Power Lunch - Power Lunch 10/26/23

Episode Date: October 26, 2023

CNBC’s Tyler Mathisen and Kelly Evans take you through the heart of the business day bringing you the latest developments 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 pcm.adswizz.com for information about our collection and use of personal data for advertising.

Good afternoon, everybody. On this very interesting market day, welcome to Power Lunch, alongside Kelly Evans. I'm Tyler Matheson coming up. Earnings, stock sliding as the markets react to earnings. We will process what we've heard so far, preview what's yet to come and break down what it all means, especially in tech where future spending is really in focus. Plus, Sam Bankman-Fried, he of the good hair, set to take the stand in his own defense. Could this strategy pay off or backfire? We'll get the latest from the trial and our legal expert will weigh in Kelly. I heard he got a haircut too, but we'll see. Let's get a check on the market. Speaking of haircuts, the NASDAQ losing the most ground today, down about 1.5%. We're a little off session lows at the moment as we check on the S&P down nearly 1% and the Dow down about half a percent at the moment.

Concerns about big tech spending following comments from meta. We'll have more on that coming up with meta stock down about 5%. We'll also talk about another big worry for the markets. the consumer. Mastercard cutting revenue guidance on signs spending is starting to slow. That's a 5% drop. World Pool, as Mike Santoli just mentioned, down 16% on a guidance cut as consumers cut back on more expensive items. And the toy makers, Mattel and Hasbro, both reporting. Both stocks getting hit hard. Both warning about the holiday quarter, Tyler, their shares are down 7 to 10%. As you noted there, the NASDAQ off its lows of the day. As we mentioned, down more than 1.5% nonetheless.

Mehta's results in commentary weighing up. on that stock and on the tech space more broadly. Steve Kovac joins us now to break it all down. Steve. Hey, thanks, Tali. Yeah, Meta shares falling today on comments from the CFO that the company has some softness in ad spending at the beginning of this quarter after the war between Israel and Hamas broke out early this month.

That commentary overshadowed a largely positive quarter and caused Meta to issue a wider than normal revenue guidance range due to that uncertainty. Company expecting fourth quarter revenue to fall between $36.5 billion and $40 billion. Meantime, that Metaverse division continues to lose gobs of money, a whopping $3.7 billion in just the last quarter ahead of the launch of its latest VR headset, the Quest 3. Medis has expected those losses to continue well into next year. But the tech world has moved past the metaverse. The real question is around where Meta fits into the AI space. That ties into META's cost cuts and other efficiency efforts we've seen this year.

Company plans to spend more on capital expenditures next year up to $35 billion as it seeks to build out new data centers and other infrastructure to support other AI products. But the midpoint of its spending outlook is below Wall Street's estimate guys. So the market reacting very sort of negatively to this. Was this report as disturbing as the market seems to make it? No, because the advertising business is booming reels. That's their TikTok competitor, is performing a lot better now. It's becoming kind of the standard format on Instagram. So all of these engines are humming right along. It's really those comments, it's similar to what we heard from SNAP the day before meta earnings, where they said, you know, there's just an uncertain environment as war breaks out in the Middle East. All right. Steve Kovac, thanks very much.

And meta's outlook for cap-back spending, sending shivers throughout tech. chip stocks and software names are also getting hit today. Christina Parts and Nevelas has the details. Christina? Thanks, Kelly. Well, as Steve points out and you talked about the year of efficiency for meta continues and that lower capex for 2023 and 2024, has investors worried that that means less revenue for Nvidia,

Arista networks, and pure storage. All three companies fell after meta earnings came out yesterday. Invidia is almost 20% below its 52 week high, but the reaction may be overdone because in September, so just a month ago, meta highlighted plans to spend on over 60,000 graphic processing units, GPUs from Nvidia, and given there is currently still a GPU backlog, Meta may actually have to be forced to push out their GPU spend next year.

Arista, which makes Ethernets and routers, is more reliant on meta, actually. In 2020, 26% of its revenue came from meta, and its revenue boomed almost 50%. But some of that meta-Cap-X weakness could actually be offset by, continues spending for Microsoft. Microsoft actually contributed 16% of Arista's 22 revenues and said just this week it was spending heavily on data centers, compute, and networking. City analysts suggesting today that investors should actually buy this pullback in Arista stock. And then Meta's KAPX pullback also impacting names like Cisco Systems, since it's an Arista competitor, super microcomputers, and then pure storage, which helps with generative

AI flash storage. And I'm saying again that this might actually be an overreel reaction since pure storage said it's 2024 projections do not account for orders from meta, which means if meta cuts back on CAP-X, it may not actually impact them. So again, could be a buying opportunity. And that GPU backlog, Christina, how's that looking? Oh, I don't know if you remember four months ago, Elon Musk said GPUs are harder to get than drugs. It seems like this is still very topical within the tech world.

Hyperscalers, for example, Microsoft, just a month ago, CNBC broke a story that Microsoft is spending billions on renting GPU space from a company called Corwee because they can't get their hands on enough GPUs to keep running open AI. So this is still a problem for a lot of these hyperscalers going into 2024, which is why maybe that KAPX spend may be lower this year, but could increase next year once things start to get going with this backlog. And I like to point out for those techies that are listening, the backlog has to do with the packaging and not the actual GPU wafers themselves.

And that we know from TSM's recent earnings report. All right, Christina, thanks very much. So tech is tumbling, maybe big tech, most especially. The NASDAQ down 5% in October, even though earnings have been pretty strong so far. Rising yields, worries about a slowdown. Those are among the reasons tech is selling off. And to put it all in perspective, as we await Amazon results later today. Let's bring in Deirdrbosa. Hi, Dee.

Hey, so, Tyler, let me put this most simply. It's the year of efficiency versus the year of AI hype. Layoffs or slowing higher-in cost cuts. That came first, the mega-caps, clearing the way for the rising cap-back, Stephen Christina, we're just alluding to. But now the street may be getting nervous, again, about margin erosion and weighing the promise of generative AI versus the economics of it all. So the question for Amazon is whether the weakness that we've seen in alphabet

in meta-shares is somehow about the fundamentals, or if it's part of a yield-driven rut that's affecting equities as a whole. Now, Amazon has been a mega-cap laggard over the last 12 months. Slow in cloud growth. It's costly logistics buildout playing catch-up and AI. So the bar is arguably lower here, but it will still need to balance those costs with the growth. It's cloud unit, AWS. That is the profit engine of the company, and it helps pay for all of those ambitions,

particularly in artificial intelligence. But revenue growth here has been decelerating. six straight quarters and operating margins have shrunk. Now, the street wants to see that that slump really has bottomed in cloud. So if Andy Jassy and his team can't confidently say that it has, Amazon could be another mega-cap drag on the market, guys. I guess the question, Deirdre, is since we can't really see into the future, but what would be probably the most sensitive pain point for investors in this report? For Amazon, it's AWX. It's AWS. without a doubt. And remember, because this is the profit engine, it's a big season coming up for

holiday shopping, typically Amazon's biggest, but really the street wants to know that cloud has bottomed. And that's where it's putting all of its AI efforts as well. And, you know, we got kind of mixed signals from Microsoft and Alphabet. Google Cloud was weaker, and Ruth Porat said that customers were re-optimizing their spend, whereas Microsoft said that they're actually seeing some of the benefit from their AI tools. So I'm not sure. what we're going to see from Amazon, but it definitely has the ability to throw off markets further. If it comes in below what they're expecting, say 11%. If revenue growth comes in at 13, some on the street say that could be bullish.

Absolutely. All right, Deirdre, we appreciate it. Deirdrejo, we appreciate it. Deirda, tracking those results today. And it's not just tech we're watching. Ford is also reporting. But those results, of course, take a backseat to the deal with the UAW to end the strike. Let's get out to Phil LeBowe now. Phil, what do we know?

You know, Kelly, so much of the conversation regarding the UAW contracts, the tentative agreement with Ford is on the fact that the UAW members will get a 25% raise over the next four and a half years, 30% when you add in cost of living adjustments. But here's the figure that Wall Street and analysts will be focused on. The all-in hourly labor costs, more than the fact that some workers are going to be moving up to, you know, $30, $32 an hour, whatever it might be. The current contract, all in hourly labor costs for Ford, is estimated to be at $66.76.79. After this contract goes through, if it is ratified, that figure would jump up to almost $88 an hour. That's according to Wells Fargo, along with data from the Center for Automotive Research. So what's next for Ford and the UAW members? Well, those members who are picketing, some of them are actually back on the job today.

They are no longer picketing. others, it'll take some time for them to go back in the plant. Ford will gradually resume production. You just can't flip a switch and immediately start cranking out the vehicles at those three plants that were shut down. And finally, the ratification vote. It could be as early as next week. Could be the week after. But in the meantime, they're not going to wait until it's approved to go back to work.

They're going back to work right now. And as you mentioned at the top of the segment, Kelly, today is the day we get Ford's Q3 earnings results. just like General Motors, these are going to be strong numbers. The street is expecting a 50% jump in earnings per share compared to the third quarter of last year. But then during the conference call later on, the focus is going to be for Jim Farley, the questions from analysts, what this UAW contract means for the future of Ford? Can they still invest as much as they would like to in electric vehicles? Or are they going to have to pivot even more to hybrid vehicles? Those types of questions will be there.

Quickly also take a look at shares of Stalantis and General Motors, the UAW and GM and Stalantus continue their discussions. It's been termed very active conversations. So we'll see if perhaps now that Ford is locked in, this might be the impetus to get a deal done relatively quickly with GM and Stalantis. You use the word if, or you seem to emphasize it when you said if it is ratified. Is there any real doubt that this pact would be ratified? Well, take a look at the Mack Truck contract that the leadership of the UAW approved, what was it, about a week, week and a half ago. No, the rank and file said, no, no, no, no, no, no, no, no. We don't approve this.

We want even more. There is the possibility that you could have some members who will sit there and say, hold out for more, whether that's 26%, 27%. You also have a very good chance that Sean Fain and his team could say, look, we've got a lot here, a lot more than you're used to. want to go back to the days when it was a lot less, we think that this is a good deal. And I don't think they would have approved it if they didn't think there was a good shot at ratification. No, it would seem that way. Phil LeBoe, thanks very much.

We've got some news out of the Sam Bank ofman-Fried trial. Let's get straight to Kate Rooney over at the courthouse, Kate. Hey, Kelly, so Sam Bankman-Fried is on the stand, but the catchier, the jury is going home. So he's on the stand talking with the judge, his defense team, the prosecution about what evidence they can use. What's admissible? So the defense, rather, sent a letter in last night talking about what strategy they were going to use. Their whole thing is about good intent. The fact that he did not have criminal intent here. One of the things that they want to bring up is what's called an advice of counsel strategy saying, essentially, you're blaming it on the lawyers. The judge a couple

months ago said that's actually, you can't use that. And now they're kind of going back and forth. It's a hearing within a hearing. So they are talking about what they can actually use in there. The other thing you're talking about is the Bahamas regulators, can they sort of talk about what happened there? And then some of his understanding of crypto markets. So they're going to go through some of the structure of what's going to be laid out. But Sam Bankman-Fried is on the stand, but no jury in the room, guys. So it's basically Bankman-Fried or his defense team. The strategy would be, hey, the lawyers thought what I was doing was cool, right?

Exactly, which the judge has pushed back on. They have claimed, though, that it's specifically. speaks to his state of mind at the time. And it is relevant and they should be able to bring up this strategy. So there's a little bit of hand wringing over that. But it is, again, a risky strategy to put him up there. They were saying that they're going to go about four hours with Bankment Free. This is the defense.

And then the prosecution is going to get a lot of time up there to cross-examine him, poke holes in the story. And it also, in the end, if he is found guilty, could add years to his sentence. It is up to the judge on how long he spends in prison if found guilty. And it's been a tense relationship so far. The judge, Judge Kaplan in this case, has already revoked his bail. He has been scolding, really, the defense team in the courtroom in recent weeks. And so it's tense.

They've got the defense team on a tight leash, and that's a big risk here. All right. Thanks very much. We appreciate it. Kate Rooney. Thank you. All right. One other closely watched name, due out after the bell, and that would be Chipotle.

What insight might its results provide about the strength of the consumer? Let's go to Kate Rogers for that story. Kate. Hey, Tyler. Well, analysts are expecting each. have adjusted $10.55 on revenues of $2.472 billion for the quarter. Comps are expected to increase up 4.6 percent. That's versed the guidance of low to mid-single digits. Pricing, of course, always a key focus for Chipotle, as it's really maintained its pricing power over the last year, not really

seeing consumers pull back or trade down in the face of higher costs. It did confirm to CNBC earlier this month it would be, quote, taking a modest price increase to offset inflation for the first in over a year. The company saw higher prices for some of its items like tortillas and dairy, along with beef last quarter, but avocados came down in price. So we'll see how that impacts its margins this quarter. The stock has come off some of its highs, but it's still up around 30% year-to-date. It's also one of the best performers in the sector for the year. We've seen, interestingly, here, that companies that have a higher price point for consumers like a Chipotle, a Shake Shack and a Sweet Green are doing a bit better in terms of stock performance compared to others like a

McDonald's or a Young Brands or a Burger King. We're also going to have a CNBC exclusive with Chippolde CEO Brian Nicol today after earnings on closing bell. So tune in for much more on all of this, guys. Back over to you. All right. Fantastic. Thank you very much.

Kate Rogers reporting. Thank you. And coming up, representatives from a number of the nation's retailers joined the retail lobby groups in D.C. today to meet with legislators to discuss the country's organized retail crime problem, asking for more legal support and solutions. We'll be right back. Welcome back. Shrink has been a buzzword for retailers in 2023, as organized retail theft and disorganized has become a real hit to earnings in some cases. Today, some of the biggest retailers are in Washington looking for help.

Courtney Reagan is on Capitol Hill with more on what they're asking for. Hi, Courtney. Hi, Kelly. So representatives from more than 30 retailers are joining the National Retail Federation on Capitol Hill today, meeting with members of Congress to garner support for the bipartisan, bicameral, combating, Retail Retail Crime Act. The Act lays out a new multi-agency group under the Department of Homeland Security to pool information and intelligence in order to better prosecute organized retail crime rings with new federal standards. One of the main purposes of the Corka Act, it allows us

to have a charter within a federal agency to actually help us create a clearinghouse, to aggregate properly, to investigate more efficiently and more in depth. The escalation of violence, with these thefts is a really big concern. Employees are told not to intervene. These crime rings know that, and they often steal just below the local felony thresholds, lowering the chance of prosecution. Different states have different penalties. This will raise it to a federal crime and standardize it. If the total dollar value of the stolen goods exceeds $5,000 in a single year, local prosecutors can pursue a federal charge. Several of the co-sponsors of the bill said There's wide support, but getting it to committee and beyond when time is ticking on the legislative year is a concern.

Kelly and Tyler. How do these perpetrators know as they are going through and collecting things that they're getting close to the felony charge limit? What are they doing? Good question. Fast math, calculators. I mean, it is really true. Perhaps they, quite honestly, perhaps they know the price of the item in advance, right? They know they can get 10 packs of whatever that item is and be just below that felony threshold. and it's not an aggregated number, and that's what this act is also looking to do,

is come up with a federal standard that's aggregated, meaning if, let's say the felony threshold was $1,500, you could steal $1,400 day after day after day after day, and it doesn't get aggregated. This would aggregate it at a $5,000 level. I see. Okay, Cort, thank you very much. Courtney Reagan on Capitol Hill for us today. Well, shrink isn't retailers' only concern.

Far from it heading into the holidays, consumers are taking on more debt at higher rates, posting higher delinquencies, but, Does that mean they are cutting down on spending? Not necessarily. Let's bring in Melissa Repco, CNBC.com retail reporter. So far are you saying that those higher rates don't seem to have dampened consumers' enthusiasm for spending all that much? Yes, I think we saw with September retail sales that the consumer is still going strong. The question is, how is that consumer going to be paying for those holiday gifts, holiday food, all those types of parties?

And are they potentially spending more that they can afford? and then what does that mean for January, February when the bill comes due? How do you get a judgment on that very point? Is it by tracking delinquencies on credit cards? At that at that point, you start to notice or charge-offs that banks have or card issuers have, you start to notice that the engine is starting to sputter? Yes, the delinquencies is definitely something to watch, and delinquencies has ticked up.

That's really one of the factors of concern for some of these retailers. Macy's has called that out, Coles has called that out. The other two dynamics that are at play here is that, like you alluded to, interest rates have gone up significantly. And what that means is it's just a lot more expensive to borrow. And holiday shoppers may not be aware that they're paying so much more if they carry that from month to month. Plus, student loans are coming back. So when they resume now, people are carrying more debt along with their credit card debt. They're also paying for their student loans in some cases.

So last year around this time, the average credit card interest rate, was about 16% now it's 21. And for those retailer issued cards, think the cards they try to get you to sign up for when you're holiday shopping, the average is 30%.

So that means it's a lot more expensive. I don't mean to throw out a retailer name. Bloomingdale's is going to charge a higher rate than a standard bank issued card from Capital One? Typically that is the case, that those cards are more expensive.

And again, remember, that's what shoppers use sometimes come the holiday. season because those retailers say you'll get special access or early access to sales or deals if you use our card. And that card may not be regularly in your rotation. You may forget to pay that card. You may suddenly realize you charge it a little higher than expected, carry that balance,

and that's what can get some consumers into trouble. Also, buy now, pay later. It's still out there. It's still a thing. It sounds like if anything, people might use it a little bit more this year. Yes. By now pay later is actually expected to go up. 36% of consumers said they're considering pay later.

paying through by now, pay later this holiday season, according to morning consult. And one of the interesting findings they said is that about a third of consumers, according to their survey, sometimes pay by now, pay later, but then they pay off that installment with their credit card. Interesting. So that can lead to this spiral, potentially, where you get yourself into trouble by kind of toggling between different forms of borrowing. And it's a shadow form of maybe consumer debt or even delinquencies that we may not pick up on

right away. Yes, exactly. Melissa, thanks. We appreciate it. Thank you. Melissa Repco. Dealmaking is heating up in the energy space with Exxon Pioneer and Chevron Hess, bringing total transactions across the U.S. upstream space to $174 billion this year. So who's next? That's after a break. Welcome back Chevron and Exxon, both spending big on acquisitions lately. But there are still plenty of other potential deals out there in energy now. Pippa Stevens is here with some names people are talking about that might be next. Pippa. Yeah, so starting with a big picture. here because we're seeing this enormous wave of M&A activity and energy. Of course, companies are coming

off a record year last year. They were able to shore up their balance sheets, pay down debt. And so the next question now is, well, how do we secure our long-term assets? And so Enveras actually crunched the numbers, and they found that so far this year, we've seen $174 billion worth of deals. That's more than triples last year's total. There you go. And of course, you can see how much larger this year has been. And of course, the year is not even over yet. And a lot of this is, once again, securing that top-tier inventory as their well as their basins decline. And so the question, who could be next? Well, the Permian Basin is where a lot of people have been focusing.

So key players there include Diamondback, EOG, Devon, and then a slightly smaller scale Permian resources as well as Matador. And one key player to watch is Conoco, because now that Chevron and Exxon, the two largest players... They've moved. Exactly, and they've both done two transactions this year. So they're presumably off the table for a little bit. And so then Conoco has moved from acquirer to, sorry, from potentially being acquired to now doing the acquiring.

And so they're a key player to watch. The other companies that have big enough balance sheets are in Europe. But of course, BP is dealing with some executive departures. Shell has flip-flopped on whether or not they're going to be a renewables focus company or a hydrocarbon focus company. So it really only leaves Total. So a lot here to watch, a lot of activity, a lot of people on the hunt. Look, for Total in Europe and Conoco in the U.S. of possible next movers.

Yes, exactly. So those are the two biggest ones. Yes, those are the two biggest ones that would be able to acquire a large-cap U.S. company. So those are the names to watch. And we could also just see some smaller deals as well. And you wonder at what point some of the smaller companies start to get a deal premium built in? I'm sure it's not, I mean, maybe in some case piece by piece, but overall is there, you always talk about geopolitical premium and oil, is there kind of like a takeover premium

being put into some of the smaller players on the hopes or expectations that maybe they're the next target? And I think that one thing about that is that we're also seeing all-stock purchases. And so that is kind of executive saying we're not really sure about what the oil and gas environment looks like going forward with so much uncertainty around Israel and Gaza. And so the all-stock deals can make more sense. And then even if they're not getting a massive premium, then at least then the shareholders of the former company still participate in that upside. Pippa, thank you very much. Pippa Stevens. Let's get to Bertha Coombs now.

CNBC News Update. Bertha. Hi, Tyler. Two senior law enforcement officials tell NBC news the assault-style weapon used last night by accused mass shooter Robert Card in that main mass shooting was purchased legally this year. There is a massive manhunt underway for Card with several communities still being told to shelter in place. A judge is reconsidering that $10,000 fine that he imposed against Donald Trump yesterday for violating a gag order in his civil fraud trial in New York. He fined Trump for the second time after the former president appeared to have made a reference about his clerk to reporters outside of the courtroom. Trump's attorney claims the fine violated the former president's free speech rights.

And the Beatles are back. The Fab Four will be out with a new song next week called Now and Then. The release of the song, which is being dubbed the last new Beatles tune, was making. possible by artificial intelligence. The technology helped to isolate John Lennon's voice on an unreleased demo, so Paul McCartney and Rinko Star could complete the track last year. And, of course, you're asking about George. It includes decades-old guitar parts from George Harrison.

So you've got the Rolling Stones touring and the Beatles out with a new record. And the Stone's out with a new record, I think. Right. He's either dropped or dropping soon. Forgive me for not knowing this. But at any rate, Bertha, thank you. And ahead on Power Lunch, a key contrarian call. Oppenheimer's John Stolpethus is one of the biggest bulls on the street with a, I mean, it is a shockingly high year-end S&P target with just two months to go.

We'll speak to him next. Welcome back to Power Lunch. You can see market sliding today, although well off the lows. The NASDAQ down the most. As investors digest comments from META and prepare to hear from Amazon tonight, our next guest has a year-end price target on the S&P, which is currently at 4159. His year-end price target in just about two months' time, 4,900, highest on the street. To continue our contrarian week, John Stoltless joins us now.

He's chief investment strategist at Oppenheimer Asset Management. John, welcome. Did you mean to find yourself in this position? Kelly, when we raised our target from 4,400 back in at the beginning of August, at that point, it meant 4,900 was about 6 to 7% upside to the end of the year. And right now, I think it's something closer to 17 or 18% to the end of the year. That said, it's not atypical for markets that are in the process of getting near the end. of a Fed Fund's hike cycle to have a lot of arguments happening between bulls and bears. Our target when we put in the 4,400 target, when we put that in last December, people thought

we were nuts because the S&P 500 had a horrible year in 2022. A lot of people were expecting that it would extend into 2023. And indeed, there was several fabulous rallies during this year that have occurred. And now we, you know, at this point, we are experiencing a correction that is significant enough to catch a distinctly bullish views attention. That said, you've got to remember that when we put that, raise that target, we were expecting that the Fed would continue to be vigilant against inflation, but would remain sensitive to the effects of its. policy on the economy. And it has remained so that we have, and we also expected, we said it will depend upon the resilience of the economy. Today's GDP print says resilience all over it. And the current third quarter earnings cycle, I'm sorry, the third quarter earnings season

is showing resilience. You've only got, I think, two sectors right now with about 40% of the sectors having reported negative earnings. So, John, why is the market not responding to all of those things? You ticked off the boxes and they were all check, check, check. But the market's down from where it was when you made that switch. I would say, I think the real significant dollar would be when we look at the 10-year yield, once it breaches 5%, if you, consider the generation gap that exists in the markets. Five percent sounds like an extraordinary

rate of interest or a yield on a 10-year treasury. But from a historical perspective, a 4 to 5 percent is really what a 10-year yield usually would be like during normal periods. The problem is, for 15 years, we have been predominantly in emergency periods, whether it was the financial crisis of 08 or it was the pandemic. or the process of the worries about would the pandemic resurgence return, would the whole supply chain be resolved, what would happen? And I think the highly leveraged players also are deeply incensed about Fed policy, raising the benchmark from a range of zero to zero point two five to five on a

quarter to five and a half. And this is the protest. You're seeing a tantrum right now in our viewpoint. So you're arguing that what didn't cooperate here was longer-term bond yields and that that's what spooked the market. That's what exactly. And ironically, it's the long-term bond yields coming up that will actually help the Fed be more sensitive going forward within the next 12 months or so as inflation is brought down by just a slowing in the economy, which is not uncommon when the Fed is tightening. So let me ask you a little bit of an inside question about your business, because I don't know. You made that $4,900 price projection on August 1.

Are you able now to change it if you wanted to and say, oops? Oh, we could change it. And I've gotten from a point of being reasonable. And needless to say, it's under consideration, should we? I mean, the problem is we're running out of calendar time. So should we do as the Bears do, where, you know, bears have been predicting the recession now for several years, and they just keep pushing it forward.

So we might have to push this target forward. But what we see is the wonderful thing is once again, bond issuers have to pay for the privilege of borrowing money, and bond buyers actually get something in return. with a coupon. It threatens zombie companies, memes, all kinds of gambling type thematics, maybe the bit cryptocurrencies, but for fundamental investors and for retirees, this is a good thing. John, thank you very much. We appreciate your candor today. John Stolfeus of Oppenheimer asset management. We'll see again soon. Some sad news to share now. Byron Wean,

Vice Chairman of Blackstone's Private Wealth Solutions Group has passed away. That's according to an internal memo from Blackstone. A longtime guest on CNBC, always plain spoken and genial. Byron was famous in investing circles for releasing his so-called 10 surprises each year, where he gave his views on the economy, financial markets, political surprises for the upcoming year. Part of joining Blackstone, he spent more than two decades as the chief U.S. investment strategist at Morgan Stanley and an essay back in February on the 20 life lessons he has learned. His final thought was never retire.

If you work forever, you can live forever. I know there is an abundance of biological evidence against this theory, but I'm going with it anyway. Mr. Ween was a young, 90 years old. He was as vigorous physically as he was mentally. Very avid skier. We will miss Byron Ween. Welcome back, everybody.

Sam Bankman-Fried, said to take the stand in his own defense, but the judge sends the jury home as they try to work out what lawyers are allowed to ask him. Let's bring in Danny Savalos, NBC News and MSNBC legal analyst, Danny. Welcome back. You know, it's relatively rare that a defendant in a case

is put on the stand by his defense. What are the risks here both for the defense and for the prosecution in having to question and cross-examine this principle? For Central

the rule unofficially among defense attorneys is never, ever, ever put your client on the stand. But in the last few years, that trend appears to be moving in a different direction in high-profile cases. We have seen several high-profile defendants take the stand, some with some success, others with zero success. But in a case like this, where the federal government has built quite an impressive case against Sam Bankman-Fried, this may be as simple as an act of desperation. Now, the pitfalls for the government are that no matter. How well-versed the cross-examining attorney may be in the world of crypto and Sam Bankman-Fried's business. It is doubtful that he knows as much about the business as Sam Bankman-Fried himself.

So there are traps for the unwary, as much as the government, I'm sure, is prepared to cross-examine SBF. Danny, what about this particular move of dismissing the jury so that evidently the judge can listen to testimony and what, figure out if he's going to, you know, do himself too much damage before the jury? No, in fact, this goes back to September. The judge issued an order limiting the kind of evidence that the defense could introduce. And one of those was the idea that the judge would determine on a moment-by-moment basis whether Sam Bankman-Fried could raise the issue of, hey, there were other attorneys around and maybe they sort of sanctioned this. And you can see from the letter that the defense wrote to the judge, they're really dancing.

around having to commit to what's called an advice of counsel defense because there are a lot of minuses to formally raising that as a defense. So you can see they're trying to have their cake and eat it too. And the judge back in December, excuse me, September said that I will evaluate this when the issue comes up because this is something that he has to hear out of the hearing of the jury decide whether it's admissible. And if so, then the defense will be allowed to put it on. But the judge may conclude, no, no, no, this is the kind of thing that I rule. ruled back in September. This, you cannot admit. Correct me if I'm wrong, Danny, but this advice of counsel defense, I think, has come up in the context of former President Trump's civil trial

in New York City, where he is also presumably expected to take the stand. Am I right on that? You are exactly right. And here's the thing about advice of counsel. If you raise that as a defense, there are a lot of very bad things that can happen right away. One of those is that you destroy attorney-client privilege. And so the government could theoretically call those attorneys to come in and say, hey, I heard what he said that I told him. I never told him that. That was not my advice. Now, that kind of testimony would be devastating for a defendant. So there are pitfalls to using the advice of counsel defense. And that is why you see SBF's defense really trying to straddle the line and sort of use a quasi-advice of counsel defense that, hey, there were these sort of attorneys in the

periphery. We're not formally saying it's advice of counsel, but it was kind of unofficially sanctioned by counsel, maybe. The judge is probably not going to let them do that, straddle the line. He's probably going to make them commit one way or another, or completely exclude the evidence after he hears it today.

All right, Danny, thanks very much. Always great to see you, sir. Danny Savalos. Appreciate it. Meantam, the company behind Invisaline is plummeting after earnings. Is this company specific or a broader sign for the economy? We will trade that name coming up and three-stock lunch.

Welcome back. Time for today's three-stock lunch. First up is UPS. shares of that company down more than 4% on a third-quarter revenue miss. The company warns of economic headwinds ahead. And here with our trades, Victoria Green, Chief Investment Officer at G-squared private wealth

and a CNBC contributor. Victoria, welcome. What do you think of UPS? It's not a buy for me yet. They're facing multiple headwinds. Number one is the increase in labor costs that really sink their margins down about to about 8% from 13%. And even their guidance has been cut twice in the last three months.

And now they're only forecast in a recovery to about 10.8 to 11.3. And so you look at that, you have increased costs. Labor is about 58% of their overall expenses. And you had lower volumes because they had a disruption there where people ended up leaving because they were concerned on the strike. You'll always see a bump in Q4, right? You've got holidays. They're bringing on 100,000 seasonal workers.

I just think you have lower revenue and higher costs. That's not really great for profits and profit margins. So I'm just not buying it here. All right. All right. That's a no. What about Kerwig Dr. Pepper? KDP, they're on the rise today, up more than 1%.

They had a healthy Q3, reaffirmed full year guidance. Kind of difficult in the current consumer landscape with weight loss drugs and all the rest of it. What would you do to do with this one? It's a buy for me. I really like this stock. And it's funny. Everybody kind of hated on Staples. And then Staples, especially beverages, Coke, Pepsi, and Curig Dr. Pepper all came through with really solid earnings.

I like their product mix. Coffee is still sorting itself out. It was a little bit of a drag, but they're able to increase the realized prices, and they're, they're kind of getting rid of some of their lower margin coffee business. So coffee is still transitioning might be a little lumpy and Q4, but they've got a great product mix. They're continuing to, even if they're having pod volumes down, they're offsetting it with volume growth elsewhere.

Plus, they're about 85% U.S. generated revenue, so they don't have the FX headwinds, that Pepsi and Coke face. So I really like them here. And they've cornered the market for ginger ale. They've got Schweps, Canada Dry, and Burning. So if you're looking in the gingerail 7 up market, feeling sick this winter, is going to be a curing Dr. Pepper product. I did not know that.

I didn't know that they own those brands. I drank a lot of gingerail, by the way, so now I know. I learn something every day. Finally, let's go to Align Technology. That stock down 25%. It's missing some teeth today. Let's put it that way, after missing the consensus mark in the third quarter. Cutting its full year revenue guidance, warning of deteriorating market trends.

what is the, how do they get back in alignment? Oh, man, that was some horrible puns there, but I love it. Okay, this is the catching a falling knife situation. It's likely it'll have to retest 175. If that doesn't hold, they're probably pushing back down to COVID lows. It's just the orthodontics case starts are lower. They were lower by 8 or 9%. You've got really bad macro headwinds.

They can't grow sales and they're going to face these headwinds until you see a recovery in kind of these optional orthodontics procedure. You know, everybody does love straight, nice looking teeth, absolutely. But it is a little bit of a luxury. So if consumers are getting squeezed, it's going to be hard for them to grow their market share. So you look around and say, I think it's just a little bit too early. Even their bullish analyst that had to cut price targets, I think Jeffrey said they might be in the penalty box for a little bit longer. So for me, it's a wait and see because I just don't see Q4 really adding up to growth for them.

And you really need the market to turn to the point that they're getting more cases started and they can really see higher volume there. So sell a line, sell UPS, and maybe a buy at Currig, Dr. Pepper, Victoria Green. Thank you very much. We appreciate it. Thanks, guys. I'm going to grab a ginger ale. Yeah. Other stories we're watching next on closing time.

Stay with us. Welcome back. Just three minutes left and several more stories you need to know about. Let's get right to it. Starting with usage on X or Twitter, plummeting, and Musk's first year, reportedly. Monthly active users down almost 15% globally, almost 18% in the U.S. year-on-year. That's for the month of September per similar web.

App downloads also down 38% globally, according to Censor Tower. But you still see a tremendous number of references to X in the media. I still find it indispensable, but I can understand why it's a niche product, and it's having some struggle right now, I think, amidst all of this, at a time when there's so many other messaging-type apps, more than ever. So, yeah, tough one for them. All righty. Taylor Swift helping to propel credit card fees for the third largest bank in Singapore to record highs.

Back in July, UOB, cardholders enjoyed exclusive pre-sale tickets to Swift's six shows in Singapore. They must have a nice little deal there. She is one of the best business people I've seen. This is why we always follow the little Taylor Swift updates on the show to watch what she's doing with the tour and the movies. And if you didn't know, now she's doing this for Singaporean credit cards. Yeah, she's a smart cookie. Yeah, and by the way, the business of streaming is actually pretty lucrative. Digital royalty collections surged 34% to over $4 billion in 2022,

as consumers turn to music and video subscription services, according to the International Confederation of Societies of Authors and Composers. There was a pandemic boom. Streaming collections have doubled from their pre-COVID levels and now account for 35% of total collections from music creators surpassing TV and radio. I just found this interesting. Sometimes I hear different reports about how lucrative. this really is. So this one points towards...

I guess the volume of streams has gotten so large that it has come to overcome those pennies or nickels that you used to get every time of... Maybe it also speaks to the fact that the TV and radio pieces is also dwindling. It's dwindling a little bit. All right. And here's one. Pro-Palestine protests on, of all places, Roblox have attracted hundreds of thousands of visitors. Nearly half of Roblox users are age 12 and under.

Just another thing parents have to worry about in this digital age. And now Roblox joins the list of companies, including meta and X, which have to deal with social issues. This is part of the information conflict, I guess, that goes along with the war there. But if you're a Roblox user, be aware. Exactly. If you're a parent, and Roblox, the company will ultimately have to deal with this. And speaking of reality, extending into video games, searching mortgage rates have made an appearance on Sony's newly released Spider-Man 2.

I guess this is a video game. The Real Arch Enemy is a second mortgage. According to a document found in the game, Peter Parker pays about $4,400 per month with almost a 7% interest rate and nearly $500,000 of remaining principal. All right. Well, good luck, Superman. I mean, Spider-Man with that.

Bringing it into the 20-23. Thanks for watching, Powerline. Closing Bell starts right now.