Closing Bell - Closing Bell Overtime: Weighing the Market Rally 8/23/22

Episode Date: August 23, 2022

Are stocks set up for a big fall on Friday or are they positioned for another leg higher? Joe Terranova of Virtus Investment gives his take. Plus, the latest twist at Twitter. The stock sinking as a whistleblower sounds the alarm on the company. All-star panel of Alex Kantrowitz and Casey Newton break down what these allegations mean for Elon Musk’s takeover deal. And, Pimco’s Erin Browne explains her bear market playbook.

Carl, thank you very much. Welcome, everybody, to Overtime. I'm Scott Wapner. You just heard the bells. We are just getting started here at Post 9 at the New York Stock Exchange. In just a few minutes, I'll speak live with PIMCO star portfolio manager Erin Brown and get her current playbook on the markets today. Osprey's Dwight Anderson, a so-called Tiger Cub, is with us on the life and legacy of hedge fund pioneer Julian Robertson, who sadly passed away today at the age of 90. We'll get his reflections coming up. We'll begin, though, with our talk of the tape, whether stocks are set up for a big Friday fall or positioned now for another leg higher. Let's ask Virtus Investment Partners' Joe Terranova with me here on set, CNBC contributor, member of the investment committee.

The state of the rally is where I want to begin with you. Mike Santoli said the market is caught in between ahead of Powell. What do you think? Well, first of all, today was a classic August. It feels like a Sunday day. The volumes were incredibly light, but I'm still, Scott, inclined. And I know I'm in the consensus and the emails are going to come in really quickly and I don't look at Twitter a lot, but I'm going to get the negative tweets. I'm still inclined to

try and find a spot here within the moving averages to take and reestablish another long position in the queue. So, OK, I know you were talking about that the last couple of days. Why are you more inclined to buy today than you are to sell? So I think, and listen to the halftime report, Josh did a great job talking about this. You bump your head against the 200-day moving average. Okay, that's where the momentum, it disappears for the bulls. Yeah, well, you knocked your head right on that wall. Knocked your head right on it. And you fell back. That's the problem. You fell back. Okay, now you're falling back into the support. You're falling back into the 100-day moving average. You're falling back into levels where the market actually began its advance. And you're

doing that concurrent with positioning, as reported by the CFTC, that shows us leveraged funds and asset managers are still maintaining overwhelmingly bearish positions. In fact, the extent of those bearish positions we have not seen since 2008. So I'm going to take that low risk trade. I'm going to take that low risk trade here at some point on the expectation that guess what? We make another return to the 200-day moving average because I think that's where most people in the market are actually going to feel the most pain if you break above the 200-day moving average because Scott didn't have position for it. Better hope Powell's not hawkish on Friday because you're going to have a problem with that, right? How's the market going to get back towards the 200-day moving average

if Powell on Friday is hawkish? Well, in the near term, if he is overwhelmingly hawkish, you're correct. We're not going back to the 200-day moving average. So you're going to need a little help here. Overwhelmingly. I mean, what if he's just hawkish? What if he leads you to believe that that pivot that everybody was focused on for a while after his speech in the last meeting was junk? No, there is no pivot.

Wait a second. The Fed's already done that. The Fed's told you there's no pivot. Maybe there's a pause at some point. Maybe there could be a pause, but there's no pivot. I think the Federal Reserve has done suggest, look, 75 basis points. We told you in the press conference in July, 75 basis points, that's highly unusual for the Federal Reserve. Don't get comfortable with us doing that at every meeting.

If he kind of hints that, well, maybe we are going to be consistently giving you 75-point hikes in the coming meetings, that's overwhelmingly hawkish. You're not going back up to the 200-day moving average at that point. All right. So Jan Hatzius Goldman Sachs a little while ago, quote, we expect Powell to reiterate the case for slowing the pace of tightening laid out in his July press conference and the July minutes released last week. We continue to expect the Fed to slow the pace of rate hikes to 50 in September and 25 in November and December. That's a bullish scenario for the market, isn't it? So that's where you return to the 200-day moving average.

And again, is the street positioned for that? I don't think that they are. Look, I don't want to come across as overwhelmingly bullish, where I think we're taking out. I'm not saying we're taking out 4,800. I'm just trying to identify a trend within a trend if I could find one. Right. I actually think the market is going to trade between, you know, thirty six hundred and forty eight hundred for an extended period of time while we work through the course of time. But back to Jan's note, if in fact the Federal Reserve chairman is indicating

that guess what? Seventy five basis point hikes, that's highly unusual, and we're no longer leaning in that direction. We're going to give a 50 basis point hike, and we're going to take a look in November and December and see what we need accordingly. That's welcome news. Now, what does he need? Don't make plans on Tuesday, September 13th. I know you're not, but that's a big day, isn't it?

It's funny, though. When you say a trend within a trend, I'm thinking, OK, you're gaming for a little bit of an uptrend within a bigger downtrend, because, I mean, we're still in a downtrend. OK, so what's wrong with taking 5% out of the market? I mean, back in July, when market broke above, the S&P broke above the 50-day moving average, you were able to capture an easy 10% if you rode that momentum wave higher. I think you could do something similar. You could do something similar with a break above the 200-day that's catalyzed by the

chairman being less hawkish as you move to September 13th when at 8.30 in the morning you get CPI and, OK, here's reality. It potentially could be a very sobering morning if inflation doesn't moderate. All right. Let's expand the conversation. Bring in Victoria Fernandez of Crossmark Global and Marcy McGregor of Maryland Bank of America Private Bank. Ladies, it's great to add you to this conversation. You heard, Victoria, what Joe said. He's predisposed to be a little more bullish than not. Are you? No, not really, Scott. And normally Joe and I, our thoughts align pretty well. But, you know, I was just speaking with some clients about an hour ago, and they asked me the question about, are you bullish, are you bearish?

And I said, I think, unfortunately, I have to say I'm kind of lukewarm coming into Jackson Hole. I don't think Powell has any choice but to be hawkish in this meeting. You have demand that is still there, even though it's slowing. You've got full employment. The consumer is still there. Retail sales have been mixed, but they haven't been horrible. You've got PMIs that have come down. But at the same time, you've got yields that are steadying out. You've got earnings that were a little bit better than expected this quarter. I just think you have a mixed bag. And I know at halftime you were talking about the fundamentals. And I think that's what we

have to focus on. And I think Powell's going to have to continue to raise rates to be hawkish. And for that, we want to be able to take green days and trim some names and wait for these pullbacks to add to positions. See, Marcy, this is exactly what Santoli was talking about last hour, as I mentioned. It's this neutral, lukewarm, caught in between, not really sure what to do because you're not exactly sure what Powell's going to do. Jan Hatsias at Goldman tries to game it, but it's hard. Yeah, I would call it being on guard. That's where I stand with markets right now. I think Powell is going to be resolute in the fight to restore price stability. And he's not going to spike the football with 8.5% CPI, in my view. So I think this is a market that once we get through Labor Day, you probably have a

little more volatility. And likely, this is a peaking process for inflation. No one number makes a trend. So there's a lot of data to come in. I think earnings expectations are just too optimistic for 2023 if we're seeing peak nominal GDP here in the U.S. So we're staying on guard, seeing neutral equities. I think we're probably towards the top end of a trading range until we get some big resolution on the macro front. I've been on guard for Nordstrom earnings, which I'm told have just crossed. And Courtney Reagan has that for us. Everybody bear with me for a second. Court, what do we see here?

Hi, Scott. Yes, you can see here in reaction in the OT that shares are lower here by more than 8 percent for Nordstrom. The company is putting up slightly better than expected earnings of 81 cents adjusted. The street was looking for 80 on slightly better than expected revenue, just about $4 billion here. It does look like the weakness came from the rack division. So that's that off price division that would more closely compete, say, with a TJX, for instance. Those revenues were higher for Nordstrom Rack, up 3 point or 6.3 percent, rather. The full line store, so the regular department store revenues, grew 14.7%. The outlook, though, really troubling.

The company outlook for the full year for earnings significantly below where the street is, giving a range of 230 to 260. And the street is at 304 here. It does look like they're also cutting their revenue estimates. And the CEO says that while the quarter was largely within expectations, it was the demand and traffic that decelerated significantly towards the end of the quarter, particularly at that RAC division. Back over to you, Scott. You're talking the stocks falling, reflecting exactly that commentary. Courtney Reagan, thanks so much. So Nordstrom's down about 10 percent. Back to the matter at hand. Victoria, the giveback that we've seen last week and then yesterday is sort of going exactly to your plan you thought we were going to go lower but do you think we're going to fully retest the lows or not I'm not sure we

fully retest the lows and a lot of that is because some of the things that we were looking for to tell us we had hit that bottom were just starting to come into play over the last two weeks. The breadth was looking better. Momentum was looking better. You were getting that 90 percent of names reaching 20 day highs, stocks trading above their 50 day average. All these signs that we were looking for were starting to come to fruition. So I think when we say we're going to have a little bit of a pullback here, I'm not sure we go all the way back to the lows, but I do think we have this continued volatility. We're going to have these pullbacks. And I think you have to use them to

your advantage because, as I mentioned, rates are just going to continue to go higher. And I don't think that we can say honestly that we have had peak inflation for the year. I know a lot of people think we have, but let's think about what oil is going to do when we come to December 5th and European sanctions potentially go into play. I think there's a lot more that could happen towards the end of this year that's going to cause some more volatility and allow us to have some pullbacks in the market. I'm looking at, you know, crude today back, you know, towards 100. Marcy, full retest? Not quite. I mean, we got back more than 50 percent of the losses, which typically says you're not

going back to the lows. Yeah, technicals and sentiment have both really improved. I think this nice summer rally, and believe me, I'm taking good news where I can get it, but I think this nice summer rally was really driven by positioning and extreme sentiment. So I don't know that we retest the lows. I agree with Victoria that technicals have really improved, including market breadth. But I think it's going to be a lot about choppiness and a bit of a grind into the end of the year. As much as we may love to forget, an election is coming up. That usually causes some market volatility in September as Election Day approaches. So I think this is going to feel like a bit of a grind for the rest of the year. Yeah, the fall can be unkind to the markets,

as we've learned over the decades. Ladies, thank you so much. Victoria and Marcy, I'll talk to you soon. Give me a last word from you before I steer you in a different direction, just on what you heard from our guests about where they think the markets are going. Again, I think we are trapped in a range. The only solution is through the course of time. However, I wouldn't be a seller of equities given a lot of the positive work that technicals have done here since the beginning of July. Positioning still is overwhelmingly bearish. And if you're going to return, if you're going to break all of this positive momentum and return us back towards

the low, you're going to have to have oil spikes significantly. You're going to have to get confirmation of 75 basis points. And, oh, you're going to have to break the positive structure in Apple. That's a big part of this rally. Yeah. Well, Apple sort of led you up and sputtered a little bit the last couple of days. Makes people a little nervous. 70 percent of the S&P. Tell me how you're going to take Apple down. You'll get the market down with it if you do. All right. I don't know if you had a chance to see Chanos. Jim Chanos was on the half today. Earlier today, he did reveal he is once again shorting AMC, but with a twist. We actually just initiated an AMC short. We were short last year, covered.

We just initiated a new position yesterday. However, and just calm down, apes, I'm actually an AMC security holder on the other side. We actually bought the new ape preferred and we have shorted the AMC common against it. He loved revealing that. You could just tell in the way he rolled that out. But I'm curious as to what you make. I mean, he's playing the spread between the two. That's why he is who he is. He's super smart. It's a clear arbitrage. The preferreds at some point will be converted to the common, which is going to dilute the common and bring the valuation discount, which is, I think, like, you know what, Joe, they could continue to raise capital and use the ape, the preferred, as the mechanism for that. OK, that game only goes on so long. At some point, the common gets diluted and he's going to be able to realize the ARP. I mean, you know, some have criticized Adam Aaron, the CEO. Well, I mean, like Chanos was

critical of him for, you know, taking advantage of his shareholders. The other side of that is that how could he not use the run in the stock, the many different runs to raise capital, to shore up the balance sheet? The shareholders who are allegedly getting taken advantage of have been playing right into Aaron's hands to allow him to do that, haven't they? He's managing the business. He's in the movie theater business coming out of a pandemic. I think he's done an adequate, I'll use the word adequate, I think he's done an adequate job on the other side coming out of the pandemic in managing the business. And a lot of what he's been orchestrating, there's nothing wrong with what he's doing. Well, we're going to find out how it all plays out. It's interesting, nonetheless, and certainly the revelation of

Chano's on both sides of that right now. He also revealed he is short Zoom video. Let's listen to him there. You really have, again, a situation here where the company is saying it's earning $3 in some sense, adjusted EPS. But last night, share-based comp was, I think, close to 80% of their adjusted earnings. And on a gap earnings basis now, they're earning about $1.20 on a run rate. And so the stock at 84, it's still at 70 times. And so we've got to get away from, particularly in these tech companies, just swallowing this adjusted EPS number, because increasingly now it's the tail wagging the dog. I mean, market doesn't have a real appetite for anything that's losing money or not making a lot of money.

What do you make of this particular short that Chanos revealed in Zoom? Well, I mean, we're talking about a company that's giving me single digit revenue growth. I could get more from my burrito bowl at Chipotle. So, you know, that that takes me in that direction. He's correct in terms of talking about the financial architecture surrounding buybacks and the impact on EPS. I agree with that. I also think that a lot of people have not realized that Microsoft Teams is going to be more resilient in an economy that's contracting because the user of Zoom is that small business. So that's going to be the challenge for Zoom as well. I think the white knight, candidly, for Zoom is that someone potentially comes in and either takes some form of an activist stake in the company or someone comes in and tries to buy the company at a reasonable valuation. How do you view all of these so-called stay-at-home or work-from-home plays,

pandemic plays that really ran up during the past two-plus years and now have challenges as growth slows on the other side. I mean, the companies can still do well, but their growth rate will never be back to what it was. I'm thinking Peloton and all these other stocks. These are classic. I always say that recoveries take the shape of a letter. It's either a V, a U, or an L. for all of these companies to ever kind of reset themselves in terms of positive momentum. So I struggle in the ownership of this. And by the way,

remember one other point, the cost of capital was free when these businesses were thriving. That's no longer the case. Joe, thanks so much. All right. That's Joe Terranova with us here at Post 9. We are just getting started here in overtime. Up next, a new twist to Twitter. Shares are lower, a whistleblower sounding the alarm today. What those new allegations mean for Musk's takeover deal. We're live at the New York Stock Exchange. OT, back in two. All right, we're back in overtime following new developments now on Twitter.

Shares ending lower today on news. The company's former security chief has filed a whistleblower report with the government accusing the company of deceiving regulators and focusing on user growth over security. All comes as the company now locked in a legal battle with Elon Musk over his takeover offer. Alex Kantrowicz is the big technology founder. Casey Newton, platform editor. Guys, it's good to see you both. They're, of course, your CN founder, Casey Newton, platform editor. Guys, it's good to see you both. Of course, you're CNBC contributors. Casey, what do you make of this story? Wow. Well, you know, just when you thought there weren't enough twists in this story, here

comes the former chief security officer to give Elon Musk a whole bunch of new things to talk about in court. So there are a lot of allegations in here, and I think it's going to take time to separate the ones that are true than the ones that are false. But I think there's a lot of allegations in here, and I think it's going to take time to separate the ones that are true than the ones that are false. But I think there's a lot that Twitter ought to be concerned about here. Does this, Alex, turn the case on its head? I don't think so. I think that the thing that stuck out to me was the point in there where he actually backs up Twitter's position. and he says that executives are incentivized to avoid counting spam bots as monetizable daily active users. Which undercuts

the main point that Elon Musk is trying to make in this case. That's supposed to try to help them get out of it. So I know on that point in particular I think actually Elon is hurt. You know on this but like Casey mentions there's a tremendous

amount of different issues that are going to be brought out. You know based on this reports not just one thing it's a number of things. And this case always comes down to the anticipation of enforcement. And to get the Delaware courts to do something extraordinary to push this merger through, we now have so much more doubt introduced. So, you know, it's not going to turn the case on its head because, again, it undercuts Musk's main issue, but it might push them to a settlement

much quicker. Do you, Casey, agree with that? I mean, what if what if the majority of these allegations are, in fact, true? So I am not someone who believes that the whole bot excuse is going to get Elon out of the deal. It's clearly a pretext. And there's still no evidence that Twitter has done anything other than what it said it did all along. Also, let's not forget that bots and spam do not appear anywhere in the merger agreement. That said, if this Mudge, the former CISO, he comes along and says, well, there are a bunch of sort of security lapses at this company. They weren't properly deleting user data as they had agreed to with the FTC. Is he able to kick up such a sort of dust storm around that, that Elon somewhere in

there is able to find a new pretext for getting out of the deal? I think that's the real question moving ahead. You know, Alex, it's interesting what Casey just said. It caught my attention, too, right? There's nothing in the merger agreement about, you know, spam or bots or things like that. Why? Because Musk never went through due diligence. And is that what rises to the top over everything else at the end of the day? Well, I think Musk has a valid point where he says, look, we were trusting what Twitter told the SEC. We believe Twitter to have, you know, prevent presented falsehoods to the SEC. And therefore, we're trying to get out of the deal. Now, up until today, you start to say, OK, well, what are you talking about?

You know, your belief is one thing, but where are the facts? And I think that when you have the former chief security officer come in and say, actually, they were lying or they were violating rules. They were breaking rules with the government. They were presenting information that wasn't on the up and up to the government. You know, then all of a sudden, Elon's argument starts to hold water in a way that it wasn't up until this case and that's why I think you see the stock down. You know seven percent today- you see that investors are saying

there's uncertainty introduced. All the sudden Musk's you know central. Argument not not the fact that there are bots but the fact that Twitter might have. You know presented false statements and he was relying on those- you know that's

that's now in in. In public so therefore there's a less of a chance that the. Court is gonna in in public. So therefore, there's a less of a chance that the court is going to rule in their favor. Therefore, maybe Twitter comes in and settles. I think that that might be valid. He seems, Casey, Musk does to be feeling pretty good about this. He tweeted earlier, quote, in case anyone feels like buying a fine whistle. I mean, if anything, it does raise questions. It may predispose somebody now to take a second look, the judge or otherwise, into exactly the kind of information that Twitter had or has regarding this issue and what they did with it, how public they were with it. Exactly. And I think that the real question is going to be what is going to be considered material and adverse here.

Right. Like there are plenty of cases where companies violate things that they told the FTC they were going to do. Maybe they got a slap on the wrist, right? You know, maybe this whole thing results in a $10 million fine. Is Elon Musk really going to be able to say that he, you know, he can't buy the company or that he wouldn't if he had known they were going to have to pay what was effectively a speeding ticket? If, on the other hand, you know, that these allegations get litigated and we find out it was much more serious than that, maybe he has a leg to stand on. At this point, we just don't know. Alex, before I let you go, we didn't even get to the Dorsey subpoena by Musk. What do we make of that? What kind of evidence might he have?

Well, it's hard to say. Dorsey apparently has been disengaged from the company. I mean, we knew this already, but now we're having, you know, people from the top echelons of the company saying that, you know, he wouldn't even take a meeting with them. So how much is Jack Dorsey going to tell us that we don't know right now? I mean, maybe his negligence, you know, in actually running the company is something that becomes, you know, a factor in this case. But, you know, we know that he was friends with Musk and pushed Musk to do this. So, you know, I kind of don't have a lot of hopes for anything Jack Dorsey is going to say to make a big, big difference here outside of the court ruling that maybe he wasn't, you know, spending a lot of time running the company when he was

its CEO. But ultimately, I don't really see that having a major impact. All right, gents, good to have the gang back together again. We'll talk to you soon. That's Casey and Alex joining us today once again on the Twitter saga. In fact, let's get to our Twitter question of the day. We want to know what ultimately happens with Elon Musk's Twitter offer. The court enforces the deal as is. Musk and Twitter settle at a lower price. Musk pays the one billion dollar breakup fee or the court sides with Musk and the deal is off. You can head to at CNBC overtime to vote. We'll share those results later on in our show. Coming up next, remembering Julian Robertson, Tiger Cub Dwight Anderson joins us next to reflect on the life of the hedge fund legend. O.T.'s back after this. It is time now for a CNBC News update with Shepard Smith. Hey, Shep. Hi, Scott. Thanks from From the news on CNBC, here's what's happening. A special prosecutor in Atlanta announcing he will not criminally charge two white police

officers involved in the shooting death of Rayshard Brooks. One of those officers shot him in a Wendy's parking lot after Brooks stole a taser and appeared to point it at the police. The incident just weeks after a cop in Minneapolis killed George Floyd and sparked racial justice demonstrations across the nation. The use of marijuana, psychedelics and vaping has grown to record levels among young adults. That's according to a new study from the National Institutes of Health. Forty three percent of young adults say they used marijuana in the last year. That's the highest level ever recorded by the NIH.

Eight percent say they've tried psychedelics, also a record, and nicotine vaping nearly tripled from five years ago in that category. And a 39 million dollar mega yacht is now at the bottom of the deep blue sea. The Italian Coast Guard releasing this video of my saga sinking over the past weekend off the coast of southern Italy. All nine people on board rescued from the 130 foot boat. The cause still under investigation tonight. Full primary coverage from election coverage from New York and Florida.

Plus, the Twitter whistleblower claims and the water cuts hitting farmers hard in the West on the news right after Jim Cramer. Seven Eastern CNBC. Scott, back to you. All right, Chef. Appreciate it. Shepard Smith. We'll see you then. Hedge fund pioneer Julian Robertson has died at the age of 90. Robertson founded Tiger Management in 1980 with $8 million in assets, eventually growing the firm to more than $20 billion. Along the way, he mentored a legion of managers, many of whom would carry on Robertson's legacy by founding their own firms. One of those so-called Tiger Cubs joins us now. Dwight Anderson is the founder of Osprey Management. Welcome, Dwight. It's good

to have you with us today. Scott, thank you for having me, although on a Saturday like this, it's unfortunate for the reason. Yep, of course. And our condolences, of course, to you and all those who did know Julian. How will you remember him? I'll remember Julian for his generosity. I was one of those people, along with Lee Ainsley of Maverick, actually, who was a double beneficiary in that I was able to attend business school on a fellowship, the Tiger Fellowship, that had originally been given in Julian's honor by Gil Chris Berg, and then he added to it. And as I said, Lee was one as well, too. And so

that made my ability to actually make it to Wall Street and then to be hired into Tiger Management, which made my career possible. He took a bet on myself and others at an experience level and gave us a responsibility and opportunity that no one else would have at that age. And I'm forever grateful. It's pretty remarkable if you look at the list of so-called Tiger Cubs. This just names a few, including you. You mentioned Lee Ainsley, of course, Chase Coleman, Philippe Lafont, Glenn Kacher, Chris Shumway and so many more. What made him such a great investor and what did he instill most, do you think, in those gentlemen and others who have followed those so-called tiger cubs to found their own firms? So what Julian was, was a phenomenal stock picker and also phenomenal selector of managers, both in terms of corporations and managing capital. He was exacting and focused and gave you as much resources and time for research. Focused upon

getting it right and were you right and the constant questioning of that. Probably some of the best in terms of that was Steve Mandel and the fellows and the other people who were at Lone Pine, whether it was David Craver, Marco Blatta, and Andreas Haugerson over at Viking. It was that fixation on just constant questioning and work and effort in terms of that. But more than that, he taught us that it wasn't just what you did during the day in the markets. It's what you gave back when the markets were closed. And, you know, one of the things that I'll always remember and try and live accordingly is the generosity,

both in time, but especially resources that Julian gave to so many different charities, like one of my alma maters, North Carolina, or Duke, or Success Academy. He was just phenomenally generous for so many different causes. He was really as prolific off Wall Street than he was on. I was reading, you know, so much has been written, obviously, through the years, but especially once we learned the news today, I was looking at what some have written about the investing lessons that they've learned from him. One was said by this person, a smart idea grounded on exhaustive research, followed by a big bet. And I think the point there was,

you know, have conviction. And if you do and you do your work, don't be afraid to make that big bet. And that's what made Julian Julian in many respects. And others have followed in that light, too. Yes, it was exhaustive research and also willingness to take risk and continue to add to that risk, which was second to none. It's something that I wish I could do it as well. I won't. And so that aspect of his risk taking was was exceptional. And so you can aspire to the hard work. But the aspect that that I won't be able to hold myself equal is is what he did in terms of the size, scale and competence of the bets that he took. Yeah, I hope you'll oblige me a few questions on the market while I have you. I would like to get your thoughts, if I may. You certainly are. You run a commodity based fund. So that's your your wheelhouse, your expertise. So much in the news these days,

whether it's natural gas exploding higher. We've got oil close to 100, got the dollar very much in focus. What are you most focused on today? So I would say that given the uncertainties over the economy going forward in the strength of the dollar, those commodities that are most sensitive to the industrial cycle will wear you. And they have offsetting pluses and minuses of energy cost pressures, which are causing people to shut capacity in, in terms of producing aluminum or zinc, but weakening demand. So those areas, we really focus on, call it, food and fuel right now. Because of aspects of impact to supply, whether weather or geopolitical, we have an incredibly tight food environment out there.

And so the potential prices that you should see in markets like corn, or those that are more energy-related, like forward vegetable oil, bean oil, or even something that is completely economically insensitive, but is also phenomenally mispriced in liquidation in commodity markets like cocoa. I think a good number of these markets could be 20 to 40 percent higher here, whether it's food or liquid fuel. We spoke, oh gosh, it was I don't know if it was four or five, six months ago at this point about some of the ag names that you like. I'd like to discuss one of them with you. BIOX is the ticker. Bioseries, it's the biggest public holding for your fund, right? About an

$800 million market cap? Yeah. Bioseries is a company that I think is going to be the future green Monsanto. Their revenues are exploding. They're exactly in the right position in terms of their customer base and distribution and environmentally friendly products, but also products that work in the more commonly risked drought sort of environments, which we have with a great management team. And so if this company isn't two or three times higher than here, you know, within two years, I'd be surprised. Like every tailwind in a management team that can take advantage of that opportunity. Let me ask you lastly, if I could, about NatGas. I'm looking at it here, you know,

we're above nine bucks again, down big today. But what's your medium-term outlook, given all of the issues that exist globally, Europe front and center, for sure? So when you talk about U.S. natural gas, Scott, we are constrained by the amount that we can actually export, whether it's pipelines in Mexico or LNG. And we're actually starting to see a production and supply response out there.

So this morning, January, natural gas was $10. At this point, we actually think natural gas prices have become more of a coin toss where, you know, if you have, you know, adverse weather, whether heat continuing and then a cold winter, could prices be explosive from here? Yes. But that aspect where prices needed to go higher has actually occurred and you've changed the probability of that outcome. So it's much more uncertain the price path from here. We're going to have very good probable prices for the producers out there. But whether you're going to sustain these levels is much more uncertain. Yeah. We'll talk to you soon. Thank you so much for sharing your thoughts on Julian's life and

legacy. And again, our condolences to you and all those who knew him. Thank you, Scott. All right, we'll talk to you soon. Toll Brother earnings are out. Diana Olick has those numbers. Di? Yeah, and earnings per share for the third quarter came in at $2.35 a share.

That's a slight beat. The street was looking for $2.30. Revenues came in at $2.3 billion. That's a miss. The street was looking for $2.498 billion. But demand is clearly softening. Net sign contracts by value was down 44 percent year over year and by numbers of homes

was down by 60 percent. And Toll's CEO Doug Yearley said, as our third quarter progressed, we saw a significant decline in demand as the combined impact of sharply rising mortgage rates, higher home prices, stock market volatility and macroeconomic uncertainty caused many prospective buyers to step to the sidelines. He did, however, say that they are seeing better demand in August with signed contracts up about 25 percent compared with July just in the first couple of weeks of August. So that's interesting to note. We'll also note, though, that cancellations shot up to 13 percent from a rate of just three percent a year ago. So kind of a mixed bag with Toll Brothers. Remember that this is the luxury home builder, which had been performing better than its peers because it wasn't so reliant on higher mortgage rates. But clearly,

the higher rates over the last couple of months did hurt. Back to you. Yeah, no doubt about that. Diane Olick, thank you so much. Up next, the case for a correction. PIMCO star portfolio manager Erin Brown is here. She's cautious as we ramp into September. So tell us how she is positioning now for what she thinks could be a bigger pullback. All right, welcome back to Overtime. Another tough day for the Dow, which was already coming off its worst day since June. PIMCO says there could be more pain in store for investors. Joining us now is their star portfolio manager, Erin Brown. She runs the firm's multi-asset strategy. It's good to see you again. Why so negative? You're not convinced by this nice rally that we've had? Look, I mean, we've rallied pretty strongly about 11 plus percent off the lows.

And what we've actually seen is financial conditions ease since the last Fed meeting. I don't think that's what Chair Powell had in his mind when he delivered his FOMC address. And I think going into the month of September, which, as a reminder, typically tends to be a weak month, I think that the market is poised for perfection and any volatility or any more hawkishness that's priced into the market, I think you're going to see that felt in the S&P 500. The other thing to keep in mind is that expectations are still for 8% year-on-year growth for 2022 and another 8% for 2023. That is not a slowdown or a recessionary environment. And I think right now, given the

outlook that we've heard from companies, we just heard from Toll a few minutes ago, the outlook is weakening. And I'm concerned about that. Hawkish on Friday. Is that the biggest risk at this point? What are your own expectations? You know, I think right now the fixed income market and the equity market are sending very different signals. I mean, since the FOMC meeting, we've seen, you know, Fed rate conditions and hikes be, you know, sort of priced into the market. And we've seen a lot of the dovishness priced out of the fixed income market. But you haven't seen the same with respect to equities. And so that divergence, I think, will converge, you know, following the the the Powell's address later this week.

With respect to what I'm expecting, I think that he's going to try to walk back some of the dovishness that's been priced into the equity market and some of the financial condition easing that we've seen. And so I think he's just going to sort of level set that given the still elevated inflation that the Fed's going to continue to hike. Yeah, I mean, you're not so you're not a believer in this peak Fed hawkishness. I mean, so what happens if they they can remain on their hawkish and, you know, hiking trajectory, if you will. But what if that's fine as long as it's not 75 basis points and then 75 basis points. The market seems to be willing to withstand, let's say, 50 in September and then below that in the subsequent meetings. Do you buy that at all? No. I mean, I think that right now we're still in a period where inflation remains too high relative to expectations. And even in the Fed's more optimistic expectations, they still see the trajectory for inflation at, you know, sort of terminal rate being around 3%, which is not a

level that I think that the Fed would be comfortable with over the longer term. So I think that the Fed will continue to have to keep rates tight, keep financial conditions tight in order to bring inflation down. And that is not something that's currently priced into market expectations you know the market is expecting i think within equities that we've already passed you know sort of peak hawkishness and we've passed peak inflation and while headline inflation does look to be softening you know the core inflation will remain high for the next couple of months and we'll continue to see that feed through. And at the same time, we're seeing conditions weaken economically at a pace which

is quite fast. I think given some of the ISM and the PMI numbers, the ISM and the PMI numbers that we've had over the last month or so, we should be at levels that are much weaker than current levels with respect to equities. And that's not currently, I think, reflected. Given that's your view, what area of equities would you run away from the fastest here? Yeah, I think that there's two areas. And Dwight sort of focused, I think, a little bit on it in his earlier comments. I think industrials right now, just because of the high input costs, because of the run-up that we've seen over the last six weeks, and because of the demand that's softening, is really poised for correction. The other, and this is sort of related, is I think

the shippers and the truckers are also two sectors that I'd be taking a closer look at in terms of shorting those stocks as well. I think, you know, when you look at the industrial sector, it's being hit by a lot of cross-currents right now that are very challenging. And the price is not reflective of that. Aaron, thanks. We'll talk to you soon. That's Aaron Brown of PIMCO joining us once again today. Up next, we are tracking all of the biggest movers in the OT. Christina Parts and Nevelos is standing by with all of that. What's on deck? Are you, Scott, and everyone watching right now, a kind of do-it-yourself kind of car person? Well, one company is predicting prices for car parts will continue to rise, hurting its DYI business. And after you fix your car, you may want to walk and take a break in that recliner of yours.

Sales are up. I'll have those company earnings right after this short break. All right, we're back in overtime. Take a look at shares of BioSeries Crop Solutions. The ticker is a BIOX. That stock is soaring on the back of those positive comments just moments ago from Osprey Management's Dwight Anderson. It is the top holding, the top public equity holding for his firm. And you can see it's up about 13 and a half percent in the OT. There are many other movers, which Christina Parts and Novalos is tracking right now. Christina. Thank you, Scott. So the parent company of Credit Karma and TurboTax, Intuit, is seeing its shares right now

surge in the OT up over 4.5%. And this is an all-important quarter because it was tax season, we all know that. And the company beat on Q4 revenue, but revenue guidance fell light for Q1. The board, though, did approve a new $2 billion repurchase program, also helping shares. Let's move on to my pun before. Shares of Lazy Boy definitely not reclining. Up higher in earnings than a sales beat. The CEO did say they now need to focus on working on that backlog and reduce their startup costs at their new plants in Mexico. You can see shares are up, whoa, 7.8%. I just wanted to draw for that reason. And then advanced auto

parts falling 5%. Management says they believe inflation and year-over-year increases in fuel will unfortunately continue to put pressure on all customers who like to build and fix their own cars. Full year guidance lowered. Scott, are you really a fix-it-yourself kind of guy with cars? No. You don't strike me as that. Not when it comes to cars. I mean, I'm not even going to fake it. No.

But I appreciate you asking and thinking that maybe there was a chance that I was. I didn't think that at all, but yeah. I didn't think so anyway. Christina, thank you. Bye. Christina Bartz and Avalos. All right, still ahead, Mike Santoli with his last word. And coming up on Fast Money, top oil analyst Paul Sankey digging into the energy market.

The shocking problem, he says, is facing the supply side. Don't go anywhere. Overtime's back in two. Last call to weigh in on our Twitter question of the day. We want to know what ultimately happens to Elon Musk's Twitter offer. You can head to at CNBC overtime. Please weigh in. We'll give you the results. Plus Santoli's last word when overtime returns. To the results of our Twitter question, what will ultimately happen with Musk's Twitter offer? The winner settle at a lower price with 40 percent of the votes. Maybe that whistleblower account influences

that. Mike Santoli is here with his last word. And your big word today was we're caught in between. I heard you say that earlier. We absolutely are. Obviously, we're in pullback mode, but still well up off the lows. We're waiting clearly for something when it comes to Jackson Hole, even if it's just for it to be over. Maybe so. It's not the kind of day where you want to draw really grand conclusions, but super weak home sales down 50 percent off the high. And the same day we had a contractionary services number and PMI services number and the market was flat. To me, it says what we really want out of Powell is for him to acknowledge that a lot of the work of the Fed has been done. It's not going to be an all clear. It's not a mission accomplished.

But it's basically saying much of what needed to happen has happened. And we can see our way toward a even if it's higher for longer rates, it's no longer chasing inflation up with rates. Here we are again to sort of content, if you want to use that word, with so-called bad economic news, theoretically being good news because it does cause, if nothing else, a Fed slowdown. Takes the edge off of the Fed's urgency, perhaps. So again, you don't want to extrapolate too much. Yeah. I gather in the minute that we have left that you have, if not written a lot about Julian Robertson over the years, you have thought about what his meaning is to Wall Street, right? That everybody who runs money in some respects owes something to Julian Robertson,

who passed today at the age of 90. That's sad news we learned a few hours ago. Sure. Look, I think for one thing, it's a dialing back to an era of Wall Street where you could have a certain type of temperament. You're not a trader. You're a common sense value investor. And he was able to actually build wealth in that mode. You can't get away from the fact that, you know, the tech bubble kind of knocked him out of the game because he would not really succumb to a lot of what was going on in the markets right then. You could treat that as something that is a capitulation or as an expression of, listen, it doesn't make sense to me anymore. I'm going to back away. His legacy lives on, I mean, through his incredible philanthropy, but also the Tiger Cubs, like the Dwight Andersons who came on today. The coaching tree is pretty strong, as you might say.

Yeah, absolutely. All right. We'll see you tomorrow. Thanks for your insights. That's Mike Santoli. Fast Money's now.