Closing Bell - Premiere of Closing Bell Overtime: Tech on the edge, panelists tackling Nasdaq’s continued struggles

Episode Date: March 14, 2022

The Nasdaq Composite closed lower for the 7th session in 8. Satori Fund’s Dan Niles and BMO Capital’s Brian Belski tackle the “Talk of the Tape.” Plus, tech investor Brad Gerstner from Altimeter Capital opens up his playbook and talks about his positions in Snowflake, Roblox, and Grab. And Morgan Stanley’s Mike Wilson on his bold call. Why he’s picking bonds over stocks right now.

All right, Sarah, thanks so much. Welcome to Overtime. I'm Scott Wadner. It is great to have you with us. You just heard the bells. We are just getting started, though. As news breaks in Overtime, you'll know about it tech last fall, and we'll find out what he thinks now. We begin, though, with our Daily Top Story, what we're calling our talk of the tape today. Unquestionably, the Nasdaq's continued struggles, the index lagging yet again, feeling especially unstable. Take a look at what's moving after hours. Apple at a critical level, $150. Technicians focusing on $152 being the key level to watch. Well, it closes below that, and it's barely hanging on to $150. Technicians focusing on $152 being the key level to watch. Well, it closes below that and it's barely hanging on to $150. We're going to watch all of these stocks in overtime and let you know what is moving and when. Let's get right to our panel, though. Satori's Dan Niles is with

us today, along with BMO's Brian Belsky. Gentlemen, welcome to Overtime. It's good to have you with us. Thanks for having us on, Scott. Congrats on the show. Thank you very much. Dan Niles, I begin with you, and I take it on where our top story began. How can the market stabilize if its biggest sector, technology, can't? Well, first of all, congratulations, Scott, on your new show. It's too bad they have you working overtime, though but bad bad dad joke um i think you know right now you have to step back and look at the big picture um which is you've got inflation at 40-year highs you've got

unemployment in the bottom five percent of all readings and up until last week you had the fed still buying securities so you're so far out whack, and especially when you look at valuations at all-time record highs coming down, that you still have a long way to go from a time basis to get all of this stuff resolved. On a short-term basis, I think the next 3% to 5% move is actually higher from here, but you always see bear market rallies and then these retrenchments. And you're now having earnings getting cut across sectors because of what's going on with inflation in Russia. And so, you know, I think you see short term stabilization, but long term it goes still lower. You know, Brian, you have the highest S&P target on the street at 5300.

And I'm wondering if you're sticking with that and how you would answer that same question. NASDAQ's in trouble. It can't find its footing at all. So how can we do what you think the stock market can do unless that stabilizes? It's a great question and it's an honor to be on your first show with you, Scott. You know, the only thing that I would dismiss is that earnings are actually going up. If you do the math and do the analysis, you'll see that that S&P earnings for 2022 are actually up relative to they were two months ago. I think analysts are revising their first and second quarter numbers, but second or third and fourth quarter numbers, I think, are going to be strong. And I think we're going to see better growth than everybody thinks. That's kind of number one. Number two, I will agree with Dan, my old colleague from a long, long time ago, that I think this is going to be a process that's going to take several months, if not years, in terms of normalization. And I don't think investors

are quite ready for that. So why I'm still bullish and why I do not believe it's time to change the target is let's see where this kind of settles in here and then we'll be able to approximate how much the market can go up from these levels. Remember usually and historically since 1970 when you have a 10% correction you have a nine month performance of 21% after that in the upside. Over the last 50 years again it's been 27 percent on a 12 month basis. So we still have nine months to go. And I think people are still way too focused on the negative. And I think we could have a really nice bounce back in some of these Nasdaq names that people are right now avoiding. I'll tell you what, you're not the only person, Brian Belsky, who thinks that.

We had a very big interview the last hour with Guggenheim's Scott Minard, who frankly was more positive than I expected him to be. I want you to listen to what he said about what he thinks right now about the stock market, and I'll ask you to react on the other side. I think that as the Fed starts to tighten, that stocks will start to rebound. I think a lot of what we're living with right now is just a combination of two things. One is fear in relationship to whether the Fed will be serious about addressing inflation. And the other one is the uncertainties linked to the war and to the supply chains, which even when you look at that historically, wars are typically good for stocks. And trying to call the bottom in this decline, I think, is foolhardy. But at the same time, the valuations are becoming so compelling that for investors that have a three

to five year horizon, I think there's a lot of money to be made. Very interesting, Dan Niles. He also said we're approaching a top in rates. He doesn't think we're getting a recession. He's looking at beaten up tech stocks, including PayPal and Square, which, by the way, he owns. And he says a lot of companies are starting to look attractive. Yet you're calling for a 20 percent decline peak to trough in the S&P. And I'm curious as to what you think about Minard and whether you're sticking with your earlier call. Well, you have to remember, Scott, we came into the year saying we thought the S&P would be down at least 20 percent peak to trough. I would focus on that statement says at least because with what you've seen with Russia and the Ukraine, that's added

more structural inflation in the mid to long term. And I think the thing that most people are forgetting is that you haven't had inflation at these levels for 40 years. The prior high was about 3.9% back in 2011. So when you have much higher than normal inflation, your market multiples are actually below average. And if you look at the market cap of the entire stock market divided by GDP, which is my favorite measure, that's about 1.8 times. The 50-year average is 0.8. The peak of the tech bubble was 1.4. And numbers are actually coming down. If you look at what Facebook said at a recent conference they were at, they talked about, well, we're seeing some slowdown in Europe because of what's going on geopolitically. Twitter alluded to that as well. Reteo said that we're tracking to

the low end of the range. And so, yeah, I mean, it's great that numbers are going up supposedly a year from now. But in the near term, to think that you figured out where the deceleration is with these levels of inflation, with valuations this high, I would just point to JP Morgan's downgrade of, I think, 28 stocks in the internet space in China, that the K-Web is down 77% from its peak. I think it dropped like 12% today, putting it down now 80% from its peak. And that's off of downgrade. So trying to catch the bottom and say valuations are cheap, I just don't get there when estimates are headed well.

I just go back, Brian Belsky, and last word to you of what Minard says about what your time frame is. If you're watching this program now and you're a three to five year from now investor, that his words are valuations are becoming so compelling. Also, a late day note today from J.P. Morgan's Marko Kalanovic. Guy likes to put out notes later in the day, and he did today. Too much negativity is priced in. He said, add risk to equities. I'm on the Marko, and I never thought I would say this, but I'm going to Scott Meyer trade. I think bonds are massively oversold.

We're going to have a huge rally in bonds, I think, right after the Fed raises rates. And if we have a positive outcome or something happens in terms of pushing Putin out of power, I think we're going to have a melt, like a face-melting rally, Scott, that people are not prepared for. I think it's really tough to call for 20% corrections. You know, 70% of the time, the market's up. I think it's really, really tough. And I'll just leave you with this. Valuation, as you know and you and I have talked about for years, is the world's worst predictor of forward performance.

And I think that's really where the trap is with respect to still massively low interest rates from a secular basis. And most of all, we have the most consistent earnings in the world right here in the United States. And I think foreign investors are going to come back and buy U.S. stocks for that premium of consistency. We make that the last word. Dan Niles, Brian Belsky, thanks for taking the maiden voyage in overtime with me. I'll see both of you again soon. Provocative thoughts. And I appreciate that from the both of you. Let's get to our Twitter question of the hour. Now, we want to know how much further do you think the Nasdaq needs to fall before bottoming? You can head to at CNBC overtime, cast your vote.

5 percent, 10 percent, 15 percent, or it's already bottomed, or at least in the process of doing so. And again, I'll read the results to you at the end of the show. Now let's move to an exclusive interview with a marquee investor who saw the destruction in tech coming. Altimeter Capital's founder and CEO, Brad Gerstner. He joins me live. It's good to see you again. Welcome to Overtime. Hey, Scott. Thanks for having me. Congrats on the new show. You know how to time markets. I mean, two years ago, we were having this conversation. I think we spent about an hour together at the start of COVID on March 26th, when I felt about like I do today. Growth stocks were under assault. They were cratering. Ironically,

now we're normalizing and growth stocks are down even more than they were at the start of COVID. But it's good to be here. And, you know, while I think we did see the normalization in multiples as a likely outcome toward the end of last year, we certainly, our base case, as you know, was a soft landing, four to five rate hikes into this year. We didn't see the concerns emerging about hyperinflation, about 10 to 12 rate hikes. And we certainly didn't see this tragic war unfolding on the doorstep of Europe. And as a result, you know, last year we held up better than most because we own high quality stocks and we were short, lower quality stocks. But as you know, in the first three months of this year, all the high quality stocks are being destroyed as well. And so we're getting

hurt like everybody else. This is a hard game. We're down on the year. But I think if you have a time horizon over the course of one to three years, we see a lot of stocks in our universe that we not only think are going to end the year higher, but we think are going to be multiples higher as we look out over the next two to three years. Man, I love how honest you are. And I know our viewers do as well. And frankly, I was going to play some sound from you from our Delivering Alpha event last September where you called a lot of this. But I don't even have to do that anymore because you just went through it. The bottom line is where I wanted to start this whole interview with is you called it. You got a lot of this right. But multiples have come down a heck of a lot to this point.

Is it done? Is it close to being done? What do you think? So let's talk for a second about what I called. I expected that as the world normalized post-Omicron, that we would get back to the five-year average multiple. We're about 30 to 40 percent, depending upon which basket you looked at, software, internet, above the five-year average. We didn't think that was durable. We had given most of that up by middle of December. And now we've shot right through the five-year average.

In fact, our Internet stock index is at a 10-year low. And software is back nearing where we were in 2016 before the re-rating of software occurred. So we're in the neighborhood of a tradable bottom. If you have a two to three year time horizon, there is no doubt there are a lot of stocks that are going to be up well over 100% off this bottom. But listen, there's massive uncertainty in the world. What is the Fed going to do? What is the rate of increase?

How many increases? What's going to be the Fed going to do? What is the rate of increase? How many increases? What's going to be the inflation print in April? And what is going to be the resolution to the situation in the Ukraine? So it doesn't surprise me at all that buyers are on the sidelines and that sellers and short sellers are having a field day with stocks. I don't think stocks today reflect great price discovery about where these stocks are going to be in six months, let alone two years. But I'm also eyes wide open to the fact

that we could go lower before we go higher. Speaking of going higher, you see what interest rates are doing today. After sitting in a pretty tight spot, they've started to move to 11. Is it all about rates at this point, especially when you're talking about the kinds of vulnerable stocks that we've really had front and center, those being tech? Without a doubt, the single biggest lever on growth multiples is rates. And we've had government intervention of the magnitude we've never seen on the order

of magnitude of the marshall plan at the beginning of covid it massively distorted multiples on the way in and it's massively distorting multiples on the way out as i look at it the market is now pricing in at least seven rate hikes as you, we entered the year with a big bond short. We've now covered that bond short because we don't think that it's possible for the Fed to raise rates seven, ten, twelve times as some people think this year. Think about this, Scott. We've destroyed over $15 trillion of stock market wealth. We have $130 oil and $6 gas at the pump. We have no stimulus checks.

We're withdrawing trillions off the Fed's balance sheet. Rates are going up and we have a war. Consumer confidence is plummeting. It's down 32% in the last 11 months. That ranks it in the top three of the last 20 years in terms of drawdowns. You know, I said on Twitter a few weeks ago, I don't think the Fed's behind the curve on rates or inflation. I think they're behind the curve on recession. Every company I talk to is tightening its belts. Consumer confidence is plummeting. I don't think there's any chance that the Fed's going to raise rates 10 times this year. I don't think they can. And frankly. I don't think there's any chance that the Fed's going to raise rates 10 times this year. I don't think they can.

And frankly, I don't think we're going to have hyperinflation in a world where demand is being destroyed at the rate it's currently being destroyed. Let me talk about your overall exposure, if I could, because by last December, you had said you had taken most of your shorts off and your long exposure was back up to 70 percent. It's interesting that now today you say we're in the neighborhood of a tradable bottom. Where's your exposure today? Right, Scott. So that, you know, I started off by saying, you know, we've been beaten up this year like everybody else because I was covering shorts as we approach the five-year average. That was our baseline, that we were going to have a relatively soft landing, three to four rate hikes. And so we add on a fair amount of exposures we entered this year.

We were wrong. We did not see this talk of 10 rate hikes. And we certainly didn't see a war developing in Europe. We think both of those are solvable. We don't think we're going to have 10 rate hikes. And we do think there'll be an off ramp to the situation in Ukraine. So we've taken up our exposure. We've consolidated behind our five or six best ideas. We don't run leverage. And so the bet for our LPs, I'm the largest LP in the fund. I'm not a seller. I'm going to own these companies. There are a handful of select companies that are free cash flow positive that are going to be worth

more in the future. And so for our LPs, the bet is simple. Do they want to stand with me and ride that out? I can't tell you what's going to happen the next three days or the next three weeks or even three months, but I am confident these companies like Snowflake, like Uber, like Facebook are going to be worth more than they are today and significantly more if you look out two years. I want to take a break and get into some of those names. But before I do that, lastly, you mentioned very interestingly that you've taken your bond short off. I've got some people, including a guy coming up in a little while, Mike Wilson, who suggested at this point bonds may be a better deal than stocks. Right. It comes down fundamentally to a question, Scott, of whether you think we're going to have more than eight rate increases or less.

My bet is we're going to have less this year. We're not in the business of being long or short bonds generally. I put them on as a hedge against our growth exposure. And frankly, they weren't a very good hedge because bonds haven't moved all that much. But growth stocks are down 60, 70, as you mentioned about the K-Web, down over 80%. And so for us, it's about simplification, reduction of growth, and making sure that you consolidate that which you own into your highest conviction ideas. Whether you're playing at home in your 401k or whether you're doing this professionally, these times are what try people.

If you dig a hole and get into the hole here at the bottom after having lost, you know, dollars, my sense is you're locking in losses that you're going to come to regret. Two years from now, people are going to be looking back and say, why the hell didn't you buy Snowflake at $160 a share? Why didn't you buy Uber at $28 a share? The answer to that is because people are very fearful. They're fearful about the war. They're fearful about what's going to happen with rates. And for us, we consolidate behind the things we have deep conviction in with confidence they're going to be worth more in the war. They're fearful about what's going to happen with rates. And for us, we consolidate behind the things we have deep conviction in with confidence they're going to be worth more in the future. But admittedly, you know, nights like tonight, we'll we'll we'll catch a little less

sleep. Yeah, no doubt. I'm looking at Uber down five percent. Look, we're going to take that quick break. We'll come back. We'll get into some of your best ideas more specifically, because I'm looking at Facebook 51 percent off of its 52 week high. So we need to talk about that. We'll do that when overtime continues in just two minutes. We're back now with Altimeter Capitals. Brad Gerstner hanging out with us in overtime today. You know, we talk about the magnitude, Brad, by which some of these stocks have come down. And I'm looking at the list and it's not just meta, obviously. I look at another one that I know is in your book, or at least it was. Roblox is down 74 percent from its 52 week high. When you were with me in December, you said that you had picked some more of that up along

with Snowflake. Can you tell me where that stands now and how you view stocks like that that have gotten absolutely obliterated? So, Scott, you know, the top six names in our book are all companies that we believe are, you know, both accelerating, expanding margins, expanding free cash flow margins, and that are critically important and will be worth more in the future. So take Snowflake as an example. It's our largest position in the book. Everybody knows we've been in this company for a long time. In fact, we distributed over $6 billion worth of Snowflake to our venture investors last year. Nobody debates whether or not this company

is going to be more valuable in the future. In fact, in the most recent quarter, they added $1.4 billion of contracted value. This is a company that only did $1.2 billion in revenue last year. In a single quarter, they added $1.4 billion. Remember last year, they gave a guide at the beginning of the year they were going to grow at 80%. Instead, they grew at 106%. Now they've told us that they're going to achieve 15% free cash flow margins this year, five years early, while still growing 100%. That's because

enterprises love their product. We think this is a 3x in three years, even if software multiples remain at these levels near the five-year average, right? It's our largest position. We're not selling, but we acknowledge that it's been rough for our investors, rough for us. It's been a big drawdown this year. If you look at what we expect to occur over the rest of the year, this stock will compound as it continues to beat earnings, as will continue to compound. We can just go through the list, Uber, Facebook, Roblox. small or in a much more perilous position in this market because they're not generating as much free cash as some of these other companies that I already mentioned. To put in perspective, Roblox was a couple percent position for us, right? And Snowflake was a 30 percent position for us. So these are different order of magnitude bets. I hear you. But look, there are some people who think, and maybe it's not a snowflake, but it's a basket of these kinds of names that may never get back. They may never get back to the levels at which they traded before.

I just happened to look at a snowflake. It's in front of me. And because it's your largest position, I say, can snowflake really get back back to its 52 week high of four hundred and five dollars a share? It can do great. The business can be incredible. It can compound its earnings and this, that and the other. But I need to know, can it get back to that level? I love that you ask the question. I love that you ask the question. That's what makes markets. That's the asymmetry, right? I remember people asking that question about Amazon. Can it possibly be worth $100 billion?

Can it possibly be worth $200 billion? Can it possibly be worth a trillion? It's $3 trillion, right? Or it's well over a trillion. Microsoft, $3 trillion. When you look at these questions, it comes down to this. How many dogs want to eat the dog food? How big is that market? How big are the margins? Ultimately, Snowflake will be worth

a lot more because there is almost endless demand for the product. And this is a business that is highly profitable. It will get there three years from now because its free cash flow margin will continue to expand. And if you just give it the multiples that are currently in the market, right, that have already drawn down on free cash flow, you get to that 3x that I quoted. If multiples expand, then you have even more upside. So the way companies have to get there is by growing their top line and growing their bottom line. The answer as to all companies, many most certainly will not. There are a lot of companies with speculative business models, right, that should have never been valued where they were valued.

And if you don't have absolute conviction, right, that they can grow their product, grow their top line and grow their earnings to match where those earlier prices were, then you need to rotate those dollars out of those companies and into companies where you have that level of conviction. With Snowflake, the question as to whether or not that business is going to compound, I think, is not one that many people will debate. I think the only debate is what is the multiple going to be in three months, in six months, in nine months. I want to take a look at the stock in overtime here because I think you're moving it. I'm looking at what looks to be a higher move as we're having this conversation. And that brings me, frankly, now to Facebook. But before we we move, what do

I do with Facebook? I mean, you have defended it at every turn from the issues that the company has had. You defended Mark Zuckerberg. You defended Sheryl Sandberg. And you did it quite loudly on this program. The stock is 51 percent off of its high. Are you as optimistic today as you were in months past? Well, first, let's talk about what took Facebook down, right? Facebook's revenues in Q1 were lower than people expected. So were Shopify's and so were PayPal. What is the connection between those three companies? In Q1 of 2021, everybody was sitting on their couch. They were buying goods, soccer balls on Dick's Sporting Goods and candles on William Sonoma. That stuff was being advertised on Instagram.

It was being purchased on the Shopify platform and people were using PayPal to check out. Those three companies are all down that amount because it turns out that this year people got off their couch. They went out and they went to restaurants and they went and did things instead of buy things. On top of that, we had supply chain challenges. So first, you need to understand why did we see a deceleration of revenue? Because that informs why we're going to see a reacceleration in the back half of this year. In the back half, you don't have those same comp issues that you have caused by COVID. In the back half, you've already lapped IDFA. In the back half of this year, the supply chain issues begin to ameliorate. That's why even the sell side consensus numbers have their growth

rate accelerating, almost doubling between Q2 and Q4 of this year. And we think it will accelerate even faster. Now, that's what's going on in the business. So all those people writing rest in peace epitaphs for Facebook are going to have to deal with that acceleration. This is a business that's trading at 12 times free cash flow, X the meta investment, and 18 times including. It has $24 billion in free cash that they're going to generate this year. If they just take the incremental cash they're going to generate this year and buy back shares,

that's 6% of the company, Scott, let alone the $50 billion in cash they have sitting on the balance sheet. So we believe not only are you going to get dramatically accelerated earnings, right, we think they're going to be a little bit more cautious about how they're spending those meta investment dollars, how they're spending dollars across the business. I imagine they're going to be super aggressive about how they're buying back shares. Reels, which is a massive product, is going to increase its monetization between now and the end of the year. It just launched in 150 countries, has over a billion views. So, you know, when I look at what's going on in the business and I try to distill it from the noise, which is what has made us good for 20 years, not following the crowd, not panicking, but really looking at the business. Right. I think that this is a business that is investing in the right things.

I don't think Mark did a particularly good job of explaining the meta investments. And I've let the company know that, right? If you really think about what the metaverse is in the first instance, it's a better version of what you and I are doing right here. It's a better version of Zoom. It's a better version of Messenger. This company is perfectly positioned to capitalize on that. They have the ad network to monetize it. So I think they've got to match the investment to the revenue growth in the business. I think they have to take a look at their capital allocation plan. And I think they have to execute against the underlying operations in the business.

If they do it, I think the stock can be up over 50 percent between now and the end of the year. OK, that's a that's a big, bold call.. Now, you didn't address any of the iOS changes and the revenue hit that Facebook is is assuming from that. And those are legitimate changes. I mean, we're talking about billions of dollars, billions of dollars in revenue. But you left that out. No, I didn't leave it out. I said IDFA, which is the Apple changes. Right. The comp against IDFA was very difficult in Q1 and will again be difficult in Q2. But remember, Facebook's not just sitting there with its hands in the air saying, oh, my goodness, what can we do in a world where Apple wants to flex its monopolistic muscle and steal all of our advertisers? They're building their own ad platform, right, that can deal with this. And so that will be rolled out in Q2 and Q3.

I think you're going to see monetization gains against IDFA. And either way, we lap that issue in Q3 and Q4. That could, in fact, become a tailwind as we get to the back half of the year. So, no, these issues are real. What's going on in Russia is real. What's going on in Europe is real. Let me tell you the bear case on Facebook. OK, the bear case on Facebook and other ad models like Google is that we're running headlong into a massive recession. Right. If the Fed raises rates 10 or 12 times, given the demand destruction and the slowdown already underway in this country, we will be in a big recession come fall. Right. I don't think the Fed is going to throw away two years worth of work to try to avoid a recession in a election year and run us straight into the teeth of a recession while we're trying to fight a war in Europe. It makes no sense to me. But that is the risk that you run. I think if you said, why, why might these numbers have to come down? If we're heading into a recession,

the numbers are likely to come down. Let me let me lastly ask you about Grab. This the SPAC deal you did, biggest SPAC deal ever of 40 billion dollars. The stock today hit a new low under three dollars. What am I supposed to think about that? Well, the first thing I would say is this. Set aside SPAC. No matter how a company came public in 2021, let alone December of 2021, right, they've been obliterated. The average tech IPO is down almost 50 percent from last year. SPAC's much worse. Direct list bad. All stocks that were taken public last year, now it's clear,'re overvalued relative to where the world is trading them today. And then take that part of the world. This is a leading internet company in Southeast Asia, right? Its competitor, or not its competitor, its closest comp in Southeast Asia, C Limited, is also down over 70%.

All of China internet down over 80%. So I am very unhappy because I've lost money on the deal. We worked hard on the deal. And the timing was horrific. But the fact of the matter is the entire market has evaporated around these types of stocks. If you look at the company, it's now trading at a $5 billion enterprise value. Frankly, if I was C Limited, if I was Uber, I might be looking at consolidating the business. It's going to do $20 billion in GMV. They just announced that they're going to be full company profitable by 2023. We know they have high EBITDA margins on the rideshare business, which is dominant across the region. This is a region of 700 million plus people. So if you want to bet on the future of growth, Southeast Asia is one of

the places you want to bet. This is one of the dominant brands, dominant internet platforms, and it's got $7 billion of cash on the balance sheet. So listen, I'm not happy about it. You know, I told people at the time that, you know, there's risk in making these investments. Right. We're shareholders of this. We've lost capital. But I do believe that this company, like the others that we talked about, is going to be worth more in the future, supported by real free cash flow. I know. I know you're not happy about it. It's my job to ask you about it, knowing you're not happy about it. And you answered the question. And I appreciate you being with me on the very first overtime show, Brad. Thank you. We'll see you soon. Scott, thanks for having me. You do great work. Excited for the new show. And let's stay after it. Appreciate it so much. That's Brad Gerstner from Altimeter joining us today. Still to come, a big call from Morgan Stanley's Mike Wilson today, why he is betting on bonds over stocks. And does he think the correction is near over?

You're going to hear from him coming up. I told you during overtime, we're going to have some real time trading action as well when it happens. And John Najarian is on the phone right now. He joins us with his late day move. Doc, what are you doing? Well, Scott, there was a really big VIX trade today. That's one of the two. And by the way, congratulations on overtime. I love what I'm hearing. And I think this is an idea whose time has come, so congrats. The VIX itself, Scott, somebody big jumped in and did over 80,000 puts. They sold the June 21 puts, so that gives them an obligation to buy the VIX if it drops below 21.

The VIX was the June futures contract was about 29 at that point. And they bought 80 plus 1000 of the June 70 calls. So they basically sold the one to buy the other a net of 64 cents. So this is pretty close to that 50 cent range that we usually see out of that big trader known as 50 cent. And it's a bet that volatility goes higher which means in general scott of course as you know that means the market probably goes lower because they work in opposite directions just like bonds and interest rates yeah no doubt as we embark on uh oh you bought some puts nope yep so i bought s&p puts scott i bought some vix call spread i'm sure you and i can talk about it on the halftime report tomorrow.

But that's a really big trade, one of the biggest trades we've seen in the VIX in a while. And I think it's part of the reason that we saw the VIX picking up steam into the end of the day. No, that's great, Doc. I don't want people to have to wait until the next day to find out what you guys are doing in real time. So I appreciate you calling in and telling us about the trade. And we'll follow it up with you tomorrow. After the break, thank you, John and Jerry. Another halftime trader is making a late-day buy.

We'll give you those details. Plus, Morgan Stanley's Mike Wilson is coming up. Why he says bonds might be more attractive right now than stocks. We're back in overtime now to a segment we're calling halftime overtime, a look back and forward from a moment from today's halftime report that deserves another bite of the apple. Today, it was Joe Terranova saying this about interactive brokers. I will be back in interactive brokers by the time you start your show at 4 p.m. today. Well, Joe put his money where his mouth is. He made the trade. He bought the stock, he tells us, at $61.75.

Let's bring in Halftime Investment Committee member Shannon Sikosha for her take. Shan, you have some brokered stocks in your book. What do you think of Joe's move? I do. I have ICE and CME. And I'll tell you, this is a nice move by Joe, trading at 17 times forward earnings, stronger revenue growth, and a smaller stock. And so this is one that active traders, such as John, who was just on, really like.

They like the platform. And it's a great way to diversify your financials basket away from some of these big banks that are going to continue to move just on the interest rate story. All right. I appreciate you popping on and giving us the lowdown on Joe's trade. We'll follow up with him, of course, the next time he's on the half and try and figure out if there's a stop involved in this trade. Nonetheless, though, another real time move in overtime from Joe Terranova coming up. Morgan Stanley, chief market strategist Mike Wilson will join us. He's laying out his biggest risks to the market.

Closing Bell Overtime is back right after this. Welcome back to Overtime. I'm Scott Wapner. No Wall Street strategist has been more cautious over the past six months than our next guest, Mike Wilson, the chief U.S. equity strategist at Morgan Stanley. He joins us now and he's right here at Post 9. Welcome to Overtime. Thanks for having me. It's great to be back. I didn't misrepresent that. I mean, you've been cautious for at least the last six months. Are you anything but that today? Are you growing more optimistic? Well, look, I mean, the good news is prices adjusted, right? I mean, that was always our big concern has been valuation. So that's good, right?

Prices have come down and that's mostly the Fed tightening and that's happened. OK, but now, you know, we get into the slowdown part and that was the second part of our concern. And unfortunately, this Russian invasion of Ukraine just makes that more tricky. So, yeah, I think generally our targets were 4,400 for year end. Bear case was 3,900. I would say we're probably somewhere between that now, given the events of the last couple of weeks. Do you think multiples still have to come in a bit, largely because earnings are going to slow down? Look, we've already seen negative revisions pick up. Sure, absolutely. So, like I said, we've discounted some of that, but also the Fed has to go harder now, potentially,

in the face of slowing growth. That was always our concern. So, you know, markets don't go to fair value. They overshoot, right? We overshoot to the upside. We overshoot to the downside. So this week's note, we just talked about that dynamic. Could it be 16 times as opposed to 18 times in the short term?

Sure it could. We're not that precise. There's caution on stocks, and then there's just downright negativity. You said today in a note bonds are starting to look more attractive versus stocks. I mean, you had to go there? It is a little, I mean, that's a little extreme. But look, I mean, Scott, bonds have corrected just as much as stocks. Normally when you get a stock market correction, right, bonds are a safe haven. But rates have been going up and spreads have been widening. So we do think it's interesting for the first time really in a couple of years, I can look at long duration treasuries and say,

look, this may not be a bad bet if you're worried about growth. Like if you're like us and you're worried about growth, then maybe long duration bonds make sense in this environment. If you're not worried about growth, then it's not going to work. Well, what if you're overdoing it on the worries? Marco Kalanovic, right? We cite his research all the time, says too much negativity is priced in, urges people today to add risk to equity. Scott Minard, Guggenheim, Scott Minard, one of the biggest names, whoever come on this network. I think that as the Fed starts to tighten, stocks will start to rebound. He thinks that rates are topping out here. He'd

be putting some money to work in beaten down areas. Yeah, we would agree. We agree that rates might be topping here in the back end. I just don't think you're going to hear the wrong reason, though. You're not going to get the elixir on the multiple because the market now is worried about growth. Look, I think if Russia had not invaded Ukraine, we might be in the same position. We'd probably be more interested in trying to bottom fish here. But this event has really structurally changed the outlook for this year, even if there's a resolution. Let's say there's a ceasefire. It's not like you can put this all back into the bottle now.

It's going to be difficult to put the inflation back in the bottle. The Fed's going to have to go maybe harder. And the growth risk, which is really the concern now, gets worse. But you have a key unknown removed from the picture. And now we can get back to what we know. And that's the Fed is the chief participant in the ballgame that we're all trying to watch and figure out how to play. I think that's right. But once again, it gets back to growth. So we've always been a little bit more negative on growth this year on earnings, right? No recession. We're not talking about recession, Scott. We're talking about earnings, which is a margin issue, potentially. The costs start to flow through,

and that has to play through now. So, you know, I don't think this is going to be a situation that lasted the entire year, but definitely through the second quarter. I appreciate you coming down here. It's good to see you face to face. We'll have you back on overtime and I'll see you on the half. That's Mike Wilson from Morgan Stanley. Up next, we have more coming. One of the smartest guys when it comes to the market, Mike Santoli's last word right after this quick break. Back in overtime now, it's Santoli's last word. Mike Santoli, that is. I mean, we're trying to figure out, really, I think every investor is, are we at a bottom?

Are we close to a bottom? The burden of proof is high. I would say the burden of proof on the bulls is high on the next bounce. And there are some reasons to think we may be getting in the vicinity of a bounce opportunity where they can prove that. Why? Sentiment is now much more an asset than a liability. It's gotten pretty negative and pessimistic. You've seen a ton of selling positioning by hedge funds, very defensive. We're in this area where we found lows a few times.

Obviously could mean another flush lower. Also seasonally, March, it's an expiration week. You have a quarterly rebalance. Stocks have underperformed so much. Remember 2020, just a normal flow back into equities could mean that there's reason for some kind of an excuse for a bounce. Finally, bulls need a 4% or 7% bounce to even consider anything more than a dead cat. That's one thing I would watch. Are you tomorrow going to be watching the NASDAQ and tech as closely as I will and most other people will too?

Absolutely. It's it's Nasdaq. Maybe we're getting the final. The Fed is coming type selling pressure on the Nasdaq. I don't mean final, but maybe a little bit of a short term climax with that type of activity. Yeah, it's been tough. I mean, watching Apple and some of those stocks traded some key technical levels, breached them as well. Thank you. All right. That's Santoli's last word. Up next, we have top picks and pullback plays from one leading strategist. It's a two minute drill and it's next. Welcome back. Time to get our answer to the question of the hour on overtime on Twitter.

We asked you, how much further does the Nasdaq need to fall before bottoming? 22 percent say another 5 percent. Well, that's pretty even. 22 percent said another 10 percent. 27 said another 15 percent. And the winner, 29 percent, said it's already bottomed, or at least in the process. Maybe I didn't expect that. I love the optimism.

And we'll carry on the conversation conversation certainly in the days ahead. Right now, it's time for our two minute drill. It's a new segment giving you top stock picks just before the clock runs out on us. Joining us now is Crossmark Global's chief market strategist, Victoria Fernandez. You are on the clock right now and it's great to have you with us on Overtime. Yes, my pleasure. All right. So you know what? Your most recent buys, Bank of America, Visa, MasterCard. Surprising to me, financials, your favorite sector. I don't need to tell you that they've gotten beaten up. No, not at all. And I think that's why this might be a really opportune time to either start building a position or to add what you have. I mean, look, we know consumer sentiment has gotten hit. Mike Santoli just talked about how that could now be an asset. So you've got consumers with revolving credit low. So there's

room for them to put more money on credit cards. You've got loans going higher for banks. You've got yields moving higher, strong balance sheets for Bank America, for Visa, for MasterCard. So I think you've got some good opportunity here with all these names down 10, 11 percent year to date to go ahead and put them in your portfolio. Well, what if Scott Minard's right, though, and rates are topping out? What if others like Mike Wilson are right and suggest the economy is slowing down? That's negative for the banks, no? Well, I think both of those things actually might be true.

I think we top out around two and a quarter percent. But yet at the same time, it's not just rates. It's solid balance sheets. It's increase in dividends. There's other things that make the banks attractive. OK, now I also see in your ownership book right now, Apple and Microsoft. I mean, we can bring things full circle in the two minute drill to how we started our whole program today. The fact that Apple is right at a key level, $150. The stock has breached some key technical levels as well. And until that stabilizes, and frankly, Microsoft is down a bunch year to date, what do you have? Yeah, you know, it's interesting. Your halftime show today, you talked

about it wasn't the fundamentals that you thought for Apple that would be an issue for the market, but it is the fundamentals that we're looking at in order to add it to a portfolio. We know Apple and Microsoft have been hit tremendously. Apple down 17% year to date. With a company like this that you know has extremely strong balance sheets, good cash flows, why wouldn't you go ahead and take it at a discount? Put it in your portfolio if you're in for the long term. How about Microsoft before we go? Yeah, again, it's a story similar to Apple. You've got an opportunity to come in here with valuations that have come down. So go ahead when you have these red days and these pullbacks, use that as an opportunity to step your way into a name that has had some downside exposure,

but you know, longer term is going to be a strong holding. Oh, you handled the two minute drill. Well, the clock didn't run out on you, Victoria. Thanks. That's Victoria Fernandez. That does it for overtime for us. Thank you so very much for being with us. I'll see you tomorrow. Fast money begins now.