Transcripts For CNBC Closing 20240703

Not participating. He reports suggesting iphone sales in china have been disappointing, even so every sector today out of the smp is higher, its been a broadbased rally, even as Interest Rates have crept modestly higher. There is your sector heat map, a look at whats going on inside the market. It does take us to our talk of the tape, rally on, or rally soon over. Lets ask hightower stephanie lee, shes here with me in Beverly Hills, also a cnbc contributor, how about that question . Do we rally on, or is this rally seemed to fade . I think we rally on. Seasonally youre in a strong position, theres that, secondly i think the people are coming to grips with inflation has come down, made a lot of progress. Weve got cpi last week, we are a far cry from where we were a year ago, we are almost 12 inflation in ppi and 9 in cpi, and today we got the empire state number, prices paid, that came down. Inflation is still strong, still high, however, were making progress. I think rates have stabilized, theyre high but theyre stabilizing, the fed, i dont know if you want to say there less hawkish, but theyre different from what they had been, and then theres earnings, earnings are better than expected. Im very encouraged by what im seeing not only in revenue but in margins. Well get to that. On rates, the push pull in the market is, the bulls suggest, to your point, well, the fed seems to be pivoting, more dovish, the commentary of late has been the credit market has done a lot for us, maybe we dont have to do anything else. Austin goolsby today, chicago president , trend is without question lower for inflation, that works in your favor. The other side of that is, but rates are still high and the lag effects are still to come. How do you reconcile those factors that are leading the bull bear debate right now . Even in the face of higher Interest Rates the economy has been resilient, we talk about this all the time. Its a true trillion in infrastructure stimulus, that hasnt even gotten into the economy yet. Thats going to be a nice tailwind, consumer is pretty good, we talk about jobs all the time, ive always focused on the initial claims number because its a former looking indicator. Wages are still good, theyre not explosive like they were, but the 4. 2 , ill take that. And the consumer also has 2 trillion in savings. I think as the consumer hangs in and manufacturing has these tailwinds, we can handle higher rates for longer. Bears are going to be bears, speaking of mike wilson, Morgan Stanley, talks about weakening breath within the market, sees stocks down 10 , says no Fourth Quarter rally is coming, and your point on the strong consumer, hes is university and Michigan Consumer Sentiment Index fell by the largest month over month decline since june of 2022. Consumer is tapped out, doesnt have any more money to spend, dour attitudes about whats going on with inflation, how much more they can spend, what do you say . We have retail sales tomorrow, thats the biggest data point of the week, and i think its going to be strong. I look at Companies Like American Express with just came out with september loan growth of 8. 3 , led by the onsumer, up 17 , small and Medium Business is up 21 , we heard that prime day, the first day of prime day people bought 25 million products online, thats only the first day. Pepsi had betterthanexpected organic growth. I think the consumer is in better shape, if they have money theyre going to spend it whether they put it on a credit card or they have the cash. That we are a nation of spenders. Kevin gordon, Charles Schwabs Senior Investment strategist as we broaden the conversation, he joins us now. Earnings are off to a good start, but theyre all going to come down to tech, arent they . To some extent, yeah, and i would say for all the excitement around the earnings beats on friday, especially within the banking sector, the banking index closed lower and gave up all of its gains that day. I dont want to use just one day is a precursor for the rest of the season, but from an earnings breath perspective, tech matters in terms of the mega caps names lifting the overall index, we have to keep in mind when we use that big tech moniker its not just the tech sector, if youre looking at the magnificent seven, it also includes key Medication Services, Consumer Discretionary, you need to see those areas participate, and even within those three sectors, the trends are different. The trend for earnings revisions and overall Earnings Growth in the path of estimates for key Medication Services is the strongest. Its picked up a little bit this year for Consumer Discretionary mama but tech looks the weakest, its not in negative territory but thats the one that scores worst and if you go to a revenue standpoint which i think is much more important, rather than just Earnings Growth itself, that looks weaker, too. I mentioned mike wilson, he goes on today mentioning weakening breath and cautious internal, reduce the odds of a rally in the Fourth Quarter, these are people whove been on our program obviously, he talks about the technical picture of being weaker, only 41 of the stocks in the s p above their 200 day moving average. In other words, the market rally hasnt been broad enough today notwithstanding, obviously, is telling a different story, so it hasnt been broad enough yet to get definitively but the idea that you can have a rally between now and the end of the year. I mostly agree, because youre at a point in the market cycle where, as we just delivered to the oneyear anniversary of the market low last week from october of last year, youre not at a point where objectively, you can say that this is a really strong, healthy, durable market, because if youre mentioning, if youre looking at something you just mentioned, typically, after a major market low youre well into territory upwards of 80 to 90 , not near where were at right now. You look at the lack of participation from small caps, this is been the weakest advance going back to the history off of a major market low in the index history, and something that i know chris has mentioned, this is the first time in nearly 100 years worth of data for the banking index that banks have been down a year after a major market low. I agree with the fact that its probably going to feed something that you and i were discussing last time, of this narrative where youre going to be cycle for longer you keep getting these convicting messages from the market, with the market telling you what is the performance of banks or small caps that youre probably not through the worst part of the cycle, maybe in specific sectors, i agree that there are certain sectors that are turning higher, but thats been the nature of this cycle where you had pockets of weakness offset by different pockets of strength. Thats the theme thats going to persist. Nasdaq outperforming, every mega cap stop today, is higher today, there are those who say, you only need tech to continue to pull the weight of the market, because its been proven this year that that strategy can work, and if youve been in those names, youve obviously done well. Then theres the jonathan krinskys of the world who say reckoning is coming for those names, take a look at whats happening under the surface, theyre too topheavy and theyre going to roll over, its just a matter of time and thats whats going to be defeating for the market. Theyre very well owned, number one, and theyre very well supported by the sales side as well, so the sentiment is not in your favor. That said, in the last couple of weeks, theyve actually taken a pause. And in the face of energy rising, industrials rising, i would argue we are seeing a broadening in the market. Do you need tech to go higher for the markets to go higher . Probably, but the earnings are going to be good, and sentiment has come down a little bit. And maybe its some of the garpy names will do better, the ones you can defend the valuations. Something like amazon or meda or alphabet or some of the higher flying names like nvidia and tesla and that sort of thing. We will see you in the market zone in just a little bit, i appreciate you being with us today as well. We will see you again soon. To our question of the day, we want you to answer the question at the top today, rally on or rally soon to be over . Please note, were going to share the results later on, in the hour, up next, the cant miss interview, billionaire investor todd boehly is breaking down his portfolio for us which includes everything from the lakers to the Golden Globes and many stocks in between. We will find out what his forecasting for the economy and the markets, hell join the onset or an exclusive interview, just after this break. We are live in Beverly Hills today with the case alternative Investment Summit, and youre watching closing bell on cnbc. We planned well for retirement, but i wish we had more cash. You think those two have any idea . That they can sell their Life Insurance policy for cash . So theyre basically sitting on a goldmine . 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I stole them from an airport. Its always something with you, man. Great solid greek salad . Exactly dont delay the game with verizon or tmobile 5g Home Internet. Catch it on the xfinity 10g network. Hi, im jason. Ive lost 228 pounds on golo. So when my doctor told me i needed weight loss surgery, i knew i had to make a change. Golos helped me transition to a healthier, sustainable lifestyle. Im so surprised just how crazy my metabolism has fired up. I have a trust in golo cause i know it works. Golo isnt like every other program out there, and im living proof of it. announcer change your life at golo. Com. Thats golo. Com. Welcome back the closing bell, our next best guest has as diverse a portfolio as aligned with Major Investments in energy, real estate, tech, travel, media, and of course sports, todd boehly is the cofounder, chairman, and ceo of eldridge industries, joins us in a live cnbc exclusive interview. Its good to see you. I mentioned this diverse portfolio you have, you mention more than 70 companies, given those areas you have a good look into a number of different spots in this economy. How do things look to you . Things feel better than you wouldve expected based on the chitchat over the last six to 12 months. Uc hotels are performing well, people really like experiences, businesses are hanging in there. There is been obviously a little bit of inflation in the cost of goods, weve seen compression but generally we feel good about how businesses are performing. Whats your outlook for where rates may go from here, what you think that that is going to do, whether theres going to be a recession or not . Weve seen the back end of the curve move up dramatically lately. We think thats been a helpful thing for the fed, do not have to continue to move. When the frontend was at five in the back and was it 3 1 2, that was a bigger challenge. But now youve seen the back end move up dramatically, and thats started to put the brakes on some things we believe. That the market is already done, the fed worked for it. You think theyre going to be finished . I think theyre going to be data dependent. My bet is that theyre done for the year. If i had to bet right now, but i believe that theyre going to be data dependent, if you look at the prognosticators of where rates are headed, most people believe that in 2024 rates will start getting cut again. But this comes down to what happens. The good news is that rates have risen enough where weve got room to wiggle. We can see our way out of a problem if a problem arises. You said almost a year ago at a conference that the cost of money is being repriced, you have to adjust and accept that money is going to cost more now. Its costing more now than it was even a year ago, but is that impacting the way and the size of the deals youre looking to do . Its driving us to credit, were spending more time in credit, weve done quite a few loans in the last couple of months, where were getting 12, 13, 14 rates of return by being dollar one at the top of the capital structure, and structures that are for, five times where before that we were six, 78 times, and you are weight making more money. Now we think its a good time to be a lender, but, theres prepayment and no prepayment penalties on loans, so the reality is that once rates start going down well be refinance out of that. The challenge with credit is that youre on a treadmill trying to make whats next, the really good ones dont stick around very long. Howard marks new letter just dropped an hour or show arguing for a relocation, towards what youre talking about, credit instruments should represent a substantial version of portfolios, perhaps the majority. You can get equity returns in credit, you start of the credit business at the guggenheim, you know the segment of asset better than most. Now is a good time, if you look at where within the credit markets you want to play, senior secured lending has been a good asset class, it goes up and goes down, generally for me its a great asset class year in and year out, highyield bonds a little more fickle, when youre looking at high yield bonds that are 100 basis points, 200 basis points at the time behind senior credit, im not sure why youd want to be buying those. When theyre 400, 500, 600 basis points, then highyield bonds are a good thing to be buying. This does play into your strategy of what youre trying to do, getting bigger in asset management. Focused on credit. Were in the process of consolidating Asset Managers, we had a very good success, that weve built from scratch, and sold it to another alternative asset manager, so rather than sell the businesses we want to grow them and we want to scale them and get the benefit of having multiple businesses working on the same endgame. Your bullish on clean energy, Energy Transition . I think your most recent deal, Australian Mining engineering and consulting business, is it an ev play for you . Its absolutely part of it. If you look at the average they have five times more copper than a traditional combustion and it engine does. Its absolutely a play on evs, but we think in order to be the electric copper is going to be more important, cobalt will become more important, nickel as well as lithium of course. How long does it take to see a return on that investment for somebody like you you mark were not buying an actual mining business, were buying the engineering business that supports the mining business. Today, think about it as a funnel, they have 1000 people that are doing 2000 projects, for Big Companies at roughly 100,000 in projects, thats a 200 million business. They analyze opportunities, about a third of those go to whats called preproject development where they dig a little deeper, and they invest more money so they spent 350,000 on 600 projects, and then these are the ones that are on the site, trying to figure out how do i get the power, how do i get the water, copper right now is coming out of the ground at. 7 concentrate. In order to justify shipping it, you have to get to a much higher concentrate. Theyre the ones that are trying to figure out how to take. 7 concentrate, get it to 30 concentrate and ship it. One of the Biggest Challenges that the Mineral Market has right now is that most of the expertise are residing in china. Everyone is waking up to the fact that we need to be mineral free of china, and have much more opportunity in order to not worry about are we going to get our Precious Minerals and are Critical Minerals from china. How long do you have a sense that the transformation to more clean energy is going to take in this country in a meaningful way . I think thats a good question, i think people are not practical sometimes about how they think about it, youre going to have to figure out how do you leg your way out of one, because were not going to starve and were not going to freeze and were not going to stop driving. How do you leg your way out of one world into another set of worlds, and were seeing it more and more with subsidies in the eu where the dfc is willing to finance activity in the u. S. , but its definitely multi decade project. You talked about the lending business, you were lenders to the Digital Currency group, they own genesis, i dont need to tell you all sorts of problems. Can you give us an update on whats the story with that loan . The senior secured loan . We worked our way out of it, they had two really good assets, they had the grayscale business, which basically ran a closedend fund of bitcoin, and one other asset class that generated a lot of, that business is still continued to do really nicely, genesis was in bankruptcy, but, we structure the loan, so that we were well protected and theyve been able to sell off assets and they paid us off, and were completely out, and weve resolved that in the First Quarter this year. Would you invest again in Digital Currency, Digital Assets . How do you view that space . We spent a lot of time evaluating it, and we thought this was a really low risk way to watch and get involved. Part of what we did is we took our coupon and bitcoin, we didnt want to see bitcoin go to 1 million and not have exposure to it, so ultimately what we did was say, pay us 9 in cash and pay as a couple hundred dollars basis points in bitcoin, so now we have tens of millions or so of bitcoin that we continue to trade actively, but thats how we got it. What i do it again . I think were very careful about what we would do again. Interesting. I notice a lot of Asset Managers are trying to get bigger in insurance, including you. Which, too many people may seem as a boring business. Why is it so attractive to you and others . Its permanent capital. Ultimately, permanent capital is very valuable. We have the ability to compound at compelling rates of return, and our approach has always been to have really good asset flex ability, and very little leverage. If you look at our assets to equity and security benefit, were approximately six times assets to equity. You look at the industry its closer to 12, 13, 14 times, weve also got a lot of floating rate assets, as rates have moved up, our average return spread right now is 7. 5 . Look at Something Like Silicon Valley bank, why did Silicon Valley bank disappear . After four decades in existence . Because they bought a really high quality, if you will, but low coupon longduration bonds, theres a bond right now that the u. S. Government issued, which is trading at . 45 on the dollar. When people think about buying that bond, they dont look about buying that bond and having a go be, everybody things about that as a risk free bond. Now, if youre in that bond, youd be down 50 points. As rates have moved up, the fact that we have so much floating rate assets has really helped us because we dont have these big market to market losses in our portfolio that were the thing that crushed Silicon Valley bank. You obviously see the trends that are moving forward with a. I. , which we clearly talk about every day, i think youre expressing your optimism and investing style in that, through insurance through zinnia. Which utilizes a i. Historically, we would have a big call center operation, because we administrate, administer policies for third parties. Those call centers would get phone calls in, then they would have to do the call, then write down the basis of the call, and spent all this time. Now we can record everything, we go right to how the call went, all using a. I. , and it saves so much time for people to be allocating toward other problems that they actually have. How do you, in the bigger picture, view a. I. As the Disruptive Force that many predict its going to be . We think of it as another set of tools. If you go back and you think about, however we had evolved, at some point the tractor was a tool. Now we look at a. I. As, this is another set of tools thats going to help us, and if you look at what microsoft is coming out with copilot, theyre going to be doing great work for you, so theyll figure out problems that you have and give you the answers while youre sleeping, so someone comes in and says send me this file, let me find this file, microsoft will dig it out for you and it will be ready for you with this is when someone is asking for, heres the recommended file, and you dont have to dig for yourself. And you own this hotel that were sitting in, i think youre an investor in the waldorf next door, youre doing on a piece of land that you own here, you must be super bullish about whats going on with travel experiences and a high end consumer, otherwise you i couldnt imagine deploying this level of capital towards that area. If you look at the demand, its through the roof. They opened the new york property, the activity in that hotel is tremendous. Theyve got a private club, the demand for the private club is off the charts. This hotel, here, is performing better than we ever expected. We just opened the raffles in boston, its doing adr of 1000 a night, when we underwrote it at 600. We see people are really focused on how do they get out, how do they have, hospitality is part of that. You feel like thats a post pandemic sea change that stays with us . Obviously, it has to be somewhat cyclical, like most other businesses, but how do you see where the consumer is now and where it may go . We definitely think its cyclical but right now were benefiting from the fact that people are still on the move. Were benefiting from the fact that the luxury product, theres just not that much of it. When we open something new or we build something fresh, people really love it quite a bit. We just built an office tower in miami, 830 brickle, when we underwrote that we thought wed get 60 per foot, right now were getting 150 per foot, because theres really no good product in miami, no new product. Is all being in the process of building but we were the first ones there, and now were leasing it out. Are you as concerned as others are about this reckoning coming in commercial real estate . I think this is going to be, one of the things i believe is that when everyone tells you that theres going to be a giant problem, that problem very rarely manifest itself. I think everyone is talking about the commercial real estate. From our point of view, weve been very focused on staying in gateway cities, big markets where we think theres lots of demand. We havent gone into second tier cities, we havent spent any real time looking at anything other than the biggest of the markets. Youre in los angeles, were in boston, were in miami, were in washington, d. C. Those markets are strong. Media, another area that youre an investor in, a 24, studio, you on the Golden Globes. Going to be back on nbc this year. That will be, theres a giant transition going on. Streaming is becoming part and parcel of the way the world is, and obviously the flex ability that we can do, in a streaming environment is very different than what we can do on a broadcaster. What were going to try to take advantage of applicability, a 24 just came out with the show, beef, it was an alltime hit. Were absolutely excited to have the Writers Strike over, and were hopeful that the actors strike is going to be resolved soon. Everyone wants to get back to business. The country itself wants to be in business. So when you see these long moments where people are out of business, it becomes really frustrating. But were really thrilled with what a 24 has been able to do, were really excited about the transition from streaming, our partners at billboard, hollywood reporter, variety, those businesses have really informed themselves. You have any insight into how long the strike is going to carry on . I dont. I think Everyone Wants to get back to work. And i think that ultimately drives people to a place where theyre going to compromise. Lets talk sports, you are a huge player in sports. Lakers, dodgers of course, chelsea, 3. 1 billion . For chelsea . About 2. 3 pounds. Fans are passionate over there. They love their game. They do. Why do you keep expanding your sports portfolio . People want to have something to root for. Everyone loves rooting for things, we believe sports are one of the things that brings people together. In a world that continues to be fractured. And you have to listen to all of this stuff, sports works. Everyone loves sports. People want to cheer for things. Fans get super excited, our job is to identify what we think our tremendous sports teams and really give them the resources they need in order to grow. Weve done it with the dodgers, 12 years in, our job is to continue to give the fans what they want. Whats your outlook evaluations . Its been incredible where they continue to go, particularly nfl where washington just sold for 6 billion. Cannot continue . As long as the revenue continues to grow, the evenue will continue to grow on these things, because the fan base is looking for more and more and more and more. And if you can give fans unique things that they can get anywhere else and say maybe it cost a couple dollars a month to get something unique, thats less than a cup of coffee. But when you start about fan bases and the size of them, you can start to see the business as it figures out how to be more and more direct to consumer, really grow substantially, and all that really means is we can invest more in the team, we can invest more in players, because the number one thing we want to do is when. Im sorry about the dodgers, we commiserated together as a lifelong dodger fan, i was bummed, i didnt have money on the line like you did, but thats what happens sometimes. Sports is one of the things thats really humbling. You can do everything right and you have people with injuries, you get hit with circumstances, and its just days were things dont go right. Its a lot about life but youve got to prepare everyday, you got to do your work, you got to be in a position, and its just probabilities. In the end its just probabilities. Let me ask you, big picture question, have you ever considered taking eldridge public, as a Berkshire Hathaway business . Right now we think about how to continue to grow the subsidiaries, and some of the subsidiaries we take in public, but we havent ever considered taking eldridge public. Is there a time that that would make sense for you, is there a reason you wouldnt want to have the overall scrutiny of the Public Markets . I dont think theres any hard reason. Obviously access to capital is an important thing, and being public provides access to capital. Right now we havent had any problem getting access to capital, so, we are well positioned as a private company and we want to continue to grow. It hasnt been anything weve been thinking about. Let me ask you because i bring the day full circle here out of this conference, kathy wood was on the halftime show earlier, i have no idea, you tell me, you are a big reason why kathy wood is still the Majority Shareholder of ark invest, is that correct . We helped her finance the business, a while ago. And theyve done a great job, and were very happy with the fact that we are able to facilitate that for kathy. And she continues to generate significant cash flow, so its been a Good Opportunity for us. This is a great opportunity for us, i appreciate it so very much. Its good to see you. Todd boehly joining us here live and exclusively at the case alternative Investment Summit in Beverly Hills. Up next, tracking the biggest movers as we head into the close, plus, Jonathan Goldstein will join the onset, with where hes finding opportunity in the real estate space, were live in Beverly Hills today, the closing bell is coming right back. Hows the chicken . The prawns are delicious. Oh, i have a shellfish allergy. One prawn. Very good. Did i say chicken wrong . Tired of people not listening to what you want . Its truffle season ah thats okay. Never enough truffles. How much are they . Its a lot. Oh okay im good, that its like a priceless piece of art. Enjoy. Or when they sell you what they want . Yeah. The more we understand you, the better we can help you. Thats what u. S. Bank is for. Huge relief. Yeah. That first time you take a step back. I made that. With your very own online store. I sold that. And you can manage it all in one place. I built this. And it was easy, with a partner that puts you first. Godaddy. Every day, businesses everywhere are asking is it possible . With comcast business. It is. Is it possible to help keep our Online Platform safe from cyberthreats . Absolutely. Can we provide health care virtually anywhere . We can help with that. Is it possible to use predictive monitoring to address operations issues . We can help with that, too. With the advanced connectivity and intelligence of global secure networking from comcast business. Its not just possible. Its happening. Back in Beverly Hills, 25 minutes to go, lets get a check on some top stocks to watch as we head into the close, christina is here with that. Vista outdoor is lower as its preliminary q2 results show sales dropping from last year. Its also selling its products unit for nearly 2 billion, and thats why you can see shares are off by 24 right now. While, lulu lemon is trading in its highest level since 2021 as the stock is set to replace Activision Blizzard on the s p 500 which is being removed after being acquired by microsoft. That will make lulu the only canadianbased company on the s p 500, that we have to keep in mind more than 70 of its revenues came from the United States last year. Scott . Shares are up 11 by the way. I was just going to say, what a day for those shares. Thank you. Up next, the real estate sector struggling this year, Kane International Jonathan Goldstein is finding big opportunities in that space. He will tell you exactly where, just after this break, closing bell, right back. Welcome back the closing bell, live today from the case alternative Investment Summit in Beverly Hills. Real estate, one of the worst performing sectors over the last year. The industry grapples with rising rates, inflation, and work from home trends, but our next guest navigating those crosscurrents and still finding opportunities within that space. Joining us now, Jonathan Goldstein, the ceo and cofounder of Kane International, good to catch up with you here. So, your private investment firm, you invest in real estate, real estate equity, a lot of real estate equity, commercial, leisure, residential, all over the world. You have a broad view of whats happening. What is happening . Its fair to say that the industry is still adjusting to the new level of Interest Rates. But, i think its so easy to be down on the aspect of generality without looking at the positive spots. Since weve started the business we very much adopted a gateway city approach. Because we believed in the resilience of those cities. Weve also engaged and developed a lot in miami as well as in los angeles, and others, and we found great growth spots. Were about to open 830 brickle, the Largest Office lot in miami, built for a very long time, following the least with wonderful covenants up and down the building at 50 rates higher than we underwrote at the time that we start of the investment. Its very easy to simply tarnish the entire class with one view, but i think it is fair to say that there are pockets in the industry that have struggled to come to terms with the new reality. And i think thats predominantly in secondary offices in secondary cities, and seeing everyday large firms handing back the keys, and i think thats not good for the industry, obviously, the people are happily walking away from them. The new reality is the fact that the cost to serve this debt has doubled, is it going to continue to get worse . I think theres a number of factors, first of all we can talk about Interest Rates, but theres of you that maybe we are close to the peak of the Interest Rate curve. Is that your view . I think it is, and the form of the curve is taking a slower decline than people initially expected. And there is a debate to be had about whether there is groupthink amongst the fed and the bank of england, and trying to, there needs to be some justification about why rates need to stay at the levels they are. But i dont see them coming back very quickly. I think people are seeing the cost of capital double. Its doubled. Over a period of time. What was a base rate of 3 or 4 margin is now eight, nine, 10 . You cannot borrow in the Real Estate Industry for less than eight, nine, 10 today and thats hurting a lot of people. When people want to fund new deals, what do they do . The cost of capital has gone up so much, and the access to that more expensive capital is a hurdle as well. Thats why there will be a slowdown in development, because the amount of equity that people have to put into service the debt, and to meet the increased cost, weve had inflation, since the pandemic wave had significant Construction Cost inflation and labor inflation. Therefore its more expensive to build something and more expensive to borrow. So that is a slowing down the rate of development. And that will help in many areas, with people that have existing Office Buildings or Residential Development because the supply chain is short. Do you think products will get smaller, and for less money than they otherwise would . I dont he gets necessarily an issue of size, i think its the volume of development will decrease over the next 12 to 24 months, in major products, and that means that the supply that is coming to the market will ultimately be used up and will give people an exit. You said at the outset theres been so much negativity that it hides some of the positivity thats been going on. Where are the good stories to tell . Frankly we hardly hear about them. We talked about miami before and the success weve had in our office block which has met the demand needed in miami post pandemic. Weve had some Great Success in the luxury hotel space, which is done extremely well, we just opened a hotel in boston from the first raffles in north america, which is trailing off the charts. So what you are seeing in the luxury marketplace, is, there is still people with a significant amount of consumable income, ready and available, and enjoying themselves, theyre in a post pandemic world, people want to go out and enjoy themselves, and they want to ensure that theyre having service and quality. Where we have been very selective and where we continue to be selective, you have to invest behind the right brands. Because service and quality and delivery are one thing to say, they are a very hard thing to do, and the reason weve backed raffles, the reason weve backed the hilton is that weve gone to the Major Players in the industry who we trust to ensure that the consumer will get the right service. You talked about obvious inflation its out there, weve seen it for everything from lumber and things of the like, concrete, what about the cost of doing a project today . How much higher would you say it is . If you look back to 2019, to where we are in 2023, i would say the average Construction Cost is probably 25 higher than what it was previously. If you aggregate and itemize the pieces along the road, were about to redevelop miami beach. And you have to have the right product which means you can absorb these additional costs, but were seeing in civic and Construction Cost inflation because of that. What about land . Where does land factor in . If your long on land in the wrong places, and if youre Construction Costs have gone up, and if your sales have remained static, the only thing thats movable is your land, thats why a lot of people are struggling because they bought secondary land in secondary cities, and thats worth much less. We own the land next door, here, the land between the Beverly Hills and Los Angeles Country club. Is the greatest piece of real estate waiting to be developed. You have to own premier land in premier locations. We will build two towers here, 2632 story residential apartments together with an amazing retail, with a huge part for the local community. One of the things that we as Developers Need to understand and investors is that we have to give that at the same time. Perfect way to end it, a pleasure speaking with you, thanks for being on our show. Donovan goldstein, Cain International ceo and cofounder. To the result of our question of the day, we asked rally on, rally soon to be over . 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React to fastmoving markets with dynamic charting and a futures ladder that lets you place, flatten, or reverse orders so you wont miss an opportunity. E trade from Morgan Stanley the market zone is sponsored by eatrade from Morgan Stanley, trade with no account minimums. Cnbc senior markets commentator mike essentially joins us from the new york Stock Exchange, hightower stephanie linked back with us in los angeles as well. Mike, if there were people out there looking for a broadbased rally, nirvana for them today. Absolutely. Its pretty inclusive today, market relaxed after really clenching up on friday, ahead of a weekend of unknowns, geopolitical issues, volatility markets acting squarely, and we come in today, with really nothing fresh to be overly concerned about. You think back you thought you were headed on an express train, 100 oil and 5 10 year yields, all of that is taking a break, we can focus on earnings in the s p 500 has raised right up to the level that we are watching, last weeks high, its 43, it stalled out three times, we will see if it can punch through, from late september, and everyone is fixated on it and todays action, compared to certainly some middling days in the recent past when indexes were uneven, its much more of a comprehensive game. Big move obviously in the nasdaq switch is the upper former, nvidia, tesla certainly joining in on that rally, adding two big games theyve already exhibited this year, but earlier today on the halftime report, one has far more longterm potential than the other. Take a listen. We see and video, you might see this is less expensive than tesla, we think the upside surprises, on tesla, during the next five years, are going to be substantially more than nvidias. Thats kathy, whats your take . If you have a very longterm, you can justify any evaluation you want. I wish i had a five year time horizon, but, 77 times forward estimates 45 times today on next 12 numbers, the problem is, the deliveries are coming down, earnings are coming down, margins are coming down, she may be right, maybe 2025 or she then sees a rebound, the numbers are coming down post and video where the numbers are going up. 60 in 2025 and 26. I think in the evaluation is more reasonable, but, thats still too expensive for me. It was interesting, she said of nvidia, which is no longer in the Innovation Fund of course, that its really expensive. I said, how is that really expensive at 35 times when tesla is 70 times . Exactly. I think you can have two different independent market abuse, there, and nvidia you can say its extensive because people are extrapolating way too much about the a. I. Buildout that basically there is not enough server build in the world thats going to happen to meet what nvidia is projected to do. On the other hand, her story on tesla havent changed one bit, it depends massively on huge penetration of full self driving of going from a Hardware Company to software margins, its never been different, it wasnt different when it was a 1. 2 trillion valuation and now its down where it is, its still well off the low, to me theres no news in kathy saying that her 10 holding is going much higher, and over the past five years art innovation is in the bottom 1 . The fiveyear time horizon doesnt value out either. No doubt about that, its just interesting, whereas one can justify one valuation while skoff at the other, its interesting to hear that perspective alone. More Bank Earnings coming this week, bank of america and Goldman Sachs tomorrow morning, Morgan Stanley on wednesday, you got out of the gates pretty well. Whats your outlook here . Very good, bank of america ive added to it, i added to Morgan Stanley as well, i think thats betterthanexpected for bank of america who if i look at j. P. Morgans 15 growth yearover year, i think it bodes well for bank of america but, with bank of america its about expenses. If they do anything worse than 15. 8 billion for this quarter it stops going down. 63 billion is the guide for the full year. Thats the key for that stock at this point in time, you know its an operating leverage story if they get the nii and make a big expense control theyll have a decent order. Morgan stanley we heard last quarter from the ceo that Capital Markets, we also heard from the head of Investment Management throughout the quarter that Capital Markets have bottomed, because the ipo art markets opening up, and that Capital Markets overall, the number of the people that are worried about, or wondering if they can do this, 20 rotc e is the number that everybody looks at, the highest in the industry, far better than Goldman Sachs which is at 15. 17 , thats the number im going to be looking for. Mike, how about you on the banks . I guess we got a tell as i said last week, these are different, not every bank is the same, what is your view here . The minimum standard has been met with those that have reported already, which is nothing scary that we werent aware of before. The credit stuff seems manageable, and some of these are going to have pretty significant unrealized losses, but we knew that based on what the overall bond market has done. Stocks beatendown, cheap, unexciting, i dont know that theres going to be another aggressive and enthusiastic case to come out, were muddling through, building book value where possible and the Capital Markets business has enough. Appreciate you being there, its been fun out here in Beverly Hills. Mike im turning back to you, approaching two minutes left in the trading day. Interesting as well, we didnt talk about it too much, yields up, stocks up, too. As long as you get that stabilization, as well, there. Theres no doubt about it, yields up small, and up within the range weve been in for most of the month, that is the key. Were sensitive to this, you dont know what the threshold is for whatever the 10 year yield level, where it starts to impinge on stocks, you had a lot go right for equities coming into this week, there was a lot of defensive positioning as i mentioned, this is when the seasonal tailwinds are supposed to start to kick in, you have the closing of the activision deal, that through cash into brokerage accounts. Theres a lot of things you can build into a story for why were getting a oneday pop that doesnt really pay that much attention to yields, but to me, 48 on the 10 year is the one thats been hanging out there for a long time, as the high, and as long as we dont seem to be blowing through that in an aggressive way, maybe we can make our peace with it. I was going to say to you before we finished, were doing all of this without apple today, which was read until the last few seconds, because it just showed on the righthand side are screen that even it, now, has gone green. It is that kind of day, but interesting that you can have such a strong day, you didnt need apples participation whatsoever. There was a lot of relief from the rest of the market, the banks and the retailers and the stuff that has been left out in the cold, and gotten cheap. Its tough for the s p to be out 1. 1 , and have the 7 holding of apple completely ignore it. So thats what youre seeing right there, still well below the recent highs, and i think thats the case for the overall market as well, were like four to 5 below where we were. You hear the cheers, reuters reporting, building a steak in allstate. Insurance, we talked about it with todd boehly at the top. You might notice on the screen, there, ringing the bell at the Stock Exchange today, fast money tim seymour is there, that is in support of a leg to stand on, proud of what youre doing with that organization. I will see you back on the east coast, it does it for us, ot begins now. Theres your scorecard on wall street, welcomed the closing bell overtime, im john ford with morgan brennan. Coming up, we will talk about todays political headwinds that remain for investors, and were joined by longtime marcus to just. Billionaire murders tighten an nba team owner will speak with us, about rising rates and impact on the housing market. Later, a new era at the box