Power Lunch - Dimon In The Rough, AI & Health Care 8/7/24

Episode Date: August 7, 2024

JPMorgan CEO Jamie Dimon weighed in on markets and the economy in the last hour. We’ll recap what he said, and get you some actionable insights. Plus, more and more health care companies are working to implement AI into their businesses. Could this help or hurt the industry? We’ll discuss. 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, J.P. Morgan's CEO, Jamie Diamond, weighing in on the markets, the economy in the past hour. We will recap what he said. I was taking notes and get you some actionable insights. And we have more health care companies working to implement AI into their businesses. Could it help or hurt an industry plagued by red tape and inefficiency? We will discuss. But first, a check on the markets with the Dow losing all of its earlier gains, now ever so slightly, in the red by about 70 points, along with the rest of the market. This after a strong start to the session, crossing its 50-day moving average, Kelly. Some of the other groups were watching, the gig economy stock seeing some big swings,

Airbnb down nearly 15%, same for Lyft, Uber and Instacard hanging on to some gains, though, about 3.5%. And moves in the chip space, super micro down nearly 19% now after missing estimates, while AMD is up about a percent and a bullish note from Piper Sandler. We start today with Jamie Diamond, the JPMorgan CEO, weighing in on recession fears and recent market volatility. Let's listen to what he had to say. You know, America's alive and well. There's entrepreneurs everywhere.

People are optimistic. They're growing. They're expanding, building stadiums. There's technology. Just about every city we do wherever we go. And, you know, well, society's problems is quite uplifting. You know, markets fluctuate. And I literally, I think people overreact a little bit to the daily fluctuation of the market.

And sometimes it's for good reason. Sometimes there's virtually no reason. And you saw this one, it came way down and went way back up. But people are projecting, and when they project forward, it affects the markets, we don't know if there's going to be a soft landing, a hard landing, and all the things in between. You know, I've always been a little skeptical that'll be soft. On the other hand, I'm hoping it is soft. Does inflation really get back to 2%?

I'm a little bit of skeptic on that, too. Rate effect itself isn't that critical. Obviously, psychologically, there'd be a lot of chatter about, what does it mean? What do they think? if things getting bad. So, and maybe that psychological will affect the economy. But I also remind people every day, 325 million Americans go to work, go to the jobs, take of their families, take care of their kids, you know, build out their house, change the job.

And it could be affected by the Fed changing rates by 50 basements, I don't think so. The bottom 50% of income, they've spent it down. So they're doing what we call normal behavior, substitution, you know, if they have an extra expense, they might do a gig job for a weekend, you know, do something. some cheaper, less going out. The top 50% still have some extra. That extra will probably be gone at the end of this year, but they're still spending it, travel, restaurants, you know, entertainment, things like that. Let's bring in Luke Tilley, chief economist with Wilmington Trust. A lot to unpack there, Luke.

I think my key takeaway here is that he does not see the economy in imminent risk of a recession. he thinks that there's a 35 to 40% chance of a soft landing. He hopes that happens. But if not, we'll be okay. We'll get through it. What else can you say, really? Yeah, well, we're even more optimistic than Jamie. We put about a 70% chance of a soft landing.

We've been in that position for a while, maybe a 30% chance of a downturn. And a lot of it does come back to the consumer. Back to those previous comments, consumers have slowed down. their purchases quite a bit after. And I would actually say that they have exhausted some of their savings, but a lot of that was invested too. You can see the flows going to places like Treasury Direct. You can see consumers had invested some of those savings, not just spent them down recklessly,

which I think provides a good buffer. But adjusted for inflation, absolutely right. A lot of those savings are gone. So we see consumer spending now in a real sense, whether it's goods or services or the overall, is about two and a half percent year over year. and importantly, no longer relying on savings that is driven by job and wage growth. And we think that those things will continue despite a one week jobs report. And importantly, we're not hearing the hue and cry from businesses that they can't keep up with orders and can't keep up with business.

And that's what's really bringing inflation down. So we expect 2.4% growth when we finish this year, a little bit of a slow down next year to about 1.5%. But we're pretty optimistic. He said he was a bit skeptical that 2% inflation could be, that target of the feds could be reached anytime soon. I may be over paraphrasing him there. Do you agree with that? We think it'll come down to the Fed's target in the first quarter of 2025, so probably faster than what Jamie was referencing. We're going to have some challenging base effects for the remainder of this year. We had some really low readings in the second half of last year.

But with consumer spending, as normal as it is, we really don't see inflation pushing upward from here. So it's going to sort of move along right around at that two and a half percent level in a year over year since. And then when we hit the first quarter of next year, I think it will move back down to the Fed's target. And that's really important for a Fed consideration because as the unemployment rate is now already above their median forecast for the end of this year, and because the Fed has said they're putting inflation and the labor market on equal footing, that means it's time for rate cuts, and it means it's time for rate cuts pretty soon. Luke, still, I was struck by how I thought Jamie Diamond really sounded much more optimistic than in the past couple of years and kind of like his old self.

And maybe the storm clouds have cleared. Yeah, storm clouds. I was just thinking, as you were saying that, I was thinking back as a couple years ago, he said they were bracing for an economic hurricane. And there were a lot of challenges at that point. But a lot of the storm clouds have cleared. I agree with you. There are some, I'll say yellow flags, not even red flags in the labor market report and a little bit of drift up of credit card delinquencies.

But overall credit is still being paid. And as long as job growth keeps up. And we think it will. That means that companies are going to keep hiring people. As I said, it's going to be slower than it has in the past couple of years. So we don't know where the next storm cloud will come from. Like I said, a couple of yellow caution flags, but we think that it's a soft landing from here. And that's going to be good for the economy and good for risk assets.

It's interesting. Leslie Picker did ask him about credit card losses and extra reserves that they have set aside at the bank to do that. But he did not seem overly worried about that at all. He said credit card losses have normalized. It's not worrisome. Jobs are up. Wages are up. The market is up. And really what he's seeing is kind of.

of a normalization of that rather than any big dramatic acceleration? Yeah, we see that in the data, too. And Wilmington Trust, we're part of M&T banks, so we have our own portfolio. And I feel like as an economist, I spend a lot of times distinguishing between rates of change and level. So we've had the credit card delinquencies have really been moving up sharply over the past year, but they're coming off of a really low base and really hitting those normalized levels right now.

This morning, we got the most recent quarterly report from the new new. York Fed on delinquencies and the movement of balances into 90 days delinquent is slowing down. And it really does translate to a normalization. And a lot of people still are paying those credit debts. So we don't think that it is a red flag. We don't think it's a reason to panic or change our positioning yet. But we're watching it very closely because the consumer is key. All right. Luke, we appreciate your time. Thanks for joining us today. Thank you. Wilmington Trust. As we heard off the top, Jamie Diamond in short saying he doesn't think that the

Fed's rate hikes matter much on a grander scale, but they certainly impact housing. The homebuilder stocks are trading lower today, adding to their declines over the past week. For more on his take on the housing sector, let's bring in Stephen Kim. He's Senior Managing Director of Homebuilding Equity Research at Evercore ISI. Steven, it was not a pretty period for the home builder. It turns out they hate lower interest rates. Well, they've actually moved up quite nicely over the last few months actually the last month or so. So we actually have had a very nice positive reaction to the lower rates. Frankly, though, I think that we have a lot more to come because right now what we're seeing on the ground is that in two Q earnings, we're hearing that June really wasn't a great

month. July probably wasn't that great either based on our contacts. And so this moved down that we've seen here over the last few weeks in the tenure yield, which will, of course, translate to the mortgage rate is going to be very beneficial, we think, for the housing market. And we think things are going to get better on the ground as we get into the third quarter. They could get better overall, but could they get worse? Look, the builders have benefited so much from short supply, being able to buy down rates, a low inventory, relatively affordable home prices. The premium, I think you've pointed this out, they used to command is pretty much gone. Does all of that reverse or start to reverse now? Well, I think not. I think that what we have here is we're probably

going to see another step up in demand as the rates come down. But the supply remains extremely tight. It's moved up a little bit. I think people are trying to make a mountain out of a molehill. They're looking at maybe some, a couple of markets around the country where things have gotten a little bit worse, but it really hasn't metastasized to the rest of the country at all. As a nation, we have 3.8 months of supply of resale homes on the market. That used to be normally around 5 to 6 months. It was got as low as, you know, three months or so. But at 3.8 months, we're going to still see a very tight market. You're not going to see a lot of pressure on home prices.

And with demand improving, with the rates coming down, we think third quarter is looking to be a pretty good period. What would a half point interest rate cut in September and maybe a further cut or two for the remainder of the year mean for the housing business? Well, I think it's important to recognize that the mortgage rate really queues off at the 10-year yield. And that's because people usually stay in their homes for seven to 10 years. or so. As a result, the 10-year yield is really what matters, and the 10-year yield obviously anticipates a lot of the Fed cuts. So the Fed cut, per se, probably won't impact the mortgage

rate when it actually comes. This period we're in now, as people are thinking the Fed's going to cut, that impacts the rate. So you kind of get that. However, I will say that a lot of people who buy houses for the first time may not be very sophisticated. And as a result, they may not really know that the long end of the yield curve is what matters. So when they hear that, oh, the Fed is actually cutting rates now, that may actually drive more traffic to the doors of the home builders. That's something to watch out for. We are seeing that there's a lot of psychological barriers to the buyers right now. People think it's all math, but I've said many times it's not just math. It's mental when you're talking about homebuyers, man, particularly first-time buyers. So the Fed actually cutting

rates may not change the mortgage rate that much, but it might get people off their couch and into the doors of the home builders. So it could change the psychology of the buyer, in other words, make more of them feel comfortable with the rates that are out there than are comfortable today. Yes, it makes them feel like they're not doing something foolish. I think first-time buyers, they have a nervousness around this biggest purchase that are really probably ever going to make, and they're just nervous that they're going to do the wrong thing, do something foolish. And buying the house when rates are high, I think a lot of people think of, that as maybe a foolish thing. And so when they hear that the Fed is now cutting rates,

as I said, I think that that could connect some dots in people's minds, even though the mortgage rate is already moving down now. Right. All right, Stephen, thanks very much. Stephen Kim, Evercore ISI, senior managing director. Moving on, Diamond also weighing in on the consumers saying consumers are spending down the money they built up during COVID from government programs and elsewhere, from not spending, I guess, basically, but not raising serious alarm bells there. That said, Wells Fargo out with a new note, raising some red flags on retail, issuing some caution around names like Capri, Urban Outfitters, Under Armour Alta. Turning us now is the author of that note, Ike Borchow, he's Wells Fargo's managing director

and senior retail analysts. What are you beginning to see in these names? And I was struck in the last hour Kelly had up on a graphic of a lot of the hospitality names, from Airbnb to Hilton to Windham and so forth. all guiding down, all saying it's not the quarter is going to trend lower than previously anticipated. What's going on? Yeah. Hey, Tyler. So look, at the end of the day, I think not a lot is changing, certainly for the better, for the outlook of the consumer, especially in discretionary. You know, the numbers you're starting to see in the second quarter are showing you little red flags, just to kind of take the term from our note.

But I think our larger concern is what do these flags mean for the back half of the year? So we highlight a few different things that really concern us. Number one, markdown risk. We are seeing in real time the inventory situation get a little bit worse, markdown rates getting a little bit higher. You factor in then in the back half. You've got an election. We've done a lot of work around what that means to spending.

It's not good. We could go through that. And we have a shortened holiday. If I, if you were selling days this year, then you tell you. on things like elevated free, spot rates and surcharges, what do these mean to margins into next year? Tariff risk. People are already talking about that. It's really hard to find good news in the space today. So valuations are cheap, but that's never really a catalyst. Let's bear down on that one thing that you brought in that is a little bit unanticipated, at least by me, and that is

the idea that the election affects what consumers do and how much they spend. Why is that? And where do you see it? Absolutely. Look, look, we put out a big report a few months ago to talk about this because it has become much more topical with our investors that we speak with. What does it really mean? When we go through election cycles, going back 30 years, what we can see in the data is that there is roughly a 150 to 200 basis points slow down in spend in the back half of

an election year versus the first half. That has become much more exacerbated in the most recent elections. Why is that? Because when you look at the data, people are on their phones more. They're watching the news more. They're sitting on the couch, kind of debating, you know, who do they want to vote for? They're not spending. This polarization of politics really does take a number on spending.

Their attention is distracted. Their attention is lured away from what they might otherwise be doing, which is going out and spending money. That's what Amazon is arguing. That's interesting. I think there might. I thought that sounded like the dog ate my homework kind of excuse personally. Well, and here's what Barclay said, as I'm sure you're aware this morning, they downgraded all of retail to neutral and said from this point in the recovery cycle, the only way to drive further margin expansion is blah, blah, blah, blah. We believe the majority of forward outlooks have far less upside opportunity and potential risk to sales and margins in the back half of this year, which echoes what Tyler said about the unusual nature of what we've heard from the travel companies.

That was supposed to be a bright spot. I understand hard goods or soft goods retail retrenching. But this seems to be broad-based. Yeah, and again, I can speak most notably to discretionary and soft lines within this. And so at the end of the day, I think that, you know, to take it more near-term, the checks we wrote about most recently for the first couple of weeks of back-to-school are not very good. You're having a slowdown in demand. You've got sourcing concerns that are growing. But the global vendors, like look at Ralph Lauren today, a really, really good print stocks down.

You know, Europe, China. it's almost like, like I said to start, you're struggling to find the good news. There's, you know, idiosyncratic long ideas do exist. We still like some of our stocks. We're not negative everything. We're not downgrading the sector. Burlington within the off-price space is our top idea. Gap is our favorite margin recovery story.

There are names out there that are worth owning and buying on fullbacks. But again, broadly speaking, I think it's tough sledding for now. Broadly speaking, is this slow down something that is across the board, or is it concentrated more in those retailers that cater to what Diamond would describe as the bottom 50% of earners? No, it's not that. I think low end has been under pressure for, let's call it two years, but I would actually argue in some cases the low end pressure is almost normalizing. I don't know what the right word is, but like, look at the, like, for example, the off-pricers have the most consistent traffic of anyone right now. That's the lowest-end consumer.

that we deal with, but their business model and their mousetrap really, really works. But it's broad-based because, look, we could talk about Alta Beauty, Bath and Body Works, candles. We could talk about apparel. We could talk about footwear with Nike. It is across the board. It's discretionary spend in general. Alta was the stock everybody loved six, nine months ago. And now, obviously, as you see there, with the slide over the last three months, 17% in Alta. I mean, we have an underperform on Alta. I think we're, the only one on the street. So we think that we think that they have some issues. They need to

reset their business. The margins are too high. The category is slowing. They're losing market share to Sephora. I think Amazon's a problem. So I do think that they have a good amount of problems to deal with. Interesting. Ike, thanks so much for your time today. Ike Borchow with Wells Fargo. He's a senior retail analyst there. Impressive on Alta in particular. After the break, we'll dive further into the health of the consumer. While the focus of Disney's results was on streaming profitability, Park segments could offer better insight into the state of the economy. I'll tell you what they said. Plus, we're watching markets down almost 200 points on the Dow,

which has given up its sharp earlier gains after that weak auction of the 10-year top of last hour. We'll continue to track it. Power Lunch, we'll be right back. Welcome back despite beating estimates as its combined streaming services finally turn to profit. Shares of Disney are down 3% today after reporting weaker results for theme parks and citing signs of strain on the lower consumer demand and inflation. He says it's likely to continue. Let's bring in Barton Crockett, senior media analyst at Rosenblatt Securities.

Barton, it's good to see you. And there's a lot to unpack here. As you mentioned, there's kind of what's most important to Disney as a company and what's more interesting from broader sort of sign for the economy. What would you say we've learned? Well, I think we've certainly learned. We've gotten one more data point supportive of this notion that there is some pressure on the consumer. You know, the theme park segment for Disney is important.

I mean, that was last year, 70% of their segment profits, you know, this year, I think, pacing for around two-thirds of segment profits. So it's a key driver. And what Disney was saying last quarter is that they thought there'd be robust, as they put at operating income growth in parks and the experiences segment that the parks drive. And now they're saying that that segment's going to be down mid-single digits and profits here in the fourth quarter and that those pressures will persist and through the first three-quarter of next year. And that's a really rapid, substantial change. And a lot of it is, you know,

tied to the consumer domestically, I think mainly in Florida, weakening. We saw a little bit of that earlier with the Universal Parks out of Comcast. And it's just been reiterated here with Disney. So that takes some of the luster off of the good trends they've had in, you know, finally bringing their direct consumer business into profitability. So what is it that's happening here? Is it, is it, uh, consumer? was just pulling back across the board. I mean, Disney has gotten, the resorts are not a cheap ticket. The resorts are not cheap. And, you know, and certainly, you know, with time, we'll probably understand better. But we do seem to be going through a change. And we're just trying to understand what that change is.

You know, I think that one of the phrases that's been thrown out is that there's a post-COVID normalization that people, you know, did a lot of travel and experiences. and now it's time to settle down and manage your budget, you know, with a lot more inflationary kind of pressures. You know, I think that the person that goes to a Disney theme park is, you know, probably tends towards above average, you know, income and asset, you know, kind of wealth. But not, you know, not maybe as high as you would think, I think certainly for a lot of people. That's a generational right of passage for your kids and your family. You know, Disney has a line within their parks for cruise ships where they've been investing, really kind of delivering a very premium experience. You know, that seems to be holding up stronger than the parks. And, you know, maybe part of that is, you know, who goes on cruise ships, but also there may be some economic differences in the clientele.

But, you know, clearly there's a change of foot. And we've got to start, you know, understanding better what's going on. I think of Disney as a place that is a special family trip, maybe not an annual. family trip. Maybe if you're lucky, you can afford to go every year. But for many people, it's one of those things that you do maybe every four or five years. Let's talk about their sports segment. I was struck by the fact that ESPN's advertising revenue was up 17%. What was driving that? So, you know, people love sports. I mean, these guys, you know, they had the good fortune of having the WNBA, you know, and the whole Caitlin Clark thing is really, uh, training.

transformed that. I think the sports are resilient on the pay TV bundle. Now, you're paying for that. You know, they've got a new NBA deal coming up in a couple of years that they've inked that's kind of jack up their programming costs a lot. And they've got to grow to kind of cover that. But, you know, that's why, you know, the athletes and the leagues are sitting in the catbird seat because they are what advertisers want to get in front of. They're what people want to watch. They're the last kind of safe bastion of audience on TV, and they're getting paid for it. So you just reduced your price target to 122 from 129. Explain a little bit of the thinking there and what would be an upside surprise for you that might cause you to put it back at 129.

Yeah. So look, I mean, this is a first on CNBC. We just published our note as we were coming on air. So, yeah, so we're taking our price target down $7 that reflects net reduction to estimates, you know, better in DTC, weaker on parks, nets, to a little bit lower kind of EPS estimate for fiscal 26. We're assuming that they can trade it a 19 PE against fiscal 26 pro forma EPS. And the estimates just came down, so that's where the price target down the multiple stayed the same.

We think there's, you know, that's still a decent argument for the stock. It's up, you know, 40 percent that multiple is not demanding. for a premium kind of property. And they've got real asset value. So even if everything falls apart, you know, there's people who would buy the pieces there. And the, you know, I think the activist investors would come back and force it.

So you're kind of hedged. And this is the kind of quality asset when things are a little bit tougher. You want to look for opportunities to move in. And that's why we're sticking with a buy rating, you know, even with these issues that we're sorting through right here. All right, Barton. Thank you, as always. It's always good to see you.

Great. Thank you. Well, as the market rally loses a little bit of steam, should investors continue to proceed with caution? We'll dive into that in the market navigator next. Welcome back to Power Lunch. As we mentioned, the markets were attempting to continue to come back from Monday's route, but right now losing a good bit of the steam. So should you believe in the bounce, or is it getting a little wobbly? Dom Chu is here to talk about all that and more in today's Market Navigator. One of the questions we wanted to ask a lot of the folks out there, contacts that we know, experts, was if you could believe the bounce or not.

And today's, it seems like, yes, yesterday's bounce. And even today, this morning, we saw a bit of a bounce. Could it carry over? So at least one of the streets top technicians who's been bullish since late 2023 is actually starting to temper her view on what's going on. One of the key things she's looking at is the fixed income market. So let's bring in Katie Stockton and the founder of Fair Lead Strategies. She joins us now.

Katie, you're looking specifically at certain parts of the market, including the long Treasury bond ETF, ticker TLT, what's it telling you and why is it so important? Well, it's really interesting timing, right? We have a breakout, of course, in TLT and other fixed income ETS, and it comes at a time when equities have obviously seen some turbulence, and that turbulence should continue based on what we're seeing in our volatility metrics. So it may be a good time to look at these fixed income products, including TLT, which has clear to a very important resistance level on the chart. It's based on our cloud model. The cloud is a great gauge of the long-term trend, and you can see that price is now above that threshold,

and it's there for a couple of weeks, which we like to see for confirmation of a breakout. TLT also happens to have what appears to be a long-term base in place in the shape of an inverse head-and-shoulders pattern. We're usually looking for head-and-shoulders tops, but this looks like a head-and-shoulders bottom, and that could mean that it has lasting, of course, this is associated with a breakdown in treasury yield, so we have to trust that that's a cyclical down move that we have underway there. What kinds of return, if the thesis plays out and this becomes an even better investment, what kind of returns would you expect from it? What kind, if I were to follow your advice? Yeah, you know, initial resistance for TLT in particular isn't terribly far above. It's around 101 and a half in price terms and secondary resistance as well.

above. It's around 108 on the chart. So it could be a meaningful long-term turnaround that we have. We don't know what the returns will look like, of course, but we want to keep the long-term momentum gauges on our side, and they happen to be expanding in favor of continuation higher for TLT, whereas if you look conversely at the equity indices, they've seen down ticks in things like their monthly macdie histograms, and those down ticks tend to be decent times to be lesser in your exposure. So we've moved to a neutral long-term bias for equities really with a time frame of maybe four to six months. So not very, very long-term, but just to avoid this increased volatility for now. And do you see there's any kind of down, if you think it's neutral really quickly, just how much of a pullback could we see?

Well, for the bounce, we believe the bounce here, but just for the next week or two. And we would use that to reduce exposure. The 5,000 level for the S&P. P-500 is an initial support beyond the very near term. I think that could be jeopardized during the next down lake. Maybe we get a seasonal crack to phase into September. But I don't think we'll see back to the 4,800 area where there's secondary support. All right, Katie, on Market Navigator. Thank you very much.

Dom Chu, thank you as well. Any final thoughts, Dom? You know what? I'm thinking right now, it's been such a long time since we've seen any kind of volatility that it's probably at least passes the realm of reason to think that things could be a little bit. Yeah, a little bit more skittish for a while. All right, Tom Chu, thank you. All right, CVS Health announcing it's going to lean on artificial intelligence to help cut rising costs.

We're going to dive into how technology is shaping up the medical industry, specifically how AI can be maybe a real transformative force and a good investment when Power Lunch returns. All right, welcome back, everybody, to Power Lunch. Some potential warning signs emerging in health care. CVS Health cutting its full-year profit outlook and announcing a cost-cutting. planning plan amid higher medical costs. As part of that plan to reduce costs, the company says it will increase the use of AI and automation. CVS isn't alone. The medical community already starting to adopt AI for many applications. And our next guest says the actual impact of AI has been minimal so far, but has the potential to transform health care. Here on set with us is Dr. Ronald Rosmi.

He's a cardiologist and co-founder and managing director of Zoy Capital, a VC firm that invests in applications of AI in health care. Ron, welcome, good to have you with us. I should point out that you're also an MBA, so you're an MD, an MBA and a real slacker, clearly, and author of that new book, AI Doctor, The Rise of Artificial Intelligence in Healthcare. An hour ago, Jamie Diamond said on our air, I think AI is going to cure cancer. Do you agree with him? I agree with him, but not tomorrow. So Newsweek did an article about my book, and they also started with how quickly are we going to say? see all of these massive gains in healthcare delivery and medical research from artificial intelligence, and I managed to convince them that it's going to take a couple of decades before we see some of these very ambitious benefits. There are things we could see tomorrow improving health care delivery, making healthcare more precise and more convenient. However, the lofty ambitions around curing cancer and unlocking the secrets of the human body, that is going to take longer. Let's talk about where the impact of AI may be felt most immediately.

And my guess would be it would be in areas where the bureaucracy is deep and thick, and there's a lot of brush that needs to be cleared away, potentially in terms of better and quicker and more accurate diagnoses of scans and tests, and things like that. Where is the most immediate impact of AI going to be felt? And are those investable opportunities? Absolutely. So at Zoi Capital, we actually have a thesis on short-term, medium-term, and long-term applications of AI and healthcare. And the most immediate applications we're focused on are administrative and operational. Delivering healthcare takes a lot of effort. It's human resources intensive.

It requires a lot of financial capital investment. So being able to do some of the heavy lifting using technology is how we're going to make delivery of health. Making healthcare more accessible, improving quality, because everything doesn't need to be done manually. So right now we're focusing on operational and administrative use case. Some of those basic clinical use cases like radiology, and pathology and dermatology.

However, in the mid to long term, its greatest impact is going to be in medical research and unlocking. Drug development? Drug development has been an area where investors have lost a lot of money in AI and drug discovery because they thought he was going to take

a shorter amount of time than it actually has. A lot of the companies that have gone public, as a matter of fact, Zoy Capital was conceived when my partner, Brian Beeler, who was part of the team that built Horizon Therapeutics to a $30 billion company, he and I started looking at why AI was not gaining any traction in health care. And he had looked at a lot of the drug discovery AI applications and seen that although

promising, bringing it to fruition, it's going to take a long time. I'm struck that Jamie Diamond sounds much more optimistic about AI and health care. than you do. And I wonder if that's because once you're on the ground, you realize, to Tyler's point, how many barriers there are towards, you can't just kind of flip some switches and have this really take off. I mean, there's tremendous inertia and kind of hurdles and things like that. And just as the technology evolves, you mentioned that the companies that haven't been successful, like Babylon and Olive and all of this capital people have poured into the space that has really failed to deliver. So do you actually feel that optimistic about how AI can transform the medical industry? Yes, absolutely. I absolutely do. However, every application is not going to gain immediate adoption. So my book is actually a business book about how you need to do the type of analysis up front to see if the business case for the application you're building is strong enough, where the buyers who are being bombarded with different types of products can decide, yes, I want to go ahead with this because this addresses a mission-critical need for. me. You need to look at the data issues to see if the data is going to be available in the real world for it to deliver a value or the clinical workflows. Does it fit within existing workflows? So you need to do that type of analysis. So everything you build is not going to gain adoption. So very optimistic. I got a couple of quick questions before we wrap it up. Number one is what regulatory impediments may there be to the adoption and use of AI across the medical marketplace. And that could be questions of privacy,

questions of whether an AI application actually is clinically beneficial or not, is safe and efficacious. You know, the FDA has set the bar low in terms of what they're going to approve and clear for marketing. However, that doesn't mean the medical communities accepting that retrospective studies on, you know,

300 scans to be proof that it's going to show value in the real world. As a matter of fact, a lot of the radiology solutions that have come into the real world, they've underperformed the data and the evidence. So am I hearing you say then that the regulatory impediments will not be all that big in terms of clinical use? We don't know because it's a shifting regulatory environment. The FDA is issuing papers on an ongoing basis. it's not clear where they're going to land on how much evidence they're going to require before.

And another issue is reimbursement. The insurance companies have been very slow in reimbursing. So they're asking for real-world trials before they reimburse. So let's round third base and bring it home for the viewers who buy the thesis that AI could have a transformative impact on medical delivery, health care, etc. Where do they invest today? Well, what's the best way? In the public markets, I actually had a SPAC in the public markets called Deep Medicine Acquisition Corporation.

We were trying to take a health AI company public. We saw there are not a lot of late stage private companies that are good candidates for public markets. You mentioned Babylon, Benevolent AI, some of these companies in drug discovery have not done well in the public markets just because their benefits are going to take longer to show. So you're looking at early to mid stage in private markets investing in these. So that's the way that you're going to be able to play it today. And that's for a certain class of investor. Exactly. It's not for the retail person who's got a couple of ETFs.

As I mentioned in Davos this year, it's patient capital to realize the benefits of AI and healthcare. Dr. Rosmi, thank you very much. And once again, the book is AI Doctor, the rise of artificial intelligence in health care. Thank you for having me. Meantime, oil prices are bucking the downtrend and rising above $75 a barrel today. We'll have details when power lunch return. All right, welcome back, everybody. Bond yields on the rise, 10-year, back above 3.9 percent.

And let's get an explanation for all that and more with Rick Santelli in Chicago. Absolutely, Tyler. You know, a chart of this week in tens pretty much says it all. Let's look at a Monday, Tuesday, Wednesday chart. Monday's intraday low, yes, 3.66%. We're 31 basis points above that, and it isn't like equities have taken back all of Monday's drop. So what's going on here? You know, maybe there's something more of this debt and deficit story, because the minute we start talking about long-dated auctions,

boy, things start to pop. In today's 10 year, I gave it a D-plus, and I was in quite a generous mood. Look at a one week of the 2's 10 spread. Now this is also key. You see right in the middle is that big volatility move we had. Well, we shot up to basically positive one. We didn't close there. We haven't closed that spread in positive territory since July of 22.

But look how it's coming back. And this is the key. We are looking at long-dated treasuries continue to push rates higher. And one would think with that huge concession that we had with rates coming so far back, Today's auction wouldn't want well, but it wasn't. Tomorrow we have $25,030s. You want to pay attention to that auction. Let's look at a three-month chart of that Tuesday 10 spread.

Look at how wild it's been in the last five weeks. Basically, moving from minus 50 to very close to positive territory. And finally, what is the telling all this? That chart you're looking at now is the yen versus the dollar versus 10-year-note yields. And what it's telling me is, as the yen-versy, you know, values go down, long-dated rates are going up. That's the tell who was responsible for that Monday volatility. Kelly, back to you. Rick, thank you. Now to the energy market with crude popping today. Pippa Stevens here to explain Pippa. Yeah, so oil is up alongside everything else.

And we also saw a six straight week of inventory draws. So that was bullish, not gas, also up about 4% back above $2. But yesterday we talked about the solar coaster. Take a look at shares of Sunrun because they are up 10% after the company reported a surprise profit. Part of that, is thanks to a focus on higher margin products, namely batteries. They also did mention that they could see a benefit from Sun Powers, bankruptcy filing, but they're not going to pursue all those customers at any cost. They are really focusing on cash generation rather than spending excessively, and you see Wall Street likes that that stock up quite a bit.

Indeed. Hi, Pippa, thank you very much. A little delayed, but she's there. Bertha Coombe, CNBC News Update. Hey, Tyler. Vice President Harris's campaign saying today that it raised $36 million in the first 24 hours since Minnesota Governor Tim Walsh was chosen as her running mate. That builds on an influx of money in July.

The campaign says it raised $310 million for the month. The family of the French explorer who died aboard the Titan submersible on its doomed trip to the Titanic wreck last year, filing a wrongful death lawsuit for more than $50 million. dollars. Family accuses the subs operator Ocean Gate of gross negligence. Five people died in that incident, including Ocean Gates CEO. And NASA says today that the Boeing Starliner astronauts at the ISS could return to Earth on the SpaceX crew dragon if the Starliner is still deemed unsafe for the return trip, but they're going to have to wait a while. Target date for that trip, February of next year.

The astronauts have now been in space for 63 days. They were only supposed to be there for a week, but from what I've read, they do have extra provisions. Power lunch. We'll be right back. Welcome back as the markets flip into the red as we head to the close. Let's go and review some of the stories today that might be contributing to that, starting with Airbnb, which is falling on earnings, warning of shorter booking lead times globally and says it's seeing signs of slowing demand from U.S. guests.

It's a trend we've seen across the hospitality space tie and shares are down almost 15%. Yeah, you had a chart in the last hour that showed a lot of different companies, Windham. TripAdvisor, Wynne, and so forth. All saying sort of the same sort of tenor of idea about a slowing down of consumer demand. Next up, we got Reddit reporting better than expected results, citing improvements in the digital ad market. The stock, however, lower the company still operating at a loss. Still want to see if they will be an AI beneficiary. Also, decking company treks is down more than 20% after missing on revenue, cutting its forecast, getting downgrades and lower price targets.

The car on there is getting decked. Indeed. Right. Robin Hood's still struggling to keep its overnight trading functional stock down around 16% in a week. There you see it down 17%. Should be taking advantage of this volatility. And finally, Shopify in the green today, seeing better earnings, upbeat guidance, strong service demand despite that mixed consumer spending environment. All right. Thanks for watching, Power Lunch.

you everybody.