Power Lunch - Econ Recon, Tech Under Attack 9/6/23

Episode Date: September 6, 2023

We have some key economic data coming out today, alongside commentary from the Fed via the Beige Book. We’ll discuss these barometers for the broader economy. Plus, the attack on tech giants continues. The EU is cracking down on the sector’s core business, while the FTC is targeting Amazon and DOJ is going after google. We’ll discuss the regulatory threat. 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, we've got Econ Recon, some key economic data out today alongside commentary from the Fed via the beige book. We'll break down all the information in just a minute or so's time. Plus, the tech attack continues. The EU cracking down on big tech's core businesses, a messaging, basically. The FTC targeting Amazon and the DOJ going after Google, we're going to discuss the growing regulatory threat. Kelly? And a lot of those stocks down today, Tyler, let's get a quick check on the

markets. We're off session lows by about 80 points or so for the Dow, which is down 238 or two-thirds of a percent right now. The S&P is down even more than that, almost 1 percent with a 40 point dropped to 4456. And the NASDAQ is the worst performer. I'm going to say it in the face higher interest rates. The NASDAQ down one and a quarter percent today. The two-year back above 5 percent, the 10-year higher as well. We'll have more on that a little bit later on. Streaming stock, Roku, Off its highs, but up 2%. The company announcing plans to lay off 10% of its staff and consolidate office space.

And again, even so, they're only getting about a 2% pop today. Also, the talk of the street, AMC. The theater chain shares down another 31%, as you can see, after they announced plans to sell more stock. This was after that successful conversion of ape shares into AMC common. With today's $4 move, it's back below a $10 stock tie. All right, we're going to start with the markets. as the major averages are on pace for their biggest two-day losses since the middle of August.

So is this the start of a correction? And if so, how should you position? Jason Pride is chief of investment strategy and research at Glenn Mead. Jason, welcome. It is good to have you with us. So is this the start of the fall correction that so many people have been predicting for weeks? Look, I don't know if this is the exact start of the fall correction. But what I can say is that this market has been surprisingly strong this year.

face of a difficult economic environment. You know, there have been a lot of built-up hopes here for a soft landing, and there's been a lot of excitement that has now snuck in in relation to artificial intelligence, this generative AI. There's some reason to both of those occurring, but at the end, we think that investors are probably end up coming back to a little bit more reasonable of a basis, recognizing that even though we may or may not have a recession, We think our odds are probably still more likely recession, but even without one, this is not a robust growth period. And artificial intelligence, look, it's probably a big deal, but it's probably not going to be something that shows up in bottom lines for the economy and for the average company very near term. It's something that's a longer term outcome.

So we suspect that investors will probably eventually end up a little bit disappointed and probably settling out at lower valuation laws. Talk to us a little bit about what you see in corporate earnings. whether we have a recession or not, the earnings picture has been sort of spotty at best. Yeah, I think that's a great way to put it, right? So every earnings report season, our vast majority of them we see, we see companies beat expectations. And that makes it feel good. But then when you look back at the numbers, you realize we've had three quarters in a row of negative earnings growth in the midst of a fairly kind of borderline economic environment. This is a situation where companies are having a hard time squeezing out that next

rung of true profit growth at this point in time. And because of that, valuations this year with the markets run have actually expanded. Multiple have expanded and fundamentals haven't really progressed all that much. I don't mean to sound crotchety, but I always look at the, oh, we beat expectations as a really helpful tool for traders. But the real measure is whether earnings are growing or not. That's the helpful tool for investors. I completely agree. And look, you know, it's easy. to reset those expectations low and then come in ahead of it. What we do tend to like to see is rising expectations and then beats on top of it. This pairing them back and then barely beating

them doesn't really hit us as a that good of an environment to be in. So Jason, where do we go if you say to people, okay, well, your options are, you know, you can go to the treasuries, you can, you know, you can not be in the market at all. You can stay in it and just kind of ride this out. What are your expectations that into the end of the year then? Sure. So we think we're probably going to have a sluggish market going into the end of the year, and because of that, and I'm thinking more about the large capitalization marketplace where most of the overvaluation sits. As a result of that, what you can do is you can take three different approaches. Number one, you can just generally with your asset allocation be a little bit more defensive, choose to have a little bit more in fixed income and a little bit less inequities. You happen to be collecting 5% so interest rates in fixed income, which actually feels pretty good in the face of an overvalued equity market. You could also tilt within large cap or within the domestic marketplace, either smaller capitalization or into more defensive sectors. So health care, consumer staples, utilities at this point in time. The third thing you can do is actually tilt internationally.

We tend to think that Japan is a very interesting opportunity, one that's benefiting from the inflationary environment and actually started a much lower valuation spot. It's having a gangbuster year this year, and we think there's perhaps still a little bit more upside left on the table. Why have defensive stocks been sort of in a holding pattern with all of the sort of economic slowdown talk? You would think they would be doing better than they have? I think it comes down to the back and forth on this economic talk. We've had a period here where people have actually gotten to the point where they almost expect that soft landing to occur. I think maybe the odds of it have come up a little bit, and that takes some of the lust of the last.

off a defensive stocks within the broader equity marketplace. As you look at it today, though, with the market backing off, you are seeing those sectors that are more defensive in nature actually outperforming today. That's a good point. But I think more broadly speaking, people are worried about exactly what you said off the top. You look at corporate earnings, revenues haven't been growing in nominal terms. They've been falling in real terms. That doesn't leave a lot of room for companies.

If they're not going to raise price, it's unclear what exactly they do with it from here, and that's going to put pressure on employment ultimately, too. Agreed. Now, I do want to make sure that we come across as not necessarily being entirely against equities. We tend to be longer-term bulls on equities, generally speaking. That's where you make your money as an investor. And there will be a point in time here where valuations come back in to reflect the risks more appropriately and provide us an opportunity to step back in in a more constructive manner.

As of for right now, we're simply remaining patient a little bit, sitting back a little bit, taking a little bit more defensive of a posture, and collecting those excess yields that we're getting on the fixed income side, which we haven't seen in about 13, 14 years. Stay right there. Let's turn to Steve Leesman, who's got details from the Fed's beige book. Seeing some headlines about insurance costs, Steve, but I think there's probably a lot more of relevance to our audience as well. Yeah, that's in there for sure, Kelly, but the overall economic growth was seen as being modest. Tourism spending was strong, but it was described in some districts as the last gas. for the last stage of pent up demand for leisure travel from the pandemic. Other retail spending, though, continued to slow with some districts reporting consumers

may have exhausted their savings from the pandemic. In the manufacturing sector, supply chains delays improved. New orders were stable or declined in most districts and the backlog shortened. Inventory of single-family homes, though, remained constrained. Consumer loan balances rose, as well as some districts reporting, higher consumer credit delinquencies. Job growth was subdued across the nation, according to the Bayesbook. Most districts say labor imbalances continued, but worker retention improved.

Labor costs pressures were elevated in most districts. Some even saying it was worse than the first half of the year, though, employers did hold on to the hope that things would improve. On the important aspect of price growth that slowed overall, decelerating faster in manufacturing and consumer goods, also there was increases, as you said, Kelly, in some insurance areas. Input price growth slowed less than the selling price. So what happened is businesses were struggling to pass on cost pressures. As a result, profit margins reportedly fell in many districts. I'll just say, I guess, qualitatively, Kelly and Tyler, this sounds to me a little bit at odds with

the data coming out, especially the strong retail sales numbers we've had in July, as well as the overall stronger GDP numbers, the jobs numbers that have been reported seems stronger than this base book. So I don't know, maybe the anecdotes end up being what rules the day, but the data seems to be stronger than the anecdote at this point. All right. Interesting. Steve Leesman, thank you very much. And Jason Pride, thank you as well. We appreciate your time today. Let's see how the bond market is reacting. And to do that, we go, as usual, to Rick Santelli in Chicago. Hi, Rick. Hi, Tyler. Well, charts really speak much better to the beige book than I can. As you look at an intradate of two-year note yields, and let's zoom that back to the 28th, a couple of things should emerge. The beige book didn't really have a huge effect on treasury rates, but the two-year note yield did start to move up a little more quickly than the rest of the yield curve. As a matter of fact, it's firming up above 5%. And why is that important? Because we've only had one. Yes, one close above key.

Technalival, and that was in March, the 507 high yield closed, cycle high yield close, and on the 28th was that one day we closed above it. So traders are going to monitor that very carefully. As you look at tens, much less responsive, although it didn't move lower yield, just kind of a lateral move, and you can see that it's outperformed since the 28th. It's been outperforming a lot as of late. Dollar index hovering near unchanged, but maybe the biggest issue of all, and all the text I've gotten quite quickly because it's only been out a few minutes.

It's the S words, slowed, subdued. Those are what traders are paying attention to. And it took some of the zing out of a response in the treasury market. Kelly, back to you. All right. Rick, thank you. Rick Santelli and Jason Pride of Gled me. We appreciate it as well.

Coming up, a telecom power player, T-Mobile shares lower after announcing a $19 billion buyback, but they're selling off about one and a half percent. We will speak directly to the CEO next. Plus Morgan Stanley doubling down on the big business of sports. Partnering with an NFL vet to bring financial literacy to athletes and celebrities as more money rolls in. More details on that when Power Lunch returns. Welcome back. Leaders across tech, media, and telecom are meeting up for day two of Goldman's Communicopia and Tech Conference in San Francisco. But it comes during a wild and volatile time for nearly every part of these industries.

Just now, T-Mobile announced a $19 billion buyback. over the next five quarters. The stock is down on the news, and it comes after announcing layoffs just last week. Our very own David Faber is out on the ground there, along with T-Mobile CEO, Mike Sievert, who just wrapped up his keynote speech. Welcome to both of you. David, we throw it over to you. All right, Kelly, and we look forward to your questions as well. Mike, thanks for being here. Yeah, thanks for welcome to San Francisco. Thanks for being here. Yes, thank you. You too. Let's start off with that news about the buyback. 19 billion. Also, a dividend. A $3 billion annual.

essentially. Why? Well, it's part of our ongoing shareholder return program. You know, we announced that our intentions to do this in 2021 at our analyst day. And one of the things we do as a team is we lay out a business plan that's thoughtful, and then we go execute on it. And this business is producing enormous cash, and we see a lot of prospects for that to continue in the future. Our aspirations next year, 16 to 18, and then 18 billion and beyond in the out years. So it's time to continue returning that cash to shareholders. Now, for the first time ever, we're including a dividend in that program. So it's up to $19 billion over the next five quarters, inside of which $3.75 billion are thereabout would be in the form of our first ever quarterly dividends.

And that starts in Q4. And then $3 billion for next year. Now, Deutsche Tollicam obviously owns more than 50% of this company. And that continues to accrete up as you buyback shares. So what would their plan be? Will they sell into the buyback? Or will they separately sell shares themselves over time? Well, what they indicated publicly at their most recent earnings call is that starting sometime in 2024, assuming this buyback is going on, they would be selling shares in order to continue target being in the low 50s. And so that doesn't mean full participation. It doesn't mean participation exactly in our program. But they like this level, according to their public remarks, of being in the low 50s. And so you can expect some participation from them in

24. Got it. Other news that was not that long ago, Kelly mentioned it in her introduction as well, is the job cuts that you announced. And within that, and this got my attention at the time, you said, what it takes to attract and retain customers is materially more expensive than it was just a few quarters ago. Why is that? John's, thank you, by the way, sat in his very seat earlier this morning and said he's not seeing what you said you're seeing. Yeah, I agree with John. What I'm talking about is versus a few quarters ago, such as at the height of the pandemic. And all the companies have made public comments and it's clear through our disclosures that the negative revenues and or sorry negative margins on our handset revenues have been growing. And, you know,

customers in each time period, they're looking for something different. Right now, they want an incredible deal on phones. And we're guided by customers. Now, it's stable right now. You saw our performance in Q2. We had the highest postpaid phone net additions in eight years, some of the highest ever for a Q2. And so we're performing really well in this environment. But it is an environment that, according compared to the height of the pandemic, is more expensive. So why the job cuts? Well, it's part of what my job is to look around corners on this business and prepare our company to be successful, not just for this year, but for two and three years down the road. And what I said in that long note, in addition to the fact that it's expensive right now,

is that it's time for our company to recapture the entrepreneurial, fast-moving, decisive, efficient culture that got us here in the first place. Why, did you lose it? But we've been focused on putting together two massive companies and engaging in the most historic network build ever conducted in this country. That's how we've achieved our 5G leadership. And we have some duplication of roles, and we have some overlap, and we have middle management that's slowing down decisions.

And so it's just time for us to make sure that every single employee who works at T-Mobile knows that what they're working on, is essential for our future. And that's important for the culture and our company, as well as for our ability to move fast, be decisive, and be efficient. Tyler has a question for you. Mike, I want to come back to a question that David asked a moment ago, and he quoted your words, what it takes to attract and retain customers as materially more expensive than it was just a few years, quarters ago, excuse me.

I want to bear down on those words, attract and retain. What specifically has gotten more expensive? Is it the cost of the handsets? and that that has been a sort of disincentive for people to upgrade? Or what is rising and becoming more expensive in your effort to attract and retain customers? Well, it's stable right now, but compared to the height of the pandemic, it costs more to subsidize the cost of those handsets to the premise of your question. Handset prices have risen, and customers want a great deal on handsets.

Now, there are offsetting impacts on that, the monthly service investment that customers make. they've been choosing up our rate card, and that's helpful to offset those costs. We've been way ahead of plans on our enterprise and smaller markets and home broadband business plans, so that's offsetting. But yeah, you know, compared to the height of the pandemic, those device subsidies are higher, and you can see that in all of our public disclosures. Mike, it's Kelly here, and I don't want to take you too much off topic, but I'm not sure it is too off topic.

When you watch what's going on between Charter and Disney, what are your thoughts? Do you think Charter should be getting out of the TV business? And I ask because we've watched Team Mobile and competitors like yours trying to make more inroads into being the broadband provider to households and maybe having more content programming ultimately at the tip of that spear. Just kind of from your seat, what are you watching for as this fight plays out? Well, you know, we're guided by customers at Team Mobile. And so, you know, if you look at that milieu, I mean, that's what all those companies need to be.

And right now, customers, generally speaking, are voting with their dollars around streaming. And, you know, the partnerships we're striking are generally around streaming. You know, we pioneered this at T-Mobile with our Netflix on us on Carrier Move, which is one of the things that has distinguished T-Mobile, and we continue to innovate in that area because that's where customers' eyeballs have gone. And back to sort of this idea of things becoming more expensive, Mike. The upgrade cycle seems to have slowed. We've got a new Apple phone coming out.

Is your expectation that given the price point, that it will continue to keep things at sort of this slower upgrade level than has been the case in previous years, or perhaps will excite people and generate some enthusiasm that will shorten that time period? Well, we're ready for whatever happens. You know, when these new phones come out, it's a big moment for our industry every year. We're ready to capture that demand and that excitement. But do you expect it to or not? Do you don't? You know, we'll see.

I, for one, would like that new charger. I've heard that there's the USBC cable. That would be very nice in my life. But look, we're ready to feed that demand and use it as a moment for people to switch to T-Mobile. Because when you get a new phone, a lot of times, that is a time in your life when you can say, you know what, I'm already upsetting the Apple cart.

Do I have the right provider? And that's why we're out there right now reminding people how far ahead we are on 5G and our superior value, our low prices, our great new Go-5G plus rate plans, that when you get that new phone, guarantee that you can get another one in one or two years. It's up to you all built into your rate plan. That's a breakthrough.

You haven't seen the new phone yet, have you? I haven't. Okay. Man's always selling. He's amazing. Mike, listen, much more to talk about. Hopefully we'll join you or you'll join us again in the near future. Thanks, David. Cheers. Mike Sievert from Team Mobile. Back to you guys.

David, great to see you. Thank you very much, David Faber and Mike Siebert. Further ahead, Tech Underfire, the EU targeting core businesses. of the world's biggest technology giants. Details when power lunch returns after this. Welcome back. Amid growing calls this year to sanction Russian uranium. Prices in the space have been surging, and Pippa Stevens has the numbers for us.

Hi, Pippa. Hey, Tyler. While uranium spot prices are now up nearly 30% this year, according to data from UXC on growing shortage concerns, we're talking about issues on both the supply and demand side. When it comes to supply, Russia is a key player controlling about 40% of the global uranium. enrichment and conversion market. And as the war stretches on, we've seen growing calls for sanctions.

Meantime, there are growing fears around the ability to ship uranium out of Kazakhstan, which is a key supplier. On the demand side, new reactors are being announced globally, with lifespans for existing reactors being extended. So far this year, utilities have bought more than 107 million pounds of uranium on track to surpass last year's 10-year high of 125 million pounds. Two funds that track the space, the URA and URNM, both down today but in the green over the last month and also more than 20% higher for the year. One key name here to watch is Camaco up more than 60% so far this year. Just yesterday or over the weekend, I should say, they warned that they're going to miss

their production targets for the year. So that's also adding to some fears around any uranium shortages. Wow. All right, Pippa, thanks very much. Pipa Stevens. Let's get over to Bertha Coombs now for the CNBC News Update. Bertha? Hi, Kelly.

Arguments just concluded in a Georgia courtroom in the first hearing in the election interference case involving former president Donald Trump. A judge is considering a motion to sever the case of two of Trump's 18 co-defendants from the rest of the group. They are both hoping to get a faster trial. Prosecutors say a joint trial would include about 150 witnesses and could take up to four months. Brazilian officials say the death toll from devastating flooding in the southern part of the state. the country has now reached 31, and it may climb higher as rescuers try to evacuate people trapped in their homes. An extra-tropical cyclone has been battering the region since Monday night, dumping nearly a foot of rain in less than 24 hours. And the Rolling Stones officially announcing their

first album in 18 years, and the first since the death of drummer Charlie Watts. The band launched the first single off of the upcoming Hackney Diamond's album called Angry, along with the music video, which features Euphoria star Sidney Sweeney. The rest of the album comes out October 20th. And Kelly, I can remember way back in the 1980s friends who scrambled to get tickets to the Steel Wheels tour because we were all thinking, how much longer will these guys be out there touring and performing? So if you didn't get to Taylor Swift this summer, don't worry. When she's 80, Right? Maybe, yeah, maybe you can catch her then. Bertha, thank you very much. We appreciate it. Ahead on Power Lunch, there's a lot of money out there for athletes, both pro and collegiate alike, especially around name, image, and likeness.

Morgan Stanley, though, looking to educate these young athletes about the billion dollar industry and how to avoid some pitfalls. That's next. Well, there is big money in sports. News flash. And for student athletes, name, image, and likeness deals. They are a growing business. Billion. market, in fact, and Frank Holland has more. Hi, Frank. Tyler Kelly, well, you know, the market for name, image, and likeness of college athletes or NIL will grow to over $1.1.1 billion according to estimates from two leading companies, a Supreme Court ruling back in 2021 allowed athletes to profit from their fame for the very first time. And now in 2023, Brony James, that's LeBron's son. He's the top NIL earner, Livy Dunn, a gymnast at LSU, and a former

team USA member is the top earner for women. But when we're talking about this, it's really more than just cash. Former Texas running back, Bijan Robinson, received a Lamborghini as part of his NIL deal. And just this week, rapper Wiz Khalifa released a song to benefit a University of Pittsburgh NIL fund. He mentions a number of pick grades, including Larry Fitzgerald, who is now partnering with Morgan Stanley on a new platform called Money in the Making. It's designed to help NIL athletes, social influencers, and entertainers learn how to manage and grow their money. Joining us now is Larry Fitzgerald and Sandra Richards, managing director and head of global sports and entertainment at Morgan Stanley. Sandra, I know we're waiting for Larry to join. He's coming from some football-related activities.

We're going to start with you. Thank you for being here. Thanks so much for having me. So we just hit on the size of the NIL market, of course, is even more money in being a social influencer, or just an entertainer in general. Why is this platform important for these people, and why is it important for Morgan Stanley? As you just said, you know, the deals and a number of opportunities that are coming to these student athletes because of NIL, that's the reason why it's important. We've heard from a number of these athletes in our financial education sessions that there's two things.

They want more deals and they want to get financial education. Certainly we're not on the deal-making side in the NIL space, but we certainly can play in the space of financial education. And that's what we've been delivering. Even prior to NIL, this is what our business was built on in the foundation of financial education. So that's why it's important because student athletes are asking for it. All right.

So student athletes are asking not only for help with their finances, they're certainly commanding millions of dollars in various deals to their NIL, the ability to leverage their NIL. So let's talk about, is this platform just about managing money? Are there other aspects to it when we're talking about young people who all of a sudden have an influx of sometimes millions of dollars? So when you think about it from the standpoint of financial education, yes, this is a part about managing money.

as budgeting, saving, and investing. But when you look at NIL and even social media influencers, it's about the do's and don'ts, reading contracts, understanding taxes. It's all of that in the ecosystem of focusing on financial education. So for us, we wanted to make sure that we address the needs that the student athletes were telling us about. There's a whole host of things about NIL,

and even influencers and creators that are on the same length of a sports and entertainment type of client when you think about they're using their name, image, and likeness as a well. Sandra, I can well imagine that so many of these young individuals who are some of them in high school, some of them early in college, could be really vulnerable to bad advice, to theft or fraud or whatever, and that this education is a big part of addressing that sort of knowledge gap. So I want you to talk about that.

But how much of this is about education and how much, if any, of it is about attracting assets to Morgan Stanley? In other words, do you hope to manage some of the money that is coming into the hands of these young influencers, athletes, entertainers? So yes, and yes. But when you think about it, financial education is really the foundation and the forefront. And part of what we also talk about is thinking of yourself as a business. Like you are the CEO of you, so you have to build your team. So it's the financial advisors, depending on what industry you're in, the business manager, the accountant, the attorneys, and the like,

all have to play towards your vision. So yes, having a team is really important for these student athletes and these new up-and-coming creators. And the one thing that I would also like to share about NIL, what it has allowed is not only for them to be able to make money, but down they're able to engage professionals like financial, advisors, accountants, and agents without jeopardizing eligibility. So that's really the beauty that came out of NIL. Yes, the money is great, but also the representation is even greater.

And look, at the end of the day, it's our responsibility to help these young people because they're going to be our next generation of leaders. These are going to the next generation of people that are going to entertain us. And would it be something where we would love for them to be clients? Absolutely. But our focus really right now is focusing on the financial education piece. All right, we want to welcome Larry Fitzgerald, NFL great wide receiver, University of Pittsburgh graduate where I went to school as well. Larry, thank you for joining us. I was glad to be here, glad to be here.

All right, so you joined the conversation in progress. We want to talk to you because you've had the experience of being a young person who all of a sudden pretty much overnight had millions of dollars. What are some of these NIL athletes, entertainers, social influencers? What are they facing when they have this big influx of cash? Well, I think it's very difficult when you're that age and you're trying to, you know, kind of build your career, but also trying to manage your capital. It's coming in very quickly from a lot of different places, from marketing, from athletics, shoe deals, so many different

places. You want to just make sure that you have a great infrastructure and a team around you that can help support you, you know, from tax structure. You know, you have to pay, you know, commission to agents and all these things that you have to understand and that you're not really equipped to deal with at 20 years old or even younger with some of these NIL deals. And I think That's the biggest thing you want to be able to help educate the young players on so they can make sure that they can focus on what they really love doing, and that's playing ball. Larry, I took part in a father's son fantasy football draft last night with my son, and for some reason he chose you.

I don't know why. The guy's in the Hall of Fame. He's going to have a bust sooner than he's going to be on the football field again. What was, as you were a young guy coming into the league, what was the biggest money challenge you faced, and what was the biggest mistake you made? Well, you know, I didn't make any, I didn't make any catastrophic mistakes. Probably, probably had one too many cars or, you know, things like that. But I didn't make any really egregious mistakes.

I was very fortunate. I had a wonderful agent and Eugene Parker, God rest his soul. And he always used to teach me, you know, what not to do and what to do, you know, go with the bigger banks initially before you, you know, make any of these small transactions with, you know, banks that don't have a lot of capital under management. You know, so just like little small things. But, you know, he was very helpful and helping me kind of structured from the beginning and end. And as I got older and to my second contract, I got more educated and was able to diversify a little bit. But I was very lucky to be able to have an agent that took care of me and gave me really sound advice. So Larry, you're going to be a mentor and an advisor for part of this program.

We hit on one athlete. We don't want to single this person out, but they received the Lamborghini as part of their NIL deal. I know you thought there might be some better way to use that compensation. So if you ran into a student athlete that reached the same situation, they were offered a luxury car or instead of cash or possibly in addition to cash, what would you advise them to do? Well, I would tell them what I would tell my son. Like, yeah, you can have a Lamborghini, but I think there's a lot better places. You can put that $400,000 to work.

You know, you can get you an annuity that will guarantee you 7%, 7%. And if you let compound interest do what it always does at 18 years old. You look back at 60, it's a completely different story. So I just try to give them just better options. You know, do you really need the money? Do you really need a car like that at that time? You know, just so just helping them make more informed decisions that they can be educated on, you know, the luxury of having compound interest and what it can do for you. How's a golf game, Larry, quickly?

It's okay. I'll beat up on you. So when I see you next time, I'll beat up on me. That is a low bar, my friend. Larry Fitzgerald, Sandra Richards, Frank Holland, thank you all very much. I appreciate it. And coming up, the crackdown on Big Tech, Google and Amazon facing antitrust scrutiny here at home and abroad. and we will discuss that when Power Lunch returned. Big tech companies are under scrutiny across continents. The European Commission has formally designated six tech giants as gatekeepers

under new rules designed to encourage competition affecting their core businesses. And FTC's anti-trust suit against Amazon expected later this month, and the DOJ continues to work at its monopoly case against Google that opens soon. That's as new reports emerged at Google, has reached a tentative settlement with 36 states and D.O.J. to settle a 2021 lawsuit over an alleged app store monopoly. Former FTC Chairman William Kovac and our own Steve Kovac. Join us now to discuss this crackdown on big tech.

Let's talk first, Steve, if we might, about the EU commissions designating 22 services of six major tech companies as gatekeepers. What does this mean? And it goes to questions about interoperability of messaging platforms, it seems to me. What are they trying to get at here? Yeah, Tyler, and the messaging thing, that is just one tiny slice of this law that is going to have broad implications for those companies that you just mentioned. That's Apple, that's Amazon, that's alphabet, byte dance, which owns TikTok. The implications are huge.

Goes just beyond messaging, but I'll use that as your primary example. For example, now that these designations have been handed down by the European Commission, these companies, for example, meta, which has WhatsApp, on there, we'll have to have interoperability, meaning WhatsApp has to talk to iMessage and vice versa. Facebook Messenger has to play in there somehow, too. Google Search, by the way, has to give you the option to use Bing if you want, and so on and so forth down the line. And what this really is going to make these companies have to do is create their products maybe even differently the way they work in the EU versus the way they work in the rest of

the world. Let's go back to messaging, for example. WhatsApp is an encrypted product. meaning it's a private message between you and the person you're talking to. Facebook can't even look into those messages, but with interoperability, that encryption goes away, and it degrades the product. So we might see a different version of WhatsApp, for example, over in Europe, versus what the rest of the world is using. And that is just one of many examples. There are 22 services, Tyler, between those six companies we were just talking about

that are going to be impacted by the Slaw next year. Bill, what Steve just described to me sounds sort of, deprogressive and crazy. Tell me why it's not. I think that the view of the European Union is that the U.S. basically surrendered its role as an effective regulator for years and years, and that it allowed companies to do whatever it wanted. There's a keen sense that the firms have far too much power to determine the way the commerce goes. And I think Steve got it exactly right.

What's happening in Europe this week and in other measures to come, will be far more significant than the lawsuits running in the United States today. And there's simply no doubt in the minds of European policymakers that they're on the right path. When U.S. officials object or raise questions, the view is that's just what you would expect because you put us in this corner and we're trying to clean up a mess that you've made for the last 20 years or so. It is a strong sense of the identity of the European Commission that they're playing this role. No, Bill, I think you put it perfectly as to how they feel and how they feel we've performed and so on and so forth. I mean, missing in all of this is the consumer harm.

It's really not clear to me that consumers are pounding the table to say, you know, I want my eye messages to all be blue instead of green. But putting that aside, the question about how much further the FTC pushes in this direction, especially vis-a-vis Amazon, I'd be curious for your thoughts on, in light of what happened with Horizon and Amgen last week and the major setbacks they've been dealt, not just by Republican-appointed judges, but by Biden. appointed judges as well and some of the antitrust moves that they've been trying to make. They seem to be pulling back a little bit. So what do you think they're actually going to be able to accomplish on the Amazon front? You know, 20 years ago when the Department of Justice ran its Microsoft case, it did achieve a major success. But everything that's happened in the court since then, just as you suggest, has gotten made things harder and harder for the government. The doctrine that's

been embedded since 2001, 2002 gives dominant incumbent firms major advantages. And the high card that they're able to play is to say, this may not be good for some of our rivals, but it certainly is good for our consumers. And everything we do provides a better experience. I think that the FTC is going to find, that the DOJ is going to find in its case, that they may be able to achieve some limitation on behavior. But the vision of the major restructuring of the firms, I think is going to be unattainable. So the realistic objectives are going to have to be tempered by the ambition, is going to have to be tempered by realism about what they can achieve. Steve, let me turn to the Google U.S. v. Google, the antitrust case that begins Tuesday.

Walk us through the key issues here. Yeah, so Tyler, the big issue here is the government is alleging that Google used its market power and it's just hordes of cash to effectively buy its way into search dominance. Tyler, if you open up your iPhone right now and you open up that Safari web browser and you go into the main bar and type of search, chances are your default is Google. And that is because Google pays Apple billions and billions and billions of dollars a year to have that key spot in iOS search. Not only, it's not just on the iPhone, it's on web browsers like Mozilla and so on and so forth.

What this lawsuit is saying, hey, you can't do that. You're unfairly disadvantaging Bing and DuckDuck Go and any other search engine that just can't afford to leverage its bank account the same way you guys can. A small startup, go back to Duck.com go, which is a startup, they can't afford to pay Apple billions and billions and billions to be the default search engine. Google says, on the other hand, well, people have a choice. We may be the default, but you can easily go in and change your settings. That doesn't seem to be good enough for the government, though. Tyler. All right, gentlemen, thank you very much. Bill Kovac and Steve Kovac. No relation. No, yeah, it's close, but not that close. Thank you guys.

Clearly, currently a good route of a great last name there. Yep. Indeed. It's back to school and back to business for millions of Americans as we close the books on summer vacation season. So we've asked our technician to check the charts for some names set up for opportunity into the year end. Our technical support is on the other side of this break. Welcome back to Power Lunch, everybody. It's time now for our technical support where we look at some movers and look for some names that offer some opportunity. And today, we're looking for names to consider as we enter the final stretch of the year. We really feels that way, even a few months out.

Here to chart some of these names is Piper Sandler's chief market technician Craig Johnson. Welcome back. Thank you very much. I can't believe summer's already over. Pumpkin spice season and everyone's joking how it's not so nice this time of year. So you brought a couple of kind of eccentric stocks, if I can call it. We'll start with Accenture. Why does this one catch your attention?

Well, this one catches my attention because the whole focus on AI. There are so many CEOs that are asking the question of what does AI mean for their business? And when I look at a big chart like Accenture in here, I see this huge base that's been forming in here. I see something it almost looks like a cup and handle on a technical basis forming. And this really sets itself for upside. We can see upside in the stock close to about 379. So again, nice upside from where we are here. And again, kind of a stealthy way to think about AI.

That's fast basically a consulting play for companies trying to figure this out. All right, let's move on to Baker Hughes, then totally different company, totally different market segment, unless there's an AI angle here. No AI angle here, but a lot of things in energy have been moving lately, and I'm getting a lot of questions from clients about what we should be doing with energy. I'm not convinced that the energy stocks are really ready to work. We have been overweight them for a long time. We downgraded them back in June, which arguably could be too early. But if you look at a chart like Baker Hughes in here, we're just starting to see this sort of breakout in here of this sort of consolidation pattern, setting itself up back to the old highs. Our fundamental analysts think there's maybe 10% upside. I think it could be closer to 15, 16%, just based upon the chart setup in here. But again, an interesting way, if you want energy exposure, keep in mind, energy is only 5% of the overall market. Sure, and your caution strikes me.

I mean, you could easily jump on this bandwagon, but you're not quite doing that. I'm not quite doing that because as I look at a lot of charts every single week, I see a lot of charts that are just consolidating in the energy patch. I see oil breaking out. I think it probably gets stuck in a range between $90 to $95. I'm not sure you have a lot more upside from there at this point in time. And the charts are just consolidating. And the relative strength overall has been sort of mixed. I can find other things in the market that look a lot more constructive than energy. With apologies to energy investors, I hope you're right from a consumer and inflation point of view.

That brings us to floor. Not one we often talk about either, but it's up about 40% in the past year. What do you see here? So we had kind of an interesting correction back. We had an interesting correction right here in Fleur. Let me clear that. We did an interesting correction right through here. But the overall trend still remains meaningfully higher in here. We've been in this upper trending price channel for the better part of a year and change. And to us, this looks like a correction, a normal correction in the context of an uptrend. And we've recaptured our 50 and 200-day moving averages. And would also note that we're getting that golden crossover too, where we're seeing that 50 moving. back through here. Keep in mind that there's a lot of projects that are still getting finished from post-COVID and everything else. Fluor should benefit from the engineering side of it and also reshoring projects happening with manufacturing coming back to the United States. Fluor can certainly do well. Engineers, consultants, it's a bull market. It's a bull market. Craig, thank you so much for your time today. We really appreciate it. Thank you. Craig Johnson,

Piper Sandler. All righty. Coming up, skin in the game, a record number of Americans say they will bet on the NFL this year. The season starts tomorrow. It's set to kick off, and we will discuss that and much more in closing time when we return. We have about two minutes and eight seconds, seven, six, five left in the show, and a few more stories you need to get to know about. So let's get right to it. Data show that rising rents are hitting suburbs the hardest, as the great migration from cities during the pandemic seems to have staying power. According to the rentals website apartment list, rent prices in suburbs climbed 26% from March 2020 through this past July. That is 8% higher than the gain in urban areas. It certainly matches what I'm seeing in my town.

Pardon me. Pardon me. Oh, we give our tissues here. We usually do. There's so few houses for sale in the suburban towns in many cases that people are renting. and that is pushing rents up. And I think that we talked about Airbnb yesterday, and I think that is engendering some pushback. Meantime, a record number of Americans will have some skin in the game as the NFL kicks off its regular season.

73 and a half million people plan to wager on the league this year, according to a new survey from the American Gambling Association. That is up a ton from just 46 million people who bet last year. I think it's all the ability and the ease of doing it from a handheld, all of these prop bets that you can make, whether Larry Fitzgerald is going to play or not this year. Although you and I remain, you know, not among them. Yeah, yeah.

All righty, some workers are celebrating promotions by walking right out the door. New data from ADP found that between 2019 and 2022, 29% of workers quit their jobs within a month of receiving their first promotion compared to an 18% rate for workers who weren't promoted. So don't promote them. Forget it, man. Give him an inch. They take a mile.

I guess they get a big head. And they think they're worth my... I don't know. Maybe they find that the promotion isn't what they thought it was going to be. It isn't it? Thank you, Kareem, by the way. He brought over the tissues.

He fixed my IFB early in the show. He does it all, man. Don't give him a promotion, though. No, don't promote them. Can't go anywhere. Thanks for watching Power Lunch, everybody.