Closing Bell - Stocks higher ahead of holiday weekend, Howard Marks sees a “sea change” 12/23/22

Episode Date: December 23, 2022

Stocks closed mostly higher after a volatile session on Wall Street ahead of the long holiday weekend. Investing legend Howard Marks joins for an extended interview on his market outlook, including why he thinks we may be in the midst of the third “sea change” in the market during his career. Venture capitalist and regulatory expert Bradley Tusk weighs in on Microsoft’s response to the FTC’s antitrust suit against its deal to buy Activision. Plus the latest on Tesla, the holiday travel nightmare, and the government spending bill.

Ducks have been all over the map today as inflation and consumer data raise more questions for investors. But we are moving higher this hour as we head into the holiday weekend. Up 165 on the Dow. High of the day was up 191. This is the make or break hour for your money. Welcome everyone to Closing Bell. I'm Sarah Eisen. Take a look broadly at where we stand in the market. Up half a percent on the S&P 500. Looks a lot better than where we were earlier this morning. Still down, though, for the week. Third week in a row of losses for the S&P 500. If you look at the Nasdaq, it's also turned higher in the session,

but it is lagging today. It's being helped by Amazon, Alphabet, Costco, Meta, Apple, Nvidia are lagging. Tesla's down again. It's down 18 percent so far this week. Check out the major averages on the week. I mentioned the S&P, third losing week in a row. The Dow managing to eke out a gain for the week. And the Nasdaq, the hardest hit as we saw rates turn higher. They continue to march a little bit higher today as bonds sell off. Coming up on the show today, we will talk to venture capitalist Bradley Tusk about the regulatory and antitrust issues at play in the new year and the stocks that could be impacted most. Let's get straight, though, to the market with our big guest of the hour. Howard Marks from Oak Tree Capital Management joins us for a closing

bell exclusive interview. Howard, welcome. Fresh off that memo everyone's talking about. Thank you, Sarah. It's nice to be here. It's good to have you and happy holidays. So let's start with the sea change. That was the big headline from your report. It's how you kicked off your memo. You said 53 years in your investing career, there have been three sea changes and we are in one of them. What does that mean? Well, a sea change is a major transformation of the environment, a complete change in attitudes, et cetera. And I suspect that we may be at the beginning of one. The first one was the fall of interest rates from 20 to zero between 1980 and 2020, which had very, very positive effects.

The second was the opening of investors' minds to what we call risk-return analysis. And before the 70s, the job of the investor was to avoid risk. After the 70s, it was to intelligently take risk. And that was a big change. And I think that we may be on the doorstep of the third. So what is the sea change? Well, you know, since the Fed, central banks around the world, and the Treasury took strong action to solve the global financial crisis in 08, 09,

we have been living in a highly stimulated, very positive, easy money environment for roughly 14 years. And I think that, you know, a lot of people began to invest or came into the business in those 14 years. Not too many have a perspective on the period before the global financial crisis. They may think that the last 14 years was normalcy. I don't think so. I think it was the best imaginable period for borrowers and for asset owners. And I don't think that it's necessarily going to continue. So do you characterize the past 14 years post-financial crisis as a bubble? And now that's popping, we return to some sort of normality or even a crash?

Well, a bubble, most people take a bubble to mean irrational appreciation. And the asset appreciation in that period was not terribly positive. It wasn't an unusual 14-year period in terms of asset returns, etc. And it wasn't the result of unrealistically optimistic thinking. So bubble, I think, has a specific use. But it was a hyped, unusually positive period of when everything was easy for certain classes of people, as I said before, borrowers and asset owners in particular. And it isn't normalcy and it's not, I don't think, going to be the norm going forward. So is your bottom line that that stimulative rates are a thing of the past and now we should just get used to higher rates for longer, even though the market is sort of thinking that they might go down next year? Well, you know, I don't I don't think that we

should expect I don't think it's prudent to expect to have stimulative rates all the time. I describe that as taking a shot of adrenaline every morning. I don't think it's very viable. We'll see lower rates. Well, first of all, when the battle against inflation is won, I think rates will, the Fed will bring the Fed funds rate back down and we'll see very low rates again if there's a recession that has to be cured over time. But I just think that, you know, people got funds rate to zero late 08 to fight the global financial crisis and left it there for seven years and had a Dickens of a time raising it because

it thought it should, it thought that we shouldn't permanently be at zero, but the markets had tantrums and resisted. I don't think that, you know, what I say in the memo, I don't make many predictions. I don't believe in predictions, including my own. We don't bet on predictions at Oak Tree. But what I said in the memo is I think that for the next several years, the Fed funds rate is more likely to average between 2 and 4 than between 0 and 2. That's as far as I can go. So do you think that that means for equity investors,

brace for more pain after that adjustment led to, where are we, down 20 percent on the year for the S&P this year? Well, most people think there's going to be a recession ahead. And when the recession cuts into earnings, you know, you have your price-earnings ratio. Well, if the earnings go down, the price-earnings ratio goes up. If it gets too high, people may say that's not sustainable and that may bring the market down. I'm not sure how they're going to react, but that would be a possibility. In other words, recession will hurt valuations until the Federal Reserve fights the recession, which is basically what the market thinks might happen in the back half of

next year. Yeah. I mean, I think right now, I think that's it. I think that's an optimistic interpretation of what's going on. I don't rule it out, but I think that's kind of the best case for the bulls. And I don't like to buy on the basis of the best case, because that means if it's not realized, all the other possibilities are worse. I don't think that the discussion of a rate cut in the second half of next year is rational and objective. I think it's optimistic. Yeah. So are bonds a better relative bet right now than equities? Well, of course, the thing about bonds is you have a promised return. You buy a bond at an 8 percent yield, you're promised 8 percent. It's a contract between you and the issuer. You don't need cooperation from the market. And if you think 8 percent is a good yield

and the bond will pay, then you should buy it. If rates go up much further, bond prices will go down. Now, bond prices rarely go down as much as stocks go down when stocks go down. But, you know, in a rising rate environment, all assets become worth less. Not worthless, but worth less. You know, in my recent memo, I gave a list, which I thought was very important, a list of all the ways in which low interest rates are helpful. And it's worth studying. But if you pick up on that, then that means that higher rates are not helpful for investors

other than the fact that they help to get inflation under control. Howard, stay with us if you would, because we're getting into the meat of it and we have much more to talk about surrounding your outlook. Want to get a little bit more into credit conditions and how you would position for this sea change in 2023. And then later, we're going to talk more to Howard Marks. Later in the show, we're going to talk to venture capitalist Bradley Tusk about key antitrust battles to watch in the new year. It's already heating up with Microsoft responding to the FTC, which is trying to block its Activision takeout. We've got the Dow higher. We're near the highs of the day, more than 140 points. There we go. 143 points. Hanging on to the gains. S&P 500 also higher.

It's being led by energy. Most sectors are green, though, except for tech and health care. We'll be right back on Closing Bell. Welcome back to Closing Bell. Oak Tree's Howard Marks still with us talking about his latest memo where he says that we're in a sea change for investors on the back of changing dynamics from central banks toward higher interest rates, trimming of the balance sheet. Howard, wanted to also get your thoughts on credit conditions, which, as you know, have been very accommodative in recent years on the back of low zero interest rates. What happens now? We've already seen the turn this year. What comes next? People who had to keep their, who liked keeping money in cash couldn't do it because it paid nothing in that period.

So they moved out to buy securities. People who used to buy ultra-safe securities didn't get the return they needed, so they had to buy less safe securities. People who used to buy less safe securities couldn't get what they wanted. They had to go out and buy risky securities. So in all these ways, low interest rates encouraged demand for riskier assets and a movement out what we call the risk curve. And so it became very easy by definition to raise money for risky companies, risky schemes, and that kind of thing.

And one of the great ironies, of course, was the 2020, the terrible year for the pandemic, set a record for fundraising for non-investment grade debt because people were so eager to get return. And I think that that was the way it was when rates were low. And as I said, low rates cause, have a lot of effects. When the Fed funds rate is, if it's in the range I'm talking about, 2, three, four, and other things yield six, seven, eight, or nine, ten, eleven, people won't have to go out to buy the riskiest things to get the returns they want or need. So I think that's one of the ways in which the conditions will be different. So if the financing environment continues to be less friendly, does that mean we'll see more defaults?

Is that something you're expecting? Well, I think the combination of the less friendly financing environment and maybe a little more difficulty on the part of companies. Remember that from 2009 through the beginning of 2020, we had the longest economic recovery in history and the longest bull market in history. So there were, you know, we went a long time without a recession or a slowdown in the economy. And that, compared with the low interest rates, caused people to go out and approach the riskier end of the risk curve. You write that in the risk curve.

You write that in the memo here. I just wanted to do a quote. It should follow that the investment strategies that worked best over those periods may not be the ones that outperform in the years ahead because you don't have to get those riskier investments to get returns, Howard. So I don't know what, I'm trying to subtweet you there. Does that mean that that's it for, I don't know,

unprofitable tech companies, NASDAQ as some of these tech leaders in the market? None of that intrigues you? Well, to say that's, first of all, Oaktree is a credit investor and doesn't invest in tech startups or that kind of thing. No, I know, but you've written about those stocks before. Well, you know, I think you used the expression, that's it for so-and-so. It's not that that's it. It's just that everything gets a little harder. My main take on this 14-year period was that this was easy times.

It was easy times to run a company. It was easy times to be an asset holder or to be a borrower or to be an asset holder with borrowed funds. It's just not going to be as easy going forward. It's not going to be as easy to make money because the environment, because we'll probably have a recession soon, everybody tells me. It's not going to be so easy to raise money in the capital markets because there won't be the impetus from all the people seeking adequate returns who are refugees from safe securities. So I just think that the halcyon days may not recur.

So what are you guys doing as a credit investor to prepare for this more difficult time? Where do you see the big opportunities? Well, you know, the yield on high yield bonds, for example, has doubled in the last year. And it's gone from roughly four something to roughly eight. So, you know, we think that's a good yield. We're holding there. More companies need rescue financing or opportunistic lending or private lending, and we're finding opportunities there. If I'm right about the environment, all these things will get better,

which means that is to say cheaper, better for the buyer. But they're already good. And so we're already moving ahead. I guess my other question that I was wondering as I was reading your piece, is how long do you expect this environment to last? Well, I don't make, I don't, since I don't make predictions, I don't put dates on anything. One of my colleagues once said, if you name a date, don't name a price. And if you name a price, don't name a date. But, you know, I'm talking about multi-year.

Years. I'm not talking about, I'm not talking about 2023. I'm talking about a period of multiple years. Well, the last one was, what, 14? Yeah. Yeah. Well, you know, that was because the Fed engineered it. But I think that, you know, low and declining rates were such contributors to the last 14 years and the last 40 years. And if that influence is

off the table, then it stands to reason that life is going to be different. And how does the global picture factor in here? China could be on the brink of a big reopening. They have not had to fight inflation as the other major central banks has. And Europe, while it's doing it, is in a much tougher economic position. So how do you factor in the global picture, which is pretty fragmented right now, into this outlook? You know, my account is mostly about the U.S. And there'll be cross currents, as you describe, a prosperous China, perhaps a recessionary Europe. Everybody tells me. But, you know, they don't fundamentally change the story in the U.S.

Got it. So says the Fed as well. Howard, thank you very much for taking the time today and talking to us through your latest thinking. Always appreciate it. Howard Marks of Oak Tree. Take a look at where we stand right now. We're higher across the board. NASDAQ's even hanging in there, up more than a tenth of 1%. Though it's been a tougher week for the tech stocks in general. S&P 500 up about a half a percent. That's where we were when we started the hour. Energy is an outperformer.

It's up almost 3% today on a jump in crude oil. That's one I would call out. Technology is lagging again as bonds are selling off. Yields higher. Still ahead, Tesla is hitting a 52-week low, even after Elon Musk said he probably won't sell any more shares for the next two years. Details ahead. And as we head to break, check out some of today's top search tickers on CNBC.com. Tesla once again gets the most interest, followed by the 10-year yield, which is higher today. I mentioned Apple lagging and the Dow Jones Industrial Average up half a percent,

but outperforming overall for the week. It's up almost a full percent. Closing bell back in a moment. Congress takes it down to the wire to pass the $1.7 trillion spending bill, which still needs to be signed here by President Biden. Ilan Moy with the latest for us. Ilan. Yes, Sarah, the final tally was two hundred and twenty five in favor, with almost all Democrats and nine Republicans voting for that bill.

Two hundred and one against, with one Democrat joining Republicans in opposition. That one point seven trillion dollar bill funds the government through the end of this fiscal year. And in her final address on the House floor, Speaker Nancy Pelosi called it a package for the people. We address the needs of America's working families with special focus on our children. So I rise in strong bipartisan support for this bipartisan omnibus, a government funding bill for us today to keep from shutting government down, but more importantly, to meet the needs of the American people. Now, as I believe you mentioned, the government is supposed to run out of money tonight at midnight. But this process of enrolling and grossing the bill to send it to the president's desk can actually take a couple of days. So Congress has also passed another short-term funding measure to last through December 30th

and prevent an accidental shutdown over the holidays. Of course, we do expect President Biden to eventually sign this $1.7 trillion bill. In fact, he helped unstick negotiations when he met with congressional leadership at the White House. So, Sarah, both parties can claim wins in this legislation. Back to you. For 4,000 pages strong. Thank you, Ilan Moy. Up next, venture capitalist Bradley Tusk on whether Congress will take aim at big tech in the new year and the companies that could be impacted most. There is some new funding for antitrust regulators in that bill Ilan just described. We'll talk about it when we come back. Check out our stealth mover, Mission Produce.

Stock is getting smashed. Shares of the avocado producer are getting sliced after missing on both the top and bottom lines due to plunging avocado prices. Mission Produce shares have been rallying since mid-March but are hitting guac bottom on those results today, down 15 and more than a half percent. Microsoft responding to the FTC's lawsuit blocking its $70 billion acquisition of Activision Blizzard, the company claiming the deal would not harm competition in the video game industry because it is not the top maker of game consoles. Microsoft President Brad Smith saying

in a statement, in part, we remain committed to creative solutions with regulators that will protect competition, consumers, and workers in the tech sector. Also adding, as we've learned from the past, the door never closes on the opportunity to find an agreement that can benefit everyone. Let's bring in Bradley Tusk from Tusk Venture Partners. Bradley, we often turn to you about the intersection between Washington and technology as a regulatory expert. Who do you think prevails in this case? I'm going to go with the FTC. I think that for Lena Kahn, she is a very, very, very aggressive regulator. This is kind of her big campaign.

It will define her tenure as FTC chair. And I think we're in a world where there's significant concern about antitrust at this point at Big Tech generally on both sides of the aisle. We saw some new money coming yesterday out of the Senate spending bill to the FTC for antitrust prosecution. And I think that, look,

unless Microsoft has an incredible case, I think they're going to face trouble. And it is hard to argue from what I can tell that when you're spending $68 billion to acquire the biggest video game maker in the world, and you also have one of the biggest consoles in the world, that is not a potential monopoly. Yeah, I get your point about how she's a tough regulator, and they're getting more money at the FTC. But with Republicans taking over the House, I wonder how much of a priority.

For tech regulation for Republicans, it's all about content moderation, not necessarily antitrust. So I think that that's right, except if you look at legislation that has passed both the House and Senate fiduciary committees in this calendar year, both had strong bipartisan support. Senator Grassley is Republican, recently called on President Biden to be more aggressive on antitrust. So you do see it coming out of both parties. And while odds are nothing will happen in the new Congress, because that's generally how things go. What happens if there is one area where the White House, the Senate Democrats and the House Republicans could come together? It might be in big tech regulation because everyone dislikes them for different reasons, but everyone does dislike them. Well, there were two big proposals we were watching, legislative proposals on big tech

this year, American Innovation and Choice Act and the Open Apps Market Act. What happened there? Why didn't they get votes? You know, big tech did a really good job lobbying, as they do, spent nine figures knocking down the legislation. They managed to peel off a couple of really critical people and wasn't able to bring it to the floor. And to a certain extent, that's Schumer and Pelosi, right? They probably could have moved this thing through had they really cared about it. But, you know, both of them have a lot of big tech in their districts or in their states. And as a result, perhaps they're afraid to move forward on it. But I do think this issue is not going away.

So you expect tougher antitrust, which I guess could chill deals next year. Bradley, what about crypto regulation? Everyone and their mother now wants to jump on this bandwagon after the FTX implosion. Ultimately, is it SEC? Is it CFTC? SEC? Is there something for Congress to do? So I think, you know, FTX probably kind of put the nail on the coffin for the CFTC, and it's likely to be regulated by the SEC instead. I do think a stablecoin bill could make its way through Congress because everybody wants one. The industry wants one. The regulators want one. We need some sort of definition that we can all work from on it. But interestingly, I also think that the worse and crazier the sandbank

gets, the better that is for the rest of the sector. When it first started happening, it's like, oh, this is why crypto needs regulation. And it was really kind of a negative sign for the entire crypto sector. Once he becomes the sort of own circus act, that's just this unique fraud in American history, like a Bernie Madoff, it actually stops being about crypto and just starts being about him. I think that's actually the best thing that's happened for crypto. Would you put money into a crypto firm right now? Are you doing that? We do have investments. We're doing Web3.

We haven't made a crypto-specific investment in the last year or so. But we'll continue to invest in Web3 and blockchain and spaces right around it. So your faith hasn't been shaken by some of these issues and the regulatory pileup coming? I think that it is definitely more challenging than it was before. We were never a crypto heavy fund to begin with. But, you know, there's still a place for it. The question is, look, this is true for almost every tech company that we see go public and valuations then tend to fall. There's a price and a valuation for all these companies. It just may not be the inflated valuation that tech companies seem to get in the private markets. Maybe now we'll have more of

those evaluations, both for crypto, but truthfully, we could use that for almost everything. Bradley Tusk, good to talk to you here at the end of the year about what you're expecting. Thank you so much from Tusk Ventures. Take a look at where we stand. We're losing a little bit of ground here since the top of the hour. Dow is up at about 89 points or so. S&P 500 up a third of 1%. What's turned red? Well, healthcare and tech were always red. We've lost a little steam in consumer staples, materials, financials. These are the sectors that are lagging. Energy is still strong, up almost 3%. Communication services and utilities rounding out the top three. Energy, I mentioned, big winner off the pop in crude oil today, keeps outperforming the broader market. We will discuss whether energy

stocks will power your portfolio again next year. This is a sector that's up 57.7% and the only one that is green for 2022. And just a reminder, you can listen to Closing Bell on the go by following the Closing Bell podcast on your favorite podcast app. We'll be right back. What is Wall Street buzzing about today? Biotech stocks and some new concerns around an Alzheimer's treatment from drugmaker Esai and its partner Biogen. Everyone's been watching this carefully. A report this week from Science Magazine said a woman who was in that trial for the treatment died in September from brain swelling, bleeding and seizures. Isai has reported other deaths of participants in this trial. It's something that we asked U.S. CEO Ivan Chung about earlier last month. In the core study of this late-stage large phase 3 trial, over 18 months of treatment duration, we saw 13 deaths in total.

However, seven of the deaths were in the placebo group. Six of the deaths were in the treatment group. As for the most recent report in Science Magazine, Isai telling us in a statement in part, quote, it would be inappropriate to provide additional information about specific patients or comment on information that was provided by other sources, especially those who may not have all the information necessary to make an accurate conclusion. Adding, if approved by the FDA, Isai believes licanumab, that's the drug, has the potential to make a difference for people living with Alzheimer's disease, their loved ones, and healthcare professionals.

In a separate draft report released this week, the Institute for Clinical and Economic Review called the treatment with the drug promising but inconclusive. When we come back, Tesla plunging nearly 20% this week on flowing demand concerns. And amid the downturn, Elon Musk says he won't sell any more shares until 2025. That story, plus airlines canceling thousands of flights. And why energy is jumping so much today when we take you inside the Market Zone. We are now in the closing bell markets on Lafleur Tengler, CEO Nancy Tengler, back to break down these crucial moments of the trading day.

Plus, The Wall Street Journal's Tim Higgins here on Tesla, and Leslie Josephs joins us on the airlines. We'll kick it off broadly here. The Dow is marching back higher toward the close here, up 122. S&P 500 up a little less than half a percent. And let's check out the Nasdaq. It is positive, but just barely. It kind of got a tale of mixed tech stocks today. Amazon's higher. Microsoft and Apple are not. Alphabet is higher as well. Tesla is not, which we'll talk about in a moment. But Nancy, what strikes me is that we had some pretty decent data today. Consumer spending rose. Sure, it was a miss and it's stagnating, but we expect that. And inflation continues to come down. That PCE, which the Fed looks at on core, on the year over year,

ex-food and energy, all moving in the right direction. The market's not celebrating it quite as much as it did other previous softer inflation reports. Why do you think that is? Well, I think a couple of things, Sarah. And by the way, that was a great interview with Howard Marks. I really enjoyed it. And he said, yeah, he said one thing that wasn't the point of the interview, but was important. I thought that many people that have been in the business that have come into the business recently have only operated in a declining interest rate or low interest rate environment. And so what I've been observing this year in particular is you get these outsized moves to data points that ultimately are going to get revised in a month anyway.

And there's just a lot of volatility that's driven by the hedge funds and the algos who are not investing for the next two to three years like many of us do, but rather for the next two to three weeks. And so the news today was, I thought, quite good. I thought I think the GDP number was good. GDP now was upgraded. We saw CPI come in. You're seeing the signs that inflation is rolling over in all the data points. You don't have to look very far with housing rolling over, shipping costs just plummeting. And so I think we need to step back and take a longer term time horizon as investors. And that's why last week when I was with you, I said, you know, we're actually in picking away at some names because we finally think it's time to buy.

Are you still doing that? We are and we will continue to. We're not, you know, we're not making big trades. We're just adding to positions or adding new positions incrementally. And I know that sort of flies in the face of what many of the hedge fund billionaires have been saying. And I don't want to argue with them, but I do think based on my experience, even if you're early and you buy a stock at a100, it goes to $80 in the near term. But two years from now, it's at $300. The question you should be asking yourself is, why don't you buy more?

Right. By the way, you mentioned the GDP now. Atlanta Fed puts out the tracking fourth quarter GDP. And you're right, Nancy, up to 3.7% for the fourth quarter, which doesn't sound like a recessionary number. Let's hit Tesla, though, because it's been volatile again, at one point hitting a 52-week low after Elon Musk said he has no plans to sell shares until at least 2025. He said that in a Twitter Spaces chat. He tried to ease concerns over the automakers' underperformance this year,

as well as assure investors his position as Twitter CEO is not a distraction. But even outspoken bulls like Dan Ives, the analyst from Wedbush, have turned on the company. Ives cutting delivery targets, saying Tesla needs strong leadership to weather what he calls a Category 5 storm. Here's what he told CNBC earlier today. We're starting to see cracks in terms of China as well as the U.S. So we had to cut numbers in terms of Q4 as well as 2023. And it's been just a horror show from Musk, really a head striker moment as he's navigated this Twitter situation. We're still

long-term believers, but no doubt this has been a nightmare on Elm Street. Here to discuss is Tim Higgins, tech reporter at The Wall Street Journal, author of Power Play, Tesla, Elon Musk, and the bet of the century. Tim, it's great to have you. How much do you think has to do with the Twitter distraction, whether it's share sales, whether it's the fact that he's tweeting all day and all night and trying to turn around this company? Yeah, it's a huge issue, right? And some investors are concerned he's overly distracted on this new toy that he has as Tesla's future looks a little unclear. This is a company that's based upon a growth stock story. And when you're seeing some early

signs that maybe growth isn't as robust as predicted, that causes real concern among these investors. Well, that's what I wanted to ask, because as I've highlighted and what you just said is that that growth isn't as robust. And I know that obviously car sales have been hit lately by consumer spending. But what fundamentally is your best read as to what is happening for demand for Teslas and how, for instance, the competition is faring relative to Tesla? Are they finally chipping away at the market share? Yeah, sure. Now, Elon would like to argue that this is a macroeconomic issue. The Fed is raising interest rates and Tesla has just kind of fallen victim to it, just like the rest of the industry, perhaps. Yes, GM and Ford, their shares are down, but not as dramatic as Tesla. And the concern here among investors is seeing things such as Tesla in recent

days put seventy five hundred dollar incentives on the sale of new cars to move them this month. That's the sort of like old school Detroit move the metal before the end of the period kind of thing that Tesla has traditionally not done because it's had robust demand. It's always been a question. It's always been an issue of too much demand and not enough supply. And once that kind of the paradigm goes to perhaps too much supply and not enough demand, that really changes kind of some of the thesis for Tesla investors going forward. Now, you know, Elon could pull some other levers. He is saying that. Thank you very much for joining me. Oh, sorry. I'll let you finish. Oh, absolutely. Well, Elon's saying

they're filing on all cylinders and we're just going to have to see here into 2023. Yeah, absolutely. OK, Tim, thank you. Didn't mean to cut you off there. And Nancy, I'm curious your view. Is Tesla getting interesting for you based on valuation? It is, Sarah. It's so funny. I was sitting on the desk with you or down on the floor after his podcast with Joe Rogan. And we you know, this was also a tumultuous time for him. He's sleeping on the factory floor. He got in trouble with the SEC on tweets. His senior management team had rolled over a couple of times and he had this very limited insider board. And we had determined that we just couldn't invest in it anymore. It was more like gambling rather than investing. We left a lot of money on the table. We took a double. But I say you underestimate Elon Musk at your own peril. And we also need to keep in mind,

you know, other companies are discounting, you know, they're offering financing incentives to 0.9 percent financing. GM's offering 6,000 off the Silverado. I mean, I think it's an industry wide issue right now. And let's remember that his costs are coming down in terms of copper and aluminum and some of the other metals that are used in EV. So I'm not saying you jump in here. It's almost in our buy range on a relative price to sales ratio. But I do think you take a close look, which we are doing, and we're just doing the final work on what's going to be the catalyst to get it out of this funk. And I think you're probably going to be pretty happy you own this stock if you just take your time getting into it. I think the naysayers are overreacting. Keep us posted on that catalyst watch. Meantime, winter storms and bitter cold

temperatures forcing airlines to cancel thousands of flights across the U.S., impacting the surge in travel ahead of the Christmas weekend. Our Leslie Josephs joins us. Leslie, just how bad is it for air travel today relative to some of these other bad weather incidents? It's pretty bad. I wouldn't be talking to you right now if my flight wasn't canceled itself. But we had about 10 percent of the flights canceled yesterday, more than 2,000. There's another 4,000, close to 5,000 being canceled today. And now what airlines are trying to deal with is how to clean up the operation once this big storm system moves out. We have bad weather from Seattle to North Carolina to Boston to Chicago to Cleveland.

It's really all over the country. And it's not so much, I mean, it is an issue of the planes being able to take off, but also those workers on the ground, the people that cater the planes, the people that are putting the bags on the planes. You're talking about bitter cold and extremely high winds. So there are some conditions that are not safe that are slowing everything down during what is supposed to be the busiest time since the pandemic to travel. I was going to say, ultimately, you know, does it impact the airlines financially when something this big and widespread happens? It absolutely does. You know, airlines it impact the airlines financially when something this big and widespread happens? It absolutely does.

You know, airlines had a pretty easy time of it with Thanksgiving and did a few victory laps there. But Mother Nature had other plans in store for Christmas time. You could almost rename the storm, you know, Winter Storm 8K, because come January, we're going to start seeing airlines give a few previews for earnings, which come out in the middle of January. And this is definitely going to come up and what it costs them to move these planes around, cancel and reaccommodate as many passengers as possible. And Christmas, you know, that's a set date. And a lot of people, if their flight is delayed, you know, two days, three days, you know, a lot of people are asking themselves, is it worth it to continue on on the trip so airlines might be on the hook for refunds as well so

those things will be outlined probably mid or early in January good luck with your own travel I hope you get rebooked in time for the holidays Leslie Joseph's thank you very much check out oil prices they're rallying today after Russia said it could cut output in 2023 because of G7 price caps on its exports. WTI approaching, look at that, almost $80 a barrel for the first time in weeks. That news sending energy stocks higher as well. The sector is by far the top performer today, this week, and this year, Nancy. Does that continue into 23? I think it does, Sarah. I think the companies have been very disciplined about not adding capacity and not over investing

and so if you look at that and the special dividends that they've been paying. I think this is a place where you can hide out in in a volatile first quarter which we expect and maybe even a volatile first half but- you know if you

look at a name like E. O. G. resources they own a lot of the land where they're- you know at where they're drilling and for oil and shale. And in doing that, they are much less subject to the regulatory problems that have hurt other oil companies. And then I think you want to step back and get exposure Exposure to the integrated we were pretty well exposed to the upstream names and we still own them but- I think you also want to now I pull back a little and take a look at some of the integrated

even after the recent runs. This is a the stocks are very cheap and they're paying you a heck of a lot to wait I mean the O. G. paid a for four dollars. In eighty cents in special dividends this last year. And they raise their

regular dividend from $3 a share to $3.80. That's a pretty decent return. FANG had a very similar payout as well. So this is an area where we're almost double weight the sector, S&P sector weighting, and are looking to add. Nancy, let's get back to the broader market. We've got another guest here to weigh in. Joining me now is Vital Knowledge founder and president, Adam Crisofelli. We follow your research, Adam, especially when your views kind of go against the consensus. And you think it's getting too negative for Q1. Is that right? Yeah, I think that, you know, the commentary around 2023, the consensus assumes a very difficult first half, especially Q1, followed by a rebound in the second half.

You know, the second half rebound could very well happen. But I think the first half sentiment is just a little bit too negative. I think earnings season is certainly not going to be perfect. There's going to be a lot of noise, a lot of companies acknowledging headwinds that they're experiencing. But I think for a few reasons, companies have a couple of tailwinds right now, including reduced FX pressures, aggressive cost cutting. That was a huge theme this week, especially with companies like FedEx. Normalizing supply chains. You're hearing a lot of companies talk about that. Inventory levels are becoming a little bit cleaner. So that was a big theme with Nike's report.

And then China coming online. Not yet. There's still a lot of economic difficulties in China. But in the coming months, China is going to come back as a source of demand. So all that, I think, is going to help earnings come in better than feared. And you actually, I think it's very interesting to watch the price action in CarMax today. They had an earnings report yesterday that was about as bad as a company can report. And the stock is now up from when that number hit. Just kind of showing the degree of negativity in the market right now with a stock like that in Raleigh, you know, despite what they put up yesterday morning.

But I'll just play devil's advocate for you, Adam. There are a lot of headwinds companies are facing next year as well, including higher financing costs from higher interest rates and potential loss of demand, especially in the strong U.S. market. As we continue to see those Fed hikes, the inflation shock, the market turmoil weigh on the U.S. consumer, which a lot of people think outweighs, say, the tailwinds coming from China or supply chain. No, absolutely. I think you are going to see a lot of headwinds, especially on the demand front. You know, I think FedEx is going to be kind of the template for a lot of companies coming up where they, you know, revenue fell short, they acknowledge ongoing revenue pressures, they talk about softening demand, but they're able to offset it by really aggressive cost cutting. I think that's going to be maybe not to the degree

that FedEx is being forced to cut costs, but I think that's going to be a similar narrative from a lot of companies this coming earnings season, acknowledging the revenue headwinds, but being able to offset it with various other levers, a lot of the ones I just mentioned, especially cost, normalization, supply chains, et cetera. But yeah, by no means is it going to be a perfect earnings season at all. There's definitely going to be a lot of challenges. But certainly caught our attention. I know you're more bullish.

You expect 4,100 to be the ceiling on the S&P, which is higher from here. Adam and Nancy, we've got to leave it there. Thank you both very much for joining me. Happy holidays to all. Let's show you where we stand about a minute here into the close. Dow's higher. We're up 171. We're not too far from the highs of the day.

It was kind of tentative at moments there. We started the day weaker and then climbed. The Dow is the only one of the big three to be higher for the week as well. S&P 500 is up a little more than half a percent. I mentioned energy. All the top performing sectors today are subsectors are oil and gas exploration, refining. But you've also got some strength in a lot of the other sectors today as well. It's not a bad day for utilities, for instance, up a percent. For consumer discretionary, which is higher now, communication services up a percent as well. A lot of these stocks making comebacks after a rough week.

They're going to charter communications leading that group. It's up almost 10 percent for the week. What's not working today, information technology is at the bottom of the pack. But it is going positive here into the close. The NASDAQ closing up two-tenths of one percent, but both the S&P and the Nasdaq are lower on the week for the third week in a row. That does it for me on Closing Bell. Merry Christmas. Happy Hanukkah. We'll see you next week.