Power Lunch - Disney Drama, and Real Estate Road Trip 4/19/23

Episode Date: April 19, 2023

Disney’s battle with the state of Florida took a new turn today, as the stock sinks amid reports of thousands of job cuts. Can the company really win this fight? We’ll explore. Plus, we’re wrapping up our real estate road trip in San Francisco. We’ll examine how mortgage rates are affecting one of the priciest markets in the country. 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, Disney drama, the company's battle with Florida. Governor DeSantis taking a new turn today. So can the company really win this fight with City Hall? Meanwhile, reports of thousands of job cuts, and the stock is sinking. And it's day three of our real estate road trip, but this one we've got to take to the skies. We're going to San Francisco to see how mortgage rates are affecting one of the priciest and controversial markets in the country. What can you buy there? for $3 million. You'll find out. First, a check on the markets, though, which are fighting into positive territory. The S&P's up seven points. Now, the NASDAQ by almost a third of 1%.

The Dow's only down 26, and the small-cap rustles are positive as well. All right, let's get to Dom Chu for a look at some of the days, big movers. Hey, Dom. All right, so Tyler, Kelly, we'll start things off with the check on shares of travelers, which are up 7.5%. Near session highs right now, the insurance giant and Dow component reported quarterly profits and revenues at both topped estimates. It also announced an 8% boost to its dividend payment, also an additional $5 billion added to its stock buyback program.

Then there's Abbott Labs, the healthcare products company known for everything from Bynax COVID-Rapot test to Similac Baby Formula reported better than expected profits and revenues. It's up 8% right now. It also reaffirmed its full year guidance. Abbott was helped by better performance in its medical devices, like its freestyle Libre glucose monitoring system. And then we're going to end on shares of United Airlines flying the friendly skies, thanks to a smaller than expected loss on slightly better than expected revenues. CEO Scott Kirby did say he expects to return to profitability in this current quarter. So United shares up 6% right now.

Let's send it over across the studio to Christina Parts of Nevelas looking at some of those big banks reporting today. Yeah, well, Morgan Stanley shares. Let's start with them. They're posting quite the turnaround post-earnings call. And I say quite the turnaround. They're only up a half a percent. But pre-market, they're 4% lower. When news came out that although Q1 earnings and sales beat, profit had done.

dropped 20% year-over-year, rising expenses, declining revenue, investment banking weakness was also at play. I did have a chance to speak to the CFO on a call this morning about the profit job, and she pointed out, Q1 of last year was before the uptick in rates that we saw and the war in Ukraine, so the benchmark was already really high. Switching gears, let's talk about Western Alliance right now, Bank Corp, Q1 net income may have dropped more than 50% quarter over quarter, but shares surging right now, 23%. Investors like hearing deposits at the regional bank are already rebounding in April. And that's helping other regional names like First Republic. Let's bring that name up. Up 10, almost 10.5%. One of the best performers on the S&P 500 right now. Comerica, also up roughly

what, 4% the last I checked. Zion also up 5%. And those earnings are out after the bell. Guys? All right, Christina, Christina, thank you very much. The Fed releasing the so-called beige book moments ago. and Steve Leeson has leesman has been digging through it. Hey, Steve. Hey, Tyler. The page book saying that economic activity was little changed in the period of the six weeks ending in April here. Nine districts said there was no change or a slight change. Two said they saw the outlook deteriorate. That's of the 12 Federal Reserve banking districts. Consumer spending overall was, hold on one second here. Consumer spending was generally flat to down. Price growth was seen as moderate. auto sales were steady. Manufacturing activity was flat or down. Travel activity picked up.

Now, there's some important information here. We've had a chance to look at it briefly. I think the Fed's going to get a lot of sense of what's going on in the banking business from this page book. Lending volumes were down and loan demand decline that was along with what was said in the prior basebook. Banks tightened lending standards amid uncertainty and liquidity concerns. First time we've had that liquidity concerns in the in the basebook in a while. certainly. Employment growth moderated somewhat the labor market was becoming less tight and price levels rose only moderately and the rate of price increases appear to be slowing. There was some modest to sharp declines in non-labor input prices and significantly lower freight costs.

Guys, that's where I'm better to get so far. What I'll do later is dig down into each bank has a banking and finance section in their report of the 12 bank, the 12 banks. So, but right now we're hearing some liquidity concerns. and uncertainty. And of course, you guys understand the importance of what's happening in the banking business to the outlook for the economy and, of course, to the Fed. The slowing of loan demand is really one of the things that bears really serious watching it would seem to me, Steve. I think that's right. I think there's two aspects. Well, there's three aspects to it. One is the rate, Tyler. In other words, people don't want the loan because it's too expensive. They don't want the loan because demand may be weak. But there's a third aspect to it, which is the one.

One that I think the Fed follows most carefully, which is they can't get the loan because the standards are too tight, how much they have to put up for the loan, what the term of the loan is, other aspects that determine, or part of the fine print of a loan document. It's the tightening of lending standards that whatever the rate is, that would tend to increase or cause sort of more concern about the impact of what's happening in the bank business on the economy that would give the Fed's concern. Steve, for now, thank you very much. We appreciate it. Steve Leesman, reporting on the beige book. Dow, by the way, still down 65 points, not huge movement yet.

Let's shift to the key corporate story of the day. Disney finding itself making multiple defensive maneuvers. Its fight with Florida Governor Ron DeSantis continues, the state filing legislation to void Disney and the Rady Creek agreements. It comes as the company is reportedly considering more layoffs. Let's get to Julia Borson with the latest. Julia? Well, Kelly, Florida Governor DeSantis is doing everything he is. can to battle Disney over the control of the theme parks special tax district. Just this morning, the board that DeSantis appointed to manage the Reedy Creek Special Tax District that includes Disney World, it voted to begin the process of working to invalidate the agreement. This is an

agreement that shifted the power back to Disney over this tax district, and this will, of course, likely lead to a lawsuit. Now, all of this comes after yesterday. DeSantis filed a bill with the state Senate to give power back to his board, power that it lost because of an agreement made by the old board over this tax district. The governor saying that lawmakers will vote next week on a plan that could undo the actions that Disney's old Reedy Creek board took to protect the company's autonomy so we can expect a court battle to be launched by all of this. Now, Disney did not respond to the latest from Florida, but Disney did say last month that all the agreements signed between Disney and the Disney.

district were appropriate. Now, all of this comes as Disney continues with its plans for layoffs, the timeline of which Iger announced last month. So a source close to the situation telling us that the second of three rounds of layoff notifications will start next week. So Kelly, Iger has talked a lot about the layoffs and now we're just seeing them continue to be announced with them completed by early summer. Remind us, Julia, how big these layoffs are? 7,000 employees. So this is across various divisions. And it seems like as these layups have been done, we had one round already.

This is going to next week be the start of the second round, a third closer to the beginning of summer, that they're across various divisions as the company looks for efficiencies. All right, Julia, thanks so much and stick around because we're going to talk a little bit more about this with America's Reed, a professor of marketing at UPenn's Wharton School of Business and a CNBC contributor, as well as Jim Stewart, columnist at the New York Times, also a CNBC contributor. Folks, welcome. Good to have you with us. Jim, let me start with you.

I don't mean to editorialize here, but this feels to me like a lot of political theater and a manufactured crisis that could have easily been avoided. Am I close to the truth here? No, I totally agree with that. I think this is, dare I'd say, sort of fake news. the, you know, not much money has really been put on the table here yet. This skirmishing over the district, you know, where Disney has its theme parks, has very little immediate economic impact. In fact, my understanding is if the Florida really succeeded in doing what it wanted, it would have

to absorb some costs that Disney is now paying itself. So there's not a huge financial impact on that. But lurking in the background here is the potential for a truly mutually destructive war. And that would start to invoke the tax incentives that Disney has to move employees to Florida. And on the Disney side, Disney could start to pull people out of there. You know, Florida recently offered Disney about 700 million in tax incentives to move 2,000 or so. key employees to Florida, including their very famed legendary Imagineers unit. And Disney could threaten to not make those moves, or Florida could in turn threaten to take those incentives away.

Now, that's real money, and that's a real economic effect. So far, they have not escalated to that level. Marcus, your reaction to what Jim just said? Well, I think it's super interesting, Tyler, because I'm not understanding, you know, exactly why this cultural war. I mean, who goes against Mickey Mouse? Who wants to fight Mickey Mouse? I mean, this is a venerable institution. This is a brand built on America and family and all of these wholesome kinds of things. And so the idea that you would want to potentially die on that hill for a little bit of political gain makes absolutely no sense to me. And I think that what we're

seeing here is kind of the idea that folks are afraid to back down a little bit. And so, you know, it's unfortunate because, as Jim is saying, you know, there aren't any real economic issue, costs, et cetera, happening as of yet, but there's serious damage being done to an institution that's incredibly popular. I mean, Disney is celebrating its 100th year birthday, I believe, in October 16th of this year. And so you're not going to make people not like Disney. You're not going to make people stop going to Disney. Let me just jump in here for a moment. Disney is not completely innocent in this regard. I mean, if DeSantis was totally off base with us, we wouldn't be this far into the fight.

A lot of people perceive the company as being a little bit arrogant, kind of setting its own cultural course, if you will, and trying to kind of be its own entity in Florida without a lot of respect for the broader fallout or the climate around it. So, you know, and this is a big, interesting part of what Bob Eiger's return is about. You know, when he left the company

after largely setting it on this course, things went further downhill, and employees were very dissatisfied with the following ownership. He's come back. People internally are thrilled about that. They've really tried to stand up here and kind of, you know, end this standoff with the governor. But they're not really signaling that they're, they're kind of hardening their position in some ways and digging in their heels as well. You know, both parties here seem to just be unwilling to come to some kind of compromise, Julia. Kelly, I think you're you're overlooking the fact that this is a tax district. And Disney not only pays over one point. $1 billion in state and local taxes, and that was the amount of paid last year. But this particular thing we're talking about is a tax district that the state of Florida established so they didn't

have to be responsible for picking up Disney's trash. This enables Disney to deal with things like trash collection and, you know, like the plumbing. So that's not something that's managed by the state of Florida. Logistically, this saves the state of Florida money. So I think what you're seeing here And just what I want to clarify is there's this logistical tax situation where Disney has managed its own property like its own mini government because therefore it can it can have its own fire department, which is something that's important for something like a theme park. But as a result, this has become a political issue for the governor because he was upset about some of the cultural issues that Bob Eiger has taken a stand on. So what really happened here is you have the governor

and his so-called don't-say gay bill, that sort of political issue becoming a logistical issue for Disney, and that they've taken issue with the way Disney manages this tax district, which is really a logistical thing.

So it's almost like these two conversations have collided. But they've collided for a reason, right? The reason why they're picking a fight over the way this is structured is because they have big philosophical differences here. And so it's probably not really about the trash collection. Philosophical, yeah, philosophical.

Yeah, philosophical. philosophical differences, but if Florida actually takes over some of these issues and has to then be responsible for the fire department and the trash collection, it's actually going to cost Florida taxpayers more. And that's the piece of this. It seems slightly irrational for the state of Florida. And that in taking over these responsibilities from Disney, Florida could end up paying more for Disney's, you know, logistical responsibilities. But it isn't just that, Jim, it isn't. Who wanted to jump in? I just want to jump in and say that I don't think their philosophical differences are so far apart.

I mean, this bill has nothing to do with Disney's business. Disney is not in the business of educating Florida children. They took a position on one issue, and Iger, in firing back, made the point that we're a company and we're entitled to free speech. We can take a view on issues. They take a view on many issues. But on the fundamental issue, which is we want to prospect. We want to make money. We want to hire more people. And we want to pay more tax in Florida and attract more visitors to Florida. I would think that that would completely align with DeSantis's interest. Now, putting that aside for a moment, there's no question. I think DeSantis has seized on this to appeal to a certain element of his base. He's made his point. I am a little puzzled that he's digging down on this. And it's beginning to look to me as like an ego clash more than one. really of principle. But do you think that ego clash goes both ways, Jim?

Oh, definitely. We have some big egos here. There's definitely, DeSantis has shown that, but Eiger's willingness to wade into this. You know, remember when Chepec was there, he may have bungled the initial reaction to that, but he did not escalate it once the battle lines were drawn. And, you know, Iger, you know, the annual meeting, he didn't have to, like, make this a national issue again. On some level, I think that, you know, DeSantis is taking a page from the Trump playbook and that whatever is being said, he's in the spotlight here. We're here on national television talking about him again.

This is publicity, and I guess he figures it appeals to a certain segment of his potential voting pool. There is, to me, Americus, a bit of nose cutting off here, spiting faces. In other words, here's Disney, which certainly derive some benefits from having a special tax district. They benefit. Governor DeSantis wants to basically curb those benefits, but the cost of that, as Julia points out, will be some millions of dollars to the Florida taxpayers who were not having to provide services that were being, funded by Disney under the regime of this special tax district. It's a complicated mess of a story here, but the governor does seem willing to make a point

even if it comes at the cost of a two, even if it comes at a cost to his taxpayers. Am I right there or off base? You're 100% correct, Tyler. I mean, you know, DeSantis has his hands full with our former president because he's going to get into basically a phone booth with a knife pretty soon to battle it out there. So I'm not sure what this tune-up battle with Mickey Mouse is going to achieve from the perspective of, you know, Disney wants to be able to control the properties for a reason. And it's because this is how you create the experience that lives up to the brand promise that makes this brand so powerful. and important to so many Americans and people in terms of how they experience this in their lives. So it doesn't make any sense to continue this cultural war for a little bit of political gain.

Yeah, I apologize for the long kind of rambling question there. But I appreciate the idea that you got the point. Thank you all very much. We appreciate it, America's Reed. Jim Stewart, Julia Borsden. And they're debating that. They're going to pass that today, possibly the state legislature. I'm not sure whether it's today or tomorrow when they were going to go to work.

after the break, we'll stay in the media space with Netflix posting mixed results, missing on subscribers, delaying that controversial password sharing crackdown. It's leading some investors to question whether they'll ever pull the trigger. The share is one of the worst performers in the NASDAQ today. And as we head to break, take a look at Bolero. The stock up 6% as Jeffries now says they're striking the right cord and showing great growth potential. We've got more of the day's big movers as Power Lunch rolls on. Welcome back to Power Lunch, everybody.

let's take a look at Netflix shares, which are heading back towards session lows down about 4.5%. Initially, it had rebounded after that big drop last night on the revenue missed for the first quarter, but there's lots of talk about from their results. They've got subscriber growth, but also the delay of that password sharing crackdown. Our next guest maintains his neutral rating. He's got a 350 price target, still a little above where we are. He's Tim Nallin, senior media analyst at Macquarie. Julia Borson, we work her. She's back in this discussion as well. Welcome to both of you. Tim, let's start with you. And yeah, I mean, it was interesting for me last hour to hear people just emphasize advertising, advertising, advertising.

Is that where your attention is as well on how quickly they can ramp up that business and that tier, which has higher revenue per user? Yes, the next big growth story for Netflix. And in fact, it's a way to reinvigorate subscriber growth in the U.S. and in other regions of the world where it has stalled will be to generate more, more. attraction to the advertising tier. Now, actually, the way to do that, in my opinion, is the password sharing plan that they're now going to bring about. So 30 million U.S. and Canada users have been using Netflix for free all these years. Now there's an opportunity to convert those either into, you know, paid shares on the existing plans, but actually more likely over

time to convert them to fully, you know, new subscribers on this advertising tier. And the interesting bit of news that came out for me last night on the call was that Netflix announced that they are actually making more money on the advertising tier subscribers now after only six months in operation, five months in operation, then they do on their mid-tier, their $15 tier ad free price plan. So that shows you there's a lot of money to be made in advertising. It's still very, very early days for this for Netflix. And the launch of the paid sharing plan is really, I think, going to kickstart the advertising tier over the next year or two. Explain to me, Julia, how the paid sharing would work and explain it so that my mother-in-law,

who is on my password, will understand it. Well, pretty soon, Tyler, you may be offered the option of paying so your mother-in-law can keep watching on your account. You might get a warning saying, hey, if you don't start paying for these additional people who've been watching from other households, we're going to cut them off. So I think what's so essential here is that Netflix has been testing out its model for cracking down on password sharing, what they're calling page sharing

in a couple of key markets. What they announced yesterday is that they will be rolling out this page sharing option all around the world, including in the U.S., which is, of course, its biggest and most mature market,

and they're going to be rolling that out this quarter. So we're going to start to see the impact of that in the financials in the third quarter. So what they do, and the pricing is not clear yet, But what they do is they say, hey, you have been letting your account be used by other people. Would you like to pay for them to have access? So you're not going to have to pay a whole $15 or whatever else to give your mother-in-law access.

You'd be able to pay a couple dollars more to give these additional people using your account that access. So what's interesting here is it's effectively adding subscribers at a lower cost per subscriber, but it's worth it because you're keeping them in the ecosystem. And then maybe you transition them over to having their own separate account and make more money off of them, whether with ads or without. Lynn, you can Venmo me the money. Tim, how much money is this potentially for Netflix? Well, we've run some scenarios just in the U.S. and Canada.

You know, they've already rolled this out in Canada, but the real market, of course, is the U.S. You combine, you're talking 74 million subscribers in, it's called North America, U.S. and Canada. Various scenarios that we've run are seeing, you know, an incremental one to three and a half billion dollars of revenue, revenue on a full year run rate basis. And that basically the difference is if you assume that, let's say one third, 10 million of those 30 million, let's call them free riders, do take on either

a password sharing plan or their own advertising tier, we estimate that's about a billion dollars of incremental revenue on a full year run rate basis. That's an 8% incremental revenue upside to Netflix. What they announced last night was they're going to be rolling this out actually globally during Q2. Of course, you have to ramp up. So the numbers I'm talking about are, again, full-year run rate basis. But if you assume 100 million subscribers and they convert a third of those, you know, you're talking, you know, several billion dollars of potential incremental revenue. Tim, thank you very much. I can, I will never call my mother-in-law, my mother-in-law a free rider. That just is a beyond the pale. Julia Borsden, thanks very much.

We appreciate you both. All right, further ahead on the show, in poker, you can't. can't win if you fold, but that might not be true in the phone business. Google launching its first foldable phone in June. Details in today's tech check taken on Samsung in the foldable phone space. Welcome back. Let's get back to Steve Leesman with more detail from the Fed's beige book that was just released. Steve, what do you see? Yeah, Kelly, we told you we were going to comb through it for what it said about banking. And there are some concerning remarks in there. Each Federal Reserve Bank District, or most of them do, have a section on banking. New York reporting that conditions in finances, quote, deteriorated sharply. San Francisco saying lending activity fell significantly. Remember, this pagebook comes in the wake of the

failure of Silicon Valley Bank. Dallas saying credit standards tightened sharply. Cleveland says deposits continue to decline in part because of rate competition. Some of the districts had relatively more benign remarks on banking. St. Louis said bank conditions were stable, Philly, saying bank lending grew modestly boosted in part by inflation, because the more inflation, the bigger the loan. Atlanta is saying banks have not experienced, at least in that district, a large outflow. Kelly, we bring this to you because this is part of the way the Fed gets its information to try to figure out how big a deal are the credit tightening and the standards for making a monetary policy.

And it looks like there are some areas of concern. And if you notice, it was some of the bigger areas, the coasts, Chicago, New York, and San Francisco and Dallas were places where there were some areas of concern. Kelly? Just to put a kind of a pin in it, Steve, would you say this helps or hurts the, the pause posse's case, or maybe it's just Goolsby, but still. I think it does, I think it does help about half a dozen banks seem to have issues with credit standards or tightening standards, and another half said they had issues with loan

demand. So those are things that would tend to weigh on or support the dove aside. All right, Steve, thank you very much, Steve Leesman. Speaking of which, let's get a check on bonds now. Rick Santelli joining us from Chicago, Rick. Hi, Kelly, indeed. You know, in the fall, we most likely hit the high yields on 10. at 4 and a quarter on 30-year bonds around 438.

In the beginning of March, I did the Elliott Wave chart, and we definitely did lock in these highs. One, two, three, four, five wave pattern in the trend direction, and that's pretty much it. Now that's 10-year note yields. Now, today we had 30-year bonds actually touched. This chart starts in October. They touched an important line from those key highs

that were made in the fall. But 10-year note yields, you can see, see have to go all the way up to 4% to get to that level. So we want to pay very close attention to this 438 to 440 level. That's the high today in 30-year bond yields, because if we start to go through, maybe the best trade is to look for tens to get up to 4%. Back to you. All right, Rick, thank you very much.

Oil down nearly 2% today. Pippa Stevens. You've had a busy day. I saw you on one of our events this morning. Nicely done there. What's happening with oil? Well, thank you, Tyler. So our oil is under pressure today.

we got that hot inflation data out of the UK. We also have the rising U.S. dollar, which is once again leading to demand concerns and sending WTI below that $80 level, which it had finally gotten above. Now, we did also get the latest inventory report. There was a 4.6 million draw and crude stockpiles. That brought storage to a 10-week low. However, we did see a build in gasoline, more than 1 million barrel build, so that is leading to fears that maybe product demand is not there. Twitter's are also watching the gasoline crack spread today, which has come down, once again, signaling that maybe the demand for products isn't there. Now, quickly, energy stocks are under pressure today, but Baker Hughes is one notable outperformer.

The company did beat top and bottom line estimates, and they said that they still see the supply demand balance tightening over the course of the year, and they still expect spending from upstream players because they said that they're no longer as sensitive towards commodity price cycles, given that they're coming from a place of strength. All right, Pippa, thank you very much. Pippa Stevens. Let's get to Contessa Brewer now for a CNBC news update. Hi, Contessa. Hi there, Tyler. Tyrene Nichols family has filed a lawsuit against the city of Memphis and the police officers involved in his brutal beating, blaming them for Nichols' death in January. The suit asks for a jury trial and financial damages, accusing the Memphis police of using the tactics that disproportionately focused and targeted on young black men. The Florida Education Board approved a ban on classroom instruction about gender identity and sexual orientation across all public school grades. The move expands on the so-called don't-say-gay bill that Governor Ron DeSantis previously signed, barring similar lessons for elementary school students.

And the European Union has agreed on a landmark plan to boost its chip industry. The EU Parliament said these new rules aimed to double the block's global market share in semiconductors by 2030. The initiative, dubbed the European Chips Act, seeks to help the EU compete with the United States and Asia as countries rush to source chips. We'll keep eye on that. Kelly. Contessa, thank you very much, Contessa Brewer. Still to come on Power Lunch, our final Powerhouse day trip. We're visiting San Francisco with some jaw-dropping prices in that market, even amid the macro uncertainty. We'll check in with an agent there next.

Welcome back to Power Lunch, everybody. We continue today. are day trips across the country heading to the west coast and the San Francisco Bay Area to check on the state of the residential housing market there. And no surprise here, it is, well, still expensive in the Bay Area, with a median home price clocking in at $1.2 million, according to the California Association of Realtors. But that's actually down 13% from last year. And here for an on-the-ground look at real estate in the Bay area is DeLeon Realty Group CEO Michael Repka.

Michael, welcome, good to have you with us. What are you seeing? Are you seeing prices softening as dramatically as those numbers suggest? Yes, Tyler, we are. The market's a bit bifurcated, but certainly for people that are stretching to get in, it's really expensive, especially in light of the interest rates. And what about very high-end homes priced in the multi-million dollars? Are they still moving? Is there an issue with liquidity there that's restricting buyers at all? They are still moving. In fact, the higher market, higher-end market, homes above $5 million are actually holding up a bit better than homes in more the entry level, which is crazy as it is. Silicon Valley entry level is typically in like $2 to $3 million range. Those homes are the ones that are facing the most challenges. Why is that? I think it's a matter of just other financial resources that come to play. People that are buying a home that's

eight or $10 million, they oftentimes can afford to arrange the financing through other channels, or they're not stretching quite as much. But people that are looking to get into an area, such as Palo Alto for its schools, if they're really stretching, the difference between a $15,000 a month mortgage and a $27,000 a month mortgage is prohibited. We teased earlier, Michael, what does $3 million buy you in the San Francisco area? And what's the answer these days? If you're looking at primaries in Silicon Valley, it's still probably a three-bedroom, two-bathroom home on a 6,500 square foot lot. It's really not something that is going to be the type of estate that people may imagine from other parts of the country. Right. It's average. And I mean, that affordability issue, so we were talking to Austin, a realtor there yesterday, and you guys are kind of two sides of the coin.

Obviously, a lot of people left high-cost areas, moved to lower-cost ones where he says they can still be, you know, coders and, you know, engineers work from home, they're not getting called back. What do you see in terms of, are you getting any boomerang effect of people who are coming into buy houses now, who might have left and have to come back? Or are you not seeing that? Well, Kelly, we're still seeing far more people moving out of the area than moving back. There have been some, you know, California is a great place to live. There are so many nice things about it. And there are some people that move out and then they decide that they want to come back. But when you consider the cost of housing, the overall cost of living, the expense related to housing payments, most notably the interest.

It's tough for people to afford. But if they move to other areas like Scottsdale or parts of Nevada, they find it, they could get a lot more house and the payments are more reasonable. Plus, COVID has created flexibility with people's work arrangement that wasn't there a while ago. So who is still buying? And do you think the prices are going to drop? I interest. We're going to see softness.

We're going to see prices dropping in some of the prime areas. Again, since COVID happened, a lot of people are changing their lifestyle. So we're finding that quite a few people are moving out of San Francisco down to Silicon Valley. We don't do any sales in San Francisco, but we've been advertising all of our homes up there just for that reason. And we're finding people that are in some of the closer in areas, Palo Alto, Menlo Park. They're moving to the areas that are a little further away, Portoahua Valley, Some of them are moving outside of the immediate area, but still within 20 or 30 miles. And then people that are towards retirement, many of those people are moving out of state altogether.

Well, there we have it. No sign yet of a, I was going to say it's still relentless. Maybe we'll put it that way. Michael, thanks for joining us and giving us a little pre-k. We appreciate it today. My pleasure. Thank you so much. Michael Repka. Coming up, a new phone tier. Google unveiling a new foldable version of its pixel smartphone. We'll reveal when you might be able to get your hands on one when power lynch returns.

Google shares, by the way, up a tenth of a percent. Dow's down 82. All right, it's time now for today's tech check. We're going to look at the phone wars. CNBC reporting that Google is getting ready to unveil a foldable pixel phone. Deirdre Bosa has the details. Hi, Deidre. So, Tyler, maybe phone wars on the surface, but really this isn't much of a battle.

Google's smartphone business, it's a mere blip in terms of market share in North America. It has about 2% globally. It doesn't even register. So this is less about a $1,700 flip smartphone. It's more about the war being waged over search, which is still the core of Google's business. And that is where Android comes in. Google's operating system makes up more than 70%

of global mobile operating systems. It's the OS of choice for basically any phone that is not an iPhone. That in turn creates the moat around search, one of the best business models in history. So Google, investing more in pixel phones, that may actually be part protecting that ecosystem at a time when the cracks are starting to show guys. We talk all the

time about even if it's minor right now, but the idea that Bing could eventually disrupt Google's dominance of the market with chat GPT. I think you were talking the other day about how much money Google pays to be the default search engine on Apple phones. I was stunned to hear that. That was from that New York Times article. We knew that it was over 10 billion. They estimated it at $20 billion in this current iteration, that contract, by the way, is allegedly up soon. So, yes, Google pays that much money.

That's what it is worth to the company to keep that hold. I talked about how Google searches on all the Android phones, but it's also on all the iOS phones, the Apple operating system phones too, and it pays a pretty penny to have that placement. And again, just goes back to all about protecting that moat around search.

This Google Pixel phone that is the foldable phone, I think, has a price tag of something like $1,700. There is a Samsung phone that I have coveted that is also foldable that is a little bit more than that. Do these phones sell and do they hold up to wear and tear? You know, that is a great question. I only know one person that has a foldable smartphone. It is my nearly 75-year-old father-in-law. He loves it, but, you know, he had to get that because it was, you know, one step up from the razor flip.

I don't know anyone else that uses that. You said, Tyler, it's coveted to you. Does that mean you're going to buy one? Tyler, would you, are you an iPhone guy now? Would you switch out of that ecosystem, out of the Apple ecosystem, to get a foldable phone via, you know, you wouldn't be blue on the I message anymore. No, my, I have a, my private phone is an Android phone. I have an Apple work phone.

Got it, got it. So I'm comfortable with the Android. And the green guy on the messages. Yeah. Yeah. The worst, Tyler. How could you be that guy? I don't know.

By the way, Deirdre, the fact that to Tyler, this is not even a big deal tells you there will be a market for this. Yeah, I'm learning how to FaceTime, by the way. It's good. Sorry, DeAndra. So will you buy that flip phone? No. I will not. And, you know, the reason I will not is because I bought myself an really nice little iPad that does everything that that foldable.

I wanted a bigger screen, which the foldable phone has, the bigger one. But the iPad is good, man. It does everything. All right. Dee, thank you. I remember probably the most successful product ever, tie the iPad in terms of when it was launched and everyone, why do we even need this? Yeah.

What's all the hype about? And here we are. Yeah, here we are. And it's really good. It's been a really fun hour, folks, talking about my mother-in-law and my iPad and all of that stuff. How you know more about me? It's whatever.

All right, still ahead. Travelers, that would be the company. Travelers surging on a bigger earnings beat, the best performer in the Dow, pacing for its best day in more than three years. That would be travelers. We'll trade it and some other big movers in three-stock lunch. Power lunch will be right back. For today's three-stock lunch, we're going to sip on three movers of the day. United Airlines higher despite a first quarter loss, but forecasting a profit for Q2 as peak travel season begins.

Travelers leading the Dow today after the insurer blew away first quarter estimates. ASML Holdings lower despite a first quarter beat after reporting net bookings for the first quarter were down 46% year over year, citing headwinds from the chip market weighing on customer demand. All right, let's trade all three of them with Courtney Garcia at Payne Capital Management. Let's start with UAL. What do you think, Courtney? At UAL, I'd be a buyer on here for a couple of reasons, but mainly when you look at travel demand, it continues to remain robust. But business and international travel is really in its early stages of recovery post the pandemic, which they're going to benefit from.

When you look at they did have this loss in last quarter, but that's really just travelers getting back to this more normal pattern where you aren't traveling as much in January, February. There's a lot of travel towards the summer. And you're seeing that actually, when you look at their advanced ticket sales, they're about 34% higher by the end of March than they were at the end of last year and 66% higher than they were in the second quarter of 2019, which is really just showing that travel demand is there. they have the visibility into it later this year. That's actually why they kept their forward profit guidance this year of $10 to $12 per share,

which means even with this loss, they're expecting that much more of an increase later this year. As they pay down debt, they really start to meet those capacity restraints. I think you're going to continue to see the earnings per share increase. So I would be a buyer here. All right. Courtney, what about actual travelers, the company? Yes, yeah, the traveler side of things, I think it's always a little less like sexy and exciting when we're talking about insurance, but it is worth a look here.

They did have some mixed earnings here, which specifically when you look at the commercial side of their business, that's really what has been a lot. You've seen a lot of improvement and support in. Some of the personal side, specifically personal auto has lagged and likely will continue to lag as you look forward. But on that commercial side of the business, you just saw their net written premiums increase 15% year over year,

which is a very positive sign. They're handling price increase as well, and their customer retentions are really very very, prominent. But lastly, they just had a 15% dividend increase and a $5 billion share repurchase program. I'm sorry, there's a 7.5% dividend increase, which is always a good signs. You want to take a look at them for that reason. Give me about 15 seconds on ASML holdings. Yep, I'll be quick here, but demand concerns really are concerned. Taiwan Semi is their biggest customer. They did just have, again, a sales miss last quarter for the second executive quarter,

which is just showing the weakness and global demand there. And also, they're having some issues with China and if they can export other products there. I think for both those reasons you want to stay out of it. All right. Thanks, Courtney. Appreciate it. Courtney Garcia, paying capital.

First, it was toilet paper, then bicycles, then baby formula, and now we're facing a rice shortage. Why, you could be paying more for that risotto dish or sushi roll soon. We'll be back after that. One more thing before we go, everybody, and it's the latest saga in the supply chain, where now consumers are facing a global, rice shortage, not seen in at least 20 years. Dom, this one's scary because it's a big

staple for other markets. For billions, literally billions of people around the world, and rice is a huge thing for a lot of folks, especially in places like Asia, South Asia, and for anybody who has gluten allergies or anything else, because many of those gluten-free products are rice-driven. So right now you can see per hundred kind of hundred weights, $17.50 is where we've averaged so far in 2023. I've put a long-term chart up here just to kind of show you where we've been over the course of the last 20 years. 1683 right now, it's averaged about $17.30 per Fitch Insights. And just to give you an idea of where it kind of came from, we were all the way down in the single digits. And the reasons why have to do with the projected shortfall that we have, supply limited due to war in Ukraine,

weather events in places like China and Pakistan, but those prices are expected to stay high into next year, but supply could catch up. And if that were to happen, the analysts over at Fitch Insights think it could go from an average price right now so far year to date of $17.30 down to around $14.50. But if you take a look at the rough rice exports and their decline that we've seen, again, all the way through here, we're starting to see more of that supply chain play out just in the last kind of right side of this chart right here. So what it comes down to is there are extraneous factors that are going to play in guys into some of these issues. And Rice has become the latest battleground. And it affects so many people. It's probably why there's

been so much interest in this Rice story on CNBC.com over the last couple of days. What is the connection, the supply chain connection to the war in Ukraine? So it could just be the grain issues overall, plus transportation has been disrupted in certain parts going through Central Asia and whatnot. If you take that in concert with, and we know weather events are always going to be a problem, how many stories have we done over the years where coffee supplies or cocoa supplies or sugar supplies or palms and everything else can be disrupted by either natural disasters or just outright storms, things that could disrupt the whole kind of, at least movement. Noteworthy, I mean, grains and things like that are one reason. Did you see the UK inflation data? Still over 10% last month.

Food, even staples like grains are a big reason for that. So it's been stubbornly high. Well, and not just that, too. What it does do is give at least a little bit of more food for thought, for lack of a better term, for policymakers about whether or not there is still an inflation battle that needs to be fought. But also, do you fight it with the rate hikes, right? How about better weather? And not just that.

You're juxtaposing that alongside the fact that egg prices, which we've been talking about for a while, are plummeting pretty precipitously. Maybe the Fed can control the weather. That would be good. I don't think they can. And the food supply. And the food price. Thank you very much and thank you for watching Power Lunch.