Power Lunch - Earnings Optimism 10/16/23

Episode Date: October 16, 2023

Stocks are off to a strong start, as markets rally to begin the first full week of earnings season. More than 50 companies in the S&P 500 are set to report. Can those results wipe out all of the negatives hanging over the markets? We’ll explore. Plus, shares of Lululemon are jumping on news the stock will be added to the S&P 500 index, taking the place of Activision Blizzard after its merger with Microsoft. We’ll get the trade on $LULU in a fresh ‘Three Stock Lunch.’ Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Good afternoon, everybody, and welcome to Power Lunch. Alongside Kelly Evans, I'm Tyler Matheson, and coming up, a strong start to the week for stocks, markets rallying as we begin. The first full week of earning season, more than 50 S&P 500 companies will report this week. Can those results wipe out all the negatives that seem to be hanging over the markets, Kelly? Well, the answer for today, Tyler seems to be yes. Look at Lulu Lemon Chairs jumping on news. The stock will be added to the S&P 500, taking the place of Activision Blizzard,

now that it's finally merging with Microsoft. We'll get the trade on Lulu later in three-stock lunch. A lot of action in Bitcoin is well today, off the highs, but still higher by a decent amount. Around 28,000 right now, a 4.5% pop. Hopes arising not just for the approval of one, but perhaps for several spot Bitcoin ETFs. Already, let's get right to this big market gain

and what's driving the markets higher. Bob Bizani joins us now for the New York Stock Exchange. a very strong open here today, 330 points higher, Bob. Yes, and what's important is for most of the day, yields have been higher, Treasury yields have been higher, and it's not affecting stock prices. This happened a few times last week, and it's a very encouraging trend.

Believe me, we've been waiting for this for a long time. So take a look here, the S&P 500, believe it or not, we're in a little bit of an uptrent. I don't want to make too much of this, but we're at the top end of a recent one-month trading range that we've seen. And so the 50-day moving average on the S&P is 4402. You see 4376.

We're just below that. Dow's been strong as well here. We've had strength with United Health, Nike, Microsoft. Visa has been strong for the month as well. And the NASDAQ, believe it or not, is outperforming both of them for the month. We've had great strength in the mega-cap tech names like Alphabet, Microsoft, and META as well. You take a look at the sector. It's kind of a reverse of what we've seen recently.

The banks are holding up a little bit better today. That is very encouraging because they have not. not recently. Tech is underperforming just a little bit, and generally tech's been outperforming. Metals and Mining and Industrials, two cyclical groups have generally been stronger, and that's certainly a good sign. I want to show you two groups, mega-cap tech here. The one you want to look at is MGK. This is Vanguard Mega Cap growth stocks. This is all the names you think of, Apple, Microsoft, Amazon, Nvidia, all in one ETF. And you see a little bit of an uptrend here, but just the fact that it's rallying a bit after a terrible September and essentially sideways in the last two months,

that's why the market's holding up so well recently. What I'm a little more concerned about is banks and the response to what I thought were very good bank reports on Friday, but Citigroup started positive on Friday and ended down on the day. That is not a good technical sign and is down again today. J.P. Morgan was up and is down today. We're waiting for Goldman Sachs and PNC, but these stocks have been terrible performers. is 5% from a new 52-week low, Kelly, and PNC financial also 5 or 6%. We know the deposits are going to be rather poor.

It's particularly at the regional banks like PNC. We know that people have been taking money out and putting them into short-term bank CDs. So we know all that. There is no real buying interest, and that disturbs me, given how strong the reports were on Friday. Kelly? Bob, thank you very much. Our Bob Asani down at the New York Stock Exchange. Let's get to the other market puzzle piece, I should say.

And that's bonds because yields are rising, and that hasn't been too much of a headwin this time. Let's go to Rick Santelli in Chicago for more. And I see we're off session highs, Rick. Yes. Listen, I can't tell you how the stocks are always going to react to rising or solidly higher interest rates. But what I can tell you is the future probably holds higher interest rates. Let's look at what's happened just since May. We're up 130 basis points since May in a 10 year, from 330 to 470. And if you open the chart up to when we made our historic lows in 2020, you see that this all started with literally 50 basis points.

Half of 1% is where it began in August of 2020. Add in 30-year bonds, which made their historic low in March of 2020 at 1%. And if you look at them both, it's been a wild ride. But here's the thing. If you look at the knob spread, notes to bonds, right now it's trading 16 basis points. That means from 10 to 30 years, you're hardly getting compensated at all. And if we go back, you could see that that was as wide as 160 basis points in 2010. Many investors ultimately are going to demand more for holding longer. They call that term premium. And my point here is 16 versus 160, there could be a lot of room there. And if you look at fives to tens known as the fight, it's currently at zero.

You get no extra money. See, this flatter inverted yield curve has really changed the dynamics. So from five to 10 years, you don't get any extra compensation. Back in 2011, the difference there was 150 basis points. My point is that these term premiums could be what motivates long-term. rates to not only move higher, but to out distance each other, and we need to pay attention to that dynamic. Tyler, back to you. All right, Rick, thank you very much. While the market, stock market, rallying today, there are still many headwinds facing investors from higher rates, hitting the

consumer to growing geopolitical concerns. And here to discuss how to navigate it at all is Ken Stern, president of Lido Advisors and a new face to power lunch, welcoming him from the West Coast. Lee Munson, President and CIO of Portfolio Wealth Advisors. Gentlemen, welcome. Since, since Since Rick just talked about bonds and the fact that you're not compensated for going out longer in the bond area, how do you feel about bonds here? Is now a time to buy in, have some, and if so, of what duration? Absolutely have to have some. I mean, you're getting paid for liquidity. It's the first time in how many decades that you actually get paid for liquidity.

But do you go out much longer? No, I'm not a bull much longer. I actually think that we should stay in the shorter term periods, wait for it to come to. to us, the market will come in one way or the other, you choose your entry point. Lee, what kind of portfolio are you on 60, 40, and so you would have some fixed income in there? I do. So if I take my bond sleeve, that 40% that I have, first of all, I'm about 35%, I'm a little overweight stocks, but I've got right now 75% of my bonds are in the short term. Just think six month to the two year. But I started buying in August when we saw the tenure hit last October's low at a 4-4.

So I put in, you know, 5, 10% there. A couple weeks ago when we saw the tenure hit a 4-7, 4-8, I took a little bit more exposure there. When I see the tenure hit a solid 5, maybe a 5.01, just to, you know, maybe we get one more rate hike just to rattle some nerves. I want to back up that truck. But again, I'm talking about backing up the truck and maybe having 30, 35% of my bond sleeve in long duration. So, you know, I'm aggressive for a conservative player. Long duration would be 10 years. 10 years.

But I also have a little bit of the 30. I like the TLT trade, but I have to tell you, that's a pro trade. You have to know what you're doing. Individual investors can get burned that way. But I only need to see a, you know, 10 year ago for maybe five. So can banks, by the way. Well, we saw that last March. Yeah.

So I think that if you have an appetite for risk and you want to make some real money and bonds over the next one to two years, think about the tenure at 5%. because if rates go a little bit higher, your losses aren't going to be as much as the gains you can make if we just get back to a 4.2, 4.5. Ken, it sounds like you're also a little bit cautious about the economy here that both of you. So on stocks, you seem a little bit wary or maybe looking for defensive sectors, but they haven't been such great performers this year. So, you know, maybe that's, you know, in other words, dividend yielders have been under pressure. Utilities we've talked about under pressure. Healthcare hasn't been trading that great.

Consumer staples, forget about it. All of that is absolutely true. The consumer, though, is tired. And at some point, there's going to be a catch-up. At some point, the real wages, if they're not keeping up with inflation, and if we have continued inflation, which I do think the rates are having their intended consequence, I think we're not going to have a very, very exciting holiday season. I think there's going to be some disappointment. And it's time to keep powder dry. And it's also about the velocity.

I agree with what you say, Lee, on the 5%. But if we hit 5% quickly, the market's going to be a lot cheaper, and I'm going to be a much. bigger bull. You're very positive long term. Oh my gosh, yes. Why? Well, think about it. I mean, inflation was caused because of supply issues. We don't have as nearly the supply issues that we did. And in fact, demands coming in. We're going to see the sun and the moon and the stars get together. The market just needs to be a little bit cheaper. So either it gets cheaper because earnings start to get accelerated, which they're not quite yet. And the market's a little bit expensive. We need a little cheaper and then I'm a long-term ball because I love this macro trend. I love trends in finance and

health care and tech. We're in a macro ball. It's funny because we're talking about the market multiple and this is a big point of debate, Lee, as to whether maybe we're around 18 times again, you know, is that, should that be the new normal? Because the last time rates were this high, I think the multiple was maybe 14 or 15 times early 2000. So do we need to go back there or not? because we have AI and GLPs and I don't know, whatever else you want to throw in there. No, no, those multiples. I mean, I think you're going to split the difference. There's a lot more money around than there was the last time that we had rates.

So I think that you have to, you know, realize that. You know, for me, it's, I can only buy price. Early October, we priced in what I consider, my opinion, a soft landing scenario. So I bought that. Because I don't know. I have my own opinion. I think we're going to have a recession next year. But I said that a year ago.

I thought we're going to have a recession this summer. and the job markets prove me wrong. What I'm looking for, like I said, maybe a little rate hike. You know, earnings are going to be good, but, you know, the bank said going forward, it's not going to be so great. I'd like to see some other stuff. Basically, a policy error. You're hoping they get enticed into one more hike just to make sure that that recession is around.

Just have some Fed governor. Just say the wrong thing in the wrong time. And then you'll get a cheap market. Exactly. I'm going to buy a hard landing pricing. I think that could happen between now and the end of the year. And again, what is the longer? So you're not in the year-end rally camp.

You actually think the year-end could become a period. where we hit a much softer patch pricing in a harder landing event. I think so, and I think it's going to happen a little quicker. But again, it doesn't matter because the market overprices recessions. What's it? Priced since World War II, 19 of the last 13 recessions. But again, when the actual one hits, you know, it usually still has 30% to drop before that bare market bottom.

Yeah. If that's what you think is really, you know, is really coming. I think so. I don't think it's going to be actually as bad as people think, But I think that with the Fed, too many investors just do not believe they are going to keep rates higher. And I don't know why they don't listen. When does the Fed lie to us in the last several years? You've got to believe what they say.

And they're going to say it's going to be more pain. And that's, we haven't seen the lagging. So, Ken, let's tie it off with, you know, obviously the events of last week and the events of the last 18 months, referring to Ukraine, not to mention the tension that is in South China Sea and Taiwan. How do you factor this in? Did you do anything differently last week because of what went on in the Israel-Hamas war? Yeah, I think, again, when we think about the economics and we think about the finance side, protection of the asset is the first and foremost rule for making money.

Don't lose money to make money. And so it's a good time to hedge. It's a good time to be in six-month treasuries and to be a little bit on the risk off trade. And then when the markets come to you, we don't time the markets, but entry matters, and you've got to go in at the right point. So, yeah, it is a time to pull it in. Quick final question, which is like a trillion dollars. It's like a four-part.

But, you know, right now you have people like Howard Marks saying that corporate credit is the place to be. That high-yield corporate credit looks better than it. That the 64-40 portfolio is dead, and you should at least be diversifying into commodities or real. I mean, you guys have heard some of this. So, Ken, just real quickly, does stock and bond, is that enough these days? Or should people be throwing out the playbook and doing something totally different? I'm not a fan of just having a certain percentage in a stock. or a bond, and I do love private credit right now. Banks are tight, and private credit is

finally giving us the yield and getting us paid for that risk that you're taking. It's a good time for private credit. All right, gentlemen. And Lee, have a great ski season at Taos. It's coming soon. I can't wait. I can feel it. Coming soon. We're coming to you next time. How's that? Gentlemen, thanks. Great to have you both in the house. We appreciate it. Thank you so much. Thank you. All right, coming up, earning season underway yet again. When is it not earning season? Big Banks beat expectations despite all the growing risk. What about Big Tech. We will discuss that in Tech Check Plus. Piper Sandler calling Microsoft its highest conviction, large-cap name. We'll break down that call on activist investor Starboard reportedly seeking

changes at News Corp. Those details when Power Lunch returns for a Monday. Rupert Murdoch is on his way out and now an activist firm is on its way in. Starboard Value has reportedly built a stake in News Corp and plans to push for strategic and governance changes. including urging News Corp to collapse its dual-class share structure, which gives the Murdoch family voting power in excess of their economic ownership. For more, let's bring in our own Julia Borsden, CNBC Senior Media and Entertainment correspondent, and CNBC.com Media and tech reporter Alex Sherman.

Welcome to you both. It's not just because they used to work there, Julia. I said, wow, this is big. You think they're actually going to be able to push for change here? Look, there's very little incentive for a family that controls the voting shares or a large percentage of those voting shares, about 40%, I believe, to give that up. I think what this really might lead to, though, is a push to split up this company that has a lot of strength in the real estate data business, news corporate among other things,

owns the parent company to Realtor.com, but then also to split that up from the news part of the business. So I think what this really will come down to is advocating for a division of these assets into the real estate and the news piece of this separately. Alex, do you see it that way? And then let me complicate matters by saying that there is obviously this other part of the Murdoch Empire, and that is called Fox. How does that, if in any way, affect this? It strikes me as a little bit of a strange time for Starboard to be doing this. I mean, this plan of splitting up the news divisions from the real estate divisions. That playbook has already been run once by an activist last year. I rent a capital pushed for that in other. you know, more potentially more significant changes. But at that point, News Corp's value was significantly lower. So to me, the odd thing is the timing on this.

If you just take a look at News Corp stock, in the past year or so, it's up several billion dollars of market cap. So you do wonder why Starper is choosing now to do this. Perhaps they should have pushed for it a year ago. And then maybe they would have had a little bit more oomph with another activist there to get this done. Well, I think the clear reason. it's happening now is because Rupert Murdoch has said that he's stepping down from his role as chairman. So that news just came out last month. Of course, it's not a surprise. He's in his 90s, but I think it could note not just a transition of full power from him to his son, Lockland Murdoch,

but also potentially an opportunity for more change in shakeup. So I would really point to that as something that's maybe kicking off an opportunity for Starboard, if you will. Just to add to what Julia said, if you remember turning back the clock a year ago, go at that point, the Murdof family was pointing with the idea of bringing together Fox and News Corp getting to your point, Tyler. That idea now has sort of been tossed out the window. So we may be kind of rerunning the playbook again because Plan A didn't work. So now activists are thinking about what's Plan B here. The point, though, that Julia mentioned earlier, about how to get a dual-class share company, a family-controlled company to do anything is, I think very much in question.

We've seen it a few times. Recently, we saw third point try to do it with Campbell's Soup somewhat successfully, Value Act, which took a stake in maybe the closest comparison to News Corp last year in the New York Times. So it has been done where activists jump in to these controlled companies, but the question remains that they can only do so much when the family controls 40% or so of the voting share. So, yeah, Julie, I'll jump in on your point there. I mean, this feels to me like the first fastball that lots. Rockland Murdoch is going to face. I mean, this is, it feels like right up under the chin,

brother, here we come. Let's see how you respond here. Now, his father's not, he may be stepping back, but he's not gone. Let's talk about that dual shareholder issue here. Because as I understand it, Julia, isn't it true that a lot of media companies have that, including maybe even our own, have dual class shareholdings? Yes, and absolutely, if you look at Paramount, that's a company that's effectively controlled by Sherry Redstone. She's the one and national amusements. Her company gets to decide what happens with the future of that company. We always speculate about Paramount maybe being up for some of this media M&A that we've talked about so much. But the reality is that she gets to decide whether that happens or not. I would say Lachlan Murdoch is going to

face a lot of challenges. On one hand, you have already seen the digital transformation of this business, News Corp just in the past year for the first time ever showed over 50% of his revenue, really coming from digital. And so that was a momentous tipping point for this company. But at the same time, he has to continue the digital transformation of the news business and figure out whether it makes sense to have it be combined with the real estate business or whether they're different businesses. Can we put up a chart of Fox and compare it over the last year to News Corp, if possible? Because my sense is probably Fox hasn't done nearly as well. Can we do that? So I think this gets to your question earlier, Tyler.

about how does Fox play into this? Largely speaking, there's not going to be any major transformative news with either of these companies, I think, until Rupert Murdoch passes away. I mean, that's going to be the real catalyst in terms of family dynamics who's running these companies. Yeah, we may see a split of the real estate division here, the news quote from the news, but in terms of like, what is Fox News going to be in the future? Who's going to run that company?

Are they going to sell the company? Will they sell the Wall Street Journal? All of those questions that strikes me is more of a post-Rupert Murdoch question. While he's still here, yeah, he's not the chairman anymore, executive chairman, but he is still alive. He is still, you know, he's not going anywhere, he said a few weeks ago. So it strikes me as that as the more likely catalyst rather than the Starboard stage. That is certainly the succession moment.

Isn't it? And Brian Cox will be there. All right, Julia Borson, Alex Sherman. Thanks very much. We appreciate it. And a quick and important programming note, don't miss David Faber's exclusive interview with Starboard CEO Jeff Smith tomorrow morning around 9.45 a.m. Eastern time.

All right, this fall, bringing chaos to D.C. The House Speaker Fiasco continues with seemingly no resolution in sight, but let's see, we're going to bring you the latest on that because I think some votes are likely over the next 24 hours or so. We'll be right back, the fall of the House of Representatives. Welcome back to Power Launch, everybody. Shares of Pfizer have reversed course today and are now, let's see, they're higher by about 3% at 3305. Let's go to Angelica Peebles for a market flash on this company. Angelica. Hey, Tyler, that move coming thanks to analysts to Jeffreys upgrading Pfizer to buy, despite the company slashing its full year adjusted earnings and sales guidance on lower demand for its COVID products. Pfizer says it expects revenue to come $9 billion below its previous forecast, but Jeffrey's pointing out that's largely due to a big drop in sales for its COVID antiviral Paxlovid.

Pfizer also trimmed its COVID vaccine forecast by about $2 billion, but Jeffrey says that implies that sales will still come ahead of what Wall Street was expecting for this fall. Jeffries is also calling out Pfizer's experimental obesity pill and its newly launched RSV vaccine as potential bright spots. And Pfizer executives today are saying they only expect about 17% of Americans to get a COVID vaccine this fall. And that's dragging down Moderna and Novavax. And Tyler, even after today's gain, Pfizer's shares are down about 35% this year. All right, Angelica, thank you very much. We appreciate the report there. Now, off the highs today. Washington, meanwhile, remaining unsettled.

Still no Speaker of the House, but there are plans to vote for a new one. Emily Wilkins joins us now with the very latest. Emily? Hey, Kelly, well, it is do or die time at noon tomorrow. The House will gather to see if Jim Jordan has enough votes to become Speaker. He's got to get to that number of 217. And it's not clear that he hasn't. Remember, on Friday, Republicans took a vote behind closed doors.

And 55 Republicans said they would not vote for Jordan on the floor. Now, Jordan, of course, has been working all weekend to try and change the minds of his colleagues. And he's had some success. Congresswoman Ann Wagner told reporters on Friday, that she was a very strong no for Jordan. But after talking with him over the weekend and speaking with him again today, she put out a statement saying that,

you know, that he's really addressed her concerns that she had about keeping the government open, about making sure that they are addressing the southern border, that they are addressing international support for Ukraine, for Israel. And she said that she wants to be a team player here in making sure that the house can get a speaker so they can get back to passing legislation.

legislation. And Anne Wagner isn't the only one. Numerous other lawmakers are coming out today. A number lawmakers who have sway in their conference like Mike Rogers, the chair of the armed services committee, Ken Calvert, Vern Buchanan. They've all said that they would back Jordan now after initially opposing him. Now of course, 55 is a high number. That's only four. We don't know exactly how many lawmakers have changed their minds. But another thing to note here is that the pressure on the house to be able to move legislation is really about. to ratchet up. Biden said that he would send a request for funding and support for Israel this week. And remember, the Senate is also back in session. Guys, the race for speaker, it could be all over as soon as tomorrow, but it's just as likely we could see this drag on for another week.

If not Jordan, then who? That is the million dollar question, Tyler. I mean, certainly we've seen a couple of other lawmakers indicate that if Jordan can't get to 217, they'd like to try. You have Tom Emmer, who. who was McCarthy's number three Republican. You've heard Mike Johnson, who's also a member of leadership, Kevin Hearn, who oversees one of the largest caucuses. But the longer that this drags out, the more that Republicans are thinking that they might just have to give temporary powers

to the acting speaker, Patrick McHenry, because they know there are these deadlines coming up to move funding for the government, to move aid for Israel, and they know that they cannot just continue, you know, trying all different Republicans to see if they can get to two, 2017, eventually they are going to actually have to start acting. All right, Emily, thank you very much.

Appreciate the reporting there. Let's get to Courtney Reagan now for a CNBC News update. Courtney. Hi, Tyler. The European Union is taking steps to make it easier to deliver aid to Gaza. The EU is planning to launch a humanitarian aid corridor through Egypt. Flights are expected to start later this week and will carry shelter items, medicine, and hygiene kits. Israel has put Gaza under a total blockade since Hamas launched a surprise attack on the country just over a week ago, resulting in lost power and

low, clean water and food supplies. The suspect in Natalie Holloway's disappearance is expected to reveal how the Alabama teen died and how her body was disposed of. Her family's attorneys tell NBC news the details are part of a plea agreement for Yoran Bander's Lute, who is expected to plead guilty soon to his involvement in an extortion plot connected to Holloway's 2005 disappearance in Aruba. And Microsoft-owned LinkedIn is cutting almost 700 employees mostly from its engineering organization. That's according to a memo viewed by CNBC. The reductions come as the business-oriented social network has seen it year over your growth slow for eight consecutive quarters. Tyler, back to you. All right. Thank you very much, Courtney, and ahead on power lunch. Lulamon working its way into the

S&P, the athlete's name soaring 10%. We'll trade that and other movers of the day in three-stock lunch. Next. Welcome back. Time for today's three-stock lunch. And we have Leon Set. with us for the, we really should have had lunch or cocked, anyway. First up, we have Microsoft today, which is among the top gainers on the Dow after Piper Sandler named it the highest conviction, large cap name to own into year end. They also obviously just finalized their acquisition of video game publisher Activision Blizzard last week after months of regulatory hurdles. As I mentioned, Lee Munson is back on set with us. Here with our trades, he is president and CIA of Portfolio wealth advisors. All right, Microsoft, what do you do? Nobody has more hesitancy about buying the

magnificent seven than me. I'm sort of a value-oriented player, but let's be real. This is a game changer. I think co-pilot, which is this little add-on AI thing that's going to, you know, go on to Microsoft Office, I think that that's going to be where they're going to monetize over the next couple years. Now, here's the problem. There's a lot of people on the street who are saying, well, they're losing money, $20 to $80 per person because it costs so much to do that. this AI stuff. Wow, is that true? They're going to lose that. It is. And so when you think about that type of money loss, I think that investors, you know, next Tuesday we're going to see earnings. I think they're going to be much more, put it this way. I think they're going to have the kid

gloves on versus, say, Facebook with the metaverse. Because who cares about the metaverse? I want something that will make me a better writer and better grammar so my wife doesn't have to edit all my CIO notes. So I think that the main thing is how our investors going to react to Azure, which we know is slowing down. It's second rate compared to Amher. It's second rate compared to Amazon Cloud, and are they going to focus on what co-pilot can do, and are they also going to give it a pass card on the losses? Totally. So while I'm not saying go buy it today, I would love to consider Lee Munson buying one of the

magnificent seven after we see next earnings and see if investors say, hey, listen, we see the future, and this is an actual AI thing that can actually make money. And also, I could care less about what Open AI is worth. some people say it's worth $100 billion. Microsoft is $2.5 trillion. I don't care if they're going to add on a half, you know, $100 billion. That's not what the point is. Let's move on to Charles Schwab.

It's one of the top performers, the S&P 500, after posting third quarter earnings that beat estimates. Though net income did fall by 44% year over year, you've got falling income that beats estimates. That's always kind of a squirrely recipe to me. Yeah. Here's, I think, you have to look at Schwab. As far as the banking situation, it's going to have more pain going forward until interest rates change. But I don't think that's what the story about Schwab is. It's down 35% for the year.

They also, a lot of traders got spook last month because their net new assets went negative. That's because of the merger with TD Ameritrade. Now, what people don't get is that with that merger of TD Ameritrade, they got this thing called Think or Swim. It's a trading platform, and it's hot. It's like the category killer. So now Schwab has the category killer for both retail trading, and let's be honest, they've got a big, big pocket where they can put a lot of money into R&D and really make that thing sing. The other thing is not a lot of retail investors know, but RAs like people like me, we use a program called I Rebao, and it's our trade management software.

A lot of us went to TD Ameritrade specifically to get that software. Now that it's over at Schwab, and you're an RAA that wants to get busy with trading and do, you know, thousands of trades at the same time, they've got the only place in town. That's the platform, then. That's the platform. That's the platform. And, of course, Charles Schwab has a lot of custody arrangements with RAs just like you. Yeah, and they did not get the fallout that some thought when they had that big merger.

For me, we used, just for full disclosure, I was with TVD, now I'm with Schwab. The transition was very smooth. It's great. And all the kinks got out very quickly. So I think that we're going to see, we're going to go back to net new assets going upward. And I think that you're going to continue. I mean, it's just, it's the category killer. Let's speaking of category killers, one, all of its own Lulu Lemon, the shares are up 10% today on news it'll be added to the S&P.

You know, there's a lot of value players who like to actually buy the stuff that's like leaving the S&P when all the indexes have to sell it and the price goes down and they go, this is dumb. Why? So putting aside, you know, whether or not it's going to keep rising because of index inclusion, do you think that this represents fair value when you buy the stock here? No, I mean, it's up almost like, what, 9 or 10 percent? Wait until it backs off a little bit. Wait, you know, just give it a week or two. Here's the thing with Lulu. I understand if you look at the PE compared to, you know, other firms, it's very high.

But when you look at the cash flow, it's not as pricey as, say, you know, it's as as pricey as, say, Nike. What I love about Lulu, and sometimes you just have to hold your nose and buy. When we go into a recession next year, there's going to be certain things that people are going to retain. or their premium thing, right? They may trade down in other ways, but the two areas they're not gonna trade down are,

are their yoga clothes, right? And also, you know, Nike, for instance. The cool thing about Lulu's my daughter loves this stuff, she's 15, and she is not put off by the fact that her father also likes Lulu Lemon. She doesn't care, it's not a big deal. And I think so when you look at what you wanna own going into recession, multiples aside,

you have to decide what are people gonna continue to pay a premium, on and I think that the Lulu's of the world, I think the Starbucks of the world, I think the Nike's of the world, that's where you do it. So if you really want to be a value player, just wait for a bad week on Wall Street, hold your nose and buy. You know, it's like the last 20 years. When Starbucks hits the skids, you buy a little bit because it never goes on the store. You go to the mall. You remember malls? I do go the malls still. My 11-year-old son just discovered malls. He loves them. There are two stores that are always crowded. One is Lulu

Lemon, the other is the Apple Store. Say no more. I'm there. Lee Munson. Thanks, my friend. Still coming up, speaking of Lulu Lemon, today's surge is not enough to move defending champ Ryan Reynolds and the Mountain Goats up in their standings for our 2023 stock draft. He's in fifth place. But get this, everybody, WWE superstar Charlotte Flair, remains in first place from our stock draft by a mile up more than 50% this season, thanks to her top pick NVIDIA and her second pick meta. They're up 50 and 34% respectively. They are the best two stock performers in the whole thing, Tyler, and she picked both of that. team woo. That is that the, is that the, her dad, Rick Flair, yeah, apparently, yeah, woo. Indeed. Okay. Woo for her.

All right, coming up, stone cold reality. Concrete is one of the most common substances on earth used in building sidewalks. Nearly every structure on the planet, man-made, that is, but it's also one of the biggest culprits for carbon emissions. We will highlight some startups looking to change that when power lunch returns in two. Welcome back, everybody. If you are sitting indoors right now, the building you're in is likely. supported one way or another by concrete. It is the second most used substance on earth after water.

The problem, it emits nearly as much carbon dioxide as automobiles do. So what's the fix? Diana Oleg joins us in her continuing series on climate startups. Hi, Dai. Hey, Ty. Yeah, look, it's all about the cement, which concrete is made of and which is the big climate offender. Cement is made of limestone, which is naturally made up of about 50% CO2 by weight. So what if you could invent cement with a different rock. And that is called a silicate rock. And when you make cement from that silicate rock, because there is no CO2 in the rock, there is no CO2 associated with the production process. Brimstone, a California-based startup is one of several companies like Terra CO2 and Carbon Built, trying to reduce the carbon emissions from the production of cement,

which accounts for about 8% of global carbon emissions. Brimstone is using a different rock, but producing standard so-called Portland cement. It received certification of that last July. People already know how to build with it, so construction will not be delayed. People already know how to specify it. That way, there are not safety concerns. It is still in the early stages, with a pilot plant now in the works, but Fink says once scaled, the cement will be cheaper to produce than what's out there now. We think that that is essential to decarbonization, right, because we do not think that we can convince everyone in the world to spend. more on something that they could otherwise spend less. But it has to be lower cost in order

to efficiently decarbonize. And that goal of changing how everyone makes cement is especially attractive to investors. When you think about the potential for, say, the 3,000 or so cement plants that are on the planet today and the ability to start displacing those with a novel process, that actually represents a multi-trillion dollar investment opportunity in that underlying infrastructure, all driven by a profit incentive. In addition to breakthrough energy, Ventures, Brimstone backers include DCVC, Collaborative Fund, Fifth Wall, S2G Ventures, and the Amazon Climate Pledge Fund. Total funding to date, $60 million. And one more note on this new technology.

The silicate rock brimstone uses does not emit carbon like limestone, but it does absorb carbon, making it not actually carbon neutral, but carbon negative. Maybe you said this and it went by me. Where does this rock come from? How do you get it? It comes from the earth's crust. Oh, the earth. Yeah, it's much more abundant even than the limestone, which makes up 20% of the earth's crust. This rock makes up 80%.

Wow. And so why hasn't it been used before now? You know, it's one of those light bulb ideas out there. They just never thought of it before, and now they are. And, of course, you know, brimstone has a couple of patents on this process, but they expect it to broaden out over the coming here. And apart from the environmental benefits that are alleged here or truthful here, I don't have any reason to believe they're not.

What about the construction qualities of them? Is it just as strong? Exactly the same. That's what they tested in July. It's that Portland cement that is just as durable, just as strong, exactly the same as cement that's made out of limestone. All right. Fantastic. Diana, thanks. It's not just the banks reporting earnings this week.

Netflix and Tesla are also on deck. Coming up, we'll look ahead to some key tech earnings on the docket and what those results could mean for the broader market. Power lunch is back in a moment. Welcome back. We're working our way through banks' earning season, but will mega-cap tech have a bigger impact on the market? That's the focus of tech check today with Deerja Beau. So we already heard Danielle Shea kind of hinting at that Deerja, but at least we know the banks so far haven't been a landmine. That clears the way to hope maybe tech won't be either.

Yeah, here's for hoping. I mean, banks say maybe more of a reflection of monetary and regulatory policy. Tech is going to have a far more outsized impact on the broader markets. Taking video alone, it could be responsible for a percentage. point and a half contribution to the S&P's overall expected earnings growth in the quarter, meta, nearly 1%. Now, the B of A desk had a unique way of characterizing the mega caps as we head into earnings, what it calls the spicy three and the garpy four. Let me explain. Tesla, NVIDIA, Amazon, they make up the spicy three, that green line in this chart. They're more controversial and they have unconventional valuations. All have spent years being questioned and

even doubted by Wall Street. Meanwhile, the Garpe 4, Meta, Microsoft, Google, Apple. They're characterized by more reasonable PE ratios, so still elevated compared to everyone else. They're the orange line, and everyone else is the blue line at the bottom. And these are PE ratios now and two years ahead. Now, GARP stands for a growth at reasonable cost. So the names in this group, they have earnings revenue, business models that are relatively

solid, at least compared to the other group. And something I'm looking for in this quarter is that a lot of these companies, not Netflix, but maybe everyone else, a magnificent seven, they've all been driven by AI hype, spicy or garpy. So does AI actually start hurting stocks this quarter instead of helping them? That could happen if all of this investment in New Tech and IT spend starts hurting margins, which is something that the street's certainly going to be looking for as well, guys. There was a lot of hopes going into 2024 that IT spend would pick back up. So maybe that cap-ax that a lot of these companies are spending on AI would even out.

There's some doubt being thrown on that now. I just can't wait to see what we come up with next after Spicy and Garpy and Deirdre. I think the point being, and it kind of goes back to what Lee Munson was getting at a moment ago, but these companies kind of need to be a sure thing right now. Yeah, they got it. You have even one of them, and we broke down their weightings in the S&P 500, and that could throw the whole market off. There's a saying, right, as Apple goes, so goes the rest of the market.

But you could say that about any of those names because they just have such an outsized impact. All right, dear Jibosa, thank you. We appreciate it. All right, one of America's biggest drugstore chains filing for bankruptcy amid slowing sales and mounting debt will get the key details when power lunch returns. Welcome back about four minutes left in the show and several more stories that we need to run through. Let's start with right aid filing for bankruptcy protection. The company saying they need to, drum roll, please, significantly reduce their debt. There's an angle I think we're going to hear a lot about going forward.

CBC retail reporter Gabrielle Fon Rouge is here with more. You can walk us through this one, Gabby. what are some of the idiosyncrasies, the opioid crisis, but also maybe I'll help answer the question everyone wants to know, is the Rite Aid near them closing? You know, we're going to see that. That's going to be part of this, Kelly. So right now, Rite Aid has about 2,100 stores across 17 states. They're in a lot of expensive, long-term leases that the bankruptcy process is going to allow them to get out of. We don't know how many stores are going to close just yet, but we do know that underperforming locations are going to be

on the chopping block. We've already seen that. And then, of course, like you mentioned, the debt, They have $3.3 billion in long-term debt. And with rising interest rates, those payments are getting harder and harder to pay. And I think we're going to see this with some other retailers coming out. How have they become uncompetitive, I guess, is one way to put it. How do they get themselves in this pickle? So over the last couple of years, I mean, do you buy your shampoo and your toothpaste at Rite Aid, Walgreens, or CVS? Probably not.

You're probably buying it online either at Amazon, Walmart, Target, all these other retailers. The retail experience at drugstores has just become untenable. You have to wait 10 minutes for somebody to unlock something for you. Now you can just order it from the convenience of your home, have it delivered right to you. So what we've seen ride aids bigger competitors do, Walgreens and CVS, they've been leaning into a health care model. They want to be your neighborhood primary care because they're seeing the writing on the wall that retail is kind of dead for drugstores.

And even those stocks haven't been doing that great. And they haven't, you're right. And so Rite Aid is kind of still stuck in the past. They're really still all about the pharmacy, all about the retail. They haven't been able to compete. And so the other companies have gotten into pharmacy benefit management and providing health care clinics and giving shots and so forth. Right aid has been slow to catch up there. Yeah, exactly.

You know, we had Walgreens. They're going to be setting up primary care clinics. It's going to be like the urgent care, CVS. There's been major acquisitions in this space, and that's allowed them to compete and kind of stay ahead of the time. It's just there for a flu shot. Didn't buy anything, though. There you go. Gabri, thank you so much.

We appreciate it. Gabrielle Fon Rouge. All right, let's switch and talk about sales of Apple's iPhone 15. Reportly off to a disappointing start in China. This according to Bloomberg, one analysis estimates sales are down 4.5% compared with the previous iPhone 14, while Jeffrey says they may be down double digits. If accurate, these estimates would represent the iPhone's worst China debut in five years. I suppose, Kel, there's a little surprise here in a way.

Huawei has taken more of that domestic market, number one. and the Chinese government has cracked down on the use of iPhones by government employees. Yeah, it may be old news. I still think it's a space to watch. Absolutely. If this becomes more of a competitive threat to what was such a sure thing for them for so long. Now, you can pay for a Ferrari using crypto now in the United States. The luxury sports car maker said that decision came due to overwhelming requests from dealers and clients

with plans to extend the same option to Europe, according to writers. Let me just say, without, you know, they got to be a little careful where are this cruise? crypto is coming from. You know, I, you know, I'm not saying it's not above board, and there's plenty of people who have done quite well in crypto and still want a Ferrari, but, you know, there's also a lot of nefarious actors. I file this under problems I needn't worry about. Nor I. We'll move on to one week. All right, let's talk about Taylor Swift. Come on, everybody. ERA's tour movie, ranked in $96 million domestic box office this weekend. According to AMC, highest grossing concert film weekend ever. Also made another third.

$32 million in international sales. She also, were they on Saturday Night Live? Is she and Kelsey? Oh, good question. I think they were. She went out to dinner in New York. It's nice. It's, be happy.

This is a good. Not nice. She's a crafty one, man. And I'm thinking if she made, what, 130 million or so, I think she gets to keep like half of that. I think that was the deal. Is it more even? Not bad for a weekend of no work and going out to dinner. Thanks, Taylor.

Thanks, thanks, Travis. Thanks for watching Power Lunch.