Power Lunch - IPO's Worth Buying, PE's Push for Employee Ownership & Chinese Stimulus 9/26/24

Episode Date: September 26, 2024

CNBC’s Tyler Mathisen and Kelly Evans take you through the heart of the business day bringing you the latest developments and instant analysis on the stocks and stories driving the day’s agenda. “Power Lunch” delves into the economy, markets, politics, real estate, media, technology and more. The show sits at the intersection of power and money. “Power Lunch” gives viewers a full plate of CNBC’s award-winning business news coverage, plus a healthy dose of personality from the show’s anchors and the network’s top-notch roster of reporters and digital journalists. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome everybody to Power Lunch. Glad to be with you alongside Kelly Evans. I'm Tyler Matheson. And stocks are higher right now, but experience a little volatility throughout the session. A little, but I mean, generally speaking, it's been green arrows across the board. And it's all about China. Stocks are soaring there again as the country gets even more aggressive on stimulus, this time more fiscal. $280 billion of sovereign bonds they're going to issue this year. Big number. It's sort of the, hey, we're going to do whatever it takes to get the economy going again. That's exactly what people are saying. moved over from relying solely on monetary stimulus now to bringing in the fiscal weapons. It's got people thinking back to Mario Draghi's comments.

We'll talk to Marco Pappich about this 12 years ago when he said, I'll do whatever it takes to defend the EU. Boom. Wasn't that a moment to buy European sovereign debt? David Tepper made some comments this morning echoing his famous call on stocks also about a decade ago. But he was very bullish on China on Squawk Box. Take a listen. I thought that what the Fed did last week would lead to China. easing, and I didn't know that they were going to bring out the big guns like they did,

and I think there's a whole shift. Well, when I asked what he was buying in China, Tepper said everything, and he said it not once, not twice, but three times. I think there's going to be a lot more to discuss here. Last hour, some of our guests were very, I don't want to say bearish, but cautious on whether this could be anything more than a two-month run, acknowledging, fine, two-month rally. That's what you've had in China for years now, but will it be more than that? All right, let's stick with China and that economic stimulus, which is really the big sort of underpinning story of the markets around the globe today.

The economic stimulus there. Joining us now to discuss this is Anna Ashton, the founder of Ashton Analytics and Marco Poppich. He's chief global geomacro strategist at BCA research. Anna, how big is this economically? It does seem as though China is pulling out the stop. here and realizing, number one, that they've got a weak real estate sector and a stagnant economy, and they've got to do something. Right.

It definitely is pretty big. It's the biggest stimulus since pre-pandemic days. You know, whether or not it's enough, I think that remains to be seen. And part of the reason that remains to be seen is because there's not an indication that that the government is in any way sort of scaling back its focus on developing new industries. And so that leads to questions about whether or not the support that the government is rolling out is going to be sufficient to prop up the industries that are already the major engines of the economy. So Marco, obviously from the get-go here, Chinese stocks have gotten a big boost.

The stocks around the globe have gotten a big boost. How do I take what the Chinese did today and apply it in my own portfolio? What should I do? What should I not do? Well, I think what you need to start looking for is value, especially in emerging markets, especially in beaten down currencies and economies. For example, BRL could be a very interesting buy at this point. What is BRL? For those who don't know, BRL.

Yeah. So Brazilian Real is a good example of. of a currency that's going to be pretty correlated with what China does almost to the extent where it doesn't really care what's going on domestically in Brazil. So this is a very broad potential move by China that should benefit cyclicals over defensives and global stocks over US. And most important for US investors is that if China has truly committed to putting in a policy bottom and actually starting to focus on fiscal policy, in that case, the dollar should also

start declining, which it already has been for the past two months. And so that for a U.S. domiciled investor means just buy anything foreign at this point. And obviously, what else do I have to add to David Teper's point? I mean, he is obviously a legend, and he's saying buy everything in China, can't disagree with that either. Let's flesh that out a little bit. He explained in part why he thinks these measures are so dramatic that were just announced. Take a quick listen to what he said about the efforts lawmakers they are pursuing. They're also, believe this or not, swap facilities to buy stocks. Encouraging buyback of stocks.

Encouraging buybacks of stocks. Okay, this is China. All right? This is stock buybacks, not only encouraging it, lending you money to do it. And they're giving money like health money where you can put money out and you have no losses if you want to do it. You know how that thing works? You have what only the money you put up and you can don't lose money. That's a great deal for me.

I want to be over there and borrow for some of this stuff. Anna, let me turn to you. Why would they be pursuing such aggressive measures like this? Because they don't have another means of really stimulating economic growth in the economy, especially with the real estate market, floundering sort of indefinitely. They really do have to look to the stock market to try to boost growth. The question is, is this going to make any difference to unemployment? Is it going to make any difference to consumer confidence?

Marco, let's talk about something very broad, and that's the idea that Xi Jinping is certainly the most autocratic authoritarian leader China has had maybe since Mao. The economy in China did extraordinarily well when there were less autocratic leaders in charge there. Is this then what he's had to do here? And the state of the Chinese economy, is it a tell in any way about the relative virtue of authoritarianism in control of an economy versus democracy or a less authoritarian hand in the running of an economy? You know, I think it's a lot simpler than that. I think that what we had basically in China over the past five years is secular stignation. This isn't that much different from what happened in the U.S. and Europe after the great financial

crisis. You have basically the popping of the real estate bubble. And just like in Europe and in the U.S., Chinese policymakers, whether they're authoritarian or not, they've actually faced a very human response to a leverage crisis, which is to focus on moral hazard, to focus on the leveraging, tightening everyone's belt, you know, lots of sort of, you know, focus on prudence and not letting local government debt expand. That hasn't worked because it hasn't worked anywhere. The only way to deal with private sector the leveraging is unfortunately to actually leverage

the public sector. It took the U.S. and Europe some time to figure that out. It's taking the Chinese some time to figure this out as well. And so that's why two days ago, the announcement by the financial regulators were actually not that bullish. It was just more of the same, more interest rate cuts, more monetary policy easing. That's not going to do anything in private sector leveraging, as we found out in the U.S. So the reason there's a bullish signal today is because this surprising Politburo meeting

came on top of the monetary policy decision from two days ago. And today, there's a complete shift in verbiage on fiscal policy. Now, we don't know what they're actually going to do. So that's why I agree that there's still a lot to figure out what kind of fiscal measures they're going to implement. But the focus on fiscal is the game changer today. That's interesting, Anna, so build on that. And again, pursuant to those who might say, okay, this is a two-month trade. And it always is with Shanghai or with China, that you can kind of make some money in the very short term, but in the long run, it's a losing trade.

Is what Marco's describing, is that realization on the part of policymakers, okay, government borrows more debt, clean up the private sector, come out of this. Okay, is that going to be profitable in the long run, do you think, for investors? It has a better chance of being profitable in the long run than other moves that have been made so far. You know, I think the question about whether or not there is something to be drawn in terms of, you know, the benefits, relative benefits of democracy versus autocracy and managing economies is less about this and more about, you know, industrial policy, the effectiveness of industrial policy. And you still have a Chinese government that is quite committed to its industrial policy of developing new industries.

And those new industries are not yet big enough to absorb the employment, to create the employment that's needed in the economy and boost consumer competence. So I think that is really a key here that can't be left out of the equation. Sure. Even the carmakers, which have been very successful, EV-1s, are now being tariffed all over the world, kind of preventing their flourishing, I guess we could say. So, Marco, there's a couple of different questions here. You mentioned U.S. investors should think about investing in any stock market outside of the U.S. because of the weakening dollar.

Tepper did mention maybe to be cautious on Japan. If it starts doing too well as a result of China's success, they could have to raise interest rates and upset the apple card. And he also mentioned that U.S. valuations might be a little stretched. Do you agree with all those observations, or where do you see sort of what's the portfolio? now post all of these announcements that people should be thinking about? You know, I would favor Japan and Europe actually equally. I don't think that the BOJ is going to over tighten. In fact, I think there's going to be a nice currency tailwind as well to investors in Japanese

equities. You could actually argue that Japanese equities didn't appreciate enough over the last 18 months given the weakness in the yen. And I think that divergence was because the main growth engine for Japan, i.e. China, was on the sidelines. But, you know, most investors that I speak to, they don't want to touch emerging markets at all. It's, you know, you hear the same things. Everyone's basically in Indian equity market.

Everyone has completely run away from Latin American markets due to politics in Brazil, Mexico. Southeast Asia is not really causing anyone to, you know, get super excited. And I think that this move by China does give us a bottom for emerging markets. And I think that you could start seeing some real trends there and some inflows. Also, just commodities should do better, which will then help commodity producers as well. So my mix would be equal to Europe, Japan, and emerging markets. As you said, those are some big bets for investors who've gotten quite comfortable just sitting in the U.S. And maybe a little India in recent years, potentially a big shift there.

Thank you both for your time today. Really appreciate it. Anna Ashton and Marco Paypitch. And over here in the U.S. investors are sending stock prices up. economic news helping that as well this morning. Jobless claims back at a four-month low, GDP growing 3% in the spring. Gross domestic income revised higher. That was a key if wonky one. It all strengthens the case for a soft economic landing, especially after last week's rate cut

and the prospect of more. Further ahead on the show, we'll speak to billionaire Don Peebles about the economy and real estate and more. As we had to break, though, let's check in on the chips with two key names on the move. Micron to the upside, up 14% on its strong outlet. look, robust AI demand boosting chip revenue. It comes when money is on the table for anything AI related. Even Open AI is looking to shift towards a for-profit model. On the negative side, however, our reports emerging the Justice Department is probing super micro after a former employee includes the AI server maker of accounting violations. Those shares down 13% today. Back below 400. Power Lodge will be right back. Welcome back, everybody. Debate over the wealth gap has

sharpened in recent weeks as both presidential candidates try to woo middle class voters. New reports from Gallup and Motley Fool show just how wide that gap can be. For example, they say the top 1% of income earners hold 50% of all stocks worth about $21 trillion. The bottom 50% of income earners own 1% worth about $430 billion. Now, against this backdrop, there's a push on Wall Street to expand equity ownership for the rank and file. A sale announced by KKR, today gives tens of thousands of dollars in special payouts to equity holders at a construction company. Here with more on this announcement, Leslie Picker. Hi, Leslie. Hey, Tyler. Yes, we are actually joined by Pete Stavros, who is joining us from Denver, from an event, where KKR announced a deal.

Stavros is the global co-head of private equity at KKR. And thank you for joining us, Pete. You announced this deal today to sell Geostabilization International GSI to Leonard Green, a return of five times the equity invested by KKR. You're at this company event in Denver where you announced that all 900 GSI employees will receive payouts with the most tenured getting $325,000 each. Now, just to put things into perspective, the average wages for these workers is about $80,000 per year. What were their reactions like at this event? We watched some of the footage coming in and heard one person say, for example, very excited. They could be. buy a new car and this is going to help them get that new car.

Well, it took a minute for the news to settle in. We have over to my right here, there was a table where we handed out envelopes where people actually got the specifics of their payout and what the math actually meant for them individually. Your comment about the car, part of the announcement today was, and we always do this, we prepaid for 12 months of financial counseling, this time with Ernst & Young. Also, we're taking care of everyone's tax preparation and tax filings. We want to make sure people pay their taxes on time, of course, but that the money goes to the highest and best use possible.

A number of our colleagues six years ago at the beginning of the journey, we're in debt, and now some are walking away with $325,000. We want to make sure the money goes to its highest and best use. What would you say from a business standpoint here? Did employee ownership in this company directly correlate to that 400% return, that upside in this sale is there a direct correlation that you saw in this case in particular there's there's no question i'm i'll just give you one statistic the turnover rate of the employee base and this is an epidemic in the country was almost 50 percent so think about that that means

this company was rehiring its whole workforce every two years and i wish i could tell you that was uncommon but in america on in an average company 40 percent of workers are leaving every year that quit rate at this company is now 17%. So think about the benefits to productivity, quality, customer satisfaction, doing jobs the right way on time. There's no doubt in my mind we would not have gotten the 5x result for our investors had we not been able to create this culture of engagement where people want to be at the company

and stay at the company. Pete, may I just observe that this is not the typical face of PE that a lot of people associate with how private equity companies relate to their workforces. Have you or KKR done this in other instances with other companies that are part of your portfolio? And am I remembering, were you on 60 Minutes? So 60 Minutes did cover this story earlier this year. Look, we started this effort 15 years ago.

We've now done this with more than 50, well, we have currently 50 companies. with more than 120,000 front line workers who have ownership. And this is across all industries. We're doing this in other geographies, not just the United States. And we've exited more than 10 of these investments. And so you've done this, you've followed this model before of making large life transforming payouts to workers. We've been doing this 15 years.

And every time we do it, we get a little bit smarter. You know, I wish I could tell you this were easy. I mean, you mentioned it's not common. Well, it's hard. You know, it sounds so elegant, like, we'll just give workers ownership and great things are gonna happen. They're gonna be happy, they're not gonna quit,

that's not what happens. There's a lot of mistrust, there's a lot of skepticism, and it takes years to build these special cultures where employees feel respected and trusted and included and don't wanna quit. And then start to really get engaged in the job as a business partner and help you deliver great outcomes for customers, which creates great outcomes for our investment,

and creates wealth for the workers themselves. And you were in DC this week advocating to update the 1974. I believe it's the ERISA law that kind of can help incentivize more companies to give equity to employees. What exactly needs to be... I lost Leslie there, but I think I know what the question was, which was, yeah, I was in DC this week meeting with members of the House and Senate and talking about a huge opportunity to modernize the ESOP laws from 1974. Now, in ESOP, without boring your audience to death, is a tax structure that gives companies

a tax incentive to share stock ownership with frontline workers. It was a part of the ERISA Act from 50 years ago. There was a big boom in ESOP activity in the 70s and 80s, and today we're just not getting enough new ESOP activity, and I think this model holds tremendous potential. If you want to talk about inclusive capitalism, which I hear all the time and it drives me bananas, Because if we're going to talk about capitalism being inclusive, the rewards of capitalism have to be more broadly shared. And ownership, in my view, is a way to do it. So let's go dig up this old law.

Let's make it more viable for companies to implement ESOP structures. And let's change the economy once and for all. Let's get workers involved in wealth creation. This was like dinner table conversation in the Evans household growing up. My dad would talk about 401ks at ESOP. I can't. I don't have. Don't worry, Pete.

We lost Pete's earpiece connection there. Leslie and Pete, thank you very much. I actually had an ESOP. Did you? Years and years ago, in the 70s when I worked for Time Incorporated. I think it got rolled up into a 401K, ultimately. They've started to make a comeback. And I think what K-Kare is doing could, I mean, correct me if I'm wrong,

they're by far the most vocal about this in the industry. And are others starting to follow suit? Yes, others are following suit. There's a coalition of private equity firms that have been kind of at the forefront of this. what Stavros was doing in Washington this week is he was basically going to members of Congress and telling them that there needs to be an update to this law because 100% ESOPs. This is kind of companies that are 100% controlled by the employees of the company. They have tax incentives, but those have dissipated over time for partial ESOP.

So that's what they're looking to change because private equity, you know, you would take a position in a company. You may not take 100% ownership. Some cases they do. But they're trying to also expand this to public companies. Interesting. Other private companies. As I was watching him, and I didn't mean to catch him off guard by asking him about the 60 Minutes piece, but I was sitting there.

I was going, I remember. You look familiar. I recognize this man. Yeah. I really recognized him. And it was a great story. I'm not sure whether it was this company that was the example in that story, but it was a tremendous story. Well, you know where you could have seen that story first, Tyler?

Where? Here on C&BC. We did it two years ago. Oh, okay. Yeah. Okay, well, I must not have been watching at the right moment. Maybe we're off that day. I think it was in the pandemic, actually.

Probably was. Well, in the pandemic, when there was a massive labor shortage, is when they were emphasizing how this could really help with talent retention as well. Exactly. Anyway, Leslie, thank you. Leslie Picker. Speaking of stock ownership, a huge new IPO is hitting the market, BioAge, riding the popularity of weight loss drugs.

More on that later in the show. But after the break, we'll break down new reports that Saudi Arabia is pressing ahead with oil production hikes later this year. And that's why energy and oil are lower today, despite China's stimulus. Stay with us. Welcome back to Power Lunch. There you can see materials and industrials leading the S&P today. Materials are up about 2% getting a boost from China's stimulus measures.

But the worst performing group, curiously enough, are the energy stocks down about 2% and oils down as well. Saudi Arabia may be ready to pump more, even if it does mean lower prices, crude. below $68 a barrel now. Pippa Stevens is here with more. The timing of this, you know, otherwise you have to imagine oil would be doing quite nicely on these China announcements. Yeah. And so what's happening today is that this all comes on the heels of an FT report, which said that Saudi Arabia is essentially giving up trying to stabilize prices and instead now focusing on market share. Now that does mark a big shift for them because for so long for more than two years, they've implemented these production cuts in an effort to keep prices stable in

order to fund their huge expansion, all their building projects. But now, according to this FT report, they're focused on the market share because while OPEC and its allies have kept production, you know, have kept production at steady levels, we've seen production outside of OPEC grow, including here in the U.S. in places like Brazil and Guyana. And so finally, they are, you know, maybe you're fed up. And so this isn't so much of a surprise. What the FT says is that they will start bringing output back on December 1st. They were initially supposed to start returning that production in October, and at the end of August, they pushed that out to December. So not so much of a surprise, but maybe what the price reaction today tells us is that some in

the market had thought that they were going to stay committed to the price side versus the market share side. It's tricky because they need money. I mean, at some point, they want to have the market share, but they also have to balance the budget. Yeah, and as energy strategist Clay Siegel told me, they've shouldered the vast majority of this. There are some other members of OPEC, including Iraq and Kazakhstan, that have been perennial, overproducers relative to their cuts.

And so that's also frustrating them. And, you know, at a certain point, Saudi Arabia is saying, you know, we don't want to see all of this market share. And also demand, of course, is still very weak. With the China stuff, it's interesting because they should provide a boost. But we've also seen a structural decline in some areas, like things like diesel. Clay Siegel was telling me about now their trucks are powered with LNG. Wow.

And so that's, yeah. And so that demand has now dried up. But what a perfect sort of recipe for U.S. consumers who can wake up today to stronger stock market, stronger growth potentially. because of all these announcements and lower oil prices because of what's out. Yeah, but watch Hurricane Helene. Right, that's the next thing. Very true.

All right, Pippa, thanks very much. Meantam, let's get over to Kate Rooney. CNBC News Update, Kate. Hey there, Tyler. Speaking of Hurricane Helene, it is now a category two storm as it's expected to make landfall on Florida's Big Bend tonight as a category three or four storm.

Florida officials are warning of 10 to 20 feet of storm surges, life-threatening, flooding, and extreme wind. damage along the I-95 corridor up into Tennessee. Meanwhile, a New Mexico judge will hear arguments today over whether to dismiss the criminal conviction against movie armorer Hannah Gutierrez-Reed. And that's in the shooting death of cinematographer Helena Hutchins on the Rust movie set. Gutierrez-Reed is requesting a retrial or dismissal for her involuntary manslaughter conviction, alleging that prosecutors failed to share important evidence at that trial. And finally, Daniel Ricardo,

He's the popular Formula One driver featured in the Netflix series Drive to Survive, was fired today by Red Bull Racing. He's going to be immediately replaced by Liam Lawson. The 35-year-old Ricardo only finished inside the points three times this year. He won eight races over 14 seasons with his last victory coming in 2021. That was for McLaren, guys. Back over to you. That's big news in the Formula One world.

Absolutely. Thanks, Kate. Appreciate it. I have a big fan up the street. Watches it every morning. every weekend morning. All right, still to come on Power Lunch today's stimulus news out of China, along with a recent string of positive U.S. economic data, may give stocks a big left. After the break.

We'll see what one of America's top investors thinks. Don Peoples, when Power Lunch returns. Welcome back. Here's a glance at the markets with the small caps leading the way today, finally, for those who have been waiting since the Fed cut for them to do so. They're up three quarters of 1%. The NASDAQ is up a half percent, though. The S&P and the Dow are higher as well. All of this fueled by China's aggressive stimulus, U.S. investors also getting some signs of hope from positive GDP and jobless claims data this morning.

And it all comes after the Federal Reserve's half-point cut last week. The jumbo cut was welcome news for the commercial real estate sector. It's seen property values plummet 19 percent since 2022 amid a drop in transactions. But my next guest says the cut, the rate cut, it's a double-edged sword. It could hurt housing affordability. Joining us now for more is billionaire real estate developer, Don Peebles, chair and CEO of the Peebles Corp. Don, it's great to have you here. You're on our shadow fed. I think actually you've been the one pushing for a half point cut, so you must be very pleased. Well, yes, I'm pleased that I was the one pushing for the rate cut at 50 basis points. I'm pleased. It's a little late. I think it should have been done at the last meeting at a minimum. And I think they'll have to do more as we go forward, though.

Do you think they're going to have to do more? Why? The way I'm looking at it, you know, it's all coming up roses. And now we've got China stimulus and we've got the U.S. data looking okay. And the U.K. wants to be more business friendly. We just heard, you know, prime minister telling you're Andrew Ross Sorkin. You know, do we really need a series of bigger cut still? Well, I think if we want to give Americans the access to the American dream, which is including homeownership, I think we're going to have to do more.

50 basis points is not going to be enough. to pull back the increasing cost of home ownership and housing costs. I mean, we're at a point in America where more than half the renters in this country are paying more than 30% of their income and housing costs. So we're going to see affordability continue to be a problem, especially in supply-constrained markets, unless we get rates down because rates will make housing more affordable to purchase, but also developers like me will start building when we get rates down to where we can make

a profit on building our buildings. Don, maybe then I'm puzzled. In our introduction, we said that you caution that a cut is a double-edged sword that could hurt housing affordability. I would think, and based on what you just said, that it would help because it would lower rates and therefore the monthly payment that a person might have to pay on a loan of a given amount. And it might encourage real estate builders, developers like you, to build more housing

and maybe even more in the affordable category. So how would it hurt? No, look, I think what I'm speaking of is what will hurt is any kind of financial stimulus by the government, like a $25,000 down payment by the government for first-time home buyers, for example. That will have the effect of increasing the cost of housing. I think that by getting rates down, it'll create more activity. The challenge that we have and the reason that rate cuts could have an impact on pushing pricing up is because, we have such a small inventory. We really haven't been producing much new inventory since the beginning of COVID. And so we haven't kept pace with demand. And so real estate's a pretty simple business. It's a supply and demand business.

And so demand will increase when interest rates drop. And supply is not there to meet it. I get it. In other words, when you lower the rates, you get more people coming in because the rates are lower. But you don't have more supply coming on. So it's going to push up the price. Correct. Very, very interesting.

So Don, because you're here, and we've talked many times about the different metro areas you think are thriving and not thriving and investments you've made and so forth. I saw the news about New York City Mayor Adams this morning and immediately thought of you. And I'm curious, if he ends up leaving office, there are many people a little concerned about what would happen to the city. Are you amongst those who are concerned about what these developments all could mean? Well, look, I think that New York City and the future of New York City is certainly bigger than one person. person. And I think that the mayor occupies a critical role in New York City's future, but you have a city council as well. And in fact, I think the headwinds that we've seen in the real estate market have come from the city council. I think that stability is important.

And it would be, one, I think we're a long way from seeing the mayor resign and a long way from him being tried. And we are in a society where you're innocent until proven guilty. So I think that we have to kind of step back and take a look at this. But I think, ultimately, New York is on its way, I think, back, I think, for a number of different reasons, but it's still got to deal with some of the structural issues, especially the migrant crisis that is continuing to affect New York City's quality of life. Those are going to be bigger issues than if the mayor were forced to resign, which I don't see right now. What's going on in Miami, Don?

Well, Miami's leveled off. I think there was this big rush, of course, because New York City was closed down during COVID, and people were moving to Florida, which was wide. open for business and wide open to live your life. And so many people relocate it. And with remote work, we have, you know, movement of many businesses opening up satellite offices or primary offices in South Florida. That rush is over now. Things are stabilized. New York is kind of bounced back. People are coming back to work around the country. And so things are leveling off. And but there is still, I mean, if you look at the price increases in South Florida year over year, they're still in positive territory.

But it's slowing down and leveling off, but it's still a very strong market. Don, thank you, as always. You educate me. I come out of every discussion we have a little bit smarter. Thank you very much. Appreciate it. Thank you. All right, sticking with the economy.

After the break, we'll get some deeper insights into the Treasury market. It yields mostly higher today. Our next stop is the CBOE, CBO and Power Lunch returns. All right, welcome back to Power Lunch, everybody. Stocks off their best levels coming down from the sugar high of Chinese stimulus earlier today. That stimulus comes after the half-point cut last week from the Federal Reserve. So tail wins for the stock. How's the bond market digesting the easing from two of the world's biggest economies

and the stimulus in China? For that, let's go to Rick Centelli. Rick. Yes, Tyler. Well, let's start with what the Treasury market's doing. A good way to measure the Treasury market was the auctions this week. And the seven-year completed $183 billion in supply. My guest, Peter Cher, what did you think about how well the short-to-be?

mid-dated curve instruments were bid. I think people are really gravitating to that two to five-year point. The Fed has started to cut finally. They like that. You're seeing it even in the credit markets. The credit bond auctions are going very well. You're seeing a lot of debt placement. I do think you're going to see pressure on the long end of the yield curve.

And we'll see that a little bit when those auctions come up. Yes. And if we talk about the China stimulus packages with an S, I'd like to hear your thoughts on it. And then I'll weigh in a little bit. So my view has been that what we're seeing is a transition from made in China to made by China. So China is trying to sell their brands, right? They can't get U.S. manufacturing to come in there anymore.

So they're trying to make their brands. They're trying to sell them. They're having some success. Their economy's two weeks. So this is something to buy them time. It gives them one year to stimulate domestic demand. Well, they continue to try and sell their products. Whether it's BYD, whether they're using TEMU, whether they're using Shine,

and that's their only way out of it. And I think we are going to see aggressive competition with China. Competition I can live with. But in my opinion, if you think China is going to ever be what it was 10 years ago with the relationship with the West, I personally don't think so. capitalism's best days in the rearview mirror, and until China figures out that they need to be more of a consumption economy, an export economy, I just don't see it. Now, let's go to the Fed. Any thoughts about the handoff from inflation fighting to the labor markets, which are purportedly weak, although

I don't see the weakness showing up anyplace. Initial claims was strong today. We've seen strong confidence, strong durable goods. Yeah, I think people are overdone, right? People were way too comfortable that we're having soft landing. It was not going to be a soft landing, but I think at best it's going to be a bumpy landing. Some industries do well, some geographic regions. And I think there have been huge errors in the data. They do the seasonal adjustments wrong. We give way too many jobs in January, February. We take way too many away. I think when we start getting September and October jobs number, they're going to joke just fine. This 130 to 150, the Fed's overreacted. We are not going to have to cut anywhere near as fast as the market's pricing in. You know, and to me, soft landing, it all depends

where you are in society, okay? If you're a Wall Streeter, I think a soft landing is definitely a high probability, okay? But if you're a 25 to 30-year-old, You don't have a house, you have student loans. I'm sorry. The average price of a car over 40 grand, that doesn't sound so soft to me. I think that's a great point. So when we're watching for this to roll over to recession, we're really watching close to that 25-to-35-year-old employment.

They've got great jobs, great companies. They're making a lot of money, but they don't have much savings. If they start losing those jobs and can't make $80, $100,000, I think that will eat into consumption very quickly. So that's the part I'm really watching is big tech. Are they continuing to keep and promote those young people, or do they start losing jobs? And that, to me, is going to be what makes it into a recession or a bumpy landing.

Couldn't agree more. In our last few seconds, the Fed's balance sheet information comes out every Thursday come out today. Last week, it's still right over $7 trillion. In the end, the balance sheet's really big. I think that the long end is definitely going to be steep anymore, your final thought. Yeah, we should be above 4% on tens. And I think we're going to get back to talking about the deficit, right? We've got the debt ceiling.

You know what happens to the debt ceiling? They agree to raise it. They both take in some port projects for themselves. They spend more. even if we get gridlock post election, the deficits going higher. There's no such thing as gridlock. The baseline goes up. It's all in concrete.

Peter Cher, thank you for joining me today. Kelly, Tyler, back to you. Great stuff, gentlemen. Thank you both. Rick Santelli. On the stock front, let's get a power check. On the plus side of the S&P today, Southwest Airlines, raising its summer revenue forecast,

authorizing a $2.5 billion share buyback, and the shares are rising 7.5% now. On the negative side of the S&P is dive. Amundback energy, ticker fang, having its worst day in two years. Energy-related stocks in general are leading the declines, as we mentioned with PIPA earlier, involving that possible ramp in Saudi oil production. And in spite of China's stimulus efforts, Power Lunch will be right back. All right, welcome back, everybody. With what time we have left in the program, we want to draw your attention to an IPO that hits the market today, obesity therapy firm BioAge. It's a space

that's been front and center lately is the company behind the blockbuster drug, OZempik, found itself on the hot seat yesterday on Capitol Hill. Bob Pesonic here with more on BioAge and the IPO market. Such a pleasure to see both you. It's a rare appearance here right in the heart of CNBC headquarters. BioAge has had a warm reception on its debut on the NASDAQ today. The company priced the 11 million shares at $18. The original price talk was only 7.5 million shares at 17 to 19,

so they sold more shares than anticipated. It opened at 2250, up 25 percent from its IPO price. The company's lead drug candidate, Zelliprog, is in phase two clinical trials. Pre-clinical studies have indicated that when used in combination with GLP1 weight loss drugs, the drug can help increase weight loss while preserving muscle function. Now, there are phase two studies with both Lilly's Zepound and Novodortis' Weigavi. IPOs this year, unfortunately, they're still running above last year. That's the good news, but they're still way below normal levels.

Let's take a look at these numbers here. 104 IPOs have been raised so far this year, but there's only $24.7 billion raised. In a normal year, going back into 2000s, we would expect to raise at least $50 billion in IPO proceeds. So this has been subpar now for three years running. Still, hope springs eternal. We do have the fourth quarter. Next week, Aerospace Engine Maker Standard Arrow is set to price a $1 billion IPO on the New York Stock Exchange.

Elsewhere, Kindercare has been mentioned, Digital Health Marketplace, Salera, both could raise 500 million. There are potential candidates as well. Lubrican Company Move could be decent sized as well. And there's big names still out there. Stubhub, for example, Seat Geek and Ingram Micro all seem possible as IPOs, maybe even inspire brands. They own Arby's and Duncans, but still, it's been a long, long drought for the IPO market. I just heard, by the way, reports, not confirmed, but Chime has hired Morgan Stanley for a possible IPO in 2025. But I keep waiting for the big ones to come, and it is amazing.

How many of these companies... They just want to stay private? I think the problem is a lot of them, particularly in the tech space, don't want to expose the private market valuations that they have obtained to the public market. Because they know they're going to face a down round, particularly in tech. The numbers were so titanic in 2021 and 2022, the rounds that they got in the private funding rounds that they don't think they can reproduce them. So they're trying to hold on as long as possible. The problem is, our viewers sit there. they're now can't get access to the private market.

And so these companies are middle-aged companies by the time they go. It's very depressing. Remember the 1990s when companies went a little early and somebody said, oh, well, they take a while to mature. Now we have the opposite problem. Now we have geriatric companies that have been private for too long. All right, Bob. You don't want them then.

No, thanks. Good to see you. IPO environment has been hit or miss of late, as Bob just detailed over the past few years, investors have been burned on high-profile IPOs, particularly of consumer companies, rent the runway. Nearly all of its market value gone and is now a microcap beyond meat and Peloton down big, but maybe there's some hope. Instacart has been a steady gainer since its IPO a little more than a year ago. Reddit up as well since its debut. Same for arms. So there are names or are there names out there worth buying. Let's bring in Chris Grissanti, chief equity strategist at

MAI Capital Management. It seems from my notes, Chris, that you favor not the IPOs or the near IPOs, but ones that have come out in the past and been pummeled, like Zoom. Yeah. Tyler, it's funny because when you asked me that question, I thought, well, there's some stocks that were really expensive in the pandemic when they came. And I just haven't looked at them yet. And I've got to tell you, they're kind of interesting. So let's look at a couple of them. Zoom is the poster boy for pandemic IPOs. It actually came in 2019. But obviously it rose to prominence when everyone stayed home. The stock was in 600 and something. The stock is now down 88%. It's a lot like the ones you showed like Beyond Meat and others. But now it's really kind of interesting.

It's $20 billion market cap, but over $7 billion, they haven't just cash sitting on their balance sheet and no debt. Free cash flow is strong. They're not burning that cash. They're actually growing it. They're buying back stock. It's 12 times earnings. Now, the growth isn't great, but it's an established franchise. I'm talking to you. on a Zoom link right now. So obviously big important successful companies like CNBC are using Zoom. So this one I think you ought to look at again. And if you're like me and you thought, oh, it's just too expensive. Look at the math. It's kind of interesting. 12 times earnings. It's very kind of average in a good way. It no longer stands out as being

super overvalued. And it maybe has a cheap better way. Right. Cheap business model. The next one real quickly, Chris, is a much more controversial name lately. It's been somewhat ailing. to walk us through this briefly? Yeah, I think the problem with Airbnb isn't so much that it's down. I think it has a successful business model, but we've never seen it go through a recession. It's a travel company that was really expensive. It's dropped. It's made more money, even at a lower price.

So now it's about the same valuation as booking. I think if you buy it ahead of a downturn, it makes it through the downturn. I think investors will come back. You'll have yourself a good investment there. So I like the Airbnb, even though, as you say, Kelly, it is. controversy. Quick thought on Kenview, which was really not an IPO, but a spin from J&J. Quick, thought there. Well, you know, it's always interesting to buy an established company. It was spun out of J&J a little more than a year ago. This is the kind of company that a private equity

or a big cash flow rich healthcare company might want to buy. Terrific brands. It's got Tylenol, Nutrizona, Listerine, Johnson's Baby Shampoo, great cash flow, almost a 4% yield. But this is the kind that won't be a public company in two years, at least there's a good chance. Wow. They're playing our song, Chris, thanks. Chris Garanti. And thanks also to Bob Bazani. He's always good to see him.

And thank you for watching PowerLum. And maybe the IPOs will start to pick up after today. Who knows? Closing bell starts right now.