Power Lunch - China’s New Year, but same problems, Re-Building a Bridge and Tesla’s Pricing Power 1/23/23

Episode Date: January 23, 2023

China celebrates a new year, but with the same problems. Will Lunar New Year cause new Covid concerns. Plus, Transportation Secretary Pete Buttigieg on improving the Golden Gate Bridge, and the FAA outage. And Tesla cuts price, will that spur EV adoption, or just start a price war? Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

Good afternoon, everybody, and welcome to Power Lunch, along with Kelly Evans. I'm Tyler Matheson, glad you could join us. China coming up today, reopening there, having a huge impact on the global economy. Will a surge in Chinese demands send prices even higher? Investors already pouring money into Chinese stocks and funds hoping to capitalize, or could the reopening go wrong as COVID? Kelly remains an issue. And Tesla stock jumping today, the company reports on Wednesday. Analyst watching those gross profit margins as they cut prices will look at the impact it could have across the EV market. But first, speaking of prices, let's get a check on the markets. Rally, big time today. The Dow up 338 points were near session highs. The S&P up 1.5%.

The NASDAQ not only up 2% today, up more than 8% so far this year. Chips leading the way. More on that coming up. And we begin, however, with China at this hour. and the portfolio repositionings that are taking place as investors try to get ready for what is forecast to be the great reopening. Sima Modi has that for us. Hi, Sima. Well, Tyler, that reopening story continues to fuel optimism. HSBC is recommending names beyond the Alibaba's and Baidu's of the world, pointing to names like Yom China, Budweiser, and Lenin, which is a sportswear company as more consumers start to travel. And according to Goldman Sachs, hedge funds have been adding more Chinese stocks to their portfolio. and that is reflected in the MSHI and FXI ETFs, both of these hitting new highs today.

Emerging Market Fund managers are also increasing their China exposure. So far, about one-third of emerging market ETFs have Chinese stocks in them. That is down from the 40% peak hitback in 2020. Now, even with the run-up we've seen in Chinese names, Kevin Carter, the CIO of Emerging Markets' Internet ETF, points out that China is still trading at 12 times earning. So that's cheaper than the NASDAQ, which is trading. at 22 times earnings and cheaper than the global MSCI in ETF, which is trading at 15 times, Kelly. Great point, Sima. Now, China's reopening. The question is, will it slow companies like Apple

from actually moving their supply chains away to try, you know, to places like India? So far, that doesn't seem to be the case. In fact, a prominent minister from India was quoted today saying that Apple is looking to increase this market share across the country from 5% to 25%. So it's sort of creating this rat race between these two 8%. Asian rivals India and China. So we'll see how this plays out. All right, Sima, thanks very much. Sima Modi reporting. It's been three years since China experienced a fully unrestricted lunar New Year celebration. And now that the Communist Party has jettisoned its zero COVID policy, hundreds of millions of people are expected to travel

for the holiday as the country essentially shuts down for two weeks. According to the Ministry of Travel, more than two billion passenger trips forecasted for the month, while domestic flights are running at 80% of pre-pandemic capacity. Next guest says the travel boom does not mean China is fully reopened or back, and that 2023 could be a struggle of a year for the world's second largest economy. For more, let's bring in Dennis Uncovic, partner at Meyer Uncovic and Scott, and a longtime expert on China. Dennis, welcome back. Is there the possibility under the relaxed COVID plans of Xi Jinping, that this Chinese new year

could be a super spreader event that could hobble the Chinese economy? I believe it is a super spreader event. If you take New Year's, Easter, Hanukkah, Labor Day, put them all together. This is the biggest time in which the Chinese

get together as a family. And I think you're going to see essentially between 400 and 600 million Chinese go throughout the country. This looks a lot like it did in the year 2000 when COVID started in Wuhan. And so I'm really very worried about the fact that so many of these projections that you're putting up there saying, China's back, everything's healthy, don't worry. Because when you look at the statistics, I'm concerned. Well, can you believe the statistics, number one, on COVID?

Can you believe the case counts that the Chinese are putting out? They said they had no deaths or 500 deaths or 50 deaths or whatever it was. And now they're saying that in the first month of the reopening or the ending of the zero COVID policy, they had 60,000. Can we even believe that? Well, I saw the same statistics. It's like 59,938. But there are some independent folks out there who were saying that the number of deaths in this period was 600,000 or about 10 times as much. The problem with the Chinese are is you never know whether the statistics are correct.

There isn't a lot of transparency there, and that's always been a problem. Years ago, when China, Xi Jinping said, we want China to grow between 6% and 8% per year. When you went down to the provinces at the end of the year, they always grew 6 to 8%. So frankly, I don't believe what I see. I don't know if they're wrong, but usually the Chinese want to put a very good loss on this. If I could say one thing that I think is interesting, the Guardian newspaper a couple of days ago came out and said in an interesting article that the government in China is now supporting positive news on COVID in the new year and that they're going to suppress what are called gloomy sentiments. And again, I really just want to know the facts. And I'm concerned about the fact that the Chinese are not very transparent.

No, we just want to know the facts. This has been going on for years now. Dennis, I don't know if you caught Stephen Roach last hour. You know, obviously he's been following in China for years. He said he's the more concerned about it than he's been in 25 years, really, of following developments there. And largely because of the demographic issue. And if that's the case, do you think that's motivating some of these sort of flip-flops on COVID policy where the leadership is just sensing they really need to generate GDP growth even at the cost? of this policy? China grew last year at their figures at 3%. I think it was less. They projected in 2022 that it was going to be 5.5%. And so it's like a daisy. It's sort of like Bill Murray in Groundhog Day. You know, you keep repeating again and again.

Well, they really have to jump-kick, jump-start the Chinese economy. And this is one of the ways they're going to do it. And I think they don't seem to really care how many people who are sick or will be affected. So let's cut to the bottom line, Dennis, in terms of investability in China. We began the segment by talking about people seeing promise in some of the companies in China, some of the funds, some of the ETFs. Are you saying basically that you just don't believe it? It's BS and you should stay away from China. if I was a retail investor in Del Rey, Florida.

Tyler, when I don't see facts that I can depend a decision on, I step back. And so my answer to you is, no, I don't think I'd be a big investor in China now. The earlier person right before me talked about how the growth in Apple is going to go from 5 to 25 percent in India. That's what major companies are doing around the world. They're not leaving China in droves, but they're saying, am I going to make a major major investment there? Is this going to be my future? I think the answer is probably not. All right, Dennis Unkovic, thank you very much. As always, good to see you. Thank you, my friend.

Kelly. Thank you both. And that's two major figures now telling us they're concerned about China just in the last hour or so. Let's get back to the U.S. economy. Transportation Secretary Pete Buttigieg in San Francisco today at the Golden Gate Bridge announcing a $400 million grant to upgrade the landmark and make the structure earthquake proof. Secretary Buttigieg joins us now to discuss that and where else money from the infrastructure bill will be heading. It's great to see you. Welcome. And first of all, why this landmark, what is the significance as far as our audience in particular, the investing public is concerned here?

What is the message you were trying to convey? Well, the Golden Gate Bridge is incredibly significant, not just, of course, because of its iconic status and its symbolic meaning, but also because of the very real and very important role that it plays moving people and goods around this area. Not only do something like 37 million passenger vehicles go over this bridge every year, but also over half a million freight trucks serving key elements in our supply chains like the link to waterborne freight at the port of Oakland. So keeping it in good shape is a matter not just of regional interest, but really of national interest. Now, just over three decades ago, there was the Loma Prieta earthquake. Golden Gate Bridge

stood strong, but the analysis after it's made it very clear that if a comparable earthquake were to strike nearer to the heart of San Francisco, this bridge would be at risk. So it's going through a seismic retrofit. We are committing $400 million to help strengthen it and put it in a position to better withstand those kinds of threats. You know, there's a lot of talk about resilience right now in our economy, certainly in California what they've been through. Part of that's dealing with climate effects, but part of it is the seismic side. Whenever we can strengthen the strengthen a key part of American infrastructure. Of course, that's a big part of what President Biden's infrastructure package is all about. Mr. Secretary, the infrastructure package includes,

I'm seeing on our screen, 110 billion for roads, bridges, and major projects. I'm wondering, simply put, how you choose which bridges, which highways get that money. A cynic might well say, well, of course they're going to put it in San Francisco. That's where former Speaker Nancy Pelosi resides. Of course they're going to invest in a bridge in Kentucky and Ohio. That's where Mitch McConnell resides. These are politically sensitive areas, Ohio, and so forth. So how do you decide which bridges, which tunnels, which roadways get the money? Well, it really is about the merits of the project. There are so many applications that come in. We prioritize them based on the main reasons that our department exists and the reasons we needed this investment in the first.

place. Number one on the list is safety and that's definitely on our mind with something like strengthening this bridge against earthquakes. We're also looking at what's going to benefit our supply chains lead to economic strengths, support jobs. We're looking at investments that are fair that contribute to equitable economic growth. We're looking at climate impacts because every transportation decision in the 21st century is a climate decision whether we recognize it or not. And thankfully because we have such a big investment, you don't have to look at which states got funds from this infrastructure law and which ones didn't. Every

single state, I believe we're already over 3,000 bridges. Some of them, big iconic ones like this, some of the bridges that you or I might not know the name of, but if you live in a rural community that depends on that bridge and it's got, let's say, a load limit because it's in poor condition and a truck or a school bus and an emergency vehicle can't use it and has to go around 20 minutes out of its way, that's a huge problem. So we're making sure whether we're talking about big projects, like this or smaller communities that every part of America sees the benefit because frankly every part of America has a need and mr. secretary where are we speaking of infrastructure it's less visible but obviously what happened in the skies the last couple months still has people

uneasy can you give us an update well that's right and uh there's several things we're looking at here the first of course is to maintain the safety record of our aviation system that's one of the reasons why uh fAA is very conservative for example that morning uh when this disruption happened made the conservative step of pausing flights until they could be absolutely 100% sure that the system was operating the way it should. This is a system that is actually in the middle of a multi-year, multi-million dollar upgrade. As you can imagine, I'm interested in what we can do to speed up the completion date of that project that's been underway for many years. And I think that's going to be one of many hot topics as we enter the FAA reauthorization. This is the year for us to

work with Congress on legislation that's going to shape the next five plus years of aviation policy in this country and really welcoming the conversation with our congressional partners on how to get the right funding to the right places so that we can have a robust system, knowing that there is an enormous amount of change and an enormous amount of demand coming to the U.S. aviation sector. That's one thing we can be pretty sure of. Yeah, no, I just chuckle when you say we welcome a robust discussion. I mean, we're going to be lucky if the government doesn't shut down in a couple of months, Mr. Secretary. So how, you know, do we expect any of this to be caught up in there?

It sounds like something like modernizing FAA infrastructure should be relatively straightforward, but this is a year in which nothing's going to get through without a fight, and the priorities better be pretty clear. And, you know, so I don't know how many warm conversations there's going to be. Well, look, this is an example of why we can have political games affecting critical infrastructure in this country. The roads, the bridges, the aviation system, They don't care about Republican-Democrat fights going on in Washington. The president has been very clear, the administration has been very clear about our priorities.

We've been very clear that, you know, especially as we see some of these strange threats and claims being made by congressional Republicans, that that can't get in the way of the day-to-day work, the blocking and tackling of keeping things moving in this country. We have the funding for this infrastructure bill. We're working the plan. the less drama and the more action we can have in the year and years ahead, the better off this economy and this country is going to be. All right, we'll leave it there, Mr. Secretary.

Thanks so much for your time today. Thanks for joining us. Thank you. It's a pleasure. Transportation Secretary Pete Buttigieg. And by the way, you want the Golden Gate Bridge to be earthquake-proof. Yes, you do. By the way, what's moving on the NASDAQ as the index gains 2% today,

we'll have the full list of those names coming up. And Tesla reporting results this week. So much to discuss on this front. got the price cuts. We'll increase affordability, kick EV adoption to overdrive or undermine the whole sector that's trying to compete. We'll talk about that coming up. Stay with us. Welcome back, everybody. The NASDAQ jumping another 2% today, continuing a strong run this month. Let's go to Frank Holland for a look at what's working, Frank. We're there, Kelly, investors are partying in like it's 1999. As you mentioned, the NASDAQ on pace

for its best January performance since 1999. And today, it's getting fueled by mega-cap tech as it has been all year long. We're seeing Apple, Nvidia, and Tesla. You see, see at Nvidia, actually up 31% year-to-day. All these three stocks have the biggest positive impact on the tech-heavy index. Also, chip stock surging today, getting a little bit of help from the thoughts that we may really be on course for a Fed pause or a pivot or at least a lower hike of 25 basis points based on Fed comments today. We also want to see Intel reporting later on this week.

And that's also helping those comments, helping high-growth EV names like Rivian and lucid. Important to note, despite today's double-digit rally by Rivian, shares are still in the red year to date. Microsoft's also giving a boost to NASDAQ announcing its multi-billion dollar investment in ChatGPT ahead of its earnings after the bell tomorrow. You're seeing the performance of these three companies all called hyperscalors. They're cloud infrastructure players. This could be a big inflection point for the NASDAQ that's up more than 8% year to date. We could see a rally if Microsoft's cloud results beat expectations. Tyler and Kelly back on. All right. Thank you very much,

Frank Holland. Coming up, fast fashion, becoming a slow burn to the environment, demand for cheap clothing, big business with an even bigger carbon footprint. We will look at one company looking to solve that problem. Plus Citadel's sweet $16 billion. Fund manager Ken Griffin turning in a record profit. Details on that one power line. We've got a little more than 90 minutes left in the trading day. We want to get you caught up on the market, stocks, bonds, commodities, and more. Let's begin with Bob Pazani at the New York Stock Exchange, where stocks have been climbing Bob throughout the day. Yeah, and we have a powerful rally going. Growth is really back.

You heard Frank talking about the NASDAQ. Semiconductor stocks have been a real leadership group. They're up 12, 13% for the month. And so some of the big names got an upgrade today over at Barclays. So AMD is moving to the upside nicely. Qualcomm, Seagate has also got an upgrade over at Barclays. That's moving to the upside. Skyworks solution.

Boy, 109, that's the highest in so going back many months, July, August or so for Skyworks there. We also have some new highs in some of the China plays, of course, winds at a new high, Las Vegas sands, stuff very close within a tenth of a percent or so, Alter Beauty, KLA Tencore, also in the semiconductor space. Then there is the oil stocks. Oil's at 82. It's been creeping up the last few weeks. So there's stuff that is just near a new high within a fraction of a percentage point of hitting new highs here like Hess Exxon Mobil and some of the refiners like Valero Energy and Marathon Petroleum. I'll tell you what the big thing is, though, everybody's got quite excited. The technical analysts out there is we're beginning to break a downtrend in the S&P 500. What's a downtrend? Down trend is lower lows and lower highs. And that is a one-year chart you're looking at.

We hit the highs January 4th, 2022. It's been a downtrend. We're now breaking out of that. It depends on who you ask on whether or not we're there. But essentially right around here, right around the, oh, 4,100, 4,000, 5,0,0,0,0,000, 5,050, level. That's the breakout and breaks that downtrend of lower lows and lower highs. And yes, Kelly, technical analysis matters a lot, particularly when people are unsure of the macro environment and trading on fundamentals, they trade more and talk much more about technical analysis.

We'll talk more about that tomorrow. Kelly back to you. I have come to appreciate that. It's absolutely true. Bob, thank you. Let's check the bond market right now. Yields rising along with stocks. So that's kind of interesting. The 10-year backup of 3.5%. It's making people wonder if it's going to really decidedly break below that number. Speaking of technicals, anyway, the focus is next week's Fed meeting. The key number before then is this Friday, the PCE, the personal consumption expenditure, it's spending its income, Tyler. It's the Fed's the Fed's endorsed by the Fed.

All right, oil closing for the day. Pipis Stevens joins us now with the details. Higher yet again, but Nat Gas is the big mover today at more than 6%. And this, of course, follows those five straight losing weeks. So it's kind of threefold in terms of factors driving this. First is colder temperatures. It all comes back to the weather with not gas. Then we have shorts covering their positions.

There was a lot of short sellers coming into the market, given the surge in temperatures at the start of January. And then finally, the contract does roll in a few days. And so we tend to see more volatility around expiration. But since we are in earnings season, I did want to focus on energy earnings and how the outlook looks there. And according to data from FAC said, the reality is that they probably peaked back in Q's.

earning about $62.5 billion. They then came down in Q3. And for Q4, estimates are calling for about $48 billion. So that is meaningfully lower than the prior two quarters. But if we do take a step back and look longer term, you can see that that is still well above where we were prior to the pandemic. And now Wall Street's kind of thinking that we'll stabilize with earnings around the $45 billion mark for all of the quarters this year.

And so you've got to wonder, you know, is that good? Is that good enough? how will the stocks react? I have a small but very big question, Pippa. So everyone is talking about their electric bills, their gas bills, their heating bills this winter. And it's ironic because you and I the last couple weeks have been talking about not gas prices at these very low levels, but everybody's bills are at way highs. How big is the lag do you think? You know, is relief coming if we stay at current prices for people who are paying what I assume must be rates that were set six months ago when prices were spiking higher?

Yeah, I mean, it's definitely dependent on where you live and how the bills work there. But, you know, it also depends on things like hedging. And so it's really hard to make those predictions. But I think, you know, any relief is relative. Since it is, you know, they have come down a lot, but it's still higher than last year. So that's probably still going to be a pressure. And now there are all these calls that we have to upgrade our grid, and that takes spending by utility so they could get, you know, the green light for more rate increases. Wow.

And so there are a lot of factors, you know, here to watch. The utility sector is so complicated and how those are passed along to consumers is very variable. It takes a while, but then it hits, right? Yeah, like a punch in the gut. Pippa, thanks for now for now. Thanks, Pippa. Let's get to Bertha Coombs now for our CNBC News Update. Bertha?

Hi, Kelly. Here's what's happening at this hour. The suspect in this weekend's dance hall shooting may have been targeting his ex-wife. That according to the mayor of Monterey Park, California, 10 people were killed and another 10 injured in that attack. Police are still investigating and have not commented on a possible motive. The FDA is proposing making COVID shots an annual vaccination. The plan would also allow most people now to skip the initial two-dose vaccination and immediately get a shot of the most up-to-date vaccine.

FDA advisors will meet on Thursday to discuss the new COVID prevention strategy. And lawyers for the Theranos founder, Elizabeth Holmes, denies, deny accusations that she was planning to flee the country following her fraud conviction. Prosecutors made the allegation in a filing opposing efforts to keep Holmes free on bail pending her appeal. Defense lawyers say Holmes's partner had booked them a flight to Mexico to attend a wedding on the assumption that Holmes would be found not guilty. Of course, that was not the case. All right, Bertha Banks. Ahead on Power Lunch, the key earnings on deck this week. It comes from Tesla.

Analyst expect earnings and revenue growth, but what role will price cuts play on the road ahead? With the stock up nicely this month, by the way. We're back in a moment. All right, welcome back to Power Launch, everybody. Tesla stock rallying today, 17% higher in just a week. Never a shortage of news seemingly surrounding this company and its founder will get to all of it, including Elon Musk testifying once again today in a shareholder lawsuit related to that now infamous funding secured tweet. from a couple of years ago. Phil LeBoe has been monitoring the case for us, Phil.

And Tyler, the testimony from Elon Musk has just resumed. He was on the stand for about three and a half hours this morning. And during that testimony this morning, a lot of the questions focused on what exactly did he mean and when did he make the decision in terms of sending the tweet back in 2018 about taking Tesla private, considering taking Tesla private at 420 with funding secured. One question came into the, from the attorney was, well, did you know that you had secured funding? And Elon Musk said yes, because he had been talking with the Saudi investment fund. Elon Musk on the stand said they were absolutely supportive of taking Tesla private, unequivocally without hesitation. And in fact, I asked them, I asked the head of the Saudi

investment fund if he was certain about being supportive. And he said yes. Again, this gets back to the question of, did Elon Musk truly have support when he said funding secured at $420? Also, by the way, he has denied, and he did this on Friday, that when he tweets, that automatically people are going to make investment moves based on those tweets. Again, the testimony from Elon Musk has resumed. And the questions this afternoon, a lot of them are going to focus on, what exactly did he think was going to be the result of these tweets? In fact, an attorney for the shareholders, guys within the last hour said, well, how long did it take you to realize the impact of your tweet? And Elon Musk said, well, I wasn't really paying attention that day.

And the attorney said, well, when did you pay attention? You didn't tweet for three more days. And he said, I used the word considering. So this is the kind of testimony back and forth between Elon Musk and the attorney for the shareholders that's going on right now in the courtroom out in California. And, Phil, even as this lawsuit is going on, a potential trouble spot emerged last week with this former engineer at the company saying a video demonstrating full self-driving was faked. And given what happened at Nicola for a similar issue, what do you make of this? Well, it depends on whether or not a regulator steps up and gets involved. And remember with Nicola, it was a case where you had a noted

short fund said, hey, look, this was fake video. That ultimately led to the SEC getting involved. if there is some kind of regulator who gets involved, whether it's the SEC or NHTSA, and NHTSA has been investigating the autopilot technology at Tesla, then there are real implications, Kelly, but otherwise we've heard these allegations and these claims from people, either who have worked at Tesla or who have tested out autopilot who have said, look, this is not the system that he purported it to be, that it's completely full self-driving, it's not full self-driving. And we've known that for some time. The question becomes, when does a regulator say, okay, enough is enough?

We're going to step in. All right. And, Phil, stay right there because if all of this wasn't enough already, the company reports its results on Wednesday. We'd call them earnings, but, well, I don't know. Analysts are expecting growth of 30% on the top and bottom lines, as you can see here. We already know that Tesla delivered more than 400,000 cars in the quarter. And, of course, gross profit margins will be probably the key thing to watch after those price cuts of as much as 20% on some models. A move that reminded some of the famous Marlboro price cut 30 years ago. Marlboro

Friday, I think it was. Michael, correct me. For more on the impact of Tesla and the auto industry, let's bring in Joelle and Posner, management professor at Santa Clara University's Levy School of Business, Michael Santoli, as I mentioned, and Philo both still with us as well. It's great to have you guys all here. Mike, will you start with just some history for us? Sure, it was a Friday, 1993. Marlboro, Philip Morris, was the parent company, and now it's a series of price cuts to its flagship brands in response to having been losing some market share to private labor lower price brands of cigarettes, it really jolted the market. Now, Fillamara shares have been sort of weakening in a subtle way before that, but really did go south on that news because

it undermined a very specific premise of investors, and they were kind of complacent about the ability of Marlboro to hold market share and also have consistent price increases. So I'm not sure we have a one-to-one here, but certainly the idea among Tesla investors that they were only constrained by supply and not demand and did not have to actually cut price to actually stoke demand. That seems to be one vague similarity here. Joellen, what about you? In the case of this price cut for Tesla in particular, what do you expect the cascading effect to be across the rest of the industry? Are they going to, to the historical precedent here, are they going to elbow competitors out?

I think that's the likely a scenario, at least for right now. I mean, Tesla definitely has the best position relative to supply chain and to getting cars out on the market. And although, you know, the EV market is growing dramatically and the number of players involved is growing by leaps and bounds, Tesla still has the ability to deliver more goods to the market right now. So I think that they can really take a big bite out of the market, which is growing, and we'll continue to grow for the foreseeable future. And the cost of that is near-term profit margins, Joellen, right? So, I mean, maybe give us a feel for what would success look like? Is it going to start off by looking like failure? I don't know that it will, to be honest. I mean, the profit margins

at Tesla are still very strong. And to be fair, if Elon Musk wanted to rebate everybody $10,000 out of his own pocket, he could do that pretty handily. So I don't see a huge cut to Tesla's long-term profitability. There might be a short-term bump or drop, rather, but it's not going to be a organizationally threatening event. Phil, how much pressure is Tesla under to boost deliveries? They're under a fair amount of pressure from the standpoint of, look, they've got four gigafactories worldwide. They've got two here in the U.S., one in China, the biggest is in China, and then they've got

one in Europe. So you've got these factories that are in place with a manufacturing capacity of somewhere around 2 to 2.2 million vehicles. So you don't want to, you know, if you have that capacity, and you can use that capacity, you want to use it. And if you're Tesla right now, you have the hammer, Tyler. You have the best-selling electric vehicle in the world with the Model Y, and it's in a sweet spot in terms of pricing relative to other vehicles. So if you are Tesla and you can afford to take a bit of a hit on your automotive gross margins, which are what, 26.8% last quarter,

all right, so you drop them down to 22 or 21%. You know what? That's still more than double than the profit margins from all the established auto makers. So that's why if your Tesla, the cutting of prices makes sense. You can afford to take a bit of a hit on profit margins, but you can grow deliveries potentially. And Mike, are you looking to the stocks of the other EV automakers, kind of for signs here of which way this one is going to break in terms of opening up more of the market to Tesla or shooting themselves in the foot? Certainly looking at them. I actually even think the legacy car makers are worth looking at too because a lot of the embedded growth expectations for GM and the Europeans and everybody else is based on how much of the EV market they can capture.

So I think it's all connected. One of the issues with reacting to Tesla's pricing moves is that if it seemed as if it were this grand strategy and they had sat there in a disciplined way and said this is what we're going to do as a power move to gain market share, it might have been taking a little bit better. And if expectations for earnings weren't already so high, then maybe the market could have absorbed it. But it seems as if it came right along with the typical end of quarter scramble at Tesla to try to deliver as many cars to meet targets.

And it's happening at a time when they were shut down in China for a little while. So it just has this sense of a disorderly, slightly panicky reaction to, and by the way, earnings estimates for 23 and 2024 are down 20% at Tesla in the last three months. So whatever the long-term impact, the short-term impact is, the stock looks more expensive than it did in September, even if it were at today's price. Joe Allen, how vulnerable, let me put it that way, is Tesla to Elon Musk's popularity or lack of same? I think it's really too soon to tell, particularly because the kind of base Tesla buyer leans Republican. So the fanboy base of Tesla is the same as the fanboy base for Elon Musk. The range of EVs available for people who don't like Musk is still pretty large.

The price might be high, but I don't know. It's, I think too soon to tell. There's always a risk of CEO personality and CEO behavior, leading organizational behavior. The organizational reputation seems to follow CEO reputation pretty robustly, and the organizational research. So it could happen. I think the likelihood in this scenario is relatively low. And look at the shares up almost 8% today

with all of this going on. Thank you all. Joelle and Posner, Mike Santoli and Phil Lebo. Still to come. Compost clothing. Fast fashion is a growing business with a growing carbon footprint. Details in today's clean start.

That's next. You know, fast fashion is a big business, but it is also a big polluter. Now, new companies are stepping up to try and lower clothing's carbon footprint. Diana Oleg joins us to explain in her continuing series on climate startups. Tai. Thai, fast fashion is responsible for about 10% of global carbon emissions, according to several recent reports.

And while some companies are claiming sustainable clothing lines, there is a very wide variance in what that means. But one Portland, Oregon-based startup aims to upend the way we dispose of our clothes. The market for plant-based clothing is growing fast. Companies like active-activeware, Kent underwear, and a startup called Unless. Unless calls itself the first streetwear brand to create products that will harmlessly decompose at the end of life. Unlike today's mostly petroleum-based garments, you can compost these clothes. This basically was a T-shirt three weeks in the composting process.

We started the company because we're a bunch of fashion executives. that got tired of the make, take and throw away of a culture of fashion. CEO Eric Lidke came from Adidas, so no surprise unless includes footwear, along with apparel and accessories. It's all made from 100% plant-based nutrients, like recycled cotton, hemp, plant-based leather, and coconut fiber. What happens when I'm done using it? It harmlessly goes away and becomes plant and worm food.

And that, to me, is just as important as the quality of the product you make. Unless has just one pop-up retail store in Portland in addition to its online sales. The hope is that the brand will grow along with the already fast-rising consumer demand for greener products. I would pay more for sustainable clothing. I think it is, I mean, partly just like it's my contribution to helping the planet. And I think that we should all contribute in the ways that we can. Unless is backed by Connect Ventures, an investment partnership between Creative Artist Agency and NEA. Total funding to date, $7.5 million. Now compostable clothing does not come cheap.

This biodegradable hoodie that unless was nice enough to send us goes for $119 on the website. They also sent us the sneakers, which are very thick and cool. They run for about $139, which I guess in the sneaker world is not that expensive. But they do say that the more they can scale this product, perhaps the lower the prices will be in the future. Tyler. And how will they scale their product against so much competition? Well, what they're doing is collaborating already with well-known brands.

In fact, they just did one with a Swiss company and immediately sold out. So the more that they can get their brand out into other companies like this, spread the word, the more they can scale their business and lower the prices. Can you literally throw them in the backyard compost, Diana? You can bury this hoodie, which, by the way, is very heavy. It's strangely heavy, actually, but you do, you bury it in the backyard. It's made out of dirt. But it can become dirt, is the point.

And so I guess you buried it in the backyard. just like everything else or put it in your composter and it becomes the earth again. You bury it in the cube bench and say, kids, you know, once every three months, go throw your close in the yard. It could be fun. I love it. Diana, thank you very much, our Diana Oleg. Up next, chip stocks leading the NASDAQ higher.

We'll trade them and others in today's three-stock lunch. It's time for today's three-stock lunch, and we're taking a look at some of the big movers today, like NVIDIA, jumping 7% along with a lot of the other chips today. Barkley is seeing upside for the sector. Spotify up 2% if they announced after their plan to lay off about 6% of the global workforce and of course Salesforce. The shares up about 3% on big news of activist investor Elliott taking a multi-billion dollar stake in the company. Let's bring in Ari Wald head of technical analysis at Oppenheimer. I love this area because you're a purist. You don't have to have an opinion on what's going on at Salesforce. Just an opinion on the stock. Let's start with Nvidia. What do you see?

Yeah, Invidia, this is one of the key reasons of why we think that the 2022 bear cycle is coming to an end, is that we're seeing a running list of the right stocks that are reversing higher. Semiconductors included. We upgraded the semiconductor industry to overweight about a week and a half ago to gain exposure to this cyclicality. And Nvidia is one of the several names in the group. If you look across that industry, you've got several names that are moving about their 200-day average, reversing their prior decline. And we think that strength continues. Looking at Nvidia, the stock has come into a test of resistance at the 192 level.

It's a bit less tactical than it was, but we think you want to buy pullbacks in anticipation for a breakout. out. And looking out through the course of the year, we do see upside into $250, that being a key resistance level from about a year ago. Let's move on to stock number two, and that would be Spotify, Erie. Okay, Spotify. Here's a great example, tie, of the market rotating to the bear cycle's biggest laggards, which we have found is a characteristic of a new bull market, this junk rally, low momentum stocks pushing higher. It is more of a beta trade for us. You think you got to buy it right. You got to sell it right. You need a very tight stop as well. There are some longer term structural concerns in the chart that we're worried about. But it is a stock that has moved above its 200-day

average nonetheless for the first time in a year. So as long as you're above today's gap, let's call it support at $99. The next key resistance comes in at 125, which is the upside that we're thinking. about over the coming weeks to months. All right. So that brings us to Salesforce area and what do you make it this one? All right. This would be a relative cell. Listen, a rising tide lifts all boats. If we're right about the market, most likely sales force rises with the market over the coming months. The thing with Salesforce, why we're less convinced about it, it has been relatively weaker. It's a stock that is still trading below its 200,000.

moving average, which is sloped lower as well. So for these reasons, we would prefer to sell it into that resistance point at $162, $162, understanding a rally above it would be an incremental positive for the stock's trend. Okay, Ari, thank you so much. And so by the way, Ari, how far do you think this bullishness on the market overall could extend? I'd be playing along the lines that this is the start of a bull market coming out of a non-recessionary bear market. If you look at performance under those circumstances in the post-war era, typically over the first 15 months, the market is up about 25%. Now, that starting point would be October of 22, which we think was the low point of the cycle. But that gets us to 4,400 on the S&P 500 through the course of the year. So we do still see more upside even after recent strength. Yeah. All right. We'll see. Ari, thank you so much. We always appreciate it. Still to come is Jeff Bezos punting the post. I'm sorry, Tyler.

That's all right. Finish it. For the commanders. We'll both discuss right after them. My hometown paper, my hometown football team. A new best year ever on Wall Street. Ken Griffin's Citadel brought in $16 billion in net profits for investors. This is according to estimates from LCH investment. That surpasses John Paulson's gain from 2007 when he made billions shorting the housing market. what has been called the greatest trade ever. According to LCH, Citadel's flagship fund, Wellington, returned 38% last year, compared with a nearly 20% loss for the S&P 500, short on details in this research on what exactly propelled Citadel to such a monumental year. They now ended the year with

$62 billion in assets under management because of, in part, that $16 billion in profits. They had to be short something. Right, and it sounds like it's a little bit of everything as well. Equity, commodities, commodities, global fixed income, macro credit, quant. You know, they've probably reached a size now. I think they unseated Bridgewater. As the biggest. Yes, and so they've probably reached a size now where they're just getting the best of the bunch from all over.

Obviously, Ken Griffin has been on a spending spree, new offices in Miami and all the rest of it. Yeah, he has no state income tax to pay now. The other thing that's interesting here is, of course, they do not merely have their fund business. They have securities business and all kinds of other ancillary. businesses that I think are very profitable as well. Yes, flywheel, shall we say. Speaking of which, from one D.C. main state to another, Jeff Bezos is reportedly considering selling off the Washington Post in order to clear the way for a bid on the Washington commanders, the football team. He bought the post for a quarter billion, $250 million all the way back

in 2013. But the commanders are going to be a lot more. According to the New York Post, the highest first round bid on the team came in at $6.3 billion. And Tyler, this is your backyard. This is the newspaper I read as a young boy and the football team that I followed for many, many years. And there was bad blood between the current owner of the Washington commanders, Dan Snyder and his family and Mr. Bezos over what Mr. Snyder believed to be. Impolite, let me say, coverage of the commander's team. Whether selling the post would get Bezos in the running and patch over that whatever, feeling there is. Who knows or whether and we don't really know what what Mr. Bezos's intentions are. He did not submit a bid in the first round of bidding

for because he's felt like well I'd be bidding against myself if I do so because everybody knows I'm the biggest foot in the shoe store here. So do we think he has to sell the post or he is just choosing to? Well I have no idea whether he would be choosing to sell the post so it clears the way for a bid on the commanders or whether he He wants to sell the post because he wants to sell the post. And if so, who the buyer of that would be. Remember, the Washington Post was a real, powerful institution that he got for just $250 million from the Graham family.

We are, this is one to watch, especially to see if sports truly are recession. We shall find out. This night are apparently looking for $7 billion. Thanks for watching, Power Lunch. Closing bell starts right now.