Ishbia, chairman and CEO of UWM, United Wholesale Mortgage. He is also owner of the Phoenix Suns and Mercury. Matt, it's great to be speaking with you again. And that is exactly where I want to start with you. The fact that we have this log jam between home prices that are still stubbornly high, mortgage rates that we've seen pick up to two decade plus highs, and then inventory that's also at historic lows. Yeah, no, it's obviously interesting to see all this stuff happen together. But what I would say a little differently, and some people's like, people are thinking that people aren't buying houses still. There's a lot of houses for sale and a lot of people are buying them. First time

home buyers, some people are realizing like, wait, if I wait till rates come down, well, more supply. Well, guess what? The prices will go up even more. Right now is actually a great time to buy. You lock in your rate, your 30 year fix. You know, yeah, it's high rates. Rates are higher than they were before. They're not three percent anymore, but seven and a half, seven point five, seven point two five, whatever they may be. You got to go to a mortgage broker. They'll find the right deal for you. But the truth is, it's a good time to buy right now. There is inventory out there and there's a lot of young people buying house right now. So we're

seeing houses move, maybe not as fast as we've seen in the past, but it's still been pretty busy for us. It's interesting to hear you say that. I realize you're in a quiet period right now, but it's interesting to hear you saying that because we have seen, last month is a good example when Mortgage Brokers Association saying mortgage demand was at its lowest level since 1996. You're not seeing that? Definitely not since 1996. No, we had a great second quarter, all-time purchase second quarter, and third quarter was not far behind. It was a great quarter as well. And so I'd say it's definitely not the boom of 2020 and 21, but the reality is people

are buying houses. People need mortgages. And the people that are the best at that, which are mortgage brokers, are still pretty busy. And we're the best lender for the mortgage brokers. And that's why we've been pretty busy throughout. Now, it's going to get slower in the fourth quarter and first quarter. And if rates are seven and a half, eight percent, of course, it's slower. But it's not like nothing's going on out there. I think people overstated a little bit, although it's slower. nothing's going on out there. I think people overstated a little bit, although it's slower. It's not dead out there. Okay. I mean, we're in the midst of bank earnings right now as well. And of course, there's been this focus for months now on credit tightening and standards for credit tightening where the banks and those more, I guess, traditional lenders

are concerned. Has that been a boon for you? No, it's not been a boon. The only thing that's a boon for us is people need, like mortgages are a weird thing. If you're buying a house, you need a mortgage. You don't want one, you need one. And so you got to make it faster, easier and cheaper. And when you're a specialist like mortgage brokers and UWM is, we're actually the ones people go to. And so banks do great things in a lot of respect, but they're doing so many things. And so we only focus on one thing, which is mortgages. And we try to make it the fastest, easiest and cheapest. And that's what we're all about. So it's not a boon for us that other people are, but we're just focused on it. That's all we do. 7,000 people. How do we make this faster, easier and cheaper for consumers? And that's what we focus on. We were just talking about, you know, the Fed and this ongoing message, this drumbeat of hire for longer. How does that affect housing if you see that continue to stretch out even as inflation comes down into next year? You know, so I don't really see that how it is, how it's going to go. I think by the election next year, rates will drop is my personal perspective. Do I have great data behind it?

Not really. Besides a lot of different things that I've read and looked at and researched on. But with that being said, if it stays higher for longer, that's fine. People are still buying houses. And the best thing is when the rates do drop, because they are going to drop, whether it goes from 7.5 to 6.5 or 7.5 to 6.25, at some point they drop, all these people that are buying houses are going to refinance and are going to save more money, which then helps the economy, helps spur positive things. It's like there's a lot of good things happening.

And so people kept saying, if you remember last year, they're saying housing values are going to crash. The whole world's going to fall apart. Well, housing values went up again, 3%, like we said they would go up a normal amount, maybe not 15%. So a lot of doom and gloom out there. It's just not reality if you're really in the weeds of the business like we try to stay. Okay.

I do want to shift gears because you are the owner of the Phoenix Suns as well. You've been making some significant investments there, changing up the team this year, but also making some changes on the media side as well as you have offered these antennas out to fans and look to make the games more accessible. Walk me through the opportunity there for you as a team owner and and what that means in terms of the ability to capitalize it if you are offering over the air yeah well as a team owner like it's

the it's the city's team i'm just the guy that works for the city now so it's the phoenix suns and phoenix mercury's team and i'm proud to be the the steward of the team and so to have their team not be able to be on TV for everyone to watch was completely crazy to me. So we changed that. It's out for free for everyone, 3 million households. There's no cost. You just need an antenna, and you're good.

Or just any TV, and you should be able to watch the games. I think that's important. Now, how am I going to capitalize on it? I have no idea. I don't own the team to make money. I own the team because I'm proud. I love basketball. I want to contribute to the Phoenix community. Money follows success. We're going to focus on winning

and being great, taking care of the fans, taking care of the community, take care of winning, and good things usually come. It's not a money play. Money would be, there's a lot of people that made money plays in this. We have not made it. We've done the reverse, and it's always served me well in the mortgage business, and I think it'll serve me well in the sports business as well. I'm sure. Just one final question on this, and that is as the NBA rights are in focus right now and there is all this disruption afoot, for example, ESPN+, it's not a matter of if but when. How do you think this landscape evolves? Well, listen, the NBA is a global game.

People love it throughout America, throughout the world. It's a great game, and I it throughout America, throughout the world. It's a great game, and I think more and more people are going to consume it on television. National media rights are going to continue to go up. Opportunities are going to continue to go up because people want to watch the game. It's live, so it's an opportunity for people who have commercials to get people who are watching it live, not DVRing and going through everything. And so I think the game is going to only continue to grow globally, nationally, and in each community, and I'm excited to be part of it. I think the NBA is growing to only continue to grow globally, nationally, and in each community.

And I'm excited to be part of it. I think the NBA is growing at a really fast pace. It's a great game and a lot of excitement. I'm excited for the season to start next week. All right. We're looking forward to it. Matt Ishbia, thanks so much for joining me. Thank you.

After the break, Kamal Shrikumar on the geopolitical risks in the market and why he says bringing inflation back to a 2 percent target would require a, quote, gargantuan effort from the Fed. As we head to break, check out the pop for the transports today, outperforming the broader averages. Norfolk Southern leading the gains, along with Alaska Air and J.B. Hunt, which reports after the bell in this hour tomorrow. Stay with us. Welcome back. It was an update for stocks, but Wall Street is closely watching for any broad impacts or escalations from the Israel-Hamas conflict. Treasury Secretary Janet Yellen weighed in on the potential consequences earlier in an interview with Sky News. I think it's too early to speculate on whether or not

there will be significant consequences. I think, importantly, it depends on whether the hostilities extend beyond Israel and Gaza. And that's certainly an outcome we would like to avoid. Joining us now is Kamal Sreekumar. He is president of Sreekumar Global Strategies. Sree, thanks for being with us. So you've written recently that getting inflation under control is going to be tough. The last mile won't be covered without a significant degree of pain. How does this geopolitical instability factor into that pain? John, it's a very timely question. Even without the geopolitical uncertainty, it would have been difficult to bring inflation down from 3 to 4 percent down to the 2 percent target. Now,

with oil prices going up, geopolitical uncertainty is increasing. It makes it even harder for Federal Reserve Chairman Jerome Powell and his colleagues to do so. So I would say, if anything, the 2% is beyond reach for at least the next couple of years. So when you look at, say, sectors in the S&P, are there areas of certainty, even in this broader, uncertain environment where you expect the traditional relationships to remain? Normally, you would think during the circumstances, if you're very concerned about growth equities, that you would go into utilities, you would go into consumer stables to hide, to get yourself protection. This cycle, you have a different story. Bond yields are extremely high. Six-month Treasury bills

have been yielding 5.5% or higher. So, I think equities are facing a huge headwind, even the so-called defensive sectors, because of the fixed income opposition that they get, which is not the case generally in the past. So, we are talking about a very different situation. Investors need to handle it, taking into account the importance of high-grade fixed income at the current stage. Because I don't think the 10-year yield is going to go out of control. It's not going to go to 5, 6, 7 percent like some people have been talking about. I think there is a natural ceiling. And you went back to the geopolitical uncertainty, John, that also puts a ceiling on it and keeps you from losing too much money in 10 year or 30

year securities. Why do you think there's a ceiling? And I ask that because, yes, I realize, you know, geopolitical risk premium, flight to safety that makes bonds more attractive. But on the other hand, and you just talked about it, if inflation is not coming down for the next couple of years, potentially, and you have the U.S. running at record deficits and we know conflicts, whether we're in them directly or just helping to fund them, are inflationary and require more spending, doesn't that actually fuel the argument that you could see rates go higher? Very good point. All of those do. But look at the other side of the equation. When you have geopolitical uncertainty, you want a safe

haven. You want to protect your capital. And even if you're going to get a guaranteed minus 1% in real terms after inflation, you would rather have it than to lose money in equities under those circumstances. So I think with short-term treasury yields so high, even if inflation stays high, you're still going to get somewhat of a positive real yield. So I think that's how I make continuing high inflation rates consistent with your ability to get returns in the fixed income market. Another safe haven has been the dollar. Investment thesis for that right now. Dollar has been a safe haven. I think it will remain a safe haven. For instance, today you're seeing the euro at 105.5 US, 5.5 cents. I wouldn't be surprised to see parity.

And the reason is Europe is much more vulnerable to energy prices going up than the United States. We produce most of the energy we require in the United States. Europe does not. So, I think if you see the Brent crude, which today is at $90, Morgan, if it goes to $100, immediately I would see the 105.5 going to 103, 102. So the dollar is going to remain strong as long as the geopolitical uncertainties continue. Okay. Sri Kumar, thanks for joining us. Thank you very much for having me. Good to have you. Thank you.

Well, it's time now for a CNBC News Update with Courtney Reagan. Hi, Court. Hi, Morgan. Belgian police say two Swedish people were killed in Brussels today in a shooting. The gunman fled the scene and is at large. Prosecutors said they are investigating the shooting as terrorism. Belgian authorities have raised the terror alert to the highest level, with the second highest level across the rest of the country. Belgium was scheduled to host the Swedish national soccer team in a match tonight. That match has been canceled.

The former top engineer at crypto exchange FTX testified today in Sam Bankman Freed's fraud trial. Nishad Singh told jurors that Bankman Freed spent over $1.1 billion on celebrities and sponsorships. His testimony could play a key role in the prosecution's case, which is examining alleged fraud that revolves around what happened to billions of customer dollars that were supposed to be invested in crypto. And the University of California, Berkeley, is partnering with NASA to build a 36-acre space center in Silicon Valley. The university said the center will be a place for students, scientists, and tech companies to work together on space exploration, climate change, and social sciences. It's projected to cost $2 billion. Morgan, back over to you.

Looking forward to that. Bet you are. Good morning, Reagan. Thank you. Looking forward to that. Bet you are. Good morning, Reagan. Thank you. Thanks. After the break, are stocks falling out of fashion? Mike Santoli takes a look at two charts that could be pointing to an impending flow away from equities. And take a look at the wild session for vaccine stocks.

Pfizer jumping despite its sales warning while BioNTech took a leg lower. And Moderna closed at a 52 week low. We will talk about the post pandemic outlook for these companies when we come right back. Welcome back to Overtime. Could equities be falling out of favor for investors as bonds offer attractive yields? Mike Santoli has a look at whether a shift could be coming. Mike. Yeah, Morgan, at least there's a sense out there that you don't necessarily need as much in the way of equities. There are other options. Take a look at this from Goldman Sachs. It is the funding status of the top 50 corporate pension plans.

What that means on the right is that in aggregate, these plans are 115 percent funded, meaning they're above what they would need long term to meet their longer term obligations. Stock returns have been decent in recent years. Plus, now we have higher yields. There's a sense out there they could just sort of lock in their asset levels right now and keep things safe through bonds and meet their long term obligations. Now, also, this has been reflected in something like the Blackstone versus BlackRock chart, which I like. BlackRock is not just stocks, but it's public markets in general. And Blackstone, alternative asset management, which, of course, means private credit buyouts, real estate, has really been in favor.

And that's because the flows in general among institutions have been away from just give me what the market's going to deliver in the public sphere. And we're going to look for returns elsewhere. So maybe there's a budding shift. I just am not clear, Morgan, that what it means is that the stock market itself is going to be orphaned and somehow returns are going to be bad because, strangely enough, it doesn't always follow institutional flows. Yeah. I mean, meantime, you've got Oak Tree's Howard Marks penning a memo where he basically says, quote, unless there are serious holes in my logic, I believe significant reallocation of capital toward credit is warranted and kind of lays out his case for this as well. So it certainly seems that some very high profile investors have a similar. No, it's in the air. And the math does get you there. If you if you know you have a certain set of obligations or long term goals, return goals that you can meet by just capturing what the credit markets are going to be giving you right now, whether that's mid to high single digits a year or whatever.

It does make a lot of sense. I also think, though, it enables people, if you lock in that and part of your portfolio to sustain more risk in the other areas, because equities over time benefit from inflation and have tended to perform better over very long time frames. All right. Mike Santoli, thank you. Meanwhile, Hollywood's been having a bit of a love story with Taylor Swift after her Heiress tour set the new box office record for a concert film during its opening weekend. The film also setting a debut record for IMAX. Up next, CEO Rich Gelfand is going to tell us how important this release might be for the industry. It's being impacted by the ongoing actor strike. We'll be right back. Welcome back to Overtime. Taylor Swift's

Eros tour is the highest grossing domestic concert film ever, and that's just from its opening weekend. Compared to the full run for the other movies, IMAX screens accounted for more than 12% of that number, despite showing on 9% of screens in North America. That's according to Comscore. Joining us now is IMAX CEO Richard Galfond. Richard, it's great to have you on. Wow, a lot of firsts this weekend with this concert tour. And with just one weekend to go here, it's poised to potentially break the records we've seen for box office for October in the past.

Walk me through what you've seen in terms of demand. The demand was tremendous. I mean, this weekend, the amount of pre-sales was extremely high. IMAX had almost $10 million in pre-sales before the weekend even started. You know, before I was coming on, Morgan, I was sitting here thinking that if this was two years ago, people would say nobody would ever go to the movies again. People were going to sit on their couches and stream for the rest of their lives. And one of the priming things that's been streaming was concerts. And a lot of the streamers actually tried to get in on the Taylor

concert and stream it and think that she's such a phenomenon and think how much theaters have come back in that period of time that we'd be talking here now about a whole new business um concerts and theaters people dancing in the aisles people jumping up and down what a different world than the pundits predicted a few years ago yeah to that to that point of a whole new business i mean we have beyonce poised to release her concert film later this year uh these are these are films that are not being distributed by major studios the middlemen have essentially been cut out. And of course, it's happening at a time where we've just wrapped up the writers strike. But actors are still striking as well. So I guess, A, is this filling the void for content? And B, does this set a new precedent in terms of who's going to make money and what that's going to look like?

I mean, sure, it fills the void. Actually, if you look at it holistically, not that many movies moved out of 2023. So it was a small void, not a big void. But, you know, the Taylor Swift project was found money and Beyonce has found money. And obviously it's very good for a business that's been deeply affected, potentially in the backlog by both the writer's strike and the actor's strike. But I don't think it bodes a fundamental change for the studio business. Taylor Swift and Beyonce are unique. Not only are they unique talents with unique concerts, but they could afford the budget to film it themselves and produce it themselves. And there are such star personalities that they could generate the marketing just by a tweet.

I don't think there's that much talent of that category and that much pull. So I think most of the talent is still going to need to work with studios. I do think it means maybe more content for exhibition and for companies over the long run. But I think the middleman model is not in danger. I've talked to a lot of people in the studio business all the time, and I don't think they're going to go away and exhibitors like AMC are going to take their place. OK, so Richard, format wise, though, could this be a thriller moment for live digital hybrid experiences? Or again, are Taylor Swift and Beyonce just such unique artists that it can't be replicated? Because I'm struck by the fact that U2 has this brief residency coming up at the Sphere in Vegas,

which is kind of a mix between a live performance and big screen experience. The whole Sphere is a screen. And they're considering extending their residency because of the strong demand. Well, I think what it could do is convince music acts and managers and financiers that there's a big business in creating kind of quasi-live, as you say, hybrid experiences. And for Taylor, I heard people in the theaters were dancing. They loosened the rules on cell phones. They were, you know, hugging each other. So I think it does open the door to what you call this hybrid experience. And at IMAX, we started something called IMAX Live a couple of years ago.

And we've done a number of things. We did a Brandi Carlile concert. We just did the Talking Heads from Toronto Film Festival a few weeks ago. So that, I think, is a lot of promise, these kind of quasi-live experiences where you have a live theater and at the same time, you know, maybe you're streaming it into theaters and maybe you're filming it. And I do think theaters can be, is a place where cultural events happen. And I think, you know, these are cultural events and I think it could open the door to more of that.

All right. We'll have to see. Rich Gelfand, thanks for joining us. Thanks, Morgan. Thanks, John. See you soon. Up next, a top analyst tells us whether vaccine makers have a shot at a comeback in the wake of Pfizer's profit and revenue guidance cut. We'll be right back. Pfizer sending a chill across the vaccine space after it cut guidance over waning demand for COVID treatments and vaccines. But the stock had quite a reversal on news of a multibillion dollar cost cutting plan. Meantime, Pfizer's partner BioNTech sinking after flagging similar concerns and Moderna closing sharply lower as well. Let's bring in BMO Capital Markets analyst Evan Seegerman. Evan, this reminds me of the inventory problems that we've seen in semiconductors, lawn furniture,

so many different areas as the economy normalizes post pandemic. So is this the kitchen sink moment, though, for the companies that you cover where investors should consider, hey, they've normalized, they're cutting costs. Now's the time to get in. I think there's a lot going on with Pfizer at this point. This was kind of the rip the bandaid off moment. We knew from the second quarter that, you know, there could be some uncertainty around the covid business and they could do some cost cuts. Now they just executed on it. I think what was what pushed it over the edge was the renegotiation of the government contract for Paxlovid. And let's face it, I think COVID is in a very different place than it was three years ago.

And even in 2021, when we all got vaccinated, we're in a different new normal moving beyond this. And that's what's being reflected with this update from Pfizer. Yeah, BioNTech, Moderna, Novavax as well. These are companies that the COVID vaccines are their only approved products. What does Pfizer, though, have in the pipeline? And as it's cutting costs right now, where is it going to invest? I think what's key is the closing of the Pfizer Cgen transaction. This is the $48 billion dealfizer cgen transaction this is the 48 billion dollar deal to acquire cgen getting them really accelerating their oncology footprint that's what i'm most focused on i'm also very interested to see what they do with daniel glickbron which is their oral

glp1 we love to talk obesity we could talk obesity all day every day this is a twice daily not as competitive with the lily asset but if they reformulate, that could be a key player in that market. Speaking of areas that have gotten perhaps overhyped, what's your, how are you modeling out this GLP-1 effect? Because it's not just affecting the companies that have them, these weight loss drugs, but the whole health space. So is there some kind of weird dislocation taking place that we're going to be recovering from similar to what's happening with the vaccines now? That's a great question. I think a few things. One, we're still in early days when it comes to

obesity. You know, Lily's Manjaro, which was Epidite, isn't yet approved in obesity. So we need to see what that launch looks like. I'm really interested to see how the payers pay for these. And so how managed care reacts, for example. And I've heard rumblings from my other colleagues who cover other sectors, impacts in consumer, you know, eating less sugary foods. So that could play out down the line. But still, I want to refocus and say that these drugs are for patients who have serious, you know, who are seriously obese and need real medical intervention. That's where I get to this large market. And that's what I'm most focused on when it comes to things like Lilly, for example.

Okay. So quickly, if you had to buy one stock right now in your coverage universe, what is it? Structured Therapeutics. So it's a small cap biotech. They have an oral GLP-1. I frame them as the closest to Lilly's or for glipron. There's a lot of interest in the oral GLP-1 space. They had some good data a couple of weeks ago showing on par weight loss to what Lilly had shown with or for glipron. They have more data coming later this year and more data in obesity coming next year. Okay. Evan Seegerman, thanks for joining us. Thanks, guys. The financial sector popping 1% in today's rally and big banks take center stage again tomorrow when Bank of America and Goldman Sachs report earnings. Find out what Wall Street is expecting when overtime returns.

Welcome back to Overtime. J.P. Morgan, Wells Fargo, and Citi all beating Wall Street's earnings estimates on Friday. Will Bank of America and Goldman Sachs be able to continue that trend for the big banks when they report tomorrow? Let's bring in CNBC.com bank ranking. Banking reporter Hugh Son. Hugh, it's good to have you. I do want to start with Bank of America because, and we have talked about this on the show in recent weeks, it has treated more like a regional than its other big bank peers. Yeah, and there's a really great reason for that, which is they made the same error that the regional banks made is during the pandemic. Billions and really 600 billion or so of deposits poured in. They said, we're going to put these into longer dated, low yielding securities because we don't know what the future is going to hold.

So let's make money today. And so three years later, they're stuck with a portfolio that's down roughly at midyear. One hundred and ten billion dollars. Right. And nobody says B of A is going to go out of business there um there there's no run that's going to happen because their deposit base is so massive and really uh in till the towards insured deposits it's the core deposits of so many people in this country however their net interest income is really hurt by this because they've got these low yielding securities and say, well, JP Morgan is expected to make $89 billion in net interest income. B of A is about to make $57 billion the last time they said it.

That's a 55% smaller amount. That's $32 billion that B of A is not making versus a similar sized bank as JP Morgan. So, Hugh, what would you say the big question overall in the banks is for Q4? You know, Q2, it seemed like how many more SVBs might be out there. Q3, you know, maybe more interest rate related. What's the big question for Q4? Well, I mean, I would separate into the spicier part of the portfolio is going to be the regional banks. Ten-year yields blew out in the third quarter. What does that do to their bank bond holdings? Now, if you're a regional bank and you're more tilted towards the longer part

of that duration, you're going to have more pressure than you had, say, in March. And there is a non-zero percent risk that something that you disclose in the next couple of weeks is going to cause some kind of concern there. And nobody's know, nobody's saying that that's likely. It's just possible. Now, with the big banks, they're much more stable. We've seen them really kill it in terms of the credit costs have been much lower than people expected because people still have jobs. And so that's really holding in well. And we would expect that on the credit side, on the just core business of banking, that the big banks are going to do excellent. All right, quickly, Goldman Sachs and then Morgan Stanley on Wednesday. You start getting into investment banking as well. We've

seen the IPO markets start to crack open more dealmaking. Is that going to actually show up be a positive for these companies? I don't think it's about what's what's happening in this quarter, third quarter. I want I think people want to hear that the tide has turned and that it's less bad going forward and that you have a pipeline of deals and you can expect 2024 is going to be better than it was this year. I think that's what it is about the Wall Street banks. All right. Thank you, son. Thank you. You are our ranking banking reporter on CNBC.com. Thank you, John. I do not miss a first on CNBC interview with Bank of America CEO Brian Moynihan. That's tomorrow, 10 a.m. on Squawawk on the Street. That's right.

Geopolitics continues to be in focus. We monitor the situation in Israel. Lockheed Martin is actually going to kick off defense earnings tomorrow morning as well. So that will be one to watch. And, of course, we get retail sales. I trust you will be paying a little bit of attention to that. We know, we've talked before about the impact of war and instability on a stock like that. What are you wondering? How quickly they can ramp production to meet demand.

That's going to be the key. Supply chain has been an issue. Are we moving past the worst of that? It would seem perhaps that we are, but we'll have to watch. That's going to do it for us here at Overtime. Fast Money starts now.