Power Lunch - Cause For A Pause?, and Teed Off 6/7/23

Episode Date: June 7, 2023

The S&P 500 is near 10-month highs, but next week’s Fed meeting is looming over the markets. Will the FOMC pause, or press on?We’ll get the take of a former Fed official, and break down what it all means for the markets and economy.Plus, reaction to the PGA Tour-LIV Golf merger was swift, and sometimes angry. But if fans and sponsors eventually look past the Saudi money, could it soon come for other U.S. sports teams? We’ll explore. 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, everybody. Come on inside, get some fresh air. Alongside Kelly Evans, I'm Tyler Matheson. Coming up, the S&P 500 near 10-month highs, but the Fed meeting looming over the markets, that one's next week. It's a week away from the next decision. So what will the Fed do? Pause, press on. What do you say? We'll get a take from a former Fed official and break down what it means for the markets. Plus, the mega merger that shook the world of golf reaction was swift, sometimes angry, but if fans and sponsors eventually look past the Saudi money, could it come for teams in big U.S. professional sport league, the NBA, the NFL, MLB, or hockey, Kelly? You wonder. Thank you, Tyler. Hi, and let's get a check on the markets before we go any further here.

The Dow's up 65 points. The S&P's still down 13, right at 427. It was up at 429, almost above 4,300 earlier in the session. hasn't done that since last August. Nasdaq, by the way, still down about 1%. Let's look at Netflix shares higher after JPMorgan raised the price target to 470. It's currently at 402. They're saying the password crackdown can drive growth. Wells Fargo also raising their target to 500 per share. Campbell's Soup falling after beating on earnings, but disappointing on guidance. They say inflation is slowing. And the CEO telling our Sarah Eisen not to expect deflation anytime soon, but the 7.5% drop probably reflects some margin compression concern. investors worry they can no longer pass along prices. And shares of Manchester United are higher as

a Qatari shake is reportedly submitting a new bid for the team. Now it's only up 2%. But still, this has been a play to watch. Tyler. All right. Thank you very much, Cal. So we'll next week bring a skip, a hike, a pause in interest rates. Some Federal Reserve officials signaling it's ready to end its run of 10 straight increases, despite inflation still hovering near 5 percent, and a surprise in unemployment last month. Job growth was strong, but unemployment moved up. Treasury Secretary and former Fed Chair Janet Yellen had this to say about the central bank and the economy today. I see a path to bringing down inflation while maintaining a strong labor market. And I think the data we've seen recently and over the last year suggest we're on the path with those characteristics.

Thanks. Well, let's bring in Robert Kaplan, former president of the Federal Reserve Bank of Dallas. Mr. Kaplan, welcome. Good to have you back on CNBC. We're delighted to have you here. I'm going to get to the monetary question in just a minute, but I also picked up on something in one of my notes, and that is that you seem quite concerned that the banking crisis that sort of seemed to blossom in March is not over yet, and that there may be more troubles ahead. Where will it show itself? How and why do you believe this? I think the headline making part of the banking situation is probably behind us. I think we're now in a position, though, where by and large, there's less capital in the banking system than we might have thought two or three months ago.

And that's heavily because of the mark-to-market due to these asset liability mismatches. Some banks have had withholding AAA security. and mortgage backs. And so what banks are doing now more quietly is shrinking their loan books, disciplining their loan books, because they have less capital than we may have thought two or three months ago. And they're also aware that we're heading into a credit cycle. And also there's always a risk with liquidity being drained from the system that deposits will continue to decline. And so it's not a three alarm fire. I would call it more of a slow bleed, but the impact is it means small mid-sized businesses are going to have

a harder time and are having a hard time getting loans, commercial real estate's having a harder time getting loans, because the banking system is trying to guard its capital and is being much more cautious about making new loans. So what you just said there suggests to me, in other words, that banks are being more cautious about making new loans, they are shrinking their loan book, they may be applying tougher standards. It suggests to me that you think the banking system is doing some of the work of the Fed with respect to restricting money supply and pressuring inflation downward. Do I have that right?

Yeah, that is true. Here's the issue. Big companies like the S&P 500 don't really borrow that much from banks. It's small, mid-sized businesses that are very dependent. on small mid-sized banks. So, yes, you're right. This is doing some of the feds work for it, but it's disproportionately affecting

small mid-sized businesses. All right. So it seems to me, and I'd be so curious, you know, the leading indicators are all pretty clear. And I think Jeff Gunlock made comments like this as well,

that they're telling us a recession is coming. And I understand people, you know, say, well, it's taken a while. That doesn't mean it's coming. Should the Fed be talking more about leading indicators than it does about employment and inflation? Well, it should be looking at all of those things, and it should also be talking intensively to contacts, because at these points of inflection, in where we're getting some change in the

economy, data is lagging. It's backward looking, and you need to be more forward looking here. That's the reason why I think it'd be wise to take a hawkish pause in this meeting. You want to see how the refilling of the Treasury General account affects liquidity. We have cross currents between the good sector appearing to be weaker, but the service sector being very, very strong, also monetary policy acts with a lag. And so, yeah, I would want to be more deliberate here and really emphasize being forward-looking. Data dependence is more backward-looking. It's a part of the puzzle, but it shouldn't dominate the thing.

A hawkish pause would give the Fed pardon on this day of bad air quality, a little bit of breathing room, I suppose. What does a hawkish pause mean? What does that phrase connotate? It means what I'd be saying is we're not going to take action in the June meeting, but that's within the context. We're in the middle of a tightening cycle. We still have a tightening stance.

You should be prepared. We may have to keep rates at this level for longer. And we may have to increase rates, 25 or 50 more basis points or something more. And I think the market will understand that. But it gives the Fed time to digest. And it gives time to let the dust settle and see how some of these cross currents are going to play out. And I think it also limits the risk of making a mistake. I think at this stage, we're down to the last X number of moves.

You want to be more deliberate, maybe slower, and I think it gives you a greater chance of not making a mistake. Well, that is a very persuasive argument. Robert Kaplan, thank you, as always, for being with us today. We appreciate it. Good to talk with you. And speaking of the Fed's big decision, make sure to tune into a special edition of the Exchange and Power Lunch live from Washington, D.C. That is next Wednesday starting at 1 p.m. Eastern. We're going to merge power lunch and the exchange, just like live in the PGA, right, Kelly?

I mean, I hope it's not like that. Maybe, you know, it could be lucrative. I don't know. From the Fed to the markets, markets are showing their resiliency as several headwinds from the debt ceiling of regional bank drama, the hawkish fed. Well, they've all become tailwinds over the past couple of weeks. Our next guest thinks we've seen the last of the rate hikes in this cycle and that more mean reversion for the market could be coming. Art Hogan. I like this take. Okay. So you're not in the skip camp, which says they skip and keep going.

Yeah, I think, you know, President Capital just did a great job talking about what's happening as an offshoot of the regional banks, right? And so we knew this was going to come about. And so clearly the Fed always wanted to see credit heading. They didn't want to do it by having four banks going to the waves, but it's been thrust upon them. That probably equates to 50 basis points in hikes. And they have to calculate that into where they think their terminal rate is. If you take the new Treasury issuance, that's likely to be a drag. You'd call it 25 basis points. So they've already got 75 basis points that they didn't have to do. On top of that, owner's equivalent rent is about to be recalibrated this month. And when that catches up with real real estate values like Redfin and Zillow that have been telling us since last July, real estate values are coming down, you're going to see a CPI and a PCE that's got a three handled by August. But they're going to go, you know, course, four and a half percent and wages, you know, unless the labor market buckles, they're going to be concerned.

going to stay too high. I'm curious, though, about the market. You don't sound like you're chasing the NASDAQ here. No, I think the NASDAX's done a nice job of leading here because it's been what you go to while the Fed's still raising rates. When the Fed gets to the place where they've stopped raising rates, the market tends to be, let's find out what we missed along the way. And what did we miss?

We missed the entirety of the Russell 2000, which, oh, by the way, is starting to catch a bid. We missed everything that's not technology, communication services, and to a certain extent consumer discretionary, which is mostly Tesla. That has been the leadership, right? And it's likely overdone to a certain extent. And now you get that meanery version or catch-up trade, which is small and medium cap. That's why the Russell II is catching a bid in June. I think you're going to continue to see the underperforming sectors like health care and energy

start to get some sponsorship and start to catch up. And that happens every cycle. The Fed Titans. Everyone's flocked into that sort of mega-cap harbor of safety because they've got Fortress balance sheets, defendable cash flows. And I think that that's a bit stretched. Quickly, why does new treasury issuance of a trillion dollars or something like that? Why does that do some of the work of the fact?

Well, the theory here is that that crowds out money that otherwise would be going. It absorbs money. But if you actually look at the repo market right now, that's going to be absorbed pretty easily. I don't think it's going to be a headwin for equity market. So let's get to equities and zero in on a couple of names that you have your eye on right now. Right. So the first is T.J. Max. Right.

So a retailer that's got the perfect size footprint in a slowing, economy because the treasure hunter and the person that's a value shopper continues to go there. So it's got a cult-like following. They continue to be a beneficiary. What does in my house. Yeah, exactly, right? And they replenish their inventory so often because big box stores that are over-inventory, that's their discount channel, right?

So they do very well. Another name that sort of pops up on our screens now is John Deere. And John Deere is going to be the beneficiary of all of the money that we're going to spend on infrastructure on top of the fact that they're making farmers more productive. with the technology that they have. And I think it's an incredible name training at a very reasonable valuation. Even though you're concerned about the economy overall,

wouldn't hurt ag prices, hurt, you know, things like that? Well, you know, hurting ag prices might not be a bad thing for us because that's been a major input to the inflation, right? So, but it's much more of the, how do you become more efficient as a farmer? Use less water.

Use less fertilizer. It's the targeted approach. And John Deere is able to do that with the latest technology that they're rolling out. All right, Art. Good to have you in the house. Great to be in the house. Thank you.

All right, fantastic. All right, coming up, the uproar over the PGA, making a deal with LiveGolv, reigniting the debate over so-called sports washing. Will consumers overlook the moral issues surrounding Saudi Arabia's investment and live? Not just fans, but sponsors as well. But first up, we're going to be joined by former FDA Commissioner Scott Gottlie discussing the potential health impact of the smoke that is moving from Canada's massive wildfires all down the eastern sea.

board. Getting so bad here in the New York market that the FAA, FAA is pushing some flights in the tri-state area, putting a pause on it. Plus, we will discuss Pfizer taking on the federal government. Power Lunch will be right back. Welcome back to Power Lunch. Smoke from Canadian wildfires has left the northeast U.S. engulfed in a thick haze, pushing New York City to the top of the list of global cities with the worst air pollution on Tuesday. The FAA briefing briefly issuing a groundstop at New York's LaGuardia Airport, with many schools and towns canceling outdoor activities for kids. So we wanted to know the real health impact. Joining us to discuss is Dr. Scott Gottlieb, former FDA commissioner and a CBC contributor. It's good to see you again, Dr. Gottlieb.

And is this just, you know, any exposure at the time you want to try to minimize, or could exposure create, you know, problems down the road? You certainly want to minimize exposure. Right now, the Air Quality Index in New York City is about 220. Oftentimes in California, when they experience fires out there, they'll reach in the 300s. And so this isn't unprecedented. It's about equivalent to what you would see in a smog-filled city like New Delhi or Jakarta or Beijing at times. A lot of the impacts we know are short-term. People who have pre-existing health conditions, cardiovascular disease, respiratory conditions, those could be exacerbated by exposure to the smoke and those individuals should try to limit their

time outside. We're a high-quality mask, a K-N-95 or N-95 mask can reduce the impact of the smoke. There's not as much that we know about the longer-term impacts of exposure. There's some data, some literature from studies that have been done in California showing that there could be some risk of, for example, to pregnant women, the risk of premature delivery. A lot of those studies are speculative, they're not really definitive. So we don't really know a lot about the longer-term impacts to people who don't have pre-existing health conditions that could be exacerbated by exposure to smoke. Right. And I'd have to imagine that any problems like you mentioned would be from, you know, direct exposure for long periods of time versus this?

Well, we're talking about short-term exposure. Are there long-term impacts from short-term exposure? Because this is going to be a short-term exposure. And that's where we don't have as much data, that there are long-term impacts. Again, there are some studies that have been done in California. They've showed, for example, some spirometry reductions in people a year out from short-term exposure, exposure over the course of a week, for example. But there's been very few studies that have looked at that. And I think for most individuals, what they should be concerned about is going outside exposing themselves, for example, extended periods of time outside, so it's not a good time to be outdoors exercising, for example. If you have health conditions, if you have respiratory conditions, cardiovascular disease, probably emergency room visits will be up because people who do have preexisting health conditions who are exposed to the smoke outside will have some impact from it.

But for most individuals who can limit their exposure, there really shouldn't be any long-term impacts from this episode. And the people who should limit their exposure would be people with pre-existing respiratory conditions, asthma, may be people. above a certain age with compromised breathing and so forth. Those are the people who are most at risk here, right? And younger individuals, small children, because their airways are more susceptible to the impacts of smoke.

I think everyone should try to limit their exposure. Obviously, not everyone can, but this isn't a good time to be outdoors jogging, riding a bike. It's only, this is going to be hopefully temporary. It's a couple of days. It might extend into Friday. We'll see how it goes into next week. And so to extent that you can limit your time.

outside. Close your windows? Close your windows? You know, people who have central air in a better position because they can filter their central air. People who receive their air from an air conditioning unit in the window, it's going to suck in some of the, some of the contaminated air. It's harder to filter. In those circumstances, you should try to create a room inside, maybe if you have a hepa filter, a room that's more filtered. For example, a bedroom. You might move a filtration unit into that room. Not everyone can do that. The other. thing people recommend is trying to reduce reductions in air quality indoors. So it's not a good time to be smoking indoors or lighting candles doing things that might contribute. You have a

substantial reduction on the smoke that gets into a home on the order of 30 to 40 percent, but some of this smoke will still get into households. Dr. Gottlie, I want to ask you about Merck's lawsuit against the government over the Inflation Reduction Act, which they're saying is unconstitutional. What if they're right? What are the consequences? And are you surprised that they have taken this to such a level? I'm not surprised that there's going to be litigation. They'll probably be out of lawsuits filed. Look, there's a lot of components of this legislation that really create questions of whether

or not the companies are being afforded due process. For example, it was the mechanism for setting the prices was explicitly exempted from judicial review. The agency, centers for Medicare, Medicaid Services doesn't need to go through notice and comment rulemaking like they would for any other regulatory process. They even put out a guidance saying that the companies, when they go in to purportedly negotiate the price with the agency. I really think the agency will be setting the price. But when they go in for those discussions, the documents that get created as part of those discussions need to be destroyed.

And so that's an indication that's CMS. The government doesn't want to be bound by prior precedence. They don't want companies coming in and saying, well, you did this last time. So you've got to destroy your documents and you can't talk publicly about the context of those negotiations. So it raises real questions of whether or not due processes being forwarded to these companies. And that's the basis of this and other lawsuits I think you're going to see. Yeah, I mean, also free speech rights. And they're basically just saying that, you know, these forced sales coerced by the threat of penalties the government has admitted no manufacturer could ever pay will deprive mark of possession and its title to personal property. I mean, they're basically saying, in other words, that it undermines the entire viability of the private market's ability to set a price they think is fair based on a product that they're creating. That's right. And I think you're going to see other lawsuits attack other aspects of this, of this legislation. So this will be checking.

challenged in court. Now CMS is under the obligation to implement the law while this litigation hangs over them and creates a lot of uncertainty going forward. Yeah, absolutely. Dr. Gottlieb, thank you for your time today. We always appreciate it. All righty. Up next, there's the sunbelt, the rust belt. Now the battery belt, how the Inflation Reduction Act is helping to reinvigorate domestic manufacturing. We'll highlight the company's benefiting when power lunch returns. Plus, speaking of batteries, let's get a quick power check on the S&P 500 as we head to the break. On the positive side, Warner Brothers Discovery on the back of its CNN CEO departure news. On the negative side, Campbell's Soup reporting decent

results. Investors likely disappointed they weren't more positive with guidance. Power lunch is back in two. All right, welcome back to Power Launch, everybody. Treasury yields, they're rising, nearly 3.8% on the 10-year note. Let's get to Rick Santelli for a check-in with more. Hi, Rick. Yes, interest rates indeed are rising. And they didn't necessarily pay attention to some of the data points to get up there. Let's go back to the 8.30 Eastern data, shall we?

We have the trade deficit. And, well, let's look at the chart. If you go back, what you need to see here is that pre-COVID, the biggest trade deficit we had going back to inception at 1992, a recordkeeping, was in August of 06, it's $68 billion. Today, well, today it was 74.6 billion. That's important, especially after China was supposed to reopen, and it did. The problem is, it's hard to tell.

Exports aren't really growing, our trade deficits growing. There was a time when globalization was more popular where China was exporting disinflation. Considering current dynamics, it seems like inflation is what we're going to be most likely getting. Choose versus tens on one chart. you could clearly see it. 8.30 Eastern didn't hardly move the needle. It was 10 o'clock Eastern that moved the needle. Why? Bank of Canada's surprise interest rate increase.

Really responsible. As a matter of fact, you can see it on the July Fed Fund Futures contract. It pushed the contract down, which raised the possibilities to over 50 percent now. For the July meeting, didn't have a huge effect on the June meeting, although it did move the market there. And finally, well, how can we tell what? going on with China. One way is to watch their currency market, whether it's onshore or offshore, both of them are trading at the lowest level against the dollar, meaning of the dollars higher

of the years. As a matter of fact, going all the way back to the end of November last year. Kelly, back to you. Thank you very much, Rick. There has been a building boom in this country, the Inflation Reduction Act spurring a boom in clean energy factory announcements. With the bill's credits looking to jumpstart broader domestic manufacturing, Pippa Stevens has more on this so far. successful rollout, PIPA. Yeah, that's right, Kelly, the IRA and its incentives have already had a huge impact. Upwards of $150 billion has been invested across more than 40 new factories since the bill passed in August. This includes everything from solar and wind to battery plants. Now, these facilities are all across the country, although we're seeing a concentration in the southeast as well as the Rust Belt, as this map from American Clean Power shows.

Now, some are even calling the region the battery belt. There are a few reasons for these new manufacturing hotspots, including proximity to the expertise and infrastructure of the steel industry, access to nearby suppliers, friendly business climates, as well as historically cheaper labor. Notable announcements include Album Arles' lithium processing facility in South Carolina, friars a battery factory in Georgia, as well as First Solar's new factory in Alabama,

and expansion of its existing factories in Ohio. Tyler Kelly. All right, Pippa, thank you very much. Pippa Stevens. Let's go now to Sima Modi for a CNBC News update. Hi, Sima. Hello, Tyler, good afternoon. Republican House Oversight Committee.

Chairman James Comer is taking the first steps to hold FBI director Christopher Ray in contempt. He released a resolution today, which takes issue with the FBI's refusal to hand over a document that allegedly describes Joe Biden accepting a bribe as vice president. The FBI says it cannot release the document because it is bound by Justice Department policy. Pro wrestling legend and notorious villain, the Iron Sheik, has died at the age of 81. He rose to prominence in the 1980s when tensions between the United States and Iran reached a boiling point during the Tehran hostage crisis.

His team shared the news on Twitter but did not give any details of how he died. Soccer star Leonel Messi is reportedly set to join the MLS, the Argentinians, legend is apparently joining into Miami after his exit from Paris, the St. Germain. The deal includes a collaboration from brands like Adidas and Apple, according to a report from The Athletics, something we're watching closely. Kelly. All right, Sima, thank you very much, Sima Modi. Ahead on Power Lunch, live golf becoming a live wire. The backlash over the PGA's deal, outrage over Saudi Arabia's human rights violations,

and fears that the PIF could invest more heavily in other U.S. sports teams. Details when we come back. Welcome back to Power Lunch, everybody. The Sports Word is still buzzing about the PGA Tour merging with Live Golf. It, of course, funded by the Saudi Arabian Public Investment Fund. Golf-related stocks, well, they've gotten a boost from the announcement, as you see right there, a Kushnet, Top Golf Callaway, up a little bit today. But many are criticizing the PGA Tour Commissioner Jay Monaghan for his about face,

following a long legal battle between the two tours. Worry McElroy, who became the face of the PGA, during this battle, says he understands the anger and confusion from fans. Of course. You know, I said it to Jay yesterday, you've galvanized everyone against something, and that thing that you galvanized everyone against, you've now partnered with. So, of course, I understand. It is hypocritical. It sounds hypocritical. Joining us now is Mark Patrickoff, founder and CEO of Patrickoff Company, a sports private equity and advisory services firm, and Americus Reed,

professor of marketing at U.Pen's Wharton School of Business. He's also a CNBC contributor. Marcus, let me begin with you. What interests me here in part is whether you think pro men's golf is now a damaged brand and whether advertisers and sponsors will see it as such and possibly withhold their dollars. Yeah, it's a great question, Tyler. I think that it's a bit early to tell. And oftentimes when we have these kinds of situations where brands can potentially get a little bit tainted, brands stand back a little bit and watch as the temperature unfolds with respect to the marketplace and consumers and whatnot.

So it's not clear right now to what extent this is going to have a negative impact in terms of people who would be interested in consuming the events of this new league, of course, and also watching on television. But I got to say, it's pretty powerful because it's one thing to sort of say, hey, we're a new league. We've got some cool new rules, new formats to sort of liven up the game. But when you add in this Saudi component and you add in potentially a narrative around a morally bankrupt, potentially leader and money going into that, consumers may not be able to decouple from their desire to participate. So I think it's going to be a bit of a wait-and-see game. And whether or not the fans will actually react to this will depend a lot upon the consensus

around what the players do and their voices as they come out because the plans, excuse me, the consumers are very much tied to the players, their favorite players. So the players will basically drive the extent to which demand may or may not get hurt in terms of the consumer side of things. So, Mark, let me sort of pose the same question a little differently to you. Do you think golf has a pro golf has a brand problem? And if not, why not? If so, how do they fix it? Well, for sure, at least today and yesterday, it's got a brand problem.

And, you know, I assume that Jay Monahan and a handful of others were calling Charles Schwab and Nike and Coca-Cola to check their pulse. And America says, obviously correct. It's going to be a while before we actually know what the fallout is. But at the end of the day, if there's one place to go watch golf, if there's one organization that puts these tournaments on, I think the fans ultimately are pretty insensitive to bigger issues. Fortunately, unfortunate for someone else to decide. But I think if that's where you go see, go watch golf, they'll go. That's the only place to do it.

Mark, take a listen to what Tillman Fertita told us when he was on recently about how many more American buyers there might be with sports teams trading where they're currently priced. Take a listen. 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, we're in numbers now that were middle class billionaires like myself can't afford them anymore. Mark, are we at a point where we could see the Saudis move from professional golf to other professional sports paying some valuations that are increasingly hard for a lot of people to

afford? You might. I mean, it depends on the sport and it depends on the sellers. I mean, I think there's going to be at some point of leveling out of these valuations. I mean, Silver Lake obviously has invested in Man United. They've invested in the All Blacks in New Zealand. So it's private equity and sovereign funds. I mean, institutional capital, Fratita's right. I mean, at the end of the day, there's only so many billionaires who can write. You know, I think at the end of the day, you have to put up a third of the purchase price of an NFL team. So you have to have two billion dollars of liquid assets. Not so easy to find people lining up to do that. Plus, take all the public criticism and the lack of control over the product. So it's an obvious evolution,

whether those organizations who have that capital can see the returns they need to make in this sector depends on if there are other buyers who will promote their investment. So at some point it has to max out. America, to pick up on what Mark was just talking about, is it only a matter of time before a foreign buyer, potentially a public investment fund from the Middle East or elsewhere, owns an American sports team. I don't believe that that kind of ownership is permitted in the NFL. I think the NBA has liberalized its ownership rules recently. I'm not sure about MLB and others. But is it only a matter of time before we see what we've seen, for example, in the premiership in England and in Perry San Germain, which is owned by a foreign owner?

It's a great question, Tyler. I think that following up on what Mark said, you know, it's a bit of a cascade, So this is a test case, right? So we'll see what happens as things evolve here. But I think depending upon how this reaction permeates the marketplace in terms of consumers, advertisers, sponsors, things like that, will determine to what extent this becomes kind of a normalized thing that we might expect to see in other sports. Now, in terms of the constraints, you know, that's a different set of questions. But in terms of the potential latent demand that could be generated in the return on investment here in terms of participating in. additional American sports teams, it's a bit of an open question because I think that, you know, again, folks want to enjoy their sports and not necessarily get involved in a lot of

the cultural wars and all of this stuff that's going on in the marketplace right now. So we're in a middle of kind of a social experiment, if you will, to see what the reaction is going to be. And then based on that precedent, others might look at that framework and think about how it might be followed with respect to getting involved in this kind of thing. Remember, when markets are hot, that's when people start, you know, want to sell their assets. So I think you're going to hear a lot of conversations now, whether those buyers are the right ones. Also think about the sponsorship space, not to dump on Mercedes-Benz, for example, but they're a brand sponsor for NFL stadium. So, you know, and there are a lot of cross-pollinizations of international companies that want to attach themselves to U.S. sports brands.

They can do it with ownership. They can do it their sponsorship. if you're going to create a dialogue or a social discourse around it, I think it starts to thin out the number of people who are going to be available to make those deals. Yeah. Mark, Americus, thank you both Mark Patrickoff and Americus Reid. Apple is officially venturing into virtual reality and the Metaverse. Will that be a help or a threat to legacy firms like Meta and Roblox who have already owned the space? Both stocks are down today, Roblox by 6%. Stay with us.

Welcome back to Power Lunch. It's time for tech check. Apple breathing some new life into the metaverse with that headset announcement. Good or bad news for existing players? Let's ask Deirdreboza. Hi, Deirdre. Kelly, it goes beyond the metaverse. This is something that is going to affect many other areas of tech. Guess what it's not artificial intelligence. It's connected to it, though. It's spatial computing. That's what Tim Cook talked about earlier this week. The interaction of computers with a physical world through a virtual or mixed reality headset, the gaming space. Look at how Unity and Roblox have performed this week. Unity, which got the shout out from Tim Cook, its stock is up some 13% week to date. Roblox, on the other hand, is actually lower. But I sat down with Roblox CEO, Dave Bazuki, who shared his thoughts on the new Apple Vision Pro. We're really excited because when a young game developer makes something on Roblox, they push it to our cloud. It runs on everything right now.

It runs on phone, computer, iOS, Android. It runs in all these languages. and VR is the most immersive way to experience Roblox. So it's another awesome platform. It's amazingly immersive, and of course we'll be there. Will you be able to play Roblox when the Vision Pro launches? Won't say that for sure. I'm looking forward to playing with one.

Have you tested it out yet or played? I have not played with one. But you guys are on Meta's version. We are on Oculus right now, and I think we've hinted that meta quest is not too far away. Right. And what is the experience? What do you hear from people who are doing there?

So here's what's really interesting. We have the vision that immersive 3D. You know, we have 2 million creators. They're making all of this immersive 3D content. Millions and millions of people are experiencing it. It runs on all devices. On a PC, it's your big laptop. On a phone, you're using pinch and zoom to use it.

The first time I went into VR, I played some older Roblox experiences. and it blew me away. Because you're right in there, it's more immersive than any other form of media. So the creator, the developer part, is really important here. Roblox may be best known for its gaming ecosystem, the many universes within the game, largely for younger audiences,

but it also does have developer tools for creators to build the next generation games in that new technology spatial computing. Bazuki says that developers are flocking to the platform, but Kelly, it may be worth noting Unity, that is an open ecosystem. It could have a head start here. Cook told the audience Monday at Apple Park

that thousands of Unity-based VR games will be supported at launch. And if this is really a computing shift, Kelly, we don't know that Roblox is going to dominate it in the same way that it has the PC. So it'll be interesting to watch what happens to the world of gaming when it becomes even more immersive.

Yeah, a lot of excitement for Unity. Deirdre, thank you. We appreciate it. Deirdre Bosa. All righty, coming up, why Amazon is lower, but helping send two other stocks higher a firm and Marvell rising on reports of new deals with the juggernaud, while Amazon is lower after Bernstein said its management needs some significant self-help.

There's plenty of those books on Amazon, if you need one. An all Amazon edition of Three Stock Lunch is on deck, and we want to take another look outside at the smoke and haze, blanketing the northeast. It is an amber day around New York City. Hasey and dangerous fumes from ongoing wildfires, Canada engulfing the skies over much of the northeast today, prompting serious air quality alerts in at least 13 states. Visibility getting so severe that the FAA has halted flights bound for New York's LaGuardia Airport.

Let's bring in NBC News meteorologist Bill Cairns. Bill, explain it to us and is any relief insight? Yeah, let's first give you the headlines. The headline is that what you're seeing right here, the smoke and haze in New York City, is the worst that's ever been measured in the New York City area. measurement started in the late 90s. So roughly about 24 years. This is the worst air than any New Yorker has been breathing. That's the first headline. The second is that we are now number one in the world for the most polluted air of any city that has measurements. That happened again last night. So this is two days in a row we've done that. So just in the last three hours, this plume of dark, thick smoke moved in over the New York City area. The street lights behind me

have come on. It got so dark in the last hour. And it's a little bit lighter now. So it looks like the concentrations come down a little bit, but the air pollution level now in New York City is above 300. And all that really means to anyone is that it's now in the hazardous category. The New York Health Department is telling people to be wearing masks if they're outdoors. Stay indoors if you don't have to because it's not just dangerous for the young or the elderly or people with respiratory illness. It is dangerous for everyone to be breathing in these particles right now. From these fires, by the way, that are roughly 800 to 1,000 miles north of here. It's pretty wild that it's this thick and this smoky from fire so far away.

We've had reports of hazy smoky skies as far south as North Georgia, Charlotte, North Carolina. But the really dangerous stuff has been over Syracuse, the Finger Lakes, Pennsylvania, Northern New Jersey, and right now over New York City. Tomorrow, this will be shifting southwards. So our friends from Richmond, the D.C., maybe even North Carolina and Raleigh, some of this is going to head to you. Hopefully it will not be as bad as what we're seeing right now. This is, again, unprecedented for this area. People are reporting that their eyes are itchy, they're coughing a little bit. It smells like smoke outside.

And it's not just outside. People in all these office buildings are now saying they can smell smoke inside. These are such fine particulates that if the windows are open, the doors are open, everything is getting inside. This is something that this area of the country is not used to, guys. And you just mentioned the problems at the airports too. Numerous problems, LaGuardia and Newark. And I'm sure JFK is not far away. Bill, thank you very much. And I have to say that the pictures do not do justice to just how dark it is outside right now at midday in New York City. Bill Carrens, thanks very much.

Time for today's three-stock lunch, folks. And all Amazon edition, first up, Marvell shares higher in pre-market today after reportedly securing an order for Amazon's second generation AI chip, now up only about 1% a little less than that. According to the Liberty Times, the production will begin in the second half of 2023. The stock up more than 60% year to date, soaring off on the optimism surrounding AI. Here with our trades, Quint Taitro, founder, president, Jewel Financial. What's your take on Marvell, Quinn? Well, we're bullish on Marvell, and, you know, today's action's not all that surprising. The stock had a 30% jump just the other day on using the term AI as a key growth initiative going forward. but the stock's still cheap.

I mean, this is the catalyst I think this stock needed. It's trading 25 times forward earnings. Those EPS are set to grow over 50%, very little debt. So I think this consolidation after the jump it saw just recently is healthy. We'd look to be a buyer on any pullback here for sure. All right, buyer on a pullback for Marvell. What about a firm, Quinn? It's surging.

It was up about 3% right now after they announced a partnership with Amazon pay. You like that? You like the stock? Yeah, again, I think that this is the catalyst. Some of these stocks just need to light a fire every once in a while. This is not a great fundamental play. However, it's got 20% share float short and that I think it will continue to probably press it higher. This pullback, you know, the tape seems real heavy today. So this selloff on the initial pop is not all that surprising. Would never chase a pop like that. But I think pullbacks in here, for a firm also like Marvell, I'd be a buyer. I think it trades higher in the near future on the short squeeze. All right, let's go to the granddaddy of all of this. Amazon stocked down about 4% are thereabouts today. Bernstein out with a note this morning calling on Amazon to refocus its capital, whatever that means. Meanwhile, Wall Street Journal reported that Amazon planning to launch an ad tier for its prime video streaming services.

What do you think of Amazon? Yeah, again, Tyler, the tape feels heavy. to me here. So the sell-off is, I mean, we've had a great run in a lot of these blue chip tech type names, Amazon being one of them. But if I had to go across the landscape, this is not a name that I just think is still incredibly of value. It's trading 50 times forward, set to grow those EPS by 60%. But still, we're not talking about a cheap stock, 60 billion in cash, which is great for the balance sheet. But this is, again, this is like a slow-moving blue chip now. And I think when you're When Amazon is under pressure, that's when you buy the stock,

but you certainly don't chase it after the run we've seen this year in this name. All right, there you go. It's going to have a pass on Amazon. Quinn Taitro, thank you very much. We appreciate it. Still to come. Another key story we're watching. Well, a couple of them.

Power Lunch will be right back. Welcome back, everybody. About three minutes left in the show. Warner Brothers Discovery confirming that Chris Licked is out as chairman and CEO of CNN effective immediately, stepping down after just a year in the role. He reportedly faced a rebellion among the network's talent and staff, thanks in part to poor ratings and some criticized missteps. This happened quite swiftly at the end.

It certainly did, and when he came in among the early moves was scrapping CNN's Plus streaming service. He had difficulty with talent management. His evening two anchors, Cuomo and Don Lemon moved, fired or moved out. And so the ship was hit below the waterline. Now they need to steady the ship very quickly with the election season coming up. All righty. It's going to be a difficult season for them.

New York City is suing Kia and Hyundai because it says their cars are too easy to steal, saying they don't have anti-theft devices and they're creating a public nuisance. Well, I don't understand, but I don't have a law degree. So let's bring in somebody who does. Danny Savalas is MSNBC's legal analyst. Danny, thank you for joining us. Do they have standing here? I mean, not standing, I guess, from a legal point of view, but does this make sense to you?

I have a law degree, and it doesn't make much more sense to me either. Here's why. New York City alleges all of this data and statistics on theft of cars in New York City and how dramatic it is and how out of control it is. It sounds like an indictment against New York City itself. You could ask the question for each of these allegations, yeah, but what are you doing about it? You're the ones in the law enforcement business. Hyundai and Kia have no control over law enforcement. But the theory of responsibility is that these car companies have fallen below the industry

standard in failing to install what are called immobilizers to prevent theft. And that failure has led to a rise in car thefts, which then lead to all kinds of things like car crashes. And they even include pictures of car crashes in the complaint, which tends to be a little on the melodramatic side. And you're dealing with the fact that this is not a case where a corporation releases toxic chemicals into the air, there's an intervening cause in the form of individuals who are committing car theft. And so New York City's interest in this would be the idea that, well, we've got to

investigate all these thefts, we have to run down stolen cars, there may be involved in car crashes and so forth. So there is a quantifiable cost or impact on us? Is that their standing? Yes, which is even more peculiar because New York City is, again, the only agency, the only entity that can be in the business of law enforcement. So they're essentially alleging, hey, theft is out of control in our city. It's this corporation's fault, and the corporation should pay us, New York City. No mention of whether the people who have had their cars stolen are entitled to anything in the complaint. You used to own a kid.

I like it. Nice car. Danny, thanks. Appreciate it. I somehow feel better that he doesn't, you can't make much more sense out of it than we can. Sign of the Times, everybody. All right. Thanks for watching Power Lunch, everybody.