Power Lunch - Money & Politics, and Lead Cable Concerns 7/19/23

Episode Date: July 19, 2023

Money and politics are colliding in 2 key stories today. First, a potential move to ban stock ownership by lawmakers and their staffs is forthcoming. Second, the FTC is proposing new guidelines for mega-mergers. We’ll bring you all of the details on both.Plus, shares of AT&T are bouncing back today as the company responds to reports about lead-sheathed phone lines. We’ll get a medical doctor’s explanation of just how serious the health risks of this issue are. 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 Lunch. Alongside Kelly Evans, I'm Tyler Matheson. Coming up, money and politics colliding in two key stories today. First, a potential move to ban stock ownership by lawmakers and their staffs. Some say the move is long overdue. Second, after a couple of stinging losses, the Federal Trade Commission proposes new major guidelines for mergers. Plus, shares of AT&T bouncing back today after responding to reports about lead-sheathed cable. lines the company downplaying the issue. We'll get a doctor's explanation on just how serious this issue may be. Tyler, thanks. But first, let's get a check on the markets with stocks higher again off the highs, though. The Dow is trying to put together an eight-day wind streak. It's still up 130, a pretty comfortable margin. The S&P up a quarter percent. But the NASDAQ is negative by five

points with a couple of big components like Netflix and Tesla about to report. It's all about earnings right now. Check out Elevance, the health care company. It beat on earnings, raised guidance, shares are up 5%. It's helping the whole health insurance group, including United Health, and that is giving a nice boost to the Dow. And the big earnings are watching after the bell, Netflix and Tesla shares. Here's by the way the health insures UNH up 1%. Netflix is lower, though, and Tesla has just turned lower, which those shares were previously at a 10-month high. Tyler. All right, thanks very much, Kelly. We will begin with a civil war of sorts brewing in Washington over investing. Two senators set to propose a ban on U.S. lawmakers and executive branch members from owning individual stocks.

Emily Wilkins has more. Emily. Well, Tyler, this is an issue that lawmakers in D.C. are simply not letting go of whether or not they should be allowed to trade stocks. Now, currently lawmakers can so long as they follow reporting requirements, which they often do not. And several members also have come under scrutiny in recent years for trades that appear to use insider information. Now, two senators, Josh Hawley, a Republican and Kirsten Gillibrand, a Democrat, introduced a new bill today that would not only ban members of Congress from owning stocks, but prevent their family members and executive branch officials from any trading. Now, momentum around a ban has picked up last year, both inside Congress and out. A new poll released today from the program for public consultation found 86% approved a ban for stock trading for members of Congress. And unlike so many other issues today, there is no divide among party lines.

87% of Republicans, 88% of Democrats have agreed with that band. Tyler, it's really not clear right now whether this new bipartisan bill will have more success than past iterations, but it shows that this battle isn't over yet. All right, Emily, thank you very much. Emily Wilkins reporting from the Capitol. As Emily just mentioned, most Americans are in favor of at least some restrictions on trading by congressmen and women and other members of government. But is it really going to happen this time?

Let's bring in Dan Mitchell, chairman of the Center for Freedom and Prosperity, and Aaron Klein, Economic Studies Fellow, with the Brookings Institute. Dan, is this a good idea and is it likely to happen? Well, it's a double-edged sword, Tyler,

because I like the idea of members of Congress owning stock because then they have a stake in the success of our economy. But on the other hand, there's something very just sleazy about politicians going to Washington and then retiring 20 or 30 years later and being fabulously rich. And if they're doing that by using their insider knowledge, their ability to hurt some companies

and help others then trade off that knowledge ahead of time. I mean, it reminds me of that old Star Wars line. It's a wretched hive of scum and villainy. So on balance, where do you come down, Dan? I mean, you've clearly framed the issue. In other words, it's good to have people who have a stake in the system. On the other hand, it's bad to have people in places of sensitivity where they could take advantage of the system. So where do you come down?

I think the legislation tries to draw what hopefully is a good balance because it allows members still to invest in mutual fund, you know, broad-based funds. Yet on the other hand, they would still have the ability to like punish an entire industry and perhaps short that mutual fund or something like that. So I don't know that there's a perfect answer other than, you know, this will be my inner libertarian coming out. Don't give politicians so much power over the economy, and then they can't manipulate the system in ways that line their pockets. Aaron, where do you come down on this? Well, look, the last point he makes doesn't make any sense, right? It's not just about power. It's about knowledge.

People in Congress know things that are coming. They're briefed. I worked in the Senate for over eight years on the Senate Banking Committee, and we had a lot of information available. The second point is that we have a set of rules in here, and I haven't seen that many consequences of violating the rules, of trading on insider information, which Congress made illegal. But what happens? I think there's just an assumption that voters will be the ones metting out the punishment when in point of fact, Congress sometimes struggles to punish itself and punish its own members. Ultimately, there's a distinction between ownership and trading.

It's not clear to me that any member of Congress should be trading actively in any stock or even of broad-based industry or mutual funds. You know, there are things like blind trusts and other ways to handle that type of situation, and we shouldn't conflate the question about whether or not you can own a de minimis amount of company or if you're a staffer, I have a little bit of concern in the legislation reaching down into the staff and you inherit some stock from your grandparents. You have to divest it all of a sudden or something with tax consequences. But there's a difference between trading and investing.

And members of Congress and senior government officials shouldn't be in the stock trading business. very different than in broad-based investing. It's an interesting point. As many people know, we are subject to certain restrictions here at CNBC. For example, on-air talent like Kelly and myself, cannot own any individual securities, corporate bonds, corporate stocks. We are able to own mutual funds and ETFs and other kinds of securities. But we are restricted in many ways. if, if, Aaron, you went this route, how far down would you go in restraint?

And you've raised, how far down would you go in restricting stock ownership? I mean, I take your point on the difference between trading and owning, but it's sort of the same. If you're an owner, if you're an owner of Google, you don't have to be trading it to profit from inside information, right? You can know what's going on here and put more money into the stock if you wanted to or sell it because you knew something was coming. No, no, but buying and selling the stock is trading. There's a distinction between saying you owned Google when you entered government and you could own, you know, and you own it until you leave. And if you want to sell your Google stock that you walked into government with, you have to leave government. otherwise it's yours and whatever information you have, you're handcuffed for buying and selling.

That's where the trading element comes in, which is where I think the greatest improprieties can come up. And the second point is I think we need to have a little bit of de minimis. If you have $1,000, if you have $5,000, if you have 1% of your net wealth, it's very different than if you have 10, 20, 50%, if you're investing in a large amount. You make an interesting point. Dan, I want to get you in because I saw you're shaking your head there, we have to move on to the next topic. You're going to play in it. But what was your final thought there, Dan? Well, I think Aaron made a couple of good points, but I would still warn that if you say own a bunch of Google stock, and even if you're not trading it, you might pass

some sort of legislation that improves the price of that stock. Or like, if you owned a bunch of Intel stock, you had a big incentive to pass Biden's big subsidies for the semiconductor industry. So, yeah, there are always going to be ways for politicians and their senior staff to benefit, but hopefully we could at least put some fences to make the system less sleazy. That was kind of the point I was trying to make, and I did it much more clumsily than you just did, Dan. I think it's noteworthy that the executive branch would be included in this as well. Yeah, and how far down would you go there?

And maybe pretty far. Is it cabinet level? Is it sub-cabinet? Is it ordinary employees? If you have access to-in-the-forest. Who may know something. Right. Is it going to-

Career employees? Career employees. Yes, exactly. Is it the grandchild who, as you say, is it the grandchild who inherits something from grandmother or grandfather or who comes into government service after having worked in the private sector and accumulating stock? Do you have to sell it then and incur a big tax liability? It gets gnarly fast. Yeah, I run into problems just trying to give stock to my younger cousins. But I can't.

You know, I'm talking about like, you know, $10 at a time. Anyway, just to teach a teacher of the basics. Guys, one second. Let's also talk about some of the other big news out of Washington coming from the merger side where the White House is not backing down from its antitrust fight with the FTC and the Justice Department is proposing new merger guidelines. Let's get Amon Javers in here with some of those details. Amen, what can you tell us?

Hey there, Kelly. Well, the FTC and the DOJ are releasing new draft merger guidance in an effort to clarify their more aggressive approach to antitrust enforcement of corporate consolidation. Under this framework released this morning, the agencies will use 30. 13 criteria to evaluate both so-called horizontal mergers in which companies in the same industry are merging and vertical mergers in which companies in the same supply chain are merging. Assistant Attorney General Jonathan Cantor explained the Biden administration's approach here on Squawk Box this morning.

Anti-trust enforcement oxygenates the market. It gives opportunities for new firms, technologies to flourish and thrive. And what we want is we want competition, we want disruption, We want innovators. We want them doing it throughout the economy and throughout the country and throughout the world. And that's what we're trying to promote. We're not trying to prescribe outcomes. We're not trying to pick winners and losers. We want the marketplace to do that.

Now the proposed new language updates existing guidance that was last changed in 2020 in the case of vertical mergers and in 2010 for those horizontal mergers. But the administration's approach to antitrust was blasted as harassment of big business by Republicans on Capitol Hill just last week. The saying in Washington, guys, is that personnel is policy. And by selecting Lena Khan as his FTC chair, President Biden has clearly decided that he wants the agency to take this more aggressive approach. Back over to you guys. Well, if the FTC has tried to get tough on tech mergers, but it hasn't worked out, then is Congress the next avenue here, Amen? Well, that's a really interesting question. The FTC has not had the kind of success that maybe they'd want to, but you could argue, and some have who are in.

in Lena Kahn's camp that simply by bringing these cases, you put a little sand in the mill here, so to speak, in terms of the pace of deal flow as lawyers on all sides of potential acquisitions and mergers look at the administration's approach, decide to slow down, decide to hold off on some deals. You can affect the antitrust landscape, even if you're not winning the individual cases

in every single instance. So they could be. getting sort of a general trend toward what they want, even if they're not winning in court, Kelly. All right. Let's turn back to our panel of Dan and Aaron. And Dan, we'll start with you. What's your take on kind of the right way to move forward here? And if we should be moving forward at all to change the way that mergers are allowed to be done? There was a major revolution in the approach to antitrust, starting about, I don't know, 40 years ago when instead of just this sort of simple, clumsy, big as bad approach.

Lawmakers, regulators, people at the FDC and DOJ, they adopted a consumer welfare standard, which was based on our prices coming down. What's the evidence of actual competition? Are you factoring in overseas competitors and things like that? And unfortunately, it looks like the Biden administration wants to go back to that old-fashioned big as bad approach that led to really embarrassing mistakes by the government, like the harassment of AT&T and IBM. And of course, the marketplace ultimately shrank those companies a lot. So I prefer innovation, competition, diversity, all those words that that administration

spokesman was talking about on your network this morning. But I just don't think you get that through having a bunch of bureaucrats at DOJ and FTC adopting these prescriptions. Erin, what about if Congress goes the route of trying to tighten some of the, I think the new rule would be that anyone who would automatically have more than a 30% market share, you know, would trigger a review or something like that. Yeah, I'm disappointed. I have low expectations that this Congress could agree on much. I mean, I'd like to see them first agree on their own ethical standards for stock trading,

as we just discussed. But Dan's idea of going back in time to the 1980s is backward. Is libertarian ideology as opposed to the reality of a modern economy? These rules absolutely needed to be updated. I mean, the rules were existing before we had ride. apps. Anybody want to think about taxi regulation and taxi competition before we had Uber and Lyft? So the administration is spot on to review these. There's been an activist right-wing judiciary, led by Clarence Thomas, and others that have unwound long-term standards. And so it's time for DOJ

to flex its muscle. And I think the administration has listened to a lot of small businesses who are being hurt by the current weak antitrust enforcement. That's been a hallmark of many administrations over the last 40 years, and I'm really pleased with the direction the Biden administration is going. All right, folks. Dan, them's fighting words. I'll give you the last word here and very articulately expressed fighting words. What do you think? I like the idea of Thyrins Thomas setting the direction for antitrust, because I think he has a much more realistic sense of how a free market economy works. And for heaven's sake, we don't want to become more like the European Union with bureaucrats trying to dictate market out.

comes. All right. There you go. Guys, we'll leave it there. This one we can come back to. This is a good conversation. Both of you, very forceful. Great points. Appreciate it. Coming up, Goldman, showing the first real signs of weakness for the banks, taking a big hit from real estate investments, as well as a trading slowdown. Plus, Apple working on its own AI tools, those details in tech check when power lunch returns. We're off to a spicy start. Welcome back. Goldman Fax, reporting a miss on profits, right downs to commercial real estate, and the sale of its green sky lending unit, the stock is rallying today. They also stated how tough of a quarter it has been for the firm. CEO David Solomon saying he remains confident the environment feels better.

And a lot more investors wondering if this is now an entry point to turn things around. Let's bring it David Conrad. He's a managing director at KBW. David, one of the worst quarters for Goldman in some time, and investors seem almost relieved. Yeah, it was a tough quarter, but I think it was largely expected. I mean, they had guided to quite a few of these charges. And I think if you take a step back, you know, some of the charges, whether it's Goodwill impairment in green sky, impairment of private equity, or the consolidated real estate investments, these are kind of really investments that weren't really getting part of their valuation.

Investors weren't over, you know, fully on board on these investments. And so as they are exiting them, you know, certainly the cost to exit is a big issue. But I think, you know, taking these impairments to exit these businesses, ultimately, we think it'll be a positive for the company. Where does it leave Goldman, you know, six months, 12 months from now? I think where it leaves Goldman, you know, if we look into 24, there'll be, you know, the consumer business would be largely curtailed. We'll see, you know, with the Apple relationship in terms of the cards business. But presumably Green Sky won't be part of it. I think the bigger issue, though, is some of these equity investments that took the charges of these quarter.

You know, if you go back a couple of years, equity investments were over $20 billion, now they're $13 billion. These are really heavily capital-intensive businesses. And so I think freeing those things up, shrinking those investments, and really focusing it on the investment bank, trading, and asset management will be a much more capital-free business and will allow a lot more buybacks and improve the process. profitability. Do you have to have investment banking and deal flow come back for Goldman really to light it up? Yeah, I think you do. I think you do. And I think that's why you kind of want to own the stock here because we're at the trough of that activity. We are seeing, you know, I'm sure you said on the show many times the green shoots coming through, but, you know, announced M&A is up quarter and quarter. ECM is up quarter on quarter. And we've just been in a, you know, over a year lull in this activity.

And so with the Fed nearing end of the tightening cycle with inflation coming down, you know, we think those businesses are set up better for 24. But you definitely need that leverage in the capital markets to get the ROTC up for the business. So this, so what I'm hearing you say, not to put words in your mouth, though, I'm really expert at that, is this is an opportunity to get in at a trough point. of at least one of their critical businesses? I think that's right. I think when you look at it, you know,

it's trading at 1-1 of your intangible book. I think that's a pretty attractive valuation. I think the rest of the year is going to, you know, there's more noise to come with exiting the consumer. But I think it's going to be largely cleared up by year-end. And yeah, you are positioned really well with an attractive valuation, a company that's really strongly capitalized with hopefully a momentary. minimum in these businesses.

David, thank you so much for your time today. We appreciate your insights. David, David Conrad, KBW. Coming up, we're calling in tech support. The Chartmaster Carter Worth will be here with a look at three stocks and where they're headed. Don't go anywhere. More power launch right after this.

Stocks rising once again today. Nice rally for the summertime. Bond yields, meanwhile, continue trending lower. Rick Centelli joins us now from Chicago with him. Hi, Rick. Yes, Ty. We're rallying on the price of treasuries pushing those yields down, but not all at the same speed across the entire curve. Look at two-year and the furthest maturity, 30-year bonds on one chart.

And you can clearly see that the long-dated treasury yields are racing down lower, many investors buying them more aggressively, as was evident by the 20-year bond auction today. I gave the grade A.B for demand, but you could clearly see that long-dated treasurer. treasuries were leading the yield curve lower. And as you look at a 10-year chart starting on jobs, jobs, jobs Friday and July 7th, today we're on pace for seven of eight lower yield closes, which really is something to ponder because that report, along with some of the recent inflation reports, have definitely changed the tone of yields. And if you look at overseas, the UK has potentially the stickiest inflation horizon. Well, they got to be free.

When we saw their CPI and PPI today, their yields dropped. There's a two-day chart of 10-year guilds and their currency dropped against the dollar from what just a few days ago was a 15-a-half-month high. And as you look at a dollar chart starting on June 1st, you can see the dollar index has not had a very good time lately. But we do see some buoyancy around that psychological level of 100, thanks to much of the European currencies, starting to slide along with inflation. back to you. That was definitely welcome news. Rick, thank you very much. Let's get to Steve Kovac now. Hi, Steve for the CNBC News Update. Hey there, Kelly. Yeah, Stanford University's president is stepping down as he faces concerns over his past research. In a statement,

Mark Tese Levine says he was cleared of fraud and falsification of data tied to his past work as a neuroscientist, but he says he will still resign at the end of next month for the good of the university. Also, New Hampshire Republican Governor Chris Sununu announced today, he will not seek re-election. Just last month, the four-term governor announced he would also sit out of the 2024 presidential race after teasing a possible run. Sununu said he feels like it's time for another Republican to lead the state. But New Hampshire Democrats issued a statement saying they have two candidates prepared to enter their race. And just weeks after the Supreme Court struck down affirmative action, Wesleyan College in Connecticut is ending legacy admissions.

The practice receives scrutiny following the high court's ruling because white, wealthy applicants tend to benefit from legacy programs. MIT, Amherst, and Johns Hopkins are among other institutions that recently ended admission preferences for children of alumni. Tyler, I'll send things back over to you. All right, Steve, thank you very much. Ahead on Power Lunch, former FDA Commissioner Scott Gottlieb will join us to discuss growing concerns of lead pollution across the country and several other important topics.

We'll be right back. Welcome back to Powerlunch. Shares of AT&T are back up 8% today after the company responded to the issue of lead-sheathed cables that some are concerned could cause health issues. We've got Pippa Stevens here looking at them and the other telecom names so far that are impacted. That's right, Kelly. So last night was the first time we heard from AT&T since the Wall Street Journal published its investigation on July 9th. The company saying that lead-clad cables represent less than 10% of its copper footprint of roughly 2 million sheath miles, while also saying it strongly disagrees with the journal's conclusions. AT&T's rebuttal was convincing enough for some investors, with the shares rebounding today after falling to a three-decade low yesterday

and posting 10 straight days without a gain. Stocks of other legacy telcoes with possible lead cable exposure, including Verizon, Lumen and Frontier, also surging, although all four stocks are still in the red this month, with more than 30 billion in market cap wiped from the sector since the initial report. Now, AT&T and Verizon are widely held stocks in part because of their traditionally attractive yields. One or both of the stocks are owned by one in 10 U.S. mutual funds and ETFs, according to Morningstar Direct. For equity funds specifically, that number rises to almost 15%. And we've seen an uptick in options trading activity amid the sell-off with volume spiking yesterday. Open interest has also increased while the

put-call ratio has declined, according to Schwab. And taken together, that could point to investors betting the upside will continue after the stock became extremely oversold. But Wall Street remains divided. Argus cut AT&T to a hold rating, pointing to, quote, new material risk while Deutsche Bank stuck to its buy rating today, saying, quote, this doesn't seem like a $34 billion problem. The one thing they all agree on is that there are still a lot of unanswered questions. All right, PIPA, thank you very much. Pippa Stevens reporting. As the telecom companies face pressure over concerns about cables covered in lead, just how big of a danger does the potential exposure pose? Here now to discuss that and more is Dr. Scott Gottlieb, former FDA commissioner and a CNBC contributor. Dr. Gottlieb, welcome,

as always, good to have you with us. Let's talk about these lead sheathed cables. Do we know enough to come to any firm conclusions about the dangers they may pose. One thing we do know is that lead is a danger no matter where it is. That's right. We don't know what the level of exposure is from these cables right now. No amount of lead exposure, whether it's inhaled or ingested, is safe. It stays in the blood for a period of two or three months. It can stay in the system for much longer than that, getting sequestered in organs or in the bones. And lead has dilatious effects on multiple organ systems.

Its most damaging effects are on the neurological system. It can impair cognition and development, especially in young children. It also has substantial effects on reproduction. It lowers sperm counts. It can cause stillbirths and miscarriages. So you want to make sure that people aren't getting exposed to lead. Now, the question is how much lead exposure is happening as a result of these cables? And I suspect that's going to need to get resolved by the EPA.

The EPA probably has authorities that it could use right now to step in. investigate these cases and make a determination about how much lead is actually leaching into soil or water and potentially getting into human consumption as a result of these cables. There's probably going to be certain parts of the country where cables are leading to exposure to humans of lead. And there's probably a lot of other parts of the country where these cables are buried and are going to be best left alone. That taking them out is probably going to cause more harm than good.

So I think you're going to need an authoritative judgment on that and a risk assessment And that's ultimately going to come from EPA. As was the case in, I believe it was Flint, Michigan, it would seem that maybe the biggest risk would be if these cables were near water supplies. In that case, it was lead pipes in the water system. That's right. You worry about access to water.

And some of these cables undoubtedly are going to be near water supplies and probably are leaching lead into local water systems. I suspect that that's the minority of cases where these cables are buried, just looking at some of the reporting that's been done. The very good reporting from the water supply. Wall Street Journal. You know, we worked a lot with EPA when I was at FDA, and a lot of that work was on setting allowable limits in different environments for things like lead and other contaminants, other chemicals. Like I said, lead, you don't want lead exposure no matter what, but there's

going to be instances where these cables are buried and left undisturbed. The lead isn't getting into any soil or water supply where humans can get access to it. There's going to be other cases where humans are getting access to that lead. And it is contributing to, you know, lead levels in children and adults. And those are the cases where you're going to want to remove those cables. EPA can make a judgment. They're going to have to set, you know, sort of a stricter or sort of framework around where these cables are going to get removed and where they could be left in place. And also there's questions about whether you can sheath some of these cables to prevent lead exposure, particularly the ones around overhead wires.

Dr. Gottlieb, let me ask, because this one seems like, because the lead risks are so clear and the evidence is so clear that there's been, like, for instance, you know, people who have been fishing in spots with, you know, 15 times the acceptable limits for almost 30 years. I mean, every paragraph in this original story details examples like this, the Lake Tahoe one with a camping ground and a lake. And you can imagine how many people over the years have been. There's not going to be any question of possible exposure and possible damage. So my question to you is, what's the precedent for these companies? Is there a precedent for some kind of structure or pay settlement? that could help investors understand how big the financial risk might be and how it might be resolved.

Yeah, look, I don't think that there's a precedent on this kind of a scale that's this distributed, attributable to one source of lead. We know that people are still getting exposed to lead, but we don't know the source. Quest did a study, Quest did a study in 2021, looking at lead levels in children who were tested for lead. Most kids get tested for lead around the age of one or two, and about half of the children had levels of lead. And, you know, you can't trace that back to a very clear source. We've done a lot to reduce lead exposure in the environment, taking out lead pipes, removing lead from paints and gasoline. Yet people continue to get exposed to lead.

So it's probably going to be from these kinds of environmental sources. I think demonstrating causality, except in the most obvious cases where someone was directly exposed to, you know, a source that was contaminated from one of these cables, is probably going to be difficult. I don't think that there's a real precedent for a company having responsibility and obligation facing, you know, potential liability for something that's this distributed. Whether or not the government steps into backstop some of that, there's obviously funds that do that. This, you know, may fall into some of the clean water standards. Remains an open question.

Let's switch to the sort of topic that's everywhere these days, and that is AI. Is there a scenario under, as medicine begins to integrate artificial intelligence into its various realms? Is there a scenario under which AI products could be deemed medical devices subject to FDA regulation? Yeah, look, artificial intelligence already is embedded in medical devices, and it's in software that's regulated as medical device. For example, there's programs that help radiologists, you know, examine x-rays and make determinations based on x-rays. And that's regulated as a medical device.

those software products are regulated as medical device. Now, in that case, the software product itself was built on a locked data set. What I mean by that, it was built on a data set where FDA knew that the scans that the device was being trained on were known results. They either, for example, a mammography piece of software that helps radiologists diagnose breast tumors. That was trained on a data set where you had breast tumors that either were or were in cancer, and you know the result. It was confirmed by a pathologist. The difficulty is in these large language models, which are trained on open data sets, where they're trained on data that sometimes has mistakes in it.

The FDA is going to take a different view with those kinds of AI tools that are trained on these large data sets where you can't guarantee the provenance of the data. But this is already happening. I think the next leap is going to be using large language models, particularly in drug development, where it isn't going to be necessarily regulated by the FDA if you're using it to actually assist in drug development. but if you're trying to apply it to patient care to informing decisions about when a patient should or shouldn't get a therapeutic or when a clinician should or shouldn't intervene on a particular medical problem, that's going to be regulated as a medical device. And the question is, how is FDA going to regulate that? I think ultimately they're going to have to develop standards for guaranteeing the provenance of the data, the integrity of the data that goes into training those large language models, making sure it's representative enough and large enough that it could correct for any mistakes.

and ultimately confirming the result, having some of these AI tools running them against known data sets and making sure that they're giving accurate results based on known examples. Let's talk very quickly about weight loss drugs. How do you see them fitting in the medical culture? Is it going to remain that the best way to lose weight, frankly, is to have a healthy diet and exercise? Is that still the best way to go? these drugs are incredibly popular and they are going to be marketed really, really aggressively. Not to the extent they aren't already.

Yeah, the best way to lose weight is to have a proper diet and watch your calorie intake. I think that we're in the early innings of the use of these drugs. Right now there were 5 million prescriptions written in last year in 2022. Upwards of 40% of the population may be eligible for these drugs based on the criteria that's been set. Having a BMI of over 30, that's about 220 pounds for. a six-foot man or having a BMI over 27 and risk factors related to your weight like hypertension. So we're going to see broader use of these drugs. And I think as we do, we're also going to unmask some of the side effects associated with

these drugs. Remember, we've used these drugs for a very long period of time, but we've used them in a setting of type 2 diabetes, mostly. And in that instance, the dose that you're using is about one-fourth of dose that you're using to promote weight loss. So as we go into these higher doses, I think you're going to unmask more of the side effects of these drugs. and it's going to start to target these more appropriately.

Dr. Gottlieb, as always, pleasure to have you with us. Appreciate your time. Thanks a lot. You bet. Still ahead, Apple's AI ambitions. The shares hitting a record high today on reports it's working on some new artificial intelligence tools, but apparently it's struggling with something that it's been admired for in the past, a marketing plan.

We've got details when Power Lunch return. Shares of Apple briefly hitting a record high today. after a report that it's building its own generative AI tools, including an internal chatbot that some engineers call Apple GPT. That's the focus of today's tech check with Deirdre Bosa. Hi, Dee. Apple GPT, it doesn't sound that creative, does it? But I think that's just a nickname within Apple.

But essentially the report says that Apple is working on its own large language model. So sort of like a chat GPT that insiders, inside the company, employees can use and test out. And we know that Apple is sort of comfortable being a second mover. So it shouldn't be all that surprising. But what may be getting investors excited, and you saw the stock pop on this news, is the idea that Apple would be able to monetize general AI. It's the same reason we saw Microsoft shoot up yesterday when we heard the announcement that it was going to be charging $30 a user to use some of these generative AI tools.

We're at this phase of the bubble, guys. We're still, you know, it still has the ability to mention generative AI. to create a pop, but investors want to hear about monetization as well. You think about Apple's user installed base of 2 billion devices, if you could simply charge for some generative AI tools on top of that, the way that they charge for things like cloud services that bring their services, revenue up so much. That is exciting.

It is exciting, but I guess what's the concern about their marketing of this potentially DERDRA? I don't think there is any marketing yet, right? Apple likes to test things internally before they come out. We heard that they were working on an AR VR headset for a long time. Then we got the Vision Pro. So they're comfortable moving kind of slow and steady. I guess some concerns have been about Siri, right,

that it has fallen behind some of the other AI assistants. And some general doubts over how much Apple is actually focusing on generative AI. But when you take a step back, you see that they are incorporating it into a lot of their different products on the devices. whether that be auto correct or photos. So it shouldn't be surprising. Remember as well that Apple has a secret self-driving car project. That would lean very heavily on artificial intelligence. Indeed.

Deer, thanks. Dear Jervosa, we appreciate it. Over to Dom Chu now for a market flash. Hi, Doc. All right. So Kelly Tyler Carvana is soaring today on a slew of different headlines. We're going to start with a deal to reduce the company's debt by more than $1.2 billion in a restructuring.

So the used car retailers reported around $6.5 billion worth of long. term debt at the end of the second quarter. The company is also selling up to a billion dollars worth of stock in a restructuring and capital raising effort. And all of that comes as Carvana reports a much lighter than expected loss per share figure, along with revenue that topped analyst estimates. Now, Carvada stock has now gained over a thousand. Yes, 1,000 percent so far this year, but it still remains a whopping 86 percent below where it was during its record highs during the COVID pandemic. Kelly, back in August of 2021. So, So keep an eye on those Carvana shares.

I'll send things back over to you. Very high short interest as well. Dom Banks. Carvano CEO, Ernest Garcia, will be on Mad Money tonight. He'll join Jim Kramer for an exclusive interview around 6 a.m. PM, I'm sorry, Eastern Time. Still ahead, boys for a breakout. CNBC pro out with a screener of stocks about to make a bullish golden cross chart formation. We'll ask the chart master himself, Carter Worth, to break down his favorite names on the list for us.

We'll get some technical support after the break. NBC Pro out with a new screener laying out a list of stocks about to break out, according to the bullish golden cross chart formation. These are names where the 50-day moving average is approaching the 200-day moving average and is within 3%. And the 50-day moving average has not been on the other side of the 200-day moving average over the past month. Got that? Okay. Our support technician today is Carter Worth, founder and CEO of Worth charting. I set it up for you, Carter.

Take it away. You sure did, Tyler. So if you think about the circumstance, before we look at the charts of a Golden Cross, definitionally it's something that's been in a downtrend, and where current price over the past several weeks is so aggressive that it's allowing for a short-term moving average or 50-day to move above a longer-term moving average. But let's look at the charts together and try to figure it out. What you have here is a comparative chart, and what it is is three stocks, Lab Corp, which has nothing to do with BlackRock, which has nothing to do with Best Buy, a retailer, a financial, and a medical company.

And yet you can see they're quite correlated. What's leading the way there on the top is the S&P. So let's drill down here a bit and look at the year-to-date chart. And you will see if you look at this next iteration what we're talking about. So these are laggards, definitionally, yes, that have not kept up with the market. can see the spread is quite wide. But that is the opportunity, which is to say playing for stocks that have not kept up with the market. And so we'll look at them individually, and you'll see, I think, what is an important circumstance in each case. So the first one here, this is

LH. And the way I would draw the lines is as follows. We have a well-defined downtrendline, and we have something of a head and shoulders bottom. So that warrants a nice arrow up and to the Right. And we're going to look at each of these in turn and they have the same exact setup. But you see here LH making the turn. We might look at the other two just to make a point. Take a look here at BlackRock and I'll clear, but you almost don't have to clear it. Watch. Draw the lines again. Here's the head and shoulders bottom and that warrants the up arrow. And then finally let's do a third and then we can discuss it if we were to to look at, of course, the last stock.

What is the circumstance? It's the exact same thing. A well-defined downtrend. Stock strength, recent strength is allowing a move above that downtrend. And, of course, the head and shoulders bottom, which again warrants the arrow. So my thinking here is that these are stocks that have an opportunity because, what, they've lagged, but on a short-term basis, they are handily outperforming the markets. That's a perfect one-two setup.

a precondition of underperformance and now nascent, very developmental action of late that is so good that it's outperformance here and now. So as I look at what you just pointed out there very clearly, I see those double bottoms or the head and shoulders bottoms, and then I see a rise back. But it almost suggests that that upward trend presages another downtrend. Well, if the sequence was intact, the downtrend sequence, that would be the case. Meaning, if we hadn't made those triple bottoms, right, which is to say we were coming from a new low and then rallying, yes. But the sequence is different now. We haven't made new lows for typically six months, and that's what a bottoming formation is.

So this strength, this current leg that you're referring to, is confirmation that those lows are quite good. Those lows are lower than it's likely to go on any pullback. That's exactly as you said. Carter, as always, great to see you, my friend. Thank you. I think I'm going to see a Friday night on Fast Money. I'll be there. Oh, I thought maybe you had a dinner reservation or something.

Well, maybe. You never know with Carter. All right. Those were just three of the names, but you can get the full list at cnbc.com slash bro. And still to come, speaking of dinner reservations, maybe your grandparents had the right idea after all. Data shows America has slowly become a nation of early birds, more five o'clock dinners, more matinee shows,

and less time out after midnight. That story and more when Power Lunch returns. Welcome back, everybody. Less than three minutes in the show and several more stories to highlight, so let's get right to it. Microsoft and Activision Blizzard agreeing to extend the deadline

for their merger until October 18th. They were originally supposed to close by July 18th, but the regulatory pushback here and in the UK delayed that takeover of the video game giant Microsoft would have been on the hook for a $3 billion breakup fee if they did not extend the deadline.

I assume this is, if you are in favor of this, this merger that this is good news. They're not pulling out. They're not giving up on it. And they're going to continue to fight the fight in the regulatory world. And that was the tone that Bobby Kodick struck with David Faber this morning. So Fabor said, do you think there's a 99% chance of this deal getting done now and he wouldn't comment? But the question suggests that that's how high the market is thinking about it.

All right. Clear sign that 7% mortgage rates are taking a toll on the housing market, according to Redfin, just 1.4% of the nation's homes changed hands in the first half of the year. That is the lowest level in a decade, and it equates to 14 out of every 1,000 homes. That puts a number on what we call the inventory problem. The pre-pandemic average was nearly 2% of homes changing hands in a given year, and it's easy to see why. Why, if you own a home with low or no mortgage, or the low mortgage rate,

would you sell and take on a high mortgage rate? It's not going to unlock until rates come down. It's going to take some time. An unexpected group of workers is leading the resistance against. This is not unexpected. The top level executive. Wait, wait, am I reading this right? No, they're leading the resistance against being in the against.

Okay, a survey from McKinsey found that the largest share of employees who prefer to work from home are those earning more than $150,000 per year. 44% of the most senior workers wanted to hold on to remote work abilities. Again, the real question is will they be extended to everybody? Will this be enshrined as an option? Yeah, bosses want to work from home, right? And now the rest of the workers have the power too. All righty, the Wall Street Journal highlighting how America is turning into a nation of early birds with data to prove it. Yelp says restaurants are now seating 10% of diners between 2 and 5 p.m.

A 5% increase from 2019. A third of all Broadway shows now start in the 7 o'clock hour, according to Playbill, a rarity before the pandemic. And Uber says trips in the 4 p.m. hour are up nearly 10% since 3%. 2019. What? I don't know. I guess I go out earlier and dine earlier now than I used to. Maybe it's a function of age. No, I do too. Maybe it's a maybe it's a maybe so yeah, you got kids that they, they insist on eating early. But I wonder why was it, why didn't it used to be so late? Who are these heroes of previous generations who were just lighting it up at 9 p. They had bigger families than we do. I mean, I got to go to bed earlier. Thanks for watching power lunch everybody. I'm going to dinner.

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