Power Lunch - New Phone Frenzy, Streaming Madness 9/22/23

Episode Date: September 22, 2023

Apple’s iPhone 15 goes on sale today at stores in the U.S. and Canada. And as usual, big crowds are forming—especially In New York, where Tim Cook showed up. We’ll get a live report.Plus, the next step in the migration to streaming: live sports. Warner Brothers Discovery’s “Max” just announced the pricing for its new tier. Will customers now have to pay to watch “March Madness”? We’ll discuss. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Hi, everybody, and welcome to Power Lunch. Alongside Kelly Evans, I'm Tyler Matheson. Coming up, the iPhone 15 goes on sale today at stores in the U.S. and around the world. And as usual, the crowd showed up, especially in New York. Even Tim Cook was there. We'll get a live report. Plus, the next step in the migration to streaming. Live sports, Warner Brothers Discovery's Max, announcing the pricing for its new tier.

Will customers now have to pay to watch March Madness, Kelly? Yes, we'll ask about. that. And so much more, Tyler, thanks. Let's get a quick check on the markets, though. Dow's coming back. It's only down 23 points after dipping back in the red last hour. The S&P is up four and the NASDAQ is up 35. All three of those, of these, though, I should say, are lower on the week. Now, to the Microsoft Activision deal, it may be about to clear its final hurdle. The UK, they've made a deal with the UK regulator. Both stocks are hired today, well, they were, before Microsoft turned lower by half a percent. Activision trading about a dollar,

below that $95 deal price. So we've really closed almost all of that with the shares up 2% today. Some interesting names on the 52-week low list today that we want to call out to you as well, like Target, Dollar General and Dollar Tree, some of the weakest retailers this year. And Walgreens Boots Alliance, which for now is still a Dow component. It's back to lows we haven't seen since 1998, 25 years ago. The last time Walgreens traded around $21 a share. and that gives it 1 25th the impact on the Dow as fellow component United Health, Tyler.

Well, Kelly, we begin with the latest on the UAW strikes. Lots of news today. Strikes expanding most of the news coming from comments made by the head of the UAW. And Phil LeBow joins us live from Michigan with the very latest. Hey, Phil. Hey, Tyler, we're outside a MOPAR parts and distribution center. Mopar is the parts wing of Stalantis, if you will. and we were here, take a look at this video, we were here at noon, when about, it seemed like about 75 workers.

There's 200 employed here overall who are UAW members. They walked off the job. They were greeted by other UAW members who were cheering, saying it's time to stand up for what we believe in. They have striking at 38 Stalantis and General Motors parts and distribution centers around the country, employing about 5,600 UAW members. Here is the president of the UAW, just minutes after everybody started picketing here at this plant, talking about why these parts centers are so critical. There's a lot of options with our stand-up strike strategy, and it's just going to depend on what these companies do.

This is our next move in the process, and I think it's a great move. This is one of the strongest aspects of our membership, is these PDCs. They generate a lot of profits, especially for Stalinas. If you take a look at chairs of GM and Stalantis, keep in mind that this strike really hurts the parts supply to dealership. What we're talking about is that dealers will not have as many parts so that if somebody goes in for a repair, they may not be able to have it made right away. Doesn't mean that they won't be able to get the repair done eventually, but it's going to take a while. In some cases, they're going to put it off until the end of the strike.

As you take a look at shares of Ford, Ford is not part of the new strikes because the UAW says it sees real progress in its contract talks with Ford. We're back live here in Centerline, Michigan, just to the north of Detroit. This is what we've seen at a number of the entrances here. Now, this is not a huge facility. This is not a part of the strike that is going to have a huge economic impact for Stalantis. Same with General Motors and its part centers. But it will be a situation where people will go to their dealer, and they may need to have a repair done, and they may have to put it off.

They will have to put it off if the dealer cannot get that part or it doesn't have that part in its inventory. So how many new locations are now subject to the strike action, and how might that expand over the weekend or the next week? Well, there's 38 new strike locations between General Motors and Stalanis. That's 38 parts and distribution centers around the country in 20 states. Add those to the three final assembly plans where the strike started last week. And so you're looking at right now a little over, what, 40, 41, places where UAW members are on strike. In terms of future strikes, that remains to be seen.

The strategy of the UAW guys is we're not going to tell you exactly where we're going to announce our next strike or when we're going to announce it. It all depends on the pace of negotiations. So you mentioned very pointedly that these were Stalantis and General Motors locations. Why not Ford? Yep. Because they believe they're making progress with Ford. And they believe that GM and Stalantas are nowhere close to where they should be. In a nutshell, that's what it comes down to.

in the opinion of the United Auto Workers. By the way, GM, Ford, and Stalantis, they've all put out statements following this announcement today from the United Auto Workers. GM and Stalances both say, look, we are negotiating. We want to get a deal done. And Stalantz, just a few minutes ago, said, we've got a real solution on the table

for a number of the issues that the UAW has been raising. So, you know, we're in that stage, guys, where the automakers feel like they're making real efforts and the UAW is saying, nope, not enough. All right, Phil. I know you'll be on it all weekend, and as long as it takes, Phil LeBoe, thank you. Yes, you bet.

Now to the iPhone 15, going on sale around the world today, and Tim Cook showed up at the Apple store in New York City as part of the festivities. Our Steve Kobach is there as well. Lines being reported in China and Dubai and in New York, Steve, so there's some enthusiasm here. Yeah, and I've been here since, believe it or not, five in the morning today, Kelly, and the line is still going. People just keep adding to the line.

It's around the corner here on 58th Street, stretching from Fifth Avenue down to Madison. And as you mentioned, Tim Cook showing up to open the doors this morning at 8 a.m. We saw him inside. He was signing autographs, believe it or not, of people's boxes of newly purchased iPhones. But look, after all the cheering and the and so forth that we're seeing and the celebration, The pressure is really on for this iPhone 15 lineup. After we've seen Apple go through three straight quarters of declining revenue, expecting a fourth quarter of declining revenue as well,

unless these phones right now in the last couple weeks of the quarter perform above expectations. But look, next quarter is the real quarter to watch. That is the important holiday quarter. Comparisons for Apple's revenue, top line growth, should get a little easier next quarter just because of all those COVID lockdowns and supply chain issues. they had in the year ago quarter. So Apple really hoping that the comparisons get better, returned to the top-line growth investors are looking for.

And the key to that, Kelly, is the pro line of phones, the more expensive phones, especially the iPhone Pro Max, which costs 100 bucks more than it did a year ago. I talked to the first person in line early this morning. He got here at 8 o'clock last night, and he said he's in line for that max because it has the best features. That's exactly what Apple wants to hear, Kelly. What are the features, I was going to ask you, you know, apart from the nice round number of 15, that's a lovely number.

My son wears it in football, so I'm fond of it. But what are the features that people are turning out and getting in line at 5 a.m. or whatever it was to get? What is so different about this phone from its predecessor? The answer in short, Tyler, is not much. So year over year, year over year, the advancements are pretty iterative. And Apple does that because people hang on to their phones for so much longer than they used to. So whereas, you know, in the early days of the iPhone, people might want to upgrade every one or two years. That's been extended to three to five years.

So if you buy, if you're going from an 11 to a 15, that feels like a significant upgrade. The cameras are so much better. The performance, the battery life, the screen technology, everything that you would care about will. be improved. If you have an iPhone 14, you're not going to feel that improved as much. I'll go back to the guy I talked to the first guy in line. He's going from an iPhone 13 to the 15. So he's a couple generations behind. For him, it's going to be a more significant upgrade. I don't think you're going to see a lot of people except the ultra Apple fans going from a 14 to a 15, Tyler. I think that's a very interesting piece of analysis here, Steve. In other words, that people are keeping

their phones longer. And so when they're ready to move from that 11 or the 12 to the 15, It really is a markedly different phone as compared with the 14, where, as you say, the changes are really iterative or incremental. I just got a new phone myself. It's bad. I held onto my old phone three and a half, almost four years. And it's marketly. It's a better phone. Wait, you literally get, did you get a 14 then, like just a couple of weeks ago?

I am not in that ecosphere. Oh, I see. So the timing of this launched. Oh, we got a Samsung guy here. Yeah. Yeah. Yes. Yes, yes.

Green, green guy. Yes. And I message. Yes, that's right. That's right. All right, Steve, thank you, man. Green bubble. All right.

Thanks, Tyler. Unless the EU gets its way. But we digress. Meanwhile, check out shares of McDonald's as that stock is hired today. The company announcing they'll raise royalty fees being charged to new franchisees. Let's bring in Kate Rogers for more on what this means for the company, Kate. Hey, Kelly, you said at McDonald's raising its royalty fee from four to five percent. for franchisees who open new locations in the U.S. and Canada beginning on January 1st.

This is the first raise of its kind in nearly 30 years. The higher fee, formerly known as a service charge, will impact those who are new franchisees, those who buy company-owned restaurants or relocated restaurants. It will not impact existing owners with their current footprints or those who buy a location from another franchisee or restaurants that are transferred between family members. U.S. President Joe Erlinger telling CNBC, quote, we're not changing services, but we are trying to change the mindset by getting people to see and understand the power of what you buy into when you buy the McDonald's brand, the McDonald's

system. The company says the fee is not kept pace with the brand value over the years, and franchisee returns are at all-time highs with average cash flows up 35% in five years. The U.S. business, of course, has remained strong and has been a top position stock pick in a potential downturn by many analysts. Same store sales were up 10.3% in the most recent quarter. Next will be how franchisees react. They run, remember, 95% of McDonald's locations in the U.S. They have butted heads with corporate over the last few years as the company has made some major changes to its franchising structure that we've been reporting on,

including putting in place a new grading system for owners and changing terms for new leases for owners. So take a look at the stock, though. It's just up about a half a percent today, guys. Back over to you. Did I understand you correctly, Kate, that the, you said something about return rate of franchises being 35 percent? Does that mean that 35% of people who take out franchises after five years yield them back to the company or sell those franchises? That's the average cash returns up 35% over the last five years at an all-time highs, is what the company is saying. So the brand power is there.

And this, to me, really speaks to what corporate believes the brand power is at this moment in time, right? Because they're raising it for new owners. So new people who want to come into this system, you're going to have. have to pay this higher rate because we haven't raised this in a long time. And also, if existing owners are buying new locations, they want to add to their portfolio, it's going to be higher. But if you just renew your current 20-year lease, you wouldn't pay a higher fee, right? I completely misunderstood what that word return meant there.

Sure, sure. Yeah, but thank you for explaining and digging me out of my ditch. Thanks, Kate. Thank you, guys. Also helps explain why McDonald's might be striking now, because that's pretty impressive. Still to come was Bolero's success a fluke. The stock was a hot name after going public via SPAC, but post-pandemic, the growth story is striking out, and Hart Greenberg says it is a no-bye zone. He joins us next to explain.

Plus the future of streaming, pay to play, or at least pay to watch the play, Max bringing a live sports tier to its platform. Is this the start of a new bundle? Is the bundle back? We'll be back right after this. Welcome back to Power Lunch. IPOs are back in the spotlight with three recent high-profile offerings, Arm, Instacart, and Clavio.

And they've all fallen back to their offer price nearly. They're well below where they actually opened on IPO trading day. And with that tepid and disappointing performance, this does mark somewhat of a resurgence for traditional IPOs after SPACs had their brief moment in the sun. But looking back, many of those that went public via SPAC aren't around anymore. Those that survived are often trading way below their merger price. And Herb Greenberg is taking a close look at one of them. A survivor, a thriver even, Bolero. And he's throwing up the red flag alert and calling it a gutter ball.

Herb is senior editor with Empire Financial Research and Herb on the street substack. And we had talked about this when the stock was doing well earlier this year, Herb. So what's changed? What's happened? Well, think about this, Kelly. you have a company that was the perfect, the perfect company, the perfect stock with a great story to tell at the right time. That was during the pandemic, when we were at the peak of SPAC mania, everything was going its way. Everyone wanted to get out of the house. And so what did they do?

They went to anything leisure. And this was a company that is, this is a company that is rolling up mom and pop and bigger bowling alleys. And people went bowling. And business was so strong, this company could raise prices over and over and over again. It was so busy at times they instituted what they called peak pricing. That's, you know, surge pricing. And it was great. And their sales growth and their comp stores, you know, their same store sales growth was literally, I mean, I say through the roof, it was so strong.

But you know what happens? When anything is that strong, there's the other side. And now people have decided they want to do something else. And, you know, there's always been this talk about the revival of bowling for years and years and years. There are waves of that. This was the wave. People are doing other things. Guess what?

They can't raise prices the way they used to. In fact, they have to discount prices to get people to stay longer. They need people to play what they call a third game. So they'll stay and spend more money at the arcade and buy more food. Well, people, you know, and what happened is they took away some of those discounts because maybe they went too far. And now they realize, oh, my gosh, we have to put some of the discounts back, get people back in. So I think it's a challenge concept at this point. You know, the company is going to continue to roll up other bowling alleys.

That's their growth story. But their debt is rising. Their margins are falling. Something's got to give. And Tyler Herb tied this back to a company that we had on, I think earlier this very week. Brunswick, the voting company. The voting company. We talked to them about autonomous boats.

They had tried bowling alleys back during one of the last excitement cycle. That wasn't just them. That wasn't just them trying it. That was the original Brunswick. Brunswick bowling. That's what Brunswick came from. And so, you know, Brunswick was the pin setters in the alleys, right?

As I recall, yeah. In the bubble of 1997, AMF Bowling Centers went public. That was the bubble of 1997. It ended up filing for bankruptcy because there is a recession. A recession would not be good for this business if indeed there ever is a recession. Look, bottom line on all of this is very simple. And it's why I do the no buy zone, the red flag alerts on Empire and on substack is because this is my line and it's constant with thousands and

with thousands of public companies out there to buy. You could come back and say, why this one? And so you have to start thinking about that because, you know, I always say stock avoidance is just as important as stock picking. So, you know, that's where this one fits. Why are we talking about Borlero today? Is there new? Because Herb is. Or because Herb is talking about it. And Herb is an influencer. Is that right?

Not quite. I am I an influencer? From your lips to whoever's, listen, I'm talking about it because it hit my radar. Yeah. I started seeing people talk about it. And then I dove in. And until I actually dove in and went back through the transcripts and what the company had said over the quarters, that's when I said, oh, my gosh, there's some big changes here.

Yeah. And that's when I looked at it and I said, Tyler, it's a good story. To their credit, I think they did two things really well. One is they timed the SPAC market pretty damn well, it seems to me. Number one. Number two, they improved the experience of going bowling and made it, not that they were alone in doing this, and they made it fun again. By the way, Tyler, I heard from somebody on Twitter in Kansas who said they took their family of 40. go bowling. I've been bowling in a while, so I don't know this. It costs them $200. And so

bowling has also become expensive. And that's, you know, another part of the story as we start talking about inflation and other things. That has to have included food and drink and beverage. I actually think he said that was pre. I'd have to go back to the Twitter feed or the extra feed or whatever you want to call it to see. And I've also heard the sticker shock. Yeah. Big boy, that's, that is that takes my breath away. That that is a 710 sports. lit that I ain't converting. Herb Gleinberg, thanks, man. Have a good weekend.

Sure. Further ahead, we've got working lunch, except skipping the food and adding a workout. We will hear from the CEO of Jim Pass, a company trying to help companies bring gym benefits to employees. Power Lunch will be right back. Welcome back to Power Lunch. Pershing Squares, Bill Ackman, tweeting a long analysis on bonds. And the bottom line is he's still short. Let's get to Rick Santelli on the floor of the CBO amongst traders, whom,

might agree, Rick. Yeah, I'll tell you what, there's many more traders coming to his line of thinking, and one of the threads there is debt and deficits for sure. Let's start at the beginning, shall we? Look at Fed Fund Fut Futures for December of next year. Why? Let's see how all of it's moving through the system. It's ending up 15 basis points, less easing in for next year, and it made new contract close yesterday. That means it is more of a tight policy terminal rate firmer than many thought KBW Banking Index. Look what happened Wednesday. That's a two-week chart. We seek tightening credit continues to take its toll. And look at one week of twos and tens. Maybe they've

moderated on the day. That makes sense. But on the week, there's still higher yields. And this week, we had cycle-high yield closes across the curve. And finally, the dollar index is a huge beneficiary. Near a six-and-a-half-month high close, Bank of Japan doesn't do anything. and they're still calm about it. Let's go find a trader who's not so calm. Paul? Hey, Rick. Big week, big week, okay?

Fed doesn't do anything. Bank of Japan doesn't do anything. A Bank of England doesn't do anything, but some big moves. What are your thoughts? Well, while they didn't do anything, there was some commentary there that I think spooked the markets a little bit. With the terminal rate,

people are starting to think that might be a little higher, and that affects the valuations down here. Oh, yeah, discounting rates with higher yields in the future is definitely going to be an exercise that isn't fun for many investors. What do you think about the notion of where rates are, where they can go? How would you summarize how that is going to play out in the equity space? I think it's more about where they're not going to go, Rick. I think the market stomached pretty well that we're not going to be lowering them as much next year. I don't think that was much of a surprise.

and the fact that they're not going to get lower, fast, beyond that is what's being noted right now with the recent sell-off in equities. You know, one of the mantras we hear on every channel is ultimately higher for longer. I know you and I were talking off-camera. We don't necessarily agree with that. We think it's more like what's kind of a stay-here-for-longer mentality? Yeah, and if that's true, I think we're going to, equities are going to have a little bit of a headwind, we saw today. It's important to keep in mind we're still much closer to the highs than the lows this year. And what we saw was ticking off the highs more than a panic to the downside.

Kind of scooping the foam off the top of the glass. But at this point, if you had to make a call whether you think the equity markets are going to stay in the green through some of this Fed-related interest rate-related volatility, do you think that's likely? Well, there's still a lot of foam left there, Rick. So I think for now it's got a it's pretty safely up well above these. Paul, thank you. It's been a wild week at the CBOE. And Tyler, back to you.

All right, Rick, thank you very much. Have a great weekend, sir. Let's turn now to oil. J.P. Morgan, one-upping recent calls for $100 a barrel, saying yes, yes, that level is likely, but a spike to as high as 150 is possible. Pippa, say it ain't so. So it's not their base case,

but they're saying that 150 is possible. And they do think that we're going to see higher for longer prices. And so basically, this all comes down. It's the theme of the week, isn't it? Higher for longer. Everyone's getting on the higher for longer bandwagon. But this law comes down to what they say is underinvestment in the sector. And so they see $1 trillion worth of underinvestment through to 2030,

which ultimately pushes up the back end of the curve. So the longer term prices north of 80, they see it stabilizing around $100 per barrel. And of course, 100 is not what it used to be. And so while that might have once led to demand destruction, we're seeing. That isn't what it used to be. I mean, coffee's not, what, $8? So, you know, $100 oil is not going to have the same impact it used to have.

And essentially, they're saying that $80 is kind of the floor for prices, because with companies, they now have CAPEX, dividends, buybacks, debt, and then also in some regions like Europe, their windfall profit tax. And so they need that $80 level in order to incentivize any new production. So higher for longer, theme of the week. And spike year, I think, too, is their warning that, you know, because if you don't have the supply, when you all of a sudden might need it, prices could really jump.

That's how you get to $150, too. Thanks, Bethleh. Thank you. Let's get to Bertha Coombs now for the CNBC News Update. Bertha. Hi, Kelly. California insurance companies will be allowed to consider climate change when setting prices. Regulators announced the updated policy as floods and wildfires have swept across the U.S.

The move aims to prevent insurers from leaving the state over fears of losses from natural disasters. But the rule change could skyrocket policy. prices. The Department of Insurance said eight companies in the state are already requesting at least a 20% increase. Spain's women's soccer team will now be known simply as Spain's national soccer team. Same title used for the men's team. The move towards greater gender equality follows an international scandal when the Federation's president allegedly kissed a player without her consent. An ad-free viewing will be a thing of the past on Amazon streaming survey. unless you pay a little extra.

The tech giant announced today it will join its streaming rivals next year by offering customers different tiers of viewing. The ad-free prime video option will cost an extra $2.99 each a month. Oh, well, Kelly, I guess that's the way of the world. You know what I'm liking these days streaming I've caught up on? Is Pokerface on Peacock? Not to just promote Peacock, but it's a great show. I will have to check it out, and I will have to check it out.

not instead rant about how the new bundle is like the old bundle because now it has ads and everything costs more. And I won't be the old man yelling at the sky or whatever. Bertha, thank you very much. And everyone should check that out, Bertha Coombs. Ahead on Power Lunch, sports to the max, Warner Brothers Discovery, adding a tier to its streaming app for another $9.99 a month if you want to watch MLB, NHL, NBA, and NCAA March Madness. We will discuss that next. Welcome back to Power Lunch. We've had a very vigorous conversation here about streaming. And we're going to talk about the sports streaming surge. It's showing no signs of stopping.

Amazon and Apple are already major players in the space. You watch Thursday night football last night. You're probably watching it on Amazon. And just this week, Warner Brothers Discovery said live sporting events. They're going to be added to the max streaming service starting next month. It's going to include access to Major League Baseball playoff games and regular season NBA. and NHL games. Now that's going to be free for Max subscribers for now. But come March Madness and playoff time for the NBA and NHL, access to the games will cost an additional $10 a month for the Max streaming subscribers. So does this model have any chance of working? Let's ask Joe Flint, media reporter for the Wall Street Journal. I'm assuming here, Joe, that what Max is doing

is taking what Warner Brothers Discovery already owns in terms of rights to show baseball playoffs, NBA games and playoffs, and NCAA games and playoffs, and taking it from TNT or whatever other channels they have where they air those things, and moving it over to Max. Am I understanding that correctly? and I get it for free now, but eventually they're going to charge me $10 a month. You're close, and thanks for having me on, Tyler. You're welcome. It will remain, the sports will remain on TBS and TNT, but they will be also available on Max,

and you might say, well, what's the logic in that? And here's the logic. For me, anyway, I'm still a cable subscriber. I have the bundle, and I also have Max. certainly don't want to pay twice to get sports. I get these sports on TNT. I don't want to pay for them on Max. No.

But if I've cut the cord and I'm one of those crazy cord cutters, now I can subscribe to Max for, say, $16. And then, yes, to your point come March, for another $10, I can get all those sports I used to get on TNT and TBS. So they're trying to thread a very fine needle here of protecting the old business model. well enhancing the new one. How lucrative, Joe, real quickly, is this new business model? Because I can't imagine, let's say someone like me, okay, I'll do $10 for three months,

then I'm canceling it again, right? Like, what's the difference in the risk with this strategy? Because I can't imagine it's as profitable as the old way. Well, that's the challenge because, right, streaming is grown in popularity for its convenience and consumers are embracing it, but the streets of streaming are not paid with gold. So the challenge here is you want the sports because you know people love sports and they'll subscribe to your streaming service if it has sports. But the economics of sports on TV is based on the old business model of subscriber fees and a lot of people paying for something that only a portion of that audience watches. So yeah, at some point all of this is sort of, I don't know, explosion is probably too dramatic.

But at some point, the rubber has to hit the road here in terms of streaming services and justifying the economic bets made in sports, whether it's through them paying more or, God forbid, sports rights coming down in price. And that ain't happening. I can't imagine that the sports rights for the NBA and the NFL and those are going to come down. But who knows? I mean, sports can go through cycles just like the rest of the economy. it seems to me that the analog here is going to a restaurant and buying a la carte. And that's what you're doing when you're picking the streaming services, as opposed to buying the sort of prefix menu that has all this stuff on it.

Some of which you may not want. I don't want the dessert, you know, but I get the dessert anyways and I eat it, you know? It's true. I mean, that's always been the argument about the big bundle. I don't watch ESPN. Why should I have to pay for it? And I certainly understand that. I will say, and I'm not preaching the wonders of the bundle here,

but the theory behind it is that all those items together are able to keep the price lower for everyone. So when ESPN goes direct to consumer with the streaming service, it's going to cost a lot more than what the typical cable subscriber, Right. Right. You're going to be your homes paying for it. And that's what I mean, where the challenge will be. Are they going to get enough subscribers paying what might be a 1999, a month fee to have ESPN to cover those sports costs? I mean, that's the big gamble all these companies are going to be taking.

Yeah. But if I'm a current cable subscriber, which I am, the thing I care about is that Max is not going to take away Shaquille, O'Neal and Charles Barker, and Ernie Johnson and Kenny the Jet. That's really all I care about. Yeah, exactly. And the good thing is, if you're a Mac subscriber, they'll be there. And if you still have cable, you don't have to pay this extra money for it. And if you don't, of course, you do pay the extra money.

You don't want to make it better? I just had this idea. They should take, if they do this, they should take the guy from curb your enthusiasm. Larry, what was it? Larry David. They should put him on with Shaq and those guys. Can you imagine? That would be freaking great. Joe Flynn.

They're all part of the same family. They're all part of the same family. So let's monetize. That's just sort of something about it. Monetize. So let's bring in Larry David. That's right. That's what we're doing.

I'm telling you, Zazloff, listen up. It's a good idea. He's watching. He's watching. Joe Flynn. Yeah, you bet he's watching. Bet. Thanks. Joe. Thank you.

Coming up, health as well. We will hear from the CEO of a fitness app, helping employers connect workers with thousands of gyms and trainers across the country. And as we had to break, CNBC is celebrating Hispanic heritage, sharing stories of influential business leaders. Here is Henry Fernandez. He's the CEO of MSCI. So I first came to the United States in the mid-70s. I felt very strongly that to succeed in this country, I needed to think like I belong in the United States. the country, that everyone else, one way or another, was an immigrant or a descendant of an immigrant, and I was not different than that. You're part of this fabric of society and success.

That attitude, that mindset is what helped me succeed despite any odds in any part of the career that I've had. Welcome back. We've seen dramatic shifts in fitness and wellness in the past couple of years. change post-pandemic, Peloton, for instance, having its share of issues, even traditional gyms like Planet Fitness and Lifetime Group have been struggling. Today, John Ford brings us up close with the CEO of one startup connecting corporate benefits. This is the gravy, the gravy, the gravy to health resources. Yeah, exactly, Kelly. Cesar Calvalio is co-founder and CEO of GymPass, a startup that helps companies offer fitness memberships, wellness apps, and nutrition resources as a benefit. He started the company in his native Brazil 11 years ago.

after realizing how unhealthy his lifestyle had gotten working as a McKinsey consultant. In August, the company announced an $85 million series F at a $2.4 billion valuation, holding that valuation from its last round in 2021. Now, as you might imagine, the pandemic posed a massive challenge for a startup pitching corporate fitness memberships. Caesar saw the way forward during a conversation with a prospective corporate client, who he had assumed was going to back out of the gym pass deal with the gym shut down. they were about to launch. And with all the gyms and studios closed,

one would say, oh, this opportunity is lost. They're not going to invest in it. But I still remember today that that specific conversation saying, look, well-being for me is physical activity, meditation,

nutrition, and sleep. I need one key offering on each of these verticals and we're launching next month. And I said, let's do it. Since then, gym pass has been offering a combination of in-person gym membership packages and personal training and wellness apps and helping companies use data to understand what employees need to stay healthy.

So what we are doing recently is being very close to every corporate client to track utilization and to track engagement. Corporate wellness programs that work are those that start with high engagement, but they see the engagement growing over time and not fading away. We're tracking that with every single corporate client because that engagement is what drives retention, is what drives lower burnout, is what drives fewer sick leaves, and is what drives lower health care costs for those companies. The new funding is going to go toward expanding in the 11 countries where Jim Pass already operates and expanding further into nutrition, sleep, and mental health. Is this a deal that my employer does with Jim Pass? Exactly. And then what do I get as the benefit?

You get, depending on the level that your company makes available to you, you can kind of have your strip mall fitness type experiences that are available, you know. I can go to a plan of fitness or any participating. Yeah, if you're kind of going for the investment banker level gym experience, a luxury gym experience in the city, there's a level of packets that includes that higher end. It might also include some personal training, some nutrition, you know, options that you have to mix in there. So, yeah, no, please. Yeah, please. I was just going to say, I think that if this were, you know, a year or two or 10 ago, this would be getting a lot of traction, I feel bad because I think the weight loss drugs

are going to threaten the inroads that he would otherwise make with a lot of corporate benefits, which are now probably hearing much more from members that they want that version of weight loss than this one. Well, there's weight loss, and then there's nutrition. We're seeing more and more people who are going on these drugs, losing more weight than they intended, especially with your muscle, tone can be affected. And then your mental health is affected on either side if you're not perceived as being as fit and healthy as you want to be. So they're trying to attack this from multiple angles. And then you've got more of these health and fitness options adding in some of those

drugs as they become, right, comparable under insurance. All right. John, thanks. Have a great weekend. You too. All righty. Shares of the Chinese e-commerce giant Alibaba hired today on reports Beijing is considering easing rules on ownership limits for certain stocks. We will trade Baba and other movers of the day in a fresh three-stock lunch next. Welcome back, everybody. Time for today's three-stock lunch here with our trades. Malcolm Etheridge, CIC wealth executive vice president. Also a CNBC contributor. Let's start, sir, with Pfizer.

The stock slipping a bit today, news regarding Pfizer's $43 billion bid for C-Gen, a see-gen drug to treat bladder cancer succeeding in a study. So Malcolm, how do you feel about Pfizer? Yeah, Tyler, I'm not the biggest fan of Pfizer here. You know, the stock's down more than 35% this year primarily due to waning interest in COVID-19 vaccines and boosters, right? And that trend is extremely unlikely to reverse at this point, which means that Pfizer's got to find new ways to, new drugs to add to its portfolio to try and stem some of that declining revenue. But when you couple of the declining interest in the suite of COVID-19 drugs that include Paxlovid with the fact that they've got several important patents that are going to roll off in the next couple years, right?

You think about like Zell Jans, for example, which is a marquee for them. It's something like $5 billion or more of revenue per year on its own out of the $67 to $70 billion they've guided for for the year. They've really got to find an aggressive new portfolio to take the place of a lot of the drugs that they have that are going to be rolling off here. And I just don't think they're going to be able to do it fast enough. All right, leaving Pfizer aside. Then what about Baba as Tyler was talking about Alibaba, the stock rising on those reports about China easing ownership limits. Would that make you a buyer here? Yeah, I'm actually not sold, right? How often do we see the Chinese government trying to play nice and then, you know, not very far after that the tone changes a little bit,

depending on who you hear from, right? So the company's been facing several regulatory challenges that are unlikely to clear, in my opinion, from the CCP, who has hit them in other tech behemists in China with billion-dollar antitrust and anti-monopoly suits that even if they come out victorious on all fronts, which is unlikely, but it's a big distraction operationally. So if you just think about that plus the fact that the CEO, new CEO of the cloud division, which was the crown jewel of the six newly formed subsidiaries, has just recently resigned, it's unlikely that they're going to be able to spin that out and IPO it, which obviously was a plan to try and return some capital to early shareholders, and maybe the grocery division would spin out and follow it behind it. So I don't see that when it's a plan that's going to actually be able to happen, even if the CCP is able to play nice for a little while and allow them to execute that master plan.

So I don't see Alibaba's investable right here. All right, let's talk about a company that in a way kind of almost a little bit feels like Baba, and that would be eBay. an eBay-backed European classified company, Adventa, Adventa, jumped the most it has in three years after saying it received a private equity takeover proposal that would rank as one of the year's biggest buyouts. Malcolm, what is your trade now on eBay, sir? Yeah, so I actually could be convinced to be a fan of eBay,

primarily because they're a pretty good steward of capital, right? They've shown their willingness to take that excess free cash that they have something like 24% excess free cash last quarter reported and actually return it to shareholders, right, in the form of buybacks and also about a two and a half percent yield on that dividend makes it pretty attractive when you just consider that it's the only one of the more niche online retailers that actually is in positive territory for the year. I think if you compare it to somebody like an Etsy, for example, who's down 40-ish percent maybe for the year, it's the only one that's actually performing positively in that, you know, online marketplace business.

And I think a lot of it has to do with the fact that eBay is really just the only grown up in that space. It's the one that's a little more seasoned when it comes to operating. And I think if I'm going to choose one, especially as they make this pivot into online ad sales, eBay would definitely be the one I think is the most attractive of all of them. Interesting, clear argument there, Malcolm. Thank you very much. Have a great weekend, Malcolm Etheridge. We appreciate it. And if you cashed in by reselling your Taylor Swift tickets this summer, the IRS might have something to say about it. We'll discuss that and much more after this. All right, we've only got about two and a half minutes left in the program.

A bunch more stories we want to tell you about more and more people aren't paying off their credit cards. Goldman Sachs saying credit card companies are rising or delinquents are rising at the fastest pace since the financial crisis. Goldman says losses are going to keep increasing until late next year or maybe even 2025. And this is when the economy is pretty good shape, not anywhere near a recession just yet. Kelly, right now, losses on credit cards, 3.63%, up 1.5 percentage points from the bottom in the pandemic, season rising another 1.3 percentage points to 4.93. We've got a trillion dollars carried on our credit cards. If we pay the minimum every month, that's a lot.

That's a long time to pay down a trillion dollars. A lot of people like to dismiss these concerns about credit by saying, well, debt to income is still healthy by historical levels, but the delinquencies tell you something different is going on. It's area to watch. All right. Moving on. According to Morning Star, more ESG funds have closed in the U.S. this year than in the previous three years combined. Investors also pulled more money from ESG funds in the first half of this year than they put into them. This is clearly a response, I think, to the difficulty of threading the needle.

ESG, number one, number two, some of the political controversies that have surrounded the idea of ethical or ESG investments. Indeed. Indeed. Can we skip ahead to Taylor Swift? Yeah, let's go to Taylor. All right, let's do it. If you cashed in this summer by reselling tickets to Taylor Swift's Ares Tour, brace yourself to pay taxes. A new law requires ticketing platforms like Ticketmaster and StubHub to give the IRS information on users who sold more than $600 worth of tickets this year. The average price sold in the U.S. on Stubhub, Tyler, are you ready for this? What? $1,0,095.

For a ticket to see Taylor. On average, with the best seats going for thousands. This $600 thing, you know, more and more people are realizing the different things that can get ensnared. So the idea is you're going to end up having to pay income tax on the money you collected by selling your Taylor's with tickets. I guess, but is that only if you sold it at a gain? Yeah, at a gain. What's the basis? What's the proof of how much I paid?

Yeah. Well? And watch the concession workers. We didn't have time for that one, but Wrigley Field concession workers can be going on strike as our summer and year of strikes. Right in time for the playoffs. Thanks for watching, Power Lunch, everybody. Closing Bells are right now.