Power Lunch - Breaking Fed news, an entertainment power player and a biotech bounce. 7/7/22

Episode Date: July 7, 2022

Breaking Fed news. Fed Governor Waller favors a 75-basis point hike at the July meeting and is pointing to a 50-basis point hike in September. Steve Liesman has the details. Plus, the biotech sector’s big bounce. As m&a activity heats up, is the group investible again? And, the Live Nation CEO on the strength of consumer spending. 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'm Dominic Chewin for Tyler Matheson today, and here is what's ahead. Biotech bounce. The sector, one of the most hated on Wall Street to start the year, is now going gangbusters on a relative basis. Up 26% since mid-June alone. With M&A activity heating up, is the sector investable yet again. Plus, an entertainment power player. The CEO of Live Nation is here to discuss whether the concert ticket business is inflation-proof. and how long he sees consumer demand remaining strong for those live events. Kelly, we've got a very big hour ahead. Over to you. Looking forward to it, Dom. Welcome. Hi, everybody. Let's get a quick check on markets, which are green once again. The Dow only slightly off its session highs up nearly 1%.

The S&P up 1.4%. The NASDAQ up 2.2% right now or 250 points. The small caps are actually even the strongest performer. Now, chip stocks are getting a lift after Samsung's profit and revenue surge. that has all members of the SMHETF higher. That is trading back at around 208, up nearly 5% on semi-KLA Corp, Taiwan, semi-all-seeing gains of anywhere from 7 to almost 10%. Let's also check on the yield on the 10-year, which is back above 3% by just a hair. And within the past hour, Fed Governor Chris Waller making some comments about inflation

and continuing to say maybe he wants those front-loaded rate hikes. Let's get right to Steve Leesman for all the details. Steve? Yeah, front-loaded is the perfect phrase, Kelly. In the past hour, Fed Governor Chris Waller saying the Fed needs to get to a much more restrictive setting and do it very quickly. Therefore, he's saying he favors 75 basis points at the July meeting, moving on to 50 in September. Though he says recession fears are overblown because the job market remains strong. And he has said Fed has a good shot at a soft landing.

Now, the important one, the Fed can flatten out rate increases once he says. the Fed gets to neutral. It's that last comment echoed in the minutes released yesterday that holds out some hope that if inflation is brought under control, the Fed won't have as much work to do next year. Take a look here. The Minutes said after the Fed is neutral just a bit beyond, quote, the committee would then be well positioned to determine the appropriate pace of further policy firming and the extent to which economic developments warranted policy adjustments. Now, Peter Williams over at Evercore ISI, he wrote, The silver lining for risk assets is that the committee underscored that as policy gets to the vicinity of neutral, it becomes more data dependent again.

The market's kind of sniffing this out. During the June meeting, the futures peg the Fed going to 370 by year end. It's now priced around 338. The market then was priced for a 410 funds rate in May. That's now priced at 340. So a big decline there. Here's the hope. The Fed stops there because inflation eases a bit a slowdown, not a recession.

going to talk about this and a bunch more tomorrow with Atlanta Fed President Rafael Bostock on Squawk Box. Kelly. Excellent. Looking forward to that. Steve, thank you very much. Our next guest, though, is saying buckle up for a long recession. He says stocks won't bottom until the PMIs do, and that could be a two-year long road ahead. Let's bring in Michael Kantrowitz, the chief investment strategist with Piper Sandler. All right, Michael, it is great to see you here, and you've been so consistent on this theme and correct that the economy is slowing. But why do you see it getting worse from here instead of of stabilizing or resetting at what's still a growing level.

Sure. And thanks for having me, Kelly. Kelly, good to see you. The reason, you know, the business cycle is something that doesn't change over time. And the reason we have the ebb and flow of the cycle and we have recessions and recoveries is all about the cost of money and the cost of goods going up and down. So things like interest rates and oil prices are the most obvious drivers of the cycle. And we still, you know, have the Fed raising rates.

We still have very high oil prices. We still have now banks that are beginning to tighten lending standards. And so we're not even done with the tightening phase of the cycle. So you can't really begin to talk about the beginning of the recovery until that's over. There's a long lead between changes in policy rates, changes in oil prices, and how long it takes to respond in the economy and earnings and employment. And that's why you keep hearing people say employment's still good. Well, yeah, it's a lagging indicator. It's going to take several more months before we begin to see the impact of what the Fed has done on employment.

So there's a long road ahead and history very much suggests, you know, points that out with clarity. Let's talk about some of the stocks that you would both buy and sell here kind of on this point of view. Because you're short, a lot of the highly cyclical names, right? And some of the names like DuPont and Alcoa, even KKR. things like that. And then you're still long, some names of people might be surprised to hear, like AutoZone Dollar General Costco Northrop Grumman. Can you dig into that a little bit? Yeah. So, you know, there's two problems right now that the market's facing. One is getting incrementally better, which is inflation slowly, but it's getting incrementally better.

And the other one's getting incrementally worse, which is the odds of recession, earnings, growth, and the speed of the economy. So what we want to be avoiding until we see a bottom in leading economic indicators, which again, is not until next year, are stocks that are very sensitive to macro data like the ISM or unemployment claims or credit spreads. So the four stocks you mentioned, DuPont-Alcoa-KR and Aptiv, are all, they all have correlations of their relative performance of about 70 to 80 percent with the ISM. So if you think the ISM is going to continue falling for another year, which we very much do, you're swimming upstream from a macro perspective of owning those names. In addition to that, these companies rank in our cell model. So it's a combination

of a bad macro environment for these types of names, and these companies have poor fundamentals according to our cell model. On the long side of things, we just want the opposite. What stocks have correlations that are negative to a slowing economy? In other words, we'll do better as the economy goes down and have good fundamentals. So AutoZone, Dollar General, Costco, and Northbrook Grumman are few of the stocks that have count. countercyclical relative performance behavior and have the fundamentals that investors tend to gravitate towards in an economic downturn, such as high profitability and decent earnings growth. Michael, it's Dom. I wonder what you think of or what your kind of, I guess, read is on the late

outperformance that we've seen in just the last maybe couple weeks in those mega cap technology names, some of those unprofitable tech and growth names that did so well over the course of the last couple of years. It seems as though we've kind of gotten away. We've rotated almost out of. I mean, rotates a big word. We've moved away in the last couple of weeks from that oil and gas and metals trade the commodity trade. We've now gone back into seemingly the apples, Microsoft's, alphabets of the world, even maybe the Etsy's and cloud computing stocks. Is that something where you think this is a bit of a head fake? Or is there really a rotation in play right now? No, the rotation is absolutely in play. And it's been going on in the Russell style indices in favor of

growth over value for about five and a half, six weeks. And it's happening because we're seeing the transition away from inflation fears and towards growth or recession fears. And so as that happens, interest rates peak, commodities come down as that's part of the story for the underperformance of value stocks and cyclicals. And the beneficiaries of that, especially lower inflation and interest rates peaking, are the stocks that got hit the most from that. So, you know, large cap tech or growth in general has been benefiting from people believing that the Fed is not going to go as far as they thought earlier this year with the 10-year holding in here around 3%. And the stocks where you're starting to see downward earnings revisions, where the worst are those cyclical areas

of the market. So it's happening because inflation fears are now transitioning into growth fears, and that's going to be really the story for the next 12 months. So we do think there's some upside for quality growth stocks, but I wouldn't hang on to the lower quality companies that don't earn a profit for too long. Those tend to do really poorly when job losses start to accelerate. All right, a bigger macro tailwind for certain stocks and not others. Michael Cantroyd's at Piper Sanger, thank you very much. We appreciate it. All right. Thank you. Our next guest says investors should be focused on companies generating, among other things,

cash flow with bigger potential down the road. Let's go value hunting with who else but Sarat Sethi, managing partner at DCLA. He's also a CBC contributor, often seen on the halftime report as well, a stock picker. He does it for a living. So, Sarat, let's talk about some of the names we heard. Michael Cantroy's talk a little bit about some of the names on his list. Do you feel as though there are still opportunities for growth out there, or are you still focused on that value side of the equation?

I think it's a combination, Don, you've got to look at value. stocks here because some of them are really cheap, but then growth at a reasonable price also has really come down as well. I'm not a firm believer in the price to sales model, haven't been, you know, since for a long time. But I do think you have a combination where you can get a balanced portfolio. Value, I think, is going to have its day. We've been saying that for a while, but I do think cash flow is going to matter. Long-tail assets are going to matter. And that's really where you want to put your capital these days? So where is that? Where can you find that right now among the names that you track more closely, what goes on a shopping list for you, given that

cash flow outlook? So take a company like Morgan Stanley, so they just came out, they had their stress tests, they're going to buy back 15% of their capital, they increase their dividend, you're getting a 4% dividend yield on a highly cash flow, liquid company, 60% of their revenues, wealth management. They don't have any credit issues. They're not levered to the consumer. And if you look at kind of the capital markets, they don't really use their balance sheet. And they're really, with the two acquisitions they've made of the last couple of years with Eaton, E. Trade, it is a recurring revenue model. And with even slightly uptake and interest rates, that falls to the bottom line. So, and guess what? Trades at 10 times earnings. So it's trading

at a big discount to the S&P as well. So you've got Morgan Stanley, interesting only because you've got big bank earning season coming up. You've also got a host of analysts on Wall Street taking down their expectations for many of these big bank type stocks. So I can see that play a little bit contrarian in that mind. Where else are you finding it? Is there anything in some of those cyclical sectors like industrials or materials that you're still finding that value trade that's compelling? Absolutely. So one of these stocks is GE, right? It's the Haiti most unloved stock out there. People look at it and say, we don't understand it. What are you doing? Well, you have a new CEO, not new. He's been around for a couple of years now. Larry Kulp. He ran Danor, one of the best

companies out there. Now, if you break up G and you do some of the parts, aviation, healthcare, power renewals, you get a much bigger some of the parts. Now it's a wait and see story. So what Larry's been doing is really getting Wall Street ready for the breakup over the next two years. You'll get health care spun off. You'll get power renewals spun off. And aviation, which is the crown jewel, 60% of all the flights in the world come from GE engines. And you're seeing that demand out there. This is not something that we're going to, you guys were just talking about airlines before.

And if you look at it on some of the parts, it's trading it, you know, something like a little bit over 15 times earnings with eight times cash flow. And when you break it up into investment-grade quality, which is what Larry wants to do, I think this unloved story while you're going through this, I think we'll have a big gain down in the future. Surat, what do you make of the recession and business cycle debate that we were just having with Cantra? I mean, basically are two camps. One thinks this was a needed and necessary slowing of inflation primarily. Sure, growth is slowing, but it's not a recession. That's the more bullish camp.

The more bearish camp is, you know, exactly the scenario that he described. this could be, you know, a year plus of kind of the cycle rolling over. Where do you fall? So I fall kind of in between there. I think, you know, things are slowing down. There's no question about it. You've got housing slowing down. You've got the consumer slowing down. You've got interest rates going up. All that is happening. And we might even actually be in a slowdown. But the recession is not that bad a word. It's a slowdown from a very heated economy when we had so much liquidity thrown into the system. The markets, as we know, and you look back at 2020, you look back at 2008, discounting 12 to 18 months in advance. So I do think even if we're not, if we're getting close to the

bottom in cyclical stocks, it's impossible to time it. And these stocks will start re-rating way ahead of when earnings start going up. So as we bring earnings down, there's no question that the multiples have already contracted. But I think the future, which is so hard to tell, because if you do get, you know, oils coming down below 100, you get the Fed kind of saying we're still going to increase, but not at the same rate. You see the light at the end of the tunnel. It is going to be too late to come into some of these cyclical stocks at that point because they're going to be reflecting in earnings growth that is not in the multiples today. All right. Sarat, thank you. We'll leave it there. We appreciate it. Some stock picks and his view on the cycle right now, Sirat SET. Coming up, the S&P biotech ETF,

bouncing about 26% since mid-June. It's still nearly 40% off the highs, though. With Merg now in advanced talks to buy C-Gen, is that a catalyst? Which companies could be the next take out targets. And we've talked about the companies most at risk to a strong dollar. What about the beneficiaries of it? Three stocks, three trades in today's three stock lunch. And as we head to break, let's check on shares of Beyond Meat extending their gain to now 28% over the past week. And its fourth straight weekly gain with an 8% bounce today. We're back in a moment. Welcome back to power lunch. Shares of Merck are slightly lower today as it gets closer to a possible deal to buy C-Gen for reported nearly $40 billion. Big Pharma has, by the way,

outperform the markets this year. Merck is up more than 20 percent, up more than 20 percent. Pfizer lower, but still better than the broader market overall. You compare that to biotech overall. The XBI ETF is higher today, but still lower by 25 percent over this year. Investors seemingly liking those bigger, safer, dividend-paying pharma drug-related names, but could that be about to change, Bertha Coons joins us now with a look at big biotech and that turnaround there, Bertha. Yeah, Dom Cullet, the stealth rally. Biotech has actually, of course, taken a pounding this year as investors turned away from speculative stocks. But take a look at the big shift we've seen since June.

The small cap-loaded S&P biotech ETF ticker, XBI, has roared higher. Though still deep in bare market territory, the XBI is up 35% from its may low, while the I shares, NASDAQ, biotech ETF, the IBB, is up 20% from its June low, with both trading back above their 50-day moving averages. Part of it may be seasonal. Analysts at Wedbush say that biotech usually outperforms in summer, up about 5% on average between June and August, better than the S&P. But they're also seeing analysts momentum some of these stocks. Today's big gainer, small-cap, CTI Biopharma, at a new high with analysts raising earnings target. as it launches a new bone marrow cancer treatment called Vanjo.

It's among a handful of biofarmor stocks that have seen their stocks outperform and also are seeing upward analyst revisions. According to FACSET, Masuho analysts see about a quarter of biotechs folding or getting acquired this year, though not necessarily for a big payday. Take a look at Meridian Biosciences. It's down today. It's had a huge run. It's agreed to be taken private for just over $1.5 billion.

But Kelly, that is no premium to its current market cap. Again, it's had a big run, but you know, you kind of think there might be a little bit of a premium. If you're especially if you're looking for a premium, we're about to talk about takeout plays, and you might not get it, although I will say nothing makes me feel as hopeful as hearing Bertha mentioned things like bone marrow cancer, you know, treatment in the works, you know, a reminder of all the positives that are going on here, take out premium or not. Bertha, we'll leave it there. Thank you, our Bertha Coombs.

As I said, according to our next guest, this may just be the start of a bigger biotech M&A wave. Let's bring in Jared Holtz. He's a health care equity strategist at Oppenheimer. Jared, what do you make of that last point Bertha said there about they're not being a takeout premium? Well, that one is a little bit different, Kelly. I think we just have to look at each of these situations in a kind of a unique aspect. You know, Vivo was trading up a lot. There was probably some takeout premium in the stock at that point. But all of these are very unique situations.

We've seen a lot of deals with massive premiums. We've seen deals with very little premium. So it's just very company specific, I think. All right. So let's get company specific. Where are you looking as, you know, possible candidates? I know it's hard to name names. But when we're talking about a dealmaking wave, do you see a dealmaking wave coming, by the way?

Well, I think so. I mean, we've looked at this entire sector. I mean, we look at it every day. And, you know, we started the year with approximately 850, individual companies roughly in biotech that were either, you know, really sorted all the way from large cap to microcap based on, you know, a wide variety of inputs. And what we're seeing now is a little bit of a flurry of activity, but it's very inconsistent in terms of like the type of companies that are actually getting acquired. We've seen small caps. And if this Merck for

C-Gen winds up happening, which I think most investors believe will be the case at this point, given the ongoing headlines, then we're going to see the biggest deal that we've seen in a number of years, you know, kind of trumping Alexion, which was taken out a couple of years ago. And I think this is why most of the sector is rallying at this point, although the expectations, I think, are all over the place as far as what could be the next takeover target, because the amount of companies or the list of companies that have been acquired recently is just very diverse. Jared, it's Dom. One of the things that I think caught at least my eye about this is the size of the deal, no doubt, if it were to happen, if the reporting is true. But also the fact that

this is a company that very, very high profile-wise, specializes in a very specific kind of treatment, and that's oncology. It's cancer. It's been that way for years now. Many of these acquisition targets are to shore up mega-cap pharma's pipelines for drugs, specifically in oncology. is that something where investors remain focused strictly on that cancer side of the business, or are there other places you go to to look for possibly some of those deals to happen, just cancer or not? Dominic, it's a great question. I think for Merck specifically, just given how concentrated they are in oncology and their

expertise in the area, it's just natural that they would kind of go in this direction, I think. I think that's the way most investors look at it, too. a core competency, you know, in a very, very large category within therapeutics. This is why I think most analysts believe that Cgen is logical, among others. Oncology as a therapeutic category more broadly, again, I think it's very case-specific. It's dependent on the buyer and where their focus is. And so, you know, we've spent a lot of time on trying to, you know, really understand the direction of M&A as it is in biotech. and it's just very, very vast when you look across this spectrum of companies and what they do.

But oncology is such a large cross-section. You could almost argue that the vast majority of therapeutic companies within the XBI or the IBB have some sort of exposure to oncology. So it's a huge area. So that kind of makes it, you know, pretty topical for most buyers. All right. Jared Holtz. Thank you very much. We'll leave it there.

Jared Holtz over at Oppenheimer. We appreciate the thought. thoughts on biotech there. And ahead on power lunch, top dollar plays. We'll lay out stocks benefiting, yes, benefiting from the strong US dollar and our trader will tell you whether to buy or sell in today's big three stock lunch. Plus, Jobs and focus, of course, ahead of that big tomorrow's

employment report tomorrow. We are going to highlight a growing employee training program in today's working lunch segment as well. So work is a theme here. Jobs are a theme here. We'll be right back after this break. Welcome back to Power Lunch. So let's get to check on the meme stocks right now, right? Because they're all higher today and strongly so, led by Bed Bath and Beyond shares. 28% gains there right now. GameStop higher on an announced stock split, four for one. And then AMC up 16% overall as well, bucking a bearish note from Citigroup analysts that cut their price target and reiterated a sell rating. It doesn't matter. All those meme stocks, those so-called meme stocks, up strongly right now. Let's get out to Bertha Coombs for the,

CNBC News Update. Good afternoon, Bertha. Hey, thanks, Dom. Here's your CNBC news update at this hour. Film legend James Kahn has passed away, according to a tweet posted to the actor's verified Twitter account. His cause of death was not immediately released. Khan was 82. Florida Governor Ron DeSantis is planning a private fundraiser in Utah later this month, hoping to attract some of the country's wealthiest Republican donors. The event's location, and noticeably not in his home state could suggest aspirations for national office. Mexico's Army and National Guard announcing what they called a historic seizure of more than a half ton of fentanyl at a warehouse in the northern city of Kulia Khan.

And nearly the nearly 1,200 pounds of fentanyl has an estimated street value of about $230 million and is said to be a hundred times more potent than morphine. And there's a new dominant Omicron sub-variant here in the U.S. So-called BA5 accounted for nearly 54% of the country's COVID cases as of Saturday. BF5 appears to evade protection from both vaccines and previous infections more easily than its predecessors. But guys, you know, that's a lot of folks who are testing officially. True. A lot of folks are just tested at home, so you don't even know which strain you've got.

I just found out I have antibodies, so I was all excited. Now my hopes are dashed. Seriously, we appreciated our Bertha Coombs. A head on Power Lunch with nearly all COVID restrictions lifted, live events are making a comeback. But the return to normal is not trickling down to the event stocks this year. Live Nation down 30%. This is exactly what we were talking about with the casinos a moment ago. We will speak with Live Nation CEO next.

Welcome back to Power Lunch. 90 minutes left in the trading day and we want to get you caught up on where we are in the markets for stocks, bonds, commodities overall plus a check on the return of live events later on this summer. Let's begin with a check on the markets. All the averages, by the way, are higher with the NASDAQ leading the way, markedly so. This would, by the way, be the fourth straight gain for the NASDAQ up more than 5% in just the past week. Chip names are making some of the biggest moves. Samsung out with its results in Korea overnight.

Some positive signs there about the health of the industry, maybe. And then we want to show you the rebound in some of the hard hit stocks like a firm, like Crocs, Moderna, and Beyond Meat, all up at least 15% in a week. All those still down at least 30% so far this year. 75% declines for a firm overall. So keep an eye on those stocks. Turning now to bonds, yields are moving higher today, but the 10-year note yield remaining inverted with the two-year. Rick Santelli is in Chicago for us to go through all those deep. It details Rick, the fixed income market is still very much a fixation with that big recession narrative still floating around.

It absolutely is. The only thing that isn't keeping par with the narrative of recession are interest rates themselves. We both know that two year and 10 year dabbled very close about three weeks ago on an intraday basis with three and a half percent. But as you look at a two day of twos, yes, we have taken off. We've done our going into jobs numbered two steps. We always seem to sell off pushing yields up. No exception. Look at a two day of tens. Look at how much ground we've covered. About 25 basis points low to high.

It really has been a rather big move, especially considering at $235,000, as Kelly was referencing earlier, we're basically at a six-month high on initial claims, even though the numbers are small. It's a very flat line that goes from basically slightly under $200,000 to $235,000. but even though historically they're low, the market pretty much avoided that. As a matter of fact, as you look at a five-year break-even, right now it's under 260, so 2.6%.

It's at the lowest it's been since September of last year. And if you look at the CRB index, it's the lowest since February of this year, which is painting quite an interesting picture going into the tomorrow's jobs report, because most likely jobs are slowing, but exactly how much, and after Joltz being stalled, still a lofty 11 million plus, it's going to be a very important number in the morning. And one thing that really has been on a tear of late, that's the dollar index. As you see here, it is on pace for once again another fresh, high close going back to 2002, which means the euro currency, which is about 58% of the dollar index,

is also on its way to a fresh 20-year low against the greenback. Dom, back to you. Traders jockey in for position ahead of that big jobs report. Rick Santellin, Chicago. Thank you very much for that. Oil, by the way, also bouncing back in a big way today after a big drop yesterday. Still, though, down 13% in just a month. Let's get out to Pippa Stevens for those numbers. Pippa. Hey, Don, well, I'm starting to get some whiplash from all of these commodity moves. Oil is now back above $100 after settling yesterday at the lowest in nearly three months.

But natural gas is the big mover today surging more than 13%. You can see that big move there at 11 a.m. That's when the last. latest inventory report dropped showing a lower than expected build. EBW analytics, adding that on a technical basis, Nat gas was near oversold levels. But despite this jump, still down more than 30% in the last month. Turning to gasoline futures also on the move up 5.7% today, still in the red for the week, so we could continue to see some relief at the pump, but a lot does depend on the direction of oil. The energy stocks jumping, APA, the top performer with Marathon Oil and Diamondback, also on the move.

New energy in the green as well. The Invesco Wilder Hill Clean Energy Fund, ticker PBW, up 7% with solar stocks, up about 5 and 3 quarters of a percent, led by Jinko Solar, Array Technologies, and Canadian Solar. Dom. Stevens, thank you very much for that. Many people this summer are attending a concert for the first time in years. Julia Borsden is live in Sun Valley with the CEO of Live Nations to talk all about whether that trend could continue.

Julia, I want to hear all about it. Can we still go to concerts and are they a big thing this year? Well, you can certainly go to concerts and we're going to be talking about that now with Live Nation CEO Michael Rapino. Michael, thanks so much for joining us from here in Sun Valley. Thank you. So there's a lot of conversation here in Sun Valley,

the Allen & Coe Conference, about recession risks about the health. We'll go back out to that interview in just a moment there with Julia in Sun Valley, bring you up to speed with all the latest that's happening at Live Nation. Also coming up, this week's working lunch, John Ford bringing us his interview with the CEO of Coursera. Is it back to school time yet? It's getting close there.

The lists are already in my house. Mine too. I only went shopping. Trapperkeepers and everything. Lunchbox? There you go. There you go. You're little.

Welcome back. Let's get back out. to Sun Valley where our Julia Borsden is sitting down with the CEO of Live Nation. Julia? Thanks so much, Kelly. That's right. I'm here with Michael Rapino. Michael, we were talking about what you are seeing in terms of the health of consumer spending. You have a global view of what's going on right now in terms of ticket sales. Are you seeing recessionary trends? You know, we're not. You know, we've had such pent-up demand. Both in Europe, America, Australia, we're headed for a record year right now as of this weekend. I checked all our latest data. People are showing up 90% rates.

Our ticket sales are double digits over 2019. And the one factor we like to see is what are they spending on site. And those are up 25% since 2019, which was a record year. And that's spending on tickets or spending in all the ancillary stuff? Oncillaries, when they're there having a beer, having a hot dog, you know, do you see any pullback in that? We haven't yet. We're seeing record levels when they're coming there to have fun and drink and enjoy the night. So we are hearing a lot about ticket prices being on the rise. Obviously, we talk a lot about inflation, about gas prices being high. Can consumers absorb these higher prices for tickets if they're paying so much for everything else?

Yeah, I mean, there's always the top end ticket that gets the press. But a ticket and a concert ticket is still really affordable. Average ticket price is $35. You can't have a dinner for that. You certainly can't go to a Laker game. So of all entertainment options, it's affordable. Now, ticket prices at the top end have gone up, but that's to make sure that the artist starts to participate in some of that pricing dynamic versus the secondary market.

You look today, the market is still hot on the secondary business, which would indicate pricing still is below market. But we still believe that the artist should gather more of the upfront costs, but we also think make it affordable is right. So it seems like there's been a lot of pent-up demand, A lot of concerts that were delayed until this year and a lot of pent-up demand from consumers. But once you work through that and digest all that pent-up demand, do you think that concert going is going to continue at pre-COVID levels,

or do you think it'll drop down below that? Yeah, we're looking at 2023 right now with about 85 tours booked. That would put us on another record year. So we think that, you know, overall, historically, concerts are an 8 to 9% growth business. We think that's going to continue. So we don't think there's an air pocket. We think we're going to be back to a continual growth business as we have for the last 30 years.

Well, certainly a lot of optimism here. I'm sorry we're going to have to leave it there. I know you just renewed your contract for five years, so we hope you'll come back and talk to us more maybe after earnings. Michael Rapino, thank you so much for joining us. Kelly, back over to you. Rec, that's what I heard was record, record strong consumer. Julia, that was great. Thank you very much.

Now, in a shifting economy, workers need to acquire new skills to stay relevant. And today, John Ford brings us up close with the CEO leading a public company that's trying to change norms in ed tech education technology. Yeah, Kelly, that's right. Jeff Maggiangalda is CEO, of course, Sarah, $2 billion market cap company that offers online classes, certifications, and degrees. Ed tech companies are having a difficult few quarters lately since demand for classes tends to be weaker when jobs are plentiful. But Jeff is sticking to the long-term vision. It's a discipline he needed at financial engines, one of the first robo advisors where he was the founding. CEO. That company almost failed in the dot-com bust. In fact, close friends advised him to quit. Every year, a couple friends and I go to Vegas, and we're very honest with each other.

We're good friends and we're mess around, but we're honest too. We love each other. We're honest with each other and we try to support each other. And in that spirit of support, the one of them said in Vegas, they said, Jeff, you're the, you're the, you're the definition of the living dead. will not give up, but you're not going anywhere. You are too talented to just ride this dead forks. I don't have any mixed metaphors I can put out with it. But they were like, they said, it's really nice to keep trying, but at some point, your next employer is going to question your business judgment. If you stay in this dying opportunity, people are going to say, you just have lost all judgment. So I still didn't give up, but there's a downside of being too persistent

in sticking with something for too long. And maybe I was past that point, but it ended up working out. It did work out. He didn't give up, figured out the Robo-Advisor model. Financial Engines later went public, was acquired for $3 billion. And today, Jeff is working on education, not finance. And he says it's possible for workers to learn digital skills that will make their careers more inflation-proof.

He's trying to position Coursera as a relatively low-cost way for them to level up. What I will say is over the last three years, we've been working with McKinsey to identify jobs that don't require a college degree or any prior work experience that can be done online and the skills can be done online. And McKinsey's estimate is like, you know, 75 or so of these entry-level jobs are there if you can get skilled for them. And generally speaking, you know, they pay pretty well. And even the 20 that we, the 20 professionals are the biggest we have on Coursera, there's like 1.6 million job openings today in the U.S. So there's definitely a lot of job opportunity for people who've got those skills, and you can at least learn the skills online.

Yeah, and tomorrow's jobs report will give us insight into last month's labor market, but the health of tomorrow's labor market will depend in part on whether there are enough trained people to do valuable work. Jeff at Corsair trying to figure out the right models to teach people quickly and remotely. And in many ways, we're still in the early days of online learning. And just today, the Wall Street Journal had a feature piece about schools like UNC that are using third parties to provide online courses that are not up to their standards and leaving some customers feeling a little burned. So there still seems to be a huge opportunity,

just like for remote work, for remote learning. And I think a lot of change still to come. Yeah. Part of Coursera's business is degrees business, which they work directly with the universities to bring their caliber of class into a digital environment, which increasingly is also what students are demanding. I mean, professors want them in class,

but students don't want to come to class. It's like the hybrid version of what's happening in. You know, on Wall Street, and banks and all kinds of employers. How do you meet them in the middle? What's crazy is another headline that we see all the time, especially approaching Jobs Friday, is the number of job openings for every, you know, unemployed American. Two of them, right now, roughly. And you talk about the idea that you can't just make that comparison because there's a skills gap.

The whole idea of Coursera and those models is to close that skills gap, right? Because you can do the training on your own schedule, on your own free time, and then you can find that skill set that gets you the high. higher paying job. Is this a bigger picture macro theme that you think Coursera is going to go after in the coming years closing that skills gap? It is, but it's also going to take policy because you think about it. If you're going to learn online, you need a home. Housing is increasingly expensive. You also need a reliable broadband connection because video is going to be an important part of that. True. So that costs money. So in an inflationary environment where housing is scarce,

where there are all these different kinds of pressures, how important is it for different governments and they operate Coursera outside of the U.S., of course, as well. How important is it to create that workforce of the future and what kind of policy needs to be in place to enable it? Still not free. Yeah, nothing's more annoying than in the middle of the important point and the video bleeps out. We know what that's like around here. Sorry, Live Nation. Yeah, exactly. John, thank you very much, our John Ford. All right, well, coming up on the show, the Green Machine, a strong dollar can be a huge boost to some domestic stocks will lay out which ones you should buy or sell.

That's coming up next in our three-stock lunch. Welcome back to Power Lunch. Time for today's three-stock lunch with the dollar index at multi-decade highs. CNBC Pro and their subscribers are looking at some of the stocks that could potentially benefit. Diamondback, Southwest Airlines, Alta are all on that list. All three, by the way, get more than 80% of their total revenues from within the demand. United States have projected revenue growth of more than 10% this year, are beating the market in 2022, and have a buy rating from a majority of analysts that cover them. So all of those factors, those criteria, are met with these three stocks. Let's now bring in Scott Nations,

President and Chief Investment Officer of Nations Indexes. So maybe we'll start Scott with this Diamondback Energy trade. Consensus trade for energy overall. Is this one that you'd be a buyer or seller of, given the dollar headwinds or tailwinds that you see. Dom, I love that. Let's cut to the chase. I'd be a buyer of Diamondback. Even though it's 28% below it's 52-week high, now that crude oil is rebounding, it's up 5% today, back above $100 a barrel. That's going to be great news for somebody like Diamondback. You know, energy is still insanely expensive, even though crude oil is pulled back a little bit. Let's look at some of the technical. The one technical I like to pay attention to is relative strength index. So even though I'd be a

buyer of Diamondback, from a momentum point of view, we can actually buy it at a relative discount, RSI of 38. But it all comes down to earnings. And the expected EPS for the current year for Diamondback, $25.15 a share for stock that's trading at a buck 16. So we're talking a single digit PE ratio. We know that those sorts of earnings are not going to continue so that PE is going to come back down to Earth. But again, energy is going to be insanely expensive for the next, insanely profitable for the next couple of years. All right. So you're a buyer of what about Southwest? Southwest is a very different animal. You know, they're hurt by the fact that energy prices are so much higher, even though they're best in the business when it comes to hedging.

They're only 34 percent, about a third below their 52-week high. So they've not been hurt that badly. but every airline is being killed by capacity constraints. We saw more people going through security in the United States, airport security in the United States on the 1st of July, than they did the 1st of July in 2019. So we're all trying to fly now on Friday. 29% of loves that is Southwest flights were delayed.

So they have a real problem as far as capacity. It's the best name in the airline space. So I don't want to be a buyer. If I did have a loss in Southwest, I would be harvesting that loss. I would be harvesting it. I would be waiting well more than 30 days to make certain we don't have a problem with wash sale. But then I would reevaluate.

And if I wanted to get back in the stock, if I still liked it, then I would be a buyer. But right now I think it's a sell for tax reasons. All right. And the last one here is Alta Beauty. We're talking retail for personal care and cosmetics and perfumes and colognes, that sort of thing. We're getting out more, Scott. we want to be more social post-pandemic. Is Alta Beauty one that you'd want to buy?

It's already down 7% so far in 2022. And Dom, we all want to look good when we go out. It got killed. This company is a great story, a great niche, great brand, but it got killed in August of 2019 well before the pandemic because of some really disappointing guidance. At the bottom of the pandemic low is down 60%. This all started with EPS disappointment.

It's now bounced back. the way, made a new all-time high at $1.00 a share. But the problem is inflation. I agree that the stores and the products are seen as a luxury. I think they're going to have a really tough time with inflation. They may end up being the first thing that people cut. So, again, I love the store. I love the brand, but it's just not the time to be long, Alta, and I would be a seller. All right. Those three stock picks on our three stock lunch. Scott Nations, Nations Indexes. Thank you very. much, sir. Have a good day. Thanks. So much for dollar beneficiaries. There you go, right? We'll be right

back on Power One. Welcome back some breaking news of verdict in the trial of former Theranos, C-O-O-Sunny Balwani. Steve Kovac has the news for us. Yeah, that's right, Kelly. Sonny Balwani is guilty on all 12 counts of fraud. That includes fraud against both patients and investors of Theranos. He is up to 20 years sentence when his sentencing comes. You'll remember in January, Elizabeth Holmes, CEO of Theranos, she was found guilty on just four counts, but all related to fraud against investors. None of the counts for fraud against patients. She was found not guilty on all of those.

But in this case, Sunny Balwani, guilty on all counts against both investors and patients. Back to you guys. That's what we got right now. So, Steve, I mean, you've been following this for a while. We go all the way back to kind of like the 2017-2018 range with regard to. Earlier than that even. Right. when some of these investigations started to come out about the viability or the actual use of Theranos' products.

So you look at the counts that were then kind of found guilty on for both of them. Does it in your mind kind of imply that the jury or, you know, just the American public in general, buys this notion that Elizabeth Holmes was saying that she was manipulated in some ways, that there was kind of like a puppet master, so to speak, and all this in Sonny Balwani. Does this then mean that kind of that story is true in the mind of those people who are kind of reaching a verdict on this? Well, in the mind of the jurors, they're both guilty, right? I mean, during the Elizabeth Holmes trial, which happened earlier last year and concluded at the end of the year, she was trying to throw Sonny Bolani on the bus.

Remember, they were romantic partners for much of the time. They were running the company together. She made claims of sexual abuse and so on and so forth trying to paint him as the abuser there. But no, he was found guilty in all these accounts, and she was found guilty. on four of the counts, and they both will get sentencing up to 20 years. I think Elizabeth Holmes, she's scheduled for sentencing in September dumb. Wow. All right. I mean, who knows? This could still go on. There could be more left to come.

Sentencing remains a major discussion point. Steve, thank you, our Steve Kovac. Markets at Session Hives, everybody. Thanks for watching, Power Lund.