Power Lunch - Dow heads for fourth straight decline 10/24/24

Episode Date: October 24, 2024

The is sinking today, putting the 30-stock index on track for yet another losing session as higher rates and lackluster earnings continued to pressure stocks. 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 on this fine Thursday afternoon. Alongside Kelly Evans, I'm Dominic Chu. And joining us for the entire hour is Steefel Financial CEO, Ron Khrushchevsky. And we're going to start with a check on the markets right now. The Dow is off its worst levels of the day, but lower for the fourth consecutive session, down a thousand points so far just this week alone. But the broader averages are starting to move a little bit higher. It's a mixed session.

Maybe Kelly a churn in the markets overall. I think the top level is six-week win streak, headlong into a three-day losing session, and today they're trying to turn things around. And interest rates have finally stopped rising. There you go. That's enough to do it. One stock that's been weighing on the Dow is Boeing, though. Machinists voted nearly two to one to reject the company's contract offer.

Less people run away with the idea that this was a said-and-done thing. Well, what's interesting is you heard the estimates from S&P about whether or not it's a billion dollars a month these guys could burn through in terms of overall cash. At some point, you've got to raise capital, whether it's through the debt markets or the equity market. What does it mean for Boeing down the line? It's going to be huge. No, and we talked to the analysts yesterday. I mean, everyone's hoping this is finally, finally, the inflection point, but we're still not there as it keeps dragging out. I mean, Ron, this is one of those situations with the Boeing where capital is key at this point.

Absolutely. And anytime you need to raise capital in times like this, it's difficult. All right, you never want to raise capital when you have to raise it. From a position of weakness. From a position of weakness. More expensive. Yeah, absolutely. Absolutely.

They gotta wait for the clouds to clear a little bit. maybe then, you know, add to their coffers. There you go. And from the Boeing side of things to a lighter subject here, for many of America, much of America, the NBA season is kicking off this week. One of the biggest complaints about the league is the officiating. It's not just the NBA. It's sports, right? We're going to hear from Adam Silver, the commissioner of the NBA coming up.

But, Ron, you are in favor of the robot officials, instant replay, laser judges, everything else that many sports have incorporated. Why? Well, wait a minute. First of all, you want to get the calls correct. You absolutely want to get them correct. But I'm from St. Louis. And, you know, in 1985, I still talk about Dom Dengert.

I remember the empire that blew the call, one of the greatest umpires of all time, by the way, in the 85 World Series. Game 6, top of the 9th. I'm talking about it 40 years later. You should get that one right. But I've got to tell you, I'm concerned about the flow of the game. And we're going to replace officials that maybe call fouls a little bit tighter versus a little bit. not tight and take the human element out. I'm not sure that I'm completely in favor of that.

I agree. But the human element's important. It is. And just pitch clocks on the major league baseball. They've made the game good. Instant replays, everything else. Replay assists. But again, the human element, there is something to be said for them.

Judgment. Judgment preserving the game, all the flow and all the rest of it. We'll have more on that. Don't worry. Let's start with the markets, though, because the 10-year treasury is pulling back today from its recent highs. The slight dip is helping to lift sentiment across broader markets. Rising yields had kept stocks under pressure this week. Yields are still up significantly the past couple months with the election.

Some more Fed speak about, or I should say another Fed meeting just around the corner. Here to discuss what's driving these yields off the lows. Megan Chu is head of investment strategy and portfolio construction at Wilmington Trust and a CNBC contributor. Megan, it's good to see you. What's this telling us, do you think? Well, I think the big story of the past few weeks has been the move and yields and increased volatility in the Treasury markets and interest rate markets specifically. We've seen that move and yields be a result of both higher inflation expectations, but also higher real yields. So a little bit of maybe more angst around the inflation outlook being reflected in the market, but also just better economic data, which suggests, again, that real yield should be higher, getting some of the Fed activity in 2025.

priced out. I actually think this creates a really good setup for equities in 2025. If you're looking at stronger data, we actually don't buy into the increased inflation angst because we're seeing virtually no signs of inflation re-accelerating. So better data, a Fed that can remain on track with maybe more managed expectations from the market around Fed activity is a really good backdrop as we move into the new year. All right, fair. And we're sitting here with someone who's stock is up 50% since Jeff. That's why I'm smiling. That's why you're smiling. I mean, and Ron, a lot of people have been looking at the performance of investment banks and certain parts of the financial sector as big beneficiaries of what would you describe this cocktail that has things looking so much

brighter now than it did nine months ago? Well, for financials. I mean, from where you sit, what's changed so much for the better? Well, look, I think that, first of all, I think the market here is fairly, if not highly valued. So I don't know if I'm taking the, other side of this. Markets are 23 times earnings. Credit spreads are as tight as we've seen in 15 years. Right. So I just feel like can it get any better? Well, can it get any better? And it's going to depend on earnings. You see a lot of the stocks that will react to earnings and a big misses. What I personally think, I agree that real yields in a soft landing and no landing need to be about 1%. And if inflation, I think core CP lands about 2, 8 to 3, that means Fed funds

needs to be four. And at 4%, to me, if that's normalized, well, then the 10 years should be closer to 5. And that doesn't support a 23 times PE. So I think you have to be a little cautious in this market. But people are arguing. I don't know if you've heard that, you know, not just today, but in recent weeks, that equities could support 5% yields, whether it was early 2000s, late 1990s, you know, that that shouldn't itself be so much of a headwind.

Well, the economy can certainly support that. whether or not we support 24 times earnings with a 5% alternative tenure, that's another question. I don't think that math adds up for me, but, you know, hey, look, we love good markets. We're doing great. We're hitting an all-time height today. Wow. So I'm going to double smile. And we should say you booked this before.

It was not like you booked it this morning. Megan, I want to turn back to you because the long-term yields question has been one that's at least being debated right now, whether or not it is the inflation side of the story that is perhaps driving more of that narrative on the longer end side of things like the 10 year? Or is it this idea that there could actually be growth over the longer term? And that's the reason why you're seeing a bit of pressure on that long end of the yield curve. It may not be all that bad to see yields rise on the long end if it's for the right reasons. Absolutely. That is critical. And if yields are moving for the right reasons, it's a good backdrop for stocks.

I think if you looked back at the September lows, we were looking at a market that, at least on the bond side of things, was pricing in a more material risk of recession than we were seeing in the equity market. And I think we've priced a lot of that out at this point. So I agree with Ron. We've set up in terms of a market that has a lot of good news baked in. But if we do not see recession on the horizon, we have the Fed. We're actually maybe expecting the Fed to cut a little bit more. than I heard mentioned just a few minutes ago. We think that the Fed can get back to a neutral rate of about 3% next year. I think that is where you get a better backdrop. But certainly some of the market is looking at higher inflation expectations, maybe some repricing of election risk. But at the end of the day, if you were pricing in a 3.6, we thought that was too low. Maybe we've overshot a little bit at 4.4 and a quarter. And we're probably settling in here at about 4.1, 424 on our end.

expectation for the 10-year going out over the next 12 months. Ron, I mean, we could go ahead because I would just ask. I mean, what bothers me about that is there's really no term premium in the tenure. And that is more now than there was. Well, it depends on where, you know, GDP settles and inflation. But that is at 4-3-6 tenure, which is what I think I just heard. That's pretty optimistic in my view relative to the economic activity, relative to where inflation may settle.

So I see the tenure a little bit higher. It sounds to me like you're expecting higher yields here potentially, but lower stock prices? I think that over time, higher yields, an economy that's not showing any signs of weakening. And if there's anything that's going to impact sentiment will be that, look, investors are impatient. The Fed is not impatient, all right? And the Fed, I believe, will be cautious. I was just going to say, Megan, can we just bring you in for a quick word from you about whether or not you think that there are key parts of the market in that backdrop that you and Ron just laid out that are going to be the outperformers if we are to see a constructive market? Yeah, and just to clarify, the 3.6 is where we were. We think that was too low on the 10 years. So I think you are looking at maybe being more accurately priced going forward.

But I think the opportunities in the market still lie in the consumer-facing companies. So we have, you know, maybe a little bit more of a balance between defensive and risk-on in terms of sectors with an overweight to consumer staples, but also consumer discretionary. The consumer continues to overall exhibit strength and continue to surprise the upside, even though savings has come down and you're seeing some signs of weakening in lower credit tiers of the market. We also have a neutral allocation to technology where we think, you know, long term, that's a place where you want to continue to hold an allocation. All right. Let's broaden this out.

Megan, thanks very much. We appreciate it, Megan Schu. Turn to Rick Santelli for more on that discussion about yields, which are pulling back, taking a bit of a breather today. Rick, what would you layer in here? Well, I think that it's very difficult to ascertain if the yields are moving up for reasons about a stronger economy. They are to some extent, but I still say the driving. course, is what everybody's hearing pretty much every day in every commercial, pre-election. Are the candidates talking about deficits servicing the debt, spending, welfare, all the

issues that are making servicing the debt, one of the most expensive pieces in the budget. Ultimately, it's more expensive now than defense spending. And yes, yields have slowed today. What was interesting, though, is as you look at an intradate, they slowed after we had decent data. I mean, we were supposed to have higher claims. had lower claims because of all the different hurricane issues, different strike issues, and at 227,000, that's extremely well behaved, and even the PMIs. Well, manufacturing is still under 50. That's not a

shocker, but the other two were a bit better than expected, and all three were actually sequentially higher. So as you see, right afterwards, we almost got and tested yesterday's highs, but we failed and we're moving down. If you look at the next chart, and I love this chart, of course, This is since the Fed cut 50 basis points. Looks like, you know, you're going up a mountain there, almost a 45-degree angle upward. And finally, we don't talk about this a lot. You know, Europe's going to have to be borrowing money. The U.K. is going to have to be borrowing a lot of money.

And yet, here we are sitting roughly, blur your eyes. We just came off four and a quarter. Ten year boons closed it two in a quarter. There's 190 plus basis points of widenness there. That's the five-month widest it's been. And we need to pay attention to that. I completely agree with Ron on term premium. It's going to most likely continue to expand.

And one thing that has changed with all the other comps in history and where you think rates ought to be, and it's how much debt that saddlebags of debt that the economy has to carry along, and that is going to be a continued issue with long duration rates. Dom, back to you. A couple weeks to contemplate all of those fiscal issues there before the election. Rick Santelli, thank you.

very much for that. Coming up on the show, some big stock and headline movers in the transportation space today, activist investors taking action at Southwest Airlines. Boeing's woes, as we mentioned, continue. Machinists rejecting the new labor contract over there. And despite all of those concerns, Tesla cannot be stopped. We'll lay it all down in a power rundown coming up next after this break. Welcome back to Power Lunch. We've got several transportation stories today. So Phila Beau is by for a power rundown. Let's start with Southwest Airlines, whose shares are down 6% despite that agreement with Elliott to resolve the proxy battle. Phil What gives? I think people are trying to figure that out right now, Kelly. You would imagine that the

stock, based on this news, would be up because the activists having seats on the board could push it to transform Southwest even quicker. That hasn't been the case. But they do have a sizable presence, Elliott Management Group. Five of the people that they put forth as possible candidates will be joining the Southwest Board. That will happen at the end of next week. One independent chair has also been added, former CFO of Chevron, also joining the Southwest Board. Gary Kelly, the former CEO and executive chairman, he's out starting next Friday. Again, all of this kicks in on Friday, November 1st as you take a look at shares of Southwest. We talked with Bob Jordan earlier today, and he said, look, I'm upbeat about working with these new directors, not just the ones that were put forth by

Elliott, but others who are joining the board. This board has changed dramatically compared to a year ago in terms of the number of new voices, new perspectives that will be on the board. By the way, they beat the street on the top and the bottom line reporting their numbers before the bell. But again, what's getting the attention, guys, is the fact that Elliott is not going to have to go through with a proxy battle. That's shareholder meeting that they requested. That's not going to take place. And now you have a new board at Southwest starting on November 1st. anything on this one? Well, you know, I would just say that it seems to me, Elliot won. I mean, I'm a CEO, all right? And if I'm going to walk into my next board meeting and I have new six

board members, I'm either doing one or two things. I'm either packing my bags or I'm going to listen to the new ideas. So the fact that the stock's selling off today might be one of those, buy the room or sell the fact type things, because you are going to see changes at Southwest. In my opinion, just from my perspective as a CEO, you don't change the board completely like this and then it's business as usual. And the CEO keeps his job, by the way. Well, that's why he's keeping his job, so he's going to listen. Last hour, Ken Squire said he shouldn't print his business cards yet.

You know, again, sitting in one of those seats. If I had six new board members who didn't like me before, I'm not exactly going to be sitting comfortable in my seat. Yeah, but investors might like that in the long run, even if today they're not rewarding the shares. All right. Let's go to our next topic here with Phil, which is Boeing. The machine is rejecting the contract offer from the company.

So, Phil, does this mean we should expect this to drag on for a while and what is a while? That's a good question, Dom. Look, this is going to continue at least, I would imagine. My guess is at least another week, maybe two weeks. Depends on how quickly Boeing and the union can come to another tentative agreement and put it before the rank and file. What was voted on yesterday was roundly rejected. 64% of the machinists, and there are about 33,000 of them, most in the Puget Sound. area. They voted no on this contract. Now, that's an improvement compared to how many voted no in

September, but it's still, Boeing's got a long ways to go on this. And just to remind everybody, here's the deal that's on the table that was rejected, 35% raise over four years, a $7,000 signing bonus, a one-time deposit of $5,000 in 401k accounts, and an annual bonus of at least 4%. Boeing's going to have to sweeten this in order to get that 14% who voted no to change their minds and at least vote yes. We know that the Labor Secretary has been in touch with Boeing today, as well as the machinist. Let's see how quickly Boeing can come together and put another proposal on the table and a vote go before the rank and file. I'm just trying to remember, Ron, has Boeing had any activist activity over the years? I don't think they have. I mean, maybe it's

viewed as constrained by its virtue of being somewhat of a duopoly with all these sort of fixed contracts and fixed issue. Maybe it's not the area of expertise for a lot of activists. But I mean, if there's been a company that seems like it needs a complete overhaul at this point. Well, they, I mean, of all the controversies and not the planes and, and it's been years. It's been years. It is a big company with the national type duopoly. But I don't think, I don't remember an activist. I can be wrong.

No, I don't think there has been. But anyway, at this point, I mean, they've tried to remake it. They have the new CEO. Maybe he can try to finally turn a page on all of this. Speaking of turning a page, how about Tesla whose shares are soaring 20% after its results? Phil, I've heard a couple of reasons for this, that it's cheaper now for them to make cars that surprise people. Also, it seems like they're putting a lot of credibility on what Musk said about revenue or unit growth next year. He mentioned 25 to 30%.

Yep. I think that's the primary driver, Kelly. At the end of the day, even though they want to be valued like a tech company, it's still auto sales, auto deliveries that drive shares of Tesla. If you look at the report today between autos and the energy generation, energy storage, that's really where Tesla got the real juice coming into today. Energy storage, it's kind of more than double this year compared to last year. That growth continues at a very quick pace. Lower priced models are going to be coming, going into production next year,

maybe by the end of the year they go into sale in North America and around the world. And then you've got Elon Musk saying during the conference call, look, sales should be up 20 to 30, percent. Street right now is expecting deliveries this year to fall compared to last year. The street expects 1.79 million deliveries. It was over 1.81 million last year. And if you go forward, taking a look at shares of Tesla next year, the early consensus is just over 2 million. 2.05 million is what analysts are expecting. That's not 20 to 30 percent. That's what, 12, 13 percent. So the street is not completely buying what Elon Musk is saying, but certainly investors like hearing his optimism about deliveries increasing next year.

Rob, we'll just give you a parting word on that one. Well, look, Tesla's about to have its best day in a decade, and I think that Elon's lottery just got a little cheaper, his registration lottery. So he's having a pretty good day. Of course, the politics and the tech world converge. They come together. On that one there. All right.

Thank you very much, Phil LeBoe, for that big power rundown on transportation stocks. We'll see you later on. Still to come on this show, navigating the housing market. Some strong data out today, lifting the home builder stocks. But what do those numbers really mean for the long run, the trends in housing? The market navigators coming up next. Welcome back to Power Lunch. A quick check on the markets right now.

We're off the worst levels of the session for the Dow, which is now down about 160 points. It's still off about nearly half of 1%. But the S&P 500 and NASDAQ, both getting buoyed by strong performances from Tesla, amongst other names, as well. Among the positive gainers today, stronger new home sales data propelling some of those stocks, housing-related names are getting a boost. But what do the numbers actually mean for the overall sector? So is this a blip or the start of something sustainable? Our next guest is here with some insight there. So joining me now is Jim Egan, the co-head of U.S. securitized products research over at Morgan Stanley. Jim, many of those securitized products deal with mortgages and financial instruments

tied to mortgages. What does the data show you and what does that mortgage information kind of tell you about what the broader state of the housing market looks like? Absolutely. And thank you so much for having me. As you mentioned, we had a strong new home sales print this morning. If we take a step back, there are a number of different ways to kind of crack the housing market, a lot of different statistics that we look at. But one of the big drivers is affordability. And yes, there's been some volatility in mortgage rates. Mortgage rates have increased a lot over the past three weeks. But if we take just a wider view from the fourth quarter of last year to today, mortgage rates are down over 100 basis points. Affordability is improving. And as we see that

affordability improve, you've seen mortgage applications increase. When we take a closer look, that application increases a little bit more skewed, or it's definitely been driven by refinanced applications. Purchase applications have kind of bounced along unchanged for the better part of 12 months, but that's not too unusual. We look at prior periods of affordability improvement. It sometimes takes nine or 12 months for purchase applications really to pick up. And as you saw this morning, and if you contrast it to the data yesterday, we're seeing those pick up a little bit more significantly in new home sales than existing homesets. Now, Jim, with all of that in mind, is there a way that investors out there can read some of this data?

and figure out whether or not the housing market is due for that sustained move higher, despite the fact that they've already been outperforming in certain key parts of this market rally. Right. So when we think about those underlying kind of fundamental housing statistics, where home sales are going, where building volumes are going, as I said, purchase applications holistically, kind of treading water for the past 12 months. But the second half of September, the first half of October, showing year-over-year growth in purchase applications really for the first time, since 2021. It normally takes that nine to 12 months to see sales volumes start to increase.

Those purchase application increases kind of might be the first signs of that growth. And so from our perspective, we think in the fourth quarter of 2024, where we are right now, that's where we might be entering that sweet spot from a growth in sales volumes perspective. We don't think the growth will be as significant as it's been in prior periods of affordability improvement, despite the fact that affordability is improved. It's still a lot more challenge. than it's been at really any point in the past 30 to 40 years, with the exception of 2023 and the absolute supply of homes available for sale, it remains pretty tight, but we do think you're going to see growth. We think existing home sales are going to grow by about 5%

over the next 12 months, and we think that new home sales, like you saw this morning, should continue to outpace existing home sales because the lock-in effect, one of the key buzzwords in the housing market, has kept existing listings pretty low, and you've seen more of a response from the supply in the new housing. Right. James Egan with Morgan Stanley saying that homeowners across America can be cautiously optimistic. Jim, thank you very much. We'll see you soon. Thank you very much for happening. Dom, thanks. Still to come, a one-on-one with NBA Commissioner Adam Silver exclusively on CNBC Sport will wrap the key headlines and takeaways when we return. Welcome back. Plenty of stock moves are on our radar this hour. So let's do a power check. And on the earnings front highlight lamb research, which is higher and beating on revenue. It's overall outlook not as bad as ASML. Remember, which has.

had that disappointing miss. You can see investors breathing a sigh of relief and sending lamb shares up about 4%. Over at Mattel, results were mixed, but Goldman seeing a decent amount of upside, those shares are up more than 3%. And Whirlpool. Look at this one. Topping expectations, raising guidance. Despite the weaker economic outlook, the shares are up 13%. A little bit of a comeback lately. They're still down, Dom, 8% for the year. It's a derivative housing play, by the way, as well. Good point. All right, some interesting Wall Street calls as well. Bernstein reiterating meta platforms as an outperforming that meta has replaced Google as the set it and forget it blue chip within technology. So meta shares are higher half a

percent. Wolfersarch out with a new note highlighting the names that would get hit under a potential Donald Trump proposed tariff program. Those include American Eagle, Caterpillar, Estee Lauder, Deere, Stanley Black and Decker, amongst others. So those names in focus as well. And that is your power check. Indeed. All right, well, CNBC Sport today is releasing a new videocast, a podcast that you can actually see, right? What a concept. NBA Commissioner Adam Silver. We are in a visual medium here after all, right?

It's like a TV show, practically. It is. Alex Sherman is the guy behind that CNBC Sport video cast now, and he asked the commissioner about what's always a hot topic for fans these days, and that's the officiating. So could refs be actually replaced or at least be aided by things? like robots and artificial intelligence, and take a listen to this. We're hoping through Hawkeye type technology that we can automate those calls, so it would just be Lakerball,

you'd quickly play on. Sure, there'll be some animation that will quickly show, so it's not a black box, what the AI is demonstrating? Because remember in Hawkeye, it's, sometimes people watch it, think it's just a video replay. It's not video, it's an AI recreation of the ball hitting.

And I think if we could take that category of calls, automate them. So the guy who did that interview is Alex Sherman, who's sitting right over there. He joins us along still with Stiefel's CEO, Ron Khrushchevsky, who's sticking around for the entire hour, both sports fans, these guys. But, Alex, let's start with you about the content of this particular video cast. And what exactly you were trying to get out of NBA Commissioner Adam Silver, with regard to the future of the game. Yeah, so we spoke for about, excuse me, my voice is a little sore from talking to Adam for so long.

We talked a lot about the future of the game. That part of it was sort of like, you know, is parity better than dynasties? How do we fix the salary cap so that we can have an intended result, or is that something that a commissioner can even do? We talked about the big media rights deal that the NBA had. he sort of lamented not being able to come to a deal with Warner Brothers Discovery, which has had an almost 40-year partnership, Turner Sports, that is, more recently owned by Warner Media Discovery,

almost 40-year partnership with the NBA. That's ending, assuming that they're pending litigation, they're actually suing the NBA right now to potentially still try to get in there and have a media package deal. But we'll see how that bears out. That I thought was very interesting. He taught, Adam Silver talked to me about, how national politics in the NBA mix

and trying to keep politics out of the game, especially as we have an election coming up. We talked about the future of sports betting and why he's so pro sports betting, even in this sort of climate where we've already seen a scandal in the NBA. A lifetime ban. A lifetime ban, exactly. I'd love to see the clock rolled back on that one,

but I'm guessing I'm the only one here who feels that way. Well, Adam Silver certainly doesn't. I mean, he's very pro sports betting. And his point was that if you make this legal, then it's all out in the open. So actually, from a scandal purpose, he wants it legalized because you can see the betting. It's easier to figure out the scandals if it's above board

than if it is below board, at least in his opinion. Well, we were having some controversial discussions earlier about the, how exactly is the AI going to work on calls? Is it every player, is it just when there's some controversy? Yeah, so, you know, look, I think Adam Silver wants AI to speed up the game. So to avoid going to replay and taking a look, you would have automated calls similar to how tennis uses it. He mentioned that Hawkeye in the bite so that the crowd would see an animation

and you'd figure out if a player stepped on a line or who did the ball go off of? He used the example of, you know, sometimes it's like there's two hands on the ball, so maybe you could come up with an animation that showed that. And you could see the crowd participating in liking it. And maybe the best part is, from a player perspective, there's nobody to argue to, right? You can't argue with the robot. So even that will speed up the game a little bit. So that's the type of call, I think, that you'll see it.

And it won't replace officials altogether. So, Ron, you're a fan, just like I am, of sports in general, basketball, everything else out there. Do you feel as though the robotic side of things does have a future in this game? Well, of course. And what I hope, though, as a fan, all right, and maybe to take the other side. Who's going to argue with the NBA, by the way, one of the most successful league, period, end of the story. So whether it's balls out of bounds, whether you step on the bound, like tennis, is it out or in the Hawkeye, that makes sense. Those are the calls that are pretty, balls and strikes, whether you're out at first.

But calling a foul, I feel that like AI in my business, okay, humans with AI will do better. Reps with AI might do better, but don't tell me that AI is going to decide that that's a foul and that's not, as I just touch you. And what is the intent? And frankly, speed up the game. Can you imagine the last two minutes of a game if every call is disputed? Actually, football. Automated. I think football slowed down.

I'm so sick and tired of seeing these replays. As a fan, I'd like to see less of it. Yeah, maybe they could make it quick. I remember him saying they had a hard time with projecting the human hand or something, and then that was part of what was going to make it difficult to use this technology appropriately. Yeah, I mean, it will be used, I think, in bits and spurts. They'll try to figure out where it's most useful, and then maybe it expands over time. Yeah. All right. Alex Sherman, thank you very much. And by the way, this is a great interview.

You've got to watch the full video cast. It's with Adam Silver, NBA commissioner. Just go over to cnbc.com slash sport. Part of our entire new CNBC Sport Vertical. Great reporting there by Alex Sherman. Thank you very much, guys. Let's go to Pippa Stevens now for a CNBC news update. Pippa? Hey, Kelly, the three Georgia men convicted of murder for chasing and killing a black man while he was on a jog asked a judge today for a new trial. They're making a number of arguments over the next two days, ranging from a tainted jury to claims one juror hid his bias in favor of Ahmed Arbery's family. All three are serving life sentences. The CDC has lowered its recommended age for the pneumonia vaccine. The shots were previously only pushed for adults 65 and older and for children, five and younger.

Now, the CDC says those 50 and older should get the vaccine each year. And more fast food restaurants are removing onions from their meals following the meals following the men. McDonald's E. coli outbreak that has killed one person and gotten at least 50 other sick. It's been linked to the chain's quarter pounder burgers. As a result, young brands, the parent company of Taco Bell, Pizza Hut, and KFC says it will temporarily remove fresh onions out of an abundance of caution. Kelly, Dom, back to you. Pip will pardon us. We had a special guest who just swung by the studio here, and he's actually going to show us this fine countdown. We're less than two weeks away from Election Day. A lot is at

stake. And Tyler, just there, there he is in the dark. Tyler Mathis is. Eleven days, nine hours, 19 minutes. Welcome back. The election is less than two weeks away. And both candidates have outlined tax strategies that are complex and at times seem worlds apart. For instance, former President Trump says he would keep the top ordinary tax rate or income tax rate at the third. 37%. Vice President Kamala Harris would raise it to almost 40. Trump would likely extend or make permanent his 2017 tax cuts, which are due to expire, while Harris would let that happen for high-income earners. So what does that mean and what are some strategies investors should consider? We turn for that to discuss Sam Petruski as head of trust company at Newberger-Berman private

wealth. And so with us is Ron Khrushchevsky. He is the Cefel CEO. It is great to have you both here. And Sam, I'm not sure whether we should be debating what they hope to do or talking about whether they will actually be forced either way to let these expire because of the deficit situation that we find ourselves in. Look, one thing is really clear. This election could go either way. And there's a lot at stake. There's a lot of money to make or lose.

And whenever you look at President Trump, he would like to double down on the tax cuts that he passed back in 2017. Whereas former current vice president, Kamala Harris, would like to increase taxes both on the wealthy and on, corporations. What we're telling clients is that they have to plan for three possible outcomes. Number one is a full Republican sweep, in which case taxes will likely remain low. Number two is divided government. And unless you have bipartisan agreement, taxes will go up at the end of 2025, beginning in 2006. And then a Democratic sweep, in which case taxes will likely increase, at least for the wealthy and for corporations. And you could actually see a whole host of new taxes, such as a billionaire's tax. Sure. Ron, how are you thinking about this?

And again, I wonder how much the deficit constrains policymaking that would otherwise happen. If they're forced, I don't know whether that's through markets or not. Maybe, as Rich Bernstein said last hour, GDP is strong enough. You don't have to worry about these things. You can keep the tax cuts in place even in a GOP sweep. But it sounds like it's possible. Paul Tudor Jones talked about this Gary Cohn earlier this week that we would have to revert to the 2017 state of affairs. Well, that's very possible absent a Republican sweep, although I think there would be a compromise.

I don't think that the Democrats want to raise taxes on everyone. So the real question about both parties that I find interesting is that at the fringes and on the populace are very similar, okay, in terms of some of the ways. They're just redistributing the money differently. But no one's talking about the deficit. That's what bothers me. No one even talks about it. It's either we'll cut taxes, but to put it somewhere. It's not to do this, or we're going to raise taxes, but then we're going to spend it.

We're going to give you $25,000. or we're going to give you this, we're going to cut debt. Both candidates have inflationary policies, and that's what I think we need to focus on a little bit. Markets might be the forcing mechanism here. So that's why it's coming into more focus this week with the long-end rising. The question is at least being asked. Sam, I don't know if you have an opinion on whether it is a revolt against debt and deficits, or it's just better growth, a little bit stickier inflation,

and ultimately, if there is enough growth, that will kind of broaden the base enough that you can still do tax cuts without it being problematic. I think it's a little bit difficult to score whenever you consider that it seems every day these policies continue to be proposed. We don't have the fine print in the form of an actual bill. According to one estimate by the Tax Foundation, Trump's tax cuts could cost roughly $3 trillion over the next decade, whereas Harris's plans to increase taxes on wealthy in the corporations could result in $1.5 trillion added in terms of revenue to the government over a decade. The million or really the trillion dollar question as it relates to Trump is our tariffs and how much tariff revenue can offset the potential

cost of those associated tax cuts. Ron, what would you add in these kind of waning days until the election? Well, one thing that I think there is a trade out there that people have to be aware of. And I think one of the things that could happen, even in a compromise, would be the estate tax exemption. And I know that that's the business that you're in. It is. And I like to tell people that our estate planning that if they allow the estate tax exemption to expire to be cut in half, which it could be done under either scenario here, that's some of the, that's the best trade in the market to take advantage of being...

Because it's quite high right now, is it not? It's 13.7 million dollars. It's 13.6 million dollars currently. Index for inflation will increase to 13.99 million beginning of next year. And then at the end of 2025, it will revert to prior levels, roughly $7 million. So one of the things that we're talking to all of our clients about right now is to use that exemption or potentially lose it. And so we have plenty of clients that are making gifts to trust which benefit their children, also their spouses. This is commonly known as a SLAT that's short for a spousal lifetime access trust, whereby you can make a completed gift for gift tax purposes, but indirectly access it if you need it down the line, if he's a trustee can make a distribution to the beneficiary spouse.

It is the easiest, simplest trade in the market. That's what I would say. Thank you. It is. It is. An area we don't usually talk about either. No, it isn't. Thank you. Sam.

We appreciate it. Sam Petruski. All right. Well, coming up on the show, special delivery, UPS is posting its first revenue and profit gain in nearly two years. So is it time to buy some shares? We'll trade it in three-stock lunch coming up right after this. Welcome back.

Time now for three-stock lunch. We're trading some big earnings movers of the day. Here with our trades is Eva Ados. She's the C-O and chief investment strategist at ER shares. First up, Ava, IBM, lower after falling short of third quarter estimates. What's the trade there? It's a hold. 12 years ago, the company had $100 billion in revenue and $23 billion in EBIT.

Now, the revenue has dropped, and the earnings before taxes have dropped by two-thirds. The company has said the best year has had in a very long time, almost doubled in price, but now the relative valuation is slightly above Pierce. And since it's EBIDA growth is 100% compared to negative 1%. We have some weak strengths, and that's why it's a hold. All right. Next up is UPS, higher after topping Q3 estimates this morning, posting a year-over-year revenue and profit gain for the first time in nearly two years. Eva, what's the trade there? This one is a sell. We would recommend for investors to take advantage of the great day they had today the great appreciation and take profits off the table. The big advantage this company has

had throughout the years is it's 5% dividend yield, but we need to realize that it has almost 100% dividend payout. That means that almost every penny from its net income is going towards the dividend yield, which puts it under risk because now both the sector and the category and the company itself have negative net income growth, which means that net income is coming down, and now the dividend yield is at risk. And then in general, the company has had negative revenue growth and negative EBITDA growth. So it's a sell. All right.

The final name is Newmont Mining lower by a large amount after missing estimates for the third quarter. That's despite reporting its biggest quarterly profit in nearly five years as gold prices hover near all-time highs. It's cost pressures and concerns here, right, Ava? Yes, it's another cell. In fact, if someone wants to have exposure in gold mining companies, we would recommend closing your eyes and almost every other choice in the category probably is better than this. It has been consistently among the weakest companies in its category for one, three, five, ten years.

In the last four years, its gross margin has dropped by 20%, almost 20% from 53% to 35% and in 12 years, its EBITDA margin has dropped significantly and is priced about double its category, its peers, on an enterprise value to EBDA basis. Wow. All right. A hold in two cells. Eva Ados, not really optimistic right now on those three names. Thank you very much.

We'll see you soon. Power Lunch will be back right after this. Welcome back. Let's get some final thoughts from our guest host this hour. Steephal CEO Ron Kershefsky with a consequential election happening in what do we say, 12 days time? 12 days. Yeah.

Is it that big of a deal or are you in the camp that it doesn't matter? Well, first of all, as I've said, divided government, the markets like. So either way, the markets will do fine. I think that there's a lot of uncertainty in this market, not just about the election, but post-election and how much litigation, which either side wins. I think there could be a lot of controversy. That is holding back the capital raising.

I will say that companies that are thinking about going public are going to delay. Is that? Do you think that's a factor? I do. Because it's been so quiet. Why is it so quiet on the IPO front when we've had record highs week after week after week? It hasn't been that quiet, but it isn't as robust as I think it can be. And I think that we'll transition into a good year in 2025.

But let me leave you with a thought. One thing for your pollsters. And I'd love to come back to talk about this. I'm a math guy. The national polls showing Trump up by two and the battlegrounds saying that they're tied, doesn't make sense to me mathematically. He should be doing better in the battleground states. Or the national polls are wrong.

You can't make this up. How about this? One quick question before we let you go. All right. Will the Republic stand regardless of who's in office? The Republic is, God bless the United States of America, no matter who's in office, this is the best country, the best markets, period, end of story. Thank you. I heard it here. The best golf courses. Ron, thanks for joining us today. The best host on television. The best investment bank.

Thanks for watching. Thanks for watching Power Lunch, guys.