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Halftime Report Live from Schwab Impact in Denver 11/5/25
00:43:31
Scott Wapner is live at Schwab Impact in Denver, Colorado where a record 2800 advisors have arrived to discuss the market, consumer sentiment and where stocks are heading next. Liz Ann Sonders, Chief Investment Strategist at Charles Schwab, joins us to discuss it all. Plus, Omar Aguilar, CEO & CIO of Schwab Asset Management, joins ‘Halftime Report’ to explain why Schwab voted in favor of Elon Musk's $1 Trillion pay package. And later, the desk shares their crypto strategy as Bitcoin hovers around the $100k range.
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Scott Wapner
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Scott Wapner
I'm Scott Wapner and you're listening to CNBC's Halftime Report, the podcast the most profitable hour of the trading day. We record this live weekdays at 12 Eastern. Listen in. All right, Carl, thank you very much. Welcome to the Halftime Report. I'm Scott Wapner live from Schwab Impact. If you're an investment professional who uses the Schwab platform, chances are you're among the 5,000 people in the Colorado Convention center over the next couple of days. A record 2800 advisors are here as well. So it's a great place to take the pulse of the retail investor, a cohort that has helped fuel this record setting rally. Schwab's Liz Ann Saunders will join me in just a few moments. Right here as well, the committee here too for the hour, Joe Terranova, Bryn Talkington, Shannon to Kosha and Malcolm bathroom. We'll go check the markets today. We are looking, of course, to bounce back some stability after the worst day in about a month. We're getting it today with the NASDAQ once again leading the way, I guess no big surprise there. Joe, I'll come to you first today. I thought it was really interesting, you know, the sell off, the rockiness we've had, the bounce back. And this note from Tony Pascarello of Goldman Sachs I think sets up the conversation pretty well for us today regarding all of what we are witnessing. Yesterday's back backup was harsh, he said, particularly in the most popular exposures. And it continued overnight. The tension not entirely unhealthy. I'm saying that I want to go with the Fed and with the cyclical upswing in US Growth and with the flow of AI Capex and with the underlying flow of funds. So with a serious dose of humility and open mindedness, I'm sticking with the plan of being responsibly bullish is that the responsible perspective to have about this.
- [02:30]
Joe Terranova
Market right now perfectly articulated once again by Tony, as he usually does. Scott Look, I think where the marketplace is is it's got a degree of skittishness and the skittishness surrounds valuation. That does not mean that it changes the tailwind that exists from the secular fundamentals that Tony has identified. Those remain in place. But the skittishness around valuation means that potentially what the market begins to do is turn the battleship very slowly away from high beta, away from a lot of the high momentum names more towards quality. And I think it's very clear over the last four weeks that's the intention of the market. Health care beginning to outperform. You're looking at various stocks which have reported earnings and are not responding as they have in prior quarters. We'll talk later about one of those names, Exxon Enterprises. So I think that's unfolding in the marketplace right now. We're turning that battleship more towards quality.
- [03:32]
Scott Wapner
Bryn we're in a pretty decent place too, you know. Yes, an ugly day in the market brings unease with it. But the S and P and the Nasdaq would have to fall another 2 to 3% to test their 50 day moving average. So I mean technically or in a decent spot. But I wonder what you make of this B of A flow show data which we always cite because it gives us a good perspective on where the money's going. They saw the largest ever sales of single stocks driven by institutions last week, record near record net sellers of equities after buying the prior week. What is, what do you think that tells you about where the psyche of the big investor is today?
- [04:13]
Bryn Talkington
Well, I mean it shows that if you extrapolate that that small data set that they are getting more defensive. But I think the retail investors are still in charge. They got beat up a bit this week and beat up quite a bit this week with the high, high beta names like the palantirs, the Rigidis, etc. Just got their one of their legs kicked out underneath them. And so I wouldn't read too much in that institutional data because it is so short term. I think where I'm looking at to see kind of Joe hit on it. Well, these really high, high beta, high momentum names, are they going to start petering out? Are they going to be able to regain that? Because some of these stocks like Etherium bit mine once again we're getting all those stocks that just have been parabolic, you know, really had some technical damage done in the past few Days. I think also on top of that single stock data point that you said, you know, these individually levered single stocks, I mean, that's just been a complete disaster for investors. Were long those the last couple of days?
- [05:14]
Scott Wapner
Yeah. Malcolm, is Tony Pascarello correct? Just keep your eye on the ball, so to speak, of the Fed, the upswing in growth, capex and where the money's flowing and then that gives you a pretty good picture that this market's going to go higher over the next couple of months into the end of the year.
- [05:29]
Malcolm Bathroom
Yeah, I think Brent just put it perfectly. Retail is still in charge. I think that maybe what we're seeing is investors are starting to get a little bit more discerning about which companies they place their bets on within the AI revolution. You know, Allah meta selling off after earnings, a la Microsoft sort of trading flat after earnings. However, Amazon and Alphabet being positively rewarded. I think maybe what we're just seeing is the revolution continues to go. Capex spending is going to be rewarded. It just depends on whether you can prove that there really is some there there as far as the spending is concerned. So I'm not super concerned heading into the end of the year here.
- [06:05]
Scott Wapner
Yeah, yeah, we're going to get to that too. That's a big story whether we in fact did have an inflection point over the last week or so with first Metta and now Palantir, whether it relates to either spending or valuation. But I'd rather get your broad thought first on where you think we are and how you think we're set up for this stretch run of 25.
- [06:26]
Shannon Sokosha
Yeah, we've got two months left essentially, Scott, and those two months seasonally tend to be fairly strong in the equity markets. We're looking at things like equity inflows, corporate buybacks and underlying strong fundamentals that while valuations may seem stretched, particularly some of the names that, that Brian and Joe have already mentioned, that underlying fundamentals from an earnings perspective support some of the valuations that we see outside of those top high momentum names. The other thing that we're seeing is that again, this reversion to companies that perhaps might represent the next phase in this mega trend, taking this and making these innovations applicable and actionable within their businesses. And so if we get an acceleration of companies going into 2026 that are talking about potentially integrating AI into their businesses, increasing that productivity, that creates an even stronger margin and Earnings picture for 26 that can support these valuations in sectors outside of technology now, we're going to still continue to See Volat based on those tech trades. But I think that reasonable investors are looking at potentially reallocating from some of those larger single names into areas that can benefit from this next phase.
- [07:44]
Scott Wapner
All right, our headliner today is one of Schwab superstars. She joins us now. As I mentioned, Liz Ann Sonders, chief investment strategist at the firm is here at what really is your company's Super bowl. We said there's 5,000 people people here, a record number of advisors. What's the message you're trying to get out here?
- [08:03]
Liz Ann Sonders
Well, first of all, welcome back to our quaint little gathering here that we have every year. I think the message is certainly for the business of advisors is incredibly optimistic. This is a booming part of the business. I think they're optimistic about what they are doing for their clients, for, for their investors and you know, hopefully, and I believe their relationship with Schwab, but obvious a little bit of valuation related concerns, sentiment related concerns. So those are the questions I'm hearing at a more micro level.
- [08:37]
Scott Wapner
You know, it's interesting that this does come at a time where you heard some of the members of our investment committee say retail's in charge. Retail has played such a huge role in this rally. From your perspective, what have you seen?
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Bryn Talkington
Seen?
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Liz Ann Sonders
Well, first of all, I would, I would say it's retail traders, which is maybe a subset of individual investors. You know, the cohort that was born that kind of grew out of the pandemic alongside sports betting and gambling. But they, they have become the power drivers of the market, you know, in the aggregate representing 25% of trading volume. And that can really spike on, on certain, certain days. The one thing I worry about a little bit is, is that gambling mentality. And I think what we're maybe starting to see a turn in which I think is a positive from a broader market perspective is maybe a shift away from the ultra low quality non profitable zombie micro cap stocks and, and taking advantage of some of the rotation that has happened in indexes like the S&P 500 to look for opportunities that are arguably at least marginally up the quality scale.
- [09:48]
Scott Wapner
Do you think that that made the market a little more fragile, that those stocks had done particularly well, as you say, so called high beta, low quality. You said unprofitable. I mean, in some cases on revenue. Right, right, right. Do you think that made the quality of this rally a little questionable? No.
- [10:09]
Liz Ann Sonders
In fact, I would say we benefited from the fact that that speculative fervor shifted from, you know, the Mag 7, the, the mega cap tech, AI space into these more micro segments of the market down the quality spectrum. Good news in the sense that you can start to see a movement away from that, a bit of a washout of that sentiment. And they're not the power drivers of the market from a contribution perspective. Perspective. So I think you could have some digestion there without it causing major problems for the cap weighted index. So it would have been worse if there was that speculative fervor had gone hog wild in the big mega cap names.
- [10:49]
Scott Wapner
Yeah, well Brent, it hasn't gone into that sector of the market.
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Omar Aguilar
Right.
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Scott Wapner
You were speaking about that earlier and even mentioning some of the names. What are your thoughts about what Liz Ann has said here?
- [11:01]
Bryn Talkington
Oh, I think she's of course, I think she's so spot on. I like how she puts the subset of not just retail but the retail traders and they have, I mean if you look at obviously the Met as the Googles are up very strong this year but they pale in comparison even to you know, a Palantir or Robinhood, which I think are actually the cream of the crop of the high beta names because they actually have earnings, they actually have earnings, free cash flow, etc. But I do think it's important and does give me actually bullishness towards the end of the year to actually see some rationality come back to the market. I'm happy that I think it's, I think it's healthy that Oracle is traded down since that kind of outlandish, you know, mean thing with him, with them and Sam, Sam Altman. I think it's like hey, that's maybe going to happen in a few years from now. It's very positive when that speculative fervor as she says, just gets sucked out because we do want to have more oxygen, oxygen in the room for other companies to actually get some attention hopefully of retail traders. We need them, we need that cohort to look outside of just, you know, those type of speculative stocks that have done so well this year, Liz.
- [12:07]
Scott Wapner
And this has been in some ways a very self correcting market. Just like you're talking about the areas that have gotten a little bit speculative and excessive have corrected on their own really without taking the rest of the market down with it.
- [12:20]
Liz Ann Sonders
And I think that's important because if you just look at the period since the April 8 closing low, s and P at its recent high up 38% but the average member within the S and p just since April 8th has had about a 17% maximum drawdown in the case of the NASDAQ that's more than 35%. So this churn and rotation first of all helps connect the dots between all the uncertainty that's out there and what the market is doing. The fuller story gets told under the surface of the cap weighted indexes. But I think some of that churn and the weakness we've seen underneath among the soldiers, not so much the generals actually provides an opportunity to Brin's point where you actually get fundamental research happening again and looking for spots and opportunities away from just those mega cap darlings.
- [13:10]
Scott Wapner
Or prior darlings still darlings, probably the way that this market has judged them. Malcolm?
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Malcolm Bathroom
Yeah, I'm curious Liz Ann, as you guys talk about speculation and some of the more volatile names that fall down in the micro cap category, if that includes the adjacent names. Right. So we in the last stacks report Schwab's trading and Activity index report, which I do follow regularly. I know it's about to come out here in November soon, so I won't ask you to front run it, but just curious if the lesser quality names that you're referring to include some of those AI adjacent names, the Neo cloud names we see Microsoft doing deals with that is spiked recently or if that's more broadly just all micro cap companies and tosses that one out or doesn't.
- [13:55]
Liz Ann Sonders
Specify now I think that that's a good question. When you look I track a lot of the baskets that that get to sort of these micro categories and it is in areas that are adjacent you've had a bit of a rolling over, but in baskets like Drones and Quantum, but also in the meme stocks which doesn't have a fundamental theme associated with it. It's whatever is sort of the hot meme at the time. So yeah, there is still that story, AI related story. It's just that for a while there there was an attempt to find find sort of a trading opportunity in less discovered areas, but it was again really, really down the quality spectrum.
- [14:37]
Scott Wapner
Joe, you're kind of our resident expert on momentum.
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Joe Terranova
Yes, well it's very clear to me that we are making a turn a little bit away from momentum and what has really supported that has been the narrowing that we are seeing once again. So Liz Ann, I guess the question would be how are we to interpret the return of this concentrated market that we're seeing once again? Some will say the enemy of performance is is is diversification. Others will say the concentration risk is real and it's sending an ominous message as we look into 26. How do you think about it?
- [15:17]
Liz Ann Sonders
Here's the way to think about concentration. First of all, if you if we're going to let's put pick on the Mag 7 because it's everybody's favorite thing to talk about. The best performer among the MAG7 is Nvidia. Maybe no surprise, it's the number one contributor to S and P cap weighted returns. However, it's ranked 40th from a price performance standpoint, meaning there's 39 stocks in the S and P outperforming Nvidia on a year to date basis. If you're an institution and you are being benchmarked against the cap weighted S and P on a quarterly basis, you are beholden to the weight that those represent in the index. But for individual investors, I'm not talking about retail traders here, you're not benchmarked against the cap weighted index. You don't have to take that same concentration risk and the potential downside associated with having that. They're not the best price performers. They're among the biggest contributors to performance. And I think that gets conflated at times.
- [16:18]
Scott Wapner
I wonder also, Joe, as we look at the names that are in the most concentrated parts of the market, all the hyperscalers, for example, whether we have in fact hit an inflection point, whether we are going to scrutinize the spenders and the high valuation names, maybe more so than we have in the past. Past. You look at what happened with Metta, obviously was sort of the first one where you're like, okay, maybe that's a check. We'll check you here and see what you're spending and where we think the ultimate end game is going to go. And then Palantir, okay, we'll check you. We know you're a great company, we know you're doing amazing things, but we'll still check you on your valuation. And I wonder if this is the start of more of that.
- [17:01]
Joe Terranova
I think, I think it is. I think you're correct, Scott. I think, I think it's two different set of circumstances though. I think there's a skepticism related to meta. It's okay you're spending. Are you going to spend efficiently or are you going to tell us in the next 18 months that you need a year of efficiency because you didn't spend efficiently? You did what you did with Super Intelligence and Reality Labs and the Metaverse blow up. So I think that's more skepticism surrounding we spend $72 billion this year, we're going to spend more next year. I think in the case of Palantir as you correctly state that it was a remarkable quarter, but at 85 times sales and 200 times earnings, you're calling into question if that valuation is justified at a moment where the marketplace is saying, wait a second, we are overbought. We are certainly in terms of sentiment, bullish. I don't think that we are, you know, this is an unloved market and I know Tom Lee has said that, so I'll disagree on air with saying that with Tom, but I think we're at a moment where valuation is going to matter as we move forward. I think Palantir is a great example of that and I think there are others that you're seeing that look at Arista Networks, that's another name that reported today great earnings but not a good reaction. Why valuation.
- [18:20]
Scott Wapner
Yeah, guidance was, was somewhat questionable too, which is why the stock is down some, some 7%. Bryn, you own Palantir as well. Is this an inflection point for some of these names?
- [18:33]
Bryn Talkington
Well, I mean, I thought it was an inflection point before, so just put some context. Originally bought it at 28, so. And it was crazy multiples at that price. But then I sold some at 50, I sold some at 70 and 100, so I still have some left. But at $100, I couldn't get my arms around the valuation. So I think it's one of these unique companies and especially a year ago, to me it was the only true AI company out there that wasn't an Nvidia. And so I think they'll continue to have, you know, incredible rule of 40 the way over that rule of 40 number. But I do think at some point people will just, I think it's like the hive, this retail trader will just move on to other names, volumes. And so that to me is maybe what's happening. It's a high valuation at 100, at 200 and they move on. And so some of the oxygen, that daily oxygen just comes out of these kind of companies. And so I think that's more of what's happening than like it's at some, you know, why at 250 or 80 times sales, why wasn't it expensive at 60 times sales? So to me, that's hard to put my finger on versus just this retail trade or hive is going to start moving, moving on to other types of names.
- [19:42]
Scott Wapner
Do you feel lizard like we have hit an inflection point the way we view some of these names?
- [19:48]
Liz Ann Sonders
I think your comment earlier was, was a valid one where it's about the margin of Error. And you see it in throughout earnings season where it's only the mega beats that have had short term relative outperformance to the S&P 500. The misses are getting punished disproportionately. I think we're now focused on the fact that so far this boom has been equity financed. It's now shifting to be more debt finance free cash flow growth for the sort of mega cap tech related names have gone from more than 50% to now slight negative territory for the last couple of quarters. You've got still a widespread between the cost of capital and the return on invested capital but the return on incremental invested capital is going down.
- [20:32]
Scott Wapner
So.
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Liz Ann Sonders
So it's a rate of change thing that I think is being brought into the conversation.
- [20:36]
Scott Wapner
Maybe you can throw AMD Joe into the mix now too. Right. You know, you give guidance that you know meets expectations and the market takes it down in the pre market by more than 5% is the name that you just added in the rebalance. So we're going to go down the list by the days that we hear from companies reporting and you may see a similar thing here forward.
- [21:01]
Joe Terranova
I think you will. But I think in the case of AMD the market's taking the other side of that. I'm on air with you. I see the chart there. It's now higher on the day. So it's living off, it's living off that open air agreement and the Stock was up 58% in October. They have delivered here. I think the market appreciates that and I think it's now sweet welcoming them, welcoming them into the conversation along with Nvidia along with Broadcom in delivering the needed semiconductor chips to the artificial intelligence logistical build out. So I'm happy we took the position. Obviously we took the position based on momentum itself but I think it's justified with what we heard today and I think at the analyst day next week you're going to hear more positive flow fundamentals surrounding that story.
- [21:53]
Scott Wapner
Yeah, Liz Ann, I mean okay, two months left in the year more or less you feel like we're pretty well set up for where we can go between now and then.
- [22:01]
Narrator/Commercial Voice
Yeah.
- [22:02]
Liz Ann Sonders
But it wouldn't surprise me to see a little bit more consolidation up the cap spectrum but at the same time maybe a little bit better breath under the surface. Just an environment where you see more profit taking in some of the high flyers. But money is looking for opportunity in places that haven't had that same kind of participation.
- [22:21]
Scott Wapner
When you see something that says worst breadth day ever on an update. Right. It was a week ago. You care about that sort of thing that matter to you?
- [22:34]
Liz Ann Sonders
Yes, but it's none of the breadth statistics, much like valuation. They're gauges of temperature, not of timing. They don't serve as anything resembling short term timing indicators. But I think what, what we may start to see that would be healthier is not up days with weak breath, but weaker days with better breath. Sort of that distribution that, that's exactly what we saw in fact, in that October 2022 period of time when we had that second big move down in the bear market, we retested and blew through the June lows. Yet at the same time, breadth under the surface was improving. It wouldn't surprise me to see that as we finish out the year.
- [23:19]
Scott Wapner
And does it even matter that we have this, you know, bifurcated consumer, high end versus low end? I thought the McDonald's commentary which they played on the program preceding ours was, was pretty interesting that they expect that weakness to persist at that point. Lower level well into 2026. Brian Moynihan talks about a bifurcated consumer. People just seem to be focused on what I read at the top of Tony Pascarello's checklist and they don't really care that that's not something important enough for the market to even worry about.
- [23:52]
Liz Ann Sonders
Well, I think the K shaped nature of the economy, I would agree. I don't think that changes anytime soon. And it's not just the consumer. It's not just upper income versus low income. There's so many other bifurcations. It's obviously the CapEx non AI CapEx. It's asset owners versus non asset owners. It's inflation at the goods versus services level. Within the goods. It's tariff impacted goods versus non tariff impacted goods. I mean the list goes on and I think we're unlikely to see a convergence in a lot of these bifurcations as we head into next year.
- [24:26]
Scott Wapner
Enjoy yourself here at your conference. Thanks for having us. That's Liz Ann Saunders of Schwab right here at Impact. Still ahead, Elon Musk's pay package controversy. How Schwab found itself in the middle of that debate. This week the CEO of Schwab Asset Management joins us about the firm's decision to vote.
- [24:43]
Liz Ann Sonders
Yes.
- [24:43]
Scott Wapner
But first, our calls for the day when we come back in to we.
- [24:55]
Narrator/Commercial Voice
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- [25:24]
Joe Terranova
CNBC Sport on the Record, your front row seat to sports and business. From commissioners and owners to media executives and top athletes, these are Rembrandts. I'm telling you. These franchises on the Record all new Saturdays, three Eastern.
- [25:41]
Scott Wapner
All right.
- [25:41]
Malcolm Bathroom
Welcome back.
- [25:42]
Scott Wapner
Live today from Denver at Schwab Impact. Let's do some calls of the day. Uber's price target getting bumped up today, $110 from 96 its truest. Joe, the stock fell on earnings. They still like it, obviously.
- [25:54]
Joe Terranova
Yeah, I think you should. It was a legal charge that I think really concerned investors yesterday. And I think the overall market environment was challenging for them to be reporting earnings on that day. But bookings growth was solid once again above 20%. Consensus expectations going forward and the guidance for bookings growth was 18 to 22% the upcoming quarter. That's going to be good enough. The story about this stock the last several years has been determined the balance sheet and the free cash flow generation and that was present once again. Watch dash. They report earnings after the close today. Scott, that stock has pulled back nearly 20%. I think we're going to learn a lot about Dash after hearing from Uber as well.
- [26:35]
Scott Wapner
Brian, why do you think this? The stock has traded the way it has over the last month or so. It's had a great run, but obviously a leveling off. Is it concern about competition in Robo, Tesla and others?
- [26:48]
Bryn Talkington
The stock just can't get above 100. 100 is like this outer earth orbit. It cannot get above 100. And so I can talk about maybe 10 different reasons why, but I just think technically 100 is a very, very strong resistance and I think it bounced. Right? I mean it fell right off of that after earnings. And so I think as an Investor, I think 100 is the upside right now and you're going to need to get a catalyst to get it over 100. And so to me, just know that if you're taking a new position, I think you've got like 6 bucks and 50 cents of upside until it can break out of that.
- [27:21]
Scott Wapner
Malcolm, let's go. Spotify reiterated by UBS they had stronger than expected results. You own the stock?
- [27:28]
Malcolm Bathroom
Yeah, I think Spotify is actually going through, aside from the CEO moving to a board chair position and signing two new CEOs. I think the stock is the company itself is going through a little bit of a remaking as they try and justify the increased cost that's happening. And they're doing a really good job right now of converting their free customers onto the paid premium subscription model. I think 30% gross margins now is what they're boasting. So it's going to take a little while for the share price to start to go back in the right direction, I think. But it is a stock that I want to continue owning here.
- [28:01]
Scott Wapner
What about Pinterest, Joe? Following earnings, that stock was lower. We can take a look at it now.
- [28:05]
Joe Terranova
Yeah, so not every name that we add into the ETF is going to be a name that I'm applauding because it's rules based that I don't have the discretion on it. This came in reports earnings. There's clearly pricing pressure, challenges. Look, we added it on, yes, momentum, but also a pretty strong balance sheet. I think the question here is obviously tariffs are having an effect on pricing, but also the effect I think is real here. And you have to call into question, is the business being cannibalized in a way that Adobe is being cannibalized as well because of AI.
- [28:42]
Scott Wapner
Shan, we can, we can get you, you on retail. I mean, if you want to take, you know, Ross, Target raised, tjx, Target raise. You heard what Brian Moynihan had to say. I referenced it with Liz ann Kempinski at McDonald's. You heard his commentary too.
- [28:56]
Shannon Sokosha
Well, we clearly have some, some divergence between higher income and lower income. And Scott, I think that retail is really where we might start to see some of the concerns around the shutdown really starting to emanate as we get closer to that big retail week of earnings the week of November 17th. So if you look at snap benefits, if you look at higher premiums in aca, you look at furloughed employees, the federal government, you combine that with weak consumer sentiment and higher prices as less as Ann mentioned earlier, you know, we could, coming into what is the most important season for retail, the holiday season, this confluence of events could create some consternation from those companies. And so I would be thoughtful about guidance going into that week and really try to understand is this just a lower income problem or could it be a more pronounced problem with some of this confluence of overhangs for the consumer coming into this eight week stretch?
- [29:52]
Scott Wapner
Yeah, both those stocks in the green today. Let's get the headlines now with Julia Borstin. Hi Julia.
- [29:58]
Julia Borstin
Hey, Scott. Kentucky Governor Andy Beshear declared a state of emergency today to deal with the fallout from yesterday's deadly UPS plane crash in Louisville. We want to warn you that this video may be distressing to watch. Bashir says federal investigators are on the site to begin finding out what caused the cargo plane to catch fire and crash shortly after taking off last night. Night he says nine people are confirmed dead and he is fairly confident that number will grow. A federal judge ordered prosecutors to produce more materials in the criminal case of former FBI Director James Comey by Thursday. He expressed concerns that the Justice Department's position has been to indict first and investigate later. Comey is charged with lying to Congress in 2020, which he has adamantly denied. And Hollywood's leading trade association, the Motion Picture association, is demanding Instagram stop using the PG13 rating to describe content on its platform. The MPAA claims the system is a registered certification. Mark Meta said in a statement Its references to PG13 constitute fair use. Back over to you.
- [31:05]
Scott Wapner
All right, Julia. Thank you, Julia Boythin. Coming up, Schwab signing off on Elon Musk trillion dollar payday, the man behind the decision. He'll join us next. And now a next level moment from AT&T business. Say you've sent out a gigantic shipment of pillows and they need to be there in time for International Sleep day. You've got AT and T5G so you're fully confident, but the vendor isn't responding. And International Sleep Day is tomorrow. Luckily, AT&T 5G lets you deal with any issues with ease so the pillows will get delivered and everyone can sleep soundly, especially you. AT&T 5G requires a compatible plan and device cover. Not available everywhere. Learn more@att.com 5G Network.
- [31:47]
Narrator/Commercial Voice
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- [32:04]
Scott Wapner
Big bounce back in the market as you see there. Schwab's been in the news this week with some prominent retail investors threatening to pull their accounts from the platform if the company voted against Elon Musk's trillion dollar payday late yesterday. The firm said it would support that plan. Omar Aguilar is Schwab Asset Management CEO and CEO. It's good to see you. Thanks for spending some time with us. So the statement that you all put out yesterday said in part, quote, we firmly believe that supporting this proposal aligns Both management. Management and shareholder interest, ensuring the best outcome for all parties involved. Was this your decision to vote yes?
- [32:42]
Omar Aguilar
Yes, Scott. And we are very clear. You know, we have been doing proxy voting since, you know, we started our mutual fund business. We take our fiduciary responsibility of represent shareholders very seriously. We have a very systematic process for approaching this. And this was not the exception. We had already made a decision on how we're going to vote on Tesla shares. You know, probably like two weeks ago when we started doing this and we were just waiting for, you know, the votes to be casted. And so the process, you know, aligns to our philosophy of enhanced shareholder value. That's what we promised shareholders and that's how we did.
- [33:17]
Scott Wapner
Why do you think though this particular pay package aligns with the shareholders best interests when the proxy advisor advisors say it does not, Some large pension funds say it does not. And Schwab by the way, voted no on prior pay packages for Musk as well. So if it didn't align then for Schwab, why does it today?
- [33:40]
Omar Aguilar
Well, we voted, you know, the majority of all the proxies in this particular case with management. And again, this is a lot of what we call mirror vote, where we actually believe the factors that drive the, these pieces aligned to the long term value of this stock. And that's exactly how we did now in the past. You know, the conditions that were part of the packages, you know, the previous years were not exactly the same as they are today. And we actually like to see what management does when they put performance aligned with the potential results for shareholders. So that's the big differences of what was before and what it is now.
- [34:15]
Scott Wapner
Okay, so you, do you think the. Because it's laid out in, it's large, obviously the number garners all of the attention, of course. But if you laid out the steps that Mr. Musk has to reach for the tranches that he's going to get, that gives you comfort in the end result.
- [34:35]
Omar Aguilar
That is exactly correct. At the end, the shareholders are the ones that will basically see the value if these milestones get met.
- [34:43]
Scott Wapner
How much did the threat from some pretty influential retail investors play in this decision, if at all?
- [34:50]
Omar Aguilar
None. As I said, you know, the decision that we make for all our proxy votes is based on a very systematic process. And in this particular case, our decisions were already made before we actually got close to the deadline.
- [35:05]
Scott Wapner
What do you think if anything it says about just the power of retail power of the retail investor, especially around a name that has such a. What would be Described as a cult following like a Tesla does.
- [35:17]
Omar Aguilar
Well, we always been an advocate for retail investors, Scott. As you know, Schwab's name, you know, basically has been on that. And we encourage investors to express their opinion. You know, that is a big part of this now. We represent all shareholders, not just retail, you know, shareholders. And that's the reason why we, you know, just for this particular case, but for all the thousands of companies that we make proxy votes, that's how we actually have that systematic process that basically maximizes shareholder value and it is in their best interest.
- [35:46]
Scott Wapner
Were you surprised at all though that even if it didn't factor into your decision, because you suggest it was already decided, were you surprised at least that there was this uprising, if you will, among this retail cohort? You either vote with us or we're out and we'll just go to another platform. And by the way, there are more platforms now that exist that didn't before.
- [36:05]
Omar Aguilar
Yes, and you know, it is interesting that you mentioned that because as you, as you pointed out, you know, while the conditions were different in the past, we made a decision that was different this one. So we were not surprised. But obviously, you know, that doesn't necessarily change the process that we go for applying to that, to all these votes that we place.
- [36:24]
Scott Wapner
Let's talk about the markets. I did with Liz Ann seems pretty positive, although wouldn't be surprised if we had a bit of a pullback of sorts between now and the end of the year. I read off a list of things from Tony Pascarello of Goldman Sachs of why he remains responsibly bullish. You know, economy's good, you're going to get rate cuts, you've got all this capex. How do you see things?
- [36:46]
Omar Aguilar
Yes, well, there is a lot of positives that are going into the market, a lot of tailwinds that are going in there. You know, cloud clearly, you know, the biggest, you know, positive things continue to just be driven in the market. You know, like monetary policy, fiscal policy, you know, big part of that big beautiful field could actually increase that Capex that we go. I think the concerns that we have tend to be more about the concentration and more about that. Capex seems to be very driven by AI and not necessarily in other parts of the market. And I think as Lisanne may have shipped, should discuss, you know, the case shape of the consumer is obviously something that we are watching very closely.
- [37:23]
Scott Wapner
Do you think though that, and I asked her this question too, whether you think the case shaped recovery, the bifurcation of consumers matters at all to market performance? Yes, the high end is doing exceptionally well. In the low end, maybe not so much. There are more inflation pressures on the lower end. Of course, the market just doesn't seem to care.
- [37:41]
Omar Aguilar
Well, but what is sitting interesting is that the headline market, it is also fairly concentrated and it's also in a K shape. You know, the top, you know, 15% of the, of the S&P 500 are driving a lot of the returns for the market.
- [37:55]
Scott Wapner
Once again, it's a good way of putting in.
- [37:56]
Omar Aguilar
The K shape market is a K shaped market too. And it's a K shape even earnings season if you think about it. Right. So those that are actually beating the market seem to be, you know, doing really well. And the ones that just missed a little bit or have a not so positive of outlook are actually underperforming.
- [38:10]
Scott Wapner
If I walk around this convention center today at what is, you know, as I said to Liz Ann, your Super Bowl, I mean, it's Schwab's big event. There are 5000 people here and you've got 2800 or so advisors. How much am I going to hear about alternatives relative to what I would have in the past?
- [38:25]
Omar Aguilar
I would probably say a lot. So the three things that people are actually very interested in this convention but also in our latest, you know, wealth management survey is that they're looking for private assets, they're looking for alternatives, they're looking for tax efficiency, they're still looking for, for indexing and they're looking for crypto. Those are big themes that we continue to hear, you know, here and we have heard from other, you know, parts of our clients.
- [38:51]
Scott Wapner
I appreciate your time very much, Omar, thank you. It's good to see you and thank you for sitting with us. That's Schwab's Omar Aguilar right here at Impact. Up next, speaking of crypto, we'll talk about the state of the crypto trade. Bitcoin slipping below $100,000. It is back above that level today, but it has been volatile and we'll discuss it next. Dow is good for more than 300. As you see, Bitcoin is good for about 3% today. But what that chart clearly shows you is the volatility that has happened recently below $100,000 for the first time in a while is obviously rebounded a bit. Brin, back above that. Are there cracks in crypto here? What do you make of this?
- [39:34]
Bryn Talkington
Well, we've seen a lot been reported about these original whales who've held Bitcoin for 8, 10 years. Either outright selling billions worth of their Bitcoin or moving them from their private wallets to an exchange, inferring they were going to be selling those, hence they were put them on the exchange. And so you have this confluence of events. It's risk off. So I mean I think a 20% sell off, it's somewhat mild for these, for the space. Right. Etherium, closer to a 30% sell off. So I don't think it's any more than just a regular sell off. But I do think the market gets a little panicky when you have these very long term holders, you know, selling billions and billions that they've held on for 10 years. I think people are like, what do they know? That I don't know. But I just think that's part of the narrative of why it's weak. But I think this will once again be an opportunity for people that want to own it, to be able to add to it while it's down versus that versus adding to it a month ago when it was at an all time high.
- [40:29]
Scott Wapner
Joe, I think I need to get your take too. I mean you literally just added strategy and the rebalance.
- [40:35]
Joe Terranova
Yeah, I'm not so sure. Look, Bryn knows way more about the fundamentals of crypto than I do. We're tracking moments, momentum, and I fear that if you're looking at momentum, maybe we showed up in the crypto universe a little bit late. At the end of the summer we bought Coinbase, we're now down on that Coinbase. We added strategy recently. We're scanning 500 large cap US companies by market cap, not by being in the S and P. Now strategy qualifies to be in the s and P500, but it's not in there, it's in the NASDAQ, NASDAQ 100. So I'm a little bit troubled. I don't like in the case of strategy, the overwhelming exposure to bitcoin. So I'm a little bit troubled that maybe we showed up late to the, to the crypto universe. Thankfully we're equal weighted on our nature, so we would never get too punished. But I am concerned for sure about what I've already said. We might be late.
- [41:29]
Scott Wapner
Yeah, because. Because momentum can reverse at any time.
- [41:33]
Joe Terranova
It can maybe. And we've seen whether. And sorry Scott, I was stepping on your word and. But absolutely you are correct. And that's why what we are doing, this strategy is not relying solely on momentum as a single factor because when momentum turns, you need a shock absorber that could be quality, that could be growth, that could be equal weighting. But if momentum is turning as is it, it appears to be doing, if you're isolated to the single factor momentum, you're going to be in a detrimental position.
- [42:06]
Narrator/Commercial Voice
All right.
- [42:06]
Scott Wapner
We'll take a quick break. We'll come back sent only on the other side with this midday word. Senior markets commentator Mike Santoli joins us now for his midday word. Pretty good bounce back.
- [42:21]
Mike Santoli
Yes, definitely, Scott. I mean, you know, a lot of the stuff that we're doing was sort of suspect yesterday. Stabilized coming into the day includes bitcoin. It includes matter which you've been talking about hadn't had a bounce. I'm looking to at the airlines today. It seems like the market is treating, you know, we get through the elections, maybe there's movement on a government shutdown being resolved and all of a sudden the airlines are up 6%. So parts of the market that seem like they were suppressed by the cyclical concerns and other things, they are getting some relief today. I also think just on the S&P 500 level, two days in a row we bounced off of like call it 6750. That was the top of the market in early October from which we fell two and a half percent. So if you just keep it simple and say we've stayed in the upper range, we didn't break containment on the selling, it's fine now. We didn't get any kind of great reset. But I do think the fact that it was such a narrow rally in the final phase is benefiting in a backward way because a lot of the market didn't have to go down anymore and a lot of the market was primed actually to bounce a little bit here. So so far so good. We still haven't made up yesterday's losses, but it's firmed up throughout the day.
- [43:30]
Scott Wapner
Yeah, it seems. No doubt about that, Mike. I'll see on closing bell a little bit. That's Mike Santoli. We'll do finals next. I hope you'll join me today. 3:00 clock Eastern on closing bell. We're going to have a special report on the state of the retail investor. We'll be be joined by John Beatty. He is Schwab's head of advisor services. Cheryl Penny is going to join us as well, head of Dynasty Financial. Sonali Basak of iCapital is here and Kathy Jones of Schwab's head of fixed income will join me at 3 o' clock in just a couple of hours time. Let's do some final trades. Brian, you're up first. What do you got?
- [44:02]
Bryn Talkington
Dell Computer. I think Super Micros pains will be Dell's gains when Earnings come out November 25th. Looking for 12 and 15% revenue and earnings growth.
- [44:12]
Scott Wapner
Okay, thank you for that. Malcolm, how about you?
- [44:14]
Malcolm Bathroom
Yeah, I'm going. Microsoft, it's selling off again today. Heading toward a 10% slide from its 52 week high. I see a buying opportunity for me.
- [44:23]
Scott Wapner
Okay. Yeah. I mean some people are certainly talking about that on social media. The fact that the stock hasn't traded all that well. Joe T, what do you have?
- [44:30]
Joe Terranova
Senior Health Care. Reed Scott, we own it. Welltower. Good earnings. I think it moves above 200.
- [44:37]
Scott Wapner
Okay, thank you for that. And Shannon Sokosha, last but not least.
- [44:41]
Shannon Sokosha
Despite my concerns that I stated before, we actually are becoming more constructive on consumer discretionary and we use weakness in those names in the coming weeks to add to position.
- [44:51]
Scott Wapner
All right, good stuff. Thanks everybody. I'll see you in a couple hours. On closing bell back here in Denver at Impact, you've been listening to CNBC's Halftime Report, the podcast. You can always catch us live weekdays at Twitter, 12 Eastern only on CNBC.
- [45:09]
Narrator/Commercial Voice
All opinions expressed by the Halftime Report participants are solely their opinions and do not reflect the opinions of CNBC, NBCUniversal, their parent company or affiliates, and may have been previously disseminated by them on television, radio, Internet or another medium. You should not treat any opinion expressed on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of an opinion. Such opinions are based upon information the Halftime Report participants consider reliable. But neither CNBC nor its affiliates and or subsidiaries warrant its completeness or accuracy and it should not be relied upon as such. To view the full Halftime Report disclaimer, please visit cnbc.com halftimereportdisclaimer the holidays mean.
- [45:49]
Joe Terranova
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