Power Lunch - Market Moves, and In The Hot (Inflation) Seat 8/8/23

Episode Date: August 8, 2023

Stocks are shrugging off yesterday’s rally, after a big downgrade of multiple U.S. banks at Moody’s. We’re also seeing lots of earnings-related moves. We’ll break it all down for you.Plus, inflation is a concern for all sectors right now, and that includes concerts and live events. Ticket prices, travel and accommodations are all expensive. We’ll speak to the CEO of Vivid Seats about it. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Good afternoon, everybody, and welcome to Power Line. Alongside Kelly Evans, I'm Tyler Matheson. Coming up, stocks shrugging off yesterday's rally, a big downgrade of multiple U.S. banks from Moody's stocks showing some serious volatility, plus lots of earnings-related moves. We'll break them all down. Plus, edge of your seat, concert inflation becoming a big issue. Ticket prices, travel, accommodations, all expensive. We're going to talk to the CEO of Vivid Seats about all of this, Kelly. But first, let's get a check on the market.

which are recovering after some worrisome early trading. The Dow is down about 466 at the lows and a little bit shy, about 268 right now. A pretty big volatility in both stocks and in bond yields, by the way, which went below 4% before reversing a little bit above that level. And while everything else is down, healthcare names, some of them biotech are booming, lily soaring on positive results fueled by its obesity drug push. We'll have more on that in just a bit with the shares of almost 14%. Same for Novo Nordisk up 16%.

But leading the worries today are the banks. As Tyler mentioned, Moody's cutting the ratings of 10 U.S. banks and putting some big ones on downgrade, Roch. Leslie Picker is here with more. And these are, we'd call them kind of the big regionals and maybe some of the trust banks. Is that right? That's exactly right. And, you know, there were 27 ratings actions in all, all along this same theme. Interest rates likely to remain higher for longer amid quantitative tightening,

exacerbating a mismatch between assets, loans, and liabilities, deposits. Its risks associated with monetary policy have been pressuring profitability. And regulators are layering new potential rules on mid-sized banks that could cause them to ultimately pull back on loanmaking, which could, of course, affect profitability as well. And then there's that canary known as commercial real estate. We talk about it all the time on this show, particularly office buildings in certain pockets of the country that have plummeted in value due to the prevalence of remote work. Moody's said Q2 earnings releases actually informed the. ratings actions, which is interesting because prior to today's move, the regional bank ETF, the KRE, was up a whopping 20 percent since quarter end, and the major issues that

the ratings agency flagged have been pretty well telegraphed since Moody's prior round of actions for the regionals in the spring. Even as equity investors have been willing to look past some of the major industry headwinds, bond and options investors have not been quite as sanguine. As New Edge's, Ben Eman's notes, regional bank spreads remain above. of high yield spreads and options on a handful of small-cap regionals imply a 15% chance of FDIC seizure. So perhaps today's move by Moody's is serving as a reminder that even though it's been a quiet summer on the regional banking front, we may not be out of the woods quite yet, although there's a lot of debate over whether the worst is behind us or if there's still more dominoes to fall. So why now and were these downgrades in any way anticipated or could they have been anticipated? They weren't anticipated by the market.

That's very clear. You talked to market participants, most analysts, nobody really expected this to come today. Why now, we've seen the bulk of the earnings releases from the regionals at this point in time. So I think they were able to, you know, collate a bunch of the balance sheets, income statements, and draw some conclusions based on that, that informed their ratings action.

Yeah, that said, I mean, if this had happened a couple of months ago, can you imagine the impact? Certainly if it had happened back in the thick of, you know, the days when we were most concerned about the banks, it could have really sparked. And not to minimize the moves. I mean, Wathad, we speak to Brent Beard all. They're down 5% today. But now that we kind of know that this is priced in, the real question to me is not so much

about Moody's and it's really just about economic activity, six or 12 months out, when they're clearly retrenching under pressure and facing some future losses and problems as described. That's it. And then, of course, what's going on with the tenure and all the volatility on the rates picture, you know, you've got quantitative tightening, you've got all this issuance. And then you've got monetary policy in Japan that's also impacting the various flows. And so all of that plays into what you're seeing with banks, whether it pertains to their deposits,

whether it pertains to, you know, their asset markings. And then there's just an overall confidence issue that remains in the balance as well. That was one thing that Moody's pointed out in their notes, this idea that, you know, it's unclear just kind of the way that these things are accounted for what the level of capital is. You saw that, of course, with Silicon Valley Bank, how much capital you could have in order to fulfill some sort of of bank run. Nothing has changed in terms of just the technicalities that caused the Silicon Valley bank run. I mean, they had definitely idiosyncratic issues as it pertained to their customer base concentration levels, uninsured deposits. Those are very specific situations. But the sheer

amount of deposits that fled, nothing's really changed in terms of the picture that would keep deposits in-house anywhere else. True. Yeah. All right, Leslie, thank you very much. Good to be with you. Thank you. All right, those bank downgrades adding to some worries on Wall Street, the Dow falling as much as 466 points at one point during the day. While off those lows now, the volatility is here. The VIX hitting its highest level since May. For more on the markets, let's bring in Jeremy Bryan, senior portfolio manager with gradient investments, and Mike Santoli joins us in the discussion as well. Jeremy, let me begin with you. How important is this bank downgrade in the overall market picture? Is it a one- day story. Obviously, it wiped out all of yesterday's, or most of yesterday's 400 plus point gains for the Dow. Yeah, where we really needed this was March 10th. We didn't need it now. To be completely honest with you, I don't think this is a long-term, long-tailed story unless things are getting incrementally worse than what we heard in earnings, because we've gone through all this analysis at this point now. We know what deposits look like. They're not falling off a cliff, even though they're not

paying them a whole heck of a lot. So we know that. We know capital ratios are still fine. And the earnings estimates have come down pretty precipitously for these banks. And so for them to say they're eroding income and all that, well, we've already somewhat A-priced it in and also it's in the estimates as well. So I just don't see this as really a long-tailed type of downslide for the market based upon this Moody's downgrade unless something incremental comes out that we just didn't see from here. Mike, how about you? Is this a one-day story or something more? Probably the Moody's action is a one-day story, but it does re-concentrate attention on probably the chronic issues in the banking sector, which are really macro issues. Do they have stale valuations on commercial real estate that are going to show up down the road?

Is there going to be a pinch in general on credit creation as they have funding and earnings pressures? I think that's one element of it. To me, the bigger picture story, and this started three or four weeks ago. I think it started to become clear that the market has. had taken an awful lot of credit up front for, we're going to have an economic soft landing. We're going to have a benign macro scenario for a while. The Fed is just about done. Earnings are troughing in the second quarter, they're coming back.

All that still looks like it's in place. It's just that the market already kind of arrived at that moment. So anything that disturbs the happy picture is going to have a result in the seasonally week period of the year like August. So to me, it feels like normal choppiness. The S&P's exactly where it was three and a half weeks ago when we got to that overbought point and it started to hear people say, maybe it's enough for now. So, Jeremy, what kinds of stocks do you think, let's set aside the regional banks, the mid-sized

banks for now? Where do you think the targets of opportunity are in the market? Yeah, what we've been looking at a lot lately is fundamental momentum that maybe the stock momentum hasn't quite caught up to yet, where earnings estimates are stable to growing, and honestly, and the stocks haven't reached their 52-week highs yet, and valuations are relatively cheap. So we're looking for areas outside of where, hey, the magnificent seven that have had really substantial runs here, we're looking for areas outside of that and that's maybe the next leg of growth going forward. And so companies like United Healthcare fit that bill, air products fits that bill and MetLife fit that bill. What is the common tying bind, even though these

are very different businesses, is that their momentum from a fundamental perspective, what they're on an earnings perspective, what they're talking about in their commentary was all relatively positive and it looks like they're an accelerating profile. Now, the stocks have rallied here a little bit, but we still think there's quite a ways to go for all three of these names. And actually, we just bought Met a day ago. And we really think that once we look through their earnings, that a lot of the fundamental operations there are pretty interesting. Mike, do you think we're going to be in a choppy period for a while here? It would make sense, Kelly, that we are for a little bit of give back. It's a feature of bull markets. It's not a bug. I do think that the

up trend that we got over the last few months, the fact that the market did broaden out through June and July has sort of gotten the benefit of the doubt toward people who are saying, look, it's an up trend. If we have a 5% pullback from the highs, it's probably not going to change that broad effect. This is a weird cycle. And I mentioned the seasonals. They start to stay kind of unfriendly for a while through the fall, if that's what's going to matter this year. But I do think it makes sense that when you see the reactions to earnings, especially in some of the big, high-performing NASDAQ stocks, and the market sort of effectively saying, you know, we knew it was going to be good,

it was good, we paid up front for it. It's time for them to back off a little bit. Indeed. All right, gentlemen, thank you. Jeremy, Brian, Mike Santoli. We appreciate it again with a Dow about 200 points off the session lows. Coming up, beyond the bank, some key earnings moves we're watching today, including Eli Lilly bucking the broad market trend. Shares are up almost 14%. We'll speak with an analyst who raised their price target on the stock by $115.

The stock is around $515 right now. Plus, it's been over a year since the $53 billion Chips Act was passed in the House. And yet chip firms are still not seeing government funding. We'll talk about the implications when Power Lunch returns. Welcome back. Beyond the Bank, some key names reporting results. Three in particular had some unique factors that drove or held back their results. And let's start with Eli Lilly, whose shares were up as much as 17% earlier, thanks to a stronger than expected second quarter result and a guidance hike. It's obesity drug, Mungaro, helping boost company profits last quarter by 85%. Let's dive a little further into the results now with Wells Fargo's equity analyst Mohit Bansal, who just, as we mentioned, raised your price target by 150. dollars, Moheed. So where does that leave you?

Oh, thank you very much, Kelly, for having me. But yeah, so we are very excited about Lily right now. Quarter, quarter was good, and there was a beaten race, but more than the quarter, the stock is up due to the results from competitor, Novo, for their weight loss drug Vigovi. Right. And this is a seminal moment in the drug development right now. Right. So let's talk about these. So for months, people have been waiting these trial results, really because they want to know if employers and insurers are going to cover the cost $1,000 a month of these drugs or not, if they can show, you know, an economical outcome

where it reduces cardiovascular problems, you know, that's a little bit easier to justify coverage because basically the companies can argue, insurers can argue, they're not just going to see a huge increase in spend. It's just going to be offset by more spend here and less spend elsewhere. So how much, how significant do you think this is for Lilly and for Novo today? Right, this is a big moment because like you pointed out, so far these meds, at least for obesity, were just aesthetics, drugs. Basically, they were making you look better. In this case, this is a definitive health benefit these drugs are providing.

For Lilly, this is significant because right now the access is significantly limited. Pairs are providing commercial access, Medicaid has no access, and even Europe, the access is very limited. We think with this data set which shows 20% improvement in cardiovascular benefit puts this drug right at the same level as other cardiovascular drugs. And it does start the discussion like you mentioned, the health economic benefit of these drugs, which was not present until now. When you look at some of the drugs they have, you see just huge increases in revenue sales here. Verzenio, up 57%, Jardians, which we've all seen advertised very heavily by Lilly, probably type 2 diabetes, up 45%. Mujaro, 979 million in sales in the quarter, up from 16 million in sales in the year ago period.

Those numbers are really extraordinary. Can they keep them up? Can they keep them up with respect to Mujaro, which is the big blockbuster? And second question is, does Munjaro potentially have the same or even more helpful cardiovascular effects than Wigovie? Right. So, on your first question, definitely there is some quarter-over-quarter improvement, which you see, which is more than normal. But we do think this has an industry-leading growth profile. This company has industry-leading growth profile driven by not just, Munjarro, they have this Alzheimer's drug which showed strong results back in May. So we model this company growing at more than 15% year over year for next few years, and

that translates into 25% plus bottom line growth for many, many years to come here. Now the other part, you mentioned Munjaro. For Munjaro, I think at this point, the growth will continue. The reason is Novo and even Lilly. combined, they probably don't even have supplied to cater to the demand at this point. Lilly today talked about a new plant, RTP plant, which is fully functional. Now, even then, we do not think this plant is sufficient to supply. So back to my question, if you could just tie it off quickly there, is it possible that

Munjaro will have the same or even better cardiovascular benefits than Wigobi? Yes, if weight loss is the reason, Munjaro provides 22% weight loss at highest dose versus we go with 17%. So by that logic, it does seem like it could have a better cardiovascular benefit. All right, Moheed, thank you very much. We appreciate your time today. A very favorable rating there on Lilly. Next up on the earnings rundown UPS, the delivery company lowering its guidance, missing on revenue due largely to the impact of labor negotiations. Our next guest maintains his buy rating on UPS with a $212-dollar price target. Let's bring in Amit Merotra. He's transports analyst with. with Deutsche Bank.

Amit, welcome. Good to have you with us. Thank you, the revenue mess, I guess I'm perplexed that it would have something to do with the labor negotiations because that contract

really hasn't even gone into effect yet. But explain why the labor negotiations affected the numbers today. Well, there's two real differences here. One is with respect to the second quarter and you're absolutely right. The number of packages per day

that UPS has, handled or down about two million per day, about half of that related to diversions that the customers implemented as a result of the risk of a strike. Ah. Ah. Uh-huh. Gotcha. Interesting.

Interesting. That's why you do what you do and why I do what I do. So that gets out of the way. Let's look then deeper down the field here at what the labor agreement, which is going to raise wages rather significantly, particularly in year one. And also, I think, in year five, what is that going to do to the company's profitability? How can they blunt the impact of that? Do they have the pricing power, that whole cluster of questions?

Oh, absolutely. I mean, we at Deutsche Bank could not be more bullish about UPS's ability to grow profitability. We predict over the next several years this company will report margins that are higher than they ever have and profits that they ever have. This is truly a win-win-win deal. Just to give you a sense, we can focus on year one or focus on your five. But if you look at the cumulative five-year effect of this deal, the average labor deal is 3.3% a year. Let's be clear, you know, UPS Teamsters employees are the highest paid in the industry, and they deserve that, and they are getting corresponding increases. but this labor deal and our analysis, I would say we have done more work on this than I think anybody here at Deutsche,

and we believe that this is a company that's going to be on the path for profitable growth for many years to come. And what does then that look like for the share price at 180 right now in it? It's going to go higher. I mean, we have a $212 dollar price target, but let's just break it down. Today, the company trades at about an 18 to 19 times forward earnings. That means this year's earnings. you know, that's a discount to where the S&P is trading at today. They generate over 30% returns on invested capital.

They generate oodles and oodles or free cash flow. This is a company, there's multiple should expand. And when you translate, you know, that to the stock price, Kelly, to your question, we're talking about 19, 20 times earnings expectations of maybe $13, $14, $15 over the next three years. We think this company can trade well into the 200s. We have a price target of $212, but obviously that's a $12. month price target, but we don't really see any roadblocks, especially as we enter the second half of 24, we really think the way the labor deal wakes, the curve of the cost inflation really

moderates in the second half of 24. And that's why, last thing I'll say is last, that's why earnings expectations are coming down 10% this year for this company, and the stock is basically flat. And I think the market is telling you that this company is primed for a lot of upside once that curve on that inflation moderates. All right. Amit, thank you very much. We appreciate your time today. I meet Marotra. And our final name in the earnings rundown is AMC. Those shares are down despite a second quarter EPS and revenue beat. It was the strongest second quarter in four years, and this is the entertainment name we should emphasize. A helped by a jump in attendance, 66 million moviegoers, highest quarterly attendance since the end of 2019. But my next guest

still foresees trouble ahead for the theater chain and has an underperform on the stock. Alicia Reese covers media and entertainment at Wed Bush. Alicia, it's great to have you. Not much of a share reaction today either. What do you make of that? Right. There is a lot of positives to point to in the quarter. I think they had a really nice quarter. They were able to hold on to market share gains that they had gained during the pandemic, even growing year over year on that. And that's despite like a little share, sorry, screen decline. And they're just closing underperforming screens as those, you know, contracts come up for renegotiation and improving their operating metrics as they go along. Their concessions profitability was greater than, or, you know, in line with pre-pandemic averages, and that's on, you know,

30% less attendance against those years. And so as that attendance starts improving on a higher volume of films, we'd expect, you know, AMC to continue printing really nice numbers. The overhang, however, is related to the pending court case that still does not have a resolution, and also the Hollywood labor strikes. If they can, continue for much longer. This could create quite a hole in the release slate next year. And if there's a perfect storm, there's still no resolution or AMC is not able to fold its apes shares back into AMC. And they'll have some bit of cash issues next year if there is that release late hole. How do you take apart that those ape shares and the regular common

and the controversy around them? What's the resolution here? What's the effect on the company now? potentially. Sure. So at the moment, they can use, they have plenty of ape shares that they can issue. It's just trading at a significant discount to AMC shares. So if they have to rely on ape shares to raise cash, which they will need to do, especially if they're a release late holds next year, that'll have, that'll cause significant dilution of the stock. If they're able to convert the apes, the legal case falls in their favor. They're able to convert those apes to AMC shares. they'll sell those for, you know, they'll get more cash for less solution. So that benefits them.

If that happens and they must raise cash to deal with the release late holes, that doesn't really improve their position materially but does cause some position. If the Hollywood labor strikes resolve earlier, we might have some near-term disruption, but maybe not much in the way of 2024 and then AMC, with all of that, you know, falling through. favorably for them, they could be pretty well positioned. If the company chairman, Adam Aaron, were to sit down and write a note to Barbie, what would it say? Thank you very much.

We really appreciate all the marketing efforts around that film. All right, and he'll be wearing pink for the rest of the summer. Alicia, thank you very much. Alicia Reese. And coming up, vivid seats lower by nearly 8%. The company reporting results as well as a key acquisition. We will discuss that as well as ticket prices, consumers, and Taylor Swift. As we head to break, check out shares of international flavors and fragrances,

having its worst day on record, down 18% after cutting full year guidance because of weakening customer demand. Power lunch to be right past. All right, welcome back, everybody. Yields showing some volatility along with stocks today, so let's get to Rick Santelli, who is tracking the action, the 10-year, a little bit above 4%, Rick. Yes, hovering right around 4%.

The low yield today was around 3.5%. 98 that happened a bit earlier, but the big news continues to be that short maturities, well, you can't keep them in stock. It's like sweets. Investors can't get enough of them. Case and point, today's 42 billion three-year note auction. Boy, it was an aggressive auction. I gave it an A-plus. Look at a short intro of three-year notes, and at one Eastern, you can see the drop. Now, if you look at a three-year since Friday's Jobs, Jobs, Jobs Report, you can clearly see it keeps moving lower. Is a matter of fact, whether it's the two-year or three-year, all short maturities are in their happy place with respect to investors. And if you put a March 1st chart up, you can see whether it's a

two-year or three-year, they failed to get a new high-year close in early July, especially when the two-year in particular was above 5%. That changed everything. Then, well, let's look at the spreads to give us the next clue. If you look at 2's-10s on the same chart as 3s30s, once again, they've de-inverted rather dramatically, and that shows you the appetite for short maturities is hotter than long maturities, but it shows you something else. You see on that chart where it really started to de-invert, the 25th and 26th of July, two-day Fed meeting. Kelly, back to you.

Rick, thank you very much. That A-plus certainly got a lot of attention. What about oil? Still higher today and up more than 10% in a month, while consumers might focus on prices at the pump. Higher energy costs also filtered through a lot of parts of the economy. with this events. So starting here with today's price action. So oil turned around about at 12 1 p.m. today after the short-term energy outlook from the EIA said that they see upward

price pressure until the end of the year. But overnight, it actually fell significantly after that data from China missed expectations on both the imports and the exports front. For oil, specifically, imports were down 18.8 percent between June and July. However, over the last year, they were up 17% compared to July of 2022. So it isn't quite as ominous when you look at it on an annual basis. But, you know, prices are going up. They're up 11% in the past month. And that, of course, does create a headache for the Federal Reserve.

And as you mentioned, consumers see it in prices at the pump. But in reality, energy filters through to basically every area of the economy. So John Kildoff over at again Capital said that he thinks $90 WTI is when the soft landing could be in jeopardy. So we're not there quite yet. But we are inching closer to that. And one other area to watch is heating oil futures. That is a proxy for diesel. That's at the highest since February.

And so that starts to create a headache for things like truckers and freight and anything that's transported. It has higher diesel costs. Obviously, it all filters through as you make the key point here. It filters through and it's going to affect the consumer price index, a CPI. I mean, whether you look at the headline number, the core number is going to, going to be different, obviously, because it takes out energy. But it's, you can take out energy prices, but those energy prices do filter in through other products that aren't taken out of the core. Exactly. I mean, you can't. Energy is the economy. And so while the Federal Reserve and,

you know, central banks look at that core number that strips out energy and food costs, which are typically more volatile, energy underlines everything, even just in terms of production, plastics comes from oil. And so all of these things, you know, exactly. Exactly. And, and And there's like a freight tax for everything that's transported when you get those higher prices. And so even when you take out and just focus on core, energy is everywhere. All right, Pippa, nice to be with you. Thank you. Appreciate it. Let's get to Sima Modi for CNBC's news update. CMA.

Tyler, good afternoon. The FAA is referring nearly two dozen cases involving unruly passengers to the FBI. The allegations against some of these passengers include making terror threats, attacking flight attendants, and trying to break into the consequences. cockpit. The FAA Ken Levy finds up to $37,000 but cannot file criminal charges. That's why these cases are going to the FBI. A member of the so-called Tennessee 3 just launched an exploratory committee to run against GOP Senator Marsha Blackburn in 2024. Gloria Johnson, the only one of the three Democrats who avoided expulsion from the Tennessee House, filed a paperwork late last

week. Johnson and her colleagues garnered national attention when the Republican-controlled House started expulsion proceedings following their gun violence protests. And get this, police in Charlotte, North Carolina are telling people to be on the lookout for a 900-pound bull. They say the Longhorn got away while his owner tried to move him to a safer space during the severe weather last night. Anyone who sees the rogue bull is advised to keep safe, keep safe distance before calling the police.

And as someone told me recently, never turn your back on a bull. They can still attack. That's right. That story is not a lot of bull, right? There you go. Wild. Wow. All right, Seema, thanks. Appreciate it. Be on the look at the Bulls. Ahead on Power Lunch, Boeing Deliveries. They fell in July. Struggling to keep up with its key competitor Airbus details when Power Lunch concerned.

Welcome back. Boeing deliveries fell in July as the aircraft maker struggles to keep up with customers clamoring for new jets. Phil LeBoe has more details for us. Hi, Phil. Hey, Kelly, yes, the numbers were down in July, but you can't really go month to month with Boeing. You have to look at the progress over the course of the year, and they're going to be passing the total for orders sometime this fall relative to where they were last year. For July, they logged orders of 52 planes. That brings their year-to-day total up to 467, and the backlog now stands at just under 5,000 planes. The deliveries are really what Wall Street is more focused on. The deliveries in July, 43 planes, most of those being 737 maxes.

Remember, they're in the process of increasing 737 max production. Year to date, 309 planes have been delivered. They will probably pass last year's delivery total sometime in the next couple of months. As you take a look at chairs of Boeing, keep in mind that they are increasing not just 737 max production, but also 787 production. So their delivery numbers will be greater in the second half of this year. As you look at Boeing and Airbus, also keep in mind that these guys both expect several large orders to be placed in the second half of this year. So the momentum we saw in the first half and at the end of last year in terms of new orders, very large orders, that is expected to continue in the second half of this year. Where will those large orders come from?

A lot of the leasing companies. We've already heard from a number of the airlines, and we'll hear from some airlines, but we will hear from a number of the leasing companies. They are the ones who still need to place the large order so they can get a slot in line. Very interesting. So even bigger than the orders from Chinese airlines or Emirates or Dubai or whatever would be these leasing companies that then do what? Turn around and release the planes to the operating airlines? Well, they don't release the planes. They buy the planes. They buy the planes from Boeing and Airbus. Then they will lease them to airlines around the world. Right, right. Very interesting.

Okay, Phil, thank you very much. Phil LeBow reporting on Boeing. Still ahead, the waiting game nearly a year has passed since the $53 billion chipzac was passed to help kickstart production of semiconductors here in the United States. And yet, manufacturers are still waiting on much of that funding. We'll hear from a few of them about their plight on the other side of this break. We'll be right back. Welcome back to Power Lunch. Shares of Ticket Exchange and Resale Company vivid seats lower today, despite reporting beats on both the top and bottom lines.

and hiking full year guidance yesterday. Vivid announced it's going to acquire Wave Dash, a secondary ticketing market in Japan, marking its first foray outside of North America. Joining us now to discuss is Stan Chia, the CEO of Vivid Seats. I asked one of our prior guests regarding AMC, the theater chain. If she was the CEO, what would she write to Barbie?

What would you write to Taylor Swift? Hey, Tyler, thanks for having me. I would say Taylor Swift, you are an amazing artist and performer. Thank you for putting on an amazing three-hour show for all of your fans. We're all very appreciative. And I count myself a fan too. Her show in L.A. looked absolutely remarkable at Sofi Stadium. It was really something.

So let's talk about this acquisition of the ticket company in Japan. It seems to be weighing on the stock a little bit today. Yeah, look, I'm excited about all the things we announced today. I think as you look at all of our strengths here, as we've built a profitable, scaled, and growing company that continues to beat expectations, right? As you said, we beat 20% on the top, 27% on the bottom today. I think we're excited to take those talents and look at what we can find internationally. As we looked at Wave Dash, we were able to find a company that is scaled is the secondary market leader and profitable. And so we look to be excited about what we can continue to do with what we have here. as we look to expand and learn more on the international landscape. So, Stan, let me ask you a sensitive question that is driven in part by personal experience. I'm a customer, and I love what you do. And I have used your product very successfully to buy and sell tickets.

Where I have issue is in the fees that are charged. What is the average fee on a ticket for, let's say, a high-ticket concert, like a Springsteen or something. What do you charge? And what does the consumer get for that fee, which to me seems high? Yeah, for us, you know, I think when you look at it, we're a pretty stable company in terms of our take rate,

which is really our fee. When you think about our marketplace, again, being a company that connects buyers and sellers, the pricing really isn't set by us on the ticket. And where we've always looked to innovate and invest on is to make sure for that. ticket, Stan, but on the fee. I get that the seller is setting the price on the ticket, basically. In other words, if I'm willing to sell my seat for $375, the next person in the next row

back may be willing to sell it for $325. But I'm asking about the fees specifically. Yeah, for our fee, I think we continue to invest in elements that we believe are largely valuable to users. We're the only ones out there with a loyalty program, and our loyalty program, has economic components, buy 10, get one free. So if you think about that, that's almost half of your fee off as you accumulate rewards and earn them. We also have Surprise and Delight program. So as you buy and you get rewarded, we'll upgrade your seats.

So you'll get a better seat than what you bought with us. And we also invest in our customer service. You know, we've been recognized now by Newsweek as, you know, best customer service and ticketing for multiple years. So I think we continue to take that fee and try to reinvest that into areas that are valuable to consumers. So what happens if it goes away? The Biden administration is trying to crack down on these fees, aren't they? Look, I think, look, we're looking at making sure that for what we, we as a company, charged to our users, that they continue to find value in a platform where they can discover events, they can earn loyalty.

And certainly what is out there in terms of transparency, we're big supporters of. I think consumers should know exactly what they're buying. Could you do something where you become an industry leader by going to a fee-free, you know, price now? and try to kind of set the tone knowing the regulation's coming anyway? Yeah, I think how we think about things, look, we look to make sure that, you know, principally, we are doing things on behalf of consumers and protecting their rights, and then we're also ensuring fair competition. And so, you know, I think we've always been leaders in driving a loyalty program and driving best customer service as well.

And certainly on the fee front, as we look at the regulation that's coming, we're very supportive of all of the efforts in that area. Are the fees that you do charge, are they based as a percentage of the ticket price or the sale price? And if so, what is the percentage? Or does it vary? Yeah, our fees are charged as a percentage and they vary based on the event type. As you can imagine, I think there's just certain things where we have costs that we need to recover based on the price that will cause that variance. But if you look perhaps at the indicator for us, we've always been fairly stable on our take rate as a company. and if anything, when you see some of that coming down because of loyalty,

I think you can see, again, our investment in giving back to the consumer in terms of what they're paying in terms of fees. What is the take rate? I don't know that term of art, number one. What does it mean? And then what is it? And then you said it's a percentage of the ticket sales price, but it varies. What would the range be?

Yeah, look, when we talk about, you know, I think our earnings, you know, on the, for example, this quarter we announced we did $954 million in gross order volume. On that, we delivered $165 million in revenue. That revenue is our take rate. And so you can think about that in the area of, you know, I think call it as we disclose, 15 and a half-ish percent, right? And I think that's almost where you step down against that. We have costs to bear to power the service, to power loyalty, to power the tech.

That's how I think about that. And we've been very stable with that in terms of, you know, our entire history. Stan, thanks you for your candor today. We appreciate it. Of course. Thanks for having you on. Stia. A vivid seats. All right, the $53 billion Chips Act signed into law a year ago tomorrow aimed a jumpstart. The production of a leading-edge semiconductor manufacturing in America. But today, manufacturers are still waiting on much of the funding.

Christina Parts of Nevelas now with a progress report. Christina. Oh, we're celebrating almost one year. And construction sites like this one have popped up across the United States. But like you mentioned, there has been no government aid dispersed just yet. Wolfspeed, which is a silicon carbide producer, has created this facility here in North Carolina, even though they have not received any federal dollars. I spoke to CEO Greg Lowe, and he told me they're spending as much on all of this as they get in revenues on an annual basis.

Listen in. Our CAPEX is a percent of revenue is about 100%. And so obviously getting government support to build this technology is going to be really important. Other companies, though, are not in the same position. They've had to put their plans on hold because they haven't received government aid. Listen in. There is no commercially viable way to do this project without support, which is why the Chips Act was passed in the first place. This Chips Act consists of $53 billion, which is going to be dispersed in trenches over the next five years.

The earliest that companies will see money is at the end of this year. Listen in. You know, I'm pushing the team to go fast, but even more important to get it right. So the Commerce Department clearly has their work cut out for them. They rushed. They hired 140 staff members. They got to go through 400 statements of interest, which is really just the beginning stages of the application process, which means all of these companies will still have to wait for those funds. Why the holdup?

Why is it taking so long from the standpoint of the companies? I think this is me editorializing. I think they may be underestimated how many companies would actually come forward, not just domestic, but international firms like TSM, Samsung. So you have all of these applications. They have to follow the stipulations, provide childcare, hire a certain number of workers, you know, no buybacks, engage in some type of profit sharing at a certain threshold. So because of all that, it's just created a lot more work, hence why they've had to hire over 100 new staff members. I was going to joke that the government doesn't even to spend the money at this point because they've already, you know, but I mean, they do. I mean, at some point they're going to need to see it come through, but it reminds me like when the Fed announced its, it's like corporate bond facility. I don't think they ever had to buy a bond. Just their backstop was enough to, you know, stabilize the market. Well, that's the argument a lot of these companies will make too. Well, they'll say, hey, look at the economy that's being built around this.

This is a massive, massive facility. There's going to be restaurants that are eventually going to open up in the near region, and it's going to help the local economy. economies, but there does need to be some type of kickstart for some of these smaller firms like Integral, like Skywater, they can't afford to do it themselves because this in cheap. This is what, nine football fields, nine football fields. It's massive. It is fun to go see it and just get a sense of the size and scale of these projects. Christina, do that kickstart move again, will you?

I don't know why I did that again. I have awkward kickstart. I have no idea why I do something. Yeah, there you go. I don't know. I'm sorry, guys. Give it it a kickstart. Let's kickstart to the commercial.

All right, Christina Ports and Nevelas. Thanks very much. Be safe down there. Still to come. Other big stories we're watching. Closing time is next. Welcome back. Only three minutes left in the show.

Quite a comeback for the market, by the way. Dow's down less than 200 right now. And a bunch of other headlines to get to, so let's rip through it. It's been rumored for weeks, but now it's official that July was the hottest month on record. Scientists from Europe's Copernicus Climate Change Service announcing July's global average temperature hit 62.5 1 degrees Fahrenheit. eclipsing the prior record of 61.93 set back in July of 2019. And it's not just in the northern hemisphere. It's in the southern hemisphere as well. I was speaking to a person who just came back from southern Africa, where it's winter.

And she said it was a heat wave. Same in Brazil, I think, that it was like 100 degrees during their winter. Really, really, really hot. All right, we touched on this earlier in the program. Novo Nordus says its obesity drug Wagovi can also cut the risk of heart attack or stroke by 20% compared with a placebo, that is according to findings from a five-year trial study. Analysts say it could go a long way toward increasing accessibility to the drug for patients since it would mean that it has a medical use rather than merely a cosmetic use.

It's not just an obesity drug. It also, as we spoke earlier this hour, has sort of knock-on effects for other drugs in this class like Munjaro of Eli Lilly, which is trading in an all-time high. Once you can quantify the savings, potentially from less cardiovascular problems, you're going to get more employers and more insurance plans able to cover it. And that's probably the key development here is instead of people were starting to pull back because it was too expensive, now they'll probably be able to justify a very big deal for market access. Who doesn't love a sequel? Amazon says last month was its biggest prime day ever. And so now it's going to host a second one

in October. Had they done this before? No word on exact dates yet, but they say the sales will be offered in 19 countries around the world. Analysts are expecting a downbeat holiday shopping season amid some economic uncertainty and inflation. Well, that's interesting. I mean, a second way to just get more sales in, and I think they need that, actually. But then I think they did this. But then they also have the actual Black Friday coming up. So at what point does it cannibalize? Maybe they're just willing to push it to the point at which it does.

All right. If you enjoy the taste of champagne, folks, enjoy it while you can because, yes, climate change could change it forever. A new report from S&P Global. What do they know about champagne taste for S&P Global? Yeah, they probably understand stocks beautifully. But they're warning that the risk of droughts in the Champagne region of France, which is the only place that you can really get champagne, could triple by the 2050s,

thanks to soaring temperatures and extreme weather events. That means that champagne production could have to change locations, and in turn could change the taste of bubbly as we know. And I forget how they describe the different taste. I just was reading up on this. They said it's sweeter and almost a little bit richer. And so they said they no longer have to add sugar. I know.

I'm thinking, well, more. More palatable for some of us. Yeah. All right. Thank you all. Go have a glass of champagne wherever you are. Right now, I urge you to do that.

Thanks for watching, Pamela. Tell us how it takes. Closing bell starts right now.