Closing Bell - Closing Bell Overtime: Will the interest rate rally sink stocks? 3/21/22

Episode Date: March 21, 2022

Stocks turned lower following hawish comments from Federal Reserve Chairman Jerome Powell. Could rising rates sink stocks? Ed Yardeni from Yardeni Research weighs in. Plus, top investor Keith Meister from Corvex Management reveals his top stock picks. And, Michael Santoli sounds off on his last word: Hard road to a soft landing?

Sarah, thanks, and welcome to Overtime. I'm Scott Wadden. You just heard the bells. We here are just getting started. In just a few minutes, we'll be joined by star investor Keith Meister to get his thoughts on where we are in the markets. Nike earnings breaking any minute now. We'll have the very latest and, of course, the instant stock move in Overtime. We begin with our talk of the tape. The big leap in interest rates today, whether it stands to kill the rally in stocks just as it was getting started. Let's welcome in Odyssey's Jason Snipe, Fieldpoint's Cameron Dawson, Ed Yardeni, the president of Yardeni Research. It's great to see everybody. Ed, I'm beginning with you. That is the big question.

Did Powell kill the rally just as it's getting started? Did you see what's happening in interest rates today? The 10-year at 230, that's up 7%. The 2-year at 212, up 8%. Spread is getting tight. Yeah, absolutely. And that's where those rates should have been about six months ago. Took them a while to get here, but it makes sense that with inflation at 7.9%, we'd have

the bond yield over 2%. Makes sense that the 2-year would be over 2%. What's really odd, though, is the spread between the 10 and the 2, a kind of borderline turning negative. I mean, we're awfully close to turning negative. And I think that's got a lot of people spooked about a potential recession. So there's a lot going on here, a lot of messages from the financial markets, for sure. Yeah. So, I mean, we came in with this newfound momentum. Did Powell just kill it? I don't think so. As a matter of fact, I'm pretty we came in with this newfound momentum. Did Powell just kill it? I don't think so. As a matter of fact, I'm pretty encouraged that the market came back pretty nicely in the last hour of trading.

I don't think he killed it. I think the market is looking for opportunities, and the opportunities continue to be in areas like energy, commodities. I think the market will also find more opportunities in financials as interest rates go up. And technology looks awfully cheap to me. There's a lot of cheap technology stocks. So I think there's opportunities. I think this correction we've had since January 3rd has brought buyers in. I would call them dip buyers. I call them correction buyers. We'll see if they'll become sell-the-rip sellers. You have this interesting idea today that while the Fed put may be dead,

the CFO put, in your words, is alive and well. Explain. Well, I think it's pretty important to, I think we all recognize that the Fed put is gone. We're not going to, even if we had a real big tantrum in the stock market, the Fed's just got too big a problem with inflation to cave in. So I think the Fed's going to have to continue to raise rates no matter what. It's not going to give us easy credit conditions to keep the market going higher. As long as the market goes up or down, but with a certain amount of stability without any really kind of crazy breakdown.

I think the Fed's going to continue to raise rates. So, on the other hand, we have the CFO put. Corporations are just flush with cash. They've raised over $2 trillion in the bond market over the past two years. They've refinanced a lot of their debts at record low interest rates. They've paid off loans and the cash flow is a record amount. So what are they doing with all this money? Well, they're buying back shares.

They're issuing dividends. And M&A activity was at a record high last year. I think it remains very strong this year. And I think all those areas will continue to prop up the market. Hey, as we learned today, obviously with M&A, is the Fed going 50 basis

points at the next meeting? You look at the percentages shot up from a day ago, from 43.9 to 61.9 today. What a jump. Yeah, well, I guess when Powell more or less said the same thing at his press conference last week, the markets really figured a quarter point of meeting for a while. But then he wanted to make sure everybody understood that he is concerned about inflation. The title of his speech today was about restoring price stability. So that's become the number one priority now of the two mandates that he has, given that the labor market's so tight. So I think it's reasonable to expect 50 basis points. And if that's the case, then again, I think the market's held up pretty well today. That's for sure. We saw how it ended. Thank you

so much, Ed Yardeni. In overtime, we'll see you again soon. Let's bring in Cameron and Jason. They, of course, are still with us here in OT. Cameron, same question to you. Is this a rally you can rely on, or does it feel too much like a bear market bounce? I think we can certainly see rallies off of oversold conditions, just like we've seen over the past few days. The question is, where do we go from there? Do we return to that kind of unflinching, up into the right bull market that we saw last year, or do we get caught in this sideways chop?

And we think it's more likely that we're in that sideways chop for the remainder of this year, or at least until the Fed is still staying away from being accommodative. So that means that, yes, we can see this rally, but we don't really think that we're out of the woods on market volatility or that we're going to see really strong upside returns from here. So we do think it's stuck in that sideways chop because of the Fed. How do you see it, Jason, the same way or differently? Yeah, I agree with a lot of that commentary. I mean, obviously, the Fed is trying to put a lid on inflation. I mean, we had a CPI of 7.9 percent, which we all know, a PCE of 6.1%. You know, I think the Fed will remain data dependent. I wasn't terribly shocked by the commentary or moved by the commentary earlier today.

You know, I mean, at one point we were talking about 50 basis points before the crisis in Ukraine started. So I think the Fed will be data dependent from here going forward. And I do think we will likely be in a range for the foreseeable future. And we'll see how earnings start in the next few weeks. But Jason, you like technology here, which is interesting, given this move in rates and the path of rates looks to be higher if today is any indication. And it could be rather swift as well. Yeah, for sure. I like established tech, you know, obviously companies that are printing off, you know, a lot of free cash flow that are not as tied to the credit markets to continue to

scale and grow their businesses. I think those companies will do well. And then I like defensive areas of the marketplace like health care, which I think will benefit from preventative care and elective surgeries coming back online. I think those are some of the sectors that could fare well in this environment going forward. Cameron, this is the great debate. Technology is coming off an incredible week. It manages to get off the lows today, but can it really go higher if rates continue to move the same way? Well, it's not just about rates. It's about real rates moving higher.

And Powell was very clear that he wants to see real rates move higher. And the challenge for tech and growth stocks overall is that tech valuations and real rates move in the opposite direction. So as we saw real rates move deeply negative over the past few years, growth valuations surged to 36 times earnings. Now, as we've seen real rates move higher, those growth valuations have fallen to 25 times earnings. Now, we still think that there could be further downside in growth valuations as those real rates move higher if the Fed is capable of doing that. But the challenge we have is that that will

continue to weigh on their performance despite all of those good fundamentals on the earnings standpoint. All right, guys, we'll see you again soon in overtime. Cameron and Jason, I appreciate your time. To our Twitter question of overtime right now, is the Fed going to raise 50 basis points or 25 at the next meeting? That is the topic of the day, given what Jay Powell had to say today. Head over to at CNBC overtime with your answer. We're going to reveal the winner before the end of the show. I'm curious to see how this ends up today. Now let's bring in Corvex Management's Keith Meister on the markets and where he is placing his bets. It's good to see you. Welcome back. Hi, Scott. Great to be with you. Congrats on the new show. Thank you so much. I'll ask you

the answer to our Twitter poll first and foremost. They go in 50 or 25 at the next meeting. I don't know if they're going 50 or 25, but they're going a lot this year and they're going to end up way higher. If the Fed has to choose between having credibility as a in terms of a central bank fighting against inflation or potentially causing recession, I think they'll choose credibility over potentially moving a little too quickly. So what does that mean for where we are right now in the markets? Last we spoke in October, it sure felt and looked a lot different than it does today, Keith. Yeah, I think it's a tricky period with a really wide range of possible outcomes. You know, as you said, the Fed pivoted towards the end of last year in the fourth quarter from, you know, acknowledging inflation as transitory to acknowledging inflation being higher than where they would like it to be and being persistent.

And the 13 years of QE has now pivoted to QT. I think last week the government finally stopped buying bonds. So we go from a period of time where, as investors, the Fed has had our back, and it's been a tailwind, to where it's become a headwind. So I think things are harder. At the exact time it's become a headwind, lots of people have argued for the Fed to move sooner, such that they won't have to be moving and playing catch up at the same time as we have a geopolitical crisis going on in Europe, with a war none of us could have imagined, an energy crisis, a shortage of commodities. So if we had to design a, you know, the awful

backdrop of a wall of worries, it would be the scenario we face today. With that said, balance sheets are strong, the consumer that said, balance sheets are strong. The consumer is healthy. American businesses are fantastic. If you're going to allocate capital, I think you want to allocate capital in the U.S. So I think it's a tricky market with a wide range of outcomes. It's not going to be as easy going forward as it's been for the last few years. But there's probably still opportunities to allocate capital and idiosyncratic opportunities

and make good risk adjusted returns. We're going to get to inside your portfolio in just a bit. But in this new world, which you describe, valuations have obviously been adjusting to it. Have they adjusted enough? And that really is the trillion dollar question as to whether this correction has gone far enough, have valuations reset enough to reflect the new world you described? Yeah, look, I think it's a, the market's made up of lots of individual stocks. And while the indices may only be down 10 to 15% year to date, most tech stocks, as an example, are down over 50% since November. So my answer is, while at 45-50, the index feels like it's going to have a hard time

breaking out to the upside, I'm certain there's lots of individual companies whose prospects have been over-penalized by the market that may not be directly affected by what's going on in Europe or may not have commodity headwinds and may have bright futures. So, you know, today we were investors in a company, Anaplan, which was a financial planning software business, which had been, the space had been hit mid-cap SaaS by the market over the last six months as interest rates and real rate concerns have increased. Yet a smart, well-informed private market buyer looking to make a 20-plus percent return was able to buy the business at a 45 percent premium to where it had been trading over the last five days. So clearly, there's a real money buyer there who thinks they can create value.

So, you know, it's not just so simple as the market being one. I think the overall market will have a hard time breaking out to the upside and could see downside pressure. But I do believe there's idiosyncratic opportunities and we need to pivot as investors. Yeah, forgive me. I was going to ask you, I mean, had you been pushing and a plan to sell itself? Toma Bravo was on in the last hour. Holden Spate from the firm was on and suggested that they approached the company well before an activist had arrived on the scene. Is that your version of the events as well? I'm certain that's right. I mean, you know, if we're looking in the public markets and seeing an opportunity, I'm sure Tomo Bravo's doing the exact same thing. We have a different way of expressing it. We invest in liquid markets

and a playing great company, great product had a bad quarter in the third quarter of last year. Market overreacts, stock gets hit. We buy lots of stock in the marketplace. We can move very quickly. But Tomo Bravo probably has it joined their radar screen, begins to engage with the company. We can buy, in this case, the partner 9% of the company. And Tomo Bravo can work more slowly and ultimately negotiate a deal to take the business private. And it's a win-win because my guess is they're not buying it at 11.5 times consensus 2023 next year's revenue to not invest in the business and help make it more valuable. And I'm sure as a private company, there's things that, in this case, Anaplan can do with the help and partnership of Toma Bravo that they may not have been able to do in a myopically short-sighted public markets that we're thinking day in and day out.

And over three to five years, my guess is with this and provide capital into a very idiosyncratic situation. As if I think about the last decade, money was made by owning beta. Central banks had our back, interest rates went down, and most assets inflated. My guess is the next decade is not going to be all horrible, but it's not going to be as easy. And money will be made by being more opportunistic and helping to make value or create value in the companies in which we invest and also being on trend thematically. It's interesting. I've got Nike earnings coming in less than a minute. And one more question before they do hit the tape. If I have to interrupt you, bear with me. I hope you'll do that. Your positioning is interesting to me. One quarter of your portfolio in Amazon, Microsoft, and Google, another quarter of it in small technology, as you describe it,

and then another 50% in idiosyncratic things. Yeah, that's how we're positioned. Why do we have 25% in Amazon, Microsoft, and Google? They're amazing businesses with great growth profiles that are being transitioned in each case from being founder-led to manage with best-in-class professional management. They have amazing moats and they have great growth profiles and they trade actually at relatively reasonable valuations. And if you think about the inflationary pressures in the world, tech is a tremendous deflationary force. When times are tough and you need to get costs out of your business, businesses will invest more in software and businesses like Amazon, Google, and Microsoft are really well positioned to benefit from that at very reasonable valuations. So we're very happy having a chunk of our

portfolio there. With that said, for a lot of tech, the move up in rates, while it may make the businesses have higher nominal growth and higher earnings, it does affect the valuation. So we're much more comfortable playing in the Garpy side of tech and not the high multiple growth side. With that said, we were able to put new positions on in businesses like Anaplan and Five9, really chasing capital out of our Garpy names when those stocks all went down by about 50% peak to trough. And they're proven, you know, SaaS, you know, enterprise software is god's gift to capitalism i heard a very smart investor once say these businesses have 100 recurring revenue they grow up to 20 a year from existing customers so without any new sales they

have 20 revenue growth it's all recurring revenue it's 80 plus percent gross margin and when we talk about labor being up when we talk about food prices when we talk about labor being up, when we talk about food prices, when we talk about commodity prices, they don't have these pressures and they help real businesses solve these pressures. So I think their future is bright. Their valuations got ahead of themselves and we had an opportunity

to reallocate some capital. I would say this is not surprising. Let me do this if I could. If you'll just bear with me, I see Nike is moving as we speak. Let me get the numbers out, some quick analysis here. We'll watch the stock move, and then I'll take a break and come back with more from Keith Meister. You've got a beat on the top and bottom from Nike.

Of course, there's much more to the story that we need to know. Supply chain, what the business in China was like. Earnings was expected to fall from a year ago. The stock has already declined, so you have to wonder how much was already in the stock. You can see it jumping by three and a half percent. Sarah, what do we know about the key details here, specifically China supply chain? Well, China's coming in a little bit better than expected. It was expected to be a weak spot and China revenues were down five percent, Scott, but that was pretty much expected to be two billion dollars. They were two point one six

billion dollars. We knew that was happening. They're dealing with rolling shutdowns because of COVID. And they're also dealing with a little bit of brand pressure. We saw it from Adidas and really all the Western brands as China has gotten a little more nationalistic. The North American numbers also come in in line, which is very important for Nike because that's the home market. Saw 9% growth there, about $3.9 billion. That was expected. I think the overall top and bottom lines look much better. And then there are two things that I would highlight, Scott, in terms of what is important for Nike and for investors to see that the brand strength is still there. That is the digital sales up 19 percent. Why is that important? Well, these are

tough comps for digital. Remember, we're looking at it compared to last year when we were still in the depths of the pandemic with a lot of stores shut. And I would also compare it to what Adidas, I just went back and looked at what Adidas showed for the current quarter, which is digital sales declined 2% on the back of those tough comps. So it shows Nike's strength there. And also the direct sales up 15%. Scott, this is what Nike has had an edge over its competitors, the direct-to-consumer business and the online business. They got a head start, and they continue to grow that business during and now out of the pandemic. So if you're looking for signs that the brand strength is intact amid all these macro factors that impact Nike, you see that in those numbers.

Now, they're still vulnerable to the strong dollar, obviously the war in Ukraine, the potential spillover effect on Europe and China. But it looks like they are putting up better numbers. The guidance comes on the call, and that will be key. That's why the stock is up. The market likes it thus far, Sarah Eisen. Thanks to you, you know this company better than anybody. I'll tell you, 87 cents, guys, for an earnings number is strong compared to what the market, I guess, had feared. Look, 90 cents a year ago and 71 cents per share was the estimate.

So it comes way ahead of that at 87 cents a share. Sarah's going to have more, I'm sure, in the next 24 hours about the real nuts and bolts of what's happening at Nike. For now, let's bring in Pete Najarian with some instant reaction. He, of course, is the co-founder of MarketRebellion.com. He made a trade in Nike just ahead of the number. What did you do, Pete? Well, we had some call buying in there today, Scott. They were buying the March 140 calls.

Last week they were buying the March 135 calls. And when I say March, that means these expire on Friday. But I can tell you, listening to Sarah and going through it myself, I tell you what stands out for me is that direct-to-consumer up 15% is a huge number because that is where the margins are for Nike. That's what we were looking for. We're looking for any kind of supply constraints of any, constraints of any kind. And we know how strong Vietnam has been. 80% of the shoes are manufactured in Vietnam, 50% of the apparel manufactured in

Vietnam. So very, very critical. And apparently that supply chain, not so bad, at least not as bad as maybe expected. And then when you look at China, as she mentioned, China, not great, but still down 5% is not the worst thing in the world. And then you get those digital sales up 19%. That shows you the power of the brand. And brands can be monsters, as we know, Scott. So I like what we're seeing here. And this includes, obviously, not just China, but Europe, Russia, everything across the globe, because this is such a monster of a company. But I think most importantly, we wanted to see what would happen in China and how is North America holding up. And I think what we're finding out is it's holding up not even just OK, but doing much better than OK.

And things are moving along pretty nicely. Quickly, before I let you go, is it a table turner for you, Pete? Somebody who has always said over the last at least year plus, no, I like Lulu better. Nope. I like Lulu better. I don't want to own this stock. And even today, you have an options position on what makes you buy shares. Well, I think I'd buy share stock, Scott, on any kind of a drop on the macro side of things, because then I would be a bigger believer in Nike only because of the fact that we know how stretched the company was. When you looked at those PEs going back to November, we were talking about mid-40s, high 40s. Now if you look at the forward right now, based upon everything we're seeing,

we're talking about close to a 25 PE. So because of that, that attracts me a lot. I still think there's a little bit of a room to the downside. We know we bounced off 117 pretty strong to get to these levels. I think on any pullback close to 117, get to 120, I'd absolutely start filling it up and buying some stock. Appreciate it very much. Pete Najarian on the phone. We'll see you on the half. I know we will. Thank you, Pete. Coming up, we'll have much more of our exclusive interview with star investor Keith Meister, the stocks he is making big money moves in right now and later. SkyBridge Capital

founder Anthony Scaramucci, he is here at Post 9. He's got a lot to say after Jim Chanos revealed a short position in Coinbase on this very program. Stick around. Overtime is right back. We're back now with Corvex Management's Keith Meister with us exclusively today. Thank you so much for being patient with us. Had to get the Nike earnings out in overtime and see what that stock was doing. We mentioned part of your portfolio. In fact, half of it is what you call or characterize idiosyncratic ideas.

And you mentioned a name in passing, and I just want to hit a little more on it. 5-9 is one of your best ideas. And then we're going to talk a new position, but why five, nine? Well, five, nine is a stock that is 30 plus percent growing company tied to great end markets, which is distributed workforces and something called CCAS, which is contact center automation. And one of the things that happened as a result of COVID is people realized that workers can be anywhere and you need to have a different way to communicate with your customer. And the concept of moving from old school call centers to distributed cloud-based solutions where you can use automation and AI to take costs out and drive outcomes has really

accelerated revenue growth for Five9. So today the company is growing at over 35% and trades at a lower revenue multiple than prior to COVID. So if I compare Five9 to Anaplan, Anaplan today was bought at 11.5 times 2023 revenue. If you put a similar multiple on Five9, you would have a double. Five9 clearly had strategic interest less than a year ago when they thought about doing a change of control transaction with Zoom at a value of 210. Today, the stock's trading at 105, and they've done a great job of accelerating revenue growth by moving up market, by moving international. Now, why has the stock gone from 210 to 105? A lot of it's because of this existential question about interest rates and valuation. So the business clearly could be worth less in a higher interest rate

environment because the NPV of future cash flows may be lower, but the fundamentals of the business are better because of the change that's going on. So because interest rates are higher, because labor costs are higher, more businesses are trying to move more things to the cloud and use companies like Five9 to take costs out. So we think they're a well-managed business with great long-term prospects that could be a highly strategic asset over time. Yeah, good looking move in the overtime as well, as you're talking about it. You have a new position that we should talk about, Constellation Energy Group, ticker CEG. Sure. So one of the things I talked about was being thematic. And one of the areas we're

spending a lot of time thinking thematically is about energy transition. And clearly, the debate on energy has been way too political over the last few years. But clearly, we could all agree on what's needed, which is some level of balance. The U.S. consumer wants access to affordable, reliable energy. And we also want to reduce carbon emissions. And if you think about how we'll do that in the US, the bridge fuel is nuclear. Constellation was spun out of a utility by the name of Exelon on February of this year. It's a $20 billion enterprise with $4 billion of debt, so $16 billion of equity, and open EBITDA of about $3.5 billion. So if it was not hedged in

the market today, they'd be making $3.5 billion. So we'd be buying the company about five and a half times EBITDA with less than one turn leverage and investment grade rating. The business generates, nuclear generates 25% of the electricity in the U.S. And of that 25%, 20 plus percent is generated by Exelon. So 12 and a half percent of the carbon free energy in North America is generated by Exelon. Yet the company only has a valuation of $16 billion. So our guess of what happens over time is we need to move to more renewables. Nuclear is the bridge fuel. And as gas and oil prices spike as a result of one-off things, as a result of less capital being put into oil and gas because of ESG,

there's a nice long-term earnings stream for a company like Exelon. And what happens is nuclear becomes baseload and Exelon becomes an energy infrastructure asset. And there's no reason in the fullness of time why energy infrastructure assets shouldn't trade at 10 or 12 times EBITDA and the business grows. So we think there's a path to double. And I think one of the real things that happened over the last 18, 24 months is the renewable carbon. The world realized if we want to get to our goals of being carbon free in individual states by 2020, 2030 and the like, the way we're going to do it is by embracing nuclear. So we think what that does is it creates these as sort of baseload infrastructure assets and should result in multiple expansion. The opportunity to buy a business that's spun off

from utility shareholders during a period of market dislocation where there is no comp, where it is the only large pure-play nuclear power plant company in North America is, we think, really attractive. So we think we found a very interesting idiosyncratic situation. We could never have expected to get build back better. If we get build back better, that's incentives for nuclear. There's production tax credits that would increase EBITDA. We never expected the awful tragedy of what's going on in Europe with the energy crisis. But what I think that's helped people realize is we need to invest in nuclear and having nuclear as a bridge for fuel is really, really important. And it's shocking to

me that the largest owner of nuclear assets can be bought in the markets for an equity value of $16 billion. Wow. Okay. We'll keep our eye on there too. Lastly, and briefly before I let you go, MGM, I believe you're still on the board. What's the view of Vegas? There's a lot of talk of certainly the casino business about China, impact on Macau. Just how do you see the landscape briefly before I let you run? Sure. So I guess I would say, you know, simply put, Vegas is back. If you were in Las Vegas this week during March Madness, you would have seen assets that were running essentially at 100 percent occupancy.

MGM did a great job of, you know, there's an expression, never let a crisis go to waste. The team led by Bill Hornbuckle at MGM did an amazing job of looking in during the crisis and saying, how do we manage this business better? No better way to zero base budget than to actually have to close all of your assets. So in March of 2020, MGM furloughed almost 100 percent of their employees and had to say, what are we going to do to survive? And then as the pandemic and the world began to reopen, they reopened the assets and they said, if we were starting from scratch, what do we want to keep? And as a result, last quarter, I think MGM had 40% margins versus pre-pandemic historic margins of 30%. Over time, they won't be able to maintain that thousand basis points of margin, but they'll maintain a lot of it. So MGM is in a really unique position where they have the best assets in the

industry. The U.S. consumer is ready to go back out and be social. And MGM is sitting with assets that are really, really well managed. We have $5 billion plus of net cash. So in addition to moving very aggressively to reduce our equity capitalization through buybacks, we're investing for growth. We bought the 50% of city center we did not own. We bought the Cosmopolitan from Blackstone. We have a once in a generation potential opportunity to develop a mega resort in Japan. So I think MGM's future is bright. There'll be ups and downs because it is a consumer levered cyclical.

It's got a great management, great asset base. And I think the other thing which I can't believe I haven't talked about, which is sports betting and iGaming, the MGM brand. And what we've done with BetMGM has been nothing short of amazing. We took a business from zero to, I think it's supposed to do over $1.35 billion of revenue this year from scratch. And I think if we look forward a decade, you'll see as much gambling done online as you'll see in brick and mortar casinos. And MGM is in a great position to be one of the winners there. Good to see you in overtime, Keith. I appreciate it very much. That's Keith Meister of Corvex Management. We'll see you soon. All right, it's time for a CNBC News Update now with Shepard Smith. Hey, Shep.

Hey, Scott. From the news on CNBC, here's what's happening now. On the verge of a stalemate, that's how a senior NATO intelligence officer is describing the situation in Ukraine to NBC News. Ukrainian forces have Russian troops stalled, they tell us, but Putin shows no sign of backing down. The assessment comes just two days before President Biden heads to Europe for a major NATO summit on Thursday. A historic Senate confirmation hearing underway today. Judge Katonji Brown Jackson made her opening statement to the Senate Judiciary Committee. The first black woman ever nominated, she pledged transparency. Judge Jackson thanked her family for a lifetime of support and acknowledged many mentors, including the man she has nominated to replace, Justice Stephen Breyer.

It is extremely humbling to be considered for Justice Breyer's seat, and I know that I could never fill his shoes. But if confirmed, I would hope to carry on his spirit. Well, beginning tomorrow, senators from both sides of the political aisle will question Judge Jackson on her judicial philosophy. And a crackdown on spring breakers in South Florida. The city of Miami Beach just declared a state of emergency this afternoon. It follows a weekend of violence with two separate shootings that hospitalized five people.

Curfews will now be in place in Miami Beach, beginning Thursdays through the weekends during spring break. Tonight, searching the wreckage in China. Investigators try to determine what caused a Boeing 737 passenger jet to crash with more than 130 people reported on board. We're live in Beijing, right after Jim Cramer. 7 Eastern, CNBC. Scott, back to you.

All right, Shep, appreciate that. We'll see you then. Up next, the coin collapse. Coinbase falling hard in today's session. Legendary short seller Jim Chano is telling us right here on Friday he is short that stock. The move has SkyBridge Capital founder Anthony Scaramucci all fired up. You haven't seen that before. Why, he says, a beat on the top and the bottom line. Obviously, the stock likes that story.

Highs of the session now in overtime up almost 6%. Keep our eyes on that one for certain. In today's halftime overtime, reaction to Jim Chanos' Coinbase short revealed right here in Overtime on Friday and Bryn Talkington's rebuttal today. Listen. We think that as competition increases in crypto, and this is not a call on crypto or Bitcoin prices or anything like that. But we think as competition increases amongst the exchanges, you're going to see fee compression. And as it is, Coinbase will probably not be profitable this year with a $40 billion market cap. I think his thesis that he shared with you on Friday that, you know, over time margins will come down because fees, compression from trading

will come down. I don't think that's a secret. And I think you would need more to short the stock. There's so many different verticals that are happening that I think shorting that today is just short sighted when you're only looking at the trading aspect. All right, for more, let's bring in Anthony Scaramucci, the founder of SkyBridge Capital, a CNBC contributor. Welcome to Overtime. It's good to have you.

It's great to be here. And congratulations on the new show. Thank you. They said you're all fired up. You're defending Coinbase, so what's the story? Oh, listen, I have an enormous amount of respect for Jim, but I think he's analyzing it like a brokerage stock, like it was a Morgan Stanley. Yeah, like a Schwab back in the day. Yeah, and I think that's where he's making the mistake.

Why? Well, because there's an exponential growth in what's going to happen in the cryptocurrency markets. There's a likelihood of a cash ETF, if not at the end of this year, certainly by the end of next year. And there's going to be a proliferation of the market. So even though the margins are coming down, he's probably right about that, there will be just explosive growth that Coinbase is going to capture. And what's interesting about what Jim is saying, nowhere have I read anywhere that he thinks that there's fraud at the company, like he did in things like Enron and other things that he potentially shorted. So this could be, and I'm not being offensive to him because he's a brilliant guy, so I'm actually analyzing my

position. And we do own the stock, Scott, so I want to be clear about that. But it's like a trade-fi guy looking at DeFi space with TradeFi analytics. And I would actually caution him to do that and spend some more time with the company to see all the different things that they're working on and all the potential revenue avenues. I should also point out I own privately FDX and Kraken. The Goldman move today, the first over-the-counter trade in options, how significant is it? I mean, you did that, what, 18 months ago? But for the credibility, if you will, of the asset class itself, does it mean anything for that?

Well, I think it does. And I'll take people back to the junk bond market in the early 80s. Goldman Sachs was very, very reluctant in that market. They waited longer than the other people, but then they built a massive junk bond department. And I think this is apropos to Goldman's culture. They like to sit back and wait and see other people potentially innovate. But then when they come in, they usually come in in very large size and scale, and they have a tendency to dominate markets. So I like that. That's telling me that they have demand for Bitcoin and crypto related products. And I would imagine that that business is going to be a very big growth business for them over the next six to 12 months. And by the way, their competitors are looking at that. And they're also

going to get in that space, which, again, speaks against the long term macro fundamentals of what Jim is saying. So I know you heard the conversation I had with Jeffrey Gundlach last week about Bitcoin versus gold and what was the better bet in this new Fed environment, at least for the near term. He said Bitcoin, which obviously I know you agree with. But let me ask you this. When does Bitcoin stop being such a speculative asset? I ask you that in the context of you've got people like Jack Dorsey saying, well, Bitcoin is going to replace the dollar. The dollar is not a speculative asset, right? The dollar does not move wildly like like Bitcoin does. When does it stop and what stops that? Well, we've had these conversations off the air. I have never said Bitcoin is an inflation hedge.

I don't believe it is. I have not said that it's a store of value today. I believe it can become those things, Scott. It has about 3% market saturation. However you want to measure it, Mike Novogratz says there's 140 million Bitcoin owners. Glassnode says there's 240 million wallets. However you want to measure it, it's two to three percent market saturated. Take Goldman Sachs as an example, stepping in now.

If there's a cash ETF, there'll be broader demand for Bitcoin. If Bitcoin got to a billion wallets, then I would look at you and say, this is probably a three, $400,000 coin, and it becomes more stable. And I would go back to Amazon. Amazon went from a $10,000 investment on its IPO to $21 million. But Scott, you had to go through eight or nine times where it dipped 50% in value, once where it was down 90. And so these things take a while to mature. But look at Amazon last year. It was one of the least volatile stocks in the marketplace because it was saturated. So you need Bitcoin to get saturated in terms of its ownership before you and I can look at it as a store of value or an inflation. Well, how long is that going to take?

I think it's people making that argument today that it's a store of value and all this other stuff that sounds nonsensical. Well, I think it's a premature argument based on what Bitcoin is doing and based on the tactical properties of Bitcoin and all the fear and uncertainty and doubt. Warren Buffett is calling it rat poison. Charlie Munger says it's the worst thing that ever happened to the civilization. But Goldman Sachs wading into it, you're one step closer to that. But I think it's three or four years from now. If you look at the exponential adoption of Bitcoin, where it is today, could it be at three to five hundred million wallets by year end? It's very, very possible. Could it be at a billion wallets by the end of 2024?

Kathy Wood says so. She's a very smart analyst. Let's take her word on that. If that's the case, Bitcoin is a four to five hundred thousand dollar coin asset. It's saturated. You and I will be discussing it as a store of value and a potential inflation hedge. I hope we're discussing it many times in overtime. Yeah, me too. Thanks for being here. It's good to see you in person, by the way. That's Anthony Scaramucci of Skybridge coming up. A turning tide. Deutsche Bank out with a big call on EV maker NIO.

The analyst thinks the stock could double. We'll press him on that call next. Breaking news, a change in forecast and a big one from the White House on supply chain issues. Our Kayla Tausche has those details right now. Kayla. Well, Scott, the increasingly pessimistic outlook is wrought by one thing in particular, and that is the Russian invasion of Ukraine that has prolonged the geopolitical and financial uncertainty. That was the focus of a conversation today at the White House with top officials on the economic and national security realm and 16 executives ranging from the CEOs of JPMorgan Chase, Bank of America, Visa to ExxonMobil and Chevron. Earlier this afternoon after that meeting concluded, I spoke to Commerce Secretary Gina

Raimondo, who participated in that meeting. And this was her recap of the conversation as it took place and that outlook that you just mentioned. We need to be prepared for the worst, which is quite a long-term disruption. We're also prepared for this to last quite a long time. And that was the message to the CEOs, but they are all already thinking that way and preparing. We're in a scenario planning situation. She said that the export controls of the Commerce Department has already announced have had a significant, in her words, impact on the Russian economy and that the administration remains committed to using every tool available

to try to end the war and pressure President Putin to end the war as quickly as possible, but acknowledging that just simply might not be possible. I also asked her about the administration's stance toward China, what consideration it is giving to possible sanctions, counter sanctions on China if it does decide to assist Russia in its efforts. She would not go there. But Scott, that is going to be a big topic of discussion this week in Brussels when leaders of allied countries meet there. Scott. All right. Kayla, appreciate it. That's Kayla Tausche, the White House, the backdrop for us. Thank you. Still ahead, the stocks making the biggest moves in overtime, plus Santoli's last

word, why he thinks Powell's path to a soft landing could be rockier than expected. News alert on Disney. Our Julia Borson has those details. Julia. Yes, Scott. An update on Disney's meeting with its employees to address frustration around its handling of the so-called Don't Say Gay Bill in Florida. CEO Bob Tapek saying he knew he made mistakes and wanted to use this as a catalyst for meaningful change, announcing that he's going on a listening tour. company-wide task force to develop strategy and concrete actions to engage lb lgbtq plus employees and creators to be a force for good for those lgbtq plus communities with a focus on developing more content in this arena also saying they signed the human rights campaign opposing the policy in texas that criminalizes parents providing gender affirming care for transgender minors guys back over to you.

All right, that's Julia Borson-Forrest. Thank you for that. After the break, Santoli's last word and the hard truth about a soft landing. We'll be right back. Oh, it's time for Mike Santoli and Santoli's last word, which is today. Well, soft landing is two words. Might be a little bit of a tough road to get there. Jay Powell today saying he believes that they can engineer a soft landing.

It's plausible. I remember 94. I think that's when Greenspan basically made his bones about Maestro. Shock value to the initial rate hikes and then feathering the break and then letting off. Now, the issue is the market has a lot of room to spook itself along the way when you have the opportunity for accelerating bigger hikes, things like that. I think that's what we're in for. Any rally in risk assets loosens financial conditions and basically gives the Fed more slack to tighten them up again.

So that's the cycle we might be on. Look at the 210 spread here. This is the market casting its doubt as to whether they think Powell and company can do it, at least in part. They think that they're going to have a path to 2% plus on the short end. The question is, if something breaks along the way, and that's always the issue, then they're not going to have clearance to just go that in a straight line. And therefore, the economy is either going to moderate or inflation is going to come back in a line and they can calm down a little bit.

Tightest it's been in this cycle, at least, right? These 17 bips. All right, Mike Santoli, thank you very much. Coming up, it's our two-minute drill, three picks for your portfolio. Over time, we'll be right back. Now to the results of our Twitter question of the day. In OT, we asked how many basis points will the Fed hike interest rates at the next meeting, 25 or 50?

And I'm not surprised at all by this answer. 50 basis points is the winner. 58% of you thought that compared to 42% for 25 bips. We're going to see what happens, but it certainly seems like Jay Powell and company are setting the table. Now it's the two-minute drill. Bannery and Capital Management founder and president Shana Sissel joins us now with her topics. Good to see you in overtime. Your top pick right now, or at least one of them, Camden Property Trust, CPT.

Why? Well, primarily because housing and rental housing are in big demand right now, especially in certain geographies. There is a huge migratory trend going on, and Camden is in the sweet spots. They have 30% of their properties in Texas. They have exposure to Nashville, North Carolina, Florida, Phoenix, Denver, all the places where people are moving. So there's a big demand for their properties. They have 95% occupancy, 98% rent collection. And this is an area where I think in this market you want the dividend yield. It's a good place to be right now when you look at high inflation and rising rates. The next one is just absolutely shocking.

Not Apple. Apple is, you know, I'd like to say it's the favorite of the talking heads. And I say that facetiously because I'm one of those talking heads. But it is a name that has strong brand loyalty, has steady growth, good management, strong balance sheet. It's trading at a 26 time forward multiple. This is the time I want to be buying Apple. Tech is definitely going to have headwinds as rates go up. But there are pockets of opportunity here, and Apple is one of those names. All right. I appreciate it. The last one is NVIDIA, which is just ahead of its, I think it's shareholder meeting or analyst day or one of the other. Anyway, it's good to see you, Shana. Thanks. We'll have you back in overtime sometime soon. Want to remind you as well, tomorrow, don't miss our interview with legendary investor Carl Icahn. He's going to be right here

to talk about the markets. Haven't heard from him in a while. We'll see how he is positioned. That does it for us today. And over time, I'll see you tomorrow. Fast Money begins now.