tv Squawk on the Street CNBC January 28, 2021 9:00am-11:00am EST
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good thursday morning. welcome to "squawk on the street," i'm carl quintanilla with david faber and john ford, jim cramer has the morning off futures swinging around, the story remains the war between retail and hedge funds as the s.e.c., reddit, david tepper, all weigh in today it's an enormous day for corporate earnings and macro we will get to all of that the road map begins with the reddit revolution and the short squeeze. continued volatility and tesla records its first profitable year, facebook and apple post record profits.
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shares of apple and tesla are lower ahead of the open. >> and coming up this morning right here, the ceos of both servicenow and southwest airlines will weigh in on quarterly results. from both those companies. >> david, as you well know, a less directional story this morning, after reddit briefly went private last night on wall street bets, watching amc, we have seen some of the other names go into the red, but amc is now down 40%, so this is an evolving story, not quite an echo, or repeat of what we saw the last couple of days. >> no, things are reversing a bit. gamestop i mean hit the high of 500 in thepre-market, it is certainly down from that, but still up there it is. it is now starting to fall as well but i'll tell you what's going on, on wall street and amongst the hedge fund, first of all, to the extent this this has been about more than just traders making money, traders on wall street bets that reddit forum, making money, it has also been
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about exacting pain from the hedge funds. they've been successful at that. any number of large funds have suffered significantly 15, 20%. it depends, i'm not going to go through a lot of the names and then of course, the key focus, melvin, the very successful hedge fund headed by gabe plotkin, massive loss, so much so, we will get to it in terms of its future. and it what this has also done is forced massive reductions in shorts it has hedge fund managers questioning whether you can really short single names or at least not for the time being because it has changed their view of the risk inherent in doing so you've got obviously fund managers taking down their growth, taking down their leverage overall at this point and their exposure all of those things are sort of linked and so when that starts to happen, you will start to see some of these stocks decline now, in the case of amc, we were
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saying yesterday, why not sell stock, well, silver heard that, converted all 600 of the convertible note into common stock. why? because the conversion price was 1351 a share why wouldn't you right, john? and the question is, why wouldn't you, if you were gamestop, which for a brief moment there, actually not far away, had the same market cap as best buy i think their sales are a little different. but the same market cap. their profitability is a little different. why wouldn't you sell as much stock as you could, if you were amc, struggling to avoid bankruptcy if you're gamestop, struggling with your business model and any of these other, as we watch american airlines, the key beneficiary this morning, and koss for some reason as well continues, as there is still this focus on the wall street bets on short positions and one thing people are keeping a close eye on, how many people are a part of wall street bets, 3.6 million to 4.4 million
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overnight. >> don't let the grass grow under your feet. as we can see at the market movements, life comes at you first. who knows what will happen next. it seems the justification what will happen here, and wall street bets, it started out to be a couple of specific stocks and punishing the hedge funds and folks who were shorting it and it turned into something else, i think. there are apps like robinhood that will tep people what's trending and not everybody is going into reddit to figure out how to participate in this. and it strikes me that for sure, some retail investors, traders, gamblers, however you want to put it, are seeing stuff and hearing stuff in their own ways and piling into this some people are certainly doing it too late because that's how it work, right somebody is long, somebody is short, somebody bought amc, you know, 30% ago, it's down 30% pre-market right now, and this is the sort of potential retail investor pain that we're talking about here it's just a question of how many
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people get hurt before this is all over and people who benefit because certainly there have been people who benefitted from finding these problems in the system, carl, you know, mark cuban's comments on "squawk box," i think, and chamath palihapitiya's comments on "half time" yesterday, they make some sense. these are people who are playing by the rules as they stand if there are problems with the rules, you can't just talk about that when it's the big guy, making money, and the little guy losing out, this is a case where the tables are turned. >> right and as we said, a lot of voices added to the conversation, this morning, not the least among them was alexis ohanians co-founder of reddit whotalked about whether the genie is fully out of the bottle. here is what he said on "squawk." >> the thing that has been eye opening for me is to see for how many people this is, it's personal, there are stories from the recession, from '08 and the
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aftermath that were being told during occupy wall street, and zucoti park, and that was at a time when the internet was still in its infancy and now we're seeing a new reality and i do think, i mean this is, this is about precedent, and obviously, everyone should be making, they should be very thoughtful about where they're putting their money and their investments. but i do think this is a drastic shift. >> david, he went on to say that occupy wall street didn't have robinhood accounts and in his words, they're figure tive drum circle has gotten a lot bigger. >> and it may be in fact robinhood and i don't know that we confirmed this, carl, andrew was talking about it earlier, that robinhood, not allowing trading in certain names we haven't confirmed that, but that might also be a reason we're starting to see a reversal in some of these names, because gamestop would be amongst them it is a powerhouse, robinhood, as we well know, and of course, you know, i've made connections
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to the late '90s in some way, but certainly, and bob pisani made this point many times, the difference of course is the ability to do something so quickly, with this but you know, what is also interesting is the populist nature of this as you pointed out, politicians like aoc and elizabeth warren chiming in and sort of the group mentality here of attacking, sticking it to the man, has been a fascinating, kind of unexpected, and certainly those who have been no stranger to this program know that i've talked for years and years about the outsized compensation of hedge fund managers which has been ridiculous. i've always said that they've all been paid as if they're superstars and most if not all of them are not, although mr. plotkin's numbers in the past has certainly indicated he is amongst those and perhaps at least deserving of being given that title and of course, made enormous amounts of money, like so many others have, for years but don't forget hedge funds also are invested in by pension,
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invested in by teachers, and firemen pension, and all of those kinds of things, they employ many other people other than the top management who does typically make fortunes if they are even in the least successful but mr. plotkin, well, as for him, the plot-kin thickens is what we got to say. >> there the fund that was the focus for so many of these wall street bets traders is in trouble. there's no doubt about that. i have not been able to get mr. plot kins specifically, but the numbers and what he's down is dramatic and you have that influence from citadel and point 72, that money is probably gone at this point, and so the question will become there, what is the future of that firm. unclear at this point. unclear how that would, if in fact he would, citadel and point 72, were to try to work something out, or, it's just unclear, i guess is, what i have to say, although i would have to
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point out steve cohen and ken given are not exactly the best of friends that would be one heck of a negotiation to watch and of course, mr. plotkin himself. listen, he bought a $44 million home in miami, bought part of the charlotte hornets. keep an eye on hedge fund managers who buy teams doesn't always work out that well michael jordan still owns most of those he did kind of do a number of those things he never had a high profile. but the question will become, i think, his and a number of other firms are in serious trouble others have suffered losses. 15, 20%, as much as that given the volatility in particular yesterday but there are going to be a number of firms here that it's a more of a reckoning than just that. >> for sure. and david, what i would say also is let's also talk about who's winning here at least in a sense. this reddit crowd that did, who aligned, right, to, who am i to speak to this, but here is what i would hope, they don't stop here with a short squeeze, for
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the ages if this is really about the little guy, in this american economy, in this global economy, let's see if you can use this as a way to democratize good research on the fundamentals of companies. why not do that next get people banked who are unbanked save, invest in a small business rebound. if there's really this power, right in the retail investor pooling together for good idea, let's see if it can be done on fundamentals as well because there's so many people in this country, coming out of this difficult period, that we're in, that we need to get smarter about investments. so how about not just playing the system, carl, in this sense, and very well, you know, in a way that might be justifiable in a lot of case, but how about something that is sustainable and benefits the little guy for years to come. >> and it is a nice, i like the way you're threading that out, john, because you know, david,
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shamat's point yesterday, whether you believe him or not, and he said the research in the retail community, given the power of reddit is now equal to that of any hedge fund and it would be nice to see ways to democratize tools for the good. >> i'm not sure i do believe that not to take away from the peter lynch school of thought, but you know, melvin has 35 very well trained analysts, they had an incredible data platform and by the way, he didn't get the flows right, he didn't understand what was going on here, he took way too much risk and short way too much of the float, so all right, to that thread on that point, and mr. plotkin's paid the price for that, and as have some others but it is hard to imagine to a certain extent, i know the work that a lot of funds do, and it has nothing to do with fundamentals and otherwise it would be gamestop for $10 stock rather than a $300 stock the size of the trades here. the size of the dollar volume
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being traded points to the fact there are other big investors in here somewhere i don't know who they are. look into the options market there is leverage in the options market for some significant bets that perhaps are beyond the wherewithal certainly of those who are just buying a share or ten shares or something along those lines, so there is that. and you know, gamestop doesn't have 140% of its float short now. i don't know if it ever did. but it certainly doesn't now if you want to borrow it, you can borrow it. so chamath brought that up yesterday. >> because he was learning, david. he was learning. there's some big money in there learning, i think that's the volume you're seeing >> the learning is interesting he criticized the 2 and 20 that was interesting and he is one of the few guys on the spac side still taking 20% he gets his full 20% by the way. relying on part on the same audience to step up and buy some of those spacs that he's rolling out. carl >> john, you know, the long/short community is going to work this out however they work it out in the meantime, it is beholden
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on us to at least mention what is probably the busiest day of earnings season. i know you went over microsoft earlier in the week. and that incredible number on azure. and of course the apple quarter, most profitable quarter ever revenue above 100 billion for the first time up 21. and then you talked earlier on "squawk" about the silos that were incredible, iphone, ipad, wearables and services >> oh, my goodness guy, i mean for a second story, right, $111 billion quarter. that is crazy. i'm thinking about what apple is doing and what tim cook has achieved and for a while i was thinking about tim cook being happily in the shadow of steve jobs and being sort of a scottie pippen, michael jordan situation, like do we really appreciate the greatness of scottie pippen, and now i'm thinking this is more of a phil jackson michael jordan situation, because tim cook is who steve jobs needed to even scale apple off of that original
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base he had to bring tim cook in to get apple working again. and tim cook has scaled that like nobody could have imagined, carl >> yes, this is what cook said on the call. take a listen. >> iphone grew by 17% year over year driven by strong demand for the iphone 12 family and our active install base of iphones is now over one billion. the customer response to the new iphone 12's model is unprecedented innovation, from world class cameras to the great and growing potential of 5g, has been enthusiastic even in light of the ongoing covid-19 impact at retail locations. >> of course, we showed the stock down a touch here, david it does sort of remind you what b of a said earlier in the week and that is we're seeing comes that beat, underperformed, relative to the rest of the
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market, by a degree we've not seen in 20 years or so. >> listen, we know, we bring analysts on all the time, what was the multiple, john it is like 35 times, right the multiple has moved up substantially. it has been rewarded of course, at one year move, as you can see, 78% but at 35 times perhaps people are starting to wonder again, carl, back to valuation, which perhaps does seem to matter in apple. i guess about 140% of the shorts up there, share shorts, you know, it would be a $10 trillion market cap >> right speak of which, we will get to what goldman said this morning about spacs and bubble-like sentiment and some of the other earnings from mcdonald's, tesla, facebook, american, southwest, we will talk to gary kelly of southwest about the quarter, and maybe about what's happened to some airline stocks this morning. and of course servicenow's bill mcdermott, when "squawk on the re" meback don't go away.
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shares of servicenow are higher, almost 5% higher in the pre-market quarterly results, subscription revenue and guidance exceeded analyst forecasts. joining us today in a cnbc exclusive is ceo bill mcdermott and given all of the news this morning, let me start with guidance, some companies still gant get it. you are. and you are giving quite strong guidance up 28% for subscription revenues for full year 2021, nongaap
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subscription billings up 25% what gives you the confidence you can put those numbers out there? >> we are building the best platform for digital business in the enterprise today and i give so much credit to our great engineers. you back that up with the secular tail winds of digital transformation, the whole idea of cloud computing, everything is move together cloud, and business models have to innovate to serve their customers, in this new environment all of those forces are core competencies of service now. and that's why we're growing faster than everybody else, and that's why our customers love us >> and the new environment, it's not even new anymore, of which we found ourselves, we talked about it in the past, you've given some interesting predictions as to how much of the work force will remain remote but how has it impacted your business, how do you see that evolving over the course of this year as people do get back to the workplace >> well, look, we were very strong before covid hit,
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actually covid has accelerated digital transformation, so if you think about the world gdp, growth in the world is actually down, yet digital transformation and the spending in digital transformation is way up and ibc for example predicting 7.4 trillion will be invested in this digital transformation movement in the next three years. so what's going on out there saint jude's hospital as an example is one of the real success stories i enjoy for the quarter, because they had to work remotely to save children's lives. and by enabling saint jude, with the now platform, they were able to take everything remote, streamline their operations, and deliver success, in 30 days. and the same paradigm is true in nhs scotland, with vaccine management, now vaccinating 5.5 million people on the now platform, north carolinians with
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10 million citizens. the point is, we can pivot so quickly, in any environment, pre-covid, covid, and then more of a hybrid world, after covid, which is why we're growing faster than all of the other ones so i really see a re-ordering of the enterprise participants and servicenow will continue to be the market leader for sure >> bill, good morning. it's john, hay, put a finer point on that for us, if you can, because we've seen such success from certain enterprise software players that were positioned right to begin with, heading into this crisis, servicenow seemed to be one of them, what is the difference maker for you in 2021? is it more the overall macro rebound which as you mentioned, you're doing better than overall, the economies are, or is there some particular area you're investing in whether it's a particular engineering area, or it's your salesforce? >> well, that's a great
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question, john, if you take at&t, take paypal, nike, bp, usaa, these are all customers we announced as references in the quarter. and what they all want to do is they want to deliver great employee experiences, because look, they're hiring people they never even met, they have to train them, and bring them up to full productivity, really fast and they have to now service their customers, and a frictionless environment, where the customer now gets streaming services as an example, that they can subscribe to, and have an incredible customer experience, and you have to use virtual agents, and all of these new ai technologies, to simplify the customer experience. so john, our competitive advantage is the platform itself we have one platform, on the best architecture, and we're doing it all organically, on a year over year basis, we had two major product releases, we have 70% more functionality that
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we're delivering to our customer, and we built it all organically, and there's nobody that's growing, at more than 30% on a year over year basis, at 25% operating margins, with 1.5 billion in free cash flow, all spinning off from organic innovation great engineering. exceptional go to market and exercise customer care and that's why our customer is the most loyal in the business so john, this is sustainable and that's why we were bullish when we came into the forecast and we remain bullish. >> all right and that's why the stock is up almost 75% over the last year. bill, as i said, we got to leave it a bit short today than we typically do look forward to seeing you next quarter. thank you. >> thank you so much for having me, guys >> carl? david, we do right now have statements from robinhood and interactive brokers about restricting trading on some names. the statement out of robinhood says our mission at robinhood is to democratize finance for all we're proud to have created a platform that has helped every day people, from all
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backgrounds, shape their financial futures, and invest for the long term. we continuously monitor the markets and make changes where necessary. in light of recent volatility, we are restricting transactions for certain securities to position closing only. as for int active brokers, they say we put amc, bb, express, and koss, option trading into liquidation only due to the extraordinary volatility in the marks. in addition, long stock positions will require 100% margin, and short requires 300% margin until further notice david, that's likely to raise some hackles and some anger in certain sectors. >> i've seen it on twitter already, as you point out, carl, people upset at the idea that they can no longer buy and it will have an impact i will be curious to see just how much of course but it will conceivably have an impact on shares of gamestop and others and american airlines this morning, that was unexpected, better than expected numbers for a company that had been losing,
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what $30 million a day, but you can see, there the stock had been up as much as 50% it's come in, gamestop is coming in, amc, we talked about the conversion there, by silver lake, of 600 million of convertible notes, into stock, given the conversion price well, it was at least, above, excuse me, well below where the stock was, although no longer, but carl, this story is far from over and again i would come back to the broader story which is you've had an enormous reduction in risk, by many on wall street, who run hedge funds, who are now going to think very differently about how they go about shorting stocks no doubt about that. that equation has changed. ene mewh wco back, gary kelly on the quarter and the markets in a moment
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the people who bought it to speculate, some will make money, some will lose money but that's just the way the market has always worked. >> mark cuban on "squawk" earlier this morning he did say last night on twitter, i got to say, i love, love what's going on with wall street bets, all of those years with high frequency traders and now the speed and dense sy of information is giving the little guy an edge. but he did point out this morning, it is a two-way street. >> listen, at some point, gamestop is going to return to a more normal valuation of a company, based on brick and mortar stores, for an industry that has gone fully digital, i don't know when that is going to be, nobody does, but it will happen, and at the same time, there is a stick it to the man sentiment here that is quite strong on the wall street bets chat forums that people have been reading there is a desire to sort of see pain or what they call loss
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porn, i guess, and there really is, that is an interesting part of this, and perhaps unexpected, but kind of reflective of our political situation, in some ways, as well. >> i think it is but we keep saying the little guy. i keep saying the little guy, i think it's important to remember, there's lots of little guys, right? there's the early little guys and then there's the late little guy, and a lot of this is going to play on who the late little guy is, and who ends up holding the bag here because there is a bag to be held >> yeah, you know, there's no confirmation that you're little by the way, on these sites you don't get a blue check mark that affirms you are little. >> exactly no transparency at all, carl a good point we really don't know who's on those boards >> yes, you can imagine all kinds of scenarios where people pretend to be something that they're not. so we'll keep an eye on the broader indices. you know, david, given what's happened with corporate earnings, and we talked a bit about it in the a-block, given
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what's happened with stimulus, certainly the vaccine number, the hospitalization numbers, jpmorgan points out long short is going to settle this but the fundamental story in their view hasn't changed and we will see the degree to which these dislocations overpower the broader story about the recovery >> yes, let's not forget as well, we did have a broadly down day, yesterday, with the s&p off roughly 2.5% one of the worst days in quite some time. so we will be keeping a closer eye on the broader market. despite the fact that this attracts so much attention right now, given how crazy it's been but carl, your point is a good one. people are talking about it. of course, the vaccine rollout, the return to normal for the economy at some point, the enormous amounts of potential stimulus that are coming in. certainly seen as positives by some and those who are bullish overall, john, i also wanted to come back to earnings if we could, as we watch american airlines up 23%. >> oh, those >> and we talked a bit about apple. we didn't get to facebook at all. but i would love to get your take as well on some of these
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comments from zuckerberg on the facebook call, saying we now increasingly see apple as one of our biggest competitors. and let's take a listen to zuckerberg and i'd love to get your reaction, in terms of how you see things >> we increasingly see apple as one of our biggest competitors my message is a key linchpin of the ecosystem, it comes preinstalled on every iphone and they preferenced it with private apis and permissions and which is why i-message is the most used messaging service in the u.s. >> convenient, convenient to say that in a real sense, business model sense, you know they're not really kpetd tors and mentioned vr which facebook is not making any money out and ar, which apple is rumored to be stepping into and messaging, which apple for them, it is kind of an extension of their ecosystem, but it's not something apple makes money at in the way that facebook is trying to. but when zuckerberg says that,
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it sure opens up, boy, we're competing with one of the biggest companies in the game, regulators, hint, hint, but really, what is happening here, is apple is an ideological competitor at a level that they have not been before when you look at ios 14, its potential impact on the likes of facebook when it comes to ad targeting, that is really important. and this more open war of words that has been heat up between apple and, heating up between apple and facebook, they have been more cute about it in the past, apple serves itself with the app store ecosystem and its rule, oh, well, apple saying we don't make money off of ad targeting other people's data the way others do and now taking more open shots at each other than they were before, david but even that said, i still think facebook is in position, even with the ios 14 changes, they're going to do really well because in this omni channel world, we were just talking about digital transformation, with bill
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mcdermott, part of that with retail and so much of the world is trying to touch the consumer, is being able to play digitally, you got to buy facebook ads to be seen, and even if facebook's old style of targeting isn't going to work the way it used to, the best position of to figure out what will work and facebook has a history of figuring stuff like that out. >> listen, you're right. although we need to be fair. it is pretty interesting to watch and i'm just taking absolute shots at each other and not holding anything back and sort of questioning each side's veracity, and things like that and i mean, it's early in the conference call, they write these things out, it is not just that they rift, it is a script as you well know, so they chose to come after them hard. as for the facebook numbers, fourth quarter revenue, 28.1 billion, john, up 33%, that's still their fastest growth rate in over two years. >> and they've still got more in the tank we've talked for years about monetizing the facebook
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platform, what about instagram, what about whatsapp, and now monetizing facebook and instagram, what about whatsapp, and now we're starting to see whatsapp come together, and they're talking about the ways that these different platforms, even at a billion-plus in terms of user, the ways that they are working together, and there is more potentially to come and we're seeing the same thing out of apple oh, my goodness, right on the day when the ipad hit the 11-year anniversary of its being unveiled by steve jobs, the ipad is at, you know, just really, fortune 500 level revenue, in this resurgence of productivity technology, during covid, so when you consider, when you are looking at ipad, when you are looking at mac, with apple's homegrown chips in it doing so well in the quarter, look at iphone, oh, my goodness, china, up about 60% year over year, now granted there's a comp issue there, with covid in china a year ago but the strength that apple is
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showing across the board, even considering that they in a sense have one hand tied behind their back, with the physical retail stores, closed, shows you that across the board pretty much, remember, netflix earnings, an eternity ago, across the board, these faang stocks, these big tech stocks that had this thesis about changing things, they continue to have momentum, whether it's amazon, microsoft, apple, facebook, netflix, service now, and so forth. >> yeah, guys, we also want to touch on tesla, of course, 80 cents, misses by 21. revenue was ahead. we did see some price target increases out of deutsche that go to, i think, i can't remember, i want to get my numbers straight before goy with it, but a downgrade of tesla over at jmp and looking at other killer technology companies we cannot justify higher target multiples than seven times revenue and 35 times ebitda which is where we have been,
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they go to market perform. although elon musk still expressing confidence in deliveries jumping by 50% for 2021. >> and we've seen a lot of analysts of course try to justify increasing their price targets by going u significantly in terms of their expectations for deliveries into the future, carl as they obviously open up more and more factories around the world, and looking at one this morning, from jmp now, the unit delivery estimate for 2021, john is 952,000, they had been at 841,000 previously the stock is still up 600-plus percent for the year, just one year, despite what is, as you say a 5% reduction in the overall market cap today. >> and we got to remind the viewer of course, elon musk, when it comes to targets, and meeting them, he's no tim cook, right, he's more of a steve jobs, and i mean that in the most complimentary way possible, carl, but you can't exactly take that to the bank with elon musk, but you can count on him for
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vision >> yes, by the way guys, we did get a halt on gamestop momentarily. it has now resumed trading down about 9%, probably not the only halt that we'll see today, we obviously have seen multiple halts in the last couple of days on gme and american airline, topping estimates but falling short on revenue. the 2020 loss of $3 billion does represent the first annual loss in nearly a years. and gary kelly as he always does joins us on the quarter, southwest airlines ceo, welcome. >> great to be back. thank you all for having us. >> i want to get to some of what is happening with airline shares in the capital markets, but just on the recovery, and cash burn, we've been hearing from a lot of players, that the first half hope might be dimming and turning into a second half hope. is that turning into your base case >> it's just hard to predict
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and i think we are, well what we want to do is stay healthy you know, we're running the best airline, once again, we'll have the best customer service record, we are outperforming financially, we've got the strongest balance sheet, and our people are pumped, and they've done a great job surviving 2020, and getting us to this point, and this is going to be a recovery year. finally the case counts are starting to ebb and that's encourages and january and february are seasonally rough months anyway, in addition to the covid case count, coming into the year. so i think we'll wait and see what happens here with march, it's a little too early to call. we're certainly anxious to see how things begin to materialize memorial day and beyond, getting into june. and you know, i think as soon as the case counts start to come down, and people regain their
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confidence, i think there's pent-up demand, and we want to be ready for that. i think the important thing for everyone to know is that we're poised and ready, and we're in a position where we can adjust our flight counts, downward, if demand is weak, but we're also ready to move up, and increase our flight activity, if demand starts picking up of the only way for us to get to break-even is to generate more customer traffic and more revenues. we can't cut our way to break-even so that's important that we maintain our readiness on that front, and again, i'm very optimistic we got the vaccines, the vaccination process is under way, and a little bit off to a sluggish start, but we're going to get there, and when we do, we're going to be ready and we'll do well. >> i mean a lot has been written about southwest the past few months how you've been opportunistic in adding some capacity to mark markets where
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you hadn't trauditionally been given how nimble you are but what you are looking for given cancellation rates have made booking trends a little more cloudy when would you be confident enough to start bringing pilots back in, to start adding cycles in a meaningful way? >> well, we, and again, i think it's important to note, talking aboutour employees, we had no furloughs, we will no pay cut, the only major airline to be able to pull that off, so we had a lot of people that are temporarily taking time off and we can recall them very quickly, so we'll look to see what passenger demand does, and we'll look to the bookings, to see that the orientation with bookings is relatively short usually, you know, outside of a pandemic environment, we would start a month with about half of the bookings that we would expect to ultimately achieve for that month
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so it is a very short cycle. and again, we'll just need to be nimble and be ready to respond we've been adding new markets, which is a different aspect of your question. and there, we're tapping into new customers, and giving existing customers new opportunities to fly on us, so that's a breadth play as opposed to adding depth in existing markets. right now, there is no depth we're going to have to see the recovery begin before we get to that point but the nice thing about southwest, this is still in development, we still have tunes to add new routes as you witnessed, and since november, of last year, we'll have added a dozen new markets that we published so far >> gary, it's david. for those employees that you have, particularly those that are tending to the inside of the air plaep, the flight attendants
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and the like, are you doing anything to make sure that their mental health is okay? and i ask that because we've all heard the stories about the stress they must be under, whether it's getting somebody to put a mask on who refuses to, or dealing with a passenger who wants somebody else to put a mask on, or even political divisions apparently, that occur, in an airplane and arguments, what is the state of their mental health right now and what are you doing to deal with it? >> our folks are very resilient, first of all, and pardon the expression, this isn't our first rodeo, so we've been in business, this is our 50th year, we focus on people, we focus on customer service, we focus on taking care of each other and in return, we take great care of our customers, so that's just part of the culture at southwest airlines now, this has been the most stressful time period in my life, and certainly for our company, so absolutely, and i think a lot of it starts with
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just making sure that we support our people we need to have clear policies, we need to have clear boundaries on customer behaviors and then we need to have an understanding with our employees about how to deal with conflict, and how to be reasonable and rational in certain situations, so yes, i think our leadership has really leaned in to supporting our people, where we do a good job of listening at southwest airlines there's definitely been challenging situations, but again, i would say the morale at southwest is very, very high and people are anxious to get all of this behind us >> for sure. now, gary, tell us to what degree is further congressional action, especially when it comes to help financially, is that important to southwest as a company? and is it important to southwest employees and the type of worker base in this country that that represents what are you seeing based on
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both your position as ceo of this company and someone who is listening to the workers >> well, i think it speaks to your last question as well i think one of the major concerns of americans and people around the world is, am i going to have a job. and am i going to be able to pay the bills? am i going to see my hours cut am i going to see my pay rate cut. all of those things. so to the extent that we can assure our people that there is job security, which we have tried to do, at southwest, i think that that reduces the anxiety tremendously we could not have done that without the government support no company can be prepared to lose the vast majority of its revenues and survive it's just not possible so without that government stimulus, throughout our economy, i think you would, we would be facing a very serious depression right now so we're not out of woods yet. i think it is appropriate that
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the government is looking at that i know that yoon leaders around the cun, union leaders around the country are urging congress to protect their memberships with jobs, and it's something i think should be looked at. but clearly, what's been done so far, has been critical to maintaining job security, and also air service you know, we haven't cut any domestic routes from our system. every point that we were serving coming into the pandemic, we are still serving, and then as i mentioned, we've actually added, we'll have added a dozen, so that's an important element of this government alliance, if you will, also >> gary, finally, american airline shares are more heavily shorted than southwest but it did appear this morning that american got caught in what appeared to be a bit of a short squeeze. pre-market shares were up 80% at one point. i guess i'm wondering, to what degree are you and your
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financial team watching that, and what is the role of a fiduciary at a company when they see their shares rocket, and i mean some argue, it's incumbent upon you to somehow take advantage of it, in this squeeze that we've been witnessing >> well, you all have been talking about it all morning, and i'm not sure how many different people made the point, but i agree with you, you can't change the fundamentals, and you know, we want to be a good citizen, we want to certainly take care of all of our shareholders and you start by telling the truth, setting goals, and then executing. and we've got a a 50-year history of performing, 2020 is the first loss since we started up, which is an unparalleled record and it took a pandemic to finally result in a loss at southwest airlines but that's where you start. take good care of your people.
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take great care of your customers. be good partners in the community that you serve, and produce a profit and not overpromise, in fact, underpromise and overdeliver if you do all of those things, everything else ultimately will take care of itself, but yeah, it's a really strange scenario that we're watching, with these short squeezes, and you know, form we haven't been victim -- fortunately, we haven't been victimized by shorts honestly for the 35-plus years i've been at southwest, it hasn't been a real significant challenge for us. >> gary, appreciate the time obviously, it will be a lot to discuss in the weeks and quarters to come but we love that you come on and talk about the quarter appreciate it. >> you bet thank you again for having me. still to come, washington's message to wall street about gamestop's wild ride and by the way, it is up again, approaching best buy's market value, i would point out i think it's interesting, given
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the disparity in revenues between the two companies. first though, let's get to the bond report. and we're going to take a look at how treasures are running this morning it's a rollercoaster ride for yields since yesterday afternoon's fed policy announcement and chair powell's news conference as you can see from this chart on the 10-year note. we are a bit above 1%. same goes for the dollar index as you are looking at it right now, down a bit. new home sales data due out at the top of the hour by the way i want to keep an eye on that. and we're right back here on "squawk on the street. alright, who can break this down for me? coach saban... i crutched out to the mailbox and there it was -
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washington have a warning for wall street in the wake of this reddit-driven short squeeze. eamon javers joins us to explain. >> yeah, john, that's right. there is a group of political consultants in washington watching this gamestop situation with fascination and also with some familiarity they argue what we're seeing is a financial version of the type of populism we have seen in american politics the past decade or so with the trump mega
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movement and also going book to occupy wall street so a couple of similarities they are sport lighting for me in my conversations with them and also some of the lessons learned from washington here as you think about how this movement might take shape going forward first of all, the similarities in terms of the populous piece of what we are seeing in the financial markets. one is the rage in economic anxiety that we are seeing being expressed in these actions the belief that elites are rigging the system against the little guy and the fact that technology equalizes the playing field in the communications technologies and also in the trading technologies the ability to participate the memeification of the message is similar here. the vir al it i of some of these communications enabling a larger group of people exposed to these messages the element of nostalgia for a better time. make america great again was about making america great again harkening back to a time in the past people are explaining to me that the lure of gamestop is that
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this is a company that a lot of these investors remember from their childhood. >> a better time before covid-19 and before the economic troubles of today distrust of the media and a willing you embrace of risk. they know the risks here, and they are willing to do it anyway what are the lessons learned here and sort of the washington message? well, one is that this mixture of fun and a moral or political cause is an extremely potent force. the pool of potential people here who participate is nearly unlimited. their advice is to understand your critics if you are a member of the wall street establishment and don't think this is someone else's fight pay attention here to what these critics are saying and try to understand the social dynamics of the movement that we are in right now. so fascinating look at the populism of the markets from a political lens >> it's so many parallels, eamon. amazing to talk about. david, it kind of reminds me, you look at what's happened to, say, campaign finance because of what social media has been able
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to bring same kinds of things are happening to markets, although, to your point earlier, this is very clumsy work there was an australian nickel producer overnight gme resources, right, where have we seen that before, up 53% overnight. >> and there was a confusion about amc versus amc x as well amc networks, of course, the living dead, that, you know. that was up a great deal yesterday. so, yeah, there has been some confusion there. and, carl, to your point in terms of transparency, i mean, the growth in users on wall street bets from 3.6 million to 4.4 million, i believe, in less than 24 hours. we don't know who all those people are not sure we should call them retail anymore maybe they should be called traders because there are a lot of them and some are taking large positions, particularly in the options market and then there is a lot of vitriol for robin hood right
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now, john, which you know. you are seeing it on twitter saying you can't own or at least i shouldn't say that you can't buy shares of gamestop and amc and the like. >> when you are robbing from the rich and giving to the poor, that's one thing if there is a glitch in the system, if you are robin hood, the populous can turn against you. on that nostalgia piece, it's a testament to how quickly the story changes. it might have started with that nostalgia with gamestop, amc or remember when we used to buy video game cartridges at gamestop, when we used to see movies american airlines, or remember when we used to fly, you know, on vacation? no that's the next short squeeze opportunity and i think the other piece of this that we saw in politics, question is whether we will see it here, is who capitalizes on this to
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consolidate power? we saw donald trump do it with the populist movement in politics wh will we see it in finance, carl? >> great questions, john we will continue to stay on top of gamestop and some of the other wild rides we have seen. we have some data at the top of the hour, if that matters. we are back in a minute. from fidelity -- a visual snapshot of your investments, key portfolio events, all in one place. because when it's decision time, you need decision tech. only from fidelity.
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good thursday morning. another hour of "squawk on the street." dow's trying to claw back from five days down big day for earnings and macro data the top story is the long short dislocations look what's happening, volatile fi in gamestop and amc entertainment. new home sales out moments ago diana has got that >> carl, we are just waiting for the numbers to clear here. still coming in. this is based on signed contracts to buy newly built homes. so people out shopping in the month of december, and we just got the numbers. new homes sold 842,000 that is below expectations and the median sales price though up 8% year over year. so that's what the problem is here, is a lot of people are hitting that affordability window but that's a miss on the
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headline number. what we are also seeing though is that the month supply is down 18.9%. that's because the builders are just not keeping up. so, again, we are seeing the sales number below expectations. it is 1.6% higher, but the november rate was revised significantly lower. sales still higher by 17.2%. so a mixed bag year over year for the builders reporting very strong earnings we will see how it is going forward into 2021. back to you. >> thank you. returning back to the reddit trade, take a look at the extreme volatility in gamestop and amber alert. again gamestop won't stop. they are restricting trading in stock in options in some of those names. we got that statement from robin hood that we continuously monitor the markets and make changes in light of recent volatility we are restricting transactions
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for certain securities to position closing only, it goes on anyway, carl, i think it just sort of speaks to what we have been talking about for days now, which is just the incredible debate that is now hovering around this very frothy pocket of the market. i would note that it's not just gamestop and amc there are other names and certainly i think many people have pud out the list of most shorted stocks in the market right now. another name i am keeping an eye on is virgin galactic. stocks up about 4% right now, but it's trading in the premarket as high as $50 a share. this is long time been, i think, a popular name among retail investors and certainly has enjoyed conversation over the months on places like wall street bets. also very heavily shorted. so i think again it speaks to some of these other names we are continuing to keep an eye on. >> indeed. and, david, you know, as some of these restrictions are placed on
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names like gamestop and amc, it will be interesting to see what other targets they search out. obviously, we mentioned american airlines in the premarket got to 80% plus silver, obviously, some of the miners within the gold mining index starting to feel a little bit of this as some traders, i guess you could argue, lose some options on the main names. >> yeah, options is an important point here that played an important role, too. it's not just outright buying. a lot of option opportunity fueled in part by leverage of firms well we are not sure we are keeping an eye on that because the numbers are fairly large there, too i want to step back for a minute you heard eamon talking about it i think it's so interesting. the idea on this wall street bets community of sticking it to the man. well, it's worked. a lot of hedge funds have suffered bruises some have perhaps suffered much more than that perhaps more significant wounds
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that will even put them out of business but you have seen from what i have heard, and i have had a lot of phone calls this morning, a lot of funds take down their gross, their leverage, overall exposure, and most importantly, massively reduce their shorts, particularly in individual names where i think many are going to rethink about how they go about doing that it's fair to point out, despite the massive compensation that so many hedge fund managers have gotten the last -- and i watch this industry become an industry over the last 25 years, and it is abis urd in so many ways. they also manage money for a lot of pensions for a lot of working people out there they also employ an awful lot of people, far beyond the top part of their management. and so when you take them down, yeah, all right, maybe you are taking some retribution against the really rich guy, but there is a lot of other people who may potentially suffer as well
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leslie picker, i want to get to you because you have been following that part of the story for us so many interesting parts here i talked earlier about melvin, which was the center of this, of course, run by plot-kin. the future in some doubt the role of citadel here citadel's all over this thing. i don't know if you follow that part of the story at all, but it's fascinating because they are in so many markets on so many different sides of it. >> yeah. and it's interesting just looking at the boards just in the last hour or so. people have turned their attention to citadel almost for blame for what's going on with robin hood, their inability to trade. one distinction is that there are two citadels there is the hedge fund that quote/unquote bailed out melvin, the one that helped participate in the $2.75 billion emergency rescue financing that melvin obtained earlier this week but then there is citadel
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securities that's the market maker. and what they do is they do pay for order flow from robin hood so they are not front running. if they are, it's illegal. i have no indication to believe they are front running trades. i want to make that extra super clear. two separate companies there is a chinese wall between the two. they are supposed to be a chinese wall between the two epically legally, there needs to be a chinese wall between the two front running is illegal if someone is doing that in the market, that is an illegal move. and so i can't speak to whether someone is or not. all i know is that is not something that is part of their business model, shall i say. so that's one thing that i think is really interesting going on, that you are still seeing a lot of targeting towards melvin in particular you are seeing a lot of conversation on these platforms about taking down hedge funds. you know, keep pushing on that gas to make sure that these guys
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really suffer here and it's just remarkable that it's really turned into kind of an us versus them mentality. one thing that i think is really interesting and gets lost in the narrative of this whole thing is that hedge funds are not all equal. they are not all the same. there are different types of hedge funds. the ones that are really feeling the pain right now are the fundamental long/short equity firms. that in particular is a slice of the hedge fund community that is really, really feeling some pain there was a prime brokerage note sent to clients from goldman sachs that said tuesday, not yesterday, but tuesday the data is a little lagged was the worst day for this community on record they were -- they had negative alpha of 2.35% but quant funds, noernon the otr hand, they can benefit they are traversing these -- >> they can. although, yeah, although i heard
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millennium didn't have a very good day yesterday you will hear names, you will hear numbers and then we make the calls, and typically it's not quite what is being rumored in the market in terms of how much they are done certain firms, not just melvin, have suffered dramatically i think that goldman sachs long basket versus the short basket widened by 25%, of which 13% widen yesterday. that blows away all records in terms of a basket of longs versus shorts in their performance. >> right because what's going on, it's not just the short side, which gets so much attention and clearly a lot of this underperformance is being driven by the short book getting blown up but it's also the long side, too. these really popular concentrated long names that hedge funds own aren't performing that well to compensate for the short side. then you have this other dynamic where hedge funds need to find sources of liquidity if they
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find theirselves prone out of positions. so as a part of risk manage. you have to sell liquidity positions which also doesn't help that case on the long side, david. >> yeah. leslie, great coverage, and look forward to future fconversation. that's a good place to start with the next quest. questions about whether regulators can and should step in are certainly ones we have been asking. amy lynch special investigator, e trades chief compliance officer and sec regulators, founder and president of front line guidelines. if you were in one of your regulatory roles, what would be doing, thinking about doing as such regulator in terms of what we have seen occur the last few days >> good morning. thank you for having me on the show today and, yes, the regulators are very busy. they are looking into this as we speak, and you have basically three primary regulators that are looking at this right now.
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the s.e.c., fin ra and the s.e.c. is coordinating with exchanges to see what is happening with the actual trading activity and these issuers. fin ra has been taking a look at the broker-dealer platform and the individuals that own accounts that are trading on those platforms. cspc has oversight on the options market they can look at this in three different ways they are very busy right now trying to determine who the players are. so we know the targets are the hedge funds. but we don't necessarily know who the players are on the other side in other words, who are these traders in these chat rooms that are pushing out the shorts and squeezing them out and it will be interesting, in my opinion, to see if these
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individuals are just that. your robin hood type traders, individual retail traders, or if these are actually professionals. so if these are professional industry market players, simply trying to push out the competition, then you have a very interesting case for the regulators to step in with enforcement action against those individuals. >> yeah, that's so interesting we talked about the lack of transition there and a number of people have brought up to me, questions about the options marg in particular where you are seeing some large big-money trades. something that would seem to be beyond the wherewithal of your typical robin hood trader. >> exactly i agree 100% you can't have these big market moves, these huge pops during the course of the day on these securities without having some really big volume trades in there and some big dollars at play
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and your robin hood trader, a few thousand dollars here or there, it's not them it h look a back at some of the other companies last year that saw major moves in their stocks. hertz. tilray saw an epic short squeeze a couple of years ago. i wonder what kind of just from a regulatory standpoint, what kind of precedent is in prlace and how some of those other examples, while in some ways may be different, not quite as big and public as this, but what those examples might actually offer in terms of guidance >> sure. it is a great example that you point out. i am going to go abback even further. you may recall back in 2012 there was the case against harbinger capital and -- and that was a short squeeze
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that was a big case. he got barred from the industry. there were many things that were going wrong there with misappropriation of funds, et cetera but it all started with the short squeeze on a particular distressed debt issuer so we're talking a bond issuer as opposed to equities, as we are here, but the concept was the same and he got pushed out. >> i want to go back to the conversation around more scrutiny of the actual infrastructure, the platforms. obviously, we had these comments and we had these confirmations from robin hood interactive brokers, for example, confirming restrictions on trading activity how closely will be the infrastructure and those platforms now be, i guess, monitored? and how concerned do you think regulators are or could be that we could see more spillover into other parts of the market now? >> well, it is interesting to hear that certain platforms are actually restricting their
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trading activity because typically they don't do that there would have to be a very significant market event for them to step in and take that action so to publicly announce that they are doing that is extremely unusual. and most likely they are in discussions with their regulatory bodies, with the s.e.c., with fin ra to get permission to do that without having action taken against them for sequentially limiting access to their platforms for their customers. they are in a precarious position and it sounds like they are trying do the right thing to quell this froth in this gaming attitude that's out there right now. but the regulators need to be onboard with what they are doing. and it sounds like they are. >> amy, i wonder, if regulators are drawing any lessons from -- and i know the technology was much different in its scope and its ability, but from aol chat rooms in 1999.
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is there anything they can learn from that period do you see any parallels >> there are definitely parallels. the same type of activity was happening back in the dot-com era when the bubble burst there. so here we are with another type of bubble bursting the regulators will step in and see where they can tighten the rules and regulations around certain market conduct activity to prevent it from happening in the future so they had an opportunity over the past 20 years or so to prevent this from happening again. but, obviously, their toolkit is not quite there as far as preventing it because here we go again. >> amy, we'll be watching closely. we appreciate your help in doing so thank you. >> thank you for having me >> coming up, sap owned qual tricks going public on the nasdaq today we will speak with the company's founder and the current ceo next we got a big show still ahead.
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sap owned software seller qualtrics going public today raising more than $1 billion the founder and executive chairman ryan smyth joins us along with the ceo congratulations. good to have you. >> thanks, carl. good to be here. >> thank you. >> ryan, for those who are coming to the story for the first time, i wonder if you can just lay out experience management software, what is it and why did it seem to do so well within the sap customer base >> yeah, first, carl, what an incredible day for all of us for our employees who worked so hard this is a great moment but experience is the forefront of everything. there is not a ceo i talk to who doesn't have the employee experience, customer experience. sap wanted the category. they looked at everything out there and said they wanted this
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company. zig and i operated in lock step throughout this process and the chance came out to have this category expand. i think it's been $46 billion to a $60 billion tam. we said, hey, let's go and we have the appetite to do it >> zig, i know that the mission here is to help ameliorate things that go wrong with products, things that go wrong with customer churn, employee experiences that are less than satisfactory how does the product address those issues >> well, we built a business operating system for experience management it's a software system, a single system that helps to create breakthrough designs and continuous improvement of customer, employee product, brand experiences. it's the four cexperiences of business for the first time all experience data, how people
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feel, what they emote, what their preferences are, what they like and don't like are in a single place we help to activate action around that and create more personal experiences for the way that our customers work with their own customers. >> zig, two years ago, right, the company was poised to go public and sap swoops in in the middle of this we have a pandemic as well what have those two years enabled the company to be able to do to get it this point where it's now going public finally today? >> when sap acquired us two years ago we had the whois to go public on our own or public through a part of sap. we took the sap path because we felt that we would be able to bring xm and a accelerate xm to many, many, many customers that are part of the sap customer base and we have done that. we have accelerated a category, accelerated this technology foundation and bring it to many of sap's customers and at this point we are ready to take xm to the world. we are at a point where
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experiences matter every moment matters in to how organizations operate. the decisions you make around the product experience you create, how you work with your employees, activate your employees to serve their customers best are all time sensitive and they are business critical decisions and so we have worked with sap to continue to expand and accelerating the way we are building this category. >> ryan, shifting gears a little bit, given the fact that qualtrics is born and bred in utah, you just recently with some of your tech colleagues bought that majority stake in the utah jazz as well. i want your thoughts on the migration we are seeing of other tech entrepreneurs out of silicon valley to other parts of the country right now. >> yeah, it's hard to not notice, right? i mean, we rang the bell and opened the market today from utah we have operated here for years. we have a co-headquarters in seattle. look, no one has the exclusive on smart people, and we think that lot of people want to move
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here you have outdoors, you have jobs, we are the number one economy last year, lowest unemployment in the country. we are not a small market. we got the number one basketball team in the league right now and it's early days, but we are pretty excited about that as well. >> yeah, you beat the knicks the other night. zig, sap still controls this company and, you know, the economics and certainly almost all of the votes how long is that going to be the case have they given any sense what their plan is to sell out over time >> we have been operating as mostly an intact independent unit under sap since the time we came into sap. so, you know, they have been allowing us to operate almost like an independent company, add more fuel to the business, enabling more customers to take advantage of the platform. this next step where we went public today is simply building on the culture, building on the long-term durable growth we have
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been delivering to sap now that we are delivering to the market. we will continue to operate that way. we have an independent board some of the most well recognized tech leaders on the board, kelly from zoom on the board so sap is doing everything possible to help us accelerate and build this business and continue to lead the category. >> finally, ryan, you come into market at a time people are asking big questions about capital markets, some say they are being democratized, some saying they are going gamified i mean, are companies like yours who are going to be new issues, and i don't know, maybe one day may get the attention of would-be shorts or the reddit crowd. are you having to reconfigure your strategy within investor relations? . >> look, in 2018 when we were going out, we were the only company on the road. if you remember the fall of 2018, i mean, it was a weird
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time when we filed we knew we would be dealing with election, post-election. i am going into my 20th year i am not smart enough to time the market this is the right move for us. this is the right time for us. it's a moment in time. we are much more focused about being a public company it's the time to take experience to the world and that's what drives everything this is an event we will put our heads down and get back to work >> ryan smyth, zig seraphin, look forward to afghanistan wat watching that today. thanks >> appreciate it. after the break. >> why art carbon says the recent reddit is an old game with a different name. we will talk to him after the break. we are back in two keeping your oysters business growing has you swamped.
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welcome back everybody i'm sue herera here is your cnbc covid-19 update almost 4,000 covid deaths recorded in the united states on wednesday even as the daily case count stayed below 200,000 for an 11th straight day organizers of the tokyo olympics scheduled to start in just under six months went before reporters today to say they are still planning to go ahead, even as polls show about 80% of that country want the games either postponed again or canceled. a team of world health organization investigators emerge today from 14 days of quarantine in a wuhan, china, hotel to start their probe into the origins of the covid-19 pandemic and in southern california people are being called vaccine chasers. they are not currentlile eligible to get a shot, but they spend hours waiting outside vaccine sites hoping that they can get the leftover doses that would otherwise have to be thrown away.
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understandably, local health officials are discouraging them from doing so. you are up to date i'm sue herera and i will see you again in an hour and i will send it back to you guys david. >> thank you. turning back to what we're calling the reddit trade, how that site's format and layout phenomenon. >> well, david, reddit's design has amplified the attention on stocks like gamestop and hled to conversations about them going viral. here's how reddit works. it's an open discussion forum where people can post and up vote or like people, other people's posts the posts that received the most up votes are featured more prominently, and then the most up voted posts are included in the r/popular reddit feed. th that goes on the home page once a conversation starts to gain traction, it can reach a much broader audience. while conversations on reddit have driven short-lived rallies
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in the past and died down, the rally in gamestop was so meaningful in just a couple of days that the conversation on the wall street bets reddit feed made to reddit's home page then there is reached many more casual investors, people who might not have been following or looking for information on stocks or trading. now, the reason we've blurred out this video, i want to say, is because foul language is frequently used on the platform. reddit co-founder who is no longer involved in the company weighed in on reddit's trading phenomenon on cnbc this morning. >> whether it's one platform or another, this is the new normal. and we have watched the internet now over the last 10 or 15 years that's to the rise in social media and all this infrastructure really bring the bottom up revolution >> now, there are also conversations about stocks happening on facebook. the most popular investing groups there are private on facebook people use their
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real names, unlike reddit, which is open forums where people post usually under aliases. people also posted about stocks on twitter they have also been often on twitter been linking back to reddit guys, back to you. . >> that was a good breakdown let's bring in ubs art cashin is who is calling this an old game with a different name. art, what do you mean by that? >> well, we have seen both the short squeezes before. in 1902, not that i'm quite that old, but in 1902 there was a massive short squeeze in northern pacific railroad, and that stock went from 45 to $1,000 they skritried to scramble to cr that forced the market into a very heavy selloff in general. the new u.s. steel company went from 60 down to 20 and the other thing that people keep forgetting, i mean, this is
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not the discovery of fire, all right? this has happened so many times before you get hedge funds that are overextended i am sure some of the viewers remember something called long-term capital markets. and they traded mainly in bonds, foreign bonds and treasuries and they got overextended, not unlike some of the people in gamestop, and when it blew up, it created a massive selloff in the market in general, even though they were in bonds. but they lost so much money, and the leverage and liquidity was such that the fed and wall street had to call people together to bail the market out. and we've seen that time and time again going all the way back to 5,000 years ago when the ancient sumerians were trying to short the grain markets and the weather turned good and they got caught off base.
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so it's not tremendously new now, the reddit format is a very sophisticated chat room, and i, like, i believe, one of your earlier guests, have some suspicions that it's not a democratization. i'm not sure that everything you are reading is coming from the little guy, the public i think there may be big professionals in there that want to turn the crowd into a mob. >> okay. >> and get them to attack the hedge funds by buying this that lends you great support and puts buying power under a stock you want to see higher so i think we have seen some of this before, morgan. >> okay. i do want to dig into that, those last comments just a little bit more, art be before i do, and i would expect nothing less for you to go back as far as 5,000 years. i get that there are examples, but on the other hand, there are key aspects of this that are in many ways, i think, very new,
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the fact that you have the internet and the proliferation of all these social media sites. the fact that we are in the midst of this pandemic we have seen things like direct stimulus checks to people who are sitting at home rather than going into an office and working. you have what i would call more populist ethos playing out as well in terms of the language. and then let us know forget, lower or no-cost brokerages and the access that has given to retail traders as well how does that change your color or even enlarge the scenario that we're seeing play out right now? >> i think what it does is it, to some degree, makes it easier, all right? conspiracies used to be involved in somebody's office or in a barroom and they would have ten or 20 principals i mean, the famous jay gould cornering of the gold market
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they were small conspirators this now has thousands of people because of the social media access and we've seen in politics and elsewhere, they seem to make it very easy to move a crowd into a mob. all you need to have is some people out there shouting something incendiary and they all chime in so if i'm a rather devious professional and get on there portraying myself as one the little guys and it's us against the world and i can recruit lots of people to start buying gamestop and short squeeze some big hedge funds, it's very practical. and they have the blessing of making it look like it is the little guy against the big guy i have serious doubts when it's all going to be investigated that that will, in fact, turn out to be true >> wow, that will be
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interesting, art it's not just the advent of these chat rooms, of course, that is adding to this powell asked yesterday point blank if he thought monetary policy was to blame for what's happened to some asset prices. he clearly said, no, which i think took some people by surprise i wonder what you made of that comment? >> well, i think he meant, no, that he didn't believe it was directly there, as if there were a surplus of money sloshing around that had to find someplace to go. however, the general background, the virtually zero interest rates do make it somewhat more conducive to speculation so, with all due respect to the chairman, i don't think he was about to volunteer to say, yeah, this mess that you are looking at, that's our fault
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but i do think it is extremely low interest rates and them being projected for years to come are a factor in adding to this speculative background. >> do you think at this point it will remain contained to names that are heavily shorted as a percentage of the float, or is a long squeeze a real risk here whether we see forced selling in names that would have, obviously, a bigger significant impact on the broader market >> no, i think, interestingly enough, what you are seeing in the short squeeze, you saw the inverse of that when they drove lehman out of business during the -- you remember people selling out of the money puts and things like that, rumors of naked short selling. so there are manipulative aspects of that which is going on i think what you see in the
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general market, carl, is people need to raise money, and as i think was pointed out, you sell some of the more liquid stocks, the stocks that have run the further exist up if you have some profits and you are riding stocks that are good, say, wait a minute, there is about to be a national margin call here. i am going to take some of my profits, and that tends to feed on itself. that's why we had the big selloff yesterday. wie advice the viewers, you are not going to hear them ring a bell what you have to do is watch the market like a cardiac patient, test and retest itself once it begins to show that it is stabilizing, they will move back in. conversely, if you are looking at the heavy short squeezes like gamestop and others, watch when they begin to slow the rally and then the rally pauses. do they reverse and begin to sell off that will tell you that game is
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over but don't anticipate it. let the market tell you. >> i realize it's not an either/or situation. i am saying all those who are watching gamestop turn negative. but for years, years we have been sitting here on this network saying the retail investors is being left behind and is not participating in the market rally now ref retail investors participating, perhaps not as all of those folks who make comments anticipated but i wonder how you see it and what all of this does, this bigger, broader conversation, the fact that we are now talking about potential for regulatory scrutiny and everything else, what this does to that retail investor participation longer term. >> i think nothing helps retail participation better than a bull market so people can buy in and see stocks advance and do well that helps out
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i think there is a certain populous bent and it is being aided by the media's portrayal of what's going on but i tend to agree. people seem outraged that some of the brokers are putting restrictions on leverage in some stocks and whatever. i think that's the kind of protective kind of routine, you know the same way they change margin rates to prevent people from gambling margin rates are 10%, and then you are going to have a lot of retail unsophisticated people say, wow, let me do this and thereby put their home at risk on something going. and they think some of these stocks are too volatile for some of the people to be playing in i think it's not a conspiracy of wall street haves picking on everybody. i think these leverages are
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trying to be caution so they don't get sued later by saying you should have realized i was not accredited enough to do that there is a lot of protectionism going on here. >> art cashin, thank you. >> okay. got a fresh halt of gamestop we will watch that meantime, a lot of the big names that posted earnings last night trying to get out of the red facebook's slightly in the green. apple and tesla down 2% to 3%. we'll be right back.
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wall street's own populous revelt as reddit traders take on the wall street pros are there lessons on both sides? that and the broader implications next. wall street ps are there lessons on both sides? that and the broader implications next. the wall stres are there lessons on both sides? that and the broader implications next.
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ticker jets gets a boost from the reddit rally several names in the group reported this morning. jetblue and southwest are in the green after posting q4 results american though with a larger percentage of the float, short is the biggest gainer up 9%. as we said, up 50, 60, 80% premarket. we are back in a minute.
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welcome back to "squawk on the street." jim bridenstine joining the aerospace private equity form acorn growth companies jim bridenstine joins us along with ceo rick nagle. jim, great to see you. fresh off of your tenure at nasa, the fact that you are jumping into now the investment landscape, i'm curious commercial space, everything you did as nasa administrator to continue to, i think, spur that time of investment and innovation, how is that now going to shape how you approach investments with acorn
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>> well, thank you, morgan as always it's great to be with you as well. obviously i have a big desire to continue the mission i was on as the nasa administrator joining acorn gives me that really amazing opportunity when i was at nasa i saw firsthand that there's a lot of publicly traded companies, big companies, that are focused on the cost plus contracting and in many cases that's not the future there is a lot of disruption that the private sector is pushing forward right now in aerospace and defense. and that disruption is a lot of times coming from the really small, private companies, venture capital kind of organizations. but there's going to be a lot of failure there. there's a lot of risk in that sector there's this sweet spot that is private equity where it's patient capital. you're looking at a five or eight-year horizon, and you're able to deploy resources without necessarily worrying 100% about
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what the next quarter looks like you can worry about what the next three or four years looks like and that's the patient capital that i think is important for our country. and when you think about the disruption that's happnot just the space sector but in the private equity kind of sector. >> rick, how are you thinking about it on the one hand we just had some defense prime earnings throughout this week, on the one hand you have those more established contractors on aerospace and defense side that have just seen their stocks down double digits. kind of just flat lining in anticipation that we've seen the best in terms of a defense budget has already come and gone on the other hand you do have this investor excitement out there for some of these commercial space names, also seeing it on the government's tech side as well. how would you assess the investing landscape in the sector right now and how are you thinking about valuations?
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>> i actually think it's pretty predictable. a new administration means you're going to cut personnel, you're going to cut procurement and focus on innovation and turn to smaller companies to lead the way, which are the kind of things we invest in. long term we feel that aerospace and defense are going to be -- are going to run just fine commercial aerospace, for example, obviously impacted by airline activity good to see today some of the airlines ticking back up hope is on the way with these vaccines that people will be traveling again. on the defense side it's about procurements versus keeping older stuff working and modernizing those. on the space side for the first time space is an investable marketplace from a private equity standpoint. for years it was left to the billionaires and venture capital firms to lead the way. but you have enough robust activity now for groups like ours to start getting involved
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>> all right so you just mentioned the billionaires jim, i have to ask you about this very public spat that's taking place right now between amazon and spacex around low earth orbit and the mega constellations that are either being put in place when you're talking about spacex or proposed to be put in place talking about project keimer over at amazon. obviously space is crowded how does this work out you've worked closely with these billionaires behind these companies. >> absolutely. these are important capabilities and technologies for the nation to connect the world to enable more people to have more access to information than ever before. these are important, but it's also important to recognize that we can't put up constellations of thousands and thousands of satellites and dozens of constellations of dozens and dozens without there being challenges and so when we think about acorn growth companies, for example, one area we might get
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interested, and i'm looking forward to working with rick on it, how do we do space situational awareness, space traffic management these are areas the united states of america will have to make big investments and they already are and we're seeing that not just put into place with presidential policy directives but also with legislation put forward by the house and the senate and now funded by the appropriators. i think there are opportunities here to get it right we have to get it right. >> all right and just very quickly because we have less than a minute here, jim, the fact that you do have the spac behind momentous, it's take that go public, doubled despite the fact their ceo left earlier this week. you're seeing major runup in virgin galactic shares it's great to see the investor focus excitement space is hard. how real is the risk here that you could see some of these companies or investors in some of these companies as they do start to go public burnt >> i think, morgan, there is a
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lot of pentup demand for investment in these new commercial space activities. and that's what we're seeing that's why we're seeing the exuberance whether it's virgin galactic or momentous, we're seeing that right now. and i think while there could be risk there, and there's always risk in any investment, i think it's good for the nation i think it's good, in fact, for humanity to see the enthusiasm in this area >> all right gentlemen, thank you for joining us today "squawk alley" is back after this break
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