Power Lunch - Costco gets downgraded to Sell at Roth 12/15/25

Episode Date: December 15, 2025

Costco gets a rare sell call on it from Roth Capital Partners. Gold and Silver are outperforming the S&P 500 this year. And Kyle Bass joins the show to discuss the Fed, China and more.  Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Just 10 days until Christmas, stocks hovering a little lower today, but still near record highs. Welcome to Power Lunch, everybody. We are Kelly and Brian. Kyle Bass is here, the outspoken critic of China's government now saying we are not doing enough for protect investors here at home. He is here with that and more. Plus, the hottest trades of the year. You may not be talking about the one group that doesn't get a lot of media love, but maybe it's, should and Kelly, it will today.

It deserves it with this performance lately. Plus, the CNBC exclusive, our All-America Economic Survey, taking the pulse of the U.S. consumer, what it reveals about holiday spending and where wealthy Americans are hunting for bargains. Why do they need to? Speaking of retail, a rare downgrade for Costco, one analyst says it's time to sell and it's not just a valuation story. And Morgan Stanley Stock Girl, Mike Wilson, he is here with his new call on what you need

to watch for next year as year. three of this fairly incredible bull market just rolls on. Hi, everybody. Hope you had a great weekend. Thanks for joining us here on Power Lunch. We're going to kick off this hour with your money and how to invest in the new year. And for that, we turn to a Wall Street heavy hitter and friend of the show. Joining us now with more on that, China, and maybe even a little touch of Venezuela, is Kyle Bass, founder and CIO at Hayman Capital Management. Kyle, I hope you're ready because we got a lot of things that we want to hit with you. Are you ready? I'm ready. Let's do this. All right. Let's kick things off. Maybe with the Federal Reserve, obviously you're very well known for subprime years ago.

Some people suggest the Federal Reserve is making a policy mistake by keeping rates too high for too long. What say you? No, Federal Reserve, you know, is both the potential arsonist and the fire brigade. And, you know, as you know, they're the one institution in the world tasked with keeping a lid on inflation. They're also the one institution of the world, the only institution of the world that can actually cause dollar-based inflation. So I think when you look at where we are today, Brian, we created 40% more money in a very short period of time over the COVID disaster between 2020, 2020, 23.

So the price of everything went up about 40%, you know, on average. There are a few things that are exceptions. But now when we're lapping year over year, could those numbers come down? of course they could come down. Could we have a year over year zero once we move the price level up 40% or 50%? The answer is, of course, we can. So I do think that if you look at where inflation is today and you look at where short rates are, I think the new neutral rates and other 100 basis points below where it is today. So I think you'll see at least four or five cuts next year. To me, to me the headline on Wednesday, and we talked, Kelly and I talked about it,

was not just the interest rate cut. I know that gets all the headlines and kind of all the love, who's kind of this mechanics they're doing under the hood where they were starting what I called the son of QE or QE quantitative easing light, and they're starting to alter their mortgage portfolio. Fannie's doing some stuff, letting it roll off. I know it's a little bit wonky, but do you find it to be important or did we make too much of it? Look, I think, Brian, that home prices, the real issue with what happened during the call it the last five years when they were expanding their balance sheet like they did, Brian. You remember, the Fed's balance sheet was below a trillion dollars until 2009, so the 2008 crisis. We were sub-1.

We went from one to four and a half between 2009 and 2019. We were trying to take some of that off in 2019 when the disease from Wuhan propagated around the world. And we went from four to nine. We went from one sub-a-trillion to nine. trillion on the Fed's balance sheet in a very short period of time. So now I think when you look at what we're talking about, well, we're going to alter the mortgage bond portfolio. In the end, Brian, we're going to run a trillion aid at least in a deficit, if not $2 trillion this year. And the Fed's balance sheet has been shrunk from $9 trillion to about $6.4. I think we're at a permanent $6 trillion balance sheet from now on. And we're going to be, we'll be expanding that again,

Brian. So I think you're going to be right. I don't think the wonky nuances of mortgage this or that are really going to help anything in mass. But I think going forward, you're going to see the Fed's going to have to expand its balance sheet again. Right. In other words, as this debate rages, Kyle, is it QE? Is it not? You're saying it is, but also in some ways it doesn't matter. It's like the point is the liquidity, the backstop is there. And it should be supportive of the economy. And I guess of the stock market, do you have any point of view on what's going on in China? is the data wasn't great. They're still an export-led economy. They had a trillion in exports. Even in the face of tariffs, you know, it's kind of the same old story. In a story that doesn't

appear to have a lot of juice in it right now. Yeah, I mean, the export picture in China is their only shining spot. The rest of their economy, their banking system is completely insolvent. Their real estate markets down 40 to 50 and has been circling the drain for four or five years, and their demographics are collapsing. And the reason all of that is is inflation. China's secret weapon, the primary reason they've been able to do what they've done around the world, Kelly, is simple. They have 64% of their electricity is still dirty, rotten coal. They are the cheapest electricity producer in the world, and they also do some slave labor. So imagine if that was your actual weapon. You talk about, oh, we're going to build solar. We're going to

build wind. We're going to be amazing. We're going to build so much nuclear. That ratio of power from dirty coal hasn't changed. And I think that's vital for the world to understand. As Dan Ives put it last hour, he said, look, maybe the best scenario right now is that in the AI race, we are right now in the leadership and the pole position for once, finally, the U.S. is. So you kind of want them to be somewhat, you know, reliant on these NVIDIA chips so they don't create their own industry and leapfrog us. But do you feel that our position is secure? And do you think that the strategy is correct to kind of let them have just enough access to those chips that they don't develop a better competing industry. Because if they're still relying on the model from 30 years ago, then I think we all

just kind of, at some way, just toss up our hands and say, all right, well, that's it, but we don't want necessarily the next chapter to be, you know, at the forefront of AI. Yeah, it's a great question. And I think it's important to open our aperture a little wider when you think about this. We're basically involved in a hostage exchange with China. We're giving them some of the advanced access to chips, they're giving us, are affording us the ability to have rare earth magnets. And I know that sounds wonky, but rare earth magnets are vitally important to call it every single electronic vehicle motor out there. They're vital to guidance systems. We are desperately relying upon those for our weapon systems. So when you look

at what we're doing, you look at what the Department of War is doing, and they just announced a new deal over the weekend with Korea's Inc. We are trying to write our ship and create our own processing facilities for rare earth while China is trying to figure out how to get into the advanced chip market. So all we've done is press pause. We're both trying to buy time to get out from each under's thumb. And do I agree with the fact that we're sending H-200s over to China, absolutely not. I think it's a disaster. We're arming our enemy with the very weapons they're aiming at us.

But at the same time, look, there's an unfortunate truth here. We're both trying to buy time, and we'll see how long that time lasts before things go south once again. Yeah, I want to ask you about Venezuela, but first I want to ask you about companies listing here from China, big report in the Wall Street Journal today about companies that are either maybe not fraudulent, but certainly not representative of what they said they might be, the journalist at 12 of them today. You have written about this as well. But I've got companies that list here that U.S. investors buy. One of them had a market cap of almost $7 billion.

Kyle, what more could our U.S. government be doing? Because we can do our best from here to say, hey, just be careful of this company, be careful of that company. But in some cases, maybe these companies should not be listed at all if they are misrepresenting fundamentally who they are and what they do. Yeah, thanks, Brian. Look, look, I think that there are about 250 plus listed Chinese listed companies in America. They don't adhere to the same standards American companies have to adhere to or the standards of any U.S. listing in our marketplace. It is a, it was an Obama-era memorandum of understanding in 2013 that basically just said, China, you're not going to have to adhere to the same rules that the rest of the world is or U.S. companies do on

our exchanges. You won't have to submit yourselves to the same audits that we do. And, you know, the audit overseer in the United States is an NEC called the Public Accounting Oversight Board, which is overseen by the SEC, Brian. Their job is to protect U.S. investors. That's their job. And when you go to the PCAOB's website and you look at the auditors, they're like 47 or so auditors in China that are JVed with the U.S., they've reviewed seven of them.

They posted seven of those reports up. The grades that they got, they were deficient 66 to 100% of the time. It's actually hard for me to fathom. What are we doing wrong then? 100%. We're missing. These are the people that are paid in the U.S. government, by the way, to help make sure some of these.

companies, which many of them might be just straight up frauds, they don't get through, and yet they are. We are looking the other way, Brian. There is a trillion dollars worth of U.S. investor money invested in these listed entities, both stocks and bonds. And yet we don't let, we don't, we don't, the watchdog is not overseeing the watchdogs out there. And by the way, the person that runs the PCOB in the United States at the government agency makes over 700 thousand dollars a year mix more than the president of united states makes more than the admiral in charge of our fight against china it's actually again it's unconscionable for this to be happening brian and i just i don't understand the lack of oversight somebody has got to do something about

this well you know what you're bringing to attention we appreciate that very quickly i know you're wall connected militarily what do you think's going to happen with venezuela look i think that we are we are likely to strike them on shore and i'll give you you two reasons why. Number one, you know, what happens when our enemies all work together. We all know that Putin and Xi from China have publicly announced and reconfirmed a limitless partnership between the Chinese and Russian governments. We know they're working with the Ayatollah. We know they're working with Maduro. And what Maduro has been doing for the last four or five years, if you've heard President Trump and then Secretary Hegg said talk about this, is

they are working closely with the Chinese, the Iranians, and the Russians. What's happening is China, Iran, and Russia are sending military-age mails to Venezuela. Venezuela is giving them a bona fide passport and shipping them here. They set foot here through Mexico, and we give them the temporary protected status that Biden gave to the Venezuelans in 2021. We think there's 700,000 of those people here in the United States. That has to end. We have to stop leaving the door up of the enemies. And then we've also interdicted more drugs this year by October 1st than we've ever interdicted as a country before in the Caribbean. So enough lethal doses. If you assume 1.2 ounces of opioids is a lethal dose, we've interdicted 334 million lethal doses this

year. Okay, that is a reverse opium war, and that has to stop. So we're going to stop it, and we should have stopped it long ago. Well, and the one thing that we'll let it go, And one thing I want to remind our viewers that a very small amount of things like fentanyl can kill. And so we say, well, we caught 20 pounds. People say, oh, it's not very much. It's enough to kill millions of people.

Kyle Bass, wide-ranging interview, as always, thank you for joining us. Appreciate it. All right, folks, on a programming note, you may, look at that. That is our new logo. There it is. If you're on the radio,

just got to imagine it's a new logo. As part of our evolution, we have removed the NBC Peacock to embrace Kelly, a distinct identity that aligns with our future as a brand, small visual update as we continue to deliver the same

trusted coverage of markets, business, and the economy. I like it. I like the triangles. It's pointing up. Upward we go, baby. Upward and onward. All right, coming up, new logo, same great content.

And after the break, the analyst behind a rare downgrade of one of America's favorite retailers. Can you guess that mystery chart? Well, hit me or Kelly up on X in the commercial break, and we'll reveal the name next. CNBC is out with its latest All-America Economic Survey, and of course holiday spending is front and center.

Good way to touch in with the consumer. Christmas is just 10 days away. Today is also the first day of Hanukkah, and the CNBC survey found Americans are making significant changes this holiday season, possibly driven by inflation and the continued hunt for deals. Our senior economics reporter, policeman has more details. Hi, Steve.

Hey, Kelly, thank you very much. What we can tell you is inflation is factoring heavily into consumers' views on spending this season. You know, sapping some of the holiday cheer out of the shopping, the CBC All-America Economic Survey finding. It's affecting also where people choose to shop of, the 1,000 people surveyed across the nation. 61% say their income is lagging the cost of living. 68% say gift prices are higher this year, including many people have already been out in the malls, reporting this same percentage back and 46% are spending less due to the high cost of goods. By the way, 36% spending more because of the high price of goods. First time that's been the number one spot. The result

American shopping for bargains and looking in different places, we found a nine percentage point increase in American shopping online. Take a look at that. That's a meaningful move right there. A three point gain for big box stores, a slight decline in non-chain store sales, and a six-point gain, sorry, a four-point gain for wholesale retailers, among those things where they, this is where people plan to do most of their holiday shopping. Moving on, compared to 2024, what we found is the move to online shopping was strongest among those with incomes below 30,000 women of all ages, and both those spending a fair amount, and those spending the lease, which is really interesting because the wealthy have already been online, and it's now lower-income Americans making that move there. the wealthy increase they're spending at big box warehouse stores like Costco and BJs. Those spending more than $1,000 on holiday gifts, up nine points. Women age 18 to 49, up eight, income over 75, and also in that middle income there, 50 to 75, up

seven points. So far, we're only seeing a modest turn to AI to help with shopping. Just 13% of those who have used AI in the past couple months say they've used it for shopping. Most likely, those people under 40 college graduates, over 100,000 white collar workers, but 57% of that group said, why are they using AI to find the best price? Meanwhile, 28% of the public say they only buy discounted items, while half look for discounted items, but they'll purchase a product anyway. 10%, they don't care about prices. What was interesting about that for me is that is true for the wealthy and lower American income,

lower income Americans. So everybody, Kelly and Brian, looking for a bargain regardless of how which they make. Yeah, no, I think that makes sense. And I noted the people, you said we're shopping at Costco, Steve? Yeah, some wealthy people. I don't know if they do it for fun or for a bargain, or maybe you get both out of it, right? I mean, I have to admit, I enjoy wandering the Costco hallways there every now and then when I get a chance. These earrings are from Costco, but I didn't plan that, by the way. They just, they have great jewelry. Thank you to my mother-in-law. Steve, thank you very much. Steve Leesman. Well, let's stay on that topic, because speaking of retail and deals and earrings. Let's dig a little deeper into one of those big box retailers that

Steve and Kelly was just talking about. That, of course, is Costco. Despite its relatively strong earnings last week, the stock has had a pretty lackluster year. It's underperformed the broader markets. And in fact, Costco hitting a 52-week low today. And your next guest says more downside may be coming. He downgraded Costco to a sell from a neutral. Joining us now Bill Kirk, covers retail at Roth Capital. Partners, Bill, the call is getting a lot of attention, so we appreciate you coming on Power Lunch. What's the primary thesis behind that sell rating? Ben, thanks for having me. The primary thesis is when you unpack the quarter, there's a lot of key metrics that are going the incorrect way. If you take a look at traffic, whether it's in the

United States or even the worldwide number, it's decelerating. It decelerated this quarter from last quarter, which decelerated from two quarters ago. If you look at renewal rates, the renewal rates are fading, and they've faded a few quarters in a row. And what really put us over the edge with this for the, for the downgrade, was if you take a look at their paid members, their paid members grew 400,000 year over, sorry, 400,000 quarter over quarter. For years, it had been a million new paid members quarter over quarter. So you have a big deceleration of incremental paid members at Costco, and that's come despite them opening more clubs. So more clubs should bring more members.

If you adjust for that, same store or same club paid members might not be growing anymore. And that's a big divergence for what people think about this stock and how valuation treats it. Is the, you know, it reminds me a little bit of the Chick-fil-A issue. I always have this rule, like as soon as one opens near me, it's over. You know, and they finally have, and it feels like, you know, the portions are smaller. They're not publicly traded, so we don't know about the comps. But with Costco, too, as they open more centers, is it possible that they lose the specialness that made them so unique and kind of drove so many people to want to go?

And now it just becomes a little bit more commoditized. And as Brian has talked about a lot, you've got Walmart with a great digital product, great prices. Not everybody needs the bulk scale of Costco. So I wonder if they've kind of hit penetration. Those news clubs, they increasingly cannibalize the existing clubs, right? When you have 900 plus stores, you know, just logically you would think the 922nd store won't be as good of a real estate location as some of the first stores. So they're cannibalizing and competing with themselves more.

Walmart, to Kelly, you're and Brian's point, Walmart is competing with them more, both Walmart and Sam's Club. Sam's Club's getting increased openings, increased investment, increased tech, and even BJ's wholesale is opening more stores. So their own stores, Costco's openings, competing with existing Costco, Walmart, and BJs. And so you have increased competition against a wholesale segment that is maybe becoming a little bit more commoditized and just more like a traditional shop that you can get in most places. Is Costco countercyclical Bill, does it benefit if the economy goes down because people look for more savings? Or to Steve Leasman's point, maybe at the top, does it benefit because it can be a fun store to shop at?

And I know a lot of really well-off people who love going to Costco. They do a fabulous job of offering very good value. So when people seek value, Costco comes to mind. And so they benefit when value-seeking increases. they also over-indexed to that high-income consumer that Steve was talking about. So they over-indexed to the high-income consumer. And so if that consumer is feeling fine, they're shopping for discretionary stuff at Costco as well. So they kind of have both sides.

And to Costco's credit, they have both sides. If people want value, go get your food at Costco. You'll find a lot of value. If the higher-income consumer is feeling good, go to Costco. You're going to find some good discretionary assortments, some unique assortment that other retailers don't have. So they kind of have both. So I wouldn't say it's anticyclical, but they are diversified from the cycles pretty well. Well, I appreciate, Bill, that you're not.

A lot of people would look at this guy. I'm sure it was on valuation. Like, no, no, no. This is a lot more core than just that. And certainly would question anything in the PE range of where they are. We'll look to get more info in the coming months. Bill, thanks so much. Yep, thanks, Bill Kirk.

Coming up, we've discussed weather 2025 is reminiscent of the dot-com bubble from 1999. But she would be looking a little bit further back, like 1979. Gold and silver are both pacing for their best year since then. We'll get into the commodity trade more right after this. Welcome back. We spend a lot of time talking here about the tech stocks and the AI trade, but the big winners this year are actually mining stocks. For example, Hecla mining is up nearly 250%. Newmont is up 170%.

The gold miner's ETF is up 150%. Southern copper is up 64%. What is driving these moves? And more importantly, are they sustainable? Well, metals are soaring. Silver and gold are on pace for their best year since 1979. Copper is on pace for its best year since 2009. So let's drill down on these trades, starting with copper and see what 2026 might hold. Phil Strebel is the chief market strategist at Blue Line. Phil, I need to eat a little crow here. I can't remember who I was discussing this with at the

beginning of the year. And I said, even if the commodities perform well, the stocks often don't. They can be very cyclical. They go up and then they go down. And they're not necessarily always the best stewards of capital. Well, what a year it's been. Does it continue? It really looks like it is. I mean, the underlying drivers for these different commodities to keep going up are there and they're set in stone. You look at copper and silver, their prices are rising due to tighter supplies from mining disruptions, surging demand from the green energy transition, and the building and running of those AI data centers. So it's the surging demand, the global shift towards electrification. And that includes the growth of EV vehicles, renewable energy products.

wind and solar. It's really driving that record consumption and demand for copper, silver, and green energy. I want to switch gears to silver now because it's a little weird, but it's pointed out by Andy, Andy Brenner, so I'm just stealing his data, by the way, that silver per ounce now costs more than a barrel of oil. It obviously happened back in 2020 when oil went negative, but to the broader idea, it normally does not happen. We're showing a chart right now, Phil, you can see it. What do you make of silver's run? And do you see any slowdown to silver? Because it has outperformed most of the stock market this year. Yeah, Brian, you couldn't have two different products going in complete polar opposites. And the spread differential is really driven by the

changing dynamics and the growing fundamental uses of silver versus crude oil. You've got that physical scarcity. You know, the market is experiencing growing like a global scramble to get physical silver. You've got five consecutive years of supply deficits leading to those tighter inventories across major exchanges like London and Shanghai. You also have individual investors. They're becoming more savvy in a sense or realizing that allocating small slices of their portfolios towards these growing themes with the commodities behind it have really helped structurally support prices, but back to the oil, the fundamentals of the opposite. You've got production surges. You've got oversupply, not only from OPEC Plus, but from shale at

record highs, the growing supply glut, I mean, the amount of oil that's just floating around in storage right now is unbelievable. So look at the chart pattern on oil year to date. Look at the chart pattern of silver year to date. And it's like looking in a mirror with the opposites. It seems like, and again, with oil, it could turn on a dime. I know some people might question all the data around floating storage, et cetera, et cetera. But from a chart perspective, Phil, do you think it's possible, or I should say probable, because anything is technically possible, that oil will fall into the $40 range and fairly soon? I think it's already written in stone. I mean, you look at the administration's mandates. They're really trying to bring

inflation down. The easiest way to do it is by lowering energy costs. We're just becoming more and more efficient using electrification for things. I mean, people don't even buy gas or oil anything in your yard. Your lawnmower isn't even run on gas anymore. And you look at electric vehicles. They don't even use oil at all. So it's the demand for oil is just not there anymore. And that's where you look at these AI centers, these data centers, they're using things like copper to turn a turbine through electrification in order to create that energy. So it's just been a complete shift and a changing dynamic of where things are at. And it's possible we even see triple-digit silver at some point in the future. Wow. Wow. The Burlives trade, gold and silver? Just in time.

I inverted it. Phil Strebel. Appreciate it. Thank you. Well, let's get now with a Bertha Coombs with a CNBC news update. He's Jess Shing and Silver and Gold. The Los Angeles Police Chief said this afternoon Rob Reiner's younger son, Nick Reiner, has been booked for murder in connection with the fatal stabbing of his parents. According to the chief, he is being held on a $4 million bail. Authorities say the All in the Family Actor and when Harry Met Sally Director was found dead in his home on Sunday, along with his wife, Michelle.

A judge has disbarred Hunter Biden in Connecticut today for violating conduct rules. The decision stems from complaints related to his conviction on federal gun and tax charges. Former President Joe Biden later pardoned his son. And Trinidad and Tobago say it will, says it will open its airports to the United States military as the U.S. builds up its military presence in the region amid tensions with Venezuela. Officials say the U.S. will use the airports for logistical purposes, such as facilitating supply replenishment and routine personnel rotations. Trinidad and Tobago's prime minister has previously praised U.S. strikes

on alleged drug-carrying boats near Venezuela. Brian Begarved. All right. Thank you very much, Bertha Coombs. All right, let's get a check now on service now and maybe a wellness check on its investors because the stock is slammed down. about 11.5%. This after report that Service Now

may be in talks to buy cybersecurity startup called Armist's shares of now down about 27% this year. And it's adding to some weakness in the stock. By the way, Service Now CEO Bill McDermott. We'll join John Fortin closing bill overtime later for an exclusive interview. All right, for the markets and your money overall. What can you expect next year? Well, after the break, Morgan Stanley's Mike Wilson is here. He'll join us with his outlook for 2020. All right. All right. Welcome and welcome back. Morgan Stanley's market gurus are out with a new note on the market, specifically whether the Fed's quarter point rate cut will be enough to keep stocks rising into next year, which would be the fourth year of this pretty incredible bull market with us not to break it all down.

the author himself, Mike Wilson, Morgan Stanley, CIO, and Chief U.S. Equity Strategist. He had a 6,500 initial target on the S&P 500 this year, just a little bit below the median of 6,600. So we have done a little bit better than that. But I think this idea, Mike, that you're always some great bear is incorrect. You have a pretty bullish target on this year. I'd rather be above a target than below it. What do you see then for 2026? Hey, Brian. How are you? I think, you know, the call for 2026 is just a continuation of our call this year. You know, I think as you pointed out, I mean, we're going to end up a little bit above our target for this year. The one thing we didn't do that most did was we didn't, you know, capitulate in April. I think a lot of folks took their targets down. We stayed with it because our view coming into this year was that the administration would do the growth negative stuff first. And that would turn into a tough first half second second.

second half being quite good. And that's exactly what's played out. It was a little more dramatic than we would have liked in April. But, I mean, that playbook is working. And so now for 2026, we're going to see more of the good news effects of the fiscal policy. And now, of course, the Fed getting on board to be supportive of this sort of run-and-hot strategy. Yeah, talk a little bit about that run-at-hot strategy, Mike. That caught my attention. Yeah, no, I think we were first ones to talk about this. This goes back really to 2021. This isn't a new feature. And I think, in fact, the last administration was trying to run the economy hot, too,

but with a different strategy on how they would do it. And the Fed has to sort of acquiesce to that plan because the only way we're going to grow out of the debt and deficit issue is to basically run the economy hot, which means not only getting the growth better, but also getting inflation higher. And the Fed has to be tolerant in that process. And I think they were tolerant in 2021, obviously. They were late to kind of raise rates. But, of course, then they had to react to high single-digit inflation. And then 22 was a tough year.

And now we're in the same situation, I think, that we were in 2021, which is we're going into a year where inflation is going to be accelerating again, which is very, very good for earnings growth, which is where we're out of consensus now. And it's okay for stocks if the Fed is being supportive. It's not okay for stocks if the Fed is hiking rates. rates or tightening policy like they were in 22. So we're back to this hotter but shorter playbook we've been using really since 2020 at the lows of the pandemic.

It reminds me of what Charlie Babrynzkoi told us last hour as well, because the areas that you favor are very much the ones that he does too, like consumer discretionary, financials, I don't know if industrials are on this list, small caps, some health care, you say software over semis. Are there individual names? Or why do you think, for instance, consumer discretionary would do well in an inflationary environment, obviously because of the pricing power, but does the consumer writ large hold up okay next year? Well, that's it. I mean, that's the sort of, you know, the tricky part about

this. As I said before, inflation is going to be good for a lot of these lagging areas of the economy. I mean, our view has been that we kind of went through a rolling recession the last two or three years. It bottomed in April. And now we're going to get, you know, kind of an accelerating economy, both in terms of real growth and inflation. And that's quite good for earnings growth writ large. It's not just for, you know, the large companies that can mitigate inflation. So it's good to a point, meaning the consumer can tolerate higher inflation as they're getting higher wages, which is, I think, part of the plan, too, with the policy changes, right? Restricting immigration is arguably good for real wage growth at the

lower end, the middle class. And, of course, the high end may suffer from wage compression due to AI pressures, but that's a decent rebalancing. And so the idea here is, is that we've had a three-year recession and consumer goods, very low-volume growth, and that now is changing, some of which is due to policy change and some of which is just due to pent-up demand. Right, a trade where there's many more winners than just the AI names, and we're already perhaps getting a taste of that. Mike, thanks so much. Appreciate your time today.

Thank you. Morgan Stanley's Mike Wilson. And for the next trust for the Treasury market, well, it comes this week after the Fed's latest decision to cut rates. We're going to get the November jobs report tomorrow. It is expected to show a continually sluggish labor market. That's why you heard Mike talking about lower rates there. The reading also includes an estimate for October.

These were figures that were delayed by the federal shutdown. And the fallout from the longest ever government closure extended to another high-profile economic indicator, CPI, which is scheduled for release on Thursday. Quick check of yields shows the tenure hovering still around 418, similar to levels from last week. Coming up, six names that our next guest thinks you should own for 2026. Nancy Tangler joins us with her top picks for next year. Welcome back. It's time for today's power check. And as we wind down into the end of the year, let's home in on investors' top picks for 2025 and look ahead to what she's buying next year. Nancy Tangler's five stock picks for this year were Goldman, Broadcom, Spotify, Amazon, and Service Now for those names of a positive year today.

interesting that Amazon is flat. Service now, we just talked about its challenges, but Golden and Broadcom up 45 and 55% respectively. So what are her top picks for 2026? Let's bring in Nancy to discuss. She is the CEO and CIO of Laffer Tangler Investments. Nancy, you're here, so I also want to get to you about Oracle, but let's start fresh year, clean slate. What do you like? Yeah, so we have a pretty interesting list that we put together, Kelly, and thanks for having me. Walmart's kind of the leader on this. It's been our poster child of old economy companies pivoting to the new technologies. They've been able to really utilize robotics and automation to get orders out more quickly and to really drive e-commerce growth. So

dividend growth has been 12% last year, 9% the previous year, an indication of management's confidence. Tesla is another one. So let's, I'm glad you went right there because we were just talked. This stock is near a record high. You know, who would have thought after, you know, Elon Musk left the administration when it seemed like it was on this sugar, you know, induced high. Now we're almost all the way back there. Why do you think it's a top pick for 26? Yeah. Well, so we were buying the stock again. We owned it many years ago, got kind of spooked by Elon and some of his behaviors. And so we got back in when he was selling X. That was a bad decision or selling his shares to buy X. That was a bad decision to get out in

the first place. We were picking it off around $104 a share. We added to it again. in the spring, after all the bad news, and it looked like the company was never going to recover, he was never going to become popular again, 240's share. This is a stock that is the AI trade for the next generation. We think FSD is going to move more quickly than most probably think. Cybercab is going to go into production. I've been in one. They are going to, I mean, they're just amazing.

And then, you know, we've liked the megapack battery business, the elective. utility-grade business and robotics. I think my generation in particular is going to benefit from FSD. You can take our keys away and robotics. So we love the company, even though the valuation is nuts, this is a narrative stock. I was defending it on your air right before you went out on maternity leave. And I think we continue to like it. It's one of our largest holdings. It's in our thematic portfolio for the next generation of technological innovation. So, We like it in just about every way. I got rear-ended on Friday pretty severely at a red light.

Yeah, just got ram from, you know, sitting there at the red light. So I would like everybody to have full self-driving, Nancy, because maybe the car would have stopped. Either way, you can't do any of that electrification without the power lines that do all this. That's what Qantas services does. They build out the lines that are boring, but important. Yeah. Yeah. Well, Brian, I'm sorry that happened.

And I do think that I was in my son's Tesla. Hawaii with him while he was driving and texting. So there's a lot to be said for it and against it. But Quanta Services is one that we like for the long term. It's been in our 12 Best Ideas portfolio. It's in our ETFTGLR. They have delivered a triple play every quarter this year. The ongoing electrification is certainly a main theme, but data center buildout is also another, and we think it continues. I think this whole talk about data centers in space is interesting. and I have a feeling that quant services will be participating. But last thing I'll say is, you know, just like in football, you want to go with the team

that has the best quarterback. This is a management team. I would argue that for Tesla and for Walmart, even with, you know, Doug McMillan on his way out and John Ferner on his way in. These are the elite of management, and that's who we want to be associated with. That brings us to AMD, which is both in the space you're extolling, has great management, but has always been kind of the number two to envision. Why does this one your pick for 26?

Well, so, Kelly, when I got in the business, they had almost no market share, and we used to laugh. They were kept around to keep, you know, intel out of antitrust problems. But Lisa Sue came in in 2014. CPU business was 0%. It's in at that time. It's 41% today. So this is a CEO that's proven she can take share, have a vision. See,

We needed some more power lines here that could have added more energy. No, Nancy Tangler, if you're out there and you can hear us, really appreciate you coming on. Some good picks there. What were the other ones? You had. Horton and CrowdStrike. D.R. Horton. Yes.

Not the elephant from the Dr. Seuss thing. D. Horton, the home builder, crowd strike, the cybersecurity company, Walmart, AMD, Tesla, Quanta. She did have four more, by the way. It's listen. Amazon, IBM, American Express, and Alphabet. People are bulled up for 2026. Yes. Yeah.

Full self-driving, folks. So the car stops automatically. Not in my rear end. All right, coming up. Should you bet on the consumer in 2026? Well, if you are, Goldman Sachs has some consumer discretionary names. It upgraded just this very morning. We're going to bring those to you right after the break.

The calls for 2020. are beginning to roll in, and we are following, of course, all of them. This morning, Goldman Sachs out with its outlook on the gaming and lodging sector and is making some big stock calls, upgrading three stocks to a buy. Here they are. First up is Marriott, and the upgrade coming with a price target bump to 345 a share. It's on hopes of strong bookings for the year with the World Cup and all the costs associated with that, and by the way, those costs are not low.

Next up, Las Vegas Sands, LVS upgraded in part due to the expectation of continuation in strong business in Macau. And last, but certainly not least, win. Getting bumped to a buy, Goldman likes win, calling it, quote, the most catalyst-driven stock in their coverage. So there you go, three big upgrades to Marriott, Las Vegas Sands, and win, courtesy of Goldman Sachs. By the way, on the World Cup tickets, if folks, if you've looked, the costs, as you know, are so high that some people are now pushing back. But if the travel is, if the travel follows, it's going to be a huge one of fault. Not just that we spoke to the media analyst, Peter Sapino last hour, who's not that excited about the streaming stocks right now,

just thinks they're going to pay a lot for sports rights. They're kind of losing their price. But he's bullish on live, live entertainment, for instance, even on music and people going, and that just makes me think about the hotel stocks, right? Like, are there many reasons, not just the World Cup, that could be a catalyst? for people to be out and about booking those hotels and doing more next year. A tier two ticket. So if you put in for a lottery,

for a World Cup game, if you're looking to watch the USA play Paraguay, it's about $2,000 a ticket. And you cannot confirm. Is this in Jersey? No, no, it's in L.A. And they will not confirm that you will sit next to the person. So like, if I brought my son, my kid could be like over there somewhere. It's bizarre. The whole thing is very bizarre.

Well, I guess the hotel is a rounding error if you're going to spend that much. And if you're looking to buy a new house, well, should you just Google it? That's the concern that sending Zillow, Compass, and other real estate listing sites down after a report that Google might be getting into that business. More after a break. Very quickly, real estate stocks. Some of them are falling on a report. Just a report. Kelly, that Google may be looking to get into the home listings business. Just a report.

Yeah, Zillow co-star, they're all lower. We've seen this playbook before. I think that's what they're worried about. Thanks for watching, everybody. Have a great rest of your afternoon. And closing bell begins right now.