Power Lunch - Crude confusion, is tech too pricey and buy Twitter? 8/30/22

Episode Date: August 30, 2022

Crude falls on inflation concerns. What’s the next stop for oil as it bumps up against its 50-day moving average? Plus, tech has been getting hit hard but a top strategist says the sector is still too pricey to buy. And, why our trader says Twitter is worth a look. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Power Lunch. I'm Contessa Brewer, and for Kelly Evans. Here's what's ahead. Crude confusion. Oil prices drop as more rate hikes loom, but there are also concerns about unrest in Iraq. Will make sense of the move as oil approaches 90 bucks a barrel. Plus, Apple, Microsoft, and Alphabet, all down more than 5% over the past week. Is tech too risky to buy on this pullback? Our Market Pro tells us how he's positioned. But first to Tyler and a check on the markets. Contessa, thank you very much and welcome to you and everyone. Stock's pulling back now for a third straight day. Now off the lows of the session, however.

The Dow Industrial is now down about 1% or 341 points. The S&P 500 meantime is back below the 4,000 mark. I look over there down 1 and a quarter percent. Energy sector, worst performing of the day, dragged lower by the fall in oil prices that Contessa just mentioned. APA, Halliburton, Valero, some of the big laggards there. shares of Alcoa down about 9% after the company said it was going to curb production at a facility in Norway to offset power costs. Well, the S&P 500 has shed more than 3% since Friday's route, and that cuts its mid-June rebound to about 9% overall. Our next guest says what we are witnessing is new leadership emerging, and investors need to stop clinging to yesterday's winners.

Let's bring in Dan Suzuki, Deputy Chief Investment Officer at Richard Bernstein Advisors. Dan, welcome. Good to have you with us. It seems to me that what has hit the market over the past week, certainly since Powell's speech on Friday, and probably in anticipation of that, is the following. The realization that a recession is coming. It is in the cards. That's why oil is down $5 a barrel today.

That's why stocks are down and falling today as well. or disagree? Well, Tyler, I actually think it's probably more story of the Fed, if you're talking about the weakness over the last week or so, than growth itself. I mean, if you look at, you know, what's been rallying, I mean, it doesn't make a lot of sense that, you know, interest rates would be rising significantly if people were starting to price in a recession. And if you look at Fed expectations out to last year, out into next year, you know, people are

getting more aggressive on their expectations. But, you know, certainly the Fed's not going to be getting more aggressive if we actually are going into a deep recession. So I really think this has been more about a repricing of the Fed, you know, than pricing a recession. I think that story may still be yet to come. I just don't think it's in markets just yet. I think in a funny way, Dan, we're talking about the same thing here. In other words, the idea is that the Fed, as it aggressively tries to wrestle inflation to the ground, the understanding in the market is that the Fed is going to raise interest rates and that hurts equities, but that the likely result, the likely result of the kind of aggressive Fed tightening

that we are seeing right now is a recession. Not that we're necessarily going into one imminently, but that one is going to be very, very hard to avoid as a consequence of what the Fed's doing. Yeah, I think, I mean, that's the tug of war that's going on in markets, Tyler, is that, you know, people just can't figure out, you know, whether they should be focused more on growth through the Fed. And now week to week, I think that that story is changing. The reality is neither of those stories are going to be good for markets. I think it's, you know, in some ways, it's almost a lose-lose for markets here unless you see a drastic shift in either of those stories. Because, you know, from my vantage point, you know, the only two certainties for the rest of the

year are that growth is going to continue to slow. And we think we will be in a profits recession, you know, by early next year at the latest. And we think the Fed's going to continue to tighten. That combination is probably the worst combination historically for markets. So either way you cut it, whether it is the growth or it's fed or it's both, you know, that's not a great backdrop for markets. Yeah, a profits recession is never a good backdrop for markets, I would say. Exactly, man. So, Dan, the real question is, then how would you guide investors to look at profits and liquidity and the things that you think are important in the near term? How do you gauge balancing that against the prospect of how other companies have done in the past? Yeah, I mean, first of all, I think.

that you know the big debate happening within markets right now is you know is the bear market over or is it not and i think if you look historically you know it's very difficult to make the argument that it's over unless you're going to see some major shift in either that profit story or the liquidity story neither of which we see in the cards just yet so i think to see a sustainable rally you know you need to see one of those two turn in terms of how you position for that environment going forward clearly i think it's too early you know to jump into the market into the markets with both feet. In fact, if you look historically the history of bare markets, you know, the history is very clear that it's actually better to be late than it is to be

early when jumping back to the markets. Not only do you have better probability of success and better returns and lower downside risk, but more importantly, you know, you have the benefit of more time and more time to, you know, analyze the data that's coming in because unless you're looking at the data, it's just guessing. How late is too late? Yeah, so the analysis I'm referring to is we basically looked at six months early versus six months late. And by being six months late, you're generally right, you know, about 70% of the time historically. And the only times where it didn't really work out was, again, in those scenarios where, you know, policymakers had pivoted in panic because the things that things were collapsing. Clearly, that's not the case. You're not

seeing that panic from policymakers. And so, you know, it's hard to argue that, you know, this is one of those times where you should be early. Three sectors you would favor right now. Three sectors you would shun, avoid? Well, Tyler, I think right now what you want to do is you want to focus on the areas where they're seeing their relative earnings show the best fundamental trends. And in a slowing environment, just not going down as much is sometimes a big win. So I think right now, you know, focusing on those defensive sectors, the traditional ones, like utility, these staples and health care, you know, they're not going to be as tied to

slow down the economy as the other sectors. I think they're best position for the market. And so the ones to avoid. would be high growth, emerging tech, I suppose, and give me a third. Well, Tyler, I think that the bubble has still not deflated. So clearly, I'm more worried about the areas most exposed to the bubble, which are technology, consumer discretionary communication services. But just cyclicals in general don't do well in a cyclical slowdown.

Dan, great conversation. Thank you so much. We appreciate you. Thanks, Tyler. Dan Suzuki. It's not just equities selling off today. the energy market also taking a hit, especially crude where investors are grappling with competing headlines here. On one hand, prospects over a revived Iran nuclear deal and a hawkish vet are

driving prices lower, with crude selling off sharply on the session. But geopolitical tensions, turmoil in Iraq, and improving consumer sentiment may signal further upside for energy prices. So how should investors make sense of these dueling headlines? Joining me now is Kevin Bow. Managing Director at Clearview Energy Partners. Kevin, which of these headlines are you giving more weight right now? What's driving your thesis? Contessa, good afternoon to the downside, Iran. I think it's the proximity to a deal that is on the horizon.

When you look at what that means, there's two components. There's the return of above board sales on an ongoing basis. So think of those as flowing barrels. But the second part of it is if the reports are correct and the deal looks like this in the end, 50 million barrels of stocks delivered to market on day 60 after signing. That would come right at the time when strategic stockpile drawdowns in the U.S. are basically coming to a close if the deal were signed, say, this week. So you'd have more continuity in supply.

You've already got four Q with supply looking to be ahead of demand, and that's even without the Iran deal, added in, and you see pressure to the downside. And then we have the geopolitical tensions, which I am. mentioned, you've got some issues coming in with Russia. You have issues coming in, new issues in Iraq and the turmoil that's happening there. How do you weigh in outside of Iran some of the other geopolitical risks? Well, it turns out that there's another side to the story. And the Russia side is actually, right now, there's still plenty of Russian barrels flowing to markets. On December 5th, that's due to change with the European Union sanctions. One question is whether there will be a price cap in place to allow continued delivery to markets, ostensibly at a lower price than Vladimir Putin might want.

But even if that cap is possibly coming, the prospect that it might not could create a bid. What about the buyers of Russian crude who, four to six weeks back from December 5th, have to start asking, where am I getting my barrels if this doesn't happen? Where am I getting the supply I need to refine? So there's definitely upside catalysts. And it's possible that an Iran deal doesn't happen, in which case you have a deal. decay in the region, greater risk to supply and transport routes, as we've seen in past periods when Iran has been pushing back against the West.

Where does OPEC fit in all of this these days? I mean, they are saying they're going to think about cutting production. Yeah, well, my colleague, Jacques Rousseau, pointed out just last week in a note here at Clearview that OPEC basically got back round-trip. But if you look at OPEC's historical cuts, they cut when OECD-Pedrillion inventory. are ahead of the five-year rolling average. And right now, we're still a couple hundred million barrels behind. Now, give me a big recession, give me a return of Iranian prude.

You have a catalyst for a cut for sure. Interesting. And here we are heading into what is typically the height of hurricane season. We've had a very calm Atlantic hurricane season so far. But I just read a note today where the atmospheric specialists are looking at what's happening in the Atlantic and thinking, okay, well, now we may start to see some action pick up. How does the potential for a hurricane in the Gulf Coast or in the Caribbean affect what you're looking for toward the end of the year?

Well, a couple of dynamics at once. One is supply to the world. If we end up with a hurricane shutting down delivery to the East Coast, it's possible that stockpiles are so lean right now. The Department of Energy, the President might look to limit or restrict refined products exports, tightening the world, creating a bid for products in Europe at a time when a lot of diesel is going into power generation and backup generation. That would be a staggering result, but with an election coming up, you couldn't rule it out. Second side of that, of course, is that when hurricanes shut down the refined product production, they also shut down the demand for crude.

So some divergence between the WTI barrel in the demand going into refineries that aren't operating, and the Brent barrel would happen at the same time. And then how does, you know, as we head into winter again and this increasingly, demand for natural gas, how does that supply and demand then affect crude? Yeah, it may seem simplistic contest, but it's a great question because when you're not able to get gas to burn, you burn something else. That means demand push coming underneath coal and also petroleum, petroleum fire generation. In general, if you think about Russia as having supplied about five and a half percent of global consumption with its coal, oil, and natural gas exports

for the last 10 years, we're now missing about 20% of that, or up to about 20% of that, based on our numbers. That's a big shortfall, 1% of missing supply, and it's not even winter yet. Kevin Book of Clearview Energy Partners, Kevin, it's great to see you. Thank you. Thanks for having me on. Okay, coming up, we will break down the restaurant business as the industry battles inflation. Up next in our cookbook series, a look at the beverage players, and which offer the best

returns for investors, plus Twitter, Peloton, and Bed Bath and Beyond, darlings or troublemakers, controversial stocks, but there's one. Our trader says you should buy more Power Lunch straight ahead. All right, welcome back. Time for another chapter of our Power Lunch Cookbook series. We focus this week on some overlooked stocks and sectors in the restaurant space. Today, we take a look at beverage names from Coca-Cola to Pepsi Constellation Brands and here to help us trade them. Nick Modi, managing director at RBC Capital and as some best position names for us today. Nick, welcome. Good to see you with us. Good to have you with us, I should say. There are three stocks that we're going to get to in just a moment. And I wonder whether, as you look at these purveyors of beverages and foods and things like that,

the key at this time is whether they have pricing power. Can they pass along cost increases to their purchasers? Yeah. I mean, so far what we've seen is, absolutely they've had a lot of pricing power. And Tyler, we really think about it and go back in history, take carbonated soft drinks, soda, for example. There was always a lot of doubt that that industry could take any pricing. And what we, I think, have learned over the last several years is that these categories aren't very price sensitive. The issue is cross elasticity. So it's when the competitors don't take pricing and you take pricing. It causes a lot of mayhem. And so far, we've seen the industry act very rational and everyone has been taken

pricing at the same time. I mean, even with all the increases today, you can get a can of Coke for, you know, 40 to 50 cents a can, you know, which is pretty good value when you think about other beverage alternatives in the marketplace, like a Starbucks coffee or Dunkin' Donuts coffee, as an example. Yeah, you do. You have a lot of beverage companies on here, but also in your, in your, the stocks here is Clorox company. Let's suggest that people not drink the Clorox. That has been suggested before, as you know. Anyhow, one of the ones you like, and it is hard in sort of any environment to go wrong with alcohol. Constellation brands. Why? Yeah. So, you know, look, there's a lot of debate, obviously, of, you know, what's going to

go on with the economy, how deep a recession will be if one does happen. And the beauty about constellation is that they're just gaining distribution because they have so much marketplace momentum right now. So when you think about their opportunities in stores like grocery stores, Walmart, et cetera, they're gaining distribution. But they're also gaining distribution in bars and restaurants where they have very, where they're less exposed right now relative to their industry. So regardless of what happens to the category, this company is still going to be able to grow and outgrow and gain share because of this distribution muscle. If you're concerned that the rising prices are going to pinch what people are willing to spend

on dining at, if you're worried about restaurants, are there other companies other than Constellation that you think are well positioned to weather that? Yeah, absolutely. So you think of the beauty about beverages, right? right, is that you will consume them regardless of where you are, right? Just see what happened during COVID. People didn't go out, but they were drinking plenty at home. Maybe more than usual.

That's certainly in my household, no question. So again, when you really think about it, which are the companies that have this distribution opportunity that can help deliver outsized growth in an environment where people are still consuming beverages? So we think about duckhorn portfolio companies, right, ticker NAPA, NAPA, they sell duckhorn decoy wine. They're only distributed in 20% of the retail locations that they should be distributed in. So they still have a lot of opportunity for distribution outside of bars and restaurants. So that's another opportunity.

And if you're really worried about people going out and about, cured Dr. Pepper, right, you basically can make and brew your coffee at home. So that obviously is a value move for a lot of consumers that they may not want to spend $4 or $5 a cup for a cup of coffee outside the home. And the last one you mentioned here, it goes by the ticker symbol Napa. I'm not familiar with it, Duckhorn portfolio. What do they provide or do? I'm so sorry not to know. Yeah, yeah, no worries, Tyler. They sell the duckhorn and decoy.

Oh, labels, the wine labels. Oh, yeah, okay. Did you know that? Yeah. Well, I mean, I'm not saying that I know a ton about wine or that I drank more than I did before the pandemic. However, Nick, I appreciate you bringing duckhorn to my friend's attention to because those of us who do love wine with one glass of dinner. Just one glass. Just one glass with dinner. Thank you, Nick.

Nick, good to see you, my friend. Good to see you too. Cheers. We want to check in with another restaurant tour that we heard from on CNBC over the past two and a half years. President of Maria's Italian Kitchen based largely out of Los Angeles, Madeline Alfano says they've experienced major labor challenges, rising costs, and had their business shift largely to takeout. Pre-pandemic, we were at 60% dine-in and 40% take-out.

We've totally flipped now. We're 40% dine in and 60% take-out. Customers have changed the way they buy food. As far as labor, we have a tremendous labor shortage. And we're 500,000 shy in our industry. At Marius, we've integrated more technology and also cut our hours to mitigate the labor costs and shortages. As far as inflation, prices have gone through the roof.

Chicken 40%, but are 59% higher. Oil, 76% higher. And our flour at one point was 100% higher. I mean, those commodity prices, those food prices will change. They will fluctuate in the future, but won't change. Did you hear her say that now they've invested in more automation? If you can't get humans to do the jobs that need to be done

and you invest in machinery to do it, those jobs will not, that won't come back. That's not going away. I was speaking to a person who owns a bakery in my town, and the difference in the amount that she is having to pay for butter, for flour is staggering, staggering, staggering, and she can't find workers. Right. Very hard. It's slim margins there.

Still to come. Elon Musk. Doubling down on his push to scrap his deal with Twitter, citing security flaws as alleged by the company's whistleblower. In today's Working Lunch, we'll speak to the head of a company that focuses on preventing these very types of security flaws. We'll be right back. Welcome back to Power Lunch.

I'm Dominic Chie. We want to call your attention to what's happening with the casino stocks right now, many of whom are the biggest laggards on the day in many indices. In particular, it's the names with exposure to Macau, including Melco. You can see Wind Resorts, also Las Vegas, and MGM as well. Now, those declines come as China implement several fresh lockdown measures as part of its ongoing zero COVID strategy. Now, Macau doesn't appear to be impacted for the time being, but the region still has seen several lockdowns throughout the pandemic that have effectively

shuttered the casino business over there, especially for foreign tourists and Contessa. That may be the reason why you're seeing some outsized losses, especially in names like Melco. And that's something to keep an eye on. You know, the issue with Macau is there is simply no clarity. There is no certainty about when China emerges from these strict COVID lockdowns. That pursuit of zero COVID infection and policy is just crimping these casinos like you can't believe. And what has happened is, Dom, Tyler, you have companies that depended for Las Vegas sand, 65% of their profits came from Macau pre-pandemic. For when it was 75%. They're now turning to relying on for Sands, Singapore,

for when it's really Las Vegas and the boom there to support the overall operations. Las Vegas supporting Macau. It's totally topsy-turvy. It's a world post-pandemic, right, where the whole world is upside down, but it also shows you the stark contrast in the way that we here as America have treated the COVID lockdowns that we've had and the emergence from them, versus a very strict hardline approach happening in China. You can argue, and I would say, that Las Vegas looks a heck of a lot better right now than Macau does. And so maybe there's an interesting kind of tilt or political commentary on just what kind of system works more effectively, especially when it comes to things like casino games.

Well, and it's one reason why MGM Resorts has come out of this a little bit better because they have a much more diversified portfolio and much more reliant on domestic operations there. Hey, Dom, thanks for bringing us casinos. That's fun. Let's get to Sima Modi now for a CNBC news update. Contessa, a news update is also fun. President Biden has arrived in Pennsylvania where he is set to speak shortly about his plan to bolster police forces across the nation and reduce gun crime. This includes hiring and training 100,000 police officers over the next five years. Three months after the shooting at Rob Elementary School in Yvaldi, Texas,

a promised evaluation of responding school district police officers has not yet started. and those officers will be allowed to continue working within the district this fall. Now, many citizens are expressing their frustration and disbelief and are asking the board to suspend the officers until the evaluation is complete. And get this, people who drink tea may be a little more likely to live longer than those who don't. That's according to a large study. Scientists from the U.S. National Cancer Institute asked about the tea habits of nearly a half a million adults in the United Kingdom, then followed them for up to 14 years. Higher tea intake, they found, two or more cups daily,

was linked to a modest benefit of 9 to 13% lower risk of death from any cause versus non-tee drinkers. So, Tyler, if you're a caffeine drinker, if you're opting for coffee, you may want to go to tea. Tea has never floated my boat. I have had coffee every day of my life since I was in second grade. I was like you until recently. I actually did switch to tea about a year ago.

I wonder whether it's the tea gives you the good effect or whether the fact that people who drink tea take a pause and they slow down and they have their tea and everything. The morning routine. It's a routine. It's a nice habit and they, tea or coffee? No, no. She says I'm going to live longer by doing this. There you go. I'm here all day.

Seema, thank you. All right, ahead on Power Lunch. controversial companies, three names grabbing headlines, Bed Bath and Beyond B.BBBBY, Bamb blam-B-B-B-B-B-B-B-B-B-B-B-B-B-B-Bon. Beyond's meme run is faltering, Peloton, delaying its annual report to the SEC, and Musk sending a second deal termination notice to Twitter. Are these names investable? We'll trade them in three strong stock line. Plus, how can companies manage pressing situations like these? We'll get a take from Harvard Business School's Bill George.

Well, if you were than 90 minutes left in the trading day, and we want to get you caught up on the markets here, stocks, bonds, commodities, and how to lead amid a crisis. Let's begin with Bob Pisani with stocks just off the session lows. Hello, Bob. Contessa, it's not been a good day. I want to show you the S&P 500. We basically fell apart around 10 o'clock Eastern time. Got some economic data at the time. The Joltz report, that's the job openings report, a lot stronger than people anticipated. The revisions were revised upward, essentially. A consumer confidence. was very strong. So to the extent the Fed wants a weaker economy, this is not good news for people who are looking for signs of somewhat weaker economy. Then we had talk about from some ECB officials about maybe raising rates more than expected next week. That caused another leg

down in the market. A little bit of good news. If you think of energy as a proxy for inflation, we're finally getting some moves down in crude oil, which has been moving up recently, 97 earlier this morning. Look at this. We're down rather noticeably 91. So some of these big energy names, Occidental, which has been a new high recently, down big today. Some of the more natural gas-oriented energy stocks like APA, also down rather noticeably today. And the oil service names like Halliburton and Schlumberjay also to the downside. Material stocks, you want to watch them because they're proxies for global growth. Here, not such good news.

To the extent that they are proxies, very bad day. Freeport's been moving down. Again, it's now in a downtrend, one of those occasional downtrends. It was 34 on Friday. Look here, you see 29 now below. $30. Mosaic, new core, CF Industries, some of these, of course, in other areas of the subsectors, the materials also to the downside today. One sector that's holding up pretty well, though, bank stocks, we actually have a number of the big Money Center banks like Bank of America and

Wells Fargo in positive territory. J.P. Morgan, region, some of the regional banks only down fractionally right now, higher rates helping them, and signs that the consumer is still holding up pretty well, also helping them as well. Contessa, back to you. Bob Sons, glasses, Pizzani. I like the look, Bob. Thank you. Now to the bond market where the yield on the two-year hit a 14-year high in today's session, and Rick Santelli is tracking all that from the CME.

Hi, Rick. Yes. You know, post the Jackson Hole Symposium, the short end has been energized to more selling and higher rates. And as you look at a three-day of two-year, we flirted above 3.43 percent Friday. yesterday and today, but today it looks like we may close above it. And why is that so important? Open the chart up to June 1st. This is why it's so important, because we will be nearly at a 15-year high

should we trade and close above 3.43%. That was the mid-June high. And if you open the chart all the way back to November 2007, you can see what I'm talking about. Ten-year, not exactly the same. See this June 1st of our U.S. 10-year? It's hovering right around 311. virtually unchanged on the session. But its mid-June high was a couple of basis points shy of 3.5%.

We still have a long way to go. When we think about the pound, we have to think that the UK has energy caps, which means it's one of the few economies we know is going to be experiencing even bigger inflation ahead. And to that end, let's look at what's going on with the pound versus the dollar. This is from COVID, March 2020. It closed at the lowest level.

Greenback since then. But if you take out that COVID, it's really near the lowest levels against greenback since 1985. Contessa, back to you. Rick Centelli, thank you. Oil closing for the day, falling more than 5 percent. Pippa Stevens at the CNBC commodity desk. Pippa, what are you looking at? Hey, Contessa, well, we're seeing heavy declines across the energy complex today with global growth concerns front and center. Then on the supply side, we also have unrest in both Libya and Iraq, although it is yet to impact any output. Anticipation of some disruption had been supporting prices. Matt Demetriessen from Telemus, adding that technical factors are playing a role as oil bumped

up against this 50-day moving average. Let's check on prices. WTI at 91-54 for a loss of 5.7 percent. Brent crude right around 99-25 down 5.6 percent. And we're also seeing declines for natural gas. Henry had prices down more than 3 percent with the year. European benchmark dropping 6%. And this is weighing on the energy sector, which is the worst S&P group, Contessa, with a loss of 3.6%.

Right, Pippa, thank you for bringing us that. Of course, this market is one of the most challenging environments for CEOs to navigate. They're facing economic downturn, rising rates, and in some cases, a new, very vocal shareholder base. So how does a CEO try to give investors clarity when there are so many factors that they have to manage right now? Juggle is more like it. us now is Bill George, former CEO of Medtronic, professor at Harvard University. It's good to see you

today. What are you learning about how CEOs need to navigate such a difficult, uncertain environment? Well, Contessa, we've never seen these intersecting crises, you know, whether it's inflation, recession, post-COVID trauma that people are experiencing, the great resignation, people not want to come in the office. And I think we need a new generation leaders to step up and do this. Too many the older generation, just want to get back to the old normal. It's not going to happen. This is the new normal, leading through crisis the whole time. And so that's how I wrote my new book, The Emerging Leader Edition of True North, to say we need new leaders that know are adaptable, they're flexible, and they can take care of their people during difficult time to inspire them to step up

and deal with these difficult times. We don't know where this is going to go. True North was a great book when you first dropped it some years ago. I'm sure this new emerging leader edition will be nothing. less than that. So congratulations on that. So I'm hearing you say it is time for the baby boomers to step aside, whether it is in the corporate suite and or I think, most importantly, in the political arena. I think we've got too many folks my age, your age, hanging on in politics. But let's set that one aside. Are you saying we need more millennials, more generation, Xers and Ziers leading companies. Absolutely.

Because they know how to lead entirely with compassion, passion for their people, and they have courage to make bold decisions. Too many of the baby boomers are just set in the old ways. You're just focused on the stockholder of today. You can't do that.

Today you've got to meet the needs of your employees. You've got to meet the needs of your customers. They're changing rapidly, and you have to be out there with them. Too many of the CEOs and the O'Guard are sitting up in their offices. But making bold decisions often means making decisions that adversely affect the employee base. Well, sometimes you have to do that.

If your business goes down, you're going to have to do layoffs. I think you ought to prepare for that in advance. A lot of CEOs are doing that right now instead of hiring, even though they're holding back right now because they see this coming. Look, when you have high inflation, last time I've seen this, Kyler, was in the late 70s. It's inevitably going to be followed by a recession. We don't know when or how long or how deep. But it's going to happen.

And so people are being more cautious about that. But they have to adapt quickly. That's what happened. The best CEOs like Corey Berry at Best Buy adapted very quickly when COVID hit. That's what we need to see more of these young leaders taking over. And you can say, just to be clear, though, and not to be agest about it, you can see adaptability from experienced leaders as well, for people of all years. But it does take a certain sort of gut and stamina to be willing to change on a dime without a lot of, you know, getting in behind the corporate board and making sure everybody's on board.

AMC CEO, Adam Aaron, has faced a lot of criticism because he's done some really unusual, sometimes irreverent things, tactics. He's had a second offering of apes shares. He's accepted Bitcoin. He's had multiple capital raises here. What do you think of his style of leadership in this current environment? I knew Adam, no Adam, when he was CEO of VAEF. he did a spectacular job.

He's one of the great marketers of our era. He knows how to create loyalty game. He did that in the ski business. He's done in every business to be in. Frankly, he's spending too much time focusing on trying to hype his shareholder base in his stock. And frankly, his stock's down two-thirds, 70 percent, since he took over in the end of 15. He needs to get back to figuring out creative marketing of how are you going to market theaters. Because today, people want to sit at home.

And he's got to figure out make him into entertainment. Senator. But I think Adam is spending too much time on his shareholder base and enough time in his customer base. We're going to get to another controversial CEO right now, Bill. Implicit in the title True North is that you as a leader or as a CEO have a load star, a guiding star, a guiding principle. Who among the current ranks of CEOs has that guiding principle? Who does not? and where does Elon Musk fit? Well, Mary Barra clearly has it at General Motors. And, you know, she took a bankrupt company and was turning it around

and she put markers out there, Tyler, of saying we're going to be zero congestion, zero pollution and zero accidents, very bold. And then said we're going to get rid of all of our fossil fuel cars, oil and gas cars. And, you know, another one is Satchinadella, who understood exactly where the computer business is going and has transformed Microsoft off from what was a big decline there's Steve Bomber and took a great company. Ken Frazier did that at birth. And so there are some great leaders out there. Does Musk have that or not? Elon Musk is the greatest inventor of our time. We would send an earlier generation Steve Jobs was.

He's brilliant and it's amazing, Tiley, what he's done with Tesla, what he's done with SpaceX, and what he's done with other things. Frankly, I think he's getting caught in a celebrity trap right now of looking at the adulation of the masses and a little caught up with his own amount of money he's worth and all this game with Twitter. I wish he'd go back to inventing things. He's a great inventor. And I think that's where he's really good and shouldn't worry so much about being a celebrity. The book is called True North, Emerging Leader Edition. Bill George, great to talk to you. We could have gone what? Another half hour more? Right, the whole show. Thank you, Contessa. I didn't even ask the question what authentic means, but we'll talk about that next time.

Bill George. Thank you. Up next, today's working lunch, John Ford will bring us his interview with the CEO of the cloud security firm Vanta. We'll be right back. All right, Twitter is in the hot seat facing allegations of outdated software that put it at risk for data breaches this week. John Ford brings us up close with the CEO of one of today's hottest security startups, which is tackling this very problem. Hi, John. Hey, Tyler.

Yeah, Christina Kasyopo is co-founder and CEO of Vanta, which announced a series, be around in June at a $1.6 billion valuation. The company's software does automated checks of customer security readiness, exposing flaws so they can be fixed. Christina got her start in business growing up in Ohio when she discovered the art of buying and selling Beanie babies on eBay. It's funny because those websites and businesses kind of, I think, foreshadowed like a lot of, you know, something like Shopify or like the rise of, you know, things like that.

At the time, it's very early eBay. And so, you know, a couple years later, I tried to flip some of my old beanie babies on eBay. This was like money orders, right? They had like biking to Kroger, just like the grocery store to go get money orders. And then, like, you know, basically like sliding a bunch of dimes and quarters across the counter. And the clerk being like, what's going on here? Anyway, here's your money order, like little girl. Money orders.

Yeah. She ended up going to Stanford working in venture capital, learning to code, then try. trying a few startup efforts that failed because they weren't solving big enough problems. It's after she took a product manager job at Dropbox that she found a big one. A product she was launching got tripped up in security compliance issues. It turns out it's way too hard to make sure a given piece of software is practicing good security hygiene, keeping the doors in windows locked to borrow a metaphor. The other reason these software systems are so hard to secure and why you see these big,

established super competent companies getting breached is to use your analogy, it's like new doors just pop up all the time, right? When you think about a company of cloud infrastructure, it's constantly changing and moving new databases, new cues, new services, all of that, often happening programmatically. And so again, back to the analogy, it's hard because there's more doors and windows every day, and then the locks on those doors and windows change. And so trying to do this without an automated monitoring system, it's just near impossible. And of course, security threats don't take a break in a shifting economy, which we're likely to hear more about when CrowdStrike reports this afternoon.

And meanwhile, Cassiopo's company, Vanpa, is a standout in a few ways. Not only is a rare software as a service unicorn that's founded and run by a woman, women make up two-thirds of the management team, guys. That's really incredible. You know, it's interesting to see a company trying to tackle this issue of popping up doors. It's one of the reasons why you're seeing triple-digit premium increases, percentage increases in cybersecurity insurance, because the insurers who provide it have to constantly make sure that they're covered, and there's such a big increasing number of incursions.

So how did she get the idea that she could think big enough to solve? all these big, complicated, evolving problems? Well, she's always been curious, and she did a lot of traveling. But then she was working at Dropbox and was working on the product paper and was looking to expand the number of people who had access to it, but ran into trouble with the security of the product for Dropbox's existing paying customers. And so that was sort of an aha moment. Right now there are so many companies that need security compliance work,

whether they're going through an audit for a standard reason because they're getting ready to do a deal or even if they're getting ready to be acquired, I mean, bringing it back to Twitter. And then just to stay safe in general, there are so many ways that companies can get tripped up when they have a big issue like this. So artificial intelligence and smart software

coming to bear to try to solve some of these problems. There increasingly, as she said, more doors and windows opening. That was my metaphor. Fascinating. John, thank you. Thanks, John. Good to see you. So to come, not worth a risk. We'll take a look at some of the controversial trades in today's three-stock lunch.

We'll be right back. Today's three-stock lunch focuses on three controversial stocks. First, Twitter, Elon Musk filed another notice to terminate his acquisition of the company, citing recent whistleblower claims. Peloton is delaying the filing of its 10K to sort out accounting issues related to its restructuring, and Bed Bath & Beyond is scheduled to release its turnaround strategy. tomorrow as it struggles with slowing sales. With us, Marianne Maintain portfolio manager with gradient investments. Marianne, which of these three is a buy for you? For us, Twitter is the most interesting. Since Elon Musk, also known as X Holdings, agreed to buy the company, he then

backed out. So that $54.20 share offer is still on the table, but he's not backing it. It's now the hands of the court with some very capable lawyers on the part of Twitter. And I think Elon's getting pretty nervous here because those same lawyers that are representing Twitter represented him in the past, according to my sources. So in the meantime, Twitter's been undergoing its own restructuring program, and we believe it's likely to emerge with better growth in cash flow dynamics post the legal decision. So with or without Musk, we believe that the general negativity on the stock is excessive. We're contrarians and be buyers. Are you then counting on this deal going to completion, or that's just not relevant really to your analysis of the stock? Yeah, that's the way

I feel. It's just not relevant with or without him, with or without a $54 offer. We think the stock could be in the 50s anyway, just on its own merit. All right. I hear Bono in the background on singing with or without you. Marianne Montaigne, thank you. Love it. Up next is Mega Cap Tech, the safety trade. Some say it is. We are going to put it under the microscope.

Welcome back to Power Lunch. Mega Cap Tech hit hard again today, leading to questions about whether it can be called a safety trade. Dom Chu is taking a look now. Dom? So what's interesting, Contessa, since the great financial crisis, right, in the era of ultra-low interest rates,

stocks like Apple and Microsoft and others have been viewed as that kind of safe haven trade at times. When they go down, people go into those because they think they have stronger balance sheets, they can weather the storm. Well, with the NASDAQ 100 overall being some of the most vulnerable parts of the market because of that big technology trade, we did see that kind of rally, right? The 24% rally that we saw here only to kind of roll over by about 9, 10% in just the last couple of weeks here. The reason why we're going to look at that is because Apple, on the dip,

had been one of those stocks again where everybody kind of poured into. And I'll show you right here because what this is right here is a 36% gain in Apple shares from the June lows that we saw to the recent highs. All of a sudden we've seen a more pronounced drop off here on the other side of the kind of equation. So we don't know whether or not Apple is still viewed as that safe haven trade. It looks as though for right now it's being hit harder with the rate concerns. Microsoft is a similar kind of story. If you take a look at Microsoft shares overall as well, another move higher off the lows that we've seen recently,

and then a more pronounced move to the downside here for Microsoft shares as well. Two of the biggest weightings in both the S&P 500 and the NASDAQ 100. The one place that's a little bit more disconcerting for some traders right now within mega-cap technology is what's happening with the semiconductor stocks, and specifically Nvidia, which is the biggest one out there right now by market cap. If you look at the invidia trade, it's been a kind of downtrower. trend for a while into this area of consolidation that you've seen over the last maybe four or five months. It never really got an upside move going, and it's been kind of rolling over for the last

couple of weeks here as well. So if the semiconductor trade is one of those ones where you say, is it more indicative or a leading indicator for the rest of technology, that chip stock trade has not been behaving well, which is the reason why some traders are questioning whether or not there could be a retest of those lows that we saw back in June if semiconductor stocks aren't part of that leadership group. And why are tech stocks so affected by rising rates? So the tech stock trade, it's a valuation concern, right? When you have an environment where risk-free rates, the amount of money you can get without any kind of risk whatsoever goes higher, it makes that hurdle. The return you need from tech stocks that much greater, that's the concern for valuations right now.

And that does it for us. Thanks, Tom. That does. for us. Thanks for watching, Paloan.