Closing Bell - Closing Bell: Stocks Soar, Inflation Easing & Legendary Value Investor Bill Miller's Top Picks 1/6/23

Episode Date: January 6, 2023

Stocks staging a big rally after the December jobs report showed wage growth is slowing, giving investors optimism that inflation may be cooling. Apollo Global Management Chief Economist Torsten Slock says this is a clear indication of a soft economic landing and should force the Federal Reserve to pause its interest rate hikes. Legendary Value Investor Bill Miller reveals his top stock picks for the new year and why he is still bullish on Bitcoin despite the collapse in cryptocurrencies following FTX's failure. Plus, the big stock he just took a larger short position in. And the CEO of Clear, which provides security screening at airports and stadiums, discusses the outlook for travel demand.

It is the first big rally of the year. Stocks are off to the races after today's jobs report showed wage growth slowing, what it all means for the Fed and the market. This is the make or break hour for your money. Welcome, everyone, to Closing Bell. I'm Sarah Eisen. Take a look at where we stand at the highs of the day right now. The Dow is up 726 points. We got more than 2% rallies across the board. Look at the Nasdaq. It's surging 2.7 percent. Bonds are rallying as well. There's the 10-year note yield all the way down to 3.5. Weaker wage growth on top of that ISM services number, which was a big miss and showed a drop. Bad news is good news when all eyes are focused on the Fed. It's a broad-based rally. Every sector is in the green. Take a look. Materials

and consumer staples are leading the way right now, but it is across the board and technology is bouncing back strongly after a rough start to the year. As I mentioned, the Nasdaq up 2.7 percent. Information technology as a sector is up more than 3 percent. Coming up this hour, legendary value investor Bill Miller III and his son, Bill Miller IV, here to discuss the outlook for the market, their top picks, including whether they are still bullish on Amazon and Bitcoin. Both have been painful lately, as well as their fund succession plan. Don't miss it. But first up, let's head to the market dashboard. Senior markets commentator Mike Santoli, what do you make of this rally?

It's impressive, actually, and it shows you the amount of energy that got built up with this real sideways, tight-coiled pattern that we had for the last few weeks. Been pointing that out. Right around $3,800, the market had refused, really, to buckle below that level. That goes all the way back to mid-May of last year in terms of when we first got down there. And you see there actually haven't been that many prolonged periods of time in the last year when you did have such a period where the market really did just sort of churn sideways in this very, very narrow bend. Now, what does that mean longer term? Well, we're going to tag thirty nine hundred looks like we just did here. Hadn't been at that level

since December 15th of last year. It is still obviously in a downtrend. But, you know, with the passage of time, as we move along, the hurdle for deciding whether, in fact, we've broken the downtrend goes lower. The 200-day average for the S&P is now under the 4,000 mark. So it's less than 3 percent higher. So that would be one technical test of demand and see if that's going to work. It seemed as if late in the day today, so far this afternoon, people just stopped leaning on the big Nasdaq stocks that have been big, big laggards for a while right now. In fact, you could say that Tesla and Apple going toward multi-year breakdowns over the last couple of weeks. And yet the S&P 500 holding strong maybe was telling you something

that there was something underneath there. Now, clearly, the market has not given up the soft landing scenario. And that's where that was part of the story. We'll see if it plays out here in terms of earnings is what a lot of folks are looking for is the next potential challenge. This is from Mike Wilson over at Morgan Stanley. What it shows is the P.E. ratio has come down a lot from the peak. We're now under 17 times forward earnings. His argument is earnings estimates have just started to roll over and they will come down and make it hard for the market to perform well in that scenario. I would argue that's a possibility, but it's not necessarily the only way this goes. As you can see, the multiple has plunged in the past without earnings

buckling. And also it kind of leads the way. So the fact that the multiple is down shows you the market's already braced for the earnings level to decline to some degree, Sarah. So for all those people saying earnings expectations are not low enough, markets already sniffed that out? I mean, they've sniffed out part of it. I think the market, the decline in earnings expectations, by the way, for the fourth quarter, which we're going to start to see the numbers, they've declined six or seven percentage points over the course of the fourth quarter. That was the same percentage they went down over the course of the third quarter. And then companies report, they beat the numbers on balance. You're a couple percent above that. And so, yes,

there's been a decline, probably still will be more of a decline. Margins are going to be under some pressure, but I don't think it's necessarily going to be utterly a surprise to the market itself. Got it. Mike, thank you. We'll see you soon. Mike Santoli, this morning's jobs report showed wage growth maybe slowing, easing inflation concerns. But this morning on Squawk on the Street, Atlanta Fed President Rafael Bostic said the data doesn't change his outlook at all.

I've been looking for the economy to continually slow from the strong position it was at in the summertime. And this is just the next step in that. The question for me has always been how fast is it going to slow? And it's going incrementally, it's steady, it's not super disruptive. But because of that, it really says to me, you know, we've got to stay the course. Joining me now is Apollo Global Management Chief Economist Torsten Slock. It's great to have you back, this time from Apollo. Torsten, welcome.

Thanks. Thanks for having me, Sarah. So even though Bostick says it doesn't do much for him, the market is taking it as a sign that the Fed won't have to do all that much more or may be able to pause sooner than expected. The slower wage growth, the weaker services, is that the right take? Yeah, I think, I mean, both what Mike is saying and also what Bostick is saying here, I mean, the slower wage growth, the weaker services. Is that the right take? Yeah, I think, I mean, both what Mike is saying and also what Bostic is saying here, I mean, this is the definition of a soft landing. I mean, we have inflation coming down. The economy is not slowing dramatically.

It's gradual, it's steady, as Bostic just said. And all that tells you that up to this point, this recession that we all have worried so much about for so long, it is not really showing up in the data. There is definitely recessionary tendencies in markets. But in the real economy, it is the case that inflation is coming down, as the Fed has been trying to achieve for quite some time now. And at the same time, the labor market is still holding up. And that's definitely good news from a bullish perspective.

No, I mean, as far as the report is concerned, it really does speak to a soft landing. You've got the hiring and then the moderating wage growth on the inflation side. The problem, Torsten, is that the Fed is not going to be satisfied. They are resiliently sticking to their 2% inflation target and their tough talk against inflation. So the risk for the market is that they way overdo it, isn't it? Totally understood. The only issue here is that, as Jay Powell has said, and as several FOMC members have said more recently, they will continue to go at it. And here is the quote, until inflation is well underway towards the 2% target. What does well underway mean? If you look at the consensus by the middle of this year,

the consensus expects that inflation will be at 4%, and by the end of this year, the consensus expects inflation will be at 3%. Is that well underway? Is that enough for the Fed to begin to take a break? At least the market pricing, if you look at the OAS curve, is expecting that the Fed will peak with the Fed funds rate at 5% by the middle of this year. So that means from a trading perspective, we are only really four or five months away from the Fed beginning to pause. And the consequence of that, of course, is that the Fed will certainly stay very, very attentive to all the details,

both on the inflation front and also, of course, on the labor market. But so far today, with average out earnings falling in December to 4.6 from 5.1 in November, that's a steady decline in wages. So if that trend continues and with CPI next week also trending lower, that does certainly tell you that the Fed is succeeding in getting inflation down towards and being well underway towards the 2 percent target. I have a lot of questions about that, but we're going to take a pause, Torsen, if you would. Stay with us, because we've been monitoring this story all day. Biogen shares have just reopened. They were halted after winning FDA approval for the Alzheimer's drug. Let's get to Meg Terrell with more on how they've opened and what the story is.

And welcome back to you, Meg. Well, thank you, Sarah. So Biogen stock looks like it's up about 6% there, reopening. You know, some analysts had estimated the stock could go above 300. It's about 288 now. This is largely what analysts were expecting for the approval of this Alzheimer's drug. It is the second Alzheimer's drug from Biogen and its partner, Acai. This one was led by Acai with all of the clinical development

and the FDA process. Acai now has announced the price of this drug. It will be $26,500 per year per patient. That is essentially in line with what analysts had been expecting. It is higher than what a pricing watchdog called ICER had said would be cost effective. They had said about $20,000. So we'll see how that is digested by people who would pay for this drug. And that is really the tricky thing, Sarah, because Medicare had essentially come out from the last Alzheimer's drug and said, we're not going to cover any of these Alzheimer's drugs targeting the plaque buildups in the brain that are given accelerated approval, which this one was, except in specific clinical trials, which really limits how these drugs get paid for for Medicare patients. And that's the bulk of patients who have Alzheimer's disease. So that's the next key question for this drug. What will the reimbursement look like for it? But the second Alzheimer's drug

in this class now to be approved and on the market. Well, yeah, and I think that was a question, too, whether it would ultimately be approved. We talked to Acai throughout this whole process, and there were some safety questions about this. So good news all around on the slowing of the progression of the disease for Acai. By the way, Acai's Ivan Chung will be on Fast Money today, 5.15 Eastern time. Let's get back to Torsten Slocke talking jobs, talking the market rally, talking the slowdown in the economy, Torsten. So I guess what I'm wondering, you expect the Fed to pause along with the market's expectations in the middle of this year. Are you guys as a firm at Apollo, is your position that you are then bullish overall that that will cause a rally and the soft landing scenario to play out? Well, I mean, the scenario, of course, that the market has priced in is certainly a soft landing.

The consensus does not expect a deep recession. And the consensus also is telling you that earnings should not be slowing down dramatically. So from an investing perspective, I mean, this just speaks to the fact that markets have been a bit more wobbly because we just don't know quite yet how quickly inflation will come down. But if inflation is coming down a little bit faster than the market has been expecting, and if the narrative here in the beginning of 2023 is that, well, now we know that inflation has peaked and now we also have a discussion about how quickly inflation will come down. That's very different from the narrative we had last year, where it was all about how much is inflation going to go up? When will the Fed be done with

all these rate hikes? That now we have much more clarity in terms of the outlook, and that should be, and is in particular, of course, today, something that generally should be good both for credit and for equities of risky assets. Yeah, well, let's just see if the Fed buys it. We haven't quite heard that pivot in tone from them yet. Thank you very much, Torsten. Appreciate you joining me on the news today. Torsten Slak of Apollo now. Up next, legendary value investor Bill Miller revealing his top stock picks for the new year,

discusses his succession plan with his son in an exclusive interview. It's coming up next on Closing Bell. Quite a rally, highs of the day, up more than 768 points. We'll be right back on Closing Bell. Stocks are trading higher. We're near the best levels of the day. The Dow S&P both up more than 2 percent and the Nasdaq is soaring. It's up almost 3 percent, 2.8 percent right now. Bonds are rallying and the dollar is selling off. Joining us now is Miller Value Partners chairman and CIO Bill Miller III. Also joining us, his son, Bill Miller IV, who is currently the portfolio manager of the Miller Income Fund, but he will soon be taking ownership of the Miller Value Partners later this year. Gentlemen, it's great to have you on. Good afternoon. And I definitely want to talk about

the succession story a little bit later, but we've got a nice rally here. So maybe I'll start with you, Bill Miller III, on the market celebrating lower wage growth, weaker services number, and this idea that inflation is falling, but we're not necessarily barreling into some big recession. Is that what you think the story of 2023 will be? How do you look at it? Sarah, I think basically that it's been all about macro for the past year or so. It's been about the Fed. The markets tend to have days where 95% of the S&P is up and other days 95% is down. I don't spend any time thinking about where the market's going to be or where it's going to go. I'm just trying to figure out if there are cheap names out there, names we think looking at a year, two or three, that we can do quite well in. I do think in this

market that is absolutely the case. So more opportunities for you after what was a pretty rough year last year. Where do you see the most value? Are there certain sectors or pockets of the markets or it's just individual names for you as always? Well, the market's like a giant Rorschach test. You know, everybody sees what they want to see in it. For us, I think it's a lot like, or for me anyway, I think it's a lot like 1939 when John Templeton, who founded the Templeton Growth Funds. So in 1939, when Hitler invaded Poland, John borrowed $300 and told his broker to buy every, he was in his 20s, to buy every stock in the New York Stock Exchange and trade it for a dollar or less. And he did that, and that was the basis for his fortune and 30 more than 30 of those names were were in bankruptcy but only four actually ended up worthless and i think right now it's pretty much you know if you look at burton malkiel's random walk down well street i think

if you have if you throw 15 darts at the market right now i think you're going to do quite fine if your time horizon is a year year and a half or so. What about you, Bill IV, I'll say, coming off of a year like last year where all the focus was about higher inflation and the Federal Reserve raising rates? I know you guys aren't necessarily macro, but in such a macro market, how do you view the opportunities this year? Well, I think it's really interesting to start with the market's expectation for things and then look where there may be opportunities within that. So if you look at actually what the bond market has done over the past few months, their expectations for inflation moving forward are pretty clustered over the next two, three, five, 10, 20 years, between two, two, two to two, three percent

annualized over the next two years. So people aren't really paying attention to some of the more near term data that's coming out around annualized numbers over the past month. What have prices done over the past month? Well, when you actually annualize that, we're getting pretty close to 2 percent. So the Fed's done a really good job with the forward communication in terms of getting the market to figure out what's going on. Macro-wise, we're in a great environment. Low unemployment, growth overall, economy's growing strongly, and some really compelling valuations out there. So when I look around, one of my favorite names personally is Chico's, the women's retailer. They also own White House Black Market, Soma. Phenomenal,

phenomenal management team. They're undergoing a big turnaround. They trade at less than three times our estimate of normalized cash flow. So we have a position in our income fund, even though they're not currently paying a dividend, we think they may eventually. But at the same time, it's an incredibly cheap stock, and there's a lot of others out there like it. It's really outperformed over the last year. It's pretty much flat. But is retail consumer a good place to be if we are going into a recession? It kind of depends on the name and the valuation going in. So, again, we don't look at buckets like that. I can tell you another retailer that we own in the income fund, actually one of our top positions, is a name called The Buckle.

BKE, it's a jeans retailer. Look at them in their malls. Phenomenally well run. The management team owns almost a third of that company. If you were to just look at the company's profitability over time and what they've done, this is a really well run company, very high returns on capital, 8% trailing dividend yield and going higher. They just reported comps in December of 7% up year over year. So recession or not, they're growing 7%. So yeah, we think there's a lot of interest in stuff in retail. Yeah. I mean, that's been a great kind of quiet winter over the last few months. So Bill Miller,

the third, I was going to ask you about Amazon in particular. You've been with it from the beginning. It's coming off of a year down 50%. Have you been adding to that position? Do you think Amazon's due for recovery? Yeah, absolutely. I think it's one of the easiest names in the market. A year ago, Amazon was double this price. If it takes three years for Amazon to get back to where it was a year ago, you make 25% a year. I think that'll easily beat the market. AWS, which is their crown jewel, AWS is running at $80 billion annualized rate and a $20 billion revenues, $20 billion of profit. And we think that AWS will easily grow 25% a year

the next three years. They're 30% operating margins. We think AWS alone right now is worth almost the whole price of Amazon. So you get the advertising business, the logistics business, which is a relatively new business, retail all for free.

I think Andy Jassy is doing a great job. They announced yesterday 18,000 layoffs. That's not good for the people that are being laid off. But, hey, with unemployment like this, I don't think those people are going to have a hard time getting jobs. And I think that Amazon this year will report all-time record profits. And there's also a big transition at Amazon, whereas the last year they were a negative free cash flow of about 13 billion. We think they'll do 21 to 22 billion of free cash flow in 2023 42 billion of free cash flow in

2024 and 60 billion of free cash flow in 2025. So I think in terms of quality and a management team that is absolutely as good as it gets. I think you know that that for me is a fairly easy one. And yes, I actually bought more Amazon personally. You bought more. I was going to ask about your thoughts on Andy Jassy in particular because the stock did peak just right around the time

where he took over as CEO and whether some of the stumbles were on him or sort of macro drivers. Yeah, well, you know, Jeff Bezos has already had a good sense of timing, I guess. I think Andy's terrific. I've known him ever since he joined Amazon. And when you mentioned stumbles, I don't think there have been any stumbles. People, I think, have misunderstood what's happened there, which was when the pandemic happened, they had a massive upsurge in business, as you may realize, because all stores were, which was when the pandemic happened, they had a massive upsurge

in business, as you may realize, because all stores were, everything was shut. And so the one thing that Amazon ranks number one about everything else is customer satisfaction. And given the choice between perhaps overhiring, overbuilding in terms of new supply, and or otherwise disappointing the customer, they chose to overbuild and overhire. That's that's being rectified now, in my opinion. And so I think within within a year or so, Amazon would back it normalized. And I think also people are looking at the operating margins in the retail business and don't understand that those operating margins are, you know, 2 percent or so. That's that's way way way

below what normalized would be in 2002. When Amazon was bleeding red ink and all their up and they had to basically basically cut back on expenses. Operating margins in the retail business were 7%. Right there are there negative in Europe so

I think longer term. Even you at U. S. domestic retail my opinion to be a 10% operating margin business in that that, can be a 10 percent operating margin business. And that certainly is not at the stock. Bill, the fourth, any other opportunities, new opportunities for you within broader technology as that has been the eye of the storm and as you guys look for good value? I'd love to mention both of our favorite things here, which is Bitcoin. That is truly a new monetary technology. What you've just seen with the FTX debacle, you've seen all the leveraged

hands and weak speculators that are operating on margin. They've all been flushed out at this point. And I think toward the end of the year, the market's going to start looking towards 2024 when the Bitcoin miner rewards are halved, right. So Bitcoin becomes harder to produce at the margin. And also people are going to start looking towards monetary stimulation, which has been going on for hundreds of years in fiat currencies. So, yeah, that is a technology that we own heavily personally, full disclosure. And we are still very, very optimistic about it over the coming decades. So so, yeah, that is one in technology that we like a lot. Your confidence has not at all been shaken by,

clearly, by FTX, the fraud, the fact that Bitcoin was so inflated by fraud, speculation, monetary stimulus, all were bubblicious type of things. You can frame it as speculation or you can frame it as volatility in a new asset class. And I think it's the latter. And so if you just look at it, it's been volatile over long periods of time, but it's a phenomenal store of value. The network has never been stronger

and more secure than it is today. And so there's hundreds of millions of people around the world that own Bitcoin and growing. And so we're still very optimistic about it as a technology and where it could go. How much of the fund is Bitcoin or Bitcoin related at this point? So in the income strategy, we have a small portion of it in things tied to micro strategy, which is the dominant leader in that technology. It's a small percentage, but personally, it's a lot bigger than a small percentage.

And Bill, the third, Silvergate was one that you had liked. I think it was in the competition that you guys do where you hold stocks for the last year. That's a stock that tanked 43% yesterday after they gave an update of much bigger withdrawals tied to FDX than people were expecting, layoffs. And it was a terrible update. Are you still bullish on that stock? Yeah, the reason it tanked was because I bought the stock personally the day before that. So that's why it went down a lot. That happens any time I try and buy these sorts of things. I mean, we bought Amazon at the open when it came public. We sold it after it doubled a year later.

We bought it back around 90 and it went to six. But we kept buying it. I think with Silvergate, so let me group Silvergate together with Coinbase because we own Coinbase in the fund. We own, personally, and then we also own Silvergate. But they're completely different sorts of things coinbase is more of a more of a direct play on the crypto space And I want to emphasize something that bill for said which is that Bitcoin and there's there's no fraud in Bitcoin you go back to the pandemic when the Fed had to come in and there's a scramble for liquidity and Treasuries were being bid through the roof and everything else, mortgage backed securities were collapsing. And the Fed had to come in and clean those markets by just injecting massive amounts of liquidity.

Bitcoin trades 24-7, 365. There was no, there wasn't even a hiccup in the Bitcoin, in the Bitcoin market. That's the FTX collapse. That was a centralized enterprise, as was Celsius. And I think that it's very important to understand that Bitcoin is dramatically different from that. Somebody said to me the other day, Bitcoin has been really, really terrible. And because it was 60, 70,000 and now it's like 17,000. And I said, well, let's look at it here this way.

On the market low in March of 2020, the market was around 2300 and Bitcoin was around five and a half thousand. And so since the market low through last week, the market's up 70 percent and Bitcoin's up 190 percent. So as Bill three, Bill four said, it has been more volatile except for recently in the past month or so, it's been less volatile than the market. So, you know, I'm optimistic on all those things. I mean, Coinbase. So Coinbase has a $7 billion market cap. It's got $5 billion in cash. Its bonds yield 15%. And I think that Brian Armstrong is an excellent CEO. It's much broader than Silvergate, which is actually an FDIC-insured bank. And interestingly enough, Silvergate now trades as about an $18 tangible book. The stock is 11. Silvergate now trades as about eighteen dollar tangible book stock is. Eleven- it was

silvergate was I think around a hundred and thirty a year ago and now it's eleven- they met all of their deposit- withdrawals- relatively easily said very liquid balance sheet. There there are tangible common equity ratio is higher than J.

P. Morgan's- there were two concentrated in the crypto space somebody came out today. And said I think correctly that they were too concentrated in the deposit space somebody came out today. And said I think correctly that they were too concentrated in the deposit space will probably have to diversify that. That's that's I think that's

accurate. But- I would guess that you know a bank that trading below tangible book. And with a with all the other- that more. More cash than they have deposits right now. So I would guess that in a year from now. Silvergate would

likely be at least tangible book which would be have it be up, you know, would be 60, 70 percent. FTX was a $32 billion company in the second week of November. And Coinbase is a $7 billion company today. And it's a dominant U.S.-based company. So I like both those things. So you're backing it still. Bill, Bill, three, I got to ask you about Tesla, because I think personally for the for the stock contest, you were you've been short. Is that true for the last year? And that's certainly been a winning trade as the bears have pounced on every piece of that. Not for the past year, but more recently. And I actually shorted more today.

So I did more Tesla today. Today. Yeah. I mean, I think think what I think Tesla's been a phenomenal company company I think Elon Musk is a genius- but you know a three hundred eighty billion dollar market cap against the General Motors at fifty. You know more than probably the top

five automakers combined. That's is now losing market share they're cutting price. B. Y. D.'s introducing a luxury of a version over and. You know over in China. And it's a phenomenal company, but it's not worth $380 billion in my opinion.

You've probably never heard of the great short seller, Bob Wilson, who got carried out when he was short Resorts International when they first got a license in Atlantic City, and then he disappeared for six months and his broker sold him out of a lot of stuff. And one of the points he made was never, what he learned from that,

he said, never short on valuation alone. So, but wait until it breaks. And then that's the time to, he used a colorful four-letter word, but he just said, that's the time to be short. So, you know, I've shorted it recently. I've shorted more today. You know, if it goes up, I'll short more.

So it's on this idea that you think the valuation is still too high, even though it's sold off 70 percent over the last year and the momentum is to the downside, basically. I just don't think it's worth more than the top five automakers in the world combined, and all of whom have been coming with massive electric vehicles. There haven't been any electric vehicles. What killed Resorts International was ultimately they gave more licenses to the companies in Atlantic City. And so while it was idiotically expensive when it had a monopoly, it collapsed after that. And I think that Tesla is too expensive. Tesla is much more profitable, obviously, than the current

auto companies. It's got a lot of free cash flow. The earnings multiple, if you consider it a tech stock, is not out of whack, certainly with his dominance in electric vehicles. But the issue the difference between Tesla and other technology stocks is that it's selling into a bad business the auto industry globally is a bad business it's over it's got too much cap.

Too much capacity and they earn low returns on capital. And so I think that that I think with with Tesla it's it's fighting a bad tide on them. Bill for so I think that that I think with Tesla, it's fighting a bad tide on that one. Bill, Bill, for so I know you don't short in the fund. Right. So you don't have the test. That's a that's a personal pick there. Clearly, it doesn't sound like you guys like the auto sector right now. I was just wondering if there was any any sort of related related bet that you have on now. Do you guys still like the airlines or any of the transportation sector? Sarah, one thing. We actually own General Motors and like that a lot.

Oh, okay. Yeah, so in addition to that. You mentioned it was a tough cycle now, though. No, well, cyclical cycles, the cyclicals in general, I think, are really attractively priced at this time. So one sector I think is really interesting here is the home builders, which have collapsed over the past year or so as mortgage rates have spiked, which hurts home affordability. Reality is, I put a piece on our website that said, are we in 2008 again when prices started rolling over last year? And the answer is no. We're in a fundamentally different position than we were in 2008. There's a very strong need for housing in the country, in the U.S. today. And so homebuilder stocks are super interesting. Beezer trades it three times this year's earnings estimate, which is, again, lower than it was last year, about half

of what it was last year. And it trades it three times that. So I think there's a really compelling case to be made for homebuilders and stocks right now. So that but that's also kind of a bet that the Fed is going to be done sooner rather than later. Right. Well, there's a limit. There's a limit to the extent to which they can hike rates. And that's for sure. And the market's on to that. Wanted to ask you what we have you both. The reason we have you both is there's a succession happening at the at the firm. Bill three. Can you can you tell us a little bit about how it's going and what it's going to look like and what's different? Sure. It's going a lot slower than I would have hoped in terms of the mechanics of splitting into two companies. So Bill 3 will take over and

own Miller. It'll be the majority owner. I'll be minority owner of Miller Value Partners. And that will have the income strategy. We have a small cap, a deep value strategy in that side. And then the opportunity strategy will migrate over to patient capital, which is a majority owned by my colleague, Samantha McLemore. And so it'll be two completely independent, two completely independent companies. And I'll let Bill Three talk about maybe some of the strategies that he's thinking about. But I would just say that you can expect that there will be, I would say, new products in both of those areas. And the thing that is, I would just say, an interesting and positive coincidence is when I took over the equity business at Leg, that was in 1990. My late partner, Ernie Keeney, was then 72 years old in 1990. I was 41 years old in 1990.

And we had had a very bad year in 1990. And so I took over at the beginning of 1991. And so everybody said, well, gee, what's going to happen here with this guy that is really proven? And I proceeded to beat the market for 15 consecutive years. We've had a bad year in both the Opportunity Fund and in the Income Fund in the past year. But both funds are well ahead of the market in the early going here. And I think that both of those funds are going to do extremely well in the next several years. So tell us more about that, Bill, for and what the strategies will be and how they'll be different under your leadership than your father's. For sure. I could not be more

excited about MVP 2.0, Sarah. So active management has completely lost its way. It's because the customer experience is terrible. It's not really about the customer, it's about the manager. And so for MVP 2.0, it's going to be about the customer because we are going to be the customer. And so we have a couple of strategies that we've been incubating over the past year to two, actually longer than that, that we're really excited about that are aggressive. I can't say too much about them today. I will say they're aggressive. They're unlike anything that's out there right now. And they're going to be coming out in the imminent future. We're going to have a lot of funds personally in them. And we are super excited about what we can deliver, I are interesting in the market right now. Bill Miller, the fourth. Bill Miller, the third.

Thank you. Thanks, Sarah. For Miller Value. Appreciate it. Take a look at Costco, one of the big winners in the S&P right now after stronger than expected December sales. When we come back, what that says about the strength of the consumer. Stocks up 7.5%.

The market is on a roll here. We're up about 750 points. Stay with us. The holiday travel debacle not over for Southwest. In an SEC filing this morning, the company said it expects a fourth quarter loss after last month's cancellations. As a result, Southwest is looking at costs of up to $825 million, thanks to revenue loss from canceled flights and reimbursement to customers. Joining us now is Karen Seidman Becker. She is the CEO of Clear, the security identity platform used

at major airports and stadiums. Karen, it's great to have you on the show. Welcome. Thanks. Great to be here. So I was really interested in talking to you for a perspective on what you're seeing as far as demand right now. You've got a clear window. We had seen leisure booming. Is that still the case? Is there any sign of a slowdown? No, we think travel is in major growth mode. Last year, we were calling it travel palooza. This year, we've taken to calling it super travel palooza. Traffic in the Clearlane over the holidays was up over 50 percent from 2019. Morgan Stanley is out talking about corporate

travel being up this year. Hybrid travel, which is that hybrid of business and leisure. People don't want to stay in their apartment for their four-day weekend, so they're hitting the road. Experience economy, revenge travel. It is alive and well. Travel is in major growth mode. We are extremely bullish in 2023. And how many travelers actually are using Clear? And where's the opportunity there for you? So we have over 15 million travel members on the platform. And today, over 6% of the traffic across the U.S. in airports are coming through Clear Lanes. In the airports that we're in, between 10 and 30% of travelers are coming through Clear Lanes. We're now in 48 airports and adding more.

And so, you know, travel is in major growth mode. But I'll also say, as you talked about with the past few weeks with Southwest, travel is hard and it's getting harder. And it's not just what you saw last week. It's what you saw all last year as travel was coming back. And I think it's really important. You know, we're on the side of the American traveler. And we've seen Secretary Buttigieg and others out talking about a passenger bill of rights. And we do think a common sense passenger bill of rights makes a ton of sense.

It is just too hard to travel. And it's in growth mode. And we've got to make it easier. People expect it. And the American travelers deserve it. What does that mean exactly, a bill of rights? So do you think that more pressure needs to be applied in this case to Southwest and the airlines? I think a common sense passenger bill of rights, broadly speaking.

This is a really connected industry. There's airlines, there's airports, there's federal and TSA. And I just think that people need to come together on behalf of American travelers to make it easier. You know, people expect it now when they go out and get an Uber or when they order food. These are what they're experiencing, frictionless experiences, and they deserve that in their travel experience. And so not quite sure what should be in it, but I certainly know a common sense bill of rights to protect travelers. If you look out to 2030 and it's not that far away, you'll have another million travelers coming through airports. That's a 3% CAGR from 2019. If this is where we are today, where are we going to be out a few years? So I do believe innovation, partnership, collaboration,

and passengers should be protected. Again, common sense. Right. But what's your perspective on this whole nightmare situation for the Southwest flyers that had canceled flights? Is it something that could have been avoided? Clearly, the other carriers didn't have as big problems. I think if you, I can't talk to Southwest specifically. I

think what I can say is if you look at 2022, whether it be weather, you know, whether it be air traffic control, whether it be airline, it's just, it's a very fragile industry. And so it's hard. People love traveling and we've got to come together as an industry to protect American travelers and make it safer and easier. It's just it's good. They're going to be more passengers every year coming through airports. So what are we going to do to provide them frictionless experiences? It's incumbent upon us. We at Clear are launching new products like reserve lanes for free for travelers.

We announced pre-check last week at a lower price, greater value and greater availability. I think that's one great solution to get more people into the TSA pre-check, in this case powered by Clear Solution. And so that helps create easier experiences through airport security. We've just got to keep launching products, innovation and collaboration as an industry in order to make it a better experience for travelers. American travelers deserve it. I wanted to ask you about that new partnership you just announced, TSA PreCheck, how that works and how many airports you're going to be expanding that to. It was something that the analysts have been looking for.

So TSA PreCheck powered by Clear will be Clear enrolling travelers in the TSA PreCheck program at any of our locations. Today we're at 48 airports. We have hundreds of enrollment locations, and so people will be able to enroll without an appointment. You know, we're there at 430 in the morning. Our awesome ambassadors are still there after 10 o'clock at night. So easy, accessible, lower price.

And TSA will still be doing the screening, but we'll be able to enroll people. And we think that there's tens of millions, like more than 50 million American travelers who could be in the TSA PreCheck program. I think today the number is something like 12 million. So we have a ways to go, and it does make it easier for travelers. And so we want to make it really easy for them to enroll. And so we're really excited to launch that either on a standalone basis or bundle it with our Clear Plus lanes.

Again, these are the kinds of products that people have outside of airports and outside of travel and we're excited to bring it to them here. Speaking of outside of travel, I was going back and looking at some of your interviews and the discussion around your IPO back in 2021 about the potential for growth outside of travel

and airlines and using the biometric technology in other places like healthcare and car rentals. Can you tell us how that is going, that expansion, and what it ultimately is going to mean for the top and bottom lines and when? So we announced our partnership with Avis. So you can verify now, I think in 54 Avis locations across the country in the Avis app, verify with Clear, and then you can skip the counter and go straight to your car. So we have taken that nationwide in the back half of December, and we're really excited about that, right?

It's any place, identity to have a better customer experience. And in this case, the platform is in the Avis app. And so we'll be announcing some other things in healthcare. So stay tuned. But identity is foundational online and offline to make experiences safer and easier. How it will help Clear.

It will add members, bookings and free cash flow, which are the three things we drive at Clear. Got it. Karen, thank you for the update on the business, on the booming travel industry.

Appreciate it. Thanks. Karen Seidman Becker from Clear. We've got more breaking news from Washington on the House Speaker Vote. Appreciate it. Thanks. Karen Seidman Becker from Clear. We've got more breaking news from Washington on the House Speaker Vote. Ilan Moy with the details from Capitol Hill. Now what, Ilan? Well, Sarah, the House has now voted to adjourn

until 10 p.m. as Kevin McCarthy gets closer to holding that Speaker's gavel. Republicans wanted to give themselves a little more time before holding the 14th round of votes because some members need to get back into town after leaving for personal or family reasons. In addition, they also wanted to spend some time working on those six remaining holdouts to see if they could potentially sway them to vote for Kevin McCarthy.

Already today, McCarthy has flipped 15 Republicans into his camp. We'll see if he can seal the deal, perhaps sometime tonight, but we'll have to wait until 10 p.m. to'll see if he can seal the deal, perhaps sometime tonight, but we'll have to wait till 10 p.m. to find out if he can close the deal. Sarah. Got it. Elon, thank you very much. Elon Moy in Washington. We are going to go straight here into the closing bell market zone with a big rally on our hands, up 757 on the Dow. CNBC senior markets commentator Mike Santoli is here to break down these crucial moments of the trading day. We've got Melissa Repko on Costco, which is an especially big winner today. But there are no shortage of them. Let's kick it off broad. The Dow's up 760. The S&P 500 is soaring 2.5%. Every

sector is participating. But the tech stocks are in the lead, up 2.75%. Apple and Amazon and Microsoft in particular, Mike. If we got a flavor today of what to expect for the rest of the year, and that is slowing inflation. We saw that in the wage numbers, slowing economy. We saw that in the services number. Are mega cap tech stocks the way to go after they've been beaten down? If you expect more of this? I don't know that that's the leap I would make in that scenario because they have been punished so hard. And then

today was a real catch up move. I'm looking, you know, for example, software stocks underperforming today. So it really is a handful of names that are doing well. Of course, semis were really spring loaded. They're popping. But I would basically say today was a little bit of relief, added evidence for the softish landing camp that's out there. You know, one of the dream bullish scenario has been the so-called immaculate disinflation, where you can't actually have inflation decline to acceptable levels without a cost of lost jobs or negative GDP. Obviously, cannot declare that that's the case. But today was at least pointing vaguely in that direction. I got to say, another score for the bond market, honestly, because we've seen these yields lower

and the stock market not getting on board, bond market more sort of pessimistic on the data. And what we saw from that services number showed they're right. We're now at, what, two-week lows on the 10-year, the 30-year, and the two-year. But still, it does feel like the bond market was out front here. There's no doubt bond market was there. But still, it does feel like the bond market was out front here. There's no doubt bond market was there. But see, the bond market is telling you inflation is going to become more manageable and probably is going to come down hard over the next couple of years. It didn't tell you whether it's going to happen the easy way or the hard way. So that's the part that we need the data.

And stocks have to sort of wait for that to know exactly how to reprice. What stands out in terms of the biggest winners beyond tech? Because, I mean, everything's rallying today, but you do have some notable performance. REITs, for instance. I guess it's just a lot of the names that have gotten beaten up on higher rates. Yes. That's basically what it is. I mean, there's some internal noise in there, too. For example, Staples were really strong, but that was because Costco, in part, had really good December numbers, and that stock was leading the way. So I think, in general, consumer-related have done relatively well. You obviously have industrials that have already been outperforming for a while.

So, you know, I don't know that it's all about the specific macro message of the jobs number and the ISM services number as much as people were leaning negative. There's been a definite hesitancy coming into this year to add risk. And today, I think you basically had an excuse to do so. And over the course of the day, I mean, the way this market operates right now, you get all these one day option bets that people start to stampede into. And therefore, we run right to the next round number on the S&P, which is thirty nine hundred. Got it. We're actually up for the week now. S&P 500 up two and a half percent today. And therefore, we run right to the next round number on the S&P, which is 3,900. Got it. We're actually up for the week now. S&P 500 up 2.5% today and for the week as a whole, up 1.6%. Let's talk Tesla. Shares are getting a little bit of a boost today. It's still down

70% from the highs. We spoke with value investor Bill Miller earlier this hour. He told me he personally shorted more Tesla today. Here's why. $380 billion market cap against the General Motors at 50. You know, more than probably the top five automakers combined. Tesla's now losing market share. They're cutting price. BYD is introducing a luxury version over in, you know, over in China. And, you know, it's a phenomenal company, but it's not worth $380 billion in my opinion.

And then went on to explain, Mike, that you don't necessarily always short because of valuation, but it's already broken and the momentum is lower. I thought that was interesting. They doubled down on both millers, on Bitcoin, on Silvergate, which is the embattled Bitcoin bank, and added more Amazon. Overall, what do you think of his calls? Well, the Tesla call, I mean, certainly, you know, valid as a premise in terms of saying that there should be some convergence in valuation between Tesla and legacy automakers, perhaps. But, you know, when Tesla was a trillion dollars, it was a little bit more skewed, I would argue. So Tesla is kind of coming back in the zone of maybe even being able to grow into this

valuation. That aside, I found it interesting that they were still very loyal to Coinbase and Silvergate and not just Bitcoin, because Bitcoin as a premise is, you know, if you believe in it, it's more of a an alternative asset to future kind of monetary technology, digital, whatever you want to call it. But that didn't mean that the business models like Coinbase and Silvergate that are kind of, you know, in the orbit of crypto were necessarily values, at least before they crashed recently. But both have very much crashed down toward, you know, rock bottom levels, especially when it comes to Silvergate. Yeah, well, he said, you know why it fell 40 percent yesterday? Because I bought it the day before. Phil Miller with a little, I don't know, humility on that call, but has been buying. It's down another six and a half percent today.

Let's talk about Costco, because you mentioned the staples are getting a boost. Costco's rallying after reported a solid holiday stretch. Sales in December coming in up seven percent to nearly 24 billion dollars. Melissa Repko joins us. Usually Costco doesn't move a whole lot on these numbers, so this must have been a lot better than expected. Yes, there were a lot of different pieces, Sarah, that jumped out to investors. And one is the strength of particular categories. In a lot of ways, Costco is showing not just its strength during the holiday season, but kind of the strength, the unique strength of its business. It has a lot of services that drive traffic, and traffic was up during December. And some of the things that

people were buying were tires, you know, something that people consider largely a necessity. They were also coming to its optical store, its pharmacy and lingering in its food court, which all bode well for drawing people in, keeping them there and getting them to make purchases. And of course, it does have a unique business model with its membership and at a time like this, people may see that membership as sort of a down payment that continues to drive them there even as they start to make trade-offs about purchases. Does it say anything about the competitors,

Target, Walmart, what do you glean from this for the others? Well, one of the things is that its discretionary purchases did do quite well compared to what November numbers were. And so that may indicate we had a later holiday season and Walmart and Target may have seen that as well, where they saw a lull in October and November. Potentially they saw a bounce in December. We'll see how it goes for them.

But it also could bode well for Target and Walmart because they are also one-stop shops like Costco, where people can get a lot of different things with one place and may see value in going to those stores as well. So we'll see if they got a bit of a bounce back in December like Costco did. Melissa, where are the analysts going into the new year on retail broadly? Because last year it was really the lower income that got hit. And we saw that reflected in some of the stock performance. What is the idea this year about a slowdown in the consumer and where that's going to hurt the most? So really a lot of the

names that analysts are calling out going into the new year is a lot of the value players. So Walmart is one of them, but also off price has become a standout because people are looking for that treasure hunt experience, still going to names like Burlington and Ross. And so that's become a hot area. So we'll see if those continue to hold up. Luxury seems to be, again, more resilient. And it's worth noting that Costco does have a higher income customer than typically BJ's or Sam's Club does. So that may also be contributing to its December results and may help it in the new year. But in general, value does still seem to be the name of

the game going into 2023. Yeah. And the only two retailers down today are Ulta and Bath & Bodyworks, and both have been big winners, especially Ulta. Melissa Repko. Melissa, thank you very much. If you look at some of these consumer discretionary stocks, Mike, into the year, I mean, first of all, they've been strong and they've actually outperformed the market at a time where we're worried about a consumer slowdown and possible recession. For sure. I mean, let's keep in mind that, you know, the bond market and the stock market are celebrating a deceleration in wage growth last month to a 4.6% annual rate. So in other words, wage growth has remained very strong on top of a pretty good consumer cushion that was built up through the

pandemic, through all the stimulus. So I think that the steady state of spending is there. Also in consumer discretionary, homebuilders aren't doing a lot today in terms of outperforming, but they're up more than 5% for the week. The 30-year mortgage rate is now back down. I think I saw it today, 6.2. So obviously well below the recent highs. So a lot of things are working toward forestalling that moment when you get consumer fatigue setting in. You don't want to celebrate prematurely. Obviously, there's a decelerating job market, even if it's still relatively strong. And you can't necessarily know what the numbers are going to bring because the leading indicators are what they are and they've been pointing lower. But for now, there's enough to go around in terms of income and revenue.

Well, I think the big risk here is that the Fed just is clearly not as excited about the market of these lower inflation numbers and these soft landing numbers. And in part, they can't be right. They don't want to see an easing of financial conditions. But if they keep talking tough and they keep holding on to their resolve around inflation not coming down fast enough when inflation is a lagging indicator, then do we have to start talking about a harder landing? No, I think that's totally legitimate if, in fact, most of the committee at the Fed believes that there is a particular number in terms of unemployment that they really feel is going to be necessary to decisively take care of inflation. Now, they're not going to say that.

They have their estimates of where it goes. But nothing is going to override the inflation numbers actually coming down into their target range. If that happens, then they're not going to say, you know what, but we still have to eliminate a bunch of jobs here because we want to just finish what we said we're going to do. I do think there's a risk the market can get overexcited in the short term and you're going to have them not want to see financial conditions ease too much. I just don't think we're there yet at thirty nine hundred in the S&P yields. You know, corporate spreads have been fine, but they haven't been back to their narrowest level. So, you know, that's a risk out there. We still have four weeks to the next Fed meeting. They can definitely take the opportunity to try and put the market

back on its heels. But I'm not sure to me that there's this really fierce standoff between the markets and the Fed that we like to say that there is. The other thing to point out, and I know you and I have talked about this, but just how strong January has been for primary market activity, for bond issuance, basically, especially in investment grade, especially in some of these investment grade banks, much stronger and a big reversal from December. What does that tell us? Right. So the first few days of the year, I mean, the issuers were active. You saw flows come back into investment grade bond funds. That's something that had been in the negative column last year. I mean, the issuers were active. You saw flows come back into investment grade bond

funds. That's something that had been in the negative column last year. So basically, people are willing to lock in yields. Companies are still feeling like they can do fine if they do pay what the market will bear right now in terms of rates. So it's net bullish for risk assets in general when you do have that money flowing into corporates. Got it. We've got less than two minutes to go. We're just showing yields now down to 3.56 on the 10-year. That's a few-week low there. Moving lower as bonds rally, the dollar sells off and stocks take off.

We're off the highs, but we're still up nicely, 680 points or so on the down. Mike, what do you see in the internals? Yeah, they've been strong. So as you've been saying, it's a broad rally, although it doesn't look like we're going to get to one of those, you know, true kind of mega upside breath numbers where you'd have 90 percent of the volume to the upside. So we're just short of that, but still quite strong. Look on a weekly basis at the S&P value versus growth, because, you know, it's been the same story as last year, where value has radically outperformed by almost three percentage points this week alone. Last year, it was more

than 20 percentage points spread in performance, although there's some catch up from growth today. And then the volatility index backing off, as you would expect, with the big market rally, with the jobs number in the past, still in the low 20s, above 21. Let's not forget, we've got the CPI number coming in for trading days on Thursday. Let's not forget that CPI number, Mike. Thank you. As we head into the close, take a look at the Dow Jones Industrial Average. We're up more than 2%, 700 points, a celebration of slower wage growth, which is what the Fed wants to see. Weaker services, the first contraction we've seen post-COVID. It sounds like bad news for the economy, but it's good news for the market because it means the Fed won't have to raise interest rates as high as they potentially might. S&P up 2.25% into the close. Broad rally,

every sector's in it. NASDAQ is surging as well, almost 2.55%. Apple, Amazon, Costco, and Microsoft are your biggest winners. Have a good weekend. That's it for me.