Power Lunch - Fear vs. Safety, Grand Plan 12/5/23

Episode Date: December 5, 2023

Now that interest rates are up, many investors are seeking the safety of bonds or even money market funds. But those who have, also missed out on huge November rally. We’ll discuss.Plus, gamers are getting a look at Take Two’s ‘Grand Theft Auto VI’ release. The previous version did a billion dollars in sales in just a few days. Can the latest installment do even better? We’ll explore. 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'm Tyler Matheson. Coming up, fear of missing out versus the safety trade. Now that interest rates are up, many people are seeking the safety of bonds, money market funds, CDs, treasuries. But those who have missed out on a huge November rally, the people who have put their money in those safe behavior. Wow, we'll talk about that. Plus gamers getting a look at the next Grand Theft auto release. The last version did a billion of sales in just a few days. Anticipation for this one is even higher. But take two stock is lower. A very fired up Steve Kovac will join us. Let's get a check on the markets before that, though. As you can see some red and some green just in time for Christmas. The Dow's down a quarter percent, the S&P down five points, and the NASDAQ up 19. Apple back above the $3 trillion market cap level today.

There you can see it right around that number at 192. First hit that milestone back in June. We're also watching shares of Starbucks down for the 12th straight session. and sinking to session lows, we'll have more on that coming up. And we start with the fear of missing out versus the so-called safety trade. According to a new report from B of A securities, investors, their love and cash, money market funds hit a record high of $5.84 trillion at the end of November. That's an increase of 27% from data from last October.

But while those investors enjoyed a safe return, they did miss out on a stock market rally. The S&P 500 up 10% from. the low hit in late October. Could that cash on the sidelines come back into the market and send stocks even higher? Joining us now, Jim Tierney, CIO of concentrated U.S. growth with Alliance Bernstein, Stephen Sutton Meyer, Chief Equity, technical strategists with B of A securities and the person behind the report. Stephen, why don't I let you then lead it off here? Is this money that has been in these safe havens, where the CDs, treasuries, money market funds, even savings account. Is this the kind of money that is poised to, inclined to, go back in the market at some

point, or is it money that is being put intentionally in these safe havens? Because for the first time in a decade and a half, the safe havens actually pay something. Well, the answer is actually both. I hate to say that, but sure, you're getting a greater return on cash. Cash is definitely asset to invest in now. And I think that's very important because you're actually getting a nice return on CDs and money market funds. So it will be sticky to some extent. But what is really surprising to me is that even with interest rates falling on the 10-year yield over the last a couple months or so, and the equity market rallying in the face of that, you're still getting, believe it or not, money market funds go to new record highs. I mean, it was really interesting

is retail investors have increased their money market fund. assets, 44% in the face of a 28% rally in the S&P. I mean, that's unheard of. But I do think if we continue to rally on the market, on the equity market here, some of that cash will get put to work and provide a source of funding to make purchases and equities, especially given what we are in terms of seasonality and in terms of the presidential cycle. What do you say, Jim? Is this money on the sidelines rocket fuel for the next leg up? I don't know about rocket fuel, but certainly investors have to think about where are money market fund yields going to be in a year or two years. They're not going to be five and a half. So five and a half feels really good right now and it's

zero risk, but a year from now it might be four and two years from now it might be three. So I think investors have to think about extending duration and whether that's in long bonds or whether that's in equities, both are on the table. Should I, Jim, under that scenario, as opposed to letting my rate float down, should I lock in a longer-term Treasury, maybe a two-year, maybe a, maybe something like, maybe a one-year ladder them out a little bit? I'm in equity, guys. Are there other people at AB that know a heck of a lot more about this? But again, I think investors shouldn't be lowed to sleep by a great current yield. They have to think longer-term here. So, Stephen, just to go back to this idea of cash on the sidelines, you know, is it just an accounting trick in some ways? Or

people who sell their stocks. I mean, they end up with cash that they have to put somewhere too, right? Yeah, of course. And right now, I mean, it seems like the market itself is broadening out. So perhaps some money is being put to work. I mean, you're looking at the S&P 500, bumping against 4,600 with the advanced decline line going to a new high. So the equity market is actually a lot broader than people think. And the other factor, it seems like when you look at the equated index versus the cap way of the index, that ratio found support. So now the average stock is starting to outperform the biggest stock. So maybe there is something going on here under the surface that folks are missing.

If you look at some of the sediment indicators, for instance, such as the Farrell sediment indicator that we track here at B of A technical strategy, they're not euphoric. In fact, they got somewhat more euphoric in the summer, and they paired back. that curve their enthusiasm. So right now, in terms of sentiment, in terms of cash levels, not just us, but the sell side indicator that my colleague Savita Suamani puts out suggests to us that the path of least resistance should be higher. So Jim, Monlight, why don't we go to some stock choices, you being an equity guy that you like

in today's market, a couple from the medical field, broadly speaking, and another that, I guess, could be a kind of medicine, Constellation brands. They sell beer and spirits and the rest. When you look at the year-to-date returns, it's been dominated by the Magnificent Seven. As Stephen talked about, the market widening out is a good thing, and there are lots of opportunities. Cooper companies is an example. Contact Lenz company, they've been taking tons of market share. They raise prices by 5%, give or take, in early November.

That's going to supercharge their business, and you're not going to have as much of a interest rate or currency headwind for them. So I think they report this Thursday. I think there's a positive surprise there. look at Abbott Labs, the discussion has been all about GLP1 and what it's going to do to their diabetes franchise, GLP1s may be a benefit if you're having a blood glucose monitor in addition to your GLP1. And then finally, as you mentioned, Constellation Brands, the growth of Medello, the growth of Corona is unprecedented in the industry right now. Tremendous growth story, the knock on the firm had always been their capital allocation between the new management team,

new board members, an activist investor, I think investors are underestimating the strength of this business and how they're going to be great stewards of capital going forward. So love all three stocks right here. All right, gentlemen, thank you very much. Jim Tierney, Stephen Suttonier. We appreciate your time today. Thank you. And shares of Microsoft have gained 50% this year as they've taken a huge lead in the AI race. But now some competitors are hoping to catch up by teaming up. Julia Borsden literally joins us now. Welcome with more on this new alliance. led by Meta and IBM? That's right. They're calling it the AI alliance.

IBM, Meta, Intel Oracle, and about 50 other companies, as well as academic and research organizations, are teaming up with a focus on making AI open source. They'll, quote, develop and deploy benchmarks and evaluation standards, tools and other resources to enable the responsible development and use of AI systems at global scale, including the creation of a catalog of vetted safety, security, and trust tools. They're also talking about addressing social issues. with AI as well as educating policymakers on regulation. Open source powers the world's most critical infrastructure.

And you talk about interoperability, you know, through open source, it allows people to build very diverse set of applications and interoperate, because to some degree it's become the modern way to have interoperable standards, is to do it by building together through open source. Open AI and Microsoft are notably absent from this consortium on the heels of criticism that Sam Altman's startup

is actually not so open source. I also have to point out that Google and NVIDIA are also not members of the consortium. But this alliance say they want to ensure that AI is not controlled by just a few stakeholders who can license out their tools. So why isn't Google? Invidia, I could see, okay, maybe, but it's interesting to find Google not joining this with META. So Google and Microsoft have both said they don't think AI should be open source. They want to be able to have their own tools and their own sort of playbooks and their own systems that they're licensing. meta is making this entirely open source. And interestingly, I talked to both Meta and IBM about this.

And I said, how is this new alliance can impact your business? How is it can impact potential revenues? And both of them said, hey, we were already taking an open source approach around our AI investments. What this does is just ensure that we're all working together so that the software and even hardware can really be interoperable. What does open source mean in this context? Open source means that they're basically sharing their information about how,

how they're approaching these problems. Obviously, AI is about this huge wave of technological innovation. What they're saying is let's all share enough information that we can have my tools interact with your tools. So they're not speaking different languages. And to be clear, Microsoft and Google have said we want to have our own Waldgarden. Well, yes, for instance, I mean, but yeah, that's how business typically works, right? Business is typically not open source. If you think about how pharmaceutical, the pharmaceutical business works or other tech tools, this they're saying is such a technological leap that they want to open source it. And meta in open sourcing its AI tools has been a little bit of an outlier compared to the Microsofts and Google.

Give me an example from the history of either social media or the internet of open source that worked. Well, I would say typically things are not open source, right? So that's just not usually how it works. What meta is saying here is we're going to share, we're going to open up the doors and let everyone see the way we're using our AI tools so then people can can borrow from them or make sure that their their apps are effectively built on top of our language. Julia, thanks. Great to see you. Thanks for being here.

All right, tomorrow, CNBC's Work Summit focuses on the promise and peril of AI and how it will transform the way we work. Some great guests on lineup. Scan the QR code on the screen there. We'll leave it up on the screen for a few more seconds. Five, four, three, two, one. Or visit CNBC Events.com slash work. I will be there hosting the event.

We hope you can join us at work tomorrow, December 6th, the promise and peril of AI. Now to breaking news on the big bank CEOs set to testify on Capitol Hill. And Leslie Picker has to speak. Leslie. Hey, Tyler, testimonies from CEOs of the eight largest banks in the country

just disclosed the leaders plan to share these remarks tomorrow at an annual check-in with the Senate Banking Committee. In them, regulation will clearly be front and center. No surprise here. J.P. Morgan's CEO, Jamie Diamond, plans to tell the Senate that the Basel 3 endgame proposal, if enacted as drafted will, quote, fundamentally alter the U.S. economy in ways the Federal Reserve has not studied or contemplated. He is urging lawmakers and regulators to, quote, be thoughtful about the effect of arbitrary and unstudied regulatory proposals and their cumulative impact on access to affordable credit and traditional banking products. products, capital markets, and market liquidity, and the economy overall. Morgan Stanley's CEO James Gorman plans to mirror those concerns saying, quote, blanket increases in capital for the large U.S. banks who already undergo rigorous stress testing each year and are required to maintain additional specific capital buffers is wholly unnecessary.

He says the proposal as it stands would increase the cost of capital to large corporations, small businesses, as well as pensions, municipalities, and endowments. There are several of these to get through, so we're continuing to dig in. We'll bring you any additional headlines we come up with. But clearly, regulation front and center at tomorrow's hearings in Washington, Cal. Even as we're talking about the growth of private credit and more capital at the banks, but then so much more opportunity it seems elsewhere. This will be an interesting moment for that.

Leslie, thank you very much, our Leslie Picker. Coming up, we'll talk more about those bank CEO testimonies. And further ahead, we'll have restaurants on the menu. We'll be joined by the former Wingstop CEO, Charlie Morrison, to discuss some of the latest issues facing the space. Power Lunch will be right back. Some of the biggest names in banking will be on Capitol Hill tomorrow, as you just heard. Jamie Diamond, Brian Moynihan, Jane Frazier, all on the guest list at a Senate Banking Committee hearing. The execs will tell the committee proposed new rules for banks could stifle lending and hurt the economy.

For more on that, let's go back out to Leslie Picker, who is at the Goldman Sachs Banking Conference with a special guest. Leslie? Hey, Kelly, yes, a very perfectly timed conference, one hosted by Richard Ramsden, the analyst who covers banks and financial institutions. Richard, thank you so much for being here. So we just hit on some of these testimonies that are expected to be delivered in front of the Senate Banking Committee tomorrow. Key focus, you've done a lot of work on this, is the Basel 3 end game rules. I'm curious what parts of these rules do you think will get the most pushback, and what will they be the most successful in pushing back on that could ultimately lead to some watering down of these rules

that they say will be so harmful to credit in the economy and so forth. So the Basel three proposals have obviously been in focus now for six months. It's obviously been a key focus at this conference. Pretty much every large bank that's presented has spent quite a lot of time talking about these. I mean, if you take a step back, you know, what these proposals will do is significantly increase the capital requirements on the largest banks. And I think, look, what the largest banks are saying is, look, this could fundamentally change the way that they think about certain businesses, and it will change the way in which they approach certain types of lending decisions, whether that's lending to households

for mortgages. It will change how they think about pricing loans for small businesses. It could have ramifications on liquidity in financial markets that could impact things like the Treasury market. You know, so look, these banks are really, I think, saying, look, holistically, these proposals are very far-reaching, and there hasn't been a cost-benefit analysis that's being done that really thinks through, look, what is the ultimate cost of these proposals relative to the benefit, which is that you will obviously have a safer banking system on the other side of it.

And that's a ubiquitous sentiment among the largest bank CEOs. You've done that cost-benefit analysis. You've seen kind of the impact in your modeling of what? what these rules would do. Do you think ultimately, given those results, they will be watered down? I think what's interesting is pretty much every bank CEO that has talked today has said that their expectation

is that these rules are gonna change. I don't know if there's agreement on exactly what's gonna change, but broadly, I think most banks think that the change in risk requirements on say mortgages that could impact lower income households is likely to be an area, there are likely to be changes. The significant change in capital requirements on lending to renewable energy companies is another one, which I think most of these banks I think think could change.

But I think what they're hopeful for is that there will be enough pushback from politicians that the whole framework gets called into question and they go back to the drawing board and come up with something which is quite different to this proposal. Fascinating. Kelly has a question for you in studio. Kel. Appreciate it. Richard, if you don't mind, could you just talk a little bit about, you know, have banks been disintermediated by the growth of private credit, which is obviously within some banks, but also without, and other such institutions, you know, the growth that we've seen over the past decade. How vital, when they're making these arguments to regulators, how vital is it that economic activity is flowing through the banking system?

So I think that is an area which, again, I think will come into focus tomorrow, in these hearings. I mean, if you look at the data, it is really clear that certain parts of, you know, the regulated banking market have shifted, you know, out of the banking system over the last decade. I mean, if you look at mortgages, you go back in time. I mean, the majority of mortgages were underwritten by banks. Today, the majority of mortgages are not underwritten by banks. I mean, if you look at the role that banks play in terms of credit provision, especially to non-investment-grade companies, that's obviously been declining. And the tremendous growth in terms of private credit assets means that that will continue to migrate out of the banking system

over time. I think, look, the focus, though, is this creating new types of risks that regulators need to think about. So I think what the regulators care about is not so much, is the banking system competitive, but are we seeing pockets of risk emerge outside of the regulated banking system that could cause issues further down the road? In terms of today's conference, you've spoken and heard from dozens of CEOs at this point in time, it feels pretty okay. Everyone is reiterating NIA guidance despite a lower interest rate environment.

Capital markets seem like they could be picking up credit quality. Seems like it's normalizing, but not necessarily deteriorating into any areas of concern. Health of the consumer, okay. Is that kind of your general sense as well? I think the key message is that most of these banks feel pretty good about the economy heading into next year. So relative to last year when we did this conference, there was a real question mark about the risk of a recession, about the risk

of stagflation. Those have really faded into the background. You know, I would say most banks now think that the base case scenario is that you do get a soft landing, that the Fed has threaded the needle, they've brought inflation down, but economic growth may dip negative. for a short period of time, but it's not going to be a traditional recession where unemployment increases dramatically. So I think most of these banks are feeling really, really good about the path for the economy and think that a recession, or a deep recession, at least, is now a relatively low probability event.

Secondly, look, I agree. I think, look, there's a lot of focus on what is going to happen to revenues and net interest income for the banking system more broadly. And look, the two, I think, most important things are what happens to net interest income. And as you said, most banks have said, look, declining interest rates is probably going to be positive, especially in the second half of next year for net interest income. But the second thing is what's going to happen to capital market activity, especially M&A and ECM. And I would say the term there is cautiously optimistic.

So pipelines are building. Corporates are very engaged. Financial sponsors are very engaged. And that should be positive for the revenue picture next year. Only net additive. If NIH, despite the interest rate backdrop, is still looking decent, The one caveat, the one anomaly, and I know we hear from Mark Mason, the CFO of City tomorrow, is Jane Frazier in her comments to Congress tomorrow.

She says we do expect a recession as a result of a range of macroeconomic factor. So perhaps she is the one kind of anomaly in the group of CEOs and in their commentary. So we'll see kind of what kind of color she adds in front of Congress tomorrow. And I think the key thing will be what type of recession is she. expecting? I mean, is this a technical recession where economic growth goes negative for a short period of time, or is it a true recession where you get a much shorter, you know, pull back in terms of economic growth and a significant increase in unemployment? There's a really big difference in terms of what that means for the banking system. Absolutely. Richard Ramston, thank you so much

for your perspective. Really important day for you. We appreciate the time. Pleasure being here. All right. Guys, I'll send it back to you. Richard, Leslie, thank you very much. And coming up, a rock star moment, the long-awaited Grand Theft Auto 6, finally getting its first trailer. Some already expecting this could outsell any game that has come before it. More on that ahead. Bond yields are falling today after the job openings hinted at a cooling labor market. Let's get to Rick Santelli in Chicago. Rick, this bond move has gone from Wow to Morewow. Yeah, absolutely. And, you know, the measurements, and we went over that on a chart yesterday, If you measure the head and shoulders that we violated that neckline right around 4.5.4.6%. That measurement comes out to around 4.10. So there could be still room to run. Even when it gets there, it doesn't mean it's going to stop. That's just a measured objective. The big number today, $617,000. That's the drop in October. Job openings and labor turnover known as Joltz that Kelly's referring to. Look at an intradate chart of tens, 10 o'clock Eastern.

Look at that volatility. And when you add in a couple of days, well, you can see we took out Fridays low. That's the right side and the left side. But two-year notes yields, for example, did not. So more inverting of the yield curve on that weaker than expected data. And that puts the tenure right on pace for a fresh three-month low yield close, as you see. Anything below 417 takes you back towards the last sessions of August currently. We're on a close equivalent to the first day of CEP.

But maybe the important issue is November. Yes, we have an election in November, which means the last Fed Fund futures contract in front of the election would be the 17th and 18th of September. Take that September contract and look at it since it made its all-time low right around the 26th of September. The reason I'm putting it up, the implied rate there is 4.3,000. about a hundred basis points lower than we're trading.

Kelly and Tyler, back to you. All right, Rick, thank you very much. Shares of Uber have more than doubled this year. One reason the stock is being added to the S&P 500, news of which gave it another boost. It's a common trend. Stock really does well, joins the index, does less well. Some call it reverting to the mean.

Others call it the S&P 500 curse. Let's bring in the wizard himself, Bob Bazani, for a little wisdom. Wizard. Hello, Tyler. Good to see you. Uber's finally going into the S&P, as Tyler said, four years after going public,

and just shy, by the way, of an all-time high. This is good news for Uber investors because all those index investors are going to be forced to buy Uber to include it in the index. It's bad news for holders of the S&P because it's become a very expensive stock to buy. Uber went public in May 2019 at $45.

It's now close to 58. That's up nearly 50% in the last month. The market capitalization is 120. billion dollars. This would make it roughly the 66th largest company in the S&P 500. It's basically on a part with Amex, AT&T, lows. That's a nice company to be in. This speculative rising companies going into the S&P is a well-studied phenomenon. It's called the S&P 500 inclusion effect. It's the tendency of a company's stock price to rise on speculation. It might be added to the S&P and also rise when it's initially announced, like it was yesterday or Friday, but then underperform the benchmark

after it's added, after it underperforms. Tesla's another example of this. It shot up 50% between the time the S&P announced it was going into the S&P in November 2020 and its inclusion on December 18th of that year. Tesla instantly became the fifth largest component in the S&P 500 when that happened. Then the stock flattened out.

It went nowhere for the next year, essentially. So here's the bottom line, guys. The act of adding a company to the S&P 500 or even speculating it'll be added just before has the effect of at least temporarily overvaluing the company. This leads to a strong likelihood that it might underperform at some future day by mean reversion. Uber, by the way, set to go into the S&P on Monday, December 18th. And, Kelly, we've seen this with ETFs.

When cybersecurity was a big thing a few years ago, we had all these new cybersecurity ETFs and everybody bought them at the height because the demand for those ETFs were so strong. It drove up the prices. And then, of course, subsequently, they underperformed. It's a pretty well-studied phenomenon, Kelly. It's that season. We get the S&P 500 curse, the Santa Claus rally. All the familiar patterns are showing themselves. Bob, thank you. We appreciate it, Bob Bassani. Out west to Kate, Rudy, now for a CNBC News Update.

Kate. Hi, Kelly. So Senator Tommy Tuberville lifted his hold on most of the military promotions that he has been blocking for months. He said this afternoon he released all of the promotions except for about a dozen four-star generals. The backlog of nearly 400 promotions has been building since February as the Alabama Senator protested a Pentagon policy which reimburses service members for travel to seek abortion care. Vice President Kamala Harris just set a new record. She is now cast the most tie-breaking votes in the Senate in U.S. history. She broke the previous record set by John C. Calhoun back in the 1800s by approving the nominations of a U.S. district judge. And billions of dollars are being poured into a high-speed

rail train connecting Las Vegas to Las Angeles to Los Angeles. ahead of that 2028 Olympic Games in LA that's coming up. Nevada Senator Jackie Rosen says the Transportation Department will award the project $3 billion. The 218 mile Bright Line West is expected to reach speeds of 186 miles per hour. It'll get passengers between those two cities in just over two hours. Right now it takes about four hours to drive that distance. That is without traffic guys. Kelly, back over to you. Wow, I also saw some rail approved in my old neck of the woods from Rale. to Richmond. Wow.

They're going to put something together. Interesting. Kate, thank you. The East and West Coast. I'm waiting on that. Yeah, well, that would be a long trip. Super high speed. R. K. Rudy, we appreciate it.

A head on Power Lunch, growing concerns around the future of Starbucks. It's lower again today. It's down more than 7% in a month. We'll ask a former restaurant industry insider about this and more next. Welcome back to Power Lunch, everybody. Starbucks shares down 11 days in a row. concerns now arising about consumers trending down in an economic slowdown, maybe not wanting to pay $7 for that vanilla latte like I did last week. And on top of this, the food industry is still

facing inflationary pressure, feeling the impact as well from weight loss drugs like Ozempic, or so they say, here to discuss these headlines and the latest trends in fast food, Charlie Morrison, former CEO of Wingstop. He is now the CEO of a new drive-through concept called Salad and Go. We'll talk more about that in a moment. But let's talk a little bit about not Starbucks so much, but about the consumer. Are consumers becoming more price conscious? So one of the things you're attacking with your new startup is you are a very price conscious player in this. But are you seeing that, a more price conscious, price sensitive consumer? Absolutely. You've seen brands for the past few years

taking a lot of price. And I think consumers are starting to reject that. Absolutely, all of them. And, you know, some of it warranted by the supply chain challenges they've had, but the pressures are there. And I think consumers are saying, look, you know, it's too much. We need a value option. We need healthier food. We need somebody to come up and disrupt this thing and find a way to get us what we really want, which is fresh food, good food, good for you food, at a great price. So why don't we talk a little bit about your new startup, currently the CEO of Salad and Go, which is a drive-through-only salad-a-old. concept. Tell me about the price point. Tell me about how you do it. You just described your

company and yourself as a disruptor in the industry. How so? Well, it starts with making sure that we recognize the challenges of supply chain. And we have built this concept around the concept of a central kitchen where we bring all the produce in fresh directly from the growers. So we're disrupting the supply chain by going vertical. When we do that, then we provide all of that fresh food to our stores, which are only 750 square feet in size. Wow. They are a double drive-through. It simplifies the labor model both in the store, and then moving a lot of that,

the challenging part of the labor model for restaurants, which is the kitchen, the assembly of the food. Where we do that. So we build them first. We build the stores around them. Doing so allows us not only to still pay a very competitive wage at $15 an hour starting in our stores, over $20 an hour inside our central kitchens. But also, we can return the efficiencies and the savings through the entire supply chain back to the guest, the customer.

And they can get a salad with protein, chicken or tofu, 48 ounces of product for just under $7. Yeah, Americans going to go for fast food salad. Listen, I wish there were more fresh options, you know, on the go. Don't get me wrong. But you think this concept is going to work nationwide or is it going to be more targeted, tailored? I joined this company as a board member while I was still at Wingstop and felt. in love with the brand. And what I love the most about it was the passion our customers have for this product. And it's not just salad eaters, if you will, people who are more prone to,

you know, they like to eat salads, but it's everybody. And the price point is the real differentiator. They want healthy options. Customers want to see something that's affordable. For seven bucks plus a drink, so under 8, 850, you can't buy a burger fries and a shake for that anymore. But not even close. It's like 15 bucks. We truly have demonstrated portability. The brand started in Phoenix. We've expanded now into multiple markets. We're in Las Vegas. We're in all of Texas, up into Oklahoma, moving into California, Kansas, soon to Georgia.

We're moving fast. I'm always a little scared of eating raw lettuce. I'll be honest, at the fast food restaurants. I mean, there's a little bit of comfort and knowing, hey, at least something was cooked and it's not going to happen. So I don't know if there's a little bit of that ick factor as well, or maybe that's just me. I don't hear that much.

I think the skepticism would be, how do you do it and make it so inexpensive, expensive and you're still using romaine and mixed greens and fresh ingredients. The central kitchen is really the key to the safety element of this as well because we're able to control everything, clearly controlled environments. That's hard to do in thousands of restaurants in those kitchens around the country that a lot of brands have dealt with. And we've seen some impacts associated with disease and contamination and foodborne illness from that in the past.

So this model completely disrupts that. It changes the game. If there is an impact on the restaurant business or the grocery business from the growth of these weight loss drugs, OZempe, or Govi, Mungaro, whatever they call it, I would assume your answer would be, hey, we're in a good place for that because we're selling salads. But my more sort of tertiary question is, are you really literally seeing that? Is this idea that weight loss drugs are going to materially affect the restaurant business, the grocery business? Is that true or is that myth? Well, I agree with you on your sentiment about salad and go, that it absolutely will be beneficial to this brand. If the phenomenon is real.

If the phenomenon is real. And we do believe it's real. We believe it's real because consumers are telling us they want healthy options. They want them to be affordable. There's not a brand out there, I believe, today, that eliminates the... that conflict between accessibility, affordability, and wellness. We do that because we provide you with a fresh, high-quality product. All of our dressings, all of our products are made without preservatives and additives,

just the way you would expect it to be, and we do it for a very low price. So regardless of whether they have the drug to benefit a better, healthier lifestyle, or they just choose to eat well and can afford it, I think finding accessibility either is going to be beneficial to all this. have to let you go. But what's the scuttle butt on Starbucks? Why do you think I think the shares are down for 12 straight days? And are we just, is this just a stock slide that we should shrug off? Or do you think there's, is the consumer board? I don't know. Well, I think the consumer wants value. I think they're tired of the high prices. And for what you have to pay for what you get, I think that's a real challenge in the restaurant business today. And we're seeing it across the board.

The lower end consumer is definitely voting right now. And I think people are trading down. I think we're going to see more of that for sure. And I think they're going to trade to better occasions, value occasions, healthier occasions. Charlie, will you bring one of these to New Jersey? I will. You will? You will. Get on that.

Please, very quickly. As fast as I can. Call me. We'll say that. All right. Charlie Morrison, thank you very much. Appreciate you, John. It's been fun.

Coming up, we'll talk about a sneak peek. Take 2 Interactive, moving up the release of its official Grand Theft Auto 6 trailer after it was released online. What we now know about the game, that's been a decade in the making and could be a few more's yet still a few years more to wait. Power lunches back into. Well, it's a moment more than 10 years in the making. Take 2 and Rockstar officially announcing Grand Theft Auto 6 after the trailer was leaked online.

On X, in fact, hype around the newest installment leading some to expect billions in sales, but it won't be released until 2025. Shares of Take 2 are actually lowered today as we digest all of this. Steve Kovac is here with more. details. Yeah, and let's talk about the stock move first of all because, you know, people are really curious about this. Is it coming out late? Is it coming out, you know, unexpectedly delayed or anything like that? It's not. This is, if you look at Take 2's guidance, they gave back in May for their fiscal year 2025. It really looks like this game is going to come out probably the first calendar

quarter of 2025, so early 2025. That's assuming the guidance hold, assuming no more further delays. But they really gave the street a big hint of. when this game is coming out. And there's reason around this excitement. It's because the previous game, Grand Theft.05, continues to make billions for this company. And when it first launched a decade ago, first day, 24 hours in sales, $800 million,

within the first three days, $1 billion. What, the first, how many days? 24 hours. I think I remember. 800 million? There's no movie does that. No movie does that. This is the biggest entertainment property

in history, this one game, and now we're getting the sequel to it, 80 million views on YouTube, I think we have up there, more than the Beyonce trailer, more than the Taylor Swift trailer. It is, this is a cultural phenomenon and a huge moneymaker for Take 2 and its studio rock star. How is the game done? So you'd think a product that was now 80 or 9 or 10 years old or whatever it is, you know, it loses. It is still making money. That's extraordinary.

And a lot of that's online plays. So, you know, they add stuff to the game over time. You can play online, play against people, continue, you know, recurring revenue. This looks like real life footage almost. Exactly. I mean, this is a new generation, so this is going to be on PlayStation 5. It's going to be on the new Xbox consoles. So that's why it looks so good compared to the game that came out 10 years ago. And look, we don't know details about how the game will work. All we have is this minute-long trailer. But based on the history, based on the pedigree of this company, and what they've been able to do with previous titles and just the excitement around it, you can see what you can see the results here. And they're starting to promote a game that isn't going to be out for another year plus. Between, you know, 10, 12, or sorry, 12 to 14 months, let's say. And people spend in the game using these credit cards already. I mean, it's very lifelike, but so that's how they're continuing to monetize. It's not only that, Kelly, it's this game has been across three generations of video game consoles over the last decade.

So people buy, you know, they might have bought the PlayStation 3 version back in 2013, then they buy the PlayStation 4 version, then they buy the PlayStation. version, and then they buy all the online stuff, too. So it's just constant recurring revenue. They're always adding new content to it and new missions and new things to do. It's also an amazing story. These are epic games. It's not just what we see talk about so much, the violence and so forth.

It has that. But it's also like a really deep story. It's incredibly immersive, and it's an open world game that people can spend hours. I mean, there's a lot at stake for the next release. Yeah. I mean, these guys have the pedigree. Again, this is this, they have not failed before when it comes to these main launch titles. Some of the mobile stuff has kind of failed, you know, not been as successful.

But when it comes to the marquee console games, they're all hits. And they just, it's a home run every time. I think my son, my son for his birthday just got PlayStation 5, and I think either it came with Grand Theft Auto or the old one, the old. The current one, yeah. The current one, the current one. So it's a big deal. And they'll sell you the game now for like $10. Yeah.

But then you buy stuff online. Ons and oh, Dad, I need your credit card. Now, when this game comes out, it'll probably cost about 70 bucks, you know, just for the game, and then they can add on from there. But these games, you know, the game itself will get cheaper over time, but of course they can add more stuff and keep you. We've got to leave it there. Steve, thanks. Steve Kovac. Still ahead, lattes, lithium, and long-term investments. We'll trade some names in the news today. Starbucks, Alamo, Robin Hood, fresh three-stock lunch coming up. Time for today's three-stock lunch. We're going to take a look at

three big movers of the day with our trades is Jerry Castellini chief investment officer at Castle Ark Management. And up first, the stock we were just talking about a few moments ago, Starbucks down a percent today on track for its 12th, 12th down day in a row. It needs some caffeine, Jerry. What's going on? Yeah, a tough situation. We're a sell on it right now. It just doesn't have any visibility coming up in a very important fourth quarter. New CEO, some questions on China and some of the other places. And there's just better places to take 20, 25 multiple values than this one right now. And I wouldn't want to wait for all of that stuff to get over and try to tough it out.

All right. Not waiting around. What about Robin Hood? They're saying their crypto trading volumes in November were 75% higher than October. That goes back to the good old rocket fuel that used to power this day. name. It's up almost 9% today. What would you do here? Yeah, so this is kind of the mirror image. I'll just go back. Starbucks could be one of the best stocks in the next five years. We just don't want to touch it right now. On the other hand, we have no idea what can happen to Robin Hood.

It could be the next Uber, it could be the next Amazon, or it could be out of business. They've just have a tough balance sheet situation. All that said, you're talking about a stock that today has very little priced into it for a Bitcoin ETF, a surge in trading now that the Fed is eased back. If you look at where this stock was when the Fed started raising rates and where it is now, it's dramatically lower. And I really think this is one, if you're going to put some money into the market today for all the changes that are likely in the economy next year, this would be at the front of the pack. All right. Let's go finally to AlbaMarl. Shares down around 6% today, down

grade, Piper Sandler, cutting the rating to underweight, lowering the price target to 128 a share. I think it was 140, your trade here on Albumarle. Yeah, I mean, these are, this is kind of tough. The stock is down to 65%. But think of it this way. If you go out in the next five years, it won't matter how many EVs Ford sells in the next two quarters. The names that are attached to this stock right now are the names that have a near-term electric vehicle impact on earnings. Alvimar just has the most exposure to lithium of any publicly traded company in the U.S. It's safe. It's well managed. They're just in a really, really soft spot right now. There's too much lithium on the market for 2024. But starting in 2025, there's just going to be a shortage,

and you're going to want to be able to pay for it. And so that is a buy on Alba Marr, right? Yes, it is. It's down more than enough to account for what's happened. Gotta leave it there. Jerry Castellini, always good to see you, sir. It's good to see you. Thanks. Happy New Year. You too.

Still ahead. It is, I mean, advent. Anyway, eyes on the IPO. Lawmakers are ramping up the scrutiny of China's Shian after the fast fashion company filed to go public here in the States. Pretty predictable, but we'll talk about it when Power Lunch returns. Welcome back, fresh scrutiny over Sheehan's IPO. One congressman is pushing the SEC to block it from going public.

Like CABC.com retail reporter, Gabrielle Farn Rouge, joins us as it ramps up as we thought it might. Exactly. Sheehan has had a lot of scrutiny throughout its entire journey. As it's getting more successful, that scrutiny is ramping up. And so you've got Congressman Luke Kameyer basically saying that the same kinds of things we've heard about then, the concerns about forced labor in their supply chain, how they're avoiding U.S. tariff laws. And then kind of behind all of this is the company's connections to China. It still has a Chinese CEO at the helm who we know very little about.

Its supply chain is almost entirely based in the region. And with rising geopolitical tensions between Beijing and the U.S., this is just not a good time to have those kind of connections. Is there a concern here, this is kind of fast fashion, right? Yes. Is there concern about IP protections, international, intellectual property? So that's been a big problem for Xi'an. You know, like I said previously on the show, they were sued back in July that their IP infringement was so bad. It could be considered racketeering.

But Congress doesn't really care too much about that. At least that's what they say on the record. You don't care much about racketeering? No, what they care about is these human rights abuses, the forced labor in the supply chain, and also that they're not paying any import duties. You know, Gap paid about 700 million in import duties in 2022. She and Timo paid zero. That's the one that I think is getting more and more attention.

I don't know if they ever moved to slap them regulatory, it would derail the whole operation. Exactly. Yep. Stuff to ponder. All right, Gabrielle. Thank you. Nice to have you with us. Thank you. And thank you all for watching. Powell Ramon. We appreciate it. Closing bell, she said, starts right now.