Power Lunch - Post-election rally cools off, Arnold Schwarzenegger + Zimmer Biomet 11/13/24

Episode Date: November 13, 2024

The major averages hovered near the flatline on Wednesday as the postelection rally lost some steam and traders contemplated a key inflation report that was in line with expectations. We’ll track the market action.Plus, Zimmer Biomet (ZBH), a global medical technology leader in orthopedics, is partnering with Arnold Schwarzenegger, who will take on the newly established role of Chief Movement Officer. We’ll speak to Arnold & the ZBH CEO. 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 on this Wednesday afternoon. Happy Hump Day alongside Kelly Evans. I'm Dominic Chu, and stocks are higher today following that latest CPI report in line with expectations. And the year-over-year number was 2.6%. Getting closer to be in line with that Fed target, Kelly, and that's maybe one of the reasons why you're seeing at least a little bit of optimism today. Speaking of getting over the hump, I mean, we keep thinking we're going to lose momentum on markets. We're going to lose momentum on Bitcoin. But no, we just, we're just on the other side.

President Trump continuing to add members to his administration. Elon Musk, Vivek Ramaswamy will head the Department of Government Efficiency or Doge. Speaking of Doge, Dom, that's worth like $60 billion. So, I mean, Department of Government Efficiency, it's very, it's almost ingenious. It is. It's clever. You've got the coin going on. But the thing with Doge, it builds inflation into the code.

It's Bitcoin plus inflation. So Bitcoin, we can argue about the merits of that. It's breakout relative to gold. Doge, come on. All right. So Doge coin, by the way, is soering on. on that Department of Government Efficiency News. And we are all very excited because the governorator himself,

Arnold Schwarzenegger, will be here in person on set with us here on Power Lunch. Now, he's teaming up with medical technology company Zimmer Biomit as their new chief mobility officer. We're going to ask him about that, but also he endorsed Vice President Kamala Harris in a lengthy post on X, a big supporter of hers, a fellow California. if you want to look at it that way. So there were battle lines drawn. It'll be interesting to see what he has to say about the political environment right now. I want to know what he thinks about Doge, not the coin, the idea, the construct. Because, you know, in California, he did make a big

push for trying to trim and make government more efficient. So it'll be a good conversation. He'll know better than anyone how hard it might be. Let's start with markets and the latest read on inflation. CPI for October. The headline increasing 0.2% in line with estimates. The core was a little hotter here to break down what it all means. And Jacobson, he's chief economist and annex wealth management. I'm in the sticky camp on this one, Brian, but the markets are pricing in higher odds of a rate cut in December. Now, higher odds, even in Jan and March, although they seem to now think we'll be going every other meeting. Yeah, it does seem like that.

When we were talking about it on our investment committee here, we were really looking at the numbers. And I think we agree with you that it is going to be higher for a longer period of time. But that still gives the Fed room to continue to cut. Because if you look at real interest rates, which is what the Fed is mostly concerned about, even at around, say, 4.5% or even 4%, that is still at a faster run rate than overall inflation. So even if we peter out here at like 2.5% inflation year over year, they could really cut rates down to 4, 3.5%. And then we'd be at a neutral stance. So monetary policy is still restrictive. It's almost as though the Fed, they're just slowly taking their foot off of the break.

with the rate cuts. They're not pushing on the accelerator yet. So if rates are restrictive, so restrictive was like, you know, 2022. The Fed raises rates after that massive inflation. The markets take a nosedive. I mean, that feels like restrictive policy. Now we have stocks at all-time highs. What does that tell you? Yeah, that's a really good point. We do see the equity markets at new highs. You also see credit spreads very, very narrow. It doesn't really feel like financial conditions are restrictive. It seems like financial conditions are actually pretty easy. But it's pretty easy for those who can get it. If you are actually, you know, some of the smaller businesses, households, the cost of credit is still very high. The senior loan officer opinion survey

really shows that banks have heightened their credit standards and there's not a huge demand for borrowing. So, you know, financial conditions are easy if you want to borrow at these levels. It's just that a lot of households and smaller businesses aren't showing. that they have a lot of appetite for borrowing at these rates. Brian, it's Dom. Credit risk is not really out there. At least that's not what the government bond slash corporate bond slash high yield markets are telling us right now. We also have liquidity conditions that are, as you point out, relatively easy, okay. Is there anything that can derail the upward momentum of this market? It seems like there's

just nothing that can take this thing down. Yeah, it does feel like there's quite a bit of momentum here as you were talking about at the beginning, and that's the thing with momentum. It tends to beget more momentum. But you can get trips along the way. And I do think that we are going to see that, especially as we get into the new year, you're probably going to see some of the economic data, especially let's think about like GDP numbers. If we look at trade data, if people are anticipating that we're going to be seeing higher

tariffs, they're probably going to be accelerating imports. And imports, just through the mathematics of GDP calculations, is a, negative on GDP. People might be thinking, well, are we building up too much inventory, making too much of a bet on these tariffs? So some of these distortions, I think, are going to really put some worries at the forefront of investors' minds. Right now, there's a lot of that optimism. And at what point are we going to tip towards people thinking about, well, what are the side effects of some of these policies that could be coming down the pipeline? Can you leave us, Brian, with some kind of actionable advice, you know, given where we are with

valuations with multiples, you know, big argument over small caps, anything kind of tactically that you want to leave us with? Yeah, I think one of the biggest themes I would really highlight is the idea of bigger deal flow and merger and acquisition activity. A high multiple company purchasing a lower multiple company is a good thing if you're in that lower multiple company, and those are oftentimes the smaller companies within that space. If we're entering into a period where you're going to have a more accommodating Department of Justice and Federal Trade Commission for some of this deal activity, that could really redound to the benefit of small and midcap companies. So I think there's a valuation argument for small and midcap, a cyclical argument,

and then also perhaps an acquisition argument for a lot of these firms. All right. And we've been talking about stocks like Apollo, like Goldman, the investment banks, which really reflect that optimism. But I like your point about multiples more broadly as well. Brian, thanks for your time today. Thank you. Brian Jacobson. All right. There's still a lot of focus on debt and deficit.

as President Trump prepares to take office for a second term. We've gotten new data on government spending, including how much it costs to service our national debt. Megan Kisela is live at the White House with those they've got to be staggering numbers. They always are, Megan. They always are, Don. That's right. New Treasury data out just now shows the government spent $82 billion on interest costs just in October alone. That was the first month of the new fiscal year. But that is actually an 8% decrease from the same month a year ago. It is a of lower rates, not exactly of any progress made in reducing the nation's debt load. Overall, for the month, Treasury ran up a deficit of $121 billion on an adjusted basis.

Not exactly a great start for the fiscal year. That was due both to lower revenues, which were down about 19 percent, in part because of lower corporate taxes coming in. And it was higher spending. Spending was up and adjusted 8 percent overall. And that higher spending was driven in part by the Department of Education. Costs there for the month were up 19 percent from the same month. a year ago and at Veterans Affairs. They were up 17% there. And guys, I want to add, we get this

glimpse at the Treasury's budget every single month, but this one does come on the same day that we're talking about Elon Musk and this new Department of Government efficiency, which does have this goal of cutting $2 trillion out of the $6 trillion federal budget. So with spending up at education and the VA last month, those are by no means the largest buckets of federal spending, but they are two areas, guys, where there's been a lot of focus, a lot of discussion on cutting or maybe even eliminating the entire agencies. So if you want to cut a third of the budget, I guess you do have to start somewhere. The conversation is just going to get more intense. Meg it can sell it live at the White House for us on interest cause. Thank you very much for that.

Yields are holding steady after that inflation data on the CPI this morning. Let's get out to Rick Santelli in Chicago for more on today's bond trading action. Rick. Well, I'm not sure if I I will call them exactly steady, but let's start at the beginning of the story, shall we? I never thought CPI would turn into a Roar Shack, but it has. Expected. Numbers were as expected. But that doesn't dismiss the fact that it's hot. If you look at year-over-year core, remember, core used to be the definitive metric that the Fed used, but it isn't anymore.

All of a sudden, it's just year-over-year because that was a little cooler at 2.6. But you see that chart, 3.3. Does that chart look like it's going anywhere near 2% anytime soon? No. Inflation is sticky. Now, if you look at an intraday of two-year note yields, you see everything you need to know that all our guests have been talking about. Two-year yields are lower. As they sit, they're down a half a dozen basis points.

Why? Because the market's pretty smart. They know that pollen company are going to ease. They've pretty much seeded this, and they really haven't changed their story, no matter really, what the data says. Now let's look at an intraday of 10-year-note yields. A slightly different picture, because like the story we just heard on breaking news,

debt and deficits aren't going to go away. There is definitely an anticipation going on that pushed equities higher, maybe more common sense policies ahead, but it's not gonna happen overnight, servicing the debt's gonna keep going up for a while, and the market's really responsive to that as well. So the curve is steepened.

It's actually steeped, all the way up to 17 basis points. The magic number there is around 20 to 23 basis points. If it takes that out, watch for a little more electricity in the long end. But the end of the story here is pretty easy. Is that the market in equities is probably going to do fine because it has the care of the Fed. The long end is going to pay attention to the data.

So what's the trade for the next six months? Steapening yield curve. Where have you heard that before? I've been shouting about it for about six months. Dom, Kelly, back to you. Curve steepeners. We're very much in play. Rick Centelli with the Bond Report.

Thank you very much for that. Clean energy is preparing for a messy transition, possibly. The Department of Energy is racing to give out money for green projects before President-elect Donald Trump takes office. Now, obviously, many are anticipating the new administration will be a boon for big oil and gas. But what other energy policies might we expect? We've got that story coming up right after this. Welcome back to Power Lunch. A lot could change for the federal government on January 20th.

Pippa Stevens is here with a look at one Department of Energy program, PIPA, that could look very different a couple months from now. Yes, so we are talking about the loan programs office or the LPO, which is part of the DOE, and it's basically a green bank of sorts. They provide financing for companies and projects that are looking to cut emissions. Now, for the last decade, they didn't do a whole lot. But then under President Biden, it was really supercharged. They had a hiring spree. The funds available for lending grew tenfold under the Inflation Reduction Act. This year, they're set to give out $30 billion in loans.

Compare that to the last 10 years, which is $30 billion as well. So you can see the kind of speed at which they've been lending. And they've really become a go-to place for companies that are looking to scale that might otherwise struggle to get funding in private markets. And so right now, there are more than $200 applicants looking for more than $300 billion in lending. in addition to 17 conditional loans. Those are ones that have been approved, but not yet paid out. And so the risk here is that this could all go away under President-elect Donald Trump.

And so now there is a rush to get as much of this out the door as possible before inauguration day. Because while he can't unilaterally cancel the LPO that would require a congressional act, he can basically make it go dormant by just having someone who's the director who doesn't give out loans. So, you know, my mind goes to bond yields. and to all of it, you know, so here we are with a massive FISC. Are these going to be implemented quite quickly, or is it just kind of earmarking funds for projects that might be spending the money in, you know, a year or two years' time?

So that's one of the criticisms for the LPO's that takes a very long time in order to get one of these loans. And that's because there was, back in the day, there was a loan to Cylindra that did go belly up. And so that has been overhanging the agency for some time. But after that, they implemented a lot of very strict rubrics, very strict framework for who they give out these. loans too. And so once you get it, then, you know, the company can build their factory or, you know,

scale their technology and then pay it back to the government over time. And it's competitive. And for a lot of these new technologies, you might not be able to get that in private markets because you just don't have the experts or the scientists to evaluate. And so if you have the LPO, that stamp of approval from the government, that can then let some of the private lenders get on board with that project and say, okay, it's been approved, we're good to go. We can back this company. All right. So not a real sunset, but an effective sunset by the time it's kind of done. All right, Pippa Stevens, thank you very much, LPO's. All right, so what could the energy agenda look like under President Elect Trump's new administration?

Our next guest says, while there are some pros, there could be some cons as well for the oil and gas market. Joining us now is Bill Perkins, president and CEO at Skylar Capital Management. Bill, you just heard Pippa's report about this kind of balancing act that we're seeing between green energy and traditional hydrocarbon energy. The presumption is that it's just all oil and gas, drill, baby drill, and that's basically. basically it, but it's much more nuanced than that. Yeah, I think this incoming administration is pro-energy of all kinds, whether it's nuclear, renewable, natural gas. And so any type of energy delay or delaying the United States from producing any type of energy, they're looking to remove those delays, those bottlenecks,

and those frustration points. And so we should see that happening very quickly. I think the first time this administration came in, it took a while for them to get their feet wet to understand how things work. They now understand these frustration points, and they're looking to come in hitting the ground running. The markets have already made at least a near-term verdict, right, Bill on this. We've seen clean energy companies like solar companies see their stocks relatively lower, and in many cases, absolutely lower compared to oil and gas stocks. How exactly do investors navigate this kind of environment? Are there relative value trades, and how exactly do you position portfolios to allocate to all different kinds of energy.

Well, let's go by sector. So these companies, I think people are worried about the incentives, the I inflation reduction act, those type of things going away. I don't think that'll be the first thing. I think the first thing will be positive for them. Whether you produce solar panels or transformers or any kind of renewable product, you have to get a permit. And the biggest issue we have in the United States of America is the permitting times

are too long. There's a wing within the EPA. and if in the government, that is basically an anti-development of any kind of energy source, and that is hurting along the value chain and renewable energy. So I think they're going to actually benefit to begin. And there is some odds that the IRA gets reduced or something happens with that. But I think the main bottleneck for energy production in the United States of America is the weaponization of the permitting system.

For crude oil, on the other side, I think the current administration has kind of turned a blind eye to some of the sanctions violations. They're not really big on enforcement. We're big on handing out naughty voice lips. And we know where these sanction violators are going, who they're meeting up with, et cetera. And so the enforcement has been a little lax. And I think this new administration is going to take a much tougher stance on enforcement. Bill, I want to ask you, the administration has turned. Trump has it reportedly considered an energy czar who would kind of go and unwind a lot of the Biden kind of climate rules.

At the same time, some of the business leaders, I believe it was Exxon, was maybe trying to communicate for it and say, look, if every four years we go totally in one direction and then totally in another and then totally back and forth and totally, it's hard to get to be able to invest in projects with clarity in the long term. And obviously, if we want low energy prices, we need to know, you know, and have people put capital to work over, you know, 10, 20 year period of time. Do you think there's some truth to that that we're seeing too much volatility? Or do we need to turn back, turn a page from what took place during the last four years? Yeah, I think, you know, everybody wants clean air and clean water. And I think the people coming in have kids and families, et cetera. What they're trying to get rid of the obstructionist attitude, the inability to use electronic communications using stalemail, the deliberate attempts to slow down reasonable permitting. I think that's the part where they're going to come in and rip things.

up and roll things back. As far as like on the legislation side, on the EPA rules and Clean Air Act, I agree with the CEO. You want stability. Stability breeds investment. And so, and we want the rules to be followed. We don't want obstructionist wings within the government, even though you have the cleanest renewable plant, but they are slowing you downward permitting times that basically destroys your ability to bring this facility on, whether it be solar or or wind or hydro or geothermal. And so I think there is a balance that that needs to happen and some stability that needs to happen.

But currently the incoming administration is set on blowing up anything that is obstructionist or weaponized. All right. And permitting sounds like it could be one of those first avenues to explore Bill for now. Thanks. We appreciate it.

Bill Perkins. Got some breaking news on the election results for the House of Representatives, Emily Wilkins, with the details. Emily? Hey, Kelly. Well, NBC News can now call that the House will be controlled by Republicans. This isn't a giant shock for those of us who have been following the races closely, but it now is official that the Republicans have cinched the needed 218 seats to control the chamber next year. Now, there are a number of races that have not yet been called. We're assuming some of those are going to break for Democrats. We do expect Republicans to pick up a few more. What this basically all means is that Republicans are going to once again be working. with very tight margins in the House. But of course, this time they get to do so in an environment and in a government where

things are very much in their favor. They've got that trifecta, the House, the Senate, the presidency. President Trump was meeting with House Republicans a little earlier today, really kind of getting everyone's spirits high up there, talking about the need for unity at this point. Of course, last year we saw a lot of chaos with House Republicans, a lot of disagreements over the speaker, over various policies. And I think Trump was trying to now set the tone that everyone does need to work together under this unified government. But of course, now that the margins are going to be close, that means that only a few lawmakers can again continue to hold up major pieces of legislation.

So Kelly, we're just going to have to see how this plays out. It's definitely a bit of a different vibe. But once again, the math looks quite similar. And Emily, was there anything to ask in terms of the leadership? So for leadership, we're looking again at Speaker Mike Johnson, at Majority Leader. Steve Scalise at Witton Emmer. The top leadership really remains firmly in place. Trump has really thrown his support behind them, including Mike Johnson.

We do have a couple other lower leadership positions that are yet to be decided upon. But at this point, the team that we saw last year is going strong into this year. Obviously, they won the House, they won the support of Trump, and that last piece might be the most key of all. Yeah, and they have their work cut out. The Red Wave is official. That's right. Emily, thanks.

Emily Wilkins. Still to come, should you short the world? Carter Worth is taking a look at the technicals for the MSCI World Index, and it is not looking good. We'll discuss in Market Navigator next. All right. Welcome back to Power Lunch. A quick check on the markets right now. We are off our best levels of the session, but we are still fractionally higher. The Downdust rolls up about 100 points. It's a quarter of 1% gain. Similar percentage move for the S&P 500, which currently sits at just below the 6,000 mark, 5996, the last trade there.

And the NASDA composite, 19,300. It's up about 1,000. tenth of one percent. Now, we talk a lot about how specific markets around the world are doing, but our next guess is taking a more global view. So we're going to zoom way out, way out, to the MSCI All-C-C-All-country World Index, which measures the performance of nearly 3,000 stocks, both from developed and emerging market economies. So joining us now as Carter Worth, founder and CEO of Worth Charting. His clients have a mixed view on where that index is headed, but his charts have a very firm indication. Carter, take us through, and I'm not going to bury the lead here, why you're negative. Sure. So we'll look at the chart in a second, but interestingly, when sort of polling

institutional portfolio managers post-election, where they think equities as an asset class are headed on a three to six-month basis. Fully half think it's quite robust ahead and equally size is the group that says this is exactly where you're starting to get. a pullback that a lot is priced in. The word expensive is never used, at least by me, because valuation is a terrible timing tool. But I would argue that the word full is the appropriate word. The global equities as an asset class are full.

And Don, maybe we can look at a charter two. But the MSCI All Country World Index, as you pointed out, is some 3,000 stocks. It's about 80 trillion in market cap. The S&P itself is 45. And what you'll see here is that we're up against an important internal trend line going back on a multi-decade basis. And so do, does one make the bet that we exceed, we break out to the upside, or that it hits its head.

But you can see here, and it's very clear that almost, well, there's the expression to the penny, the index has ricocheted off these converging trend lines, like a pinball machine, in perfect order repeatedly, and each and every time it's been at the upper band here, it has struck its head. And so we're thinking that that indeed is what's happening or going to happen despite all the day-to-day euphoria. And so we're in the camp that fully half of our clients are that it's not all sort of great things ahead that much, if not all, on an intermediate basis, is priced in. Carter, we're going to keep that chart up for our viewers right now. Listeners on Sirius XM, what you're seeing is kind of like this ascending triangle, right?

It kind of keeps going, and it's getting narrower and narrower here. But when it bumps up against that bottom line that you're seeing, it could bounce as well from there. Isn't it important to know what's going to happen when it resolves itself? So even though it's short term, is it a short term very bearish view or a short term kind of tactical or due for a pullback view? Well, remember, this is a five-year, this is a, well, this is a 30-year chart, but that part that's highlighted, right? That's the past five years. And again, that's that chart. These are these lines.

I mean, I haven't manipulated and make them fit to make a thesis. it is what it is. And so just playing the arrows, playing the pinball machine, we're making the bet that it will falter here and pull back. Now, to your point, Don, if it gets down to the lower ban, I think one would want to anticipate some sort of bounce or said differently. Sequencing has been very clear here. And let's benefit of the doubt, stick with sequencing. All right. Carter Worth, with that trade on the MSCI All-C-C-World Index, thank you very much. We'll see you soon, sir. Bye. All right, Kelly, back over to you guys.

Thank you very much, Dom. Coming up, medical device firm Zimmer Biomet announcing a strong new partnership. Arnold Schwarzenegger taking on a new role as the film's new chief movement officer. He and the CEO join us next. CNBC News Update. And what we have right now is that we watched oral arguments today where the Supreme Court appeared to keep the door open to a class action lawsuit against NVIDIA. The chip makers accused of securities fraud for allegedly misleading investors about how much its sales depend on the volatile cryptocurrency market, a decision it's expected by the end of the term in June.

A coalition of gun groups is suing the state of Maine over a new law requiring a 72-hour waiting period before firearms purchases. They argue the measures unconstitutional. Maine passed that waiting period law shortly after an army reservist killed 18 people in the deadliest shooting in the state. history last year. And Amazon is hoping to win over Sheehan and Timu shoppers with a new discount web store where every item is less than 20 bucks. Amazon Hall will offer free shipping on orders over 25 bucks or $3.99 shipping for orders below that threshold. The online retailer says the items will be delivered within two weeks, but one catch, anything that costs you less than $3 can't be returned. So, you know, Kelly, good for Amazon, bad for the landfills.

Yeah, I mean, it costs like $30 to return. So anyway, Contessa, thanks. Contessa Brewer. Now to a partnership involving one of Hollywood's biggest stars and fitness buffs and a medical technology leader. Zimmer Biomet is teaming up with Arnold Schwarzenegger, who will take on the newly established role of chief movement officer. Schwarzenegger will work closely with the orthopedics company to motivate and support individuals to increase mobility, and maintain joint health here on set. For a Power Lunch exclusive is Arnold Schwarzenegger, Hollywood icon, and former Republican governor of California.

And Yvonne Tornos is president and CEO of Zimmer. Welcome to both of you. Ivan, kind of a splash in your first year here. You got Arnold. If you're gonna do things big, do it big, right? Who's I deal with this? Well, look, it's a lot of us, but I can tell you, we are beyond excited.

We have a bold mission, ambition here at Zimmer Biomed. We want to solve some of the most meaningful healthcare challenges. And if you're going to go bold, you've got to go with the Terminator. We're here to terminate pain, and I love the partnership. Arnold, I mean, talk about it. They came to you. Have you done a lot of these kinds of partnerships so far? Or what made this one stand out?

Well, first of all, I have to admit that him having an accident that is worse than mine was very helpful. Okay. So, but anyway, we got along right away. And there will be a working dress the same thing. For the last 50 years, I've been on this fitness crusade. It's all about making people be able to move and to go out and to exercise, not just to lift weights and to puff up and to get musk, be the muscular man or anything like this, but to just do sports. And as you get older, of course, you get the wind here and you get the damages and your joints. And then people talk about joint replacements and stuff like that.

And they're afraid of it. And so this is why I said, look, I go and I tell people because I had hit replacement and all those kind of things, valve replacement and everything. I mean, I'm like the real Terminator. I have so many artificial parts of my body. I said, you know, I know how to talk to people. I talk to them every day in the gym and around the world and pump them up and tell them, go and replace your knees. Go ahead and replace your hip if you need to.

It's always the last resort, but now they have the technology to do it. Zimmer is a fantastic company. I've read up on them. They have the best research. They've been around for 100 years. And they are also not only doing it for the people that can afford it, but also for people that cannot afford it. You know, they're at the Martin Luther King Hospital in Los Angeles,

donating, you know, parts for them and to do the operations and all this stuff. So it's a great company. And I think it's one of those things where one and one will become three. So for the T-2000 to the next generation of whatever Terminator is out there, Yvonne, this is an interesting story because there probably is no more evident trend in demographics in America and the world than an aging population that needs to be fixed as they get older. Take us through what you think, landscape is going to look like for orthopedics for this kind of care and what exactly are you the

most worried about is it the track of insurance is it the kind of spending is it government reimbursements what exactly weighs on you for the next 10 to 20 years great question dominica let me let me let me bore you with some data points and and then we'll get to the problem that we're trying to solve to your point every day here in the u.s 10 to 12 000 people are turning 65 years of age we get older we want to live longer and we want to be active The real problem we're trying to solve is those patients who are waiting in the sidelines to get treatment, and to the governor's point, they're afraid to get that treatment. Arthritis impacts 600 million people on earth.

Osterisitis, knee pain, hip pain, shoulder pain is the lion's share of those patients. Only 5% of those patients are doing something about it. With the partnership with Arna, what I do is bring those patients to get treatment. It's minimally invasive. It's not what it used to be. You don't need to live in pain for years. Rehab is not what it used to be. And I think that this partnership and the technology

will bring into market is going to change the way that we take out of those patients. So you want people to do it a little more proactively than, as you mentioned, kind of this last resort. Can you both speak to the effect of weight loss drugs on the market? Arnold, what's just your knee-jerk reaction to this? Is it a good thing to have now so that people can avoid being overly obese

and injuring themselves? Or do you view it as kind of a little bit worrisome, too soon to tell, a bit of a shortcut towards real health and vitality? I personally don't know enough about it, but I've seen the effect it has in some people. I think that medical technology and all the stuff that is being done is all good, but you should not abuse it. I don't think that the young people that maybe 10 pounds overweight should immediately go and take this kind of medication and stuff like that. But the key thing here with us is to create more movement. And of course, the movement is important because,

you can through a natural way, lose weight. The more you move, the more you exercise, the healthy you're going to get, the better it's going to be, the better your quality of life is going to be, the longer you live. And this is why it is so important of accomplishing that goal that Zimmer has to have more people feel more comfortable with the idea of getting replacements. And I see in the gym people, older people all the time walking around in pain. And I just tell them, I said, there's no reason anymore to be in pain.

And there's no reason anymore to take pain medication because there is now a way of going to replace that body part that is failing you because of we and tear. So go and get the research done. Go to your doctor and move forward with that. And so many people do it and I'm very happy about that. But now it will be a whole different, a new extent where I can reach out to the world and use my platform

and my popularity and my name. and everything in my involvement in fitness and just really pump everyone up and say, hey, don't ever give up. We're going to go and march forward. No matter what you need to have to replace it, we're going to move, move, move, because if you rest, you rust.

Okay, so this is the interesting part about the discussion, because you mentioned movement. My doctor tells me the same thing. I'm closer to 50 than I am to 40 these days. And the one thing she keeps telling me is you've got to keep moving around. It's the reason why I ditched my analog watch, which I've worn for years,

and many of our viewers kind of know the watch. I've been wearing, and I've gone to an Apple Watch because it tracks my movement, calories, and everything. Does Zimmer Biomet have this idea in the future that you can actually look at your products and have them be part of an ecosystem, either through your own doing or through partnerships, to actually work with fitness and technology companies to make a more holistic approach towards movement and joint and pain and repair? What you call the future, we call the present. We're already doing that. We have a digital ecosystem, we partner with the best of the best. We partner with Apple in informatics. Through

an eye watch, you collect data on how you behave before surgery. And after surgery, the same watch, through our app, my mobility, actually tracks the recovery. We also partner with Microsoft. We use mixed reality to do physical therapy remotely. We got a digital ecosystem that collects data before the surgery, doing the surgery, and after the surgery. And through AI, now we are predicting outcomes and treating different patients in a different way. Super scalable, What you call the future, we're doing already. Yeah. You know, Arnold, I want to ask you about politics while you're here.

I don't know if we have to. I don't know if you want to go there. But there's a lot of talk with the new Trump administration about maybe shaking up the approach to health and wellness in this country. You know, I'm sure, as you know, RFK would be part of that. Is that an approach that you think is welcome? And do you have any other thoughts about that team as it's shaping up and looks to, you know, take power next year? As long as Zimmer is included in their plan. I'm going to be happy.

Because I tell you, no matter which way you cut it in healthcare, you got to go and face the fact that people, when they get older, need to get help. And a lot of times that is through joint replacements. If it is hip, if it is knee, or if it is shoulders, if it is elbow,

if it is wrist, whatever it is, the day there's a replacement for everything. There's no reason to go and to suffer. And that is the bottom line. It doesn't matter what the Trump administration does. This, the Zimmer plan and philosophy, has to be part of the health care program. Well, take of the corporate approach is interesting here, because we talk about this Department of Government efficiency, this Doge, so to speak, that's coming up. You, at one point in your gubernatorial career in California, I'm a California native, I know this, you worked on trying to optimize government operations, efficiency.

Is this something that can be done on a large scale like the United States? And if it can be done, what exactly is the timeline for making these efficiency-type gains a reality? Can it even happen in four years? Well, you know, that is questionable. I mean, you have to try it because, I mean, there is a lot of waste in government. I've seen it on a state level. I see it on a local level. There's a lot of waste.

But the bottom line is, it's like, with Zimmer, there is no waste. We go move forward there. See how I move our wall? We're watching. This is what they call bridging. You get a question about A, you answer it with a C. So this is what it is about. No, no, but I mean, we can talk.

It's another time where we can talk about politics and about the conservatives, about the liberals, how they run the country, which is the better way to go. about my state of California and how they're driving businesses out of California all of those things we can talk about but today I'm here with my friend with Ivan and we are both excited about

working together and having this great partnership and really seeing exactly the future the same way I do want to chime in and talk about the award that got my attention on efficiency which is a word that we love here at Zimmer Biomed here in the US we spend $4.7 trillion in health care and we the bad guys

pharmaceutical, medical supplies companies, medical device companies, account for 10 to 15% of the overall cost. In orthopedics, in musculoskeletal care, the number may even be smaller. What do you need to do? You need to drive efficiency. Spend less time in a hospital. If you do need to go to a hospital,

a lot of our products are going to ambulatory surgical centers. You don't even need to go to the hospital. Potentially, you don't even need to go to a physical therapy location. Potentially, you're going to get detection earlier, which is what we're partnering with the governor, so that you don't need to go through the entire. start cycle. You don't need to spend as much product. You don't need to do all the things I used to do. So that's the real problem we're trying to solve. How do you make the episode of treatment shorter,

how you drive efficiencies, and how you work on the other 85% of the cost of healthcare versus talking about what's happening from a product perspective. Amen. I mean, this is a whole other can of worms. But if there's anything either one of you can do to shed light, I mean, the experience of using health care, even for people who have it, is a complete nightmare. It's incredibly complex. It's difficult to understand. You get turned down for treatment all the time. You're constantly checking with your provider and trying to figure out your deductible and what portion of it is built. And that's just the consumer experience, let alone what you're doing with providers. So it just seems there's so much room for improvement on that front.

And that's the power of the technology we're bringing through AI, through predictive analytics, through understanding the patient early on, before sometimes even she or he becomes a patient and then personalizing the entire care journey. That's what we're doing in orthopedics. That's what we're doing in other areas of Zimmerman and we're just getting started. Arnold, you're going to get shares of the company? They're down. You're down this year. I don't think that Arnold needs shares of anything.

He's got plenty of money. The company is now mine, officially. No, but let me tell you something. You talked about physical therapy. This is another very, very important aspect. And I know that because my girlfriend has elite ortho sport. I love physical therapy. I mean for two different things right now.

So please, go ahead. I agree with you. Which is a huge kind of. of clinic where, you know, hundreds of patients come in every day, and she has like 40, 50,000 patients a year, which is really staggering. But she talks about what you just talked about, which is, you know, to get the right kind of reimbursements for patients from the health care providers. It's really a shame sometimes of how they kind of cut back and make kind of cuts, and it's unfair to the patients, it's unfair to everybody. So this has to be all sorted up. But

I think the combination with having those kind of, you know, magic, which I call magic parts that Zimmer is producing and the combination with physical therapy and to have the right surgeons and all of that is extremely important. I wonder as well, if you take a look at extending somebody's useful life, not to look at this in such an objective or callous way, but this is all about trying to make our quality of lives better, extending our lives and everything else. We are seeing that same kind of thing play out and giving new leases on life towards athletes, actors, if you will.

In Hollywood right now, there's a change that's happened. There's a paradigm shift, right? There's new technologies and everything else. How exactly then do actors like yourself or people who you know in the industry, how exactly do they move forward knowing that they're aging can actually be something that they can work with? And what exactly is the state of Hollywood when it comes to things like fitting into this new type of paradigm?

Well, I think that people are in better shape today than they were like 20 or 50 years ago, because everyone is working out. There is everyone now, I mean, think about that, that 50 years ago, when I started pushing the idea of exercising every day, there were no gyms around. I mean, now every hotel has a gymnasium with life cycles, with stairmasters, and with the ellipticals inside, with weights, with machines, with pories. everything that you can think of every military station every fire station every police station every university every sports team everywhere you go there are gymnasiums

so it has changed that people now are much younger for a longer period of time I mean think about Jane Fonda I mean she's in her 80s and she looks fantastic still and when she was like doing you know the one movie that she did

on Gordon Pond where she was her bikini in her 50s. So that's unheard of. I remember that in Austria when I grew up, people in the 50s were already sitting on a rocking chair and considered old. So I mean, this is how things are changing. So you see in Hollywood people looking better, that they can care of themselves much better. But now with the kind of like things that we, the technology that we have in medicine, you can continue doing the stunts and doing all this stuff. I mean, I now am 77 years old and I'm still doing all the action on a movie. I just finished, you know, Fubar.

Foo bar, yes. We shot for four and a half months in Toronto. I'm going on to now in December to do a Christmas movie. Wow. You know, you just continue on. It's not anymore like the old days. And now I have got my hip replaced 25 years ago. I couldn't ski anymore.

I had problems with making my turns and everything. Now I ski. I'm 77. I'm a ski. I love skiing. And every time I see somebody complaining about their knees or so, I said to them, I said, don't ski in pain or just doing the three runs and then you have to give up because you've swollen knees. No, there's a way of doing this.

There's a better way of doing it. Replace the knees. Then you can go and do their 15 runs again a day. You don't have to worry about it. I know we have to go. But just elaborate. What is your workout regimen these days? Basically every day for an hour, and I work out with the weights around 45 minutes.

and I encourage everyone to keep moving. I'm the movement officer. For Netflix, I was the action officer, and I'm the movement officer, and it's all about moving, moving, moving. Yvonne, before we go, also, you're a corporate guy, much like us, you're behind desks often, you're sitting in an office.

What do you do at the office to try to keep that movement up? What's a tip you can give our audience here, about how you move around? I've been following the encyclopedia of modern bodybuilding ever since I was a young guy in Madrid, Spain. I don't think I'm going to be in a bikini soon like Mrs. Fonda, but I try to stay active. And as Arnold says, it's not a big thing that you've got to do 15 to 30 minutes per day.

Walking down the park, staying active is enough to keep the life moving. We're so excited to be here. We're so excited about the partnership. Thank you. It's time to terminate pain with the terminator. There you go. Gentlemen, thank you both. Absolutely.

It's great to be a new show. Fun chatting today. Arnold Schwarzenegger and Ivan Tornos of Zimmer. All right. Thanks very much, guys. CNBC is extending the deadline to nominate a leader for our 2025 changemakers list. It recognizes women transforming business and philanthropy. You can now nominate a changemaker until November 18th. Just scan that QR code you're seeing on your screen right there or visit CNBC.com slash changemakers. We'll be right back after this.

Welcome back to power lunch. Time for today's three-stock lunch. Here with our trades is Eva Ados, the ER shares C.O. And chief investment strategist. We will start off with Rivian. Those shares are surging. higher today after the EV manufacturer announced a joint venture with Volkswagen in a deal worth nearly $6 billion. Eva, are you a buyer of Rivian? We have this as a hold. There was, as you said, a great JV announcement today, but investors should not assume that this necessarily will go through. In the past few years, we had two major deals that did not go through. Ford backed out of a Rivian deal and Volkswagen backed out of a Ford deal. So in the auto market, it's very common to see that these deals do not go through at the end of the day.

So the stock has been down 90% in the last three years, and the SGNA, the sales general and administrative costs are now equal its gross margin. This is never a good sign. Also, the debt to equity ratio is above 100%. That's another bad sign, although its revenue growth is 23% compared to some. 6% for the category, which is why we have it as a hold and not a sell. It's a difficult market, especially with Aynne Now, well positioned in this Republican administration. All right, let's move along to Kava. That's when we haven't talked about today, and it's making a huge move after its third quarter results. It's up 16% or so at last check. Keeps having the,

well, is that the same cop? Am I mistaken, Eva? Has it? Yeah, look at that. It's during, it's only up by 1% right now. What do you do here? So Calva is a hold. It is a great entrepreneurial growth store. It's in the food market. They have great growth. It's up 220 percent year today. That's amazing. And the total growth is now 43 percent compared to 20 percent for the rest of the category. And the growth per store is great. It's now 18 percent, and that includes new customers as well as a greater expenditure. per visit. So at the same time, though, the enterprise value is now 133 compared to 15 for the rest of the category. So it is well priced. Actually, the valuation is kind of stretched

here, but the revenue growth is double the pier. So that's why we have it as a whole. There are some negatives, some positives. Again, this is a competitive market with very low barriers to entry. So I would have it as a hold. All right, that's two holds so far. Finally, there's App Lovin. That stock has been on an absolute terror this year, up over 600 percent since the start of 2024. It's one of the top holdings in your global growth fund. Eva, why do you like the stock and are you buying more even at these levels? I'm buying more, but I'm looking for great entry points. So our entrepreneur model identified this company in early 2023 as a company on the verge of a breakout. And that's when we got in.

Since then, it's up 11 times, and it helped us reach 54% performance year-to-date for our ER30TTR index. Now, this is a company that has revenue growth, which is double its peers. And the most important statistic here is that their enterprise value to EBIT is half their peers. It's a solid performance. Do we think it's going to do another 600% next year? We hope so. I don't think so. But it is going to be a solid performer.

All right, but thanks very much. Ava Ados with ER shares. All right. So as we talk a little bit about the markets right now, we have the Dow up still, but it's only up 26 points. As Kelly points out to the Kava chart, we're seeing the same thing play out across the entire broader market. The Dow industrials now only up about 23 points.

The S&P 500 is not 5988. It's only up four points right now. The NASDAQ composite is actually in red territory, 19,261, down about 19 points at this stage. Maybe throw up the 10-year yield. I think this is one to watch. Initially kind of rallied. The yield came down after CPI this morning. The line was, well, it wasn't worse than feared.

Well, 445, we've now made that back up, and we're looking to move to the upside. I think this is a space to watch. All right. Well, that does it for us here on Power Lunch. It's good to be here with you guys. Thanks very much for watching with us today.