Power Lunch - Dow falls for eighth day ahead of Fed, but Nasdaq notches another record 12/16/24

Episode Date: December 16, 2024

The S&P 500 climbed while the Nasdaq rose to a record, with tech shares kicking off the week with a bang as investors await this week’s key Federal Reserve meeting. We’ll tell you all you need to know. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Power Lunch, everybody. That is the drone shot coming in there. Alongside Kelly Evans, I'm Tyler Matheson. Checking the markets right now, a similar theme to what we've been seeing in recent days and weeks. The Dow is lower by just a few points. It could be the eighth straight losing session there, having that kind of skid in quite a while. But the NASDAQ higher by 1% hitting another record high. The Fed looming all over it. We're going to talk with Loretta Mester in just a moment. A little bit more, I would say, caution seems to be attending to the Fed. the trajectory of interest rates for 2025. Yeah, I'm scratching my head about that one. We're also watching one interest rate sensitive sector, which is housing. We'll talk to the JP Morgan analyst who downgraded three names in that space, and is getting more cautious on the sector into 2025.

One of the things that is going to affect that sector is the labor market and what happens with respect to immigration, because many of the people who work in that industry as builders are immigrants. And so we will find out. Plus, the Grinch bots, That stole Christmas. The same problem we have with concert tickets happening in retail bots are buying up the hot products before people can get to them, driving up prices on the secondary market. I don't even know what the hot products are, so this just doesn't affect me. That's right. We should find that out. Frankly, it just doesn't affect. But we're going to start this big week, folks, with the Fed. Investors are widely expecting a quarter point cut on Wednesday.

The key question is whether the Fed will take a pause after that. In an article out today, the Wall Street Journal's Nick Timrose raises some concerns that the Fed could be going too far. And Apollo Global Management's chief economist Torsten Slocke says the Fed may have even to raise interest rates next year. Here to make sense of it all, all of it, every bit of it. Loretta Mester, the former president of the Cleveland Fed. She's also a CNBC contributor, adjunct professor of finance at the U.Pens-Warton School of Business. Professor, Governor, President, welcome. Good to have you with us. Thanks. Great to be with you, Tyler. So I expect you, I would anticipate that you will say you

expect the Fed to go a quarter point on Wednesday, and then what? Well, I do expect them to do it because they haven't done anything to deter that view, either in the markets or the public. So I think they will follow through. But then I think they were going to have to pause. I mean, the data that's come in since they started moving rates down and reducing some of the restrictiveness of policy really have said that the economy is strong. The fears about the employment part of the mandate have sort of lessened. In fact, employment's holding up pretty well. And the inflation news hasn't been very, very pleasant in this holiday season. It's basically stalled out over the past three or four months, any progress.

So I think they're going to have to sort of stop, you know, beginning of the year is a good time to stop, reassess things, and then see what they learn about where the economy is headed. Is inflation going to resume downward path or not? And then we may get some more clarity about the fiscal policy actions that we know will be a... So if you do a cut in December on Wednesday and then you pause in January, you're really getting up until late March before the next meeting, right? So that gives the Fed three plus months, basically, or three months, three full months, really to evaluate the economy. And in the middle of that comes a new administration. Yeah, but that's what you kind of want to have.

the Fed, you know, the Fed doesn't have any impetus right now a hurry to get back to neutral, right? The economy is doing really well right now in terms of its dual mandate goals. And so it gives them a real opportunity to really take their time, look at things. You know, one of the other uncertainties out there is just how restrictive policy is. And there's a lot of reason to think that the level of interest rates is at neutral as higher than it was pre-pandemic. So I think they have the opportunity here to really take some time to assess things and get a sense of where the economy is headed. And of course, we always talk about these things as if the economy is going to look what it looks like without any other shocks. But there could be other shocks

in any of the economy now going forward. And so that's also what they have to keep in mind is, is policy well positioned so that no matter how the shocks occur, they're in a good position to set policy appropriate. So if we're in that position, in that really sweet spot position, which I'm hearing you say, why do anything now? Why not just pause now?

Or is it because, well, the Fed hasn't really exactly prepared the markets or investors of the world for a pause yet? And he may do that in his press conference or the message on Wednesday. Yeah, Tyler, I mean, I think, you know, the Fed doesn't want to surprise everyone.

And frankly, whether they pause in December or pause in January is probably much less important than what kind of communications they accompany the December meeting. And you're right. I think the press conference and the new survey, you know, the summary of economic projections that will come out in December, give the chair the real opportunity to explain sort of here's how we're seeing things. There's some upside risk to inflation given that we've seen some, you know, some little firmer inflation readings than we'd like to have seen and expected to see. And at the same time, the labor market, the downside risks that we were concerned about in September when we started have eased off.

We're still watching. We're still having to care about that part of the mandate. But those risks have changed. And that change in the balance of risk means that we're likely going to be, you know, really taking our time to assess things. And I think it gives that message in the press conference, and I am predicting that the SEP will show fewer than four 25 basis point cuts in 2025 that we got in September. Then I think that's a strong message that, you know, we are assessing things. We do have some, both parts of the mandate and focus, but this is a good time to pause. I mean, one way to think about it, Tyler, is that, remember, they moved 50 to start with in September. and I interpreted that as they wanted insurance.

It was insurance move against the downside risk they were seeing on the employment part of the mandate. If you were to pause either in December or in, which I don't think will happen, but if you to pause in January, think of that as an insurance move, an insurance pause against upside risk and inflate. And that's how I think about it. A final question, which is, so if the kind of resting rate is somewhere, it's 4.6 right now, maybe 4, 6, 4, 4, something like that. I was just like, I mean, you go back to the 2010s where for six or seven years we were at zero. Now we're above four. What does that tell you?

Well, it tells you, given how strong the economy has been, that the economy probably in equilibrium, if you will, the neutral rate is higher than it used to be. Now, whether it's permanently higher or not, that depends. But we do see some evidence that it's higher. And even the Fed has marked up their estimates of that long-run Fed funds rate. And the economy has done pretty well throughout this whole period, even though interest rates were high. And those interest rates being high were really helpful to get inflation started on its path down. So I think the economy right now is handling it quite well. And it could very well be that interest rates will settle in at a higher.

higher rate. I certainly think the nominal rate, the nominal funds rate is higher, is going to end up being higher over the long run than it was pre-pandemic. All right, Loretta, thank you very much. It's great to see you again. Have a happy holiday. Yes, you too. Happy holidays. Quick programming note. We're all, we're all Federal Reserve, all hour long on Wednesday. We will have wall-to-wall coverage, wall-to-wall starting with the latest interest rate decision. that's at 2 p.m. right up to Fed Chair Powell's press conference at 230. It starts at 2 p.m. You'll be here. It might start at 1.

I mean, you'll be... Really, you'll be leading. You'll be revving. There's going to be some strong. It's going to be a fun couple of hours for sure. And for more on what the markets are making of the Fed's future actions. Let's go out to Rick Santelli in Chicago. As the 10-year yield, Rick, is back up to about 4.4%. Yeah, and it's not only that.

There's so many interesting dynamics going on here. First of all, this is the six consecutive session. We look to have a higher yield close. Talk about building momentum in front of a Fed meeting. Many wanted to say, well, you know, kind of neutral day. We're not doing much. But yes, we're getting towards 4.5% A and B, the momentum of the technical sell-off that's pushed yields higher remains in place.

Consider this. A two-year now is about 80 basis points away from its high yield close in April. The 10 year is only 30 basis points away. That speaks volumes. Now, let's find a trader. Paul, how you doing today? All right, so we all know that the big F-O-MC meeting is this week, and we have 97.9% chance of a quarter point east. But thereafter, it gets a bit dicey. Your thoughts? Kind of what are you hearing on the floor? Yeah, as recently as September, we had a lot of interest in the Fed meeting, the uncertainty with the actual statement. This time around, like you said, not as much. There is some interest.

mostly forward-looking with the dots and seeing what the raid path will look like going forward. You know, when it comes to inflation, inflation seems to be, you know, inflation and deficits, all of a sudden it seems after the election, many have discovered this in the press. Where have you been? But the biggest story is they make it seem as though the Trump administration and tariffs is what all this inflation is about. Now, granted, that probably the uncertainty of that is adding to inflation anxiety, But there was plenty of inflation over the last six months in sticky data.

Wouldn't you agree? Yeah, I do think the inflation narrative in the data sense hasn't changed that much. However, the options markets are pricing a little more uncertainty and volatility into the new year when he takes over and based on the policies he may or may not try and implement. Right. So you are seeing a volatility that increases after the third week in January that you're not seeing right now. Absolutely. Now, the other big deal, of course, is deficits, and we were talking about this off camera. I think it's great. It doesn't matter what reason we start paying attention to deficits.

But it's because the new administration, unlike the last administration, the press seems to be really interested in the things they should be interested in all the time. Do you think that there's a chance that Congress might take the same route and start paying more attention? You know, the political part of that's not really my purview. I prefer to let you comment on that. Are you seeing anything in the marketplace that would change your mind as to the future that we have with regard to debt or deficits? No, again, I think there's, you know, even though we've had a Trump presidency before, we're not sure exactly what roots he's going to take when he takes over. And that's what we're observing is just general uncertainty.

Now, I am hearing in the Treasury complex that there's an inordinate amount of buying of calls today. Are you seeing anything similar in the equity space? No, unfortunately we're not seeing a whole lot of much today. I think it's pretty typical ahead of a Fed meeting. You get a couple slow days tomorrow, definitely. And I wouldn't say there's any certain theme we're observing today, which is too bad because those are better days for us. Absolutely.

And when it comes to why clouds are being purchased in the fixed income complex, most likely it's because many believe this 440 to 4.5% which has stopped the market before is going to be pretty good technical resistance. Is there any specific area in the S&Ps of the Dowell? or anything. Are we near any major resistance in equities in a macro sort of way? Well, we're going towards all-time highs every day now, and that's usually generally a floor for volatility. But I wouldn't say there's any certain point when you're at all-time highs, you can't really. That's right. We just keep going. Paul, thank you for joining me today.

Kelly and the gang, back to you. Thank you both very much. After the break, not so home sweet home. J.P. Morgan shifting to a cautious outlook for home builders for the first time in two years. We'll speak with the analyst behind the call right after this. All righty folks, Trump tariffs causing a little bit of turmoil in Canada. Let's get to Megan Kasella for the latest on that. Megan. Hey, Tyler, that's right, a little bit of turmoil up north today. It started this morning when Christian Friedan, she's one of Trudeau's top aides, announced that she would be resigning from Trudeau's cabinet. Freeland said in a letter posted to social media that Justin Trudeau

told her on Friday that he no longer wanted her to serve as his finance minister. She says he did offer her another position in the cabinet. She does not say which one, but that her only honest path, she says, was to resign. Now, Freeland had a very broad portfolio. She was a key advisor to Trudeau for years now, first as his foreign minister, then more recently as his finance minister. She was the top negotiator for Canada during the first Trump term on trade issues. She was regularly here in Washington for those NAFTA talks.

She also pushed to make sure that Canada would not be hit in that first term with Trump's tariffs on steel and aluminum. Now she says that she and Trudeau were at odds in recent weeks about the best path forward for Canada, including over how to handle what she called the grave threat of aggressive economic nationalism from the incoming administration. She goes on to say in the letter that Canada needs to take the threat of tariffs extremely seriously, including by keeping its fiscal powder dry today, so we have the reserves we may need for a coming tariff war.

Now, Tyler, all of this appears to have come as a shock in Canada. TV is reporting up there as well that Trudeau himself has conveyed to his cabinet. He is considering resigning no clarity on that yet. But it does leave Canada without a key trade negotiator at this very tense time with the U.S., which is its largest trading partner. I think the assumption is that Trudeau is in an extraordinarily weak position politically. Can you comment on that? And I'm not sure when their next election is. I do not know when it is scheduled, but it may come up sooner rather than later.

It might. And part of the reporting now is that he's considering resigning or something that's called prerogation, which could impact when that next election is or whether Parliament goes on pause, for lack of a better word, for a little while. But he is in a fairly weak position. He has not had great approval ratings in recent months. And he's gone up once. He, of course, was the prime minister throughout that first term with Trump where there were so many tensions. Now I think a lot of questions among Canadians about whether he's up for it the next time around, recognizing that there is going to be a lot of tension and a lot of discussion with the U.S., with the Trump administration. Remember, Trudeau was down in Mar-a-Lago just a couple of weeks ago having dinner with Trump.

We saw the photos at first, both men coming out of those discussions, calling them productive and exciting and a good negotiation. Then just a couple of days later, Trump puts statements on social media saying that Trudeau suggesting that he should be a governor, that Canada could become the 51st state sort of belittling him. In a way, I think that sort of fed into some of this concern that he might not be up for the job. But clearly Trudeau must think that Christia Freeland, who was a journalist at the Financial Times, among other places, and a very well-respected one, was just not the right person to be sort of tete-a-tete with the incoming Trump administration. Maybe a little too confrontational, I don't know. That's right.

You've got to wonder. It really makes me wonder what was going on in Mar-a-Lago. And if there were any discussions about personnel, we don't know that. But what's clear just from reading the tea leaves in this letter is that she appears to have wanted to be much more aggressive with this administration. And maybe what part of the dispute is here is that Trudeau wanted to walk it back and maybe try to play nice and see what he could get that way, cozying up to the administration and trying to play nice rather than going on strong, talking about retaliation right out of the gate. Those are sort of two paths you can see here. They weren't agreeing on which one to take.

Well, the great state of Canada, the doors are open, my friend. Thank you. Megan, appreciate it. And coming up, a trade you'll love a latte? Coffee futures backing off of record highs hit last week. Is this an opportunity into a trade with room to run? Our market navigator is next. It'll be a brouhaha. All right.

Let's give you a quick check on the markets right now. The industrials are for all intents and purposes flat. S&P 500 up a half a percent. And the NASDAQ, the big window, they're up 251 points above 20,000 up. 1 and a quarter percent. Well, coffee is considered the second most traded commodity by volume after crude oil. Don't mix the two up. Don't drink the crude oil in the morning. They kind of look alike, but don't get confused here. Coffee futures are backing off a nearly 50-year high hit just last week. Despite this, one analyst believes growth of the retail coffee business could still climb over the next

decade. Joining us is Andrew Charles. We're going to have a little coffee talk. He's an analyst at TD Cowen. Andrew, welcome. Good to have you with us. So the growth in this industry is this include at home coffee sales and coffee shop sales or just one or the other. Hey, Tyler. So it's going to be both, but the real key is that you're going to see faster growth amongst coffee shops, which will grow about a 7% keg or we think of the next 10 years. While we estimate that coffee at home is more like a 2.5% and really the fuel here, the horsepower around why we think coffee shop growth is really a function of the stickiness of Gen Z and the fact that people drink more caffeine as they age, but the stickiness of Gen Z is they enter the workforce and enter parenthood.

Their allegiance to coffee shops, given the stickiness of digital, as well as the ice beverages made at coffee shops as well that are just not as easy to make at home, I think that's what's going to drive this horsepower around coffee shops outpacing coffee at home that we think sets up riply for the next five to ten years for the coffee shop market. How wounded or how out of favor? I don't know how to put it, but you're going to get what I'm driving at here. How wounded is Starbucks? Starbucks had the challenge that the brand really lost its soul, I'd say, under the prior administration with the company.

And so what I think you're seeing now is that you're seeing the fact that they're restoring the operations, improving the advertising. And, you know, simply put, back to Starbucks plan is exactly what it is meant to do to restore the shine and the brand. And so we think that you have someone coming over who essentially did the same playbook at Chipotle between operations and marketing, that we think that this is something they're going to see quite a bit of success within 2026, recognizing that it's going to take some time in 2025 to really get its mojo. And 2025 is really more of a back-half story. But 2026 is the year that we're most bullish. And it seems like investors are anchored to 26 around the assessment around how things are going and how the turnaround's performing. Yeah, I think you've kind of nailed it there.

The question is whether they can do the turnaround because I sense there's a fair amount of dissoning. enchantment with the brand. In other words, it's too expensive. It's too slow. The service isn't what it was. The shops aren't as spiffy as they used to be, and they aren't the hangout they used to be. Yeah, you know, so there's action plans, you know, that are going to be pretty quick, you know, to help restore exactly what you just said in the litany of issues the brand is facing. The value is being fixed by no price increases in 2025 and no longer a surcharge for plant-based creamers. You've got a new marketing chief brand officer. who's stepping in as well. We're very excited about her, given her success when she was at

Young Brands and at Chipotle with the incoming CEO as well. You've got the fact as well, the operations, they recognize they haven't been flowing as much as they need to be. And so you're going to seeing a lot more focus on making sure the customers taking care of more quickly and service times below four minutes. With the side benefit, we think that it's going to have a better barista experience too, with the potential for more automation coming as well. So we think that these are all fixable. To be very clear, it will not be a tomorrow fix, but I think this, streets pretty well understanding that this is going to be more of back half 25 and more so 2026. Pardon the pun. Who's the sleeper in the coffee game here in coffee shops?

You're full of puns today. It's great. I think that, you know, the, you know, we like Dutch Brose quite a bit. That's our top stock. It's about 900 stores. Yes. Yeah, tickers BROS. And so we think this one is one. It's only about a tenth the size today of Starbucks's company-owned infrastructure. But we like what we're seeing there. You know, top pick is they implement some changes in 2024 around the improved brand advertising. as well as the fact they've really done a great job with their Dutch rewards loyalty program. They just rolled out and finished the rollout of their mobile order, which we think is going to be driving quite a bit of success with the same store sales,

and will be a nice 2025 stories. And they've also said they're going to be doing food in 2026 with their CEO, used to work at Starbucks running food for the business. So very excited about the two-year catalyst path that Dutch Bros has. And the ticker is Bros. You've got to love that, man. Isn't that great? Yeah, I love it. Bros.

All right. See you later, bro. Andrew. You too. Thank you. Coffee talk with Andrew Charles. I can't wait for the next installment already. Remember, you can always hear us on our podcast. Enjoy it with your beverage. And be sure to listen and follow Power Lunch wherever you go. We're back right after this. Welcome back to Power Lunch. Some caution ahead for the home builders next year potentially. J.P. Morgan published its 2025 outlook saying they are shifting to a more cautious, less constructive approach after holding a positive view of the sector the last two years. combo of higher rates, affordability, and a potential disruption to the labor force due to immigration policies are all contributing to their lowered expectations.

Here to discuss is JPMorgan Senior Homebuilding analyst Michael Rehart. Michael, it's great to have you, and this has been just an absolute outperformer going back two or three years now. So this would be a big deal at these stocks. And maybe you can catch you up to speed if they've already stalled out a little bit the past few weeks or months. Yeah, thanks for having me, Kelly. Yeah, the stocks have acted a little more softly in the last month or two with rates retracing upwards a little bit. But, you know, our concern is really in contrast to the last couple of years, particularly

as we've seen rates move up during the latter half or the latter quarter of the last two years, what we see different this time around is inventory levels are much higher than they have been. On a national level, it's interesting, existing home sales, existing homes for sale remain fairly tight, but more than half of the 23 major markets that we track have now inventory levels of existing homes at or above, around or above normalized levels. Interesting. And so that's really, I think, the big difference. Normally, when rates stabilize, if they were to stabilize again this year or into next year,

we would view that as a positive, but with demand drivers remaining more, we think, unchanged, going into next year and supply much higher than the last couple of years, that's some of the challenges that we see facing the industry. So specifically, I thought it was interesting, you have Horton underweight, toll and I think meritage are neutral. Why do these, Horton in particular, you think, face particular challenges? Yeah. So, you know, the way we approach our stock selection remains more or less unchanged over the last few years.

And it doesn't have as much to do with specific positioning for DR Horton. We think it's actually one of the better managed builders, national and scope. It's also shifted towards more share repurchase and returning capital to shareholders, which you think is a positive. The bigger driver of the underweight is more on a relative base. basis, we take a portfolio approach to the stocks and look at relative valuation versus relative fundamentals and see which names versus their peers are better positioned to outperform or underperform. For D.R. Horton, the stock is trading at a roughly 10% premium on a PE basis and roughly

in line on a price to book despite our outlook for below average margins and returns over the next couple of years. And so that relative valuation doesn't sit as well with us. as it had in the past year. I believe I heard you say earlier that in certain selected markets or maybe half of the markets follow, I forget your exact phrasing, the inventory picture has kind of normalized. What is driving that? What's changed?

Yeah, so, you know, it's a great question. I don't know if there are great answers there because existing home turnover remains fairly depressed. And so typically you would see maybe a little bit of a positive coincidence. I think it's a combination, frankly, of the higher home prices that we've seen over the last two or three years. In many markets, it's been very strong, some of the most elevated markets, like in Austin, Texas, had outsized home price appreciation in the prior few years. And I think that just encouraged a lot of people to put their homes on the market. Yeah, that's bringing people out of the woods and into the open, in other words.

Right. And so, you know, as a result, what that does for the homebuilder specifically is more so of a weight on pricing and gross margins. You know, they're going to have to compete in a much broader sense and a much broader backdrop than they had in the prior few years. And that makes gross margins a little more susceptible going forward. Michael, the only thing that I still think about it, I forget if the stat was in the Wall Street Journal or somewhere the last week or so, is that there's still the people are not. in homes because they're a great value right now. They're trading much more expensively to apartments than normal and all of that. But they're in homes because it's a life-based thing and they kind of have to be. So does that premium still remain in the market where there's still people just seeking out a home, not regardless of price, but there's just still so much pent-up demand? Or do you think that that tide is turning?

Right. So, I mean, I think it's a great point. You know, when you look at home ownership rates, they remain right around 65%. And so it's not dramatically different than the long-term average. I think what you're always going to have at points in time over a three, six, 12-month period is outside of the more positive, arguably demographic trends that the industry and the builders themselves should continue to benefit from, you're still going to see moments of dislocation, either from higher rates, putting people on the sidelines, or pricing maybe taking a pause or even a step back. if inventory is a little too high. And so, again, those are some of the areas that we're focusing on, at least over the next six to 12 months,

as seeing a little bit more of an area of challenge for the builders themselves. I think that makes sense. Michael, thanks for joining us today. Appreciate it. Thank you. Michael Reheart. All right, let's go to Contessa Brewer now for a CNBC News update. Hey, Contessa.

Hi, there, Tyler. Police eight three people died in a school shooting this morning at a private Christian school in Madison, Wisconsin. According to the city's police chief, the suspected shooter is a child, a student at the school, and is among the number of dead. The police chief says officers found the student dead when responding to the active shooter call

at the K-12 abundant Christian school. Police say six more people were injured. The criminal investigations into New York Mayor Eric Adams' administration are deepening. The attorney for his former top aide, Ingrid Lewis Martin says today she expects to be indicted for allegedly accepting improper gifts. Lewis Martin abruptly resigned from her post as Adams' chief advisor Sunday. Adams, meanwhile, himself is facing federal corruption charges.

And President-elect Donald Trump's pick for Health and Human Services Secretary will make his case on Capitol Hill this week. According to NBC News, Robert Kennedy Jr., set to meet with more than two dozen Republican senators, including incoming Senate Majority Leader John Thune and Majority Whip, John Barrow. So that's the news. Tyler, I'll send it back to you. All right, interesting week ahead. Of course. Thank you, Contessa. We will be back with more power lunch after this with the NASDA at a record high. Welcome back. We're watching the markets as the Dow potentially looks to be on pace for its eighth straight losing session. We haven't seen that since 2018. The S&P's up half a percent. The NASDAQ is at record highs up 1.3%.

So a lot of differentiation across the markets today. All as we gear up for the Fed's decision coming on Wednesday. could be the last cut, maybe for a meeting or two. Our next guest expects the traditional Santa Claus rally in markets, but then maybe a pullback next year. Marianne Bartels as chief investment strategist at Sanctuary Wealth. It's great to see you again, Marian. So, you know, no one wants to fight the market this time of year, but what do you think happens come, you know, mid-January and thereafter?

Well, certainly the bells are ringing with the NASDAQ hitting record all-time highs and the S&P having hit all-time highs. And investors shouldn't be expecting any coal in their stocking this year in terms of their investment performance. But we are seeing interest rates start to rise, both on the front end, like the two-year treasury yield and the 10-year. And seasonally, companies need to get capital to close their book to your end. And in the beginning of the year, they need capital for capital expenditures. And so the demand for money goes up, interest rates go up. If interest rates do go up as we expect, that could put a little bit of a ripple within the markets as we go into the first quarter.

But we are expecting a very good year next year. In fact, our forecasts, I think, are probably the highest on the street right now. We're looking for the S&P to hit a range of about 7200 to 7,400 to 7,400. So any pullback that we get in the markets, we still think is a buying opportunity. So that's 7200 is what? about a 20% gain from here? Something like that, a 20% gain from here. Where does that come from?

Does it come from earnings power or PE expansion or both? Because the PEs are pretty high. Tyler, you're right. PEs are really near record highs, even going back to the 1900s. But what a lot of investors don't do is they don't look at secular bull markets. That's the period where markets can go up sustainably for a long period of time. They normally last 15 to 20 years. In a secular market, PE multiples expand.

And I think before this secular bull ends, we could have record PEs even surpassing 2000. But I do think that AI, blockchain, is really going to have a positive impact, not just on earnings, but on productivity. And I really think that tech and tech related continues to be the leadership in the market that's going to drive the markets higher. And the last time we did this was from 95 to 2000. I think we're repeating that, but also very similar from 1925 to 1929. I know a car doesn't necessarily sound like technology or railroads or radio, but those were the technologies of the 1920s. And we saw both of those market cycles in the 20s and the 90s do extraordinarily well, but the economy also did extraordinarily well. But they also ended extraordinarily badly.

Yeah, that's the one risk that we do have here if my forecast winds up being correct. It doesn't end pretty. But between now and the end of the decade, I think we can have extraordinary returns. From 95 to 2000 in every year, we were up 20% or more. And I think we're repeating that cycle. And all the liquidity from the Fed and from the government is hoping to fuel all of this. Marian, it's interesting to me that you think we're shifting from semi-stocks to software. Maybe we're just rotating within the semi-stocks, but you actually think Salesforce could be an ultimate beneficiary at a time when a lot of people still say the verdict's out on how exactly AI is going to affect that space.

That's true. In technology, we get a cycle. You normally get your chip, you know, advanced. You get your hardware advanced. And then you go through a whole software cycle. And I think we're moving from chip to software. And Salesforce is a leader in the space. From a technical standpoint, has had a significant technical breakout saying that this move is going to be quite substantial for the company. All right. Marianne, thank you very much. Marianne Bartels. We appreciate your time today.

Thank you both. All righty, the tech heading NASDAQ-100 unveiling its quarterly rebalance. We will trade two names getting added to the index and one, getting the axe. Get your axe out of here. Three stock lunch is next. Time for three stock lunch now. The NASDAQ 100 announcing its rebalancing effective one week from today before that market opens on that day. The three names getting added, three getting hacked. We will trade some of those names right now here with our trades. Steve Grasso, CEO of Grasso Global and a fast money trader. First up, Steve, welcome. And let's go to Palantir set to be added to the NASDAQ 100, was on the New York Stock Exchange.

recently. Shares are lower today. The stock has surged more than 300% this year. Top performer in the S&P 500. You now favor this one. You didn't recently. That is true, Tyler. I did not favor it. I thought it was going to be in the target of the Department of Government Efficiency that Musk and Vivek are leading. You know, the 35% of the revenues are derived from the government, specifically and dominantly from the U.S. government. If those margins, are at risk, the stock should go lower. But when I start to see Elon Musk make comments about the next war will be fought with drone swarms versus jets and Palantir is dabbling with JVs in the drone department,

it makes me think that there could be an underlying bid with the name. And especially because artificial intelligence on one hand, drone technology on the other hand, put them two together. Government is going to be their leading, knocking down their door for investments within the company. And they have had the ability to expand their commercial business as well. So I'm not, I'm 80% there, but for the purposes of this segment, we're going to call this one a buy. That's up more than, the only thing that can out do Palantir is the next stock, Steve, which is micro strategy, also joining the NASDAQ 100. But to be fair, very, very different fundamentals between these two companies. Micro strategy is up more than 500

percent this year, building on Bitcoin's 150 percent gain. You go in near this? Yeah, this is one that I would, you know, I'm a bull in Bitcoin, Kelly. And when you look at micro strategies, it's basically a three and a half times play on the performance of Bitcoin. So it bites both ways, both up and down. And by the way, is there any better, is there any better a, advocate for Bitcoin and Michael Seller. He is unbelievable on, I don't know if he's been on your show, but I saw him on Sarah's show today, I believe, and he just knocked the ball out of the park. If you look at the convertible notes where he's raising money and then putting it right back in buying Bitcoin, he owns the most digital assets of any company. And we have the most pro

Bitcoin administration ever. So if you couple those two things together and think about it, you're going to start to see if if President-elect Trump pushes a Bitcoin reserve, other countries are going to get pushed for a Bitcoin reserve. If that happens, you're going to see, even though Microsoft voted it down. You're not concerned. I take your point. Maybe people put Bitcoin in the corporate balance sheet, but you're not concerned about the other side of this trade here, if or when it goes through a correction? I'm always. concern. I'm a trader. So you have to put in some smart losses. But I will tell you, Kelly, what, you know, the whole old community that just sits there and says, we're looking out 20, 25 years

in Bitcoin. And you don't have to look out that far. Look at the performance coming out of the election. So when people want to hold it, you have to, as with any other stock. I ever mentioned in any other stock that anyone buys on your show or through your show, you should always be using stops to the downside. But unfortunately, you can get forced out of these plays because a lot of times they are so volatile. So big risk, big reward. I'm always worried, but I'm a believer in the long story of Bitcoin. All right, let's move to one that I know you're not as fond of. Talk about a company that has seen its revenue shrivel. That would be Moderna. Yeah, Tyler. So Moderna is my bail on this one. I'll just put it in simple terms. In 2022, they made over $19 billion.

on the vaccine. This year, their forecast to make three to three and a half billion off the vaccine. The vaccine is still 95% of their revenues. Do you want to buy a stock that has those fundamentals? No? I don't. No, no, I don't. No, really? I don't. Steve, great to see you, man. Have a great holiday. Likewise. Cheers. And still to come, how the bots stole Christmas. The rise of AI giving way to so-called Grinch bots, which scoop up in-demand deals and goods online before you can. We'll get the full story next. Before we go, we've heard about bots being used to scoop up concert tickets before the general public.

It's infuriating. Well, that same thing is being used to do the hottest holiday gifts before you can get to them. Joining us now with more on GrinchBots is Courtney Reagan. Good name, right? GrinchBots, this will make you pay attention. They're basically mini-computer programs designed to buy up in milliseconds. It's a problem that create shortages on high-demand items and, of course, increases prices. bots come in, they procure a lot. And suddenly you're out of stock.

And now you go, okay, I want to fulfill it. You fulfill it, but actually it wasn't real demand. It was bot demand that was changing what you thought was real demand. And now you may start producing more next year that may or may not get sold. And while these bots have existed for years, Gandhi says generative AI has supercharged them. He actually now calls them Grinch Swarms. Datadome helps retailers to combat them and says the big. barrier to entry has never been lower. They've seen a steep increase in the last three months of these.

Now, the bots usually target high-end limited edition goods. Think sneakers, gaming consoles, and even likely targets very popular Taylor Swift Erez Tour of Book, which very quickly sold out. Those capture puzzles, image recognition, multi-factor authentication. Those are all meant to, at least in part, stop these bots. But in many cases, the bots, they figure out workarounds. Cloudfare also helps retailers fight these bots. It observed 6.1 trillion bot requests on blackfax. Friday this year up from $1.5 trillion in 2021. Now, not all the bots are resellers. This is interesting. Bots can actually be purchased by anyone for as low as $10 to $400. There are bots as a service and also subscription bots. I've talked to someone that has done it for sneakers

in the past. He doesn't do it anymore because his wife put the kibosh on it, but he used to buy bots to help him buy sneakers. They buy up the goods. They buy up the goods. So a lot of times they want to do it at volume to buy the hottest sneaker and then resell it. But you could also use a bot if you want just one of those sneakers, for instance, and you want to wear yourself. It's not illegal in many cases. It does often violate some of the retailers' terms and conditions. You don't always know where these bot programs are being located. Maybe they're in geographical areas that, you know, get a little dicey when it comes to legality. So I'm not endorsing the use of bots. I'm just telling you, they're not all done. You are totally using

dots. Yes, yes. I should have. Now that I realize this, it would have been a lot easier way to go about it, but did it the old-fashioned way. Well, that's bot. All right. Cort, thanks. Thank you. Thank you for watching, Powell.