good wednesday morning. i'm carl quintanilla with sara eisen at the new york stock exchange. mark esper joins us this hour as fighting in the middle east stretches into its fifth day. >> and the dealmaker behind birkenstock's highly anticipated ipo. >> and later, a new short from muddy waters. carson block will join us with a sector he says to be bearish on. let's start with the markets. wholesale inflation, ppi coming in a bit hotter than expected this morning, signaling the fed might need to continue to raise rates, at least that might be on

the table. today the fed's governor, michelle bauman says the policy rate may need to rise further to stay behind the goal. so what should we expect from monetary policy and for the markets overall? joining us now is marathon asset management chairman and ceo, bruce richards. reminder, marathon has $20 billion in assets under management. always good to see you. i do want to talk about the fed and inflation and everything, but i think we first have to start with the middle east and what's happening in israel. you see this as a macro challenge for the markets, for the economy? >> well, first, let me say that we all pray for peace and stand with the president of the united states, who stands staunchly behind the support of israel. i say that as a personal citizen, as well as a ceo of marathon. listen, israel is a great credit. it's an a-plus rated credit. it has a strong currency, the equity market has done woeell or time, its bonds trade well and its debt-to-gdp is over 60%.

in terms of risks residing, they're at war right now, we hope that it ends swiftly, but my base case is that wars, like they tend to do, tend to take longer than one thinks. and so as long as it doesn't drag in other regions and bad actors that might want to enter -- >> iran is the wild card, right? >> other bad actors that want to enter, i think it will be quite contained. but that black swan is sitting there, as you know. and it's real. so we're considering that as a risk factor. for right now, energy has been a bit softer, which is a little surprising, given the turn of events, but we'll see, because it's early times. >> so you say you'll have to prepare for that risk. just tease that out a little bit. you're saying if there's a smoking gun around iran here. >> it's one of the risk factors that might cause inflation to be higher for longer. just add that as another log on to the fire. and we saw the ppi numbers this morning and inflation is higher

for longer, although it's softening, it's going to be firm at this three handle or higher for long, which mean the fed has got its work to do. >> you don't think they're done? >> are they done? the big date for me, tomorrow, of course, we have cpi, but it's october 26th. and what you'll see is third quarter gdp. this is remarkable, because the fed chair himself talked about 2.1%, his economists, 2.1% gdp for the third quarter. it's not coming in at a two-handle, in a three-handle, it's going to come in an upper four handle, which is what we're seeing right now. real gdp has been running quarter after quarter after quarter and it's going to accelerate in the third quarter. because when you see strong jobs and growth what it's been, because of the fiscal stimulus, you'll see a really strong gdp. i ask you, when the fed meets october 31st, halloween day, and when they come out and adjourn and announce on november 1, what are they going to do when they

see 336,000 jobs created just last friday, plus 100,000 revision higher in the prior month, plus gdp accelerated. this whole narrative of the higher rates has done the fed's work, i don't think so. >> but that's what we're talking about. that's what you say. it feels like they definitely want to talk about. >> that's what they're talking about, but that's not what happens. that's not what's happening. i listen to john mainord when he says, when the facts change, i change my mind. what do you do, sir? so these facts are changing right before them. this is the fed, come october 26th, and now you're going to see a four or the atlanta fed now says 5.1%, non-gdp print on that day. what do they do the following week? i ask you? >> pause. they're coming to the realization that they've done a lot. if you monitor the fed peek, the long rates are doing the work for us.

we can wait to see how that shakes out. >> i'll take the other side of that, but that's okay, because the fed has moved 525 basis points. so the fact that they have one more left in them is really not my focus. my focus is, for all of next year, the markets are assuming, as they always have, wrongly, from march of '22 -- from the dp beginning of the tightening cycle today, the fed will be easing, and i see rates higher for longer for all of next year. and that's the big disconnect. and that's what's given a bid to the erraticquity markets all al. when the markets realize the fed won't be easing soon, i think that's a wakening that's going to be really impactful for equity markets. >> so you see no cuts next year? >> at least until the very end of next year, no. the recession doesn't start until the -- the economy is too strong for now for a recession to start in the first half. that recession is then pushed out. so i think the risk factors at higher rates. more things will break at the

higher rates. the higher you keep rates here, the more you'll have problems in commercial real estate, the more you'll have problems with some of the banks, the more you'll have problems with some of the companies that are highly levered. the more homeowners will feel pressure and consumers will feel pressure. so, i think with -- >> which will eventually cause them to cut. >> which will eventually cause them to cut, but that will take some time. so i think money markets is a very safe place to be. you weren't paid to be in money markets. now money marks are 5.7 trillion, and it continues to go up and up and up, because you're getting paid a high rate of return. consumers i think at some point will say, let me save. i'm actually paid to save, where spending is just taking on more indebtedness for many. >> what do you see ahead for the credit market then? it seems like you're pretty bearish on equities. >> i would say that the economy is relatively strong, so you can't be too bearish. just valuations are bit high

given rates. what i would say is, what i said to all of our clients, let's get jiggy with it. >> what's that mean? >> it means jobs, inflation, growth, creates yield. and let's take advantage of all of this yield. where's the yield coming from, it's coming 9 to 10%, in leveraged loans, 10%, in structured credit, 10% plus. in our private credit loans, for all the private equity managers who are out there, we love it, providing you financing on your acquisitions at the best rates we've ever earned. and when there's a little trouble in the portfolio in terms of ebitda softening and margins softening, we have capital solutions available as well, to help those companies through. so we're making private lanes, we're making, we're investing in the public markets and we're getting j-i-g-y with it. >> it's like the new alew tina.

there's no alternative. any other dislocations that you see as you are expecting, you said, something to break. that's usually where you see opportunity, whether it's just stress or other issues. >> well, first, you have the banks starting to report this friday and you'll see, you know, one large bank, but a couple other large banks talking about their compressed nim, the cfact that their cost to funding is going up because their rates is higher. number two, significant credit write-downs in some of the bank portfolios. so look for the regional banks and some of the soft banks to be under some pressure, i think, coming through earnings season, which starts this friday. that's number one. number two is commercial real estate is always front and center. if there's 1,561 different securitizations out there in a $1 trillion cmbs market, and we're buying the tranches that are above what we consider to be the fulcrum, above where there's going to be security losses, because there's a lot of noise and a lot of pain coming in commercial real estate, there's

also going to be fortunes lost, but fortunes gained for those of us that can take advantage of that and lend in that space, buy loans from the banks. so along with the banks and the lending problem, we're also doing what we call capital solutions with the banks, which is their capital relief trades. we've recently done a very large transaction recently and we'll continue to do more of these as they become available. >> private credit? >> these are privately negotiated transactions with banks to relieve capital pressures, given their risk requirements and capital needs, and given how they're trying to reduce their balance sheet and balance sheet risk. >> yeah. which has been the big issue for them. bruce, thank you. it's always good to hear from you. bruce richards, marathon asset management. appreciate it. >> thank you. we're getting some details out of the sam bankman-fried case as caroline ellison, the former head of bankman-fried on the stand for a second day.

caroline ellison, of course, made news yesterday. i think we're going to kate rooney on this. kate? >> reporter: hey, carl. yeah, so caroline ellison has been on the stand this morning. they're in a short break right now. we are getting a picture of her state of mind when she was running sam bankman-fried's hedge fund. she talked about this constant state of anxiety she lived in that everything would come crashing down. she said she knew it was wrong, but, quote, sam told me to. she said she lived in what she called a constant state of dread every day worrying about customer withdrawals from ftx. she also said that sbf told her to be careful about putting things in writing that might get them in legal trouble. according to ellison, bankman-fried, also her former boyfriend, continued to tell her to repay alameda's loans with ftx customer money. at one point, she said she calculated the probability that she wouldn't be able to pay ftx customers back. she said she shared that with

bankman-fried, said that she was concerned, she said she lived with the constant fear of ftx customers withdrawing their money and that, quote, we would not be able to meet those withdrawals. she also talked about living in fear when it came to lenders, guys, hiding $10 billion of money that they owed from ftx customers. she said that they doctored their financial statements to hide that. she said she discussed some ways with bankman-fried to make the balance sheet look larger. they prepared seven different versions of documents to send to their lenders, all of which were doctored. ellison arrived this morning wearing a baseball cap, she had sunglasses on. this is her second day on the stand. yesterday, she and bankman-fried avoided eye contact, didn't seem to recognize him at first. she was asked to identify him in a courtroom. he's been in a suit, much cleaner cut, lost some weight in prison. ellison has pleaded guilty. bankman-fried has pleaded not guilty. the defense will get a chance to

cross-examine ellison, but have tried to place a lot of the blame on her. >> we'll check back soon. that's our kate rooney. meantime, this massive energy deal to get to. exxon agreeing to buy pioneer natural resources, $59.5 billion, all stock. the deal expected to close in the first half of next year, but the regulatory environment remains a concern. exxon's darren wood spoke about those concerns this morning on "squawk box." >> together, while scott and i will have a large business together, it will still be less than 15% of the production coming out of the permian, so i think from a scale standpoint, we're still a small player in what is a very large market. so we don't anticipate any regulatory issues here. >> let's bring in our brian sullivan on that, with crude oil down about 3% this morning, we're watching the m&a part and some of the headlines this morning regarding what iran may have known about this attack. >> there's a lot to dissect here. you just heard it from his

words, he's not worried. the deal is done with $253 per share. pioneer stock is under $240 a share. so that could signal some investors don't think the deal would go through. there could also be another reason, which is a little more wonky and boring, i would get to in a second. some bankers tell me that they would expect that some lawsuits maybe from investors or the government could be filed to block this deal. the administration obviously squarely focused on climate, so may not look favorably at a massive oil and gas deal right now. though, carl, to your point, one wonders, if war in skpisrael an the potential for broader middle east conflict or the re-tightening of sanctions on iran could push regulators in the u.s. to perhaps soften up a bit. that is critical. and this is interesting. the first page of exxon's presentation for the deal says the deal, quote, enables even greater energy security because

of domestic production. one source i talked to said it looks like exxon is marketing to the federal trade commission, carl, as well as investors. going back to that stock price, you see it, it's not at 253. could be because of regulatory issues, although pioneer pays this variable dividend, and there is some concern among investors about what would happen about that dividend as it pertains to the arbitrage in the price between the two stocks in the deal. super wonky, could be one reason. but there's no way, carl, that regulatory issues are also not front and center here. >> two kind of related questions from me, brian. as you have covered some of the individual stock stories, and bp, which had an investor day which i think you thought was pretty notable, especially after their ceo just left. and in terms of the reaction to this deal, the potential for more consolidation, especially in the permian. >> this is interesting, okay, on any other given day without the exxon news, i think the bp news

would have probably been the headline story in oil and gas, and what you're referring to, sarah, is bp, yesterday, had its investor day in denver, colorado. now, bp has been shrinking its oil and gas footprint, basically saying, we're going to go to net zero by 2050. we'll reduce our carbon output. that was under the former ceo bernard looney. he is now gone. the head of the u.s. business stepping aside. so at the investor day yesterday, bp saying, effectively, they're going to recommit to growing oil and gas output, doing really a 180, about face, whatever term you want to use, and to your point, sarah, one analyst note from -- i think it was citigroup or stifel this morning that i read, was suggesting that bp energy could be a part of any future consolidation. so you have the exxon pioneer deal. bp has basically said, hi, guys, remember us? we're still here and we're going to grow oil and gas under new

leadership and maybe, just maybe, that will mean more consolidation. but i think the domestic side with everything that has been going on in israel to your point, the attacks, domestic energy security, back front and center, because of iran, which as you know, has tripled or quadrupled its oil exports in the last three years as america effectively turning a blind eye to sanctions. >> brian sullivan, connecting all the dots together. thank you so much. let's turn now to the latest in israel, which is continuing to shell the gaza strip, and now preparing for a ground invasion, following this weekend's terrorist attack. so where does the conflict go from here? joining us with more on what to expect is former defense secretary, mark esper. secretary peesper, it's good to have you. welcome. >> good to be with you, sarah. thank you. >> what are we looking at in terms of a time frame? we're hoping for something swift here sas far as the war, but what's the minimum expectation? >> i think at a minimum this conflict will last weeks for

sure, but it depends on what are the goals of the netanyahu government? is it simply to go in, decapitate hamas, get rid of all of its military potential and pull out, or occupy or reoccupy until they're really sewer that hamas is completely ineffective. i think it depends on what the goals are. and then, of course, does it escalate. does hezbollah attack the north? is there some type of action in iran to the east. and on top of all of h is the complicating factor of hamas holding 130 to 140 hostages. we know they've already threatened to start killinging hostages on tv if further civilian targets are attacked in gaza. so very complicated situation. >> keep your kids off social media. so "the new york times" is reporting that early intelligence shows iranian leaders were surprised by the hamas attack, according to u.s. intelligence officials. and that really has been a wild card here for the markets, as brian mentioned, and for what to

do here with energy, and whether this is going to have a wider spread economic impact. what is your assessment of how iran fits in and whether there's a risk of further escalation there? >> well, look, there's no doubt that iran is complicit. they've been training, funding, arming, inspiring the militants in gaza and hamas and hezbollah to the north. you know, the houthis in yemen, the shia militias in iraq, all throughout the region for years, for decades. they're complicit in this sense. i think what remains to be determined is to what degree did they assist in the planning and did they greenlight this terrible operation? and i saw these new reports saying that some were surprised. i think all that has to be recognized with "the wall street journal" report from sunday, that said that hezbollah and hamas actually sat down with ircg leaders and planned out and talked about this operation in great detail. so much remains to be seen. i can't imagine that this

doesn't expand to iran at some point in time, not initially, because i think the israelis will have enough on their hands dealing with an incursion into gaza, but at some point in time, the only way you solve this problem is if you go back and address iran. that's biggest funder of terrorism in the region for sure. >> so what then? the question from that becomes, what about the u.s.' role and how involved do we get? >> well, it depends on what israel decides to do, right? you could see it on the left end of the spectrum. more political and diplomatic isolation. maybe a reposition of sanctions by the united states and others on the energy sector, coming out of iran. as far as, you know,. it strikes on certain parts of iranian infrastructure to teach them a lesson, to punish their role in this. i think it depends on what we learn in the coming days and week on the intelligence side and secondly, how does this war play out with israel. and third, how do they, we, decide to address really the root cause of all of these problems. and that is iran. >> i mean, it's so many

questions unknown at this point. secretary esper, i feel like you're in prime position to answer this question. what is is the u.s. defense department's capacity to arm and help israel, our ally, which president biden made very clear i think in a very strong speech yesterday, we're doing, given what we've been doing with ukraine and use of some of the military equipment and our defense forces there. >> look, i think we have sufficient reserves, but first and foremost, what's most important is the political signaling of sending an aircraft carrier and cruisers and destroyers to the eastern med to show support for israel but also to deter syria, iran, and others. second is the tactical and strategic intelligence we're providing israel right now. and third, we provide other kp capabilities. but when you get into munitions, look, clearly some of what israel will be asking for will compete with what ukraine and taiwan are asking for as well. this gets to the core question

of why isn't the united states spending more on defense? we've seen budgets under the biden administration be below inflation in terms of what we need, the budget deal caps it even further. we can talk about that political dysfunction in washington, which can see drastic cuts come in early january. but the bottom line, with what's boiling in europe, a hot war in europe, a possible cold war in asia, and now the middle east, we've got to invest more in defense and our defense industrial base. that's a role not just for the pentagon, but the executive branch coming out of the white house and congress, by the way. which is a big player. >> speaking of congress, we're waiting to see if we can actually get a house speaker by the end of the day. jordan seems to think so. how does all of this that you're discussing conflict, if at all, with the ongoing debate about spending in this country and our inability to finance more? >> yeah, look, it absolutely does. the republicans are right. the debt is out of control at $33 trillion and we have a deficit this year of nearly $2

trillion. but i think these sequestration-like measures -- and as you recall, we have in the budget deal right now a measure that says, if all 12 appropriation bills are not passed by january 1st, 2024, than an automatic 1% cut on 2023 levels automatically goes into effect. think about the impact that's going to have on defense spending, at a time we immediate to spend and invest more in defense more than ever, when we see the world is just becoming unpredictable and unstable. so the political dysfunction in d.c. is a big problem. and i think, you know, it will depend, if it's scalise or jordan, i think those two will take different views on defense spending, particularly with regard to supporting ukraine in the long-term. >> so you think that there's a danger here? that we don't -- that we aren't able to increase defense spending to meet the needs of the current world? >> the danger has been with us for a few years now, we're not inf investing enough. whether it was the last year of

the trump administration or congress for the last few years that's been pumping more money into it. clearly at this point in time, that support for increased defense spending has broken down. look, i argued when in office, we need 3 to 5% annual real growth, and we're not seeing anywhere near that. in fact, our spending has been underneath inflation, and projections are it will continue that way. we have a large transformation that we have to make from the reagan area into what we need to fight or be prepared to fight the chinese in the future. and at the same time, these other conflicts are popping that pup putt strains on our defenses and stockpiles. >> munitions is the word i was looking for that you know much better than i do. how else can we project strength? a stronger u.s. is safer for the world? how else can we do that right now at this time of danger and turbulence? >> allies and partners. that's our greatest strategic

alliance. i was hoping to hear more from our nato allies, in the context of this disarray in washington that they were increasing spending on defense, but i haven't heard that yet. there's a handful of countries that have done more. fewer than 10 that are spending more than 2% of gdp on defense. i think it's time for europe to really step up until we get through this disarray in d.c. >> mark esper, thank you very much. very valuable commentary. we appreciate it. former secretary of defense. well, the conflict is one of the big themes of yesterday's international business exchange conference. i sat down with a number of prominent executives, mostly in europe, including the senior country officer or jpmorgan in italy, the banker that runs italy there. listen to what he said about the global impact of the terrorist attacks in israel and specifically what they would mean for european growth and the financial system. >> the impact that we see is continues uncertainty in all of the decision that are across

business. whether it's banking, our clients, our corporates, or our private individual. and this is what we have been experiencing in the last 6 to 12 months. that it is very, very difficult today to really forecast what will be the next 12 to 18 months scenarios in terms of macro, geopolitical, fiscal, monetary policies. and we really need to be alert that, you know, given the g geopolitical uncertainty. >> carl, i thought it was important to highlight, because, you know, investors -- it's always hard to grasp the direct economic impact when you have these wars in the middle east in particular without the iran factor, for instance. you don't see a spike in oil prices. but i thought what the head of jpmorgan italy said there about continued uncertainty on decision making, we know, we talk to executives every single day that it's top of mind. and just not knowing what the world is going to look like eventually does have an impact

on economies. it holds back decisions on investment and on deals and on other things that stimulate economic growth. the imf just put out its growth forecast for this year and next. we're going to see a stepdown in the global growth. 3% this year, 2.9% in the follow year, and in advanced economies, it's a lot lower than that 1.4% growth next year. this channel, this war, on top of the war that's already happening in ukraine and other geopolitical issues, is certainly a downside risk for growth, because of the uncertainty it poses. >> limping along, as the imf said. and of course, uncertainty about what the world is going to look like is never an option. no one knows what's going to happen next. coming up this hour, short seller carson block will tell us. >> and new ozempic data is sending a number of names in the health care space lower. the dow has turned negative, losing its gainsdo, wn 25% -- i mean, 25 points, excuse me.

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welcome back. ozempic maker novo nordisk stopping an study trial early, but not for the reasons you might think. angelica peebles has more. >> shares of novo nordisk are up better than 5% today after a trial looking at ozempic for chronic kidney disease will end almost a year early because it's clear the study will succeed. the goal of the trial was to show ozempic can slow the progression of chronic kidney disease in people with type ii diabetes. the independent data monitoring committee recommended novo stop the trial now because it already met the bar for efficacy. the trial was designed so the reviewers could take an early look if enough data had been

collected. the company plans to disclose the results in the first half of 2024. about one third of adults with diabetes have chronic kidney disease, so this could be another trial for semiglue tide. but players like da vita and presnius. >> getting around its arms on eating habits and dialysis. angelica, thank you. let's get a news update with our silvana henao. >> israel formed an emergency unity government. according to a joint statement, the deal brings prime minister benjamin netanyahu into a wartime with benny gantz. the cabinet will focus entirely on the conflict.

a main hospital in te telev is moving underground. it came after a hospital about an hour south suffered a direct hit by a rocket. they say it was previously hit by a missile a few days ago. and four months after the submersible titan imploded during a deep sea mission to the wreck of the "titanic," the coast guard says it has recovered the remaining debris. the finding included presumed human remains which will be analyzed by u.s. medical professionals. the submersible disappeared on july 18th, launching an international race to find the vessel and five people onboard, carl. >> silvana, thanks. it's been a tough year for the ipo market, despite the window opening up a little bit. arm, instacart, kenvue all way off their high. >> and now birkenstock hoping it

can buck that trend. the banker leading the deal for the private equity firm that owns birkenstock joins us. right now, indications for the first trade, between $42 to $44 a share. it pceatrid $46 a share which was the midpoint of the previously stated range. we'll be right back. and businesses need to navigate the changing landscape to stay ahead. when you partner with barclays, every change leads to a bold possibility. you have the vision. we have the insights, financial solutions and global perspectives to help you make it real. barclays corporate and investment bank powering possible. there are some things that go better... together.

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we are awaiting the first trade of the shares of birkenstock after the stock priced at $86. we talked to the ceo last hour about the company's guidance. take a listen. >> the track record i've created in this company in ten years is 20%, 60% gross profit margin and 30% plus "x" ebitda margin. you show me any comparison to this, and you really have to dig deep into the luxury segment. yes, we are very confident, and yes, our estimation for the future and the forecast is always a bit more traditionally

oriented. >> conservative. >> but the insiders -- the insiders know -- >> underpromised, overdelivered. >> you got it. >> leslie picker is here with a managing partner of the flagship fund who led the birkenstock deal. leslie? >> thank you, carl, for being here. reportedly at the time, the valuation was $4.8. today, going public at a valuation near $9 billion. so i'm curious what changes did you make strategically, operationally, that you believe drives, say, 80% upside in valuation today? >> yeah, by the way, thanks for having me. so, look, leslie, this is what we do. everything within consumer, what we saw was a terrific brand with an underwriting that was very similar to what the company had been doing. so the growth rate, and oliver talked about this earlier, but the growth rate you saw was well

before we invested. one was a continuation of expanding the product assortment. so the product was really geared more towards open-toed shoes. we defined that category in particular. and we thought there was a big opportunity in closed toe shoes. what do you wear in the winter? so we underwrote that. and that penetration rate more than doubled relative to what we underwrote. you know, second, we continued to drive the channel strategy of the business into our own channels, because it's all about control. so as we moved product into our own channels, that research is worth more to us, it's more profitable to us. and lastly, we really underwrote an expansion of capacity. and so you heard oliver talk about this, we were capacity constrained, always in sellout mode. so the first thing we did was

spend 150 million euros in expanding capacity so we could start to supply the markets we were underpenetrated in asia in other markets. i'm curious, why now? there was such determination to take this public. i know you had a whole host of curveballs thrown your way from the potential government shutdown that almost kmthwarted the road show over the weekend, there were events in the middle east. so why do public now? i know you'll still hold 83%, at least in the short run, but why take it public now? >> again, 80% of the businesses with we do, we're partnering with founders and entrepreneurs. and one of the things we came in and talked to oliver about was a promise to get the company public. and so, all along, that was the intent. what drove the timing was, when

you think about markets like this, it has lived war. this is the kind of business where quality will differentiate itself. it's exactly what we do in terms of the kinds of businesses we want to invest in. get the business out. we will continue to own 68% of this business post offer, be aligned with our long-term partners, be selective about who we brought into the capitalization and be patient. so we have the opportunity to be able to continue to enjoy what we think will be a lot of great growth in this business and the upside that comes with it. >> i have a question when it comes to geopolitical risk, you wonder about retailer supply chains and where they're located. this company has a unique value here, because all the shoes are made in germany?

>> from the onset, that's the authenticity of this brand. all captive to us. it's also all the input materials materials come from europe. there's very little that comes from outside of the european theater. >> but the end market is very global. i know it's more than 50% in the americas, but china, there's a lot of growth markets out there, right? >> that's right. you know, the bulk of the business is u.s. and europe. asia, broadly, and asia is not asia, it's four different markets for us. that represents an underpenetrated an opportunity. and china in particular is massively underpenetrated. we just didn't have capacity. >> you mentioned geographic expansion, pricinge ing product expansion. are the shoes going to get more expensive over time? >> no, the intent wasn't to

drive the sp higher. we have been able to offset pricing. the pricing is the protection of our product. take the arizonas. you'll see arizonas come in at $49. the point is the that if you're a consumer, you pick and choose where you want to be on that asp. so you can start to participate in the benefit of the footbed, but you pick and choose where you want to be on that price point. >> private equity is watching today very cloesely. because there's a significant pipeline of portfolio companies that need some sort of an exit and the ipo market has been pretty closed over the last say year and a half, almost two years now. you are taking this one public. you took oddity public this summer. what's your assessment about the current environment? do you feel like there is significant buy side demand out there, or are investors still pretty discretionary? >> look, i think, investors are

picky, as this should be and the environment is clearly choppy. that said, if you have a unique business and a great asset, we thinkthere's a market for businesses like that. and birkenstock is an example of it. we went through this analysis. there were 175 ipos between '14 and '23, of which there's only one, which is birkenstock, that's got scale at a billion, more than 20% growth rate and a 25% plus ebitda margin. so if you've gotta kind of uniqueness in the public market, there's always a market for that. and those who are partnering with us on the public side understand that. >> appreciate you joining us today on the ipo day of birkenstock, which you have led that deal and continue to be very close. >> the whole firm, but thank you very much. thank you. >> waiting on that first trade. getting indications. leslie, keep us posted on that. up next, buyouts and bankruptcy. the struggle of direct-to-consumer pbusinesses s

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still awaiting birkenstock's first trade after the german shoemaker priced at the midpoint of the range, $46 a share. our deirdre bosa is taking a look at its direct-to-consumer business in the state of dct. >> the secret sauce of pi bickerenstock's revenue growth has been its direct-to-consumer business. and that makes birkenstock a rare success story. other brands like warby marker, casper, they have struggled to sell their products right direct to consumers. smile direct club filed for bankruptcy. birkenstock has cracked the model. back in 2018, dtc made up less than 20% of revenue. in 2022, it doubled to more than 48%. birkenstock celebrates the shift

in that ipo prospectus, writing, our dtc footprint provides access to birkenstock in its purest form. it has enabled us to express our brand identity while engaging directly with our global fan base. it's also more profitable. the company notes it now operates its own ecommerce platform in more than 30 companies and is eyeing new markets, but birkenstock has its own twist on the dtc model that may have positioned it better than its predecessors. its so-called engineered distribution model seeks to boost brand value by creating scarcity. that means that the company strategically allocates products between whole s.e.ale partners its dtc channel. it allows them to build a foundation for long-term growth and reduced dependence on whol wholesale. it's using dtc dpagainst the wholesale model. that's a lot different than the last class of dtc companies. that it spent big on google and

instagram ads to create hype around their brands, bring customers in, and then that playbook was disrupted when apple upended the advertising landscape with its new privacy policy. i like this line from the ceo letter from the birkenstock prospectus. he writes, everything hads to change so that everything hay tsays the way it is. and i've had at least one pair of my birkenstocks in my closet since middle school. i cannot say the same about my allbirds, and what birkenstock tells us, they used a very different strategy. >> you should buy a new pair, because of the new colors and they do metallics now. >> i want the clogs. >> that's how you know that those have come back in fashion. >> deirdre, my question is, where does amazon fit in on all of this? i know there were some questions, because irkenstock doesn't directly sell through amazon anymore. and investors are always watching this, because it's obviously a growth driver, but presents some risks like counterfeits. >> amazon has its own private

label business, so you're successful handing over all of that data to amazon, which it says that it absolutely does not use that data for its advantage, that's kept totally separate, but theoretically, could use that or see that these are selling and create its own brand of shoes or mattresses. i still mattresses. casper was not on amazon but when it ran into a hard time of the dtc sales it started putting mattresses on amazon. i went to look for mattresses and the first one that came up a few years ago was an amazon mattress. you had to scroll further down for casper. it's a really tough challenge. if you're a brand that needs amazon, you have to go there, but you could be giving something up, be lower down in the search results. that's what shopify tries to do and another startup called fair trying to solve that problem, be another option than amazon. that's something the brands have to consider. >> nike can attest, dee.

thank you, deirdre bosa. short seller carson block is with us on the sector he is targeting next. stay with us. ♪ ♪ every day, businesses everywhere are asking: is it possible? with comcast business... it is. is it possible to help keep our online platform safe from cyberthreats? absolutely. can we provide health care virtually anywhere? we can help with that. is it possible to use predictive monitoring to address operations issues? we can help with that, too. with the advanced connectivity and intelligence of global secure networking from comcast business. it's not just possible. it's happening.

welcome back. our next guest is one of wall street's most prominent short sellers and has a busy q4 on deck with plans for a number of new shorts year's end at robin hood foundation's investor conference here in new york city. joining us this morning muddy water's research founder, carson block, with us. thanks for the sneak peek. what can you -- lay it on us.

>> i can't tell you anything with my idea, of course, because that would disadvantage the people going to the conference but i would like to talk up the conference for a moment. robinhood is an anti-poverty organization to alleviate poverty in new york city, been around for 35 years and is a fantastic conference. i will be on the same stage as steve cohen and stan druckenmiller. really excited to be there and, yeah, i think i have some interesting things to say when it's my turn to talk. >> we had tudor jones on yesterday, and he said the same thing about the speaker's list and all for a very good cause. maybe you can talk whether the universe of ideas is getting larger or smaller. >> i've been an activist small seller for 13 years.

we find reasons to complain about the universe of ideas or the market. bad behavior, it's not going away. valuations have compressed but there's still so much frost out there and particularly we look at things globally and will do things in europe and asia. there are still a lot of companies using misleading accounting, a number of stock promotions that occur and there's always some hype cycle. we've seen a few shorts in our world already, the fake ai space. really i'm bullish on our business model anytime post the

frauds imploding in 2012 and 2013. >> you revealed one of your shorts with us and it was on the esg front. i know you've been going after the esg companies, you call them grifters. how is that going? hhsi. you accuse them of all sorts of things, i think mostly funky financials and cash flows. i assume it's a profitable short for you. the stock has overperformed the last year. give us an update where you stand there. >> sure, that was armstrong, hassey. the issues were that their accounting is entirely legal but it was highly misleading. so they produced all of these paper profits, but there was no or very little cash underlying that and in an environment in which rates have gone up, what we've seen from hasi and the dumpster fires of businesses is that the stocks have underperformed.

there could be more down side on hasi, we did close out our short at some point. >> you did? >> that was actually a little bit controversial internally. we developed this ai -- talk about the ai hype cycle -- but we did the pre-ai hype cycle, to advise on when to close positions and it did advise us to close hasi at a time when the rest of us were sitting around the table and saying, i think it might have this one wrong but since we told investors we're going to listen to this to some extent, let's close it. we would have made more money likely if we held on to it. in any event, a lot of what we said has been ratified. and you did interview the ceo soon after -- >> yes, of course. >> he refused to answer the most fundamental question we posed which was how much cash -- how much of your earnings were

actually cash? he didn't say anything and he just obfuscated. for people who kind of believed him, rolled the stock down, it's been unfortunate. >> we don't have that much time, but i do have to ask you about the doj investigation, i think, into you and your firm, which was ongoing. haven't it an update on that. anything you can share? >> well, number one, at least several other firms also caught up in this. look, we, as far as muddy waters goes, are confident it is completely in the rear-view mirror. there's not a lot that i can really say other than we're confident at the outset it wouldn't amount to anything although it's an unpleasant experience to go through. we think it's behind us. >> carson, appreciate you coming on. it's good to see you, thanks.

carson block. we have lost some gains this morning. there are ap headlines about israel urging residents in the north to take shelter on reports of military activity. the market will be wrestling about that. >> hezbollah firing into israel, another terrorist group. cpi tomorrow will be big. >> to the judge and "the half." . carl, thanks. i'm scott wapner. front and center, the murky road ahead for your money as a key read on inflation comes in hotter. all of it only adding to questions about what to do now in the markets. we'll ask the investment committee. joining me for the hour today, stephanie link, joe terranova, liz young, everybody here at the table. we'll check the markets. what was green is no longer at least for the dow and the s&p. the nasdaq is still holding on. yields are still lower