Yields we continue to grow lower in stocks. And everything about the q4 playbook begins in the direction for yields. I do not see any fundamental catalyst in front of us for yields to fall. The last several days and certainly in the previous quarter, the equity market is telling you what the playbook should look like, and you think about utilities and in q3, they bolted down 10 , and its not about a safe haven. Utilities are down today alone, and high yielding sectors are not advantageous. The only area of the market i believe you could have a degree of confidence that while rates could stay higher for a sustainable amount of time is the mega caps. We go through the reasoning behind it, whether its the strength of the Balance Sheets or whatever it might be, and i believe a lot of it has to do with positioning. You have seen the nasdaq is slightly higher while the s p is down. Its not coming from financials. Look at financials and they are down two to 3 in the last five days, and target is down 4 in the last five days. Retail is down. Nvidias higher, 6 . S amd is up. Yields are not coming down. Jpmorgan says challenging risk reward remains that way. And equity weakness is finished, not convinced. You have what . Only two times in history has it been negative for the Fourth Quarter, two times. The average return is 4 for the Fourth Quarter. Where you look at where we are at, 4 or 5 , thats number one. And number two, we think this is part of a broader normalization phase. Returns are normalizing for the next three to five years, and yields are going to normalize, and we think that the process has already started. Earnings will be better. Number three, in the Third Quarter, we have been key on that for a long time. We think the big part of the move is over and we are hoping earnings will be even better for the Fourth Quarter to get us to the 50 50. We are comfortable at 45 50. The feds Balance Sheet, right, thats normalizing to a degree that it has not in decades, really. That, weiss, seems to be the most profound influence on how some, including your pal, david tepper, are viewing the market according to the conversation we had on friday, and we can throw the quote up. Its not that complicated right now, youre just not in the qe times. Its not bad its just a different environment. Hes not overwhelmingly bearish, as you know, and its a reality check, weiss, on the kind of environment we are in and what that may mean for stocks relative to where earnings are. You have to determine because of both of those what the multiple in the market is supposed to be. Right. So i agree with dave, or he agrees with me. Whichever way you want to look at. We know how to look at it. Yeah, i do too, in full candor. You are in a restrictive monetary environment, but not just a little restrictive, a lot restrictive. To your point, we have a lot more supply coming on from the fed. Rates are going to go higher. Even if they stay where they are, theres no reason for the market to go higher where they are. Unless earnings come in good. Yeah. So i dont think they will. This quarter they may because we have seen a delayed reaction to monetary policy, and maybe that gives you your catalyst, joe, and i think it will be shortlived if it moves higher. Lets throw out the calender, and the last quarter will be a good quarter. Well, steve, you should address address me. Yeah, we can always look at the calendar, but thanks for showing up. We are talking tiers in the market. Heres what i would say. Rates are too high, plain and simple. We are seeing delayed reaction. We have had 15 years of free money, and theres no normal, and normally the s p equal weight, as you reminded me on friday, its flat, and the s p is up about 12 . Flat is a gift in a rising rate invinement. Why is it flat . Companies had massive Balance Sheets, a lot of cash, and consumers had it, and that has been depleted. With that being the backdrop, and with costs to the consumer, regardless of what headline or core inflation is, we know it has gone up because the price at the pump, and by the way, it has yet to filter through actual cpi, and dave does not see a disaster and neither do i, because the bank system is solid and in 2008 it was not. We should keep the tenyear note yield for the entire program, and thats where the story begins and thats where it ends. As long as it continues to go up, stocks will be challenged. Period, end of story. Scott, i couldnt agree with you more. I think the challenge for equity investors, we are entering into a new phase. Last year we clearly understood the fed was going to be aggressive and then even more aggressive, and then, wow, they were being really aggressive. In the first half of the year, we got this pump, if you will, especially with the liquidity infusion and the impulse coming out of the banking sector, and we got the infusion of liquidity and it reset, i would say, what the longterm expectation was on rates. We have seen the tenyear continue to creep higher and higher and higher, and if you were angering around the may and june timeframe, we were already at peak rates, and the market priced in what the fed had left to do this year, and by the way, there would be four Interest Rate cuts because of the looming recession we all telegraphed coming into this year, and now you are seeing a period of digest chun. The challenge is september was a tough time to digest that, and what is happening in Central Bank Policy outside of the United States right now and the divergence of that that. What we are trying to do now is figure out where is that top for yields, but if this is where we are going to be at, and maybe slightly higher because we are not seeing any abatement, how are you setting yourself up for 2024 . This is the quarter to do that in terms of what you think will happen in the first half of next year. How do you counter, brian, all of that . You are not naive to what is happening with rates, obviously. How do you judge what is happening there and maintain your bullishness through all of that . I think a couple things. When you take a look at average Interest Rates and compare them to the last three years, obviously higher for longer, and i am so bored with higher for longer. If you look at since 1950 when the markets are trading above average with Interest Rates, and the return ratio is higher and you are a stock picker relative to just buying the index. I think joe is right. We are going to have a period where the mega caps work. I think what has happened to the high yielding areas like rates and utilities made people learn you want to own Dividend Growth and not just dividend yield, and you want to own a bunch of things as returns moderate. The market told you we are head into the high single digit and low double digit return for several years. Its notable, joe, as you said, the mega caps doing well, and normally you would see the nasdaq moving considerably lower and its not happening. Why . Because the stocks like we are showing you on the screen here, whether its amazon, tesla, all higher on the day. I think theres a universal thought that we have to lose the concentration that has been so dominant so far in 2023, and in fact, i believe that only intensifies as you move towards the end of the year and you study the treasury market and ask yourself the most critical question as it relates to treasuries, and who will be that buyer of treasuries . A significant enough buyer that will bring yields down. The answer to that question is very difficult right now to try and find. Is it going to be Pension Funds . They are could step in but they will not be aggressive enough to press yields lower. We know theres a tremendous amount of issuance, and as long as you have the Structural Force in place, and i believe its structural, and i dont think this is going to be in place through 2024, and you have to identify the areas of the market where you believe theres not that sensitivity to where the move in yields might be. But there has been a sensitivity to growth and tech. One day does not a trend make, but its clear to track, when rates move up, nasdaq has been lower. You have been making that point i have not made the point, the market has been made the point. I will credit you, because i believe you are right to focus on that. Its important to also say, well, where, in fact, was technology coming from and where is technology now . You are talking about at the end of july when the move in yields really began. If you look at a 30year, its up about 80 basis points since the beginning of august. Scott, you are correct, the mega caps sold off, and technology and mega caps were already overbought at that point. Now where we are in the marketplace, you could make a reasonable argument that technology and mega caps have a little more of a comfortable valuation from where they were three months ago, and the fundamentals are still strong and the Revenue Growth is still strong, and the need to access the debt markets from these companies is not going to be there. Lets say arc, for example, the arc etf, it was down 9 in september. Why . Thats the month we saw rates rise dramatically, as they did. And we are talking about zoom and coin base and that was up today, and its about to go negative, and just to give you a flavor of what is in it, and thats far from all, but at least enough of what her holdings are, kathy woods, to give you a flavor. Where in tech is a decent place to be in rates remain elevated . Well, not ark, and its a binary fund, and she chooses to be that way. Its a strategy i wont say its bad or good, but you have to know that going in. Its still up 20 year to date. Yeah, and lets look at it for two years. I understand that. The place to be in is tech, and meta, its 16 to 17 times next year. I like microsoft. You will start to see starting in january, actually, the products flesh out and adapt ai into it, and thats going to drive revenues. Of course they both have cloud businesses, and those two stocks happen to be my two Largest Holdings of where i would be, and can you find other areas but lets not bet on consumerdriven businesses like cell phones and et cetera, and so going back to the semis. Amazon is another one, and i own a small position, smaller than the other two in amazon, and i decide do i want to be there or be bigger . I cant answer that. I may want to be bigger there because andy has been a better financial ceo, better than bezos. You have so much more data that has to go to the cloud, and you have to be safe in the big cap names that have fortress Balance Sheets and dont have to go to the market for funding, and thats what hurts tech stocks. You bought more oracle . I did. They missed the estimate which was 12. 47, and there was an overreaction. They are trading at six multiple points near their tenyear multiple, and talk about f fortress Balance Sheets, we just added to our more tactical s p 500, and number one because of the strong earnings going forward, and the cash Balance Sheet. It helps us to bring the multiple down with respect to the s p 500. I know you like oracle because you picked it in the stock summit. I want to talk about the playbook of sorts for the Fourth Quarter. I find it interesting here we are talking about a higher rate environment, which you agree will be with us, yet you like utilities and staples. Some areas that dont do as well when yields are going up for obvious reasons. Why do you like them . Well, i would say one of the things that i want to make sure that i identify here is that this Fourth Quarter could be a setup for complacency in terms of what happens next. Scott, we talked earlier in the show about how the last three years we have had negative returns in september and all three of those years we generated positive returns in the Fourth Quarter. To brians point, we could be in for that setup here and we could see a positive quarter. I want to make sure people are thinking about this in terms of we are likely approaching peak yields. Yes, the dynamics, if you will, and the enthusiasm and sentiment behind utilities and real estate is probably not going to play out in the first half of 2024, but i think if you look at the sectors that under performed this year, and, oh, by the way, we are now at more stocks with negative returns in the s p 500 than positive stocks just by a little bit as of fridays close, but i think you want to look at places like health care. If you look at reads, for instance, reads has an entire collection, and you may not see the opportunity there but they are tied in with the infrastructure spend, particularly in technology. We better perform in health care, and there are growth dynamics in that sector that are attractive. Think about all the concerns we had with higher costs, and a lot of those have been passed on. If you are worried about the consumer in 2024, and you are thinking about the shift from, you know, retail to necessities, Consumer Staples company should benefit from that. One of the things i would say for our viewers in the equity space in particular is take this quarter to think about setting up for a little bit more volatility and a little more uncertainty, and think about the places in your portfolio where you are underweight and add some to that, and just add to those exposures. Not that they will be in the best place this december, but looking forward through 2024, we are going to digest these higher rates and reset to our new level. This is where you will want to be when we start to see some of the consumer slowdown. Rates are one component in the 27 or 48 theory of yours. Yeah. And then this is the quarter we will get back to earnings growth, and then you have a lot to live up to next year, and why dont you think those expectations are over inflated . I think they bottomed out with respect to revisions, and not only for the current fiscal year, scott, but 2024 the revisions bottomed a couple months ago and started to recover quite nicely. That could still hold true. Yep. And estimated could be overinflated moving forward. One doesnt preclude the other . Yeah, especially the 24 numbers, right . Thats what i mean. Lets call it a 245, 250 number next year, and the s p is pacing up to a 223 number. Could they come down . Sure, they could come down. Analyst follow each other in the herd in beginning to increase their numbers, and any downward number will happen in the second half of next year and not the first half. What a is fair multiple do you think the s p could be trading on . All roads lead back to that, right . Thats the crux of the conversation is how do i know what the multiple of the market is supposed to be in a higher rate environment, in a qt environment . That is beginning, middle and end, the story. In a qt environment where rates most likely peaked, and coming out of a bear market low, you have six multiple points that come off of that low, and we are only 4. 5 from that, and the turn, we could have more of a multiple expansion, and the multiple is a trap question because is it 18 to 20 times . That would be great, but on the average side we are going back into normalization so it will be a higher multiple, and earnings are going to grow into that. The word we keep using is peak, and i take it not personally with you, but i take issue using peak when we are talking about yields. If you are thinking we are at peak yields, the right word to be using is elevated. You will see rates are going to be elevated for an extended period of time. If thats the environment as we are seeing today just look at today, the s p equal wait is down 1. 25 , and trust me, i run an equally weighted strategy. And thats the environment of an elevated yield setting, and i think the viewers and investors really have to think about that, not just for the coming quarter but was move into 2024. Russell, to your point, was down 8 from last month, and super sensitive to rising rates. If you listen to one sound bite in the show, listen to what joe just said. Elevated, staying there. Too many bulls are saying rates have peaked. I have to buy. Its not that they peaked. Maybe they have peaked. It doesnt matter to my very cautious case. It matters they will stay there for a while. Its not a temporary thing and that will influence spending behavior and the economy, and thats why i firmly believe we will go into a recession, not the soft landing. Stocks can go up. You have made multiple cases where stocks can go up with rates being elevated, and at some point you have to stop the elevation, you have to stop the speed in which they went up over the last 30 or so days, and it has a profound affect on what the market has done . Yeah, we came out of the pandemic where people could not spend money if you wanted to, and yeah, you could go to the mall and experience out to dinner, and that was a fire hose that came rushing in. Now that is gone. Now we are leveling out to slightly more normal activity and looking at the personal Balance Sheet and saying we cant spend. Stocks go up, but only to a certain point. My view is we hit that point on rates a while ago, perhaps six months ago, and its taking a while to catch up. Unless rates were abnormally low for an unusually long period of time, and maybe now they are abnormally high. They are. The fed is going to embark on a cutting cycle at some point who cares what they say. I am not saying next week. Who cares what they say . They have growth wrong and inflation wrong. Scott, they had everything wrong but at a certain point we are reacting to a Federal Reserve meeting weeks ago where we are hawkish. The only voice that matters is jay powell. Exactly. Take a look at what hurt civilizations. Take a look at south america where they are operating in 20 Interest Rates. Its disastrous. The only important thing is to get inflation back down to 2 . They have not said 3 . Some said they are going to 3 . They are not going to 3 , its 2 . Until they get there, its an issue. To me its just very simple its a very, very simple market. Coming up, we have our call of the day. Its a fresh 52week high, and expectations for shares to rise 20 from here. We will get the take next. Halftime is back in two minutes. Nice footwork. Man, youre lucky, watching live sports never used to be this easy. Now you can stream all you