Closing Bell - Closing Bell: Summer Swoon or Surge? 5/31/23

Episode Date: May 31, 2023

Is the summer more likely to bring a swoon or surge for the market? Solus’ Dan Greenhaus and Citi Global Wealth’s Kristen Bitterly give their expert takes. Plus, BlackRock’s Bond King Rick Rieder breaks down the company’s new active ETF, the fed and more. And, Bill Miller IV acquired a majority stake of Miller Value Partners. He explains where he is seeing opportunity in the market right now.

Welcome to Closing Bell. I'm Scott Wapner, live from Post 9 at the New York Stock Exchange. This make or break hour begins with turning the page on May, and we have two big interviews this hour to set you up for the months ahead. BlackRock's Rick Reeder joins us in just a bit. He launches his first ever active ETF. He's going to give us the read on the markets, the Fed, and where you should be best positioned for whatever comes our way in June and beyond. And Bill Miller, the fourth, is here as well. We'll get his take on the AI trade, crypto, and much more. And we're watching D.C., of course, we all are,

as the debt ceiling vote gets underway at the bottom of the hour. In the meantime, here is your scorecard with 60 minutes to go in regulation. The final day of the month, a bit of a whimper. Major averages all in the red. They've been there throughout the day. Tech taking a bit of a breather today, too. And cyclical areas getting hit as concerns about the economy and another possible rate hike continue to swirl. I think we're all thinking about that. Leads us to our talk of the tape.

Whether summer is likely to bring a swoon or surge for stocks? Let's ask Dan Greenhouse, soulless alternative asset management. He's here with me at Post 9. Welcome back. Thank you, sir. Closing out the month and we're about to embark on the summer. What about that? Sell-off, swoon or surge? What do you think? Yeah, listen, I think there's a lot of technical reasons to think that maybe we're up against the 4,200 level is obviously what everybody speaks about the most, but we've had a pretty good rally here.

And if attitudes about the next Fed rate hike in a couple of weeks start to change, you could make a case for a little bit of a sell-off back down to the lower end of the range. I don't think that would be particularly deleterious to the rally that seems to be happening now. You think we're in a better place than we were months ago? I mean, you've been reasonably cautious, I think. The market looked better to you or worse since we've had this rally. And we can get into the sort of top-heavy nature of the rally in a moment. But generally speaking, does the market look better to you?

Yeah, just as a refresher, like, we were pretty bearish. I was pretty bearish all the way in 22. Somewhere earlier this year, the technical stuff started to work in your favor. And I think that's largely continued. So I think right now, from a broad market standpoint, you should certainly feel better about the market. At the same time, the top heaviness can't be ignored. I mean, again, this has been over, we've been over this a hundred times. Is it a bad thing? I mean, people have said it a hundred times or a thousand times. Well, you had our mutual friend Brian Belsky on today who recently put

out some work on this. I don't think history is clear. He said it's not a bad thing. Yeah. Listen, history is not clear that this level of a narrow leadership automatically means lower prices going forward. What I think it does do is leave the market susceptible to downward moves if something should come along that would warrant such a move. So, again, you've got the seven or eight, whatever, biggest stocks. They're up, call it 30 percent median or up 30 percent. The rest of the market is down 2.2 percent or so this year.

It's not strong in that respect. What about the AI trade? What do you make of it as you've sat here, you watch these stocks and what they've done? Does it make sense to you? Does it make you nervous about whether there's a bubble? How are you thinking about it? Because everybody is thinking about it. Yeah.

And listen, I do agree with the general consensus that this is going to be the net. You should think about this, the royal you. You should think about this in terms of the move to the Internet, to desktop, to cloud, and now to AI. It's going to reorient business up and down the spectrum. I think the one point I want to make, I'm excited to be here after this point continues to be made for the last month or so, is this idea that somehow part of the move,

particularly in NVIDIA, but Avago and everybody else as well, owes to the under-owned nature of tech. And so the only reason or a primary reason that you would get such a dramatic move in some of these names is people are playing catch up. And I checked because it sounded not correct to me. When you look at hedge fund holdings, the top names in order are Microsoft, Amazon, Meta, Google, Visa, Uber, Apple and Netflix. And then just a few down that list is is NVIDIA, Salesforce, Palo Alto and PayPal.

Yeah, but that doesn't sound to me like an under-owned sector. I know, but they can still own those stocks, but be lighter in their holdings than they otherwise would have been because most people, I think, did come into 2023 offsides on the tech trade. You can have smaller positions and larger cash, and maybe some of that money has yet to come into those areas. Sure. These are the most widely held stocks. Now, again, are they under-owned relative to the benchmark?

Obviously, that's going to be a fund-by-fund, hedge fund and mutual fund level of analysis that I don't do being on the buy side. But I do think what you saw with AI, not just in terms of the mentions, because everybody was mentioning it, but in terms of the rush to take advantage of this, you are resetting some of the earnings expectations, which warranted some level of appreciation in the names beyond simply everybody catching up to buy them. All right, let's bring in Kristen Bitterly now of Citi Global Wealth. It's good to have you here as part of this conversation as well.

How do you see this very question? Has the market gotten too top-heavy as we turn the page into June? Are these AI stocks out of control? Is it too much too fast? What do you make of it? I think there's a couple of things. Everyone's talked about the concentrated nature of this rally. And when you look at it, those seven stocks that we keep talking about represent more than 100 percent of the year to date gains. And actually three are responsible for 65 percent. So I think that creates some exposure in terms of in terms of any type of future volatility. When you also look at net long positioning and NASDAQ futures, they're at three-year highs.

And so you could see some profit taking going into the summer months. That's something that we tend to see from a seasonality perspective. But when it comes to AI, I really do think that that's something that, yes, we've seen that concentrated in a few stocks. But when we look at what this could add to the global economy, we're talking about $16 trillion, $7 trillion in productivity gains by 2030. This is something that may feel over-exaggerated short term, but it's here to stay long term. I wonder whether NVIDIA taught everybody a good lesson this week in saying, well, look at the valuation. My gosh, it's so expensive relative to its earnings. Then they come out with their guidance, which blew everybody look at the valuation. My gosh, it's so expensive relative to its earnings. Then they come out with their guidance, which blew everybody out of the water. And then the stock was, why are

you falling back in your chair? The stock was cheaper the day after earnings than it was before. But you have Gerstner on all the time who makes this point, as do a lot of other growth investors. You're not looking at these names from a valuation standpoint. I think that's a mistake that a lot of investors make, looking at NVIDIA and saying, oh, it's trading at 160 times earnings or something. Inherently, inherent in growth investing is an assumption that the E is incorrect. And I think what you've seen historically, not just with NVIDIA, but over the last 10 or 20 years, is for a lot of these names, the E is incorrect. It's not to say that valuation doesn't matter, but growth investing, which is not what we valuation doesn't matter, but growth investing,

which is not what we do, admittedly, but growth investing requires some semblance or some different level of investing acumen simply than looking at for deep value, which they're never going to give you. What you can't have happen is what happened in 99 into 2000, where the P gets way off into the distance from the E. And the debate was starting to be had at this point whether, Kristen, those stocks, the large mega cap stocks, had become too expensive relative to where their earnings were in the environment that we're in. NVIDIA sort of said to you, maybe not. There's a couple of things. One, going back to what I just mentioned, this is about addressable market, right, and the opportunity to continue to grow.

I think the other thing, not to bring this conversation back to rates, but we have to bring it back to rates, a lot of these companies that have benefited from the rally, that have benefited from inflows, it's about free cash flow generation and this ability to self-fund some of this growth and innovation, which is why you're seeing that big delineation between the profitable companies and the unprofitable companies when it comes to tech.

The last thing that I'll say about AI, it does not need to be a pure play. It does not need to be in one of those companies that's mentioning AI a hundred times in their earnings calls. It can be in areas like cybersecurity. It can be in areas like clean energy and investing in the energy transformation because AI consumes a lot of energy. And that's going to be a big theme, not just immediately, but looking five, 10 years out. All right. So you mentioned rates. Tom Harker, Philly Fed president today, says I'm for pause in June. That doesn't mean that I'm for being done, but we can pause in June. Dan was talking about, well, what's the thing that upends the tech trade?

Is it a more live meeting in June and maybe a hike thereafter that does that? I think it's interesting because every day it seems like we're repricing rates in terms of the probability of a hike in June or July. Looking at Fed funds futures right now, obviously it's kind of splitting the difference. But I think we have to look at that combined with we've been dominated by this talk of the debt ceiling. Now what's coming? What's coming is monster issuance when it comes to T-bills. And just over the next month, you're going to see about $300 billion plus flood the market. You're going to see another $1.3 trillion by the end of Q3. That's a lot of

liquidity out of the market. And so I think that's something to be cautious of in terms of the flows that we're going to see over the summer months. A lot of people are talking about that. Yeah. And I wonder if it's one of those things where it doesn't turn out to be nearly as dire as some of the predictions around it are, that the market's able to absorb that better than some would otherwise think. Yeah, listen, I think this is somewhat of a complicated issue,

so we're not going to get fully into it for the viewer at home, but I do want to say, pardon me, I think a lot of this is a good talking point. Because yes, a lot of liquidity is going to be drained, although we don't know from where that liquidity is coming from, which is a really important part of this conversation, which again we won't get to. If it comes from bucket A, not a big deal. If it comes from bucket B, a little bit of a bigger deal. But also, the larger pool of liquidity is nowhere near where you were, say, in late 2019,

when you had that repo implosion that nobody remembers about, but it engendered this QE before the Fed actually had to do QE for COVID. You still have a level of reserves way above that dangerous level, that threshold where the banking system might be concerned. And we could have another segment another day on it, but this is going to happen. They're going to raise a trillion dollars in liquidity. I just don't know if it's quite the boogeyman everyone says it is. Actually, I agree with you on this point.

I don't think it's necessarily a boogeyman. Is it something that could create some movement in the rates market? Could it create some volatility? Absolutely. But I think another thing that we have to point to, all of these different events, why are they not raising the VIX? Why are they not creating more volatility? And it's because of the positioning going into this. When you look at all of those flows that have come into money market funds eclipsing $5.4 trillion, you have a lot of cash on the sidelines. Where's the cash gone? It's gone into T-bills and those stocks that we mentioned earlier in the segment. Yeah, guys, we've got to leave it there. I appreciate it so very much. Kristen Bitterly joining us here along with Dan Greenhouse.

Thank you. Let's get to our Twitter question of the day. We want to know, do you think the Fed will raise interest rates in June? You can head to at CNBC closing bill on Twitter. Vote yes or no. Maybe you would have answered that differently a few weeks ago. I'm not sure. But please vote yes We'll see his take on everything markets, stocks, the Fed, fixed income, and more. We're live from the New York Stock Exchange. You're watching Closing Bell on CNBC. Welcome back. Stocks and bond yields are both set to finish the last trading day of May lower, capping off what's been a volatile month for the markets. So how should investors be positioned as they grapple with the looming debt ceiling deadline and the Fed's next rate decision?

Let's ask the man who oversees nearly $3 trillion in assets. BlackRock's bond king, Rick Reeder, is here with us at Post 9. He's ringing the closing bell today, by the way, to celebrate the launch of his first actively managed ETF. It's good to see you. Good to be here. Congratulations on that. Thanks a lot. It's the BlackRock Flexible Income ETF, which says that it allocates to harder to reach fixed income sectors. What does that mean? So, I mean, you know, one thing I think people forget in fixed

income, you know, in fixed income, there's 65,000 securities. So you've got less liquid assets, you've got liquid assets. The idea is we get yielded in the portfolio, do it flexibly. Things like high yield, emerging markets, securitized assets, and try and keep your yield. Today, we're yielding over 7%. I mean, this is one of the great things about fixed income today. It was one of the last times you were able to get 7%. And by the way, you don't have to take that much risk to get 7%. What are the harder-to-reach areas that you've identified that need to be reached through this product?

I mean, the securitized market is one. You talk about a market that is opaque and they're different, whether it's CLOs or residential mortgages, commercial real estate. Did I damage commercial real estate? But there are actually some opportunity in high quality parts of the commercial real estate market. So the ability to actually dig in, say, where do you want to own it?

How much risk do you want to take? What's your collateral? You know, it's hard for an individual, including someone like myself personally. What's the collateral? risk do you want to take? What's your collateral? You know, it's hard for an individual, including someone like myself personally. What's the collateral? What's the covenants? What's the structure? So to do it in that, to have us, hire us to do it,

is pretty attractive. I mean, this has been, I think it's fair to say, a historic period for fixed income and for bonds relative to stocks. And when we talk about, you know, the road ahead for the market, stock market, one of the problems the headwind has always been over the last year well there's competition and

there hasn't been competition and it's seemingly for forever that we can remember but now there now there is does that opportunity still exist in the magnitude that it has so it's pretty incredible I show this chart that I think blows people away normally when companies borrow used to be you borrowed one to three year money and you'd borrowed at one and a half, 2%. And the equity market, the earnings yield of the equity market was seven or eight. Now they're both five and a quarter, almost exactly the same percentage. You think about it. I can own companies. I can finance companies, not take a lot of interest rate risk, keep it short. And I'm getting the same yield as the earnings yield of the equity market. So what does that tell you?

Equity multiples are too high. That being said, I actually don't think the equity market is going down much because I think the technicals in equities are amazing. But you talk about a historic opportunity to build income and put that next to your equity portfolio, it's pretty extraordinary. So you like the stock market here? So I think if you take versus fixed income, where companies can finance themselves, which is not just a quirky metric. Companies finance themselves for CapEx, M&A, buy back their stock.

Today, that's much more attractive, certainly on a historic basis. The reason why I don't think equities are going down, you're getting a tremendous amount of issuance in fixed income. We're going to get a trillion of Treasury bills in the next three months. Equity market, not a lot of supply. Most people are short equities. If money just incrementally comes into the equity market through 401k equity buybacks, the market just has a hard time going down. The natural gravitation is higher. So I think the equity market is fine. I think it should be a good portion of your portfolio. But I think now you've got to build more income. Okay. So separate, I'm glad you went here. Separate fact from fiction for us, because I just had this conversation with our two prior guests, and many are coming on the network saying that

once this debt ceiling thing is figured out, the treasury issuance is going to be so large, don't know the market can handle that. That's a negative for the market. Is it, or is it not? It is. I mean, if you do it, so it's a negative for the market, like I say. I mean, I'll talk about the balances. We're going to take a trillion dollars a bill. So think about the Treasury hasn't been, has postponed liabilities. You've got to build the Treasury's general account. That's $500 billion plus another $500. You've got a trillion dollars. That drains liquidity. If you track how the markets do relative to draining liquidity, it's pretty symmetric to QE. Markets tend to have a hard time

during that. Here's the counter today. And this is why I think it's a hard call. Do you think the market's going down? Definitionally, people are sitting on immense amounts of cash. I mean, the amount of money that's going into money market funds every week, every month, it's almost $6 trillion. I think anytime you see a significant dip in the market, you'll see that just that natural, I got to put money to work. So I just think it's hard to say today that, gosh, it's going down because we're going to drain that liquidity. But there's no doubt, there's no ambiguity around it. It is a drag. Well, when you drain the liquidity, what does it do to yields? Which have been, you know, rising of late, obviously, maybe not today, but certainly it feels like almost every

day they've been going up. So, I mean, it's definitional. Maybe you push that much supply into the market, and particularly think about that supply is coming in without a lot of interest. You don't have to go out the curve. It's an alternative to what you get in fixed income. So is there a natural migration to yield tire? I think so. But one of the things you watch in the last couple of days, particularly at month end, people are sitting on their hands, worried about the debt ceiling, worried about this draining of liquidity, worried about a lot of things, economy slowing, et cetera. People are sitting on their hands. It doesn't take much to actually get these markets. People have to put money to work. What do you make of what's happening with tech? I mean, you're the CIO of the global allocation team. So you don't only think about fixed income. You think about the markets.

So if you said to me, what would you do with tech? And I've been on your show many times over the years. I love tech. If you think about where the economy's going, and structurally, we can talk about AI, or valuations, too full in some names, they seem pretty elevated. There's a structural dynamic. Think about how the infrastructure's

gonna build in this economy. Where's CapEx going? It's not coming in the traditional places. It's coming in AI, it's coming in automation, it's coming in software. You think. You look at the big tech companies, their ability to create real cash flow to support R&D. Listen, I think tech has still got to be, you know, we build equity portfolios. I want convex upside and tech is still a place to get it. Is tech the biggest part of where you think a portfolio should be built? For sure. I think there are times when it gets elevated.

You think about the moves. If you strip out the seven top seven companies, how much they've driven the equity market, it's had a good run. But if you said to me, I'm building a portfolio for the next two to three years, tech, by the way, think about the other structural, healthcare, it's got to be a big part of that portfolio.

I think defense today, you think about how the world is going, that's got to be a good part of the portfolio. But think defense today, you think about how the world is going, that's got to be a good part of the portfolio. But yeah, I build in equity. I think it's so different, equity and fixed income. Equity, you want to take the upside. You want to be what I call the bottom part of the cap stack where you're going to have real growth.

And I'll say one last thing, when you grow like that and you throw off that cashflow, it goes back into R&D. If you said to me one thing that drives return, it's investment in R&D, And you're seeing that play out today. So let's talk Fed, OK? Because I want your opinion on what you see and what you think is going to happen. Parker, Philly Fed. I think we can take a bit of a skip for a meeting. He said just a short time ago. He went on to say a skip would not be a pause. What do you think

happens? Are they done? So listen, the inflation data is concerning. It's just not coming down fast enough. And, listen, I think we're going to be, you know, you look at the Fed projections for unemployment. I don't think we're going to get there. I think there is a dearth. Have you seen the JOLTS report today? Look at things like leisure, education, health care. I think employment is going to stay robust for a period of time.

So is the Fed going to do more? I think they should pause, personally. I think there's more data. You're going to get another payroll report. You're going to get another CPI before the next meeting. And then there's more data to come. You've moved 500 basis points. That will work its way through the system. Inflation is coming down. It's just not coming down fast enough. There is a trade-off, you know, getting into a technical discussion about what is the equilibrium interest rate for the economy and for financial, the financial system. Clearly, you're high relative to the financial system. You saw that play out in

the banking system. There's no risk, I don't think, in waiting. See how the data plays out if you got to go again. And I think they could go again. But I think there's no reason not to wait at this point. Governor Jefferson was like, well, one year is not enough time to see what 500 basis points is going to do once it really filters in and through the system. We're trying to make decisions after we've done this historical move by the Fed and assume that we're going to have all the answers now. That's good. I mean, I think you also have to build on that. We also kept rates too low for too long and did QE for too long. So you think about what happened. You kept rates too low too long, and then all of a sudden you shocked the system. You watch that play out in regional banking systems, small banking systems. You shocked the system higher.

Let's see. You certainly see commercial real estate. You certainly see in leveraged loans. You're going to see a lot of rollover financing that's going to be harder to do. Why not see that play out? And by the way, if inflation is not coming down fast enough, then you could go again. But there's no reason not to wait and see how this works through. How concerned are you about commercial real estate and what it could mean to some banks, particularly regional banks, which have been sort of the epicenter of the worries? So I'm not worried about it as a systemic basis. So you think about, I mean, residential real estate, you think about what happened in 08, you think about what happened in the savings and loan crisis.

Residential real estate is where three-quarters of the wealth in the country is. That is a systemic problem. That you can't disrupt. Commercial real estate is a pressure point for regional banks, a pressure point for small business. You will see, for small banks, you will see some credit contraction. Is it a systemic risk? It's not a systemic risk.

But it will result in some slowdown in credit extension, which is part of the view of let's see that play out. Do we have a recession or no? Listen, I think growth is going to be better than people think. You've got a 3.4% unemployment rate with over 4% wage and $1.9 trillion of excess savings. It's pretty hard to go into a recession. You know, you look at surveys. Consumers are in a bad mood, but they spend like crazy.

I think the economy is in good shape. Can we have a dip in the second half? Maybe, but I think that's a lot of nuance to what is a strong economy. Fed cuts anytime soon? I think next year they're going to cut. I think markets have been pricing in cuts because of the risk that the system tips over because of a significant credit crunch. I don't think the Fed is going to do a let's cut 25 base points at a time. I think as you get into the back part of

the year, mostly in I think in 2024, they should cut rates. I think that you're talking about the debt ceiling. If you keep rates too high, too long, what it does to the cost of your debt service is significant. I think they got to bring rates down. Make that the last word. I enjoyed it. Congratulations to you on this big day for you and BlackRock as well. That's Rick Reeder joining us here at Post 9. Up next, searching for opportunity. Bill Miller, the fourth, is with us. He just acquired a majority stake in Miller Value Partners as well. We'll find out where he is seeing upside in the market just ahead. Closing bell. Just right back. Welcome back. A shakeup ater value partners this week after bill miller the fourth announced he's acquired the majority stake of the firm bill who now holds an 80 stake and mvp is now the firm's

chief investment officer and chairman and will continue to serve as the portfolio manager of the miller income fund bill miller the fourth me now. It's good to see you. Welcome. Awesome. Thanks for having me, Scott. So the bottom line here is this is your show now. What is the Bill Miller IV show going to look like? Well, Scott, I think the whole idea here is to reinvent the customer experience in active management. You think about what active management has done over the past 20 to 30 years. It's continued to lose share to passive. Fees have been too high. The investment strategies are not all that transparent, generally speaking, not well marketed. So we want to change all of that because we are the primary

client here. And so we want to actually reinvent that experience for everyone else in our funds as well. We want to be more transparent. We want to let people know what we're doing in the funds as we do them. And we want to find new ways to help our clients. How will your philosophy on investing differ, if at all, from your dad's? Well, I learned most of what we're doing from him. So there's going to be a lot of similarities. First and foremost, we're going to invest in a very concentrated way. It's very hard to have 50 or 100 good ideas. So we're going to find 30 to 40 and bet them where our convictions lie relative to where we think our edges are. So there's not going to be a ton of transition from an investment philosophy

perspective. You're just going to see more transparent communication from us, I think. And what role, if any, will your dad have in this whole process? We've just been so accustomed to having him in that role. You lean on him as part of the vetting process. How will he play, if at all? He'll have as much of a role as he wants to. And he's certainly still involved in the markets for a good portion of every single day right now. so as long as he wants to do that we're going to welcome his input as much as we can get it we certainly want more from him rather than less we'd love him to be out in front of people marketing ideas and and what he's thinking about too not only in the markets but outside so he's going to continue to be an advisor playing an important role with us you know what i what i

thought was interesting as part of this transition, and I want you to explain this better than I'm going to ask it. You no longer own the Opportunity Trust Fund. That's my understanding, which means you no longer own Amazon and Alphabet and Meta. Now, is that true? And I ask it, and it's somewhat startling, I think,

because your father is so synonymous with Amazon that it was a bit of a surprise when I learned this information I just want you to verify that I have it correctly so that our viewers understand it fully there so Miller value partners is going to continue to manage the Miller income fund which is a flexible income fund we're also exploring new ways to help clients and new strategies that they may be more interested in from a fee perspective, alignment perspective, all kinds of other perspectives. So his strategy, the Opportunity Trust that he ran for so many years is actually now managed by Patient Capital and Samantha McLemore, and that's her RIA. And so

she's calling the shots on that particular fund. MVP is now actively exploring new wrappers and new ways to help clients where you may see some similar names like that. Sure. But, you know, how do you as we look to what's been so red hot in the market right now, AI and AI related trades and big tech in general. So how do you view that in the here and now on your own? Do you look to buy those names back? Do you feel underinvested, so to speak, in AI related stocks? How do you look to buy those names back do you feel under invested so to speak in ai related stocks how do you view it well what's really interesting right now about the market and ai's those are the only really the only names that are going up are ai and big tech right now so

if you actually look at the market breadth over the past 60 days 80 of the market is under performing the market and thatperforming the market. And that's because things like Nvidia are going up, Facebook, Google, those are the only things going up. Everything else in the market is not doing all that well. They tend to be more economically sensitive. So what's happening is the feds are moving capital and liquidity from the system. So capital intensive things are not doing. Facebook is not a capital intensive business. Nvidia, well, a little different. But Google is not a capital intensive business and video well a little different but Google's not a capital intensive business businesses that don't need capital are doing fantastic well and that's the only

people want to buy so it's very hard when you run a value or an strategy or an income strategy to then say okay where you can get yield not an Nvidia but it's an interesting question as to how that plays out if you look at what happened in year year 2000, stuff called Intel was all the rage. It's $75 a share, trading at a huge multiple, not dissimilar from NVIDIA. Actually, it was less expensive than NVIDIA then.

It's now $27 a share today. It was $75 then. So how well is NVIDIA going to do over the next 20 years in this valuation? I don't know. It's certainly not something I want to own at these multiples. I would certainly be more interested in Facebook at 10.5 times even though than NVIDIA at 50 times even though. But see, I find that sort of ironic as well, whereas, you know, your father could justify sort of the valuation of Amazon even as a value investor, whereas you can't justify the valuation of Nvidia as the same value investor so to speak well I don't think he owns Nvidia so it's a little bit of a

different situation agree though we do have somewhat we have different investing styles but one place where we certainly are aligned one technology we both love is Bitcoin so bitcoins up 60% year year to date. It's done 70% a year over the past decade. Best performing asset in nine of the past 12 years. We obviously have a big personal stake in it, but it's a really interesting new technology that a lot of people still are underinvested in, continue to not understand or think about properly. We absolutely love it. Are we going to emerge from what many have described as the crypto winter? Are we in the process of doing that?

Bitcoin's, what, 27,000 as I'm looking right now, and it's been in a pretty tight range now for a while. Yeah, but if you've owned Bitcoin for more than four years, you've never, no one's owned Bitcoin for more than four years or lost money. So I think that's an interesting point. If you look at some of the feedback loops involved and the way it's produced and managed, it's incredible. So we continue to be massively optimistic about it. And I think it's very important to draw a difference between Bitcoin and crypto because they're two entirely different things. Bitcoin is a cryptocurrency. But if you look at all the other ones, there's some very fundamental differences in how they were formed and created, what the verification mechanisms look like. And it's really important to understand

those differences. When you bring up the Intel example on valuation and where the stock price was back in the day, so to speak, and we compare it to NVIDIA, are you insinuating that you think that the way these stocks have traded were in a bubble related to AI or not? Well, it can certainly go farther. But if you look at what the options market is saying about NVIDIA, I mean, you can write calls on NVIDIA right now, you're out and get a 24% yield. So, yes, it's going to continue to be massively volatile. People are trading this short term in this thing. Do I like it over the next 20 years relative to all kinds of other things out there? It's probably not the one I want to be swinging at. And in terms of growth versus value, obviously, I would think you're hopeful that this,

what appeared to be throughout last year in some respects a renaissance in value, at least from the let's say the October lows. Now everything's back towards growth. So was that just two steps forward and we're going to go back to five steps back for value investing? How do you see that playing out? I think it's really interesting to think about what value these massive tech companies have and what the limits are of that value. So if you think about Facebook, how many of those employees at Facebook have any impact on tomorrow's revenue? Probably very few.

Probably the same with Microsoft. So you've got these massively valuable things. You know the top five stocks in the market today comprise 25 percent of the market cap i mean that's unprecedented so you're seeing this massive concentration at the top and yes the best performers have always outperformed and it's been a you know a power law and that a small percentage of the market tends to drive all the performance but you're seeing unprecedented amounts of concentration it would not surprise me at all if over the next few years regulators came and started to break that up and try to make things a little more competitive. But there's all

kinds of ways that these massive things could lose. And what we're trying to do is find things with low expectations that we think have a high probability of outperforming that market. What's your most recent buy? What's your most favorite name right now? Well, so as an income investor, I'll just give you two names that are not in the fund. We can't talk about what we're doing in the fund, but I'll just throw two names out there that I think are really interesting that people would know. So a company called Stellantis, that's fiat price. It trades at one times operating profit, one times operating profit. We think their value is much higher today. That's a nine and a half percent dividend yield. It's covered by about, it has a stack of cash on the balance sheet that pays four or five years worth of dividends.

They don't do any cash flow. So they've got this huge pile of net cash. That's a 9.5% yield, super safe yield. So there's all kinds of interesting stuff in the market if you are creative and look around. And I mean, Verizon right now, 7.5% dividend yield. Trades at a big discount to the market relative to where it's always been. And so there's a lot of interesting stuff. Even if you're concerned about recession,

rise is an interesting one if you're concerned about recession. Yeah. I look forward to talking to you again. Appreciate having you. Congrats. Thanks so much, Scott. It was great. All right.

That's Bill Miller IV joining us here on Closing Bell. Up next, number one retail analyst Matt Boss of J.P. Morgan. He breaks down what he's watching when Nordstrom reports in overtime. Macy's in the morning. We're talking retail when we come back. I want to alert you that that moment in Washington, D.C., has come. The House of Representatives beginning to vote on the debt ceiling deal. We're going to monitor any developments, bring you the speed,

bring you up to speed on the very latest. It's not supposed to end anytime soon. I should tell you that first and foremost. Some are suggesting it could go until 8.30 tonight when the vote closes, but you can start voting as of now and you can see the tally on your screen here. Speaker McCarthy predicting it will pass. He has said, telling reporters, quote, it's going to become law. And we shall see in what has been not the easiest process to get to this moment, but we'll find out by later this evening how we end up there. And the markets, of course, continue to watch that closely. Let's send it over to Seema Modi now for a look at the key stocks she's watching. Seema.

As you watch that vote, Scott, take a look at some of the biggest movers. Advanced auto parts sinking after a big miss on earnings and revenue. The company also cutting its dividend and outlook, citing higher costs, inflationary pressures and supply chain problems. The stock is now on track for its worst day ever, down 35 percent. Meantime, SoFi is on pace for its best day since August. Those gains really being fueled by the debt ceiling deal, which would cement the resumption of student loan payments. SoFi has reportedly said that the moratorium on payments is weighing on its business. So hopes for the bill's passage has shares up almost 32 percent in two days, up 15 percent on the day.

Scott. All right, Seema, thank you. We'll see you in a bit. Last chance to weigh in on our Twitter question. We asked, do you think the Fed will raise interest rates in June? You can head at CBC Closing Bell on Twitter. The results are right after this break. Let's do the results of our Twitter question. There you go. Will the Fed raise rates in June? Wow, 61% say yes, almost 62. All right, we'll discuss. Coming up in the market zone, up next, star analyst Dan Ives. He counts down to Salesforce's results, what he is watching for in overtime. That and more in The Zone next.

We're now in the closing bell market zone. CNBC senior markets commentator Mike Santoli here to break down these crucial moments of the trading day. Plus, Dan Ives of Wedbush on Salesforce, which reports in overtime today. And J.P. Morgan's retail and leisure analyst, Matt Boss, digging into the department stores ahead of Nordstrom and Macy earnings. All right, Mr. Santoli, 62 percent of our voters said there's going to be a hike in June. I think that's that that conventional wisdom is at least two or three hours old, because what's gone on in the afternoon and on in the midday when we spoke, I said, you know, it's one of those days where the market's starting to think again. Oh, is the Fed going to hike into a little bit of a soft patch in the economy?

And then you had Fed speakers just grab the wheel and steer market expectations toward a likely pause with maybe a resumption thereafter. Now, we could get a blowout jobs number on Friday, and it could change the equation. But it's very interesting, and it's a reminder that the equity market, which has firmed up throughout the day, at least at the index level, it requires multiple things to break at once to get really a lot of selling pressure, taking the big and the small down. So it's still an uneven market. No real improvement in market breadth today.

But you did have some life in the defensive stocks, which, by the way, I came in this morning to all the technicians saying, wow, utilities and staples, they look broken. And here they are bouncing today. All right. Dan Ives, waiting for Salesforce, as everybody is, after the bell in overtime tonight. How many times are we going to hear AI related to this one? I mean, look. 2,000, 3,000. How many?

I think it's definitely going to be double digits. But because ultimately, when you look at Benioff and Salesforce, there's a golden opportunity for them to further mine that install base. And I think they're not being talked about as much as an AI play because of what's gone on in the last few quarters. I think this is just another quarter step in the right direction in terms of margins, in terms of growth, I think better than feared. And in my opinion, it's one of the best risk rewards out there in software. I mean, you're not looking for much though, right? There's not that much enthusiasm about what this company might deliver in overtime. Well, I think that's what I love about the setup because in my opinion, Benioff, one of the best executors out there,

you have an install base that's really unparalleled. And now when you look at the opportunity with Slack, Tableau, and when I look at AI, I believe that ultimately could be incrementally a $4 billion a year opportunity for Benioff and Salesforce. I think this is just another example of some of the transformation that's going on right now in this market. I know, but you've mentioned the setup. I mean, the stock's up 35% in three months. Why? Well, first of all, I think this was a name many were negative on because of margins and because of the Slack deal. I think ultimately they really overestimated in terms of what was actually going to happen because

Benioff, back against the wall, came out with a Hall of Fame quarter last quarter. And when you look from an actual valuation perspective, this is a stock, without being egregious, could be $250, $260. And I think it's just another example. You bet against Benioff and Salesforce, you've proven wrong. OK. Matt Boss Nordstrom OT, Macy's out tomorrow a.m. Let's talk Nordstrom first. What are we expecting?

Yeah, look, Scott, I think what you're seeing right now from the retail space is the tale of two halves. In fact, I remember you and I talking about this to close the year and actually calling for this tale of two halves for the group. I think that's exactly what you're going to get from Nordstrom. The two themes that we're hearing in our work is, number one, the aspirational consumer. In fact, Capri this morning talked about it. That consumer is slowing.

The growth on a year-over-year basis has absolutely moderated. That consumer, in my opinion, is focused on experience and leisure. We're seeing that in our leisure coverage and cruise lines with bookings out through the middle of 24. And I think the other theme that you're going to hear about on both Nordstrom and Macy's tomorrow is the value-focused consumer. That lower-income consumer is focused on necessities, and that consumer is holding back on discretionary purchases. I mean, Capri specifically mentioned expectations of slowing sales from department stores. Yeah, absolutely. Look, the consumer is being very discerning. And I think what you really

have happening overall, the consumer picture, I think, is resilient. When you look at it on a four-year basis to normalize for year over year, meaning one year, when you look at that picture, there's no question that growth in the consumer space is slowing. And that's because, look, you've pulled government assistance, $25 billion year over year. The savings rate is also normalizing. So you have a year over year normalizing consumer, but you look at the growth from two years ago and you smooth out that curve, the consumer, in my opinion, multi-year is fine, but on a year-over-year basis, we're in a vacuum right now where the growth is slowing.

And to your point, you are absolutely seeing a shift more towards experiential and leisure in that category that we cover and away from department stores and mall-based specialty. Man, you've got a tough market in terms of retail to navigate and choosing winners versus losers. Who's the best bet right now? Value convenience. So I would stick with best in class, which would be a TJ Maxx for us. And then I would look at best in class brands. So Lululemon has the growth. And if anything, I think the pandemic has created an inflection in terms of casualization. I also like SelfHelp on Nike. Tapestry and the handbags and accessory space, I think, has the global diversification. So you need SelfHelp

and you need things outside of North America macro on a one-year basis. Those are the things I'd be buying today for the opportunity as we move into 24 and you start to see this consumer picture on a year-over-year and some of these shifts normalized. Because like I said, the underlying picture for me on the consumer is actually more resilient than people believe. All right, good stuff. Matthew, thank you. That's Matt Boss joining us from J.P. Morgan, as you can clearly see there. We'll talk to you again soon. All right, we're approaching the two-minute warning, Mr. Santoli, before we get into some pretty important earnings, right?

Salesforce, CrowdStrike, Okta. We're all over the cloud. A lot of these stocks have done quite well coming into the print, too. They have, although, again, with Salesforce up a lot since the last earnings report, but it's only kind of halfway back from its peak to trough decline. I think you have a lot of stocks in tech in that zone. Salesforce has rarely been this inexpensive or relative to free cash flow in its history. Now, that doesn't mean that's how it's going to trade or that the print is going to satisfy people. But I think there's an eye of

the beholder effect in a lot of these stocks, depending on when you start the clock looking at them. I think it's worth mentioning we had some pretty sloppy earnings responses today with advanced auto parts, with HPE and HPQ. And the overall market is kind of, again, it's kind of ragged. It seems to reflect relatively low expectations, low momentum in the market. It's the kind of market where everyone's selling something to buy something that seems a little bit safer or more predictable. And that's why I think the market breadth is not really cooperated. If I could see an upside to today's action, it's that we got a jolt report that scared the market briefly because it seemed like it was too strong. Too many job openings out there. And you had Fed speakers come out more or less say, don't worry about that. We still have a

pause on the table. It seems silly. It seems fickle on an intraday basis. But that's what we're trading right now. Are we going to over tighten? Is it going to make a recession a goal and not a nasty side effect of what the Fed's been doing? Or can we muddle through for a while? And do we have soft landing still, you know, as a plausible scenario? Whether or not we get a so-called June swoon is going to center around the very stocks that got us to where we are through May. Most likely, yes. So if those have to cool off, as they seem like they probably do, the question is what else happens to the rest of the tank? I mentioned earlier, you know, it's pharma contributing the upside today to the index

and its staples and its utilities. Those aren't leadership groups, but it shows you we're rotating as opposed to liquidating right now. There's a wrap. There's a bell. I'll see you tomorrow. I'm going to send it to the closing bell. Well, that doesn't work.