Power Lunch - More Efficiency?, Debt Regret 01/18/24

Episode Date: January 18, 2024

Google is warning employees that more job cuts are coming, even as the company has ambitious goals. We’ll discuss what it means for big tech in 2024.Plus, we’re seeing signs of progress in Washington over how to tackle the country’s $34 trillion in debt. We’ll talk about why it matters to lawmakers. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Power Lunch, everybody. Alongside Contessa Brewer, I'm Tyler Matheson. Coming up, Google warning employees that more job cuts are coming, even as the company has ambitious goals. 2023 started off as a year of efficiency for big tech, especially at meta, but it became the year of AI. We'll have much more on Google's plans in 24. Now, here's something we don't get to say often on the air. We are seeing signs of progress in Washington, D.C. at least a plan to do something to tackle the country's $34 trillion in debt. We'll talk about why it matters to lawmakers. First, a tech on the markets now. The Dow is lower. Hurt somewhat by United Health. We'll have a bit more on that later.

Well, actually, you can see it's passed into positive territory flat. S&P 500 up by a third of a percent. And you've got the NASDAQ composite up by 8 tenths of a percent. And Apple, a big reason for the NASDAQ's gains. Bank of America upgrading that stock from neutral to buy, the firm flagging that AI and Vision Pro are drivers for, Apple's hardware and services businesses. And chips the other driver of the NASDAQ today.

Taiwan's semi up nearly 8% after beating on earnings and raising guidance for the current quarter. It's leading a chip rally on Wall Street today, AMD and Invidia hitting all-time highs. When hasn't Nvidia hit an all-time high? It just seems to happen all the time. But there you see it, right there, 56782 for Invidia. Let's begin, however, with those Google job cuts, CEO Sundar Pichai, sending employees a memo titled night, 2024 priorities and the year ahead. Pichai says Google has ambitious goals for the year and will be investing big in them, but also saying that Google has to make tough choices, code for layoffs.

CNBC.com's Jennifer Elias obtained the memo, and she joins us now with more. What does the memo say and why is it so interesting, Jennifer? That's right, Tyler. The memo actually says that the company is preparing to define its 2024 goals and that it has really big plans. for things like AI. The memo goes on to say that if employees essentially thought that the tech layoffs and job cuts are over, they should think again because it's going to continue. The memo also said that in order for the company to have the capacity to invest in big goals that it has for AI, it needs to reallocate sources essentially telling employees that they can expect more cuts

to come. All right. So that's sort of what we've seen. How many cuts are we talking about here? The memo didn't specify, but the company, based on the last year, has been doing rolling cuts at companies at various groups company-wide. It's hit many different teams at the company. So it's unclear right now. We'll probably find out as the company kind of files these. So far, we've already seen several rounds in the first couple weeks of January.

So it will continue. We just don't know the scale. Sundar, which I did say that it won't be the same scale as last January's cuts, which hit about 11,000 employees roughly 6% of the workforce, and that it won't hit every team. But it's hard to say at this point. Yeah, hard to say here. The company added lots of employees in and post-pandemic. Some people think that they simply overhired. It's true. The company did actually overhire, and there have been a couple cases where we've reported that executives have admitted to over hiring throughout the pandemic. And so this drastic cut is in some ways related to that as it's happened over the last year. But you have to think about the morale aspect here, Tyler, because Google's already at risk of losing its top AI talent, many employees have left for competitors, including Open AI. And those startups aren't cutting, and they're moving fast. So you have to think about the risk of what this poses for

employees and what looks attractive to them in the coming year. Very interesting. Jennifer, thank you very much. We appreciate it. Let's get more on to what this means for the tech space. Will we be hearing more stories like this? Big investments in AI, but it doesn't include hiring or even retaining human beings. Let's ask Alex Cantraowitz, founder of big technology and a CNBC contributor. Alex, great to talk to you today. All right, so first of all, if you want to invest in AI and you think AI is the driver in the future, do they have to cut costs somewhere else in order to make that payoff?

I think they do now. We're not living in a zero interest rate environment anymore. I think a couple of years ago, what they would have done is just hired away in these areas and not worried about where they had to cut previously. But that's gone. And now they really need to find ways to cut costs so they can invest here. Training AI, deploying AI is very expensive. And I think that's what's happening with Google today. Okay. So when you look at the numbers that are being cut, is it going to be enough?

Or would you expect that this is a trend? We're going to keep seeing unfold that, you know, here's 7,000, here's 6,000, in total 13,000. is this going to be a near-term trend, not just for Google, but for other big tech that is investing in AI? I think it will be a near-term trend. And here's why. You're going through a technological transformation, right? You're almost replacing one way of doing technology with another way of doing technology. And when companies are betting so big on this new way, you're going to need different personnel in there. And there's going to be places where old personnel just don't fit in the way.

the new vision. And so, of course, there's a strategic change, but there's also personnel change. And so when Sundar says, okay, we're going to have these rolling cuts over 2024, that is something that I expect other big tech companies to follow. It's not huge, right? We've seen a thousand people, which is, you know, for every one of them, it's very difficult, but a thousand compared to 12,000 last year is small for Google. So it's not the wholesale change we're going to see, but this drip, drip, drip, yeah, that's something that we could see throughout big tech this year. You know, Alex, it's interesting because I've been. working in companies that have done big layoffs, and I've actually been part of layoffs before.

What happens, though, is that there's a spillover effect that even if the workers are retained and you have your job and you're necessary to the functioning of the company, it doesn't feel good. And so there's an impact to company morale, number one, is that I want to ask about the headwind there, but also is there a way that they could work around that? I'm just thinking that in Las Vegas, they're getting ready for another strike deadline, culinary workers union sees automation, not AI, but automation as a threat to the workers' jobs. And they said, we're not trying to say there can't be automation. But we have to have in the contracts some protections for retraining the human beings who will be replaced and for severance pay

so that they're not left high and dry and didn't know it was coming down the pike. Could these big tech companies take a page from the culinary workers union and apply some of the same strategies? So first of all, I think we're already starting to see morale issues. And I've read some incredible stuff from current Google employees today on LinkedIn, basically slamming the company, saying they have no visionary leadership. I mean, it's astonishing what's happened within the current Google employee base. So that is a problem.

And what you point at about how you manage these transitions is spot on, because that's where leadership comes in. Do you come in first of all and say, we're going through this and we don't know where it's going to end and we don't fully know where we're going, but we have to be on top of this technology. That's a terrible strategy. Do you come in and articulate a vision and say we're going to be leaner but point everybody toward a direction that makes sense of what's happening? You know, that's what a company needs to do. And then finally, when it comes to re-skilling, the companies that I've seen, the big tech companies that I've studied that do best in these transitions, they don't put in

AI technology and then fire people. They say, look, you were good enough to be here yesterday in one version of technology. Now, how do we need? now take what you do best and put it to play for our next big move and competitive situation. And I think the companies that do that well and articulate that well and think through that well are going to be in really good shape. And honestly, with Google right now, you know, I'm left with some questions about where they're going when they're trying to make these moves. Let's talk a little bit about the competitive situation that confronts Google. A year ago, the narrative was that OpenAI and ChatGPT were far and away the leading horses in this game

and that Google had gotten off on the wrong foot here. Have they closed the gap? What about their latest suite of products, including Gemini? And are they closer or have they surpassed in performance and quality their competitors in AI? So first for Google, the big sigh of relief is that AI has not taken over search yet, right? People are still searching with Google, they're not searching with Bing. They might be searching a little bit with chat GPT, but we haven't seen a plummeting of the share that Google is using in search.

So I think that's already like that's a good moment for Google. Now, when it comes to the current suite of AI products, the consumer facing things, things like chat GPT and Bing and even perplexity AI, my personal perspective here is that they're blowing Google's barred out of the water. And that Google's barred, which is their answer to chat GPT, has a lot of room to go there. Now, when it comes to the model that enterprise are using.

The quality of the response you get, in terms of the quality of the responses you get? Okay, go ahead. 100%. I don't think the quality is there. And I think that you're starting to see. Now you're seeing companies like perplexity take them on, and that's a real issue for Google. And I think they're going to need better responses there. They're trying with generative search, but they don't want to put everything there.

They have something to lose where the others don't. And that sort of is hamstringing them a bit. Now, Gemini, you mentioned the enterprise model, you know, that is something that people are starting to see. might challenge Open AIs GPT4. And Open AIs GPT4, I don't know if it'll be in the industry standard forever, at least they're models, because you have so many coming in, whether that's Gemini, whether that's anthropic which Google has invested in or any of the others. And so Google now at least has a seat at the table when it comes to the foundational model

question. If you're looking at the attempts to control costs where you can so that you can invest big in AI, and this is the decision that Google and others are making, what does that mean for the smaller companies that are trying to at least carve out a piece of the pie for themselves? The good news is for the smaller companies, they don't have these legacy companies that, these legacy businesses that they need a prop up, right? Like at Amazon, for instance, you know, they say it's always day one, keep investing as if you're a startup because they have this legacy business that they need to prop up and they have to remind themselves.

When you're a startup, you don't have that problem, so you're in good shape there. However, this is extremely costly. And so what you're seeing with the biggest startups here, whether that's OpenAI or Anthropic, they're taking in lots of money from big tech because to be honest, you look at VCs, they can't support it. They need the computing power. They need the money from big tech companies. And so even if these startups succeed, it's going to end up going back to the big tech company's bottom lines at the end of the day. Alex, a really fascinating conversation.

Very interesting. Yes, indeed. Thank you. We appreciate that. Alex Cantorwitz. Thanks so much. The $34 trillion national debt was quick to build up, but by all accounts, it will be very slow, very long time before it's paid back, if ever. So how could Washington ever hope to solve its debt problem?

We're going to solve it. We're going to freaking solve it right here at 2.15 p.m. Just put Tyler on it. What date is it? Tyler and Tessa. We can do it. We can tackle it. We're going to solve it next.

Welcome back. News today on a bill in Congress to keep the government. open and it comes as finally there seems to be attention being paid to a huge problem. Emily Wilkins is in D.C. with the details. Is it just that they think here, Emily, that finally they see the debt and the deficit as a problem? Well, I think there's really a lot of factors that go into here and play. I mean, one of the big things is that a lot of the stuff that drives the debt and the deficit, two-thirds of federal spending, is not the stuff that Congress has to worry about approving every year. I mean, right now, we're just watching the Senate floor live.

They have passed the 60 vote threshold needed for them to pass that stopgap measure that will fund part of the government until March 1st and part of it until March 8th. We're then expecting that piece of legislation to go to the House this afternoon. They're going to vote on it. So it looks like at this point a shutdown will be averted, at least for a couple months. But all of this hand-wringing really only deals with about one-third of what the federal government spends. That other two-third was a subject of a House panel today that has come up with a proposed commission to look at that $34 trillion in debt and really address it. And a lot of that comes from a different couple sources. Number one is just the interest that the government's currently paying on debt.

That amount has almost doubled in the last three years. And of course the other big thing are these mandatory programs, these very key programs, things like Social Security, things like Medicaid, things like Medicare. And they have really been ballooning. They're, of course, important programs for a lot of Americans, but they're also part of the reason why our debt is as large as it is. House budget chairman Jody Arrington said today in his opening remarks for the hearing that part of the reason that they really need to address this right now is because of what happened just the other month with Fitch downgrading the U.S. credit rating,

saying that a key part of that was because Congress doesn't have solutions for how to go forward. central to their concern and their downgrade was the lack of confidence that the United States Congress would do anything to address it, meaningful. They thought that the current hyper-partisan climate, the broken process, would not lend itself to us coming together to create a medium-to-long-term fiscal plan. Now, while there's bipartisan consent about the need to address the debt, changes to programs like Social Security is really a third rail for lawmakers in both parties. Even today at the hearing, it was interrupted by protesters claiming that such a commission would kill Social Security, even though, of course, members do want to see the Social Security

program continue. Lawmakers are hoping that the plan commission can be passed with the federal spending bills in March, assuming, of course, that Congress is able to finish the job and actually, pass those bills without yet another stopgap measure. All right, Emily, thank you very much. We appreciate the reporting there. We're going to solve the debt problem, as I promised. Right now, right here.

One of our next guest says there's no evidence that the debt is creating any serious problems. Well, then it's solved, okay? The other says it's an issue, but he's seeing an interesting solution, and that would be AI. Joining us now, Dean Baker, economist and co-director at the Center for Economic and Policy Research, and James Pethakoukis, economic policy analyst at the American Enterprise Institute,

and a CNBC contributor. Gentlemen, welcome, good to have you both here. James, the last time there was such a commission, it was called Simpson Bowles. It seemed to me to make a lot of sense, a lot of what they came up with was sensible, but Congress did nothing. Why should we expect anything different this time?

I mean, I wouldn't. I wouldn't. Listen, if the problem is a plan, we have the plan from Simpson Bowles. We have think tanks, including my own, scattered across Washington, D.C., coming up with plans. That's not the problem. The problem is will.

And I think it's quite telling that this year marks the 30th anniversary of the last time the federal government really got serious about debt and deficits. That was during the Clinton administration. And why did they do that? Remember we had the famous James Carville quote about bond vigilantes? They got serious because they believed markets were serious about debt and deficits. And they were worried interest rates were rising for that reason. That perception is what drove action.

And until politicians today think markets have had enough, and unless they cut the debt, interest rates are going to go up and its whole thing's going to collapse, they're not going to do anything of substance, particularly on entitlements. Dean, is the problem, not a problem? Definitely say it's not a problem. I mean, you know, I've been around a long time, just like James. I remember in the 1990s, they were,

celebrating. They got the deficit down. We had surpluses for three years. They were celebrating. They got interest rates. The long-term interest rate fell below 5%. Big celebration. Well, it's about 4% today. I haven't checked the latest number. But interest rates aren't a problem. Inflation has come down. That's not a problem. You know, we're looking for a problem. James is waiting for the markets to get really upset. So then we could say it's a big problem. Not going to happen. So then it would be a big problem. problems to worry about. But isn't it concerning, Dean, that so much of our expenditure, I think it's going to be, if it is not already, the largest line item apart from Social Security and Medicare, it's the largest expenditure in the federal government, and that is paying interest

on debt that has been run up by generations of Congresses and administrations over the years, and therefore causes us not to be able to spend, maybe. maybe on the kinds of things that we ideally might like to spend on today or in the future. Well, let me make it too. It's around 2.5% of GDP. Again, I'll have to check the exact number. That's a ballpark number. We were around 3.5% GDP interest on the debt back in the 90s.

I'm old enough to remember. 90s was actually a really good decade. Great growth, low on employment for the last four years of the decade. It would be better to spend less. I'll grant that. But that's just not that big a deal. Let me put another point here that really never gets mentioned. It's just bizarre to me.

Government pays for things by paying for them directly. That's one way. The other way we often pay for things is granting patent and copyright monopolies. So just to take the most visible example, drugs are cheap. The reason they're expensive is the government gives a monopoly. So we'll spend over $600 billion, about $640, $650 billion this year on drugs. It probably costs less than $100 billion if the government hadn't given out patent monopolies. No one even talks about that.

That's $500 billion. in a year. That's almost as much of the interest on that right there. No one even talks about that. So if we're trying to be serious, let's look at the facts on the table. Although you want to see. You want to see pushback real quick. Start trying to tell the pharmaceutical companies who are spending big on research that they don't have any chance to make big money on those risky endeavors. That would be a good way to do it. We have to research. They spend a little over $100 billion a year. I know the data. The government spends about 60 billion a year in biomedical research through NIH and other agencies.

I think, you know, the interesting thing when we're talking about whether there's a will, back to this, is that we can slice and dice all the ways that our government is wasteful, that it's the victim of fraud and abuse. There's lots of those. And as journalists, we cover it, right? But I'm curious about the will. If you shut down the government, Jim, if you have an impact on military members and veterans and senior our grandmas and grandpas, then isn't there a political backlash for these lawmakers for not doing something? I'm always surprised that there's not more to be held to account on whether it's border issues or the or the deficit.

If you don't like something, why aren't we holding our elected representatives to task? Because people will say they're concerned about it, but they do, but they do. They do not want any actions taken that they think harm them, whether it's higher taxes, whether it's an adjustment to entitlement benefits, anything. That's why I'm saying that until we get a black Monday, a Black Tuesday, Black Thursday, Black Thursday, black Friday, when markets react, Congress won't act. Now, we better do that beforehand because any changes we make today will be a lot more gradual than changes we make tomorrow. And unless we're, you know, we were talking about, you know, patents and things.

Unless you are counting another AI-driven productivity boom, like we saw also in the 90s, I hope so. That would be great. That would make the problems a lot less. But while I hope that happens, I would not count on it. What I would count on now is us taking the kinds of measures for these reforms before markets forces to. But again, I'm skeptical without that action-forcing mechanism. It won't happen.

James, I'm going to ask you one final question. Then I'll let Dean get the final word. What about Dean's contention that as a percentage of GDP, the amount of money that we spend on interest is not all that material? And in fact, was as high or higher in the 90s a period of prosperity. So we really shouldn't worry about what I suggested was a very worrisome thing. And that is that we're spending $800 billion or $900 billion to pay interest on our debts. address that? I think one, one, that's money we don't have for other things. Two, when it was higher, when it was higher back in the early 90s, that's when people suddenly got very concerned

about the deficit. So it's going up so one can see a situation where people will become more concerned as what we spend on interest goes up. And also again, during the 90s, we were very lucky we had an amazing tech boom. Again, I hope that happens. I think it will happen. I won't count on that it happens. But again, to be dismissive now because we don't see the impact at this moment, I think it's extremely short-sighted. Dean, let me give you the last word here, and you can sort of take it as a jump ball and go where you want with it. But one of the things that is of interest to me is in my recollection, and it is imperfect. The older I get, the less perfect it becomes.

But in my recollection, when there have been government shutdowns in the past, we've shut down portions of the government, but never, to my recall, have Social Security. recipients not received a check on time, never have military members not received a paycheck on time, and there are probably other examples where we've created big carve-outs so that the large constituencies represented by seniors, represented by military and their families, by pensioners who are dependent on veterans' benefits. So those constituencies are not aroused and won't take it out on the elected officials. Am I right or wrong? You wrote about that, and I have to say, I frankly think that's a good thing.

I don't want to take people's social security check away from them. But I'll just say, you know, there's another side in this story. And President Biden, President Biden remembers this well. We actually did a lot to reduce the deficit back in 21, 212, 213. That was, we did have a shutdown, and there were big concessions made, and there was a lot of deficit reduction. It took us a decade to get back to full employment. We got back to full employment this time, you know,

about a year. And to my mind, that's a huge deal. There's quite a difference between having 3.6, 3.7% unemployment and having 6% unemployment. You guys tell me, you have to offset the amount deficit reduction, a lot of savings on interest to make up for that. Millions of people have jobs who won't otherwise. That's a big deal. Dean Baker, James Pethakoukis. Thank you, gentlemen. Appreciate that. After the break, Humana Lower, following a major health insurance warning, and the infection is spreading to rival stocks in the space. We have more. More details ahead. Welcome back to Power Lunch, everybody.

Shares of United Health accounting for nearly all the Dow's losses today. UNH falling in sympathy. If a company can have sympathy with another company, in sympathy with Humana following a warning. Let's get to Bertha Kuhum's now for the buzz on H-U-M Bertha. Yeah, Humana causing a lot of collateral damage. Effectively, Humana is now lowering its 2023 full-year outlook, and it's blaming it on the theme that we've heard from all of the Medicare insurers, high medical costs. They're warning that their fourth quarter medical loss ratio, that's the percentage of premium that is spent on medical costs will top 91%. That's

240 basis points above what analysts were looking for. And as a note, insured MLRs rarely top 89%. That's usually the highest. Now, Humana blamed it on high inpatient costs, as well as outpatient surgeries, what we heard from United Health last week when it reported fourth quarter results. But unlike UNH, Humana says this is going to be a $2 hit to full year 2023 earnings. It's now lowering its adjusted earnings outlook for the full year to $26.9. Now, on top of that, Humana also warning that it saw higher attrition and lower new member growth during the recent Medicare Open enrollment season. and it's now projecting 2024 Medicare membership growth of just 1.8%,

which is below what people are expecting for the industry average. So Contessa, you could say, if it weren't for any bad news today, Humana would have no news at all. Yeah, all right. Well, Bertha, thank you very much there. You're seeing that the stock just plummeting. Natural gas is also falling sharply once again today, down nearly 20% this week, even though temperatures are freezing across much of the country. but, well, it's period. It's cold everywhere. Pippa Stevens, our resident forecaster, as well as oil and energy expert joins us.

So I'm back with more about the weather. So it may feel like it's very cold, and it is very cold. We're over the hump. It is very cold, but we really need to look back once again to December to explain what's going on here. So we have a chart showing the heating degree days. You can see there in December, December was officially the warmest on record since records began in 1850 for North America and South America. So you can see the 10-year average, that orange line and where we were in December. So that really, really cut demand for natural gas.

And so right now, while demand is actually at a record, we're still working through that excess supply. And that's why we're not seeing a response in the prices. Okay, so we have that. And then moving over to one big mover of the day, which is plug power. So the hydrogen fuel cell maker, that stocked down 15%, 14%, after announcing a one billion, an up to one billion dollar at the market equity raise yesterday after the closing bell. This is just the latest challenge for a company that's faced a lot of headwinds. They keep pushing out their Georgia hydrogen facility. They issued that going concern warning back in November.

They have yet to make this hydrogen story a reality. Just so that you know what happens is if you come on and you do a great job of explaining how the weather affects prices, the next thing you know you're out in the middle covering her hurricane. Just saying. All righty, folks. Thanks, Pippa. Let's get to Kate Rogers now for a CNBC News update. Hi, Kate.

Hi, Tyler. The judge overseeing Donald Trump's federal election interference case rejected Trump's request to hold special counsel Jack Smith in contempt. Trump's legal team argued Smith continued to file motions in the case, even as the two sides are waiting to hear the result of Trump's presidential immunity appeal. However, the judge did agree Smith's filings were putting a burden on Trump, so she's now requiring both parties to seek her permission before filing any more motions. firefighters in Washington, D.C. say they safely evacuated everyone on a city block this morning just minutes before a building exploded from a gas leak. That included 16 children who were in a daycare next door. The blast leveled one building and damaged two others in the area. And some 90,000 NATO troops are set to participate in the military alliance's largest exercise since the Cold War. The drills will rehearse NATO's response in Europe to a potential conflict

with a, quote, near peer adversary. The alliance didn't mention Russia by name, but strategic documents call Moscow the most direct threat to NATO member security. Tyler, back over to you. All right, Kate, thank you very much. And coming off, fending off the competition, despite now having more rivals in the space,

Fandul, not losing as much market share as previously feared, those details are further ahead. We will be back in about the length of an NFL in-game time. Welcome back to Power Lunch, everybody. Is that getting a boost from Apple today and on track to erase 2024 losses so far. But given the recent market bounce, our next guest cautions of more downside risk, especially if things don't go exactly as the market is hoping. Joining us now is Carl Farmer, portfolio manager with Rockland Trust.

Carl, welcome. What is the market mostly hoping for and what are you most worried that it may not receive? Hey, good afternoon. Thanks for having me on today. You're welcome. What we're looking at here is that, you know, the big story has been around the optimism that the Fed's battle against inflation has been won. In fact, if you looked at the Fed dot plot, it indicated that there'll be three cuts later this year. And the bond market's already priced in more, five to six.

So with earning growth projections of 10% or so for this year, that might be too high. And at 20 times earnings for the market, the investors really need to see results. So, I mean, if we look at kind of dealt down and look at those earnings estimates, there still were on a shade being revised. lower and slowing inflation doesn't necessarily mean cost or falling, just not rising as fast. We even saw that with Humana mentioned earlier today with the anticipation of medical costs being a little greater. And at 20 times, the S&P really needs to win confidence in those future earnings before moving higher. So the three things that you're worried about, I guess, are that prices are high. Rates may not come down as much as they are anticipated to by the

by the market. And third, that earnings may not come in where people think they will. Correct. I mean, on the bright side, the consumer's been very resilient. This may be the most anticipated recession that did not appear. You know, kind of the old adage, if you ask three economists, you'll get five predictions. And those five predictions, I think, had a soft landing in the forecast. So from what we've seen so far, the consumer's been able to hold things up. So, you know, again, as long as they can keep delivering on earnings, may be able to justify the move we've had. Is consumer strength part of the reason why? you would pick Starbucks as an investment?

That and the fact that it really didn't participate in the rally. There were some instances that China wasn't going as well as they thought, but kind of the old saying, you know, big trouble and lit of China, this is less than 10% of their overall revenues, and they're fixing the issues. The company guidance of 5% to 7% comps and the store expansion they have in Target is achievable. It's trading it less than market multiple for better earnings growth. That's why we like Starbucks here.

Why do you like Visa? So Visa is a little different. Kind of fits in with that consumer resilience thread that in the face of inflation, they're still spending. Payment services has been as consistent in areas one could find. And the name's not cheap, but you know, you pay a premium multiple for a premium business here. Carl, it's great to talk to you. Thanks for sharing your insight with us. Hey, thanks for having me.

Bond yields continue to rise today as more data goes in the economy is holding up category. Rick Santelli is tracking the action for us in Chicago. Hello, Rick. Hi, Contessa, indeed. 8.30 Eastern this morning, watching initial jobless claims get ever so close to levels we haven't seen since the late 1960s. Now, as you look at charts of two-year, 10-year, and 30-year over two weeks, watch the left side and the right side. Because with two-year, they're about imbalance. As you move down the curve, the right side moves.

higher until you get to the longest maturity, 30-year bonds, where you're really launching on the right side of those charts versus the left side. What does that mean? I'll tell you what it means. It means long-dated interest rates continue to firm, and they're firming at a rather rapid pace. And for many of the reasons that our last guest, Dean Baker, did not agree with. But market participants see the ugliness of servicing the debt. They see the improbability to be able to continue to pay potentially trillion dollars to service debt. And it's starting to show up in every place you would expect. Five-year break-evens, they're hovering a bit below 2.30, two-month highs.

If you look at 10-year break-evens, a bit above 2.30, two-month highs. If you were to look at 30-year break-evens, pretty much same price scenario, a yield scenario. They're hovering around 234. So we see they're firming up. Now, granted, these aren't huge, aggressive levels. But it continues to push through. Remember, all we keep talking about is lower interest rates. Or maybe the Fed may lower interest rates.

But that certainly doesn't mean Mr. Market on the long end is going to go along with the program. Contessa, back to you. Rick Santelli, thank you, sir. We talked at the top of the show about layoffs in big tech. Annie Palmer of CNBC.com has news of new layoffs at Amazon. Annie joins us now. What do you have, Annie? Hey there.

Thanks for having me. Yeah, the latest is that Amazon is cutting fewer than 5% of its buy-with prime unit, which is this service that essentially brings the prime badge to sites off of Amazon. It's a program that they've been growing pretty steadily over the past year, but it's not immune to the broader cuts that are happening of Amazon. We saw layoffs in other divisions last week, and the cuts are just going to continue, it looks like. Okay, Annie Palmer, we can read more about that on CNBC.com. Appreciate that.

Coming up, Game on shares of Fandul's UK parent flutter surging ahead of a planned listing here in the States. We bring you the key details when Power Lunch returns. While shares of Fandul parent Flutter have soared today, look at that, up 15% in European trading after releasing fourth quarter results that showed U.S. gaming revenue growth up 26% year on year. Now, the results missed Wall Street expectations in large part because customers won. They won big on games with surprise endings last fall, a $343 million impact in the quarter and a drag on margins. But there was big growth for Fandall in monthly players. And Fandall is maintaining its status as the nation's leading sportsbook, 51% market share based on net revenues, grabbing 5% more market share year-on-year in eye gaming. That's online casino games.

And that puts it in second place. But really this is a battle between draft kings and Fandall. It's one of the reasons why Fandul wants to flutter, wants to list here in the U.S. And where does ESPN's betting initiative fit in these standings? They launched in mid-November, and in mid-November and December, for instance, we just got Pennsylvania's December mobile betting numbers. And it looks like ESPN bet basically doubled their market share in Pennsylvania. But it looks like they're taking that market share from draft kings. Fandall was still able to grow its market share in Pennsylvania.

And they've done that in other places as well. If I have one of these draft kings or Fandul or whatever, on my phone now, do I need another? It depends on how avid of a sports better you are. If you want to chase promotions, then you would have multiple platforms on there. But I think a lot of the loyalty is coming from ease of use, how fast you're getting your deposit, and how easy you find it to use the platform. How do ESPN is deploying some of its on-air talent to do ads for their bet platform, their betting platform. Yeah, and really, they have nothing to do with the operation of the sportsbook.

It's just the branding. It's the branding on top of it. Exactly. Penn is paying ESPN a big fee for the licensing rights to the ESPN brand. I bet they are. All righty, still ahead. Falling out of fashion. Chairs of Birkenstock sinking.

I forgot to wear money today. The warning full year revenue will remain under. under pressure as it embarks on the global expansion. We'll trade it. Birkenstock. With woolly socks. Open toes. You know, you don't want to see that.

We'll be back. Time now for three-stock lunch. We're going to look at three big movers of the day here with our trades, Brian Vendig. He's president of MJP wealth advisors. Up first is Apple getting an upgrade to buy from Bank of America calling for more than 20% upside over the next year. Your thoughts on Apple, Brian. Welcome, by the way. Thanks, Ta, Tate.

I think right now, believe it or not, we're actually going to say Apple as a hold. And when I look at this personally for myself as an investor, I recognize that Apple has a growing services business, which really helps us provide stability with its business model. But at the same point in time, we know that innovation's been an issue for hardware. And we heard from Bank of America today, which is a welcomed upgrade. But I think we need to hear a little bit more for management over the next couple of weeks on what type of innovations are coming with artificial intelligence, with, with, with, with, their phones as well as the Division Pro. So I think right now, just considering the backdrop, a hold right now might make sense, Tyler. All righty. Up next we have United Health. The shares falling along with Humana today as the company warns of cost to hit from rising number of surgeries. What do you think, Brian, does it make you feel ill? Are you feeling good about it? Well, thank you, Contessa. I think on this one, actually, I would feel more comfortable saying this one's a buy. And I'll tell you, it's because we have the demographic trends going on right now in the U.S. where we know we have an aging population,

people retiring more and more every day. There seems to still be a demand, obviously, for services and products that UNH provides to the marketplace. But at the same point in time, historically, we've had these concerns about medical costs and some concerns coming from other competitors in the space. And UNH has always been able to work through those trends. The other point I'll just make is we're moving into a period of economic uncertainty, and health care stocks really are something that help us weather through that storm, especially when considering some of the risks that are still out there for a slowing economy. And over the last 12 months, this stock has only appreciated around 7 percent. And for a blue-chip name, I think there's still some upside to go over

the balance of the year. All right, and finally, let's take a look at Birkenstock. A share sinking there as the German footwear maker disappoints investors with a profit warning in its first post-Iuble. IPO results. Berkonstock. Well, Tyler, on this one, I'm going to go with a sell personally for this stock as well. And the reason why I say that is we still are in a high interest rate environment, Tyler and Contessa. And when you consider the forward P of this stock at around 40 or so, and also the fact that it's only been public going back to October,

I think we need to hear a little bit more about the dependency of the business model and also considering that it's tied to consumer spending, We know there's data that's out there. It's showing that there are some concerns about consumer spending at these levels moving forward. So considering the macroeconomic and some of the things that are out there of concern for Birkenstock, I think we've got to be a little cautious at these valuations. I'd like to see a little more track record there as a public company. Thank you very much, Brian. Brian. We appreciate it. Brian Vendig.

Still ahead. Passive makes perfect. The management style that's gained ground for years officially becomes tops with investors. We'll discuss it and much more in closing time next. Here we go. Fewer than two minutes left in the show. Several more stories will you need to know. Let's get right to it. Passive investing is overtaken Wall Street.

According to Morningstar, total assets under management and ETFs and other passively managed funds reached a combined $13.29 trillion as of the end of December compared to the $13.23 trillion for actively managed products. So now it's not that it's just a big deal among retail. traders or whatever. In all assets, it's become the go-to. And it's not just flows. Flows into index products have been outstripping flows into managed products for a long time. But now the total amount of capital in them has exceeded it. My view is that it is hard to beat an index product as a core holding. It's okay if you want to have managed accounts also, but that the core ought to

be the index. Why not? Average beats most, most of the time. Good advice. All right, newly approved Bitcoin ETF, speaking of ETFs, pulled in a net of $871 million of inflows in just the first three days of trading. That's according to the financial times and data from coin shares. BlackRock led the way with $723 million worth of those inflows. That's a big, big market share for BlackRock. Speaking of inflows and outflows, there were big outflows, 1.8 billion of outflows at gray scale when it converted its Bitcoin. We were going to try and do another. We were going to finish solving the national debt issue.

In 10 seconds. We ran out of time. So all I have yet let to say, all I have to say is thanks for watching Power Lines. Closing bell now.