Power Lunch - Econ Recon, and PR Pendulum Swing 5/31/23

Episode Date: May 31, 2023

The Fed is releasing its beige book today. We’ll wrap up the most important insights for you.Plus, what if companies are the ones keeping prices high for their own benefit? We’ll explore the concept of “Greedflation.”And, more companies are being sucked into social debates at the center of American discourse. Are the days when corporations could appeal to all gone? We’ll debate. 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 Mathis, and glad you could join us this afternoon. Coming up, we're going to do some econ recon. The Fed releasing the so-called beige book. We'll wrap the most important insights, plus we'll explore so-called greedflation. The Fed is stuck raising rates until inflation is curb. But what if companies are the ones keeping prices high for their own benefit to plump their own margins? Plus, the PR pendulum swing. More companies are getting pulled into social debates at the center of American discourse. The heat is hot right now. The day's gone when corporations can claim maybe to be in the middle in order to appeal to all customers. We'll debate that one ahead, Kelly. First, let's get a check on

the markets, though, where we see the Dow about having its declines. We were down more than 300 at the lows. We're down 147 right now, half a percent for the Dow in the S&P, 4186 for the S&P, the NASDAQ, a third of percent decline. Just want to point out about this. Notably, we heard heard from two major Fed speakers in just the past half hour or so, especially Phil Jefferson, who might become the vice chair, kind of making the case for a skip at the Fed's next meeting. And that didn't really move the needle that much here. We did move a little bit more off session lows, but probably the most pertinent thing prior to the beige book. Also some huge earnings movers today. On the retail front, Capri Holdings down 10%.

Revenue declines across all of its major brands, Michael Coors, Versace, and Jimmy Chew. And another potential sign of a luxury slowdown. The company is still pointing to strong trends in China as a positive, though, but it's down 38% so far on the year. And in the auto market, advanced auto parts is down 34% just today. That makes its worst day ever. They cited full, or they cut full-year profit guidance, cited higher costs for raw materials, for labor, for freight prices and more. This comes after a big beat back in February as well. We'll dive deeper into the stock a little bit later on in the show tie. All right. Thank you very much, Kelly. But first, we await details on the beige book and here to talk about the state of the economy and the market.

Malcolm Etheridge. He's a CNBC contributor, Executive Vice President at CIC Wealth, and Brian Jacobson, chief economist with Annex Wealth Management. Welcome to both of you. Brian, let me begin with you. Where are you on the sort of spectrum of recession, slight recession, no recession? What do we need to be prepared for, economic? Yeah, thank you for having us. So when we discuss it here at Annex on our Investment Committee, we actually think that, you know, just look in the rear of room here. We've had recessions. You had two downgrows. quarters in 2021, 2022, 2023 as well. You see the fourth quarter, gross domestic income was negative. Same thing, first quarter, 2003. So really, the recession is somewhat in our rear rear mirror,

and we may be going through this kind of choppy period, almost like a double dip, triple dip, kind of recession environment. Now, thankfully, earnings were one of the first things to drop. So in a way, you can almost kind of position yourself more for a recovery, but it's likely going to be a tough slog. So in terms of from an investing perspective, we think actually the recession is mostly in the rear view mirror. That's very interesting because, I mean, while I take your point that the classic definition of recession is two quarters of negative GDP growth, I think more recently the definition of a recession has become one where an esteemed group of economists declare there to have been a recession. And that, in fact, has not happened. Has it, Brian?

No, but they'll be late to the game. They don't typically declare the recessions until, what, a year, year and a half later? And really, as investors, what should we care with these exalted individuals on the National Bureau of Economic Research's Business Cycle Dating Committee even care, think? Really, what matters are earnings, the fundamentals, earnings deteriorated. The market probably priced in a recession back in October. And now we can actually think about which companies are in a better position to gain market share and hopefully protect their profit margins and what could be a tougher economic environment. One second, gentlemen, the beige book is out from the Fed. Let's get to our Steve Leasman, who is digging through it with the headlines. Hi, Steve. Hey, Kelly. Yeah, the Fed-Begbook saying that late April, early May economic activity was little changed with the four districts seeing a small increase in activity. Six had no change.

Two saw a slight decline. Growth expectations, however, did deteriorate a little bit. Contacts reported a, quote, freight recession. Interesting comment. rare to see the word recession, but connected with the trucking industry. Interestingly, residential real estate picked up in most districts. Diana Oleg has been talking about recent strength in real estate, but commercial construction decreased overall. The office space segment was seen to be a notable weak spot. Several districts reported a rise in consumer loan delinquencies, something to watch

with an economy that's slowing down. And budgets of low and moderate income households were said to be continued to be stressed. Employment increase in most district. though at a slower pace than the prior report. Labor market continued to be strong, but there was some cooling reported in labor markets with easier hiring. Some firms reported that they were at full staff now and not hiring any longer.

There was slower growth in demand at staffing firms. And importantly for the Federal Reserve, wages were said to have grown modestly. What about prices? Prices overall rose moderately. The rate of increase slowed in many districts. Prices were still moving. moving up, though, due to solid demand and rising costs, but districts reported greater price

sensitivity by consumers when it came to buying at the actual stores there. Cost pressures had eased. Home prices, interesting though, and rents both rows. Tyler? All right, Steve, stick around. We're going to get our panel back, Malcolm Etheridge, Brian Jacobson. Malcolm, let me ask you the simple question. Now, obviously, the beige book is a rear-looking, rear-facing review of conditions in in April, late March, early April. But given what it says about the state of the U.S. economy, how can I make money right now? Yeah, I actually, I wish I shared Brian's optimism as far as knowing for sure that we're

already beyond the recessionary concerns and that we were on our way out of the bare market that we found ourselves in back at the October lows. But my concern is the pagebook data continues to show that there's pressure everywhere. So when you couple that with the fact that we got Jalt's report data that showed 10.1 million open jobs right now with the fact that we had the historical unemployment that came out at the last month's print, it makes me a little bit concerned that we may be headed for another raise, which then means that the Fed is basically committed to breaking something, which means that we're probably going to tip back into a recession if we were already in one before.

And so I don't know, Tyler, that there's necessarily one particular place that you want to look for as an opportunity to say, you know, that's the safe haven right now other than maybe like the three-month treasury. But I do think that there's definitely going to be quite a bit of choppiness or headwinds or whatever other term we want to use here in the short term as the Fed figures out just how much it has to tighten to bring down wage inflation, which is probably. the most important figure in this whole thing. I would just point out, Malcolm, your stock picks, kind of explain the market, right? Like elevated recession concerns, but Microsoft, Amazon, Qualcomm. So is it kind of like growth

when growth is scarce kind of idea here? Well, it's more so sticking with the ones that we know for a fact, right? So as we look at like the AI hype cycle that has led us in the last couple of months into positive territory on the S&P, save for what we gave back here in May. I think it's sticking with the stocks that we know for a fact are going to be the leaders

out of a downturn, right? So if we are going to continue to surge, tech is definitely going to have to lead that surge. And if we are in the middle of a recession under our feet that we can't see yet, it's a safe assumption that the names that are going to lead us out of that are those same megacat tech names that seem to be sort of the reversion to the mean for anyone looking for that safe haven trade. Brian, let me get you to react to what Malcolm just said, but also to respond to the very interesting story in today's New York Times about how companies are continuing to raise prices, even though their input costs really aren't rising anymore. And in fact, in some cases, as in the case of transportation, fuel costs and so forth, have actually gone down a great deal. I just heard in the last hour on our air

that oil is all 40 percent over the past year. So there are costs that are going down, but I don't think consumers are feeling that as companies try to maintain or even expand their margins. Yeah, I don't disagree with Malcolm. I think a risk is that we get like a triple dip recession kind of environment if the Fed does decide to continue to hike. Thankfully, it looks like they're going to take like a skip meeting, is that like a skip year after you graduate from college or something like that before you join the actual labor force, who knows.

But in terms of the profit margins, our process here at Annex is to try to identify companies that are able to maintain those profit margins despite what might be a challenging environment. Interestingly, S&P 500 profit margins peaked coming out of the COVID recession that we had and with recovery. They were able to the price pass through from their input costs to consumer prices was greater than one. That doesn't typically happen, but they had massive pricing power. Mainly policymakers were telling everybody, hey, plan for inflation, and just accept it. And so that gave the green light to a lot of businesses

to increase their profit margins in this environment. But as Steve pointed out, the page book says, people are getting a little fatigued. Maybe you're going to see a bit of a consumer rebellion against these higher prices. And so even though they were able to increase and expand those profit margins up to this point, those are coming under pressure.

And that pressure could be a little intense. Steve, let me come back to you. And I don't know whether you were able to hear Brian's initial comment which while you were studying the beige book, which were, if I'm understanding, Brian, correctly, were that we've actually kind of been in a couple of many recessions over the past few years. Pandemic-related 2020, I believe 2022, he also mentioned where there was consecutive quarters of negative GDP growth. Do you see it that way? Have we been in a couple of little mini recessions like a light dose of COVID? I guess I wouldn't call it that.

see has been happening in the economy is that sectors have been adjusting at different speeds. And there's been a series of boom bus cycles. For example, in the good sector, it went from boom to bust. The service sector went from bus to boom. Consumer balance sheets have gone from overflowing to a little bit flush at this point. Government spending has gone from boom to less so and maybe more less when it comes to the debt ceiling deal. So I don't see it as recessions. I'm very careful about that word. I don't like to use that two-quarter definition because it's not really the definition used by the NBER. And when I look across, I see that job growth has been strong throughout. I see that wage growth has been relatively strong relative to other

raises, though not as high as inflation. So I don't see that we've been through a series of recessions. If there is a real recession, it is yet to come. And I remain somewhat optimistic. It can be avoided. It's going to require two things to happen, the Fed to stop hiking and for inflation to go away and to start to come down on its own. If those two things can happen, I believe at this point, when I hear about things like American Airlines raising their guidance for the year, and I hear about what's happening broadly in the service sector, and also I'm trying to not be too excited, but be interested in developments in AI, which is something that could in order to the benefit of the economy.

So I think there's still some reason for optimism, but we have to not screw it up. On that very plain spoken note, thank you, Steve Leesman. Brian, I hope I characterized your viewpoint correctly there. If I didn't, you know, shake your head or whatever. And Malcolm Etheridge, thank you very much. I appreciate it, guys. Let's check in on how the bond market is reacting to the beige book.

See whether the response is beige. or red or green or what? Rick Santelli with the action. Hi, Rick. Hi, Tyler. Yeah, I had to call an audible. I was all ready to come and talk about a variety of important treasury issues, but the beige book did something big,

and the chart should say it all. Here's the July Fed Fund Futures. Look at that pop at 2 o'clock Eastern. Now, many could say, well, we had some Fed speak, Harker. They were all in the camp that potentially could have made this market rally diminishing, taking away the over 50% possibility, at least for the moment, of a quarter point increase in the next meeting on June 14th. It may come back down, but it really was the beige book. Just look at the timing of the chart. Now, let's get back to job opening labor turnover.

Here's a chart. You know, jolts in Chicago PMI. It was the one-two punch. Chicago PMI was the ninth month under 50. So you could see that the markets didn't really like. that we're still red in equities and we're read for another reason with Joltz breaking the streak of three consecutive months of lower job openings it popped back over 10 half million second highest read of the year now let's go to that chart to your note yields you can see it 945 yields go down then at 10 o'clock Eastern Joltz popped it up the one two punch and if you look at 10 year note yields on a long view going all the way back to September boy I'll tell you what you don't need to

be a genius technician to see that that chart really looks topy. And finally, the dollar index. No matter what legendary traders are going short, that market isn't cooperating. It's on pace for a two and a half month high close. Kelly, back to you. Thank you, Rick. Strong dollar. In the worst case scenario of a tougher recession, Wells Fargo names one company a top pick, saying it has an excellent risk reward valuation, even if its revenue were to be cut in half. And that name is Amex, American Express, outperforming its rivals in the payment space so far this year. Joining us now is Don Fandetti, the analyst behind this call. Don, it's good to see you, and we know they have a little bit higher income demographic,

but they are also exposed to a lot of small business, aren't they? And couldn't that be a risk factor? Yeah. So, you know, look, it's a good point. They do have a lot of credit risk. We just think tactically, from a stock perspective, it does make sense to stick with some high quality, defensive names. The consumer is in pretty good shape, has been resilient, but it is under some pressure from inflation and higher rates.

And Amex fits that defensive category in our view. They have a very strong competitive position. As you mentioned, small business, yes, some credit risk, but they're also bigger than their next five competitors. They dominate that credit card issuing business. So some pluses and minuses, and it all ties back to a pretty attractive valuation, trading it around 12 times, 2024 earnings. We think it should trade actually around 16 times, which is closer to a market multiple. Is the beauty of American Express that its prime market is affluent,

and affluent people are likely to survive so much better than less affluent people in whatever economy unfolds in front of us? Yeah, so I think it's a good point. We do feel like their customer base will be more resilient. It is higher-end premium consumers. But look, nobody's immune. I think one of the concerns we want to watch is it's essentially been a travel bonanza in the United States. And as we look at 2024, we do expect some moderation in that travel. And I think investors are, you know, initially we're worried about the low-end consumer. And now actually they're starting to worry about, you know, the prime consumer. A lot of the job losses have been in the professional area. But we think net net Amex will be much more resilient. And, you know, as we talked about the

competitive position, they're effectively building a moat around that high-end premium consumer. They have a lot of high-end spenders, so companies want to partner with them. And those hotels and airlines co-fund a lot of those membership benefits and rewards. And so it kind of, that sort of virtual circle sort of feeds on itself, if you will. It's a moat. All right, Don, you've got an upside to your target price of 26.6% on American Express. Don Fendetti, thank you very much. Appreciate it. Thank you.

Coming up, a lack of trust in leadership. Amazon employees worldwide planning to walk off the job to highlight concerns over layoffs and a forced return to office. We will discuss in today's tech check when power lunch returns after this. Welcome back, everybody. Time for today's tech check. Amazon workers planning to walk off the job. job over a quote, lack of trust calling out return to office and layoffs, in particular, Dea deirder Boza has the details. Hi, Dee.

Hey, Tyler, that walkout is expected to happen about 40 minutes from now. And the employee group that is organizing this is expecting 1,900 employees worldwide, about 900 in Seattle itself at the headquarters, at that day one building. They're complaining about a few things or walking out over a few things. One is return to office. Second is layoffs. Remember that At the end of last year and this year, they did their biggest rounds of cuts ever, equaling 27,000 employees. Also, Amazon's environmental record. And as you said, Tyler, sort of a lack of trust.

They're citing a lack of trust in the company's leadership's decision-making. To put this in perspective, Amazon worldwide has about 350,000 corporate and tech workers. This is separate from the warehouse workers that manned those fulfillment centers, where we have also seen some rising worker turmoil in terms of strikes and unionization. So this is something that Amazon faces on a number of fronts, both in the blue-collar side and the white-collar side. This one in particular is looking at those corporate employees.

Guys, it is a very, very small number of vocal people. But again, we've talked about this in the past, is that does this amount to a distraction for the company at a time when it is seeing slowing growth and trying to show that it's innovative and be part of this whole AI. hype cycle. Deirdre, real quick, I mean, this is a little unusual. Is it Andy Jassy in particular who looks vulnerable or, you know, somehow in the crosshairs here? Or is this just reflective of a

broader moment in which the company is struggling? I think it reflects the idea that Amazon has become the second largest employer in the country that is private employer. And, you know, I've been covering the Amazon shareholders meetings for years. And there is a vocal group of employees that come out and don't necessarily like the environmental record or things that Amazon is doing. So it's not actually that unusual, but it does come at sort of an important moment for Amazon when it's trying to find fiscal discipline. When Andy Jassy, you're right, has been less than two years than the job, I think coming up to two years, when he has to manage sort of this rising unrest amid the workforce. By the way, also just on the wires, getting news that the FTC has now

sued Amazon over rings doorbell privacy. What can you tell us? Yeah, so I'm just looking through this document as well, and I can bring you more as I find it. But Ring is its security camera devices. And I'm looking at the suit now, and it's claiming that Ring employees and contractors were given unnecessary and unrestricted access to customer's sensitive video data. And, you know, they're so widely used that I don't know how many people or how wide this is, but it's saying that it didn't limit access to customers' video data and that there was some, you know, know, some liberties taken. And this certainly isn't the first lawsuit from regulators or the first look that regulators are taking. So at the same time, this is piling up to, Kelly, not just for not just for Amazon, but for the other big tech companies also. Yeah, I guess they're going to be

requiring ring to destroy all pre-2018 home security recordings recovered by the settlement. Pretty interesting stuff. Deirdre, thank you very much. Deirdreboza, on a tough day for Amazon. Coming up, lights, camera, and action at the tables, a big push to turn Las Vegas into the next Hollywood, and it's got some strong celebrity power behind it. Power Lodge is back. Dow's down 115. Welcome back to Power Lunch. Got to check on oil today. Really tough month, Pippa, down what, 10%? Yeah, worst month is November 2021. It is off the lows of the day earlier to get all the way down to $67. So it has bounced from there. But that decline followed the weak data out of China, manufacturing, contracted in May, which once again calls into question, this narrative about the rebound in Chinese demand.

It's not only oil, copper is on pace for its worst months since June, zinc, worst months of September. But sticking with copper, just now, City released their new copper outlook, and they actually think that prices will rise by 50% by 2025, thanks to the demand from decarbonization. That is their base case scenario, their bold case scenario is that prices double. And they've been very cautious on other commodities like oil. So the fact that they're really coming out saying that copper prices looks at for a huge run higher. The copper was usually related to a building boom. So that's what it has been traditionally.

But looking forward, the energy transition is a huge opportunity. EVs require six times more copper than ice vehicles. And also because of copper's properties, it is, it connects its connectivity. And so for all of the transmission infrastructure, all of the grid upgrades that are going to be needed from more solar, more wind, more batteries coming online, you can't do that without copper. That's pretty cool. Learn something every day. Pippa, thank you. Let's get to Bertha Coombs now for the CNN.

NBC news update. Bertha. Hey, Kelly, here's what's happening. Virginia Governor Glenn Yonkin ordered 100 National Guard troops to the United States Southern border today. The Republican governor says he's sending the troops at Texas Governor Greg Abbott's request. Yonkin says the troops will help to address an increase in the flow of illegal drugs and human trafficking on the border. Nikki Haley's husband is set to begin a year-long deployment with the South Carolina Army National Guard to Africa.

according to the Associated Press. The mission will likely last for the rest of his wife's campaign for the Republican presidential nomination. The AP says a formal deployment ceremony will likely happen in the next few weeks. And more than 18,000 people have been evacuated from Nova Scotia as 13 wildfires burn in the Canadian province. Three are considered out of control. The impact of the fires can be seen in the northeastern United States, More than half a dozen states from Maine to New Jersey have seen air quality alerts because of a southwestern wind that is carrying the smoke over the border. Tyler?

Yeah, we've been seeing some of it in the New York metro area, some overcast from the smoke all the way up in Nova Scotia. Bertha, thank you. Ahead on Power Launch, Bud's PR dilemma still weighing on the company. City says the latest data show little sign that consumers are moving on from the Bud Light controversy. and we expect these issues will continue to weigh on investor sentiment. So, Citi, now Target facing a somewhat similar controversy. We'll be right back. Welcome back.

Over the past few years, we've seen more companies step into social discourse and debates, with some more than others shifting their messaging to appeal to younger and more progressive demographics, what some critics call woke capitalism. But have they gone too far? Target and Coles now facing backlash over their LGBTQ-plus product lines, Those stocks near 52-week lows, similar to what Bud and Disney faced in previous months. And while some are standing firmly behind their messages, others are backing down following boycotts. In the case of Bud, the stock is having its worst months since 2020, while all its rivals are tracking gains.

It shares are down 20% since the Bud Light pushback began in April. So does corporate America need to accept that consumers are too divided to win them all over? And if so, how should companies navigate these delicate social issues? For more, we bring in Tony Ponturo of Ponturo Management, and America's Reed of the Wharton School of Business. Welcome back to both of you. Tony, I'll start with you because the situation for Bud, your former company has worsened in the past month or so in terms of market share.

Is there a lesson here for the kind of broader corporate landscape? I think so, Kelly. I think the lesson is it's time to go back to your original brand marketing meeting, if you will. Talk about your brand. What are the attributes? What are the qualities? What's the price value relationship?

and be consistent with that to the consumer. You know, sponsorships are really probably about 30 years since probably the mid-90s, and that was sort of in a way lazy marketing. It's like, how do I spend money on another brand to increase the image in my brand? But it has risks. And we're seeing that in this very polarized environment. And I would guess the next 18 months are going to even be more polarizing. And so brands, I think, need to say, talk about yourself, convince the consumer you're the right brand,

and maybe not be so quick to align yourself with another brand and their image that you have no control of. Americas, are companies on the safest ground, which is not to say the correct ground, but the safest ground, if they simply stay away from any of these potentially socially divisive issues, whether it is transgen, gender rights or transgender celebration or whether it is a host of other social hot buttons that we could all tick off. Are they safest if they simply stay out of the debate, stay out of it? I think it's a great question, Tyler. I think the answer is yes. However, the other aspect about this is that if you build your argument to consumers only on the stuff, only on the features, only on the functional utility of what it is that you do, then competitors can come in and offer that

as just a copy of that and claim, I've got a better mouse trap. So a bit of what is driving why this is so attractive to align with purpose and these sorts of issues is that because it gives you an opportunity to link with something deeper with consumers. Now, of course, as Tony's saying, there's a downside to this if it goes awry, but the idea is that you're trying to get an opportunity to connect with self-expression and identity. And that has powerful gravitational pull to keeping consumers loyal if they indeed believe that your values align with their own. Tony, there are some of these campaigns in particular that are for June for Pride Month, which hasn't even begun yet. So if you're a company who has one plan and then you've seen the pushback to some of these,

is that something where you need to change course, recalibrate, you know, figure out, or do you stick with it and say, you know, this is important to our identity and to the demographic that we're trying to reach? I think if you've already gotten involved, it's probably best to stay sort of, you know, stay the straight narrow, like go forward with what you're doing, but maybe not blow it up as big as you may have in the first place. I mean, it is just a very sensitive time. Obviously, every brand, every company has the right to speak up for what they believe in, but you really need to understand, you know, your consumer is a wide variety of regionality, age groups, ethnic diversity. And even if you offend 5% of your consumer base, that's a negative impact. And I was trying to look at the other side of the story. What if in a target, it said, and I mean

political here, but I think it makes the point, is if you're an NRA member, you have a 20% discount. You know, everyone would be in arms on that as well. So all these issues are very polarizing today. And I just think we need to understand the environment we're in because the consumer's not pulling back. They're just digging in more and more. And we need to see where this all goes as a culture in our country. I see you nodding there, Americas, and I'd like you just to pick up and sort of do some jazz, some riffing if you want. I'm thinking of the Disney case. And Disney was late in their condemnation of the so-called don't-say gay bill.

They responded after internal pressure rose, as I understand it, within the company to take a stand on this. And in retrospect, their stance mushroomed into a probably much larger controversy than they anticipated or than it would have been had they been earlier in their opposition to, and different. in how they opposed that piece of legislation? I think that's 100% correct, Tyler. And what I hear you pointing to is a very important word that we use in marketing a lot, called authenticity. And it's the idea that you have to have a track record and that you don't want to be late to the party. You want to be early and you want to be fully committed.

And the idea is that if you're going to do this purpose marketing stuff, you can't sort of have to do it. You have to go all in. You can't thread a needle. You can't try to make everybody happy. You have to make the decision that it's in our best interest. that we want to speak to a specific group of consumers, both demographically and psychographically, and what we need to do is have full commitment to that. And that literally means being okay

with some people getting upset because to building on what Tony was saying, the short term might be, imagine this thought exercise. You lose 5%. But the people that you do gain are much more loyal to you over time because they're coming to you as a function of this identity argument and less of a functional argument. Let me ask both of you this. I don't want to give up. This is a fact. fascinating conversation to me. Is there a company, and I know when I'm thinking of, see if you can read my mind, is there a company that has navigated these very tricky shoals the best? And if so, what company would it be? Well, Tyler, I think I know because, oh, go ahead. Sorry, go ahead. Sorry, Tony. I was, what jumped to mind for me was, was Chick-fil-A in the sense that they stepped in it a little bit and made a statement about the norm.

around what marriage should look like. And this caused a real massive backlash on both sides. But what they decided to do is they said, they looked at the market and said, listen, LGBTQ plus community has $1 trillion of disposable income there. That's a lot of chicken. So what we really need to do is kind of back off this. And we can still maintain a commitment to our Christian values, but we don't have to have, as Tony is saying, we don't have to have it front and center. We can have it sort of float in the background. And we can continue to success. If you look at the case for Chick-fil-A, they've done a good job. So, Tony, same question to you.

Is there a company that comes to mind that has been authentic, has played this card better than any other? Well, I think it's Nike. I think it's Nike. I agree with you. And it just, and they started, we talked about this the last time where they started with this position. This was their authenticity, as America said. We're going to touch these comments. of topics, you know, just do it.

That was their positioning. So it was consistent with how they branded the Nike brand from the start. You know, the tough balance is when you come in and it doesn't look authentic, it looks like, you know, you are trying to reach a new and different consumer, but you do take that risk that you're going to turn off that revenue stream. And we're seeing this with Bud Light. Where it seems to me that companies get into trouble on these issues is where this has been part of Nike's lane for a long, long time. Whether it was specially abled athletes, whether it was transgender or LGBTQ people, they've been in this lane a long time.

And where companies, it seems to me, get into tricky, and we have to leave it here, get into tricky space. It's where they step out of their normal lane and get into a lane of social commentary or taking positions. I'm sorry we have to leave it there on my editorial point. I think it brings it all together. But gentlemen, thank you very much. This could be a fascinating hour-long conversation, you know, and love to have it sometime. Absolutely. Americus Reed, Tony Ponchiro.

We appreciate it. Thanks a lot. All right. Your chances of winning it big in Las Vegas. Vegas are getting smaller folks. The casinos on the strip reportedly stacking the deck against gamblers, increasing minimums, lowering the odds of shrinking payouts, too. Why the House always wins.

It's inflation, folks, when Power Lunch returns. All right, welcome back, everybody. Can Vegas become Hollywood 2.0, Mark Wahlberg, lobbying state lawmakers to increase the state tax incentives for film production, something that has been done in many states, including Georgia. Contessa Brewer has more. Hi, Contessa. Yeah, and in fact, Tyler, there is some fierce lobbying going on in the building behind me as we speak. State lawmakers are just getting an earful today about importing a chunk of California to Nevada. For one thing, the Oakland A's president came in. The team is pressing the legislature for public funds to build a stadium for a move to the

Las Vegas strip. And then, of course, film star Mark Wahlberg, lobbying lawmakers for a package. of tax credits to incentivize movie production in Las Vegas. Here he is. I would love to see us building studios, creating jobs, and just diversifying the economy. I've moved my last film here. I'm shooting another film here coming up in the summertime. I moved permanently here. And Walberg insists he's ready to invest personally in seeing the film industry grow in Las Vegas. Now, real estate developer Howard Hughes has committed to spending $700 million, to build a movie production campus in southern Nevada. Sony says it will spend a billion dollars over the next decade on film production,

but that's only if lawmakers agree to $190 million in tax credits. That's 20 times what's currently being offered. Supporters say it would bring thousands of jobs. It would make a huge economic impact and diversify beyond gambling. But opponents just cringe at the price tag. The Nevada Policy Research Institute says in other states, those tax credits actually end up as a financial drain, and they don't recoup the initial investment. The Assembly is required to vote by June 5th. They're in there arguing about the A's and the package for the stadium there and the budget.

So let's see if this gets done, Kelly. Very interesting, Contessa. Also, everyone's talking about Vegas because of the story that they're decreasing the payouts. So I guess it's still easy or the same to win, but you don't make as much money. And I guess if all the casinos do it, then gamblers don't really have a choice. Yeah, that Wall Street Journal made a big splash with that article. So here's the deal. Those changes where the odds were being tweaked a bit, that started back in 2018.

It's not new. But what they saw during the pandemic is that when they had social distancing requirements, they had fewer tables. They really needed to increase the value of the players. So one, you saw all of those minimum bets going way, way up. I mean, it's, I know because I play roulette. It's hard to find a table some nights, especially if you're on a weekend, anything less than a $50 minimum in some casinos. Secondly, what I saw on the roulette table myself, instead of just having double zeros, you had triple zeros. So that increases odds in the house's favor. And then blackjack, maybe instead of paying out on a natural blackjack from three to two,

they would go six to five. And that also increases the house's chances. I talked yesterday to Derek Stevens, who owns four casinos in downtown Las Vegas. And he said, look, when the casinos change the odds a little bit, what they find is that the players don't really care, especially what they call retail players, retail gamblers. These are people who come in, they put their cash down on the table. They're doing it for the entertainment value, not because they are regular gamblers. And he said, for them, it just doesn't really make a difference if you change the odds. Is it incremental to the casinos? Sure it is. It slightly increases the chances that they'll hold more money. But we're not seeing when you're looking at room rates, when you're looking at occupancy rates, it looks like people

don't care. They just want to be in Las Vegas. Well, absolutely. For now. Or maybe forever. Contessa, thank you very much. We appreciate it. Contestive Brewer. From changing the odds to changing the strategy. Coming up will reveal the new approach to loans that car buyers are using to skirt around surging interest rates, power lunch is back right after this. Welcome back after years of pushing out the length of auto loans and a bid to lower monthly payments. New car buyers are trying a new tactic, shorter loan terms that have lower interest rates. Phil LeBoe has more. Phil. Tyler, you and I are old enough to remember when you never took out an auto loan longer than four years. But that really hasn't been in fashion over the last several

years. Well, look what happened in the first quarter, a resurgence in the popularity, according to Experian, which tracks all of the auto loans. Take a look at this data. The number of people who took out a four-year or a five-year auto loan, it went up substantially. There was also some growth in those six-year loans. Where did it come from? Fewer people taking out the seven-year loan or the six-and-a-half-and-seven-year loan. And the reason is easy to see. It comes down to interest rates. Take a look at a four-year loan interest rate in the first quarter. Three and a half percent, is what you're looking at. Compare that to a seven-year loan, where it was over 8%. You do the math here, and yes, you have a slightly higher payment with that four-year loan, but for a lot of people,

it's going to be more cost-effective over the length of time that they're owning the vehicle. So as a result, you see people, even with vehicle prices close to record highs, by the way, in the first quarter, the average new vehicle, the average monthly payment was $725, roughly in line with what we saw in the fourth quarter, average monthly payment for a used vehicle, $650, that continues to climb. As you take a look at GM, Ford, Tesla, Stalantis, all of the automakers. Keep in mind that they still have fairly tight inventories. Now, their inventories are growing up to 37 days supply, but they are noticing that people are saying, you know what, if I'm going to buy and I'm going to take out a loan,

I'm not crazy about taking out 8% over seven years. And that's why we see a shift in buying patterns. I ask you, speaking of shifts, Phil, what's going on with advanced auto, just competitive weakness, or is there something more broad about the auto industry this is telling us? I don't think it's broader about the whole industry. Almost every analyst note that I read today when I was like, what happened here? Everybody says the same thing. There are some certainly advanced auto part issues for themselves, whether it's management, whether it's execution, whether it's a poor game plan.

That's the bottom line. You have a company that fell well, well short of it. earnings expectations. They cut their dividend by 83%. This is not a reflection of the broader consumer, guys. All right, Phil, Phila, Bill, Bill, Bo. As we had to break a quick clarification, that FTC suit we told you about with Amazon's ring division, the company settled the lawsuit. We'll pay almost $6 million to the agency over alleged privacy violations. Again, the settlement is the newest part. We'll be right back after this. Before we go, let's check in on the 2023 stock drafts so far, Charlotte Flair in the lead.

Thanks to Invidia's massive move. If you had Nvidia, you're going to be leading. Followed by the financial feminists getting a big boost from A&D. Let's bring in the head of that team. Tori Dunlap, author and Financial Self-Health Expert. She's also Captain Financial Feminist in the Stock Dress. Tori, welcome. And congratulations.

You've ridden the wave there with AMD. Good pick. And your second pick, which was Microsoft doing pretty well as well. Thanks for having me back. Yeah, it's been really crazy to see even in the last month what the kind of progress has been. But even in my own education around personal finance, we're playing the long game here, right? Investing through my book and through what we teach at Herper Center K is meant to be a long-term play. So I'm excited to see the finish line in February and hopefully we keep leaving until then. Not worried that this is a bubbleitious, this tech push? I mean, who knows? We can't predict anything about the stock market, right? We just hope that it goes up, consistently. And so we're excited to see how it progresses. But if you were picking today, Tori, and I remember, you know, AMD's female CEO played a role in this, but would you stick with that or would you now say, you know, maybe it's a little overvalued? No, we never, we never regret

betting on women. So Lisa Stue, I think, is a great, you know, leader in this transition. And the irony of just, you know, the stock draft in general is that we are focused in my own work on picking things for years, if not decades. So while I see this is like super fun and it's so excited to, you know, so excited to see the progress, again, we're in this for the long haul. You know, I remember during the stop draft, Tori, thinking that Endomicon Sue had a good pick there in Peloton. It hasn't worked out so well for him.

He's in last place. I think Peloton is limping there. I know. It's funny. We're all been talking some smack to each other and the Instagram DMs and so it's interesting. And again, it's so fun to have this group of people come together from different walks of life. You know, I'm a financial expert. We have football players.

We have Olympians. We have wrestlers. So it's just really fun to see. I didn't. Yeah, it was for the Peloton pick. Who knows? I didn't know they took this offline. They're having a whole chat without us.

All right. Tori, congrats. And thanks for watching Power Lunch.