Power Lunch - Power Lunch - 09/06/22

Episode Date: September 6, 2022

CNBC’s Tyler Mathisen, Melissa Lee and Kelly Evans take you through the heart of the business day bringing you the latest dev elopments and instant analysis on the stocks and stories driving the day’s agenda. “Power Lunch” delves into the economy, markets, politics, real estate, media, technology and more. The show sits at the intersection of power and money. “Power Lunch” gives viewers a full plate of CNBC’s award-winning business news coverage, plus a healthy dose of personality from the show’s anchors and the network’s top-notch roster of reporters and digital journalists. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

Thank you, Brian. Welcome to Power Lunch. I'm Simam Modi in for Kelly Evans. Here is what's ahead. Stocks are falling today as the September swoon continues. All three major averages are lower right now. If the NASDAQ stays in the red, that would mark seven losing sessions in a row. That is the longest losing streak in six years. Is there even more downside ahead and risk for stocks? We're going to talk about that. We'll also be joined by a power player. Tillman Fertita will be here to tell us what he's seeing in his businesses, Inflation, the labor shortage, consumer spending, we'll cover it all. Tyler? Seema, thank you very much and welcome everybody to Power Lunch.

I'm Tyler Matheson. Stocks have once again turned lower after briefly peaking into the green. As Seema mentioned, the NASDAQ is the one to watch, trying to snap a six-session losing streak, down 8% over that time. But right now, as you see, it is off about three-quarters of a point. Today we're seeing declines in media and entertainment stocks, notably. What Netflix, Warner Brothers, Discovery, Warner Bros. Discovery. Warner Brothers Discovery, it's all one company now, among the worst performers on the S&P 500. Alternative energy stocks, they are higher, end phase expanding a distribution deal over in Europe

and next era upgraded by Morgan Stanley on hopes for hydrogen. Well, as investors try to figure out the Fed's next move, our next guest is bracing for further rate hikes. He says inflation poses the greatest risk to risk assets. Joining us now with his outlook for the market and some top picks, Mark Lushini, Chief Investment Strategist at Janney Montgomery Scott. Mark, welcome. Good as always to see you. What do you think the Fed will do? Are you in the idea that they're going to raise by three quarters of a point or a half a point?

They do seem sort of hell-bent on crushing inflation. Well, they really do, Tyler. And I think the old adage don't fight the Fed is certainly in play at the moment. They seem to make it very clear, particularly Jay Powell's brief speech at Jackson Hole. that their commitment is unconditional, and they're willing to cause some pain in both households and the economy relative to loosening up labor conditions to relieve demand from swamping supply and therefore provide a release valve, if you will, for the elevated inflation readings we're seeing. So I do worry that as a consequence of their effort to do that, unless what we've seen recently giving some evidence that perhaps inflation is receding off of its peak levels, doesn't develop either as a pattern or come down as quickly as perhaps the Fed would like it to otherwise see, then they're going to keep on their campaign to raise heights and talk of three and three quarters to four percent on the overnight rate is a non-trivial risk for the market. And I think you're seeing that reflected in equity investors' opinions. With that in mind, with an inverted yield curve in mind,

is there any way we avoid a recession over the next six to 12 months? Well, I think there is a path for that, Tyler. However, it's exceedingly narrow. Obviously, one only has to look at the labor market as evidence of the fact that employers continue to hire. The Joltz surveys showed that job openings outnumber unemployed two to one. We continue to see employment ranks increase. That's certainly good news.

Also, the fact that the labor force participation rate actually rose, giving some evidence that perhaps the wage gains that the Fed would be concerned about may also help to subside inflation readings. And so collectively, like we saw in this morning's release of the ISM services numbers, the consumers still are well-endowed and are more inclined than not to continue spending. And in that environment, perhaps we can overcome. the threat of too tight Fed policy may thwart what is still a non-trivial risk of a recession and as a consequence allow for this so-called soft landing to occur.

Yeah, I think it's one of the big questions is how much more pain do we need to see in the labor market for the Fed to get inflation down to its 2% target? We are one week away from the next CPI report, which will tell us whether inflation has in fact cooled similar to what we saw in July or if it in fact is continuing to be continuing to get worse than expected. With that in mind, Treasuries, we're seeing some of the highest yields in years. Would you be a believer in shifting some of your capital away from equities and into fixed income? Well, Sima, we've advocated reducing equity exposure to a level that is congruent with one's risk budget.

In other words, target weight on equities within a balanced portfolio. And to diversify, including sectors like energy, which has its own idiosyncratic tailwind, along with more defensive sectors, as the playbook would suggest you should into an economic slowdown. Having said that, I think with yields having backed up the way they have to 3.34 or so on the tenure, I think there may be some offerings or opportunities within the fixed income market that would allow perhaps for some of that capital to be treated better if, in fact, we see this evolution of the economic slowdown come to pass, even if we avert a recession, which suggests that yields from these levels should in that environment, at least on the longer-term maturity spectrum, work their way lower.

All right, Mark, we'll leave the conversation there. We appreciate you joining us today with the Dow, currently down 157 points. Mark Laskini. Thank you. Let's turn to energy. Europe's energy crisis escalating and the worst is still to come. That's according to the CEO of German gas giant Uniper, who warned of a broken relationship with gas prom after Russia suspended gas supply to Europe indefinitely in response. to economic sanctions. Adding fuel to the fire, OPEC will cut production by 100,000 barrels a day, just one month after it pledged to increase production by the same amount. Let's talk about it with

Chris Wright. He is a CEO of Liberty Energy to discuss the European escalating crisis around energy. Chris, to many, this is clearly an indication that Russia is seeking to force Europe to lift economic measures. The question is, will it work? Do you think the Europeans will cave? I don't know if they'll cave. I think the temptation will be strong. The cutting of the gas on Nord Stream 1 is just a massive move. Natural gas is the largest source of electricity in Europe by a fair margin. It's the dominant fuel for industry and home heating. And via fertilizer, it's the most important ingredient for agriculture. So this is a significant threat to society in Europe. It's going to be a rough winner. And what does this mean for the U.S.? I mean, many people would say this is just a European problem, but we are seeing natural gas prices continue to hit historic highs. Brent crude now above $90 a barrel.

California weighing the option of potential blackouts as it deals with this new heat wave. Absolutely. There is ripple effects. And as the European industry shuts down, a good part of their industry will shut down this winter. That's inflationary effects across the industry. I've Russia plays politics with cutting back oil. exports, we could see oil prices double from where they are today. So yeah, these things have global ramifications. So what do we do? Well, the best thing we can do, and we're marching slowly in that way, is to increase our ability to export natural gas. United States past Russia as the largest

source of natural gas in Europe, but there's only so much LNG we can send to Europe with our existing infrastructure. But with more pipelines and more LNG export terminals, We can send a lot more natural gas. But that's years from now, isn't it, Chris? It's not going to help this winter. That's years from now. That's absolutely true. That's a long-to-a-medium-term problem.

In the short-term, we certainly want to encourage more natural gas, I mean, more oil production in the United States and natural gas liquids. We can send propane on tankers today. So more natural gas liquids, more oil out of the United States. That keeps a little bit of a lid on this energy. crisis that frankly has been brewing for years. Putin didn't start it. He's just capitalizing on it. Let me ask you this. Do you think, I think Seema sort of got at it there a moment ago, do you think the weaponization of energy by Russia is going to lead to a fracturing of the coalition

that has heretofore stood rather resolutely against Russia with respect to Ukraine? Well, at some level, it already has, Tyler. Germany is giving less economic aid to Ukraine than Estonia. So the Germans are not all in in defending Ukraine. They're not there on Ukrainian side, but they're not doing a lot. They're trying to not look provocative to Russia. It hasn't worked clearly. But the United States and United Kingdom, the dominant suppliers have stood steadfastly behind Ukraine. This is against Russia's interest. Things aren't going well for Russia. I think at the end of the day, Russia becomes five years, ten years from now, Russia is sort of a client-state commodity supplier to China and certitiously to the rest of Asia. But yeah, this is a change in world geopolitical alignment that we are seeing unfold right now. So what's the answer here? Does the U.S. just continue to lean more on the Middle East? We had a headline this morning that U.S. reserves of crude oil have now fallen to the lowest level since 1980.

That's a domestic problem. We're by far the largest producer of oil and natural gas in the world. We are a net exporter of oil and the second largest after Russia exporter of natural gas in the world. So the U.S.'s energy situation is mostly in our own hands. Just slightly less obstructive policies in the United States and the ability to build more pipelines and more energy infrastructure in the United States would build confidence and would spur growth in more U.S. oil and natural gas production. We're going to be a winner out of this geopolitical alignment with our local domestic sources of energy from oil to natural gas to natural gas liquids. But to be a bigger winner, we've got to avoid the hostility towards hydrocarbons. That's what got Europe in this position to begin with

and not go down that road of expensive, unreliable energy that ends out just exporting your industries overseas. We're kind of headed the wrong direction, but it's far from too late to change the tack. Chris will have to leave the conversation there. Always great perspective. We appreciate your time. Chris Wright, CEO of Liberty Energy. And be sure to catch our CNBC special energy emergency hosted by Brian Sullivan tonight at 6 p.m. Eastern.

Coming up, Power Lunch, the Biden administration making big moves this summer, the Inflation Reduction Act, student loan forgiveness. The midterm elections right around the corner. But will voters have money on their minds over social issues dominate their decision-making? We are speaking a big money moves as well. The dollar continuing to strengthen 24-year high against the yen. Half parity with the euro, what it all means for markets and your money. Plus our power player, Tillman Furtita, will get his view on the economy, what he sees in his various businesses. Power Lunch, we'll be right back.

Welcome back to Power Lunch, everybody. We are in the home stretch to the midterm elections. Labor Day really marks that home stretch. is beginning, about two months away now. Democrats planning to tout their pro-business agenda to sway voters. Elon Moy joins us now with more. Hi, Elon. Well, hi, Tyler. You're right. Campaign season is now officially underway, and Democrats are kicking it off in part by celebrating some big corporate investments in key swing states. The big one, of course, is Intel on Friday President Biden plans to attend the groundbreaking for the company's $20 billion facility in Ohio,

which he promised would create thousands of jobs with six-figure salaries. But that's not the only one. Treasury Secretary Janet Yellen will travel to Michigan and North Carolina this month to talk about clean energy. The administration's been touting Toyota's new $2.5 billion EV battery plant in the Tar Heel State. And in Arizona, where Democratic Senator Mark Kelly is fighting to hold on to his seat, Corning is building a new fiber optic plant as AT&T looks to expand Internet service there. That plan is scheduled to open in 2024 and create 250 jobs.

Now, on the trail, you're still going to hear candidates talk about how corporate America needs to pay its fair share in taxes. But that fight is basically over for now in Washington. Instead, Democrats are framing these investments as the fruits of their legislative victories, like the Chipsack, the Inflation Reduction Act, and that infrastructure law that passed about a year ago. So, guys, Democrats want to show voters that they can work with businesses and bring home, jobs ahead of the November elections. Back over to you. Fascinating eight weeks ahead. Alon, thank you. For more on the midterms just two months away, let's bring in Libby-Centrell, head of public policy at Pimco and Libby. You say the odds are

still in favor of the Republicans winning the House, but you say the Senate, the Senate, is looking increasingly difficult. Tell us why. That's right. And good afternoon. Yeah, so usually the party out of power does typically, typically does pretty well in the midterm elections, on average, the party out of power wins 26 seats in the House, four seats in the Senate. That's since World War II. However, in a big however here, in the Senate, particularly given some of the dynamics and battleground states such as Pennsylvania, Wisconsin, Arizona, Ohio, the candidate's selection

matters a lot. And what we're seeing here in terms of sort of the polling on the ground is that. that Democrats are actually doing quite a bit better. Now, with the big caveat that we are, you know, nine weeks before the general election, so a lot can change. And if passes prolog, usually Republicans improve in what's called the generic ballot.

But at this point, at this point, the Senate does look like it, you know, kind of leans Democratic. Now, I think the bottom line for investors, though, is that even if Democrats are able to keep the Senate, they will not be able to have a filibuster, approved majority. And so, you know, whoever, whichever party controls the Senate will be a very thin majority. So from a policy perspective, it doesn't change all that much. But again,

Democrats are doing quite a bit better, at least in the polling, than they were in, say, May or June. Let's talk about the issues that you think will define these races for House and Senate. We know inflation is a big one. We know gas prices are very easy to grasp onto, but they've been coming down. We know the country's direction. Are we going in the right direction or the wrong direction? That's one. But there is also the overturning of Roe versus Wade. As you rank these issues in terms of how telling or important they will be in who controls these two chambers, how would you rank the issues? Yeah, look, Tyler, I mean, voters still very much care about the

direction of the economy, about inflation. There's sort of this axiom in politics, gash gas and groceries. Voters see a gallon of gas. They see a gallon of milk every, every week usually. So those very much loom large for voters. And that's, you know, why I think the conventional wisdom in May and June was that Democrats would do quite poorly because inflation and, of course, gas and grocery prices were up then. Now that you see those, though, retreating and they still are, you know, quite high, historically speaking. But you see those retreating. And then very importantly, you see some of these social policy issues, particularly the overturning of Roe v. Wade. And that sort of recast the election as not so much a referendum against the Democrats, but more as a choice between Democrats and Republicans. And that very much benefits, you know, Democrats. So in terms of kind of the issues for sure inflation and the economy still very much matter.

But again, some of these social policy issues have become much more important, particularly for some blocks of voters that are very important, especially suburban women who are sort of the quintessential swing voter. They helped to get Joe Biden elected, but they also have helped some Republicans get elected as well. So, you know, all lives will be on that group in particular. And I failed to mention crime and gun violence in that list of various issues, which are all right. also obviously percolating and very much a part of sadly our society right now, the violence. All right. Shall we leave it there on that happy note? Libby, great to see you. Thanks so much, Tyler. Nice to see you. We'll see again before the election time. All right, here's what's further ahead on the program. Today's working lunch. We highlight the cybersecurity firm Octa.

That stock struggling down 32% so far this month. Plus Verizon has raised its dividend for the 16th consecutive year. year, but with the stock down 20% this year, is this a yield trap? That and more in today's three-stock lunch. Welcome back to Power Lunch. A major hit today for the SPAC attempting to take over Donald Trump's social media startup. Digital world acquisition falling about 16% today. It's trying to get shareholders to approve an extra year to complete the deal. If not, it could have to return money to investors. Today, it adjourned the shareholder meeting after two. two minutes saying it will keep counting votes. Let's now get to Aiman Javers for a CNBC news update. Good afternoon, Amy. Hey there, Seema. Jewel Labs says its new $439 million

settlement with 34 states and territories is a significant step toward resolving accusations. Its marketing targeted young people. The deal was announced today by Connecticut's Attorney General. Jewel still faces nine suits from other states and hundreds more filed by individuals. President Biden will be heading to Detroit tomorrow to highlight what the White House calls an electric vehicle manufacturing boom in the United States. Today, as he began a meeting with his cabinet, Biden said he plans to speak to Liz Truss, Britain's new prime minister, later today. And beachgoers enjoying the Labor Day on the Jersey Shore gathered for an unusual sight.

A man who bought a sailboat just three weeks ago says he put it on autopilot as he went below deck to use the toilet. But he says the autopilot shut off, beaching the boat around 4 a.m. Monday morning, look at that right on the sand there. It was towed away hours later. One curious onlooker told her reporter that she likes to watch people, but watching a beach boat is even better. Back over to you. Mistake he probably won't make twice. End of the summer anyway, right? End of the summer story. Thank you very much. We appreciate it. Right ahead on power lunch, power player, Tillman Petita, from inflation, a lack of workers, rising interest rates. Well, look at how his businesses are

dealing with it and ask if the economy or the consumer is actually slowing. Plus, what's not slowing right now, the dollar. The green vaccine biggest moves higher against the euro, the yen, and even the pound. We'll look at what it could mean for some of the big international names. Power lunch, we're back in tune. 90 minutes left in the trading day. We want to get you caught up on markets, stocks, bonds, commodities, and a look at the consumer with Power Player Tilman Furtita.

Let's first take a look at how stocks are fair. and we're off the lows of the day. The Dow currently down 133 points. NASDA currently down about three, about a half a percentage point. So we are off the lows of the session. Let's go to the bond market where yields are continuing to rise with two-year yields. Now at the highest level since 2007, Rick Santelli here with us. Look at why bonds are moving so much.

Rick. Yes, indeed. As a matter of fact, you have it. November 2007, you see it on the chart. Here we are up 11 bases. points a whisker under 3.5%. And one of the reasons, of course, is that the Fed in September is most likely going to raise three quarters of 1%. Could be the third three-quarter point increase in a row, and the market is making its adjustment. And the curve is steepening today, because it isn't the

two-year yield that are zooming ahead fastest. It's long-dated treasuries. Right now, you're looking at seven year and 10 year of 15 basis points, as you see on this chart, starting in June, because we are still getting close, but not quite ready to take out that June 14th, high yield close, just a bit below 3.5% for the 10 year yield. The curve is steepened about three basis points and come a long way. Steeping might not be the exact correct terminology. How about less inverted, especially if you're looking at twos to tens. Now, it isn't only in the US, all yields are going up. But maybe in the UK where the energy crisis

is really coming to a head, well, it's 10 year, closed around 3.10%, 310%. That's the highest in 10 years. And if we look at the foreign exchange markets, dollar is king. The dollar index on pace for another fresh 20 year high close. And if we look at the component parts, 1985, we're getting very close to levels

in the pound versus dollar that we're we haven't seen since the mid-80s. That would be close to 40 years. And if you look at the Euro versus the dollar, definitely on pace for a fresh 20-year low where the dollar index hit a 20-year high. And finally, the dollar yen today on pace for another in a row, fresh 24-year low close against the dollar. And all this, of course, is happening for a variety of reasons. Energy crisis in Europe and U.S. interest rates are moving up aggressively. Back to you. these historic milestones being hit. Rick, thank you for summing it up. Oil closing for the day, it's been a volatile session as OPEC cuts production, gas prom pipeline remains offline. Pippa Stevens,

though, here with the details. Pippa. Hey, Seema, it's been a pivotal few days for the energy market, starting with oil, OPEC and its allies agreed yesterday to cut production by 100,000 barrels per day beginning in October. Now, this is not a meaningful amount, but as RBC noted, it's important because it signals the group's willingness to respond to price dynamics, or as the firm put it, active market management. Brent crude is down 3% at 9289. WTI is about flat on the session. The difference in those moves is because WTI didn't have a settlement price yesterday, so it is trading against Friday's levels. Now, moving over to gas, gas prom shutting down flows through the Nord Stream 1 pipeline indefinitely. That's then, prices jumping yesterday. although the contract is now down. But still, Ryestad Energy saying that winter is coming

with the firm predicting one of Europe's most challenging few months in decades. U.S. natural gas also tumbling down about 7%. Production is up and an early start to heating season is being challenged SEMA by warmer temperatures. Back to you. Actually, I'll take it from there. Thanks very much, Pippa. Now time for our power player from inflation to the potential for a slowdown to a lack of workers. chain issues, he deals with all of them in his hotels, casinos, and restaurants.

Is Tillman Fertita back with us now for a special treat. Thank you, Tillman, for joining us. We appreciate it. Hey, Tyler, that sounds pretty negative. Well, I don't know. We're going to get there. I'm going to ask you just to tell me how business is by segment, by region, by type of business. So it's really interesting.

High-end is off a little bit. But tourism is up because we didn't have the European traveler last year, and we didn't have traveling near as much as we do this year. So that's all kind of come up a lot. And now that high end, because of all the PPP money, most people have spent it all at our high-end restaurants, and so that's a little off now. But overall, sales are really strong.

We continue to be extremely busy, but then we go into all those negatives that you just, said. And natural gas, you know, has been at an all-time high, so our energy cost alone was up over a million dollars just in August. And of course, hourly wages are up over 10% compared to last year. There is no need for minimum wage anymore. It's way, way, way above where people ever want at minimum wage. So then you have, you know, the energy that everybody who delivers something to you puts a surcharge on. it. So cost are high. It's exactly kind of what you said, but yet business is still good.

Casinos, business is good. Casinos, business is good. Good. So let me ask you about that. When you see rising prices of the inputs like food and other things, how do you have pricing power to put it through? In other words, I'm going to restaurants and I'm seeing most in the higher-end restaurants, the steak is not. now $65 minimum on its way to 100 for some cuts. Do you have pricing power to do it? Let me just say this. I think we're running out of pricing power. And part of the reason that your same store sales is so up is because of pricing power over the last 12 and 18 months. But at the same time, everybody's wages are a lot more. But you're right. At a high end,

restaurant now, you can order an 8 or 10 ounce filet and be paying $65. But remember, we're paying $25 for that steak. And then we have the waiter that delivers it costs so much and the cook that cooks it. And occupancy has gone through the roof for restaurants. Any decent restaurant location now is $500,000 a year just in rent. So costs continue to rise, but business is good. CMA, I'm curious in the latest August jobs report, we saw the hospitality sector at around 31,000 jobs, which was less than some of the other sectors like business services, healthcare and retail. What are you seeing on the labor front? Is it still hard to find new workers, or is that easing?

I'll continue to say, when you go into a restaurant today, you should always expect good food, but service is not going to be what it was. I got a report on front. Friday that we're short 250 managers and 2,800 hourly. Okay, that's for 500 restaurants. Okay, so just take that and that's what it takes to operate when you're full on a typical night. And so there's a tremendous shortage. A lot of people have just left the industry.

I don't know what they're doing, but they've definitely left the industry and realized, you know what, I don't, we can't even get people to go to work nine to six Monday through Friday. So how do you think hospitality people think when they say, wait, why am I working at nine o'clock when a Saturday night? Why am I working on Christmas Day? So I think a lot of people have just left the industry and are not coming back. Why do you think that is if you point out earlier and it's true that wages have gone

up? Is that the only lever you have to get people to come back, is to pay them more? and more and more, but at some point, you can't. Well, we are paying them more and more and more. But go back to what I just said, Tyler, is that people learn not to work and go to work every day. It was all about today, all the Wall Street firms telling everybody to come back to work in New York and all over the country.

So think about a waiter who doesn't want to work or a cook who doesn't want to work at eight o'clock on a Saturday night when all their friends are going out. And so they're finding other things to do so they don't have to work when everybody else is out play. You raised something that I wanted to get to, and since you opened the door, I'll go there. And that is, what has your policy been? Obviously, you have a lot of hourly workers who have to be in place to do the job. But in your, I call them back office functions, what has your policy been on return to office? How are you handling it?

We never left the office. Well, you are in Texas, so I guess that's... Right. I mean, that's where our corporate office is, and that's kind of, we kind of followed the state. But at the same time, we've had an extremely good productive two and a half years because we were in the office. And I'm not saying that if you're not in the office, you're not, and let me tell you something. I believe that when somebody has something personal to do, especially mothers need to be at

their kids' functions. dads have got to be at their kids soccer and baseball games and football games. I believe in family lifestyle companies, and I'm one of them, but also expect you to be in the office every day to work. Yeah, I think those of us who work in TV, we agree with you. This peak inflation narrative, Tillman has raised, has gotten some traction in recent days, especially with the drop we've seen in gasoline prices. We're down about 20% compared to early summer. What are your thoughts?

Has inflation peaked? It sure looks like it has peaked and we sure hope that it is peaked because you're going to see it's been a great summer. Okay, so now we're going to see this, you know, October, November, December, September, what's going to really happen? Now remember, we're going to do better than last year in the fourth quarter because of the fact that if you remember, we had an Omicron scare. And so you're going to look at same store sales and they're going to be better.

good, produce and products, your proteins and everything seem to be flat right now except for prime. Okay? But what's going to happen is your labor costs are still so high. So look for sales to be good, labor to be up. You're going to see, I think, strong sales in the fourth quarter from all consumer businesses, but the profitability is going to probably be the same or a little less, even though we're doing a lot more business.

Interesting. Very interesting. Tillman, as always, we appreciate your time. Tillman, for you. Thanks, guys. You bet. Coming up, today's working lunch, John Ford will be bringing us his interview with the CEO of cybersecurity firm, Octa. We'll be right back.

Enterprise software stock still under pressure after an earning season that saw more companies report delays in closing deals. This week, John Ford brings us an up-close one CEO who says he's learned to be clear when there are problems. John. Yeah, hey Seema, Todd McKinnon's co-founder and CEO at Octa, an identity management and security company. Now, ACTA stock fell hard last week after he said the company was having trouble digesting a recent acquisition. Todd has faced operational trouble before in Acta's early days, and he says it forced him to change his approach, which had been to project that he had everything totally under control. That second year in the job at Octa, my instinct was, my instinct was show no weakness, show no problems. because if this company has problems, it's my fault.

I'm the CEO, I'm the founder. I shouldn't have let it had problems. And that was my instinct. That instinct turned out to be totally wrong. The right way to do it is like, team, here are all the problems, and there are a lot of them. And I trust you and I have confidence in you as co-owners of this to help us get through them. And my first reaction was like, oh, that's going to scare everyone away.

And it did scare a few people away. There are some people that bailed out on Octa during that second year. But it had an amazing being open and transparent. and showing them the situation we were in and showing them the possible ways out of it and some of the risks was galvanizing for the rest of us. Now, when I spoke to McKinnon on Tech Check earlier this week, some of that mindset was on display.

Even though the quarterly results mostly beat expectations, he pulled in revenue projections saying some salespeople were leaving, which had slowed momentum. Yeah, we have had a little bit higher than average attrition in the sales team, and that is driving some of the near-term mixed results. I think when you look at the quarter, though,

I think there are salespeople being successful at Octa. We had a record number of million-dollar-plus deals in the quarter. So we had great customer retention, our net retention for customer, which is really emblematic of customer success, is 120% plus. So there's a lot of success going on. But when you think about trying to reach this new buyer and bringing two sales forces together in service of trying to broaden that appeal in the C-suite of every, organization in the world. That's challenging and a little bit more challenging than we thought it

would be. So we're going to work through those issues and move forward. McKinnon was also an early executive at Salesforce, rising to head of engineering at one point. He told me he learned from Mark Benioff how leaders can talk about the future, even though it doesn't exist yet in a way that motivates a team to move forward. Given the choppy economic waters were in, he's probably going to need both the transparency and the vision to move on from here, guys. Yeah, I was curious, John, there was a note from Guggenheim last week that really laid it out, right? They said, Octa is a company in disarray. As McKinnan mentioned to you, Salesforce attrition historically high levels. They also talked about how the co-founder and COO is taking a year sabbatical. Their chief project officer is departing.

What is he doing really to turn around the company over the next three months here? Now, Seema, Todd would argue that that net revenue retention number shows that people who were paying, companies that were paying for the product a year ago, are paying that and more now, which shows product quality and customer satisfaction. So he would argue that the product isn't broken. Also, they had some security issues earlier this year, you might remember. The company's arguing that they're hearing about that less and less from customers than that actually that's had no quantifiable impact on revenue. So he's arguing that maybe some of the problems have been blown up to be more than they are. But of course,

The street's going to continue watching that from here. What is OCTA's edge in what is increasingly becoming a crowded security and authentication marketplace? Tyler, I would say it's focusing on identity versus historically the security market has been trying to, well, not trying to, but has ended up in its pitch sort of being more fear-based. Well, you know, if you don't install this, here's what's going to happen. Octa's sort of unique approach from how it started is this is really about managing the identities of people. in the organization who's allowed to access what. So it's a little bit more proactive about productivity versus being about fear. All right, John, thank you very much.

John Ford, we appreciate it. Always interesting. All right, coming up, the biggest dividend payer in the Dow, the big call on FedEx's future and the stock that could rally 100%. That's a double. Double your money all ahead on three-stock lunch. All right, welcome back, everybody. Time for today's three-stock lunch.

We're going to look at some of today's biggest headliners, Verizon, which on the day it named itself Verizon. I didn't know better. I called it Verizon. But that was a long time ago. It used to be Bell Atlantic. Raising its dividends, 16th consecutive year and has extended its lead as the highest yielding Dow stock. That's not always a good thing.

FedEx moving lower following a downgraded city. The firm saying macro pressures could impact earnings growth and Stiefel reiterating its buy on Norwegian cruise lines. Seema knows a little bit about this one, saying the stock could survive nearly, serve up nearly 100% surge 100% following recent weakness. Here to help us trade them. Craig Johnson, managing director, chief technician at Piper Sandler. Craig, welcome. Let's start with Verizon high dividend, raising it again, but it is 25% lower than when it began the year. You know, Tyler, you look at the stock and it's very clear looking at the chart that you're still making lower lows, lower highs in here. And the stock right now is sitting at a 52-week low.

Yeah, the dividend is attractive. But again, at this point in time, we've got to really see the chart sort of set its footing in here before you can really get excited about Verizon stock in here. So from my perspective, I think you get to avoid this name until we can actually find support in the shares itself, Tyler. Craig, what about FedEx? Shares are down about 21% this year. So when you look at FedEx, it's sort of consolidating in a range, upper end of the range. is around 240, lower end of the range is $200.

And from our perspective, the stock is getting oversold. But I really want to see some sort of indication that at the very lower end of this range, that the stock is going to kind of bounce and start to rally off of the lower end of the range. We are below a declining 50, 200-day moving average. So technically at this point in time, the best you can hope for is some sort of oversold bounce at the lower end of the sort of trading and consolidation range for Fed. Well, let's move on to number three. That would be Norwegian cruise line. What do you think here? Norwegian cruise lines. It's been sort of a tough stock at this point in time, down 36% year-to-day,

widely underperforming many of the broader averages in the market at this point. But here's the thing I see a little glimmer of hope here, Tyler, is that the stock is now starting to make an emerging sort of new uptrend here in the shares. And if you look at that uptrend and you compare it to where the long-term resistance comes into play, that's around 1650. So from my perspective, just looking at where we are now, we could probably see a nice trade back up to 1650, which is around 20 and change percent upside from here, and probably looks among the most attractive among these three stocks here today for lunch.

And the stock is up today on a note from Stiefel, upgrading the stock to buy following the new launch of a new ship. In comparison to Royal and Carnival, you would still pick Norwegian, or is there a better buy within this space? I think Norwegian is fine at this point in time. A lot of them, a lot of those names look the same. There's been tremendous amounts of adding of debt to the balance sheet to keep these companies afloat, shall we say, during the pandemic. And they've diluted their companies quite a bit. But overall, they look all about the same. I think Norwegian or royal, probably among the two more constructive

of the kind of big three names out there. Let's widen out our lens a little bit, Craig, and get your thought on the market generally, down 212 points on the Dow right now, as we have begun September, which is seasonally not a particularly good month, neither really is October. What do you see between now and your end? Tyler, all I'm seeing and hearing from people at this point in time is a tremendous amount of negativity. I haven't seen investors this negative on the market in quite some time, and I can understand why they are negative, the challenges that you have in Europe, the downturn that we've seen in the broader markets here to date, interest rates that have been going higher, the curve that has inverted, all these things. But here's the thing

that I find interesting, is that the market is reflecting a lot of this. Some of the indicators that we've looked at, Tyler, they're tremendously oversold. There are levels that we rarely see over the last 50 years. And when I see levels this low, I start leaning into the negativity, and this is where I want to start buying things. No change to my year-it objective of 4775. Yeah, you know, I was going to ask you as you started to answer there. Well, is all that negativity actually a good thing and you answered it? Craig, as always, great to see you. Thank you.

All righty. Up next, we will put the surging dollar under the microscope, what it means for your investment. That's come up. Welcome back. Let's talk about these historic moves in the currency market and what it means for your money. Now, as the Federal Reserve tightens, Japan continues to ease. That's why we're seeing the yen at a 24-year low against the U.S. dollar. And I'll say that could challenge U.S. companies with exposure to Japan.

We look through facts at Industrial Supplier at W.W. Granger with 13% of its revenue made in Japan. Vistion, automotive electronics supplier, and a manufacturer's Nordson and Allison Transmission. These are some of the names to keep an eye on. They collect revenue in Japan. So what happens when the dollar is stronger is when they convert that back into dollars, you're basically bringing in less revenue. And it's not just Japan. The UK currency at a 24-year low against the U.S.

dollar as the economy there softens and inflation remains at the highest in decades. U.S. companies with exposure to the U.K., according to Goldman Sachs, Newmont Mining, with 69% of its revenue generated there, eBay, Etsy with high exposure to the U.K. The weaker currency is also pressuring U.K. equities. It's not so much the Futsi 100, which tracks multinationals. Remember, they benefit from a weaker pound, but it's the Futsi 250, which tracks the domestic companies. That really tells the story you'll see down nearly 20 percent so far this year.

The euro certainly challenged by all of this, trading at a 20-year-low against the U.S. dollar today as we await the European Central Bank to make a decision on interest rates this Thursday, Tyler. The expectation is somewhere between 50 to 75. The euro at parity to the dollar sure makes it easy if you're traveling there. If it's 500 euros, it's $500, basically. But as you point out, U.S. companies that are doing business in Europe or in England or Japan, they're bringing back fewer dollars for each transaction because the dollar is so much stronger. Exactly. So this becomes a big headwind for all of these multinationals. It really questions whether diversification makes sense in an environment where central banks are not on the same page. Yeah. Falling dollar is better for multinationals who want to be.

get more dollars back when they bring them back. All right. Thanks for watching Power Lunch, everybody. Glad to have you with us. Great to be here with you, Tyler. Closing bell begins right now.