Closing Bell - Closing Bell Overtime: Why Some Investors Are Now Favoring India Over China; Shift4 CEO On Summer Trend Travel Data 6/21/23

Episode Date: June 21, 2023

The third straight down session for the major averages. Wedbush’s Sahak Manuelian and Bespoke’s Paul Hickey break down the market action. Former FTC Commissioner Mozelle Thompson on the FTC’s probe in Amazon Prime. Ruchir Sharma, Rockefeller International Chairman, on his new column breaking down why investors are moving towards India and away from China. Shift4 CEO Jared Isaacman has insights into restaurant, hotel and other business spending levels; he talks why he still sees a strong summer ahead. Our Eamon Javers previews his new documentary on China’s corporate spy war. KBW’s Jade Rahmani on KHB earnings. 

And we will take it a third straight day of losses for the major averages as tech stocks led those losses today. That's the scorecard on Wall Street, but the action is just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan with John Fort. Coming up this hour, breaking earnings results from KB Home, giving us a window into housing as Fed Chair Powell tells Congress that supply and demand for homes is getting back in line. Plus, we will talk to former FTC Commissioner Moselle Thompson about news today. The FTC is going after Amazon over what it calls a deceptive process for prime signups and cancellations. Let's get straight to the market action.

Joining us now, Sahak Manuelian, head of equity trading at Wedbush, and Paul Hickey, the co-founder of Bespoke Investment Group. Welcome to you both. Sahak, you're here on set. I'm going to start with you. Consolidation and digestion is how one of our market guests put it yesterday. How do you see what's been happening in the markets this week? Yeah, a very big, robust rally last week. This week, we've seen some tapering off, some consolidation, a little bit of maybe a little bit of a retracement. But really, the underlying technical backdrop to stocks right here in pretty good footing. We've had very strong upside momentum. You can take a look at the 14-day RSI oscillator. Stocks want to go higher and things feel OK, I think, in terms of the technical

backdrop here. And you couple that with some- So not overbought? Overbought in the short term last week. We were overbought in the short term last week. The 14-day RSI was above 70. We've retraced back below that. So we're, I think, maybe 66, 67 as of today or sometime today. Near term towards the overbought area, but still in a very good position for higher prices ahead.

All right, Paul, I want to get your thoughts on this, especially since at Bespoke, you're the chart master, or at least you put our Mike Santoli, you give him a run for his money with some of the charts you put out. What are you seeing right now, especially as we do see an S&P settling down about half a percent right now, 43.65? Well, no one gives Mike Santoli a run for his money. So let's just get that behind us. But echoing what Sahak was saying, I think what you've seen is you've seen a very overbought market here, especially in the face of what you saw is any number of reasons why the market should have gone down and it didn't go down. So that's really important. The market was bucking the trend of the conventional wisdom. You can measure levels of short-term overbought in many different ways. One way we

look at is just standard deviations above the 50-day moving average. We were the highest above the 50-day moving average measured in those terms since 2004, right after the second George Bush got re-elected. So that's a long time ago. And what you tend to see during these periods is short-term returns can be mixed as the market either pulls back a little bit or just pauses. You can have corrections in time or price. But when you've seen these really big upward thrusts in the market, what you have seen is longer term going out six, 12 months, you've seen better than average returns. So, I mean, I think, you know, we're flat now over the last week in the market.

So we're sort of digesting these gains. But over the, you know, over the long term, this strong demand for stocks is an encouraging signal. Okay. Well, so Sahak, if we're lucky enough at home or smart enough to have been invested over the period up to now, I guess the question is, what do you do next? So how should we think about international exposure in this market, whether it's from U.S.-based multinationals that might have exposure in certain geographies or even from companies that are based, say, in China or in India? Yeah, good question, John. I think for international exposure, any of our multinationals that have exposure overseas, those should start to perform a little bit better.

We've seen the dollar index abate significantly since last summer. We were, I don't know, 115-ish to about 103, 104 area today. So our multinationals should act better, should trade better, and those should start to show up in Q2 earnings and so forth going forward. Aside from international stocks, I think really the playbook, if you will, into the second half of the year will be more about small caps and some equal weight S&P as opposed to the leaders that we've seen the first half of the year. Okay, so Paul, what does that action in the dollar mean for small and mid caps, which tend to have less international exposure if they're domestically based? Is that something that you have in mind and how you expect those to perform relative to some of the biggers? Well, I would say a broadening out of the rally you could expect to see. I mean, obviously, these mega caps can't go up forever at this pace. But what you've seen is it hasn't necessarily been this narrow rally.

The cumulative AD line of the S&P 500 is at new highs. You've had a quarter of the S&P hit 52-week highs since the start of May. And what you want to look is for maybe what would lead to a more broadening out of the rally. Well, you look at the financial sector, which is about 75 companies out of the 500 and the S&P 500. It's had an awful first half of the year relative to other sectors. But the thing is, they've shown some stabilization since the pullback in March or the outright crash in March of these stocks. And when you tend to see that, negative sentiment also remains negative. You can't find much to say positive about the bank stocks right now. Even in the congressional testimony that Powell had today,

some members of the House were talking about how the banks are in such a bad shape. When there's nothing good to say about a sector and the stock prices have stopped going down that's usually something you want to notice you can say the same thing about the home builders last year at this time they were right near their lows there was no good news for the sector and we're talking about kb homes reporting today the sector is up 80 percent since last year in the face of what looked like at the time the most horrendous backdrop for home building stocks that you could imagine. So when people, when everything looks bad and the stock prices stop going down, take notice. All right. Paul,

Sahak, thank you. Great way to start. Now let's bring in CNBC Senior Markets Commentator Mike Santoli, who I think has got a chart. He's taking a look at the tech sector. Mike. Yes, pretty bankable there, John. I do. And actually a picture of how somewhat out of balance the market has become, skewed toward technology relative to the rest of the market. That ETF there is the S&P 500, excluding the technology sector. What's interesting to me here is that tech itself essentially went up and threatened its late 2021 levels. Didn't quite get just every penny of it, but almost did, and has now started to pull back very modestly from this.

We should also note that the tech sector does not include everything. It includes Microsoft, Apple, NVIDIA, clearly not all like Meta and the others and communication services. So it's really semis. Microsoft and Apple is pretty much gets you to it. But you see that huge gap that has opened up. So in theory, it should probably close a little bit. I don't think you have to unwind everything. Tech is still leadership at this point. Valuation wise, it's getting up toward those November highs, but not November 2021 highs, but not quite there. So it's rebuilding some of those animal spirits. The chase is on. We'll see how this settles out, whether the overall market can absorb any further pullback if we do happen to get that. Now, take a look at the next picture here of Amazon in particular, relative to the overall market. That news today, the FTC suit, not too much of an impact on Amazon.

But what I find interesting is this goes back to the end of 2019. So right before the onset of the COVID pandemic, you saw the massive outperformance of Amazon and then gave all of it back relative to the market. And now kind of neck and neck, it's been struggling to return. I think it's a good reminder that a lot of the traditional FANG stocks have really just been in rebound mode. They've not been carving out nearly new highs. Meta's in this position. Netflix is in this position, too, of really being well below all-time highs.

So there's a good mixed bag within the mega caps of the NASDAQ. Not all of them have been really making new highs and getting stretched on the on the valuation or sentiment side, John. That's so interesting. A reminder that not everything that we talk about as tech gets categorized as tech. Does that have any implication for the back half of the year and how tech tends to perform versus other categories? I'm not sure if it's about the back half of the year seasonally, but I do think that our tendency to lump all these things together, it's an evolving definition of what we consider to be the leaders of mega cap growth, let's say. Amazon has sort of fallen by the wayside.

It's neither efficient or foul. The retail side, people have lots of concerns about the cost that it's assumed, the logistic issues. And then the cloud side, obviously a better business, but also not getting full credit for what it might have as a role in the AI excitement. So I do think that there's a little bit of a good debate to be had on some of these names. It's not all about how high can NVIDIA go tomorrow. Yeah, you could probably throw Tesla in the mix, too, in terms of this debate. Mike Santoli, the CNBC chart master. Thank you. We'll see you later in the hour. After the break, a prime target for the FTC. Well, we're going to talk to former FTC Commissioner Moselle Thompson about the news that the agency

is going after Amazon, saying it, quote, tricked and trapped people into recurring subscriptions without their consent. Stay with us. Overtime's back in two. Welcome back, KB. Home results have crossed the table. You can see it is higher there by about 2%. We are going through it, and we'll give you the details as soon as we have them. Meantime, Amazon, let's see, it was dipping in the early trade today after the Federal Trade Commission sued the company, alleging it duped millions of consumers into enrolling in Prime and knowingly made the cancellation process complicated. An Amazon spokesperson saying in a statement, in part the fdc's claims are false

and in on the facts and the law the truth is that customers love prime and by design we make it clear and simple for customers to both sign up for or cancel their prime membership joining us now is former fdc commissioner moselle thompson moselle it's been a while good to see you so it is to what's different about this mostly seems to be this dark patterns claim that the FTC is making about Amazon, that they make it way too easy to accidentally sign up and way too hard to cancel on purpose.

Now, as a consumer, it feels to me like dark patterns are part of life. But is it different when you're Amazon and the biggest e-commerce retailer around? It might be. You know, you're right. To a certain extent, whenever you're visiting anybody on this site, or even if you go to the department store, they're trying to figure out a way to capture your attention and to keep you engaged. What they're talking about here, though, this might be a test on what they think of as dark patterns, things

or tricks that are in the code that direct you back to the site and makes it harder for you to actually leave. And this will be a test of that. And in this case, there's also been reported that there are whistleblowers out there from inside Amazon or former employees, et cetera, who can talk about how Amazon used those tricks and they knew that they were capturing people and wouldn't let them leave. Now, I have had friends who have worked in customer service and frankly, our parent is a cable company. So I know that companies try to make it, you know, try to sweeten the offer, try to keep you from dropping a service. Not every company makes it easy for you to cancel a service online.

How much of this is going to come down to data about how hard or easy it is for prime customers to cancel? How much of it is going to come down to anecdotes, perhaps from employees internally or former employees, about how hard they tried to make it? I think a lot of this is going to be fact-driven. It's really going to be based on what the evidence provides. And the other thing, too, is you all know, I mean, I know people anecdotally who say, I'll sign up for Prime and I'll quit on the 29th day instead of the 30th day. So one of the things that's going to be really important here, as more and more companies are looking for a way to stabilize what their user base is, then the practices they use in order to make those bases stable are going to be under increased scrutiny,

especially if they have a consumer face. So, Moselle, I mean, the fact that the stock only settled down about three quarters of a percent, it wasn't a big move lower ultimately on this news about the FTC suing. What could this actually look like? Say the FTC is successful in its suit it finds that amazon has been doing this i mean what are we talking about in terms of repercussions for for the company well one of the things that could be a heavy fine or they could even compel amazon to um to allow a large group of people to leave. Now, if those people are really happy the way Amazon says,

then I think most people won't leave if they do believe that Amazon is providing value. So it could be a range of things. They could issue an injunction to stop you from engaging in practices. And Amazon has already said that the practices that are complained of, a lot of them ended a little while ago. Don't forget this complaint, these allegations have been going on in the investigations for two years now. So that's one. But the other thing is whether they make them pay a hefty

fine or they make them provide some sort of refund for people who did not want to be on crime and were captured in Prime and unable to leave. Yeah. I do want to get your thoughts in general on the dealmaking environment, given the fact that you do have Microsoft defending its bid to take over Activision against the FTC and, by the way, also has had some issues with regulators in other countries. You've seen other deals that have been squashed or challenged, too, under this administration. It does seem to be maybe

throwing some cold water on some of the M&A you might otherwise see. I want to get your thoughts on it and whether we've seen a shift in precedent and how regulators are thinking about the types of combinations that are happening and why. Well, I think the current FTC has made it clear that they want to look at technology companies and the markets involved in technology in a little more close way. And that's pretty clear. So far, most of the cases, they have not been successful. But on the other hand, they're trying to send a message that if you have a transaction, it's going to receive some scrutiny, perhaps more than would have happened before. On Activision, that's a little bit of a different challenge, because this has been looked over

by a lot of different people. It's looked over by the British, looked over by the EU. And there's been a split between whether they think the market looked over by the British, looked over by the EU. And there's been a split between whether they think the market is defined by the FTC is the same as the market that they see as the competitive marketplace. So there's a hearing that's going to take place over the next few days on a preliminary injunction to stop the deal from closing. And you'll hear a lot of witness testimony and a lot of factual evidence about whether the market that people have defined, the FTC has defined, which is the high-end gaming market, does exist,

and whether this will be anti-competitive or not. And you'll also hear testimony about the various steps that Microsoft has promised to do in order to mitigate the problem. Moselle Thompson, great to get your thoughts. Thanks for joining us. Thank you. KB Home earnings are out. Diana Olick has the numbers. Hi, Diana. Yeah, another home builder, another beat. KB Home came in with Q2 EPS at $1.94 share versus estimates at $1.33. That's on revenue of $1.77 billion versus estimates of $1.42 billion.

KB's CEO, Jeff Metzger, said the improvement in demand we started to see in February was sustained throughout our second quarter as we achieved monthly sequential increases in our net orders, resulting in an overall absorption pace of 5.2 net orders per month per community. Now, there were a couple of highlights in this that is that the price was down 3% average price for the home, and that made gross profits lower 21.1% versus 25.3%. And they said that was mainly due, again, to the price increases and other decreases and other decreases and other home buying concessions, together with higher construction costs and a shift in the mix of homes delivered. That is likely the homes on the lower end because that is where the demand is, because affordability is so difficult right now. The home builders have said that they have

kind of lowered the number of concessions that they're giving to buyers. That was in the fall. They were doing a lot of rate buy downs for the higher mortgage rates. This was a tough quarter for mortgage rates. It started over 7 percent on the 30 year fix, dropped back a little bit and then ended the quarter again over 7 percent. But still, demand seems to be holding on if it's at that lower price point, which KB Home can accommodate. So a nice beat again. Back to you, Morgan. All right, Diana. Thank you. And of course, shares are trading higher, even in the face of what has been a really strong rally by this name and other home builders in recent days and recent weeks. Well, after the break, Rockefeller's Rashir Sharma will join us

to talk about investing in China and India as Washington assesses tensions with Beijing and India's prime minister meets with President Biden. Stay with us. Welcome back to Overtime. Indian Prime Minister Narendra Modi is expected to meet with President Biden at the White House this evening, one day after meeting with corporate leaders in New York, including Elon Musk. Seema Modi has a closer look at the prime minister's trip and America's business ties with India. Hi, Seema. Hey, Morgan. Well, Modi is fully aware that U.S. companies need ways to diversify away from China and is keen to meet with U.S. CEOs that are ready to put money to work. Following dinner tonight with President Biden, he will

address Congress tomorrow and then dine with the biggest names in Silicon Valley, Apple CEO Tim Cook, Microsoft CEO Satya Nadella, Alphabet CEO Sundar Pichai, among others, according to our reporting. Now, Google is expected to announce something on artificial intelligence. We're also hearing executives will use this time with Modi to express their grievances with India's regulatory hurdles, lack of skilled labor, and laws that could increase government oversight. Now, whether Modi listens, that could certainly determine whether corporate America warms up to India or not. John and Morgan. All right, Seema, thank you. Now, the focus this week isn't just on India, also on China,

as Secretary of State Blinken returns from his meeting with Xi Jinping. Joining us to talk about the investment landscape in both India and China is Rishir Sharma, chairman of Rockefeller International. Rishir, welcome. So we're also at this moment where India is officially passing China in population and the youth population of India is going to have this boom demographically over the next several years. How should investors think about playing that bet on that booming economic opportunity outside of just ETFs? Right. I think that, in fact, this is a great time to be investing outside of ETFs. But I'm also keeping in mind that even though the Indian economy is still about one-fourth the size of the Chinese economy,

the Indian stock market is much bigger in terms of as a share of the Indian economy and has delivered great returns, even compared to the S&P 500 over the last couple of decades. So from a stock allocator standpoint, India has definitely been the better market to allocate capital. And the company creation there is very impressive. The number of companies there which have doubled or tripled in dollar terms over the last decade as a share of the overall market is the highest of any country in the world. So this is a great place for stock pickers. And just buying the ETF or India index is really something which is limiting because there are so many compounders in that market. Are the rules of the road relatively clearer than with China? You know,

we go from is China, are Chinese stocks investable or not based on, you know, how Xi and the Communist Party over there are treating things. Now, there are some concerns, as Seema mentioned, that corporate executives are raising with Modi here this week, but are they the level of concern that should give investors pause at all? Well, I think it's great that these CEOs, if they have a frank chat with the Indian prime minister about some of this, because there are issues in India. One of the issues I've spoken about as far as India is concerned is that the regulatory agencies out there or the investigative agencies, the tax authorities tend

to be overzealous. And India really needs to think about how China used to be a decade ago. Because remember, before Xi Jinping came to power, China was also a great place for wealth creation. A lot of companies got created there and you had the Tencent and the Alibabas that came out. But I think what's happened in China over the last few years is both a distrust of the kind of capitalism that is being practiced in China and also the demographics that you alluded to earlier. So there's a lot more that India can do to make the environment more conducive, but that doesn't take away from the fact that India has already been a great place for wealth creation over the last couple of decades.

Yeah, Rishir, I mean, the last time you were on with us, you were talking about boomy talk about the Chinese economy being a charade. So I want to give a hat tip to you, because obviously now we're seeing disappointing data come out of China right now. We're starting to see some stimulus measures. And one of the other things we're starting to see is investors maybe rotate out of some of those Chinese investments into other Asian markets like India. But also, as Larry Fink at BlackRock has pointed out in the last 24 hours, Japan as well, as investors continue to want their Asian exposure. Just want to get your thoughts on that dynamic and looking across these different markets, where those compelling opportunities are? Well, lots of places, because if you look at the dollar returns for EMX China even this year, it's close to 10 percent. So you have many emerging markets that have delivered very strong returns. And there are many countries, in fact, not just India,

that are benefiting from the U.S.-China Cold War going on out there. There's Indonesia, there's Vietnam. There are even countries such as Philippines, Thailand. So I think there are lots of countries benefiting from that. And so I would strongly recommend, I think that the single best investment opportunity out there in the world is in emerging markets ex-China. In Eastern Europe europe we have seen markets like poland uh boom in latin america mexico is finally benefiting from uh the near-shoring boom a promise that it's held for a long period of time so a whole host of emerging markets are doing quite well many of them have generated dollar returns in the double digits this year, comparable to what the

S&P 500 is doing, even though the S&P has done very well because of the big tech names. There, the gains have been more broad-based. So I think that there's plenty of opportunity. And I'm glad that people and investors are now looking beyond China, because there was far too much obsession with this one big market in the emerging market world, at least over the last decade. Yeah, near shoring, or some folks are calling it friend shoring. Roshir Sharma, thanks for joining us. Thanks. We'll talk more about China later in the show when our Eamon Javers joins us with a preview of his new documentary on Beijing's corporate espionage efforts against one of America's most well-known

companies, must watch TV. Absolutely. And time now for a CNBC News update with Pippa Stevens. Pippa. Hey, John. Just minutes ago, accused Pentagon leak suspect Jack Teixeira entered not guilty pleas to each of the six counts against him. The 21-year-old National Guardsman was indicted last week by a federal grand jury in Boston. Authorities say he leaked the classified documents on the social media platform Discord. He could spend up to 60 years in prison if convicted. Thousands of Writers Guild of America members and supporters marching through Los Angeles today as the union strike stretches into its eighth week. They're calling for better pay

in the world of streaming, new minimum staffing requirements, and a ban on the use of artificial intelligence. Hollywood studios are mostly pushing back on the staffing point, calling it a non-starter. And for the first time, U.S. regulators approved the sale of lab-grown meat. Upside Foods and Good Meat can now sell their chicken, which is made from animal cells, to the nation's restaurants and eventually grocery stores. The move coming months after the FDA deemed products from both companies safe to eat. Morgan and John, back to you. It's like genetically modified 2.0. I can't even wrap my head around it. Pippa Stevens, thank you. But no thank you you. I would say like,

what's the matter with just meat? Why do we have to go beyond it? Why does it have to be impossible? Just anyway. Oh, well, we're going to go beyond, beyond meat. After the break, we're going to talk to billionaire payments company CEO and founder Jared Isaacman about the state of spending as Fed Chair Powell says wage growth is moderating, but that the fight against inflation still has a long way to go. And let's get another check on KB Home following a beat on both lines and a strong guy at the stock ticking higher in the post market, but just barely. We're up a lot more than before.

Average selling price for homes was down in the quarter. We're going to talk to an analyst about what to listen for on the call when we come back. Welcome back to Overtime. Fed Chair Jay Powell testifying before the House today saying some wages are moderating, but inflation is still too high. He said he sees two more rate hikes in the cards this year, calling that forecast, quote, a pretty good guess. So what does it mean for economic growth? What does it mean for the payment sector? Joining us now is Shift4 CEO and founder Jared Isaacman. Jared, it's great to have you back on the show. Thanks for having me, Morgan. So you focus on the services part of the economy in terms of servicing and providing the software and infrastructure for restaurants and casinos and hotels and venues and this part of the economy where we know consumers have continued to spend

resiliently and where inflation has continued to be sticky and remained higher than the Fed perhaps would like to see. What are you seeing in real time right now in terms of transactions and in terms of consumer behavior? Yeah, thanks, Morgan. So, you know, Chiff 4, I mean, we touched nearly a quarter of a trillion in payment volume across our gateway and our N10 payment platform. So we have pretty good visibility across restaurants, hotels, you know, travel and leisure, lots of discretionary spending locations. What I'd say is, you know, business is good, which, you know, we're intending to grow payment volume well in excess of 50 percent this year, which is largely a factor of taking share. But I will say when you drill down to the same store sales level, things are much better than we thought.

Now, travel and leisure is continuing to be very strong. I mean, again, much better than we would have thought at the beginning of the year. I would say even restaurants are doing better than expected. You know, now that's not to say it's at the same euphoric level that it was at in years past. But if you ask us from looking at the data and what we're seeing so far, I'd say we're on a trajectory that more looks like a soft landing than anything else at this point. Interesting. And when I hear you talk about taking Markinshare, I mean, that's exactly the question I'm going at with you is how much of this is company specific and some of the strategy that you're implementing versus just a reflection of an economy that has remained more

resilient than everybody, at least up until now, expected it would. Yeah. I mean, so really in both parts, I mean, just in the shift forward perspective, sure, we're able to differentiate when and that's what's driving, you know, in excess of 50% year over year and 10 volume growth. But when you really drill down to just same store sales, which is how is the restaurant doing last year? How is it doing relative to this year, hotel, that type of comparison. And I'd say we went into this year, not that optimistic. I mean, everybody was fearing the worst at the beginning of the year. Everything is doing much better than expected, which is probably consistent with the Fed chair's commentary that inflation is more persistent. So, yeah, hotel travel, leisure. It's going to be a great summer. Restaurants, people are still going out to eat.

Maybe, again, not to the same level that we would have seen in more euphoric times have passed. But again, it's all it's all tracking towards much more of the soft landing than the sudden slowdown that I think many feared, you know, at the beginning of the year. Jared, how much are we still in revenge travel kind of post-cabin fever mode? I mean, I understand that there's a certain segment of the consumer that's maybe trading down, but is there another segment that's still just getting out there because they couldn't before? No, it is, to be honest, it is. It's a great question in terms of like the revenge travel, like I'm tired of being locked up and I'm going out and living my life. That was last year. And honestly, even to some extent, it was in it was in 2021. I think what we're seeing now is just some sort of, you know, somewhat of a return to normal. You know, people

are going to a lot of travel and leisure destinations versus a year or two ago was anywhere. Right. I mean, even like, you know, small motels near like national parks were seeing bookings like they'd never seen before. It was like there was like this vengeance to get out and, you know, make up for lost time, if you if you will. And now it's like it's a little less of that. And it's a little bit more back to, you know, Las Vegas, South Florida. I mean, typical, you know, you know, vacation, vacation travel pattern. The difference is it's just prices are higher than they were before. And that's what's being reflected in the in the volume and obviously consistent with with the Fed chair's comments.

All right. I got one more question for you on shift four before we shift gears. And that is the fact that you do capture millions of consumer data points. With all that data that's coming in and coming through your platform and your infrastructure, what does that mean in terms of something like generative AI, which we talk about so much? Yeah. You know, look, everybody loves talking about AI. And I mean, we catered a lot of restaurants, hotels, like I said, casinos, sports stadiums. I'm not trying to say that your restaurant experience, your hotel experience is going to be dramatically changed by AI. I think some people are maybe, you know, playing that up a little bit.

But what I will say is within the world of like operational efficiencies, you know, we have 2,500 employees. Like I can guarantee you this, you know, the measures we're taking to implement AI in terms of some of our internal systems is improving productivity in a big way. And that translates into margin and free cash flow, things that investors care an awful lot about in this higher interest rate environment. So there's absolutely a benefit for every industry out there. It just may not be as transformational from a customer-facing perspective as others are talking about. And, of course, you're also an astronaut. You did that historic Inspiration4 mission. You're getting ready to go to space again later this year with the first Polaris mission.

Virgin Galactic, next week, poised to finally launch commercial service. Stocks up 65% since the start of the month. I guess just walk me through, as somebody who has personal experience with this, walk me through the economics or the business case for regular space tourism and more accessible space flight. Yeah, look, it's a good question. I got to wear different hats here on this one. So let's just put on the astronaut hat and as an immense fan and enthusiast of all things space, because who doesn't want to wake up and live in a Star Wars world tomorrow, right? I mean, that's awesome. Maybe without the dark side. But, you know, and in that respect, I want to see Virgin Galactic succeed. I want to

see Blue Origin succeed, Rocket Lab, all the new space companies that are out there that are trying to make the world a more interesting place. I'm all for it. If I put my business and investor hat on, I'd say, look, you know, suborbital spaceflight has a lot of limitations. You can't put satellites into space. You can't, you know, send people to the International Space Station. You can't explore space for our solar system. So I'd say that the business case for suborbital spaceflight has a long way to go. But hopefully, you know, some of the investments that are going into this can be applied to things that, you know, have even broader utility than we can imagine today. All right. Well, we're going to watch that one closely.

Jared, always great to get your thoughts on a variety of topics. Thanks for joining us. Jared Eisenman. Thanks, Maroon. Take care. Well, up next, Mike Santoli is going to take a look at what the recent surge in bullish investor sentiment could mean for the market. And speaking of bullish investor sentiment, check out Bitcoin and other cryptos getting a huge pop in part on enthusiasm around a new crypto exchange, EDX, which is backed by big established Wall Street players like Schwab and Fidelity, also Citadel. There's also hope of approval for BlackRock's Bitcoin ETF. So you can see Bitcoin crossing back above 30,000.

Stay with us. Welcome back to Overtime. This year's rally has left many investors wondering if there's too much optimism baked into the market. Mike Santoli has a look at one gauge of sentiment, or maybe I should call you the maestro of the magna doodle. I'll take it, Morgan. I appreciate that. Maestros have a mixed record out there. I know Alan Greenspan's loved and hated by both sides. But yes, take a look at this plot of one measure of investor sentiment, in particular, the Investors Intelligence Survey of Professional Investment Advisory Services. It's been around for a very long time.

You now see the bull bear spread, the number of bulls minus the number of bears, reaching to the upper end of the range, I would say, over the last decade or so. What's interesting, though, is looking at prior periods when we've come out of extreme pessimism and up to today's level of bull bear spread of bullishness. So I would say at the bottom in 2020, we came up there around mid 2020. And what happened to the stock market? Well, we kept going up. Similarly, early 2019, deep pessimism. We got up to this level. And again, you were still in an uptrend, some chop along the way for sure. Now, 2016 is another example. We got there. You know, it didn't do much for a while, but it was still within an uptrend. The point is there's room between people recognizing a new uptrend, feeling a little more positive toward the market before we get to that moment when everyone's on one side of the boat. You have extreme speculation and optimism to the point where

it's a contrarian signal for the market. I think we're still in that in that zone where we're shy of of the danger area, John. All right. The charts make it clear you can't just thumb in the in the wind and try to time the market. Mike, thanks. If only. Yeah. Up next, a look at China's corporate spy war against the U.S. and how the government is combating it. We come right back. Welcome back. In a new CNBC documentary, Out Tonight,

Eamon Javers looks at how Chinese spies are targeting corporate America and what the nation's law enforcement is doing to fight back. Great to see you, Director Ray. Thank you so much for doing this. FBI Director Christopher Wray has been warning American industry for years about the threat from China. The Chinese government is determined to try to steal key technologies through a whole variety of means, cyber means, human intelligence programs, and even seemingly benign investments, and then using them in concert. One of those Chinese intelligence programs targeted a GE engineer named David Zhang.

In a corporate office just outside Cincinnati, Ohio, the FBI is questioning him about a lecture he gave in China and the people that he met there. A lot of the questions had to do with what information did he download, what did he take with him, what exactly transpired in China. Well, Eamon Javers is here on set with us. He joins us now. First of all, congratulations. Thank you.

On an incredible project. And the fact that you sat down with the FBI director who doesn't do much media. He only does a couple of these a year. So we were glad to be able to get into the building and sit down and talk to him and have a real meaty conversation about this. You know, the message from the intelligence community to corporate America is, you know, pay attention here because corporate America for years has sort of thought of this as a real nagging problem. IP theft out of China. Right. It's going to cost you some money. It's going to be a frustration, but it's sort of a cost of doing business. And what you hear from Ray in this documentary tonight is that when the Chinese talk about stealing technology to compete with your business,

they're also embracing the idea of eliminating your business altogether. The Chinese think about this, the Chinese government thinks about this very much in terms of taking chess pieces off the board, right? And those chess pieces, in many cases, are American companies. How did GE react to all of this? I'm assuming you spoke to them for this documentary, too. Yeah, they didn't go on the record with us at all, but we did reach out to them quite a bit. And the interesting thing here is that the FBI raises this as sort of the quintessential how-to case, because they say GE worked cooperatively with the FBI.

The FBI found out that the GE engineer had gone to China and given a speech and hadn't told GE that he was doing that. That's a no-no under GE rules. The GE folks brought the engineer in for this meeting that we talked about in the clip you just saw, and then they stood up, walked out of the room, and into the room comes an FBI team and they sit down with the GE engineer. I don't want to give away the whole story for tonight, but they gave the engineer an opportunity to work with the U.S. government. They flipped him and sent him back to China as a double agent. Wow. Ruchiro Chama just casually referred to this situation between the U.S. and China

right now as a Cold War. China's effectively complaining about containment policy. Are we there? Did people talk about that? Yeah, absolutely. And this is a very different Cold War than the last one that we were in, right? I mean, Russia really didn't make anything that we need in the United States, right? I mean, what Russia wanted was access to American stuff at the end of the day. At the end of the Cold War, it was cassette tapes and blue jeans that the Russian public really wanted out of the United States. The economics of this are entirely different. And I think it's going to be a real challenge for American companies and American CEOs who are dealing with this threat

because there wasn't a single Russian company that could take out an American company, like take it off the playing board. In this case, what I was told about this GE Aviation is that GE Aviation wasn't even the ultimate target of this spying operation. It was actually Boeing, because what the Chinese government wants to do is have their competitor, Comac in the aviation industry, be able to outcompete Boeing and Airbus, underprice them, and eliminate one of those companies in order to have the global commercial aircraft market more or less to themselves. Now, that's an ambitious goal. They're not anywhere near there yet. But the intelligence folks tell me they're trying to steal their way toward that goal at the end of the line.

It's a deep, deep threat for Boeing. And I think the message from U.S. intelligence is pay attention to this. All right. Well, viewers, pay attention to this. It's a must watch. Thanks, Eamon. Do not miss the premiere of China's corporate spy war. That's tonight, 10 p.m. Eastern here on CNBC. Up next, the top real estate analyst reacts to KB Holmes' earnings and he's going to tell us what he wants to hear on the call,

which kicks off in just a few minutes. We'll be right back. Welcome back to Overtime. Shares of KB Home are now fractionally higher following a strong earnings report. The call kicks off at the top of the hour. KB's report comes as the home construction ETF ITB touched its highest level today since January of 2022. Joining us now is KBW Managing Director Jade Rahmani. Jade, strong guide from KB Home. Margins coming down a bit, it seems, from concessions. How much of this is sustainable for quite a while? How much of it is just the

extreme lack of inventory in the existing home market? Well, thank you for having me. And that's a great question. How long will this last? We did write about this recently. If you look at affordability, current affordability is stretched with a mortgage payment income ratio of about 26 percent and a home price to income ratio of 4.4 times. So both of those are above historical levels. And based on our forecast, which is for a slight home price decline this year, it would take a mortgage rate of 6% and income growth of 6% to restore affordability. And we think it's likely this will take one to two years or perhaps longer. So in the meantime, we expect housing inventory to remain

low. And with most homeowners having a mortgage rate of below four and a half percent, the home builders are poised to gain market share. Yeah. And the home builders are certainly rallying to the cause. I wonder, when you have commentary out of KB Home that the improvement in demand that they started to see in February was sustained throughout Q2. Have we seen a bottom to the housing market? Are we now in this place where the market is just adjusting to this new normal of higher rates?

It certainly feels that way. And part of it is driven by the record low home resale inventory, just one million units, which is close to all-time lows. I think in the homebuilders case, they were very quick this cycle to both cut price and also offer mortgage buy-downs. So that allowed the new home market to take about one to two quarters to really adopt to that phenomenon. And now you're seeing scarce inventory during the spring, and the new homebuilders take advantage of that. It's benefiting them through higher deliveries, but also gross margins. Their pricing, in fact, is up about 50 to 100 basis points over what people

were expecting. And that trend seems likely to continue for the next few quarters. All right. Jay Romani, thank you. Well, tomorrow, don't miss Overtime's interview with the CEO of RoboAdvisor Betterment on the investing trends she is seeing among retail investors. And in the meantime, John, I mean, just taking a look at the major averages, everything but the Dow Transport's ended the day lower. The Nasdaq had the worst day since late April, finishing down the Nasdaq 100, finishing down 1.3 percent. Really interesting day, I mean, because the overall indices didn't have huge moves. Would you look at some of these names? We like to look at C3 AI, right? It was down 9.5 percent. Intel was down 6 percent. You can ascribe all kinds of reasons to that. But AMD was also down almost 6% and Tesla 5.5%. Yeah, we got Powell testifying in front of the senators on the Hill tomorrow as well.

So part two, we'll be watching that. That's going to do it for us here at Overtime. Fast Money starts now.