Power Lunch - Labor Pains, and ABC-ya? 9/15/23

Episode Date: September 15, 2023

The summer of labor’s discontent continues. Auto workers are striking at some plants after failing to reach a deal. But fast food workers in California are about to get a big raise. We’ll look at the potential fallout. Plus, rumors are swirling around Disney and which of its television networks it might sell. To whom? And for how much? We’ll try to make sense of it all for you. 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. The summer of Labor's discontent continuing. Auto workers now on strike at some plants in the U.S. after failing to reach a deal with the big three companies. And fast food workers in California going the other way. They're about to get a big raise. We will examine the potential fallout there.

Plus, rumors swirling around Disney and which, if any, TV networks it might sell. To whom, for how much? We'll try and make sense of all of it, Kelly. But first, let's get a check on these markets. And we see the Dow just off session lows, down 258 points. The S&P 1.1% to the downside today. And the NASDAQ down 1.5%. The 10-year treasury yield did start moving higher overnight.

That could be playing into the higher yields here and the reason why we're seeing some pressure there. Anyhow, let's also check on arm holdings in its second day of trading. Holding on to that first day, pop, even building on it. We're up at almost $64 a share after. at price at 51, opened at 56. And Lenar shares are lower after reporting results. Lower home prices actually cut into profit margins, but the market remains, quote, constructive. Shares are down about 3 percent, still up 25 percent year-to-date. We'll get the trade on this one a little later

in the show. Well, Kelly, despite targeted strikes by auto workers beginning today, shares of the affected companies are actually all higher. Several analysts saying the strike could create a buying opportunity in the shares. City, for instance, saying if the stocks fall on the strike headline, it would consider buying at those depressed valuations. But that's not what's happening. He got Ford unchanged and the other two higher. Let's get to Phil LeBow now for the latest on the strikes. He joins us from Detroit. Phil. And Tyler, just a few minutes ago, Fitch put out a note saying that the automakers for GM Stalantis could withstand an extended strike because of their financial resources and how much cash they have on their balance sheet at this time. They

do not want to see an extended strike, but really this all comes down to at the end of the day, a lot of different things, but it's the wages and how much they might increase over the life of the next four and a half years, which is the length of the contract that's being negotiated. The UAW has said, look, we want 40%. That was the original position. They have since then, there have been numerous reports that they would come down maybe to 36%. You've got GM and Ford at 20% over the life of four and a half years, and Stalantis at 17.5%. This afternoon, the president, weighed in on his thoughts about the UAW and its push to make more money. Companies have made some significant offers, but I believe they should go further to ensure

record corporate profits mean record contracts for the UAW. I'll say it again, record corporate profits, which they have, should be shared by record contracts for the UAW. That is one reason why many believe the UAW has leverage right now. The strikes at the plants that are being hit, one here in Michigan, one in Ohio, one in Missouri. These are among the most popular models coming out of those plants. Look at the day supply for the Chevy, Colorado,

which is the pickup truck, mid-sized pickup truck built outside of St. Louis, and the Ford Bronco, which is built at the Michigan Assembly plant, which is just west of Detroit. 35 and 37-day supply, guys, is not a huge amount in terms of supply in the market. It doesn't mean they're going to run off of dealer lots tomorrow, but you would like to see that closer to 65 days in a normal market. Finally, I want to show you GM and Ford, over the last year compared to Toyota and Honda.

You know where Toyota and Honda are today? They are at 52-week highs. And I know we talk a lot about the wages and the comparison with Tesla because of electric vehicles. But keep in mind that the big competition is also the foreign automakers in this country, at least for the big three when it comes to cost for building a vehicle. Guys, back to you. This may be a dumb question, Phil. But what explains the difference in the difference in the,

stock performance, is it that the Toyota and the Honda brands are selling that much better than the GM Ford and Stalantis brands, particularly in trucks? They don't dominate in that sector at all. Sure. I think it comes down to investor sentiment, Tyler. At the end of the day, when you look at, especially GM and Ford, those stocks do not trade relative to the record profits that they've made in the last year. Investors, they hear that. And I've reported on those. record profits and you usually see a bump, but you don't see it last for long. What's driving the sentiment on those stocks is whether or not both of those companies can successfully transition to electric vehicles. And the jury is out on that. They're making big investments there,

but whether or not they can succeed and compete with Tesla, has cars and trucks that are selling as well as Tesla, that remains to be seen. Okay, Phil LeBoe. Thank you very much. Phil. be a busy all weekend, I'm sure. Thanks, Phil Lobo. And another labor fight between fast food chains and unions appears to be over for now. The California State Senate passing what they say was a controversial bill yesterday that would raise the minimum wage for fast food workers to $20 an hour starting next April. Here to discuss the impact and the growing labor tensions overall is Mary Kaye Henry, president of the service employees international union or the SEIU, along with our own Kate Rogers.

First, Kate, give us the details. Welcome to you both. Hey there, Kelly. Thanks so much. And as you said, this is a landmark bill for the state of California. Most importantly, getting that wage to $20 an hour. So Mary Kay, we want to thank you for being here with us. Of course, this is a win for your worker members. But there have been some critiques from franchisees and also small business owners that this could be extremely costly. Is there a concern that it'll put workers out of jobs in the end? This is a transformative agreement that's been reached in a fast food council that allows workers, franchise owners to sit at a table together and solve systemic problems that have existed for a half a million jobs in California. And California typically a leader for the nation in terms of legislation of this nature. What states is the SEIU considering next for this type of organized action? Well, you know, the fast food workers movement has been led by the bravery and tenacity of black, brown, and immigrant women, primarily, and men who haven't let no stop them.

And so in California, we're going to continue to organize to set the table that has been one to solve problems on the job. We're going to educate workers about the 25 percent wage increase that they will get in April of 2024. and they will keep organizing to solve all the other problems with health and safety, scheduling, sexual assault and discrimination that occurs in these jobs. And then their movement has been a national movement. And the solution that they created with the Fast Food Sector Council is going to go to as many states as workers will be organizing in. And you mentioned, obviously, this is a fast food Council, not all restaurants in the state of California created equal in this bill. Why focus in on fast food companies in the QSR space in the way that this has? Why was that important for the

SEIU? And what do you hope to accomplish? Because the original demands came from workers in working for the major multinational corporations, McDonald's, Wendy's, and Burger King. They knew that CEO comp was going through the roof, that there was record profits, that these same companies pay living wages and have good standards for jobs in other countries around the world. So why can't these companies make that happen in the United States and still do right by consumers? And we think that fast food council is a way for the industry to stop driving a low road model on cutting labor costs and compete on quality services and products. And for workers to finally be able to work hard for a living and provide for,

for them families and themselves and for their children to imagine being able to do jobs outside of the fast food sector. Mary Kay, it's Kelly here back in studio. We've been talking, obviously, about the fast food business. California next may be one of the states hit by one of the biggest health care strikes we've seen that were just authorized against Kaiser Permanente. And of course, we have the auto worker strike going on right now as well. We want you to take a quick listen to the soundbite from President Trump,

who just spoke with Meet the press host, Kristen Welker, to share his thoughts. Let's talk about the economy. And I want to start by talking about this big standoff between the auto workers and the big three auto manufacturers. My question for you, Mr. President, whose side are you on in this? I'm on the side of making our country great. The auto workers are not going to have any jobs when you come right down to it. Because if you take a look at what they're doing with electric cars, electric cars are going to be made in China. the auto workers are not going to have any, I'll tell you what, the auto workers are being sold down the river by their leadership, and their leadership should endorse Trump.

The reason is, you're going to have choice. Like in school, I want school choice. I also want choice for cars. If somebody wants gasoline, if somebody wants all electric, they can do whatever they want. But they're destroying the consumer, and they're destroying the auto workers. The auto workers will not have any jobs, Kristen, because all of these cars are going to be made in China. The electric cars are going to be made in China. The electric cars are going to be made in China. automatically are going to be made in China. So let's talk about UAW's leadership. The president, Sean Fane, has withheld his endorsement of President Biden. But this is what he had to say about you. Quote, another Donald Trump presidency would be a disaster. How would you win that endorsement? Well, if that's the case, I probably won't win his.

I don't know the gentleman, but I know his name very well. And I think he's not doing a good job in representing his union because he's not going to have a union in three years from now. Those jobs are all going to be gone because all of those electric cars are going to be made in China. So it's a fascinating point, Mary Kay, that is absolutely a threat to the auto industry. And maybe for service workers, they can sit here a little prettier and say, well, you know, my McDonald's job, my job as a nurse, that can't be outsourced to China. So do you expect those kinds of workers to have more bargaining power and how much bargaining power do you really expect the UAW to ultimately have here? Well, our 2 million members and Starbucks workers and fast food workers stand in solidarity with auto workers. And I completely disagree with the arguments that I just listened to because we, as a nation, have decided to invest in a clean energy transition to electric vehicles. There are millions more manufacturing jobs that are going to be created thanks to what President Biden pulled off with Congress in the past two years.

years. And each of the big three auto companies have announced joint ventures that they're going to open up inside the United States of America. And so the auto workers' demands are righteous and just. The auto companies are earning record profits. Billions of American tax dollars are going to be invested in opening up an electric vehicle industry in this country. And those jobs should be good union jobs. Whether Mary Kay, the ex-president is correct that auto workers in the United States face an existential threat from China or not is, I don't weigh in on that. I have no idea. But I wonder where you think the service jobs are going to go in the face of artificial intelligence, robotics and automation.

Might those three things come together and disintermediate the industries that you and your membership serve so admirably, particularly in fast food and hospitality? Well, I think the real issue for service jobs is for workers to be able to have the ability to be in a union and collectively bargain over the introduction and use of artificial intelligence in this sector of the economy. And so I really look forward to replicating the fast food sector council in as many states as possible and finally convincing the big three fast food companies to set a national collective bargaining agreement because I'd love to transform those jobs through artificial intelligence in a way that unleashes the talent and creativity of working people.

Mary Kaye, last quick question here. employer did not make the final cut here. Will the SEIBIU rather be continuing to push for joint employer liability, meaning corporations take responsibility for actions at their franchise locations in the future and why? Well, you know, the fast food workers movement has been the best way to hold this employer accountable. And we will continue to connect McDonald's, Wendy's, and Burger King multinational corporations to their franchisees, because we do, believe that they are joint employers, we're organizing and striking and bargaining and legislating. And that's why this fast food sector council is so significant in the state of

California, why we need to replicate it in other states, and why we need to transform national labor law to actually make it possible to hold multinational corporations accountable and get them at the bargaining table to make decisions on wages and benefits. Okay, I think we're going to leave it there. Kay Henry, thank you so much for joining us. Back over to you, Kelly and Tyler. Kate Rogers, thank you. Mary Kay Henry from the SEIU. We really appreciate it. Big, big moment for all of these strikes across the country. And you can watch, of course, Kristen Welker's entire interview with former President Trump this Sunday on Meet the Press. Kristen has also reached out

to President Biden for an interview we should note who hasn't agreed yet. And now let's turn to Disney, which is in talks apparently with several bidders to sell its ABC network. Something the CEO, Bob Iger, has hinted might happen as he tries to remake the company in the streaming era. The stock, Disney, down 23% this year and more than 50% below all-time highs. Let's bring in CNBC.com's Alex Sherman now with more on how this process could play out and who the possible buyers could be, Alex. Yeah, thanks, Tyler. So I think we're early. We're very early in this process still. In fact, Disney released a public statement last night saying, look, we've made no decisions whatsoever here.

But we're, you know, thinking about what we might do with our assets, which echoes what Disney CEO Bob Eiger said to our own David Faber a couple months ago. Disney wants to transform its business to a more modern-looking company. And it realizes that the traditional pay TV bundle is declining, has been declining for years. And it's kind of finally it's come to Jesus moment here where it's like, look, we may need to modify this company. We may need to sell off some of these assets that used to be crown jewels for us that aren't anymore. What could be bundled along with ABC in any possible sale and who might the buyer be? Or buyers. So there have been preliminary discussions with Nexttar.

NextTar is an owner of many different local affiliate teams. TV stations around the country. But it also owns some national assets. It owns the CW network or the majority of it. It's starting its own sort of news network called News Nation. It owns the Hill. It owns other digital media assets. It makes a lot of sense that Next Star would be interested in buying the eight owned and

operated local stations that Disney owns, which are in big markets, typically. Chicago, New York, L.A., Disney owns eight of these things in addition to the ABC network. The interesting question is, does NextTAR also buy ABC? That would be really industry changing if one of these local TV network affiliate companies owned the network itself. That doesn't exist today, of course. CBS owned by Paramount, our own parent company, NBC Universal, of course, owns the NBC station. Fox owns Fox. So that would be the real industry shaker. The question I have there is if Disney wants to stay in the sports business and wants to keep owning E.S. Do they really want to sell the ABC network because so many of those sports that air on ESPN also air on ABC?

Alex, and also talk through, since we haven't seen that before, what would it look like? What would the implications be of a TV operator like Nextstar owning a marquee network like ABC? So what's in it for Nextstar is that it could use ABC as leverage to get more what are called retransmission fees paid from these local networks. In other words, when NextAR negotiates with a large pay TV operator like DirecTV or DISH or Comcast or Charter, there are fees paid from the pay TV operator to Nextar for the right to carry those broadcast networks. Sometimes you see there are carriage blackouts. We just saw one with Disney and Charter where the ABC networks and ESPN and so forth went off the air for charter. So these happen from time to time. In fact, Next Star is in a blackout

right now with Direc, trying to get a deal. So if they owned ABC, they'd have more leverage for those discussions. On the flip side, though, there are current carriage negotiations, or carriage rights deals that already are in existence with all of those paid TV operators and ESPN and ABC with Disney. So those deals may need to be rewritten because they're already in existence if ABC were to be separated from ESPN. I think that is a major complication. That would be a factor in why a deal like this wouldn't get done. Well, thank you very much. We appreciate that. Every time I hear next star, I think of Waystar on Succession. I think of that crew. But anyhow, there we go. Thank you very much. And coming up, the setup for the markets as the Fed is dead ahead. A lot of debate about

what the Fed will do and say at next week's meeting, what it'll all mean for stocks. That's coming up, Plus a quick power check as we head to the break. Leading the S&P 500 is Waters. The company makes equipment for the healthcare industry. The stock having its best day in nearly three years on the downside, lows, lower. Earlier this week, the company's CEO saying customers are spending more on travel and concerts and less on home improvements. More faucets.

We need to sell the faucets. We'll be right back. Isle 6. All right. Welcome back to power launch, major averages, trading just off the worst levels of the day and wiping out most of yesterday's gains. With another Fed decision ahead next week, will there be more choppiness ahead? David Bianco, a CIO at DWS Group Americas, and Ron Insana, is CNBC senior analysts and commentator

as well as chief market strategist at Dynasty Financial Partners. Gentlemen, welcome. David, let me begin with you. You think the fall is going to be choppy and a little unsettled, in part, because of competition from higher interest rate-bearing instruments? That's the main reason. The bond market, not just these overnight rates, but increasingly when you look a little further out the curve,

even intermediate duration, credit, munis, they're offering a five, six, in some cases, with a little credit risk, 7% return. I just don't think the S&P 500 is going to do better than that, not just over the rest of the year, but even to the end of next year. I think it's a good time to put more money than usual in fixed income, and see how things play out.

Yeah, you've got a sort of a range-bound S-E-S-N-P forecast of 4,000 to 4,800 or something like that? That's right. I am the regional CIO for DWS, and I look at all asset classes. We're always invested across all of the asset classes. I do head active equities. I've been an equity strategist for a long time. I tend to favor equities. I just think right now it's not a Goldilocks for profits.

We do expect profits to grow next year, mostly from tech. But a lot of industries are going to be challenged to do more than 5% earnings growth. And with these interest rates, I don't think you get any PE expansion. Ron, how does what David says sit with you? Similar but not the same. I would imagine that for the remainder of this year, we're going to chop around it. It's something I think I've maintained for the last couple of months that going into September in particular, and given the kind of event risks that exist around the world and some of the credit concerns we may have going into early 24,

that's a possibility that we chop first. while. I think ultimately, if the Fed does start to cut rates in 2024, you're going to get a break for the market, and that turns into a bit of a tailwind instead of a headwind, assuming inflation cooperates. And we've seen a bit of an uptick, obviously, energy prices and shelter costs and things like that. But I think choppy until we, you know, kind of get out of this typical window where markets are under pressure, I'm not as bearish on next year as David might be. Let's talk a little bit more about the Fed and your thought there. What would cause the to start to lower interest rates next year? Does it mean a major slowdown in the labor markets?

Does it mean a major slowdown in GDP growth? What would cause it, particularly in light of the fact that inflation seems pesky? Yeah, I think, Tyler, at the end of the day, there'll be an event of some sort, whether it's, you know, commercial real estate, putting pressure on financial institutions. you know, there's $270 billion of exposure on just small and medium-sized bank. There's one, banks, there's 1.2 to 1.4 trillion worth of commercial real estate debt that's going to get rolled over the next year, year and a half. So that could be a trouble spot. You know, if China slows down materially and threatens global growth and domestic growth, and the fact that just real interest rates are too high relative to inflation could start,

and Jay Powell himself has admitted this, could start the Fed in a process of towards bringing down interest rates. Also, fourth year of a presidential cycle, irrespective of one's politics, is typically the second best year of that four-year cycle, this year being the best. So I think there's maybe a little more tailwind coming, even though, obviously, there are some event risk issues out there for the markets in the next several months. Do you agree, David, with Ron, that 2024 is going to be a year of falling interest rates from the Fed? Well, our base case is that the Fed cuts in the second quarter of next year. Most investors, the Fed expectations, point to that. We share the view that there'll be deterioration enough in the labor market to give the Fed that cover. But the labor market

and the economy, because of jobs and services, is holding up really well. And inflation has indeed been stickier, and that last mile of getting to 2.0 percent on, it's going to be tough work. So what I would argue is it may be the case the Fed is not cutting in the first half of next. year, and then the closer and closer they get to the election, maybe they decide to wait until after, to take more insurance against inflation staying really, really low. I think what you'll see out of the Fed, no hike in September, maybe a hike in November, but we're all thinking that the new normal interest rates, the Fed funds rate, wherever it settles, maybe a year or two from now, maybe it's not lower than three and a half percent unless we fall into a recession.

But lower than it is today. than it is today, but we have to get used to the idea that we're not going back to rate. To zero. That's exactly what the Fed wants to avoid. But even during a recession, they'd like to give themselves room to cut without having to go back to zero. Yeah. All right, David, thank you very much. Have a great weekend. And Ron and Sana, thank you as well. Appreciate it. On that note, let's get out to Rick Santelli in Chicago. The bond market, Rick, the 10-year yield. Do you think that's what's doing it to stocks today? Well, I'll tell you, when we look at yields, the only thing that I see, is that they're at the lofty levels based on where recent, or I should say, cycle-high-yield

closes are, 508 in a two-year, 4-34-in-a-10-year, and we're within striking distance of both. The equity markets, they march to a different drummer many times. Today, we see one-year inflation, 3.1 percent. That is the lowest since March of 2021. Five-to-10-year inflation, 2.7, the lowest since DISA 2020. So it's math versus surveys, quantitative versus qualitative, hotter CPI, PPI, but surveys are cooling off. And if you look at the 10 year that you were just referencing, there's a week to date, keeps bumping up against those 430s.

They're going to pop through on a close, whether it's today or next week. Traders are basically looking for that. We've hit the line too many times. And finally, if you look at the dollar index, it really has been loving rates and what's been going on with the slowness and the rest of the globe, because from mid-July to today, it's up, what? 5%. Kelly, back to you. Thank you very much, Rick Santelli. Our Delivering Alpha Summit is now less than two weeks away.

Join us on September 28th in New York for insights from some of the biggest names in business. So much fun this conference. We have scan that QR code on your screen. Visit cnbcevents.com slash delivering alpha. And we'll be right back with the Dowdown 278. Welcome back. It's still above 90. Oil is. Let's get to Pippa Stevens for more on this move. Rapping up a big week here with WTI holding above that $90 level and now on track for a third straight week of gains. We did get some positive numbers out of China this morning, better than expected retail sales and industrial production number. So that is helping things.

We did just get the latest rig count number, which saw an increase for the second week in a row. However, it's still 16% below this time last year. So we are still seeing some discipline there. Interestingly, the dollar has now been up for a number of weeks, and usually that pressure is oil. But I think that this time around, because it's not, it clearly shows that the market is so focused on the fundamentals and the physical. However, we are heading into a shoulder season, seasonally lighter demand picture. And so if the dollar does continue where it's at and they continue to rise, that could ultimately play into oil here. Although, of course, Saudi Arabia is still that backstop with Matt Kepler over, Matt Smith over at Kepler telling me there was pseudo-central bank at this point. So some support there.

But for the time being, gas prices at 386. So things to watch here. And maybe some disruptions this weekend to refineries from Storm Lee. We'll see what on the East Coast only. We'll see what happens there. Pippa, thanks. All right. Let's get over to Courtney Reagan for a CNBC news update.

Court. Hi, Tyler. Well, the mystery is deepening into the disappearance of a top Chinese military official. Secretary of State Anthony Blinken said this afternoon, he has no knowledge of the status of Chinese defense minister Lee Shang Fu, who hasn't been seen since August 29th. Reuters reported today Lee is under investigation by Chinese authorities, according to nearly a dozen people familiar with the matter.

Lee's absence comes two months after the disappearance and replacement of China's foreign minister. Well, the Texas Senate is now deliberating in the impeachment corruption trial for the state's Attorney General Ken Paxton. The lawmakers will decide whether to remove Paxton from office after hearing two weeks of testimony. A verdict could come later today. If convicted, he'd be the first Texas official. to be convicted on impeachment charges in more than 100 years. A New York City mayor, Eric Adams, handed over the keys to the city to Harlem native Sean Diddy Combs this morning.

The rapper is celebrating the release of his new album off the grid. It's the first new studio album he's released in 17 years. Tyler, back over to you. Wow, thanks very much. Courtney. And ahead on Power Lunch, casino hack attack, MGM and Caesars hit with ransomware. We will speak with a cybersecurity expert who says all the can see casinos are vulnerable now. That more when Power Lunch returns in just a moment. Place your back. We continue on Power Lunch to follow those cyber casino attacks, cyber attacks on casinos at

MGMs and Caesars. They've both been hit by ransomware, leading to massive system outages for MGM and a reported $15 million ransomware payout from Caesars. Our next guest says of all the industries he's worked with casinos have some of the worst cybersecurity he's seen he thinks that years of neglect are coming back to bite them let's welcome in our friend david kennedy trusted sec CEO and chief hacking officer uh one of the best titles i can think of some of the worst security you've ever seen why why have they let it get this bad given the amount of cash that they're handling yeah thanks towner kelly thanks for having me on uh it's interesting you know the casinos you think Ocean's 11, you know, massive physical security, all of the state of the art facial recognition

systems to protect all of this money. But they really consider themselves more in the hospitality business. While they protect money, cyber networks, things like that have really gone neglected over the years. And they really have kind of the antiquated times of thinking of it from a physical security perspective, not cyber infrastructure. I mean, you know, we test some of the largest casinos out there. We test some of the largest, you know, companies from, you know, critical infrastructure, all the way to education, to, you know, technology. Casinos are some of the worst that we've ever seen out there. And it's more expensive for them to fix the network issues than it is for them to actually go and address the security issues because they don't want any hindrance to their

casino operations. They don't want any kind of interruptions. So you've got MGM, you've got Seizers, are others likely to be hit as well? They're on notice. All casinos right now are on notice from this group as well as other groups. Ransomware groups, when they have success, they smell blood, and they start going after the same industry vertical. So if you're a casino right now, you're a target. By far, this group, LV, really good of social engineering. It took them less than 10 minutes of finding somebody online on LinkedIn and then calling the help desk up, social engineering them,

and then getting full access to their entire infrastructure. I mean, that's an insane statistic. If you think about how big these corporations and organizations are, an entire downfall by one employee and a hacker group loosely attributed to Russia, it's not a good set of odds for these folks in these casinos right now. The odds are not in their favor. Wait, that's an incredible story, Dave. And I had heard a prior breach was caused by a fish tank that was connected to a casino or a hotel network.

But what you're talking about is something very different. What is social engineering? So you're saying that the hackers use LinkedIn to get an employee's information, called them on the phone, and we're able to do what? So what a lot of hackers will do is do what's called open source intelligence gathering. and will use information on LinkedIn, your credentials. Maybe I'm a employee that works at a certain location

and I forgot my password. They were able to find an employee of MGM and then called a help desk to essentially reset their password saying, I'm this employee, I can't log in. And they use the technology called ACTA to allow them to authenticate and log into the systems. And then from there, they start spreading across what we call laterally or lateral movement

to start taking over more and more systems. And that's the damaging part, right? When an attacker gets access to one system, they start spreading like wildfire throughout all of the rest of the organization. And then from there, you start seeing these catastrophic breaches, especially if they go into tech for large periods of time. So, you know, absolutely devastating for MGM, devastating for Cesar.

Cesar's may be the largest ransomware payout that we've ever seen in history. I mean, $50 million. You know, this is a billion-dollar industry now for these ransomware groups, and they're not shutting out of time soon. And again, casinos are right for the picking. As you look at ransomware hits across all industries this year, how are they running? Is this the worst year ever for them? You know, it was interesting when the Ukrainian conflict with Russia, when Russia invaded Ukraine kicked off, we saw a big dip in ransomware. It was actually really quiet. Very strange. But as of Q2 and Q3 and then now into Q4, we're seeing such an elevated rate of ransomware group takeovers, especially in the private sector, that this is by far the largest year and the most amount of payouts that we've ever seen organizations take. They're just not focusing on disaster recovery, business continuity, things that we know work against these to recover from them.

But also one thing to note is that they don't just take your systems down. They also steal your data, whether it's user information, personal data, intellectual property. They hit you in every different front they possibly can. Very quickly, do most of the victims of these ransomware requests, whether their health systems or commercial businesses like Caesars, do they usually pay up? Over 85% of the customers that we worked with pay the ransom. And it's devastating for them because they literally can't recover their business. It doesn't look like MGM's going to pay.

Cesar's did. but I mean most of the time, you know, nine times out of ten, they are going to be paying the ransom. They're going to be paying these ransomer groups to continue to increase their sophistication, and we're going to continue to see these breaches occur. Dave Kennedy, trusted sex CEO. Thank you very much. Thank you, Tyre. Thank you, Kelly. Appreciate it. Fascinating. Coming up, banking on technology. We'll hear from the CEO of a Brazilian fintech startup with dreams of becoming the JPMorgan of South America. That's when Power Lunch comes right back.

Welcome back. There's been a lot of change. through banks this year and not just in the U.S. John Ford is here and brings us up close with the founder and CEO of the bank using technology to make waves in Latin America. Yeah, Kelly, David Veles is the CEO of New Holdings, whose new bank is growing quickly in Brazil and beyond. He told me he started the bank after dealing

with the extreme hassle of opening up a bank account in Brazil when he moved from Colombia a decade ago and thought there had to be a better way. Today, new holdings trades on the NASDAQ, $35 billion market cap. Valas came from more humble beginnings. His parents fled Columbia's cartel violence, and he grew up in Costa Rica, where his father had a button factory. And that's where David got to start.

I spent summer working with my dad in his factory. And I was doing little buttons. I was doing quality. I was working with the machines. I love spending time there. And when I was 12, I remember having saved enough money, my dad had a, we had a, we had a, a little house in the countryside with some cattle. And I convinced my dad to sell me a cow. And that was a big, big investment buying that cow when I was about 12. And then he went from

one cow to six and eventually sold them to help pay for college at Stanford. New Bank hasn't had an easy path. Either of Bellas has had to overcome regulatory hurdles and race financing for the bank. But he's become a major disruptor in the Latin American banking landscape and plans to push harder from here? We have a very clear organic opportunity ahead of us, which is we have half of the adult population of Brazil as a customer. I mean, it's a very large base. I don't think J.P. Morgan can make that claim in the U.S.

just to tell you how now how big that consumer base is for us. But we have about 15% market sharing credit card, 5% market sharing personal loans, 2% market sharing investments, 1% insurance. And so big ocean that we have consumers that have trusted us with their savings, with one of the most valuable brands and loyalty in Brazil and Latin America, but small market share. So the next 12, 24 months for us, priority number one is gain all of that share. So yeah, geographic expansion and moving beyond credit cards into more loans and investments

will be big. And as the population gets more accustomed to digital transactions, that works in his favor, too. from buttons to billions. Where is his company, is bank dominant now? In Brazil. Credit cards. Oh, yeah.

Credit cards, yeah. Mainly is where they got their start. Yeah. Because consumer credit was so difficult to come by, even debit card. He went through this process, having to go through metal detectors to get into the bank,

right, to set up an account when he first moved there. They acted like he was doing him a favor, like they were doing him a favor, and he said, I can still feel that way in the U.S. I had a terrible time,

to get a credit card. It's been very hard if you're like a small business or you're trying to get a mortgage or go to a bank. Anyway, it's just fascinating to see if he can really pull off something transformative. You had a hard time getting a credit card? Extremely. Yeah, because I never had one growing up. Oh, not recently. It was pretty recent. It was like maybe eight years ago. It was really hard. And same with the mortgage. I called up my existing bank and said, do you want, you know, they said, no, no, no. You need to own cows. It's collateral. That's the point, right?

I think you can get a pretty good credit card. Real assets, yeah. John, thank you. All right, coming up, we'll get the trade on Adobe. Linar, Charles Schwab, and a fresh three-stock lunch when we return. All right, folks, it's time for today's three-stock lunch. We're going to trade some of the day's worst performers. Up first, Adobe among the worst laggards on the S&P and NASDAQ 100,

despite beating on the top and bottom lines for the third quarter. Here with our trades, Brian Vendig. He's president at MJP, well, advisors. Brian, welcome. Good to have you with us. Take us through your thoughts on Adobe. Thanks, Tyler. I think Adobe is definitely a buy. When we look at the numbers, they had an overall good quarter. And again, there's been a lot of assignment this year that's been priced into the stock due to the AI frenzy. So it looks like today's price action seems more like investors are locking in some of their profits. However, the company is expected to raise

prices November 1st on a lot of their cloud offerings, which is going to be good for their margins. and we know they're in process of trying to close on a $20 billion acquisition in the private cloud and design space, which also will add some momentum for the stock moving forward. We just think they're in the center of a lot of exciting things like AI, cloud, software, and that's great from a reoccurring revenue perspective. But we recognize that the stock is up about 57% or so this year. It's had a pretty good run. It's for PE around 35.

It's a little pricey in the market. So we'd probably be buyers on a pullback. All right. Let's turn then to Schwab. The firm saying it still hasn't recovered from deposit level attrition after its takeover of TD Ameritrade. And client assets held by TD continue to walk out the door. What would you do with this one? Well, Kelly, I'm going to be consistent again. I'm going to give this one a buy. And it's because I think Schwab is a great company. And right now the market is not really appreciating the value of the company itself on a moving forward basis. And you're right. The stock has really been very. crushed this year and hasn't really recovered from the steep decline in assets, which really goes

back to March as part of the overall banking crisis. But keep in mind, they just recently finished an integration with TD Ameritrade, which really gives them an opportunity to capture some cost synergies, focus on some products and solutions that they promote to their clients and customers, and also just consolidate assets on one single platform which can create more opportunities for growth. And again, we think the forward P.E. in this market is pretty attractive. So we think the stock still has some room to run after this eventually, after the sell-off eventually passes this week. All right. Let's move from Tech and Finns financials to Lenar, the home company, lowered despite posting a top and bottom line beat. His profit fell year over year because of lower home prices. What do we think of Lenar? Well, Tyler, for me, this one, I'm going to have to give a sell. And I was a little turned because

the valuation is very attractive with a forward P.E. of around 13. However, there's plenty of macro headwinds that makes me cautious about this stock, hence why we're being sellers. And look, in this most recent quarter, revenue was down, even though deliveries was up. And that's because right now buyers of homes are a little bit conflicted where interest rates are. And Lenar has to give away a bit on price, which has been impacting their margins. And right now, when buyers are looking at homes, they're saying, do I buy now at these high rates or do I wait for rates to come down? So even though there's this demand supply imbalance, we really don't want to be exposed right now to home builders when there's still a little bit of this interest rate drama. Now, again,

Lenar is a great company, and this would be just one of those that we might avoid for now and just wait for a little bit more clarity on rates and some of these imbalances to play out. All right, Brian, thank you for your insights today. Have a great weekend, Brian Vendig. We appreciate it. And so many more stories we'd like to get to, but so little time left. It's closing time when we return. Well, we've got less than two minutes left in the program and a bunch more stories to tell you about.

Let's get right to it, starting off with a big drop in shares of Planet Fitness. The board there forcing out longtime CEO Chris Rondeau, effective immediately, saying they decided it was time to make a transition. but Rondo is going to stay on to ensure a smooth transition and will remain a board member. That stock is down significantly so far this year, including, I think it was something like 14% today. That may have something to do with it. Maybe they just thought that he'd been in the job, I think he'd been in the job since 2011 or thereabouts. Well, remember, this was a $90 stock during the pandemic. Ironically enough, people kind of thought, okay, reopening, you know, here we go.

And maybe it's failing to live up to expectations. $51 stock. Served as CEO since 2013, so 10 years. Employees apparently not too happy about it. Speaking of executive turnover, staffing firm Challenger Gray and Christmas, says more than 1,000 CEOs have left their post

so far this year. That's up 33% from last year, highest total to start a year since they began tracking exits back in 2002. Do you remember when we had the last raft of exits? It was, I think, 2020. Still not at these levels, but Iger and some notable department might have been before, and then COVID hit.

So I always watch this. It's some weird side of the times. Earlier this week, the head of BP left after admitting he hadn't been transparent about some relationships, but there were also business issues in that company, but there have been a lot of changes in the executive suites. While Netflix discusses live sports, it does have a strong history with sports documentary series, Formula One, tennis, and for golf, a series called Full Swing. But the U.S. Rider Cup team decided to keep the cameras out of full swing. That's their decision. That's the way it's going to be. Come full circle. Felt like it was inevitable. Have a great weekend, everybody. Thanks for watching.