Power Lunch - Apple’s big announcement, biotech’s next catalyst and the CBOE CEO. 6/6/22

Episode Date: June 6, 2022

Apple makes a push to disrupt the buy-now-pay-later sector and unveils its M2 chip. What today’s announcements say about Apple’s next chapter. Plus, a trading floor with people?? The CEO of the CBOE unveils its modern-day trading floor to usher in a new era of open outcry. And our three-stock lunch trades restaurant names that Oppenheimer calls recession-resistant. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Power Lunch. I am Tyler Matheson. Let's tell you what's up this hour on Power Lunch. Apple's next chapter, the company making a push to disrupt the buy-now pay-later sector. The announcement made just minutes ago at its annual developers conference, we've got to look at Apple's future as device sales slow and the stock is slumping along with a lot of other stocks, by the way. And the Financial Exchange Power Player, the CBO CEO, launching a new open outcry trading floor, throwback. to in-person trading as more exchanges go electronic. Now to my friend Contessa Brewer, who is in for Kelly. Contessa. Well, hello there, Tyler, and hello, everybody.

It's a volatile day on Wall Street. The Dow up as much as 336 points at the highest today. But now you can see it's trading just a third, but hanging into a third of a percent, hanging in on the green. You have got the S&P 500 up three quarters of a percentage point, and the NASDAQ now up almost a percent. Now, part of the reason we saw the pullback off.

the highs is the rise in rates. The 10-year yield above 3% closing in on its 22-high of 3.2%. It hit that in early May. Tyler. All right, Contessa, with the 10-year yield above 3%, the market this week faces a key inflation test. The release of the CPI on Friday could help answer the question, has inflation peaked? Joining us now with her look ahead and a few stocks she's watching is Stephanie Link, Chief Investment strategist and portfolio manager at Hightower Advisors. She is also a CNBC contributor. So what do you think, Link? Is inflation peaking? Is that what you're hoping for? Or is that what you're expecting? Yeah, it was good to see, Tyler. I think macro is front and center at this point until we get

earnings in a few weeks. So yeah, it is inflation, it is the Fed, it is interest rates, it is potential recession or timing of when that could occur. CPI is very big this Friday. The number is 8.2%. If it's better than that, if it's cooler than that, then you will hear about the peak inflation talk. The problem is, Tyler, is you have inflation everywhere, right? And it's still very high and very elevated. And I think it's going to remain so. I mean, just last week alone, we got unit labor costs up 12.6% year over year. Wages from the non-farm payroll rose 5.2% year over year. The PCE price index rose 6.3% percent. percent year over year. These are these are astounding kinds of numbers I've not seen in my lifetime.

And so I think the Fed is going to have to go 50, 50, 50 in the next three meetings. I know the September is debatable, but I just don't think why, I don't know why they would take the foot off the gas, given the inflation is everywhere. So do you think the inflation is peaking then and that, but it's going to take time for it to slow? Yeah. Okay. Yeah, yeah. It's been, it could be peaking next couple of months or so, but I think it's just going to stay very high. Let's get to a couple of stocks you've got your eye on, and they seem to be with one exception, which is in the chip area, what I would call safe plays. One is Campbell's Soup. The other, it's getting safe in the Campbell Soup, Contessa.

I mean, nothing like a canned bowl of chicken and noodle. Of chicken noodle or a little bit of clam chet, whatever. Campbell's soup, sure when way, paint is safe, paint is safe, and advanced micro-device. Why these three? These are ones you've got your eyes on. Yeah. Yeah, I do. There's not a lot of company news this week, but I do think these three will learn some things, and that's what's important here. Campbell's Soup is not going to be market moving, and you said it's a safe haven. It's up 5.4% year to date. It yields 3.4%. It trades it 16 times for a staple stock. That's actually cheap, believe it or not. They have been increasing pricing, and so what I want to learn is have we seen demand destruction? They guided organic growth, negative one to positive one for the

So let's see if anything changes based on the pricing. And then I want to hear about consumer trade down because we've heard that from a host of consumer companies over the last month, month and a half that consumers are trading down and how they're handling that. Sherman Williams, they're going to have an investor day and they have housing exposure, right? So we want to hear about the housing market, any cooling down there. But also the stock, if you recall, when they reported earnings, the stock rallied 12% in two days because people thought raw material inflation was actually starting to ease. I find that very hard to believe, but everybody got all jazzed up about it. But they have put price increases in and costs are

coming down and that's good for operating profits. So let's hear what they have to say. And then finally, AMD, probably the most intriguing because it's down 34% from its highs and it trades at 24 times earnings. They have an investor day. And I think they just let just at their last quarter, they raised guidance to 60% total revenue growth from 30%. And it trades at 24 times. So that kind of is interesting to me. The problem, Tyler, is that semiconductors, I think once the supply chain's ease, you are going to hear about double and triple ordering, and that's going to be problematic. You know, I'm just curious, when you're looking at inflation and you're looking at the, especially these consumer-facing names, Campbell's Soup and Sherwin Williams,

there's this friction between how much they can turn around and raise prices before they start to see demand backing off a little bit. What kind of insight do you expect to get from them, and what will that tell you about where we've hit in terms of inflation? Yeah, there's no question about it, Kintessa. We've heard from so many companies that were caught off guard in terms of the supply chains and inflation and the consumer, and that they did raise prices, and then the consumer decided all of a sudden they were trading down. In fact, if you look at a chart of the consumer, of listening to all the companies in the last earnings report, companies that talked about trade down is back to the 2008 level.

So this is very, very important because the consumer is 70% of the U.S. economy. We know that. So I do think a little bit of it is in your world, right? In the services world, people are going to the gambling casinos, right? They're going to travel. They're doing hospitality. They're going to restaurants. So it's a services shift away from goods.

But no question about it. Inflation is definitely hurting the consumer. And it's definitely happening, Stephanie, to your point, where they're seeing the erosion is at the very bottom levels of those, I mean, the high-end gaming customer. customers are still coming, they're still spending, and they're ready to spend big. So it's interesting to watch that happen. Stephanie, you always get more content.

It's like a can of condensed soup, you give us all that content in a condensed soup game. We thank you as always. Thank you guys for having me. Anything better than a good grill cheese sandwich and some tomato soup? I mean, it's kind of off my menu now, but yes, there's nothing as good. It's good, man. Breaking news, speaking of delicious, how about an apple?

It's the annual developers conference. Let's get to CNBC Steve Kobach, who's outside Apple headquarters. Late breaking news, Steve, what is it? Yeah, hey, Contessa. They just announced their new M2 chips. So this is their latest version of the M series of chips that they're using to replace Intel and all their Mac computers. And they just put that chip in a new MacBook called the, it's the new MacBook Air,

very similar to the MacBook Pro that was launched last fall. It has a nice screen with that kind of notch in it for the camera that we saw last year. And they're still going over all the specs and pricing and details and things like that. But this was one of the few expected hardware announcements we're getting today. On the software side, new iOS 16 announcements. The big one is a buy now, pay later option called Apple Pay Later. This is a direct competitor to those companies like Klarna and a firm. In fact, Affirm's shares drop down about 6% when this was first announced.

And this will let you anywhere Apple Pay is accepted will let you pay things off interest-free and no fees over the four months. So a big swipe at competitors trying to build Apple wallet into this kind of thing that you basically only need to carry your iPhone around. You can do your IDs in there. You can have your car keys in there. And pretty soon you can just buy everything on a buy, now, pay later situation. And there you're seeing Apple stock up about a percent at this point. Steve, thank you for that. Let's bring in Casey Newton, who's the editor on Platformer and CNBC contributor for more on what Apple is announcing today, what it's not delivering today. I mean, this idea of Apple competing in the buy now pay later space, do you think it has the potential to be very disruptive? I do. I mean,

you're already seeing it in the decline in the affirmed stock price. I think that there has long been a question about whether these buy now pay later services deserve to be companies or rather they're just better off as features of a larger platform. And given how ubiquitous Apple Pay is already, I expect that this could eat up the lion's share of that market. I'm interested as well in some of the other things that we've learned, for instance, that they're going to be able to translate text that are in photographs. I'm wondering how that affects the potential for hackers to get in past, you know, they say, can you read this?

Can you do it? You know what I'm saying, the images. And then this other thing about the paying, the Apple tap to pay, launching where you can pay somebody just by bumping your phones. I know that that was announced earlier, but for developers, does that have the potential to create new opportunities? Yeah, absolutely. I think that that has long been a goal of these sort of payment apps is for people to do those direct peer-to-peer payments, right? So, you know, you think about some of the companies that have seen success in that area, like Square or Venmo, hey, if two, you know, iPhone users can just start trading money back and forth,

easily, maybe that eats into their business as well. So I'm sure everybody in that payment space is watching what Apple is announcing today very closely. And so much attention paid to augmented reality and whether Apple is going to give meta, Facebook's parents or run for its money on glasses or virtual reality or, you know, living in this sort of virtual space right here. Have we heard anything yet, Casey, that you think, oh, yes, this is the way that you can create the content where then people are demanding the augmented and virtual reality. Actually, yeah, and you mentioned it. That live text feature, which is going to sort of increasingly help you understand the world

around you, right? You're going to be able to scan it and figure out, you know, what kind of dog or cat am I looking at or what does this text say? This is all stuff that is going to find a very happy home in these mixed reality glasses, right? You put them on your face and it becomes a new kind of heads up display that helps you understand the world. So a lot of the kind of stepping stones on the way to Apple's AR future are hiding in plain sight in this keynote.

Which of these announcements today, if any, could move the stock, which is down nearly 18% for the year? It's up a little bit today. Is there anything in here that is that market moving that the stock would move higher? Well, you know, when I think about what moves stocks, I look to the financial side of things. And so everything Apple is doing with Apple Pay, I think, is the spot to look. look, you know, it clearly has widespread adoption. It's unclear to me, you know, how much revenue it is driving for Apple. But, man, when they introduce that by now, pay later stuff, those direct peer to peer payments, Apple is increasingly becoming a bank to hundreds of millions,

maybe more than a billion people. So, you know, if they're able to preserve that grip they have on that market, I'm sure in the years to come, that's going to do wonders for the stock. Well, and one reason that they've really had this crunch this year is because of the shutdowns in China where they couldn't have their factories and their supplies. open, the announcements that things might be looking brighter at this point, do you think that's going to push forward? For instance, the announcements about the new laptops? Yeah, I mean, we'll have to see. What I do know is that Apple is already diversifying the supply chain. You've seen announcements in recent weeks that they're moving certain production to Vietnam, for example. So I think that increasingly

for them, the goal is going to be to try to diversify the number of countries where they are producing these devices so that when these supply chain crunches come up, they're able to solve them a little bit more quickly. Could we switch topics and talk a little bit about musky, musky, Elon? Yeah. Yeah. What do you think about what's going on in that tussle between him and Twitter? And do you think this is gamesmanship to get a lower price, or is it gamesmanship to get out of the deal entirely? You know, if I had to guess, I'd still say it's likelyer than not that he is seeking a lower price. But I just always love to remind people that we have known that Twitter has had about 5% of its user base as bots for a long time. The company has been reporting that

in SEC filings for the last eight years. Elon knew it when he signed the deal. The deal was binding. He has buyer's remorse because the company looks a lot more expensive today than it did when he bought it. But in most transactions, you're not allowed to get out of it just because you got a bad deal. So we'll see if you can weasel his way out of this one, but the law is certainly not on his side. All right. Casey Newton, thank you very much. We appreciate it. All right, coming up, biotech stocks, battered and bruised, down 36 percent. This year is a group underperforming the S&P. Will some stocks get a boost as new cancer clinical data emerged?

Plus, Oppenheimer has a list of recession-proof restaurant stocks. We'll talk about Chipotle, McDonald's, and Papa Johns in today's three-stock lunch. And as we head to a break, a look at the Chinese EV makers, which are, are trading higher on signals of strengthening demand. We'll be right back. Well, biotech stocks, some of the most unloved in all the market. The two major biotech ETFs are down 37 and 24% this year compared with a 13% decline so far for the S&P 500. Investors are hoping for some relief and a few catalysts that come out of the world's premier oncology gathering currently underway. But our next guest says the best strategy is to stay

defensive in the sector. Joining us is Chris Raymond, senior biotech analyst at Piper Sandler. Chris, welcome. When we say it's almost oxymoronic to me, biotech and defensive, but explain what that means and where that leads you in terms of stock names. Yeah, absolutely. Well, I guess from our perspective, it leads us into the larger commercial, more mature names. So companies that have earnings, actually have a more established commercial footprint. And in some instances, names that have been largely de-risk, given all the carnage that's happened in the space. So let's get to some names there leading with your favorite, which is a large-cap, Ab-Vee.

Many people would know that name. Some of the others, they're not going to be familiar with, I would bet. Yeah, you bet. So from our perspective, you know, Ab-V is the preeminent large-cap. you know, name in the space. You know, from an evaluation standpoint, it's pretty attractive, but there are so many sources of upside to expectations, at least the way we view it, from, you know,

essentially this drug is, this company is facing the loss of exclusivity of the world's largest drug next year, Humira. And there's been a ton of angst over whether they can replace that revenue whole. And we believe there's a couple of sources that are underappreciated in terms of upside to that. And in addition, you know, you're getting it at a decent valuation and there's a pretty decent dividend yield. So that sounds pretty defensive to us. I'm just curious, if there's attractive entry points right now because of how far these stocks have come down, do you think they hit a bottom? And if you don't, why not? What would be the indicator? Yeah. Well, calling the bottom is the

trickiest part of doing this job. And one of the surefire signs of a bottom that we've seen over the years of covering the space has been signs of capitulation. And, you know, one instance and an aspect of that is we analyze the flow of funds into and out of biotech and health care mutual funds. And usually when you see a sustained outflow for a period of time and the breadth of outflow being massive, that's your surefire sign of capitulation. Over the last 20 years or so, it's happened about a dozen times. And every time you see this specific outflow dynamic take place, the sector does rally on average about 20% over the ensuing six-month period. We just haven't seen that capitulation sign yet. So it's not to say that we wouldn't see a recovery in a rally. It's just,

I'd feel a lot better calling the bottom if we saw that sign of capitulation taking place. more on your list are argenics and ultrigenics. One has performed a lot better than the other. Argenics down 8 percent. Ultrogenics down 41 percent this year. Yep, that's right. So the call on argenics is simply a beat and raised story. We believe their lead drug or the only drug that they have is going to beat numbers this year pretty sizably. Ultrigenics, you know, this is another name that would it's pre-profit but they do have a number of drugs on the market and there's a transformative therapy with key data happening sometime this summer for angelman syndrome and we like the opportunity there and the odds of that readout being positive um of potentially transformative

therapy for the company right all right chris we have to leave it there alas thank you we'll have you back soon we appreciate it chris raymond with sandler here comes the sun I'd sing it, but then the lawyers call me and tell me I'm out of line. So solar stocks surging on news that the Biden administration will lift tariffs on imports of solar panels. Those moves next. Plus, honing the craft. We take a look at one startup, helping food companies like Kraft Heinz become more sustainable. Plus, throughout the month of June, we're celebrating Pride Month.

Here's Krista Lila, senior field producer. My advice to the community, especially LGBTQ youth, is to stay true to your children. yourself, no matter what your background is. There will always be someone who doesn't agree with you, and that's okay. Don't let labels define you. What defines you is the kind of person you are. If you're an ally, be supportive. Speak up when someone makes disparaging remark. To create change, we must use our voices and help lift each other up. Welcome back to Power Lunch. Solar energy stocks powering higher this afternoon. Let's take a look at array technologies. As you can see, it's up 18%. Sun run, up 7% end phase up 6%.

You've got sun power and solar edge up about 4% now and the Invesco solar ETF up 4.5%. Now, the Biden administration reportedly is ready to declare a 24-month tariff exemption for solar panel products from some southeast

Asian nations as the Russia-Ukraine war has actually disrupted the energy markets around the world. The White House says it will apply the Defense Production Act to spur U.S. production of solar panels and other clean energy technology. Tyler?

Hi, Tessa, ahead on power lunch. Open for trades. The CBO opening a new trading floor in Chicago. We'll talk to the chairman of that exchange next. Plus food for thought. Oppenheimer bullish on these three restaurant stocks if we enter a recession. Should you own them? That's our three-stock lunch for today.

I'm Simam Modi. Here's our CNBC News update at this hour. A manhunt continues today for attackers who kill 50 people at a Catholic church in Nigeria. Explosives were used in the coordinated attack on worshippers inside and outside the building. Authorities have not yet identified the suspects and no organization has claimed responsibility for the attack. 82 million COVID vaccine doses have been discarded in the U.S. since December 2020, that according to NBC News. About one fifth of them came in the past three months. That comes even as less than half of fully vaccinated Americans have

received a booster shot, and as many poor countries struggled to get supply. A variety of factors have contributed to the waste, including unused doses from open vials, expired vaccines, and spoilage due to power outages. And the world's largest trial for a four-day work week began today in the UK. 3,300 workers across 70 companies will work one fewer day per week for the next six months. They'll still get their full pay with expectations that their productivity won't change. researchers will attempt to learn how the new work schedule impacts quality of life, overall productivity, and the environment.

Tyler, let's hope it works. I worked at a company that had that once during the summer, and it was a good experiment. It were long days. We went from, well, really, eight hours to ten, ten and a half every day. Sure. I think it could work well. Yeah, absolutely. And what we do, it certainly could.

Seema, thanks. All right, we've got 90 minutes left in the trading day. I think that's right. Yes. And we want to get you caught up on the market, stocks, bonds, commodities, all the markets, all of them, and a trade and a new place to trade as well. We're going to throw that in. We'll get to that, but we begin with Bob Pisani as the markets are off their highs of the days.

Robert? And there's a fairly tight trading range, three to two advancing to declining stocks. So the spread between the highest best performing, worst performing stocks fairly tight today. So very interesting what's going on. And we're being led up by, of course, some of the mega-cap tech names, Alphabet, Amazon having a very good day. Micron, Apple, of course, you have a very good day. heard about what's going on over there with some new product ideas from them, but only up fractionally. It's really Alphabet and Amazon that's moving the S&P. Meantime, if you look at the

market, what's interesting is gaming stocks are kind of like ping pong balls for consumer sentiment. If the economy's doing better or the perception is gaming stocks are usually up. If not, gaming stocks are down. Today, gaming stocks are all doing very well up to two and a half percent. One sector that's down, the only sector in the S&P 500 that's down is REITs. Real estate investment trust have been struggling recently because rates have been going up all last week remember yields on treasuries go up they compete against uh reeds they've been having a little bit of a problem all those are down uh today we're going to get an update for some of these uh apartment reeds sometime this week finally just look at the s m p 500 we're in this kind of weird trading

range it's very tight 4100 to about 4200 uh for the last six or seven days and not coincidentally this is the time when yields have been moving up on treasuries all throughout last week. And I think that is the major headwin for the markets right now. Tyler, back to you. Bob, thank you very much. Let's look at oil right now. It is slightly below $120 a barrel. Saudi Arabia briefly raising the price of its crude. There you see West Texas at 118 down about a half percent. We're also checking on wholesale gasoline futures known as Arbob or Billy Bob. No, R. Bob, slightly lower today, but still up 5 percent over the past week. They're down one and a half percent today, but up about four and a quarter percent over the past five days. Let's move now to

the bond market, the 10-year yield jumping more than to over 3 percent today, but it is still short of the 3.17 we hit back on May the 9th. Bond market looking ahead to Friday when we get that latest reading on inflation. So we'll the CPI show some cooling, some indication that inflation may have peaked. Right now, you're looking at yields. What is it right now? There you got it. 0.038. To Rick Santelli now, who is with the chairman and CEO of the CBO and a new era of what's known as Open Outcry. Rick? Yes, you know, Tyler, it's amazing because I thought we're never going to see another exchange open up with actual humans, but I was wrong. And here is the chairman and CEO Edward Tilly, known as Ed on the floor. Ed, welcome. Thanks. Congratulations on the success of the

opening to the new trading floor. Maybe you can tell me why you're opening a hybrid with people when everybody else is dealing with computers. It's simple. We're the customer service business. Our customers find great utility and the value added from this incredible talent of liquidity and our brokers. The service is excellent and our customers look forward to that. You know, there's something unique about options trading in general as we look over these pits. Some of those transactions can be rather complex. It isn't just matching buyers in sales. Some of those have multi-legs. You have condors. You have double condors. All of those, of course, need a little work. The term when I used to be on the floor is, work my order. Computers don't necessarily work orders.

Is that one of the big pluses here? It is a big plus. And the nice thing about a hybrid trading environment is our customers choose how they'd like their orders represented. So a vast majority of the orders are electronic, but about 33% of the orders in the S&P 500 use that open-eye cry or the the human intervention for price discovery and better execution. So the more complex the order, the higher notional value, great utility from this incredible pool of liquidity. Do the numbers bear it out? In other words, are the option numbers enough to compensate to have this added dimension

outside of a computer? Absolutely. This is customer service first. So as I say, about 33% of the orders in the S&P 500, about 42% in VIX, which is right over your shoulder. So where there's a huge advantage. for us and our customers to continue this type of trading. I'll tell you what, the VIX, the VIX has changed everything.

It really has. It's one of those great contracts that hit right from day one and gives a whole new dimension to try to assess risk, try to manage risk, and there's now many different leg spreads and trades that use VIX as one of those legs. Do you see new products even beyond that coming along? Well, we do.

And what we've seen in VIX are the many ETNs or exchange-stated notes, that have come in as a direct continuation of what the pure Bix trade futures and options. Really, the democratization of volatility is an asset class. So we do see more products coming out. You know, democratization's been a huge word the last couple of years from kind of the Robin Hood crowd, and we know that retail in general wants to play with more options. And in many ways, this is a much safer bet for newcomers to try to assess risk.

I know that you have a variety of ways to educate some of your users and customers on CBO products. That's what we do. So, really, education is part of CBO since we started in 1973. We think the educated investor is one that is a sustainable investor for the long term. Super important for us. And as you bring up education and the change that options allows in a portfolio, it's not just being long and short. That payout scheme is much different in options,

and there is a product and versatile approach to investing in every marketplace. Cash settlement, okay? Maybe quickly give an explanation for our viewers. There are many contracts that trade on the S&P 500. Yours is unique in certain ways. So we are a security version of the S&P 500. Across the street, you can trade on the future side. Also, most investors find access to the S&P 500 through spiders, an ETF,

most popular ETF in the country. but we do trade the cash settled version here. Tends to be institutionally based, but we just launched a new product called Nanos, which is a bite-sized version of the S&B 500, directly designed for that new retail investor. No, and that's been a huge plus, because whether it's the CME or CBO,

there's always the notion that there are smaller customers that need the same type of transparency and have the same needs to try to advance strategies, and the smaller bite-sized product seem to be a perfect. fit. It's a great fit with a great feedback. And again, that comes with education at every turn. So, but we have had great success. Now, real quickly, we only have about a minute left. The Federal Reserve meets a week from Wednesday. The ECB meets Thursday. Interest rates have gone up. Ten year notes are over three percent. The dollar's getting hit a bit as overseas currencies.

See, their central banks also tiny. My question to you is, can the consumer withstand the Fed activity that's going to dent this to try to bring down inflation. Importantly for us, the consumer can position themselves for all of the moves that you've mentioned and all the ones that you and I don't see coming. So an options overlay or options that's a protective investment as part of the portfolio, super important, and that's what we teach. Excellent. Ed Tilly, it's a pleasure. Thank you. Contessa, back to you from the exchange with people. It's so exciting to see that, Rick. Thank you for bringing us. us that. Just really amazing. All right, so the recipe for recycling, today's clean start,

focusing on reducing food waste. That's next. But before we had to break, this month we offer financial planning tips to secure your money and your future. Here's Sharon Epperson. Here's a tip for your money, your future. A silver lining when stock slide is the potential to trim your tax bill by tax loss harvesting. Here's how it works. Sell an investment that's in the red in a taxable account and replace it with a similar investment. Then use that investment loss to offset earnings on winners. That can help reduce or erase your capital gains taxes for the year. If losses are greater than gains, use that amount to offset up to $3,000 of ordinary income from federal income tax. And if there's money left over, carry those losses forward

to future tax years to offset capital gains, taxes, or taxes on ordinary income. For CNBC, I'm Sharon Epperson. A lot of companies are now claiming their products are, quote, good for the environment. Climate friendly, sustainable, but the claims really are hard to verify with the data. Well, now one new tech company is taking on that challenge and attracting some very big customers in the process. CNBC's senior climate correspondent, Diana Oleg, joins us with her continuing series on Clean Startups. Diana. Well, Contessa, take a product.

any product and ask any number of questions. What are its greenhouse gas emissions, its soil biodiversity impact, its water usage, does it create deforestation? And this Brooklyn, New York based startup will have the answers. How Good provides sustainability intelligence. The idea here is that we have the largest database in the world on food sustainability and companies get to use it now to start making better decisions and to be more transparent. Because every ingredient in every product has different environmental impacts, all of which change region to region. Howgood claims to have mapped over 33,000 ingredients. For cocoa, we've got high greenhouse gas emissions and high labor risk.

For each product analysis, it takes in close to 250 different attributes from those ingredients and boils it all down to a rating, which companies can then use to improve their products. But companies are hungry for the data, both to meet their sustainability goals and because their customers increasingly demand it. Now you can measure how the ingredients in your order help to reduce its impact on the planet. Chipotle uses Howgood for its so-called food print, a measure of its carbon footprint. And Kraft Hines is a new client, now experimenting with some of its staples. We're already looking at some really favorable, interesting things with cheese, as well as plant-based alternatives inside that same category.

So we're really excited about the possibility that how good can really help us with their extensive catalog, lot, look at more carbon-friendly alternatives to sourcing as well as our other ESG metrics. Howgood's backers include Titan Grove, First Mark Capital, Serious Change, Danone Manifesto Ventures, Contour Venture Venture Partners, Great Oaks Venture Capital, and Astonor Ventures. Total funding to date, $26.5 million. While companies like Kraft Heinz and Walmart are buying the deep data to assess their products, consumers can also use the How Good app to check on the sustainability of the products they're buying. Back to you. Okay, so let me get this straight. They're taking data about, and he mentioned Coco, so that seems a good one to go for. And you look at the greenhouse gases they're emitted,

or, you know, is it sustainable in terms of worker and human rights? You add that altogether. So you could have a company that comes out with a great score because it's good on lots and lots of metrics, but miserable on another. Can consider it? Do consumers see that? Can the companies themselves see where they're doing well and where they're doing poorly? Yes, they can break down all the pieces of it, and that's why the companies are buying the data. But you'll see this score. And interestingly, they said most of the companies don't have a high score, but the companies still want this data so they can use it to improve it to get the higher score. They said only about 3.5% of the millions of products they have in their database actually have the highest score.

So they're taking in, yes, they may have some great attributes and some not so great attributes, and that's what creates that one score. I saw on one of the shots there used 1.5 less fewer gallons of water or whatever. So what would these metrics be compared with? It would be compared with what would normally be used for that type. So maybe you're using some sort of system that saves water or you're putting carbon retrieval from something so that it doesn't get out into the atmosphere.

Those would all be factored into saving those emissions or saving that water versus what would be done. without any environmental standards or metrics that would help. I see. Well, Diana, really fascinating. Thank you so much. Appreciate that. Sure.

Interesting. All right. Still to come. The results of the National Economic Challenge. That's next. And we will go back to Steve Leesman for the results of this staunch competition. 18,000 high school students competing in the National Economics Challenge. After a long competition, Steve Leesman standing by now with the winners, Steve.

Yeah, Tyler, thanks. What a really exciting competition. Very close up until the very end. 22 questions. Unbelievable how smart these kids are. In fact, let me introduce the winning, the winners of the Adam Smith Division from Harker School, San Jose, California. We have to my left here, that's my left, Zachary Clark, and then we have Rohan. No. I'll put my glass on here. Hold on a second. We have, oh, Shazeb, Rohan, and Harshi. Right? Okay. Zach, you did Rubik's Cube competition for fun? Yeah. Since like 2015, so when I was in sixth grade, I've competed on like a national level. I've drawn like eight seconds for the traditional three-by-three Rubik's Cube.

Eight seconds? Yeah. And then COVID came along and you decided to get serious about school? Yeah, like physical competitions and person competitions sort of ended. So I've been mostly school working, I guess, economic since then. What was the toughest question? It's probably the World Bank one. Hopefully it's trivia and we... Wait a second, now you just did all this stuff about marginal utility

and upwardly swoping curves and stuff and the one about the World Bank and what used to be called was the hardest one? Slightly. Was the rest pretty easy? I wouldn't say easy per se. Everything you had to think about, ultimately it was as a result of our preparation.

Just trying to figure out what kind of questions will be asked and preparing different terms, logic to solve them really quickly. Favorite economist? Ooh, it's a good question. I'm going to have to go with Adam Smith, you know? Why? I think he just kind of kick-started the whole shabang,

and, you know, everyone I think owes a lot of credit to him, even though, of course, his theories have all been refined, refuted against, et cetera, but I think that he sort of got the conversation going, and that's very admirable. Right on. Okay. Advice for Powell, did he screw up, you think? Well, he's doing the right thing now, right?

raising the rates. What about before? That's okay. You can talk. Just be me and you. What do you think? You'll just do a job with the Fed. Don't worry about it. He might have, he might want to have, like, started raising the rates a little bit earlier. And what about QE? Did he keep around QE too long? Yeah, definitely. That's why we have this inflation, like 8% rate, 8.3? Yeah, it's pretty bad. You think guys in Congress ought to learn some of this stuff that you guys do?

Yes. Why? I think that a lot of policies should sort of take greater account of the concrete results of those actions rather than just the political implications of those actions. Awesome. Answer. What about some investing advice for people at home? 363 rule. If you don't know it, look it up.

Nice. Zach, how about you? I guess diversify your portfolio. Yeah, it's all I'm really say. That's it. That's all it takes diversify your portfolio. We go 15 hours a day on CNBC, and that's all we need? Yep.

That's it. All right. Now, Tyler, are you there, Tyler? Because I want to read you one question here that came up. Are you ready, Tyler? I want to know what the 363 rule is at the end, but I'll take any question you got. What is three? Explain.

I don't remember it. You don't remember it. Okay, but listen, Tyler, I got a question for you. And I'm going to give you the answer that one of our contestants gave here. What is the name for currency that fluctuates widely? is unconvertible into other currencies and is expected to depreciate. Garbage.

Okay, all right. Well, one group said junk currency. The correct answer is soft currency. Soft currency. But I want you to know that one of the, right, soft currency is the right answer. I want you to know that one of the groups here answered cryptocurrency.

I'm not surprised. I'm not surprised. So soft currency. So these kids are, These kids are pretty smart, but they have a good sense of humor, too. And it was a real delight to have to be able to do this contest again and just see how incredibly hard these kids prepare and then come and really perform in front of the cameras and the lights and all their friends and family. And a great job by the Council of Economic Education, which obviously, Tyler, this is about fostering this education.

That's fantastic. Steve, and congratulations to all the participants and especially the winning team from out in California. Congratulations, gentlemen. I think it would be really interesting. And Steve, you can get back to me on this. if the teenagers have some parenting advice about how to turn my kids into geniuses, too. All right, Oppenheimer offering a refreshed recession playbook. We'll trade the names in three-stock lunch.

As we head to break, remember you can now listen to Power Lunch on the go. Look for us on your favorite podcast app. Follow and listen today. Time for today's three-stock lunch. Oppenheimer naming its top recession-proof stock saying, restaurant spending remained resilient during the 2008 recession. Chipotle, McDonald's, and Papa John's. It's top picks with Chipotle and Papa John's down 20 to 30 percent this year.

McDonald's down only 7%. Let's bring in Lee Munson, portfolio asset manager, CIO, to trade these top restaurant names. First up, Lee, Chipotle. I love Chipotle, but here's what it is. It's a beat-up growth stock that you're trying to pick away at. It's kind of like buying a home builder. Like, you know we're going to get out of recession, the one we'll probably have next year, but you have to be careful about how you start getting your positions now, right?

So here's what's going for Chipotle. Number one, they've got a different customer mix. They don't rely so much on that bottom 20% of wage earners that are out of stimulus money, starting to get the squeeze from high gas prices, and we have that wage price spiral. Tripoli also has the ability to have a little bit more dynamic pricing. So as we have, you know, instability in food prices, the raw and business, ingredients to make that stuff, they're going to be able to be a little bit more responsive. But I think that people have to remember, this is not a recession play.

This is just as Oppenheimer was telling us, you know, this week, they were able to successfully grow and never go negative back in 08 time period. But I also have to tell you, they created their own competition because the brand so tight. So they're going to have to deal with that this time around. Let's move on to McDonald's, which I sense you're going to tell me is a slightly different customer mix and maybe a dramatically different customer mix than Chipotle? Absolutely a different mix. That's why this is the core holding you want for a recession. Remember 2008? McDonald's was up 11% that year, right? Its big decline was only 20% where

Chipotle was something like 70 plus percent decline back in the great financial crisis. What I love about McDonald's is that they control their suppliers. They serve more food. than any other corporation on this planet. And they also have the muscle, as they did back in 2008, to try to capture some people that are going a little bit lower on the rungs. Remember, they started to come up with premium salads

that were a lot cheaper than say, something like Chipotle. So this is a core holding. I think you add things like, you know, maybe a Walmart or a dollar tree, but you gotta get the timing right because by 2010, McDonald's is really underperforming the broader markets.

How about PZZA, Papa Johns? Okay. I mean, here's my, you really want my opinion. I'll tell you, I think this is sort of like one of these old, you know, COVID lockdown stocks. I don't see what the catalyst. I understand that, you know, maybe they'll sell through this recession better. But when you're dealing with the bottom 20% of wage earners seeing no more stimulus money running out of cash, there's also this time around, we have better delivery options.

We're not in COVID lockdown. And if we stay not locked down, people are going to have other choices to buy pizza and have it delivered. I would move on. I would find something I'd either buy cheap and start picking away at a position at Chippole, or I'd go full blown and say, I'm going to put together a recession basket. Papa John's just isn't in that mix for me. Lee Munson, you make it sound also delicious. Delicious. And now the drinks are empty. All right. Thank you, Lee. Thank you. We should point out that the Apple event, the Developers Conference, has ended out in California. The stock has actually closed, and hasn't closed, but it is lower now on the news of more of its own proprietary chip, as well as a new Mac book.

And it's going to be delayed, the delivery of the computer. Thanks for watching, Power Lines.