Power Lunch - Consumer [Extra] Credit, and End Of An Era? 8/7/23

Episode Date: August 7, 2023

Consumer credit card debt has hit a new record high. But with rates on the rise and inflated prices remaining high, could this be a catalyst for problems in the economy? We’ll discuss.Plus, Zoom – the company that basically facilitated the work from home” trend – has officially called workers back to the office. Is this the end of an era for remote work? 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.

Good afternoon, everybody, and welcome to Power Lunch. Alongside Kelly Evans, I'm Tyler Matheson. Coming up, extra credit. Consumer credit card debt, record highs now with rates still on the rise and inflated prices remaining high. Could this be a catalyst for problems in the economy? We'll explore that. Plus, the end of an era, Zoom, the company that, as much as any, facilitated the work-from-home trend, is calling workers back to the office. Yes, you heard it right. That debate is ahead. But first, let's get a check on the markets, and it's kind of the Wild West out there. Lots of movers, the S&P seeing lots of good, also a lot of bad and downright ugly moves. The good, for instance, Viatris up 4% leading that index, beating on earnings. The bad Tyson Foods down 5% after missing on the top and bottom line, citing slowing demand. And the ugly, look at Sage Therapeutics shedding more than half its value today. Oppenheimer slashing its price target to 24 from 70. This comes after news of an FDA rejection for its major depressive disorder treatment.

And the major averages, a Dow actually moving towards session highs right now, I should say, up 422 points, tie. All right, Wall Street can't seem to agree on whether or not we're heading into a recession. Firms either saying strong or maybe reversing their calls from earlier in the year, reversing them generally towards the more doveish scenario. Inflation data out later this week, a key focus for many as we look for any signs about the health of the economy, but perhaps we should be focused on one thing in particular. That would be debt. The St. Louis Fed, revealing that credit card debt has hit a record $1 trillion

and bank rate out with a new survey showing that cardholders are carrying more debt than ever before. Joining us now to talk about this rising debt are Ted Rossman, senior analyst with bankrate.com, and Peter Bookbar of Bleakly Financial. He's also a CNBC contributor. Gentlemen, welcome. Ted, let me start with you and ask you to tell us what you found in your surveys of consumers. debt. It seems to me that there are more people carrying more debt at higher rates. But is there any indication that they are having trouble carrying this higher debt, that they are more delinquent

on the debt, that they are suffering because of it? Well, thank goodness for the strong job market. That's really what's helping to keep people on track, because delinquencies have gone up a little bit, but not really to worry some levels. They were artificially low during the pandemic because of stimulus, we're basically back to 2019 levels, which were still pretty low, historically speaking. Same thing with the debt to income ratio. Because wages have gone up, most people are keeping up. There's some trouble brewing in the subprime sector, though. So higher debt, more people with higher rate debt, but it isn't a pair, but because incomes have gone up and maybe because of some of the monies that were received through the pandemic, people are in a better position to handle it.

For the most part, yes. Now, there is still a big bite to this debt. The average credit card charges 20 and a half percent. That's up. Most people are paying five and a quarter points more now than they were a year and a half ago. So there's a cumulative effect to that. Credit has started tightening a bit. More at the lower end of the credit and income spectrum. For most people, credit is still flowing pretty freely. But it bears watching, especially if the job market were to take a turn for the worst. I think that's the big indicator. Peter, you agree?

Yeah, those were all good points. And one thing also missing, it's not just affecting debt that's currently on consumer books. It's also affecting future behavior. Because if someone is going to debate whether they should buy that big ticket item, while they need to calculate a much higher interest rate on that. So there also could be future purchases that are deferred with this high level of interest rates. A lot of conversation, Ted, about the return or the required repayment of student loans. How big a factor is that going to be? I think it's one of these All News is Local kind of things. I don't think it'll do much to dent the overall economy because only about one in six households have student debt. But for those that do, that's another $400 or $500 a month that they're going to have to come up with that they haven't been used to paying. So does that lead directly or indirectly into more credit card debt? Credit card debt is the ultimate all news is local thing.

You know, half of cardholders have it at an average interest rate over 20%. The other half, they're getting rewards and buyer protections and life is good. So it's a big difference. Peter, when you see these numbers about rising debt, I go back to this fact that I think it's 80% of American households or some high percentage of American households could not swing an unexpected four or five. $500 cost in any way. The water heater goes. They have to repair an air conditioner. The car requires a repair that is unexpected. How fragile are Americans' finances? When you look at numbers like that and you add on the propensity, particularly among lower income people, maybe to rely on credit cards and high-rate cards, it's not a pretty picture. Well, you make an important point

because we can't just talk about the consumer as one broad brush. There are major distinctions here. And that lower income consumer is dealing with the cumulative impact of inflation. They're dealing with, as we talked about, the very high interest rates in order to borrow. And they're not benefiting from the rise in markets, whereas the higher-end consumer has a pool of savings that they can get 5% plus in a T-bill. They've benefited from the rise in stock prices. and they have other cushions

and are less impacted by this rise in inflation. So there are different segmentations of the consumer and all is not well with that lower end. There's one consistent theme that I heard when retailers reported last quarter earnings, which I expect to hear in the coming weeks. It's that consumers are prioritizing spending on non-discretionary items.

And even Walmart said more people are shopping at our stores that are making more than $100,000. McDonald's the other weeks when they reported earnings, I think last week, said more people are shopping at our restaurants that are making more than $100,000. So the consumer overall is prioritizing their spend. How do they know that? How do they know that? When I go to these places, they don't ask me, what's your income? It is a great question.

I think they do have some surveys that they then sort of extrapolate from. So, yeah, when you go and you pay cash or you pay your credit card, they're not immediately going to know. But I think there are some surveys that are done that can give them an idea of the type of demography of their customer base. And Ted, I like your point that it really all comes back to the labor market. So we all can kind of keep this delicate dance. Reminds me of what they used to say, you know, you can dance while the music's playing. When the music stops and that being the labor market, all of this could look very, very different, obviously. Yeah, I mean, historically, the charge-off rate on credit cards.

has more or less matched the unemployment rate. And we've been in this period of artificially low unemployment, artificially low delinquencies and charge-offs. Unfortunately, there's only one way to go from here, which is up. The question is, how much does it go up? So far, this normalization has been fairly muted and much more restrained compared to the past couple of recessions. That's a great point.

Peter, what is your reaction when you hear quite a few of the big Wall Street banks sort of calling off their recession predictions? I think it's way too premature. I think that the adjustment to this higher rate environment is something that is not clocked in months, not even quarters, it's going to take years, assuming the Fed keeps interest rates higher for longer. Because not everybody's debt resets all at once.

It takes time. And I think we have a lot of low-cost debt that has major repricing ahead of us. And that will sort of chip away at economic activity as time progresses. And we further transition to a higher rate environment in terms of the cost of debt that we have as an economy. I see Ted nodding here. I'm with you on that, Peter, and particularly in commercial real estate, where a lot of debt may roll over next year.

And who knows about the ability to refinance at today's rates compared with rates from five years ago. Peter Bookbar, thank you very much. Ted Rossman. Thank you. Good to see you. Thanks. In meantime, another important snapshot into the consumer comes from the auto space, where demand is high but so are prices. Phil Abo is here with more. Phil. Kelly, the prices for used vehicles are high, but they are also coming down. This is the latest report from Cox Automotive, which has the Mannheim used vehicle index. And for the month of July, what they found was that the prices came down 1.6%, down 11.6%, down 11.6% compared to the same time last year.

This is the fourth straight month that prices have fallen on the used vehicle lot. Keep in mind there is improved supply. So when you're looking at used vehicles in the U.S., greater supply from the new vehicle manufacturers means greater supply when it comes to the used vehicle auctions. And demand is still strong. In terms of volume, retail volume, it was up 6% in June. So as you take a look at some of the larger auto dealership stocks, and we're talking about CarMax as well as Lithia and Sonic over the last six months.

Keep in mind that the overall pace of used vehicle sales in this country for the whole year, it's expected to come in about 35.7 million vehicles. Not all of those are retail, not all of those are through dealerships. A lot of them are second party, you and me selling vehicles to each other. But that's the pace of sales for used vehicles. That's not a record high, but it's still strong demand out there. So if there's still strong, you know, this, Phil, I think we're watching autos in particular because other than housing, it's one of those places where you might first see the consumer cracks show up.

And with everyone kind of squatting in place in their home, we're not going to see that turn like we did in 07. You wonder if autos are sort of somehow a place where you could see more pain show up? I'm not sure we will, Kelly. I do think there is the possibility that as you see higher interest rates for auto loans, there is the possibility that people will say, look, it's too rich for money. my blood, I can't pay this. However, we've seen this now for a number of months and we've seen people say, okay, I can't go new. I'll go into the used market. And now, because the monthly payments are generally the same, it's a little bit cheaper for use versus new. The advantage

that the new auto manufacturers have is they can sweeten the pot with incentives. And that has a lot of people saying, well, look, if I can get X amount cash back or a lower interest rate than I could get on a used vehicle, I'll move into the new market. All right, Phil, thank you very much. Phil LeBoe reporting for us. And coming up is the era of free money over. For years, companies have been battling for consumers' pockets, offering freebies, sign-up bonuses, perks, more. But that's no longer the case. It's being scaled back. Plus, move over tech. Industrials could be an underappreciated market star with the X-L-I-E-T-F, trading it 20 times forward earnings. more on those moves when power lunch returned.

Welcome back. We talked about consumers tightening their purse strings in some areas, but many companies are now doing the same. Gone are the days of freebies on your birthday, sign up promos or airport perks. Companies are trying to cut costs and pare back the rewards they started dishing out during the COVID slowdown.

Here to discuss our CNBC.com retail reporter Melissa Repco and CNBC.com airline reporter Leslie Josephs. Welcome to you both. Leslie, kick this off for us. What is going on? So if we think back about three years when the pandemic started, a lot of companies were desperate for customers. And that went for retailers. It went for airlines. And they extended these perks.

Airlines, for example, hold on to your status. We know you're not flying. All of that's gone. There are a lot of people, if you've been to an airport recently or traveling again. So what airlines are doing is they're really cracking down. They're making it. You have to spend more, fly more to get that status. So this is something that was a little bit of a pandemic quirk, let's say, and understandably.

but now that people are traveling again, they've grown accustomed to, yes, I'm a such and such status, and maybe they've lost that. What is that experience like for people? The airlines must be a little concerned about it. There is a lot of shock. And, you know, the Delta CEO told us late last year, you know, if everybody is special, no one's special. So when they call that group one, and it used to be that we're only a few people,

and now you see dozens of people in those categories. Everyone's in group one. Yes, everybody is special. Yeah, everyone is special. But isn't the point to make everyone as the consumer feel special as a company? Isn't their whole goal to convince us all that we are special, even if we're not? But we're not. Melissa?

The problem is it comes at a price. All of these perks do come with money attached. And I think we all saw that during the pandemic, that we saw with supply chain becoming a household term, that free shipping never really was free. Free returns were never free either. And so companies, in some cases, felt emboldened to say, hey, we're going to charge you a restocking fee or a return fee when you ship back that item because you bought three different sizes of the same shirt. I think that's, I think that is the. coming thing. I think more and more retailers and companies are going to charge little fees. I went to a place this morning and they said, well, if you want to use your credit cards, it's going to be a dollar

fee. Every time now. A dollar fee. A dollar fee. And it reminds me of when when ATMs first came out, you use the ATM. It didn't matter whether you used your card or another bank's card. It was free? Now, yeah. And it was 50 cents. Then it was a dollar. Now it's $3.75 to use somebody else's card at the machine. And I think that's what's going to happen. There's going to be restocking fees, return fees, shipping fees, and so on and so forth. We're already seeing that play out. A lot of companies have added that. Just this past week, Macy's was the latest to say, we're going to charge you return fee if you ship back that item. But the trade you can make is instead you can sign up for our loyalty program, which is free.

And then you're paying in terms of your personal data. You're establishing a connection with that company, and that's when we get all those emails saying, shop with us and buy more goods. there are some people who abuse the return policies where they'll buy six of an item and then say, well, I like this shade, not that shade, or I like... In their defense, I might say, the

companies sold us this model. They said free shipping. Why don't you order six and try... Zappos.com. Sometimes, Leslie, I feel like it's a bait and switch. Like when all of these companies are starting up and have plentiful capital and then they get to the point of saying, oh, you know what? Maybe after 10 or 15 years we need to show profits. And by then their competitors

are gone, we're used to the way of doing business, and then they come back to us like we're the problem. Yeah, I mean, e-commerce was all fun in games when oil was $50 a barrel, and you're thinking about transportation costs and every delivery van that is clogging up your street, you know, those were different days, and now they're under pressure to cut costs. So let me ask you this about airlines. Have they gone back to the very high fees, service fees they charged if you changed a reservation or you rebooked? Have they, reimposed those $250 per ticket fees? For the most part, they have not, unless you're flying on basic economy, you know, the lowest

ticket that you can get. But those went away in the pandemic. Yes, they went away in the pandemic. And they have not come back. I think there would be an uproar if those fees came back and everything that airlines were ridiculous. They were ridiculous charges to rebook. It was very high.

But what airlines are doing now is that they want the highest paying customers. And Delta has said, for example, that they're seeing, in the United, too, you know, higher growth in those premium cabins, premium economy, business class, paid leisure. We're not even talking about corporate travelers. That's growing faster than the revenue in the back of the plane. So they want to hold on to those travelers. And just to mention as well, we've talked about how credit card points could potentially be under threat if they push through the credit card bill changes. That's according to critics.

It's not clear if that would actually happen. But the Biden administration, Melissa, has been trying to crack down on some of the fees we see on travel websites and ticketing websites. This is kind of a no-brainer for the consumer who does feel like they're under attack from. this. Yes, I mean, one of the commonalities here, and Leslie referred to it, is that, you know, I mentioned people can pay with their personal data, but there's been a huge push across the board to go after the most valuable customers. Delta, for example, is rolling out free Wi-Fi, but they are requiring you to sign up for their loyalty program. So it's really going after the big spenders, the more frequent users. You know, gone are the days of retailers and airlines

chasing consumers that were kind of the fly-by-night type people. And so the thought is, these companies may tack on those fees, but maybe your tolerance is higher because you have some kind of loyalty to them. You have some real buy-in, and that might help make it more palatable at a time when people still get annoyed by some of those things. Or you just give up and you say, fine, take my email address. Yeah. I don't know. I give in. That's how they win. That's like the end was in 1984. Anyway, Melissa, Leslie, thank you both. We really appreciate it today. All right. Coming up, using AI to sort recycling. Today's clean start looks at one company using machine learning to improve and simplify the waste management process. Power lunch will be

right back. Welcome back, everybody. It's not just tech that is outperforming. Industrial's also beating out the overall market. Sima Modi tracking that performance. I, Seema. Tracking it all. Tyler, over the past one month, industrials have performed better than the S&P tech sector. And that is despite the latest ISM data, which shows the U.S. manufacturing sector is still in contraction territory. 88% of industrial companies have reported and profits are coming in about 12% higher than initial estimates, and that's thanks to strong beats from Eaton, General Electric, Tech Strong, among others. Jeffrey's analyst, Stephen Volkman, says what's giving investors relief is inventory drawdowns. Now, just hear me out. The market may interpret inventory reduction as a sign of weakening demand,

but Volkman points that CEOs have been very clear that this is not the case. Rather, it's a sign of supply chains normalizing so that excess inventory is no longer needed. China, though, that remains a question mark for the industrial sector. Come in CEO Jennifer Rumsey on the second quarter earnings call said she expects China construction volumes to be flat to down 10%. That's in line with prior guidance and consistent with the tepid economy and weak overall activity. she says. Others like HVAC manufacturer Lennox at a recent sell-side conference said that China exposure has come down as it looks to diversify its suppliers. And that certainly is a trend that we are seeing across the sector as well, Kelly and Tai. Forgive me for not knowing,

but what does, what does how much business does Cummins do in China and what do they sell into that market? Engines for heavy equipment or what? That's exactly right. It's about a 20% exposure to China, Tyler for Cummins, and it's big trucks, it's engines, it's a number of different parts. But I think what a lot of these companies are finding that as much as they rely on it for, as it a manufacturing base and also a customer end market, because of the tepid overall economy and the outlook not improving so much, they've really taken steps over the last 12 months to diversify their supply base from Vietnam, India to Mexico, which is becoming a bigger hub. Sima, thanks very much. Sima Modi reporting for us. Thank you. Now to the increasingly hot button topic of oil. It's closing for the day. Up or down, Pippa, Stevens. It is down today. Retreating a little bit, but that, of course, follows six straight weeks of gains for the first time in more than a year. And was WTI holding above, you know, the $82 level right now at $81.87? Dennis Kisler over at BOK Financial did say that prices are now starting to catch up with that falling rate count. On Friday, the latest data showed that the recount is currently at the same level going back to March of 2020.

So at the lowest in about a year and a half. He also said that hedge funds have been a major buyer in the past few weeks, but then after the big run-up, a little bit of a pullback here is warranted. Now, one area I did want to take a look at today is the OIH. That's the OILS field services names, and that's because the OAH hit the highest level in more than four years on Friday. A little bit of an under-the-radar play here. And that's because we are seeing an uptick in international as well as offshore production.

And then Jim Schum over at Cowan said that there really has been a reset within the industry that used to invest heavily up front in order to anticipate a potential boom. But then, of course, there were also a lot of busts over the longer term. And so it ultimately led to a lot of capital destruction. But this time around, they are keeping the spending down. They're not flooding the market with equipment, things like that. So they're getting a little more attention today. And M-Rida, I thought, made a really interesting point on Squawk this morning about how the

cost, higher rates, basically, have caused a lot of the inventory de-stalking. It's too expensive. Even with Contango, it's too expensive to hold things in storage. And so that does make us more vulnerable potentially to future shortages and price spikes. Absolutely. And then also, you know, we have to refill the SPR at some point. Right. And with prices now much above the DOE's range, that's a factor.

And the desocking at some point, that's going to end. So then, you know, producers will be buying up again. A refiners, I should say, will be buying up again. And then we also have the demand increasing picture. So those two things pair together could mean an increase to come. Where's gasoline? And where's it likely to go? Gasoline is at 383 on the national average.

I believe, yeah, 383 on the national average. So we are at, you know, how do you keep this stuff in your head? I ask you this out of the left field question, and boom, 383. Oh, yeah, let me check it is. You might ask, because everyone's been checking their gas prices recently. So we are at summer, you know, the peak of the summer driving season right now,

so it could trend a little bit higher in the short term. But then once we reach the fall, demand does tend to fall a little bit. We've also got the less strict standards in terms of blending, which means cheaper prices. So we'll see. But honestly, it is hard to predict the direction. of gasoline prices. Pippa, thank you, as always. Let's go to Contessa Brewer now. For the CNBC News update, Contessa. Tyler, a federal judge has tossed out a defamation counterclaim by Donald Trump

today against writer E. Jean Carroll. The former president filed a suit a day after Carol appeared on CNN and claimed he raped her. Trump claimed that was defamation because a day earlier a judge had awarded Carol $5 million, finding that he defamed and sexually abused her, but did not rape her. The judge who dismissed the case wrote that Trump's argument had no merit. One person was heard overnight when a Sherwin Williams paint plant went up in flames outside Dallas. Firefighters knocked down the two-alarm fire within a few hours. People who lived nearby said they could hear explosions and see fireballs more than a mile away from the scene. It's not clear yet how that fire started. The Houston Astros made a victory lap at the White House to celebrate their World Series victory

last year. They defeated the Philadelphia Phillies for the title and the president compared himself to 74-year-old Astros manager Dusty Baker during the president's remarks. He says he knows what it's like to be counted out for being past his prime. Tyler. I'll tell you, Dusty Baker is up there in years, but man, he has had a great record. He's taken, I think it's five teams to the playoffs. Nobody else has ever done that. Contessa, thank you. You're welcome. All right. A head on Power Lunch. Zoom. changing its tune, the virtual meeting service calling workers back to the office and the irony lost on no one. More and more companies are laying on the pressure. Even the White House is calling for more in-person work. We will discuss it next when Power Lunch return.

Welcome back. Is the work from home fight finally lost? Zoom, it's the company that became the face of work from home. The stock climbed 400% during the 2020 shutdown and shift to remote work. But now even they are telling employees to come back to the office. We've seen plenty of companies already making that push. Even the White House now encouraging agencies to get more people to work in person. But are these efforts working? According to data from a report compiled by Stanford, the University of Chicago and others, about 59% of all workers are now fully back in office.

But 29% are hybrid and 12% are fully work from home. Joining us now to discuss is Nicholas Bloom, Professor of Economics at Stanford, who worked to compile that study. And Julie Bowke is founder and chief career strategist with the Boki group. Nick, those numbers are actually a little lower than I thought for work from home, 12%. But this seems like a trend that still is persisting or is it? Well, it's a good question. So we've been tracking this month by month going back to the beginning of the pandemic.

You also have the data from swipe cards from like Castle, how many people are going in and out of the office. What you see is it's been flat through 2023. So there was a huge return, but we kind of flattened out. So yes, Zoom is calling folks back in the office two days a week, but you see other companies that are getting rid of office space and downside. And so overall, we're about flat for the last half a year. Julie, do you think this trend is here to stay or is this the end of work from home? No, it's absolutely here to stay.

What we're hearing is that both from the employer and the employee side, is there willing to come to some terms on a hybrid schedule or a hybrid model? model because fully remote is not necessarily working for most organizations, but fully back in the office, it's hard to attract, retain, and engage people, the talent you need to meet your business goals. So when you say it's here to stay, what is here to stay is probably some kind of hybrid version of work from home, whether it's one day a week at home, two, three, whatever, right? Julie? Yes. It could vary. It's certainly going to vary because some jobs and some industries lend themselves very well to

a hybrid model and others just don't. And then leaders have different views. But what we're seeing is Gen Z is trying to get behind the wheel on this. And they are going to be 30% of the workforce by 2030. And so they're very much saying, we're going to need some compromise here, folks. And with an unemployment rate still hovering around 3.5% they still do have leverage. How much of this, Nick, when we're talking about these dynamics,

depends on literally the strength of the labor market. It's interesting to me that companies are making this push, even while employment is relatively strong. Certainly if the labor market weakens, they would seem to get the upper hand back, and they seem to want to demand that people are back in the office as much as possible. I should say, Julie, is spot on. I totally agree.

I've talked to probably by now 1,000-plus managers. hybrid is very much the future. So you don't want one extreme of folks working from home five days a week, but employees don't want to come in every day. I think what's really interesting about this story is I was actually having lunch with Eric Yuan from Zoom in their headquarters about a year ago. And even back then, they were basically operating on hybrid. So what for me is interesting is why they decided to formalize and put this out in the media

yesterday, in fact, is when it broke. It's kind of breaking this morning. That's the really, you know, intriguing thing, but the strategy seems very clear. As Julie said, pretty much all companies get professionals, managers, typically in, you know, most common numbers is three days a week in the office, typically Monday, Friday, work from home. Nick, I realize this isn't the school year, but it looks like you, it looks like you're at home. How much more often are you working from home? And the same question for you, Julie, are you working from home than you would have, say,

three years ago? There's a great question. Yes, I am at home. You know, it's exactly, you know, aligns with Julie's point. Teaching, seminars, big meetings, much better in person. I go in for that. And in fact, I'm going in later today. Individual meetings may be talking to students working with co-authors on data. It's great on Zoom teams, whatever. So like, you know, the U.S. workforce, I'm basically a hybrid. Julie, how about you? For me, I have, what I have found works is I have space for a membership in a co-op. working space. Uh-huh. And so it's full of people who are doing exactly what we're talking about. There's a lot of things we can do from home, but there's certainly, from a professionalism

standpoint where we're meeting with customers or clients, you want a more professional space. And you don't want to be moving your dog off the couch for your customers to visit you. So it's just from a perceptual standpoint. I love having some place to go. But it's very much, I'm selective about when I go. When do I need to be there? When will it serve my purpose to.

be there. And if it doesn't, I'm at home. Yeah, sweatpants, no sweatpants. I mean, it's just, you know, all these decisions you have to make now, Julie. Decisions, decisions, decisions. To her point, by the way, this should have been the perfect environment for the success of WeWork. You know, we should be sitting here every day and saying, what an amazing idea, all of these hybrid workers. And of course, that stock kind of, you know, dug its own grave. Nick, when we spend this forward a couple of years, do you think Fridays to quote, I forget who it was who made the quip, but Fridays are gone forever, Mondays are touch and go. Is that going to be the way the workplace looks in the next five or ten years time? Yes, totally. It was Ross, the CEO of Bonado,

a massive real estate company. And he said, frankly, Fridays are dead. And in fact, I've been tracking this. I was just actually looking at the data on the weekend. It looks like Friday is just dominating as the work from home day. So go back two years. There was a mix of days. Fridays just remained, you know, staunchly work from home. People are drifting in on the other day. So yes, You know, there's now a three-phase week that's like Monday to Thursday, Friday, and the weekend. You know, everything has changed since pre-pandemic. Well, listen to what you just said. You were looking at the data over the weekend.

We all can now work whenever we want to work. We can, the story the other day that how people, you know, at 4 p.m., their productivity dips. And some companies have started saying, go home. We know you're going to log back in between 8 and 10 p.m. Yeah, exactly. You know, sorry, Julie, go ahead. No, I was just saying the boundaries. Technology has made our lives bounderless.

And so workers are saying, look, I might be checking Slack or check in email early in the morning late at night. So if I want to take a yoga class from two to three, as long as I'm being productive and delivering the results you expect, why do you care? Because they really are, in a lot of cases, over delivering, and not everybody. And then you address those on a one-off. But in general, people want to be treated like adults who can meet your expectations and not micromanaged. All right. Julie, peaceful warrior, balky. We appreciate it.

Thank you very much. We appreciate your time today. You know, Kelly, it matches with, we were speaking last week to a restaurateur who said Thursday night is his new Friday night. No kidding. Right? Because people aren't in the city as much on Friday nights. So it's not as busy. And people are eating earlier because they're getting off of work earlier and going home. And that's why I love coming in on Friday because the cafeteria, they let me customize and do whatever I want. And the parking lot is less full. There's no money. Yeah. I agree. All righty, recycling papers. plastics and other items can be messy and equally as complicated, but that could soon change. You know why? Of course you know why. A.I. and robotics are helping to clean up the process for

everyone involved. We'll get the key details when power lunch returns. Welcome back, everybody. Recycling is as messy as it is complicated and not just for you and me. The same goes for the companies involved, but one firm working on a solution that uses AI. Diana Oleg joins us now in our continuing series on climate startups. Hi, Dai. Hey, Ty. Yeah, imagine if we could learn from what we're trying to recycle and at the same time simplify the process. In a combination of AI and robotics, that's just how new companies are reimagining and revamping recycling. Is it a milk container, a can of Budweiser or a jug of Thai detergent? Until now, defining that has been a difficult and dirty job in recycling plants.

But now companies like AMP Robotics, MachineX, Recycle Eye, and a California-based startup called Everest Labs are using AI and robotics to simplify, expedite and improve the process. They have been losing millions of dollars to the landfill, and because of AI, they were able to identify the value of the losses and deploy robotic arms to capture that. Everest Labs puts 3D depth sensing cameras on recycling conveyor lines. They can identify up to 200 items in each frame. Within 12 milliseconds, the AI software can tell what those objects are and what type of packaging they are. We get data around brands, types of packaging, types of material, and how much of that is getting recovered and reused, and how much of that material is being sent to the landfill.

That helps increase the potential recovery of recyclable items. Add to that, robotic arms, which he says recover the packaging three to four times more effectively than humans. That means big cost savings for major recyclers like SMR. If we can replace some portion of the positions that we would otherwise at the pill of human beings with a robot and can do that in a cost-effective way, that's obviously good for the business. Everest Labs is backed by TransLink Capital, NEC orchestrating future fund, BGV, Sierra Ventures, Morado Ventures, and Explorer Capital. Total funding to date $24.6 million. Increasing recovery through automation is the primary goal here,

but reducing costs is important as well. Recycling has been a rough business for many reasons, not the least of which is sorting through all the trash, and this seems to solve that problem actually in a matter of milliseconds. I'll merely point out that whenever I ask my 17-year-old to take out the recycling or the trash, his response is robotic and instant and not favorable. The robots are expensive by definition, but it sounded like one of the entrepreneurs you talked to there said that the net cost is actually better with robots than it is with humans. Yeah, you add the robots and the AI, which you think would be very expensive. but when you weigh that against the cost of labor,

you're actually saving so much more money with the robotics and the AI. And not only can they sort better, they also have quality control. This AI can actually see if your son cleaned the stuff out of the recycling materials, like you're supposed to rinse them

and do that before you put him in the recycling. I'm sure he does that. Right? Yeah, he is, yeah. Uh-huh. All right. Dye, thanks. Appreciate it. I'm about as cheery as him when it's my turn to take.

to the curb, by the way. Shares of Campbell's soup are lower on news. It's buying my favorite marinera sauce. Oh, yes. Rios. They're owned by Sobo's brands, $2.3 billion. Some concern about, a lot of sauce and some concern about Campbell's ownership. Those shares are down almost a percent and a half. Should you buy the dip? We will trade it. And other... It's a sauce. It's not a dip. They better not turn it into one in three-stock lunch right after the break. Welcome back. Time for today's three-stock lunch. We've got three big earnings and headline movers starting with Tyson Foods. Moving on both the missing, I'm sorry, on both the top and bottom lines. The stock is moving to the downside by about 5%. They talked about slowing demand and plant closures. Here with our trades is Ava Ados. She's chief operations officer at ER shares.

Eva, what do you do with Tyson? It's been a tough one lately. I would say a strong sale. And the reason is this is a publicly traded family business. but it has been run by the company that by the family that owns 22% of the company as a private company. The reason I say that is that there have been behaviors that would not be tolerated in other publicly listed companies. And we have also seen excessive chairman compensation, which is not aligned with how the stock has performed. By way of comparison, if you look at Kellogg's, for example, the same person is receiving a fraction of what Tyson is paying. So there is a misalignment there. I've also noticed that in the last one year, the gross margin has dropped by 50% actually.

The EBIT has dropped by two thirds. And the profits have gone from $4 billion to $900 million. So the fundamentals do not look good. This is a culture, a company actually that has been set by bad family culture, bad corporate culture, bad corporate values, and I do not see that changing anytime soon. I think once the culture has changed, it's really hard to get it back to where it was before, and I do not think that it's being run in a good way, and the fundamentals are aligned with the way the company is managed. I do not think that's going to change. It's itself. That is a fairly strong indictment of Tyson's.

Let's stick with food, shall we, and move forward to Campbell's Soup, which has acquired Rayo's owner, Sovos brands for $2.33 billion. That's a lot of sauce. Sovos up 25%. Campbell's down 1%. What's your take on Campbell's here? We all like the Reyes sauce, Eva. What do you think of this trade, however?

I do like the sauce too, but I have it as a sell again. Although this time it's different. The store is different. It's again a family-owned business. Yes. And the family owns 33% of the company. but in this case, they've hired external professionals to manage the company. And we've seen, again, about culture as a result of this.

The growth margin has dropped from 52% to 30% and the EBIC has gone from 27% to 17%. And so in the last 25 years, their revenues have slightly increased, but the profits are way off where they were 25 years ago. So I've seen the culture change. And again, there's consistency here. The culture has changed. I'm not optimistic that it's going to get back to where it was 25 years ago. It's a cell.

Wow. Okay, Eva. We've got a quick programming note. We should point out that Campbell's CEO, Mark Klaus, will join Mad Money today with Jim Kramer. That's at 6 p.m. Eastern Time. He'll talk about the deal for Raleo's sauce. So make sure you watch that one. And shares of dialysis firm, DeVita,

are up about 3% after UBS upgraded the stock to a buy. What's the story here, Ava? What would you do with this stock? That's a hold. On the one hand, I like the fact that their valuation is consistent with their peers. And also there is the expectation that there's spent on the demand due to COVID. Now, on the other hand, again, in the last four years, we've seen our flat revenues. And in the last two years, we've seen that the profits have actually dropped quite a bit.

So that's when the stock was at their all-time high. And when the profits are of 40%, and now the stock is up 55% for the year, approaching its all-time high from two years back with the profits far off, I do not see, I cannot justify buy here. So if you own the stock, you can hold it. If you do not own the stock, I wouldn't rush to buy it. All right, Ava, thank you very much. I appreciate it.

Very strong opinions, Ava. Thank you so much. Well, you bet. We've got a lot more stories we want to get to with just a little bit of time left. It is closing time on Power Lunch when we return. We've got a little less than three minutes left in the program. We've got several stories we want to tell you about, so let's get right to it. First is Warner Brothers.

It says that Barbie, you can't go a day without a Barbie story. Come on now. That movie has now topped a billion dollars in ticket sales at Global Box Office. Fastest pace to a billion in Warner Brothers long in storied history. Just 17 days. Barbie, the number one movie in the U.S. and Canada for the third weekend in a row director Greta Gerwig, the first female director to top a billion dollars. Mason has taken that long for that to happen, but it shows you a little bit about Hollywood.

This movie, this is more than just, hey, this year, this is a breakout. This is historic. Yeah. And you saw it. I saw it. I like it. I thought it was good. Yeah.

Yeah, we'll see. According to care.com's annual survey of parents, 67% say they spend 20% or more of total household income on child care. That's up from just 51% of parents surveyed last year, and it's in direct conflict with what the government says is reasonable. The Department of Health and Human Services considers 7% of total household income to be affordable for child care. Yeah, not preschool.

Maybe once you hit, you know, when you hit five, everything gets a little easier in the public school system, but zero to five, it's a lot. What surprised me here in part was the big jump from 51% to 67% in the number of people who say they spend that amount of money. on child care. And it was just in one year. I don't know what happened to make that so. I would just offer anecdotal evidence. A lot of our preschool costs have gotten much higher because all of a sudden their labor costs jumped and they're catching up with that. So places that had previously been 7,000 or now 10, things like that. And a lot of parents do have sticker shot.

Interesting. All right, from daycare to back to school spending where it's estimated to be a record year for retail spending. The National Retail Foundation estimates the total back to school spending could top $41 billion. That would be a more than $4 billion increase from just last year. Families with K to 12 children expected to spend about $900, $890 to be precise, an all-time high. And for college students, an average of $1,367, also an all-time high. I guess that would be for furnishing dorm rooms, for nerdy house rooms and so forth. And that's a perfect entree for our final story here, which is that inflation has more and more workers worried about their retirement.

How can you fund retirement when you're spending a thousand? thousand dollars on pencils. A new survey from Charles Schwab found more than 60% of retirement savers think inflation is an obstacle to being financially comfortable and more than a third say they'll delay retirement in order to save more to meet their financial goal. You see this more and more people saying they want to stay in the workforce longer, both for financial reasons and also for personal reasons. Yep. All righty. Thank you also for watching power lunch. We appreciate you being with us today. Dow's just off session highs, 400 point gain, but it's the outperformer today. Closing bell starts right now.

See you tomorrow. Thank you.