Power Lunch - Persistent Prices, and The AI Race 2/14/23

Episode Date: February 14, 2023

Stocks are falling today on signs inflation might not be slowing as fast as everyone hopes. We’ll dig into what stubbornly-high prices mean for the Fed and markets. Plus, we’re continuing our coverage of all things AI. We’ll speak with C3.ai CEO Tom Siebel about where the industry is headed, especially with Google & Microsoft joining the game. 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, stocks are falling today on signs that inflation maybe is not slowing as fast as everyone hopes. The CPI showing prices rose 6.4% from last year. We'll dig into what stubbornly high inflation means for the Fed and for the market. Plus, we're continuing to cover all things AI. Today, in fact, we talked to the head of C3 AI, the company with AI as its ticker. Tom Siebel was ahead of the game, but with Google and Microsoft and all of their data getting into the game, will they crush the little guys? First, let's check on markets. Stocks are sliding, but off the lows after that CPI report, Dow had been down more than 400 points. It's down 130 while the NASDAQ has turned positive.

All right, let's check in now with Christina Partsenevelas, who joins us in studio for a look at what's moving. Hi, Christina. Oh, hi. Well, it seems like you said Kelly's stocks are wavering today after that CPI report, but the NASDAQ, I want to focus on that because it's still up fractionally. If it stays positive, that will be two straight days of gains and tracking, actually, for its best February since 2019 so far. So let's talk about the movers. Tesla, Cadence design, Nvidia, all up more than about 4%. You can see cadence up 6.6.

Reason for that, it's moving on a positive earnings report that came out last night. Invidia is moving on Bank of America's price target increase. They believe the chip name is well positioned to lead the AI arms race. We are talking about that. That's definitely a theme this month. On the S&P 500 auto parts supplier, Aptiv, which the ticker is APTV. You can see right here up 8% after a Reuter story

said the firm expects revenue and operating income to surge by 2025 driven by strong demand for electric vehicles. Rivian, Tesla, also moving in sympathy on that bullish call from the company. Boeing, top Dow leader right now. Earnings were okay, meh, but they did get a massive order from Air India. Nearly 500 Boeing planes. You can see the share price up almost two. Lastly, software firm Palantir continues to surge after posting a surprise profit yesterday after the bell in the fourth quarter.

And you can see shares are up whopping 15.5%. Kelly, Tyler, back to you. Christina, thank you very much. We start with that key CPI data and the somewhat bad news for investors, and that is that things on the inflation front are still a little bit hotter than the Fed would like to see. Inflation rose 0.5% in January from December. That was a bit more than expected and up 6.4% from a year ago. Here to discuss these numbers and more, including Lail Bernard, leaving the Fed for the White House, is Steve Leasman. Steve, take us through these CPI numbers.

They're a little bit perplexing, I guess. Yeah, the perplexing, the confusion began on Friday because the Bureau of Labor Statistics did its annual revision. that took a negative 01 we thought we had in December, made it into a positive 01. It also revised earlier, up to 2000, back to 2018. Bottom line is inflation. We did not get the disinflation we thought, as much as inflation we thought we had in the last half or last part of last year. Come to today and the numbers come in a little bit hotter than expected. They're still going down.

You still have this disinflation rate process. But what we call the second derivative, the change in the change is not as fast as we had hope for and had expected. I think the story here is, Tyler, there is not going to be a straight, smooth road to bringing down inflation. There's going to be days like this. It's going to happen. We still think that inflation is coming down. It's the general forecast of an economist out there on the street. It's just going to be kind of more like this. Where were the hot spots in this somewhat hotter than expected report? Was it rents and housing? Was it eggs again? What was it? Eggs were up 8.5% 70%

year over year for your eggs Tyler. That's a big story. That's what I'm giving my wife for Valentine's Day. Nice part of eggs. I think the way to start with in the what's hotter than expected question is the energy gave it and the energy taketh back away, which is a big part of the disenfranchase we've

had has been energy prices. They went up 2%. They think they may be down again in February. That's a part of it. Food was up 0.5%. You got a little bit of bump from some of the insurance numbers that were in there. The used cars came down, new cars were up. So a little bit of back and forth in there.

I think the thing that we're looking at is goods prices are coming down. The key is the service sector, X housing, X energy. That's down, but not as much to give Fed Chair Powell comfort that the labor market is not pushing up inflation. Well, and then we have, so as we're sifting through all of this data, one of the key Fed officials is leaving, Lail Braynard. And is there some significance there in terms of someone who has a lot of markets respect? Also, maybe perceived as a little bit doveish. I don't know that her replacement would not be, but...

Well, I mean, the thinking was that Brannard was a good counterpart to Powell, who's not an economist. Brannard is an economist. She also has a lot of experience working internationally as well. So she brought that expertise to the table here. I think the key is... I think she's going to be missed in and of herself, but the key is that's how she's replaced. just replaced with a macroeconomist at that top level. You know, there's this thing that they kind of call the Troika.

New York Fed, President, Chairman, and Vice Chair of the Federal Reserve Board. Those three are seen as the key policy makers. Brainer has been in there. She's been a little bit more doveish, not necessarily on policy. She has voted with the chair and supported the chair and all of these rate hikes we've had from March on forward. But her explanation for what will happen with inflation going forward, has been more dovis. She sees a way out of this without big pain to the labor market, rather than Powell, who seems to think you've got to have some increase in unemployment in order

to bring inflation down. You mentioned the head of the New York Fed. That's John Williams. I gather you have some news for or about him. Yeah, pretty much in line with what you would think. John Williams, New York Fed president saying at this hour that our work, his work, not my work, our work is not yet done. William says, he says inflation remains elevated. And the labor market remains extremely tight. There's that whole labor market explanation we've been talking about. And he sees three things that could hurt the Fed's effort to bring down inflation. European economic resilience, China reopening, and stalled supply chain improvement are threats, he says, to the decline in inflation that he wants to see. He's yet to see the inflation of

core services X housing improve. And he says demand remains well in excess of supply. Some good news, commodity and good prices declines are coming down, but not enough, he says, for the head to hit. It's 2% gold, Heather. Does this keep with the kind of theme of the day, hawkish talk a little bit? What do you think? Yeah, I think we're three for three. Barkin, oh, four for four. Barkin, Harker, Logan, and now Williams, four.

And who might replace... And who read all four speeches, okay? Yeah. Which person read all four speeches? You know why I read them? So you didn't have to. So we didn't have to. I'm loving that.

Quick final coded to this in terms of shortlist to replace Brainerd, anything you're hearing. I have not heard anything. It's interesting to think if the White House would want somebody who was in the White House for that job. Powell doesn't quite get a say in it. He kind of gets a little veto maybe, which is, don't give me that person to work with, but it wouldn't be his pick.

They would have a say in it. A lot of people say this puts Brainer in position to succeed Janet Yellen, should Janet Yellen depart or not take the role in a second Biden administration, should there be such. I think there is thinking that Janet Yellen will step down perhaps sometime during the year.

There's that thinking out there. and that Brannard would be a person who would be high on the list or a person of interest. I just can't imagine that someone coming from a Biden White House onto the Fed wouldn't be dovish. I mean, I'm not struck that the, I mean, I don't, you know what I'm saying? In terms of market implications? Kelly, it's like the shells are coming. Who's a dove? Right.

What does that even mean? At 6% inflation, that's really the key. The difference between the doves and the harks is like this. I'm a dove. But if they start getting really worried about a slowdown coming, we're in this moment where it still doesn't. You're right. We will have that discussion about doves and hawks like March and May. Right now, it's full hawk ahead.

Steve, thank you. We appreciate it. Let's turn to the market now, mostly lower as Wall Street tries to digest this report showing inflation is still hot and persistent. Our next guest says the read-through is that the Fed will stay higher for longer. Let's bring in Sarat Sethi, managing partner and portfolio manager at DCLA. He's also a CNBC contributor. Surat, welcome. One question for you.

This is like the third time I've read a similar intro today. about people expecting a hire for longer Fed. Does that give you any pause here that maybe things are going to play out differently than what the current consensus, it clearly is? You know, I think when you look at the data coming in, you look at where the economy is. And, yes, we have leading indicators saying things are softer.

But you also have the positives that, you know, the economy is still strong. And the Fed sees that they're going to keep rates higher. They're going to keep them higher for longer. And that really, if you're doing what we do, which is investing capital, you have to kind of marry that with what earnings are going to be as well. So I think that calculus is changing in the sense that, look, we're not going to get this drop off in interest rates that people are expecting at the beginning of the year. So valuations have to then actually adjust to that. And I think that's where investors really have to focus.

People, Swat, always like to know where kind of specifically you're looking. As Stephanie Link said yesterday, it's a year for stock picking, she thinks. I mean, with all of these cross currents, market timing is going to be really difficult. So how do you get to a Delta to American Express? And for what time horizon do you feel comfortable with exposure to those names? So I'm looking at valuation to, and I think that's going to be really important. You want companies that are reasonably valued, that both of these, American Express and Delta trade below what the market is trading at. And you look at earnings of expectations of what is management saying.

So Amex, even on their last call, confirmed what they're going to be growing double digits. They are in the sweet spot of the premium card business. Gen Y and Z users are using their cards more and more. And as we've seen, people have moved from goods to services, right? So they're traveling, they're spending more in entertainment. And the interesting part on both, it actually goes to Amex and Delta. If you look at it, the leisure traveler has really picked up. They didn't really have that pre-COVID.

That was really being carried by the business traveler. So if that happens in addition to the leisure traveler, travel. Prices are still going up. Amex makes money as prices are up. Don't forget, they make their percentage based on charges. Trades at 16 times earning. So if you look at kind of where they're going, it really isn't the speed spot for the next two to three years. Why shouldn't Surat people just go own a 5% six-month T-bill instead? Because I think if you look out two to three years, you're going to get a better return. So take a stock like Amex trading it 16 times. If it grows 10 to 12% a year with a 2% dividend yield, you're going to get a double-digit return as opposed

to 5%, which you're obviously right, you can get for six months, but what happens? Let's look at where the yield curve is. Let's look at two years out. Maybe rates go back to 2 to 3%. At that point, what do you do with your capital? Because the stocks will have already reflected at that point when rates go down, the valuations go up. Delta is seven times earnings and free cash flow positive, the best run airline out there, you know, they're trading at seven times earnings. And again, If they grow their earnings 10%, you're going to get, even without any multiple expansion, a price uptick. So that's kind of where we're looking at.

Now, there's no question that, based on any individual allocation, should you have bonds, it's actually a better time to buy bonds that we had for many years for the last probably five years. So there is another alternative, but if you're going to be exposed to equities and that's part of your allocation and that's part of a risk profile, you really want to pick stocks that are cheaper than the market, that have better outlooks than the market. and that actually can actually do better than what we think by just holding cash. All right, Sarat, thank you very much. Good to have you with us, as always, Sirat Sethi.

Thank you, Todd. All right, coming up, what is the real state of the retail trader? How is trading activity holding up? We'll ask the founder of Interactive Brokers as that company's stock. It's a new all-time high today. And we'll also talk to the head of C3AI, Tom Siebel. His company has been working on AI for quite a while, Microsoft and Google, somewhat later to the game, but are they big enough to catch up?

That's what they're doing, playing catch up. That's all coming up on Power Lunch. Welcome back to Power Lunch, everybody. While the stock market is having a positive start to the year so far, many retail investors do seem to be looking for safer alternatives following big losses last year. Here was some more on the shift and the state of the retail investor. Is Thomas Petterfee.

He's founder and chairman of Interactive Brokers, joins us from the Bank of America Financial Services Conference way across the river over there in New York City. Mr. Petterfrey, welcome. Good to have you with us. In the past week, we've had two guests on, one who said that the retail or amateur investor is sort of pulling back, not making as many trades, making maybe smaller trades.

Another saying, no, not so. It's actually higher. What are you seeing in your business? So our customer type is less of the regular retail and more of a professional trader. But what they are doing is they have lightened up on their stock portfolios and have transferred their risk-taking to options. So they often use vertical spreads to take a bullish position in the market and they get a better risk-return ratio with vertical spreads than they would do. with pure stock holding.

So here you're describing, you're describing, forgive me, I just want to make sure I'm understanding, you're describing the behavior of your clientele which leans towards professional investors. Absolutely. And secondly, given that we pay 4.08%

on idle cash in our brokerage accounts, many customers find that a better alternative. to holding stocks, especially when, you know, the market is at the point where many people think that, well, it's amazing how high it has come, but it may not go much higher from here on. So that is certainly a better alternative. So how would you characterize that behavior of the professional investor moving away from holding and or trading stocks to playing options? is are they speculating on price movements or are they really investing? What are they doing? Well, you are basically speculating.

Investing is speculating on price movements. That's what I thought. It says, oh, the only question is how long of a time horizon you're looking at, right? So, you know, with options, you can go out a year or two. and so you can do the same thing with options as you do with stocks. So it's basically not very different. And as I said, the risk return is much better because with vertical spreads, you can drastically increase the amount of capital you have to put at risk

and still benefit from a move in the market that goes in the direction that you expect it. Very interesting. Thomas, always good to see you. I'm sorry we're a little short on time today. We'll have you back soon. Thank you again. Thank you very much. Thomas Petterfay. Further ahead on the show, is it time to flow back farm spending? Farm equipment manufacturers making some big sales over the past year, but something the cycle is slowing down. Plus dry cleaning up the environment. Getting your suits and dresses press can cost a lot, but it can cost the planet even more. We'll discuss in today's clean start. As we head to break, here's a look at those yields we were talking about in treasuries

after the CPI. 376 on the 10-year right now. Over 3% on six-month bills. We'll head to the bond pits for more next. Welcome back to Power Lunch. Stocks are mixed at this hour. We're well off the lows of the day when the Dow was down more than 400 points. The NsX's even positive.

Christina Partsenevilus is here with the market flash. Well, Kelly, although we're still awaiting the 13F filing from Berkshire Hathaway, we have received 13G filings, which show any current passive positions above 5% in a certain name. So what we're seeing is Berkshire reducing its stake by 12% in VideoGagin Company Activision Blizzard, but the stock's not really reacting too much right now. It's down a little bit. And then you have increasing its stake by almost 60% in the Bank of New York Mellon, leaving Berkshire with a much smaller 3.1% stake in the bank.

That means they won't have to file any 13Gs anymore. And then lastly, the third big mover, Berkshire, upping its stake in Louisiana Pacific. It now owns almost 10% of all outstanding shares. But keep in mind, this is a passive position. And hopefully we will be getting the 13F in the coming minutes or hours. Yeah, don't we usually watch for those 13Gs, but in this case, cutting positions on two of those increasing in a third. Christina, thank you. Thanks.

Let's get to the bond market reaction now to this morning CPI report. Rick Santelli. What do you make of it, Rick? You know, I found it to be pretty much as expected. We didn't match expectations, but in the end, it's never about expectations. It's about history. It's about what's in the rearview mirror. And when you consider two-year notes have a high watermark from November, that's at 472.

We're still about 10 basis points away. And if you look at what's going on with 10-year note yields, you can clearly see. Yes, we've moved up. Yes, we're getting closer and closer to that magic resistance level. we were earlier at 480, but that's still a long way from 4.5, which is the high watermark. And finally, Fed Fund futures. The fulcrums shifted. You know, today, if you look at the prices go down, it stops at August, not September. August is making a new low for the contract. It's going to make a new low close. That brings it more fed.

And for that, I think we need to find a trader. Hey, Dave. Yes, sir. You have a minute? All right. So we have our friend, Dave, Meeseel. Listen, Dave, what happened today with respect to how CPI played into the market? So, CPI, big number.

People were panicky. They wanted some options. They wanted the calls in case we rallied. They wanted the puts in case we crashed and they wanted protection. Number came out relatively in line. Nothing crazy. Everything got cheaper. Everything just kind of came up.

So you're basically being polite, but they drilled volatility. They kind of hammered it in the volatility. Now it's kind of leveled off. There's numbers tomorrow. We've got retail sales tomorrow. Industrial production, past utilization. Let me interrupt you there. Yeah, go ahead.

We're not expecting a whole. Whole lot. Four of the last six months, retail sales have been negative. Four out of the six of the last months for industrial production have been negative. Capacity utilization is at a one-year low. What are they looking for tomorrow? What if there's a surprise that it's really weak? Because stuff came off so hard today. If there's a surprise, we could go back up. Volatility. People want the protection. They want the options. Now, I see that the VIX is down rather substantially.

And many traders and many viewers put VIX and correlate with volatility. It is, but there's a lot more going on. and volatility in just what the VIX is. Absolutely, absolutely. There's, and like a lot of the real small stuff, that really comes into play with the volatility. But that's not very, that's not the beefy options that people sometimes really need and want. The beefy ones go to institutions,

and we're going to have to leave it there. David and Tyler? Back to you, sir. All right, Mr. Santelli, thank you very much. Time now for check on oil prices and many other things with Pippa Stevens, who has those known. Yes, bouncing from the lows of the day, but still under pressure,

here and thanks in part to this $26 million sale from the SPR by the administration. Now, it might not seem like that much on the face of it. Remember, U.S. demand is about 19 million barrels per day. But when looked at in the context of Russia cutting output by 500,000 barrels per day beginning in March, the SPR released, this 26 million barrel sale will actually make up 52 days of that lost supply. So we are seeing some downward pressure on oil today. Because of that, now these barrels won't hit the market until between 8,000. April and June. So some of the price activity is further out in terms of oil contracts, and we're not seeing it necessarily today. But the market right now is still in contango for WTI. It is seen as oversupplied. And it really feels like there's no longer, you know, a catalyst that could come in and change the narrative, of course, famous last words. But people are scratching their heads a little bit saying what, why the sales now, you know? Well, it does seem like it's part of a program that was mandated from back in 2015.

So we knew this was coming at some point. But, you know, the administration, traders were thinking that the next move was going to be to refill the SPR and to buy back. And, you know, the administration can't both buy and sell at the same time. So it seems like they're getting this out of the way, which does date back to 2015. And then maybe further later on in the year is when they'll seek to replenish the SPR. Remember, around that $70 range is what they had targeted. All right, Pipp, we have to leave it there. Thanks very much.

Pippa Stevens. Let's go to Contessa Brewer now for a CNB. News Update. Contessa. Hello there, Tyler. Hi Kelly. Democratic Senator Diane Feinstein of California, the oldest member of Congress at 89 years old, says she will not run for re-election next year, but will serve out the remainder of her term. Her decision clears the way for two House Democrats who already have announced they're running for the seat. Katie Porter and Adam Schiff and others have expressed interest. An expert says a new study published today could be a game

changer for a male contraceptive. This is perfect timing for Valentine's Day. It shows when a drug is injected into a male mouse, its sperm stops moving within 30 minutes, preventing a female mouse from becoming pregnant. A few hours later, the mouse's sperm returns to normal. The studies authors say it could take years to develop a medical product for humans. And since it is Valentine's Day, one more for you. A giant panda in Japan got a special treat. It was a panda-shaped dumpling made out of bamboo flour and apple sticks cut into heart shapes. It would be fun if you could see it, actually. IMI has fathered 16 cubs and is about 90 years old in human years. And there you have my Valentine's Day presence to you. Thank you very much, Contessa. That's very nice. Good, good for him.

90-year-old panda. All right. Ahead on power launch, artificial intelligence, real gains as AI becomes the new buzzword. shares of C3 AI reaping some of those benefits. We'll talk to the CEO next. Welcome back to Power Lunch. Everyone's talking about AI, and it's being reflected in the stock price for companies like C3 AI with the chairs doubling this year. But yesterday we had venture capitalist Adrian Mendoza on who said the winners of the AI arms race are the ones with the data. Take a listen. Part of the issue with AI is that it's all really about data.

And it's garbage in produces garbage out. In our view as an investor, we really believe data is the new currency. But it's really you have to take a step back in an investor. And when you hear the startup pitches about AI, it's really looking at if you have good data to start with, then you're going to be able to have incredible results. And for more on the future of AI. We're now joined by Tom Siebel, C3 AI's CEO. Tom, it's great to have you here. Welcome. Hi, Kelly.

Is Chad Cheap-PT the best or worst thing this ever happened for your business? chat GPT is just, if we look at what's going on with generative AI, this is just another development in AI that we're able to take advantage of, like supervised learning, unsupervised learning, deep learning, reinforcement learning. And now with generative AI, this is a very powerful tool that we can take advantage of to dramatically increase the utility of these enterprise applications. across all the industries, utilities, defense, intelligence, oil and gas, precision health, whatever it may be.

I mentioned your stock performance. You know, if you think it's been a good year, you should remind people your stock was over $100 a couple of years ago back when liquidity was really at its apex. The question now becomes to the point that some have made, will the Googles and Microsoft's leapfrog you, Amazon's, and in the future be able to offer to enterprise cloud customers or whatever, the very tools that you guys specialize in? The Googles and the Microsofts look like partners to us. I mean, they will be investing, you know, literally billions in this, what the, in generative AI.

And as they make these tools available, we'll immediately be able to take advantage of them in our architecture. So as they leapfrog one another and add additional functionality, our products just become increasingly functional. Google is a close partner. Microsoft is a close partner. so the research they're doing serves as an accelerator for our business. Tom, I am below a freshman in my studies of AI. So you're going to have to educate me here a little bit because I have an imperfect, imperfect understanding of it.

If the quote was right and it's garbage in garbage out, where do you source or where do AI companies source their data, how constantly must you refresh it, and how do you know that data are reliable, accurate? What are the assurances that you know that what you're producing in terms of a result is reliable because the data are reliable? Well, it's a great and very important question, Tyler. And when we're dealing with big data, it's not the fact that we're dealing with hundreds of petabytes or an xabyte rather than a megabyte. It's we're dealing with all of the data. And it's a

fundamentally different computing methodology. So this garbage end, garbage out, amphorism that we all learned in our computer science 101 class kind of doesn't apply to big data. When we have, big data means we have all the data about the system, all the data about the pipeline, all the data about the United States Air Force. So we can take those data with the sparsity, with the erroneous data. And the fact is that we can build machine learning models that are predictive of what an organization might want to predict. They might want to predict demand.

They might want to predict, you know, stochastic optimization of supply chain. They might want to predict where their supply chain is going to break down. They might want to predict which device is going to fail next in the F30, in each, any given tail number in the B1 bomber fleet, so they can fix it before it fails. So with big data, we can actually deal with the garbage end, okay, and build machine learning models that are, in fact, you know, highly accurate with very high levels of precision and recall. So this idea that we need to, you know, build a pristine, unified, federated data lake of day

and the organization kind of goes away when we deal with big data and AI. Interesting. You know, Palantir today, Tom, or last night in its earnings was also talking. quite a lot about AI, saying it knows it has experience with dealing with some of these big government contractors, for instance. It reminds me a little bit of the clients that you're talking about. So again, we're starting to see major competition flooding into this space. And is there, what is the differentiator you think for C3 AI in the long run? Well, I think Pallentere is primarily a professional services company that does have some software tools. C3AI is a software

company with a very small professional services component. Penelentier appears to have built a pretty good utility for aggregating large data sets, structured data, non-structured data, what have you, into a unified federated image. To my knowledge, they don't have AI tools. Okay, so we have, so you can think of the functionality that Pellantir offers represents, we have that within our, within our platform, and it represents perhaps 5% of what we do. The rest is, you know, platform services, encryption in motion, encryption and rest, access control, machine learning services, data visualization. I believe they're a fine company. They do a good job, but they're in the business of fundamentally in the business of data aggregation and visualization. To my knowledge,

I don't think they're in the artificial intelligence business. Well, I think we're all scrambling to kind of parse one of these things from the other. And again, listen, your ticker might be the most value. You could sell that thing. How much you think you could get for it at this point, Tom? Well, I think we got lucky on that one. I think it was a good game. And before it's all over, I think it's going to be,

it's helping position the company well. Absolutely. Thank you so much for joining us today. We appreciate it. Thank you. Tom Siebel with C3AI. They were once a Disruptor 50 company, by the way, and CNBC is now accepting nominations for the 11th annual list of innovators.

If you're a private venture-backed company, get out that phone camera, get the QR code on your screen or go to CNBC.com slash disruptors to learn more. And ahead on power lunch, Presto Changeo. After the break, we will take a look at one startup looking to transform the dry cleaning industry in order to save the environment. But first, as we head to the break, during February, we celebrate Black Heritage through the stories of some of our CNBC teammates, contributors and leaders in business. Here's Plexo Capital founding managing partner, Lowe Tony. When I think about Black History Month, the name that really comes to mind for me is Reginald Lewis. He was so inspirational in my career and getting me excited to go out and conquer the world of finance. And the work that we're doing here at Plexo Capital, I hope will also empower others or at least inspire others to go create generational wealth. Welcome back to Power Launch, everybody.

there is some truth behind the expression getting taken to the cleaners. Dry cleaning is hard on your wallet, but it's also hard on the planet. While some industrial dry cleaners are opting for greener chemicals, others are looking to change the whole business model. Diana Oleg explains how in her continuing series on clean climate startups. Dye? Well, Tyler, not only do industrial dry cleaners release toxic chemicals, they also, some of them use a lot of water for steam.

now one Atlanta-based startup is not only making dry cleaning cleaner, but also more convenient. It's kind of like a vending machine for dry cleaning. At least that's how the execs at Pressau describe it, but it's a little different. We actually invented an entirely new clothing care process from scratch with compostable, organic cleaning liquids that we synthesized in our own office with our own engineers, as well as new ways to stretch and press clothes. The Presso machine consumes seven times less water and three times less electricity than traditional laundry and dry cleaning services, according to the company. It also eliminates transportation to a cleaning facility, and all that reduces the carbon footprint of the clothing care by 93%. There are no hangars that are disposable. There's no disposable plastic bags. None of the process of even doing logistics inside a dry cleaning facility, none of that exists anymore.

Presso now has machines in a few boutique hotels and apartment buildings, but it's pushing into the big hotel brands like IHG. It has machines now at two holiday ins and plans to expand to more IHG properties. Franchise owner Diphan Patel says the guest response has been very positive. Once we get the service to a point where our guests are educated and people are comfortable using the services, I don't see a reason why it won't be in every hotel in the country. Presso is backed by Uncourt Capital, Cherubic Ventures, 1517 fund, Ame Cloud Ventures, SOSVs hacks, and Pathbreaker Ventures. Total funding so far, just under $10 million. Presso doesn't have a lot of competition in the industrial space, but it hopes to bring these machines to consumers at home.

There is already some competition in that market, but Presso's CEO likens it to the microwave, the way. that moved quickly from restaurants and industrial use to become one of the most popular home appliances. And by the way, it's also a lot cheaper than sending your clothes out. Back to you guys. I mean, I'd get one now if it's going to be, what, 150 bucks? Yeah, I mean, I don't know what that price would be yet, but it's supposed to be a lot cheaper going forward. Yeah, no, absolutely. Fascinating, Diana. Thank you very much. Diana Oleg. Up next, Happy Go Lewis, a famed luxury brand betting on an even more famous music brand name. We'll discuss that next.

I really should be saying Louis. Louis. Happy go, Louis Vuitton. We've got the details next. Welcome back to Power Lunch, everybody. Have we reached peak farming? Farm equipment stocks have been on a nice run, but is it about to end?

Jane Wells is at the World Ag Expo, where they probably hope no, Jane. Kelly, this may freak you out a little bit. That is a driverless tractor from a tech startup called Agonomy, which is partnered with Bobcat, autonomous vehicles save on labor, which costs on average $40 per acre per year.

And so a bunch of companies are demonstrating driverless products like there's one from Monarch, which stops when it senses humans. Farm equipment stocks have gone up over six months, but as you noted, farm incomes are gonna come down this year, but they'll still be elevated. And even so, companies like ACCO, ACCO says it could have actually sold more tractors,

but for supply chain problems in 2022. I think we're pretty lucky, right? Farmers are starting to see a reduction in some of their input costs, while their outputs still remain pretty high. Now another trend is sustainability. You see a lot of electronic tractors here, and this one from New Holland that runs on methane.

Yes, from cow manure, it allows dairy farmers to make fuel from their own cows. We are still working through our pricing right now, but based on our customers qualified trade-ins, there are different subsidies that are also available for this product. Yeah, as these farm incomes come down, Kelly, while they still may be willing to spend, to go to this new technology, it may take subsidies, government subsidies, subsidies from you the taxpayers to convince them to do it.

Kind of like we're subsidizing electronic vehicles for the road. Jane, those driverless tractors, I mean, that feels like a productivity revolution in the making. You know, Pippa Stevens was telling us she grew up spending summers where you're just all day back and forth. and back and forth. I mean, can you imagine if these tractors could do a lot of that work and free everybody up to do other things? Here's the thing. Even if it's not fully autonomous, some applications on the tractor are autonomized, that really saves on the wear and tear on a farmer's body. The person doesn't have to get in and out every road to check something. You can have somebody who's not fully capable of

operating a tractor to at least drive this and it can do some things. So, some companies are building these equipment from the ground up like agtonomy others like agco are retrofitting existing tractors to do autonomous goals tasks so that farmers can kind of do step-ups with something they're more and more comfortable with it's it's really the buzz here more than electric tractors autonomy saves a ton of money it's fascinating jane thank you as always for bringing that to us we appreciate it you bet our jane Wells. Meantime, sports gamblers used to betting on Fanduel may soon get the opportunity to literally

bet on Fandul, their parent company considering a U.S. listing. Flutter, Contessa, what is Flutter? And why now? And what do you know about it? I love those questions, and I can answer them. So Flutter, you guys, is Fandual's parent company. It's traded in Europe and it's based in Ireland. And what they have said is they think that if they put a listing from Flutter in the U.S. on the exchanges, is that they get access to more investors. They get deeper pockets where capital is concerned. They get more brand recognition. And when you think about it, when we talk about the sports betting stocks,

we talk often about draft kings because it really is at this point the only pure play on sports betting. But Fanduel. Tradeable in the U.S. Exactly. I mean, there's, look, Cesar's MGM has a stake in bet MGM. You've got Penn that has a growing sports betting business, and they just had a quarter where they, they proved profitability, but Fandall doesn't get that kind of attention because its parent

company is traded overseas. So Fletter thinks it can come in. It may be able to expand in lots of ways. And right now, Fandle is its most important business. It's got the biggest share of company revenues in just a few years, and it has other big names like Patty Power and Betfair. So this is a big deal for them to come in and consider it. But a big hurdle is that they're talking to shareholders, then they would put it to a vote.

it would have to get 75% of shareholder approval to move forward. And this is a tough climate for IPOs. Would shareholders naturally go along with this idea? Or what would they fear? Why would they not? Maybe not, because some of them might not want to hold U.S. stock, for instance, so you might lose some shareholders in that way. However, when you look at the trajectory of growth,

here's Fanduil that has about 42% market share nationwide. It is not getting stock market credit for that leading stock. status and Fandle believes and Flutter that the total addressable market in the United States could be more than $40 billion by 2030. Jeffrey's analyst points out that would be bigger than three times the rest of the world. So if you're in the business of making sports betting profitable and lucrative, this is the place that you want to be. So they've got 40% in the U.S.?

Who's second? Draft Kings is second. And Peter Jackson, the CEO of Flutter, said to me, in November and he said publicly at an investor day, he's like, you know, it's really interesting when we're thinking about an IPO of Fandul alone, which has been widely expected in this industry. He said, we're watching Draft Kings. And what we see is that they're benefiting from their customers actually buying their stock. And as you said, Kelly, actually betting on draft Kings, and they like to get a piece of that action. Speaking of all the sports betting, one more

thing I wanted to note, you know, I did this story yesterday about Super Bowl betting. Fan Duel got hold of me today and said, we mischaracterized our peak betting rate. They told me it was 50,000 bets per second. It was actually 50,000 bets coming in per minute, which makes a difference, of course. Everybody's working on very little sleep post-game time. That's what I was going to say.

It's still a lot. Yeah, for sure it is. And exciting times for them to come in and now talk about. Well, maybe they're trying to ride some of that momentum. But again, a tough market. And it's interesting what you said, too, about where the shareholder bases and if they'll want to go with it. Thank you, Condessa. We appreciate it. Condessa,

We appreciate it, Condescent Brewer. All righty. Louis Vuitton is betting on a music star to help restore its menswear line to glory, but celebrity partnerships have not always worked out so well. That's next on Palo Lund. All right, luxury fashion brand Louis Vuitton, tapping the music star, Farrell Williams, as the brand's next menswear designer. Robert Frank here to discuss it all. Tell us about this story, Robert.

Well, Tyler, shareholders certainly clapping along. with this move. You know, you look at LVMH stock. It's up today. It's up 21% this year. That made Bernard Arnault. Of course, he is the richest man in the world. He is closing in on a net worth of over $200 billion. And it's all because of the strategy by Arnaud to be not just a luxury company, but what he calls a culture company. So they're partnering with musicians, with artists, where streetwear designers to kind of not just create designs, but to create cultural moments. And, you know, look at the results. So Louis Vuitton, just the label itself, has doubled sales over the past four years from $10 billion to $20 billion last year.

And their previous men's designer chief, who is Virgil Ablo, he passed away last year. Farrell will be replacing him. And you look at the designs that Ablo did, you know, the sneakers that he did with LVMH with Louis Vuitton, Those sneakers have auctioned or sold for over $350,000 a pair. So literally, Farrell has some big shoes to fill here. But, you know, he's also got a great history of designing himself. Well, I guess, Robert, the question is, do we have a great history of celebrity partnerships? Because the last couple weeks we've seen these problems at Adidas with Kanye with Beyonce.

We've seen even reports that at Salesforce, perhaps celebrities had too much influence in the boardroom. and that's triggered some activist involvement. Absolutely. And, you know, their Louis Vuitton and LVMH partnership with Rihanna, she had a design wear line that didn't go well, although the Fenty Beauty line is doing well. This is a little different, Kelly, in that he is going to be the head of the men's design.

So it's not just sort of a celebrity collaboration. He's going to be in-house at Louis Vuitton. This is, remember, Farrell created or co-created, the billionaire boys club line. He's done a lot of collaborations that have most of them done really well. So it'll be interesting rather than just partnering with a music celebrity to actually bring him in house to be the lead designer and see whether that magic can continue. But so far, both LVMH collaborations and Farrell's collaborations have mostly gone well. But this is a big bet.

Does he bring a team with him? I mean, I'm not familiar. I'm not exactly maybe the target audience for Farrell's fashions. But does he bring a team with him? He's got people that he's worked with various designs. designers, you know, again, billionaire boys club. He's done collaborations with Louveton before with sunglasses and other things. So I suspect yet he's got people who work with him, but LBMH has its own team.

So it's going to be fun for both sides. All right, Robert Frank, thanks very much and thank you for watching Power Lund.