Transcripts For CNBC Squawk 20240704

First of all, that a. I. Fueled boom, dell shares surging. Nasdaq coming off its First Closing high in more than two years. And ray dalio down plays talk of a tech bubble. Plus new York Community bank corp. Is warning of Material Weakness in its accounting, and its dragging down a number of other Regional Banks. That bank stock is also down sharply. Suboptimal situation. And in the land of lawsuits, elon musk, suing openai, accusing it of putting profit before humanity. Didnt you ask him about this . I did. I did. And well cover that. But first, lets get to the markets. Obviously, a new month. Happy march. Yes. February, obviously, we had a nice run of things. Jeff marks, my partner for the investing club, happy birthday. Happy birthday. Not mine this time. What do you want to talk about as we look ahead to the month of march . Whats in your mind . I want to obviously get to the dell earnings in a minute, but just give me your overall take on where we are and where were headed. Sure. I think that we actually, at the end of the month of february, started seeing why nvidia was important. We started realizing that there are companies that are far ahead, because theyre using a. I. , and there are companies that are being left behind. There are companies that have made it so that theyre getting a lot of new customers, and ones that arent, and im going to do something thats a little classoriented. The big guys have it. And the little guys dont. So, youre going to see, i think, a widening gulf between the Rich Companies and the small and mediumsize business and even though there are Companies Like adobe that are frantically trying to help the smb, so to speak, only the big guys can afford what jensens putting out, jensen huang. And so, of course, i mean, it requires enormous Computing Power to run generative a. I. Models. And therefore a lot of money. Or at least given just what you have to actually do. And its hard to afford an h100 for most. With the h200 coming. Wont the application start to filter down eventually to these companies that youre discussing that perhaps are not in a position to have their own servers running and or paying for the enormous compute that they need to do it initially . Well, i think that filter down is absolutely right, but right now, and well get to dell, but you look at dell versus hpe, which i know you know. Dell got the h100s. Dell got the finest got the finest chips from amd. Right. Which are also a. I. Oriented, and were talking about a huge amount of storage thats needed. I dont want to get too in the weeds here, but what im trying to say is that when you look at i have some companies on. Im not going to pick on them tonight because theyre nice companies. But david, were aware you can either cover the 100 billion to 300 trillion companies, and the numbers are just extraordinary, whether Everything Else is 30 or 40 billion. And you find yourself saying, why should i look at a company that only had a billion dollars in revenues . Its unimportant. This is an amazing time, because the big companies, youre talking about revenues that are make it so that mag seven actually makes sense. Theres, like whenever i look at a company, i think, why am i wasting my time . Well, first of all, that goes against so many of the things youve talked about, which is the opportunities everywhere, jim. Youre not going to stop saying that. But saying in the last ten days of february, when we sit back and look at the quarter, we realize there are Companies Like celsius where you can double very quickly on a short squeeze. There are companies that get takeover bids, and then there are Companies Like dell that overnight we realized was the one that had the cards, therefore, they have the servers. Therefore, they have brought a. I. To a level that i think that is shocking. Lets talk about dell. Yes, absolutely. Orders for a. I. Optimized servers, 2. 1 billion in a quarter, after recording just 100 million in the quarter. Excuse me, 100 million in orders during the month of october. Given the acceleration, a. I. Backlog at the end of the quarter was 2. 9 billion, up 80 from the last quarter. In addition remember, thats consecutive quarters. Not year over year. Enabled dell to ship 800 million in a. I. Servers in the quarter, up from half a billion last quarter, accounting for roughly 15 of server and networking revenue and you also need high bandwidth memory, storage, and you need networking, and that is broadcom, so theyre going to distinguish themselves. That could be up a couple hundred. Today, power scale storage is so important. The cost of gpus, no one can afford not to have the right storage, and dell has the storage. Its from the company jeff clark, a remarkable Conference Call. We should make the point, its not about pcs. This is about a. I. Servers. What im saying is that people are now beginning to realize use cases, where if you have a. I. Servers, and you are able to ask your data the right questions, and i mean that, ask your data the right questions, you will get answers that make it so that youre head and shoulders above your competition. So, this is a have have not market. We back away. The reason im talking about this is because what it says is, for instance, ray dalio, i dont know if you saw, he was saying that mag seven is measuring a bit frothy but is not a fullon bubble. When you read about what we have here thats developed, whether it be with salesforce, whether it be with dell, whether it be with hpe that doesnt have it, whether it be amd that does have it, you realize that these gains, amd is up 30 points in the last few days. Dell could be up 40 today. I mean, these are these are enormous gains. Yeah, you see what dalio had to say. This is a guy thats typically talking about the end of the world coming, so i dont know how much we care. By the way, anybody interested in dalio should read that book, the fund. Oh my god. Thats some wacky times over there at bridgewater, man. Wow. Really . Hes no longer there. What is it what was it about . Just very cultish. Guns . No, not guns. Just crazy. And over his many, many long career, hes yeah, his predictions have not look, i dont want to get away from the rest of the market. Please dont. Im just saying the first two months of the year, a lot of people would have felt that a. I. Was a joke, that its it became funny. You would read a call from a food company that says, were using a. I. In the last ten days, it crystallized that there are companies with real a. I. , and theyre crushing it. Servicenow is crushing it. Salesforce was down 15 when they reported and closed up first. If you talk to state farm, theyre using it to break away from the insurance pack. State farm. You know . You know, state farm, like i know state farm. Im just trying to get a sense here, i mean, with dell up that much in terms of what the multiple is going to be. Okay, 17 times whether or not higher multiples are deserved. Obviously, given these higher growth rates, as a result of what youre pointing to, which is these companies that are seeing meaningful increases in revenues and earnings as a result of a. I. But you see, mellius, which has been the best on this, ben rice, he had this early on in dell. He said, look at 2027 numbers, 152 price target, because why shouldnt they get a 27 multiple . So, again, what im saying is that well, no, ten bucks what was his price target . This is 27. Okay. But im saying that what happened here is that we went from thinking, bubble, bubble, bubble, toil and trouble to, who has it and who doesnt . Thats what happened in the first two months of the year. Yeah. And the only other company away from this is lilly. Excellent documentary last night by our own melissa lee. Big shot. And lilly, i understand when they get, and its going to happen this month, approval for the alzheimers drug its fueling so many different narratives,even within the mag seven, of course, because we talk so often about alphabet and whether they have made any number of missteps when it comes to generative a. I. Or what threat that represents to their monopoly on search. Weve talked about apple a number of times over the last couple days as well, not having it as of yet. What is to come from them . So, it colors all of the sort of perspective on many of these big companies, whether theyre putting the numbers up or whether theyre not and will or whether theyre missing an opportunity. You have to find it in strange places. You find it in the dell quarter, which is jeff clark talking about these numbers that he didnt expect. Barrys excellent Conference Call, the ceo of best buy, its in this, blah, blah, blah, and someone asks her, whats selling well . The raybans. Zuckerbergs raybans. I knew they were hard to keep in stock. I didnt know you could buy them at best buy. Yes, you can. And the Samsung Phone taking big share. A. I. That one is loaded with a. I. You can translate. You want to speak to somebody in italy because duolingo cant teach you italian . Boom. Youre speaking italian. What it says is the 16 is going to have all this, david. The 16 is going to be a step function for apple, and despite that fact that it was downgraded, im ignoring to downgrade. Got it. Im going to act as if that didnt occur. Okay. Im going to forget that the downgrade was made. Coming up right here, elon musk, speaking of a. I. , he sues openai that started all this with their generative a. I. Chat bot, and sam altman, the founder of the company. Plus a flashback to what musk told me about that startup. This was last may. 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Ahh elon musk had filed a lawsuit in a San Francisco court against openai and its ceo, sam altman, for breach of contract. Musk alleges that the company abandoned its Founding Mission to develop a. I. For the benefit of humanity instead of profit. He helped to create it, of course, the maker of chatgpt in 2015, put in as much as, i think he said, 44 million, maybe as much as 50 million. Complaints interesting, just reading through it. Gives you a quick little history if people are interested in the history of a. I. From Gary Kasparov playing chess against it in the 90s and deep blue to where we stand today. Jim, this has not been unexpected. In fact, when i spoke to musk at teslas annual meeting last may, so, lets call it, what, some almost nine, ten months ago, i asked him, given his previous sort of protestations, whether, in fact, he might sue openai. We can take a listen. Youre very disappointed in whats happened there in terms of it becoming a for profit. Are you going to take any action, sue them in some way . I do think that theres some look, it does seem weird that something can be a nonprofit open source and somehow transform itself into a for profit closed source. I mean, this would be like, lets say you funded an organization to save the amazon rain forest, and instead, they became a lumber company and chopped down the forest and sold it for money. And you would be, therefore, like, well, wait a second, thats the exact opposite of what i gave the money for. Is that legal . That doesnt seem legal. And if it is and in general, if it is legal to start a company as a nonprofit and then take the ip and transfer it to a for profit, that then makes tons of money, shouldnt everyone start shouldnt that be the default . Right. And then i also think its important to understand the like, when push comes to shove, lets say they do create some digital super intelligence, almost godlike intelligence, well, whos in control . And what exactly is the relationship between openai and microsoft . And i do worry that microsoft actually may be more in control than, say, the team at openai realizes. Microsoft, as part of the microsofts investment, they have rights to all of the software, all of the model weights, and everything necessary to run the inference system. Kind of gives an interesting background to why they would have moved forward with the lawsuit. In fact, there is some, given what he said in that interview, some nine and a half months ago, jim, thought it might have been sooner that we saw legal action. I remember that part, and i just said i initially said and i think to a lot of people said, oh, couple billionaires sitting around being angry at each other, but when you listen to it closely, theres a real disclosure issue here. Remember, microsofts a public company, made it so its public, and i think that you dont turn a nonprofit into a profit. Its entirely possible you can say, look, we have nonprofit stuff, but lets spin that off if we find something profitable. Maybe you could sending it back the nonprofit . I listen to musk, and it seems like its obvious that altman did something wrong here. It will be very it will be worth watching closely. Theres no doubt about that. In terms of their reference to the 2015 sort of founding agreement and what it memorialized and what it said. Obviously, he was musk was the main funder back in the earliest days of the company. Unclear what the outcome will be, certainly, at this point, jim, or exactly what it is he wants, musk. You know, i reached out, but i dont expect were going to hear anything. Is there any aspect of it thats just, he wants to inflict pain . I dont im not certain. I know that he has been frustrated for quite some time, as you heard in terms of the change and his concern overall that a. I. Will be a threat to humanity. That said, tesla is obviously very much developing its own, and you know, full selfdriving is reliant on it. Theyve taken a new approach fairly recently in terms of using generative a. I. To power full selfdriving, i believe. Right. And that could result, finally, in the breakthroughs they need to actually bring this technology to a car near you in a way that musk has promised for many years and not yet delivered. Its the authorities that have made this so hard. Were in this mode where cars cause a huge amount of f fatalities that are driven by humans. If one person is killed by selfdriving, we shut it down. It makes no sense. Think about what its like to have some drunk or drowsy person at the wheel. What is it, 30,000 people a year . You cant deal with local municipalities and the insurance companies. But david, i just want to go back to some of this. You talked to musk. Lets say he doesnt like bob iger. Well, we know he doesnt. Hes frustrated. Its personal. Yes. I think a lot of us arent used to things getting personal so quickly. Now, when i listen to him here, its obviously been simmering for a very long time, but personal usually doesnt figure in business. But musk takes these things to a level where its insulting to him. Yeah. But the lawsuit reads pretty well. It does. Yeah. I mean, listen, again, im no im not a legal expert. Whos he using, do you know . I can tell you. Its not its irel shoot, man, theyre good. Its big time. Big legal team as you might imagine. I applied to them once. Superior court of california, county of San Francisco. Liberal court. The relationship between microsoft and openai, obviously, the for profit, even though its still a not for profit, bosa talking yesterday about the s. E. C. Investigation and what occurred with that very brief period under which altman was pushed out and then returned. There are crazy things going on here. Altman stuff with microsoft, where i think microsoft obviously, straightforward company, ive never heard them violate any disclosure issues, but altman almost asks as if disclosure is at the behest of him. Not when you mix it up with microsoft. Openai is still a private company. Hasa 70, 80 billion value based on the last place of california. Microsoft has to disclose everything. A la the musk lawsuit where he didnt disclose everything properly to the dissenting shareholders, but again, you and i might say i might say, you made so much money. Shut up. But thats not the way the law works. No. So, well be focusing on this. Dont forget, though, of course, tesla in its own i mean, they are a huge buyer of your friend, mr. Jensen huangs h100s. That last Conference Call, he said, yeah, nvidia has it. Theres nothing we can do. By the way, dell has the 200, which is the next iteration. And that is going to really separate the haves from the have nots. David, this is really huge, the have have not economy. Meanwhile, well see what chatgpt 5 is going to look like or 6 or 7. I use it every morning. Used it again this morning. Use it every day. All right, use it for your mad dash, then. Ask it what you should do for your mad dash. Sure, sure. Thats what we got coming up here. We got an opening bell as well, less than eight minutes away on this friday. Last trading day of the week, of course. More squawk on the street straight ahead. You know doug, ever since switching to workday youve been a real rock star. Rock star . What do you know about rock stars . Billy idol . I mean wheres the skintight leather . My shoes are leather. Wheres the unnecessary zippers . That thing billy, rock star is just how doug feels when he uses workday. Thanks, rory. Ill show you rock star be a finance and hr rock star. Workday. For a changing world. Billy idol just stole your golf cart there are some things that work better together. Like your Workplace Benefits and retirement savings. Voya provides tools that help you make the right investment and benefit choices. So you can reach todays financial goals. And look forward to a more confident future. Voya, well planned, well invested, well protected. Announcer the opening bell is brought to you by nuveen, a leader in income, alternatives, and responsible investing. Welcome back. Lets get to a mad dash. We suspend a lot of time talking about dell. Cant help but think about hpe sorry, hpq, but now we want to move on to hpe, which reported earnings after the bell yesterday as well. Dell will be up the most of any stock today, and i think hpe is a possibility to be down the most. There was a moment in the Conference Call where it was just a jawdropping moment. Antonio, who was on this morning, he says, first i will touch on our revenue, which was lower than expected in large part because network and demand softened industrywide. Untrue. Untrue. We know that dell said, network and Network Demand strengthened industrywide. Just untrue. The timing of several large gpu acceptances shifted. Didnt get the nvidia. Michael dell got the nvidia. Additionally, we did not have the gpu supply we wanted, curtailing our revenue upside. Werent able to provide bringing a. I. To you, in other words. These are all things that he sk screwed up on. However, gpu availability remains tight. Michael dell has the gpus. And our delivery time has been delayed. Broadcom and dell, no. So, you need to draw the contrast even more so then. Dell is was able to get access to h 100s, for example, incorporate them in the servers that their customers want to drive their generative a. I. Platforms. These guys work. So, what accounts for that . What accounts for not being on top of that . I think that michael dell jensen huang wants to give it to everybody, but some customers are more equal than others, and michael dell has a great relationship with jensen. So, it really is about having a preferred relationship with nvidia that is going to that is going to mean youre up 31 versus down 5 . I dont know why hpe didnt get the chips. The graphics cards. I do know that to say that network and demand industrywide softened is just its not true. Its an illadvised way to portray what happened this quarter. It was very strong for dell, their direct competitors. Do i know about how do we know that they didnt make their bed with another wayto do it . Just so you know, michael dell also got all the good amd. Amd has great a. I. So interesting, jim. Im just saying that hpe may have a view that the industry has softened, but michael dell, look at what hes telling me today, how strong the demand is. Im not buying what hpe is selling. Yeah. Thats i mean, okay, so, that gets to a level where we simply lose our ability to fully understand, frankly, what exactly other than just saying, execution. Thats why im going out to see the keynote of jensen. I want to understand, because jensen is a fair man. I mean, i remember at one point he said, listen, meta wants a lot, and theyve really come to us and said, look, we really want to embrace, and were going to help them. Frank slootman, formerly the ceo of snowflake, goes to jensen. Its not a pilgrimage. Jensen is not like that at all, but what it is is a recognition. Maybe their stuff look, i was i went out there several times just to demonstrate the technology that nobody wanted. That jensen nobody wants this, jim. Tell me what to do. I said, i dont know, im a reporter. He said, well, talk to this thing. I know, i know. Dont Start Talking about digital twins. I dont want to hear it. I dont want to hear it. Okay. Now, the well, i was going to talk about it. I knew it. Nobody knows what youre talking about when you talk about digital twins. You always go there. Well, its the a. I. Factory. Now i feel bad. Im sorry. I didnt mean to make you feel bad. Look, and you can say, jim, youre so focused on this. But what im telling you is that when you sit down with apple or dell or salesforce or servicenow, this is it. Then you sit down with lilly and its glp1s. All right. There you hear it. Cant hear much else. At the big board, gbtc. We will speak with grayscale ceo michael. That will be important because we want to know about ethereum etf. Next hour. Over at the nasdaq, fin front, a Digital Asset mining company, celebrating a listing via spac. Theyre still doing the spac thing. Yes. Time, i guess, to make it so that people theyre still doing them. Its ill advised, we know. You know what the problem is . We have this ceo on yesterday, sara and i, and he was, like, listen, i have no i wanted to go public the traditional way, but i have no certainty. Spac gives me certainty. 7 billion deal . Yeah, 7 billion deal. No certainty . Thats kind of odd. Were not seeing a lot of ipos for whatever reason. Dave cody with vertiv. Youre going way back. Im saying theres only two spacs. I could name maybe three. Draftkings, vertiv, and ill come up with it. Oh, really . There are 300 of these, and youre having trouble. Youre right. And yet theres people theyll say, oh, digital miner. I want a digital miner, let me go buy that. Good luck to you. These are not stickered the way cigarettes are. But i want to help people, not hurt people. The odds do not favor buying spac. Your buddy, thats a success. You and my wife. Last night. Attacking me. Its not no. Just saying. Im not attacking you. By the way, dwac has been a great performer and that deal is going to happen. Its treasury secretary, would you say that . At dinner. If you asked to be treasury secretary, would you say no . I want to know right now. I said, what the hell are you talking about . Im under contract. Chairman of the federal reserve. Thats what jims going to go for. I know jay powell. Hes not going to renew powell. Yeah, never mind. Lets move on. Lets move on to something more important. Lilly . Nycb, jim. New York Community bank corp. , down 29. 5 . Let me get to a few really good idea for them to get that signature last year. Weve been talking about nycb for some time, but then there was new news. We thought they might be done, so to speak, out of the woods. But we get this release yesterday. Well, its too early to buy that stock. They have a new ceo. Im told, by the way, danello is a very serious guy. He steps in as ceo effective immediately. They got rid of their old ceo. They have also made a number of other appointments, but you know, they had some control issues, lets leave it at that. We cant leave it at that. This is a multi the assets sh t , the apartments may be worth a great deal. The federal reserve, it was a gunshot marriage. Bring people back here. This is not a large bank. That said, it acquired the portfolio of loans from Signature Bank, which almost a year ago at this point, if you recall, when we had that mini banking crisis with svb, Signature Bank and then First Republic all going out, they took on signatures loan portfolio. It hasnt gone well for them, particularly given what is already an outsize position in commercial real estate, particularly office. A number of loans brokered by this firm, meridian, which is very big here in the cre space in the new york area, a Company Called new mark, apparently, acting on behest of the fdic is the one that found these buyers, but what in the world were they thinking, sending this portfolio to nycb . I think it was a momentary, lets get this deal done. And lets not do a big bank because were under a lot of political pressure not to reward the large banks . We already did one with jpmorgan. Lets give it to small. This was a bank, by the way, that was always viewed as being a lender that was aggressive, so it did not anyone whos involved with this should have known the quality of how these the bookkeeping, by the way, the charges from 2008, pre2008. Almost come up on the anniversary of the demise of Silicon Valley bank, though, it does, of course, raise recollections of that. The question here is, will deposits start to flee or not . Now, previously, when they first acknowledged that there were some issues with the loan portfolio, and taking higher losses than they had anticipated originally, the deposits didnt really flee. No. So, most of the companies yet again, will they . Analysts were pretty positive about the company, and i dont know why anyone would be positive. This company has never no. This company, for 20 years, did lending that i felt was aggressive. And yet, they got this signature . I just was astonished when they got it. Yeah. We didnt even know it was in signatures portfolio. Even the bulls are like Piper Sandler that had been, like, situation without a doubt feels a bit uncertain right now. Can i just say thats the kind of analysis we rely on. Thats very helpful. If anyone wants to say this is going to spread, this was an outlier bank to begin with. That does not make it so its an inlier or liar. Maybe change the word there. It deserves to be paid close attention to. Again, not necessarily to your point that its going to spark a conflagration, but its always something that is in peoples minds as we come up only ten days from now to the anniversary of the crisis at Silicon Valley bank. I want people to read charlie scharf, the ceo of wells fargo, on that last quarter, describing actual commercial real estate issues and how small they are in the banking system, because of how widespread they are. By the way, tadavid, remember, this is not office. This is actual apartments, and we have a shortage of apartments, so maybe theres just a loan to value issue here. It is. To your point, its not systemic. Certainly, we dont think, in any way, it would be, but its a name weve been watching closely. Jim, lets move on. What else are you keeping an eye on this morning that we havent yet mentioned . Broadcom, again, is the big beneficiary. Two upgrades today. Price target up huge. And then, david, lot of people trying to get ahead of next weeks retail earnings. Jpmorgan raises its price target. Huge. 125 to 157. Citi raises williams sonoma, and they dont even like it. Citi takes up rh. Thats been a while. Pvh. These are all retail names ahead of next week when the consumers supposed to be strapped, so to speak. No. Well, weve been getting different reads on the consumer in terms of the theyre strapped. We have. Sara always brings a lot of comments from companies that have report earnings, and its a mixed bag, i guess, in terms of the commentary from those retailers that have already reported. I think that walmart was amazing. Costco, amazing. Amazon, amazing. Again, i come back to this, who has the money to do a. I. . Who has the money to be able to take in giant amounts of inventory . If the sku is limited at costco, but the answer is the big guys with the Balance Sheet. Im just saying, we have to emphasize that this is about Balance Sheet, not just technology. Who can afford the technology . And by the way, david, apple, long knives still out. Yes, they are. Not stopping. Yes, they are. Wasnt there Something Else there was another couple of kind of more negative than positive pieces so to speak . Yes. Goldman. People just feel they have nothing special. There was a piece this morning. Sternlicht, very good about how often people would use the vision pro, and i end up hearing she uses it on an airplane, which is when i want to use mine because im dog tired of watching somebodys backseat or having people hear what im doing. Thats vision pro. Apple is moved from the conviction by list by goldman. But look what they added. Nothing like a good lock company to replace apple. The technology for aggregates versus the technology in vision pro . I mean, come on, stonehead. Its true. The vision pro, spending 3,500, though, jim, on something thats going to make your flights a little make your flights a littlenicer, thats got to be a limited audience. You take pictures. You get the app. You get the special photo. Take pictures on it. It looks flat on the phone but its 3d glasses. Lets say that you have grandchildren. You take pictures, and you can save them in your vision pro, and you watch them and its 3d. Its like, well, i like looking how much i wish they had the vision pro when my late mom was around so i could remember what she sounded like. Yeah. Just saying. You know, youll never leave. I mean, even when youre gone, youre going to be around. Theres so much tv time of you, we could just have you playing forever. Thats the game, my friend. Youll live in the cloud forever. You bet. Yeah. They know nothing. What version would you like of you . Kind of in your 40s, your 50s . 60s . We made a panoply last night, doing an evergreen in the business, and it had me with my sister when she was 9 and i was 6, waiting for my father to come home from work on saturday. It was just precious. Precious view of my life. Yes, it was. When will daddy come home . He worked every saturday. You know, im looking at our mega cap tech. Meta is the outperformer right now, along with nvidia. Thats the best buy. Meta is up 1. 5 . You think its up partially on those comments from best buy . Have you used them . David, they look like raybans, but you can text, you can take pictures, you can talk. It is just a wonder. Its the eighth wonder of the world. What is going to be given the price point is far lower than the vision pro, obviously raybans. I mean, marks giving them away. Zuckerbergs giving them away. So, is that going to be the far larger selling product . That is. Versus the vision pro . Its an amazing product, because if youre an instagramer, youre taking it, book, anything you see. And youre not its not like theyre goggles. Theyre just youre taking a picture. Right. And then youre able to post it. Yeah. My daughters into this thing like theres no tomorrow. Really . Yeah. Just very cool. Theyre very cool. What can i tell you . Thats why best buy runs out. Thats why when i call meta, they said, listen, we cant keep them in stock. No one cares. Remember, this is part of that weird business that they have. Remember, zuckerbergs product review of the vision pro a couple weeks back. Brilliant. Now, you know, theres a big move to start thinking that hes cool and then theres like the the fallout shelter from 1961 thing. So, theres people just every day, back and forth, saying, is he cool, is he not cool . Yeah. Seems a little more human lately. Thats the deal. Yeah, definitely. I advised him. You did . I said, be more human. Thats what you told him . I thought it was good advice. How many years had you been telling him that before he took your advice . Never mind. I shouldnt have said i advised him to be more human. Jim gives advice to a lot of ceo, by the way. I dont know who takes it. None. All hours of the night, theyre calling. Thats true. But im up all hours of the night, so Everybody Knows it. Eli lilly shares up 2. 8 after our documentary last night. Also, some positive comments out there. I think one firms got what i see on your list here, raising their price target to im telling you, this is about, now, alzheimers, dementia. Why . Because of what they have working there . This is a serious drug. Not a reversal. But stave off. I have radnett on tonight, mris. You got a lot of plaque in your brain . Youre going to want to be on this lilly alzheimers drug. What phase are they in for the lilly alzheimers drug . It is this is an anyday approval by the fda. Any day. It is . Between now and the end of march. This is going to be so huge, and people think i didnt think it was, but i did this American Brain Foundation stuff and got friendly with a lot of doctors. People very ready to start this. The move were looking at there now is almost solely a result of the success of glp1s, mounjaro, zepbound now. Zepbound is now widely available. Youre saying todays move is on the hopes for an alzheimers drug. Yes. That doesnt just, what, slow the progression of the disease . Lets say it looks like that youre going to get it when youre 75. If you start taking it now, theres a chance that its delayed, and if you have alzheimers, dementia, theyre seeing some positive results. Now, dave ricks, the ceo, will not hype this thing because hes too great a guy, but the early word on this is its a serious drug that a lot of people are going to want to take. As you well know, finding something that would truly deal with alzheimers holy grail. Yeah. Bigger than the glp1s, potentially. I want to emphasize that dave ricks is not your typical pharma guy. I have tried to press them over and over again, going deep into the bowels of the company, please Say Something that gives me the ability to say theres hope. They will not do that. They do not play that game. Thats what you underpromise, overdeliver. Have to play upod. Lilly is a phenomenon of which, by the way, kenny langone, isolated when the company was about 300 million. To be fair, lilly shares did nothing for a long time. Because they had a cancer franchise that was comme ci, comme ca, diabetes. Langone hung on through it all and stayed an enormous profit as a result. The thing about lilly that people should realize versus one of the new magnificent seven in europe is they have the Balance Sheet to build all the plants you need for zepbound, and thats very, very important. There is zepbound widely available. And theyve got a giant plant in north carolina. Theyre building a second plant in north carolina, building a plant in europe. They can meet the demand. Yeah. Nobody else can. Right. I mean, 20 years. Now, that may be it holds out hope for the likes of pfizer. Why . Because you can go along you can go a long time and then maybe you find something. Yeah, and im a big believer in seagen. I worked with them. My mom died of kidney cancer. Its not going well for pfizer right now as you see over 20 years. Its not. Its a dividend. Horrible, horrible, disastrous. Bristol myers, merck, meanwhile merck is just and you isolated that early on, that rob davis has reinvented that company in a very positive way. Yeah. Some great acquisitions too. I think that i thought that amgen was going to have terrific glp1like, but it didnt. It will potentially. All right. Groupwise, jim, anything in terms of, you know, financials or no. Were talking to drugs. Industrials . No. Yes. Industrials. Industrials, were still getting the infrastructure money coming from the government. And those who bet against the industrials, again, you know what kind of invitation im expecting for those who bet against an invitation to the funeral. Parker hanifen was upgraded today. I wont even mention the firm that was sell on it because im a kind man, but td cowen upgraded it to market perform from sell. They had a sell on it. Take a look at parker, ph. This is a Great American industrial. David, theres a revival of cleveland that people keep telling me about. Cleveland. You and i are going to go there. Cleveland all right, lets do it. From the rock and roll hall of fame, and were going to rockefellers original house. Great. Original street. Cant wait. The ceo who is crazy. Whoa just out of his mind. Love that guy. Lets get over to Rick Santelli now. I think you got some data for us. Good morning, rick. Good morning, david. Inn indeed, our february final read on s p Global Manufacturing pmi, the midmonth read was 51. 5, which happened to have been the best since september of 22. Well, it improved. 52. 2 replaces it. Thats now the best level since june of 22 in terms of strength over 50, and do keep in mind this comes now the second in a row over 50 in expansion after last year. We had ten out of the 12 months under 50, so a nice improvement, and it doesnt end there, folks. We still have university of michigan final reads and the ism pmis for february to still come out at top of the hour. Squawk on the street will return after a short break. Hey you, with the small business. Whoa. Youve got all kinds of bright ideas, that your customers need to know about. Constant contact makes it easy. With everything from managing your social posts, and events, to email and sms marketing. Constant contact delivers all the tools you need to help your business grow. Get started today at constantcontact. Com constant contact. Helping the small stand tall. Best thing ive ever done. Thats what freddie told me. It was the best thing ive ever done, and really . Yes, without a doubt i dont have any anxiety about money anymore. Great people. Different people, thats for sure, and all of them had Different Reasons for getting a reverse mortgage, but you know what, they all felt the same about two things they all loved their home, and they all wanted to stay in that home. And they all wanted to stay in that home. [announcer] if youre 62 or older and own your home, you could access your equity to improve your lifestyle. A reverse Mortgage Loan eliminates your monthly mortgage payments and puts taxfree cash in your pocket. Call the number on your screen. Why dont you call aag. And find out what a reverse mortgage can mean for you . [announcer] call right now to receive your free noobligation info kit. Call the number on your screen. Take a look at solana. You know, weve talked a lot about bitcoin. Why did i put this . Take look since the ftx, this was in part created by Sam Bankmanfried and they own 55 million bankrupt ftx. It was trading at 10 when the company went bankrupt. It had collapsed. Now its 132 based on this recent rally, of course, that weve seen overall in crypto. Thats worth 7 plus billion dollars. Imagine the recovery for the bankruptcy. That value is going up fast and in terms of getting full recovery, that possibility is greatly increasing as well. I thought im glad you did that. Look, we try to analyze it every day, like investment, not this one. If theres an ethereum etf i would buy. Hes in prison, but the value of solano is according to some reports giving advice on crypto to the guards and the like and the inmates. Is he . Solano whats he saying in. 55 million coin. Whats he got . I dont know what hes got but thats whats in the in prison i dont know. Maybe hes like shawshank. You dont know. He could be. Right. Get ready for stop trading. Hes probably going to the best. Definitely my top ten. Stop trading with jim is next. I miss my friend sam. Pickle yeah, aw whoo these guys are intense. We got nothing to worry about. With e trade from Morgan Stanley, were ready for whatever gets served up. Dude, you gotta work on your trash talk. Id rather work on saving for retirement. Or college, since you like to get schooled. Thats a pretty good burn, right . Got him. Good game. Thanks for coming to our clinic, first ones free. Fresh, warm hot dogs when im not selling hot dogs, i invest in a fund that advances innovations like robotics. Fresh, warm hot dogs, straight out of my torso one for you, one for you. Oh, youre a messy one. Cool, right . So cool. Anyone can become an agent of innovation with invesco qqq, a fund that gives you access to nasdaq100 innovations. Hot dogs fresh, warm hot dogs before investing carefully read and consider Fund Investment objectives, risks, charges, expenses and more in prospectus at invesco. Com. Her uncles unhappy. Fund investment objectives, im sensing an underlying issue. Its tmobile. It started when we got him under a new plan. But then they unexpectedly unraveled their price lock guarantee. Which has made him, a bit. Unruly. You called yourself the uncarrier. You sing about price lock on those commercials. The price lock, the price lock. So, if you could change the price, change the name its not a lock, i know a lock. So how can we undo the damage . We could all unsubscribe and switch to xfinity. Their connection is unreal. And we could all unexperience this whole session. Okay, thats uncalled for. All right. Stop trading. A lot of controversy about Cyber Security how strong it is. Zs excellent company, zero identity, people saying business is weak. If you read the commentary you would say that is untrue and buy zscale and jay who is a good executive. Why is the stock down 10 . There are people who are reading through and saying the buildings were short, buildings should not be the object. That has no longer been a good metric. Okta said the trust is strong. These arent as strong lets buy okta and not this. I think zscalar is a good company and let it settle and buy it. Im trying to figure out food inflation and eli lilly and ai and literally i would say maybe one of the best businesses in the world, mris, radnet. If you can have an mri or a subway franchise which would you take . Mri every time. Exactly. Have a great weekend. You too. Okay. Enjoy myself. Enjoy them. Good. Vision pro on and take pictures of them. No. They were sold out when i tried to get it. Maybe one day there will be grandkids. Really . Wouldnt it be great . I would love it. Dont want to leave on a negative note. We dont have a while for is chicago fed president Austan Goolsbee will be up soon. The future is not just going to happen. You have to make it. And if you want a successful business, all it takes is an idea, and now becomes the future. A future where you grew a dream into a reality. Its waiting for you. Mere minutes away. The future is nothing but power and its all yours. The all new godaddy airo. Get your Business Online in minutes with the power of ai. Happy friday. Good morning. Welcome to another hour of squawk on the street. Im sara eisen with david faber, live from post nine of thenew york stock exchange. Carl is on assignment. Take a look at stocks. Were starting the month of march kind of mixed way. Dow is down 100 points but the s p is higher thanks to technology with the nasdaq starting after a very strong month up a quarter of 1 . Taking a look at treasuries as well. Got a bid yesterday after the inline pce report that kind of continues the 10year yield to 4. 25, 2year yield is 2year note bought a little more after european inflation data only showed the trend continues of lower inflation rates. Weve got Economic Data that is crossing the tape and Rick Santelli has it for us. Rick . Yes, indeed. Watch yields slip as the data surprises a bit. Construction spending, this is january, expected to be up 0. 2 . Big disappointment. Down 0. 2 instead. The last down number that we had in Construction Spending was a while ago. This takes us back to october of 22 to find a bigger negative month over month change. Keep in mind that last month we had 0. 9 , up 0. 9 . University of Michigan Sentiment february final reads, we take the readings from two weeks and modify them a bit. In this case, the modifications are to the downside. 79. 6 was our midmonth headline read. Its now 76. 9, going back to under 70, 69 and change december of last year. As we look at current conditions, 79. 4, that takes us back to the end of last year as well. And if we look at the expectations or what lies ahead, big drop, 78. 4 was our mid month read. 75. 2. 75. 2. Same scenario. December the end of last year. The pop in strength that we had seems to have disappeared to some extent. Now lets take the Inflation Numbers, shall we. 3 was the midmonth read. It remains at 3 . Thats oneyear. 5 to 10year inflation remains at 2. 9 . Now lets go to the ism pmi. February fresh. We dont have midmonth read. Expecting 49. 5. We end up with 47. 8. That means its the 16th consecutive month under 50. Under 50. Now if we look at the prices paid component, 52. 5. Lower than expected, lower than 52. 9. Thats actually a good thing. Thats a good thing. So 52. 5 will be the lowest level considering 52. 9 our january read was the first read above 50 going all the way back to may of last year. Now lets go new orders, 49. 2. Thats on the weak side as well. We are at 52. 5 our last look. And 49. 2 takes you all the way back to december of last year when it was 47 and finally employment may be the most important considering next week we have adp and the big jobs report. 45. 9. That is the weakest level going back to july of last year. As Interest Rate moves down, 10year yield closed at 4. 25, last night and last friday and trading pretty much unchanged on both. Back to you, sara. Rick, thank you. A lot of misses there on Consumer Confidence, on manufacturing, but as rick said, importantly the good news in there, is that the prices paid component, inflationary component of manufacturing, was lower. Good. Because were on high alert for high inflation. Right. And that Inflation Expectations in university of michigan stayed unchanged. Also good. We dont want to see that move up. I want to give you one chart of the day from ray dalio, linkedin, been at it for more than 50 years, spotting bubbles. Although he spotted way more bubbles than have occurred. Way more. Okay. He says were not in a bubble now. Hes been talking about bubbles since the 70s. He has this proprietary index based on sentiment and pricing and conditions, and he doesnt exactly share what is it in but goes through the ideology and says that were not in a bubble right now. Sentiment looks moderate and goes through the mag seven in detail and says there are it looks a little frothy, but again, hes not willing to go there. Nvidia, cisco comparison on stock prices and said very different. Nvidias forward p e 27, market cap has grown ten times. Cash flow is in a different space. Ciscos p e was 100 times. When it was topping over half a trillion in market cap in 2000. Yeah. Those are fair comparison. I would point out that his own track record, mr. Dalios is mixed when it comes to his predictive powers. One thing cycles in history and sort of thinking about the big picture, and still making a lot of money. Well, im not sure about that either. Bridgewater. Not because they had huge up years. The most successful. You have to read this book the fund. Ill read the book and Pay Attention to the linkedin post. We have more clues on what the fed is thinking, interview from steve liesman. He has a special guest. Over to you. Good morning. Hey, sara, good morning. Here at the Chicago School Monetary Policy for the u. S. And i have chicago fed president Austan Goolsbee. Great to see you again. Less than a little more than 24 hours since the pce Inflation Numbers yesterday. Some people ready to throw it in and say inflation is reaccelerating, others saying its an anomaly. Where do you come down . I say one month is no months. It wasnt a great month. But it was showing something quite different than the previous seven months in a row. We just have to keep watching the inflation. I wouldnt be surprised if we found out there was a lot of noise component in it, but if we get multiple more months especially on the housing side, thats the thing thats really been weird. I mean, the goods inflation is back down to where it was prepandemic. Services inflation, which we always think is a little stickier has actually come down over a longer run period, and the thing that we got to keep an eye on because we dont fully understand why it hasnt dropped more is the housing side. What do you do with that . We have other private sector reports that show market rents are coming down. Exactly. There is anomaly why its not showing up . In a way, i thought that mechanical hey, its just how the data are computed. Ive been saying that for some months. Every month it goes by that it doesnt start matching to the markets data, i got to reevaluate a little bit what i think. I still think mostly it is going i think were on this path that it just look over the last seven months, inflation has definitely improved. 2023 was a was one of the biggest drops in core inflation that weve seen in modern memory. When you see Something Like the january data does it change your outlook on Monetary Policy . I mean, the Monetary Policy were data dependent and so if the data start changing on a trend basis, its got to change your thinking. One month is no months. You definitely should be careful over indexing on one data point, especially if its in january when theyre rebalancing things. I kind of think part of what this is, is the time cnbc time and fomc time, those are on different time scales, and so its the fomc measures of are we getting on path to get inflation down to target, thats measured over months, not minutes. Right. We got a little bit of that. Im not going to quote the phrase that the long term is made up of a lot of short terms. Well leave it there. It was just an observation. Not a criticism. I agree. The question i have is whether or not you think we may have played through all of that supply side improvement that we had in the Inflation Numbers and that 24 is a year of less progress because that process is played snout. Out . This is a critical issue. Theres one world view you can look at 23 and say yes, we had great gdp growth and unemployment didnt go up much while simultaneously inflation came way down, but that just because the supply chain was healing and its not going to heal again. My take on that is, we learned on the way up that inflation was more persistent from negative supply shocks because they spill over from one industry to the next industry to the next, and maybe that same dynamic would work this way. As you got improvement. The new york feds supply measure of supply chain index is now back to zero. Its now back to where it was prepandemic. But the impact of that is not instantaneous. I still think there is a quite a possibility that it could flow through and part of the supply shock is on labor supply. You see in Labor Force Participation much higher than where was expected to be right now and we know that the lag on wage effects is longer even on prices in the supply chain. Give us the goolsbee view of the balance of risks. Do you worry yat all that your going to overstay your welcome at 538 basis points. No. And have these great Growth Numbers and low unemployment numbers and then that you know, nobody on the fed seems all that worried to me about the possibility that youre going to overstay your welcome at rates being too high. I was only laughing at the notion that what me, overstay my welcome . But i were in a i believe that the fed funds rate, the real fed funds rate, my fed funds minus inflation, is quite restrictive. If you look sdpl exactly. The longer we stay at that, if inflation continues falling we have to start thinking about the employment side of the mandate. I think thats going to be on my thinking over the course of this year, how long do we want to stay in that restrictive environment. The answer, i think, should be only as long as we have to, that were convinced that were on path to get to target inflation. I know sara whatseants to g. One of your colleagues say you should not be preemptively cutting Interest Rates. Is that something you share or do you think that as inflation has fallen, you remain more restrictive than you should be and you should be adjusting rates to get it down to a place where its less restricted because you dont need to be that restrictive . I only speak for myself. Sure. I dont speak for anybody else on the committee. Sounds like the word preemptively is doing a lot of work in that sentence. Preemptive of what . If you are asking should the fed keep applying the brake until inflation has actually gotten down to 2 , i think that would be a recipe of high danger of over shoot. You want to get on the path to 2 , but you know there are lags. If you just keep pressing the brake until youve actually met it, then the impact of that tightening and restrictiveness would continue. You would probably end up overshooting on the price target. Sara has a question. President goolsbee, good to have you on the show. Hi, sara. Hi. If were restrictive whats normal in this economy . Feels like youre toicitchin get back to normal. What rate is that . Nobody knows that. Whats the natural rate were going to settle back into and leads us back into the religious wars of the previous 10 or 15 years is are we going back to zero or are we going to settle at Something Else . I dont totally know. I do think that level of restrictiveness were at now is restrictive. Fed funds minus inflation is higher than it has been historically, and its you just take the median sap, what does the median sep think the long run neutral rate or whats the long run real fed funds rate . Were well above that. So but the economy is not getting thats a reasonable approximation. The economy is doing well . The labor market has not shown a lot of stress. The consumer has shown to be very resilient. Indeed. Where are you seeing strength in the economy . Well, wait. The question is, is it restrictive relative to neutral. You will to be careful characterizing when you know there are positive supply shocks happening. You have to be a little careful with interpreting quantity data like well but the Unemployment Rate the jobs number was strong, some component of why the data side look as strong as they do is precisely were getting supply shock. When you see prices moving, the inflation coming in better than expected and output coming in higher than expected, when theyre moving in opposite directions like that, it would make you think about the supply side. So austan, the money question i guess do you see rates coming down this year . Are you happy with how the market now has come to the fed with now expecting around three rate cuts . Its what we always say, steve. We go through these periods where the market disagrees with what the fed is saying or the sap and for the most part that doesnt stress me out in the short run because theyre going to find out. The market is going to find out paul volcker my old mentor said, our job is to act and their job is to react and lets not get the order mixed up. Right. I kind of feel like that. Its worth remembering median sap from december said inflation for 24 would be 2. 4 and we would have three rate cuts with 2. 4 inflation. If it was. 4 2. 4 in 24 thats higher than the run inflation rate was previous so janua january. Theres nothing wrong with us being on a path to 2 that involves a be little bit of wiggling up and down, and its up from what the flow rate was, and were still cutting rates in the year. If thats how the data play out thats totally fine. It all depends on how the data play out. One of your colleagues on the board mentioned the 1995 example of cutting rates which was very gradual. One of your colleagues yesterday talked about a gradual or methodical decline of rates. Is that something you think is a process the fed can follow . As i say, i dont speak for the committee or anybody else on the committee and my thee sar russ skills are not the greatest of what worded to describe it. If you look at the median sap, i cant get past, it Shows Progress to inflation, we made remarkable progress getting inflation down. One year ago, at this conference, nobody was saying, maybe we can dramatically cut core inflation without having a big recession without having the Unemployment Rates soar. True. Part of how we were able to pull that part of it off was we got positive supply side developments and part of it remains that the feds credibility in establishing Inflation Expectations that even when inflation got up, headline inflation got up to 9 , the fed said were going to do what it takes to get back to target and were doing that. We just got to stay on this path, and i think its going to be a relatively gradual process over this year and next year. Officer, thank you so much for joining us. Steve, love to see you. Come back next year. Sara, back to you at the new york stock exchange. Thank you, thank you Austan Goolsbee, but steve, while we have you, if we could keep you. You spoke to tom barkin today, whats your takeaway after now two big interviews in this sort of sea of fed speak this week . You know, i think the way to think about the fed right now is nobody is really dogmatic about anything right now. Its very hard for me, and im interested in your answer to the same question, sara, very hard for me to pigeonhole anyone as a hawk, as a dove. I thought of austan as one of the more sort of dovish sort of guys. You dont hear him screaming rate cuts. You hear him quoting the average sep. You dont hear him having concern with the idea that you may be staying too high for too long. Thats not in there. Barkin is a guy who is listening to companies and what theyre saying about raising prices and hearing less of that. I see the fed right now, the median fed official, willing to move where the data brings them and not very dogmatic about their overall view of policy being hawkish or dovish. I agree. Youre right. It feels more nuanced, but i think goolsbee did strike a few dovish notes in the interview where he said that at some point, if inflation rates keep falling we have to worry about jobs. I mean, you dont hear a lot of other sounding alarm about jobs because weve been getting incredible jobs report. Also that were very restrictive that notion which im sure is up for debate right now, up for debate on wall street, up for debate on the fed, which is how restrictive are we and, you know, thats why im sort of wondering where the normal level is right now because this feels like a very different economy than we had before covid. I think youre 100 right in how you characterize austan. I would throw it back at you it sounded to me, if the numbers come in lousy next month, austan is going to be on the side of those who say we shouldnt be cutting and cutting that fast. I dont hear him saying we need to be whole hog, like full steam ahead and hard headed about this. You remember, sara, there were times when there were discern discernible hawks and doves. I read those minutes and its hard for me to find the camps out there to know who is who on this. Austan did talk about the idea that maybe we have to worry about the employment mandate but that was all down the road. It wasnt right now. Agree. Nobody is calling for different policy. Everybody is on the patient everyone is on the patience path. The patience spectrum and learn how patient they are as we get more data. Thank you very much. Good to get those interviews as always. As we head to break our road map for the rest of the hour. New turmoil at new York Community bancorp sending shares of the Regional Bank down about 30 today on top of already a huge slide. Details on the fallout coming up. Elon musk is suing openai and Ceo Sam Altman. Why and what may be at stake for both sides. Bitcoin posting nice gains last month and now almost 50 so far this year. There is one area of the Crypto Market outperforming bitcoin. Big show still ahead with the dow down 21 points but the s p 500 zooming ahead after some weaker Economic Data and fed eabeig wel rht back. At Morgan Stanley, old school hard work meets bold new thinking. laughter at 88 years old, we still see the world with the wonder of new eyes, helping you discover untapped possibilities and relentlessly working with you to make them real. Old school grit. New world ideas. Morgan stanley. You know doug, ever since switching to workday youve been a real rock star. Rock star . What do you know about rock stars . Billy idol . I mean wheres the skintight leather . My shoes are leather. Wheres the unnecessary zippers . That thing billy, rock star is just how doug feels when he uses workday. Thanks, rory. Ill show you rock star be a finance and hr rock star. Workday. For a changing world. Billy idol just stole your golf cart welcome back to squawk on the street. Look at shares of new York Community bancorp plunging again this morning after the company found, quote, Material Weakness in its internal controls related to its loan review. The company is replacing its ceo and revising its quarterly loss to ten times higher than what it stated citing goodwill impairment tied to transactions from 2007 and before. The latest tur adding to fears about commercial real estate exposure. A month ago the Bank Reported a loss that sparked a broad selloff in bank shares and renews fears about the health of the industry nearly a year after the collapse of Silicon Valley bank and First Republic march 2023. First republic was a few weeks later. Its amazing. Almost the anniversary of that period and then we moved through and, you know, theres an argument to be made, that it was very unique in terms of certainly Silicon Valley bank. Its depositors being very sort of specific, not to mention where it was taking in assets from in terms of where it was making its loans. That said, given the turmoil thats been around this bank for some period of time now, at least call it the last month or so, there is concern about deposit flight. It didnt really happen when they first sort of acknowledged there was weaknesses in the portfolio of assets they received from Signature Bank, but, you know, you have to wonder about the underwriting and what took place and question the fdic and the agents it used in the Signature Bank portfolio. This is the last thing you want to see happen. The portfolio you were taking from a failed Bank Actually is going to cause or be part of potential stress at another institution. Well keep a close eye. Deposit flight is one of the key questions here. Didnt happen when they first reported the loss. Although, the more the stock falls the more you wonder about deposit flight that causes that concern. I will note lack of contagion where all the regionals were down on that news and the bigger banks got hit on. It youre not seeing that because what the regulators came in and did last march was a really important psychological step where they guaranteed basically deposits. Basically. Didnt ever get there to actually say it, but we all expected it. Yeah. Theres not the belief at this point that theres anything systemic should this worsen. By the way, apparently the guy who was chairman, became the chairman, now ceo, is capable but is a little too long, little too little too late here. Thats why this is a surprise. Seemed to stabilize the situation. Well keep watching it for you. Cryptos soaring over the last year after the sec approved the first ever spot bitcoin etf that was in january. Bitcoin and ethereum have more than doubled. The number of crypto related stocks surged. Grayscales ceo will join us to discushow s far the rally can go from here. Well be back in a moment. H. 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Crypto asset manager grayscales gbtc has been outperforming bitcoin in february and there are. Grayscales ceo Michael Sonnenshein joins us on set at post nine and rang the opening bell in celebration of the Bitcoin Trust etf. Welcome. Good to have you. Thanks for having me. Its wonderful to be here. Why do you think bitcoin has had an amazing run here to start the year . A lot of pent up demand based on the spot bitcoin etfs coming to market. Uplifted in january of this year and opened doors to a lot of other spot etfs coming to market and were seeing tremendous flows and investor demand and thats really also outpacing the supply of bitcoin coming into the market every day which is being added to the price. Arent you specifically at grayscale seeing outflows . Ive seen data, bloomberg said 7. 4 billion of outflows in the last 30 days . Its important to think about how it came to market. It came to market with 30 billion of assets and investors of all shapes and sizes. We anticipated some outflows as opposed to the new products coming to market starting from zero. I do think, though, if you zoom out and look at that investor, it is like weve never seen such say shahble demand providing access to a new asset class like here. The certain might be there are a lot of other options. Blackrock seeing inflows. Some of the big banks like wells fargo and Morgan Stanley are looking at getting into these products as well. Yeah. Were just at the tipping point. I think many of my colleagues in the industry have called for a new wave of adoption as bitcoin etfs become available through advised wealth channels. Theres 40 trillion dollars and they have not been participating in bitcoin or the crypto asset class broadly. We think were in the early innings of this. Only a couple weeks in spot bitcoin etfs came to market. How do you plan to stay competitive . Gbtc has one of the most Diverse Shareholder bases throughout in the market for ten years. We have some of the tightest spreads and largest liquidity out there and so it does bring a differentiated value and that track record a lot of investors are looking for when making those allocation decisions. Now youre pressing the sec to take it a step further and approve options . Correct. On the etf . Why is that, as you say, vital. It really is vital. What we see is another situation where perhaps spot coin etfs are not being treated fairly. We have a robust ecosystem of bitcoin etfs, options traded on those products, but there are not options approved on the spot coin etfs. We believe this is a feature we need within this ecosystem. Price discovery, investors being able to manage their positions effectively, this is something that we know a lot of investors want and at grayscale thats what we do. We advocate for our investors. What type of Investor Base are you seeing coming into the etf . Well, its really a broad base. We have direct Retail Investors that are trading fortheir own account, adding bitcoin to their portfolios. Wasnt the hope that this would gin more interest from sno institutions is. Absolutely we have some of the largest hedge funds and pensions. Its a wrapper they know well, that works well for them. When they try to put on large or take off large positions in bitcoin a large liquidity etf like gbtc allows them. It helps bitcoin has had a tremendous start fueled by the interest in the etf. Sure. But when it comes to if and when theres a down turn in the price of bitcoin, what are your expectations and how do you prepare to tell people this was safe and the rights move . , of course. Myself grayscale weve been in the market ten years now and weathered all types of cycles and had conversations with clients throughout thundershower cycles. Throughout those cycles. The conversations were having is a little bit more focused on the future. Were about a month and a half away from the next bitcoin which has been an important price catalyst for bitcoin and a lot of investors are focused on that and what it may mean for bitcoin this time around. When will they do Ethereum Etfs. Thats coming down the pipeline. The sec due to make decisions about spot Ethereum Etfs this summer and grayscale is in that as well. Our ethereum product, Ethereum Trust has applied to list right here to the new york stock exchange. Keep us posted on that. I will. Michael sonnenshein from grayscale. Up next, elon musk suing openai and Ceo Sam Altman. Well tell you why straight ahead. Speaking of tech, watch apple shares as we head into march. Negative on the year. Nearly 5 off their february highs. Today goldman sachs, removes the stock from their conviction buy list. Important to note they still call it overall a buy. Stock is down 1. 5 in an up market. Squawk on the street will be right back. Giving traders even more ways to sharpen their skills with tailored education. Get an expanding library filled with new online videos, webcasts, articles, courses, and more all crafted just for traders. And with guided learning paths stacked with content curated to fit your unique goals, you can spend less time searching and more time learning. Trade brilliantly with schwab. Oh no, a rash. Maybe itll go away. Awww, how am i going to find a doctor ill actually like . Is that a qr code . Dr. Stafford makes you feel at ease. Thanks rash youve got more options than you know. Book now. Welcome back to squawk on the street. Im Bertha Coombs with your cnbc news update. Hundreds of people gathered outside of the Moscow Cemetery where russian Opposition Leader Alexei Navalny was buried today. Navalnys allies accuse the kremlin of trying to derail the funeral saying they struggled to secure a venue and find a hearse willing to care his body. He died last month in an arctic penal colony. Former President Donald Trump back in court today. This time in his federal case in florida over his handling of classified documents and National Security secrets. The judge could schedule a trial date in the case this morning. Trumps legal team is pushing for it to begin midaugust while prosecutors want a july start. A federal judge ruled a new arizona voting law is not discriminatory. It requires counties to verify the status of registered voters who have not provided proof of u. S. Citizenship. The judge issued that opinion today saying arizona does have an interest in preventing voter fraud. David, back over to you. Thank you, bertha. And welcome back, everybody, to squawk on the street. Elon musk is suing openai, and its Ceo Sam Altman alleging they breached the companys founding agreement by putting profit ahead of what was the original idea, namely developing ai for the benefit of humanity. Musk saying openais post relationship with microsoft is undermined that original mission. For context, musk helped fund oly openai in its early days on the board from 2015 to 2018, essentially cofounded the company and it is something we discussed last may when we did a long sit down interview in which musk did address some of his issues with openai. Take a listen. I am the reason openai exists. How much money did you give them . So im not sure of the exact number but some number on the order of 50 million. Man, fate loves irony, next level. I used to be Close Friends with larry paige and stay at his house and we would have these conversations long into the evening about ai and i would be constantly urging him to be careful about the danger of ai, and he just he was really not concerned about the danger of ai and was quite cavalier about it. And at the time, google, especially after the acquisition, had three quarters of the worlds talent, lot of computers and lot of money. The person who controls that does not or at least did not seemed to be concerned about ai safety, that sounded like a real problem. So and then the final straw was larry calling me a speciest for being pro human consciousness instead of machine consciousness. I am. I am a speciest. So right. You helped the creation of openai. Yeah. As much as 50 million. More than helped. It wouldnt exist withouh the n. Openai refers to open source. The intent was what was the opposite, whats the opposite of google, what would be an open source nonprofit because google is closed source for profit. That profit motivation can be potentially dangerous. Profit motivation or profit is the focus of the company, though still a nonprofit. You know, people are interested, i would encourage them read the complaint. Its a good read. Some of these lawyers are they write quite well and learn a lot. It is from one side. We havent seen what rebuttal is. It goes on at length talking about founding the company, what the purpose of the company was, and it wants specific performance. Essentially it really at the end if they were to be successful they want them to unravel the arrangement with microsoft. Right. Hes suing claims breach of contract, breach of fiduciary duty, unfair Business Practices against openai and the two founders altman and brockman and wants them to basically make the make openai, and its resource and Development Open which is what it was supposed to do. What it was supposed to do. That said and, obviously, musk continues to have great fear about what artificial general intelligence will mean to humanity overall and thats something we did discuss last may towards the end of our interview. You know, when it comes to sort of right now, tesla is very much involved in developing its own and or buying a lot of h100s from nvidia to power whole selfdriving and the technologies it is introducing and the generative ai its using to fuel selfdriving. This question weve been asking about the structure of the company as a nonprofit. Yeah. That came into focus when altman was canned and brought back and the governance issues and what that means and why it is nonprofit and how that works when you have an investor like microsoft who is essentially now able to call some shots. 49 of it and very much involved there and clearly was very much involved during that previous period where mr. Altman was removed as ceo, as deirdre bosa reported yesterday, we still know very little. Unusual to say the least. I do wonder if that musk will get traction. One thing everyone can agree on the stakes for humanity are high for ai. As you heard, he constantly refers to that conversation with paige. Stuck in his head where paige called him a speciest for saying you want the human race to succeed. What about the machines . I feel like were all speciest. Maybe not larry paige. Although i havent heard from him. We have to hear his side of the story. Explain why youre not a speciest. Well continue to follow with the rebuttal. Waiting for openai to respond. It could be a little bit. Well see what they have to say in response to that. Up next taking a look at the markets we are gaining steam right now in the session. Major averages coming off their fourth straight month of gains. Hoy far can this record breaking rally go. Well discuss and tell you how to position your portfolio from here. Be back in a moment. Rude. Who are you . Im an investor in a fund that helps advance innovative sports tech like this Smart Fitness mirror. Im also mr. Leg day. 1989 anyone can become an agent of innovation with invesco qqq, a fund that gives you access to nasdaq100 innovations. I go through a lot of pants. Before investing carefully read and consider Fund Investment objectives, risks, charges, expenses and more in prospectus at invesco. Com. Its time. Yes, the time has come for a fresh approach to dog food. Everyday, more dog people are deciding its time to quit the kibble and feed their dogs fresh food from the farmers dog. Made by vets and delivered right to your door precisely portioned for your dogs needs. Its an idea whose time has come. If you are asking should the fed keep applying the brake until inflation has actually gotten down to 2 , i think that would be a recipe of high danger of overshoot because you want to get on the path to 2 , but you know there are lags so if you just keep pressing the brake until youve actually met it, then the impact of that tightening and restrictiveness would continue. You would probably end up overshooting on the price target. That was chicago fed president Austan Goolsbee. He was with us earlier this hour discussion, of course, that balancing act of containing inflation. Yeah. I think he was showing a little bit of his dovish stripes there. Worried about the overshoot, worried about being too restrictive, worried about what would happen to the job market if they continue. Hes not a voter this year. Nobody is talking about cutting now. Its kind of a spectrum of how patient do we want to be and how restrictive we actually. Ill just note that the june rate cut odds, which is the next time were watching for, they have moved up to 64 today. That is a jump from 54 yesterday and below 50 on monday. Why . We got inline pce. Wasnt hotter than even expected and weaker data. Sim data on manufacturing this morning was a little weaker and Consumer Confidence was a little weaker. Now we go into 60s for the odds of june. We think 25 basis points at a time. Thats what we think. Not that 60 minutes that was made up. I know. I told you. Were not going to say anything that was not said by jay powell himself in that interview and was not in the transcript. Therefore, nobodys talking about 50. Okay. Lets move on now to our next guest. As you heard, some expectations of rate cuts. What does it all mean for this recordbreaking stock market rally . Lets bring in jeffries chief Market Strategist david. David, love to get your response from goolsbee and saras analysis as well, do you agree . I largely agree. I think you also had barkin on earlier today so you had two fed speakers that are important. I guess my takeaway is not that different from what you guys have been talking about today. I think theres a very calculated, relatively slow rate cut desire. But i was taken by goolsbees comments about the supply side. He really pushed on the supply side story, saying that what we saw with the negative supply shocks and the creation of inflation were a lot of followon effects. They hit one industry, go to another industry, go to another industry. He talked about the reversing of that, which opens up the door that maybe some of these sort of positive supply side surprises, which have been the real story of 2023, that created the lower inflation, have some more knockon effect. I think hes still looking for kind of a goldilocks outcome for a while longer based on that view. And, therefore, i dont think theres a big rush to do anything. Even though he is talking restrictive, restrictive, restrictive and worried they might make a mistake on the other side. The typical economist on the one hand on the other, makes it fun. David, heres the thing. They dont know when they want to start cutting and the market doesnt really know when the cuts are going to start because we just dont know how the data is going to shake out. This hotter inflation january, i think, threw the market for a loop. Now we wonder if its going to stay stubbornly high, if its going to tick up more, if theres acceleration building to start the year. It feels like we have these big question marks and we have to wait for february and march data. Thats probably right. The pce was probably a little better news, at least not bad news. You pointed out the index today was lower, so that was good. And certainly the expectations data in michigan were okay. So, i think were on the right track. Weve fallen from 9 inflation to 3. 1 inflation over the last 18 or so months. Its been a big move. Its been very positive. I think everybodys feeling very good about it. Whether it takes a little longer to get on the trajectory for cuts, we dont know. I come back to the reviews we put out at the beginning of the year. It doesnt really matter when they go or how much they go. The reality is they can go. Theres a backstop in the market. If things get really messy and theres a shock of some sort, whatever that is, geopolitical, environmental, you know, viral, all those things, we can respond again. In 2022 the fed couldnt really respond to anything negative because they had to fight this inflation battle. Right. Its not if they will cut, its that they can cut. I think thats a very supportive thing for the market. Its an insurance policy and we havent had one. A lot of people in the commercial Real Estate Industry would hope they cut as soon as possible. I mention that because when you talk about shocks, david, were going to anniversary that mini banking crisis. Were watching new York Community bank. Doesnt appear to be in any way systematic. Im curious to get your thoughts on that and the continued weakness in certain pockets, certainly the Banking Industry . Look, i really think there are some people who are and sectors that are going to hurt because of the way this has fallen out on the rate side and the restrictive policy on the rate side and how long weve stayed up here. Commercial real estate is certainly at the forefront of that. I agree with you, david, its not systematic. I think there is pain in the equity piece of this commercial Real Estate Capital structure. And its a lot of people being reluctant to write that down. And theyre going to have to. Its okay. By the way, i think its in a lot of the private equity world, too. Theres a lot of equity in the private side that needs to get written down. I really i think thats not a systematic story. Theyve had a great run for a long time. Theyve enjoyed zero rates and very low rates for 15plus years. They can take one on the chin for a little while. I dont really think its symbolic of whats going to be happening in the rest of the economy. I want to add one last thing. Real quick, yep. I go back and ive said this a few times to you guys, i really think that goolsbee, barkin are missing one big thing, that is the Balance Sheet at the fed is still extremely accommodative. Thats really the story. Thats a lot of the story of why weve been able to sustain these high rates without the economy going into a tailspin. Still very accommodative liquidity in the system. Until they come own, rates arent going to be needing to come down that much. They may stay high for a lot longer than you think. Theyre already talking about tapering qt pretty soon. I really think thats the story. Im pushing that hard with our clients. Okay. David 1. 6 trillion as of today. Always appreciate it. In the last minute we have here, lets go to dom chu looking at the major indices ending february in the green. The outperformers from a sector perspective are going to be the ones that are the mag 7 related technology, Communication Services and consumer discretionary. As you can see here, all solidly higher over the last month period. As for the stocks that were the outperformers here, maybe its no surprise here nvidia was up there, but believe it or not, check out Constellation Energy and ralph lawyeren, both posted better one of my month returns earnings catalyst over that period. Take a look at Mega Cap Technology stocks, specifically apple and microsoft. Apple getting removed from goldmans conviction buy list. Still buy rated but better opportunities elsewhere. Ill send things back over to you. Theyve lost a little conviction. Dont miss the ceo of autodesk after the break. Hitting a 52eehi. Wk gh market coverage continues after this. , these guys are intense. With e trade from Morgan Stanley, were ready for whatever gets served up. Dude, you gotta work on your trash talk. Id rather work on saving for retirement. Or college, since you like to get schooled. Thats a pretty good burn, right . 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Im sara eisen with mike santoli live from the floor of the new york stock exchange. Today citigroups chief global economist on why moderating inflation around the globe wont do much to change central policy. Zealen pharma soaring after promising weight loss drug results. The ceo is with us