Power Lunch - An economic hurricane, shorting energy and the office space trade. 6/1/22

Episode Date: June 1, 2022

JP Morgan CEO Jamie Dimon has a warning for investors. He says an economic hurricane is on the horizon. His big concerns: the Fed and the Ukraine war. Plus, a contrarian call on energy. We’ll speak to the technician who says short energy and go long the S&P. And, why tech layoffs are leading a downgrade of office REITs. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome everybody to Power Lunch. I'm Tyler Matheson. Here's what's ahead, an economic hurricane. That's what JP Morgan's CEO, Jamie Diamond, says is ahead, and investors should brace themselves. His stupid concerns, the Fed and the Ukraine War, plus short energy. It is a bold, bold call on this year's best performing sector so far. We've got the technician behind the report with us this hour. Lots to discuss. Busy hour. Go ahead, Kelly. And he is no slouch. We're looking forward to that. Tyler, thank you very much. Hi, everybody. Growth concerns are weighing on the major averages. So are rising rates. A few strong economic reports saying activity hasn't slowed down enough to tamp inflation. The Dow was down 405 points at the lows this afternoon. We're down 181 or half a percent right now, about two-thirds percent declines for the S&P and the NASDAQ. The S&P, by the way, 4105. The yield on the 10-year moving higher as investors reassess the path of interest rates, 294, you can see this decisive jump here throughout the morning. It's held up at these levels. And this is a big change from last week and will continue to be a big test for the markets. Now that warning that Tyler mentioned of a coming economic hurricane, that's from Jamie Diamond,

underscoring concern in the market that the Fed's rate hikes could lead to a recession. CnBC.com's Hugh Sun is following the story. Hugh, where did he make these remarks and in what contacts? Yeah, so this is at a New York financial conference. And look, I mean, this is only nine days from when Jamie Diamond last addressed investors, the investor community, and said, you know, there are storm clouds that are gathering, but they could dissipate. Now, today, just nine days later, he's really deliberately raising the red flag saying we're in a calm before storm and that people think that the Fed, you know, can manage through this and handle this. And clearly, you know, the stock market has kind of bought along that narrative. and yet he says that there is a storm, a hurricane coming. We don't know how severe it is, but it will be a full-blown hurricane.

Yeah, and the thing that Hugh that's interesting to me is that the markets have been better over the past nine days. Rates have been better behaved. And yet, Jamie Diamond himself said, I said there's storm clouds, but I'm going to change it. It's a hurricane. So he has significantly downgraded his assessment of the outlook at the same time. The market's actually kind of, I don't want to say, upgraded it, but has, has been more comfortable lately. No, that's certainly the case.

He's downgraded his forecast. You know, what he's looked at specifically is quantitative tightening. Clearly, there's $95 billion, up to $95 billion in bond purchases that are going to, you know, going to get reversed. You know, the balance sheet of the Fed's going to shrink. You know, he's looking at oil. You know, he's looking at oil at up to $175 a barrel. He's looking at, you know, federal mortgages going up to perhaps, you know, 10% delinquency, which would be a huge increase.

He's looking at the traditional buyers of U.S. Treasuries essentially disappearing and pointing to 10 years ago in the response to the last crisis and saying, like, these are the purchasers of U.S. bonds. They helped out last time. They are going to be AWOL this time, according to Diamond. One of the things, Hugh, that's very interesting to me is his emphasis on the unwinding of quantitative easing, which is it is truly, and I hate the cliche, uncharted territory because we've never been here before. We don't know what the unintended consequences of that,

that sopping up of the cash that was flooded into the system is going to imply or mean for businesses and human beings. Well, that's certainly what Jamie Diamond is saying. He's saying, you know, investors, as we know, crave certainty. And, you know, here you have, you know, a multi-decade, you know, chief of the biggest U.S. Bank, you know, and at times the biggest bank in the world by market cap saying, I've never seen this. I don't know what's coming.

And by the way, we're bracing ourselves. We're moving, you know, our deposits. You know, he said basically he wants to change their capital structure a little bit and move low-quality deposits out into things like money markets, perhaps, that they're bracing themselves for this coming storm. And by the way, you better do so as well. Well, he is probably the leading voice among the banking world. Hugh, thank you very much. We appreciate it.

Thanks, Tyler. Let's get to Steve Leasman now with Breaking News on my favorite. book of all, the beige book. Steve? Yeah, right after the Bible, I'm sure, Tyler. The beige book offering some sense that maybe we're peaking out on inflation and wage increases. I'll get to those in just a second. Economic growth continued in all 12 districts, and it was seen as, growth was seen as slight or modest. Four districts reporting growth was slowing. There was some softening seen in consumer demand as well. There were also some sense. signs that maybe wages had peaked out and that there was some moderation in those wage

increases as well. Also, some reports of customer pushbacks as well when it came to higher prices. And I'll go through those in just a second here. I'm just waiting to call this up in one second here. Yes. There was weakness seen in residential real estate. The labor market difficulties remain the greatest challenges among businesses. Growth expectations, though, Tyler, declined in eight districts. Three districts expressed concern about a recession, actually. And employment did rise modestly or moderately across the board in most districts. But there were some hiring freezes out there. Signs the labor market was tightness was easing, and although worker shortages were set to continue. Wage rate increases were leveling off or edging

down in some districts. We haven't heard of that in a very long time. Most districts, though, on the inflation front reported robust price increases. Three districts said they were, reported moderating price increases, but businesses did retain pricing power. One last thing here, half of all dishes reported some customer pushback when it came to higher prices. So, Tyler, I don't know, maybe the first signs of inflation easing out there, not necessarily because input prices are down, but because there's some difficulty in passing along higher prices.

Also, maybe a sign of some equilibrium beginning to establish itself in the labor market here when it comes to finding available workers and hiring them at a wage that is still profitable for businesses. Very interesting, as was your interview with the president of one of the feds earlier today, very clever, very clear insights there. Thank you very much, Steve Leesman. Let's turn now to the markets, and our next guest is taking advantage of the volatility to help him identify cheap stocks that are unloved by Wall Street, and there are a lot of them. Mike Vogelzang is CIO of Cap Trust. Mike, welcome. Good to see you. Your work is turning up.

stocks that trade at less than eight times 22, 23 earnings. These are multiples we just haven't seen. And some multiples are down three, four times earnings. We just haven't seen those in well over a decade. Look, it's an indication of the deep skepticism about earnings. And, you know, we all know what's wrong, right? We all know that the Fed's probably going to over-tighten. They're probably going to tighten until something breaks.

Jamie Diamond is saying, we've never seen this before. You were just saying we don't know what's going to happen here. So we started seeing this. We took a look actually at it. And there's 12.5% I think of the Russell 3,000 trades at less than eight times 20, 23 earnings. That's up about threefold from a year ago. So right, from 4% of the total to 12% of the total. So there's, again, it's just an example of the deep, deep skepticism that's going on.

All I know is that given how difficult this environment is to understand and predict and some of the uniqueness of it, the fact that we've never seen it before, I kind of want, at least for some of my portfolio, a call option on the Fed being right. Right? I think that's not happening. We don't see a whole lot of that. I think some of these ideas give you those, I give you that. Mike, it's interesting to hear you say, you know, we know they're going to overtighten it. And I mean, I still remain concerned that they're going to under tighten and that the much

bigger risk is that inflation is around with us for a lot longer than people expect. I mean, I know it's a lot that they're doing right now, but not if you look at nominal GDP, not if you look at what's going on in the labor market and the fact that they're way below anything resembling neutral and hesitating to even do more than a couple of half-point rate hikes in the next couple of meetings this year. Yeah, it depends on what you mean by not tightening enough, right? I mean, here's the challenge. They could tighten enough so that we could see the economy rollover, but inflation remain. And that's the worst part, right?

You get a recession either economically or an earnings recession that really takes the legs out of the stock market yet inflation continues. That's, of course, the biggest worry. And so I think the Fed's credibility is at stake. I think they're going to do their best to take care of the inflation that they can take care of, which is mostly driven by productivity and by labor. They can't do anything about the price of oil, for example. So out of that 12% of the 3,000 that are trading at that low multiple, you have landed on three. Next Star Media Group, William Sonoma, and Jeffrey's Financial. Why, what is it about those three that makes you more sanguine about them than some others? Yeah, well, the first thing is we, you know, we look at companies from a multitude of angles, valuation, growth rates, capital use.

We love people who really understand how to treat shareholders well. And we think all three of these companies do that. You know, William Sonoma has turned itself in from being a mall store company to being this Omni Channel, real dynamo. And they've done a wonderful job. They're trading it four point two times. EV to EBTA at the moment, right? Okay, so we understand the furniture business is going to slow down next year if the economy rolls over and housing is weak.

Great, good. Does that mean you trade it four times EV? I mean, that's the question. And so these things seem to be really, really deeply depressed. Next star is a great example. These are your local TV stations. These are your eye in the sky, news weather five, right? These are your ABC, NBC and CBS affiliates with Fox all over the country.

They live on advertising. We know the advertising market's going to be weak, but these are really good smart capital allocators. They're raising their dividends. They're buying shares back. They're trading at seven or eight times earnings. And by the way, we have an election coming up in 2004. So they're actually trading about five times earnings if you estimate out to 2024. So again, a really neat opportunity to buy something pretty cheap.

And if the bottom doesn't simply fall out, you could easily get a double here. And our last one is Jeffrey's, again, a wonderful investment bank taking market share from some of the biggest players, really inexpensive. And yeah, we all know that deals are slowing down. But we think they're going to be able to make up for it. And the fact that you're paying, you know, incredibly low multiples for these kind of names is, again, to me, it's a call. It's a deep out-of-the-money call option on the Fed being right. That is not bringing the economy down to its knees and not bringing earnings recession about. So that's really the story. And I think it's, believe me, believe me, guys, you will never find these in Kathy Wood's portfolios. These are the antiques.

can say that again. So I've got to ask you a question. I've got to ask you a question. Has anyone ever told you that you could pass for a Manning brother? You look like Cooper Manning, man. Well, you know, Cooper is probably not the one I'd rather be, but that's okay. I'd take that as well. No, nobody's ever said that. Well, that's an interesting. Let me be the first. Interesting perspective. Thanks. Some people say I look like Kelsey Grammer because of this big expanse of whatever it is. I get it. Okay. Thanks, Mike. I appreciate it.

I like Cooper Manning. He's my favorite. I like Cooper Manning. I think he's very clever. Everything he's put up with. All right. Coming up, the tech sector layoffs are redefining the office reed industry. A new report lists the companies that can withstand the shift and those that are vulnerable. Plus, is the smart trade to short energy, the best performing sector this year by a mile. A chartist says yes, he'll tell us why. And as we had to break a look at the chip stocks, which are lower across the board,

the SMHETF down 2% this afternoon, 2.5% now. We're back in a moment. While the overall labor market is strong, a growing number of tech companies lately have announced hiring phrases or layoffs, names like meta, Twitter, and Amazon. That's the reason our next guest downgraded three office reads with high exposure to the tech industry. Let's bring in John Kim.

He's an analyst with BMO capital markets. John, an important ankle here, and how much of a hit are we talking? Well, thanks for having me. And I would say tech office leasing has been one of the few remaining bright spots in the office market over the past several years. And last year, it counted for 22% of office leasing in the U.S. in the recent quarters. So when we're talking about companies we're doing large expansionary leases, often in big developments, and now they're cooling off and hiring. That could be a major issue for the office rates.

And you have three in particular, J.B.G. Smith, Kill, Roarie. and Vornado. How much of their exposure is to tech, do you think? The biggest would be Kilroy. They're a very West Coast focus office rate. J.BG. Smith is developing the area around Amazon HQ2 in D.C. And Vernado, their largest tenants right now is meta, and they have a big development here in New York, where you would think a lot of that expansionary space would be taken up normally by tech companies.

And so, as you look at those three, or across the office, Reit, universe, Metaverse, whatever, verse, what kind of earnings impact or revenue impact could this pullback have for them? Well, I mean, the nice thing about office is their long-term leases, typically about 5% to 10% of lease expire every year. So it is relatively safe from a cash flow perspective. We may see some lease terminations occur if companies decide they don't need the space anymore or in some cases go bankrupt.

But it's really about the perception of the companies and the growth profile. So, again, a lot of these companies have been growing a lot through developments. That's been the one bright spot in all the office reeds. And if those developments aren't able to attract tenants, then that can impact valuation. Do they build those developments on spec, in other words, in the assumption that, working on the assumption that there are going to be tenants who are going to fill them? Typically not. Typically, they would be leased anywhere between 20 to 50%.

So there has been some constraints on spec of elements throughout this last cycle. Right. But it's that remaining 50 that typically gets the higher rents. And there's no certainty that's going to happen. Right. What about the exposure overall, John? I mean, would you say that REITs because of higher rates and some of the hits we've been talking about, you know, office rates, I guess, should do well. Maybe like, just talk us through the macro factors here and how that leaves you feeling overall about the space with the asterisk that obviously.

the tech exposed ones are going to be underperformers, you think? Sure. I mean, real estate in general is an inflation hedge. So as costs go up, that means there's going to be less new supply. Typically, rents will increase during that timeframe. So that's an area is still playing out. But office came into, you know, into COVID already with a lot of a lot of struggles, given higher occupancy, higher CAPX, questions on tenant demand outside of the big tech companies that were expanding. So the concerns on office have really, you know, accelerated as have a lot of things during COVID. And now we're seeing that pullback in tech demand that really takes a leg out of the stool for growth for some of these office rates.

Yeah. And there's also a multifamily reed Essex property that you've downgraded to market perform as well for some of these exposure reasons. John, thanks for coming on today. We appreciate it. Thank you so much. John Kim with BMO. All right. ahead on the program while tech may be cutting employees, how are other industries retaining workers amid the mass resignation? That's in today's working lunch. Plus, the poolside view. Mortgage demand falling to 2018 levels is housing hitting a slowdown. The CEO of Hayward

weighs in with what he sees from consumers. And in a rough spot, Dustin Johnson facing backlash from sponsors after agreeing to compete in a Saudi-backed, golf tour. That story when Power Lunch continues. Welcome back to Power Lunch, everybody. The consumer discretionary sector is lower today, but still up 8% in a week. But one stock not participating in that rally, Pool Corp. It's the only stock in the group lower over the past week, even though it is pool season. That industry, like many others, is getting hit with higher costs that threaten to eat into earnings. Diana Oleg spoke with the head of another publicly traded pool company.

Hi, Di. Hey, Ty. Yeah, I spoke with the CEO of Hayward Industries, the largest manufacturer of residential pool equipment to get his take on everything from inflation to his company's sagging stock price. Inflation is certainly hit in our industry just like so many others. You know, what I think we're seeing is still heightened demand and interest in building out the backyard and creating that backyard oasis. But what I think we're starting to see is folks have a budget and perhaps what they thought. they could get for that budget. Maybe they're not getting everything. And he said what they are getting is still being delayed, thanks to continued supply chain issues. We still continue to feel some pressure.

Transportation and logistics is nothing close to what it was pre-pandemic. And we continue to feel some input cost pressures. We've put several price increases as has the rest of the industry out into the marketplace and they've been accepted. But we're not back to anything close to what we've would expect. As for pools being one of the pandemic plays that's now on the downswing, Hollering argued that the huge pilgrimage to southern states, that is warmer climates, helps the pool industry going forward. The share of newly built homes being built with pools is actually rising. And as for Hayward's stock, which is down over 40 percent from a year ago. It is dick depressed. And, you know, what I focus on and the rest of the team here is control

what we can control. And I do think the strength of this business, is really the 80% of our revenue that's driven off of a very resilient, non-discretionary aftermarket with upgrade opportunities, with remodeling opportunities, with new technologies, and connecting that pad. Now, Halloran added that investors focus on new pools when the real money to be made is in the aftermarket. That's pull up, keep, upgrading and remodeling. And for that, he said revenue is quite strong.

So he said investors tend to misunderstand his market. Back to you guys. When I think back two years ago, and I have a relative who was in the pool business, their backlog was a year or something like that. And people were going for all the extras because they thought they were going to be confined to their homes. Do you have any sense of how it has come off of that crest in percentage terms? Well, it's definitely come down when it comes to new pools. And pool renovations especially.

He said that they had been seeing a lot of pool upgrades because, as you said, so many people were using their pools. And I remember doing a story on a company that was actually helping people rent out their pools to other people. It was just pool heaven. But now really people are dialing back on what they're doing. But they are, of course, still using those pools. And again, that's where all that equipment and upkeep comes into their play. Yeah, you can see the aftermarket being a very lucrative, aftermarket and servicing, so forth.

Diana, thank you. That's good to Christina Parts and Evelis now with the CNBC News Update. Christina? Thank you. And here is your CNBC News update at this hour. Government officials said at least 11 people are dead and dozens are still missing after Hurricane Agatha hit Southern Mexico on Monday. Thousands continue to be without electricity after the category two stormed down power lines and triggered major flooding and landslides. Agatha was the first Pacific hurricane of the season. FBI director Christopher Ray said the agency thwarted a cyber attack on Boston Children's Hospital last year. He alleged that hackers sponsored by the Iranian government planned the operation.

Ray told a cybersecurity conference that if the hacking had succeeded, it would have been, quote, one of the most despicable cyber attacks he's seen. And a 25-year-old Ohio woman was gored by a bison at Yellowstone National Park after ignoring rules to keep a distance of at least 25 yards. The visitors suffered multiple injuries after the animal threw her 10 feet in the air. She was then transported to a nearby hospital. And NBC News now is reporting that the woman has died from her injuries. Back over to you guys. Christina, thank you very much.

I've been to Yellowstone, and those bison will come extraordinarily close to your car. Can't mess around. You cannot mess around with them. And I remember one time going out of one of the Yellowstone hotels out the back door to take a run, and there was a bison probably, oh, I don't know, as far as Brian is away from me. What did you do? Well, I try and stay away from Brian as much as I can. I went back inside, actually.

I went back in through the door because I didn't want to mess with him. Well, anyhow. Smart of you. He would have run fast. He or she would have run faster than I could have. A head on power lunch. Dump the pump. One technician says he is short energy long.

The S&P. He'll explain why next. Plus a credit check. As rates rise, our consumers getting more cautious with credit. We'll take a look in today's three-stock lunch. 90 minutes left in the trading day. We want to get you caught up on the markets, the stocks, the bonds, the commodities, and a technician who says the run is done for this year's biggest winners.

You know who he is, and we'll find out why he feels that way. But first, to Bob Pisani at the New York Stock Exchange. Robert. Do we want a strong economy or a weak economy? Nobody can seem to decide. The market kind of fell apart at 10 a.m. When we got the ISM manufacturing data, it was a little stronger than expected. Immediately bond yields shut up. The stock market went down. Why? They're afraid the Fed's going to keep aggressively raising rates. So that's a bit of a problem. Do we want strong economy or a weak economy? You'd think with the higher bond yields, banks would do well, right? No, banks fell apart too. So regional banks, like Regions Financial, for example, or U.S. Bank Corp, for example, they went down as well. They're not really rallying that much. You'd think the markets worried about the economy or the Fed raising rates should go into defensive stock.

like pharmaceutical stocks or consumer staple stocks. Wrong on that one too. They went down as well. So Merck, Procter & Gamble, Johnson & Johnson, for example, they're all weaker in the day, the staples and defensive names in the Dow Jones Industrial. Finally, you think if you're worried about the Fed aggressively raising rates on this data,

tech stocks wouldn't do that well. Well, guess what? Salesforce, Microsoft and Apple, Salesforce had a good earnings report and good commentary overall holding up, but their stalwarts in the day. The bottom line here, Tyler, things are not exactly working out logically the way everyone would think, and that's what's making traders a little bit nuts right now. Back to you.

All right, Bob, thank you very much. Let's go to the bond market now where yields are rising as inflation, inflation keeps clocking in a little bit hot. Rick Santelli. Rick. Yes, you know, look at an intraday of twos. Look at intraday of tens. Zoom, zoom, zoom. 10 years now, up 10 basis points once again into the middle.

mid-290s, boy, the 270s seem like a distant memory. We have high energy prices. We have high inflation. High food prices. Housing's dented. The one saving grace? Well, jobs, jobs, jobs, right? Not necessarily. Bob was right.

We got a smidge better on headline ISM. However, the employment index went below 50. And even though prices paid move down from 84 and change to 82.2, consider this. It was at 46.5 February of 2020 pre-COVID. I think you add all that together. Then the Bank of Canada raised rates, second 50 in a row, to a rate of 1.5% and a hawkish statement, and there goes your interest rates.

And if you look at a year today to the Canadian dollar, so this is the dollar versus the loony, what you'll see is we're nearly unchanged on the year. That doesn't sound so intense, does it? Well, it should because two and a half weeks ago, it was at 1.30 and a half. Now it's barely over 126. The dollar's taking a shalacking on the loony. And finally, interest rates in Canada, they're 10 years near 3%. Which happens to be an 11-year high. Tyler, back to you. All right, Rick, thank you very much. Let's turn to oil now. Price is higher today.

As China gets back to business, Pippa Stevens has just arrived at the commodity desk with more. Pippa. Yeah, hey, Tyler. Shanghai lifting its lockdowns is a major boon for. for the demand side of the equation. And the market is still digesting the EU's agreement to ban the majority of Russian oil imports by the end of the year. Now, while this is certainly important, an even bigger blow would be a ban on insurance

and reinsurance of Russian ships, which is being considered. As this chart from Kepler shows, Russian oil is still finding a buyer with a whole lot more going to India and China. Targeting insurance would change that. 90% of the world's tanker fleet goes through London-based insurance providers.

So basically banning imports to the EU is region-specific, while the insurance measures would disrupt global trade. Let's get a check on prices. WTI up half of 1% at 115-27, for crude right around 11638. And that gas, Tyler, up almost 7% at $8. And 69 cents per MMBTU. Morgan Stanley said today it could hit $10,

which certainly not welcome news with utility bills already spiking. And utility bills is just one facet of that natural gas story. As Brian Sullivan pointed out yesterday, natural gas is a constituent of so many things from fertilizer to plastics to so many of the things we buy. It is bound to impact prices beyond just your heating and cooling bills. Pippa, thank you. Oil may be rallying now, but our next guest says he's shorting the XLE energy ETF. He says the charts are pointing to an intermediate peak.

Joining us now is Carter Worth, founder and CEO of Worth charting. Carter, you know, there is more money to be made, I will posit, by being contrarian and going against the grain than there is by going with the consensus. This is an against the grain call based on the charts. Explain show and tell, will you? Sure, Tyler, I mean, I think before we look at the charts, we know that all of the funnimentals would argue for much higher. Capacity is restrained. summer driving season is here, EU banning 90% of Russian imports, COVID ending, Prasthan China, lockdowns.

But guess what? How come oils only up a fraction from where it was three months ago? I mean, all of that news, you'd think we would have been up $10 a barrel or 20 or 30 yesterday. We're down from where we were three months ago. And so this is the question. How much was priced in in that famous six-session move? Crude went from $90 a barrel to $130 in six sessions, the last days of February, early days of March when the invasion started. And we're here at 115, three months later, with much worse news.

I think a lot was priced in, and I just don't see us going that much higher. Take a look at this chart that's on the screen. This is the S&P 500 energy sector, the stocks, as we know it, dominated, of course, by Exxon and Chevron. But we're at the top of a channel. You see the arrows. Does it have to fail where I've drawn those arrows? know, but that's the bet that I want to make. And then here's the real issue. It's relative performance, the sector to the market, one of the parts to the whole. If you look at the next

chart, it's a ratio chart. And it's simply what a relative strength line is. It's dividing energy by the S&P. And so what we know is there are no drawings there. There are no annotations. But you can see how far above the 150-day moving average we are. The final chart depicts it. This current spread. is higher actually than it was in the 08 peak. And so energy stocks went on to make new highs in 2014, but their relative performance peaked in 05. And this big move now, a lot's priced in on an intermediate basis.

I think everyone's in, and it's right to take the road less traveled. That is a very clear. I am speechless. That was so clear. Oh, me too. Carter Worth. You have a question, Kelly? I do, Carter, and it's this. I take your point that at the very market point when none of us can see the downside is usually when it happens, right? Like the market inflicts the greatest pain on the greatest people and all that. But you look at the trends and you just fundamentally, I can't see how this energy market doesn't at least remain tight.

It kind of reminds me of housing prices. You know, I don't know if they go up any further from here, but I can't see how they drop a lot either. And that's sort of how it feels with energy right now. I think that might be fair. Let's say crude just stays here. But it is kind of interesting, right, that in six days, going from 90 to 130, up 45%, people are already trying to figure out the collective wisdom, what this means down the road. Well, he will make us pay in rubles or not. He will do this.

He will do that. Demand will be tight. And yet that was 130. We're at 115. What news comes out now? to get us to 1.30, 150. Wouldn't it be nice? It seems to me we've reached.

Yeah, it was going to say if it's, you know, if there was some kind of breakthrough a resolution with the Russia of Ukraine, can you even imagine, you know, what we could see in terms of downside? But I don't, again, I don't know how likely that is to happen. Well, exactly, but there is that. Anyway, and then the shares themselves, look, they were hated, and as they should be, they've had two years of massive outperformance. It just seems a little full, a little steep, a little rich, a little crowded,

a little too far too fast. Very interesting. I mean, I think the point here really is, if you look at what the charts are telling you, they're telling you exactly what Carter. I almost called you charter. Carter the charter. I mean, there you go, man.

Trademark that. The charts are telling you what you're saying. The fundamentals may tell a different story, but really fascinating stuff. Thanks for the explanation, Carter. You bet. Carter is with Worth Charting. And that is quite a call. Up next, today's working lunch, one company working to improve fertility benefits for companies and help retain employees.

And as we had to break, remember, you can now listen to Power Lunch on the go. Look for us on your favorite podcast app and follow and listen along today. The tight labor market has employers asking what perks and programs employees truly value today. John Ford brings us up close with a founder whose company is one of several making headway in fertility benefits. Yes, Tyler. Tammy's son is co-founder and CEO of carrot fertility, a company that's trying to bring the idea of fertility health care

into the mainstream as both a women's issue and an issue for families of all kinds. Son told me she became aware of the need for a new approach six years ago when she was going through the process herself. So I went through my own fertility health care treatment. I did multiple rounds of fertility treatments, and it was egg freezing at the time. I had been diagnosed with diminution ovarian reserve,

and so my egg freezing cycles actually were, each cycle didn't produce as many eggs as I actually had anticipated and intended. And so it was a very long experience. It was a very expensive experience. It was a very stressful experience. And I think that, you know, that's really how I found, how I founded Kara and how I ended up here was just a,

a deep curiosity and respect for the role of fertility health care in our lives. Temi started out in public policy, working for Vice President Gore and later for the FCC before moving into the private sector. Now at Carrott, she's trying to expand the concept of fertility benefits to include workers who weren't included in the past. This year, Carrot included benefits addressing menopause and low testosterone. And she argues that these kinds of benefits within companies help, with retention. Fertility health care benefits is top of mind for so many leading employers. For three years straight, an average of 96% of members who use carrot tell us that they are

more likely to stay longer at their employer because of access to carrot. That has never been more important for our customers than right now. where there's a great resignation happening, where the labor market is incredibly competitive and incredibly tight, I think particularly for younger workers and as well as older workers, now as we move into menopause and low tea, the expectation is changing around what a standard compensation and benefits package looks like at a modern company. Now a big part of what Tammy is trying to do at Carrott is shift fertility benefits from being a boutique benefit for tech workers to being a mainstream resource available to everyone, including

warehouse and retail workers. And as the economy gets shakier and the labor market loosens, though, we'll see if her argument stays as strong. So I'm fascinated by this for a variety of reasons. One is I went through it in an earlier lifetime. But is she fundamentally an insurer? Is that what she is? In other words, if I'm employed by Comcast, does Comcast then go do a contract to cover fertility, menopause, benefit, and so forth, with carrot. And I, as an employee, get to elect that? She's working with insurers to put together the package of benefits. So it's more of an enabling mechanism within.

So that's why she's expanding not just with fertility benefits classically, but also into menopause, into low-tee, addressing a broader, swath of the workforce and making the justice. I think that would be my observation is as this becomes more mainstream and it undoubtedly will, just more people dealing with these issues and so forth, why can't your traditional health benefits simply expand what they offer to include these exact things? There are just so many startups and companies now focused on this area. There's Kind Body. There's Maven, for example, and they're trying to expand access to these

benefits. Companies are more interested now in this than they have been in the past, I think, partly because they're understanding it's not just a women's issue. There are different types of couples now who are looking for sperm donors, egg donors, et cetera, different ways of building a family than they have been in the past. It's a family issue. I don't know what you know. My wife is working now post-day show on a documentary on menopause. And she points out that one out of 12 women around the world will be in menopause over the next five years.

One out of 12 women. And the benefits are quite scarce. And it is an undercover, under-resourced medical issue. Stray fact. In medical schools, OB-GYNs spend three days on their whole time studying menopause. A big gap. And when there's a gap to fill, you know there's going to be a market to spring up. John, that's fascinating stuff.

Enjoyed it. Thank you. Thank you. Still to come, extra credit in today's three-stock lunch. By now, hitting a wall, Bank of America, bullish on credit cards, and slowing mortgage demand could hit the non-bank lenders. We're going to look at three stocks in the Finn world after this. In today's three stock launched three consumer credit-related names.

The buy-now pay-later companies like a firm facing rising rates and growing delinquencies, Bank of America saying American Express is undervalued as a pure play card issuer. And non-bank mortgage lenders like Rocket being pressured by a decline in mortgage demand, as rates rise. Let's bring in Delano de Saporu, New Street Advisors, founder, and CNBC contributor. Welcome. Good to have you with us. Let's start with a firm and its troubles. What do you think of this stock? Thanks for having me, Tyler. So, yeah, you're mentioning the troubles. That's very correct. One, we know they have strong partnerships across e-commerce platforms, but, you know, it's hinged on that consumer, and we know that the personal savings rate as a percentage of disposable income fell to 4.5.

4.4% in April. So it's the lowest level it's been in almost over a decade. And we're really coupled with, you know, soaring inflation, raising costs for the consumer. That confidence is starting to slip and the balance sheets aren't the same as the one one or two years ago. So a firm has the issues on that side. And if you look at the side of, you know, their merchants, you know, we're looking at what the retailers are telling us. And they're probably going to be less to spend as they're advertised, they're spending less. So they have, you know, headwinds on that side as well. So that's a stock that near term is definitely going to continue to more than likely struggle, Tyler. And Delano, it's Kelly here. What about American Express, which is actually higher

year to date? Yes, American Express is higher to your date. I think that's a function of, you know, what the note was saying is, you know, here's a strong balance sheet, better, you know, valuations than maybe a year or two years ago. And, you know, the downside risk of the consumer is a little bit hedged here on the American Express side because we're still seeing one area the consumer hold up, which is that travel area of the consumer. And that's an area that America Express kind of, you know, does well in. And then also you're mentioning the millennials and Gen Z is a growing percentage of AXP's billing, which I think is a long-term tailwind for them.

So that's kind of a buy and hold for people. And it's been doing strong year to date, as you mentioned. Let's step along to rocket mortgage. I was surprised. I'm not shocked that more than two-thirds of mortgages now are made by non-bank lenders, not the Wells Fargoes or the chases. Yeah, that is actually a really surprising stat. And I think that speaks to companies like Rocket Mortgage, their ability for loan origination. They do have diversified revenue, obviously, selling, coupling those loans and selling some of

those as well. But that is also a headwind for them. If you're looking at, we're seeing that there might be cracks in the housing market in the sense of their sort of finding starting to slow down with rates increasing. Obviously, the average price of a home is up over 20 percent over the past year. So you're seeing cracks. The stock hasn't performed well over the past year to date. And it's just because we're seeing those cracks. And also, you know, I just think, you know, if you look at the valuation, you can say that the valuation might be a good opportunity for investors, but near term, there's just no positive news flow that's going to be going on for rocket companies. Delano, thank you very much. We appreciate it. Delano Soporo.

Thank you. Thank you, Tyler. Up next, billions of Saudi dollars are trying to disrupt the world professional golf. The latest details next. All right, welcome back to power lunch. Tensions rising now over a new golf tour competing with the PGA and backed by billions of dollars from Saudi Arabia. Dom Chu has the details for us, a lot of intrigues surrounding this one, and some big, bold-faced names.

I mean, this is huge. So this is turning out to be one of the biggest, most drama-filled sagas in sports right now, big characters, big companies and leagues, and then big conflict, as well of massive amounts of money at stake, pitting the PGA tour against this upstart league backed by that Saudi sovereign wealth fund. So high profile pro golfer Dustin Johnson shocked the golf world when he showed up on a list of participants in this inaugural golf tournament for the Live Golf Series. It's an eight series event around the world, currently run by former pro golfer Greg Norman. A shocker because Dustin Johnson earlier this year said he was committed to playing on the PGA tour.

Now, the tour says members of the PGA Tour are not allowed to play in these events. Now, what they said is, as communicated to our entire membership back on May 10th, the PGA Tour members have not been authorized to participate in the Saudi Golf League's London event. Under PGA Tour tournament regulations, members who violate these regulations are subject to disciplinary action. Read into that what you will. Now, Dustin Johnson and fellow live golf participant, Graham McDowell, are also, or one, were sponsored by the Royal Bank of Canada, RBC. Well, by competing in next week's event,

both will skip RBC's flagship Canadian open next week. Now, RBC, not too pleased. It ended its sponsorship of both athletes in the wake of this. The money is big. Each event on the live golf circuit has a $25 million purse up for grabs. And reports are that some participants have agreed to large sums of guaranteed money just to be part of this live golf series. Now, for perspective,

Dustin Johnson's whole career, he's got $5 million in prize money last year, and an estimated $74 million in lifetime earnings. Some reports say that Dustin Johnson himself received a low nine-figure guaranteed payment to bolt from the PGA tour to go over to LiveGolf. So that tells you some of the money that's involved in this kind of a situation.

Nine-figure payout. Yeah. And Greg Norman is what? The commissioner of this tour? Yes, the CEO slash commissioner of this. Presumably, he got paid a lot of money from the Saudi wealth fund or the royal family to do this. The issue is about what really is the Saudi goal for doing this? And is this a short game or a long game?

And purses at $25 million. That's double roughly what it is on the PGA tour. But there is some money, there is some money that is not worth making or taking. This is blood money. That's why this is so controversial. reversal right now. Tom Chu, thank you. Thanks everybody for watching Power Lunch today.