Closing Bell - Closing Bell Overtime: Wes Edens On Brightline West Breaking Ground in Las Vegas, the Fed and The Risk Investors Are Underappreciating; What’s At Stake Tomorrow For Tesla 4/22/24

Episode Date: April 22, 2024

Markets bounced back today after a rough week. Bespoke’s Paul Hickey breaks down the market action. Earnings from SAP, Cleveland-Cliffs, Nucor and Cadence Design Systems. RBC analyst and Tesla bull Tom Narayan previews Tesla earnings and the stakes for the EV maker. Wes Edens, Brightline founder, on breaking ground for the Las Vegas to LA high-speed rail line. He also talks energy markets and the risk the market isn’t properly accounting for. Former Commander of the United States Central Command, General Kenneth McKenzie, on the geopolitical risk in the world and foreign aid bills. 

A bit of a rebound to start the week. The S&P 500 snapping its six-day losing streak as stocks gain back some of that ground to start this week. That's the scorecard on Wall Street, but the action is just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan with Jon Fort. Yeah, it is a big, big week for earnings, and today's a great way to start it off with reports on the way from SAP Cadence Design Systems, Nucor, and Cleveland Cliffs are going to bring you those results. And look ahead to Tesla tomorrow, which has had a brutal stretch of trading. Plus, we'll talk exclusively with Wes Edens, billionaire investor and owner of the Milwaukee Bucks, about his high-speed rail project breaking ground today in Las Vegas

and his thoughts on the market and when the Fed could cut rates. Well, let's get started with the market and a bit of a comeback after last week's turndown. The Nasdaq climbing 1%, NVIDIA near the top of the pack. Joining us now is Bespoke Investment Group's co-founder, Paul Hickey. Paul, happy Monday. So how much do you believe this rally in a week where we're going to get so much new information from GDP, inflation reading to, of course, all of these earnings? Oh, yeah. I mean, the earnings, I think something like 38 percent of the S&P's market cap is reporting this week. So so far, earnings season has been pretty weak for S&P 500 companies in terms of stock price reactions. We've seen companies, whether they beat EPS forecasts or miss forecasts, from the open to the close,

investors have been selling them. And what the market's been doing overall is declining from the open to close, too. So investors are taking profits. What I would say, though, is what's really encouraging about today and what you often see during, you know, when you see a market low and then a rally is you get that up open, you get that sell off in the morning, the weekends get out and people start to think, oh, gosh, here we go again. But then the market today actually turned around and rallied again. So I think if you're looking for silver linings after a week, which has been pretty brutal as far as just relentless selling pressure, today was a nice break from that.

Okay, so I'm hoping the big picture. Now, tomorrow, from earnings before the bell to after the bell, I want to single out Pepsi, UPS, Tesla, Visa. The temptation, of course, to pay a lot of attention to Tesla because Elon Musk. But which of those names do you think is going to give the most relevant signal about the state of the economy and maybe the markets? You know, I think, well, Visa, if I had to choose one, I would put Visa because we, you know, it'll give us a good read on spending on the part of the consumer. Pepsi, what we'll be watching for there is the margins.

Consumers are starting to push back. There's only so many times you can raise the price of a bag of Doritos. And eventually investors are going to say no more. And so we'll like to hear about that. How are price increases? Can they keep taking more price here? And we'll like to hear about that. How our price increases. Can they keep taking more more price here? And we'll we'll see how that goes. But so I would say this is the big one. And then Pepsi after that. All right. Cadence is out. We're going through those results. We're going to bring them as soon as we have them ready for you.

In the meantime, Paul, what matters more right now? Is it earnings or is it the run up we've seen, the backup we've seen in yields, especially on a day where treasuries were pretty sanguine today, which perhaps helped stocks with this start to the week? So I would say earnings. I think all of this, you know, we so much focus on the Fed and I just wish we could ignore it more because the earnings are what's driving things. You know, as we've got all the way back in December, we were saying the worst thing for the market would be is if the Fed cut rates in March, because if they cut rates, there's a reason they have to cut rates and things aren't looking so hot. So I don't necessarily think we need to see the rate cuts.

The economy isn't, you know, running at all cylinders here, but it's still doing well. And so I don't think we necessarily need to see the rate cuts and interest rates as far as the longer end of the curve. I mean, whenever you see a rapid increase like we saw in the last few weeks, that's going to make investors nervous. But if we can see some stabilization, you know, that's a good thing. And what's really been interesting, you know, you look for the reasons for this sell-off that we've seen in the last three weeks. The fact that gold and the dollar. Paul, I'm going to interrupt you. We're going to go to Christina Parts Neveless for Cadence Design Earnings.

Yeah, so Cadence Design, what we're seeing is an EPS beat of $1.17, four cents higher than what the street anticipated on revenues for Q1 that basically came in line. The company citing a record Q1 backlog, which sounds great. This is a company that makes software for chip makers. The problem is the Q2 guidance came in light. So the Q2 EPS guidance is $1.20 to $1.24. Street was anticipating $1.43. So you could see quite almost 20 cents lighter there. And then Q2 revenue guidance, about $1.03 to $1.05 billion, which is also light.

And the stock is reacting down 6% on this weaker guidance despite the EPS beat for Q1. All right. Christina, thank you. Morgan, I'll note also on the full- guide here, the full year revenue guide, the range of 4.56 to 4.62 billion. The midpoint is right about at what the street expected. The EPS guide also, the middle of the range is $5.93. The street was looking for $5.94 adjusted for the full year. So they're not that far off on the full year, but in a chip semiconductor market that's been pretty hot, maybe people were looking for a beat as well.

Yeah. We have more earnings, too. Cleveland Cliffs, those results are out as well. The Steelmaker reporting an EPS miss, 18 cents adjusted. This is versus the LSA consensus estimate of 22 cents. A miss on revenue, too. $5.2 billion versus estimates for $5.35 billion. Just to be about $414 million. This is also lighter than expected.

But Cleveland Cliffs is reaffirming full year guidance despite that Q1 miss. And in the release, CEO Lorenzo Gonsalves saying, quote, with more automotive and less service center business, first quarter mix was richer than originally anticipated, driving both our average selling prices and production costs higher than expected. Also saying on guidance that the company expects to, quote, benefit in Q2 from the lower costs under our guidance, which we have maintained our largest end market, the automotive sector, is expected to remain strong. So takeaway there, improving steel prices, continued strong

demand from auto. Cleveland Cliffs also initiating a $1.5 billion stock buyback. You can see those shares have been flitting between losses and gains, but now down about 2.5% here in overtime. Paul Hickey, we'll go back to you because materials has been in commodities specifically. Oh, I should note, the company's chairman and CEO is going to break down those results in an exclusive interview tomorrow on Overtime at 4 p.m. Eastern. But, Paul, just to go back to you, we have seen a rebound in some commodity prices, particularly on the industrial side, whether it is steel or aluminum. Speaking to Alcoa's CEO and the green shoots they're seeing last week,

copper, we're seeing it too. How does this speak to what's compelling in the market right now and what sectors seem to be outperforming and why? Yeah, so I mean, I think these material companies, especially the steel companies benefiting from this, you know, reindustrialization in the U.S., bringing more plants back to home. So that's going to be a positive. What's interesting is a lot of the market's been breaking down over the last couple of weeks here, the steel

stocks, you know, partially on this tariff news or headlines, but they've really held their trend lines from the lows last year. So that's something interesting to watch here. You know, I haven't seen the whole report as far as Cleveland Cliffs has gone, but it's reacted well to its last several earnings reports. So we'd like to see how this plays out. And then Cadence looks like it's really getting slugged here. Christina had mentioned the backlog was a record. I didn't hear if she said the number or not. But analysts were looking for about $6 billion there. But that stock has reacted negatively to its last four reports, but has done very well over that time. So one day reaction to an earnings report is hardly the end of the world either way.

OK, Paul Hickey, thanks for kicking off the hour with us. And that quarter end backlog was exactly $6 billion. All right, there you go. The Nasdaq finishing the day up 1%. S&P back above 5K. 50-10 was the level there. Let's bring in senior markets commentator Mike Santoli with a look at some sector rotations happening under the surface in this turbulent market. Mike. Yeah, Morgan. So below the surface of this 5.5% coming into today pullback in the S&P,

there have been some shifts around the margins. And take a look here. This is a one-year NASDAQ 100 versus S&P 500 banks. And obviously you'd imagine you'd know which one has been outperforming the NASDAQ 100. But you have seen some inverse action recently where you've had the even though we're kind of pushing out Fed rate cut expectations, which theoretically would be good for the banks. You've seen them stabilize up around these levels and in the last little bit actually converge to some degree. So there is a little bit of a growth into value type of feel to things. I'm not sure you'd want to declare that somehow that's the new leadership of the market,

financials and other value. But it's clear that it's also not across the board selling on a net basis. Now, take a look at consumer discretionary versus staples. This is a very key macro indicator of what the market thinks the consumer is going to be up to on an equal weighted basis. This is a very key macro indicator of what the market thinks the consumer is going to be up to on an equal weighted basis. This goes back a few years. You see, it's kind of rolled over a little bit, although, you know, arguably maybe is still in that kind of uptrend channel from the latter part of 2022. So, so far, you don't want to say it's game over here, but be aware that the market is at least on alert for the idea that the consumer might have a little bit of a struggle maybe a rotation or shift into some of the more value oriented parts of or value perceived parts of the market versus just defensive? Because you do have a consumer that's stretched and

you're going to always buy the staples, the toilet paper or the food items before you go out and you buy the clothing or or other things that are extra. Yeah, that is exactly the conclusion here. And it would be a more defensive market if, in fact, this trended lower and you started to see things like utilities perform. There have been hints in that direction. Hasn't really been, you know, something that you would say is decisive. But, you know, again, you want to just be aware of what the market's implicitly suggesting about the outlook. All right. Mike, thank you. Meantime, SAP earnings are out, and Bertha Coombs has the numbers. Bertha. It looks like SAP coming in at adjusted 81 cents a share on the bottom line.

On the top line, revenue just ahead of expectations, coming in at 8.04 billion euro. As far as cloud revenues, they came in right in line at 3.93 billion euros for the quarter. Software licenses were a little bit ahead at 203 million euros. Companies said it won new customers, including Cintas, Maersk and Sky during the quarter, and that the U.S. and Japan were especially strong, particularly in cloud. Back over to you. Bertha, thank you. Now, Tesla has set out today's market rebound, extending sharp declines from last week, now down nearly 50 percent for the year. So is tomorrow's earnings report going to help kick the stock back into gear?

We'll tell you what to expect next. And later, billionaire investor Wes Edens joins us exclusively to talk high-speed rail, energy, and why he thinks investors might not be fully appreciating the risks facing the markets. Overtime is back in two. Tesla shares sinking more than 3% today, hitting a 52-week low. After the company announced price cuts in a number of major markets, including the U.S., China, and Germany, this as Tesla gets ready to report earnings here in overtime tomorrow. Joining us now to discuss is Tom Narayan of RBC Capital Markets. Tom, you've got a pretty healthy price target, I believe, of $294 on this stock, which is closer to 140, maybe 142 a share. How do we get from here to there?

Yeah, and a big part of this is I wanted to wait until we really heard what happens tomorrow. So far, it's been a lot of press speculation and the like. But my valuation, my price target is really based on autonomy or 50, 60, maybe 70 percent of it comes from robo taxis, has been for a year now. I also am a big believer in FSD and then energy storage. The car business for me is only less than 10% of the business. That said, I am concerned about what could happen tomorrow if it is indeed true that this Model 2 vehicle is either being delayed or shelved to some extent. I do think that will have ramifications near term for the stock and for the company. So for the Tesla bulls out there and maybe a little bit for the bears, how does Tesla

ideally work its way out of this price war and competition with Chinese EV makers who have a pretty low cost of labor and whose cars are getting decent reviews? Like what's the way out for them? Is a cheaper car really going to help them? I actually think it is. They do have the best economics in the industry. Let's not forget, a lot of those Chinese cars are being subsidized by the government over there. So I actually think, you know, they do have the best economics. I do think a Model 2 vehicle would have been or could still be very powerful. They get the IRA benefit in the U.S. They make their own batteries in the U.S.

China is always going to be very competitive. It's also for the Chinese companies. Look what happened with BYD and the like. We're in an EV slowdown right now. That's definitely happening. But remember, this is just the car business. I think it was always going to be a challenge. What I think Tesla needs to do is really focus on FSD.

It's strong suit. It has a great version 12 product out there. Do Robotexy as well. But I do think that the Model 2 is very important to get FSD out there. That is where I think most investors are focused on. And they'll really be keenly interested in hearing what they have to say tomorrow on the earnings call. OK, so sticking with that thread and the fact that if I heard you correctly before, you said

for you and how you're valuing the company, cars are only actually the cars themselves are only 10 percent of of the value. Does that mean that you're looking at Tesla as more of a tech play and less of a peer to the automakers? And if so, then how much hinges not just on FSD and on robot taxis themselves, but also on regulators actually green lighting some of these technologies and some of these capabilities, which has been such a long time coming? Huge, huge. This is really what it comes down to is they really need regulatory approval. I think what's happened is they had this FSD version 12, which was so significant and so powerful and worked so well that I think Tesla realized, OK, now this product is so good,

let's go ahead and maybe go with the Robotaxi and we'll get the regulators to approve it. So we'll find out more tomorrow, but I long believe that Tesla has this stat, they're five times safer than the average car. Regulators want to save lives. So I do believe ultimately that they'll get that support, and that's probably why they pushed and dropped the price on FSD to get the take rate higher. But I do believe you're right. Regulatory approval is the critical part to this. And I do want to say it is true. Cars is only 10 percent of my valuation, but they do need to sell cars to get FSD in them and on the road and people paying for it. Because I don't think it's very easy to license FSD to other car makers.

They even said as much. So the car business on its own is not a big value, but you need the cars on the road to get the software in them. All right, Tom and Ryan, thanks for joining us. We'll be watching in overtime when we get those results about 24 hours from right now. Well, Fortress Investment Group co-founder Wes Edens has his hands in businesses from energy to sports to a multi-billion dollar high-speed rail project that just broke ground today in Vegas. Up next, his view on the real risks facing investors right now and his read on the Fed's

rate path. Plus, an update on the reported talks between Salesforce and Informatica with those shares moving in opposite directions today. We'll be right back. A milestone for American infrastructure today is the country's first high-speed rail project broke ground in Las Vegas. The privately owned Brightline West will span 218 miles between Southern California and Vegas with all-electric trains running at speeds as fast as 200 miles per hour. The $12 billion project is expected to be operational by 2028.

Brightline's founder, Wes Edens, the billionaire investor and entrepreneur who also co-founded Fortress Investment Group, is CEO of LNG operator New Fortress Energy, and already oversees the Brightline Passenger Railroad in Florida, joined me exclusively today. Brightline West received $3 billion through the federal government's infrastructure law, and I asked him how capital markets will be used to help fund this first-of-its-kind project and why it's a compelling investment. The bulk of the capital will be raised in the debt markets.

We've got, it's heavily equitized as well with a combination of the grant from the federal government as well as private capital. But the $12 billion, you can think of the capitalization of it as a big loan from a consortium of banks, a big chunk of private activity bonds, and then equity from the government, equity from ourselves. The partnership with the government, and it's more than one government, it's the local governments, it's the state governments, it's the federal government all together, that's the real blueprint, that's the real coalition that we needed to make this happen. Yeah, does this

represent sort of a new way to think about public-private partnerships and engaging investors in a more meaningful way? I think it does. You know, I think that when you look, there's a lot of history for the government helping to kind of start industries. So obviously, they were very, very, very involved with SpaceX originally. They're involved with the, you know, kind of the subsidies to help the kind of the electric vehicles get underway. More recently, some of the stuff in the chip side. So this is where government can really be a catalyst to help things get started, get proof of concept, then let the markets take off and go themselves. That's what's happened in other industries. It's what's going to happen here as well. What will it take to turn a profit? Just people showing up. But, you know, when you look at it, you know, these intercity rail systems

around the world are all highly profitable. So basically, you know, what you have is just the two coefficients that matter is how many people are going to ride it and how much are they going to pay and how many people are going to ride it. There's about 50 million trips that happen between Las Vegas and Los Angeles and vice versa every year. 85% of those happen by cars. So simply having those people get out of their cars and get onto this train and have a two-hour train ride rather than a four or five or six-hour car drive is obviously a a very very compelling opportunity. In terms of revenue, I'd say when you look at all the train systems like London to Paris or Paris Leon or

Madrid Seville or Rome to Milan, they average about 50 cents to a dollar in revenue per mile. Amtrak in this country, the Acela service from New York to Washington DC is about a dollar twenty-25. At those kind of riderships with these 50 million trips to kind of like, you know, try and get onto your system and those kind of revenues, this will be a highly profitable system. So I think, you know, again, the first one is the one that's the most important and of the high-speed rails. We'll get this one up and going. And I think it will then catalyze a lot of development all over the U.S. and these other similar kinds of city pairs. And if I shift from one type of infrastructure to another, you're also very heavily involved

in infrastructure on the energy side with natural gas, with New Fortress Energy. I realize earnings coming up in a couple of weeks, but to the extent you can walk me through some of the dynamics and your outlook on the energy complex right now. Yeah, I think that, you know, it's been amazingly resilient to me in the world's markets, considering all the unrest in the Middle East and all the potential disruptions and whatnot. Obviously, the Russian-Ukraine war that caused prices to spike up heavily has come down. They still remain elevated, though. There's no question that gas is really a primary transition fuel force around the world, especially with all the needs we have for power, power just for people who need power, and obviously all the impact of AI and data centers and everything else. So gas is a sure thing, and it's needed in that way. We've built infrastructure in

these different markets around the world to bring gas and power into the markets. On the flip side, we actually have built our first liquefier. It's offshore in Mexico. And as you said, we have earnings coming up here, so I'm not going to talk out of school about it. But we're extremely optimistic with the prospects for that. We hope to have big news out of there shortly in terms of that now turning on and being productive for us. But it's a really interesting time in the energy markets. But I think the one thing that's very clear to us is that gas is going to play a huge role in terms of this transition of energy, both in terms of domestic use and then also this incremental, you know, massive demand you're going to get out of the data centers and the AI, because those things are big energy hogs, obviously.

And of course, we've talked about it before, the fact that it's a critical bridge fuel. One more question on this, and that is, have you been impacted by the Biden administration's halt on some LNG exports and permits? We're quite fortunate that it doesn't really impact us in the short term. But long term, I do think that, you know, for energy security around the world, you know, the U.S. is the biggest exporter of LNG still today. It's a huge geopolitical chip that we have to play to help out different economies and countries around the world. So I'm obviously a big believer that it should be rolled back

and they should allow us to keep exporting. And obviously that would help us as well. You have your hand in so many different types of projects and businesses. If I take a step back, I mean, how would you gauge the current investing environment? You know, it's an interesting time. I mean, obviously the political environment is something that people have to pay attention to. I think over 50 percent of the world's population is going to elect a new leader this year. So that's just, that's unprecedented.

That's a big amount of change. You know, I think I've said before that, you know, the amount of like geopolitical risk in the world is greater than any time that I remember. So that always puts an asterisk next to it. That said, there's still real growth in the U.S. There's still real growth in a lot of economies around the world. So there's a lot of reasons for optimism. But I think that these big, you know, you know, kind of events that could really move the markets in a material way or something to pay attention to. And so on that

side, I guess we're probably a little cautious. OK. Do you think investors fully just looking across markets, across asset classes, do you think investors fully appreciate how acute that risk is? I don't, actually. I think that, you know, the people are a little complacent that none of these regional conflicts are going to turn into something more significant. Of course, I have no insight on this. I'm not a political expert by any means. But, you know, there's a number of different regional conflicts that have the potential of being something which is more severe. And I think that that could be a big shock. And so I think that, you know, it's easy to be complacent about something that isn't in your consciousness today.

But I think, you know, the three or four major kind of conflicts around the world, I think they do have a real, you know, they have the real potential for something to escalate into something more significant. And that's something for people to pay attention to, in my opinion. Yeah. Meantime, here in the U.S., we have had economic data that's been more resilient than some folks have perhaps anticipated. You've seen this stark repricingime, here in the U.S., we have had economic data that's been more resilient than some folks have perhaps anticipated. You've seen this stark repricing regarding rate cuts in the markets and a real run up in rates over the past few weeks. Your thoughts. Does it continue? You know, I think that obviously the Fed is doing their job to try and keep inflation in check.

And so that's obviously a that's a key principle. That's the one key principle that they're focused on. It's probably been a little bit slower to come all the way back down, and that's what's caused a pause. I still believe that you're going to get rate cuts here sometime later this year, and I think that they'll be appropriate. Longer term, I think that, you know,

the U.S. needs to get their fiscal house in order. I think that's a real issue for the U.S. I mean, you know, you can't continue to spend more than you bring in. I mean, it wouldn't work for you, and it wouldn't work for me, and it doesn't work for the country.S. I mean, you know, you can't continue to spend more than you bring in. I mean, it wouldn't work for you and it wouldn't work for me. It doesn't work for the country either. So I think that longer term, I think that that's a structural issue that really needs to be focused on. But I do think the rates are likely to come down over the course of the next, you know, six to 12 months. And then we'll go from there. Are you seeing signs that disinflation is still afoot or is it looking sticky across your different businesses and from your sort of key vantage point as well?

Yeah, you know, a lot of the price of materials and goods, I think, have come down significantly. The thing that is sticky is labor, right? So, you know, if you're paying somebody, you know, $30 an hour and they get a raise and they're at $35 an hour, the one thing you're pretty sure about is they're not going to be happy with $30 going forward, right? So I think that the wage inflation is something to point out. And the labor markets have been so robust, right? So there's been, you know, increased number of jobs and there's fewer people to fill them. So that's probably the one sticky thing.

And I'm sure that that's the one aspect of it that the Fed is really focused on. It was a wide-ranging interview. He's also the co-owner of the Milwaukee Bucks and Aston Villa. You can catch this entire interview on CNBC.com because there is more, or by scanning the QR code on your screen following us on LinkedIn, where we post a ton of exclusive content where we do talk about those sports teams, John, and even more, get into even more granular detail about this infrastructure project. Interesting stuff.

And now time for a CNBC News Update with Kate Rooney. Kate. Hey there, John. The head of Israel's military intelligence resigned today, becoming the first senior official to step down in the aftermath of the October 7th attack by Hamas. It comes as the State Department said today that as it pushes for an agreement on hostages, Hamas has, quote, moved the goalpost in hostage talks and change demands. Europe, meanwhile, is the fastest warming continent at nearly twice the average global rate. That's according to a joint report from the UN and the European Union's climate agency.

The European report focused on the human impact, writing that the related economic loss last year was more than $14 billion. And former President Trump is set to receive an additional 36 million shares of Trump Media tomorrow, a so-called earn-out bonus worth about $1.25 billion. That's based on today's stock price in order for him to be eligible for the extra shares of the Truth Social parent company. The price needs to hit a minimum benchmark of $7.50 a share by close of trading tomorrow. Closed today at 35, guys. Back over to you. All right. Okay, thank you. Well, no deal, at least not anytime soon. Data management firm Informatica announcing today it is not currently

in acquisition talks. That sent the stock down 10.5% in the day's trade on disappointment that Salesforce will not be buying the company. Salesforce up one and a quarter on that news. Informatica also pre-announcing that sales and profit for the March quarter were at the high end of the guidance ranges and reaffirmed its full year outlook. Full results are due May 1st. Informatica's market cap sits right around $10 billion, and the company argues it stands to benefit as customers organize their data

ahead of major pushes into AI. Well, after the break, Mike Santoli is going to come back with a check on commodity inflation and whether the recent upturn in copper prices is something investors should be concerned about. And later, why tomorrow is another key day for TikTok's future, following the House vote over the weekend on a bill to potentially ban the app. Welcome back to Overtime. We're sticking with steel. New core earnings are out. Bertha Coombs has the numbers.

Hi, Bertha. Yeah, like Cleveland Cliffs, new core is well disappointing on both the top and the bottom line. Morgan reporting earnings of 346 a share. The street had been looking for substantially more than that on an adjusted basis at 366. Revenues came in at 8.14 billion. Analysts had been looking for about 8.26 billion. And the company is warning that second quarter will be lower sequentially. The street had been looking for a slight decline in the second quarter, but given that they've already

missed, this is a real disappointment. They cite high raw material costs. Prices were up sequentially. Average prices were up 1 percent sequentially, but average prices that they charged were down 3% year over year. Steel mills, which is the area that really has been going the strongest, where the earnings they claimed last month were stronger on higher prices and volumes, they disappointed there on sales at $4.68 billion. According to FactSet, the street was looking for more like $5.25 billion. You can see shares down just over 5.25%. Back over to you.

All right, Bertha, thanks. Results like that test investors' mettle. Speaking of, copper has had a strong run in the last two months, but Mike Santoli is back to put things in perspective. Hey, Mike. Yeah, John, it has really been an impressive little spurt in copper prices. A lot of stories behind that aggressive restocking in China. Obviously, the electrification theme has been powerful.

And you see that acceleration we've gotten here, HG, that is copper prices on the commodity exchange. And this is the Goldman Sachs Commodity Index put up against it. This is a five year chart. Wanted to kind of get it in there for perspective that we're not really carving out new ground to the upside here in either one. GSCI, yep, we got, you know, cocoa prices are flying along with copper. Gold, of course, has been very strong, but the average agricultural commodity, not doing much. Natural gas still cannot get out of its own way. Oil still range bound even after the good run. So I think it's not necessarily time to say that somehow we have this broad, persistent inflationary move, a reflationary move coming from the commodity markets, even though we're going to get less help in disinflation from this area, John.

I'm looking at the right side of that chart and the separation that's happened since the end of 23. And even though that zero and that 50% are kind of close together, I mean, that's quite a bit of separation between the overall commodity index and copper, right? Yeah, and look at this one over here. Okay, so you obviously have had copper can outperform for a period of time. I don't know that it's telling you anything specific about sort of the rest of the real asset market. Usually it means global demand in general is picking up for the industrial economy. So that could be a net positive thing. I just don't know

if we want to extrapolate. I think what I'm really responding to here is a lot of the chatter around commodities seems a little bit overexcited relative to where the prices have so far gotten to. But we'll see if there's more on the come. All right. Mike Santoli, thank you. Up next, the retired four-star general who most recently ran U.S. Central Command on the big Israel, Ukraine, and Taiwan bills heading to the Senate and what they will mean for the defense industry amid rising political tensions. Stay with us. Welcome back to Overtime. Geopolitical tensions in the Middle East and beyond remains a big wild card for investors. Today, the intelligence chief of the Israel Defense Forces resigning over the failure surrounding the Hamas-led attack in October.

Meantime, the House passing a $95 billion aid package for Israel, Ukraine and Taiwan on Saturday. The legislation now moving to the Senate. Joining us now is former commander for the U.S. Central Command, General Frank McKenzie. General, welcome to Overtime. It's great to have you on. Good to be here today. Thanks for having me. So I do want to start with what we've seen in the Middle East, because over the last three days on the heels of Israel's counter response to Iran, which reportedly was much, much smaller than originally intended by that country. It does seem like markets and perhaps the general public is breathing a sigh of relief that

we've avoided escalation. Is that how you see it? I think the Israeli response was carefully crafted to send just the right signal, enough to let the Iranians know they're capable of reaching out and touching them in very hurtful ways if the Iranians continue along the path they started. At the same time, it reassured Israel's friends and allies that they were going to be responsible going forward. And here's the key thing. The Iranian attack on Israel of last weekend was a failure. It was a significant operational victory for Israel. And Israel's task in the aftermath of that victory was to find a way to fashion it into something strategic. And I think by choosing the method of attack and the scale and scope of the attack that they did,

they went a long way towards doing that. So I think it was all in all a very good thing for Israel. I think today Israel is much stronger in the region than they were before. And I believe Iran is gravely weakened. And to that point, 300 plus missiles and drones is a very meaningful attack, as the U.S. administration has has discussed at length over the past, call it week. But one of the other things that in addition to the technological capability of Israeli and American missile defense systems and other types of weapon systems, is it draws into the spotlight the cost or the impact on stockpiles

at a time where we know the defense industrial base has been strained with some supply chain issues to try and replenish stockpiles, and we know that now you have lawmakers pushing through this $95 billion weapons and national security spending package. Can we keep pace with what's needed, whether it is Israel or Ukraine or some of these other geopolitical tensions or hotspots that are flaring around the world? Well, I think you laid it out exactly right. While it was a magnificent victory over the weekend, we're on the wrong side of a cost imposition curve. It's a lot easier to build those weapons that are attacking us than the defensive architecture that stopped it. So we need to learn from this. We need

to learn from what's happening in Ukraine. And we certainly need to look at replenishing our arsenal, which is actually depleting rapidly, as you noted, just based on the expenditures in Ukraine and Israel in the Middle East. General, with all these demands, how stretched is the U.S. military capability? So the United States has a remarkably strategically agile military. The aircraft carrier can be moved around the world very quickly. Our fighter squadrons, our bomber squadrons, our other elements of the force can be moved rapidly. And that's our great strength. No other nation in the world can be moved rapidly. And that's our great strength. No other nation in the world can reposition strategically like the United States. At the same time,

we are seeing wear and tear on the force because of continued use. And that's a factor that we need to take into account. I mean, if someone asked me, we need more of some of these kinds of assets, particularly the high-demand, low-demand, high-demand, low-density assets like Patriot batteries, as an example. We need to look at just how remarkably effective those systems have been over the past few years, possibly something we should consider investing more in. Are we learning anything as you watch this about the strategic value of drones when it comes to sending a message that perhaps puts human life in a different kind of position? Drones have changed the character of the battle. I don't believe they're revolutionary. They're evolutionary. There are ways to defend against

drones. You can defend against drones kinetically by shooting them down. You can defend against them electronically by jamming them and doing other things. This is the ancient offensive-defensive step in this dance, though, if you will. People will come up with countermeasures. The battlefield will change yet again. Anyone who believes that some new system or some new capability represents the last great advance in warfare is often tragically wrong. It does cast a light on the ever-increasing demand for autonomous weapons systems, though, and the role that AI will increasingly play on battlefields as well. Which brings me to China, because you have Secretary Blinken headed there this week. We know tensions. This is the pacing threat for the U.S. We know tensions continue to be taught between the two countries. And this technological decoupling

continues most recently with this law that has been or this bill that's been that's going through Congress with TikTok. Walk me through the role that technology is increasingly playing and why it is showing up and materializing in this dynamic between the two countries. Sure. So technology and particularly AI, its application to battlefield systems, allows you to think faster. It allows you to make decisions in microseconds. And sometimes in combat, particularly in high-end integrated air and missile combat, you need to make decisions very rapidly. So what semi-autonomous systems do is they give you the opportunity to machine that, to make those decisions very rapidly. I would argue that we always in the United States are going to want a human being to be in that loop. I'm not certain that the Chinese or the Russians or any one of a number of other nations

share that particular view. But I believe we're a nation of values. We bring our values to combat. We're always going to want to have it. We're not going to sign up wholeheartedly for autonomous battlefield systems. Semi-autonomous systems, yes. Systems that allow commanders to make rapid decisions, to process vast and competing amounts of information, and to find within that information the patterns that are necessary to discern what the enemy is doing. All of those things can be aided by AI. All of those things can be aided by quantum computing. And we want to continue that. But I think the United States will look very carefully at completely autonomous systems.

OK. General Frank McKenzie, retired commander of U.S. CENTCOM, thanks for joining us. Thank you. Well, the clock could be ticking on TikTok's future ahead of Toronto's opening vote in the Senate on whether to potentially force a sale. Coming up, a look at what's at stake for the social media company's future. We'll be right back. Welcome back. Let's check on today's overtime movers. Lots of red on the screen, but we'll start the good news. SAP topping revenue estimates with cloud revenue up 25%. It was down initially, but now fracturally in the green. Cadence Design Systems beating on both lines, but getting slammed down about 9% on light guidance.

Nucor falling after missing on both lines, down just over 6%. And Cleveland Cliffs missing on earnings and revenue, though the company did reaffirm 2024 guidance and announce a new $1.5 billion buyback, still down about 2.5%. And news just crossing, if that isn't enough, that the FTC is going to move to block Tapestry's acquisition of Capri, something that had been reported but, Morgan, is now confirmed. Well, the list keeps mounting there in terms of some of that M&A activity and how regulators are approaching it. It's time could be running out on TikTok as the Senate gets set to take up the opening vote on a bill potentially forcing China's bite dance to sell the social media company. We've got those details straight ahead. And never forget, you can catch us on the go by following the Closing Bell Overtime podcast

on your favorite podcast app. We'll be right back. Welcome back. Get ready for a barrage of earnings tomorrow. In the morning, we will get GE Aerospace, General Motors, UPS, Lockheed Martin, RTX as well. Then right here on Overtime, we're going to get Tesla, Visa, Mattel, Texas Instruments, and many others. Pick your poison in terms of how you want to read through. Well, if that's not enough excitement, tomorrow the Senate is also going to take the opening vote on that TikTok bill, which could force a sale of the social media company, at least in theory. Emily Wilkins has a look at what's at stake. Hey, Emily. Hey, John. Well, yeah, the House passed a bill that could ban TikTok, and now it's the Senate's

turn. The measure would force TikTok to divest from its parent company, ByteDance, in as little as nine months. And the Senate does appear likely to pass the bill. It's attached to a package with $95 billion of aid to Ukraine and Israel, very popular. And key lawmakers, including Senate Majority Leader Chuck Schumer and Minority Leader Mitch McConnell, both support the bill. Now, TikTok has been pushing against this effort. It spent $4.5 million in advertising opposing the legislation, according to data from Ad Impact. And CEO Shouzei Chu also said the company will exercise their legal rights should this bill pass. Former President Donald Trump has also weighed in. Now, he flipped from wanting to ban TikTok to supporting it,

and he just posted on Truth Social this afternoon that President Biden was responsible for not only banning TikTok, but helping Facebook, quote, become richer and more dominant, which Trump alleges would be bad for Republicans. Now, the Senate will take the first vote on the bill tomorrow and final passage could come as well. We'll see how fast lawmakers are able to get this done. Guys, if they move quickly with the legal challenges that are sure to come, if this does pass, couldn't it be years before anybody has to worry about TikTok disappearing from any app stores? That's absolutely correct. I mean, we have seen TikTok win other legal battles. If you remember, Montana tried to ban the app. TikTok wound up winning that one in the courts.

Now, you have had Senator Maria Cantwell, one of the people who has been very close to the bill, very close to overseeing TikTok, come out and say that she feels the current bill does have good legal standing. But, of course, that's going to be a question for the courts and that could take some time to get resolved. All right. Emily, we know you'll be watching and bringing us the headlines. Thanks for joining us. Just to go back to earnings, because we're pretty light on macro data tomorrow, but we have so many earnings to choose from, whether it's UPS and sort of this global economic bellwether or on the geopolitical side. And going back to what General McKenzie was talking about, Lockheed Martin, GE Aerospace to a certain extent, and RTX and geopolitical conflict.

I like what Paul Hickey had to say about the importance of Visa in tracking consumer spending and the global signals that could send. Yeah, one to watch, many to watch. That's going to do it for us here at Overtime. Fast money starts now.