Power Lunch - Apple, Disney & Target 3/5/24

Episode Date: March 5, 2024

: Shares of Apple are falling once again – this time on concerns about sales in China. The stock is down 11% this year, compared to a 6% gain for the Nasdaq 100. Plus, Disney shares are reversing course after Bob Iger said he’s extremely confident that the company’s streaming offerings will be profitable by the end of this year. And Target shares are soaring after results beat on both the top and bottom lines, but there are still some areas of concern. We’ll discuss all that, coming up.   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 alongside Courtney Reagan. I'm Dominic Chu, and we are watching the markets right now at session lows. We're giving back some of that record rally this time around. Shares of Apple, by the way, falling once again this time on concerns about its sales of iPhones in China. And check out these numbers. Apple's down roughly 11% this year compared to a 6% gain Courtney for the NASDAQ 100 large cap overall. And Disney shares back in the red now. After popping, when Bob Eiger says he's quote extremely confident, Disney's streaming offerings, be profitable by the end of this year. Target shares jumping after results beat on both the top and bottom line, but there are still some areas of concern. We're going to discuss that coming up. But let's start with today's declines in the broader markets. Mike Santoli, joining us from the New York Stock Exchange. Mike, is a day like this kind of expected after the rally that we've

seen? For sure, court. I mean, in fact, maybe multiple days like this, just because, you know, the S&P 500 managed about a 25% gain off the October low. We've only had two down weeks in four and a half months. All those things suggest that there's room for relatively routine backing up of the indexes. Now, what is going on, though, below the surfaces is sort of a fitful rotation happening. The big winners in the NASDAQ 100 in tech have been giving back some of those outsides gains you've been mentioning. You still have about a 50-50 up-down split on the New York Stock Exchange today, so it's not as if everything is for sale. And the S&P as a whole is right now with this 1% pullback, back to levels that we first got to, only about 10 days of.

ago on the upside. So again, it is pretty much a skimming of the froth, but I would be mindful of just exactly how stupendously overbought things like semiconductors got and other parts of the high momentum areas of this market so that, you know, you can't just say it's a one day and done. Mike, it's pretty interesting too as well. I mean, we're not going to call it a rotation because maybe it's too early to call it that, but not every part of the market is down today, right? I mean, we're seeing some outperformance in financials, some of those value-oriented names, albeit I know that some of them have been beaten up to heck in the market these days. But still, the banks, J.P. Morgan, hits a record high today.

There is a little bit of movement out of certain big tech stocks into other big names like J.P. Morgan. Yeah, for sure, Dom, which is why I don't think that the little bit of unsettled markets today is really sending that much of a worrisome macro message. It's not as if people are necessarily panicking about, you know, a slightly softer ISM services number. credit markets remain pretty sturdy. Cicicles, I mean, industrials and consumer are doing okay if you look at the new high list, too. So everybody should be prepared for a little bit of payback after the run we've had. We'll see how deep it goes.

All right. Mike Santoli with the latest there. Thank you very much. Now, our next market guest is expecting an expansion of the rally in the year ahead, but says that expansion is contingent on the Fed cutting interest rates. Let's bring in Kevin Mon, the president and chief investment officer at Henion and Walsh asset management. Okay, so the Fed needs to cut.

You're not the only one who believes that. But take us through why it has to do it soon or not. Sure, and let's just remember back to last year when the Mag 7 account of 62% of the total return of the S&P 500. Thus far this year, 44% of the return of the S&P 500 take out Tesla, and it's nearly half of the return of the stock market. So they're still dominating, but the breadth is starting to expand. For that breadth to expand further, we'd

do need the Fed to start cutting interest rates. For the Fed to start cutting interest rates, though, we need to, at least two consecutive quarters of a slowing economy, provided that inflation continues to moderate. That takes all the way out to July at the earliest. So for those market participants that are hoping for a Fed rate cut sooner than that, think again. But then if they don't cut, is it safer to sit and wait rather than make any changes, I guess, one way or the other? What's the bigger risk, I guess?

cutting too early or waiting and seeing? It's a great question. We look back to the 1970s as the blueprint for what could go wrong. The Fed cut interest rates back then prior to inflation coming to 2%, and what did that bring on? Double-digit levels of inflation. Paul Volker stepped in, raised interest rates to a high of 20 percent, and what did that bring on in a recession? So they're really trying to thread the needle here. The bigger risk is that they keep rates too high for too long and push the economy into a recession.

If you're an investor, to your point, I guess the Mag 7 have pulled back a little. little bit for what they're contributing, but still, without Tesla, would you say about half, 50%. So you can't really afford to not have a significant position in them, can you? And I think they will move higher and they'll drive the U.S. economy ahead. Certainly names like Microsoft will be the ultimate winner of the AI race, in my opinion. Names like Amazon, who continue to dominate the e-commerce base. And NVIDIA, how can you bet against NVIDIA at this point in time, especially with the expectation that they're going to deliver their next generation ship later this year?

opportunities beyond just AI, consider cybersecurity. How about aerospace and defense or even some consumer staples and discretionary names? There are other opportunities out there, but for them to really take off, we need the Fed to cut. All right. So let's talk about why they have to cut in the guise of the market. Yes. They don't have to right now, despite today's market action, they haven't really done anything. Expectations have pretty much gone away for as many cuts as we saw three months ago, six months ago, and yet the market still hovers near record highs. People still get paid four to five percent on cash balances, yet they still buy stocks as well. It seems like everything is going up in value at the same time that the opportunity cost

of giving up cash is still relatively high. What gives? I believe that the Federal Reserve wants to start cutting interest rates sooner than later. Why would they be forecasting three interest rate cuts of 25 basis points this year, if by their own forecast, inflation will only come down to 2.4 percent by the end of this year. I think they're more concerned with inflation staying below 2 percent, remember where we were just three years ago, than they are with inflation actually staying too high. They have difficulties reflating the U.S. economy. They're more concerned with keeping rates too high for too long and pushing us into a recessionary period. If the Fed does what they suggest they're going to do and cut interest rates,

by 250 basis points over the next three years, both stocks and bonds should move higher. But we are going to have to be more selective over the next six months when the economy will slow and when, in fact, there's going to be a pickup and volatility. The pullback we're seeing today, I'd expect more short terms of out to your head. Interesting stuff. Kevin, stay right here for a second because I want to get some further thoughts from you. But target shares are searching after better than expected holiday quarter released today with improving margins and traffic, lower markdowns and lower freight costs that helped lift profitability. Now, the retailers also laying out its decade-long plan. It did so

at its Investor Day in New York City today. I was there. Just wrapped up. C. O'Brien Cornell told me that he expects Target will grow annual revenue an average of 4% over the next 10 years, so each year by 4% by opening 300 plus stores, investing in its current 2,000 stores, expanding same-due services, and taking advantage of share opportunities, for instance, like Macy's closing stores, potentially picking up some sales in those areas. Cornell said that stores will open in areas of population growth, like Salt Lake City, Phoenix, Dallas, Nashville, and sort of those surrounding areas. And Cornell also told me there's a huge opportunity in same-day delivery. Frankly, it just needs to fight a little bit more for.

And that's part of why it's updating this Target Circle loyalty program. There's going to be three tiers. Target Circle remains free. But now the deals are going to be automatically applied to checkout. Target Circle card will replace its red card. It'll still give you 5% off everyday purchases. and two-day shipping, but now add some extra time for returns. Target Circle 360, though, that's the new paid membership.

It's going to start a $49 for April 7th through May 18th, then it increases to $99 unless you have that Circle card, that tier before this, which gives consumers unlimited same-day delivery on orders of $35 or more, two-day shipping, access to ship marketplace, which delivers from 100 other retailers in addition to Target. Now, it also has two new private label brands for everyday basics, called Deal Worthy and Toys called Gigglescape and relaunching its up-and-up brand. And investors care about that because Target private label brands bringing $30 billion in annual

revenue. That's about a third of its total and contribute more than a third to its margins, which also Target laid out a long-term plan for operating margins to hit the pre-pandemic level of at least 6% going forward. So learning what we learned about Target, seeing Target share surge, I know retail is not often an area that a lot of people come on CNBC. to talk about when we're talking about the growth that we've seen comparatively in the Magnificent 7. But when you hear things like laying out a 10-year plan with these, you know,

pretty decent growth targets, does it make you any more interested in a name like Target? Well, retail's incredibly important because it's an indicator of the health, the wellness, and the confidence of the U.S. consumer. And as we know, the consumer accounts for 70% of GDP growth in our country. So I was very encouraged to see the results from Target, beating on earnings, beating on revenues. Disappointed to actually see year over year, same store sales, go down, looking at their forecast for disappointing sales this year. But then what I took away most was them suggesting what I said earlier in this segment, and that's that the U.S. economy is slowing. The U.S. consumer is now starting to focus less on discretionary items and more on staples,

and they're being a lot more frugal there. So if, in fact, everything that they've suggested, buying the lower tier brands, starting to focus more on $10 and below items, that could actually help them to weather the economic slowed down very well. I also like Target because they pay an attractive dividend, and they're trading at a pretty attractive valuation, at least compared to Walmart. Does that mean then you focus on Big Box, right? Is it Costco, Walmart, Target, that sort of thing? Is there any room for consumer discretionary at all?

Retailers that cater to maybe higher-end shoppers, department store chains, that sort of thing, niche retailers, are those pretty much tabled for now, given that thesis? I believe need to focus on that have a brick and mortar presence and are also expanding their online footprint. Target has done it. Walmart has done it. Amazon has led the way for years in that area. The American consumer has made their choice. They prefer to shop online still, and they're going to continue to look for more discounted items. What better way to do that than through online commerce. So I think those retailers that have that online presence can also cater towards lower cost items and not so focused on big ticket discretionary items will do well in

2024. Very interesting stuff. Come on. Thank you for being here. Enjoying us. All right. Well, coming up on the show, a check on China. First, Apple in the danger zone, thanks to Huawei, details in tech check coming up. Plus, China's releasing its 2024 economic targets. We'll lay them out when we return after the spring. Welcome back. Well, Apple once again weighing on the NASDAQ today, trouble brewing in one of its largest markets, China. A new report showing iPhone sales plunging 24%. Steve Kovac is here to discuss for today's tech check. So tell us about the details of this report. I know Huawei is obviously a very big competitor. Yeah, and that's small but growing. Let's put it that way. But look, the headline here is counterpoint research.

Looked at the first six weeks of smartphone sales in China compared it to a year ago. iPhone, down 24%. That is the headline number. And the other headline number, like you said, Huawei, well, it's up the other direction, 64%. And it's spin-off brand called Honor. That was up 2%. So what does that tell you? It tells you that we see Huawei coming back online over the last year or so, making phones again, marketing them kind of as 5G, but it also kind of doesn't matter. And it is bit by bit chipping away at the market share that Apple gained when Huawei stopped making iPhone. smartphones, rather, for a couple years there. So that is one thing.

The other thing that's happening in China is we just know the economic situation there. I know we're going to get into that here in a bit. But the point being, consumer demand is low because of just the weak consumer overall. And then we also know what's going on in China just holistically, not just the iPhone, but in the December quarter, the holiday quarter for Apple, sales overall in China down 13 percent, and it's not going to get any better. But first of all, yes, all of those points are valid. But the Chinese government has its fingers on the scale here.

Right. Right. Because they told basically their citizenry and certainly their government employees that they didn't want people using iPhones, right? And that kind of a sense of... That's a little nationalism going on here. Correct. Right.

They were trying to focus on their own brands. They were saying that we don't want you to use Apple. There might be security risks, blah, blah, blah. That's probably the reason why, right? It's a reason why. Yeah. But we also don't know the extent to that. So you're referring to some reports.

late last year that no government agencies were basically told, you know, don't bring iPhones into the office, don't buy your employees' iPhones. For a lot of the same reasons we hear in the U.S. don't put TikTok on your work phone. Or Huawei. Or Huawei, you know, can't even happen here. And that's part of the reason why Huawei get out. Now we're seeing, but we don't know how big that was. China kind of downplayed it a little bit. Apple has been downplaying it a bit. So it's unclear how much it's that versus the consumer. But yes, to your point, a little bit of nationalism in playing in. Huawei, Chinese company, people want those. And by the way, those Huawei phones look and act just like an iPhone. Well, I mean, what is Apple's offensive strategy here to try

to gain some of that share back? And then I guess more broadly, do investors and analysts believe they can do it? Yeah, that's the real question. It's, you know, they've, this is not a new formula for Apple. I mean, you know, they've grown in China despite Huawei being, you know, in the game for so long. But again, they kind of had this grace period where Huawei wasn't in existence basically. What can they do? Everyone's looking towards this AI announcement. I know that's part of it. The other question becomes in the fall with the iPhone 16 upgrade. You know, how many people are going to want that? Is that phone going to be good enough to attract people to either stick with Apple or avoid switching back to Huawei? How much of a concern right now? We've seen reports that the

online sites have cut the price of current model iPhones by up to $180 per unit. I mean, that's a concern is 12. It can be, but that happens a lot. We don't see it so much in the United States with price fluctuations with the iPhone, but we do see it internationally. You'll see Apple kind of tweak prices and different geographies based on, you know, foreign exchange rates and other things. So one read could be, yes, it's part of demand. Another read could be it's foreign exchange. Maybe it's a mix of both. So it's, there's no one answer to that. All right, Steve Kovac with the tech check today. Thank you very much, sir. Okay. Well, now speaking of that China economy side of things that Steve mentioned, the country's premieres revealing Beijing's economic targets for

2024. Unis Yuni Un is live in Beijing with the specifics on that macroeconomic environment in the world's second biggest economy, Eunice. Thanks, Dom. Well, the targets are more or less the same as they were last year, but because they're coming off of a higher base, they're viewed as more ambitious. So to support growth, the government said that it was going to focus and target fiscal deficit at 3% of GDP. It will also issue new long-term bonds over the next few years, some special sovereign bonds as well as some local bonds. And the money is expected to be earmarked for major national strategies as well as strengthening security in what they describe as key areas. Now, the premier who announced the targets at the start of the National People's Congress

admitted that it will likely be very difficult for China to reach those goals. At the same time, he said that the country would stick with its policy approach of being proactive and prudent. Now, what might change, though, was also hinted in the government work report. And more specifically, as you guys were talking about technology, that a tech reliance and self-tech reliance is, or tech self-reliance, was going to be a priority as well as promoting made in China brands. Guys?

Eunice, there's also a question about whether or not there's going to be any kind of a impact from the kind of ongoing economic dialogue, possibly about trade policy and everything else that happens between the United States and China. Is there a sense right now that these targets

are achievable in the greater context of its trade relationship and not just the U.S. but the rest of the world as well? Well, because of of the potential geopolitics getting worse, that is definitely seen as a hurdle to China's overall growth picture. But on the whole, I think investors should expect that the Chinese economy is going to continue to slow down. We've seen that the authorities here are not really willing to stomach any large stimulus. But one potential way that has been discussed about investing

is really to follow the government policy, which is something that people have talked about for quite some time, but more specifically, that the government is now prioritizing national security over the economy. And if as a foreign company, you're willing to help China reach its technology goals, then you might be able to benefit. Fascinating stuff, Eunice. Thank you for being there for us on the ground, as always.

Well, nuclear renaissance with uranium spot prices at a 16-year high, companies are seeing renewed interest in the space. That story coming up next. Welcome back to Power Lunch. Stocks are heading lower today, and money is heading into bonds, sending those yields lower with the bid for bonds. And of course, the bond market is waiting to hear what Fed Chair Jay Powell will say tomorrow. Rick Santelli is back home safely in Chicago, sadly for us, with more on today's action. We do miss you, Rick. I'll tell you what, Dom, it was definitely quite enjoyable to sit at the big desk with you and Courtney, and you nailed it in front of the Humphrey Hawkins, as we used to call it,

in front of the House Financial Services Committee tomorrow, Senate Banking Committee the following day. The markets are giving him a weak equity market and a very frothy treasury market. But look at where it started. 10 o'clock Eastern, look at 2's, tens, and 30s. What was going on, I'll tell you, minus 6.2 percent on the updated durable goods. That is the biggest month-over-month drop in nearly four years. X transportation. Down four-tenths was the biggest monthly drop in nine months. Then ISM services. Your employment index, by the way, we have two employment numbers this week drops back below 50. All of this, of course, you can see on the charts of 10 o'clock Eastern. Any maturity, they all move lower. But here's something fascinating. Last year, the first leg of Humphrey

Hawkins, the House Financial Services side, was on March 8th. But let's go about. back three or four weeks and look at the charts. This is a two year. You see that huge drop? That was 3-8. That was the day of Humphrey Hawkins last year. And it had a huge effect on two-year note yields. Now let's keep that same date and go down the yield curve. Here's a 10-year, much smaller move. As a matter of fact, 10-year yields at that point in time were basically trading about 15 basis points lower than they are today. The reason I point this out, if you're looking for volatility, definitely want to pay attention to two's tens curve, especially that short maturity. There's a lot at stake, especially considering all the inflation numbers that aren't far beyond his testimony in front of the both sides of the aisle.

Courtney, back to you. Thank you very much, Rick. Appreciate that. Well, uranium prices hovering near their highest level in more than a decade, which is jump-starting U.S. mining operations. Pippa Stevens joins us here with more. Pippa, I always learn a lot from you when it comes to things like uranium. It's not an area I know a lot about. Well, this law comes down to the nuclear renaissance that we're seeing,

which has pushed up spot prices of uranium, recently topping $100 per pound, a 16-year high, causing miners to restart plants that had been idled. Now, prices collapsed in 2011 after the Fukushima disaster, meaning only the lowest cost uranium in places like Australia and Canada could still be profitably mined. But now, miners are betting that prices will stay elevated. U.R. energy, uranium energy, on core energy, and energy fuels are all restarting U.S. production this year in places like Wyoming, Texas, and Utah.

Now, total volumes will still be well below the heyday in the 1980s when the U.S. produced more than 44 million pounds, meaning the U.S. will still be dependent on foreign suppliers. Now, Canada and Kazakhstan each supply roughly one quarter of U.S. uranium, followed by Russia at 12%. Now, remember, nuclear power is about 20% of the U.S. grid. And so even though Russian uranium hasn't been sanctioned due to their outsized role in the industry, utilities are scrambling to secure other and more reliable sources. The URA and the URNM have both pulled back recently, but those two funds have tracked the space and have gained a lot of attention recently. That's interesting. I understand prices, obviously, for uranium at 16-year highs that looks attractive potentially to get back into a market. But what does it take to restart idle production? I mean, how expensive is it? How long does it take? It's expensive. So it's cheaper to restart mothballed plants than it is to bring completely new, you know, green mines to fruition. But it is expensive. And the U.S. is not the cheapest place to produce it. It's much cheaper in places like Australia and Canada, which is why those factories did close after we were a major producer, you know, just a few days.

decades ago. And so these producers are now making this bet that these prices will stay at a sustained higher level, kind of above that $100 level. It's about the 75 to 80s what they need for it to break even. But, you know, there are, there is so much momentum behind nuclear. The U.S. led a group of about 20 countries back in December at COPS, saying that they're going to triple capacity by 2050. And so they're kind of reading the signals that this will be here for the long term. Very fascinating. And you said that Russian supplies have not been sanctioned. because they're such an important part of the market. This is sort of, I guess, more of a geopolitical question.

Is there a risk that they could be sanctioned? Absolutely. I mean, there's been a lot of calls from U.S. lawmakers. A lot of bills have been introduced saying that we should stop the imports of Russia because they're really, they're not so much a huge minor, but they're really important in the conversion and enrichment process. And with all of these rounds of sanctions in the European Union as well, it's been left alone because there is no alternative.

Now, the nuclear industry is not a just-in-time industry, meaning you typically have uranium on hand for about two years. But so now U.S. utilities are saying, well, what if Russia decides to weaponize uranium and stop sending it our way, then what are we going to do? And so already they're renegotiating contracts with U.S. suppliers. They're no longer looking at Russia and they're looking for alternative sources because there is that risk that if Russia decided to cut off exports, what would we do? You know, nuclear is 20% of our grid.

Wow, fascinating stuff. PIPA, thank you so much for joining us. Well, coming up, Cryptos climbed to New High. Bitcoin lower today, but still up big over the past year. Crypto uses a lot of computing power between mining and storage. So between the renewed crypto hype and the ongoing development of AI technology is all this computing power hitting the grid. We'll discuss that next. Welcome back to Power Lunch. Independent Arizona Senator Kirsten Sinema says she will not seek reelection. The move will avoid a rare three-way contest for the pivotal seat. The senator had been running out of time to launch her re-election campaign, she was facing an April 1st deadline.

The Education Department imposed a record $14 million fine on Liberty University for violating federal campus safety laws. The large Christian school in Virginia is accused of failing to disclose on-campus crimes, including sexual assault. An two-time Grand Slam champion, Simone Halle, has been cleared for an immediate return to tennis. The Court of Arbitration for sport reduced her four-year doping suspension to just nine months. They found the former world number one was not entirely at fault after testing positive for a blood-boosting substance at the 22 U.S. Open, which they determined was the result of a contaminated supplement. Back over to you. All right, Kate Rogers, thank you very much for the news update there. Stocks are pulling back here

today from near record highs. The downs down at session low so far right now. But so is Bitcoin. It's pulling back as well. Trading, you can see there just around that 65,000 market. after briefly setting a new record above 69,000 for the first time since November of 2021. And here's an interesting stat. Since our data from coin metrics on Bitcoin began back in July 2010, Bitcoin is up, and this is not a typo. 70 million percent. Million percent, 70.

Joining us now with more on the rally to record highs is McKenzie Segalos, Mac. I mean, we see it. Some people just choose they don't want to believe it. And some people are skeptical for good reasons. But this run has been stellar. Yeah. And there are a lot of drivers of this record rally. Some of them, simple, others, a lot more complicated.

So let's start with the biggest and most obvious. And that's the approval of Bitcoin Spot ETS that happened in early January. And if you include the run up ahead of the news, Bitcoin is up more than 50% this year. In less than two months, the 10 U.S. spot Bitcoin ETFs have brought nearly $50 billion into the space. BlackRock's I-Share's Bitcoin Trust is the fastest in ETF has ever gone from zero to $10 billion in assets. Okay, now let's get slightly more complicated. Well, Bitcoin has always been front and center when investors think of crypto. Many in the industry favored Ether because it has more practical use cases.

But now some innovations may allow Bitcoin to reach technological parity with. with Ethereum. And all of that is encouraging investment in new tokens on the Bitcoin blockchain with much of that interest coming from Asia. So there's a lot happening. But the price moves are also being driven by momentum. The higher it goes, the higher it keeps soaring. This is all just such fascinating stuff. And I know many of us are still trying to get our hands around the movers of Bitcoin in either direction. So stay here with us so you can participate in this. But for more in the Bitcoin rally and this crypto trade overall, let's bring in Mike Boussela. He's managing partner at Neoclassic Capital. Also, a for a four.

former trader at Goldman Sachs. So Mike, you know, McKenzie laid out a number of reasons why we see Bitcoin going higher. Her last point, to me, is the most fascinating. It's momentum. It starts going higher and just keeps going so. Where are your expectations for where the price of Bitcoin is going? And what do you think the biggest drivers are and will be? Sure. So you'd mentioned 70 million percent. The most amazing part of that is that Bitcoin hasn't changed at all. Bitcoin has stayed exactly the same from day one, the world around it has changed quite a bit. And so they think about it a different way. People aren't necessarily buying Bitcoin. They're selling things that aren't working anymore. So it's almost like they're handicapping the global government's ability to navigate

the next few decades. It's a live bet on central bank's ability to land the economy. And of course, there's speculation around that. So the price of Bitcoin represents the intrinsic value of Bitcoin plus speculation. And clearly, you know, between meme coins being the best asset, best point assets of the last seven days, Cryptopunk selling for $16 million. Funding rates going through the roof, there's obvious speculation, but the intrinsic value of that option of Bitcoin versus the rest of the world continues to grow. And so I think that's where you're getting a steady base of inflows, but the speculative piece is that kind of day-to-day price fluctuation, you see. Yeah, Mike, it's Dom. One of the things that Matt brought up is this idea that the spot ETFs, the money they're taking in,

is fueling some of this demand. You're having more, I guess, fundamental institutionalized kind of demand coming through. It wasn't that long ago. We were talking about black market stuff, right? This idea that we were using things for illicit trade and all of the bad cases for use of Bitcoin was coming about. What exactly then does this next leg look like? Does it include that conversation all over again? Yeah. I just didn't want to repeat the Black Rock and Fidelity comments that everyone said for the last three months. But I, I, I, would say that's obviously a, you know, credentialization of the asset class. So we'll use the term financialization of a new asset class, being Bitcoin, being traditional assets, being part of the

traditional asset, optimal portfolio. So a friend of mine really leads crypto and digital assets for one of the largest investment consulting firms in the world. And he had mentioned that Monday was his largest inbound day ever from those institutional clients. And so you have both the retail market, and obviously that's a large part of the market these days, both in stocks and crypto, as well as institutional side. Everyone's very excited about it. I think, you know, it's definitely changing the scope of public assets. So obviously a lot of viewers of CNBC will be trading things alongside the Bitcoin ATF, but things like miners, Coinbase stock, micro strategy, all different drivers. Microstrat is obviously a Bitcoin whale. Those whales will actually drive some of the innovation Mac mentioned around Bitcoin

virtual machines or the Ethereumization of Bitcoin because they have the ability to sort of allocate Bitcoin value to those platforms. Coinbase is obviously the decentralized neobank of the future and building on things like base. And the miners, I actually think are fairly interesting because there's going to be enormous alpha to be had post-having. And you're going to look at these low-cost, scalable miners outperforming some of the ones that are going to come into a pretty difficult time.

And so I think between all of the assets, there's really interesting opportunities to trade each of them. But obviously, the ETF flows have been, you know, the story of the last six months. And can I make one other point on that? What's especially noteworthy is the fact that, you know, the major wirehouses, asset managers and RAs haven't even cleared the ETFs yet for their clients. So you're expecting another wave of interest, which kind of goes to a larger point that Mike was just making, is you're going to see a lot of the supply go away. That market making event called halving coming up in a couple of weeks.

It's naturally designed to create scarcity around this asset. Because, okay, so let's take us through because a lot of people, we're still trying to grasp the halving concept. It's this idea that you're not going to have the growth in support. of Bitcoin be nearly as robust as it was pre-having? That's the whole idea. Exactly. It happens roughly every four years, and it cuts the circulate, basically the supply in half, the new circulation. It's baked into Bitcoin's code, and it's naturally meant to have this deflationary effect. And there's also, you know, one other point that Mike just made, you're seeing a lot more companies building on top of Bitcoin, that layer two ecosystem,

and they're scooping up a lot of the supply. All right, Mike Bichella, all of these things are huge, But there's still going to be power usage that becomes an issue at some point. We've talked about AI and data centers and how much power they're going to use. How much does cryptocurrency factor into the future energy profile of not just this country but around the world if its use is to hypothetically keep going on its trajectory right now? It is part of a major part of grid transition to clean energy. And so if you think about whether it be stranded energy, or scalable alternative energies. I'm full disclosure on the board of Terawulf.

We power Bitcoin mining through hydro power and nuclear power, two of the cleanest forms of power in the world. And we continue to scale out those facilities. There's obviously this push and pull now between the Mag 7, looking for alternative power sources for their AI applications and the high power compute that comes across that and demand on some of these data centers. And so I think for a lot of the global Bitcoin miners,

they're going to constantly need to seek the lowest cost of capital or the lowest cost of power, I should say, to continue to mine Bitcoin because, I mean, there's a clear cut. You know, we've had a run in Bitcoin, but there has been, you know, a cut in supply. And so every, you know, block of Bitcoin you're mining, there's less revenue associated with that. And so I think the low-cost miners will have an opportunity post-having to kind of get through their own little distress cycle in it, and either require or scale, you know, profitably if they have the ability to do so through scalable mining sources. And that's kind of an interesting concept because, you know, it's a way that most hedge funds have traded the sector for a period of time. And I think there's going to be material alpha generation versus basket trading versus, you know, Bitcoin, 70 million percent. They've never had a management change. They've never done any M&A. It's just a beautiful, simple product. And, you know, there is this dynamic of Bitcoin mining, creating a financial incentive to do more renewable build-out. So I was just in Ethiopia and in Kenya where you're seeing, you know, hydropower and geothermal power and these new infrastructures being built out because Bitcoin

miners are creating a financial incentive that didn't exist before. And so you're seeing, you're seeing that dynamic at play globally. If you look at Texas, there are a lot of miners who say that they're helping to stabilize grids because people assume that when you onboard renewables onto the grid, that's automatically a good thing. But you need a base load. So when there isn't, you know, the supply there, you can help round it out. So it is an interesting dynamic there. And there's a point where we, you know, between AI and Bitcoin mining and otherwise, we need to secure alternative sources of power. And if that ever taps into base load, power, we're in trouble.

But, I mean, you know, it's very exciting what's happening right now with flows. I think what's more exciting what my firm focuses on is more around innovation happening, both on the Bitcoin blockchain, but also Ethereum and Solana and other forms of smart contract and decentralized on-chain capital markets, both in the consumer side and the finance side. And I think that's really at the end of it, you know, Bitcoin is extremely simple and it's wonderful. And I think you always just continue to what we say, stack sats, which means accumulate Bitcoin over time.

Don't try to time the market unless you are a professional trader. Even Davey Day trader, he took a hit on his Bitcoin. He believed in it and he still took a loss. I don't think anyone was worried about Portnoy's balance sheet. But it just goes to show you that, you know, stacking sats is as simple as the asset itself. Case and point today, guys, we top 69,000. We're trading at about a 61,000 handle right now. All right, Mike Buchella, thank you very much.

Also, Mack, thank you. very much excellent reporting as always. All right, still ahead on the show. Elon Musk is no longer the world's richest person, but that's the least of his problems this week from a suspected arson attack at Tesla Berlin to lawsuits from former Twitter executives. Our next guest will tell us if now is a good time to be a Tesla shareholder, maybe even by the dip. Power lunch is back in two. Welcome back to Power Lunchtime for today's three-stock lunch. Here with our trades is David trainer, CEO of new constructs. Our first name is Tesla, which is down nearly 25% in the last three months, which means Elon Musk is no longer the richest man in the world on paper,

losing the top spot to Jeff Bezos. David, what's your trade on Tesla? Still, this is a no-brainer. In addition to extreme valuation risk, we're now seeing real earnings quality risk. The stock now gets our strong miss earnings distortion score. It was one of the top five stocks in the S&P. with the most misleading earnings. And we think this is a tell-tale sign of more bad to come for a business that's competitively challenged, losing market share, seeing profitability a road, and really not able to keep up with its competitors anymore.

All right. It's down 1% over the, or 9% over the last 12 months. We'll see what happens there, Dawn, 28% year-to-date. Next up, let's talk about lithium miner, Albemarle, down big on a capital raise announcement. The market seems to view it as a sign of how difficult the business environment remains. for lithium companies. David is today a good buying opportunity for AlbaMarle shares. We think so. We think the stock is cheap. We think the underlying economics are strong. We also think that there are major macro tailwinds coming in the commodities and especially chemical

development markets because both China and Russia have really China through super low-cost labor and China and Russia through just dumping commodities on the market for most of the last 20 years. we think those trends are coming to an end. And there's going to be an enormous amount of onshoreing the development of specialty chemicals and the production of specialty chemicals. And that's going to change the landscape for these companies. And now's a great time to pick up Alamo on a really good discount. Those macro tellwins are something that most people don't see, but they're going to make a big difference in the next five to 10 years. Okay. Then our last one up is Barrett Gold. David with Gold, the commodity trading near all-time highs.

What's your trade on Barric Gold here? one buy and one sell so far. I mean, Courtney, I think you took it took the, you stole my thunder. It's a commodity time highs, right? I mean, what else you have to say besides that? I mean, it's really difficult to buy anything commodity related when it's at an all time high. Sure, it could run out more, but then, you know, really, it's even more of a speculation than it already is. I think the, you know, commodities are a very speculative kind of investment vehicle as it is. And, you know, like, I think the fact of the matter is, you know, gold scene competition in a way it didn't before. I mean, the crypto,

currencies are really probably, really taking share from gold as an investment. And that's a trend that's not going to reverse anytime soon. The price is at an all-time high. The company gold, Barrett Gold, I mean, the economics of that business are poor, always had been. It's a shareholder value destroyer. And yeah, we don't see a lot of reason to believe there's any upside in the stock. All right. David Traynor at New Constructs, thank you very much for the trades. We appreciate it. Thank you. Well, still ahead. Sergey Bren is getting candid. about Google's rough Gemini image launch. We'll discuss with the tech giants co-founder.

How to say, that's when Power Lunch returns. All right, we've got just three minutes left in the show and several more stories we want you to know about it. So let's get right to it. The Consumer Financial Protection Bureau unveiled a new rule today that would cap the typical late fee that banks charge customers at $8 per incident. Fees usually average around $32.

So the CFPB says the cut would save more than 45 million card users an average of $220 annually on late fees, it also at that level implies that there are a lot of people who are late multiple times throughout the course of a year on their fees. I was thinking that too. We obviously are focusing so much on credit card delinquencies and what that all means about how restrained consumers may be financially as we're still in this rising interest rate or high interest rate environment. It's very fascinating. We'll see if this works. Obviously, President Biden has really kind of been in a war against these so-called junk fees. Well, to wear a public appearance over the weekend, Google co-founder, Sergey Brin, said that the company, quote, definitely messed up the Gemini image launch.

Brin said, I think it was mostly due to just not thorough testing it. It definitely, for good reasons, upset a lot of people. This is one Dom that we just keep talking about that Gemini launch and so the misrepresentation of historical figures and otherwise. And it's not just that. I think it's all about this idea that AI is in such an early part of the game, early innings. of what's happening right now that there are going to be these hiccups, but these ones just became so high profile and so egregious that people had to come out and say something about what happened.

Very much so, but I guess good for them for admitting that they messed that up. Sure. All right, now a year after a year of controversy, Harvard University, believe it or not, has regained its position as the ultimate dream school among college applicants. The Ivy League University bested last year's dream college, which is MIT, the Massachusetts Institute of Technology, to secure the top spot, according to a new survey from the Princeton Review, the changing paradigms and economics of college education and secondary education.

Just huge here. But Harvard, I think, at a certain level, people do if they have the chance, want to go to Harvard. I mean, I guess Harvard is probably very lucky that it's hard to destroy that hundreds and hundreds of years of brand image with one black guy. But there has been a lot of stuff going on. That is very true. That is very true. It's been a fascinating year just hearing about some of my friends anecdotally watching their kids flight of colleges and which ones they're getting into and which ones they're not wild game,

it seems. Well, Delta just became the latest airline to raise its checked bag fee. No, this time by $5, beginning today. It will cost travelers $35 for the first check bag, 45 for the second check bag. It's the first Delta baggage price increase since 2018, which the company said will help it stay on pace with the rising industry costs. I remember when they all instituted these bag fees and we thought it was just temporary and then the airline saw how much money they took in. I don't know. The balance is tough. Overhead binge. Check the bag. I know.

He knows anyway. All right. Well, thanks for your voice for watching Power Lunch. Closing bell starts right after this break.