Power Lunch - Autonomous Action, Back-To-School Pt. 2 8/10/23

Episode Date: August 10, 2023

Self-driving vehicle firms Waymo & Cruise are looking to expand their operations in San Francisco. California’s utility commission is voting on the measure. If it passes, it could open doors for autonomous vehicle across the state. We’ll track the story.Plus – our back-to-school series continues. Today we’re looking at retail. Will we see a slowdown in consumer spending this year, especially as high inflation persists and student loan balances remain a concern for some shoppers? We’ll discuss. 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. I'm Steve Leesman alongside Kelly Evans coming up, Autonomous Action in California. Self-driving vehicle firms Waymo and Cruz looking to expand their operations in San Francisco. The State's Utility Commission voting shortly on the measure. If this passes, it could open the door for autonomous vehicles all across the state. Plus, back to school day two. Yesterday, we talked about the growing role of AI in the classroom. Today, we're looking at retail. Will we see a slowdown in consumer spending this year,

especially with inflation and student loans remaining a concern for some shoppers. We'll discuss what those college kids is going to do. Indeed. Welcome, Steve. And speaking of inflation, July's CPI report showing a 3.2% increase. Less than expected, Dow was up 455 points before just now turning negative. The S&P is now down seven points. The NASDAQ down 21. By the way, these losses have all come after that week 30-year bond auction. We talked about top of last hour that has sent the 10-year note yield back. above 4%. So some pressure coming from that direction. And we have some positive earnings movers.

Disney actually up 4% that's helping hold up the Dow right now. It had some mixed results plagued by streaming woes and restructuring costs and a 7.5% nearly subscriber loss. But shares are up about 4.5% right now. They're planning to crack down on password sharing, much like Netflix. Alibaba meantime up 4%. The Chinese tech giant beating on the top and bottom lines. And also, App Levin, up 23% reporting a massive hike to its goal. guidance. And keeping up, meanwhile, with a growing theme this week, we have another big deal. Luxury company tapestry behind Coach and Kate Spade announcing they'll acquire Versace and Jimmy Chu owner Capri Holdings for about $8.5 billion. We'll have more on that a little

later on in the show. We start with a key read on the economy and the health of the consumer. Today's CPI coming in just a touch below expectations with the year-over-year rate climbing by 3.2%. That's the headline and takeout food and energy and you get 4.7 percent. A little stickier right there. But the economists cheer the momentum where the three-month annualized rate dropping to 1-9 for headline and 3-1 for core suggesting the Fed is, at least for the moment, winning its

fight to bring down inflation while keeping the unemployment rate. Well, it's actually down over the past year. There were outright price declines in new and used cars, energy, and airline passenger fares, but food rose, not as bad as it's been, and housing costs actually ticked up. We're going

to talk about this now with Dan Suzuki. He's Deputy Chief Investment Officer at Richard Bernstein advisors and Mark Zandi is chief economist at Moody's. Dan, just real quick, I want to get to the news of the hour. Any idea why the market turned? It's been, I know it's light volume. It's summertime. Most people are, a lot of people are at the beach where they could still be trading, I guess.

But I guess the question is whether or not how sensitive stocks are right now to the bond market. I think the stocks are really sensitive to everything right now. If you look at it, what's driven a lot of this market, I mean, clearly there's been some improvement in the economic data that you're well aware of, Steve. But I think beyond that, it's been improving investor sentiment and improving liquidity. I think that story is long in the tooth. And so I think, you know, basically everybody's capitulated into market. So, you know, these valuations at these levels of positioning and sentiment, it doesn't take a whole lot to get the market.

So it's just like a sell-the-news we have been pricing in lower inflation and less fed. And now the market has reason to say, okay, that process is we've kind of priced that in already. Maybe. Or what news, I guess, is the bigger question. I mean, really, you didn't, it came in basically in, line with expectations. Right. And it's kind of what you would expect. I think we have one more CPR report before the next Fed meeting. So, I mean, what do you really make of this? Not much. I think that's a good question to throw to our other guest here, Mark Zandi. Mark, is there more news

in this report than what meets the eye is the headline and the core are what they appear to be? I think the news is that inflation's headed in the right direction. All the trend lines look pretty good here, Steve. So, you know, it hit the 0.2 percent month-over-month-month-expect. but that's pretty darn good. And I think the key number here is that 3% annualized over the last three months. So it feels like everything's moving in the right direction here. So I think that's the news we're we're on track to getting inflation back to the Fed's target in a reasonable amount of time. Mark, you disappoint me, nerd that you are. I thought you were going to go out to the hundredth with me on this. And it was really 0.16, which means we were 0.02 from a serious upside

surprise of rounding down to point one. And by the way, that's two months in a row. We've been in that 1.16 where we've just barely rounded up to point two. I guess my question is, is there more juice in this decline than we're seeing to play devil's advocate? I don't know that we're going to get another 8% month-on-month decline in airline fares again. Energy is going to reverse itself. Is this about the floor for the moment? Do you see reason to believe that it's going to be coming down even more? No, we got more juice. I mean, we've got vehicle. prices, they're going to decline more. We might see a little bit of a hiccup here. It depends on the

UAEW strike. If there's a strike, that means less production, and that means that prices won't come in as fast as I'm anticipating. But barring that, you know, production is picking up in Japan and Germany's supply chains normalized and we're going to get lower vehicle prices. And the really important thing is that the growth in the cost of housing services is going to slow. We, you know, we can forecast this with a high degree of confidence because it's tied directly to market rents, and we can observe those market rents. They've been flat-backed down for the last six, nine, months. And by construction, that means over the next six, nine, 12 months, we're going to get a moderation in that. And as you know, in the CPI, the consumer price index, that's about

a third of the index. So that's a big deal. Less of a deal in the consumer expenditure deflator, the PCE, what the Fed looks at and says monetary policy. But nonetheless, you know, good news there. One last thing I'll throw into the mix. Electricity prices are coming in, and I expect more. of that because natural gas prices, which are the, you know, dual stock for a lot of electricity. I just want to point out for the record housing costs did tick up in this one, although the expectations are come. Dan, what is the next catalyst here?

Do we just see people to get back from the beach? Or is there more here? It looks like the market kind of gave a yawn at this quarterly earnings report. I guess they were a little bit better than expected, not a lot better than expected. What's the next thing or does the market start trading on the fear of an October government shutdown? Yeah, I think, you know, the big thing is going to come back to earnings, but clearly, you know, you can get an edge on what earnings are going to do, you know, based on the macro data. So whether it's a big macro report like the ISMs or other PMIs or just the earnings themselves, I think that's ultimately going to be the critical thing because basically we are at or near an inflection point in earnings coming up on the trough in earnings. Infliction points are always tough because you're getting a lot of mixed signals here.

So the base case is that things start to get better. you're starting to see positive signs, but there's plenty of stuff out there that Mark has also talked about in the past that could really dampen this recovery, whether it's the weakening consumer trends, it's the lack of big pickup in the good side of the economy, or it's the lack of pricing power. Earnings for revenue growth for the S&P is basically zero.

And so if you don't get that pickup, that operating leverage gets a lot more difficult. I worry that we're priced too much for perfection here, that we were, everybody was on one, side of the ship, and that was the ship that had the ship kind of turning over, right? That we're going to have this recession. Now we're back to the middle. And maybe I should go to this last one here to Mark. Mark, when we talk about the outlook for the economy, recession seems to be off the table. Should it be entirely off the table? I mean, obviously

there's some given percentage probability in any year that there's going to be a recession. Is there still a higher than normal probability? Indeed, there is. I mean, as you know, Steve, I've been generally optimistic about the economy's prospect for avoiding recession, but, you know, I do think it's important to not be polyanish. Recession risks are, you know, elevated. And that will remain the case as long as inflation is above target and the Fed's fighting the inflation back to target. And there are a few things that are, you know, dead ahead that bother me. I mean, this run-up in energy oil prices, that's a matter of some concern, particularly if it continues to move higher and hard to forecast oil prices. Potential government shutdown, you know, that, you know, that,

We're going to have a shutdown. It's just a question of how long that could be an issue. And of course, the financial system is under a lot of pressure with that inverted yield curve. All the operating factors affect the operating environment of banks and financial institutions don't look that good. So the system is under a lot of pressure. And I worry if the Fed has to keep its foot on the brakes for a long time, something might break there. So there's lots of things to worry about. So no, the coast isn't clear.

You know, I'm feeling really good about the no recession call, but too early to declare victory. All right, Mark Zandi and Dan Suzuki. Thanks for joining us today. Kelly. Coming up, we are monitoring that vote on the future of autonomous vehicles in California. It's happening right now. We'll get the details on what we know so far and discuss how important the decision could really be. Plus some cross-talk, or should we say X-Talk, the CEO of the newly rene. Twitter sitting down with CNBC to discuss the future of the social media platform. We will wrap up the key headlines for you. Power lunch is back after this. Welcome back. Happening right now, the California Public Utility Commission is voting on applications from Cruz and Waymo to add more vehicles and operate autonomously 24-7 throughout all of San Francisco, the decision of which could have a huge impact on the industry, on the experience we all have on the roadways. Let's get to fill a bow with the details. What do we know so far, Phil?

Well, the meeting has just begun, Kelly, and I think this is towards the bottom of the agenda, at least the last time we checked. So it may be a while until we get a final decision. decision from the CPUC. But let's recap what you said in terms of what this vote is, because I've seen a number of people say, well, this is going to allow them to put autonomous vehicles all over the state of California. No, this is strictly about 24-7 service within San Francisco and other things like they might be able to add split fare routes in the future. And it's just for crews in Waymo. They are the ones who are applying to the CPU. Why are they applying for expanded service in San Francisco? Well, over the last several years, as they have been testing their vehicles and testing the autonomous vehicle technology on the streets of San Francisco,

they have expanded the number of vehicles that you will see out there. And if you go out to San Francisco, it's not uncommon to see a cruise vehicle or a Waymo vehicle. There are 300 in operation for Cruz 250 for Waymo. And the issue here is whether or not they should be allowed to go 24-7 allowing autonomous ride share. There are some city leaders within the city of San Francisco who are opposed to. to this. They point out that there have been some very high profile incidents where autonomous vehicles have stopped in the middle of roads, have sometimes blocked emergency response vehicles from getting by, whether it's an ambulance, a fire truck, police car, whatever it might be.

And in general, they're not quite ready for prime time. At least that's the contention of the officials for the city of San Francisco. So as you take a look at shares of General Motors, Keep in mind that GM has a big bet on Cruz. It believes that Cruz will hit $1 billion in annual revenue by 2025. And it has been expanding the number of cities where Cruz is testing out its service, Dallas, Houston, Nashville. The idea is that eventually they want Cruz to be an autonomous ride share service that can operate nationwide. Now, we're a long ways from that happening. We're just talking about the city of San Francisco at this point.

But there are a lot of implications here, Kelly. Oh, tons. Phil, stick around as we bring in a couple of more experts to weigh in. Mary Cummings is Professor of Robotics at George Mason University and an expert in this space. And Gene Munster, of course, an expert on the stocks. He's managing partner at Deepwater Asset Management. Welcome to both of you. I suppose, Mary, let's just start by asking your view on how likely they are to give these companies

permission to operate as hoped. Well, it depends on who you are. but a lot of people are betting that they're going to get the approval, that this is really just a formality. But I think the more important lesson to be learned out of this is regardless of whether or not the vote goes in the favor of Cruz and Waymo, this has been a huge public nightmare. And even if they are allowed to expand their operations, I think you're going to continually see negative public sentiment. Groups are going to continue to rally and they're going to now create YouTube channels to continue to. rat out the behavior of cars when it turns out to be not very productive and or unsafe. And so it's kind of surprising that Cruz and Waymo are pushing so hard in San Francisco because clearly

it's not just the city officials, but the public is not crazy about this car. And even if they do win the vote, I do not see smooth sailing ahead. Gene, what would you say about that? And how are the sort of mega-cap stocks most affected? Well, as far as the the sailing ahead, I think that the topic of self-driving, basically has three pieces to it. One is the problem. Humans are bad drivers and disappointing to report 40,000 plus people lose their lives in auto accidents. Second is the tech. We're not there yet. Elon thinks were there by the end of the year, which means they're probably a few years away. And then there's the political piece to the topic. And that's what we're really, that's the pressure point today.

And this political piece is ripe for amplification because as politicians, many of them are content creators and they want to build a narrative around their views that get people to move to action and self-driving cars are one of those polarizing topics. And I think ultimately is that this political piece today doesn't really change the outcome of what's going to happen with autonomous driving. In the end, autonomous driving is going to be here and I think that we are all going to be very happy for that five, ten years down the road. If you think about companies that are going to benefiting for it, I think the two are most clear.

Tesla front and center, Elon said on their last earnings call that the EX expects a 30 plus X times, 30x times increase the amount of miles training their FSD within the next 12 months. And then you have Google with Waymo that doesn't get of a lot of attention. So Kelly, it's a function of time and it's Tesla and Google are the two companies. Can I bring in Phil? I want to throw your curveball because I know how good you are at this whole, all this stuff here. So I know CNBC were about making money and profiting like that, but it just, I wonder what the purpose of the AI is in the vehicles here. Gene brings up the idea of saving lives.

If the technology is about saving lives, it strikes me that it would be a whole different set of tests going on right now to help out individual drivers from his. hitting each other. But really what we're talking about here is this effort by these companies essentially to have cars that drive themselves and creates a profit source for them on this. It just seems to be like, what is the purpose of this here? Don't use this idea of saving lives and giving autonomous vehicles. If you want to save lives, you can put additional software in cars to help people drive and not hit each other. Well, they're doing that as well. Let's

clear that the amount of, it's called ADAS, you know, for driver assist systems, advanced driver assist systems, the amount of ADAS technology in vehicles now is far higher than it was even five years ago. And it continues to increase. So we are seeing automakers and suppliers do that. So let's be clear about that. Your question is whether or not this is a disingenuous effort by these companies when they say, well, we're out to make it safer and to save lives. I don't think it's disingenuous. I think they've also been clear here that ultimately if this technology takes hold, and we have autonomous vehicles out on the road, for an autonomous, for a ride share company, and I don't know the metrics exactly, I'm sure Gene does when you compare where Uber and Lyft are

right now. You strip out the driver. It drives down the cost considerably. And if you look at General Motors, they've got the new origin, autonomous vehicle that goes into production later this year, they plan to put that on the road. And think of that as almost like a small shuttle bus with no driver in it. The potential for that type of autonomous ride share to generate huge profits is immense. So I understand what you're saying. But I don't think that anybody here has said we're only doing this to save lives. They've been clear. GM has been very clear. This is also about making money. Mayor, you want the last word to pick up on that idea. If we were going to do, about saving lives, we'd be doing one set of exercise.

But this is about something other than that. Well, first of all, I'd like to jump in and say, using CPUC's own data and the data reported by Cruz of Waymo, they're crashing four to eight times more often than humans do. So there is no evidence at all that these cars are somehow avoiding the error rates that humans are. So they're not safer. And the other thing I'd like to say is Tesla doesn't even belong in this argument. Tesla is not a self-driving car company. They do not have self-driving cars on the road. We can argue about whatever Elon Musk thinks is going to happen,

but unless there's a huge technology change inside those cars, they are not self-driving. So the Waymo and Cruise conversation is separate from Tesla who does not belong in the self-driving opportunity. Gene, I'm technically out of time, but you're smiling and smirking there. I can see on my screen. I feel like it's only fair to give you a response.

I appreciate that. It'll take the Tesla is going to be a self-driving car company. Give them two, three, five years. And we're going to have a chat GPT moment when it comes to full self-driving. Let's leave it there. Gene, Mary, and of course, Phil, thank you all very much. And I guess I have the read here, too. You were supposed to do the thing.

Come on. That was such a great discussion. Netflix, opening the floodgates Disney following its lead on password sharing, much to the chagrin of viewers and cheers of investors. We're going to trade that name and others. In today's three-stock lunch, we're going to be right back. Welcome back. Yields on the move following the release of today's CPI data, Rick Santelli, tracking the action.

Rick, if we were going to write a soap opera, it would be as the bond market turns. Yes, as the bond market turns, especially considering how much movement we've had on the long end today. Let's start at the beginning. Month over month, core. up two tens. We had a guest on this morning who thought that was a little too aggressive. But when I look at the chart, all I see is down, down, down, down. And two's on top of tens, tens of outperformed. The minute the numbers hit this morning, we saw interest rates drop, we saw stocks pop. But then something happened on the way to the forum. Two-year and short rates,

they stayed mostly steady. They're only up a couple now. But look at tens. They're up eight. And 30-year auction was a dud. Why? Because investors are. nervous about long and moving higher and that is something to pay attention to. Let's go talk to a trader. Jim, how you doing? Listen, you're the man today and I'll tell you why, because you're an expert on what topic? Volatility. This is Mr. Volatility. So here's what I'd like to know. There's a couple of terms that I always smile when you say, give us the terms in a short definition and tell viewers why it's so important. So Vana and Charm, Charm is the decay of delta as you go forward in time and VANA is the decay in delta as you volatility

implied volatility comes down. What happens as you go into expiration, particularly the week before expiration, is this skew that dealers are short. They're short put, short stock decays, and all of that stock needs to be bought back, both in terms of the time passing and the volatility compression happening. This is what happens before expiration. And we're heading into an expiration next week. Excellent. Excellent. Now, let's consider this. Let's show a chart of the big VIX. Okay? We know zero days to expiration is a whole universe unto itself. But when you look at this chart, it bottomed on what, the 22nd of June, and it's basing. That chart looks like it wants to go higher. There's a tug of war going on. Overarching, you have liquidity, macro liquidity,

coming primarily from the bond market and the issuance, really forcing negative flows on the market. And that's what's holding ball up. But underneath the hood, there's a support that's happening into expiration from these vana and chanthos. Now, which expiration is the most important? So this is really important because this is the August expiration that's coming up before the big quarterly September expiration, where all of the structured product issuances and most of the puts are in the market. So as August expires, you enter a September cycle with a lot more potential volatility. Yes, and for those that don't know, if you're a futures trader, you trade commodities,

The big months are March, June, September, and December. That's what he's talking about, the biggies. Real quick, we have 20 seconds. Is there anything big with PPI you would expect to change any of the discussion? I think it's a non-event right now. Wait till next Wednesday to Friday. That's when the volatility probably will come back into the market. Excellent.

Chim, thank you. Always. Pippa Stevens is here to help talk to us about oil, which is lower today, Pippa. Yeah, and not participating in the rally that's lifting everything else, but of course it comes after those six weeks of gains. And so it is all relative when you look at oil prices. A couple of things to note, we did get the latest report from OPEC today, and they do see a deficit of 2 million barrels per day this quarter amid that production cut from Saudi Arabia. That's a little bit under 2% of global demand. And one other thing is that, so the latest inventory report showed a build in crude stockpiles itself.

But the products market is really an area to watch here. We saw falling inventories for both gasoline and distillates. Gasoline now 5.6% below the five-year average and distillates 15.4% below the five-year average. And that's not for a lack of trying by the refiners. The utilization rate was 93.8%, which is pretty high. And so the product prices could start leading oil prices higher, and then that, of course, becomes a nightmare.

Is diesel it? Is diesel or is that like heat? Exactly. It's like heating oil and distillate. It's the higher temperature in the barrel. Because we've been warned in the past about diesel shortages, and if we're 15% below historical inventory levels, that means we would still seem to be a little prone, right? Yeah, exactly. And it speaks once again to the rerouting of all these supplies. And so now we're sending a lot of our products over to Europe. We're sending them down to South America. Russia's now sending a lot over to Brazil as well. But diesel is what runs on Europe, and it is what fuels the economy, the workhorse of the economy, freight, trains, things like that. And so diesel is certainly an area to watch. Wow, Pippa. Thanks.

Okay. I was going to ask, are those cuts really going to come through? In other words, a 2 million barrel shortfall, or is that just one of those figments of OPEC's imagination? Well, they've always had trouble ramping up and then also ramping down. But Saudi Arabia keeps saying, and they do have spare capacity, and they have very easy production, so they're more able to shift their output. And they keep signaling that they are here to keep $80. They want a price above $80, and so they keep saying that they're in it for the long haul at this point. PIPA, thank you very much. Let's get to Kate Rooney for the CNBC News Update. Hey there, Steve. Prosecutors are pushing for Donald Trump's trial over his alleged attempts to overturn the 2020 election to start at the beginning of next year. The government's proposed schedule would have jury selection starting in mid-December with a January 2nd trial date. In a court filing to the judge, prosecutors estimate the trial will take four to six weeks. The Trump defense team has yet to respond to that proposed. schedule. As rescuers search for survivors in Maui, the wildfires have officially prompted a

federal disaster declaration from President Biden. The declaration opens up federal funding to Maui County to help with state and local recovery efforts. More than 100 national guardsmen are also on their way to help with that response. And federal forecasters upgraded their hurricane season predictions today. As we hit peak hurricane season, NOAA officials now say we could see above normal activity this year, they gave a 60% chance of 14 to 21 named storms and they think six to 11 of them can become hurricanes. The initial forecast back in May predicted a near normal season. Kelly, back over to you. All right. Thank you so much. Still ahead on power lunch, dorm domination. Some analysts fear this back-to-school season will be hit by inflation-fueled

consumer spending pullbacks, but the desire of college students to show off their dorm rooms on TikTok could save the season and drive sales higher. We have that story next. Welcome back. Day 2 of Power Lunches series on the business and issues facing back to school this year yesterday. Can we just not? It's only still August. Some people already started in Nashville and the South. I hated this time of year when the news was just around the corner.

Yesterday, we discussed the growing impact of AI in the classroom. Today we're looking at retail. There have been some concerns inflation could hurt spending this year, but that might not. not be the case, especially for college students. Melissa Rebko joined us here with more. That's right, Steve. Back to College spending is expected to hit a record this year, thanks to decked out dorms and demand for more electronics. College students and their families are expected to spend an average of about $1,400 per person this year, according to an annual survey by the National Retail Federation and Prosper Insights and Analytics. That translates to

$94 billion in expected back to college spending, a 70% jump from 2019. The increase isn't just because of inflation. A survey found that college students are buying more, including big-ticket items like furniture. One reason for the trend? TikTok. Students, college administrators and retailers told me social media has inspired teens to spring for headboards, temporary wallpaper, and fancy coffee makers. Some families even hire interior designers. Walmart, Target, and William Sonoma are among the companies trying to cash in.

They also see opportunity because of bedbath and be. bankruptcy. Bed baths shuttered stores have left behind market share to grab. Yet back to college sales alone won't help retailers overcome other challenges. Best Buy in Macy's are among the companies that expect sales to decline this fiscal year as consumers continue to face higher food prices and spend on experiences. Yeah, I can't tell whether we're supposed to be cheering for this trend or cheering against it. One way or the other, there's a huge economic impact. Melissa, stay right there. For more on retail now, let's bring in Sandra Campo. She is founder of fashion launchpad and a CNBC contributor.

It's good to see you, Sandra. By the way, do you have concerns about the strength of back-to-school season overall this year? Well, I'll just say this. And thank you for having me on. The store traffic, according to Retail Next, who really tracks this, storm traffic in July was actually not really significantly down against last year, but sales were. So we are seeing that people are shopping ahead. We set the floors early.

The demand was there early. mid-July. But at the end of the day, there's a lot of customers that are looking for sales. So they are shopping. They're looking for sale product. They were looking for it earlier. The biggest drop came in outdoor malls and also came through the Midwest in terms of traffic. So that traffic was down more than 2% in the Midwest, but down less than 0.2% on the West Coast. So, you know, people wanted to be indoors. They wanted to stay cool. So those, those malls were actually less affected. I think overall, we're definitely seeing that, customers are wanting to shop, but they do want sale and promotions. So where we see it,

you were mentioning some of the Amazon, Walmart, and, you know, in Williamson, Mo, who are trying to capture some of the bed, bath, and beyond store closure in that market gap. We also have stores like container store that are 25% off through the end of September. So there's definitely some reaction by the retailers to make sure that they have promotions that are timely when the customer is looking to buy. Melissa, I joined Kelly in my ambivalence to this college thing. But I'm old. She's also concerned.

We didn't have TikTok. We went to the pawn shopper wherever we could to get stuff. We would look at what the outgoing class was throwing out, and we go through their garbage to get their stuff. And then I lived in this house where the guy ran out of money and he burned the furniture to stay warm in December in Buffalo. But let me ask you this. It's true. Let me ask you this question. How significant is college versus the elementary school back to school?

Has this been a growing trend over time, or is it just sort of a post-pandemic revenge spending? College spending is actually much larger than K-12, because if you think about all that adds up, it amounts to that $94 billion, I mentioned, and that's about twice the size of the expected spending for K-12, according to NRF's survey. So it is much larger because people are getting things like food and shampoo along with decor. So it covers a lot of different categories. Sandra, what would you add to that? I mean, and I think it's very smart where you said, you know, container store 25% off.

I look at this and go, they can hold these parents hostage. Even despite what you're saying, you know, when you're sending your kid off to college, especially for the first time, I've seen some of these photos now and people are so proud to show off their kid's dorm room. That feels like it might be a little more inelastic. Well, I think it's definitely a temporary piece

because they go back to school and then, you know, again, you're not redecorate. your dorm throughout the year. So what you are doing then, what we are seeing is definitely some of those trends as it relates to secondhand sales and resale. That's definitely continuing. There's a big trend on TikTok that actually, if you look at where luxury price points jump 29 percent, even college students, Gen Z, they're jumping in on actually acquiring designer vintage. There's a hashtag archive fashion that's clocked up 36 million views in the past month and 1.1 billion views a total.

So not only are they spending in terms of their dorms, they're also spending on vintage archival fashion that's more in the luxury zone. But I do think, again, going back to it, there's certain sectors that are continuing to do well. And if you think about those college and teens that are going into, you know, TikTok and doing all the selfies,

there's a lot going on in the beauty sector as well because that continues to trend upwards. Senator, do you want to just to keep talking about this tapestry deal? What are we to make of this? Is this the leading edge of something? We have not had a lot of mergers and acquisitions these days. Are we, is the iceberg melting maybe a bit? We're definitely seeing more M&A activity.

We're definitely seeing more combination, more inorganic growth, being able to, you know, acquire so that you have more market share. And, you know, in this case, they're going to be able to compete with a lot of the European, you know, high-end luxury, carings, et cetera, of the world. So Richemont, and I think that was something that we needed from a U.S. perspective, people to really have that top luxury company that have many of them. So I find that that was, you know, obviously quite a big number that they paid for it, but we're definitely going to see more M&A activity, and it's happening now.

Well, what's that? One interesting dynamic with Tapestry. I spoke to Joanne Cravoy-Zarot, Tapestry CEO this morning, and she was saying with the deal, they'll be able to reach a wide variety of customers. And it's important to note a lot of those are younger consumers that buy, the Michael Kores brand and the coach brand. And that's really the commonality here with both back to school and with the tapestry deal is you always have to think about that next generation of customers and where you can connect

with them. And that's on TikTok and elsewhere. I'm old school on this. But my take on some of these things is when a big company buys a luxury exclusive brand, they try to bring it, go mass market on it, and they ruin the brand. You know, Joanne was talking about that. And the challenge she mentioned is keeping all the brands distinct. So it's important to remember that Capri includes Michael Khorpe,

which is a little more accessible. May appeal to that Gen Z and be within their price range, but it also includes Jimmy Chu, which is unique, and that's something they're going to get that will put them in a better position to compete with European luxury players. What are you saying? Up 55%.

So they like the deal, even despite what Sandra said what was suggested was a fair price, I guess, with a capital F on it? Right. Yes, but worth noting that back in May, Capri had cut its forecast, and it also hit a few. 52 week low. So it's coming off

of a lower base. So that's important to note as well. Great. Melissa Repco and Sandra. Campos. Kelly, I love this micro stuff. We do macro all day long. You know, back to school, TikTok trends. This is stuff we need to know about. Kids in the dorm. Still ahead. The X factor.

Linda Yakarino telling CNBC's CNBC she likes the direction. The platform formerly known as Twitter is heading and likes the autonomy she has under Elon Musk too. We'll tell you, what she also told our Sarah Isaac with peril-length returns. Welcome back, Linda Yakorino, newly appointed CEO of Musk's controversial X sitting down with CNBC today and saying that the company is soon to be cash flow positive. I've been at the company eight weeks.

The operational run rate right now, we're pretty close to break even. Close to break even. Close to break even. We're pacing well. When you think about the cost discipline that I've mentioned, and I'm, I mean incredible cost discipline before I arrived at the company. She also said that X is starting to hire again after Elon Musk cut the number of employees from around 8,000 to over 1,000 now. Our Julia Borsson joins us now to discuss.

Julia, I guess my question is Linda Yaccarina went in there with her advertising background. Has she captured the market already or is it just too soon to say? I mean, look, we don't have data on what's going on inside the organization, but the fact that she shared that they're close to break even does indicate progress. She also talked a lot about how they're working on things like trust and safety. These are things that are obviously big concerns with advertisers. And what she laid out was a vision of, and I'm going to use her words here, freedom of speech, not free reach, lawful but not awful. This idea that they want to enable really a free speech platform, but also create an environment that is very safe. for brands. And that's clearly been a big priority for her, Steve. So it sounds like she's making

progress and bringing more brands back on the platform. But it's mostly to me fascinating to see how this company will fit into a much broader company with payments, with video calls, and really going beyond just being a platform for communication. What do we know about users and usage, Julia, because I keep seeing these tweets out there from opponents or critics of X who say it's over, it's done. I keep seeing these tweets from Elon Musk about how either viewership or usership or liking or seconding, whatever he uses that term, is near all-time highs. What's the real story? Yeah, I was looking to see if there were any numbers mentioned in her commentary.

But I think the idea is that they're making it a safer platform. She said that people like the X-Rie brand. There was this question that Sarah wisely asked her about whether it was a mistake to give up the Twitter brand, because it is so iconic, so popular, and many more people even know what. Twitter is that are actually on Twitter. I might find myself calling it Twitter instead of X now, even though it's been a couple of weeks. And so she's been talking about how people like that and this idea that they need to rebrand to liberate themselves from some of the restrictions of what Twitter was associated with and indicating that consumers are on board for that. So certainly

it seems like it'll be a process, but we don't have, you know, the kind of engagement numbers that we used to get from the company when it was public. I mean, we used to get daily active or monthly active monetizable users. And then we would also see the engagement because that had a direct impact on advertising revenue. We don't get it because it's those numbers anymore because they're not public. I was interested, Julia, that just eight weeks after coming in the office, she gave an interview. How important is it for a media company like X to have a face that people can look to, turn to, or identify with? Is she going to be that person and help the brand out in that regard? She is absolutely essential as the face of the brand.

especially when it comes to advertisers, but also to big, high-profile people who want to be on the platform. If they're concerned that Elon Musk may be a little bit unpredictable, which is one word I'll use for it, unpredictable, they want to see that she is a solid, steady hand, making sure that it's a safe platform. She actually gave a really interesting answer to a question

about her authority on the platform. A lot of people are saying, hey, isn't this all run by Elon Musk? She said, I have autonomy. I don't know if we have time to run that soundbite. Elon focuses on product design. He leads a team of extraordinary engineers and focuses on new technology. So think about it as Elon is working on accelerating the rebrand and working on the future. And I'm responsible for the rest, running the company, from partnerships to legal to sales, to finance, all the things.

And you have autonomy and doing that? Yes, I have autonomy in doing that. And I think that's really what this interview was about. She wanted to make it clear. She's running the business. She has these safety issues under control. And Elon Musk may post what he does on the X platform, but she's the person who's making sure that it's a safe business investment for advertisers.

Julia, great rundown. Thanks so much. That was a fun discussion today. Coming up, entertainment, e-commerce and excitement. Disney, Alibaba, and Six Flags are all moving on their earnings results. We will trade each of them in a fresh three-stock lunch after the break. Welcome back. It's time for three-stock lunch.

And today we're taking a look at some of the big earnings movers of the day. Let's start with Disney, which whose shares are up of more than 4%, even as the market briefly turned lower, after they laid out plans to raise the price of the ad-free streaming tiers and crack down on password sharing. They also recorded $2.5 billion or so in one-time charges and impairments, leading to a rare quarterly net loss. Let's trade that name and more with Quint Taitro, Jewel Financial's founder and president. It's good to have you with us today. Quinn, are you a buyer of Disney here? Yeah, Kelly. In fact, we bought it today. Disney has been undervalued for some time, but I think they needed a catalyst.

And we really like the price elasticity in these streaming services. We think that that will stick. We also think the company and the ESPN slash Penn Gaming deal is a big deal and ultimately opens up to additional revenue streams. So we added the stock today. We've been watching it for some time. Wanted the earnings out of the way. And we're a buyer here. Great risk reward with a stop at 85.

Okay, next up, Alibaba shares rising nearly 6% after the Chinese Commerce Giant reported its biggest annual increase in sales since September 2021. The company's push overseas also bore some solid results with revenue from international commerce retail surging by 60% year over year. What say you? Yeah, Steve, we've been longing this one for a long time as well. We continue to like the name. I think a lot of people don't understand the reorg that's going to transpire here. The sum of the parts, as many people have already mentioned on this show and others, is quite attractive. In our estimation, it's trading at about a 40 to 50 percent discount.

When you throw the China risk in there, we're looking for about a 25 to 30 percent upside from here. Impeccable balance sheet, trading at a very low valuation based on what the growth is in the future. And again, the breakup allows them to avoid some of the regulatory pitfalls that they've had in the past. and execute much better. So we're longing the name and would be a buyer of pullbacks. You're saying as you assess the risk reward on this thing, the risk that someday the Chinese

Communist Party comes in and takes over this company, you have more upside than you do downside on this. Yeah, really what we're doing is taking risk of adding risk to what the valuation says. So our valuation says that it's about 50% undervalued

and ultimately that is not entirely true because there is inherent risk of delisting. or obviously, you know, the Communist Party, as you alluded to. So we would reduce that down to around 25, 30%, which in our, you know, estimation is worth it to take a shot. All right. So then that leaves us at six flags.

You know, you could say, well, it's so similar to Disney, but it's so different. And they also just missed on both the top and bottom lines, had a decrease in admissions and in parks spending, talked about some insurance costs rising as well. Would you do you like this stuck here on the poll? back? No. This is a value trap and be very, very careful here. You know me in balance sheets. This has a terrible balance sheet. Declining earnings, a negative book value is just not a touch for me until we see a real turnaround and improvement in the financial scenario. All right. Quint, we'll leave it there. Thanks for joining us today. Appreciate it.

Thank you. Coming up, we've only got a little time left, but some other stories we still want to talk about. closing time next on our lunch. Welcome back. We have a quick closing time and, you know, we've got to talk about psychedelics because a new report from Fast Company highlights how more and more companies are offering psychedelic therapies as a benefit for workers

to help dealing with anxiety, depression and other mental health issues. I didn't pick this just because you're here, Steve. But I feel like you would maybe be on, just, I'm just interpreting some of the college dorm comments from Lerl. Look, I like the concept, but you know, I'm a

data guy. So I'm going to let the science and the medicine dictate how I feel about that. Me too. Maybe a segue, maybe not, but we're going to remember Robbie Robertson right now for me personally. He's the Canadian musician passed away yesterday after what is representative called the long illness. Robertson, best known as the lead guitarist, creative genius behind the iconic rock group, the band. He wrote some of their biggest hits, including The Weight, Cripple Creek. He later collaborated with Hollywood legend Martin Scorsese, producing songs for many of his films, including Raging Bull and Killers of the Flower. personal loss for me for a generation of people who grew up listening to him.

I love Criple Tree. A huge mark on American music. I wish we could play that song on the way out. Steve, thanks for joining us today. Appreciate it. Closing bell starts right now.