Power Lunch - Banks Back In Focus, and State of the Consumer 5/11/23

Episode Date: May 11, 2023

PacWest is down more than 20% today, after reporting a 9.5% drop in deposits in the last week. We’ll explore the latest leg lower for banks, which is weighing on markets today.Plus, we’ll talk to Houston Rockets owner Tilman Fertitta about what he’s seeing on the economy, and the consumer. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Hi, everybody and welcome to Power Lunch. Alongside Kelly Evans, I'm Tyler Matheson. A lot to cover today, including Disney's drop, the debt debate. And we'll talk to Tillman-Furtita about what he's seeing in the economy and the consumer. Good time to check in with him. First, though, let's begin with the latest leg lower for the banks. Pack West's down more than 20% today after reporting that 9.5% drop in deposits last week. And it's weighing on the overall market, so though we're off the worst levels of the day. Dows down almost 300 points. Nasdaq hanging on to a four-point gain while the S&P's down 15. All right, let's bring in our panel. Dom Chu and Husson are here. And David Chiavareni is a bank analyst at Wedbrush. David, how worried should we be about Pac West? Yeah, Pac West. They've been kind of on the ropes for a little while now. Ever since Silicon Valley Bank went down and Signature went down, you know, they've been in that grouping of higher risk kind of on the bubble banks.

And seeing that they lost 10% of their deposits, it's clear that some of their uninsured depositors are being spooked by the stock price action. Last week, after they were rumored to be, you know, in looking for potential, you know, strategic alternative and the stock declined significantly, they really saw about 40% of their uninsured deposits leaked. Now, the good news is that 75% of their deposits are insured. But it goes to show that some of these depositors that don't have the insurance are getting spooked and leaving. So now it's really a matter of. of liquidity. Yeah, do they have the liquidity to cover? Do they have the liquidity to cover those kinds of withdrawals? Yeah, it's a good question. They do. So they've got 15 billion of liquidity

versus 5 billion of uninsured deposits. The real issue will be if the insured deposits start to leave. We saw about 10% of First Republic's insured deposits did leave. So if we see some insured deposits leave PAC West, that's when it can become a real issue. And, Dom, as you mentioned earlier, market cap is down quite substantially. Two newsworthy developments to mention as well. This morning, Jamie Diamond said maybe we should ban short selling of banks as we see this kind of, Paco themselves blaming the media in some ways for that deposit flight and decline last week. And also, the FDIC weren't working and announcing a plan to make those bigger banks pay up to cover the losses it's facing as we continue to see, you know, one go down after another.

It's not just that. It's the incremental news flow that's causing just about every bank, small, a big, medium-sized bank CEO to have to respond to every single development that's happened. You mentioned the Jamie Diamond comments. There's also the Western Alliance came out, maybe planned to give a deposit update, or maybe in response to what they saw happening with the free fall in PAC-West shares in the beginning. If you take a look at the way the construct is shaping up for the banking industry, though, there's no doubt that it's going to structurally change. It's going to have to either through consolidation at certain levels,

or by the bigger banks getting even bigger or taking on more responsibility for the health of the overall sector. And by the way, even if that does happen, what it does do is just give more influence to the big banks in America because they will ultimately be the ones that are seen as the ones backing everybody by the time this is all done. And having the government's implicit guarantee. Correct. Too big to fail. You know, Hugh, maybe Dom just answered it. But if deposits are leaving banks like Pack West, they're going somewhere. Where's the money going?

Is it going to bigger banks? Is it going to money funds? Is it going into treasuries? Where? All of the above. They're going to bigger banks. Clearly, the top four of the beneficiaries, especially JPMorgan Chase.

They're also going to money market funds, too, with the higher yield. I think one thing we should really dwell on for a second here, though, is the sequence of events. You have on May 2nd, after First Republic happens, you have Pack West and others

just drop like stones. Then, you know, according to the disclosure today, the 10Q out today, their deposit flight of about 10% really, really came in on May 4th and May 5th. So it is the self-fulfilling prophecy that animals have pointed to.

It is the perception of weakness leading to the actual weakness, which is kind of backwards in my way of thinking of things. And that's kind of the cycle that we're dealing with today. Although I would mention it, maybe David, I'll ask you this. Part of the response was the fact that First Republic came out with those kind of disastrous earnings and then the story played out like it did. Should there be more proactive M&A happening now for the weaker players to kind of forestall another round of disclosures that are just going to kind of cause this problem to fester? Yeah, M&A, open bank deals are difficult to do in this type of environment because banks realize if they, the healthy banks realize if they hold out a little bit longer, they might get a better

deal if they let some of the smaller, not as healthy banks, you know, go by the wayside and into receivership. So I'm not expecting consolidation in the right here and now, but I do expect consolidation to increase significantly as we look out to next year and we get some stability in the bank space. One of the things I'd also, I mean, I've talked to a number of investors out there over the course of the last several weeks. And one of the reasons why they talk about not just, I mean, the ripple effect wise, right? And that's not just Western Alliance. It's not just Pack West. You're seeing it kind play out in other regional banks as well. And there's a sympathy move aspect to it. But there's also

a fundamental reason some investors are looking at these guys. And that's because of the net interest income and net interest margins that are at risk for these banks going forward. You mentioned the deposit flight. It also means that for some of these smaller and medium regional size banks, they're going to have to compete more aggressively to keep those deposits or get new ones, which is to pay more in terms of CD rates, saving rates, and everything else. And look with Jamie Morgan. They offer like 0% on their CDs because they can't.

And so these guys have to go out there. And what's that going to do? It's going to squeeze the profit margins that they make on some of these particular lending agreements. So their basic business is coming under more pressure than, say, the other bigger banks out there. Nobody wants to catch a falling knife. Institutional investors don't want to catch a following knife of owning banks. Warren Buffett himself has talked about that. Institutional investors don't want to do it.

So it's not surprising that in M&A that there's the owners of these banks also don't want to catch that following knife. David, quick last word. Now we have to let you go. Does a short selling ban stops this? Does FDIC blanket insurance, what stops this? I think all of the above would stop it. Now would it actually happen is another issue. Banning short selling, I would be surprised.

to see that go through. Maybe we see a temporary ban given what we've seen over the past couple months, but I don't expect a long-term ban to occur. And when we look at the banks that have been targeted here, some people are saying that it's kind of random that they've been targeted. But our view is that they've been the ones

that have been the most vulnerable through this cycle. So it's not by accident that the short sellers are targeting these particular banks. So I'm not expecting a ban short selling. And then on the point, blanket insurance, that would have to go through Congress, and I'm not expecting that to go through. And we're showing M&T, fifth, third. Those are some of your picks that you think are the best of the bunch. David Chiavarini, thanks for your time. We appreciate it today. Hugh and Dom, stick around.

Let's get a quick check on the conversation. Rick Santelli, the lingering impact of the bank crisis across the currency markets, bond markets that you cover. What are you seeing? You know, there is just a general move towards safety. And we see safe haven assets are finding love, whether it was today's 30-year bond auction, which definitely was best of breed out of the three auctions we had this week. And if you look at the dollar index, and we all know the Fed's basically dumb. We could always debate whether they're going to come back after a pause or how long they're going to keep rates up higher for longer. But foreign exchange thinks Stan Drunken Miller here, the dollar index should be softening up, all things being equal. And it's doing better.

It's not far from a slight breakout if you look at a one-month chart. So I think that dynamic is going to continue because I've always thought, thinking there's a recession down the road. And, you know, you get jeered a little bit. But to me, that's the reason it's so difficult because we have a very fast-paced tightening cycle. And much of the information and changes within the financial culture have been much slower to demonstrate how the Fed tightening. cycle has impacted various businesses. So whether it's small and medium-sized banks, whether it's initial jobless claims starting to kick up, whether it's layoffs in the tech sector where one person making 100,000 is now being replaced with three lesser jobs at 33,000, all of these

slow-moving issues are starting to paint a different picture. And I think that picture is going to continue to be, for the most part, a half-empty picture, especially with regard to the banks. I just don't see what makes this go away. Would it, gentlemen, be if the Fed paused here? I think what you're seeing with asset prices, and I think... Well, I was going to say, and Rick and I have had this conversation before about this, if you start to see yields drop, specifically for longer maturity debt, say the 10 and 30-year-long bonds, if yields drop and prices rise, that helps. to solve some of the hell to maturity issues at these regional banks, because what they have

right now is a problem of market value and taking write downs on them. Right. And so if the prices for these assets on the balance sheet go higher, you have less of a problem to deal with. So if you're a bank, it sounds so perverse. But if you started to see a little bit of maybe economic weakness, a little bit more flight to safety, the banks that the kind of small to medium-sized end of things would actually benefit a little bit because their balance sheet.

would look healthier by the time this is done. What is it about the deposit bases at the banks that have seen deposits flee that makes them different from the regional banks where there hasn't been deposit flight? What is it? Pretty straightforward, Tyler. So uninsured deposits being a larger proportion of the overall deposit base. And in some of these cases, First Republic, SVB clearly, and even in the case of PAC West, being on the West Coast, the high degree of startup and venture capital funds.

So these are flighty deposits. This is the very definition of flighty deposits. These are pretty sophisticated news, news reading individuals who respond to, you know, to inputs. With big accounts as well, especially if they've had a couple of successful years. And who are no strangers to moving money fast. With very large accounts, and we've seen with SVB, SVB is the thing that taught us that a bank can lose the majority of their deposits in less than 36 hours. And that's a new risk. All right.

Rick Santelli, thank you. Dom Chu, Hugh Sun. Thank you very much for being with us. Interesting conversation. All right. Coming up, every one of Disney's businesses is facing a dilemma, whether it's streaming and the subscribers slowdown, the writer's strikes slowing down the flow of content or the ongoing fight with Florida's governor and the impact on Disney World. And speaking of Disney, let's get a quick power check as we head to break. It is the biggest laggard in the S&P as well as the Dow, down 8%.

That would be Walt Disney on the positive of the S&P, Tapestry, the high-end retail name beating on earnings, reporting a strong profit outlook and citing higher sales in China. We'll be right back. Welcome back to power lunch with the Dow down more than 300 points and Disney off more than 8% following its mixed results. Biggest drag on the Dow by the way. But beyond those broad results, we want to dive into some pieces that highlighted parts of Disney's core business. Streaming TV parks, despite higher prices helping narrow the losses, 4 million subscribers were shed from Disney Plus. TV revenue down 7 percent from a year earlier, but a bright spot for Disney came from its parks, 17 percent increase in revenue.

But the company faces headwinds in each of these areas individually. Overall, the streaming wars are over. Ripple effects from the writer's strike, including production shutdowns and the company's lawsuit against Florida Governor DeSantis, signing legislation to void development deals in Orlando. Here to discuss more on Disney earnings, Janice Min, CEO and editor-in-chief at the Anchler. Janice, good to have you back. Let's zero in on the streaming business losses of approximately $700 million. How do you lose that much money in streaming? Well, that's the good number, believe it or not. Remember, this number has come way down from the previous quarter's number.

You said it, Tyler, the streaming wars are over, and it's ending not on a bang, but on a whimper. And this is a really yesterday's call. It was just a referendum at all the decisions Hollywood it has made over the past five to ten years and it does not add up. And this chase for numbers, the chase for subscribers, it is all sort of, you know, blown up in not just Disney, but every other studio that's chased this dream, Warner Brothers, Paramount, it is all blown up in their faces and you're seeing the consequence now. So let me interrupt and ask you why the numbers have blown up or not come through, not just for Disney, but for other streamers as well in the way that was anticipated. You've got revenue coming from subscribers. The number, it's number of

subscribers times subscription price. You've got some ad revenue attached to some tiers in many of these companies, but it's not the same level of ad revenue that you might get in other areas. And then you've got costs. Where are the costs and why are the costs so high? And why is there such a mismatch of income and outgo? Well, to fight a war, you have to spend a lot of money. And so this was the fundamental problem with the streaming wars was that there was a belief fed by analysts that the ceiling was very, very high of what the market was.

And if you recall Netflix once, there were analysts who were saying Netflix would be able to achieve 125 million subscribers in the U.S. That number plateaued around 67, 68 million. And we're seeing that same effect happen at every other streamer who thought that the total market was going to be much, much bigger. But for anyone here who subscribes to multiple streaming services, which I think many of the audience here does, you know what you do. You get, you love a show, you watch it, you cancel, you might resubscribe again. And it turns out that churn and David Zasloff has identified this as the number one problem.

churn is incredibly high. And so the cost of creating content where you need to just constantly feel like you're attracting people has just skyrocketed. So you've all heard this term peak television. The cost of creating peak television are incredibly high. And you can't make money on it. Yeah. That's just that's a lot regular old linear television, like the ABC network.

Well, you know, while everyone was. pivoting to streaming and let's not forget Bob Eiger in his first reign at Disney he had reoriented the company to a streaming first mentality of initiative and along the way linear TV was was accelerating its decline and one of the really really bad signs in the call yesterday was that Disney linear revenue was profits were off of one billion dollars from this time last year and yet revenue from linear television still makes up 30% of Disney revenue. And this is not good. I mean, there's no cushion. And so if you are really pessimistic, you can see the floor starting to fall out of our legacy studios. And when we talk about linear television, let's just definitionally make

sure I'm understanding. You're talking about the ABC broadcast network. Are you also talking about cable networks that Disney owns that cable networks like Disney. What do they own? It's not NetGeo. I can't remember. Nat geo. Nat geo. And a couple of others.

Right. Okay. So that's linear television. If it's supplied by a cable or over the air, that's linear. Yes. And the affiliate fees at the same time, which, you know, were this annuity that everyone loved for decades and decades is also slipping. I think they reported it was down.

2%. All right. Like we said, problems on every horizon. And we didn't even get to the theme parts and DeSantis and all of that. The only thing we can say about the parks is what analysts said today is that they're already priced for recession. Janice, Janice, thanks so much. Always good to see you.

Thanks for having me. Appreciate it. After the break, energy executives are calling for reforms. To America's complicated permit process, now the White House is getting involved, urging lawmakers to pass legislation to streamline things. We'll have the very latest when Power Lunch returns. Dow's down 327. Welcome back to Power Lunch NASDAQ hanging on to a small gain with Alphabet shares helping again today while the Dow's down 304.

Let's get to Bob Bassani. This is just a miserable market, Kelly, to be perfectly blunt. Three to one declining to advancing stocks, that's a bad market. And yet the S&P is only down 17 points. What gives is the usual crop of big cap tech stocks are holding up the market, making a little, better than it really is. So Apple, Alphabet, Amazon, Meta, Tesla, all well, and some small smattering of defensive names. Walmart keeps working, Coke and Pepsi, et cetera. But beyond that, it's just a lousy market overall. Besides the banks, let's just ignore them for a minute. Cyclicals have been in a major

down draft for really a week and a half or so. So you look at the big names, Freeport, MacMaran, CF Industries, that's a new low. A lot of material stocks weak, like the steel names, steel dynamics, and New Corps Caterpillar generally has been in a down draft. And you go on and on Textron, Emerson Cummins, you get the idea. Big global industrial names have generally been on the weak side. Then you have, of course, hydrocarbons, the natural gas stocks, and the energy stocks have been weak on top of that. So Apache's been down. $32 is closest to the lowest levels that we've seen back to where the March lows were.

And they've been drifting a little bit lower recently. So this is a real, you call it a pocket picker, market. market, Tyler. The bottom line here is what's going on is you've got the debt ceiling problems, you've got the rolling bankruptcy or rolling issues with the banks, excuse me, and they're just weighing on the market. Some people were saying maybe the president will have some word on the debt negotiations tomorrow because he's having meetings. You're in a lot of trouble when you're depending on a rally on politicians at this point. So yes, if we raise the debt ceiling, and yes, if we raise the deposit insurance limits for the banks, yes, that would move things.

but right now they look a little bit far off. Tyler, back to you. All right, thank you, Bob. Bopasani reporting. The White House and big energy companies finding common ground on a key issue, both pushing Congress to pass reforms that would speed up the permitting process for energy infrastructure, everything from pipelines to mines, and Pippa Stevens has the details. Pippa. Well, Tyler, permitting reform is once again front and center in Congress, with hundreds of billions of dollars in energy infrastructure projects at stake.

The White House is throwing its support behind these efforts ahead of. of a hearing today on Senator Manson's bill looking to speed the process. The administration is urging bipartisan support for things including modernizing 150-year-old mining laws and expediting transmission projects. Without reform, 100 gigawatts of clean energy is at risk of significant delay, according to American clean power. To put that number in perspective, it's enough to power 26 million homes annually. The proposal, though, affects companies across the entire energy ecosystem. You've got lithium miners like Alba Marl Piedmont and Ioneeer trying to get projects off the ground. Lithium Americas just began construction at its Nevada mine after more than 10

years of permitting delays. Then you've got companies involved in transmission lines like Qantas services and Maztec, both of which mentioned permitting challenges on their latest earnings call. Fossil fuel companies are also possible winners. EQT's CEO saying permit reform is inevitable because, quote, our energy ecosystem is maxed out with pipeline operators. William's also pushing for reforms. So everybody wants this, but it's definitely no guarantee because similar, you know, legislation failed last fall. So we're not quite there yet.

If everybody wants it, who doesn't? Well, not everyone wants the exact same thing. Yeah. Bananas. Tell them about bananas. Oh, it's the bill's absolutely nothing anywhere near anybody. That is the new acronym. It's the NIMBY 2.0.

I feel like everyone wants permitting reform in theory, but until it kind of starts to impact them directly, they go, well, they want it for themselves, but they don't want it for for the other parts of the energy ecosystem. Consensus. You can't get it. Pippa thanks. Let's get to Bertha Coombs now for the CNBC News Update. Hi, Bertha.

Hi, Tilly. Here's your CNBC News update at this hour. Our borders are not open. That's the message coming from Homeland Security Secretary of Alejandro Mayorkas during the White House press briefing today. Mayorkas laying out a plan for handling the expected influx of migrants once the pandemic era restriction Title 42 ends at midnight tonight. Marjica said the level of border encounter is already increasing and blamed Congress for not taking action sooner.

Ukraine is driving back Russian forces near Buck Mood in the east of the country. That according to President Volodymyr Zelensky, leader of Russian-aligned Wagner mercenary group, also said these gains signal the start of Ukraine's counteroffensive. Zelinsky said that operation has not officially begun and that his troops needed more time before launching their anticipated spring attack. Senator Diane Feinstein is back to work on Capitol Hill and is helping to advance three nominees through the Judiciary Committee today. The California Democrat returned to Washington yesterday following an extended absence after she was diagnosed with shingles in February. Some nominees had been held up in the split committee without Feinstein's sense. high-breaking vote. Tyler, I hope you've gotten your shingles vaccine.

You know, I did. I did, because I had chicken pox as a young boy and in a bad case of it. Bertha, thank you very much. And thanks for thinking of me at my shingles vaccine. All right, still to come, we will speak with power player, Tillman Fertita, always valuable, always fun. Real estate, restaurants, casinos, he's got it all, and he will weigh in on the state of the economy. and consumers alike. We'll be right back. Welcome back, everybody. Inflation showing some signs of easing, but overall, the damage to the consumer might already be done, as we discussed yesterday.

Higher income consumers seem to be pulling back on spending, and the same can be said across the board. Here to discuss the state of the consumer and more, our friend Tillman Fertita, Chairman of Fertita Entertainment. Tillman, welcome. You know, there's been lots of talk, including on our network, of a slowdown. look back at first quarter earnings, you really don't see that. We had a company tapestry, consumer-facing company today, had a very good first quarter. Why don't those first quarter

numbers jive with what we seem to be hearing in the zeitgeist? Well, everybody that's releasing numbers doesn't want to remind everybody that the first 45 days of 22, we were still having a huge COVID scare. And that's why everybody's reporting great first quarter. quarter numbers. But the second half of this year is going to be much slower. And even starting in March, everybody started to see a slowdown. And when I say everybody, I'm just talking generally the consumer businesses. Now, what's interesting about it is, like our restaurant business, the group business, the private dining is way up over last year. But what we've lost is that consumer that had all that PPP money and all the other government money is not out there shopping the high end anymore.

So you're seeing this across the spectrum of your restaurants, I think I'm hearing you say, because you really have the waterfront covered from sort of family-style restaurants all the way up to high ends like Mastros. Yeah, definitely, Taller. You're seeing it. But you are seeing it more so in the high. in. Interesting. And we own Mastros, Ketch, Del Frisco's, Martins, the Palm. And, you know, you've got a problem in the higher end right now because of the fact that the individual consumer is not out there spending money like they did a year ago and two years ago.

Tillman, I'm just curious as we saw Darden making this play for Ruth's Chris buying the chain. Did you ever think about Ruth's Chris becoming part of your restaurant empire? Definitely did, and it's kind of funny because we've had a great relationship with Ruth Chris for years. And I love the restaurant business, but I like those bigger boxes of casinos where you can have one box to do 50 to 100 million in EBITA instead of having 50 to 100 boxes to have to do, where you only need one general manager instead of 50 general managers or 100 general managers. So it gets back to the fact when you're in a tough, tough, labor situation, even in the upper management where you're looking for those type of people, it's always easier for the bigger box theory, which I believe in today. So I don't see my

restaurant acquisitions doing what it used to do. I want to come back to casinos in just a minute, but I'm curious, you know, you mentioned some of the higher end and you're seeing some of the higher end customers maybe pulling back just a little bit. What are you seeing on the cost side, in other words, food costs? Because if I go into a high-end, restaurant now, I'm looking at $75, $80 steaks, and I can only do that. You know, that's a rare treat, man. Are you seeing any easing in food costs? Tyler, that's not a rare treat for you.

Come on, man. I live in New Jersey. The taxes aren't quite as low as in Texas. No, they believe me, I know so. I have a lot of businesses in New Jersey. You know, what you're saying. So what's so interesting, Tyler is exactly what you've said. And I've been in business since the 80s, and I'm seeing a

phenomenon that I've never seen before, where now that consumer's slowing down, your same store sales are below what they were a year ago, but yet prices are not coming back with it. You've got to remember, your beef prices are so much higher than they even were a year ago. And that never happens when the consumer stopped spending, but there's 12% less. less prime. Beef is up 30 cents a pound. That's what cattle are selling for compared to a year ago. And the labor inflation is still there at a tremendous level. I lost employees in my corporate office this week to just huge raises at other companies. And so we still have this cost problem. And you sit there and you get on the Fed for continuing to raise rates, and it affects me as much as

anybody because I have a lot of floating debt, but we don't have our arms around inflation yet. Now, I also feel like there's a lag, and if maybe they just pause and give us a couple of months, maybe, and hopefully it'll catch up, because revenue's definitely coming down for everybody in most businesses. Let's talk about the casino business. If consumer spending slows down and if there's a retrenchment or even a mild recession, Will casinos, because so much of gambling now is done from the home or online, will your casino business hold up better than in prior recessions? Well, let's go back to prior recessions, okay?

The only recession that Vegas ever really, really felt was the 2008 recession. I've been familiar with Vegas and been going there since I was a kid and had family members. members in business there for so many years. So I really know the history of Vegas and even before I owned casinos in the early 2000s. And Vegas usually is really strong, even in a recession. There's one thing, maybe they don't do other vacations that year, but they don't want to give up their trip to Vegas. That's their biggest entertainment that most people enjoy. Regional casinos will hurt a lot more than Vegas will hurt. Well, that's what I was going to ask you. There are a lot of Casinos and yours that aren't in Vegas.

A lot of casinos that aren't in Vegas, including a lot of yours. For sure, Tyler, and I think regional casinos will be hurt more than Vegas will be. But that's the way it is, and that's what history tells us. Go ahead. I mean, we have got a couple to squeeze in here real quickly. The only one, Tillman I'm going to throw out there, and it's maybe too early, is still about whether sports are going to be recession-proof. You know, the valuations paid for these teams are higher than ever.

But as a business, can they weather this with everything up in the air right now about TV rights and all the rest of it? You saw now that Amazon has its own Black Friday game. You know, $6 billion for Phoenix. I know I think, you kind of drew the line in the sand at that for the commanders. Well, I mean, Phoenix sold for $4 billion and at a $4 billion valuation, but somebody didn't have to pay for 100% of the team. And the commanders was a $6 billion price. Dan held out. Dan got it.

Josh Harris chased it and got it. But I can tell you this from being involved in the Denver process and in the Washington process, there's not a lot of buyers out there when you start talking about these numbers. And, you know, you look at all these people and it's the same people that are looking at all these teams. and you just eliminate it one in Denver, you eliminate it one in Phoenix, and you eliminate it one now in the NFL. And so it'll be interesting to see if these prices stay up or not.

Yeah, that's what I can ask you. If there's a dearth of buyers, and obviously there are exceptions, there are prime properties like the Cowboys, maybe the Patriots, maybe the 49ers. But if there's a dearth of buyers, that would suggest that maybe we have hit peak franchise value for a lot of these.

teams? You know, when I paid $2.2 billion for the rocket six years ago, that was the most anybody had ever paid for a team. The one statistic I looked at is no team has ever sold for less, and I've essentially doubled my money in these six years and owning 100 percent of that team. But at the same time, you know, we're in numbers now that were middle-class billionaires like myself, can't afford them anymore, you know, by themselves. And so remember, and a lot of those people that are in front of me in that Forbes 100 don't have any desire to own a team or already own a team, and they're out saving the world.

And so this is really going to be interesting to follow what happens with these sports teams in the next few years. Tillman, the middle class billionaire. I love it. Thank you, man. Always good to see you. Always good to see you. Thanks, guys.

Have a good son. summer. Fascinating comments there about high-end spending, a lot of other things, too. As we head to break, CNBC is celebrating Asian American and Pacific Islander heritage throughout May, sharing stories of business leaders across their community. Here is Ken Notori, the Notori Company president. We're incredibly proud to be celebrating our 46th anniversary as an Asian founded and led independent family business. One of the reasons we've had so much staying power over the years is because we have celebrated and broadcast our Asian roots. It permeates everything we do, from our East Meets West design aesthetic to our core values to even our supply chain, one of our differentiating factors is that we have a family-owned factory in the Philippines where we manufacture the majority of our in-house collections. The fashion business has never been easy, but we're going to stay authentic to who we are, and we hope our message will continue to resonate with our customers.

Welcome back, everybody. Quick look at your markets. Dow's off the lows, down 236 when we were down more than 400 earlier. deal three quarters of a percent decline. A lot of that's Disney as well. You can see the S&P's only down about a tenth of a percent, 41-31. The NASDAQ is up a third of a percent as Alphabet continues to do well after its I-O-A-I stuff. I mentioned Disney. It's costing the Dow about 50 points after reporting results and big losses, both money and subscribers in Disney Plus, near 9 percent decline still near the lows of the day. Pack West also down big after reporting a nearly 10 percent drop in deposits in its latest week. You can see those shares down 22 percent under $5. Alphabet higher after its big event rolling out a lot of those AI focus changes.

Analyst's very positive about it. The stock is up almost 5% today after a pretty nice gain yesterday as well. Big two-day move. It's up to 117. And check out Goodyear Tire. That stock soaring after Paul Singer's Elliott management is pushing for changes, including recommending five candidates to the board. GT up 20% high tie.

All right. The stalemate over the debt ceiling continues in Washington with the deadline for a potential to fall just a couple of weeks away. We're going to speak with a policy expert who says we'd be better off without any debt ceiling at all. Our launch will be right back. Welcome back. President Biden planning to meet with congressional leaders again tomorrow to try and reach a deal to avoid hitting the debt limit and the potential for default that comes with it.

Here's what former President Trump, the frontrunner, according to some polls, to be the GOP nominee in 2024, says should happen with the debt ceiling. I say to the Republicans out there, congressman senators, if they don't give you massive cuts, you're going to have to do a default. And I don't believe they're going to do a default because I think the Democrats will absolutely cave because you don't want to have that happen. But it's better than what we're doing right now because we're spending money like drunken sailors. Meanwhile, other powerful leaders warn about the potential fallout if the U.S. defaults.

Treasury Secretary Yellen, calling it an economic catastrophe. Jamie Diamond of J.P. Morgan, you will have a panic. And even Kevin McCarthy, the Republican House Leader, the Speaker, saying we can't hold the country hostage. For more on this, let's bring in Douglas Elmendorf, deem of the Harvard Kennedy School and a former CBO director. Is it sound policy to save, as the president did last night, if the GOP doesn't get the budget concessions that they seek, that they should go ahead and force the country into default? Is that responsible? No. Defaulting on the government's debt is not a responsible policy now or ever. Our leadership needs to work out some agreement about future spending and tax revenue

that enables us to raise the debt ceiling and keep going. So why is it, Dean, that regular appropriation bills are not written in such a way, way that they allow for the required borrowing, if borrowing is required, to be able to spend the money. Basically, why is there a debt ceiling at all if the presumption is that when you appropriate the money and you have to borrow, you're going to borrow enough to pay for what you spend? You pose the question very well. The debt ceiling is an anachronism, a dangerous anachronism. It grew out of a time 100 years ago when the Congress approved every separate borrowing

by the government that was changed to an overall debt ceiling. But you're just right. Once the Congress and President have passed laws to set spending and the tax code, then certain bills come due and those bills have to be paid. So the debt ceiling ideally would be eliminated. At second best, we should just keep raising it out of the way. What we should focus on is what we want our government to do for us. And that will then tell us what sorts of tax revenue we need to raise and what sorts of spending we want to do.

Do you think that Dan Clifton is right, the strategist analyst, who says we're probably entering an age of austerity regardless, because debt servicing costs are about to hit 14 percent of GDP, and that often triggers these needs to cut back elsewhere so to make sure we can pay all the bills? I think people are right to be concerned about the federal government's trajectory of the debt, because the trajectory shows increases from what is already a historically very high level. And so I think it's appropriate if going forward we are very cautious about any increases in spending or reductions in taxes that aren't offset by some other change. And then beyond that, we should look for ways to raise taxes and reduce spending. to put the debt trajectory on a more level and sustainable track rather than the upward track that it's on right now. We've never gone into default, so we really don't know what would happen if we did.

What do you think would happen? And what would the effects be, because everybody says, it seems, it would just be a deep, deep kind of economic peril? Yes, we don't know for sure, because we've never had the bad judgment to try. But the U.S. financial system and the role of U.S. government securities at the part of that system is just fundamental to the way the financial system works across this country and around the world. And taking chances with that in a casual way would just be terrible decision-making by our leaders. Dean Elmendorf of the Harvard Kennedy School, thank you very much for being with us today. Happy to be here. Thank you. Thank you.

Still to come, Robin Hood wants to be the trading platform that never sleeps, and why American workers are, at least were until recently, happier than they've been in decades. Those stories and more when power lunch returns. Welcome back, everybody. Three minutes left in the show and so much more news you need to know, so let's not waste any more time. We'll start with CNBC.com's Gabrielle Fon Rouge reporting that Bolero is now the subject of a federal investigation into age discrimination and retaliation claims. Documents shown to CNBC include claims from more than 70 former employees, alleging a pattern of mistreatment since at least 2013. Ballaro is the world's largest owner and operator of bowling centers. It went public in December 21 through a SPAC merger.

Attorneys for Bolero call the claims meritless and deny any wrongdoing. Stocks been a pretty good performer since it came out, but down 4% today. Meantime, Robin Hood announcing plans to let traders trade 24 hours a day during the week on some stocks and ETFs. The around-the-clock options will feature 40 different assets, including names like Apple and Tesla. So if you wake up in the middle of the night, you can't sleep. You can go by yourself, a few shares there. The stock up 16% for the year, even though the company lost more than a half a billion dollars. Unclear to be still how this would work.

Imagine if this had come out 18 months ago, there would have been a frenzy. There's still a pretty high retail participation, but nothing like what we used to have. Meanwhile, Big Tech's cost cutting continues. Microsoft is skipping salary increases. full-time employees this year, with CEO Sotomayna Siding economic conditions and its investments in AI as he informed employees about the change. Nadella said performance bonuses for top executives will also be down considerably from last year. But apparently they're also going to continue the practice of for those who receive stock and or bonuses who are not necessarily the highest

paid executives. That will continue. Just not the general increase. They're one of the companies, the only companies in the country doing well this year. Yeah. So that's what makes this so noteworthy. It's a telltale there. Workers are happier than they have been in a long time. This is according to the conference board. Job satisfaction hitting a 36-year high, 62.3 percent, that 0.3 percent of workers, very important here, were satisfied with their jobs last year. Among the happy workers, those who have a hybrid work schedule in office, work, and work from home. Also, happy were job switchers. So this was kind of the era of employees having massive power and leverage and we'll watch how much those numbers change as the labor market.

As Tillman Ferdin just said, he's losing top employees to big raises at other companies. Yes, still. Well, roses are red, violets are blue. Happy Mother's Day, Mom. I love you. If that's about the speed of your poetry writing, don't worry. Help is on the way. 1-800 Flowers.com is launching a chat bot for Mother's Day called the Momverse.

It can write personalized songs and poems. It will never write poems as well as my mother-in-law does. She does birthday and special occasion poems like nobody else. They should hire her. I'm going to be off tomorrow. I wish you a happy Mother's Day. Thank you very much. And all mothers are happy Mother's Day.

But would you approve, would you ever do this for Joe? A chat butt, boom? Hell yes. I'd never tell. Thanks for watching Powerlund.