Power Lunch - Eye On AI, Meme Mania Returns 5/13/24

Episode Date: May 13, 2024

We’re watching big tech closely today. OpenAI, which is backed by Microsoft, just unveiled a new flagship model. And it may team up with Apple to put ChatGPT on the iPhone. We’ll bring you the latest details. Plus, Meme Mania is back – at least for today. “Roaring Kitty” tweeted for the first time in 3 years, and that sent shares of GameStop, AMC and Blackberry all higher. We’ll discuss what it means for markets. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Power Lunch, everybody. Alongside Kelly Evans, I am Tyler Matheson. Glad you could join us on a Monday. Big day on Power Lunch. So let's start with a check on the markets. The Dow has been up eight sessions in a row last week. Best week of the year, believe it or not. But today down just a little bit. Only about 1% though from its all-time high at 39,438. Look at S&P. It's down very, very slightly. And NASDAQ is up just a little bit. And we are watching Big Tech today as OpenAI, which is backed by Microsoft, unveils a new model and may team up with Apple to put chat GPT on the iPhone. That has Apple shares up 2% in this tough tape. Microsoft and Google, which has its event tomorrow, is down fractionally. And meme mania is back. Keith Gill, better known as Roaring Kitty, tweeted for the first time on X, whatever we call that, for the first time in three years. A meme about a gamer sitting up in a chair looking in and that sent GameStop AMC. and Blackberry shares all higher.

That's fundamental investing right there. That's right. That's exactly what you were wondering whether Fed policy was too tight or too easy. I think your answer is in that tweet. Yeah. And guest hosting with us this whole hour, Sirat SETI, DCLA's managing partner and a CNBC contributor. Welcome to you.

Thank you. So. Let's talk markets. Are we overvalued? Are we due for something in the form of a correction? Or have we had it? Well, I think we had a little mini correction. And then now all of a sudden we've got these eight days in a row.

And I think really we went through earnings season. We're almost done, almost 80% done. And earnings were stronger than people expected. I mean, the earnings were there to support the stock market being where it is. Is it still cheap? No, it's 20, 21 times earnings, depending on how you want to look at it, and it's still being carried by some of the big stocks. I think the big thing going forward is, I mean, you're going to have data coming through Wednesday with CPI.

and where is inflation as part of kind of the mandate for the Fed? Because the Fed has basically said, we're not going to cut rates until we see inflation come down. And if inflation doesn't come down, I don't think you're going to get those rate cuts up maybe until the end of the year. And the last little lift there in rising stock prices came after the inflation number was hotter than expected, suggesting that the Fed would... It did, but it also had Powell saying, I don't believe. that we are in a stagflation area. That is that risk of the market. If we do get higher inflation and lower growth,

what happens to valuations? And I think that could be really hard for the market to take at that point. So that's what's being digested, and I think the markets can forecasting, hey, maybe inflation does subsides, maybe rents come down, maybe costs of mortgages, insurance,

wages start actually slowing down. That's being built in right now. If that disappoints, you could see the market going the other way and the 10 year, right? I mean, the 10 years, everybody's so focused on it. You know, and then the other wildcard is the debt. Like, where are we going with the debt? I mean, there's so much debt servicing to do with interest. I forget what the number was we heard last week Rick Santelli had it was the gross number that we're going to be spending per month on debt service alone takes you up above a trillion dollars a year. Yeah. And when it was 2%, 2% to an

is a very different ballgame. So how does that work and then also the rest of the world? Where do we go over that? If the dollar is going to be that strong, you're going to have unintended consequences, especially in the trade market. Yeah, it promised it's a bit of a trap because if things hold in there and the Fed doesn't cut, that's going to raise those interest costs further, grow the deficit further, probably lead to more inflation and then they're going to have to figure out what to do about that. But in the face of all of that, the market is still more or less going strong. And I don't know if you caught Ariel Wald's comments at the end of the show just now, just based on technical factors.

He likes the strength he's seeing in housing still, capital markets, the market overall. I mean, there's so many things that have surprised people about this market to the upside. It wouldn't be that surprising at this point if it keeps going. Right. And so if you do get that,

but if you get the benefit of maybe the slowing down, the second derivative of cost coming down, the market can definitely still do that. It's that question that if you don't see that cost coming down and you still see a strong labor market and you still see pricing going up, I think rates don't come down, and then you've got that counter-wailing factor.

Do the bond vigilantes actually come back and say, hey, we've got to move the tenure even higher. And if the tenure goes even higher, then your discount rates and everything start really changing. The MAG-7 has kind of become the FAB-4, I guess, maybe, Tesla. But what happens if one of those FAB-4 loses its footing? Can the market continue to make headway? under those circumstances?

I think you can. I mean, you already shortened it down to the FAP 4, right? So what happens there depends on kind of those stocks, but I think people have started to really start diversification away from them. But they're still carrying a huge part of the market. I mean, you look at Google, you look at Apple, and they're still very strong. I mean, Apple's kind of rebounded from where it is. I do think that equal-weighted index or other opportunities, as we've talked about in the past,

they are other opportunities. You don't need, the market might not go higher without the fat for it, but you can definitely have stocks that will go up higher, as we've seen this year, depending on the sectors you want to be in. Yeah. All right, well, let's bring in our friend to talk markets and all things related. The one and only billionaire investor, Leon Cooperman, chairman and CEO of the Omega Family Office.

Leon joins us on the phone today. We're having a little technical difficulty. Mr. Cooperman, it's always good to have you with us. We appreciate your being here. My pleasure. Sorry for the problems. Oh, please. I'm the last guy to fix them.

I think we've got video now. I have, too. I'll be on the phone to whoever the provider is right now. Get over here to my house. I notice in my note that you say very unequivocally, we are heading for a financial crisis. I don't mean to question that at all, but I'd love to hear you.

You can. No, no, I don't. Because I'm more worried about it than not. What would precipitate a crisis? You know, a collapse in a dollar. Look, we have two. candidates running for president. One is bad, another one is worse. You know, what you is as each one is a function of your beliefs and your values, you know, and both of them are

really running for election. They're pulling at every stop to spend every nickel we have. The recent proposal by President Trump expects to increase a deficit to $2 trillion next year. We have a fully employed economy. The economy, the budget is supposed to be in balance. We're racking up debt like a going out of style, and one of these days it's going to change, and we don't know the day. It's changed when it's least expected. And so, you know, in the 60s, there was in guns and butter and crowding out. I think that we're going to have guns and we have guns and butter. We're going to have crapping out as a consequence of the policies we have.

Secondly, let me just pause. Let me just pause if I might for just a second. I want to come back to the question we just were just. discussing with Sirat Setti, who's here on set with us, about the monthly carrying cost of our debt, which is truly amazing. But I wouldn't be doing my job, and you are free to say my political beliefs are mine alone. But you said one candidate is bad, the other is worse, which is which? Well, it depends upon your beliefs. I think that, you know. Well, my debt value is no way I haven't booked with Donald Trump. Why? He goes very early

on his first term, he mimicked the New York Times reported with several policy. You learn when you're five years old, you don't make fun of handicapped people. Secondly, he dissed John McCain, a true war hero, and he dissed Dickey Haley's husband. That's not presidential kind of conduct. It's disgraceful conduct. Not

worthy of being president of the United States of America. Whether anybody agrees with him, whether people agree with you or not, I appreciate the clarity of your answer. I really, thank you for that. That's my view. That's my personal view. and then you can the other you have Biden who's a tool of the left and I think the left is ruining the country so you know we we have I've never seen two candidates running for president

that basically have been more you know criticized with people who don't want to vote you know I said this a year ago one of your other programs NBC has been in 1706 nations population with two and a half million people. We're women and then have the right to vote, and 250,000 was the right to vote. So a million thousand voters found Washington, Jefferson, Hamilton, Mass, etc. We have 3 and 30 million voters.

We found Trump. As a nation, we have to do better. Well, I think there are an awful lot of people who would agree with that last point, and that is, is this the best we can do? Let's turn back now to that financial issue. Sir, I want to jump in. Sir, Mr. Grubman, a couple of questions for you. When you look at the market and I understand your concerns, where do you find, I guess,

on the one side, where would be some of the opportunities that you would be deploying capital? And then what are the areas that kind of give you caution and say, hey, red flag here, the red light is on? My historic approach has been value-oriented so I could buy an ADT at under 10-time earnings. I never found a stock up without a reason. and they're trying to stock down without a reason. My job to separate facts and fiction. So Apollo is 12 times earnings. They're doing a great job.

Energy transfer, a 7% yield, a very good management. Fidelis in the insurance field, six and a half times earnings. The insurance market is very tight. You know, all these technology stocks suggest that investors have a very long-term horizon. Okay? I look at Manu, the soccer team in the UK, Mr. Radcliffe just bought a quarter of the company at $33 a share. If you read his contract closely, he's got to come back for the rest within a year and he can't come back at a lower price. The stock is $15.

People don't have confidence. I don't think he spent, you know, bought 25% of the company at 33 to lose money. and I find a lot of things I could be doing you know and I have about 15% energy given my sheet going on in the Middle East I think energy weighting makes sense I don't expect energy prices to run away on the upside so if there's a conflagration in the Middle East

that could happen right now there's plenty of excess capacity so I think that oil is probably bound by 70 to 90 I think the stock discount a little bit lower oil price So there's one that I like. I have a big position I've talked about it before. Paramount resources up in Canada, and his brother-in-law runs Tourmaline, arguably the smartest guy in Canada

on gas business. These stocks are yielding 6%. They're generating big free cash flow. In the case of Paramount, they have no debt. In the case of Tourmaline, have very low debt relative to cash flow. I think the outlook for gas price is pretty good. Let me ask you about commodities.

What is your view on copper, steel? Positive, positive. But I'm playing in an unconventional way. I have a big position. Some of course, Sierra Meadows, you know. It's a low-price stock. They're going to have an asset value about three times the current price. And they're doing the right things.

They're generating free cash flow. Leon, say that stock name one more time. Yeah, go ahead. There's a lot of talk about the Fed being. restrictive. I don't think they're being restrictive. Where's the evidence that the Fed is restrictive? We have the stock market at or near a high. We have tremendous speculation of individual stocks. I think we're now in. I've got to shut up my iPhone. Are we in to the computer? We're actually having a little feedback there, Mr. Cooperman. So why don't we leave it there?

We appreciate your time. And as a resident of Essex County, so many families appreciate your philanthropy in the medical field. You have done an amazing job with your generosity. So we thank you for that. Leon Cooperman, always a pleasure to have you with us, Omega Family Office. One final thought of his to mention. And Sarat, thank you for helping bring that to us. But he thinks that even if the Fed cut, the 10-year yield could rise. So that goes back to the deficit, those conversations we're having. Time will tell. Coming up, Apple reportedly nearing a deal to put chat GPT on the iPhone. We'll lay out everything we learned from OpenAI's event last hour. at Apple stock up 2% outperforming the market today. Power Lunch will be right back.

Welcome back to Power Lunch. Open AI announcing its newest AI model ahead of Google's big event tomorrow. But as expected, nothing specific about a potential deal with Apple. Our tech correspondent, Steve Kovac, is here for more along with Surat SETI. We're eager to talk about why Apple stock might be up 2%. Today, Steve, seeing Google's under a little bit of pressure. What was the big news from the Open AI event? Yeah, so the big news is it's a new model called GPT40. That's a letter O, not a zero.

And basically what this means is it is what's being called multimodal. That might be a new term for you guys. Yes. But it effectively means it can interpret not just, you know, we're used to typing to chat GPT, but it also interprets voice and it interprets images as well. Now, opening eyes has been able to do this before. Other AIs have been able to do this before you might have seen, you know, show a picture, tell me what's in this picture, things like that.

This is stitching all of that together and creating the ability for to have more natural conversation. So we're so used to asking Siri or Alexa, one question at time, then you get one answer, then you get one question. This is just, just like you and I are talking right now, guys, you can interrupt it. You can have a more fluid and flowing conversation with it. Perfect development if it is about to be integrated into, say, Siri. Exactly. And that is exactly why one reason we could be seeing Apple shares up, because as Bloomberg reported, I believe it's Friday evening, those two companies are very close to some kind of AI deal that would bring, potentially this technology we're looking at right now to the iPhone, which is very impressive.

When I was on with you guys on Friday, we were also talking about that New York Times report that said, Siri is about to get this supercharge. This sounds like something they would adopt. This might be it. This could be it. Or something very similar to what we're talking about right now. And again, it's that idea of having an AI assistant that's much more natural language. You can talk to it, just like you would talk to a human instead of talking like a robot. And then Sam Altman, And he put out a blog post about this actually following the event, and he sees this as the future people can build into it. It can learn more data about you with your permission, of course, and start being proactive and doing things for you on its own. That's really interesting as well.

So would this be more proprietary just for Apple? Because then why wouldn't Android want to do it, right? So how does that work and who would they go to? Well, we're going to find out tomorrow, because tomorrow is Google I.O., the developers conference, and we're expecting a very similar announcement from Google with their Gemini model to do the exact same thing. on an Android phone or across the Google services. So this could be coming to Google tomorrow. And then the other question I would ask is, where do the chips fit into this?

This is great. So at the end of the opening eye event, CTO, Miram Muradhi, she led the event, Sam Altma to appear. She thanked Jensen Wong and for the GPUs. So there you go. There's your answer. Literally one of the last thing. Thank you everybody for watching and thank you, Jensen.

So there you go. The Google event, well, something involving Gemini, which is their version. Right. Will be on an Android phone? Will you have to download? Or it will be everywhere. It could be on your iPhone. They already had, you know, you can use it on your iPhone now.

But keep in mind, Gemini, when they announced it last fall, I believe I was on this program talking about it, they really screwed that one up because they kind of fudged the demo and edited it in a way that made it appear like it was faster, that it actually was and more capable. And it was multi-mov-and. And there was multi-mov-that's what first saw the photo intake. And this was, as far as I could tell on the demo that opening I did, that was in real time. I believe it was. It seemed unscripted, and it was working, and it worked really well.

It's even, it messed up a little bit, and it even made a joke about itself messing up. Wow. And so it was really, it was almost creepy. It's like, oh, my God, they're talking to, like, a robot person. It was really cool. So, Surrott, the essay question on the exam is compare and contrast Apple and Google as investment. Yeah, and look, I think they're both going, you know, one step ahead, and then the other one comes to one. So at the end of the day, I look at this for the consumer.

as getting something so good now that, you know, that phone of yours is a computer. I mean, it basically... It also, I look at it and I think about, maybe it's so wonky, maybe everyone's already here, the electricity you say, you know, the data, like the fact that you and I can just be ha-ha chatting along with this thing for kind of no reason and the incredible electricity and the computation behind every single thing we have. And that what I think about is my battery life. Exactly.

But maybe it's not your phone so much as, you know, the cloud that... It is running in the cloud. So that's less of a little bit of both. But this is the things when you look at investing and you say, okay, why do you want to be a copper company? Well, the data centers, right? Why do you want to be in REITs? Because, again, the data centers are going to have all this. And then why do you want to, you know, invest in energy companies?

Well, I mean, you look at the state of Georgia and you look at where all the power is going to come from. So all this is kind of, hey, there are many investable themes as we move across, not just having the phone, but all the other products with it. All right, gentlemen. Thank you very much. Steve, good to be with you. Sirot. We'll see a little more of you in just a moment. Further ahead, folks. She in's IPO could hinge on getting a membership to the National Retail Federation. But so far, that isn't working out. We've got the details when we return. She in or she out? All right. Welcome back to Power Lunch, everybody. Bond yields starting the week slightly lower ahead of some key inflation numbers due out. Rick Santelli joins us from Chicago now with more. Yes, Tyler, you pick the perfect word slightly lower. As a matter of fact, if we look at a 10-year chart,

and let's look at it going back to around the 24th of last month, because on the 25th, tenure made their high yield close for the year at a yield of 4.70%. And you could see that after that, we really have gone sideways. As a matter of fact, right now on a 10-year, we're on pace for the six consecutive close between the yields of 445 and 4.4.5. 49. Two year, most closely associated with what the Fed may or may not do in the short end with respect to interest rates, let's look at a two week of twos. They last had a 5% handle on the first of the month. They have since also gone very flat in their trading. And if you look at them on a closing basis, it's the eighth potential close today between the yields of 481 and

487. These are really compact closing yield rates. ranges. And finally, we all have been keeping very close tabs on the Dow in its record, which may be in jeopardy with respect to how many consecutive sessions it's been in the green. Maybe one of the big issues there was when the two-year closed under 5%. Look at the two-year against the Dow, and you could clearly see the inverse relationship, especially once we started to move lower and consolidate on short rates. Kelly, back to you. A coiled spring, they call it. And I will be excited to see which way things go.

Rick, thanks very much, Rick Santelli. Still to come, anatomy of a consumer. That could help tell us which way we're going. All this week, we're testing the health and asking experts whether we can still get the economy a clean bill of health. We'll dive into that next. Welcome back to Power Lunch. I'm Contessa Brewer with your CNBC News update this hour. The State Department says U.S. officials have reached out to Israel over a demonstration that blocked aid into Gaza today.

Video circulated showing a group of people blocking the convoy and throwing. blowing supplies from the trucks, you can see stamping them into the ground. They're protesting because Israel pledged to allow uninterrupted humanitarian supplies into Gaza. At least four people have died. Dozens more were trapped after a massive billboard fell during a rainstorm in Mumbai today. Another 60 people got hurt, according to local authorities. That billboard came down on houses and a gas station near a busy road. Weather forecasters say winds reached as high as 30 miles an hour in Mumbai today.

weeks before the official start of monsoon season. And the United States Postal Service will delay plans to consolidate its processing network. A group of bipartisan senators sent a letter to the Postmaster General early this month, urging him to halt the changes until an independent regulator could weigh in on the plan. They're worried about mail delays as the Postal Service makes the switch. Don't get me started on the delays and the post office. We got a Christmas card back like six months after the fact. Yeah.

Well, that took a long time. It was like in a bottle thrown into the waves. It would have been quicker. Contessa Banks, Contessa Brewer. Meantime, all this week, we are looking at the health of the consumer, all the different parts. And let's start with their bank accounts. Steve Leesman joining us with a look at consumer balance sheets.

Steve? Yeah, the we're looking at here is the April read from Equifax, showing credit card delinquencies, how much consumers are well, consumers are doing paying their bills. They show them ticking up to the highest level since May 2020, but remaining below the pre-pandemic averages. And of course, well below 2009 when we really had to worry about this stuff. The combination of low delinquencies on consumer real estate and student loans, it offsets higher auto and bank card delinquencies. All areas are up compared to a year ago. That's the left side of your screen.

But autos and bank cards, those are the ones that are above the 2019. averages. Lower income households are under financial stress, says Mark Zandi, but the worst is at hand. Delinquency is speaking as inflation has abated and real wages are rising and credit standards have tightened. The data show that delinquency rates are highest from lending in 2022. The 2020 class is better because of those tighter standards that banks employed. Wells Fargo tracks, the liquidacy is reported by banks and they're running at a 20% or so above 2019 level. As you can see on the right side of your screen, Amex is best in class and discovery.

Well, they don't look as good. The rate of increase looks to have slowed, however. Donald Fandetti, who covers the consumer credit companies for Wells, tells me the second derivative is turning. Delinquency pressures are easing. It's jobs that keep everything together, and we're just not seeing a lot of corporate layoffs. You can see here, Fandetti pointing to the declining year-over-year rate of delinquencies

at Capital One and City. It's actually true for almost all the major credit card holders. That evidence that the cycle is peaking at his belief that there's value maybe in some of the names he covers because they're trading anticipation of worse outcomes when it comes to delinquency. So, as Fandini suggests, all bets are off if unemployment rises sharply and unexpectedly. And Fed rate decisions are going to matter, especially to low-income debtors. The question is whether the Fed starts cutting rates before there is a more serious credit problem. All right, Steve, thank you very much.

Steve Leasman reporting. Let's dig a little deeper now into the consumer. Every day we're going to examine the health of the consumer this week, one part at a time. Today we look at the heart of consumer spending. Here to discuss is David Tinsley, senior economists at Bank of America Institute. Mr. Tinsley, welcome. Nice to have you with us. I notice you see in your credit card spending kind of a rise in household spending, but it is modest.

So there is no real fall off in consumer activity, but it's not growing terribly quickly. That's exactly right. I mean, credit card spending growth in our data has called a lot from the start of, say, 2023 when we were still in that kind of pandemic reopening phase, which superpowered, if you like, services spending. In our latest data, for April, year and year, spending is around 1% up 1% on a year ago. So there's neither really, when you look through the data over the first few months of this year, an acceleration or a deceleration going on in the data. It's pretty steady, I'd say. Do I read it correctly or do I misread it, that lower-income households spending growth is higher than

higher income household spending growth? Yeah, that's what we're seeing in our data. It's pretty interesting in so far as, you know, there's been a little bit of chatter, I think, from corporate reports, and it's almost become dear regard to think that the low-income consumer is turning over. We don't really see that in our data. We continue to see the low-income consumers spending growth ahead of high-income spending, and indeed their labour market performance, as measured by wage.

and salaries going into people's bank accounts in our data, they're seeing about a 4% year-on-year increase, and it's about 1% currently for the higher-income consumers. So really, as your report was alluding to just before, it's the labor market that's largely the sort of bedrock of this story, and the low-income consumer remains in pretty good shape for now at least. How do tax refunds figure into this spending? Because we're looking at April, a month when a lot of people got refunds. Yeah, that's a good question. So what we've done is we've looked at from the moment someone receives a tax refund and the average refund was up about three and a half percent, but it was skewed to the lower end of the income distribution.

We look at spending before and after, and we see about a 35% increase in spending in the three weeks after the refund to the three weeks before. And interestingly, it skewed this time towards consumer durables and clothing. So not so skewed towards services, more skewed towards the kind of retail end of the shopping experience. But also, and I think this is a noted caution perhaps, But when we look at debt repayments, we see the lower income consumer deciding to pay down debt to some extent as well, particularly credit card debt and student loans. So they did spend, but also there was a sort of note of caution there, I think, in terms of what they did on debt.

So when you break down the spending, you notice there was retail, but are they still doing experiences? Because the travel data is still pretty strong. And is that being lifted by them or is it the high-end consumer? Yeah, I think it's pretty much everyone, really. I mean, we saw, I think, about 20% year-on-year rise in the kind of services spend. So there's still a travel story at the low end going on, too. You know, in a way, everyone's been looking for normalization there, but it still looks pretty solid for now, at least. Pretty solid for now is how we'll leave it for this part of our checkup. David Tinsley, thanks so much.

We appreciate it. Bank of America Institute Senior Economist. Coming up, members only. Fast fashion firm Sheehan rejected from membership to America's biggest retail trade association. We'll discuss what that means for its U.S. IPO hoax when Power Lunch returns. Welcome back, everybody. The Chinese founded Fast Fashion Change Sheehan has been on the fast track.

for a US IPO, trying its best to win over investors, regulators, as well as the broader retail industry. So far, though, the charm offensive has failed to win acceptance from the National Retail Federation. CnBC.com retail reporter Gabriel Fon Rouge is tracking that story. What's the hold up here? So Sheehan has tried to become a member of the National Retail Federation multiple times. It keeps getting rejected. We don't actually know why. What my sources have told me is that there's somebody with sway within the organization that is against it. And let's break this down a little bit. The CEO of the NRF is Matt Shea.

Matt Shea, we don't actually know who decides who becomes a member, but Matt Shea keeps close counsel with his board of directors on the NRF. There's a lot of board of directors, but there's also an executive committee and there's also a leadership committee. There's a lot of retail executives on those committees. You've got Walmart, you've got Target, Macy's, Levy's, Albertsons, some luxury players, LVMH. So whether or not those executives are against this and are holding it up, we don't know.

But we do know they keep close counsel with him. It is called the National Retail Federation. So I guess the question is, it's kind of like the GDP, GMP. Are we defining this like within the borders of whose operate? But you mentioned already other foreign brands that have become part of this. So would she and be unusual in being a foreign brand that was excluded? Or would it be unusual in being a foreign brand that was included? So it would be, it's hard to say because like you said, we've got LVMH on the board already.

Adidas is a member. if you're doing a lot of retailing in the U.S., you can be part of the NRF. That's what board members that I spoke to told me. As long as you're primarily engaged in retailing, you know, Sheehan's largest market is in the United States. So it does raise the question, are you only excluding this retailer because they were founded in China? And then also, you know, NRF is they try to make money as well. They, you know, they make their money by membership dues. And what these board of directors told me is they're trying to grow membership right now.

And they want to expand internationally. So where do you draw the line? I guess the bottom line question is, who cares? Why would Sheehan care? Tyler, there's a very important reason why this matters. Sheen wants to go public in the U.S. And nobody really likes Sheehan in the U.S. It has to win over lawmakers, it has to win over regulators,

and of course the broader retail industry. It's been on this charm offensive. It's been trying to convince everyone that it can be trusted on American exchanges. If it earns a stamp of approval... Trusted with U.S. customer data, mostly? Or for investors? With all of it.

If it can be trusted as an American public company, if we can trust what they're putting and their regulatory filings, things like that. If they earn a stamp of approval from the National Retail Federation, it is the largest retail trade association in the country, globally as well, we believe. And they have Walmart, Microsoft, Google.

They have the largest tech companies and retailers on the planet. If Sheehan is sitting at that table, that could legitimize it in the eyes of regulators. And so they become a part of a fraternity, so to speak. Exactly. It gives them a kind of power. One of the concerns with Sheehan, am I correct or incorrect, is the sourcing of some of her garments?

That is absolutely a concern, and that's one of the main things that lawmakers are talking about. They want to make sure that Sheehan is sourcing its goods from areas where forced labor is not an issue. But that's where a little bit of this hypocrisy comes into play. This is something we've talked about before in this show. Force labor in raw materials is a problem across the fashion industry, and a lot of the mega corporations that are on InterEv's board have faced these same kind of issues. Look at Nike, for example. One of Nike's executives was on the board of the NRF Foundation a couple of years ago.

When Sheehan went under investigation by House lawmakers, Nike got the same letter, so did Adidas. Interesting. And Timu, do you know, have they tried to become part of the NRF? Are they involved at all? Timu is a black box. They don't like to talk to us. They have not done anywhere near the sort of charm offensive that Sheehan has done. Sheehan has really tried to ingratiate itself with American regulators, with American retailers, with the public, with the media.

Timu, not so much, so we're not sure about them. I wonder if it'll just be a matter of time. Still, fascinating. Hold up. Gabby, thanks for bringing that to us. We appreciate it. Gabrielle Fong Rouge. Coming up, Hoop Dreams. WNBA Commissioner Kathy Engelbert will join us to discuss the upcoming season and the trails she's blazing on and off the basketball court.

And we're celebrating Asian American Native Hawaiian and Pacific Islander Heritage Month. Here is T.J. Giam. on Avey Point, CEO. The determination in grid I developed as a first-generation immigrant really led to the perseverance needed to run an app point to the public company today in our field, in tech. We're no longer considered a minority, that community,

and allyship amongst the AAPI community. It's what really help us push us forward and, you know, be successful. Welcome back to Power Lunch. The WNBA season tips off tomorrow night with Caitlin Clark set to make her professional debut. That happened fast. The league is coming off its most watched regular season in more than 20 years

and just announced its teams will be getting charter flights for the entire 2024 season. Kathy Engelbert is the commissioner of the WNBA. She's also a 2024 CNBC changemaker. She's here with Surat Setti, who has been guest hosting for the hour. No Lehi references, please. Although I do note the tie.

Thank you. Yes, okay. So, Kathy, from your own career there back with it, So I just want to go back for everyone who's been amazed at the success of the WMBA and all the excitement around it. You just said something so interesting that 2020 was really kind of an existential year for you guys. Just kind of take us back to that time. Right. Think about it.

Our season doesn't start until May and the pandemic hits in March essentially. You know, the NBA shuts down the sports world. And we don't have a season. We'd be out of the sports landscape for 20 months. And no media money, no corporate sponsorship money. You don't have no ticket sales, anything. So you wonder how many teams would have survived that? We were already in survived mode.

And this was months after you became commission. Months after, yes, yes, very quickly. So I put all my scenario planning hat on from my Deloitte days. And we ended up having a season. The players trusted us. And we had a successful season, crowned a champion. And that put us on our path to today. One of the things that you seem to have done, as the NBA has done,

is to bank on individual players. I mean, the NBA has noted stars. You know who LeBron is. You know who Jamal Murray is. And now you all have a similar sort of cadre of players, whether it's Gabby Reese or whether it's Clark who's coming into the league or some of the established ones like Brianna Stewart or, oh, I can't remember. Isha Wilson.

Yeah, Tyler, it is all about one thing on our coming in from business is very quickly in sports. To get people to watch, you need rivalries. You need household names. You need games of consequence. That's why March Madness is. so popular because every game is survive in advance. And that's why playoffs are so popular. Every game has a game of consequence. And then when you build these household names, I mean, for many years people followed the WMBA, not a player or a team. And now we have this opportunity

to build rivalries so they're following teams and players, not just the league because it's the right thing to do because we're a women's sports league. So it's changed. How are you looking now at expansion? Because now with the popularity growing, where are the next regions? How does that in your strategic plan because this has happened so fast so quickly. Right. So in a country of 330 million people, we're the longest tenured women's professional sports league in the country by double any other tipping off our 28th season tomorrow. You have to be in more than 12 cities because our corporate partners are more than 12 cities. Our media partners want coverage in more than 12 cities.

So we've announced we're expanding up to 16. We've already announced a Bay Area team in San Francisco, which is hugely accretive to the league. and then we'll be announcing some others shortly here. East Coast maybe to help with those games start times. I know a lot of them are a little late in the day for those who live on the East Coast. Yeah, no, we're looking at East Coast, middle of the country.

We have a big gap in the mountain time zone where we have no team. So we're looking at everything. The nice thing is coming off our most watch draft in history with over $3 million at peak. We got a lot of calls just in the last few weeks. The draft was good. I watched the draft.

It was good. It was fun. And there were some good fashions there. It was really nice. I saw you last night in an interview on a sister network of NBC, and you had a very interesting answer to the question of the comparative salaries between women's WNBA and the men's NBA. And your salary is capped at, what, $75,000? Well, that's where it begins a rookie salary.

A rookie salary is 75,000. The max pays up to $2,000. And, of course, comparative salaries in golf or tennis or whatever, soccer, have been controversial. repeat that answer of why you seem to have a much more nuanced view of that than some others do. Well, I like to look at total comp like we do in proxy season, right? With, you know, you have the base pay of a CEO, and then you have their bonus and their stock compensation, and their other and other in our world is endorsements. I mean, our players are getting more and more endorsements.

But we need to work on the pay thing, but we've only been around 28 years. 50-year head start in the men's basketball league, you know, 70,000. five years in the NFL and the NHL and MLB, they're all well over 100 years old. So we're making progress but it's also being funded by the ecosystem called media. Yes, it's bigger TV contracts

which you're going to catch up on. Yes, we're catching up on quickly here and it'll be hopefully historic and we just have this opportunity now with the viewership that we got off the NCAA Women's Tournament to really have a great season this year leading into our media negotiations. You mentioned the charter flights. Were they

flying commercial before that? Yes. Yes. The players have always flown commercial. And again, in most leagues in their startup phase, that's what happens. And then when you get the media rights and corporate partners to step up and provide value, then you can provide for things like that. And we weren't, I wanted to do this for years, but we weren't going to do it until we felt we had built an economic model to fund it for the long term, meaning decades, not just three to five years, but decades. And now we have a lot of confidence that we're going to have those revenue sources, both at the team and the league level. And our owners are all supportive of it. So we're going to do it out of the league two years before our next collective bargaining negotiation and hopefully this will be a big success that we sustain over a long term. Is there any demand internationally? Are you seeing that? Huge low-hanging fruit, Sarat. You know, we obviously had a sold-out game in Toronto last year, sold-out game this year

in Edmonton. We'd love to bring our game to Europe. We have a ton of fans in Europe. Phoebe, the international governing body of basketball is very, very popular outside the United States. So Asia, Africa, a lot of our players hail from Africa. It's just such an enormous opportunity. Don't some of your players play overseas in the offseason?

They do. Some of our players play overseas. Less and less now, but still a portion of them. Some want to go play. Some are from. We actually have about 17% of our players from outside the U.S., who their home country is in Europe or Asia. But, yeah, some players do go. They make an additional salary over there.

Our season isn't that long. We play 40 games, not 80 or 82. or 162 like baseball. So again, we're working on expanding our season. We expanded our playoffs, which are highly valued by our media partners, and we hope to expand them even more. Thanks for being with us. Have a great season.

Thank you. Have fun. Kathy Engelbert of the WNBA. And remember, you can always hear us on our podcast, so be sure to follow and listen to Power Lunch on your favorite streaming service. Kathy's going to be doing that right now. She's going to go back and listen to that podcast. We'll be right back. All right.

Let's get some final thoughts from Sorrel. about Lehi where Kathy went and you went. It's a great institution and everybody should apply. I like the tie. My next door neighbor's daughter down the street is going there next year. She is a great alumni. Tony, good luck. Yeah, she's done a fabulous job.

Can I ask you sort of matter-of-factly about the markets before we go? Is that what we're here for? Yeah, you know, we could go in many different directions. I think what Mr. Cooperman said was it's a market of stocks. And really, if you're invested, look for the opportunities, whether it's in energy or commodities, industrials, and in tech, it doesn't mean you have to avoid tech. People say, oh, you've got to stay away.

You can still own them. It's diversification, and it's the size of what you have. One of the traps that we see a lot of investors get into is you fall in love with the stock, it becomes too big a position, and it doesn't matter what else happens to the rest of your portfolio. You can invest. I mean, we talked about how do you play all this stuff? You can be in infrastructure stocks.

You could be in equinix or an AES, or you can be in other things that are going to do well with copper, Freeport and if that's one part of the market but then you can play the other market of health care and there are other things to play in there too so I think you can be diversified in the area where the markets are overall overvalued but I think the opportunities are still there for the next three five years gotta leave it there Sarat always great to have you with us thank you Sati thank you appreciate it thank you for watching power line closing

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