Power Lunch - A Hollywood Ending?, and Power House Road Trip! 9/25/23

Episode Date: September 25, 2023

Hollywood writers have reached a tentative deal with studios to end their strike after nearly 150 days. But nothing is set in stone. We’ll look at what it means for the actors strike, and broader labor strife across the country as well.Plus, we’re kicking off the latest edition of our Power House Road Trip! We’ll hit 5 cities over 5 days, with a glimpse into the housing market. Are prices still through the roof? And how far does a $1 million budget go these days? We’ll find out. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Power Lunch, everybody. Alongside Kelly Evans, I'm Tyler Matheson. Coming up, a Hollywood ending writers reaching a tentative deal with studios to end their strike after nearly 150 days. But nothing is finalized yet. The ink is not dry. Plus, we are hitting the road, kicking off our latest power lunch house road trip. Five cities in five days. Our home prices still through the roof. And what does a million dollar budget actually get you in the markets we're looking at? We'll find out, Kelly. That's always a fun question to answer maybe more now than ever. Tyler, thanks. First, a check on the markets.

A mixed day to kick things off here in the last trading week of September. The Dow is trying and right now succeeding to avoid a fifth straight down day. We have erased our earlier declines to be up 15 points, up 12 on the S&P, up 43 on the NASDAQ. And the S&P and NASDAQ are coming off a three-week losing streak and still pacing for their worst months since December. So some context around these mild increases. Dozens of names are also hitting the new. 52-week low list. We're talking Target, Dollar Tree, Dollar General,

all of them here. DG, Dollar General hitting its lowest level since January of 2019. Meanwhile, Alaska Air and Southwest, those have been part of a challenged recent trade for the airlines. They are both back to 2020 lows, Tyler. All right, Kelly, we begin with that tentative labor agreement between Hollywood Writers and the studios that could end the ongoing rider strike.

That's lasted nearly 150 days. And while it's not finalized yet, the WGA reportedly calling it, quote, an exceptional deal with meaningful gains and protections for writers for more. Let's bring in Elaine Lowe, staff writer for the Ancler. Elaine, welcome. Good to have you with us. While the writers seem to be cheering this deal, we really don't know much about what's in it, do we? We don't. The contract language hasn't been fully sorted out yet, so the Guild hasn't shared it with the membership.

But like you said, the Writers Guild called it exceptional, says that. There are meaningful gains and protections for all sectors of the writer's membership. And that enough was cause for celebration. I was out covering some of the festivities last night. There were, you know, parties all across bars in L.A. You know, a couple hundred people up at a bar in North Hollywood. And when I was talking to people, they were relieved. They were elated.

They were thrilled that a deal had gotten done tentatively, of course, on day 146 of this strike. Because it's been a long four and a half months for these folks. And, you know, Sangafra is still on strike. They're on day 74 today. What would happy-making protections on AI look like for the writers? That's a good question. The writers are concerned about this. It's an emerging technology, something that's been moving very quickly.

So hard to say what that contract language is going to actually be finalized into, but there's concern about studios being able to use their words and their materials in the future. without compensation or adequate compensation. And there's just a whole host of issues with any kind of emerging technology in the same way that there were questions around so-called new media, which is just streaming as we know it today back in the 2007, 2008 strike. There are also issues that the writers right now are hoping to resolve with residuals, with pay increases, with staffing minimums. So, you know, be very interested to see in the final language of that contract. Did they give you any hints? Are we talking, you know, 8%, 12,

percent, 16, 20, 24, you know, some kind of ballpark here. And again, this revenue sharing piece that especially for successful shows seems like it's incredibly important. Well, I wish I could tell you. But I was, again, I was talking to some of the writers last night. And they, streaming residuals is very high on the list because, you know, they've seen the way the streaming economy has impacted their work over the past five to 10 years. And, you know, this is something that SAG after is also going to be taking a very close look at. Obviously, the writers and the performers have different issues, but there are some things that overlap, including AI, including streaming residuals. So, you know, I think there's a chance that this sets something of a template for those issues

once the studios go back into talks with SAG AFRA. Is there any sign of movement on the SAG AFRA agreement? Well, you know, the studios have been dealing with one guild at a time. So now that they come to a tentative deal with the Writers Guild, they will eventually be turning their attention back to Sag After. As far as I know, there aren't any talks on the books yet, but I imagine that has to happen soon. We hear a lot about the particular members of the, who were negotiating on the studio side. It included Warner Brothers Discoveries, David Zaslov, an individual from NBC Universal, our parent company. Is Bob Iger, Donna Langley, Ted Sarandos,

is there one of those four folks who is more influential in that group, than others. Is Netflix the driver here or are they all equal players? Those conversations all took place behind closed doors. I couldn't tell you what exactly transpired. But obviously, each of those players has different things at stake in this, right? I mean, you saw, we've seen how Netflix has impacted the streaming world, how all of these other streaming players have, you know, tried to come to the fore in the wake of their dominance of the streaming landscape. And we've also seen how, you know, you know, Disney with has caught up with Disney Plus and how they've been trying to reshape their

business around this new world where there's a secular decline in cable viewership and a rise in streaming that is still, you know, notoriously a fairly low margin business. Elaine Lowe v. Anklund. Ankliffe, we thank you again, as always. Good to see you. Thanks for having me. Meantime, strikes continue for workers in America's Big Three automakers. Ford warning, quote, significant gaps remain in contract talks, and it was having the easiest time so far. Phila Bow has the very latest on negotiations. Hi, Phil.

Hey, Kelly, I'm not sure easiest would apply to the Ford UAW negotiations, but they clearly are moving along faster than the GM and Stalantis ones. Let me bring up the speed in terms of what we're hearing from those who are familiar with the negotiations. There were very active talks, according to those familiar with the negotiations over the weekend, very active talks between the UAW and Ford. Though Ford came out last night and said, yes, significant gaps remain, especially on the key economic issues. talking about percentage pay raise, wage tiers, cost of living adjustments, all of those things.

GM and Stalantis, the talks continue there. It's not as though it's only UAW and Ford where the talks are happening. They're also continuing with GM and Stalantis. Right now, about 12% of the UAW membership for the big three are on strike. So even though this is getting a ton of attention, and it's significant, especially at the plants where they have shut down production or at the parts and distribution centers, keep in mind that you have 88% of the UAW members who continue to work, and 85% of the production for the Big Three, it continues. It has not stopped. One other thing, as you take a look at shares of GM Ford and Stalantis, Ford got good news that the rank and file at Uniform north of the border, which is the UAW counters part up there. They approved a new contract.

Now those negotiations between Uniford, GM, and Stalantis move forward. And that's good because it perhaps gives a template in terms of what we might expect when it comes to the UAW negotiations. It's a separate situation up there than it is here in the United States. But I think they got like a 24, 25 percent pay raise ultimately. And a lot of people believe that's in the ballpark of what we might ultimately see when these contracts are finalized between the UAW Ford, GM, and Stalannis. Don't forget, President Biden, he's in Detroit tomorrow, still waiting to find out exactly how long he'll be there and where exactly he will be meeting with UAW.

strikers, guys? Phil, the part of the negotiations take Ford as an example that aligns profit sharing seems to make quite a lot of sense in the long run. Is there a ticking time bomb in here, though, where at least from the Ford talks, it appears they were going to give them the authority to strike in the future over plant closures, which was the very thing that they did against GM for that long strike several years back. And given that there was probably going to be more plant closures to come, Stalantis, obviously, and others, are we just going, like we're experiencing in Washington going to end up kind of creating the seeds of another strike in the future over plant closures instead of overpay? Keep in mind that this contract is only through May 1st of

2028 once it's finalized. And Ford would not agree to that if it didn't believe that it's pretty confident it will not have to close any U.S. plants between now and the May of 2028. True. Sure, things can change within the marketplace. And that is always something you want to give yourself as much flexibility as possible. But remember, General Motors has made it clear that they have committed to having product at every plant where there is a UAW membership right now. So to a certain extent, those guarantees are kind of baked in there. The issue becomes if you flat out say, look, we will never, ever, ever close any of these plants and that's just the way it is. I mean, things are going to change with time. We know that. That's the nature of this industry.

But through May 1st of 2028, I think Ford is fairly comfortable. And I think GM as well. well, that they know what they need in terms of production facilities. Well, it makes a lot of sense. Phil, thank you very much. We appreciate your reporting. Phila Bow. And in Washington, no sign that Congress will be able to fund the government before Saturday night's deadline, setting up a potential shutdown that could last for weeks. There is a real logjam in Washington right now, and Emily Wilkins is all over it for us. Hi, Emily. Hi, Tyler. Well, yeah, a lot that's happening in D.C. this week, but so far, nothing that would actually lead for the government to not shut down come midnight on October 1st.

And that could have some very serious implications. You're talking about 2 million federal workers plus military who aren't going to be receiving a paycheck for the duration of the shutdown. You're talking about billions of impact to the economy. And credit agencies have started to take note. Moody's coming out this afternoon with a warning to the U.S. government that shutting down would be credit negative. Now, the U.S. currently has a triple A rating from Moody's, but in a statement, they warned that if the U.S. comes out with a shutdown, that could have some really negative impacts. It could demonstrate significant constraints that intensifying political polarization put on fiscal policymaking at a time of declining fiscal strength, driven by widening fiscal deficits, and deteriorating debt affordability could all lead to a negative credit rating. A lot of sort of big words there, but basically just the fact that things are so partisan right now.

that the House can't even get anything done. You saw them try and fail to move last week on multiple spending bills. At this point, they're not even considering a stopgap funding. They're still working on those long-term bills. And while Speaker Kevin McCarthy expressed some confidence to reporters this morning that they would be able to avert a shutdown, he had some very strong criticism for members that have been holding up the process saying that it doesn't seem like they have a strategy. Listen to what he said today.

You have to keep the government open. I mean, if people want to close the government, only makes it weaker. Why would they want to stop paying the troops or stop paying the border agents or the Coast Guard? I don't understand how that makes you stronger. I don't understand what point you're trying to make. Now, the Senate is also working at this point on a stopgap spending measure, but it's not clear that that's going to be done or be able to be passed by the time that Saturday night rolls around. And the White House is already ringing the alarm, telling federal agencies to get their plans in place for a government shutdown. Guys, in D.C., the

question is really going from if to how long the government could be shut down. And of course, the longer it is, the worst of an impact on the economy. Emily, how much does the vulnerability of the speaker play into the negotiations that are going on? It's an immense amount. You know, if McCarthy put a bipartisan bill on the floor, they estimate that about 300, which is more than enough, members would vote to pass in a mixture of Democrats and Republicans, kind of like what you saw for the debt limit. But the fact is, is that members like Congressman Matt Gates and other hardliners who have really held out throughout this process have told McCarthy that if he brings a bipartisan bill to the floor, they will vote to remove him. And at this point, it's just not clear whether McCarthy would be able to survive that vote.

But eventually, of course, even, you know, regardless of what happens in this next week, that is eventually a choice that McCarthy will likely have to make. All right, Emily, thank you very much. We appreciate the reporting. Thank you. Coming up, following the money. It's been a tough go for startups depending on venture capital lately, but there's one sector still seeing big bucks flow in, thanks in part to government spending. Could that dry up if the government shuts down for a while? We'll get a live report when Power Lunch returns. Don't go anywhere. Welcome back to Power Lunch. Markets are starting the last trading week of September with a whimper.

The S&P and NASDAQ are pacing for their worst months since December of 2022. Things could get worse before they get better between the labor strikes, the Lumen Government shutdown, and the likelihood of rates staying higher for longer. So where should investors turn? Let's ask Stephanie, Link, chief investment strategist and portfolio manager at Hightower, as well as a CNBC contributor. Stephanie, good to see you. Does the recent stock slide have you drooling or concerned? Well, we are getting some opportunities, Cal. I know we're going to get to that in a little bit. But September basically is a very volatile month. It's living up to its billing this year, right? We're down about 6% from the highs. The VIX is up 34% in two weeks' time.

And you just cite it. A lot of the reasons are there's a multiple of issues, right? You have the unknowns of the Fed. You have the labor strikes. You have oil prices are up 32% from the June lows. You have the government shutdown, which is a big looming situation. I think it'll be short-lived, but it's another uncertainty. And of course, I think the biggest thing is you have the 10-year yields are inching higher. At 4.6%. You're at New Cycle highs. And so as rates go higher, that's competition for stocks. So I don't, I'm not We've seen this kind of choppiness and this trade down. I think better things are ahead for us, though, because I think the economy is hanging in there much better than most people expected. The economy looks good. The consumer is reasonably healthy, but those high and rising and higher for longer interest rates, what does that mean, what does that spell for stocks over the next six to 12 months? Yeah, I think it's a challenge, Tyler, because for the last 10 years, there was no alternative to stocks. Right now you have all kinds of alternatives, not only in fixed income, but cash. The good news is that over the long term, stocks actually, the total return outperform bonds handedly,

about 7.7% on average total return over the long term. And so that's compares to about 3.5% for fixed income. So I'm not saying you don't want to have a diversification. I'm not even saying you don't want to have cash. I think you don't want to have all three. But I do think that stocks follow profits. And I think that we've seen a trough in profits. And I think you're going to see companies that are going to be able to handle the higher

are prices, but also they're going to be able to price increase as well as cut costs. And the demand side of the equation is better than expected. Can I ask you, Steph, about Nike? And I love that in your note, it just says gulp. And I remember I was thinking about this this morning as well. I remember when we used to talk about Starbucks all of the time. I mean, some of these were some of the best beneficiaries of the 2010s and of China. And I think of both of them now and really pondering.

under kind of what their earnings power looks like in whatever this kind of new normal world is. I still think, Cal, that Nike's earnings power is something close to $6, $6.50 in the next two years. And a lot of that is predicated on them getting back to high teens' EBIT margins. And how are they from 11% today? How are they going to do that? Well, a lot of it has to do with lower freight costs, lower input costs. We'll see about currency. That's a wildcard. But most importantly, inventories. Inventory is improving. And so then you also mentioned China. I think China, the consumer in China, is actually doing better than expected. Remember, we got a really good industrial production and retail

sales in China two weeks ago. And so I think the consumer is doing better. That's 13% of Nike's revenues. I also like the DTC movement. That's going to help margins as well. So it's choppy, dicey now. It's not super cheap at 23 times forward, but certainly down from 28 times for its 10-year average. And so I'm hanging with it. I like best to breed on sale. I think this is what it is. It's a week for Nike. It's a week for Micron. It's going to be, we're going to hear more about China and more about a lot of these factors. But I love the way you explained the challenge Nike has ahead. Stephanie, as always, thanks so much for your time today. Thanks, Kelly. Stephanie Link. All right, Treasury yields higher to start the week, the 10 year above 4.5% trading at levels not seen since 2007.

Let's check in with Rick Santelli in Chicago for the latest in the bond market. Hi, Rick. Hi, Tyler. Indeed. A month-to-day chart pretty much shows us everything we need to know. We continue to see the long-dated treasuries like tens and thirties really lead the way to higher rates. And it's been that way off and on since the middle of July. Now, that doesn't mean two-year note yields you see on this month-a-day chart are logging.

They're moving higher as well. They're just not leading the pack. We call this, of course, a bare market when rates are going up and it's actually actually. It's actually a bare steepening trade because today we're under 60 basis points in Tuesday tens, under minus 60 base points in Tuesday tens. That's the least inverted in about four months. Now, open the chart up, Tyler, to 2006. And the reason I'm doing this is that 10-year note yields in 2007 had a high close of 529, which means we're not going to be comping to 06 like a two-year for quite a while. And finally, all of this continues to be a big positive for the dollar in addition to other central banks,

basically moving to a different tune than our central bank. And we are now on pace for yet another fresh 10-month high close in the greenback. Tyler, back to you. All right, Rick, thank you very much. We are just days away from our delivering Alpha Summit. Please join us in New York City. This Thursday, we will convene business leaders to provide insights to help you, make your investing dreams come true. Tickets are still available. You can scan the QR code on the screen

or visit CNBC Events.com slash delivering Alpha. PowerLunch will be right back. Welcome back to Power Launch. It has been tough sledding this year for startups that depend on venture capital, but there's one bright spot in the private equity market. And investors say it's all thanks to the Inflation Reduction Act. Our own Kate Rooney is following the money trail for us. Hi, Kate. Hi there, Charlie. So it's not AI, believe it or not. Clean energy startups are emerging as a bright spot in venture capital. Founders and investors I'm talking to point to the Inflation Reduction Act, IRA. That law passed last summer. It promotes clean energy production and clean tech. So that includes things like wind, solar EVs. That group just had its best quarter in two years. It brought in $5.4 billion in venture funding. That's according to Pitchbook. This is at a time, guys, when most venture capitalists are really tightening their belts amidst. Higher interest rates, overall funding is down while Clean Tech had that boom. IRA tax credits incentivize some of the larger companies to invest in things like clean energy, but startups might not even have the revenue to tax.

If that is the case, they can sell those tax credits as part of the IRA and then use those proceeds to fund their businesses. That improves the math and the economics for some of their backers. If you are a VC investor looking at novel technology, if you're a private equity investor, looking at capitalizing solar projects or wind projects, if you're a large bank thinking about what the payback period is going to be and the viability of various projects, you're looking at the value of the tax credits as a fundamental input into that. The CEO of Electric Hydrogen, another startup, tells me that he scrapped manufacturing

projects abroad because of the IRA and moved some of those onshore as well. That's incentivized us to build a factory in the U.S. We announced we're building a factory in northern Massachusetts and Devin's Mass. And it's also incentivized us to do things like what you see behind me, which is our pilot plant in San Jose, California. So it's absolutely pulled the market into the U.S. And it's refocused U.S. companies like ours on the domestic opportunity. The White House says companies have now spent 100. $110 billion on clean energy manufacturing in the last year or so, 170,000 jobs, meanwhile,

have been created in this space. Some startups, though, guys, are still waiting on more clarity from Treasury on these tax credits. That is expected by the end of this year. Back to you. All right, Kate, thank you very much. Kate Rooney reporting for us. Let's get to Amon Jabbers now for a CNBC News update. Hi, Amon. Hey there, Kelly. Former President Donald Trump's attorney's issued a challenge to one of the lawsuits trying to get him off of the 2024 ballot. of dozens of lawsuits filed that claim Trump is ineligible to run under a rarely used 14th Amendment clause that bars candidates who have supported an insurrection. But in the filing today, Trump's attorney said that clause only applies to someone who engaged in an insurrection,

not a person who allegedly instigated it. They also said that the lawsuit violates Trump's right to free speech and should be dismissed. U.K. police say they're looking into a number of allegations of sexual offenses against comedian Russell Brand. They say all of the allegations are, quote, non-recent. The probe began after reports came out about four women anonymously accusing Brand of assault or rape. Brand has denied their claims. A tornado-stricken North Carolina Pfizer plant is now mostly back up and running, but the company warns the facility could still have supply issues until the middle of next year.

The pharma giant estimates the plant produces nearly 10% of the sterile injectable supply inside the United States. Kelly, back over to you. Wow. Amen, thank you very much, Amen Javvers. Still to come, we are kicking off our latest powerhouse road trip. Five cities in five days. There's the RV, each giving us a glimpse into the health of the housing market.

How are near 8% mortgages taking a toll and how far does a million dollars go these days? We'll find out after a quick break. Such a disturbing. Welcome back to Power Lunch, everybody. Today we begin another edition of our Powerhouse Road Trip across the We'll be doing in-depth looks at what's happening in the housing markets around the country, showing you how far a million dollars can go and how interest rates are affecting buyers and sellers alike. We start just up the road in the Hudson Valley, Poughkeepsie, New York. Believe it or not, one of the hottest housing markets in the country right now, clocking in at number 87 in Zillow's top 100 metro areas, with prices up 56% from last year.

and 54% are selling above the listing price. So let's welcome in Doug Wilford. He's executive vice president and managing director of sales with Brown Harris Stevens. And as a Hudson Valley resident, he's not only an expert on the market there, but he calls the area home to. Doug, welcome. Good to see you. Why is Poughkeepsie so hot? I mean, it's got Vassar.

It's got Marist College. It's a nice town. It's 75 miles or so north of New York City. Who's buying and why are prices? is getting driven up? You know what? I'm not surprised at all that it's, that's, that we're seeing this trend right now. You got two things going for it.

Value and location, which is what consumers are looking for today. First of all, value. If you look at the price you would pay in Westchester, which is just to the south and a little closer to the city, you're going to be paying about twice the amount per square foot is you're paying in Poughkeepsie. You're only an hour and a half from New York City. So if you're a commuter, you know, before 2020, that might not have been very attractive. to you, but if you're working remotely or if you're working, you know, a hybrid kind of position,

then maybe three days a week driving with that commute. If you can save this much money, isn't a bad deal. And plus, it's a great town. I mean, you've got great job opportunities. IBM is just committed to, what, $20 billion into the Hudson Valley, including the Poughkeepsie area, great cost of living. It's a beautiful area. You've got the walkway over the Hudson is one of the highest pedestrian walkways in the country. You've got cultural diversity. You've got great education, as you mentioned, Marist and Vassar. You've got a great education system because of that. You've got great health care.

It's got everything going for it at this price. I've done that bridge, Doug. It's cool. It's gorgeous right there. It's cool. And you go across and you're going over the train tracks and it's a little, you know, it's a little unnerving, but kind of fun. I don't mean to skip ahead to the big reveal here, but I would love to know what a million dollars gets you in Poughkeepsie. I mean, it's still very close to one of the.

the most expensive, you know, real estate parts of the country. Could you give us a, I mean, what are we talking about, four-bed three bath or hopefully a little bit more than that? Yeah, there was one. I think we have an example of one that sold for about seven. Yeah, there it is. Seven-49, four-beds three baths. This is a great example of what's happening to Hudson Valley, by the way, and for the Poughkeepsie area. You know, when interest rates are high and inflation's going up, people still need to buy. People still need a home. But they want to make sure that they're going to be risk averse, right? Because you have to have a place to live,

but you want to understand what the costs are. So in this case, you get new development. So everything is done. Everything is finished. Everything is, you just move your things in, put the key in the door and your toothbrush there, and you're ready to move in. Now, new development isn't the only place that can happen.

If you're a seller in this area, that just means you need to understand that when you put this house on the market, get it ready for the market. So consumers can understand what they're buying and understand that there are going to be no hidden costs there. So I think this is a great example. Let me ask you about this property or, for instance, a row house in Kipsy sold for $1.6 million over the summer.

So for sales in this range, an 8% mortgage is what kind of monthly payment and how many people are taking out those kind of mortgages? How many are using cash or other alternatives? What are those alternatives? Well, I think we're seeing 51% are still financing. You know, at 8% for this, your monthly payments, what's that going to be? It's going to be at least $6,000 or so. that. So it's not, that's not cheap for this house. But to think about the fact that if you built this same home in Westchester, we love Westchester, don't get me wrong, but you're going to be paying

twice that per square foot and you're going to have higher taxes. So for someone who wants this home and wants to be able to have a certain lifestyle or wants to be able to get to New York City or to Albany or to enjoy the Hudson Valley, this is a way to to enjoy that at a lower prices you would get someplace else. Beautiful part of the country. I, I, I, I, I, I, I, I, I sense that what you're saying is that buyers don't want any part of a house that they're going to have to fix up. So you've got to have that house letter perfect. I just think, yeah, that's true. People want to know, look, not that there are people that they're looking for fixer upers that want a project,

but I think if you're concerned about what's just happened to your lifestyle in the past, you know, let's call it 12 months, then you're going to want a place that you understand what you're getting yourself into. So I think done, finished, and no deferred maintenance is what people are going to be looking for in homes. Why is it that across the country, there's the business of staging homes, people are so fanatic about having the occupants, the current owners, clear out all their stuff? I mean, it's just incentive to me to put my house on the market. And I, oh, come on, man, you know, people live here. I got cold, they ought to be in the closet. I'm having to have an empty closets.

Tyler, that's fair enough. But there's two reasons for this that are both valid reasons. First of all, you want to be sure that you can live there. The way we live in our homes is the way we live in our homes, and it's great. It works for us. If we have, you know, if we have all the kids' toys out and we have everything in my kitchen, every imply it's out. So I can reach it.

That's great. But if I walk into a house and the sofa doesn't fit and the chair doesn't fit and the bedroom, bed takes up all the bedroom, then it looks like there's a small house because there's not enough room for my stuff. So that's one reason. The second reason is to be able to see themselves in the house, they need to see you out of the house. So they don't need to walk in the house and say, this works really well for these people who have been here for 20 years and have, you know, three kids and two dogs. And oh, look, here's a graduation picture. So that works for them, but I need to see myself there. So if I could create more of a blank slate and I can see a lifestyle,

So I can see that there's the right coffee maker in the kitchen, but barely anything else. And I can see that the furniture fits. And the closets are edited out so that there's not overstuffed. It just means that I can see myself there. Otherwise, I'm looking, I'm in somebody else's house and I'm a little uncomfortable. And the ideal version of yourself. You want to think you're the person who has the edited closet and only the coffee maker of the kitchen shelves. Oh, my.

Exactly. So put some airma's boxes up in the closet. My wife and I were talking about this over the actually last week. And I was saying, why you have to cut out all your stuff? I'm just not going to sell. Thanks so much, Doug. We appreciate your time. Great.

Thank you. Thank you both. Our powerhouse road trip continues all week long. Tomorrow, Kelly and I are driving. Yeah, there we go. Look at that. Jacket, if we're going to Ohio. We're driving to Dayton, Ohio, home to another hot housing market.

And I believe home to Courtney Reagan initially, originally. We're going to be houses staying on the market there for only five days. That's right here on Power Lunch, 2 p.m. Eastern tomorrow. come with us to date. This is always my favorite. Yeah, it's good. It's fun. Coming up, China's property crisis, intensifying as real estate giant Evergrands

suffers another setback. We'll look at what it means for companies doing business there next. And as we head to break, CNBC is celebrating Hispanic heritage with stories of influential business leaders. Here is Andres Barry, JetBlue, President of Travel Products. As somebody who immigrated from Latin America, one of the things that I'm most proud of is the values that I was able to bring from my Hispanic heritage. My family is originally from Argentina and from Peru, and I also grew up in

Mexico. Be yourself. Embrace who you are. Knowing where you've come from is critical to set that path for success. Welcome back. Embattled Chinese real estate firm Evergrand, taking yet another hit this morning after the company said it would delay a debt restructuring meeting that was set for later today. Their Hong Kong listed shares falling as much as 25% on the news, which comes just over a month after the company filed for Chapter 15 bankruptcy protection in a U.S. court. For more, let's bring in Dennis Unkovic, partner at Meyer Unkovic and Scott. It's good to see you again, Dennis, and I guess this was a deal that had reassured a lot of international investors, and now it's fallen apart. Kelly, and not only fell apart, but the Hong Kong dollar to the U.S. dollar is like 13 cents.

And today on the Hong Kong exchange, I checked right before I talked to you, it's 41 Hong Kong cents, equals one of their shares. So it's really been a devastating blow, not just for Evergrand, Kelly, but for, I think, the overall market. Yeah, and talk about why that is, because a lot of people want to understand if this is telling us more about the struggles of the Chinese property sector, which I don't want to say you can put to one side, but, you know, are there larger implications for the business community? Well, in Asia, they have the real estate investment trust, the REITs. they've been taking a big, they've been really taking a big hurt because a lot of what they've invested, Kelly, has been put into Chinese real estate, which is now down so much. And as 30% of

the economy in China is now based upon real estate, I don't think that this situation has been as bad as it is today, really since 2021 when Evergreen first went in the tank. So let's talk a little bit about this company ever grand. Is it a systemic risk to China's banking system or to the property system there? Or is it something less than that? Itself, as an individual company, Tyler, is not going to bring down the Chinese economy. But that Xi Jinping and his colleagues have got to figure out, am I going to bail out private companies who have overborrowed their money or am I going to let them go down? On the one hand, Xi Jinping's going to say, I'm not going to do that because the cost might be a trillion dollars.

And the problem with bailing out, I think that this is the Chinese view, not necessarily mine, is that if I bail them out, the Chinese people are going to bet more in the future. They're going to say, well, if my investment doesn't work, Tyler, well, then the government will bail me out. And that's the box that I think the Chinese are in. And I really think at this point, the Chinese have decided to sit back and wait to see what happens. So there's a question here of more. moral hazard, just like we went through during the financial crisis here. So is Evergrand then, is Evergrand then potentially the Lehman Brothers as opposed to the other banks that the U.S. did cash infuse or capital infuse back in the financial crisis?

That's a great question. I think that Evergrand is the canary in the coal mine. I think that if it goes down, I don't think the Chinese are going to. have any option, but ultimately to start bailing out, if not these companies, the people who have invested their money. The problem in China is the Chinese people have given these companies money in advance to build up a house or a condo or whatever they're going to buy, and now those companies are so much in debt that they can't pay it back. And at least the Chinese government, I think, has to protect its own citizens, if not these particular banks. But it's a really tough question. Do these property developers have enough people to move into the buildings they've built?

No. I mean, I could give you a longer answer, but I think the answer is no. There are several million properties in China that are that are empty now. One of the problems is we know about the big cities in China. You know about Shanghai and Ningbo and the rest, but the third and fourth tier cities where a lot of this building has gone on have been damaged. Those, those are, those those properties are empty now. And because the Chinese economy is in such bad shape, the people who work, who are going to live in those areas, aren't doing it anymore.

So this is really very serious. All right, Dennis, it's always good to see you, Dennis Uncovic, China expert. Thank you, as always. Thank you, Tyler. And still ahead. RTX, formerly known as Raytheon Technologies, hovering at its lowest level in nearly three years. And it's not alone among those multi-year lows, frankly,

but is our trader dropping this defense name yet? We will ask. Michael Farr next in three-stock line. Time for today's three-stock launch, CNBC Pro, launching a new stock screening tool this week that lets investors highlight specific stocks using more than 50 different criteria. So we put it to the test for this edition of our three-stock launch.

Here with our trades, as CNBC contributor, Michael Farr, chief market strategist at Hightower Advisors. And Michael, you use this new screening tool. choosing from large cap stocks with a forward PE ratio of 50 or above. So these ain't cheap that are up 20% or more for the year. Your first stock that bubbled up is Shopify. What do you think of it? You know, I started with that, Tyler, looking for sales.

I started playing with this tool. I've been a longtime CNBC Pro subscriber, and I really wanted to get into the screening tool. So you go through these metrics to see which of your budget. boxes get checked. Shopify up over 50, well, up 50% this year. Price to earnings ratio, just looking for an expensive stock. Is there anything out there I should think about selling? Shopify came up 50% this year, 95 times earnings. It's been a great run, but every so often you have to say, wait a minute, let's take the tarts when passed, let's take our profits, and it's

time to sell the stock. No dividend at all. It's, you know, you can have to have to be. You can have to have a good company when the stock price just doesn't make any sense. When you go through the screening tool on CNBC, Shopify says sell. I figured when I saw the 50 PE, these weren't going to be buys, Michael, but maybe you'll surprise us. The next pick is Microsoft. I mean, people would say if ever there was one to buy at this valuation. I use some different criteria for Microsoft, Kelly. I said, okay, I want to look at something now up 20 percent. And I wanted a price to earnings ratio, maybe a little more on the expensive side, up 25, maybe 25 or so. So 30 times earnings for Microsoft with a 15% growth rate. Average growth rate for the S&P 500 average stock is like

8%. So I've got almost twice the growth rate. I don't have quite twice the PE ratio. And of course, we've got a very diversified company. So going with the numbers here, I think Microsoft is certainly a hold when you use the CNBC screener, which I, I think, you know, you do this on pro. It was really fun. And I think you get the right, for me, you get the right answers. You still have to impose your judgment as an investor and your discipline. It's a name I own.

I've owned it for a long time. I'd probably add to it where I didn't own it. But it screens okay, at least as a whole. All right. So you're moving some, I don't want to say you're moving the goalposts here, but you're changing the screening parameters for these stocks. Yes. Tell us about your third screen, what bubbled up and what you do with it.

So for my third screen, I look for companies bigger than $50 billion and that were down more than 10% year to date. So I've started with one that's up 50%. Now down 10%. I like to buy stocks that are down, not when they're making new highs, 10 to 16 times earnings. I wanted something that looked a little bit cheaper. Raytheon was a name that came up. Raytheon is down about 30% this year. It's 13 and a half times earnings, 3.3% dividend.

This is a stock I've owned for a long time, but it's screened really well and made a new year low today. This stock is inexpensive. It could have a more difficult time, I think, with this geared turbofan, but they've got good technology that long term is able to save a lot of the airlines, a lot of money. There's been a part that's failed. They've got to replace it. This is not a fatal flaw, in my opinion, for Raytheon, so this is not a fatal flaw, in my opinion, for Raytheon. says Raytheon would be a buy down low. By the way, that was a great interview you guys did earlier with Willie Walker from Walker and Dunlop. I taught him in high school. He was brilliant then.

He's brilliant now. It was a great interview. You were teaching high school? I taught high school English, yes, 11th and 12th grade English. Willie Walker at Pompford School was a senior in my English class. And it was great. We were great friends. Then we've stayed great friends for 35 years now, something like that. So I taught Shakespeare. I taught Shakespeare. fear. I did the whole thing. You've got to come to each Mac, man. Come on. Get him ready for the SAT. Listen, Mac is such a great young man. Oh, he's the best. Ray Theon is now RTX, but with X in it, you've got to think it has something to do with

Elon Musk, but it doesn't, just RTX. Michael, great to see you, man. It doesn't, but I bet Musk would buy it at this price, Tyler. Maybe he would. All right, a challenge out there, Elon. And to try our new stock screening tool, thanks again, Michael. Be sure to visit CN Bc.com slash pro. That's where you'll find it. Still ahead, McDonald's franchisees ain't loving the higher fees charged by corporate.

We'll tell you what they're saying and how much of a backlash there could be next in closing time. Welcome back. Just two minutes left in the show. Let's get right to it because McDonald's is facing some backlash from franchisees over raising its royalty fees for the first time in 30 years. It's bringing Kate Rogers with the latest. We talked about this last week, Kate, but it sounds like it didn't sit well

over the weekend. some owners, Kelly, so the National Owners Association, which is an independent advocacy group of more than 1,000 McDonald's owners, spoke out on the fee changes in a letter to its membership last week obtained by CNBC. McDonald's did announce Friday it would be raising franchising service fees in the U.S. from 4 to 5 percent next year for new owners and changing the name to royalties. The NOAA says the change in nomenclature is, quote, very significant and will remove the company's duty to provide vital services. It said owners are flowing less cash today than they were in 2010, despite the corporation making record-breaking revenue, and it's imploring owners to review any new agreements with the company alongside an experienced franchise attorney.

It warns reinvestment decisions should be reconsidered as opening a new restaurant at this time, quote, will not provide a historic return for the franchisee, adding it's time for every owner, franchisee, to begin focusing on protecting their business, their employees, and their family. McDonald's U.S. President Joe Erlinger told CNBC last week, we're not changing services, but we are trying to change the mindset by getting people to see. see and understand the power of what you buy into when you buy the McDonald's brand, the McDonald's system. It added that even when accounting for inflation, 2023 is expected to be one of the highest franchisee cash flow years in the company's history. So a lot of back and forth between the two parties, which are. Okay, very quick question. It sounds like it's not so much the raise in the rate, the royalty rate from four to five percent. That's not, it's material.

But the franchises say it's services, but McDonald says it's not services. We're not cutting back on service. They're changing the name to royalties, and that's what the NOA is saying. If you change this name, does it change what they're expected to provide us? All right, Kate, thanks. What's in the name? Got time for that 10 year? We got to make time because 454 was the last print interest rates are moving higher today. Stocks are trying to shake it off, but we're still talking about about 12-year highs here. Shake it off. Taylor Swift, love Kansas City. Thanks for Power Lunch. Watching Bell right now.