Power Lunch - Market Tug-of-War, Finding The ‘Golden’ Ticket 8/6/24

Episode Date: August 6, 2024

The market bulls want a Fed rate cut so the rally can keep going. The bears want a cut to prevent a recession. It’s the same goal, but with very different views on where we are in this economic cycle. We’ll discuss.Plus, Democratic nominee Kamala Harris has officially chosen Minnesota Governor Tim Walz as her running mate. Will this choice actually move the polls? We’ll speak to Larry Sabato about that and more. 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 alongside Kelly Evans. I'm Tyler Matheson. Glad you could join us for a Tuesday. Coming up, a market tug of war. The Bulls want a cut to keep the rally can keep going. The Bears want a cut to prevent a recession. Same goal, very different views on where we are in this cycle. Plus, that's the ticket. Kamala Harris choosing Governor Tim Walls as her running mate. Will this choice move the polls? And in the direction they're hoping for, we'll speak to Larry Sabado further ahead. But first, a check on the markets. Oh, what a difference a session makes. The Dow up about 600 points right now, but we've still got a lot of ground to cover before we make up for the losses we've seen over the past few days. Some key names also reporting results. Palantir hire. They're raising full year guidance.

The industrial giant caterpillar also popping on a beat. Yum and Uber rising after better than expected results as well. Some other movers that we are watching Kenview leading the S&P 500. The J&J spinoff beating on earnings. So on the negative side, you got your Warner Brothers discovery. Lower on reports that the struggling company is looking to pursue smaller asset sales. We begin, however, with the tug of war taking place in the market. A majority now seem to agree that we need a cut and quickly.

The difference is why they think we need it. On the one side, you have those saying the rally is done. The recession is here, and the Fed needs to make an emergency cut to prevent a further slide. And on the other side, we hear, there is no recession. recession, but the Fed needs to cut to keep the rally going and ward off a recession. Here to discuss is Brian Van Kronkite, portfolio manager with all spring global investments. Brian, welcome. It's good to have you with us. I'm struck a little bit, and I don't know how long you've been calling for the Fed to reduce interest rates or not, but I'm struck that over the past

few months, while there was an undercurrent of people who thought the Fed needed to cut and sooner rather than later. It was by no means the wide clamor that we're seeing in the past couple of days where everybody seems to be saying, oh, the Fed is behind the curve. How could they possibly let this happen? I didn't hear that kind of enthusiasm for a rate cut from, let's say, February into June and July. Nick, you're right. I've personally been calling for the Fed to stay higher for longer than most people have been. I think that's the right move. Inflation has been too high and the Fed is doing their job, and they're doing it very, very well. Inflation is coming down.

Employment's becoming more balanced, but we need to slow the economy for that to happen. The Fed is productively doing their job. I think calling for an emergency rate cut right now would be the same thing as the women's national soccer team pulling their goalie in the first half of a nil-nill-nill game. It might work, it might bring some offense, but it's very risky, and we have to call into credibility, calling the question of the credibility of decision makers here.

So the Fed needs to cut rates methodically, predictably, and a little bit in the future, but not right now. Things are going quite well. Yeah, there are some people who are saying that where they need to do an intermeeting cut or that they need to do 50 basis points, a half percentage point when they meet again in mid-September. Either of those, it would seem to me, to your point, might send the wrong signal,

i.e. that the economy is in worse shape than we're led to believe that there's something they see that we don't. That's exactly right. A major cut right now, either preemptive, ahead of the next meeting or a big cut at the next meeting would tell the market that the Fed is scared. And if they're scared, we should definitely be scared. That's the wrong message to send right now. I think we need this show a sign of calm. Let them understand that the market understand that things are working correctly. And investors shouldn't be pushing the Fed into

decision making just because they lost a few percentage of their capital over the last three days, right? Things are working well. Let the Fed do their job patiently and predictably. If I'm lucky enough to have some discretionary capital lying around, maybe I've taken some profits in some of the tech stocks and I've got some cash that I that I want to put to work. Where would you advise people to do it? There's a few things you can do right now. Number one, if you did make some money in tech, I think it's a great time to move that money into traditional defensives.

Not because you need to hide out and play defense, but a lot of capital was hiding in mega cap tech for stability. The traditional defenses of health care and staples to me look very attractive. In particular, Charles River Labs, they report tonight. I think they would have to probably cut guidance, but when they do, it's likely the last cut. That company has done a phenomenal job investing through the cyclical slowdown in clinical research, and they're going to be a secular grower on the other side of this. Gaining market share through acquisitions and organic investments.

It's a great place for both defense and offense over the next 24 months. Similar kind of question, Brian. I mean, if we look at the labor market and all of a sudden it does weaken considerably in the next month or two, well, then I guess we'll know there was something more to this slowdown and to the calls for Raycuts. And even if it doesn't weaken, you have the idea that the Fed is passively tightening if they don't reduce rates here simply because inflation keeps dropping and inflation expectations too. That's right. I think we want labor to continue to loosen up. We want unemployment to move a little bit higher so that we can make sure we definitely squashed out the inflation issue. Now, we don't want to move too quickly, but the reality is the Fed is balancing this in very delicate fashion. And so unemployment likely does slowly move higher. The Fed will then take that into consideration.

We'll see a cut in the future, but right now that doesn't really concern me as an investor. I think there's a lot of companies that can fight through this economic cycle and control their own destiny by using their capital very wisely. Are you concerned at all about a recession in the U.S.? Of course. We're paid to care. We're paid to be concerned, obviously. We want to worry about that, but you want to own businesses that will both protect

capital and compound capital. We don't want to ever build a portfolio that's requiring the generosity of the Fed to make sure all recessions go away forever. Investors have been conditioned for 40 years now that we're never going to have business cycles or economic cycles. And the second we do, the Fed jumps in to the rescue. That's not normal, right? We're going to go through cycles. We need to invest through those by being very cautious and careful with the business we own. And today, I think there's plenty of places to put capital to work that can help you navigate whatever cycles ahead of us. And you're supposed to look at midcaps, you know, as a strategy, which kind of puts you

between the argument about whether you should go with big tech or rotate into small caps. So what, in fact, do you think happens to your favorite names right now? Right now, I think you want to move down cap, whether it's from large into mid or mid into small. I'm comfortable with either one of those. There's been so much capital that's been pushed up cap because of both fear around the Fed missing their window and greed around the AI trade. That capital is going to find a home somewhere. I'll layer on top of that, the carry trade, which is still unwinding, that's going to push more capital probably out of large caps. I feel very comfortable moving down cap and moving to value, actually.

In the very initial phases of the Fed's challenge here with the economic pullback, value might struggle, but not to a large degree versus growth or versus the large cap. So I like moving down cap to mid and small. I like moving to value from growth today. Bryant, thank you very much. Bryant Van Cronkite. We appreciate your time today. Thank you.

And now it's time for today's three stock lunch. As volatility hits Wall Street, we asked our trader to pick three names from a CNBC portfolio protection screener, whether he agrees or disagrees with owning the stocks. The criteria has to be. an S&P 500 member, be low volatility stock with beta less than one, have EPS growth of 10% or more in the past three years, and have a consensus buy rating with an average upside of price target upside of 20% or more. So Chris Grisanti has agreed to this. He's chief equity strategist at MAI Capital Management. Chris, it's great to see you. Your first pick off of the list is dear because you

disagree. Why wouldn't you want to own it here? Yeah, Kelly, it's good to be with you guys again. So the exercise here is to try to pick some safe stocks that ought to do well, even if the market doesn't. I don't think deer necessarily fits into that category. It's a good, strong company with a good balance sheet, but the beta is not that low. It's 0.94, so it's almost one. And years of a strong farm economy have led investors to think deer is a strong, stable company, no matter the economic environment. Deere is susceptible to recessions, just not industrial, recessions that we're used to, but more farmland recessions. And I fear that we're kind of due for something like that. So if you're looking for a company that can sail through a recession,

I think you should look elsewhere than deer. All right. Let's look at one that you actually pulled as one you agree with, and that would be Zoetis, the Animal Health Company. Yeah, thank you so much. So the Zoetis is a terrific company because there's not that many competitors that focus just on animal health. They just reported earnings. this morning. It wasn't just double-digit earnings growth. It was double-digit revenue growth as well. This is a company you can imagine doing well during a recession because, you know, folks will stop spending money on travel and other things, but they'll continue to spend money, especially where the health of their pet is concerned. Finally, it's not a cheap stock, but it's growing nicely and it's

exceeding expectations. So this is the one I would put into a safety portfolio. Okay. Another one now that you disagree with is Lamb Westing. The upside to average price target on this one is about 20%. It has had the EPS growth over the past three years of 31%. But is the tide turning now? Everyone's wondering after those poor results. Sounds like you're a little bit concerned about that. I am, Kelly.

And this is a tough one because I'm a value guy. And boy, Lamb Weston's screens as very cheap. The problem we have here is we have a lot of research in the French fry industry. It's not AI. It's French fries. It's not terribly controversial. But our research tells us that stuff is really quite difficult at Lamb Weston right now. They kept prices high during the pandemic, alienated a lot of customers.

Now that supply is more available, those customers have gone elsewhere. And so this is a real show me stock. And I'm afraid right now it's a value trap. I'd stay away. How, Chris, do you characterize or describe this period of sort of market spasm that we seem to be going through over the past three or four weeks. Some of it feels kind of seasonal to me. It feels like an August, like I've seen this movie before.

Yeah, and I don't want to be glib, Tyler, but we love this stuff because finally folks understand that equities don't go in just one direction. So it presents opportunities for investors like us to take advantage of the panic. And there have been several times over the last five years where the VIX has spiked. And if you go back and look at what caused that, you can hardly remember those events.

So I think we're in a place like that. I think the economy is pretty decent right now. So, you know, I would say, you know, gird your loins and, you know, step in after you do your math. All righty. Chris, I'm going to start girding. Chris Grisanti. Thanks, man. You need both.

Okay. All right. Vice President Kamala Harris choosing Governor Tim Walse of Minnesota as her running mate last week. Tillman Fertita told us the Veeps. matter most in this election. So how does Walls measure up to Vance? We will discuss next. All right, welcome back to Power Lunch. Vice President Kamala Harris, now the Democratic nominee, or presumptively so, for president choosing Minnesota Governor Tim Walz as her running mate. Walls is the first governor to be a Democratic vice president nominee in 100 years,

more than he is scheduled to appear later today in Philadelphia with Harris. Here to discuss how this impacts the race for the White House is Larry Sabato, director of the Center for Politics at the University of Virginia, which has done very well in the Olympics, by the way. I must point that out as an alum. And our Washington correspondent, Megan Casella, joins us on set. Larry, let me start with you. What is it that you think put waltz over the top? Well, it could have been process of elimination. You can never eliminate that as a possibility in presidential or vice presidential selection. I think partly it's because, as the Democrats have been telling us, it's about chemistry between Kamala Harris and the person she wanted to pick as her running mate and potentially governing

mate during the next four years. So that probably explains most of it. How about you, Megan, do you see it that way? In other words, it's probably chemistry or maybe a process of elimination that there was a reason not to pick Governor Shapiro of Pennsylvania, maybe a reason not to pick Any of the others who were on the short list? I think that's right. She was really looking for somebody that she vived with, for lack of a better way of saying it,

that she was looking for compatibility. And she definitely found that in walls from everything I'm hearing. And there was, you know, he doesn't have negatives in the way that some of these other candidates had. They were worried about some of this. There was an opposition campaign against Josh Shapiro. There was an old sexual assault allegation from about an aid in his office. There was concerns that he was maybe too moderate or unions weren't a fan of him because of support for private school vouchers. And there was some concern that maybe he was too supportive of Israel in a way that would jeopardize in some people's view the administration, the future administration's handling of conflict over there, of the war. And so Walls didn't have those negatives. There's a question of whether he had as many positives as some of those folks.

Mainly I'm thinking about he doesn't come from a big state that's going to bring a big electoral prize. It's not a swing state. He's not bringing Pennsylvania with him necessarily the way Shapiro might have. Exactly. Which Larry brings me back to that. I kind of thought Shapiro would be the choice. He's forceful. He's from a swing state. He's popular in that state. Well, you're right.

I think that that's why he was the betting favorite. All the betting sites had him as a heavy favorite, at least the last time I looked. And at one point, Senator Kelly, Mark Kelly from Arizona, was second but also quite high. Walls was way behind a number of others. Even Pete Buttigieg was ahead of walls at a certain point. So it's a surprise, but, you know, if you look at vice presidential history, there have been lots of surprises. Some of them work out well.

Some of them don't. And we'll have to see this campaign will tell the tale. Now we turn our attention to the convention, which is next week, the week after. It's coming up quickly, and that was partly what kind of pushed her to make the, this decision now? And then what? We don't know yet if there's going to be these September debates or singular events or whatnot. It's all up in the air. And then, of course, there could be an October surprise, as it's known. But the convention, two weeks from now in Chicago, will be sort of the big event. And it's going to be actually more important than usual for the Democrats this year,

because both of these candidates will really be introducing themselves. Harris, slightly better known on the national stage. Wall's not hugely known on the national stage. So a lot of work there to do for the party to introduce them. And they also really want to carry that for sort of an enthusiasm bump. They have this very shortened campaign, but the benefit of it, I was talking with someone about this just earlier this week, it's a major benefit for them in a lot of ways. There's just no time to lose enthusiasm. There's no time to get distracted. So they really want to seize on the convention. They're going to seize on those debates, whether they happen or not, the fact that they didn't happen, perhaps, to just sort of keep driving interest and enthusiasm

and hopefully all the way through November for that. Larry, I guess as Megan points out, the convention who will be an opportunity for Kamala Harris to introduce herself. It will also be an opportunity for her, perhaps, to lay out policy. We don't know much about what her policies are and how they might differ from Joe Biden's policies. And maybe she'll start to explain some of that. You and I haven't spoken since Biden pulled out. I was on vacation for some of that time. What does Harris mean to the Democrats' chances in the fall?

Well, she dramatically improved them. They were headed, and this came from within the Democratic Party with access to a lot of private polling information. With Joe Biden, whether he wants to admit it or his aides want to admit it, the Democrats were headed to a landslide, landslide defeat in the electoral college. Harris has restored the Democrats. This is a tie. I mean, it could go either way, and you could argue the electoral college makes Trump the favorite in a tie situation.

I don't know. It's too early to say. But the Democrats are in this race, and they were out of this race when Biden was still in it. So it's meant a lot. And the other factor, and Megan referred to this, and you did too, teller, the amazing thing is people know very, very little about Kamala Harris. But of course, they know even less about Tim Walls. I've had calls from all over the globe, and the question they're all asking in one form

or another is, Tim, you know, the last time we had this was Jimmy Carter. Jimmy, who? They just never heard of it, know nothing about him, and that can be an advantage. You know, the more you know, contempt, there creeps in, right? Familiarity breeds contempt, and you never know what's going to come out as J.D. Vance has Yeah, it's very interesting. How will Kamala Harris' policies differ from Bidens? And how will they differ from the policies that Kamala Harris ran on in 2020 when she was a candidate and quite a staked out a progressive position on most issues? Folks, we're going to talk about this for the next couple of months, I think, don't you all? I hope. I hope so. Larry, good to see you. Megan Kosella. Thanks. Good to see you in the set. Thanks for having me.

All right, from politics to protecting your portfolio coming up a brand new way to hedge volatility or even try to profit from it. Our newest daily segment, Market Navigator, is next. Welcome back to Power Lunch and this. Hi, Dom. The first of our new Market Navigator segments will be on the hunt for overlooked market signals and guide you through advanced trade ideas to hedge your larger portfolio or maybe look to generate some opportunistic gains, shall we say, on the side. Mr. Chu, thanks for joining us for these. looking forward to hearing all of the. So what are we doing today? So what we're going to look at today is the massive amount of moves that we've been seeing in the volatility index, that fear gauge.

It's indicative of actual market conditions. Is it now? Right now, indicative of what's happening or what's going to happen in the future or is something else at work behind the scenes? In other words, just how much should we fear the so-called fear index? That's going to be our key question. So joining us today is Brian Stutland, the chief investment officer of equity armor investments. You can see him right over here. Brian, thank you very much for being with us today. If you take a look at the VIX, what was the thing that stood out to you with regard to the index? What kind of charting did you see? And can you walk us through what exactly was the biggest thing for you during the market volatility? Well, when you look at the VIX here, it actually has a lot of

feel of what happened back in August of 2007, what happened in the fall of 1998, these market moving events where you had a few things go wrong for the market. You had a little bit of lack of liquidity occur. And then all of a sudden, you get the third strike, which people blame the yen carry trade on, it creates a market dislocation. Now, look, we saw a lot of selling in the Mag 7 here in the middle of July, and those are major weightings in all these indexes and ETSs.

So now you have billions of dollars being sold across the board in areas of the market, and that ripple effect really carried over, and we saw this huge spike and the VIX volatility levels sort of indicative of what happened here, and the selling sort of progressed very, very quickly and people, basically, dealers looking to cover some hedges and just sell into this market. Now, in other words, Brian, there's been a regime of low volatility and people basically collecting insurance premium for months and quarters now without any fear of having to ever pay out on the insurance policies that they collected premium for.

Is it fair to say that the volatility spike that we saw is because all of a sudden the chickens came home to roost and that all of a sudden these insurers would actually maybe have to start paying out against the policies that they've collected so much money for? Was it like picking up pennies in front of a steamroller? It, Dom, it really was, because what basically happened is what we saw is massive amounts of demand for puts to the downside, whether it was people covering all these short positions that they had in the volatility space or whatnot. But basically, call buyers dried up, put buyers came into the market. And then, of course, the market makers and the dealers that are now having to sell these puts to people trying to cover their insurance, basically have to sell into the market to stay neutral. to it. So massive amounts of selling from dealers and then obviously all those people trying to pick up those pennies down in front of a steamroller, getting steamrolled and having to panic and get out of this market really caused the spike in volatility. When we see that high demand

for puts on the downside like we saw, this is maybe only happened a handful of times literally over the last 15 years. This level of demand for put can really shake up the market and I think that's what drove the VIX to significantly high levels. So Brian, give us your trade here now that we've seen today unwind a good bit of what happened yesterday. Do you have a billion dollar idea for the next 24 hours or a longer term idea or anything come to mind? Yeah, actually, I do. And this is something I've been looking at for clients actually throughout today is when we've seen this occur before. I said this has happened maybe five times over the last 15 years. What happens is the next couple days of the market afterwards, we get a sense of is there going to be a reversal or people sort

of covering back to what they had? And we did in fact see a little bit of that where basically we saw some call buyers come into the market on the S&P 500, and now all of a sudden we have some upside momentum going. And so basically, I think you can put together an options trade that I've constructed where I want to buy a call spread and finance it. I want to play to the upside here because when this has happened, when we've had this level of panic in the market, there's some opportunities to be had. So I can buy a call spread while at the same time minimizing some of that cost by selling a downside put. So I'm looking in the SPY. This is a spider ETF on the the S&P 500, I'd be looking to buy that call spread and sell the 500 strike put against the

538, 558 call spread out to September. I only have to pay a dollar for this. And this is, this is, you know, a billion dollar idea, so to speak. I pay a dollar. I basically don't have to own the market until down at 500 on the spider ETF. So that's about 5.5% to the downside. I have a cushion here. And I get to participate to the upside from 538 to 538. And when we've had these watchouts before, like I talked about, it seems like the next three to six months, there's a rally. I'm not sure if this is August 2007 and all of a sudden, you know, we're in trouble six months from now, or if this is 1998 and there's this euphoria and the market just gaps higher. As the Fed started cutting rates back then, it looks like they're going to have to cut 50 basis

points now in September. Very good. That's the strategy. If you're not sure and you want something to do in the meantime. Brian, we really appreciate it today. Thanks for kicking things off with us. Tom. Thank you as well. Dom Chou. All right, folks, thanks, Kel. Come up, new data show that America's household debt is climbing by more than $100 billion. We'll dig into that data and what it could signal about the economy when power lunch returns right here. Welcome back with the check of the markets.

Now we see a rebound from yesterday, although not making up all of the declines. Kind of similar story playing out in the bond markets. Rick Santelli with the latest from Chicago. Rick? What a wild couple of days, right, Kelly? If you look at a three-year intraday, and this is important, we had a very solid intraday auction. But what you should notice is that yields moved higher right through it. They're now slightly reversing, and we have reversed everything from yesterday.

And if you look at an intraday of 10, you can really see that 1 o'clock Eastern auction, a good auction. But basically, the day has been all about reversing yesterday. Yesterday was about the carry trade. And the collateral damage and the flight to safety, well, that involved the U.S. and many markets. around the globe. If you look at a two-day chart of tens, what should jump out at you is how much work we have done above yesterday's high yields, which reflected the big comeback from significantly low yields. 366 was the low yield on a 10-year yesterday, and here we are hovering right around 390. And if you look at the week-to-date of the dollar yen, and this is important, five days,

we broke that street. Now, that's the dollar index. So for five days, it went down. The yen went up. Today the dollars higher, the yen's lower. All the pieces fit. But what probably should be the story today is, is that that chapter isn't over. The book of reversing that carry trade, it's going to be a long book with lots of chapters, but yesterday does give us a taste of when everybody around the globe seems to be all basically in the same trade. You know, you can't let the water out of the tub at once, but we still have a lot of water in the tub, so we need to be careful. Tomorrow's a 10-year auction, followed by 30s. And this is really going to be quite enlightening, especially considering the one-two punch that reflected treasury prices over the last

48 hours. Kelly, Tyler, back to you. Thank you, Rick. Rick Santelli. As mentioned, economic data is more in focus than ever before, after the jobs report played a large part in the global sell-off we've seen in recent days. Now the Fed out with new data that could tell us if another recession is coming. Household debt climbing $100 billion in Q2, bringing the total to well over $17 trillion nationwide. Auto and credit card delinquency rates are also elevated, with the latter hitting $1.14 trillion, a record high. Here to discuss the state of household debt is Jade Warshaw, co-host of the Ramsey show. Jade, it's great to have you here. And as we're starting to see delinquency rates tick up a little bit in some of these data sets, what does that tell you?

Thanks for having me. Yeah, I think right now Americans are just, just facing financial volatility across the board, right? The struggle is real, as they say. I mean, we've seen a lot of us thought by now the Fed would have lowered interest rates. We haven't seen that, right? And now we're starting to see that play out in the job market. So that's really scary. We've got the election coming up.

We saw Monday's dip in the stop market, right? And even though inflation has continued to tick down, it's still really, really expensive out there. And so Americans have a lot that they're dealing with right now. Their dollar is not stretching as far as it once did. Yeah, and on that note, I guess the question is with inflation coming down and wages still holding in there, could things get better or should we assume that they get more stressed? I think you always have to be prepared either way, right? And so if there was ever a time to start getting your financial house in order, the time is now.

And here at Ramsey, we teach a series of baby steps, right? It's seven baby steps that ultimately get you to financial peace. But really right now, I think of Americans can hone in on those first three baby steps. Baby Step 1 is getting $1,000 saved. Most Americans could not cover a $1,000 emergency without going into some form of debt. So having a $1,000 cushion is a game changer. Of course, Baby Step 2 is really focusing in and paying off that consumer debt, right? The car loans, the credit card debt, getting that cleared out so that you can go back in, do Baby Step 3,

which is saving up three to six months of expenses. And honestly, during a time like this, a lot of Americans might choose to have six months of expenses laying around. How much have rising prices played into the rise in consumer debt? I actually thought Americans' balance sheet were in pretty good shape. But how much has the cost of living increase over the past three years played into the idea that Americans, many of them, need to borrow just to make ends meet? Absolutely. At the end of the day, our money is our money, right?

We see it play out in real time when we go to the grocery store, when we go to the gas station. we feel the pinch. And so budgeting is a core principle into all of this. If we can look at our dollars and cents and say, okay, here's what I can spend, here's what I cannot spend. And really accepting the fact my colleague, John Deloney says all the time, we've got to choose reality. And so there is a reality here where we have to accept. It might feel very uncomfortable for a while. But the slogan that I want all Americans to kind of take to heart right now is when it comes to debt, just say no. debt is the problem. Debt is what is making us feel the stress and this anxiety in our finances.

And we've got to choose to draw a line in the sand. You can't solve a problem while simultaneously creating it. So getting on a budget is going to be that solution. Let's say I want to invest in my home. And I live in an area where home prices are going up. And I want to do an addition to my home. And I don't have $200,000 lying around. So I think, well, let me take out a home equity line of credit.

Is that a wise move or do you recommend against taking out home equity loans and lines? I always advise against debt. And in this case, you're borrowing against yourself and you're putting your biggest asset on the line and at risk, which is your home. You know, the whole purpose of a home is to build equity. And so we pull out of that in a form of a loan in many ways we're robbing ourselves. And like I said, we're putting that asset at risk. Because in times like these, when things are volatile, we don't know what's going to happen from day to day. the last thing we want is more debt in our life and more risk in our life.

So I would always advise to save up, pay cash, make reasonable choices. When you pay cash, something happens up here and you think things through a little bit clearer. All right, Jade, thank you so much. We appreciate you joining us today. Thanks for having me. Jade Borshaw with the Ramsey Show. All right, let's go over to Kate Rooney for a CNBC News update. Kate.

Hey there, Tyler. Palestinian militant group Hamas announced it has chosen the presumed mastermind of the October 7th attacks on Israel as its new leader. Yaya Sinwar hasn't been seen in public since the attacks that sparked the war. He replaces Ismail Haniyah, who was killed in Iran last week. Meanwhile, more than 8% of Americans, or about 27 million people, did not have health insurance in the first quarter of the year. That's according to the CDC today, which says it represents an increase of 3.4 million over the same time last year, and breaks a streak of record low uninsured rates following the pandemic. And Russian President Vladimir Putin is now looking to export Russian values around the world. Putin today called for the development of a program abroad to

spread, quote, traditional Russian spiritual and moral values, unclear from Putin's order as to which values would be promoted, but since his invasion of Ukraine, Putin has called the West satanic and accused it of undermining Russia by exporting liberal ideologies. Tyler, back over to you. I wonder if murdering political opponents would be part of those moral values that he would wish to foment around the world. All right, Kate, sorry for the editorializing, but at any rate, it's pretty rich. Kate Rooney, thanks. Shares of sunpower plummeting after the solar installer filed for Chapter 11 bankruptcy protection

and announced plans to sell off its assets. We're going to dig deeper into that and the rest of the energy market when power lunch returns. Welcome back, everybody. Some power plummeting on its bankruptcy announcement. You might expect that. Pippa Stevens is here with more on the energy market. Yeah, so last night, They officially filed for bankruptcy, and it's not all that much of a surprise given the number of challenges they faced recently.

They had a new CEO, their accountant left saying they didn't want to be associated with their financials. And then finally, a couple of weeks ago, they said they were pausing all new installations. If you look at a one-month chart of the stock, you can really see the big drop-off was, there you go, that big drop-off was when they said we were pausing installations. And, you know, it still, though, is very jarring for this industry because they had been founded. They were founded in 1985. They were a pioneer for a very long time. But the issue started to happen. Well, first in 2020, they spun out their manufacturing into Maxion, and then they really

focused on what at that point was a very rapidly growing consumer residential solar market. And they had a very big footprint in California, and they also focused on a loan model. And then demand started to dry up, particularly in California, after the state rolled back some of its incentives. And then as rates went higher, leases became the more popular model. And so they have really, really struggled here. Now, the next question, of course, is this going to happen to other companies like Sun Run and Sinova. Joseph Oshah over at Bukenheim was one of the analysts to say that this is really company-specific versus industry-specific.

Of course, they're all getting hit by higher rates. But Sunpower, because of their loan, because of their exposure to California, really had its own set of problems, its own set of challenges. Two other stocks, just to point out here, Marathon Petroleum, they are the top performer in the energy sector today up about 7 percent, better than expected. earnings. They reported EPS of 412, much better than the $3.00. And a nine cents analysts we're looking for. And then finally, Constellation Energy. They are one of those IPPs that is seeing a massive up boost from all the data center AI, you know, load growth. I mean, it just tells you old energy remains a better return on capital for the most part than solar. And I remember the stat from a solar analyst. This was years ago going into the pandemic who said half of the

companies ever created in the space have gone bankrupt. So I don't know why they can invent a better mousetrap or if the economics are just so daunting because of the way. the panels are manufactured and the competitive issues in China. But even with all of the help the industry has gotten to go through COVID, they seem to be in as worse a place as ever. I mean, there's a reason why it's called the solar coaster in terms of the ups and downs that this industry has seen. And executives that I've spoken to before have said,

you know, hey, we've seen this before. The industry is still better positioned than, you know, when it was. But the first wave of bankruptcies about a decade ago. But I think the point is that it is ultra, ultra-competitive. The margins are really thin. In the United States, you still have really, really, really, soft costs, you know, customer acquisition. People are still going around and knocking on doors as a way to acquire customers.

And until those costs come down, it remains a very challenged industry. All right, Pippa, thank you very much. Pip Stevens. Meantime, shares of Caterpillar on pace for their biggest gain since January after reporting earnings and beating them for the sixth straight quarter. But not all of its results were Rosie. We'll get some insights into this industrial. When we return, don't go anywhere.

Welcome back to Power Lund. Shares of Caterpillar are up 3% today on pace for its biggest gains since January. The move comes after the industrial giant beat earnings per share expectations for the sixth straight quarter, posting a 15% year-over-year boost in sales. Still, the brand reported a 7% decline in construction equipment sales and a 10% decrease in mining equipment from the prior year. Let's dive in further here with Stephen Volkman, machinery and industrialist at Jeffries. So, Stephen, how did they do it if those two key portion parts of their business, construction and mining were down.

Right. Hi, Tyler. So we knew those would be down. So I guess that's part of the equation here. But really what worked well was more of the energy and transportation business. As you guys probably know, they have a power gen business. I heard you talking in the previous segment about some of the sort of old economy power gen. And that is indeed what's helping Caterpillar. A lot of this is for data centers, but other types of power gen as well. those were probably the offsets. And then, of course, they did a really good job with margin. So this was kind of better performance of controlling what they could control,

even though the end markets are choppy. So internal cost control is really what you're talking about there, right? Cost of manufacturing. They were able to bring that down. So what does the future look like for this industrial giant? Yeah, so I think the future is fairly bright here. I mean, at the end of the day, we're going through a bit of a soft patch year across industrials, But really, Caterpillar is telling us and everybody else is kind of agreeing through earnings season that nothing is falling off a cliff, nothing is getting meaningfully worse, that we're sort of managing our way through this.

But, you know, as we come out, as we get some Fed rate cuts, as we get the sort of mega project revenues kicking in as we get into 25 and beyond, I think you'll see more activity in mining. I think you'll see more activity in energy. Those are both important markets for CAT. And I think the infrastructure will support the construction side. So I think things are going to look fairly good once we get out of this off-patch. It's reassuring, Stephen, because we've, you know, for years looked at this as a bellwether of the global economy, China in particular. What are we learning? Yeah, so there's nothing really here at the margin that's much different.

So China is fairly weak for them. By the way, it's become a pretty small piece of the pie for cat in recent years, certainly well less than 5% of sales, even though we, to sort of think of it as a China play, right? But anyway, you know, nothing, again, at the margin, nothing's really changing dramatically. So it's not telling us a lot about the economy. But I think the most important thing it's telling us is that we are not in sort of this big downtrend, that we're not sort of approaching a cliff event, a big recession in the industrial space.

And I think some investors may worry about that, but that is sort of cats telling us that's not the case. How much is Kat picking up from the infrastructure spending that the Biden administration was able to get through Congress? That's helping at the margin, but really early day, Stiler, because it takes a long time for these projects to really get funded and for the funds to start flowing. They have to be designed. There's environmental improvements. You have to hire people. So this is going to be a multi-year kind of process. It's starting now, tip of the spear kind of thing, but I don't think, well, let me say it the other way, I think you will see a lot more as we get into 25 and 26.

And still, you say it's probably an at-the-margin kind of influencer. Yeah, I think once we get further into this, you know, call it 26 and beyond. I think it could be a little more than at the margin, but it's a slow ramp. Very interesting. Thanks so much, Stephen. Appreciate it.

Thanks. You got it. And remember, you can always catch us on our podcast. If you don't get a chance to watch, be sure to listen and follow to Power Lunge on any platform you follow. We'll be right back. Welcome back. That graphic tells you we're in a nice market rally, but of course it doesn't do much to undo. Well, it does about 50% of it, really.

The Dow was up briefly more than 700 points and pretty broad-based, Tyler, as well. All right. And that rebound has gone around the world. Japan coming back very sharply from its 12% loss yesterday. We've only got about two minutes left in the broadcast and got several more stories we'd like to tell you about, so let's get right to it. Leading with Uber, surging on better than expected results for second quarter total revenue. It increased 16% from last year, including a 23% jump in gross bookings for its mobility unit. Uber shares have now turned positive for the year.

This was a company that for many years, of course, Kelly, was profit challenged, but has turned that corner very nicely. Right, and that's a big move today, although people now complain about it being too expensive, so how long that can laugh? Well, that's what they had to do. They had to charge actually to cover costs. And can they retain ridership with that being the case? Flip side is Yom brands lower on mixed Q2 results, including falling same store sales for Pizza Hut and KFC, blaming some Middle East turmoil for 200 store closures there and headwinds from a more cost-conscious consumer.

But Taco Bell, same store sales, those climbed 5% year-on-year, and Yom says it's expanding AI at Taco Bell drive-thru lanes across hundreds of locations. All right, well, that sounds good for Taco Bell. All right, let's talk about mortgage analytics, the firm H-SH. compiling a list of the most expensive U.S. cities to afford a home and the salary you need to buy in that market. Number one, most expensive city is San Jose, California, necessary income of more than $463,000 to buy a median-priced home. The median priced home there, $1.84 million. Average income needed across the 50 most expensive cities is 104,339, well above the U.S. median household income of $74,500.

or thereabouts. Many of these most expensive cities were, as you might expect, in California, I think San Diego, L.A., and a couple of others in the Bay Area, San Francisco, obviously. And in other markets, too, then later on, you know, we're talking about the affordability issue, layer on what's going on with the insurance costs and some of the other associated things. And, I mean, this is the biggest affordability challenge right now, for sure. All right. Well, it's been a busy day. Thanks for watching Power Lunch.