Closing Bell - Closing Bell: The Emboldened Bulls 6/18/24

Episode Date: June 18, 2024

What is the road ahead for stocks as price targets keep increasing and the bulls get more emboldened? Keith Meister of Corvex Management breaks down his outlook and how he is playing the market right now. Plus, Nvidia surpassed Microsoft’s market cap to become the most valuable U.S. company. Treasury Partners’ Rich Saperstein tells us how he is navigating the AI arms race. And, KB Home reporting results in Overtime today. We tell you what to watch from that report – after Lennar shares sank post-earnings. 

All right, guys, thanks so much. Welcome to Closing Bell. I'm Scott Wapner, live from Post 9 here at the New York Stock Exchange. This make or break hour begins with the rally and why Wall Street, well, getting more bullish on stocks. The big question, should you do the same? We will ask that question to super investor Keith Meister. He will be here momentarily to talk the markets. In the meantime, your scorecard with 60 minutes to go in regulation looks like this. A disappointing retail number today, sending yields lower, also capping some of the activity in the major averages. As you see, there's the move in yields. But you saw we're not doing too much. Sectors pretty split as well. Tech is leading yet again. That's thanks to gains in NVIDIA, which, by the way, passes Microsoft today to become the most valuable company in the market. What a stunning run. You see the chart lower left,

upper right. Pretty much tells the story. Goldman Sachs run. You see the chart, lower left, upper right, pretty much tells the story. Goldman Sachs, too, having a pretty good day. That's from the banking sector. Of course, it does take us to our talk of the tape. The road ahead for stocks as price targets keep increasing and the bulls, well, they seem to be getting more emboldened. Let's welcome in Keith Meister. He is the founder and chief investment officer of Corbex Management here with us at Post 9. Welcome back. It is good to see you again. Hey, Scott. Great to be back with you today. So we've got a lot to talk about, and let's begin just with your view on the markets. We've been around record highs. Where do we go from here, do you think?

So the S&P has been a phenomenal index. The returns have been driven by a handful of companies that have been able to leverage growth at scale like we've never seen before. And for a minute, let's celebrate America. These are all American companies leveraging the American capital markets. And it's a wonderful thing. But, you know, the performance, if I came on your show in the beginning of 2023, and if you told me then that these stocks would have performed the way they have, I would have been skeptical like most have been. So can it continue? I don't know. It's a very powerful trend. I think there's a difference between what's happening with a

handful of companies that make up a big portion of the S&P 500 and what's happening with the other 490 odd businesses. And with the powerful AI trend, it'll work until it doesn't work. There's been a lot of positive circularity when the hyperscalers say they're investing more money in AI and their stocks work. It's more money that can go to Nvidia and drive this amazing trend. It'll last longer than we think it will. And I'm not going to make a call on that. Where we're gonna spend our time focused is on the other 490 stocks and trying to find high quality businesses

going through change, trading at reasonable values. You still are though, investing in those big names. I mean, you hold many of them, correct? Right, you just, you boosted your stake in Alphabet recently, is that right? So our view is we should run a balanced portfolio. There's no way we're going to have 20 ideas that are better than all of the large cap names. And if there's an opportunity to own

the best businesses at a reasonable value, we should do that. A year ago, if I came on your show, I would have had probably 25% of my portfolio in names like Microsoft, Google, Amazon, Uber, Salesforce. Today, I probably have 12.5% of my portfolio in those names. We're always as sort of value-driven investors, probably going to sell a little bit early. But I think it's a very hard thing for an investor to have a whole portfolio with no bets on these amazing large companies that are allocating capital in such attractive ways, spending on R&D and leveraging technology. Are you surprised at all that the S&P is at these lofty levels,

record highs, just given what the backdrop has been? Or does it just make sense to you? Well, I think the surprising thing is if we started the year, people thought the Fed was going to cut interest rates six or seven times. Now, consensus thinks they're going to do it one or two times. So if you had said to people that that was going to be what would have happened, everyone would have thought that equities would have faced a real headwind. The offset's been that fiscal policy has been so substantial that despite the Fed's desires to try and be restrictive with monetary policy, we have a really good, healthy economy. We're at full employment. The consumer is still relatively strong. So you combine that with a huge product cycle.

There's lots of elements of today that feel a little bit like the boom of the late 90s, early 2000. And if you told me that these five or ten companies were going to act the way they would, it would be completely reasonable that the index is where it is. So said differently, if I look at the average company in the S&P 500, my sense is they trade at an appropriate valuation. It's not a streaming buy or a screaming sell. Does the overall valuation, if you take it as a whole, does it make sense to you just relative to where rates are, where the economy is? You know, I've had some question where we are now, and they make the comparison to 99, say this is the most expensive market since then. We all know

how that ended. Is that a fair comparison or no? I don't think it's a fair comparison. And what I would say is the bubblicious names aren't what's driving the market. Unprofitable tech is not soaring. So if you look and say, if you back out these AI winners and look at the average business, they trade at relatively reasonable valuations. There's winners and losers. My guess is it's a stock picker's market. It's trying to find the right story. But we look at our portfolio, there's lots of good businesses that trade at reasonable valuations. Inflation expectations have been anchored. I think the Fed's done a really good job. The tenure sits at four and a quarter. So the concept of buying the average good business at

14 or 15 times earnings who can leverage R&D, AI, cheap access to capital, despite the Fed raising rates, the private credit markets have been alive and robust. The Fed's balance sheet has expanded from $800 billion to almost $9 trillion. So there's a massive amount of liquidity in the system. We're running a 6% deficit with full employment. So during that environment, it doesn't sort of surprise me that it's a decent time to run or buy average equity. When someone says, do we need rate cuts? Does the market need rate cuts? How do you answer that? I think rate cuts will actually be a negative for the market. You do?

Yeah. I mean, sure. Like, why would we be cutting rates? We'd be cutting rates because things are rolling over, right? So if we can stay with short-term rates at five and a quarter, five and a half, longer-term rates at four and a quarter, and full employment, I think that's a healthy backdrop. And by the way, in that environment, you still have a lot of monetary policy. I mean, sorry, fiscal policy. So there still is the CHIPS Act, the IRA, all these projects are still coming. So there's been these cross currents. The Fed has tried to be restrictive, yet despite the Fed being restrictive, you have so many positive tailwinds that you can have a good economy, full employment. So if you're Jay Powell, I think you're sitting

there saying you've done the right things. People criticize you at the end of the year for not lowering rates. You were patient. It proved right. My guess is if he chooses to lower rates between now and the election, he's doing it because employment is rolling over, if the economy is a little weaker. And I don't know how good that is for equities. Not because inflation's come down enough, they're confident, they always use this word confidence, obviously, that it's moving back towards trend.

And they talk about the two-sided risks as well, doing too early, but then staying too long. So I don't think with an S&P making a new high every single day, with risk assets and soaring financial conditions easy, and employment near full employment, he needs to rush to lower interest rates. So if you're him, the worst thing that happens for your legacy is you lowered rates too early. So be patient. And what is the cost of waiting? Sure,

there's a handful of levered asset classes that may have challenges, but every single day, NVIDIA makes a new high. Every single day, Bitcoin's trading at $65,000. He doesn't need to lower interest rates right now. So I think he's in a good place, and he's going to be as patient as he can be. You think there's too much speculation? You mentioned NVIDIA and Bitcoin at $65,000. I mean, really representative of feelings towards risk assets, probably those two asset classes or, you know, the asset of of Nvidia and then the asset class of of Bitcoin, what they've been doing. Does that represent something dangerous to you?

Well, I think if you were the Fed chair and you're thinking about the the the pluses and minuses for for cutting interest rates, one of the things you would worry about is inducing an asset bubble and the consequences of that. And if you think about a world where we've separated the haves from the have-nots, if we're inflating assets, it benefits when people own assets, and you're trying to fight inflation and protect those at the lowest end of the wage spectrum, I think you'd be very worried about cutting rates too early, creating inflation, and creating asset bubbles. So I think that'll definitely be a part of the calculus. You own NVIDIA? I do not.

You don't. Did you? It's not a name I've invested in. Oh, it isn't. When you look at a stock like that, do what it's been doing, do you sit back and say, this is incredible? So my take on NVIDIA is people come on and talk about the P multiple. And I think that's the wrong thing to focus on. The question is, are they over-earning or not? If they're not over-earning,

you know, they deserve a really high multiple and it's an amazing business. What I don't have an expertise in understanding is how strong is their moat. Right now, they have a product everyone needs to buy. They can charge a lot for that product and that drives earnings. Can they do that for five years? Can they do that for 10 years? Will their big customers, the hyperscalers, empower another competitor? Will they create their own alternative? It's not in anyone's interest just to have one. I'm not an expert in understanding how long that runway is. So we're watching. We're not long. We're not short. But I think the ultimate question is how durable are the earnings for NVIDIA at $3 trillion?

And there's other people who can answer that question better than me. Well, you raise an interesting point, though. And you analyze, you know, the businesses that you look to invest in anyway. First mover advantage versus true moat. That's right. Yeah, I mean, you own Alphabet, right? People say, okay, Alphabet, Meta, they have this, Meta, they each have their sort of moats around their respective businesses. Do you find that an interesting way to analyze these kinds of companies?

First mover advantage, NVIDIA. Of course, they are running the race faster than everybody else. Right now, they have the product that everybody needs and wants. But to your point, there are others who are producing these chips too and who will. It's not going to be a one-horse race. Sure. So when you look at a stock, what we do as investors is we're not great momentum investors. We're not buying stocks because we think they're going to beat next quarter and we know they're going to go up and we're going to sell them.

We're buying stocks, but we need to understand markets and markets matter. But we're buying stocks where both we like the market dynamics, but we also think the net present value of the future cash flows is higher than where the stock's trading. We have to buy 20 stocks. It's OK to pass on a lot because we can't quite figure that out. So my answer on NVIDIA is not that I know it's going to be good or I know it's not going to be good. My answer is I'm not the right person to tell you what it's going to look like so I can pass on that. But clearly it's an amazing business that sits at a truly, truly, truly unique junction. And, you know, today's the day it became the largest market cap company in the world. And let's just pause again. We have like a presidential

election coming up in 140 days and everyone's going to be negative about so much stuff and pause and say NVIDIA is an American company, Apple's an American company, Google's an American company, Microsoft's an American company, Meta is an American company. These multi-trillion dollar companies that are spending tens of billions of dollars on R&D and CapEx are doing this in America because we have the world's greatest capital markets and we're the envy of the world. Imagine if all these companies were listed in Europe. Think about how different that world would be or in Asia. So there are a lot of great things to celebrate in this country. I mean, the regulatory aspects alone would perhaps make you shudder. Now,

obviously, there are, you know, headwinds here, at least, you know, verbally, and we'll see what happens from a regulatory standpoint but your point is is well taken i noticed and it's all it's always hard to judge holdings by virtue of 13 f's because they they're they're outdated uh small caps do you do you like small caps here when you talk about um looking for value in the market we've had debates on the more on the on the network all the time. Are small caps a good investment? Are mid caps a good investment now without the rate cuts that you say aren't going to come now anyway? So we've been a big believer in large cap over small cap. You have, okay. The

Russell 2000 has been a hedge for us for the last several years. I believe in most industries, we live in a winner-take-most world. Scale really matters. I've been on the board of 15 S&P 500-type companies. When a bad thing happens to a business and you need to deal with it, having scale is a huge competitive advantage. So there's a reason why companies that are small, in many instances, are small and big companies are big. So we would prefer to invest in companies with strong macro tailwinds and let the macro inform the micro. So I'm generally a believer in medium to large cap businesses over small cap businesses at any point in the cycle. Themes that you like, energy transition. When you look at utilities, for example, AI, we're talking about there's not enough power to produce enough energy

to make a lot of chips, to make this whole thing work. Are you playing that theme? And if not, is there another aspect of energy transition that you're hot on? So we've had about 20% of our portfolio tied to that theme. So for us, the ability to- That's a lot. Yeah, a lot. So we've owned utilities with a view that we're buying good businesses at decent valuations. So for us, the ability to... That's a lot. Yeah, a lot. So we've owned utilities with a view that we're buying good businesses at decent valuations. So we've been buying utilities at 1 to 1.1 times rate base, 12 times earnings. So good regulated businesses that historically from 2013 till 2023, electricity load in this country was essentially flat. Now, whether it's because of the IRA or whether it's because of AI or EVs,

it's projected to grow at 3%. We've created a regulatory compact where we've incentivized great capital markets in this country, we've incentivized utilities with the lowest cost of capital and guaranteed regulated returns of 9 to 10% to invest that capital. So we think utilities are a good investment for in general in this cycle. Now how do we make them a great investment? Utility

investors like Simple. Ten years into an economic cycle, 15 years into an economic cycle, many utilities conglomeratized and invested in non-regulated businesses. So we've had great success investing in utilities, engaging with the management teams and saying, go back to basics, simplify, separate your unregulated businesses and focus on what you do and get a lower cost of capital and a higher value. We invest in Exelon, the big utility in the Midwest. They owned a hidden asset called Constellation Energy, the largest fleet of nuclear power plants. We had no idea the AI boom was coming. We felt like nuclear was going to go from being part of the problem to part of the solution.

We didn't know the IRA was coming. It all happened. When we invested in Exelon, it was a $40 billion company. Today, the business that was spun off Constellation is a $70 billion asset, and Exelon is still a $40 billion company. We then took that playbook and did it with a company called MD Resources, which is the regulated utility in North Dakota and Montana and eight other states in the Northwest.

We invested in an LDC in the Southwest called Southwest Energy, Southwest Gas, excuse me. Both these companies had core utilities and other businesses. Both these companies realized that they wanted to simplify and our core competency is not running a utility, but as a shareholder, we could act like an owner and help them simplify their businesses. The great thing inside both those situations is they're spinning off businesses that are services businesses that do the CapEx for utilities. So if you think about where a great

place to be in the cycle right now is, if utility CapEx is going to grow because of the AI boom, because of EVs, because of, so we're going to grow rate-based at utilities at six or 8% over the next handful of years, they're going to spend that capital at our companies that are being spun out. So look at Quanta Services. It's a $40 billion company that was a $6 billion company five years ago. Inside of MDU, there's a business, Everest. Inside of Southwest, they just IPO'd a business century. So we think just like Exelon spinning off Constellation, there's great businesses that can be separate. And what we're trying to do is find hidden assets and value in an otherwise recently placed market, but look at utilities because they have a secular tailwind

behind them. Interesting. Illumina is a relatively new investment for you. We haven't talked about it in a while. I don't mean you and me, but just broadly speaking, ever since Icon was in it, obviously, and had the whole Grail transaction that is obviously not happening. Why do you like that name? So Illumina is a great business trading at a reasonable valuation. Why? Because it's going through a period of increased volatility. That volatility was driven by them during the middle of COVID buying a diagnostics company called Grail. And they have Illumina's core business is the enabling technology for genomics. They do the sequencing of DNA.

Oh, by the way, in an AI driven world, what are we going to need more data for health care? That's going to come from sequencing the DNA. So the core Illumina business we think is a gem, but they bought a business that was losing $600 million a year. They went through a huge journey with that that I don't need to go back on, but they came to the decision that they were going to separate that business. On June 24th, I think Monday, that business will be a freely traded separate public company. And when we look at Illumina again, it won't have those $600 million of losses, but it'll just have the core business. Along the way, they got a new chairman, a new CEO, a new CFO. We believe this team will help the company transition. So just like when I came on

the show in 2023, earlier I was talking about Salesforce. People have come on your show and talked about meta. In both cases, great self-help efficiency stories. We think there's an easy playbook for Illumina to copy. And when it does, and margins go from 20% up towards 30% over time, and it's a simply enabling technology, it won't be worth the $15 billion it's worth today, nor the $70 billion it was worth in 2019, but a lot closer to the $70 than the $15 billion. So we think it's a great opportunity to buy a high- business going through change that's got a little bit of noise, but getting simpler with great secular tailwinds. Let me ask you lastly, before we wrap it up,

time flies. I don't know where it goes. Activism. Do you still consider yourself to be an activist investor? How have you seen the evolution of that craft in the current market? So we consider ourselves to invest in high quality businesses going through change. And then what do we want to do? We want to act like a business owner. So we want to sit around the table and say, how can we help this company? You know, Illumina is a great example. We want to be a business owner. We want to help them. But we're betting on the CEO. We're betting on the chairman. We would not have bought the stock if we didn't believe in them. So somehow along the way, activism got defined as sort of good guys versus bad guys, people buying stock and attacking management. I would say it's not what activism is. There's an ecosystem who

tried to define it that way because it creates PR jobs, it creates defense work, it creates banker work. The lens through which I look at it today is acting like a business owner in the public markets. And in a world in which so much money is driven by passive indexing or people looking for the next data point, there's so few owners who can act like private equity owners in the public markets and take duration. So when we find opportunities that we can buy stock and act like owners, it adds huge value. And it happens really well in a world of high-quality businesses going through change. We have no idea how to run a company. If anyone let us run a company, it would be a huge mistake.

But we're really good two decades of doing this, plus in the public markets, of helping public companies be better public companies, think about capital allocation, how to leverage one step back to take two steps forward and be a partner with public companies. We can do it by joining the board, We can do it by recommending board members. Or we can do it by talking to management on a regular basis behind the scenes. We have no one recipe fits all. Each situation requires something different. And our strategy is to make good risk-adjusted returns for our investors.

And a tool we use is acting like a business owner. Well, it's good to catch up with you. It's been a year, believe it or not. I look forward to seeing you next year. Since we had a conversation, if not before. Keith Meister, thanks for the time. You got it. All right.

Appreciate having you here at Post 9. To Christina Partsenevelis now for a look at the biggest names moving into the close. Christina. Thank you, Scott. Well, Occidental Petroleum moving higher after filings revealed. Warren Buffett's Berkshire Hathaway has scooped up more shares over each of the last nine trading sessions. Buffett says he's not interested, though, in taking over each of the last nine trading sessions. Buffett says he's not interested, though, in taking full control of the oil and gas producer, and that's why shares

are up almost 2%. Shares of Chewy, though, they're jumping today over 10% after a 3% gain yesterday. There is no particular news catalyst for this bounce, but keep in mind management changes are in store at the company ahead of its annual stockholders meeting in July. Could be some meme trading, too. Chewy has soared nearly 60 percent just in the past month or so. You can see shares up 13, almost 14 percent. Scott. All right, Christina, thank you.

We will come back to you in just a little bit. We're just getting started here on Closing Bell. Up next, the S&P and Nasdaq trying for yet another record close. Now, PIMCO's Aaron Brown and five-star fund manager Kevin Simpson are breaking out their own playbooks. Find out how they are navigating the market's recent rally and where they're finding the biggest opportunities in stocks right now. It's just after the break.

We're live at the New York Stock Exchange. You're watching Closing hearing on Capitol Hill. We go back to Phil LeBeau now with those details. What do we know, Phil? Scott, this is a rough hearing for Boeing CEO Dave Calhoun. We want to give you a sense of how rough most of the questions have centered around the fact that he keeps saying, Dave Calhoun keeps saying, we are making changes. We are going to hold ourselves accountable.

And senators are continually coming back and saying, you keep talking about this, but what are you really doing? And then there was this exchange between Missouri Senator Josh Hawley and Dave Calhoun. Take a listen. But meanwhile, you're getting paid a heck of a lot of money. It's unbelievable. If anybody's coming out of this deal good, it's you. Why haven't you resigned?

Senator, I'm sticking this through. I'm proud of having taken the job. I'm proud of our safety record. And I am very proud of our Boeing people. You're proud of this safety record? I am proud of every action we have taken. Every action you've taken. Every action you've taken? Yes, sir. Wow. Wow. There's some news for you. That's just a taste of what Dave Calhoun

has faced this afternoon over the last hour and a half. Scott, I'll send it back to you. We think this goes for about another 45 minutes. Back to you. All right. Appreciate that update. Phil LeBeau down in D.C. on the Hill Force. S&P and Nasdaq both trying for record closing highs yet again today. Investors debating if the recent run is losing steam or simply ready to push higher. Joining me now is Capital Wealth Planning's Kevin Simpson and PIMCO's Aaron Brown. It's good to have you both with us. Aaron, Keith Meister sounded pretty constructive on the markets here. What's your view? I'm constructive as well. I mean, we're in an

environment right now where growth is still good. We have inflation coming down. That should be supportive of corporate profit margins. And when we look into the second half of this year, we're expecting to see a little bit of an earnings pickup. To date, this has very much been led by the AI sector and by tech specifically. But I do expect as we move into the second half of the year, we will see a gradual broadening out. That said, I still want to stay long AI and the tech sector and then incrementally starting adding additional sectors as well. Maybe some more cyclical exposure given the underperformance of late. Kev, I thought his, Keith's point of view on

rate cuts was interesting. The idea if they do cut, it's going to be bad. It's not going to be for the right reasons because inflation is coming down. It's going to be for the wrong reason. And right now they don't need to do anything. The economy is in good standing. What do you make of that? Well, I think the Fed does want to cut rates. I know as the investment community, we would like to see them. But I agree with Keith's point. And what we shouldn't maybe be asking isn't when they cut rates. It should be why they cut rates. So if we look at a situation where they're cutting rates because we went into a recession, that's problematic. They can throw as many rate cuts at us as they want. It's not going to save anything.

So this is a very thin needle that they've got to thread. I do think they're going to cut rates one time at the end of this year. But in the longer term, whether it's November, October, December, February, it doesn't really matter. It's affecting short-term trading. It matters, though, I suspect, in the kinds of stocks that you want to position yourself within, right? He talks about the mega cap names for obvious reasons, because they've done so much better than everybody else, even at a time where you have an investor like that who is looking far beneath the surface, looking for value. But it's no accident why the biggest stocks have done the best. Is that just the way it's going to be until we get even more clarity on the idea and timing of the first cut? In the short term, absolutely. And to Aaron's point,

we're looking for breadth in this market. We've been hoping for it for two years, especially when you run a diversified portfolio like we do. You can only have a certain amount of money that you can throw to the big tech trade. The rest of the market hasn't been participating in any way, shape or form. And that's kind of two years running now. So I think if we look at rate cuts in 2024, markets will be positive. But if you have the ability to stay in these big names, I would do it. Aaron, you suggest it's time to begin moving into quality cyclicals. What does that mean? So I think we're starting to see a little bit of signs of a recovery in the manufacturing sector. You saw that earlier today, and you've seen that

really on a global basis as well, where you're starting to see manufacturing activity, PMIs globally start to pick up. This, I think, is a healthy sign of a cyclical recovery. We're in early stages, so I think you want to be incremental in this approach. But start stepping into global cyclicals. Start stepping into some industrial sectors. The metals and mining sector has gotten hurt pretty badly over the last month. I think that there's some value there, similarly in global industrials as well. I think that these sectors are going to start to benefit as we see the rest of the world start to close or narrow the gap with respect to the U.S.

The U.S. is still going to be the top of the leaderboard, but you are going to gradually see a narrowing, and that's the time to start to step into those industrial sectors or those more metals and mining-oriented sectors that have underperformed. Do you not think that we're late cycle, Erin? It's really interesting, because when you look at PIMCO's models with respect to where we are in the cycle, we've been in a late cycle environment over the last 18 months. But what's interesting is that you're starting to see signs and indicators pick up that we're moving back into a mid-cycle environment. So instead of moving into a recession, which is what you traditionally see in an economic cycle, we're now moving back

closer to a mid-cycle environment. So right now, I think, you know, we're certainly running with high inflation. That's a sign of a late cycle environment. You certainly are in an environment where you're seeing this blow off the top in certain sectors. Again, a late cycle environment. But the economic indicators are actually moving backwards, not forwards. See, that's why I asked you, I asked you that question specifically because of the idea that you want to move into some cyclical names like industrials and materials at a time where some suggest we are late cycle. Well, right now, our earnings, our recession indicators are quite low. You know, they're sort of at average levels versus what you'd expect over a normal business cycle. So it's not like we're seeing recession indicators really now percolate and move higher. And if

anything, that they're actually moving lower over the last six to 12 months. All of that is suggestive of an environment which is maybe less late cycle than many in the market anticipated. And so that does support broadening out into more cyclical exposure. I always say, Kevin, you're one of the most active traders who comes on. You sold covered calls on JPM, on TJX, and Freeport. I think we're in a period post-earnings where we're going to be in a lull. It's going to be hard to see the markets go up another 20% from here in the short term, unless, of course, it's NVIDIA. And then you look at the market and you

say, well, there's probably not going to be a recession, so we're not going to see a 20% correction. So if you're expecting maybe markets to trade within a 5%, 10% band, either up or down, writing covered calls is a great way to get through the summer. Now, I would like to see volatility a little bit higher so we could bring in better premiums. You think you're going to get that? I think when we go into a presidential election cycle, we tend to see a lot of volatility.

But you have to wait? We're going to have to wait until we get closer to the election to get that volatility? They're going to have a debate this month, so we're getting pretty close. For those of us old enough to remember 2020 and 2016, there was plenty of volatility in those two elections. So yeah, I expect something similar this year. That's for certain. All right. We'll talk to you guys soon. Aaron, thank you. It's

good to see you as always. And Kevin, you, of course, too. We'll see you back here soon. Kevin Simpson. Up next, Treasury partners Rich Saperstein's back with us. He's ranked number four on the Barron's top 100 financial advisors list this year. He'll tell us the sectors he is banking on, the names he is adding to, and how he is playing the AI arms race. Just after the break. Closing Bell's coming right back. We're back.

The S&P 500 hitting a new intraday high fueled by a surge in NVIDIA shares. What else is new? The chipmaker surpassing Microsoft's market cap to become the most valuable U.S. public company. Joining us now at Post 9 is Rich Saperstein of Treasury Partners. Microsoft and Apple are two of his largest tech holdings. He's ranked number four on Barron's list of the top 100 financial advisors of 2024. Made the top four. Congrats. Thank you, Scott. Appreciate you being here. It's my pleasure. So for somebody who's been reasonably cautious on the market for many of the conversations that we've had at record highs yet again now, what are you now? We're fully invested, as we have been for quite a while.

Okay. With an overweight and large cap tech in oil. I think the economy is doing well, apart from retail sales, weak earnings in McDonald's or Starbucks or Target. But generally speaking, we've got low unemployment, record high household net worth, record high cash balances, and a Fed that's really poised to be accommodative. So does that mean you're more positive on the market? Yeah. I get that you're fully invested, but you sound more positive on the market. I'm always cautious.

I'm paid to be cautious. Of course you are. That's why you're number four. Okay. You're keeping your clients' money. I want to keep wealthy people to stay wealthy. That's the main thing. But see, I'm glad you make that point.

I razz you a lot about sort of your view on the market and how you're sort of activating your perspective. Your job, by and large, as the kind of wealth manager you are, is to preserve the capital of the wealthy clients that you have, not go so far out on the risk curve because you're trying to generate these huge returns. Is that fair? Very accurate. So how does that then dictate the kinds of things that you're willing to invest in? MegaCapTech, for example, screams to me, perfect example. Yeah. So it's about taking a longer term perspective. So if you look at the Q's versus SPY over the last three, five and 10 years,

over 10 years, the Q's have doubled the return to the SPY. We're overweight. Microsoft, Google, Apple, and we've had these names for years. If you think about what's going on now with CapEx and the reinvestment, Amazon, Google, and Microsoft are investing $160 billion in CapEx this year, which is really astonishing, the amount of money. Google is increasing their CapEx by 50% from $32 to $48 billion. So the question really becomes, you know, what's going to be the outcome with all that reinvestment? Our view is that it's going to be productive. It'll lead to more cash flow.

And these stocks, even though they're expensive now, you know, you've really got to own them for the long term. They've driven the market multiple higher, in some cases to some people, to uncomfortable levels. Do you think the market's too expensive at 21 times or no? Yes, it's definitely expensive. Is it too expensive? It's not cheap, but I think investors really should try to have a strategy of I'm going to own large cap tech. I'm going to own companies that have a change agent.

I'm going to own cash flow companies. I'm going to own some defensive companies. So there's a wide range of names that could be held in this market. And even though the overall market's expensive, you still have representation in large cap tech. I wonder, you know, we had Rick Reeder from BlackRock on the show yesterday, who I guess you could say defended the multiple of the market. And he's liked stocks for quite some time. Let's listen to what he said yesterday, and I'll get your reaction on the other side. Rick Reeder. I still like the equity market. I mean, boy, it's a heck of a move today. And it's been a pretty profound move. I still think when you boil it down, and I hear all the discussion

about it's a multiple, it turned too high, you're still seeing a historic dynamic around the growth that ROE, the return on equity companies are creating, and the buyback relative to the IPO calendar. When you marry the fundamentals and the technicals, they're pretty powerful. Yeah, it ties into a lot of the names we hold. So if you look at buybacks, one of our names is Fidelity, F-I-S. Talking about a company buying back 10% of their stock right now. All of our companies just about have buybacks in place. In terms of earnings growth, all of our companies are showing year-over-year earnings growth. So the market's expensive. So you can say, look, large-cap tech is 37% of the market, yet generating only 31% of their earnings. So there is an overvaluation there, a large presence. But I think you've got to own it.

We're fully invested. and we're concerned about how expensive the market is, but where else are you going to be right now? Did I see a utility on your list of recent buys? Yes, two of them. So you heard the conversation I had a short time ago with Keith Meister, who's playing energy transition as a big percentage of his portfolio. You're a big believer in that area of the market too, it sounds like. We own two names, NextEra, NEE, and VST, which we started buying in January of 21. And all of a sudden, this utility became an AI darling. Even though

we bought a utility with a 30% operating cash flow, look, today it's got a 14% operating cash flow. They're buying back 5% of the stock each year. And NextEra also is a beneficiary of the AI transition. When you were talking about buybacks, before you said Fidelity, I thought you were going to say Apple. Okay. Because the size of the buyback, obviously, that they have. You own the shares. I own it. What do you make of this run? I don't know. It's re-emerged, right? Now it's trading

at or near all-time highs now. There's the obvious reasons everyone owns Apple. You have the transition to the iPhone 6 as long as Siri is now going to get smarter. We've got the services. We've got the repeat revenue. But there's one primary reason why we've owned Apple for over a decade. There's an installed base of 1 billion wealthy people around the world. It's a billion people that are going to upgrade, that are going to keep adding to that ecosystem that they have. So I think it's a very key name to own. And if you marry it off with, let's say, a Google, which is doing search,

Microsoft, which is software, you have three names that should be the core of every portfolio. Granted, multiples are elevated right now, but if I was an investor who didn't own them, I would have a position in them right now. So you believe in the upgrade cycle that is going to take effect in part because of what was announced at WWDC? Yeah, I think it could occur. We'll see. All right, Mr. Number Four, Richard Saperstein, good seeing you. Thank you, Scott. Take care. We'll see you soon. All right, up next, we, Richard Saperstein, good seeing you. Thank you, Scott. Take care. We'll see you soon. All right, up next, we're tracking the biggest movers as we head into the close. Christina Partsenevelos is standing by once again with that.

Christina? Popular tech ETF hitting an all-time high once again. Can you guess the ticker? And a data breach is hurting shares of one chipmaker. I'll explain after this short break. We're less than 15 from the bell. Back to Christina now for the stocks that she is watching. What do you see? Well, I have to talk about the SMH. I don't know if our audience guessed it. That is the ETF, a barometer for the chip space, hitting an all-time high today. But if you consider its relative strength index, it does remain in

overbought territory. Yes, we've got to say NVIDIA is playing a big role since it just became the most valuable company in the world in terms of market cap. But Micron and Supermicron, or Supermicro, I should say, also driving the action. Specifically with Micron, earnings are out next week. Higher memory prices are expected to climb and help Micron. Gross margins. AMD, though, an outlier, lower on a report that hackers stole employee and product information and are selling it for crypto online.

An AMD spokesperson tells me they are aware of a group claiming to have stolen data and that the company is working with officials to investigate this claim. You can see shares down 2.5%, Scott. All right, Christina, appreciate that. Christina Partsinello still ahead.

The S&P and the Nasdaq pushing for yet another record close. We break down those moves right up to the bell. Plus, Lennar shares, they are slipping after reporting last night. We'll tell you what's at stake for KB Home when it reports in overtime. Closing Bell's coming right back. All right, coming up next, KB Home reporting results in overtime. All the key metrics and themes every investor needs to look out for when we take you inside the Market Zone next. We're now in the closing bell Market Zone. CNBC Senior Markets Commentator Mike Santoli here to break down the crucial moments of this trading day. Diana Olick with a look at KB Home ahead of earnings in overtime as well.

Michael, I begin with you. Diana Olick with a look at KB Home ahead of earnings and overtime as well. Michael, I begin with you. I thought it was interesting, our conversation with Keith Meister at the top of the hour on the idea of rate cuts. And it was kind of like, hey, be careful what you wish for because maybe it's not such a good thing. I want you to listen to Meister. We can chat on the other side. I think rate cuts will actually be a negative for the market. You do? Yeah.

I mean, sure. Like, why would we be cutting rates? We'd be cutting rates because things are rolling over, right? So if we can stay with short-term rates at 5.25, 5.5, longer-term rates at 4.25, and full employment, I think that's a healthy backdrop. What do you make of that? I agree that status quo has been fine and probably would be fine if conditions warranted. The keep rate's where we are. We know the 10-year at this level hasn't really completely undercut the economy. I do think you have to take, though, the Fed at its word in terms of what it would be reacting to if it cut rates.

The bull case is not. Quick and many rate cuts it is optional orderly slow deliberate cuts just to take some of the pressure off the restrictive policy all they are saying is they need inflation to be better for a couple more months that's going to be enough the first

rate cut. Was not a negative for the markets in twenty nineteen or ninety five even though it has been at other times I think I think you have to kind of understand what they'd likely be reacting to with the first rate cut. But yeah, you don't want to be wishing for a really aggressive easing cycle. Yeah. I don't know, Diana Olick, maybe KB Home and the builders are hoping for an aggressive easing cycle. You tell me. Yeah, well, they absolutely are. Look, KB is expected to report smaller gains than a year ago in earnings and revenue.

But like Lenar yesterday, it's going to be less about the last quarter and more about the second half. Lenar reported weaker than expected guidance and talked about increased incentives. Builders have been offering extras and buying down mortgage rates with rates now higher than they were at the start of this year. Those incentives are driving sales, but do cut into the bottom line. Both Lennar and KB skew more toward the entry-level buyer, who is much more sensitive to small moves and interest rates. Analyst Ivy Zellman said yesterday that if we continue to see what is slower than seasonal activity, which we're seeing now, it'll be harder for the builders to deliver the results that they're expecting or guiding for. Scott? Diane Olick, thanks so much. We'll see you in OT. The beat

goes on, Mike. We're going to get closing highs, it looks like, on the S&P and the Nasdaq. You have those price targets yesterday from a few shops go higher. You had today's fund manager survey of Bank of America, the highest in three years, at least. Bulls have had a lot to be happy about. Without a doubt. And most of the things are lining up in the right direction. The big question is, are we in overshoot mode on the themes that everybody understands and is celebrating? Today, the concentration of momentum stories become so saturated, everybody fixated on that. NVIDIA itself is accounting for 15 points

of the 14 points of S&P upside right now. So it shows you what can happen. NVIDIA is up forty five percent in four weeks since it reported earnings that's incredible kind of getting to the point where- you're at least extrapolating in a hurry

a little bit of the these great trends. That being said. Brett is better today and yesterday the market can just cool off. And maybe redistribute some of the- some of the buying. In other areas or we could pull back a

little bit not have too much of a problem I do think we dealt with a soft retail sales number okay today. Yields are more cooperative. Going down today and you know you have a bit in things like the banks. So it's encouraging even if I wouldn't

want to. Sort of draw this line extending it too far out. In terms of the angle of the cent on things like the NASDAQ 100. Just when you think, speaking of NAS 100, that NVIDIA gets a run-up into the stock split, then you get a split surge. It's always been wrong to bet that it's done.

You're right. Bill Ring marks a new closing high for the S&P and the NAS. Send it in OT with Morgan & John.