still a chance for a year end rally. november is the best month of the year traditionally december second. seasonality is on our side >> yeah. >> i see you have a new buy and it's amd and that company reports today in "ot," but why is it part of the josh brown portfolio now >> it's been on my radar for a long time. i had been in and out of it before, a long time ago. amd, i think, is at an interesting moment in the company's history. tonight they'll report earnings. the earnings, of course, are always important, but what's more important than the numbers themselves is what lisa sue has to say about the launch of the new ai chip. so, look, this is a market that nvidia basically owns. and the h-100 chip is what turned nvidia into a trillion dollar company what i would say is if you look at the history of technology, it is highly unlikely any one company maintains 90 to 100% market share forever amd is the chip maker that has the best shot to capture 25, maybe 30% of this market over the next five years. and when i say this market, understand something the market for ai chips could be literally $150 billion if you listen to what intel says, what qualcomm says, not just amd's opinion i think they have a shot at this tonight is a very big moment they'll talk about the launch which happens this quarter there are two types of chips for ai two types of chips for ai, training, nvidia, that's how they teach the systems how to operate. the other market, the more important market longer term, is inference. amd's architecture is specifically geared toward capturing meaningful share in inference. inference is like when you go on a large language model, you post a query. that's how it responds on an ongoing basis. amd is walking through the door of becoming a serious player the stock down from 158, here in the mid-90s. i have a small position. i wanted to make sure i was in before they came out that could meaningfully move the stock. >> it's been dicey, lightly, for the smh and the chips. nvidia is barely above $400. it's the most loved, you could argue, of all of the names even though i know it's not the most loved for you. that's where broadcom comes in jonathan krinsky says, come at the king, you'd better not miss, talking about nvidia and suggest at least 10% more down side is ahead. now i know because it's not yours. you may not have a specific opinion on nvidia but the space itself can't afford, i'm saying, to have an amd miss today and nvidia break down another 10%. a lot of other names will go down with it if it does. >> of course that's where your opportunity will be. the pc market is bottoming i do think that we're also hearing the end market is bottoming. we heard from lam research they increased guidance twice so far. the stock is still down a lot from a year he ago so i do think you'll be able to pick your spots. br broadcom is getting wrapped up 55% of their revenues is going to be recurring. i think there are opportunities. you asked at the top of the show if you think -- if we think there's a rally into the end of the year, i absolutely do. i think the sentiment is washed out here you're looking at the s&p oscillator, you look at josh's rsi stuff. it's pointing to negative sentiment. i think the fed is done. even if they go one or two more times, they're done. they're in the ninth inning and we're not going into extra innings. i know you were going to ask me that peak rates, we are seeing peak rates. look at the bond market. look at gdp and pce and eci today. it's kind of like in a trading range right now, not exploding higher so i think you're starting to see a peak in rates as well. earnings are coming in better than expected. 2.5%, 3% isn't something to get so excited about but it isn't a negative >> so, jimmy, it's going to depend a lot on rates in terms of late-year rally the fed meeting is beginning today. nothing really expected. there's your market picture, ten year at 4.87 consumer confidence remains strong middle east oil, yes, it's a wild card as world bank suggests you get a deeper escalation of the war over there, you could get oil to 157 steph has some moves, but size it all up. >> let's start where you ended on oil you could go to 150. it's the same discussion we were having when russia invaded ukraine and a lot of really smart oil analysts were saying we're going to 200, not we may go to 200. that turned out to be the case if it worsens, that's bad for stocks, it being the middle east let's assume it stabilizes at some point soon. i think the bigger point here, and steph was making it, this u.s. economy is a lot stronger than it has been or is being given credit to it the upshot that have is the cyclical sectors of the market have stunk for a long period of time a lot of times you've come to me and said how much more patient can you be, jimmy, on specific names. i think that is the right word to use for everybody listening it is a question of patience in my opinion, the biggest virtue in the stock market i think you're soon going to be seeing the cyclical companies continue to outperform, outearn what their share prices are reflecting and it's showing up in their balance sheets. now just to sum this up, what i'm looking for this week is the labor market report. to your point, scott, on interest rates, yes, yes interest rates are what matters right now. the flow of fund into bonds. you're looking for the friday report to show ameliorating wage growth if you get that, it's going to back the fed off even more that's what i'm looking for. >> steph, in terms of oil, the two moves you have i want to get through before we bring in our headline guest. you trimmed chevron and added to slb. can you tell me about those two things chevron has not traded well recently, as you know. >> it hasn't and it was a terrible quarter and you know i'm always looking for good quarters where stocks sell off this was a terrible quarter and the stock sold off, appropriately so and that is because they missed earnings and they missed free cash flow and they actually are buying back less stock than they actually guided to, and they guided for less buybacks as well the whole reason i owned this, they were buying back stock and were actually increasing the dividend while they were increasing capex now you do three deals and you're short on cash flow. so, to me, i would much prefer schlumberger which beat, guided to mid-20s in margins and ebitda growth in general and have pricing power and technology, and i think there's much more upside f., in fact, oil prices do go higher this is much more levered to the underlyin commodity. so you'll get more juice if it goes higher. if it goes lower, it will have a lot of juice, but i think oil prices stay about this level and they're printing money >> energy the worst sector year to date in a bad month down 6.5% almost >> ugly. >> -- on the month no one wants a spike to the degree of 150 bucks that will have broad implications on a lot of stuff the middle east has gone real bad and you get a spike and that has implications in and of itself just ranked number one in both portfolio strategy and quantitative research by institutional investor, inducted into their all america hall of fame, the chief global equity strategist at jpmorgan congratulations. >> thank you >> good to have you back >> thanks for having me. >> by virtue of these accolades, your point of view matters to a lot of people. you heard jim suggest that the economy is doing much better than people think it is. you're one of the doubters about where the economy is going let's match this up. >> absolutely. i am one of the doubters i've been a doubter even the last time i was here on the set when the market was higher for us macro is really the big headwind that markets are facing higher for longer. cost of capital being elevated is something we've talked about since february liquidity is getting sucked out of the system as well which is a pretty big and important headwind there's geo politics we can talk about, but that's very hard to handicap fundamentals, to your point, i agree. i think i see them slowing they're just not collapsing. and the word i would use on the fundamental size, increasing bifurcation on the fundamental side >> it sounds like the crux of your argument is built around the idea the lag effects will be felt more than people realize today. fair >> very fair i think there is a lagged effect the lag may be longer than we're accustomed to seeing because of the unprecedented injection we got during covid and the relatively healthy starting point for things like balance sheets >> jimmy, i want to you respond. you have a more sanguin view >> always good to see you, dubravko i think you'll agree the economy has done a lot better than expected a lot more lagged than any of us expected we can disagree about the path going forward. these companies have outearned and cleaned up their balance sheet. doesn't that actually perversely extend the lag further if they have less debt to refinance, what we're worried about on the corporate side, refinance at the much higher rates except there's a lot less debt because they've paid down a lot with all the extra cash flow. is that right? >> i think that's broadly right but that's one part of the picture. i think for the s&p 500, balance sheets are in a pretty good spot rates are going higher is a headwind but just the gradual headwind the problem is i think as you move down the spectrum you look at mid caps, the entire private sector, there's a more significant portion of that that's variable. everything that has happened from cost of capital has happened under a healthy top line demand type scenario. pricing power has been strong. >> forgive me, why aren't companies laying off people? >> i think that's the lagged effect i think that's the risk we're facing in 2024 one statistic, the s&p 500, if i'm not mistaken, the balance sheet, employs only 12 million, 13 million people. if you look at mid caps, small cap, private sector, 60 million, 70 million >> small caps are in a bear market already, though what if a lot of what you're saying is true and priced in the russell is not the s&p >> i think things are definitely getting priced in but, to me, that's a sign the market is telling you things are slowing down we're hanging on to the magnificent 7, magnificent 11. that's telling us. i think we'd better hope the nvidias of the world keep really rolling in very strong numbers the second that goes, what do you hang on to >> has the consumer and the strength of the consumer surprised you? they've been resilient and that's tied to the labor market. i was bullish about the labor market being resilient and as a result higher wages. you heard from mcdonald's and coke and pepsi they do have pricing power better demand from the consumer, better margins they have pricing power and operating leverage >> very valid point. there's macy's, coastco, the lower end is getting squeezed harder and harder. >> we didn't hear from mcdonald's yesterday that's for sure. >> last year we were defending the consumer this year my problem with the consumer -- again, i use the word bifurcation the upper is sitting still in good liquidity the problem is the lower 50% is getting squeezed excess liquidity how much liquidity households have inflation adjusted, lower 40% by income cohort is below pre-covid levels the middle 40% is at pre-covid levels the upper 20% is still above so we're basically hanging on to the upper income to keep carrying us forward. >> i feel that's always the case >> no. the bottom 80% drives 60% of household consumption and right now retail, if you look at retail numbers and consumption, it's running above trend so i think there's a very legitimate risk where retail sales at a minimum go down to trend. that's what we're seeing next year is the expectation and a multiple of 18 i just think very hard to get excited about. >> we have a bifurcated view, josh, where the market is going from here. it's the everything looks pretty good view, these two, to where the puck is going, the ice starts to melt that's the greatest issue we have to get an answer to before we can have a real comprehensive view about where stocks go from here >> in other words, can the deceleration in growth -- is there enough time for this lower consumer to hang on until the deceleration in growth stops and we're into a new cycle so you sound like the answer is no and i'm inclined to agree with you, but here is the get out of jail free card that might work out this time if we do get down to 3% inflation and then 2.8 and 2.5 and that tremendous pressure on the lower income consumer or the middle of the road consumer even, abates slightly, and what's left standing is this incredible labor market. keep adding 100,000, 200,000 jobs a month the fed in a position they can take the boot off the neck, even if that's not for a year from now, isn't that the get out of jail free card the russell 2000, 12 times earnings, mid caps 12 times earnings, s&p 17.7 forward earnings not egregiously overpriced that's -- i know it's not -- maybe not the most highly likely scenario, but it is a likely scenario and that might force you to change your mind. i don't know if and when >> it's certainly plausible. all of these things we talk about that we forecast that has a big stain around it, it's hard to say things with conviction in unique times if i had to pick a side, the side i stand on, putting different probabilities together, if you get some form of significance productivity boom in this economy and maybe ai can drive it or maybe not, but if you can pull that off, yes, i think the cycle can get extended >> that's one of the views, by the way, of jimmy and ed yardeni, people who are positive about the market, do think you're going to get that and it will offset some of the negatives that are predicted to occur. let me ask you this. your price target at the end of the year is roughly where we are now. you're looking, for the most part, nothing to happen here your mid-picture view is more that earnings estimates are overinflated and stocks will have to come down as we get into '24. we're about to have a fed decision we will not get much of any decision what if the fed is done and what if the next move they make is a cut? what if the economy holds up strong enough earnings don't collapse to the degree you think they might >> the market and risky assets in the recent weeks, maybe even recent month or two or three, have been largely trading off of two key risk factors what's happening with rates on the back end and obviously the situation in geo politics, the middle east, oil, that you discussed earlier. the fed may be done, very well, but the back end of the curve, everything we're seeing the last two, three months, keeps hiking for the fed. and largely for supply reasons meaning the discount rate keeps getting increased for corporates, for the consumer without necessarily clear growth offset maybe the fed is done, but if the 10 year, the 30 year, goes to 5.25, 6, our ceo jamie di dimon -- that creates a tricky backdrop >> of course what's the likelihood of that actually happening >> i think a lot of it is supply, is driven by the amount of supply, debt supply to finance the deficit. >> we'll learn more on wednesday. there was no big shock in the preliminary announcement if you want to call it that >> $5.5 trillion worth of balance sheets have come off in the last six quarters. central bankers are not talking about reversing qt anytime soon. you have china, the japan factor, which is also marginal head winds let's hope that yields are stabilized >> okay. >> what do you think earnings will be for next year? you said 12% is too high >> we're at 230. i don't say that with much conviction i would say 230 with a down side risk >> back to rates before we move off that because, you know, that scenario mr. dimon has said is a hyperbolic prediction. the what if. what if rates are done going up? do you have to change your view if that's the case >> i think a lot of people were disagreeing with this view of higher rates but it turns out he's been spot on. if rates are done -- >> i'm saying 6% or 7% -- >> no, no. on the upper end but i'm saying if rates are done and pause here, in the very short term, you easily could get a tactical short squeeze, short covering. would i chase it i would not chase it would i fade it? i would fade it and re-emphasize the short side of the trade. i think begin the market is correct, we're back at february levels, we're at our price target, this moment i don't have a high conviction we have to go lower. as i think about 2024, i just don't like the picture >> let me ask you about mega caps since we haven't focused on it, you said it's a small group of stocks which everybody at this point knows about is there any reason to believe that trade will turn south now it's had a rough three months, i'll give you that but the minute that those stocks are deemed to be cheap enough, which started to happen last week why wouldn't money continue to go there >> it's possible money could go into that. >> probable? >> i think the earnings -- very solid. >> they were, weren't they >> you can talk about microsoft versus a google, apple softness in top line continues to decelerate. i think numbers have to keep coming in strong because it's a very, very crowded trade everybody is hiding there. and concentration in the market is at the highest point in 56 years. what could happen, also, more money goes into nvidia or the magnificent seven. they become cheaper and cheaper and an even more extreme environment until things roll over >> what's the best place today, in your mind -- right now. >>he whole year we have been saying cash is king. why? you can clip 5% yield at zero risk the sharp ratio is pretty good equities better give you 12%, 15%. not that easy. the other thing i'll mention is bond proxies so think about areas -- >> utilities >> absolutely, yes utilities, defensive health care maybe even some pockets of staples. they've gotten hit hard. if the back end keeps moving even higher, i think you have to start pricing in a higher chance of prices and recession in which case you want to buy a more defensive exposure if rates stabilize or move lower as perhaps another is suggesting, i would be favoring higher quality, more reception proof areas. another thing that comes to mind is dividend aristocrats, for instance that have been this favored over the course of the year >> that was fun. i appreciate you being here. the hall of famer, congratulations again. that's dubravko lakos of jpmorgan joining us here at post 9. we'll talk to you soon we're getting more news out of the sam bankman-fried trial kate rooney outside the courthouse kate >> reporter: scott, sam bankman-fried has wrapped up his testimony. the defense has officially rested its case. he is off the stand. the jury was actually sent home for the day. so they're going to have a charging conference. it will pick back up tomorrow at 9:30 with the jury slightly less hostile tone from founder this morning bankman-fried was on the stand and started off with the prosecution questioning his, quote, cozy relationship with the bohemian prime minister, if he paid off the bahama debt, more than $11 billion of national debt. he responded he didn't remember discussing that, was asked about the prime minister visiting miami. a heat game with his wife, he was given courtside seats. a dinner with bill clinton, tony blair and that prime minister and was asked about the $8 billion bug discovered we talked about that in the case he deeply regretted that and not taking a deeper look he admitted he didn't ever fire anyone he said he regretted that as well questioning that side the prosecution ended about an hour ago. then the redirect from the defense attorneys. they tried to clarify what was talked a
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