Power Lunch - Earnings Bonanza, Trumping The SEC? 7/29/24

Episode Date: July 29, 2024

It’s a busy week for your money, and the busiest week of earnings season. Microsoft, Apple and Amazon are all set to report results. And Fed will release it’s latest decision on interest rates on Wednesday. We’ll tell you all you need to know. Plus, former President Trump promised to “fire” SEC chair Gary Gensler, and also promised to build a “strategic bitcoin stockpile” at last week’s Bitcoin 2024 conference. We’ll discuss all of that with former SEC chair Jay Clayton.  Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome everybody to Power Lunch. Alongside Kelly Evans, I'm Tyler Manson. Great to be back with you, Kel. Welcome back. It's great to have you back. It's good to be home. Didn't miss much. Yeah, thanks. No, nothing went on. It's a busy week. And it's going to continue here. Busy week for your money. We got earnings from Microsoft, Apple and Amazon. Big Fed meeting on Wednesday. And here to help us kick it all off. Surat Sethi, managing director at DCLA and ACNBC contributor, Surab. Welcome. Thank you. Before we dive in, let's get a quick check on the markets. Here's your state of play. Dowsdowns down. 7 this hour call it unchanged. S&P hanging on to a two-tenths gain now, NASDAQ a little better than that. The small cap brussels are lower as well, by the way. And shares of McDonald's are rising, keeping the Dow from being even more negative today. They're up 4% despite their first drop in worldwide sales since 2020. But again, down 11% year-to-date, pricing some of that in. They say lower-income consumers are visiting less often. In fact, let's bring in Kate Rogers for more

of these details. Kate, what do we learn? Hey, Kelly. So it was obviously a tough quarter for the fast food giant. estimates across the board, it's its second straight EPS miss. And as for same store sales, those also missed the mark in every segment. In the U.S., its key market, sales were down 0.7%. As CEO, Chris Kempinski said, its value leadership gap in the category had shrunk, adding that the consumer slowdown was most pronounced with low-income consumers. Take a listen to what he had to say on the call. That the consumer is eating at home more often. You're seeing more deal-seeking from the consumer, and you're just seeing, I think, a trade-down even within.

either units per transaction or within mix. All of those things for us are indicators that the consumer across a number of these markets is being very discriminating. Now, the theme on the call was all about value, no surprise there, finding the right offerings to resonate with consumers globally because this contraction isn't limited to the U.S.

It's important to note that $5 U.S. value deal began on June 25th. It's not really reflected in this quarter, which ended June 30th. And while 93% of restaurants will extend the offer into August, as we reported, management does seem keen, rather, on continuing it further. Executives said today franchisees do have the ability to invest in extending this and that they're working through the profitability with owners now. So a little bit of a public push there from management to continue to offer this, adding that it has boosted traffic. And as you said, McDonald's stock hired by over 4% today, lower, though, around 11% year-to-date, guys.

Back over to you. I think it's just a really important thing, Kate, to say McDonald's was negative. I mean, was it globally or just in the U.S.? No, globally. So, I mean, it missed the mark in every operating segment here in terms of analysts' expectations in terms of what it actually reported. But the key mark at the U.S. 0.7% dropped there. So key number and very important, but they're trying to fix this with a lot of value offerings, Kelly. Value, value, value.

Value, value. Okay, got it. Kate, thank you very much. We appreciate it, Kate Rogers. And while there have been some bright spots in earnings so far this quarter, reports are showing consumers are feeling the pressure of higher rates and inflation, especially lower-end consumers. Turn now to Sarat Setti, who joins us for your impact. Are we belaboring it? Does it make sense? I'm all confused about what the narrative is about the consumer right now. So I don't think this is a one-off. If you look just in the last couple of weeks between Chipotle, Starbucks, Pepsi, Nestle, all of them are not showing top. organic growth like they did for the last couple of quarters. And they're not showing it despite the fact that prices are higher. So that's the reason, right?

So what did you have? Yeah, that's right. The prices are higher, so they're not growing the sales. So before, for the last couple of years, you could raise prices. Everybody was raising prices and the consumer were spending. Now they're saying, hey, I'm not going to do it. So what's going to happen next is we're going to go to that price to value equation, which is what we did pre-COVID. So what a company's going to do?

They're going to start cost cutting now. So you're going to see input prices. where can they actually get the most. They're going to start cutting in terms of supply chain and people. So that's where we're going to get this. And interestingly enough, this is kind of where the Fed is looking at. You're going to cut costs. They're not going to cut prices.

No. You're not going to, you'll see shrinkflation. So basically you're seeing that already. So the same. See it in the cafeteria here. The fruit cup I used to get that was this big is now this big. It's gotten smaller. And the companies that can get that, again, best price to value are the ones that

going to do well. But you're seeing that across. So I do think it's the coax of the world. I think Pepsi can do it as well. I think Nestle will do a really good job of that too, because these are brands that people want. And I think that's what you really have to focus. The companies are going to spend in R&D, spend in marketing are going to do it. And you have to be very careful to because they also have the global reach, right? They can buy globally and cut costs. So that's a big advantage that some of these other brands are going to have. So I think you've got to watch that. And look, you can see on the multiples of some of these stocks, right? McDonald's trades it over 20 times earning. So does Starbucks. So it is Nike. So you're going to get

some valuation resets, especially if the growth rate is not going to be there anymore. And I think that's kind of where the market is looking. That's why I'm a little curious about PNG. I don't know if you have a take on that in particular. They're going to report in the next 24 hours, but the stock's actually been doing nicely. And you'd think, well, wait a minute, shouldn't they be a prime candidate for some place where we could see, you know, disinflation pressures, margin pressures, consumers pushing back. I do, and I think PNG also has China exposure, which I think, if you look at the luxury items or companies and PNG, that's where they're also seeing some slowing

of growth, because the consumer, whether it's high end or low end, is not buying there. So I think PNG will be interesting to see. I think you're going to probably have them talk about cost cutting right away, right? Say, hey, we can do all this stuff. We had a lot of costs come through the system, but now we're going to do that. And interestingly enough, this is what, like, the MAG7 did, a couple of the last year. That's their year of efficiency. So now it's the consumer product company. So now it's the consumer product company's year efficiency. And the MAG7 are now spending money in CAPX. So you

kind of have a full reversal. But the market's not rewarding some of these companies as defensive because they're saying, hey, we have to see you actually grow. No. And to Tyler's point, at least the MAG7 had pricing power. Whereas here they're trying so desperately to hang on to the price that they've taken instead of cutting that price and it's all going to be about operating leverage. So that's where the CFO is going to come in. Absolutely. All right, let's shift gears now to earnings. We've got a big week ahead with four of the magnificent seven companies, Microsoft, Meta and Amazon, and Apple, all reporting results this week.

Combined, they account for nearly a fifth of the value of the entire S&P 500. Investors on Edge after last week's disappointing results from Tesla and Alphabet, those sent the tech sector spiraling into correction territory. I was oblivious to all of it, folks, so don't buy. I didn't care. So much for more on what to expect. Let's bring in Dan Newman, CEO of the Futurum Group and Sarat Seth. He's also still with us. And what do you make of the two sort of faulty or unfavorable reports last week? What do they tell you?

And what do they tell you about what's coming up this week in those four stocks that we just referenced? Yeah, I think the two are very different. Tesla is a very different animal right now. You have a company that people are basically betting on whether it's, a real AI company, humanoid robots, the future of autonomy, or are they just a car company? And they're gotten way ahead of themselves. And I think that's the sort of the forces that are sort of opposing. And you see it run, then you see it pull back. You know, Al. What do you think it is? What do you think Tesla?

I think it's the AI company on a much longer horizon than most investors want to believe. I think he's going to get there. They're solving big problems with electrification, with power with these humanoid robots. But everything he said throughout his entire tenure has been off by a matter of years in many cases. So are we going to get there? Yes. What's your horizon? If it's longer, you're probably in good shape. Alphabet, on the other hand, I didn't think it was so bad. I understand why the CAPX pressure is creating a lot of nerves for investors. If you're trading it, you're probably super uncomfortable. But if you're investing, I would actually be looking at these companies. And if they're not putting these big dollars, these really strong balance sheets

into AI right now, I would call it their potential Blackberry moment. It is there. Well, that's what I was going I'm going to ask you, is this a moment for a company like Google that has not existential elements to it, but really game-changing challenges placed right in front of it? Yeah, I mean, look, they've owned the board. Well, their search business has a real challenge. You know search GPT and these other players are coming into the space. Now, having said that, no one's actually made a dent on that business just yet. The cloud business was long in chaos, and now it's become quite profitable, and they're on a really good trajectory. They're building silicon infrastructure, which is going to give them vertical integration. And, of course, they have to make these investments.

I just don't see a way for any of these Mag 7s to not be making these big KAPX bets. And in fact, like I said, I would actually be looking at it and saying, if you're not making these big bets, you know, are you in the Steve Balmer moment where you're saying, no one's going to send emails from a touchscreen. And, you know, we just tend to get those moments wrong. And I think on Google was, you know, you also have the YouTube piece. That's actually doing well and accelerating. And that was kind of a little negative because it wasn't as much as what people thought. But this is a cash flow machine. It's trading it 20 times next year's earnings and growing double digits.

And what are they doing at the same time? Reinvesting in the business. So that's kind of what you want. It's kind of what Facebook did a couple years ago when they said, hey, we're going to invest in the business. Stock sold off, really much bigger than what Google did. But I think to your point, if they're not reinvesting in the business, then this becomes a depleting asset. It's kind of like just an oil well that's just, you know, giving off cash without drilling. And I think Google is always the one that kind of people look at and say, hey, the search, search, search.

But remember, Bing came out and how many people are using Bing. So, yes, there is a threat, just like for Tesla. There is a threat. But in the near term, as these companies produce gargantuan amounts of cash flow, they have the ability to reinvest and buyback shares if they have to. Well, I was going to ask then what that tells you, Daniel, for the earnings we're going to have this week. I mean, any way you want to try to get ahead of what we might hear from these companies? Look, I'm a techno-optimist. but I think Microsoft is going to show up on this particular earnings.

We saw very strong cloud numbers from Google. I think Microsoft's going to follow suit. I think we all want to hear about the adoption of AI, though. We all want to hear, are the customers using it? As anecdotally, and I'm curious if you've, I'm sure you've seen this, some of these CIO surveys suggest they're not getting a, you know it. I read some of these. They're not getting a lot of bang for their buck out of co-pilot.

Now, maybe we're just quibbling over the details of a rollout, but it feels like a significant data point to maybe just say, Is this as productive as hoped? Look, the sequoias and the Goldman's, they're basically saying, you know, they're indicating we're never going to get value. They're making it seem like

we're really hitting the wall with AI. I think it's the time to value. You know, we're looking at these digestion periods. We're saying how fast do companies get value? You know, last week I talked to Bill McDermott after service now. And, you know, you look at what they're doing. Big quarter.

And you look at what they're doing with Now Assist. And they're building these systems that could connect your own data with the open available data. And then they're putting it to industries and then they're making it a subscription. That's what Microsoft needs to do. That's what Google needs to do.

Do you think the ServiceNow is ahead of Microsoft in that sense? I think it's a little bit different. I think Microsoft has definitely democratized it in the productivity suite. In the enterprise, it's so much more complex, Kelly, because you have to take these two data sets, and you've got all these issues with data rights, privacy, security. We all know what goes wrong when security gets missed. We learn that with our Y2K moment these last couple of weeks.

So I think Service Now is breaking new ground, But I think these companies have to start proving that this $600 billion problem is going to be solved. They need to talk about the timeline and they need to show numbers now. How important is this quarter for Apple or is this a quarter that we can casually kiss off as the quarter before the quarters that start to matter? I think your apps. I would say, yes, it's not as important this quarter. It's going to be how is the AI that they're talking about going to be used. to your point where you're just saying in Microsoft,

what are the consumers really going to use the AI for? Yeah. You know, is it just so we get more stickers and things like that, or is it really enhancing? So I'm going to take that upgrade, which all the people that don't have an iPhone 15 have or below, and move. And that's where people are going to say,

and Apple doesn't have to say anything, because they're just going to say, well, the upgrade will come. So is this going to be that huge upgrade? And then what is the services business going to do? Because that is the huge operating margin that they have. Yeah, we need to, see indications from Apple that this Apple intelligence moment is going to create the super cycle

that we keep hearing about on the shows right here. I think there's indications that it's going to be strong. But look, we've got these co-pilot PCs. We've got these next generation Apple devices. People need to get value. It's the story of AI across the board is value from all this KAPX investment. Well, I hear you hinting that the PCs are going to offer that value, but also the numbers on China are not promising. I mean, they fall into what was at the number four handset of the market from, is it six? Six in China. So, and that feels like, a development that happened quite quickly. Do you think it's priced into the stock? I think people are quite optimistic based on the action on the price on the stock. I think that

people are still kind of, you know, writing off what's going on in China. We're seeing it with NVIDIA. We've seen it a bit with Apple. But having said that, I do think if they get Apple intelligence right, it is going to be a paradigm shift for the company. And it's been really late with AI. Let's face it. But this is the moment that everyone is waiting for. One last thing, both Tesla and Apple get the benefit of the doubt. Yes. If you think about it, the others don't as much. If Amazon spends too much, stock gets killed. Google, same thing. But Apple and Tesla, it's the future that they get the better for that. Well, implicit in that is a warning, too, that if that flips on the stock, you know, we could see different. Bit of a love brand.

Yeah. All right. Daniel Newman, thanks. We appreciate it. Thanks for coming in today. After the break at Bitcoin 2024, Donald Trump promised to fire the SEC chair and build a strategic Bitcoin stockpile. We will have those details next. Stay with us on Power Lunch. Former President Trump, this weekend giving the keynote speech at the Bitcoin conference in Nashville. He made a series of promises, including to make the U.S. the Bitcoin superpower of the globe. Yet Bitcoin is actually lower today. Joining us now with more is McKenzie Sagalas. Mac, as you like to call yourself. Welcome.

Hey, Tyler. What's going on? It's because of all the things that Trump didn't say on Saturday. So, yes, he made promises, but these are things that he's been repeating on the campaign trail. And moreover than that, the U.S. already has this stake of Bitcoin, around $14.5 billion that it's gotten in these seizures. And usually the U.S. Marshal Service will sell it off. And he's saying, no, let's keep it in a stockpile. But the thing about keeping it in a strategic stockpile is that it's very easily

tapped by an executive order. Now, he says that he's going to hold onto it. We'll see about that. But what people in the crowd wanted to hear is, hey, we're creating a Bitcoin reserve. I'm going to establish a pathway with the help of Congress to buy Bitcoin. And of course, we saw Senator Lumas come on stage after Trump and say that she was going to be. to put forth that legislation within the next few days, one million Bitcoin over the next five years, even if Republicans sweep the White House, the House and the Senate, getting politicians on board with the idea of U.S. taxpayer dollars going toward buying Bitcoin, I think might be a hard sell with some voters.

Depends on how much money they're throwing at these politicians. Surada, I'm curious what you make of this, just this, the way that crypto has so quickly gone so mainstream. Well, I think it's interesting because you look at crypto, most other things come from the institutions investing. This is coming from the retail side. Still is it, or is it now institutions? Well, they are starting to, but the retail side is still so much stronger.

Yeah. Right. And even though the SEC now has given their blessing to certain parts of the crypto world, I think this is also becoming a political odd button to say, hey, are you with us, are you against us? So I think this was kind of a – and it's a reversal for former President Trump, right? Before he made fun of Bitcoin. But now I think it's how do we get crypto into our lives, especially what?

of the usage of it, right? I think that's the important part. So you use taxpayer money to buy and build a stockpile. That would be what? A hedge against a collapsing dollar for what? Exactly. That's the way that Senator Lummus is really trying to sell this in her announcement. In fact, just to have a hard currency to back up the U.S. dollar. So that's really what she's interested in with respect to this. And in terms of the investors, what they get out of it? Well, it isn't really a hard currency, isn't it? It's bits and bites on somebody's computer. It's how you look at it. But I'll tell you why Bitcoin isn't doing better. And that's because what this would have meant is that you're taking Bitcoin out of the market, right? And then if the U.S. government establishes a reserve, I bet you're

going to see other governments follow suit. So then you see basic supply and demand economics. You're going to see the price go up. And that's what people wanted to hear Saturday. And they didn't. In the near term, the price would go up. But then you have this come up, once it's already priced in, then they're looking for the next catalyst. And at that point, you could use the reserve for boosting the price of it or lowering the price of it as need be. So, you know, I understand the excitement over it in the very, very short run, but it would kind of be a one-off event. And I think that there are so many details that are still so unclear. I spoke to people that were at a closed-door roundtable with former President Trump ahead of this speech that he gave.

And there weren't any more details offered then about either the stockpile or, I mean, Senator Lomas was in the room. We didn't get more details than what she presented. That bill will be coming forward. We'll see how the mechanics might operate when that legislation is out. Let's switch gears, talk about another newsmaking remark the president made where he said he would, fire the SEC Chairman Gary Gensler on day one. He would have a very busy day one. He's got a lot of things that he's planning for day one. The audience loved it. Can he really do that? Can he really fire the SEC Commissioner? Certainly not. I mean, that is the entire point of having set this up as an

independent agency to avoid this precise situation. And the thing is, I mean, Chair Gensler has what, a year plus left on his term. And even after the incoming president appoints a new chairman, Gensler will have the opportunity to remain with the regulator as a commissioner. So he's not going anywhere. But as you said, the crowd erupted when Donald Trump said that, more so than any other comment that he made and he repeated it. And that's because Chair Gensler has become the embodiment of the anti-crypto movement here in the United States and frankly the world because the US is the crypto cop on the planet

today. And what they think is that the SEC has essentially been regulating this space through enforcement actions, most notably with Coinbase, a company that they, you know, gave the green light to list and they were sued last year. You know, it's interesting to me. Coinbase chief legal officer has been shown up at least two Trump fundraising events most recently in Nashville this past weekend. Before that, at David Sachs home in San Francisco, where they raised $12 million for Trump. Interesting. Tells you a lot. Thank you very much. So speaking of which, for more on all of this, let's bring in none other than Jay Clayton.

He's the former SEC chairman, and we're so pleased chairman to have you with us. Surrott SETI is here for this discussion as well. Right off the bat, as Tyler was just asking, the way in which the SEC chair himself has become such a political football means what exactly? Do you think he would ever feel pressure to resign if the administration changed or anything like that? Well, Kelly, nice to be with you. And there was a technical discussion of the chair of the SEC and the body of the SEC with the commissioners. And it was exactly right. And that is that while commissioners are appointed for a term, the chair is generally designated, is designated by the president. And the chair typically switches when there's a switch in administration.

And in some cases, in fact, in the case of my tenure and in the case of my predecessor, knowing that there was a switch in administration and knowing that the chair would change, the existing chair, the current chair, takes their leave and moves on. So, look, this is entirely up to Chair Gensler as to what he would want to do in that event. But there's precedent for leaving the position altogether or simply leaving the position as chair. And just to clarify on that, can the president take away the chairmanship and just have some... I see. So maybe he remains commissioner, but not the chair.

Correct, Kelly. Interesting. All right. So with that covered, what would you say, Chairman, retrospectively, about the way in which the SEC has handled? the emergence of crypto as an asset class? Well, look, please call me, Jay, and Sarat had this exactly right. One of the fascinating things about crypto is that it came not through the institutional markets, where most of the financial product development takes place.

Most of the financial product development in the globe takes place in the U.S. in our institutional markets. Crypto, digital assets, really came globally. and at the retail level. So the development was something very new for, I would say, regulators across the globe in the way that it came about. And there have been a lot of old lessons relearned and new lessons learned. You know, one of the old lessons relearn and learned in a tough way was that when you

raise money from the general public in America, that's an incredibly rigorously regulated transaction. We protect the public from securities offerings in an incredibly rigorous way. And this was the ICO craze and the like. I think those regulations have been shown. On the other side, what I think regulators have had to learn is that this technology could be, and it's in many ways, has become a step change for existing processes and some new processes. And some new processes. including what I would say is the rise of stablecoin, which is one of the more remarkable developments in finance in the last decade. Sarat, jump in.

Jay, can you talk more about stablecoin and kind of where you see the future of stable coin? Because it's really, as you say, kind of garnered a lot of enthusiasm amongst retail investors. And where do you see that going in terms of maybe institutional transactions? And how does that all work in this regulated world that we live in? Well, Stablecoin has proven to be an astonishing facilitator of dollar-based global transactions, in that you can now do dollar-based transactions around the globe in very little time with very little friction. As compared with wire transfers, money transfers, taking hours or days and requiring, you know,

what I would say is lots of fees and the like. Stable coin transactions take place virtually instantaneously and with very low friction. And what we're seeing is a tremendous amount of retail dollar transaction take up outside the United States. I think this is an incredibly bullish thing for the dollar around the globe and one that our regulators really need to focus on because the benefits of dollar hegemony, the benefits of the dollar being the basis, for transactions around the globe is so important to the United States. It's so important to the globe from the stability point of view. If there's a better technology to accomplish that, we should be figuring out how to facilitate it.

Let's talk a little bit about the overall regulatory climate that you see from where you sit as a former chair of the SEC. Has this administration gone way too far? The pendulum swung too far in the direction, whether from the SEC's standpoint or from the federal trade, Commission standpoint in attempting to regulate transactions, to regulate public markets, to regulate, or clog up the system of dealmaking. What are your opinions? But, Todd, I think there is no doubt that this administration has taken a heavy regulatory hand in a number of commercial areas, whether it's the FTC, the SEC or the like, imposing and using what I would call basic financial regulations, basic trade regulations,

barger regulations, to what I would say is shift power in many ways from asset owners to other constituencies. If you look at the reason cited, and look, you can have philosophical debates around this, but if you look at the reasons cited for the exercise of regulatory power, in many ways it's to shift power away from asset owners and away from consumers to other constituencies. And that is a regulatory philosophy that you can see throughout the Biden administration. You know, frankly, one that I don't agree with. But that is the common theme.

And I think regulated entities are really feeling the pinch on that. Because it adds a degree of uncertainty. It makes it difficult to put. plan. You know, just a quick final one, Chair, on what J.D. Vance's thoughts might be on, and post-Chevra, I mean, do you think the nature of the kind of regulation we've enjoyed from many of these agencies over the past 10 years will be, are we likely to see it diminish or be enhanced, or does it depend on the outcome in November? I think it depends on the outcome in November, but my hope, Kelly, I hope is that when you

look at regulation, you know, whatever your regulatory body is, what's the North Star? If it's the SEC, it's investors. And are we doing the best for your long-term investors? If it's the Federal Trade Commission, it's consumers. Are we doing the best for consumers over the long term? And unless you can answer those North Star questions very clearly, I don't think you're doing your job. Yeah, well, interestingly enough, regulation is still, in this country, feels like it's moving away from that question to maybe more of a competitive one anyway, a la Europe. But we'll save that for another.

time. We don't want to, all I could say is we don't want to be Europe. Yeah. Uh-huh. No, Chair Clayton, thank you so much for making the time today. It's really good to see you. We really appreciate it. Thanks a lot. Thanks. All right, further ahead, everybody, for any investor looking to build an energy transition portfolio, you're going to need a lot more than just solar stocks. We'll lay it out. Next. Welcome back to Power Lunch. I'm Bertha Coombs with your CNBC News update. The U.S. is cautioning Israel about escalating the conflict with Hezbollah following a weekend attack that killed 12 children and teens on Saturday. The strike hit a soccer field and is the deadliest on an Israeli target since the Iran-backed militant group and Israel began exchanging fire. It is

raising concerns of a broader regional conflict with Prime Minister Benjamin Netanyahu promising a response today. Hezbollah has denied involvement. Police in Rochester, New York, say a second victim has died in a shooting at a barbecue on Sunday. According to authorities, two women were killed and five others were injured when someone opened fire as hundreds of people gathered at a park. There are no suspects in custody. Police say they are looking for more than one person. And Venezuela's Electoral Council officially declared authoritarian Nicholas Maduro as the winner of that country's contested, presidential election this afternoon. The Biden administration accused Venezuela of electoral manipulation

and repression and left the door open for future economic sanctions. Kelly, back over you. Okay, Bertha, thank you, Bertha Coombs. After the break, AT&T being sued by a customer claiming personal photos were stolen off her phone when she was upgrading her device, and it isn't the first time it's happened. We have those details next. Welcome back. Wireless providers and including AT&T, T-Mobile, and Verizon are facing a string of lawsuits lately from women who allege retail employees stole intimate images or videos from their phones while helping them with in-store data transfers. CNBC.com's Gabrielle Phone Rouge is here with the details. Yikes. It's not good, Kelly. So the latest lawsuit against AT&T was filed today in California State Court. And all of these lawsuits, they all sound exactly the same.

I have read so many of them. A woman walks into an AT&T phone store, a Verizon phone store, two mobile store, looking to get their device upgraded or replaced. And in the process, the company offers turnkey data transfer services. And, of course, the consumer willingly hands over their phone, thinking that it's safe in the custody of this retail employee. And in the process, the employee ends up going through the photos, finding intimate images and videos. And in this case, a woman said that a video of her engaged in sexual activity and nude photos of her were taken by the store employee. I've never liked when you walk into the store and they take the phone. I think it's probably the part that we all feel a little uncomfortable.

But, I mean, there's so much personal information on these phones. Is there anything that these companies, aside from hopefully now the public pressure bringing something to bear on them changing this process, is there a bigger change that could kind of help avoid these errors going forward? Or do they just need to do a lot more to put up safeguards? So it's all of that. They absolutely need to be doing more because these things keep happening. At least six other times in the past AT&T has been accused of similar incidents.

Verizon and T-Mobile at least a dozen other cases. This has been an ongoing issue. Like I said, it's Groundhog's Day reading these headlines. But what has changed is in April, there was a case that was filed against T-Mobile. We broke that news in November when the case was filed. In April, a judge ruled on the case. T-Mobile had sought to have the case dismissed. Almost always, virtually all of these cases got dismissed because the courts agreed with the

phone companies that the employee was acting outside of the scope of their duties, and therefore the company was not liable. But what was different in this landmark court ruling is that this judge in Washington federal court actually said, you know what, there is a chance that the company is liable. This has happened so many times. They did know that this was a problem. They allowed the case to move forward. It's now headed for trial. It's now this AT&T case.

It might have a better chance of surviving. Not to get too granular or too stuck in the weeds here, but how do the employees capture these images off the phone when it's going from one phone to another? Are they carrying them also over to their own devices and then just using them, they're not selling them to blackmail the people? Are they? Or what do they do with the images other than consume them, I suppose? So, you know, when this tends to have them between intimate partners, it is used as a kind of revenge. It might be posted online. But in terms of the store employee, they're using it for their own personal gratification.

For voyeuristic intent, I suppose. Exactly. You can fill in the blanks. But what they end up doing is they either email it to themselves from the victims, phone, which is what happened in the AT&T case that was filed today. In the past, they send it over Snapchat. They might text it. And these are only the cases that the victim actually figured it out, you know, because the employee didn't properly cover their tracks. And so in this case with the AT&T, the woman about a week later was going through her sent box on her email. And she noticed

that two emails were sent to an address that she didn't recognize, and those emails contained those intimate images. So creepy. So that's how they had it. Yeah. All right. Gabby, thanks for bringing that to us. Thank you. All right, you'll need a lot more than just solar stocks to build a clean energy portfolio and we'll help you lay it out when power lunch returns. We'll be right back. Well, many investors have been preparing for the coming energy transition for years, but climate investing is a lot more than just wind and solar. And Pippa Stevens is here to explain. Hi, Pippa. Hey, Tyler. So investors are taking a much broader scope when it comes to energy transition

investing, which has pushed global climate fund, AUM, to more than half a trillion. dollars. That's 10x growth in the last five years. Electric vehicles, power grid, clean shipping, energy storage, even mining stocks are growing areas of interest. Now, part of that is because there are a finite number of pure play renewable energy stocks, and they also tend to be highly volatile. Investors who want to be closer to benchmarks, but still focused on decarbonization, can target large companies with proven business models. As Bank of America noted, that could be power management company ABB or software name Autodesk, which helps with energy efficiency. Now, across energy transition funds, Schneider Electric is one of the most popular holdings,

showing up in 63% of portfolios, according to the firm. Spain's EDP stands at 50% with Nextera, Eaton, and Train Technologies, also popular picks. Pure Play renewable companies' first solar and N-phase are at 45% and 48% respectively. And now with the added tailwind of AI and data centers, the grid infrastructure theme is one that's looking especially hot here. Very interesting. So where is solar and wind right now? Are they getting challenged in terms of the ability to create clean energy?

So they're not challenged, but they just haven't performed very well. And so investors who don't want to suffer these big losses that we've seen in funds like the tan or some of the issues going on with offshore wind are just taking this broader, more holistic approach. So they're focusing on company who have their revenues that come maybe partially from energy transition technologies or other areas like, you know, helping shippers be more energy efficient or helping buildings have better HVAC systems, things like that. So it's no longer just pure play, wind, and solar.

Surat, thoughts on solar? Yeah, so the interesting part, and we've talked about this before on the show actually is when rates moved up, these stocks all came down because it was no longer free money. It was, hey, where is your cash flow? At the same time, you had seen some of the European companies like rural Dutch and a whole bunch that said, we're going to spend a lot of money in energy efficiency, the market cut their multiple in half. So it's really, and then you saw GE spun off Vernova, right?

I mean, so I think there are companies out there, but you have to be very careful because it's cost of capital as investors is very important, and you're not getting a freebie anymore. Would you do anything in the, we don't talk barely at all about energy investing broadly speaking, but do you like those names these days? I mean, we got GE Vernova out and selling it down just because the valuation is too. We own AES in our portfolio and Audodesk, which you mentioned.

But really, it's not because of the renewable player. That's the option value. I think today it's too early to get in there. As an equity investor with fiduciary responsibility, I need to make money for my clients. I do want companies that do the right thing, but that's not the primary focus. The primary focus is, what am I doing for my clients? And then if they can do something good, I think it's good. And that's where the public-private partnerships come in, really.

And that's getting tougher. It depends on the administration. and depends on cost of capital. That's the big one. Always comes back to that, it seems. All right, Pippa, thanks, Pippa Stevens. On semi-surging as its Q2 results beat estimates, though the company saw revenue drop more than 17% year on year. We will ask our trader what to do with it,

but the shares of 12% on those developments. That's next. All right, welcome back to it's because it's time for today's three-stock, a special edition of three-stock launch today here with our trades. Will McGuff, Director of Investments at Prime Capital Investment Advisors. We're going to talk to Will. to get Sarat in on it. First up, Will, welcome Abbott Labs. Lower today, the company being considered ordered, excuse me, to pay nearly half a billion dollars following a baby formula verdict. Are you a

buyer here, Will, or not? Well, Tyler and Kelly, thank you for having me on. First off, I wouldn't be all sound as smart as I do without our guys back in Overland Park, Kansas, providing me with the information. I'm a seller of Abbott here. These litigation issues tend to hang around. We saw a with J&J. We saw it with 3M. So it's best to search for other opportunities. We actually removed it from one of our portfolios a few weeks ago for some better options in the space. So I would definitely be a seller here as there's better options out there. Surat? I agree. I think when you have an overhang with potential litigation down the road, the market doesn't give you any credit. You could have great earnings. You could have a great pipeline. But until you get that settled,

now the interesting part is once it gets settled, the stock will pop. But that's a timing issue And it's very hard to time, Matt. You can't invest on that. Almost impossible. So best to stay away and kind of come back on fundamentals. All right. What about on semi? This is an interesting one.

It's leading the S&P today. Soaring after beating two Q estimates on the top and bottom line, Will. But it's still in a declining revenue environment. Yeah, you nailed it. So this one's going to be a hold for us. Everybody's searching for the next NVIDIA, scouring the semiconductors left and right. The problem with on semiconductors is their primary customers, or electronic vehicles. Tesla, they announced a deal with Volkswagen. So you've got to kind of

keep an eye on this auto space, which has been getting hit lately, which is the reason I probably wouldn't buy it here. But if you own it, it's been up good. It's got a good technical pattern. It's 10x over 10 years. So I just kind of sit here and wait and hold it for now. All right. And finally, we got Procter and go. Somebody got you got a thought here? Well, I would actually not own this. I think the negative fundamentals facing EVs and the slowing down, this is more like a short pop on this stock. I would actually take some money. You wonder with that kind of move today. Yeah. Let's move on to Procter & Gamble here, reporting earnings before the bell tomorrow. Will, your thoughts on P&G?

So Procter & Gamble is everywhere in your household. It's a company that's probably the most PG-rated company out there. It's a great long-term holding. So I wouldn't really worry too much about earnings, given the fact that I'd take a very long-term view at this stock. But if you do want to look at earnings, the last three earnings announcements that's all pops. So hopefully that trends in play. But I just like Procter & Gamble as something to hold for retirement long term and wouldn't really worry about earnings tomorrow. Surat? If I owned it, I wouldn't sell it, but I wouldn't put new money in because I think we talked about before, I'll be concerned about China and also their revenue growth. I think those are going to be two things they need to talk to,

and you'll get an opportunity to buy it. You know, again, it's not going to run away from you, but you might get an opportunity to buy it lower. All right. Zarat, thank you. Will, thank you. Will McGuff, Prime Capital Director of Investments. And remember, you can always hear us on our podcast. Never miss a three-stock lunch.

Follow and listen to Power Lunch wherever you go. We'll be right back. All right, let's give you a quick check on the markets. As you can see, basically flat for the Dow Industrials, down 11 points right now. A very minimal decline at 40,000, 578. Cal? All right. We only have, geez, about two minutes left in the show.

So several more stories to talk about. Let's get right to it. The FDA approving a new blood test to screen for colon cancer. It's known as Shield. It's made by Garden Health and isn't meant to replace colonoscopies, but rather improve the success rate of screenings. It was previously available at an out-of-pocket cost of nearly $900. But with FDA approval should now be more widely covered by insurance,

so it'll cost $9,000. No, I'm kidding. Colon cancer is the second highest cause of cancer death in the U.S. Obviously, anything that helps detection is a good thing. Do you follow this stock at all? I don't. It'll be interested to see it's insurance companies, right? Yeah. It's what they're going to pay for it and how preventative it's going to be,

because if you still have to get your colonoscopy, does it really make sense? Well, yeah. All right, if you plan on renewing your homeowner's insurance soon, prepare for some sticker shock. Premium's rose an average of 21% between 2022 and 2023, according to data from the firm policy genius. Experts claim it's largely because of severe weather events caused by global warming, and that price increases likely won't slow anytime soon. And you see not just the weather events,

but you see these fire events like the one that is spreading out in Northern California right now and sending smoke all across the upper middle west of the United States, thousands of homes and businesses affected here. It's one of those inputs into inflation as well. So you really have to monitor where it's going and where new homes are being built, what people are going to do. So I think it's going to be interesting to see when the regulators come in here because at some point, how high can you go?

And you're seeing articles written of people not insuring their homes. And what does that mean when you do get got in auto? Yeah, same thing. With the catastrophe coming, what happens? Yeah, I think that's exactly right. It's kind of the last place inflation is showing up and needs to now go away. Well, so much for superhero fatigue. Deadpool and Wolverine just shattered box office records in the opening weekend,

raking in 205 million. This is like old big numbers. That's not only the highest debut of the year, but also the highest ever for an R-rated film. You see it. Would you watch it? I did not see it, but it's Disney. We own Disney and needs as much help as we get. And by the international too.

It did really well. But you never know. These are the surprise things that happened. Sarat, thanks for a great day. It's a great to have you. Appreciate it. Thank you. Thank you. Thank you.

Thank you.