Power Lunch - Mixed Messages on Jobs, Microsoft Searches for Answers and an Oil Power Player 1/5/23

Episode Date: January 5, 2023

The A-D-P report shows positive signs for the job market, while at the same time, tech heavyweights including Amazon and Salesforce are cutting jobs. So is this a tech-specific problem. And one analyst says Microsoft’s investment in AI technology could help Bing eat into Google’s search dominance. Plus the CEO of Pioneer Natural Resources on where oil prices are head. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome everybody to Power Lunch. Glad you could join us today. I'm Tyler Matheson, and here is what is ahead. We've got mixed messages on jobs ahead of tomorrow's unemployment report. The ADP number comes in ahead of expectations, but Amazon announces that it will cut 18,000 jobs. That's on top of cuts from Salesforce that we learned about yesterday. So is this a specific tech problem, or is it broader? Plus, Google literally synonymous with the word search, but now one analyst says, might be able to be. Microsoft's investment in AI could help Bing into Google's search dominance. We'll see about that. And we know Kelly is excited to chat bot that one. We have some fun planned for that.

I'll just leave it there, Tyler. Thank you. Hi, everybody. Markets are sliding this hour, but we are off the lows. The Dow's down 285 right now. The NASDAQ down 1%. It's the worst performer. We came off the lows after some comments from the feds James Bullard a short time ago.

We're also watching shares of United Health, the highest price stock. on the Dow, so it has the biggest impact on the index. And look, down $11 a share today, or 2%, that's partly why the Dow is seeing these losses. Silvergate Capital is also plummeting. They reported digital deposits of $3.8 billion at the end of their fourth quarter, down from nearly $12 billion at the end of the third. The shares are down 42%. The CEO saying the FTX collapse caused a crisis of confidence among its customers, Tyler. All right, Kell, we begin today with some conflicting jobs data and headlines ahead of tomorrow's big labor report. ADP private payroll growth coming in hot. There you see it. The figures in December climbing by 23,000 versus the estimate of 153,000.

That was a big surprise given the Fed's sort of attention to payrolls and so forth compared to those Wall Street estimates of 153,000. The feds are sort of attempting to slow the economy just a bit. But big tech firms are continuing their recent string of layoffs. Amazon today announcing it's going to cut 18,000 workers. And here to discuss that are Steve Kovac and Deirdre Bosa. Welcome to both of you. I assume I'm supposed to walk over here now. Come on over.

Come on. Come on. Join us, please. To join you. Is this, are these cuts a tech problem, Steve, solely, or is it a sign of something deeper? Well, right now what we've seen is it's a tech problem. It's unique to tech, right? We saw them overhire during the pandemic.

There was this exuberance around technology that we're going to be stuck in our homes forever, buying new laptops and computers and phones every year forever. Obviously didn't happen. And now we're seeing the pullback here. And I look at the hiring rates of the big tech firms. And you look at Amazon and one at the spectrum over doubled their staff during the during the pandemic and now we're seeing them come back to earth. Whereas apples on the other end of the spectrum,

they only grew by like 20% or so during the first couple of years of the pandemic. And so they were more deliberate in hiring. And of course, we haven't seen them do mass layoffs yet. Dear Joe, I mean, don't you agree that these were, we have to put these in the context of how many people were added in order to understand the significance of how big and how deep these pullbacks currently are? Absolutely. And Amazon is a great indication of that.

As Steve said, they were one of the biggest hire. and now they're cutting what, 5% of their corporate workforce, 1.2% of their total workforce. That's not really going to move the needle much in terms of the broader labor market. Remember that tech, all tech jobs make up just a tiny percentage of that. But I guess the question, is it a leading indicator? Are blue collar, our warehouse jobs going to follow? And that may move the needle a little bit more. But there's also this question, if you look specifically just at tech, is this enough?

Salesforce cut, what, 10% of their workforce? Of course, these are small numbers by comparison for an Amazon, or you take a look at an alphabet, which also hired a lot. And by the way, spent a lot on data centers and office space during the pandemic. And they haven't cut at all. They're still net adding jobs. Wow. And Tyler, to her point, we just heard from Evanstone of Recruiter.com last hour, where are they seeing big job cuts at the warehouse space?

It was the single biggest place that was shedding jobs other than technology. Is that right? What do we know about where those cuts are coming in Amazon? Are they warehouse cuts or are they corporate and HR and back office kinds of things? They're corporate. They're HR and they're also online stores. I mean, none of these companies so far doing any major cuts in places like Cloud, which is seen is still very much a growth area.

They are some of the fastest growing businesses in these companies, but that growth is decelerating. And there's a lot of questions on the street. How much are those businesses going to decelerate by? It's easy to cut marketing and ad spec. But that enterprise spending, that is a key question for the year ahead. And a lot of companies are figuring that out right now, January, the start of a new year. So a lot of this remains to be seen.

And that's why there's questions. Yeah. Do more cuts need to come? Well, and the fact that Salesforce, so if you want to know about enterprise spending, a Salesforce cutting 10% does not make you feel great about that. See, the other coincident thing that's happening right now in unnerving everybody is the fact that Twitter cut thousands of employees with no discernible impact yet on the customer product. So if you ever were wondering, if you're wondering, if you're not. could make deep cuts. You have this example staring you in the face of a company that successfully

so far did. In a strange way, Elon Musk gave the rest of the tech industry permission just to do these mass layoffs, rip off the band-day now, you know, get the costs under control and do it. Just now, there's a headline that crossed before we came on air that he laid off a bunch of his advertising employees. So it's an ad company, an ad-supported company, and he's laying off ad employees, last I checked, Twitter is still operating. So it's proof right there that you can cut costs drastically and give permission to the rest of the industry, for sure. What did Salesforce, it also goes to the point, Kelly and Tyler. Go ahead. It just goes to a point as well. I mean, Twitter is cutting, but you take a look at meta, which has done a massive round of layoffs.

Alphabet hasn't, but Google and meta, these are the most productive, some of the most productive companies in the world on a revenue per employee basis. And that's why job, tech jobs may not make up a large number of the overall workforce in America, but in terms of that productivity, in terms of revenue, they make up, what, 10% of GDP? So what they do, you can see that that will have a cascading effect, and that could hit other jobs along the way that aren't necessarily in tech. All right, folks, I know this is a topic we'll return to over and over again here. The whole year.

In 2023, Steve Deidre, thanks very much. Yeah, thank you. Now, if you've been listening to our next guest, he had a very pessimistic outlook on stocks based on the Fed and has been warning to watch jobless claims since the middle of last year. He says stocks won't find the bottom until the PMIs do. Now he says his framework. He calls it hope. It means housing orders, profits, and employment. It's a macro way of looking at things. It still points to bad news for earnings and stocks. Let's bring in Michael Cantrowitz chief investments. Oh, where is the beautiful backdrop, Cantrow? It's great to see you again. Welcome back.

Hi, Kelly. Hey, Tyler. How are you? Good. So tell us, I mean, and again, a tip of the hat because you were the one of the early ones looking at these PMIs, these, you know, numbers rolling over and saying, hey, this is bad news. What are you seeing now? We're seeing the story continuing to evolve. I'd say, you know, as the calendar year turns, we're moving into the next chapter of this same story. It's not a new story. So yes, our hope framework, housing orders, profits, employment. It was really housing and orders that. got knocked around last year, and that's continued into this year, and we expect that to continue throughout much of this year. And now the focus is going to become increasingly and has become increasingly on earnings and employment. We're all talking about employment cuts. We're starting to see them, and we expect that to broaden out, especially pick up sharply in the second half this year. I guess I'm going to assume, Michael, that you've gone back to the office after the beautiful

backdrop. But let's talk a little bit about where you see, how you see the economy you predict affecting stock prices this year. I believe you have a rather aggressive downside prediction. It depends on how you look at it and what your framework is. And our framework led us last year to have a pretty low target as well of 3,400. We got about 91 points from that at the September lows in the equity market, and then we got a bear market rally. And that's the tricky thing with bare markets, they're far more hard, harder to predict than a quiet and grinding bull market. So, you know, I'm not sure if we're going to end the year at 3225, but we do think that we will see that number before all is said and done, and we do see the economy recover.

I think the key message that, you know, we're telling clients is, you know, last year we've had, we saw a bond bear market really bang around equities, for lack of a better word. And now we're going to see the lagged effect of this bond bear market or everything the Fed is done and will continue to do start to show up in earnings and eventually employment. Again, following this hope framework we've talked about. A hard landing is coming in late 2023, you say, and it's not priced in. So that means that we've got the earnings wrong and we've got the multiple wrong. Yes. You know, I think last year, again, was all about multiple compression because of higher rates and what happened with inflation. that's not the same thing as pricing in a recession.

We can clearly see in the credit markets that hasn't been the case. So this year should actually feel a little more, I don't want to use the word normal, but for lack of better, normal or fundamental to investors as it becomes more about earnings and everything we've seen in the rates market has its long and variable lag. And this is going to be the year where it starts to show up. Michael, I also remember early last year right about this time when Goldman was in yourself, framework for, you know, you have these kind of metrics and we were all sort of going, huh, that's interesting. That's a little strange. And boy, don't we know now just what a struggle

they've had and are having. So let's talk specific before we let you go. What stocks do you think are a buy here? What names do you think investors should be really worried about? Yeah, so we approach stock selection from both a quantitative and macro approach. So it's not specific fundamental analysis. So, you know, again, we like to give examples of stocks that show up and overlap in both our fundamentally driven or quantitative models, as well as where we want to be avoiding in terms of the macro outlook. So today, I'll talk about two stocks, Boozal and Hamilton and Allstate. Those are two stocks that are in our fundamental long model. So what are the fundamentals, stocks that have lower beta, higher profitability, better realized and current earnings revisions.

So companies that are growing and they're not super cyclical. And they're also counter cyclical. On the sell side of things, Block Inc. or SQ and Comerica, which has been a name that's been in our short model for some time. These are stocks with, I would say, red flag fundamentals that are also very cyclical. So combining micro and macro is our approach, and these are stocks that pop up to the top of the list. Well, come back when you have better news. I guess Booz Allen and Allstate. You had some better news for them. No, Michael, we really appreciate it.

Thank you so much for joining us today. All right. Michael Cantorwitz. Already coming up, we're going to talk to the CEO of Roku, the company announcing it has passed 70 million accounts, so is Roku the right way to play the streaming surge? Plus Walgreens' boots the worst performing Dow stock today and one of the worst over the past year,

falling 8% after its earnings, now down about 7%. Should you pick up this stock on the cheap? Our trader will weigh in later this hour, so stay with us for that. And much more on PowerLine. We have breaking news on yet another vote on the speakership of the House of Representatives. Elon Moy has the story. Hi, Elon.

Well, Tyler, this eighth vote for House Speaker is expected to end the same way. The previous seven did with Kevin McCarthy falling short of the 218 votes that he will need in order to win the top job. Now, currently McCarthy is down six Republican votes. He can only afford to lose four. He has been trying to work members on the floor and talk to them off the floor as well. But some hardliners are holding out and saying there is no deal. And in fact, trust has been broken because details of their negotiations have been leaking out. So for right now, the vote is still ongoing, but the end is likely to be the same with no one elected as Speaker of the House after this eighth round of voting.

Guys. And no work can get done in the House so long as there is no speaker. Elon Moy, thanks very much. No matter which service eventually wins the streaming wars, Roku is hoping to stay above the fray. company introducing its own brand of smart TVs and saying it now has 70 million accounts. Julia Borsden joins us now with the CEO of Roku from the Consumer Electronics Show in Las Vegas. Julia. Thanks so much, Tyler.

That's right. I'm joined by Anthony Wood. The CEO of Roku, thank you so much for joining us here today. So the big news out of CES is that you have these new TVs. This is one of them right here. Tell me, why is Roku making a bigger push into HART? hardware when this is a money-losing part of your business? Well, Roku's business model is to distribute our platform. You know, we just announced that we passed 70 million active accounts,

which is almost half of U.S. households now have a Roku to watch TV with. And the way we reach all those households is by selling our Roku TVs and by streaming players. And Roku TVs are primarily sold through our TV partners like Hysense or TCL. But by, but we also announced that this CES, that we're selling our first Roku designed, built, and sold television. And the reason we do that is that it allows us to continue to drive innovation, a platform for innovation, that we then give back to our TV partners. But so it sounds like in a way you see these hardware devices as being lost leaders, but you're launching them at a time when there's concern about consumer demand.

There's inflation, there's talk of a recession. isn't this a particularly tough time to be doubling down on the hardware side of the business? Roku is a service company. We generate billions of dollars a year in revenue from advertising and from distributing streaming services. And we have a great platform to do that. But the core of that business is the market share of our platform. And so 70 million plus active accounts. The way we get that is through selling TVs and players.

And that's a big focus for us. Now, let's talk a little bit about advertising. You said you generate revenue from advertising. And obviously there's been concern about an ad contraction. There's been a concern that some of the streaming players are going to be spending less on content and perhaps even spending less on marketing, which is obviously important for you. Talk to us about what you anticipate in this economic environment right now. The, you know, Roku's streaming hours were 87 billion hours of streaming last year,

meaning our viewers, those 70 million active accounts watched 87 billion hours of streaming. That was up 19% year over year. The world is moving to streaming. You know, all TV is going to be streamed. That means all TV advertising is going to be streamed. And Roku is the number one streaming platform in the United States. So, you know, it's just there's temporary headwinds. Obviously, in terms of the ad business, it's affecting us, just like it's affecting everyone.

But the world is going to continue to moving streaming. The ad business is cyclical. It'll come back. And Roku is extremely well positioned as the number one streaming platform. So in addition to those ad headwinds, you have the fact that you now have new competition for ad-supported streaming from Netflix. as well as Disney. What are you seeing so far? I know that both of those businesses,

those versions of their streaming services, are relatively new. Do you think they're going to really eat into your revenue when it comes to the Roku channel? You know, just going back to what's happening in the big picture, the big picture is all TV ads used to be on traditional pay TV. Those viewers are moving to streaming. We're still pretty early in that process.

Most viewers have not switched yet. And as TV ad dollars move to streaming, streaming companies are getting to advertising. It's becoming mainstream. That's what you expect. But anything specific, you're seeing as CEO of Roku with your advertisers and your clientele. Well, we're seeing that if you look at our overall ad business, you know, obviously the ad business, the industry is hurting right now. But the traditional TV, pay TV ad business is a lot lower than the streaming ad business. So streaming, if you look at where the ad dollars are going, they are moving to streaming. We are seeing that in our business.

And the big picture also is that in times of economic uncertainty is when businesses make hard decisions. And the biggest obstacle to the growth of our ad business is just all those TV dollars moving from traditional TV to streaming. And this economic downturn in advertising is accelerating that transition. And we are unfortunately almost have time. I just have to ask a quick final question on M&A. Does it make sense for Roku to be a standalone business? you've been speculated about as potential acquisition target or partner for a deal. What does the future hold?

Like I just said, the world is switching to streaming. It's a huge opportunity. Most of the opportunities in front of us. And that's what we're focused on is building our business. So no comment on an M&A, but you know I have to ask. Anthony Wood, CEO of Roku. Thanks so much for joining us here today. Thanks.

Guys, back over to you. Julia Borson and Anthony Wood are thanks to you both today. We appreciate it. Up next, tech struggling again today. with some key chip stocks back in the red. There's Nvidia down more than 2%. We'll break it down next. And further ahead, 2023, a search odyssey.

Microsoft looking to unseat Google's search dominance, betting big on AI to get the job done. Plus, the FTC proposing a ban, get this, of non-compete clauses. More power potentially in the hands of workers, those details when Power Lunch returns. Welcome back to Power Lunch. I'm Christina Parts Nebula.

The inventory buildup, demand correction, inflation, that China tensions continue to take their toll on chip stocks, especially in 2022. And unfortunately, the selloff continues today. And we're seeing it across with global foundries, Marvell, Nvidia, all at least 2% or lower. Investors are remaining cautious right now as this bottoming process continues after names like Qualcomm, Micron, warned that the first half of this year, 2023, would actually be pretty weak. And that's why Piper Sandler analysts suggest playing defensive for the next six months with a name like Broadcon for its frequent. cash flow pile and lower valuation, while Bernstein analysts like names that have already guided lower, you know, cutting their cap-ex, cutting their earnings estimates like Nvidia, Qualcomm, and AMD.

They do say, though, avoid Intel as, quote, the business still runs off a cliff. So, guys, it's obviously still a difficult environment for chip names out there. Big debate on when the rebound comes. Running off a cliff is not mincing words. I know, I pulled that. I saw that was an interesting quote in that report. I thought that was interesting. Are these actions that the chip makers talking about slowing?

This is all macroeconomic, isn't it? It's the presumption that China's not going to come back as fast, that the economies around the globe are going to slow in 2020. Yeah, so those items that I listed, the other interesting thing that you guys actually spoke about at the beginning of your show, too, was possibly this looming drop in enterprise spend and cap-x spend that still really hasn't hit the chip sector yet.

And so that could be another looming threat in the near term. You saw it with Salesforce cutting. Micron warned of lower capex. We know Facebook did at the end of last year. So will that be the next major ball to fall, hitting not only cloud names, which is part of the weaker names that we're seeing on the NASDAQ 100 today, but also chip names.

Great point. Christina, thank you. Christina Parts and Avelas. Let's get to Bertha Coombs now for the CNBC News Update. Hey, Kelly. Here's what's happening at this hour. Doctors from the University of Cincinnati Medical Center say DeMarne Hamlin showed substantial,

improvement over the past 24 hours. Hamlin's medical team confirming that his neurological function appears to be intact, and he was beginning to wake up this morning. Despite the positive update, Hamlin continues to undergo intensive care. President Joe Biden is expected to send Bradley fighting vehicles to Ukraine in the next U.S. aid package. The decision to send the tracked armored combat vehicles could pave the way for America and its allies to begin providing more powerful Western tanks in the future.

Disney's Avatar, The Way of Water, topping $1.5 billion, globally becoming the number 10 highest grossing film of all time. James Cameron's latest blockbuster also overtook Top Gun Maverick for the top spot in the worldwide release from 2022. Avatar, The Way of Water, is expected to continue rising through the ranks in the days. in weeks to come. And Tyler, you know, I heard that some of those people who trained could hold their breath underwater for like six, seven minutes. Yeah, which is amazing.

Yeah, amazing. That's great. Nuts. All right, Bertha, thanks very much. Ahead on Power Lunch, we got more on today's market downturn. The Dow off the lows, but still down about 300 points. Oil moving higher meantime, while everything else is suffering. We're going to talk to the CEO of Pioneer Natural Resources.

very shortly. And as we head to a break, check out a couple of today's big decliner's Aplovincorpe initiated as a sell at benchmark Piper Sandler slashing Centina loans price target as well. Sentinel 1, excuse me, Sentinel 1. We've got 90 minutes left in the trading day. We want to get you caught up on the market, stocks, bonds, commodities, and we'll head down to the big energy conference in Miami to talk to the CEO of Pioneer Natural Resources. in just a moment. Let's begin with Bob Bazani as markets are down 1% at this hour, 310 points on the Dow. Bob. In fact, everything's down about 1%. And we did get a modest lift midday as Bullard made some comments.

Mildly dovey. She said inflation remains too high, but it's declined recently. It doesn't change the primary trend here, and that is growth stocks are under pressure. Microsoft's had a terrible week down about 7%. Semiconductors also had a rough week. Apple's a little more stable today, but it too, down on the week. Another group that did really well last year, healthcare is under a lot of pressure. Some of the managed care names like United Health, that was a big mover for the Dowell yet last year. I've been under a lot of pressure this week. Humana, which is also in the health care group, all of these under pressure this week. So growth and some of the defensive names under some pressure. Energy's up today, but remember we were near our 52-week low in oil yesterday. So a little

bit of a bounce today, but that was the big group and the big winner last year. So the S&P 500 is been a kind of a trading range for the last couple of weeks. We can't really break out of it. And we really need some help, Tyler, on that jobs report tomorrow's, particularly on the wage component. We need to see wages coming down a little bit or wage growth coming down. That would help the markets. Tyler, thank you very much. Let's go down to the bond market in Rick Santelli, who is tracking the action. Rick. Hi, Tyler. Well, there's been a lot of various cross currents today. We started out this morning watching initial jobless claims. Maybe you.

a little too well behaved. We saw the service sector, ISM, down for the six straight month in contraction territory, but yet yields moved higher. Look at a two-year note yield, and you can clearly see that yesterday's Fed post minutes really incited the market, especially short maturities. But then again, Steve Leesman's interview, as you see right around one eastern there, made a difference, bringing rates down a bit. Go to the 10-year. You can see the 10-year has a whole different look to it. The half-life of this tough guidance from the Fed, at least based on the minutes, doesn't seem to last long with regard to the longer maturities. And finally, if you look at the Fed Fund futures, the pivotal point, the June contract of this year, you can see

how it dropped down. The lower it goes, the more Fed we have, but it's starting to come back. And Bullard's comments there also made a difference. We were around 0.3 and a half before the minutes on the settlement. So you can see, we're still below that meaning the guidance did affect the markets, but they affected the shardom, which means, yes, the yield curve inverted more, which is probably what happens if the Fed stays tough and the economy looks so as though it's going to go into a recession. Right now, we're very close to minus 90. That is the most inverted. It's been in 22 years, and all of that is good for one area, the dollar index. It continues to do pretty well in 2023, and many suspect that no matter how it turns out, our Fed's more aggressive

than other central banks, the dollar will be that beneficiary. Tyler, back to you. Rick, thank you very much. Oil is closing now for the day, and Pippa Stevens joins us from the commodity desk. Hi, Pippa. Hey, Tyler, oil prices are steady, adding 1% this after declining 9% during the first two trading days of the year. But natural gas is once again the big mover plummeting 11% to a one-year low. This is wholly weather-driven. Warm temperatures sweeping the country are upending this market with January off. the warmest start in more than 15 years. The EIA's weekly report today showed a large decline in inventory last week, although it was smaller than forecasts. Now, despite this,

the energy sector is up 2 percent, the only group in the green. One name to watch today is Exxon. The company saying yesterday evening in a filing that lower oil and gas prices reduced Q4 earnings by about $3.7 billion compared to the prior quarter. But of course, Exxon posted a record profit during Q3. So, Tyler, it is all relative. Back to you. All right. Thank you very much. Pippa Stevens. And let's speak in a, speaking of oil, let's head to Brian Sullivan, who's live at the Goldman Sachs Energy Conference and Clean Tech Conference down in Miami Beach with an energy power player. Hi, Brian. Hey, Tyler, thanks very much. Yeah, with maybe the energy power player. I mean, Kramer will tell you, probably the most listened to guy in the oil patch. And so great way to wrap things up today. Scott Schellfield of Pioneer Natural Resources. Scott's great to have you on. Pippa Stevens is going through the numbers here. We lost 9% on oil, the first two trading days of the year before today.

I could probably make 10 bullish cases for oil and maybe one or two bear cases. The bears seem to be winning. What is up with oil at 74, 75 bucks? It doesn't make a lot of sense. Brian's always great to see you. It's been a while. And I firmly believe you all bring on people like Mamrita and Jeff Curry. I'm firmly in their camps.

China's coming back strong, 2003. once we see demand pick up a couple million barrels a day, by the end of 23, there is no supply left. U.S. shell model has changed. ABS and Saudi Arabia has mentioned they have very little supply left, along with UAE. This is the first cycle in 45 years. I see very little supply left in the world, and once demand picks up a couple million barrels a day, things are going to get very, very tight. Why are we at 75 now?

It's a combination of what happened in China with zero COVID policy, SPR. We're down to a 40-year low on our inventories in the U.S. With all the releases by the Biden administration, and then we got the recession discussion. So it's a combination of all three weighing on all prices. It really should not be there. There's this pretty easy, whenever somebody says that's an easy thought, I think to myself, uh-oh, maybe we shouldn't be thinking it, that when we have to refill the 234, or whatever million barrels to the SPR.

It's, oh, it's natural demand. There you go. But others say, no, because of shale, we don't need the SPR like we used to, and there's no rush to refill. Yeah, the only issue is shale is down in its growth rate. It's only growing in 22, about 500,000 barrels of oil per day. I'm predicting it'll slow down to about 300,000 barrels of oil per day over the next two or three years.

And eventually, and the Permian is the only place to grow. The Permian is going to be slowing from 8 million barrels a day that we've been giving out by 2030 to about 7. And so it's really the slowing down of the oil shell for all the various reasons we've discussed over the last seven years. So this morning, you were the keynote speaker this morning here at the event, you lowered that. It's not yours. It's all the players. Permian forecast from 8 million barrels a day down to 7. Why? I thought the Permian was growing.

It's growing still. It's the only oil show growth in the U.S. It's a combination of inflation. We're seeing significant inflation in 22 and 23 for the producers. It's a combination of consolidation. As the public's acquire the private companies, we're slowing the rig counts down. It's a combination also of productivity. So we're going to what we call. We're developing all zones at the same time.

so we're producing less oil per rig. So it's a combination of all those factors. That's lowering the decline rate to 2030 to 7. I know Kelly's got a question. Kelly, get in here. Sure, Scott and Brian, thank you. We had a guest last hour. I asked him if he would buy energy stocks here,

and he said the reason he wouldn't is because he no longer knows what the sort of right or normal price for a barrel of oil should be. How would you answer that question? I showed a, we'd have to put it out on our IR presentation, but we showed the predictive capability of the all futures curve over the last 30 years. And everybody has been wrong.

And we've gone through about six cycles over the last 30 years. We're moving into a new cycle. My best argument is that there is no extra supply for the next five to seven years. Demand's going to come back. I cannot change the volatility of oil. Oil is always going to be volatile. But we do know that supply demand is going to be very, very tight over the next several years. So to finish it up, and I want to quote the late, great Boone Pickens,

who whenever I'd interview Boone, he would never give you a price forecast, but he'd say, 100 before 60. You know, he'd kind of give you that range. Would you agree 100 is more likely than 60 again? Yes, I'm a firm believer over the next seven years. 100, 150 is more likely than 60. I think 70, 75, 150. That's where I think we'll have demand destruction around $150 a barrel.

We'll leave it there. Scott Sheffield, the Pioneer Natural Resources. Really appreciate your time. Thanks, Brian. It's always great to see you. It's not a cool day down here in South Florida, but it feels kind of good. Scott, thank you very much. It's as hot in the oil market, maybe in six months, Kelly and Tyler, as it is here,

if Scott's right, 100, maybe 150 in the next seven years. Wow. Yeah, no, that was a question. great interview. Brian, thanks for bringing that to us. Our Brian Sullivan with Scott Sheffield, the CEO of Pioneer. Still to come, AI generated gains. DA Davidson's bullish on Microsoft, citing its investment in Open AI, but the stock is lower again today and it's had a bad run lately.

Shares of Lamb Weston, though, are gaining. Jumping 10%, that's not small potatoes. The stock hitting an all-time high in this market. Is there more room to run? We'll ask in three-stock lunch coming up. Welcome to the world of competitive. search engine technology, where the age-old rivalry between Google and Bing takes on a whole new face as the two powerhouses fight for dominance in the search engine market. Bing has made a bold move

to gain the upper hand investing in artificial intelligence and chat GPT technology. Could this be Bing's chance to finally threaten Google's stronghold on search? Tyler, that intro was written by chat GPT. It's pretty good. It's pretty good. I think we're toast. And it's why one firm is bullish on Microsoft, even though the shares, they're kind of been toast lately. Joining us now is Gil Lurie, a DA Davidson's technology strategist. He initiated coverage of Microsoft today with a buy rating and a 270 price target. Gil, what's their strategy here with AI? Well, in the long term, at the very least, there's an opportunity for them to incorporate

generative AI into their Bing search engine. So if you think about Google's market share is about 10 times Bing's market share and probably most of its market value of over, trillion dollars. If Bing could get better than Google by incorporating AI better, there's a chance for a very significant transfer of wealth from Google shareholders to Microsoft shareholders. Although it strikes me that it's not so much about making Bing better. It's that Chad GPT itself could just displace Google. We've used it a lot already for just kind of simple. Not when you're trying to get an answer sometimes to perform a function. For instance, Google can't tell you, We did a scavenger hunt the other day and we said, you know, make up a clue about how it's hiding and a bench behind the laundry and make it rhyme.

And chat GPT gave us an answer. Google can't do that. So should Microsoft just lean into the chat GPT interface? Why even worry about bang? Because there's still some things that search engines traditionally, in the way they are positioned right now, can do better, like finding fairs for flights or hotels and things like that, you have to start pointing that generative. at the internet. Right now, what we're using with Chad GPT is not online. It's just using old data that it's been trained on. As it gets trained on more and more data, it's going to get more powerful, but when it gets really powerful is when you actually start pointing at real

online data, and that's when it really starts replacing search the way we use it today. What can ChatGBT do, GBT do, that Google really can't? And how, How is that going to translate into Microsoft being able to scale that enormous hill that, and moat, I guess one thing you call it, scale that enormous hill that Google has created? Chad GPT answers the question you ask it. If you think about what you do with a Google search, you put in a question or a search term and it gives you the places where you may find the answer. That's a longer way of getting to an answer than if you ask Chad GPT have a question

question and get the answer. So that's a really big difference. And if you think about when we started using Google, we switched from other circuits. But I may not ask the question the right way. I may ask a bad question or a question that that I think is clearly put, but truly isn't. I'm thinking of an example in my life from last night where I asked, I asked something, but I didn't know how to express it. Well, Chad GPT is surprisingly good at understanding what you're trying to ask as well. It's not perfect, but hey, Google search isn't perfect either. You can put searches in there and get the wrong response or the wrong pages. None of these technologies is perfect, but Chad GPT cuts you to the answer as opposed to making you look for it yourself.

And that's a really big advantage. And one of the points I'd make is Google has modes for sure. but don't forget how easy it was for us to switch to Google from other search engines 15 and 20 years ago. If, indeed, Bing becomes a better way of answering questions, people would switch almost instantly away from Google search. It's not a certain Google still has AI technology of its own, but for the first time, there's a chance for this market to be competitive. Very interesting. Gil, I can't wait to see how it plays out. We appreciate your time today. Gil Luria. We appreciate it. All right, coming up, three big movers in today's three-stock lunch.

See that AI? That was simple. And to point, I can't even read it. They're saying, hey, the humans can write too, or maybe they can't give in the... I can't read with that right. Only our stellar producer, Gino, could write as well as this. Sorry, Gino. I'm lost. We'll be back.

All right. Now let's see if we can get through this one. Okay, time for today's three-stock launch, and we're going to take a look at some of the movers of the day. Walgreens Boots Alliance down 6% despite better than expected results. But the company posted a net loss because of the big opioid settlement that it agreed to. Delta Airlines, up 2% on the session. Argus upgrading the stock to a buy as leisure travel should remain strong in 2023. And Lamb Weston shares up more than 9% today after beating earnings and revenue estimates.

Let's bring in Victoria Green. She's CIO of G-squared private wealth and a CNBC contributor, Victoria. Let's start with Walgreens Boots Alliance. Walgreens. What do you think? They're a buy for me. I think this is a bitness understood. They had that huge settlement. They're pivoting their company. They're really changing from a pharmacy to total health with their summit health, their civic corps or their care court. And then they've also reached out and they're getting into both emergency medicine, urgent care and primary care. So this company is evolving and changing. The stock is reasonably priced. Their earnings weren't bad minus the one-off items.

For me, it's a buy as I see potential in the stock and I see their revenue streams continuing to grow from home health care, urgent care, and ER care from just a pharmacy where you go to buy your cigarettes and your coat. Oh, it's a buy. All right. Let's talk some Delta then, Victoria, what do you do with the stock? It's free Wi-Fi now.

Let's buy it, right? I mean, they just came out with that news, with the partnership with T-Mobile. I like them a lot. I think they've got good profit growth. The industry is continuing to grow. They're one of the more premier brands, in my opinion. They're the only one that have first classed on all their planes. They only make about 5% from the economy basic. And they get a lot of their revenues from seed upgrades. So for me, I see really sustainable revenue growth. I like the fact they own their planes. They don't lease them. And they're less exposed to China. They're only about 5% of their revenues coming from the Pacific. And so for me, if China does stop, start, start, stop, we see some slowdown on travel from. the Asia area, they're less exposed than some of the other major carriers. I really like Delta. If you have a travel play, for me, it's Delta. All right, let's move on to Lamb West in what you call a great stock, a great beat, but too expensive. It is. It's price to perfection now. Wonderful beat, great pop today. Average street target of $91 are up 94% in the last 12 months, 30 times

PE. It's just price to perfection. And even they admitted potential slowdowns that they're seeing in the restaurant business may affect it. So if you're priced to perfection and you're concerned about a slowdown. I like the stock. I think it's well executed. As the Wall Street Journal said, they fried the inflation. They've been passing all the inflation costs to their consumers. But I think it's just too well priced. And remember what Warren Buffett says, buy low and sell high. So this is one of those that you're selling, not because it's a dumpster fire, you're selling it to take a profit, take a breather, it hit RSI overbought. You know, you might want to look at these signals and say, what is a catalyst for the stock to go up another 90 percent? I think you have a higher

probability it might stumble, especially in a recessionary environment of restaurants and fast casual come down. All right, Victoria, thank you very much. Victoria Green. We appreciate it. And up next, control-alt, non-compete. A big change could be coming. We say the corporate world, the whole way that we do job.

We'll explain. The details are next. Don't go anywhere. Welcome back, everybody. A new move from the FTC could have some serious ripples across corporate America. The agency proposing a new ban. of so-called non-compete clauses. Amon Javvers has the details.

Hi, Amon. Tyler, the FTC, says that rule would increase wages across the board for American workers by nearly $300 billion per year and expand career opportunities for about 30 million Americans. The rule would make it illegal for a company to enter into a new non-compete agreement

with a worker or maintain an existing non-compete, and companies would mostly not be allowed to tell workers they are subject to non-compete clauses. Now, the proposed rule applies to all paid and unpaid employees as well as independent contractors. It would require companies to cancel existing non-compete agreements and tell workers they aren't in effect anymore. And Tyler, the Chamber of Commerce told us today that the FTC's rulemaking is unlawful. And they told me today it's already contemplating legal action against it. So we're still some ways away here from this being implemented in full.

but this is the opening bell of a big fight over non-compete clauses in the United States of America. Why is the FTC contemplating this action now, number one, and number two, I may be wrong here, but my sense is that often non-competes do not hold up well in court. Yeah. Well, the answer to your first question is the FTC is on a broader sort of antitrust, what they call pro-competition agenda. They see this as limiting competition. limiting workers' ability to negotiate for their own salaries. And you're right. The legality of this is interesting.

The FTC says they have the authority to do this under the statute that governs the FTC. The U.S. Chamber of Commerce says, ah, not so fast, we're getting ready to challenge that in court. So we'll see where the legal battles over this go. The really interesting question to me, Tyler, is that all of the CEOs of the companies who make up the Chamber of Commerce stand to benefit from this, right? Because non-compete agreements among CEOs have skyrocketed. rocket in recent decades. All of those CEOs would now be free to jump ship and be free agents if this rule goes into effect. And you wonder just how hard they're going to want their U.S.

Chamber of Commerce to fight this. Yeah, but what do you think the case is for fighting and winning this? Do you think this economy has somehow changed to the extent that a lot of jobs need to be protected with non-competes? Well, when you talk about the debate over this, you know, the U.S. acknowledges that there are cases where non-competes are appropriate in their view and cases where they're not appropriate. They're particularly talking there in the not-appropriate category about, you know, smaller, lower-wage workers in positions where they don't have access to a lot of sensitive information, that sort of thing. But, you know, you talk about, you know, engineers and people who have more sensitive information, maybe the Chamber says those would be important

places to have non-competes. The interesting thing is this also applies to non-disclosure agreements. What the FTC is saying here is if you have a non-disclosure agreement that's overly broad, that could be seen as a non-compete also if it, in effect, keeps you from getting another job. So they'd block those too. So a whole sweeping change the way we do work in this country. Really fascinating stuff. We'll watch it, and you'll watch it for us. Amen Javers, thanks very much.

You back. And thank you very much for watching Power Lund.